-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VLgt48/kdSKzGdvhOkRjrgmVnJ+Ur/7l1fkRduF4cbn/cT+GQ3GdgonJ21Q2gVxv cSLSA6eEpqkyUirohcv1QA== 0000950135-98-001610.txt : 19980318 0000950135-98-001610.hdr.sgml : 19980318 ACCESSION NUMBER: 0000950135-98-001610 CONFORMED SUBMISSION TYPE: S-6/A PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19980317 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAUFACTURERS LIFE INSURANCE CO OF NEW YORK SEP ACCOUNT B CENTRAL INDEX KEY: 0001043846 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-6/A SEC ACT: SEC FILE NUMBER: 333-33351 FILM NUMBER: 98567456 BUSINESS ADDRESS: STREET 1: 555 THEODORE FREND AVENUE CITY: RYE STATE: NY ZIP: 10580 BUSINESS PHONE: 914921020 MAIL ADDRESS: STREET 1: 555 THEODORE FREND AVENUE CITY: RYE STATE: NY ZIP: 10580 S-6/A 1 THE MANUFACTURERS LIFE INSURANCE COMPANY OF N.Y. 1 As filed with the Securities and Exchange Commission on March 17, 1998. Registration No. 333-33351 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 PRE-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT ON FORM S-6 FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2 THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK SEPARATE ACCOUNT B (Formerly FNAL Variable Life Account I) (Exact name of trust) THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK (formerly First North American Life Assurance Company) (Name of depositor) Corporate Center at Rye 555 Theodore Fremd Avenue Rye, New York 10580 (Address of depositor's principal executive offices) A. Scott Logan, President Copy to: The Manufacturers Life Insurance J. Sumner Jones Company of New York Jones & Blouch L.L.P. Corporate Center at Rye 1025 Thomas Jefferson St., NW 555 Theodore Fremd Avenue Suite 405 West Rye, New York 10580 Washington, DC 20007-0805 (Name and Address of Agent for Service) Approximate date of commencement of proposed public offering: As soon after the effective date of this Registration Statement as is practicable. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that the Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. 2 THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK SEPARATE ACCOUNT B Registration Statement on Form S-6 Cross-Reference Sheet
FORM N-8B-2 ITEM NO. CAPTION IN PROSPECTUS 1 Cover Page; General Information About Manulife New York, the Separate Account and Manufacturers Investment Trust 2 Cover Page; General Information About Manulife New York, the Separate Account and Manufacturers Investment Trust 3 * 4 Miscellaneous Matters (Distribution of the Policy) 5 General Information About Manulife New York, the Separate Account and Manufacturers Investment Trust 6 General Information About Manulife New York, the Separate Account and Manufacturers Investment Trust 7 * 8 * 9 Miscellaneous Matters (Pending Litigation) 10 Detailed Information About The Policies 11 General Information About Manulife New York, the Separate Account and Manufacturers Investment Trust 12 General Information About Manulife New York, the Separate Account and Manufacturers Investment Trust 13 Detailed Information About The Policies (Charges and Deductions) 14 Detailed Information About the Policies (Premium Provisions -- Policy Issue and Initial Premium); Miscellaneous Matters (Responsibilities Assumed By Manulife New York) 15 Detailed Information About The Policies (Premium Provisions -- Policy Issue and Initial Premium) 16 ** 17 Detailed Information About The Policies (Policy Values -- Partial Withdrawals and Surrenders); Other Provisions -- Payment of Proceeds) 18 General Information About Manulife New York, the Separate Account and Manufacturers Investment Trust 19 Detailed Information About The Policies (Other Provisions - Reports To Policyowners); Miscellaneous Matters (Responsibilities Assumed By Manulife New York) 20 * 21 Detailed Information About The Policies 22 * 23 ** 24 Detailed Information About the Policies (Other General Policy Provisions) 25 General Information About Manulife New York, the Separate Account and Manufacturers Investment Trust 26 * 27 ** 28 Miscellaneous Matters (The Directors And Officers Of Manulife New York) 29 General Information About Manulife New York, the Separate Account and Manufacturers Investment Trust 30 * 31 * 32 * 33 * 34 * 35 ** 36 * 37 *
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38 Miscellaneous Matters (Distribution of the Policy; Responsibilities Assumed By Manulife New York) 39 Miscellaneous Matters (Distribution of the Policy) 40 * 41 ** 42 * 43 * 44 Detailed Information About The Policies (Policy Values - Policy Value) 45 * 46 Detailed Information About The Policies (Policy Values - Partial Withdrawals and Surrenders; Other Provisions -- Payment of Proceeds) 47 General Information About Manulife New York, the Separate Account and Manufacturers Investment Trust 48 * 49 * 50 General Information About Manulife New York, the Separate Account and Manufacturers Investment Trust 51 Detailed Information About The Policies 52 Detailed Information About The Policies (Miscellaneous Matters -- Portfolio Share Substitution) 53 ** 54 * 55 * 56 * 57 * 58 * 59 Financial Statements
- -------------- * Omitted since answer is negative or item is not applicable. ** Omitted. 4 PART I PROSPECTUS 5 [LOGO] PROSPECTUS THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK SEPARATE ACCOUNT B VENTURE VUL FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY This prospectus describes the flexible premium variable life insurance policy (the "Policy") issued by The Manufacturers Life Insurance Company of New York ("Manulife New York" or the "Company"), formerly First North American Life Assurance Company, a stock life insurance company that is a wholly-owned subsidiary of The Manufacturers Life Insurance Company of North America ("Manulife North America"), formerly North American Security Life Insurance Company, the ultimate parent of which is The Manufacturers Life Insurance Company ("Manulife"). The Policies are designed to provide lifetime insurance protection together with flexibility as to the timing and amount of premium payments, the investments underlying the Policy Value and the amount of insurance coverage. This flexibility allows the policyowner to pay premiums and adjust insurance coverage in light of his or her current financial circumstances and insurance needs. The Policies provide for: (1) a Net Cash Surrender Value that can be obtained by partial withdrawals or surrender of the Policy; (2) policy loans; and (3) an insurance benefit payable at the life insured's death. Policy Value may be accumulated on a fixed basis or vary with the investment performance of the sub-accounts of The Manufacturers Life Insurance Company of New York Separate Account B (the "Separate Account") to which the policyowner allocates net premiums. The assets of each sub-account will be used to purchase shares of a particular investment portfolio (the "Portfolio") of Manufacturers Investment Trust, formerly NASL Series Trust. The accompanying prospectus for Manufacturers Investment Trust, and the corresponding statement of additional information, describes the investment objectives of the Portfolios in which net premiums may be invested. The Portfolios available for allocation of net premiums are the: Pacific Rim Emerging Markets Trust, Science & Technology Trust, International Small Cap Trust, Emerging Growth Trust, Pilgrim Baxter Growth Trust, Small/Mid Cap Trust, International Stock Trust, Worldwide Growth Trust, Global Equity Trust, Small Company Value Trust, Equity Trust, Growth Trust, Quantitative Equity Trust, Equity Index Trust, Blue Chip Growth Trust, Real Estate Securities Trust, Value Trust, International Growth and Income Trust, Growth and Income Trust, Equity-Income Trust, Balanced Trust, Aggressive Asset Allocation Trust, High Yield Trust, Moderate Asset Allocation Trust, Conservative Asset Allocation Trust, Strategic Bond Trust, Global Government Bond Trust, Capital Growth Bond Trust, Investment Quality Bond Trust, U.S. Government Securities Trust, Money Market Trust, Lifestyle Aggressive 1000 Trust, Lifestyle Growth 820 Trust, Lifestyle Balanced 640 Trust, Lifestyle Moderate 460 Trust and Lifestyle Conservative 280 Trust (collectively the "Manulife Trusts"). Other sub-accounts and Portfolios may be added in the future. Prospective purchasers should ask a Manulife New York sales representative if changing, or adding to, existing insurance coverage would be advantageous. Prospective purchasers should note that it may not be advisable to purchase a Policy as a replacement for existing insurance. 1 6 BECAUSE OF THE SUBSTANTIAL NATURE OF THE SURRENDER CHARGES, THE POLICY IS NOT SUITABLE FOR SHORT-TERM INVESTMENT PURPOSES. PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT IS VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS FOR MANUFACTURERS INVESTMENT TRUST. The Securities and Exchange Commission ("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. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. HOME OFFICE: The Manufacturers Life Insurance Company of New York Corporate Center at Rye 555 Theodore Fremd Avenue Rye, New York 10580 SERVICE OFFICE MAILING ADDRESS: The Manufacturers Life Insurance Company of New York P.O. Box 633 Niagara Square Station Buffalo, New York 14201-0633 TELEPHONE: 1-888-267-7784 THE DATE OF THIS PROSPECTUS IS MARCH 31, 1998. 2 7 PROSPECTUS CONTENTS
PAGE ---- INTRODUCTION TO POLICIES........................................................................ 5 GENERAL INFORMATION ABOUT THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK, THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK SEPARATE ACCOUNT B AND MANUFACTURERS INVESTMENT TRUST.................................................................. 12 The Manufacturers Life Insurance Company of New York and The Manufacturers Life Insurance Company................................................................................ 12 The Manufacturers Life Insurance Company of New York Separate Account B................ 12 Manufacturers Investment Trust......................................................... 13 Investment Objectives and Certain Policies of the Portfolios........................... 14 DETAILED INFORMATION ABOUT THE POLICIES......................................................... 18 PREMIUM PROVISIONS......................................................................... 18 Policy Issue and Initial Premium....................................................... 18 Premium Allocation..................................................................... 18 Premium Limitations.................................................................... 18 Short-Term Cancellation Right and "Free Look" Provisions............................... 19 INSURANCE BENEFIT.......................................................................... 19 The Insurance Benefit.................................................................. 19 No Lapse Guarantee..................................................................... 19 No Lapse Guarantee Cumulative Premium Test............................................. 20 Death Benefit Guarantee................................................................ 20 Death Benefit Options.................................................................. 21 Death Benefit Option Changes........................................................... 22 Face Amount Changes.................................................................... 22 POLICY VALUES.............................................................................. 23 Policy Value........................................................................... 23 Transfers of Policy Value.............................................................. 24 Policy Loans........................................................................... 25 Partial Withdrawals and Surrenders..................................................... 27 Charges and Deductions................................................................. 28 Deductions From Premiums............................................................... 28 Surrender Charges...................................................................... 28 Monthly Deductions..................................................................... 32 Administration Charge.................................................................. 32 Cost of Insurance Charge............................................................... 32 Mortality and Expense Risks Charge..................................................... 33 Other Charges.......................................................................... 33 The General Account.................................................................... 34 OTHER GENERAL POLICY PROVISIONS............................................................ 35 Policy Default......................................................................... 35 Policy Reinstatement................................................................... 35 Miscellaneous Policy Provisions........................................................ 35 OTHER PROVISIONS........................................................................... 36 Supplementary Benefits................................................................. 36 Payment of Proceeds.................................................................... 36 Reports To Policyowners................................................................ 36 MISCELLANEOUS MATTERS...................................................................... 37 Portfolio Share Substitution........................................................... 37 Federal Income Tax Considerations...................................................... 37 Tax Status of The Policy............................................................... 37 Tax Treatment of Policy Benefits....................................................... 38
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The Company's Taxes.................................................................... 40 Distribution of The Policy............................................................. 40 Responsibilities Assumed By Manulife New York and MSS.................................. 41 Voting Rights.......................................................................... 41 Directors and Officers of Manulife New York ........................................... 42 State Regulations ..................................................................... 43 Pending Litigation .................................................................... 43 Additional Information ................................................................ 44 Legal Matters ......................................................................... 44 Experts ............................................................................... 44 Year 2000 Issues ...................................................................... 44 FINANCIAL STATEMENTS............................................................................ 44 APPENDICES...................................................................................... 68 A. Sample Illustrations of Policy Values, Cash Surrender Values and Death Benefits........ 68 B. Definitions............................................................................ 77
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. You are urged to examine this prospectus carefully. "INTRODUCTION TO POLICIES" will briefly describe the Flexible Premium Variable Life Insurance Policy. More detailed information will be found within. 4 9 INTRODUCTION TO POLICIES The following summary is intended to provide a general description of the most important features of the Policy. It is not comprehensive and is qualified in its entirety by the more detailed information contained in this prospectus. Unless otherwise indicated or required by the context, the discussion throughout this prospectus assumes that the Policy has not gone into default, there is no outstanding Policy Debt, and the death benefit is not determined by the corridor percentage test (see "Death Benefit Options"). GENERAL The Policy provides a death benefit in the event of the death of the life insured. Premium payments may be made at any time and in any amount, subject to certain limitations. After certain deductions, premiums will be allocated, according to the policyowner's instructions, to one or more of the general account and the sub-accounts of the Separate Account. Assets of the sub-accounts of the Separate Account are invested in shares of a particular Portfolio of Manufacturers Investment Trust. Allocation instructions may be changed at any time and transfers among the accounts may be made subject to certain restrictions (see "Transfers of Policy Value"). The Portfolios currently offered are the: Pacific Rim Emerging Markets Trust, Science & Technology Trust, International Small Cap Trust, Emerging Growth Trust, Pilgrim Baxter Growth Trust, Small/Mid Cap Trust, International Stock Trust, Worldwide Growth Trust, Global Equity Trust, Small Company Value Trust, Equity Trust, Growth Trust, Quantitative Equity Trust, Equity Index Trust, Blue Chip Growth Trust, Real Estate Securities Trust, Value Trust, International Growth and Income Trust, Growth and Income Trust, Equity-Income Trust, Balanced Trust, Aggressive Asset Allocation Trust, High Yield Trust, Moderate Asset Allocation Trust, Conservative Asset Allocation Trust, Strategic Bond Trust, Global Government Bond Trust, Capital Growth Bond Trust, Investment Quality Bond Trust, U.S. Government Securities Trust, Money Market Trust, Lifestyle Aggressive 1000 Trust, Lifestyle Growth 820 Trust, Lifestyle Balanced 640 Trust, Lifestyle Moderate 460 Trust and Lifestyle Conservative 280 Trust. Other sub-accounts and Portfolios may be added in the future. The Policy has a Policy Value reflecting premiums paid, the investment performance of the accounts to which the policyowner has allocated premiums, and certain charges for expenses and cost of insurance. The policyowner may obtain a portion of the Policy Value by taking a policy loan or a partial withdrawal, or by full surrender of the Policy. DEATH BENEFIT Death Benefit Options. The policyowner elects to have the Policy's death benefit determined under one of two options: - death benefit equal to the face amount of the Policy, or - death benefit equal to the face amount of the Policy plus the Policy Value. Under either option, the death benefit may have to be increased to a multiple of the Policy Value to satisfy the corridor percentage test under the definition of life insurance in the Internal Revenue Code of 1986, as amended (the "Code") (see DETAILED INFORMATION ABOUT THE POLICIES -- INSURANCE BENEFIT -- The Insurance Benefit and Death Benefit Options). The Policyowner May Change The Death Benefit Option. A change in the death benefit option may be requested after the Policy has been in force for one year (see DETAILED INFORMATION ABOUT THE POLICIES -- INSURANCE BENEFIT -- Death Benefit Option Changes). The Policyowner May Increase The Face Amount. After the Policy has been in force for one year, an increase in the face amount of the Policy may be requested once per policy year. An increase in the face amount is subject to satisfactory evidence of insurability and will usually result in the Policy's being subject to new surrender charges (see DETAILED 5 10 INFORMATION ABOUT THE POLICIES -- INSURANCE BENEFIT -- Face Amount Changes). The Policyowner May Decrease The Face Amount. A decrease in the face amount may be requested once per policy year after the Policy has been in force for one year. A decrease in face amount may result in certain surrender charges being deducted from the Policy Value (see DETAILED INFORMATION ABOUT THE POLICIES -- INSURANCE BENEFIT -- Face Amount Changes). PREMIUM PAYMENTS ARE FLEXIBLE The policyowner may pay premiums at any time and in any amount, subject to certain limitations (see DETAILED INFORMATION ABOUT THE POLICIES -- PREMIUM PROVISIONS -- Policy Issue and Initial Premium and Premium Limitations). The policyowner must pay at least the Initial Premium to put the Policy in force (see DETAILED INFORMATION ABOUT THE POLICIES -- PREMIUM PROVISIONS -- Premium Limitations and INSURANCE BENEFIT -- Death Benefit Guarantee). After the Initial Premium is paid there is no minimum premium required. However, by complying with the Death Benefit Guarantee Cumulative Premium Test the policyowner can ensure the Policy will not go into default for the first three policy years. By complying with the No Lapse Guarantee Cumulative Premium Test, the policy owner can ensure the policy will not go into default for the first five policy years. For Policies with a face amount of at least $250,000, the policyowner can ensure the Policy will not go into default (i) prior to the life insured reaching age 100 if Death Benefit Option 1 is maintained throughout the life of the Policy and (ii) prior to the life insured reaching age 85 if Death Benefit Option 2 is selected at any time, by satisfying the Death Benefit Guarantee Cumulative Premium Test or the Fund Value Test (see DETAILED INFORMATION ABOUT THE POLICIES -- INSURANCE BENEFIT -- No Lapse Guarantee and Death Benefit Guarantee). Certain maximum premium limitations apply to the Policy to ensure the Policy qualifies as life insurance under rules defined in the Code (see DETAILED INFORMATION ABOUT THE POLICIES -- PREMIUM PROVISIONS --Premium Limitations). SUMMARY OF CHARGES AND DEDUCTIONS Charges under the Policy are assessed as: (1) deductions from premiums - the Company reserves the right to make a charge for state, local and Federal taxes in an amount not to exceed 3.60%. The Company currently makes no deduction of charges from premium payments for state, local and Federal taxes (2) surrender charges upon surrender, partial withdrawal in excess of the Withdrawal Tier Amount, decrease in face amount or lapse - deferred underwriting charge of $4.50 for each $1,000 of face amount - deferred sales charge of a maximum of 50% of premiums paid up to a maximum of 2.59 Target Premiums (3) monthly deductions - administration charge of $35 per month until the first policy anniversary; thereafter, $10 per month (the right is reserved to increase the administration charge by an additional amount of up to $.01 per $1,000 of face amount per month) - cost of insurance charge 6 11 - mortality and expense risks charge of 0.075% per month through the later of the tenth policy anniversary and the policyowner's attained age 60 and, thereafter, 0.0375 % per month - supplementary benefit(s) charge(s) (4) other charges Investment Management Fees and Expenses. Investment management fees paid by Manufacturers Investment Trust (excluding the Lifestyle Trusts) range from .25% to 1.10% of the assets of the Portfolios. The Lifestyle Trusts do not charge an investment management fee. Total Trust Annual Expenses range from .54% to 1.95% of the assets of the Portfolios. In the case of the Lifestyle Trusts, Manufacturers Securities Services,LLC, ("MSS") the adviser to Manufacturers Investment Trust, has voluntarily agreed to pay the expenses of the Lifestyle Trusts (other than the expenses of the Underlying Portfolios).This expense reimbursement may be terminated at any time. Absent the expense reimbursement agreement between the adviser and Manufacturers Investment Trust, total trust annual expenses for the Lifestyle Trusts would range from .748% to 1.156%. Because each Lifestyle Trust will invest in shares of Underlying Portfolios (all of the Portfolios except the Lifestyle Trusts) each will bear its pro rata share of the fees and expenses incurred by the Underlying Portfolios. (5) certain transfers - transfer fee of $25 per transfer in excess of twelve transfers in any policy year - transfer fee of $5 for each transfer under the Dollar Cost Averaging program when Policy Value does not exceed $15,000 For a complete discussion of charges and deductions see the heading "Charges and Deductions" in this Introduction and the references therein, and see also the heading "Transfers Are Permitted" in this Introduction and the references therein. INVESTMENT OPTIONS Premiums will be allocated, according to the policyowner's instructions, to any combination of the general account or one or more of the sub-accounts of the Separate Account. Each sub-account of the Separate Account invests its assets in the shares of one of the following portfolios:
- - Pacific Rim Emerging Markets Trust - Growth and Income Trust - - Science & Technology Trust - Equity-Income Trust - - International Small Cap Trust - Balanced Trust - - Emerging Growth Trust - Aggressive Asset Allocation Trust - - Pilgrim Baxter Growth Trust - High Yield Trust - - Small/Mid Cap Trust - Moderate Asset Allocation Trust - - International Stock Trust - Conservative Asset Allocation Trust - - Worldwide Growth Trust - Strategic Bond Trust - - Global Equity Trust - Global Government Bond Trust - - Small Company Value Trust - Capital Growth Bond Trust - - Equity Trust - Investment Quality Bond Trust - - Growth Trust - U.S. Government Securities Trust - - Quantitative Equity Trust - Money Market Trust - - Equity Index Trust - Lifestyle Aggressive 1000 Trust - - Blue Chip Growth Trust - Lifestyle Growth 820 Trust - - Real Estate Securities Trust - Lifestyle Balanced 640 Trust - - Value Trust - Lifestyle Moderate 460 Trust - - International Growth and Income Trust - Lifestyle Conservative 280 Trust
The policyowner may change the allocation of net premiums among the general account and the sub-accounts at any time (see GENERAL INFORMATION ABOUT THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW 7 12 YORK, THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK SEPARATE ACCOUNT B AND MANUFACTURERS INVESTMENT TRUST and DETAILED INFORMATION ABOUT THE POLICIES - -- PREMIUM PROVISIONS -- Premium Allocation and POLICY VALUES -- Policy Value). THE POLICY VALUE The Policy has a Policy Value which reflects the following: premium payments made; investment performance of the sub-accounts to which amounts have been allocated; interest credited by the Company to amounts allocated to the general account; partial withdrawals; and deduction of charges described under "Charges and Deductions" below. The Policy Value is the sum of the values in the Investment Accounts, the Guaranteed Interest Account and the Loan Account. Investment Account. An Investment Account is established under the Policy for each sub-account of the Separate Account to which net premiums or transfer amounts have been allocated. An Investment Account measures the interest of the Policy in the corresponding sub-account. The value of each Investment Account under the Policy varies each Business Day and reflects the investment performance of the Portfolio shares held in the corresponding sub-account (See DETAILED INFORMATION ABOUT THE POLICIES -- POLICY VALUES --Policy Value). Guaranteed Interest Account. The Guaranteed Interest Account consists of that portion of the Policy Value based on net premiums allocated to, and amounts transferred to, the general account of the Company. Manulife New York credits interest on amounts in the Guaranteed Interest Account at an effective annual rate guaranteed to be at least 4% (see DETAILED INFORMATION ABOUT THE POLICIES -- POLICY VALUES -- The General Account). Loan Account. When a policy loan is made, Manulife New York will establish a Loan Account under the Policy and will transfer an amount from the Investment Accounts and the Guaranteed Interest Account to the Loan Account. The Company will credit interest to amounts in the Loan Account at an effective annual rate of at least 4%. The actual rate credited on loan amounts will be the rate charged on loan amounts less an interest rate differential, currently 1.75%, except on Select Loan Amounts where the interest rate differential, subject to change in certain circumstances, is currently 0% (see DETAILED INFORMATION ABOUT THE POLICIES -- POLICY VALUES -- Policy Loans). Transfers Are Permitted. A policyowner may make transfers among the sub-accounts of the Separate Account and the Company's general account, subject to certain restrictions. Twelve transfers per policy year may be made at no cost to the policyowner; excess transfers will be permitted at a cost of $25 per transfer. All transfer requests received at the same time are treated as a single transfer request. Certain restrictions may apply to transfer requests (see DETAILED INFORMATION ABOUT THE POLICIES -- POLICY VALUES -- Transfers of Policy Value). USING THE POLICY VALUE Borrowing Against The Policy Value. The policyowner may borrow against the Policy Value. The minimum loan amount is $500. Loan interest will be charged on a fixed basis at an effective annual rate of 5.75% (see DETAILED INFORMATION ABOUT THE POLICIES -- POLICY VALUES -- Policy Loans). A Policyowner May Make A Partial Withdrawal Of The Policy Value. After a Policy has been in force for two years the policyowner may make a partial withdrawal of the Policy Value. The minimum withdrawal amount is $500. The policyowner may specify that the withdrawal is to be made from a specific Investment Account or the Guaranteed Interest 8 13 Account. A partial withdrawal may result in a reduction in the face amount of the Policy and may also result in the assessment of a portion of the surrender charges to which the Policy is subject (See DETAILED INFORMATION ABOUT THE POLICIES - --POLICY VALUES -- Partial Withdrawals and Surrenders, Charges and Deductions and Surrender Charges). The Policy May Be Surrendered For Its Net Cash Surrender Value. The Net Cash Surrender Value is equal to the Policy Value less surrender charges, outstanding monthly deductions due and the value of the Policy Debt. Surrender of a Policy during the Surrender Charge Period will usually result in assessment of surrender charges (see DETAILED INFORMATION ABOUT THE POLICIES -- POLICY VALUES - -- Partial Withdrawals and Surrenders, Charges and Deductions and Surrender Charges). CHARGES AND DEDUCTIONS 1) DEDUCTIONS FROM PREMIUMS. The Company reserves the right to make a charge for state, local and Federal taxes in an amount not to exceed 3.60%. The Company currently makes no deduction of charges from premium payments for state, local and Federal taxes. 2) SURRENDER CHARGES. Manulife New York will usually deduct a deferred underwriting charge and a deferred sales charge if, during the Surrender Charge Period: - the Policy is surrendered for its Net Cash Surrender Value, - a partial withdrawal in excess of the Withdrawal Tier Amount is made, - a decrease in face amount is requested, or - the Policy lapses. The deferred underwriting charge is $4.50 for each $1,000 of face amount of life insurance coverage initially or added by increase. In effect, the charge applies only to the first $500,000 of face amount initially purchased or the first $500,000 of each subsequent increase in face amount. Thus, the charge made in connection with any one underwriting will not exceed $2,250. The maximum deferred sales charge is 50% of premiums paid up to a maximum number of Target Premiums that varies (from -2.00 to 2.59) according to the issue age of the life insured, the face amount at issue and the amount of any increase. The full amount of the deferred underwriting charge and the deferred sales charge will be in effect for five years following Policy issue. Beginning in the sixth year these charges grade downward over a maximum ten-year period (see DETAILED INFORMATION ABOUT THE POLICIES -- POLICY VALUES -- Charges and Deductions and Surrender Charges). In the event of a face amount increase, the surrender charges applicable to the increase will be those rates that would apply if a Policy were issued to the life insured at his or her then attained age and based on the amount of the increase. 3) MONTHLY DEDUCTIONS. At the beginning of each policy month Manulife New York deducts from the Policy Value: - an administration charge of $35 per month until the first policy anniversary; thereafter $10 per month (the right is reserved to increase the administration charge by an additional amount of up to $.01 per $1,000 of face amount per month) - a charge for the cost of insurance, 9 14 - a charge for mortality and expense risks of 0.075% per month through the later of the tenth policy anniversary and the policyowner's attained age 60 and, thereafter, 0.0375% per month. This charge is assessed against the value of the policyowner's investment accounts, and - charge(s) for any supplementary benefit(s) added to the Policy. The cost of insurance charge varies based on the net amount at risk under the Policy and the applicable cost of insurance rate. Cost of insurance rates vary according to issue age, the duration of the coverage, sex, any additional ratings indicated in the policy, and risk class of the life insured. The maximum cost of insurance rate that can be charged is guaranteed not to exceed the 1980 Commissioners Standard Ordinary Smoker/Nonsmoker Mortality Tables. However, any additional ratings as indicated in the Policy will be added to the cost of insurance rate (see DETAILED INFORMATION ABOUT THE POLICIES -- POLICY VALUES - --Charges and Deductions and Monthly Deductions). If the Policy is still in force when the life insured attains age 100, no further monthly deductions will be taken from the Policy Value. 4) OTHER CHARGES. Charges will be imposed on certain transfers of Policy Values, including a $25 charge for each transfer in excess of twelve per policy year and a $5 charge for each Dollar Cost Averaging transfer if Policy Value does not exceed $15,000 (see DETAILED INFORMATION ABOUT THE POLICIES -- POLICY VALUES -- Transfers of Policy Value). Certain expenses are, or will be, assessed against the assets of the Portfolios, as follows: INVESTMENT MANAGEMENT FEES AND EXPENSES. Investment management fees paid by Manufacturers Investment Trust (excluding the Lifestyle Trusts) range from .25% to 1.10% of the assets of the Portfolios. The Lifestyle Trusts do not charge an investment management fee. Total Trust Annual Expenses range from .54% to 1.95% of the assets of the Portfolios. In the case of the Lifestyle Trusts, MSS, the adviser to Manufacturers Investment Trust, has voluntarily agreed to pay the expenses of the Lifestyle Trusts (other than the expenses of the Underlying Portfolios). Absent the expense reimbursement agreement between the adviser and Manufacturers Invest Trust, total trust annual expenses for the Lifestyle Trusts would range from .748% to 1.156%. This expense reimbursement may be terminated at any time. Because each Lifestyle Trust will invest in shares of Underlying Portfolios each will bear its pro rata share of the fees and expenses incurred by the Underlying Portfolios (see DETAILED INFORMATION ABOUT THE POLICIES - --POLICY VALUES -- Charges and Deductions and Other Charges). Manulife New York reserves the right to charge or establish a provision for any Federal, state or local taxes that may be attributable to the Separate Account or the operations of the Company with respect to the Policies in addition to the deductions for state, local and Federal taxes currently being made. SUPPLEMENTARY BENEFITS A policyowner may choose to add certain supplementary benefits to the Policy. These supplementary benefits are offered subject to state approval and include an accidental death benefit, life insurance for additional insured persons, supplementary insurance option, change of life insured and a disability benefit to waive the cost of monthly deductions. The cost of any supplementary benefits will be deducted from the Policy Value monthly (see DETAILED INFORMATION ABOUT THE POLICIES -- OTHER PROVISIONS - --Supplementary Benefits). DEFAULT Unless the No Lapse Guarantee or Death Benefit Guarantee is in effect, the Policy will go into default if the Net Cash Surrender Value at the beginning of any policy month would go below zero after deducting the monthly charges then due. The Policy will not go into default if the policy qualifies for the No Lapse Guarantee or Death Benefit Guarantee. The Company will notify the policyowner in the event the Policy goes into default, and will allow a grace period in which the policyowner may make a premium payment sufficient to bring the Policy out of default. If the required premium is not paid 10 15 during the grace period the Policy will terminate (see DETAILED INFORMATION ABOUT THE POLICIES -- OTHER GENERAL POLICY PROVISIONS -- Policy Default). DEATH BENEFIT GUARANTEE On Policies issued and maintained with a minimum face amount of $250,000, as long as the Death Benefit Guarantee Cumulative Premium Test or, where applicable, the Fund Value Test is satisfied, the Company guarantees that the Policy will not go into default (i) prior to the life insured's attaining age 100 if Death Benefit Option 1 is maintained throughout the life of the Policy and (ii) prior to the life insured reaching age 85 if Death Benefit Option 2 is selected at any time, regardless of the investment performance of the Funds underlying the Policy Value. On Policies with face amounts of less than $250,000 there is no Death Benefit Guarantee after the third policy anniversary (see DETAILED INFORMATION ABOUT THE POLICIES -- INSURANCE BENEFIT -- Death Benefit Guarantee). NO LAPSE GUARANTEE On Policies issued with a face amount of at least $250,000, as long as the No Lapse Guarantee Cumulative Premium Test is satisfied, Manulife New York will guarantee that the Policy will not go into default, even if a combination of Policy loans, adverse investment experience and other factors should cause the Policy's Net Cash Surrender Value to be insufficient to meet the monthly deductions due at the beginning of a policy month. For purposes of determining the face amount at issue for the No Lapse Guarantee, the face amount shall include any amounts purchased under the supplementary insurance option. The No Lapse Guarantee Period is the first 5 Policy Years for life insureds with an issue age up to and including 85. It is not offered to life insureds whose Issue Age exceeds 85 (see DETAILED INFORMATION ABOUT THE POLICIES --INSURANCE BENEFIT - -- No Lapse Guarantee). REINSTATEMENT A terminated policy may be reinstated by the policyowner within either the 21-day or five-year period following the date of termination, providing certain conditions are met (see DETAILED INFORMATION ABOUT THE POLICIES -- OTHER GENERAL POLICY PROVISIONS -- Policy Reinstatement). FREE LOOK A Policy may be returned for a refund of premium within the later of: - 10 days after it is received - 45 days after the application for the Policy is signed - 10 days after Manulife New York mails or delivers a notice of this right of withdrawal. If a policyowner requests an increase in face amount which results in new surrender charges, the "free look" provision will also apply to the increase (see DETAILED INFORMATION ABOUT THE POLICIES -- PREMIUM PROVISIONS -- Short-Term Cancellation Right and "Free Look" Provisions). FEDERAL TAX MATTERS Manulife New York believes that a Policy issued on a standard risk class basis should meet the definition of a life insurance contract as set forth in Section 7702 of the Code. With respect to a Policy issued on a substandard basis, there is less guidance available to determine if such a Policy would satisfy the Section 7702 definition of a life insurance contract, particularly if the policyowner pays the full amount of premiums permitted under such a Policy. Assuming that a Policy qualifies as a life insurance contract for Federal income tax payments, a policyowner should not be deemed to be in constructive receipt of Policy Value under a Policy until there is a distribution from the Policy. Moreover, death benefits payable under a Policy should be completely excludable from the gross income of the beneficiary. As a result, the beneficiary generally should not be taxed on these proceeds (see DETAILED INFORMATION ABOUT THE POLICIES -- MISCELLANEOUS MATTERS -- Federal Income Tax Considerations and Tax Status of the Policy). 11 16 Under certain circumstances, a Policy may be treated as a "Modified Endowment Contract ("MEC"). If the Policy is a MEC, then all pre-death distributions, including Policy loans, will be treated first as a distribution of taxable income and then as a return of investment in the Policy. In addition, prior to age 59 1/2 any such distributions generally will be subject to a 10% penalty tax (see DETAILED INFORMATION ABOUT THE POLICIES -- MISCELLANEOUS MATTERS -- Federal Income Tax Considerations and Tax Treatment Of Policy Benefits). If the Policy is not a MEC, distributions generally will be treated first as a return of investment in the Policy and then a disbursement of taxable income. Moreover, loans will not be treated as distributions. Select Loans may, however, be treated as taxable distributions. A policyowner considering the use of systematic policy loans as one element of a comprehensive retirement income plan should consult his or her personal tax advisor regarding the potential tax consequences if such loans were to so reduce Policy Value that the Policy would lapse, absent additional payments. The premium payment necessary to avert lapse would increase with the age of the insured. Finally, neither distributions nor loans under a Policy that is not a MEC are subject to the 10% penalty tax (see DETAILED INFORMATION ABOUT THE POLICIES -- MISCELLANEOUS MATTERS -- Federal Income Tax Considerations). The United States Congress has in the past considered, and in the future may consider legislation that, if enacted, could change the tax treatment of life insurance policies. In addition, the Treasury Department may amend existing regulations, or adopt new interpretations of existing laws, state tax laws or, if the policyowner is not a United States resident, foreign tax laws, which may affect the tax consequences to him or her, the lives insured or the beneficiary. These laws may change from time to time without notice and, as a result, the tax consequences may be altered. There is no way of predicting whether, when or in what form any such change would be adopted. Any such change could have a retroactive effect regardless of the date of enactment. The Company suggests that a tax advisor be consulted. ESTATE AND GENERATION-SKIPPING TAXES The proceeds of this life insurance policy may be taxable under Estate and Generation-Skipping Tax provisions of the Code. The policyowner should consult his or her tax advisor regarding these taxes. GENERAL INFORMATION ABOUT THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK, THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK SEPARATE ACCOUNT B AND MANUFACTURERS INVESTMENT TRUST THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK AND THE MANUFACTURERS LIFE INSURANCE COMPANY Manulife New York is a stock life insurance company organized under the laws of New York in 1992. The Company's principal office is located at Corporate Center at Rye, 555 Theodore Fremd Avenue, Rye, New York 10580. The Company is a wholly-owned subsidiary of Manulife North America. Manulife North America is a stock life insurance company organized under the laws of Delaware in 1979 with its principal office located at 116 Huntington Avenue, Boston, Massachusetts 02116. The ultimate parent of the Company is Manulife. Prior to January 1, 1996, Manulife North America was a wholly owned subsidiary of North American Life Assurance Company ("NAL"), a Canadian mutual life insurance company. On January 1, 1996 NAL and Manulife merged with the combined company retaining the Manulife name. Effective January 1, 1996, immediately following the merger of NAL and Manulife, Manulife North America experienced a corporate restructuring which resulted in the formation of a newly organized holding corporation, Manulife-Wood Logan Holding Co., Inc., formerly NAWL Holding Co., Inc. ("MWL"). MWL holds all of the outstanding shares of Manulife North America and Wood Logan Associates, Inc. ("WLA"). MWL is owned 62.5% by The Manufacturers Life Insurance Company (U.S.A.), 22.5% by MRL Holding, LLC and 15% by the principals of WLA. On January 19, 1998, the Board of Directors of Manulife asked the Management of Manulife to prepare a plan for conversion of Manulife from a mutual life insurance company to an investor-owned, publicly traded stock 12 17 company. Any demutualization plan for Manulife is subject to the approval of the Manulife Board of Directors and participating policy holders as well as regulatory approval. THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK SEPARATE ACCOUNT B Manulife New York established the Separate Account on May 6, 1997, subject to approval by the Superintendent of Insurance of New York, as a separate account under New York law. The Separate Account holds assets that are segregated from all Manulife New York's other assets. The Separate Account is currently used only to support variable life insurance policies. Manulife New York 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 Manulife New York. Manulife New York will at all times maintain assets in the Separate Account with a total market value at least equal to the reserves and other liabilities relating to variable benefits under all policies participating in the Separate Account. These assets may not be charged with liabilities which arise from any other business Manulife New York conducts. However, all obligations under the variable life insurance policies are general corporate obligations of Manulife New York. The Separate Account is registered with the SEC under the Investment Company Act of 1940, as amended (the "1940 Act") as a unit investment trust. A unit investment trust is a type of investment company which invests its assets in specified securities, such as the shares of one or more investment companies, rather than in a portfolio of unspecified securities. Registration under the 1940 Act does not involve any supervision by the SEC of the management or investment policies or practices of the Separate Account. For state law purposes the Separate Account is treated as a part or division of Manulife New York. MANUFACTURERS INVESTMENT TRUST Each sub-account of the Separate Account will purchase shares only of a particular Manulife Trust. Manufacturers Investment Trust, formerly NASL Series Trust, is registered under the 1940 Act as an open-end management investment company. The Separate Account will purchase and redeem shares of Manulife Trusts at net asset value. Shares will be redeemed to the extent necessary for Manulife New York to provide benefits under the Policies, to transfer assets from one sub-account to another or to the general account as requested by policyowners, and for other purposes consistent with the Policies. Any dividend or capital gain distribution received from a Portfolio will be reinvested immediately at net asset value in shares of that Portfolio and retained as assets of the corresponding sub-account. Manufacturers Investment 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. Manulife New York will 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 Manufacturers Investment Trust prospectus. Manufacturers Investment Trust receives investment advisory services from MSS, the successor to NASL Financial Services, Inc. MSS is a registered investment adviser under the Investment Advisers Act of 1940. Manufacturers Investment Trust also employs subadvisers. The following subadvisers provide investment subadvisory services to the indicated portfolios:
PORTFOLIO SUBADVISER AGGRESSIVE GROWTH PORTFOLIOS Pacific Rim Emerging Markets Trust Manufacturers Adviser Corporation* Science & Technology Trust T. Rowe Price Associates, Inc. International Small Cap Trust Founders Asset Management, Inc. Emerging Growth Trust Warburg Pincus Asset Management, Inc. Pilgrim Baxter Growth Trust Pilgrim Baxter & Associates, Ltd. Small/Mid Cap Trust Fred Alger Management, Inc. International Stock Trust Rowe Price-Fleming International, Inc.
GROWTH PORTFOLIOS 13 18
Worldwide Growth Trust Founders Asset Management, Inc. Global Equity Trust Morgan Stanley Asset Management Inc. Small Company Value Trust Rosenberg Institutional Equity Management Equity Trust Fidelity Management Trust Company Growth Trust Founders Asset Management, Inc. Quantitative Equity Trust Manufacturers Adviser Corporation* Equity Index Trust Manufacturers Adviser Corporation* Blue Chip Growth Trust T. Rowe Price Associates, Inc. Real Estate Securities Trust Manufacturers Adviser Corporation*
PORTFOLIO SUBADVISER GROWTH & INCOME PORTFOLIOS Value Trust Miller Anderson & Sherrerd, LLP International Growth and Income Trust J.P. Morgan Investment Management Inc. Growth and Income Trust Wellington Management Company, LLP Equity-Income Trust T. Rowe Price Associates, Inc. BALANCED PORTFOLIOS Balanced Trust Founders Asset Management, Inc. Aggressive Asset Allocation Trust Fidelity Management Trust Company Moderate Asset Allocation Trust Fidelity Management Trust Company Conservative Asset Allocation Trust Fidelity Management Trust Company BOND PORTFOLIOS High Yield Trust Miller Anderson & Sherrerd, LLP Strategic Bond Trust Salomon Brothers Asset Management Inc Global Government Bond Trust Oechsle International Advisors, L.P. Capital Growth Bond Trust Manufacturers Adviser Corporation* Investment Quality Bond Trust Wellington Management Company, LLP U.S. Government Securities Trust Salomon Brothers Asset Management Inc MONEY MARKET PORTFOLIOS Money Market Trust Manufacturers Adviser Corporation* LIFESTYLE PORTFOLIOS Lifestyle Aggressive 1000 Trust Manufacturers Adviser Corporation* Lifestyle Growth 820 Trust Manufacturers Adviser Corporation* Lifestyle Balanced 640 Trust Manufacturers Adviser Corporation* Lifestyle Moderate 460 Trust Manufacturers Adviser Corporation* Lifestyle Conservative 280 Trust Manufacturers Adviser Corporation*
- ---------- * Manufacturers Adviser Corporation is an indirect wholly-owned subsidiary of Manulife. INVESTMENT OBJECTIVES AND CERTAIN POLICIES OF THE PORTFOLIOS The investment objectives and certain policies of the Portfolios currently available to policyowners through corresponding sub-accounts are set forth below. There is, of course, no assurance that these objectives will be met. AGGRESSIVE GROWTH PORTFOLIOS PACIFIC RIM EMERGING MARKETS TRUST. The investment objective of the Pacific Rim Emerging Markets Trust is to achieve long-term growth of capital. Manufacturers Adviser Corporation ("MAC") manages the Pacific Rim Emerging Markets Trust and seeks to achieve this investment objective by investing in a diversified portfolio that is comprised primarily of common stocks and equity-related securities of corporations domiciled in countries of the Pacific Rim region. SCIENCE & TECHNOLOGY TRUST. The investment objective of the Science & Technology Trust is long-term growth of capital. 14 19 Current income is incidental to the Portfolio's objective. T. Rowe Price Associates, Inc. ("T. Rowe Price") manages the Science & Technology Trust. INTERNATIONAL SMALL CAP TRUST. The investment objective of the International Small Cap Trust is to seek long-term capital appreciation. Founders Asset Management, Inc. ("Founders") manages the International Small Cap Trust and will pursue this objective by investing primarily in securities issued by foreign companies which have total market capitalizations or annual revenues of $1 billion or less. These securities may represent companies in both established and emerging economies throughout the world. EMERGING GROWTH TRUST. The investment objective of the Emerging Growth Trust is maximum capital appreciation. Warburg Pincus Asset Management, Inc. manages the Emerging Growth Trust and will pursue this objective by investing primarily in a portfolio of equity securities of domestic companies. The Emerging Growth Trust ordinarily will invest at least 65% of its total assets in common stocks or warrants of emerging growth companies that represent attractive opportunities for maximum capital appreciation. PILGRIM BAXTER GROWTH TRUST. The investment objective of the Pilgrim Baxter Growth Trust is capital appreciation. Pilgrim Baxter & Associates, Ltd. ("PBA") manages the Pilgrim Baxter Growth Trust and seeks to achieve its objective by investing in companies believed by PBA to have an outlook for strong earnings growth and the potential for significant capital appreciation. SMALL/MID CAP TRUST. The investment objective of the Small/Mid Cap Trust is to seek long term capital appreciation. Fred Alger Management, Inc. manages the Small/Mid Cap Trust and will pursue this objective by investing at least 65% of the Portfolio's total assets (except during temporary defensive periods) in small/mid cap equity securities. INTERNATIONAL STOCK TRUST. The investment objective of the International Stock Trust is to achieve long-term growth of capital. Rowe Price-Fleming International, Inc. manages the International Stock Trust and seeks to obtain this objective by investing primarily in common stocks of established, non-U.S. companies. GROWTH PORTFOLIOS WORLDWIDE GROWTH TRUST. The investment objective of the Worldwide Growth Trust is long-term growth of capital. Founders manages the Worldwide Growth Trust and seeks to attain this objective by normally investing at least 65% of its total assets in equity securities of growth companies in a variety of markets throughout the world. GLOBAL EQUITY TRUST. The investment objective of the Global Equity Trust is long-term capital appreciation. Morgan Stanley Asset Management Inc. manages the Global Equity Trust and intends to pursue this objective by investing primarily in equity securities of issuers throughout the world, including U.S. issuers. SMALL COMPANY VALUE TRUST. The investment objective of the Small Company Value Trust is long-term growth of capital. Rosenberg Institutional Equity Management manages the Small Company Value Trust and seeks to attain the foregoing objective by investing in equity securities of smaller companies which are traded principally in the markets of the United States. EQUITY TRUST. The principal investment objective of the Equity Trust is growth of capital. Current income is a secondary consideration although growth of income may accompany growth of capital. Fidelity Management Trust Company ("FMTC") manages the Equity Trust and seeks to attain the foregoing objective by investing primarily in common stocks of United States issuers or securities convertible into or which carry the right to buy common stocks. GROWTH TRUST. The investment objective of the Growth Trust is to seek long-term growth of capital. Founders manages the Growth Trust and will pursue this objective by investing, under normal market conditions, at least 65% of its total assets in common stocks of well-established, high-quality growth companies that Founders believes have the potential to increase earnings faster than the rest of the market. QUANTITATIVE EQUITY TRUST. The investment objective of the Quantitative Equity Trust is to achieve intermediate and long-term growth through capital appreciation and current income by investing in common stocks and other equity securities of well established companies with promising prospects for providing an above-average rate of return. MAC manages the Quantitative Equity Trust. 15 20 EQUITY INDEX TRUST. The investment objective of the Equity Index Trust is to achieve investment results which approximate the total return of publicly traded common stocks in the aggregate, as represented by the Standard & Poor's 500 Composite Stock Price Index. MAC manages the Equity Index Trust. BLUE CHIP GROWTH TRUST. The primary investment objective of the Blue Chip Growth Trust is to provide long-term growth of capital. Current income is a secondary objective, and many of the stocks in the portfolio are expected to pay dividends. T. Rowe Price manages the Blue Chip Growth Trust. REAL ESTATE SECURITIES TRUST. The investment objective of the Real Estate Securities Trust is to achieve a combination of long-term capital appreciation and satisfactory current income by investing in real estate related equity and debt securities. MAC manages the Real Estate Securities Trust. GROWTH & INCOME PORTFOLIOS VALUE TRUST. The investment objective of the Value Trust is to realize an above-average total return over a market cycle of three to five years, consistent with reasonable risk. Miller Anderson & Sherrerd, LLP ("MAS") manages the Value Trust and seeks to attain this objective by investing primarily in common and preferred stocks, convertible securities, rights and warrants to purchase common stocks, ADRs and other equity securities of companies with equity capitalizations usually greater than $300 million. INTERNATIONAL GROWTH AND INCOME TRUST. The investment objective of the International Growth and Income Trust is to seek long-term growth of capital and income. The Portfolio is designed for investors with a long-term investment horizon who want to take advantage of investment opportunities outside the United States. J.P. Morgan Investment Management Inc. manages the International Growth and Income Trust. GROWTH AND INCOME TRUST. The investment objective of the Growth and Income Trust is to provide long-term growth of capital and income consistent with prudent investment risk. Wellington Management Company LLP ("Wellington Management") manages the Growth and Income Trust and seeks to achieve the Trust's objective by investing primarily in a diversified portfolio of common stocks of U.S. issuers which Wellington Management believes are of high quality. EQUITY-INCOME TRUST. The investment objective of the Equity-Income Trust is to provide substantial dividend income and also long term capital appreciation. T. Rowe Price manages the Equity-Income Trust and seeks to attain this objective by investing primarily in dividend-paying common stocks, particularly of established companies with favorable prospects for both increasing dividends and capital appreciation. BALANCED PORTFOLIOS BALANCED TRUST. The investment objective of the Balanced Trust is current income and capital appreciation. Founders is the manager of the Balanced Trust and seeks to attain this objective by investing in a balanced portfolio of common stocks, U.S. and foreign government obligations and a variety of corporate fixed-income securities. AUTOMATIC ASSET ALLOCATION TRUSTS (AGGRESSIVE, MODERATE AND CONSERVATIVE). The investment objective of each of the Automatic Asset Allocation Trusts is to realize the highest potential total return consistent with a specified level of risk tolerance -- conservative, moderate or aggressive. The amount of each Portfolio's assets invested in each category of securities -- debt, equity, and money market -- is dependent upon the judgment of FMTC as to what percentages of each Portfolio's assets in each category will contribute to the limitation of risk and the achievement of its investment objective. BOND PORTFOLIOS HIGH YIELD TRUST. The investment objective of High Yield Trust is to realize an above-average total return over a market cycle of three to five years, consistent with reasonable risk. MAS manages the High Yield Trust and seeks to attain this objective by investing primarily in high yield debt securities, including corporate bonds and other fixed-income securities. STRATEGIC BOND TRUST. The investment objective of the Strategic Bond Trust is to seek a high level of total return consistent with preservation of capital. The Strategic Bond Trust seeks to achieve its objective by giving its Subadviser, Salomon Brothers Asset Management Inc ("SBAM") broad discretion to deploy the Strategic Bond Trust's assets among certain segments of the fixed-income market as SBAM believes will best contribute to the achievement of the Portfolio's 16 21 objective. GLOBAL GOVERNMENT BOND TRUST. The investment objective of the Global Government Bond Trust is to seek a high level of total return by placing primary emphasis on high current income and the preservation of capital. Oechsle International Advisors, L.P. manages the Global Government Bond Trust and intends to pursue this objective by investing primarily in a selected global portfolio of high-quality, fixed-income securities of foreign and U.S. governmental entities and supranational issuers. CAPITAL GROWTH BOND TRUST. The investment objective of the Capital Growth Bond Trust is to achieve growth of capital by investing in medium-grade or better debt securities, with income as a secondary consideration. MAC manages the Capital Growth Bond Trust. The Capital Growth Bond Trust differs from most "bond" funds in that its primary objective is capital appreciation, not income. INVESTMENT QUALITY BOND TRUST. The investment objective of the Investment Quality Bond Trust is to provide a high level of current income consistent with the maintenance of principal and liquidity. Wellington Management manages the Investment Quality Bond Trust and seeks to achieve the Portfolio's objective by investing primarily in a diversified portfolio of investment grade corporate bonds and U.S. Government bonds with intermediate to longer term maturities. U.S. GOVERNMENT SECURITIES TRUST. The investment objective of the U.S. Government Securities Trust is to obtain a high level of current income consistent with preservation of capital and maintenance of liquidity. SBAM manages the U.S. Government Securities Trust and seeks to attain its objective by investing a substantial portion of its assets in debt obligations and mortgage-backed securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities and derivative securities such as collateralized mortgage obligations backed by such securities. MONEY MARKET PORTFOLIO MONEY MARKET TRUST. The investment objective of the Money Market Trust is to obtain maximum current income consistent with preservation of principal and liquidity. MAC manages the Money Market Trust and seeks to achieve this objective by investing in high quality, U.S. dollar denominated money market instruments. LIFESTYLE PORTFOLIOS LIFESTYLE AGGRESSIVE 1000 TRUST. The investment objective of the Lifestyle Aggressive 1000 Trust is to provide long term growth of capital. Current income is not a consideration. MAC manages the Portfolio and seeks to achieve this objective by investing approximately 100% of the Lifestyle Trust's assets in Underlying Portfolios which invest primarily in equity securities. LIFESTYLE GROWTH 820 TRUST. The investment objective of the Lifestyle Growth 820 Trust is to provide long term growth of capital with consideration also given to current income. MAC manages the Portfolio and seeks to achieve this objective by investing approximately 20% of the Lifestyle Trust's assets in Underlying Portfolios which invest primarily in fixed income securities and approximately 80% of its assets in Underlying Portfolios which invest primarily in equity securities. LIFESTYLE BALANCED 640 TRUST. The investment objective of the Lifestyle Balanced 640 Trust is to provide a balance between high level of current income and growth of capital with a greater emphasis given to capital growth. MAC manages the Portfolio and seeks to achieve this objective by investing approximately 40% of the Lifestyle Trust's assets in Underlying Portfolios which invest primarily in fixed income securities and approximately 60% of its assets in Underlying Portfolios which invest primarily in equity securities. LIFESTYLE MODERATE 460 TRUST. The investment objective of the Lifestyle Moderate 460 Trust is to provide a balance between a high level of current income and growth of capital with a greater emphasis given to high income. MAC manages the Portfolio and seeks to achieve this objective by investing approximately 60% of the Lifestyle Trust's assets in Underlying Portfolios which invest primarily in fixed income securities and approximately 40% of its assets in Underlying Portfolios which invest primarily in equity securities. LIFESTYLE CONSERVATIVE 280 TRUST. The investment objective of the Lifestyle Conservative 280 Trust is to provide a high level of current income with some consideration also given to growth of capital. MAC manages the Portfolio and seeks to achieve this objective by investing approximately 80% of the Lifestyle Trust's assets in Underlying Portfolios which invest 17 22 primarily in fixed income securities and approximately 20% of its assets in Underlying Portfolios which invest primarily in equity securities. A full description of the Manufacturers Investment Trust, its investment objectives, policies and restrictions, the risks associated therewith, its expenses, and other aspects of its operation is contained in the accompanying Manufacturers Investment Trust prospectus, which should be read together with this prospectus. DETAILED INFORMATION ABOUT THE POLICIES PREMIUM PROVISIONS POLICY ISSUE AND INITIAL PREMIUM To purchase a Policy, an applicant must submit a completed application. Manulife New York will issue a Policy only if it has a face amount of at least $50,000 ($100,000 for preferred risk policies). A Policy will generally be issued to persons between ages 0 and 90. In certain circumstances the Company may at its sole discretion issue a Policy to persons above age 90. Before issuing a Policy, Manulife New York will require evidence of insurability satisfactory to it. A life insured will have a risk class of preferred/non-smoker, preferred/smoker, standard/non-smoker or standard/smoker as determined by underwriting rules. Persons failing to meet standard underwriting requirements nonetheless may be eligible to purchase a Policy provided an additional rating is assigned. Acceptance of an application is subject to the Company's insurance underwriting rules. Each Policy is issued with a policy date from which policy years, policy months and policy anniversaries are all determined. Each Policy also has an effective date which is the date the Company becomes obligated under the Policy and when the first monthly deductions are taken. If an application is accompanied by a check for at least the Initial Premium and the application is accepted, the policy date will be the date the application and check were received at the Manulife New York Service Office and the effective date will be the date Manulife New York's underwriters approve issuance of the Policy. If an application is accompanied by a check for at least the Initial Premium, the life insured may be covered under the terms of a conditional insurance agreement until the effective date. If an application accepted by the Company is not accompanied by a check for at least the Initial Premium, the Policy will be issued with a policy date which is seven days after issuance of the Policy (the "issue date") and with an effective date which is the date the Service Office receives at least the Initial Premium. In certain situations a different policy date may be used. The Initial Premium must be received within 60 days after the policy date; however, the Initial Premium may be required within 30 days on Policies issued with Additional Ratings. If the Initial Premium is not paid or if the application is rejected, the Policy will be canceled and any premiums paid will be returned to the applicant. Under certain circumstances a Policy may be issued with a backdated policy date. A Policy will not be backdated more than six months before the date of the application for the Policy. Monthly deductions will be made for the period the policy date is backdated. All premiums received prior to the effective date of a Policy will be credited with interest from the date of receipt at the rate of return then being earned on amounts allocated to the Money Market Trust. On the effective date, the premiums paid plus interest credited, net of deductions for Federal, state and local taxes, will be allocated among the Investment Accounts or the Guaranteed Interest Account in accordance with the policyowner's instructions. All premiums received on or after the effective date of the Policy will be allocated among the Investment Accounts or the Guaranteed Interest Account as of the date the premiums were received at the Manulife New York 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. PREMIUM ALLOCATION Net 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 Net Premium. The percentage allocation to any account may be any whole number between zero and 100, provided the total percentage allocations equal 100. A policyowner may change the way in which Net Premiums are allocated at any time without charge. The change will take effect on the date a written or authorized telephonic request for 18 23 change, in a format satisfactory to the Company, is received at the Manulife New York Service Office. PREMIUM LIMITATIONS 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 certain limitations. After the Initial Premium, all premiums must be paid to the Manulife New York Service Office. Unlike traditional insurance, premiums are not payable at specified intervals or in specified amounts. A Policy will be issued with a Planned Premium which is based on the amount of premium the policyowner wishes to pay. It is recommended that the Planned Premium be such that the No Lapse Guarantee or Death Benefit Guarantee Cumulative Premium Test (see DETAILED INFORMATION ABOUT THE POLICIES -- INSURANCE BENEFITS -- No Lapse Guarantee and Death Benefit Guarantee) will be satisfied. Manulife New York will send notices to the policyowner setting forth the Planned Premium at the payment interval selected by the policyowner, unless payment is being made pursuant to a pre-authorized payment plan. However, the policyowner is under no obligation to make the indicated payment. Manulife New York will not accept any premium payment which is less than $50, unless the premium is payable pursuant to a pre-authorized payment plan. In that case the Company will accept a payment of as little as $10. Manulife New York may change these minimums on 90 days' written notice. The Policies also limit the sum of the premiums that may be paid at any time in order to preserve the qualification of the Policies as life insurance for Federal tax purposes. These limitations are set forth in each Policy. Manulife New York reserves the right to refuse or refund any premium payments that may cause the Policy to fail to qualify as life insurance under applicable tax law. SHORT-TERM CANCELLATION RIGHT AND "FREE LOOK" PROVISIONS A Policy may be returned for a refund of the premium within 10 days after it is received, within 45 days after the application for the Policy is signed, or within 10 days after Manulife New York mails or delivers a notice of right of withdrawal, whichever is latest. The Policy can be mailed or delivered to the Manulife New York agent who sold it or to the Manulife New York 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, Manulife New York will refund any premium paid. Manulife New York reserves the right to delay the refund of any premium paid by check until the check has cleared. If a policyowner requests an increase in face amount which results in new surrender charges, he or she will have the same rights as described above to cancel the increase. If canceled, the Policy Value and the surrender charges will be recalculated to the amounts they would have been had the increase not taken place. A policyowner may request a refund of all or any portion of premiums paid during the free look period, and the Policy Value and the surrender charges will be recalculated to the amounts they would have been had the premiums not been paid. INSURANCE BENEFIT THE INSURANCE BENEFIT If the Policy is in force at the time of the life insured's death, Manulife New York will pay an insurance benefit based on the death benefit option selected by the policyowner upon receipt of due proof of death. The amount payable will be the death benefit under the selected option, plus any amounts payable under any supplementary benefits added to the Policy, less the value of the Policy Debt at the date of death. The insurance benefit will be paid in one sum unless another form of settlement option is agreed to by the beneficiary and the Company. If the insurance benefit is paid in one sum, Manulife New York 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 Manulife New York will pay only the Net Cash Surrender Value. NO LAPSE GUARANTEE On Policies issued with a face amount of at least $250,000 (calculated as described below), the policyowner may elect the No Lapse Guarantee. If elected, as long as the No Lapse Guarantee Cumulative Premium Test (see below) is satisfied during the 19 24 No Lapse Guarantee Period, as described below, Manulife New York will guarantee that the Policy will not go into default (see DETAILED INFORMATION ABOUT THE POLICIES -- OTHER GENERAL POLICY PROVISIONS -- Policy Default), even if a combination of Policy loans, adverse investment experience and other factors should cause the Policy's Net Cash Surrender Value to be insufficient to meet the monthly deductions due at the beginning of a policy month. For purposes of determining the face amount at issue for the No Lapse Guarantee, the face amount shall include any amounts purchased under the supplementary insurance option. The No Lapse Guarantee Period is the first five Policy Years for life insureds with an issue age up to and including 85. It is not offered to life insureds whose Issue Age exceeds 85. While the No Lapse Guarantee is in effect, Manulife New York will determine at the beginning of each policy month whether the No Lapse Guarantee Cumulative Premium Test, described below, has been satisfied. If it has not been satisfied, the Company will notify the policyowner of that fact and allow a 61-day grace period in which the policyowner may make a premium payment sufficient to keep the No Lapse Guarantee in effect. This required payment, as described in the notification to the policyowner, will be equal to the outstanding premium requirement as of the date the No Lapse Guarantee was not satisfied plus the Monthly No Lapse Guarantee Premium due for the next two policy months. If the required payment is not received by the end of the grace period, the No Lapse Guarantee will terminate, and the Policy subsequently may go into default if the Policy's Net Cash Surrender Value is insufficient to meet the monthly deductions due at the beginning of a policy month. A death benefit option change will also terminate the No Lapse Guarantee if it is in effect at the time of the change as will a decrease in face amount below $250,000. The No Lapse Guarantee cannot be reinstated after it has been terminated (see DETAILED INFORMATION ABOUT THE POLICIES -- OTHER GENERAL POLICY PROVISIONS -- Policy Default, and INSURANCE BENEFIT -- Death Benefit Option Changes). NO LAPSE GUARANTEE CUMULATIVE PREMIUM TEST The No Lapse Guarantee Cumulative Premium Test is satisfied if, as of the beginning of the policy month, the sum of all premiums paid to date less any partial withdrawals and less any Policy Debt is at least equal to the sum of the Monthly No Lapse Guarantee Premiums due since the policy date, as follows: The Policy will satisfy the No Lapse Guarantee Cumulative Premium Test if (a) is greater than or equal to (b), where: (a) is the sum of all premiums paid, less any partial withdrawals and less any Policy Debt; and (b) is the sum of the Monthly No Lapse Guarantee Premiums due since the policy date. The Monthly No Lapse Guarantee Premium is one-twelfth of the No Lapse Guarantee Premium. The No Lapse Guarantee Premium is set forth in the Policy. It is subject to change if the face amount of the Policy is changed (see DETAILED INFORMATION ABOUT THE POLICIES -- INSURANCE BENEFIT -- Face Amount Changes), or if there is any change in the supplementary benefits added to the Policy or in the risk class of any life insured. DEATH BENEFIT GUARANTEE Policies With Face Amounts of at Least $250,000. If elected by the policyowner, on Policies issued and maintained with a minimum face amount of $250,000, and if the Death Benefit Guarantee Cumulative Premium Test (see below) is satisfied, Manulife New York will guarantee that the Policy will not go into default (see DETAILED INFORMATION ABOUT THE POLICIES --OTHER GENERAL POLICY PROVISIONS - --Policy Default) even if a combination of policy loans, adverse investment experience or other factors should cause the Policy's Net Cash Surrender Value to be insufficient to meet the monthly deductions due at the beginning of a policy month. If elected by the policyowner, on Policies issued and maintained with a minimum face amount of $250,000, if after the tenth policy anniversary the Death Benefit Guarantee Cumulative Premium Test is not satisfied but the Fund Value Test (see below) is satisfied, Manulife New York will keep the Death Benefit Guarantee in effect. This Death Benefit Guarantee will expire at the end of a policy year specified in the Policy, currently (i) the year in which the life insured reaches attained age 100 if Death Benefit Option 1 is maintained throughout the life of the Policy and (ii) the year in which the life insured reaches attained age 85 if Death Benefit Option 2 is selected at any time. While the guarantee is 20 25 in effect, Manulife New York will determine at the beginning of each policy month whether the Death Benefit Guarantee Cumulative Premium Test or the Fund Value Test has been satisfied. If neither has been satisfied, the Company will notify the policyowner of that fact and allow a 61-day grace period in which the policyowner may make a premium payment sufficient to keep the Death Benefit Guarantee in effect. The required payment will be equal to the outstanding premium required to meet the Death Benefit Guarantee Cumulative Premium Test at the date neither test was satisfied, plus the Monthly Death Benefit Guarantee Premium due for the next two policy months. If the required payment is not received by the end of the grace period, the Death Benefit Guarantee will terminate. Once the Death Benefit Guarantee is terminated, it cannot be reinstated. Policies With Face Amounts Under $250,000. On Policies with a face amount less than $250,000 at issue or after face amount decrease, if the Death Benefit Guarantee Cumulative Premium Test is satisfied in the first three years, Manulife New York will guarantee that the Policy will not go into default even if a combination of policy loans, adverse investment experience or other factors should cause the Policy's Net Cash Surrender Value to be insufficient to meet the monthly deductions due at the beginning of a policy month. After the third policy anniversary, there is no Death Benefit Guarantee on (a) Policies issued with face amounts of less than $250,000 or (b) Policies on which a face amount decrease has resulted in a face amount of less than $250,000. Death Benefit Guarantee Cumulative Premium Test. The Policy provides for a Death Benefit Guarantee Cumulative Premium Test. The Death Benefit Guarantee Cumulative Premium Test is satisfied if at the beginning of each policy month the sum of all premiums paid to date less any partial withdrawals and any Policy Debt is at least equal to the sum of the Monthly Death Benefit Guarantee Premiums due since the policy date. The Death Benefit Guarantee Premium is set forth in the Policy. It is subject to change if the face amount of the Policy or the death benefit option is changed (see DETAILED INFORMATION ABOUT THE POLICIES -- INSURANCE BENEFITS -- Death Benefit Option Changes and Face Amount Changes) or if there is any change in the supplementary benefits added to the Policy or in the risk class of the life insured. Fund Value Test. The Policy provides for a Fund Value Test. The Fund Value Test is applicable after the tenth anniversary of the Policy. The Fund Value Test is satisfied if at the beginning of each policy month the Net Policy Value is greater than or equal to the Gross Single Premium. DEATH BENEFIT OPTIONS The Policy permits the policyowner to select one of two death benefit options - -- Option 1 and Option 2. Under Option 1 the death benefit is the face amount of the Policy at the date of death or, if greater, the Policy Value at the date of death multiplied by the applicable percentage in the table set forth below. Under Option 2 the death benefit is the face amount of the Policy plus the Policy Value at the date of death or, if greater, the Policy Value at the date of death multiplied by the applicable percentage in the following table:
CORRIDOR CORRIDOR CORRIDOR CORRIDOR AGE PERCENTAGE AGE PERCENTAGE AGE PERCENTAGE AGE PERCENTAGE 40 & below 250% 51 178% 62 126% 73 109% 41 243 52 171 63 124 74 107 42 236 53 164 64 122 75-90 105 43 229 54 157 65 120 91 104 44 222 55 150 66 119 92 103 45 215 56 146 67 118 93 102 46 209 57 142 68 117 94 101 47 203 58 138 69 116 95 & above 100 48 197 59 134 70 115 49 191 60 130 71 113 50 185 61 128 72 111
Regardless of which death benefit option is in effect, the relationship of Policy Value to death benefit will change whenever the "corridor percentages" are used to determine the amount of the death benefit. This will occur whenever multiplying the Policy Value by the applicable percentage set forth in the above table results in a greater death benefit than would otherwise apply under the selected option. For example, assume the life insured under a Policy with a face amount of $100,000 has an attained age of 40. If Option 1 is in effect, the corridor percentage will produce a greater death benefit whenever the Policy Value exceeds $40,000 (250% x $40,000 = $100,000). If the Policy Value is less than $40,000, an incremental change in Policy Value, up or down, will have no effect on the death benefit. If the Policy Value is greater than $40,000, an 21 26 incremental change in Policy Value will result in a change in the death benefit by a factor of 2.5. Thus, if the Policy Value were to increase to $40,010, the death benefit would be increased to $100,025 (250% x $40,010 = $100,025). If Option 2 were in effect in the above example, the corridor percentage would produce a greater death benefit whenever the Policy Value exceeded $66,667 (250% x 66,667 = 166,667). At that point the death benefit produced by multiplying the Policy Value by 250% would result in a greater amount than adding the Policy Value to the face amount of the Policy. If the Policy Value is less than $66,667, an incremental change in Policy Value will have a dollar-for-dollar effect on the death benefit. If the Policy Value is greater than $66,667, an incremental change in Policy Value will result in a change in the death benefit by a factor of 2.5 in the same manner as would be the case under Option 1 when the corridor percentage determined the death benefit. DEATH BENEFIT OPTION CHANGES The death benefit option is selected initially by the policyowner in the application. After the Policy has been in force for one year the death benefit option may be changed effective as of any subsequent policy month. Written request for a change must be received by Manulife New York at least 30 days prior to the beginning of a policy month in order to become effective on that date. The Company reserves the right to limit a request for change if the change would cause the Policy to fail to qualify as life insurance for tax purposes. A change in death benefit option will result in a change in the Policy's face amount in order to avoid any change in the amount of the death benefit. If the change in death benefit is from Option 1 to Option 2, the new face amount will be equal to the face amount prior to the change minus the Policy Value on the effective date of the change. A change to Option 2 will not be allowed if it would cause the face amount of the Policy to go below the minimum face amount of $50,000 ($100,000 for preferred risk policies). A change of death benefit option to Option 2 will shorten the death benefit guarantee period to the year in which the life insured reaches attained age 85. If the change in death benefit is from Option 2 to Option 1, the new face amount will be equal to the face amount prior to the change plus the Policy Value on the effective date of the change. The increase in face amount resulting from a change to Option 1 will not affect the amount of surrender charges to which a Policy may be subject. The Company has the right to require satisfactory evidence of insurability before permitting a change from Option 2 to Option 1. The Company does not currently require evidence of insurability when making this change. Policyowners who wish to have level insurance coverage should generally select Option 1. Under Option 1, increases in Policy Value usually will reduce the net amount of risk under a Policy which will reduce cost of insurance charges. This means that favorable investment performance should result in a faster increase in Policy Value than would occur under an identical Policy with Option 2 in effect. However, the larger Policy Value which may result under Option 1 will not affect the amount of the death benefit unless the corridor percentages are used to determine the death benefit. Policyowners who want to have the Policy Value reflected in the death benefit so that any increases in Policy Value will increase the death benefit should generally select Option 2. Under Option 2, the net amount at risk will remain level unless the corridor percentages are used to determine death benefit, in which case increases in Policy Value will increase the net amount at risk. FACE AMOUNT CHANGES Subject to certain limitations, a policyowner may, upon written request, increase or decrease the face amount of the Policy. A change in face amount may affect the Death Benefit Guarantee Premium, the monthly deductions and surrender charges (see DETAILED INFORMATION ABOUT THE POLICIES -- POLICY VALUES --Charges and Deductions). Currently, each increase or decrease (other than a decrease resulting from a partial withdrawal) in face amount must be at least $50,000 ($100,000 for increases in preferred risk policies). Manulife New York reserves the right to increase or decrease the minimum face amount change on 90 days' written notice to the policyowner. The Company also reserves the right to limit a change in face amount to the extent necessary to prevent the Policy from failing to qualify as life insurance for tax purposes. 22 27 Increases. Increases in face amount are subject to satisfactory evidence of insurability. Increases may be made only once per policy year and only after the first policy anniversary. An increase will become effective at the beginning of the next policy month following the date Manulife New York approves the requested increase. The Company reserves the right to refuse a requested increase if the life insured's age at the effective date of the increase would be greater than the maximum issue age for new Policies at that time. An increase in face amount will usually result in the Policy's being subject to new surrender charges. The new surrender charges will be computed as if a new Policy were being purchased for the increase in face amount. For purposes of determining the new deferred sales charge, a portion of the Policy Value at the time of the increase, and a portion of the premiums paid on or subsequent to the increase, will be deemed to be premiums attributable to the increase (see DETAILED INFORMATION ABOUT THE POLICIES -- POLICY VALUES -- Charges and Deductions and Surrender Charges). Any increase in face amount to a level less than the highest face amount previously in effect will have no effect on the surrender charges to which the Policy is subject, since surrender charges, if applicable, will have been assessed in connection with the prior decrease in face amount. The insurance coverage eliminated by the decrease of the oldest face amount will be deemed to be restored first. As with the purchase of a Policy, a policyowner will have a free look right with respect to any increase resulting in new surrender charges. No additional premium is required for a face amount increase. However, a premium payment may be necessary to prevent the Policy from going into default, since new surrender charges resulting from an increase would automatically reduce the Net Cash Surrender Value of the Policy. Moreover, a new Death Benefit Guarantee Premium will be determined. Decreases. A decrease in the face amount may be requested only once per policy year and only after the Policy has been in force for one year. A decrease in face amount will become effective at the beginning of the next policy month following the receipt of a properly executed request. A decrease will not be allowed if it would cause the face amount to go below the minimum face amount of $50,000 ($100,000 for preferred risk policies). A decrease in face amount during the Surrender Charge Period will usually result in surrender charges being deducted from the Policy Value (see DETAILED INFORMATION ABOUT THE POLICIES -- POLICY VALUES -- Charges and Deductions and Surrender Charges). For purposes of determining surrender and cost of insurance charges, a decrease will reduce face amount in the following order: (a) the face amount provided by the most recent increase, then (b) the face amounts provided by the next most recent increases successively, and finally (c) the initial face amount. POLICY VALUES POLICY VALUE A Policy has a Policy Value, a portion of which is available to the policyowner by making a policy loan or partial withdrawal or upon surrender of the Policy (see "Policy Loans" and "Partial Withdrawals and Surrenders" below). The Policy Value may also affect the amount of the death benefit (see DETAILED INFORMATION ABOUT THE POLICIES -- INSURANCE BENEFIT -- Death Benefit Options). The Policy Value at any time is equal to the sum of the Values in the Investment Accounts, the Guaranteed Interest Account and the Loan Account. The following discussion relates only to the Investment Accounts. Policy loans are discussed under "Policy Loans" and the Guaranteed Interest Account is discussed under "The General Account." The portion of the Policy Value based on the Investment Accounts is not guaranteed and will vary each Business Day with the investment performance of the underlying Portfolio. An Investment Account is established under each Policy for each sub-account of the Separate Account to which net premiums or transfer amounts have been allocated. Each Investment Account under a Policy measures the interest of the Policy in the corresponding sub-account. The value of the Investment Account established for a particular sub-account is equal to the number of units of that sub-account credited to the Policy times the value of such units. Units of a particular sub-account are credited to a Policy when net premiums are allocated to that sub-account or amounts are transferred to that sub-account. Units of a sub-account are canceled whenever amounts are deducted, transferred or withdrawn from the sub-account. The number of units credited or canceled for a specific transaction is based on the dollar amount of the transaction divided by the value of the unit at the end of 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 at the end of the Business Day on which the premium is received at the Manulife New York Service Office or other office or entity so 23 28 designated by Manulife New York. Units are valued at the end of each Business Day. A Business Day is deemed to end at the time of the determination of the net asset value of the Fund shares. 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 at the end of 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 at the end of the next Business Day. The value of a unit of each sub-account was initially fixed at $10.00. For each subsequent Business Day the unit value is determined by multiplying the unit value for the preceding Business Day by the "net investment factor" for the particular sub-account for such subsequent Business Day. The net investment factor for a sub-account for any Business Day is equal to (a) divided by (b), where: (a) is the net asset value of the underlying Portfolio shares held by that sub-account at the end of such Business Day before any policy transactions are made on that day; and (b) is the net asset value of the underlying Portfolio shares held by that sub-account at the end of the immediately preceding Business Day after all policy transactions have been made for that day. Manulife New York reserves the right to adjust the above formula for any taxes determined by it to be attributable to the operations of the sub-account. TRANSFERS OF POLICY VALUE A policyowner may change the extent to which his or her Policy Value is based upon any specific sub-account of the Separate Account or the Company's general account. Such changes are made by transferring amounts from one or more Investment Accounts or the Company's general account to other Investment Accounts or the Company's general account. A policyowner is permitted to make twelve transfers each policy year free of charge. Additional transfers in each policy year may be made at a cost of $25 per transfer. This charge will be assessed against the Investment Account or the Guaranteed Interest Account from which the amount is being transferred. For this purpose all transfer requests received by Manulife New York on the same Business Day are treated as a single transfer request. There will be no change in issue age, risk class of the life insured or face amount as a result of any transfer. The maximum amount that may be transferred from the Guaranteed Interest Account in any one policy year is the greater of $500 or 15% of the Guaranteed Interest Account value at the previous policy anniversary. Any transfer which involves a transfer out of the Guaranteed Interest Account may not involve a transfer to the Investment Account for the Money Market Trust. Transfer requests must be in a format satisfactory to Manulife New York and in writing, or by telephone, if a currently valid telephone transfer authorization form is on file. Although failure to follow reasonable procedures may result in Manulife New York's liability for any losses resulting from unauthorized or fraudulent telephone transfers, Manulife New York will not be liable for following instructions communicated by telephone that it reasonably believes to be genuine. Manulife New York will employ reasonable procedures to confirm that instructions communicated by telephone are genuine. Such procedures include: confirming receipt of a valid telephone authorization form; tape recording all telephone transactions; and providing written confirmation thereof. While the Policy is in force, the policyowner may transfer the Policy Value from all the Investment Accounts to the Guaranteed Interest Account, without incurring transfer charges: (a) within 18 months after the Issue Date; or (b) within 60 days of the effective date of a material change in the investment objectives of the sub-accounts, or within 60 days of the date the notification of such change. Limitations. To the extent that total surrenders, partial withdrawals and transfers out of a sub-account exceed total net premium allocations and transfers into that sub-account, portfolio securities of the underlying Portfolio may have to be sold. 24 29 Excessive sales of the investment portfolio securities in such a situation could be detrimental to that Portfolio and to policyowners with Policy Values allocated to sub-accounts investing in that Portfolio. To protect the interests of all policyowners, Manulife New York reserves the right to limit transfers when in its opinion processing transfers would be detrimental to a particular portfolio or to policyowners who had allocated investments to that portfolio (see DETAILED INFORMATION ABOUT THE POLICIES - -- OTHER PROVISIONS -- Payment of Proceeds). Dollar Cost Averaging. Manulife New York will offer policyowners a Dollar Cost Averaging program. Under this program amounts will be automatically transferred at predetermined intervals from one Investment Account to any other Investment Account(s) or the Guaranteed Interest Account. Under the Dollar Cost Averaging program the policyowner will designate an amount to be transferred at predetermined intervals from one Investment Account into any other Investment Account(s) or the Guaranteed Interest Account. Each transfer under the Dollar Cost Averaging program must be of a minimum amount as set by Manulife New York. Once set, this minimum may be changed at any time at the discretion of Manulife New York. Currently, no charge will be made for this program if the Policy Value exceeds $15,000 on the date of transfer. Otherwise, there will be a charge of $5 for each transfer under this program. The charge will be deducted from the value of the Investment Account out of which the transfer occurs. If insufficient funds exist to effect a Dollar Cost Averaging transfer, including the charge, if applicable, the transfer will not be effected and the policyowner will be so notified. Manulife New York reserves the right to cease to offer this program on 90 days' written notice to the policyowner. Asset Allocation Balancer Transfers. Manulife New York will also offer policyowners the ability to have amounts automatically transferred among stipulated Investment Accounts to maintain an allocated percentage in each stipulated Investment Account. Under the Asset Allocation Balancer program the policyowner will designate an allocation of Policy Value among Investment Accounts. At six month intervals, beginning six months after the policy date, Manulife New York will move amounts among the Investment Accounts as necessary to maintain the policyowner's chosen allocation. A change to the policyowner's premium allocation instructions will automatically result in a change in Asset Allocation Balancer instructions so that the two are identical unless the policyowner either instructs Manulife New York differently or a Dollar Cost Averaging request is in effect. Currently, there is no charge for this program; however, Manulife New York reserves the right to institute a charge on 90 days' written notice to the policyowner. Manulife New York reserves the right to cease to offer this program on 90 days' written notice to the policyowner. POLICY LOANS While the Policy is in force, the policyowner may borrow against the Policy Value of his or her Policy. The Policy serves as the only security for the loan. The minimum amount of any loan is $500. The maximum loan amount is the amount which would cause the Modified Policy Debt to equal the loan value of the Policy on the date of the loan. The loan value is the Policy's Cash Surrender Value less the monthly deductions due to the next policy anniversary. The Modified Policy Debt as of any date is the Policy Debt (the aggregate amount of policy loans, including borrowed interest, less any loan repayments) plus the amount of interest to be charged to the next policy anniversary, all discounted from the next policy anniversary to such date at an annual rate of 4%. An amount equal to the Modified Policy Debt is transferred to the Loan Account to ensure that a sufficient amount will be available to pay interest on the Policy Debt at the next policy anniversary. For example, assume a Policy with a loan value of $5,000, no outstanding policy loans and a loan interest rate of 5.75%. The maximum amount that can be borrowed is an amount that will cause the Modified Policy Debt to equal $5,000. If the loan is made on a policy anniversary, the maximum loan will be $4,917. This amount at 5.75% interest will equal $5,200 one year later; $5,200 discounted to the date of the loan at 4% (the Modified Policy Debt) equals $5,000. Because the minimum rate of interest credited to the Loan Account is 4%, $5,000 must be transferred to the Loan Account to ensure that $5,200 will be available at the next policy anniversary to cover the interest accrued on the Policy Debt. When a loan is made, Manulife New York will deduct from the Investment Accounts or the Guaranteed Interest Account, and transfer to the Loan Account, an amount which will result in the Loan Account value being equal to the 25 30 Modified Policy Debt. The policyowner may designate how the amount to be transferred to the Loan Account is allocated among the accounts from which the transfer is to be made. In the absence of instructions, the amount to be transferred will be allocated to each account in the same proportion as the value in each Investment Account and the Guaranteed Interest Account bears to the Net Policy Value. A transfer from an Investment Account will result in the cancellation of units of the underlying sub-account equal in value to the amount transferred from the Investment Account. However, since the Loan Account is part of the Policy Value, transfers made in connection with a loan will not change the Policy Value. A policy loan may result in a Policy's failing to satisfy the No Lapse Guarantee and/or the Death Benefit Guarantee Cumulative Premium Test, since the Policy Debt is subtracted from the sum of the premiums paid in determining whether the Death Benefit Guarantee Cumulative Premium Test is satisfied. As a result, the Death Benefit Guarantee or No Lapse Guarantee may terminate (see DETAILED INFORMATION ABOUT THE POLICIES -- INSURANCE BENEFIT -- No Lapse Guarantee and Death Benefit Guarantee and OTHER GENERAL POLICY PROVISIONS -- Policy Default). Moreover, if the Death Benefit Guarantee or No Lapse Guarantee is not in force, a policy loan may cause a Policy to be more susceptible to going into default, since a policy loan will be reflected in the Net Cash Surrender Value (see DETAILED INFORMATION ABOUT THE POLICIES -- OTHER GENERAL POLICY PROVISIONS - --Policy Default). A policy loan will also affect future Policy Values, since that portion of the Policy Value in the Loan Account will increase in value at the crediting interest rate rather than varying with the performance of the underlying Funds selected by the policyowner or increasing in value at the rate of interest credited for amounts allocated to the Guaranteed Interest Account. Policy loans may have tax consequences. A policyowner considering the use of systematic policy loans as one element of a comprehensive retirement income plan should consult his or her personal tax advisor regarding the potential tax consequences if such loans were to so reduce Policy Value that the Policy would lapse, absent additional payments. The premium payment necessary to avert lapse would increase with the age of the insured (see DETAILED INFORMATION ABOUT THE POLICIES --MISCELLANEOUS MATTERS -- Federal Income Tax Considerations and Tax Treatment of Policy Benefits). Finally, a policy loan will affect the amount payable on the death of the life insured, since the death benefit is reduced by the value of the 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 fixed at an effective annual rate of 5.75%. If the interest due on a policy anniversary is not paid by the policyowner, the interest will be borrowed against the Policy. Interest Credited To The Loan Account. Manulife New York will credit interest to any amount in the Loan Account at an effective annual rate of at least 4%. The actual rate credited is: - On amounts up to the Policy's Select Loan Amount, the rate of interest charged on the policy loan less an interest rate differential, currently 0%; provided, however, if at some time in the future it is determined that the current differential could cause the loan to be treated as a taxable distribution under any applicable ruling, regulation or court decision, Manulife New York has the right to increase the differential on all subsequent Select Loan Amounts either (i) to an amount that may be prescribed in such ruling, regulation or court decision that would result in the transaction being treated as a loan under Federal tax law or (ii) if no amount is prescribed, to an amount that Manulife New York considers to be more likely to result in the transaction being treated as a loan under Federal tax law. - On amounts in excess of the Select Loan Amount as described above, the rate of interest charged on the policy loan less an interest rate differential, currently 1.75%. Prior to the later of the tenth policy anniversary and the anniversary following attained age 55, the amount available as a Select Loan is zero; after the later of the tenth policy anniversary and the policy anniversary following attained age 55, the amount available annually as a Select Loan is equal to 12% of the Policy's Net Cash Surrender Value at the previous policy anniversary. The amount available as a Select Loan applies to existing and new loans. If, at the time a policyowner is considering a Select Loan, interest due currently on his or her outstanding loans equals or exceeds the Select Loan Amount, the Select Loan feature could not be used to withdraw additional cash from Policy Value. The total of all loans, including the Select Loan Amount, cannot exceed the maximum loan amount as described above. To illustrate the amount available as a Select Loan, assume that a Policy has an issue age of 47 and a Net Cash Surrender Value on the eleventh policy anniversary of $10,000. The Select Loan Amount available during the twelfth policy year is $1,200 (12% x $10,000). Assume that at the beginning of the twelfth policy year, a loan of $1,500 is taken. $1,200 of that 26 31 amount is considered the Select Loan Amount, $300 an ordinary policy loan. At the end of the twelfth policy year, assume that the Net Cash Surrender Value is $9,000. The Select Loan Amount available during the thirteenth policy year is $1,080 (12% x $9,000). If not already repaid, the $300 from the prior year's loan that was not considered a Select Loan is immediately converted to a Select Loan, leaving $780 of the Select Loan Amount available for the thirteenth policy year (provided that the sum of all outstanding loans does not exceed the Policy's maximum loan amount). The amount of any unpaid interest on the Select Loan and the ordinary policy loan from the twelfth policy year also would be borrowed as a Select Loan up to the maximum Select Loan Amount and thereby reduce by that amount the $780 available for borrowing as a Select Loan during the remainder of the thirteenth policy year. Loan Account Adjustments. When a loan is first taken out, and at specified events thereafter, the value of the Loan Account is adjusted. Whenever the Loan Account is adjusted, the difference between (i) the Loan Account before any adjustment and (ii) the Modified Policy Debt at the time of adjustment, is transferred between the Loan Account and the Investment Accounts or the Guaranteed Interest Account. The amount transferred to or from the Loan Account will be such that the value of the Loan Account is equal to the Modified Policy Debt after the adjustment. The specified events which cause an adjustment to the Loan Account are (i) a policy anniversary, (ii) a partial or full loan repayment, (iii) a new loan being taken out, or (iv) when an amount is needed to meet a monthly deduction. A loan repayment may be implicit in that policy debt is effectively repaid upon termination (i.e., upon death of the life insured, surrender or lapse of the policy). In each of these instances, the Loan Account will be adjusted so that any excess of the Loan Account over the Modified Policy Debt after the repayment will be included in the termination proceeds. Except as noted below in the Loan Repayments section, amounts transferred from the Loan Account will be allocated to the Investment Accounts and the Guaranteed Interest Account in the same proportion as the value in the corresponding "loan sub-account" bears to the value of the Loan Account. A "loan sub-account" exists for each Investment Account and for the Guaranteed Interest Account. Amounts transferred to the Loan Account are allocated to the appropriate loan sub-account to reflect the account from which the transfer was made. Loan Account Illustration. (Dollar amounts in this illustration have been rounded to the nearest dollar.) The operation of the Loan Account may be illustrated by consideration of a Policy with a loan value of $5,000, a loan interest rate of 5.75%, and a maximum loan amount on a policy anniversary of $4,917. For purposes of the illustration, assume that the Select Loan Amount is zero. If a loan in the maximum amount of $4,917 is made, an amount equal to the Modified Policy Debt, $5,000, is transferred to the Loan Account. At the next policy anniversary the value of the Loan Account will have increased to $5,200 ($5,000 x 1.04) reflecting interest credited at an effective annual rate of 4.0%. At that time the loan will have accrued interest charges of $283 ($4,917 x .0575), bringing the Policy Debt to $5,200. If the accrued interest charges are paid on the policy anniversary, the Policy Debt will continue to be $4,917, and the Modified Policy Debt, reflecting interest for the next policy year and discounting the Policy Debt and such interest at 4%, will be $5,000. An amount will be transferred from the Loan Account to the Guaranteed Interest Account or the Investment Accounts so that the Loan Account value will equal the Modified Policy Debt. Since the Loan Account value was $5,200, a transfer of $200 will be required ($5,200 -- $5,000). If, however, the accrued interest charges of $283 are borrowed, an amount will be transferred from the Investment Accounts and the Guaranteed Interest Account so that the Loan Account value will equal the Modified Policy Debt recomputed at the policy anniversary. The new Modified Policy Debt is the Policy Debt, $5,200, plus loan interest to be charged to the next policy anniversary, $299 ($5,200 x .0575), discounted at 4%, which results in a figure of $5,288. Since the value of the Loan Account was $5,200, a transfer of $88 will be required. This amount is equivalent to the 1.75% interest rate differential on the $5,000 transferred to the Loan Account on the previous policy anniversary. Loan Repayments. Policy Debt may be repaid in whole or in part at any time prior to the death of the life insured provided the Policy is in force. When a repayment is made, the amount is credited to the Loan Account and a transfer is made to the Guaranteed Interest Account or the Investment Accounts so that the Loan Account at that time equals the Modified Policy Debt. Loan repayments will first be allocated to the Guaranteed Interest Account until the associated loan sub-account is reduced to zero. Loan repayments will then be allocated to each Investment Account in the same proportion as the value in the corresponding loan sub-account bears to the value of the Loan Account. Amounts paid to the Company not specifically designated in writing as loan repayments will be treated as premiums. 27 32 PARTIAL WITHDRAWALS AND SURRENDERS After a Policy has been in force for one policy year, the policyowner may make a partial withdrawal of the Net Cash Surrender Value. The minimum amount that may be withdrawn is $500. The policyowner should specify the portion of the withdrawal to be taken from each Investment Account and the Guaranteed Interest Account. In the absence of instructions the withdrawal will be allocated among such accounts in the same proportion as the Policy Value in each account bears to the Net Policy Value. No more than one partial withdrawal may be made in any one policy month. A partial withdrawal made during the Surrender Charge Period will usually result in the assessment of a portion of the surrender charges to which the Policy is subject (see DETAILED INFORMATION ABOUT THE POLICIES -- POLICY VALUES -- Charges and Deductions and Surrender Charges) if the withdrawal is in excess of the Withdrawal Tier Amount. The Withdrawal Tier Amount is equal to 10% of the Net Cash Surrender Value determined as of the previous policy anniversary. The portion of a partial withdrawal that is considered to be in excess of the Withdrawal Tier Amount includes all previous partial withdrawals that have occurred in the current policy year. If the Option 1 death benefit is in effect under a Policy from which a partial withdrawal is made, the face amount of the Policy will be reduced(see DETAILED INFORMATION ABOUT THE POLICIES -- POLICY VALUES -- Charges and Deductions and Surrender Charges). A Policy may be surrendered for its Net Cash Surrender Value at any time while the life insured is living. The Net Cash Surrender Value is equal to the Policy Value less any surrender charges and outstanding monthly deductions due (the "Cash Surrender Value") minus the value of the Policy Debt. The Net Cash Surrender Value will be determined at the end of the Business Day on which Manulife New York receives the Policy and a written request for surrender at its Service Office. After a Policy is surrendered, the insurance coverage and all other benefits under the Policy will terminate. Surrender of a Policy during the Surrender Charge Period will usually result in the assessment by Manulife New York of surrender charges (see DETAILED INFORMATION ABOUT THE POLICIES --POLICY VALUES -- Charges and Deductions and Surrender Charges). CHARGES AND DEDUCTIONS Charges under the Policy are assessed as (i) deductions from premiums, (ii) surrender charges upon surrender, partial withdrawals, decreases in face amount or lapse, (iii) monthly deductions, and (iv) other charges. These charges are described below. DEDUCTIONS FROM PREMIUMS Manulife New York currently makes no deduction of charges from premium payments for state and local taxes. The maximum amount of deductions for such charges which may be applicable to future premium payments is 2.35%. Manulife New York currently makes no deduction of a charge from premium payments for Federal taxes. The maximum amount of deduction for such a charge which may be applicable to future premium payments is 1.25%. SURRENDER CHARGES Manulife New York will assess surrender charges upon surrender, a partial withdrawal of Policy Value in excess of the Withdrawal Tier Amount, a requested decrease in face amount, or lapse. The charges will usually be assessed if any of the above transactions occurs within the Surrender Charge Period unless the charges have been previously deducted. There are two surrender charges -- a deferred underwriting charge and a deferred sales charge. Deferred Underwriting Charge. The deferred underwriting charge is $4.50 for each $1,000 of face amount of life insurance coverage initially purchased or added by increase. In effect, the charge applies only to the first $500,000 of face amount initially purchased or the first $500,000 of each subsequent increase in face amount. Thus, the charge made in connection with any one underwriting will not exceed $2,250. The amount of the charge remains level for five years. Following the fifth year after issuance of the Policy or a face amount increase, the charge applicable to the initial face amount or increase will decrease each month by varying rates depending upon the life insured's issue age until the charge has decreased to zero. The applicable percentage of the deferred underwriting charges to which the Policy is subject is illustrated by Table 2. The deferred underwriting charge is designed to cover the administrative expenses associated with underwriting and policy 28 33 issue, including the costs of processing applications, conducting medical examinations, determining the life insured's risk class and establishing policy records. Deferred Sales Charge. The maximum deferred sales charge is 50% of premiums paid up to a maximum number of Target Premiums that varies (from -2.00 to 2.59) according to the issue age of the life insured, the face amount at issue and the amount of any increase. This charge compensates the Company for some of the expenses of selling and distributing the Policies, including agents' commissions, advertising, agent training and the printing of prospectuses and sales literature. The deferred sales charge deducted in any policy year is not specifically related to sales expenses incurred in that year. Instead, the Company expects that the major portion of the sales expenses attributable to a Policy will be incurred during the first policy year, although the deferred sales charge might be deducted up to fifteen years later. Manulife New York anticipates that the aggregate amounts received under the Policies for sales charges will be insufficient to cover aggregate sales expenses. To the extent that sales expenses exceed sales charges, Manulife New York will pay the excess from its other assets or surplus, including amounts derived from the mortality and expense risks charge described below. The Target Premium for the initial face amount is specified in the Policy. A Target Premium will be computed for each increase in face amount above the highest face amount of coverage previously in effect, and the policyowner will be advised of each new Target Premium. Target Premiums depend upon the face amount of insurance provided at issue or by an increase and the issue age and sex of the life insured. The maximum number of Target Premiums subject to the deferred sales charge varies, based on the issue age of the life insured, the face amount at issue and the amount of any increase, according to Table 1: TABLE 1: NUMBER OF TARGET PREMIUMS SUBJECT TO DEFERRED SALES CHARGE (APPLICABLE TO THE INITIAL FACE AMOUNT AND INCREASES)
AGE $250,000 OR UNDER AGE $250,000 UNDER AGE $250,000 UNDER MORE $250,000 OR MORE $250,000 OR MORE $250,000 0 -2.00* 1.68 30 1.56 2.15 60 2.06 2.43 1 -0.52* 1.46 31 1.61 2.19 61 2.06 2.43 2 0.06 1.45 32 1.67 2.23 62 2.05 2.43 3 0.24 1.45 33 1.72 2.27 63 2.05 2.43 4 0.62 1.46 34 1.78 2.30 64 2.05 2.42 5 0.63 1.47 35 1.83 2.33 65 2.05 2.41 6 0.67 1.49 36 1.86 2.38 66 2.03 2.41 7 0.69 1.51 37 1.89 2.41 67 2.03 2.41 8 0.72 1.52 38 1.91 2.45 68 1.96 2.41 9 0.75 1.54 39 1.94 2.49 69 1.83 2.30 10 0.78 1.55 40 1.96 2.52 70 1.71 2.17 11 0.82 1.58 41 1.98 2.55 71 1.58 2.05 12 0.85 1.60 42 2.01 2.59 72 1.46 1.92 13 0.88 1.61 43 2.04 2.57 73 1.35 1.80 14 0.92 1.63 44 2.06 2.55 74 1.25 1.70 15 0.88 1.52 45 2.08 2.54 75 1.16 1.60 16 0.90 1.53 46 2.12 2.53 76 1.08 1.50 17 0.94 1.58 47 2.16 2.51 77 1.01 1.40 18 0.99 1.64 48 2.20 2.50 78 0.93 1.30 19 1.03 1.68 49 2.21 2.49 79 0.87 1.22 20 1.07 1.72 50 2.19 2.48 80 0.82 1.14 21 1.11 1.77 51 2.17 2.47 81 0.76 1.07 22 1.16 1.82 52 2.16 2.47 82 0.71 1.01 23 1.20 1.86 53 2.15 2.46 83 0.67 0.95 24 1.25 1.91 54 2.13 2.46 84 0.62 0.89 25 1.30 1.95 55 2.12 2.45 85 0.58 0.83 26 1.35 1.99 56 2.10 2.44 86 0.56 0.78 27 1.40 2.04 57 2.09 2.44 87 0.54 0.73 28 1.46 2.08 58 2.08 2.43 88 0.52 0.68 29 1.51 2.12 59 2.07 2.43 89 0.50 0.64 90 0.50 0.63
29 34 * The negative Number of Target Premiums produces a negative Deferred Sales Charge. When combined with the Deferred Underwriting Charge, the negative Deferred Sales Charge reduces the total surrender charge. The maximum deferred sales charge will be in effect for at least the first five years of the Surrender Charge Period. After that, the portion of the deferred sales charge that remains in effect will grade down at a rate that also varies according to the issue age of the life insured until, at the end of the Surrender Charge Period, there is no deferred sales charge. The table to be used to reduce the applicable deferred sales charge during the Surrender Charge Period is set forth in Table 2 to this Prospectus. The applicable table will be set forth in each Policy and the policyowner will be informed of the table to be used in connection with sales charges on increases in face amount. In order to determine the deferred sales charge applicable to a face amount increase, Manulife New York will treat a portion of the Policy Value on the date of increase as a premium attributable to the increase. In addition, a portion of each premium paid on or subsequent to the increase will be attributed to the increase. In each case, the portion attributable to the increase will be the ratio of the "guideline annual premium" for the increase to the sum of the guideline annual premiums for the initial face amount and all increases including the requested increase. TABLE 2: DEFERRED UNDERWRITING CHARGES AND DEFERRED SALES CHARGES
TRANSACTION OCCURS AFTER MONTHLY DEDUCTION TAKEN FOR LAST MONTH PRECEDING PERCENT OF DEFERRED UNDERWRITING CHARGES AND DEFERRED SALES CHARGE BY ISSUE AGE* END OF MONTH* AGE MONTH 0-50 51 52 53 54 55+ ----- ---- -- -- -- -- --- 12 100% 100% 100% 100% 100% 100% 24 100% 100% 100% 100% 100% 100% 36 100% 100% 100% 100% 100% 100% 48 100% 100% 100% 100% 100% 100% 60 100% 100% 100% 100% 100% 100% 72 90% 88.89% 87.50% 85.71% 83.33% 80.00% 84 80% 77.78% 75.00% 71.43% 66.67% 60.00% 96 70% 66.67% 62.50% 57.14% 50.00% 40.00% 108 60% 55.56% 50.00% 42.86% 33.33% 20.00% 120 50% 44.44% 37.50% 28.57% 16.67% 0% 132 40% 33.33% 25.00% 14.28% 0% 144 30% 22.22% 12.50% 0% 156 20% 11.11% 0% 168 10% 0% 180 0%
* Months not shown may be calculated by interpolation. The following example illustrates how deferred underwriting and deferred sales charges are calculated using data from Tables 1 and 2 above. Assume a 36-year-old male (standard risk), whose Policy was issued at age 30, and who has paid $9,000 in premiums under a Policy with a Target Premium of $593 and a face amount of $100,000 surrenders his Policy during the last month of the sixth policy year. A deferred underwriting charge of $405 would be assessed. The maximum deferred underwriting charge of $450 ($4.50 per $1,000 of face amount x 100) would be multiplied by the 90% listed in Table 2 as applicable to surrenders during the last month of the sixth policy year 90% x ($4.50 x 100) = $405. A deferred sales charge of $573.73 would also be assessed. According to Table 1, the maximum number of Target Premiums subject to the deferred sales charge for a person who was 30 years old when his or her Policy with a face amount less than 30 35 $250,000 was issued would be 2.15. Thus $1,274.95 (2.15 x $593) would be the maximum amount of premiums subject to the 50% sales charge, producing a maximum sales charge of $637.48 (50% x $1,274.95 = $637.48). Because the surrender occurs during the last month of the sixth policy year, only 90% (from Table 2 for issue age 30) of the maximum sales charge remains applicable 90% x (.50 x 2.15 x $593) = $573.73. Charges On Partial Withdrawals. Whenever a portion of the surrender charges is deducted as a result of a partial withdrawal of Policy Value in excess of the Withdrawal Tier Amount, the Policy's remaining surrender charges will be reduced by the amount of the charges taken. The surrender charges not assessed as a result of the 10% free withdrawal provision remain in effect under the Policy and may be assessed upon surrender or lapse, other partial withdrawals, or a requested decrease in face amount. The portion of the surrender charges assessed will be based on the ratio of the amount of the withdrawal in excess of the Withdrawal Tier Amount to the Net Cash Surrender Value of the Policy less the Withdrawal Tier Amount immediately prior to the withdrawal. The surrender charges will be deducted from each Investment Account and the Guaranteed Interest Account in the same proportion as the amount of the withdrawal taken from such account bears to the total amount of the withdrawal. If the amount in the account is insufficient to pay the portion of the surrender charges allocated to that account, then the portion of the withdrawal allocated to that account will be reduced so that the withdrawal plus the portion of the surrender charges allocated to that account equal the value of that account. Units equal to the amount of the partial withdrawal taken, and surrender charges deducted, from each Investment Account will be canceled based on the value of such units determined at the end of the Business Day on which Manulife New York receives a written request for withdrawal at its Service Office. If the Option 1 death benefit is in effect under a Policy from which a partial withdrawal is made, the face amount of the Policy will be reduced. If the death benefit is equal to the face amount at the time of withdrawal, the face amount will be reduced by the amount of the withdrawal plus the portion of the surrender charges assessed. If the death benefit is based upon the Policy Value times the applicable percentage set forth under "INSURANCE BENEFIT -- Death Benefit Options" above, the face amount will be reduced only to the extent that the amount of the withdrawal plus the portion of the surrender charges assessed exceeds the difference between the death benefit and the face amount. Reductions in face amount resulting from partial withdrawals will not incur any surrender charges above the surrender charges applicable to the withdrawal. When the face amount of a Policy is based on one or more increases subsequent to issuance of the Policy, a reduction resulting from a partial withdrawal will be applied in the same manner as a requested decrease in face amount, i.e., against the face amount provided by the most recent increase, then against the next most recent increases successively and finally against the initial face amount. Charges On Decreases In Face Amount. As with partial withdrawals, a portion of a Policy's surrender charges will be deducted upon a decrease, or a cancellation of an increase, in face amount requested by the policyowner. Since surrender charges are determined separately for the initial face amount and each face amount increase, and since a decrease in face amount will have a different impact on each level of insurance coverage, the portion of the surrender charges to be deducted with respect to each level of insurance coverage will be determined separately. Such portion will be the same as the ratio of the amount of the reduction in such coverage to the amount of such coverage prior to the reduction. As noted under "INSURANCE BENEFIT -- Face Amount Changes," decreases are applied to the most recent increase first and thereafter to the next most recent increases successively. The charges will be deducted from the Policy Value, and the amount so deducted will be allocated among the Investment Accounts and the Guaranteed Interest Account in the same proportion as the Policy Value in each bears to the Net Policy Value. Whenever a portion of the surrender charges is deducted as a result of a decrease in face amount, the Policy's remaining surrender charges will be reduced by the amount of the charges taken. Charges Remaining After Face Amount Decreases Or Partial Withdrawals. Each time a pro-rata deferred underwriting charge or a pro-rata deferred sales charge for a face amount decrease or for a partial withdrawal is deducted, the remaining deferred underwriting charge and deferred sales charge will be reduced proportionately. The remaining deferred underwriting charge will be calculated using Table 2 above. The actual remaining charge will be the result of (a) divided by (b), multiplied by (c), where: (a) is the grading percentage applicable to the life insured's issue age and Policy duration; (b) is the grading percentage applicable to the life insured's issued age at the time of the last face amount decrease or 31 36 partial withdrawal; and (c) is the remaining deferred sales charge prior to the last face amount decrease or partial withdrawal less the deferred underwriting charge deducted for that face amount decrease or partial withdrawal. The remaining deferred sales charge will be calculated using Table 1 above. The actual remaining charge will be the result of (a) divided by (b), multiplied by (c), where: (a) is the grading percentage applicable to the Policy duration; (b) is the grading percentage at the time of the last face amount decrease or partial withdrawal; and (c) is the remaining deferred sales charge prior to the last face amount decrease or partial withdrawal less the deferred sales charge deducted for that face amount decrease or partial withdrawal. Until the sum of premiums paid equals or exceeds the number of Target Premiums subject to deferred sales charge multiplied by the Target Premium, subsequent premium payments will increase the remaining deferred sales charge. MONTHLY DEDUCTIONS Each month a deduction consisting of an administration charge, a charge for the cost of insurance, a charge for mortality and expense risks, and charge(s) for any supplementary benefit(s) (see DETAILED INFORMATION ABOUT THE POLICIES - --OTHER PROVISIONS -- Supplementary Benefits) is deducted from Policy Value. The monthly deduction will be allocated among the Investment Accounts and (other than the mortality and expense risks charge) the Guaranteed Interest Account in the same proportion as the Policy Value in each bears to the Net Policy Value. Monthly deductions due prior to the effective date will be taken on the effective date instead of the dates they were due. If the Policy is still in force when the life insured attains age 100, no further monthly deductions will be taken from the Policy Value. ADMINISTRATION CHARGE The monthly administration charge is $35 until the first anniversary and, thereafter, $10 (the right is reserved to increase the administration charge by an additional amount up to $.01 per $1,000 of face amount per month). 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 charges 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 is based on the life insured's issue age, the duration of the coverage, sex and risk class. The rate is determined separately for the initial face amount and for each increase in face amount. Cost of insurance rates will generally increase with the life insured's age. Any additional ratings as indicated in the Policy will be added to the cost of insurance rate. The cost of insurance rates used by Manulife New York reflect its expectations as to future mortality experience as based on current experience. The rates may be changed from time to time on a basis which does not unfairly discriminate within the class of life insureds. In no event will the cost of insurance rate exceed the guaranteed rate set forth in the Policy except to the extent that an extra rate is imposed because of an additional rating applicable to the life insured. The guaranteed rates are based on the 1980 Commissioners Standard Ordinary Smoker/Nonsmoker Mortality Tables. The net amount at risk to which the cost of insurance rate is applied is the difference between the death benefit, divided by 1.0032737 (a factor which reduces the net amount at risk for cost of insurance charge purposes by taking into account assumed monthly earnings at an annual rate of 4%), and the Policy Value. Because different cost of insurance rates may apply to different levels of insurance coverage, the net amount at risk will be calculated separately for each level of insurance coverage. When the Option 1 death benefit is in effect, for purposes of determining the net amount at risk applicable to each level of insurance coverage, the Policy Value is attributed first to the initial face amount and then, if the Policy Value is greater than the initial face amount, to each increase in face amount in the order made. 32 37 Because the calculation of the net amount at risk is different under the death benefit options when more than one level of insurance coverage is in effect, a change in the death benefit option may result in a different net amount at risk for each level of insurance coverage than would have occurred had the death benefit option not been changed. Since the cost of insurance is calculated separately for each level of insurance coverage, any change in the net amount at risk for a level of insurance coverage resulting from a change in the death benefit option may affect the amount of the charge for the cost of insurance. Partial withdrawals and decreases in face amount will also affect the manner in which the net amount at risk for each level of insurance coverage is calculated. MORTALITY AND EXPENSE RISKS CHARGE Manulife New York deducts a monthly charge from the Policy Value for the mortality and expense risks it assumes under the Policies. This charge is made at the beginning of each policy month at a rate of 0.075% through the later of the tenth anniversary of the Policy and the policyowner's attained age of 60 and, thereafter, 0.0375%. It is assessed against the value of the policyowner's Investment Accounts by cancellation of units in the same proportion as the value of each Investment Account bears to the total value of the Investment Accounts. The mortality risk assumed is that lives insured may live for a shorter period of time than the Company estimated. The expense risk assumed is that expenses incurred in issuing and administering the Policies will be greater than the Company estimated. Manulife New York estimates that virtually all of the mortality and expense risks charge currently relates to expense risks. Manulife New York will realize a gain from this charge to the extent it is not needed to provide benefits and pay expenses under the Policies. OTHER CHARGES Currently, Manulife New York makes no charge against the Separate Account for Federal, state or local taxes that may be attributable to the Separate Account or to the operations of the Company with respect to the Policies. However, if Manulife New York incurs any such taxes, it may make a charge therefor. Charges will be imposed on certain transfers of Policy Values, including a $25 charge for each transfer in excess of twelve in a policy year and a $5 charge for each Dollar Cost Averaging transfer when Policy Value does not exceed $15,000 (See DETAILED INFORMATION ABOUT THE POLICIES -- POLICY VALUES - -- Transfers of Policy Value). The Separate Account purchases shares of Portfolios at net asset value. The net asset value of those shares reflects the following investment management fees and expenses:
MANAGEMENT OTHER TOTAL TRUST MANULIFE TRUSTS FEES EXPENSES ANNUAL EXPENSES - -------------------------------------------------------------------------------- Pacific Rim Emerging Markets.. 0.850% 0.570% 1.420% Science & Technology.......... 1.100% 0.160% 1.260% International Small Cap....... 1.100% 0.210% 1.310% Emerging Growth............... 1.050% 0.060% 1.110% Pilgrim Baxter Growth......... 1.050% 0.130% 1.180% Small/Mid Cap................. 1.000% 0.050% 1.050% International Stock........... 1.050% 0.330% 1.380% Worldwide Growth.............. 1.000% 0.320% 1.320% Global Equity................. 0.900% 0.110% 1.010% Small Company Value........... 1.050% 0.100%* 1.150% Equity........................ 0.750% 0.050% 0.800% Growth........................ 0.850% 0.100% 0.950% Quantitative Equity........... 0.700% 0.070% 0.770% Blue Chip Growth.............. 0.925% 0.050% 0.975% Real Estate Securities........ 0.700% 0.070% 0.770% Value......................... 0.800% 0.160% 0.960% International Growth and Income........................ 0.950% 0.170% 1.120% Growth and Income............. 0.750% 0.040% 0.790% Equity-Income................. 0.800% 0.050% 0.850% Balanced...................... 0.800% 0.080% 0.880% Aggressive Asset Allocation... 0.750% 0.150% 0.900% High Yield.................... 0.775% 0.110% 0.885% Moderate Asset Allocation..... 0.750% 0.100% 0.850% Conservative Asset Allocation. 0.750% 0.140% 0.890% Strategic Bond................ 0.775% 0.100% 0.875% Global Government Bond........ 0.800% 0.130% 0.930% Capital Growth Bond........... 0.650% 0.080% 0.730% Investment Quality Bond....... 0.650% 0.090% 0.740% U.S. Government Securities.... 0.650% 0.070% 0.720% Money Market ................. 0.500% 0.040% 0.540% Lifestyle Aggressive 1000#.... 0% 1.116%** 1.116% Lifestyle Growth 820#......... 0% 1.048%** 1.048% Lifestyle Balanced 640#....... 0% 0.944%** 0.944% Lifestyle Moderate 460#....... 0% 0.850%** 0.850% Lifestyle Conservative 280#... 0% 0.708%** 0.708%
*Based on estimates of payments to be made during the current fiscal year. **Reflects expenses of the Underlying Portfolios. Manufacturers Securities Services, LLC has voluntarily agreed to pay the expenses of each Lifestyle Trust (excluding the expenses of the Underlying Portfolios). This voluntary expense reimbursement may be terminated at any time. If such expense reimbursement was not in effect, Total Trust Annual Expenses would be .04% higher (based on expenses of the Lifestyle Trusts for the fiscal year December 31, 1997) as noted in the chart below: 33 38
MANAGEMENT OTHER TOTAL TRUST MANULIFE TRUSTS FEES EXPENSES ANNUAL EXPENSES - -------------------------------------------------------------------------------- Lifestyle Aggressive 1000..... 0% 1.156% 1.156% Lifestyle Growth 820.......... 0% 1.088% 1.088% Lifestyle Balanced 640........ 0% 0.984% 0.984% Lifestyle Moderate 460........ 0% 0.890% 0.890% Lifestyle Conservative 280.... 0% 0.748% 0.748%
#Each Lifestyle Trust will invest in shares of the Underlying Portfolios. Therefore, each Lifestyle Trust will, in addition to its own expenses, such as certain Other Expenses, bear its pro rata share of the fees and expenses incurred by the Underlying Portfolios and the investment return of each Lifestyle Trust will be net of the Underlying Portfolio expenses. 34 39 Detailed information concerning such fees and expenses is set forth under the caption "Management of The Trust" in the Prospectus for Manufacturers Investment Trust that accompanies this Prospectus. THE GENERAL ACCOUNT By virtue of exclusionary provisions, interests in the general account of Manulife New York have not been registered under the Securities Act of 1933 and the general account has not been registered as an investment company under the 1940 Act. Accordingly, neither the general account nor any interests therein are subject to the provisions of these acts, and as a result the staff of the SEC has not reviewed the disclosures in this prospectus relating to the general account. Disclosures regarding the general account may, however, be subject to certain generally applicable provisions of the Federal securities laws relating to the accuracy and completeness of statements made in a prospectus. The general account of Manulife New York consists of all assets owned by the Company other than those in its separate accounts. Subject to applicable law, Manulife New York has sole discretion over the investment of the assets of the general account. A policyowner may elect to allocate net premiums to the Guaranteed Interest Account or to transfer all or a portion of the Policy Value to the Guaranteed Interest Account from the Investment Accounts. Transfers from the Guaranteed Interest Account to the Investment Accounts are subject to restrictions (see DETAILED INFORMATION ABOUT THE POLICIES -- POLICY VALUES -- Transfers of Policy Value and Policy Value). Manulife New York will hold the reserves required for any portion of the Policy Value allocated to the Guaranteed Interest Account in its general account. However, an allocation of Policy Value to the Guaranteed Interest Account does not entitle the policyowner to share in the investment experience of the general account. Instead, Manulife New York 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. The Company may, at its sole discretion, credit a higher rate of interest, although it is not obligated to do so. The policyowner assumes the risk that interest credited may not exceed the guaranteed minimum rate of 4% per year. OTHER GENERAL POLICY PROVISIONS POLICY DEFAULT Unless the No Lapse Guarantee or Death Benefit Guarantee is in effect, a Policy will go into default if the Policy's Net Cash Surrender Value at the beginning of any policy month would go below zero after deducting the monthly deductions then due. Manulife New York will notify the policyowner of the default and will allow a 61-day grace period in which the policyowner may make a premium payment sufficient to bring the Policy out of default. The required payment will be equal to the amount necessary to bring the Net Cash Surrender Value to zero, if it was less than zero at the date of default, plus the monthly deductions due at the date of default and at the beginning of each of the two policy months thereafter, based on the Policy Value at the date of default. If the required payment is not received by the end of the grace period, the Policy will terminate and the Net Cash Surrender Value as of the date of default less the monthly deductions then 35 40 due will be paid to the policyowner. If the life insured should die during the grace period following a Policy's going into default, the Policy Value used in the calculation of the death benefit will be the Policy Value as of the date of default and the insurance benefit payable will be reduced by any outstanding monthly deductions due at the time of death. POLICY REINSTATEMENT A policyowner can reinstate a Policy which has terminated after going into default at any time within 21 days following the date of termination without furnishing evidence of insurability, subject to the following conditions: (a) The life insured's risk class is standard or preferred. (b) The life insured's attained age is less than 46. A policyowner can reinstate a Policy which has terminated after going into default at any time within the five-year period following the date of termination subject to the following conditions: (a) The Policy must not have been surrendered for its Net Cash Surrender Value at the request of the policyowner; (b) Evidence of the life insured's insurability satisfactory to Manulife New York is furnished to it; (c) A premium equal to the payment required during the 61-day grace period following default to keep the Policy in force is paid to Manulife New York; and (d) An amount equal to any amounts paid by Manulife New York in connection with the termination of the Policy is repaid to Manulife New York. If the reinstatement is approved, the date of reinstatement will be the later of the date of the policyowner's written request or the date the required payment is received at the Manulife New York Service Office. MISCELLANEOUS POLICY PROVISIONS Beneficiary. One or more beneficiaries of the Policy may be appointed by the policyowner by naming them in the application. Beneficiaries may be appointed in three classes -- primary, secondary and final. Thereafter the beneficiary may be changed by the policyowner during the life insured's lifetime by giving written notice to Manulife New York in a form satisfactory to it unless an irrevocable designation has been elected. If the life insured dies and there is no surviving beneficiary, the policyowner, or the policyowner's estate if the policyowner is the life insured, will be the beneficiary. If a beneficiary dies before the seventh day after the death of the life insured, the Company will pay the insurance benefit as if the beneficiary had died before the life insured. Incontestability. Manulife New York 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 or the addition of a supplementary benefit after such increase or addition has been in force during the life insured's lifetime for two years. If a Policy has been reinstated and been in force for less than two years from the reinstatement date, the Company can contest any misrepresentation of a fact material to the reinstatement. Misstatement of Age Or Sex. If the life insured's stated age or sex or both in the Policy are incorrect, Manulife New York will change the face amount of insurance so that the death benefit will be that which the most recent monthly charge for the cost of insurance would have bought for the correct age and sex. Suicide Exclusion. If the life insured dies by suicide within two years from the issue date, Manulife New York will pay only the premiums paid less any partial withdrawals of the Net Cash Surrender Value and any amount in the Policy Debt. If the life insured should die by suicide within two years after a face amount increase, the death benefit for the increase will be limited to the monthly deduction for the increase. Assignment. Manulife New York will not be bound by an assignment until it receives a copy of it at its Service Office. Manulife New York assumes no responsibility for the validity or effects of any assignment. 36 41 Conversion Privilege. The policyowner may effectively convert his or her policy at any Policy Anniversary, to a fixed paid-up benefit, without evidence of insurability. The Policy Value, other values based thereon, the Investment Account values and the Death Benefit Guarantee will be determined as of the Business Day on which the Company receives the written request for conversion. The basis for determining the Policy Value will be the Commissioners 1980 Standard Ordinary Smoker or Non-Smoker Mortality Table and an interest rate of 4% per year. The Flexible Premium Variable Life coverage cannot be reinstated after the date of conversion. OTHER PROVISIONS SUPPLEMENTARY BENEFITS Subject to state approval and certain requirements, one or more supplementary benefits may be added to a Policy, including those providing term insurance for additional insureds, providing supplementary insurance options, providing accidental death coverage, waiving monthly deductions upon disability, and, in the case of corporate-owned Policies, permitting a change of the life insured. More detailed information concerning supplementary benefits may be obtained from an authorized agent of the Company. The cost of any supplementary benefits will be deducted as part of the monthly deduction (see DETAILED INFORMATION ABOUT THE POLICIES -- POLICY VALUES -- Monthly Deductions). PAYMENT OF PROCEEDS As long as the Policy is in force, Manulife New York will ordinarily pay any policy loans, partial withdrawals, Net Cash Surrender Value or any insurance benefit within seven days after receipt at the Manulife New York Service Office of all the documents required for such a payment. The Company may delay the payment of any policy loans, partial withdrawals, Net Cash Surrender Value or the portion of any insurance benefit that depends on the Guaranteed Interest Account value for up to six months; otherwise the Company may delay payment for any period during which (i) the New York Stock Exchange is closed for trading (except for normal holiday closings) or trading on the New York Stock Exchange is otherwise restricted; or (ii) an emergency exists as defined by the SEC or the SEC requires that trading be restricted; or (iii) the SEC permits a delay for the protection of policyowners. Also, transfers may be denied under the circumstances stated in clauses (i), (ii) and (iii) above and under the circumstances previously set forth (see DETAILED INFORMATION ABOUT THE POLICIES -- POLICY VALUES -- Transfers of Policy Value). REPORTS TO POLICYOWNERS Within 30 days after each policy anniversary, Manulife New York will send the policyowner a statement showing, among other things, the amount of the death benefit, the Policy Value and its allocation among the Investment Accounts, the Guaranteed Interest Account and the Loan Account, the value of the units in each Investment Account to which the Policy Value is allocated, any Loan Account balance and any interest charged since the last statement, the premiums paid and policy transactions made during the period since the last statement and any other information required by law. Within 10 days after any transaction involving purchase, sale, or transfer of units of Investment Accounts, a confirmation statement will be sent. Each policyowner will also be sent an annual and a semi-annual report for Manufacturers Investment Trust which will include a list of the securities held in each Portfolio as required by the 1940 Act. MISCELLANEOUS MATTERS PORTFOLIO SHARE SUBSTITUTION Although Manulife New York believes it to be highly unlikely, it is possible that in the judgment of its management, 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 regulations, because the shares are no longer available for investment, or for some other reason. In that event, Manulife New York may seek to substitute the shares of another 37 42 Portfolio or of an entirely different mutual fund. Before this can be done, the approval of the SEC and the New York Department of Insurance may be required. Manulife New York also reserves the right to combine other separate accounts with the Separate Account to establish additional sub-accounts within the Separate Account, to operate the Separate Account as a management investment company or other form permitted by law, to transfer assets from this Separate Account to another separate account and from another separate account to this Separate Account, and to de-register the Separate Account under the 1940 Act. Any such change would be made only if permissible under applicable Federal and New York state law. The investment objectives of the Separate Account will not be changed materially without first filing the change with the Insurance Commissioner of the State of New York. Policyowners will be advised of any such change at the time it is made. FEDERAL INCOME TAX CONSIDERATIONS The following summary provides a general description of the Federal income tax considerations associated with the Policy and does not purport to be complete or to cover all situations. This discussion is not intended as tax advice. Counsel or other competent tax advisors should be consulted for more complete information. This discussion is based upon the Company's understanding of the present Federal income tax laws as they are currently interpreted by the Internal Revenue Service (the "IRS"). No representation is made as to the likelihood of continuation of the present Federal income tax laws or of the current interpretations by the IRS. WE DO NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY POLICY OR ANY TRANSACTION REGARDING THE POLICIES. The Policies may be used in various arrangements, including non-qualified deferred compensation or salary continuance plans, split dollar insurance plans, executive bonus plans, retiree medical benefit plans and others. The tax consequences of such plans may vary depending on the particular facts and circumstances of each individual arrangement. Therefore, if the use of such Policies in any such arrangement, the value of which depends in part on its tax consequences, is contemplated, a qualified tax advisor should be consulted for advice on the tax attributes of the particular arrangement. TAX STATUS OF THE POLICY Section 7702 of the Code sets forth a definition of a life insurance contract for Federal tax purposes. The Secretary of Treasury (the "Treasury") is authorized to prescribe regulations implementing Section 7702. However, while proposed regulations and other interim guidance have been issued, final regulations have not been adopted and guidance as to how Section 7702 is to be applied is limited. If a Policy were determined not to be a life insurance contract for purposes of Section 7702, such Policy would not provide the tax advantages normally provided by a life insurance policy. With respect to a Policy issued on the basis of a standard rate class, the Company believes (largely in reliance on IRS Notice 88-128 and the proposed mortality charge regulations under Section 7702, issued on July 5, 1991) that such a Policy should meet the Section 7702 definition of a life insurance contract. With respect to a Policy that is issued on a substandard basis (i.e., a premium class involving higher-than-standard mortality risk), there is less guidance, in particular as to how mortality and other expense requirements of Section 7702 are to be applied in determining whether such a Policy meets the Section 7702 definition of a life insurance contract. Thus, it is not clear whether or not such a Policy would satisfy Section 7702, particularly if the policyowner pays the full amount of premiums permitted under the Policy. If it is subsequently determined that a Policy does not satisfy Section 7702, the Company may take whatever steps are appropriate and reasonable to attempt to cause such a Policy to comply with Section 7702. For these reasons, the Company reserves the right to restrict Policy transactions as necessary to attempt to qualify it as a life insurance contract under Section 7702. Section 817(h) of the Code requires that the investments of the Separate Account be "adequately diversified" in accordance with Treasury regulations in order for the Policy to qualify as a life insurance contract under Section 7702 of the Code (discussed above). The Separate Account, through Manufacturers Investment Trust, intends to comply with the diversification requirements prescribed in Treas. Reg. Sec. 1.817-5, which affect how Manufacturers Investment Trust's assets are to be invested. The Company believes that the Separate Account will thus meet the diversification 38 43 requirement, and the Company will monitor continued compliance with the requirement. In certain circumstances, owners of variable life insurance Policies may be considered the owners, for Federal income tax purposes, of the assets of the separate account used to support their Policies. In those circumstances, income and gains from the separate account assets would be includible in the variable policyowner's gross income. The IRS has stated in published rulings that a variable policyowner will be considered the owner of separate account assets if the policyowner possesses incidents of ownership in those assets, such as the ability to exercise investment control over the assets. The Treasury Department has also announced, in connection with the issuance of regulations concerning diversification, that those regulations "do not provide guidance concerning the circumstances in which investor control of the investments of a segregated asset account may cause the investor (i.e., the policyowner), rather than the insurance company, to be treated as the owner of the assets in the account." This announcement also stated that guidance would be issued by way of regulations or rulings on the "extent to which policyowners may direct their investments to particular sub-accounts without being treated as owners of the underlying assets." The ownership rights under the Policy are similar to, but different in certain respects from, those described by the IRS in rulings in which it was determined that policyowners were not owners of separate account assets. For example, the Policy has many more Portfolios to which policyowners may allocate premium payments and Policy Values than were available in the policies described in the rulings. These differences could result in an owner being treated as the owner of a pro rata portion of the assets of the Separate Account. In addition, the Company does not know what standards will be set forth, if any, in the regulations or rulings which the Treasury Department has stated it expects to issue. The Company therefore reserves the right to modify the Policy as necessary to attempt to prevent an owner from being considered the owner of a pro rata share of the assets of the Separate Account. The following discussion assumes that the Policy will qualify as a life insurance contract for Federal income tax purposes. TAX TREATMENT OF POLICY BENEFITS In General. The Company believes that the proceeds and cash value increases of a Policy should be treated in a manner consistent with a fixed-benefit life insurance policy for Federal income tax purposes. Thus, the death benefit under the Policy should be excludable from the gross income of the beneficiary under Section 101(a)(1) of the Code. Depending on the circumstances, the exchange of a Policy, a change in the Policy's death benefit option, a Policy loan, a partial withdrawal, a surrender, a change in ownership, a change of insured, the addition of an accelerated death benefit rider, or an assignment of the Policy may have Federal income tax consequences. In addition, Federal, state and local transfer, and other tax consequences of ownership or receipt of Policy proceeds depend on the circumstances of each policyowner or beneficiary. Generally, the policyowner will not be deemed to be in constructive receipt of the Policy Value, including increments thereof, until there is a distribution. The tax consequences of distributions from, and loans taken from or secured by, a Policy depend on whether the Policy is classified as a MEC. Upon a complete surrender or lapse of a Policy or when benefits are paid at a Policy's maturity date, if the amount received plus the amount of indebtedness exceeds the total investment in the Policy, the excess will generally be treated as ordinary income subject to tax, regardless of whether the Policy is or is not a MEC. Modified Endowment Contracts. Section 7702A establishes a class of life insurance contracts designated as "Modified Endowment Contracts," which applies to Policies entered into or materially changed after June 20, 1988. Because of the Policy's flexibility, classification as a Modified Endowment Contract ("MEC") will depend on the individual circumstances of each Policy. In general, a Policy will be a MEC if the accumulated premiums paid at any time during the first seven policy years exceed the sum of the net level premiums which would have been paid on or before such time if Policy provided for paid-up future benefits after the payment of seven level annual premiums. The determination of whether a Policy will be a MEC after a material change generally depends upon the relationship of the death benefit and Policy Value at the time of such change and the additional premiums paid in the seven years following the material change. If a premium is received which would cause the Policy to become a 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 39 44 policyowner will be advised of this action and will be offered the opportunity to have the premium credited as of the original date received or to have the premium returned. If the policyowner does not respond, the premium and interest will be applied to the Policy as of the first day of the next anniversary. If a premium is received which would cause the Policy to become a MEC more than 23 days prior to the next policy anniversary, the Company will refund any excess premium to the policyowner. The portion of the premium which is not excess will be applied as of the date received. The policyowner will be advised of this action and will be offered the opportunity to return the premium and have it credited to the account as of the original date received. If, in connection with the application or issue of the Policy, the policyowner acknowledges that the Policy is or will become a MEC, excess premiums that would cause MEC status will be credited as of the date received. Further, if a transaction occurs which reduces the face amount of the Policy during the first seven years, the Policy will be retested retroactive to the date of purchase, to determine compliance with the seven-pay test based on the lower face amount. As well, if a reduction of the face amount occurs within seven years of a material change, the Policy will be retested for compliance retroactive to the date of the material change. Failure to comply would result in classification as a MEC regardless of any efforts by the Company to provide a payment schedule that will not violate the seven-pay test. The rules relating to whether a Policy will be treated as a MEC are extremely complex and cannot be adequately described in the limited confines of this summary. Therefore, a current or prospective policyowner should consult with a competent adviser to determine whether a transaction will cause the Policy to be treated as a MEC. Distributions From Policies Classified As Modified Endowment Contracts. Policies classified as MECs will be subject to the following tax rules: First, all partial withdrawals from such a Policy are treated as ordinary income subject to tax up to the amount equal to the excess (if any) of the Policy Value immediately before the distribution over the investment in the Policy (described below) at such time. Second, loans taken from or secured by such a Policy are treated as partial withdrawals from the Policy and taxed accordingly. Past-due loan interest that is added to the loan amount is treated as a loan. Third, a 10% additional income tax is imposed on the portion of any distribution (including distributions upon surrender) from, or loans taken from or secured by, such a Policy that is included in income except where the distribution or loan is made on or after the policyowner attains age 59 1/2, is attributable to the policyowner's becoming disabled, or is part of a series of substantially equal periodic payments for the life (or life expectancy) of the policyowner or the joint lives (or joint life expectancies) of the policyowner and the policyowner's beneficiary. Distributions From Policies Not Classified As Modified Endowment Contracts. A distribution from a Policy that is not a MEC is generally treated as a tax-free recovery by the policyowner of the investment in the Policy (described below) to the extent of such investment in the Policy, and as a distribution of taxable income only to the extent the distribution exceeds the investment in the Policy. An exception to this general rule occurs in the case of a decrease in the Policy's death benefit or any other change that reduces benefits under the Policy in the first 15 years after the Policy is issued and that results in a cash distribution to the policyowner in order for the Policy to continue complying with the Section 7702 definitional limits. Such a cash distribution will be taxed in whole or in part as ordinary income (to the extent of any gain in the Policy) under rules prescribed in Section 7702. Loans from, or secured by, a Policy that is not a MEC are not treated as distributions. Instead, such loans are treated as indebtedness of the policyowner. Select Loans may, however, be treated as a distribution. Finally, neither distributions (including distributions upon surrender) nor loans from, or secured by, a Policy that is not a MEC are subject to the 10% additional tax. Policy Loan Interest. Generally, personal interest paid on any loan under a Policy which is owned by an individual is not deductible. In addition, interest on any loan under a Policy owned by a taxpayer and covering the life of any individual who is an officer or employee of or is financially interested in the business carried on by the taxpayer will not be tax deductible unless the employee is a key person within the meaning of Section 264 of the Code. A deduction will not be permitted for interest on a loan under a policy held on the life of a key person to the extent the aggregate of such loans with respect to contracts covering the key person exceeds $50,000. The number of employees who can qualify as key persons depends in part on the size of the employer but cannot exceed 20 individuals. 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. Section 264(f) does not apply if the insurance is on a single life and the life insured is a 20% (or more) owner of the taxpayer-entity, or is an officer, employee, or former employee 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 bears to the average adjusted bases for all assets of the taxpayer. If the taxpayer is not the owner, but is the direct or indirect beneficiary under the contract, 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 can't exceed the benefit to which the taxpayer is directly or indirectly entitled under the Policy. 40 45 Investment In The Policy. Investment in the Policy means (i) the aggregate amount of any premiums or other consideration paid for a Policy, minus (ii) the aggregate amount received under the Policy which has been excluded from gross income of the policyowner (except that the amount of any loan from, or secured by, a Policy that is a MEC, to the extent such amount has been excluded from gross income, will be disregarded), plus (iii) the amount of any loan from, or secured by, a Policy that is a MEC to the extent that such amount has been included in the gross income of the policyowner. Multiple Policies. All MECs that are issued by the Company (or its affiliates) to the same policyowner during any calendar year are treated as one MEC for purposes of determining the amount includible in the gross income under Section 72(e) of the Code. THE COMPANY'S TAXES As a result of the Omnibus Budget Reconciliation Act of 1990, insurance companies are generally required to capitalize and amortize certain policy acquisition expenses over a 10-year period rather than currently deducting such expenses. This treatment applies to the deferred acquisition expenses of a Policy and results in a significantly higher corporate income tax liability for the Company. The Company makes a charge to premiums to compensate it for the anticipated higher corporate income taxes. At the present time, the Company makes no charge to the Separate Account for any Federal, state or local taxes that the Company incurs that may be attributable to such Account or to the Policies. The Company, however, reserves the right in the future to make a charge for any such tax or other economic burden resulting from the application of the tax laws that it determines to be properly attributable to the Separate Account or to the Policies. DISTRIBUTION OF THE POLICY MSS, a Delaware limited liability company whose principal offices are located at 73 Tremont Street, Boston, Massachusetts 02108, will act as the principal underwriter of, and continuously offer, the Policies pursuant to a Distribution Agreement with Manulife New York. MSS is a subsidiary of Manulife North America, the ultimate parent of which is Manulife, a Canadian mutual life insurance company. MSS is registered as a broker-dealer under the Securities Exchange Act of 1934, is a member of the National Association of Securities Dealers and is duly appointed and licensed as an insurance agent of Manulife New York. The Policies will be sold by registered representatives of broker-dealers having distribution agreements with MSS who are also licensed by the New York State Insurance Department and appointed with Manulife New York. The gross first-year compensation paid by the Company, consisting of commission, expense allowance and General Agent override, if applicable, will not exceed 99% of premiums paid up to the Target Premium and a total of 3% of the excess thereof. Additionally, the Company may pay renewal compensation consisting of commissions and expense allowance, totaling 3% of premiums paid in years 2 to 15, and 2% thereafter, plus 0.15% of the Policy Value per annum after the third anniversary. RESPONSIBILITIES ASSUMED BY MANULIFE NEW YORK AND MSS Manulife New York has entered into an agreement with MSS pursuant to which MSS will pay selling broker dealers maximum commission and expense allowance payments pursuant to limitations imposed by New York Insurance Law. Manulife New York will prepare and maintain all books and records required to be prepared and maintained by MSS with respect to the Policies and such other policies, and send all confirmations required to be sent by MSS with respect to the Policies and such other policies. Manulife New York will pay MSS for expenses incurred and services performed by MSS under the terms of the agreement in such amounts and at such times as agreed to by the parties. Manulife has also entered into a Service Agreement with Manulife New York pursuant to which Manulife or its designee will provide to Manulife New York all issue, administrative, general services and recordkeeping functions on behalf of Manulife New York with respect to all of its insurance policies including the Policies. Finally, Manufacturers USA has entered into a reinsurance agreement with Manulife New York under which Manufacturers USA automatically reinsures policies issued by Manulife New York, such that total risk to Manulife New York is limited to $100,000 for the life of the insured. 41 46 VOTING RIGHTS As stated above, all of the assets held in the sub-accounts of the Separate Account will be invested in shares of a particular Portfolio of Manufacturers Investment Trust. Manulife New York is the legal owner of those shares and as such has the right to vote upon 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, Manulife New York will vote shares held in the sub-accounts in accordance with instructions received from policyowners having an interest in such sub-accounts. Shares held in each sub-account for which no timely instructions from policyowners are received, including shares not attributable to Policies, will be voted by Manulife New York 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 Manulife New York to vote shares held in the Separate Account in its own right, it may elect to do so. The number of shares in each sub-account for which instructions may be given by a policyowner is determined by dividing the portion of the Policy Value derived from participation in that sub-account, if any, by the value of one share of the corresponding Manufacturers Investment Trust. The number will be determined as of a date chosen by Manulife New York, 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 shareholders' meeting. Manulife New York may, if required by state insurance officials, disregard voting instructions if such instructions would require shares to be voted so as to cause a change in the sub-classification or investment policies of one or more of the Portfolios, or to approve or disapprove an investment management contract. In addition, Manulife New York itself may disregard voting instructions that would require changes in the investment policies or investment adviser, provided that Manulife New York reasonably disapproves such changes in accordance with applicable Federal regulations. If Manulife New York does disregard voting instructions, it will advise policyowners of that action and its reasons for such action in the next communication to policyowners. DIRECTORS AND OFFICERS OF MANULIFE NEW YORK The Directors and Officers of Manulife New York, together with their principal occupations during the past few years, are as follows:
NAME, ADDRESS AND AGE POSITION WITH THE PRINCIPAL OCCUPATION COMPANY Bruce Avedon Director* Consultant (self-employed). 6601 Hitching Post Lane Cincinnati, OH 45230 Age:68 John D. DesPrez III Director* Senior Vice President, Annuities, Manulife, 73 Tremont Street September 1996 to present; Director and Boston, MA 02108 President, Manulife North America, September Age: 40 1996 to present; Vice President, Mutual Funds, Manulife, January, 1995 to September 1996; President and Chief Executive Officer, North American Funds, March 1993 to September 1996; Vice President and General Counsel, Manulife North America, January 1991 to June 1994. Stephanie Elliman Vice President and Chief Chief Administration Officer, Manulife New Corporate Center at Rye Administration Officer York, August 1993: Manager, Marketing 555 Theodore Fremd Ave. Specialists, WLA, 1991 to August 1993. Rye, NY 10580 Age: 50 Ruth Ann Flemming Director* Homemaker. 145 Western Drive Short Hills, NJ 07078 Age: 39
42 47
NAME, ADDRESS AND AGE POSITION WITH THE PRINCIPAL OCCUPATION COMPANY Bruce Gordon Director* Senior Vice President, North American Group 200 Bloor Street East Pensions, Manulife. Toronto, Ontario, Canada M4W 1E5 Age:53 Tracy A. Kane Secretary and Counsel Assistant Vice President and Counsel, 73 Tremont Street Manulife North America, April 1993 to Boston, MA 02108 present; Counsel, Fidelity Investments, prior Age: 36 to April 1993. Theodore Kilkuskie Director* Senior Vice President, U.S. Individual 73 Tremont Street Insurance, Manulife, June 1995 to present; Boston, MA 02108 Executive Vice President, Mutual Fund Sales Age 42 & Marketing, State Street Research & Management, March 1994 to May 1995; Vice President, Mutual Fund Sales & Marketing, MetLife, prior to March 1994. David W. Libbey Treasurer Vice President, Finance, Manulife North 73 Tremont Street America, June 1997 to present; Vice President Boston, MA 02108 and Actuary, Second Vice President and Age: 49 Actuary, Paul Revere Insurance Group, June 1970 to March 1997. Neil M. Merkl, Esq. Director* Attorney (self-employed), April 1994 to 35-35 161st Street present; Partner, Wilson Elser, Etc., 1979 to Flushing, NY 11358 1994. Age:66 Robert C. Perez, Ph.D. Director* Associate Professor, Iona College, Hagen 715 North Ave. Business School. New Rochelle, NY 01801 Age:70 John Richardson Director and Chairman of the Board Executive Vice President and General Manager, 200 Bloor Street East of Directors* U.S. Operations, Manulife, January 1995 to Toronto, Ontario, Canada present; Senior Vice President and General M4W 1E5 Manager, Canadian Operations, Manulife, June Age:59 1992 to January 1995; Senior Vice President, Financial Services, Manulife, prior to June 1992. James K. Robinson Director* Attorney, Assistant Secretary, Eastman Kodak 7 Summit Drive Company. Rochester, NY 14620 Age:70 A. Scott Logan Director* and President Director and President, Wood Logan 1455 East Putnam Ave. Associates, Inc. Senior Vice President and Old Greenwich, CT 06870 National Marketing Director, Massachusetts Age: 59 Financial Services. John G. Vrysen Vice President and Chief Actuary Vice President and Chief Financial Officer, 73 Tremont Street U.S. Operations, Manulife, January 1996 to Boston, MA 02108 present; Vice President and Chief Actuary, Age: 42 Manulife North America.
*Each Director is elected to serve until the next annual meeting of shareholders or until his or her successor is elected and qualified. 43 48 STATE REGULATIONS Manulife New York is subject to regulation and supervision by the New York 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. Manulife New York 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. PENDING LITIGATION No litigation is pending that would have a material effect upon the Separate Account or Manufacturers Investment Trust. ADDITIONAL INFORMATION A registration statement under the Securities Act of 1933 has been filed with the SEC relating to the offering described in this prospectus. This prospectus does not include all the information set forth in the registration statement. The omitted information may be obtained from the SEC's principal office in Washington, D.C. upon payment of the prescribed fee. For further information you may also contact Manulife New York's Service Office. LEGAL MATTERS The legal validity of the policies has been passed on by Tracy Anne Kane Esq., Secretary and Counsel of Manulife New York. Jones & Blouch L.L.P., Washington, D.C., has passed on certain matters relating to the Federal securities laws. EXPERTS The financial statements of Manulife New York at December 31, 1997 and 1996 and for the years then ended appearing in this prospectus have been audited by Ernst & Young LLP, independent auditors, as set forth in their reports thereon appearing elsewhere herein, and are included in reliance upon such reports given upon the authority of such firm as experts in auditing and accounting. The statements of income, changes in shareholder's equity and cash flows of Manulife New York for the year ended December 31, 1995, appearing in this prospectus have been included herein in reliance on the report of Coopers & Lybrand L.L.P., independent accountants, given on the authority of that firm as experts in accounting and auditing. YEAR 2000 ISSUES Like other business organizations and individuals, the Company would be adversely affected if its computer systems and those of its service providers do not properly process and calculate date-related information and data from and after January 1, 2000. The Company is completing an assessment of the Year 2000 impact on its systems and business processes. Management believes that the Company will complete its Year 2000 project for all critical systems and processes by September 30, 1998, prior to any anticipated impact on the critical systems and processes. The date on which the Company believes it will complete the Year 2000 project is based on management's best estimates, which were derived utilizing numerous assumptions of future events. However, there can be no guarantee that these estimates will be achieved and actual results could differ materially from those anticipated. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer code, and other similar uncertainties. FINANCIAL STATEMENTS The financial statements of Manulife New York included herein should be considered only as bearing upon the ability of Manulife New York to meet its obligations under the Policies. 44 49 CONSOLIDATED FINANCIAL STATEMENTS THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 WITH REPORTS OF INDEPENDENT AUDITORS 45 50 AUDITED FINANCIAL STATEMENTS THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK Years ended December 31, 1997, 1996 and 1995 46 51 The Manufacturers Life Insurance Company of New York Audited Financial Statements Years ended December 31, 1997, 1996 and 1995 CONTENTS Report of Independent Auditors.......................................1 Audited Financial Statements Balance Sheets.......................................................3 Statements of Income.................................................4 Statements of Changes in Shareholder's Equity........................5 Statements of Cash Flows.............................................6 Notes to Financial Statements........................................7 47 52 Report of Independent Auditors The Board of Directors and Shareholder The Manufacturers Life Insurance Company of New York We have audited the accompanying balance sheets of The Manufacturers Life Insurance Company of New York (formerly First North American Life Assurance Company and hereinafter referred to as the Company) as of December 31, 1997 and 1996, and the related statements of income, changes in shareholder's equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the 1997 and 1996 financial statements referred to above present fairly, in all material respects, the financial position of The Manufacturers Life Insurance Company of New York at December 31, 1997 and 1996, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. February 18, 1998 48 53 REPORT OF INDEPENDENT ACCOUNTANTS The Board of Directors and Shareholder of The Manufacturers Life Insurance Company of New York: We have audited the accompanying statements of income, changes in shareholder's equity and cash flows of The Manufacturers Life Insurance Company of New York (formerly First North American Life Assurance Company) for the year ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of The Manufacturers Life Insurance Company of New York for the year ended December 31, 1995 in conformity with generally accepted accounting principles. As discussed in Note 2 to the financial statements, the Company adopted Financial Accounting Standards Board Interpretation No. 40 (FIN 40) and Statement of Financial Accounting Standards No. 120 (SFAS 120), which required implementation of several accounting pronouncements not previously adopted. The effects of adopting FIN 40 and SFAS 120 were retroactively applied to the Company's previously issued financial statements, consistent with the implementation guidance of those standards. Boston, Massachusetts January 22, 1998 49 54 The Manufacturers Life Insurance Company of New York Balance Sheets
DECEMBER 31 1997 1996 ----------------------------------------------- ASSETS Investments: Fixed maturities available-for-sale, at fair value $129,150,862 $ 83,466,225 Short-term investments 9,998,179 3,984,370 Policy loans 398,270 183,070 ----------------------------------------------- 139,547,311 87,633,665 Cash and cash equivalents 1,431,114 4,104,731 Accrued investment income 2,401,173 1,528,000 Deferred policy acquisition costs 28,363,714 20,208,071 Other assets 231,211 152,140 Separate account assets 597,193,343 361,309,525 ----------------------------------------------- Total assets $769,167,866 $474,936,132 =============================================== LIABILITIES AND SHAREHOLDER'S EQUITY Liabilities: Policyholder funds $ 86,611,035 $ 80,033,667 Payable to affiliates 4,345,038 2,016,646 Deferred tax liability 2,269,418 1,935,001 Other liabilities 987,521 872,306 Separate account liabilities 597,193,343 361,309,525 ----------------------------------------------- Total liabilities 691,406,355 446,167,145 Shareholder's equity: Common stock (shares authorized, issued and outstanding: 2,000,000; par value $1) 2,000,000 2,000,000 Additional paid-in capital 72,530,624 24,800,000 Unrealized appreciation on available-for-sale securities 1,095,152 419,378 Retained earnings 2,135,735 1,549,609 ----------------------------------------------- Total shareholder's equity 77,761,511 28,768,987 ----------------------------------------------- Total liabilities and shareholder's equity $769,167,866 $474,936,132 ===============================================
See accompanying notes. 50 55 The Manufacturers Life Insurance Company of New York Statements of Income
YEARS ENDED DECEMBER 31 1997 1996 1995 ------------------------------------------------------------------------ Revenues: Fees from separate account and policyholder funds $ 7,395,201 $ 4,761,702 $3,139,174 Net investment income 6,716,053 5,224,209 4,767,914 Net realized investment gain 769,361 88,772 466,164 ------------------------------------------------------------------------ 14,880,615 10,074,683 8,373,252 Benefits and expenses: Benefits to policyholders 4,746,668 4,189,360 4,734,027 Amortization of deferred policy acquisition costs 3,393,073 2,318,595 1,162,044 Other insurance expenses 5,845,047 1,191,984 1,193,232 ------------------------------------------------------------------------ 13,984,788 7,699,939 7,089,303 ------------------------------------------------------------------------ Income before provision for income taxes 895,827 2,374,744 1,283,949 Provision for income taxes Current 339,161 612,686 101,510 Deferred (29,460) 220,079 349,000 ------------------------------------------------------------------------ 309,701 832,765 450,510 ------------------------------------------------------------------------ Net income $ 586,126 $ 1,541,979 $ 833,439 ========================================================================
See accompanying notes. 51 56 The Manufacturers Life Insurance Company of New York Statements of Changes in Shareholder's Equity Years ended December 31, 1997, 1996 and 1995
UNREALIZED APPRECIATION ON RETAINED TOTAL ADDITIONAL AVAILABLE-FOR-SALE EARNINGS SHAREHOLDER'S COMMON STOCK PAID-IN CAPITAL SECURITIES (DEFICIT) EQUITY -------------- --------------- ----------------- -------------- ---------------- Balance at December 31, 1994, as previously reported $ 2,000,000 $ 8,500,000 $(2,396,360) $ 8,103,640 Cumulative effect of applying new basis of accounting $ (567,943) 1,570,551 1,002,608 ------------ ------------ ----------- ----------- ----------- Balance at January 1, 1995 2,000,000 8,500,000 (567,943) (825,809) 9,106,248 Capital contribution 3,000,000 3,000,000 Net income 833,439 833,439 Change in unrealized appreciation of available- for-sale securities, net of tax and adjustment for DPAC 2,272,070 2,272,070 ------------ ------------ ----------- ----------- ----------- Balance at December 31, 1995 2,000,000 11,500,000 1,704,127 7,630 15,211,757 Capital contribution 13,300,000 13,300,000 Net income 1,541,979 1,541,979 Change in unrealized appreciation of available- for-sale securities, net of tax and adjustment for DPAC (1,284,749) (1,284,749) ------------ ------------ ----------- ----------- ----------- Balance at December 31, 1996 2,000,000 24,800,000 419,378 1,549,609 28,768,987 Capital contribution 47,730,624 47,730,624 Net income 586,126 586,126 Change in unrealized appreciation of available- for-sale securities, net of tax and adjustment for DPAC 675,774 675,774 ------------ ------------ ----------- ----------- ----------- Balance at December 31, 1997 $ 2,000,000 $ 72,530,624 $ 1,095,152 $ 2,135,735 $77,761,511 ============ ============ =========== =========== ===========
See accompanying notes. 52 57 The Manufacturers Life Insurance Company of New York Statements of Cash Flows
YEARS ENDED DECEMBER 31 1997 1996 1995 -------------------------------------------------------- OPERATING ACTIVITIES Net income $ 586,126 $ 1,541,979 $ 833,439 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Amortization of bond discount and premium 333,012 141,447 46,319 Net realized investment gain (769,361) (88,772) (466,164) Deferred income tax provision (29,460) 220,079 349,000 Amortization of deferred policy acquisition 3,393,073 2,318,595 1,162,044 costs Policy acquisition costs deferred (11,684,074) (7,224,022) (5,481,175) Return credited to policyholders and other benefits 4,746,668 4,189,360 4,734,027 Changes in assets and liabilities: Accrued investment income (873,173) (6,987) (1,191,261) Other assets (79,071) 195,420 68,994 Payable to affiliates 2,328,392 864,422 327,843 Other liabilities 115,215 (152,572) 580,171 ------------------------------------------------------- Net cash (used in) provided by operating activities (1,932,653) 1,998,949 963,237 INVESTING ACTIVITIES Purchase of fixed maturities (103,382,988) (41,409,440) (69,601,388) Proceeds from fixed maturities sold, matured or 59,307,170 31,658,755 18,834,870 repaid Net change in short-term investments (6,011,270) (3,984,370) Net change in policy loans (215,200) (115,747) (67,323) ------------------------------------------------------- Net cash used in investing activities (50,302,288) (13,850,802) (50,833,841) FINANCING ACTIVITIES Receipts credited to policyholder funds 17,212,556 18,408,172 40,048,872 Return of policyholder funds (15,381,856) (24,676,276) (1,915,371) Change in notes payable (2,000,000) 2,000,000 Capital contribution 47,730,624 13,300,000 3,000,000 ------------------------------------------------------- Net cash provided by financing activities 49,561,324 5,031,896 43,133,501 ------------------------------------------------------- Net decrease in cash and cash equivalents (2,673,617) (6,819,957) (6,737,103) Cash and cash equivalents at beginning of year 4,104,731 10,924,688 17,661,791 ------------------------------------------------------- Cash and cash equivalents at end of year $ 1,431,114 $ 4,104,731 $ 10,924,688 =======================================================
See accompanying notes. 53 58 The Manufacturers Life Insurance Company of New York Notes to Financial Statements December 31, 1997 1. ORGANIZATION The Manufacturers Life Insurance Company of New York (formerly First North American Life Assurance Company and hereinafter referred to as the Company), a stock life insurance company, was organized on February 10, 1992 under the laws of the state of New York. Subsequently, on July 22, 1992, the Company was granted a license by the New York State Insurance Department. The Company is a wholly-owned subsidiary of The Manufacturers Life Insurance Company of North America (formerly North American Security Life Insurance Company and hereinafter referred to as MNA or the Parent). On January 1, 1996, North American Life Assurance Company (NAL), the previous owner of the Parent, merged with The Manufacturers Life Insurance Company (MLI). The surviving company conducts business under the name, "The Manufacturers Life Insurance Company." Concurrent with the merger, the Company's Parent went through a corporate restructuring which resulted in the formation of a newly organized holding corporation, Manulife Wood Logan Holding Company, Inc. (formerly NAWL Holding Company, Inc. and hereinafter referred to as MWL). At that time, all of the assets and liabilities of MNA and its subsidiaries, the Company and NASL Financial Services, Inc. (NASL Financial), were transferred from MLI to MWL. In addition, MLI's 20.2% ownership interest in Wood Logan Associates, Inc. (Wood Logan) was transferred to MWL. In exchange, MLI received all Class A shares of MWL common stock. On January 1, 1997, MLI contributed 62.5% of its 85% ownership interest to its indirect wholly-owned subsidiary, The Manufacturers Life Insurance Company (U.S.A.). Effective December 18, 1997, MLI transferred its remaining 22.5% interest to MRL Holding, LLC, a newly formed Delaware limited liability company. Also effective January 1, 1996, as part of the restructuring, the remaining 79.8% of Wood Logan was purchased by MWL. In exchange for the remaining shares of Wood Logan, certain employees and former owners of Wood Logan received Class B voting shares of MWL representing a 15% ownership interest. Until October 1, 1997, Wood Logan was the promotional agent for the sale of the insurance products of the Company and MNA. 54 59 The Manufacturers Life Insurance Company of New York Notes to Financial Statements (continued) 1. ORGANIZATION (CONTINUED) On December 22, 1995, the New York State Insurance Department approved the application submitted by MLI to acquire control of the Company subject to commitment letters given to the Department by MNA and the Company. As part of the agreement, MLI contributed $13,300,000 of additional surplus to the Company in 1996. On April 17, 1997, a revised plan of operation was submitted to the New York State Insurance Department in connection with the Company's intention to expand its product offerings. On October 21, 1997, the Company received approval of the revised plan including modifications from the New York State Insurance Department, and as part of the agreement, MNA contributed $47,730,624 in support of the new plan of operations. The Company issues variable annuity and individual life insurance contracts in the State of New York. Amounts invested in the fixed portion of the contracts are allocated to the general account of the Company. Amounts invested in the variable portion of the contracts are allocated to the separate account of the Company. The separate account assets are invested in shares of the Manufacturers Investment Trust (formerly NASL Series Trust and hereinafter referred to as MIT), a no-load, open-end management investment company organized as a Massachusetts business trust. Prior to October 1, 1997, NASL Financial acted as investment adviser to MIT and as principal underwriter of the annuity contracts issued by the Company. NASL Financial had an agreement with Wood Logan to act as the promotional agent for the sale of the annuity contracts. Effective October 1, 1997, Manufacturers Securities Services, LLC (MSS), an affiliate of the Company, replaced NASL Financial as the investment advisor to MIT and as the principal underwriter of the annuity contracts. Wood Logan provides marketing services for the sale of annuity contracts under an Administrative Services Agreement dated October 7, 1997, between the Company and MLI. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying financial statements of the Company have been prepared in conformity with generally accepted accounting principles (GAAP). 55 60 The Manufacturers Life Insurance Company of New York Notes to Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Prior to 1996, the Company prepared its financial statements in conformity with accounting practices prescribed or permitted by the New York Insurance Department which practices were considered GAAP for mutual life insurance companies. FASB Interpretation 40, Applicability of Generally Accepted Accounting Principles to Mutual Life Insurance and other Enterprises (FIN 40), as amended, which is effective for 1996 annual financial statements, no longer permits statutory-basis financial statements to be described as being prepared in conformity with GAAP. Accordingly, the Company has adopted various accounting pronouncements, principally Statement of Financial Accounting Standards No. 120, Accounting and Reporting by Mutual Life Insurance Enterprises and by Insurance Enterprises for Certain Long-Duration Participating Contracts (SFAS No. 120), which addresses the accounting for long-duration insurance contracts. Pursuant to the requirements of the above pronouncements, the effect of the changes in accounting have been applied retroactively and the previously issued 1995 financial statements have been restated for the change. The effect of the change applicable to years prior to January 1, 1995 has been presented as a restatement of shareholder's equity as of this date. The adoption had the effect of increasing net income for 1995 by $1,412,338. The preparation of financial statements requires management to make estimates and assumptions that affect amounts reported in the financial statements and the 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. INVESTMENTS AND INVESTMENT INCOME The Company accounts for its fixed maturities in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115). SFAS 115 requires that fixed maturities be designated as either held-to-maturity, available-for-sale or trading at the time of purchase. Held-to-maturity 56 61 The Manufacturers Life Insurance Company of New York Notes to Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) fixed maturities are reported at amortized cost and the remainder of fixed maturities are reported at fair value with unrealized holding gains and losses reported in income for those designated as trading and as a separate component of shareholder's equity for those designated as available-for-sale. The Company has classified all of its fixed maturities as available-for-sale. As a result, these securities are reported in the accompanying financial statements at fair value. Changes in fair values, after adjustment for deferred policy acquisition costs (DPAC) and deferred income taxes, are reported as unrealized appreciation or depreciation directly in shareholder's equity, and accordingly, have no effect on net income. The DPAC offset to the unrealized appreciation or depreciation represents valuation adjustments or reinstatements of DPAC that would have been required as a charge or credit to operations had such unrealized amounts been realized. The cost of fixed maturities is adjusted for the amortization of premiums and accretion of discounts using the interest method. This amortization or accretion is included in net investment income. For the mortgage-backed bond portion of the fixed maturities portfolio, the Company recognizes amortization using a constant effective yield based on anticipated prepayments and the estimated economic life of the securities. When actual prepayments differ significantly from anticipated prepayments, the effective yield is recalculated to reflect actual payments to date and anticipated future payments. The net investment in the security is adjusted to the amount that would have existed had the new effective yield been applied since the acquisition of the security. That adjustment is included in net investment income. Short-term investments generally consist of instruments which have a maturity of less than one year at the time of acquisition. Short-term investments are reported at cost, which approximates fair value. Policy loans are reported at unpaid balances, not in excess of the underlying cash value of the policies. Realized gains or losses on investments sold and declines in value judged to be other-than-temporary are determined on the specific identification basis. 57 62 The Manufacturers Life Insurance Company of New York Notes to Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. DEFERRED POLICY ACQUISITION COSTS Commissions and other costs of acquiring new business that vary with and are primarily related to the production of new business have been deferred. These acquisition costs are being amortized generally in proportion to the present value of expected gross profits from surrender charges and investment, mortality and expense margins. That amortization is adjusted retrospectively when estimates of current or future gross profits to be realized from a group of products are revised. SEPARATE ACCOUNT ASSETS AND LIABILITIES Separate account assets and liabilities that are reported in the accompanying balance sheets represent investments in MIT, which are mutual funds that are separately administered for the exclusive benefit of the annuity policyholders and are reported at fair value. Such policyholders, rather than the Company, bear the investment risk. The operations of the separate accounts are not included in the accompanying financial statements. Fees charged on separate account policyholder funds are included in revenues. POLICYHOLDER FUNDS AND BENEFITS TO POLICYHOLDERS Policyholder funds for the fixed portion of variable annuity contracts are computed under a retrospective deposit method and represent account balances before applicable surrender charges. Benefits to policyholders include interest credited to policyholders and other benefits that are charged to expense including benefit claims incurred in the period in excess of the related policyholder account balances. Interest crediting rates for the fixed portion of annuity contracts range from 4.10% to 6.15% in 1997; 4.00% to 6.15% in 1996 and 4.20% to 7.00% in 1995. 58 63 The Manufacturers Life Insurance Company of New York Notes to Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) RECOGNITION OF REVENUES Fees from separate accounts and policyholder funds represent fees assessed against policyholder account balances, and include mortality and expense risk charges, surrender charges and an annual administrative charge. INCOME TAXES Income taxes have been provided using the liability method in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that likely will be in effect when the differences are expected to reverse. The measurement of deferred tax assets is reduced by a valuation allowance if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. 3. INVESTMENTS The major components of net investment income are as follows:
YEAR ENDED DECEMBER 31 1997 1996 1995 --------------------------------------------------------- Fixed maturities $6,342,800 $4,476,472 $4,436,994 Short-term investments 475,545 873,146 403,497 --------------------------------------------------------- 6,818,345 5,349,618 4,840,491 Less investment expenses (102,292) (125,409) (72,577) --------------------------------------------------------- Net investment income $6,716,053 $5,224,209 $4,767,914 =========================================================
59 64 The Manufacturers Life Insurance Company of New York Notes to Financial Statements (continued) 3. INVESTMENTS (CONTINUED) The gross unrealized gains and losses for available-for-sale fixed maturities held at December 31, 1997 and 1996 are as follows:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ------------------------------------------------------------- (In Thousands) DECEMBER 31, 1997 Fixed maturities: U.S. Treasury securities and obligations of U.S. Government agencies $ 7,422 $ 284 $ 7,706 Corporate securities 108,682 1,879 $ 23 110,538 Mortgage-backed securities 5,016 69 5,085 States, territories and possessions 5,594 228 5,822 ------------------------------------------------------------- Total $126,714 $2,460 $ 23 $129,151 ============================================================= DECEMBER 31, 1996 Fixed maturities: U.S. Treasury securities and obligations of U.S. Government agencies $ 3,244 $ 193 $ 3,437 Corporate securities 73,366 1,082 $191 74,257 Mortgage-backed securities 1,017 5 1,012 States, territories and possessions 4,578 182 4,760 ------------------------------------------------------------- Totals $ 82,205 $1,457 $196 $ 83,466 =============================================================
60 65 The Manufacturers Life Insurance Company of New York Notes to Financial Statements (continued) 3. INVESTMENTS (CONTINUED) The amortized cost and fair value of fixed maturities at December 31, 1997, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers or lenders may have the right to call or prepay obligations with or without call or prepayment penalties.
AMORTIZED FAIR COST VALUE ------------------------------------ (In Thousands) FIXED MATURITIES AVAILABLE-FOR-SALE Due in one year or less $12,618 $12,617 Due after one year through five years 59,514 60,938 Due after five years through ten years 28,353 28,627 Due after ten years through twenty years 1,921 1,967 Due after twenty years 19,292 19,917 Mortgage-backed securities 5,016 5,085 ------------------------------------ Total fixed maturities available-for-sale $126,714 $129,151 ====================================
The proceeds from sales of available-for-sale fixed maturities for the year ended December 31, 1997, 1996 and 1995 were $45,217,170, $6,558,755 and $11,634,871, respectively. Gross gains of $772,361, $90,811 and $466,164 and gross losses of $5,539, $2,039 and $0 were realized on these sales, respectively. Fixed maturities with a fair value of $414,100 at December 31, 1997 are in a custody account on behalf of the New York State Insurance Department to satisfy regulatory requirements. At December 31, 1996, the comparable amount was $401,651. 4. FEDERAL INCOME TAXES Beginning in 1996, the Company participates as a member of the MWL affiliated group consolidated federal income tax return. In 1995, the Company participated as a member of the MNA consolidated federal income tax return. The Company files separate state income tax returns. The method of allocation between companies is subject to a written tax sharing agreement. The tax liability is allocated to each member on a pro rata basis based on the relationship that the member's tax liability computed on a separate return 61 66 The Manufacturers Life Insurance Company of New York Notes to Financial Statements (continued) 4. FEDERAL INCOME TAXES (CONTINUED) basis bears to the tax liability of the consolidated group. The tax charge to the Company shall not be more than the Company would have paid on a separate return basis. The Company settles its current income tax each year through an intercompany account. The Company's effective income tax rate varies from the statutory federal income tax rate as follows:
YEAR ENDED DECEMBER 31 1997 1996 1995 ------------------------------- Statutory federal income tax rate applied to income before federal income taxes 35% 35% 35% Add (deduct): Disallowed meals, entertainment 2 Nondeductible consulting fees 4 Reversal of deferred asset valuation allowance (6) ------------------------------ Effective income tax rate 35% 35% 35% ===============================
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's net deferred tax liability are as follows:
DECEMBER 31 1997 1996 --------------------------------- Deferred tax assets: Investment amortization $ 92,345 $ 62,711 Reserves 117,558 --------------------------------- Total deferred tax assets 92,345 180,269 --------------------------------- Deferred tax liabilities: Deferred policy acquisition costs (1,134,971) (1,283,150) Reserves (3,683) Unrealized gain on fixed maturities, net of DPAC effect (589,696) (225,819) Other (633,413) (606,301) --------------------------------- Total deferred tax liabilities (2,361,763) (2,115,270) --------------------------------- Net deferred tax liability $ (2,269,418) $ (1,935,001) =================================
62 67 The Manufacturers Life Insurance Company of New York Notes to Financial Statements (continued) 4. FEDERAL INCOME TAXES (CONTINUED) In the opinion of management, it is more likely than not that the Company will realize the benefit of the deferred tax assets and, therefore, no valuation allowance has been established. 5. SHAREHOLDER'S EQUITY The net assets of the Company available for the Parent as dividends are generally limited to and cannot be made except from earned statutory-basis profits. The maximum amount of dividends that may be paid by life insurance companies without prior approval of the New York Insurance Commissioner is subject to restrictions relating to statutory surplus and net gain from operations on a statutory basis. Net income (loss) and capital and surplus, as determined in accordance with statutory accounting principles, for the Company were as follows:
YEAR ENDED DECEMBER 31 1997 1996 1995 ---------------------------------------------------------- Net income (loss) $(1,562,544) $ 231,315 $ (578,899) Net capital and surplus 68,336,238 22,265,070 8,821,782
The components of the balance sheet caption "Unrealized appreciation on available-for-sale securities" in shareholder's equity are summarized as follows:
DECEMBER 31 1997 1996 --------------- --------------- (In Thousands) Fair value of securities $129,151 $83,466 Amortized cost of securities 126,714 82,205 -------------- -------------- Unrealized appreciation 2,437 1,261 Adjustment to deferred policy acquisition costs (752) (616) Deferred income taxes (590) (226) -------------- -------------- Unrealized appreciation on securities available-for-sale $ 1,095 $ 419 ============== ==============
63 68 The Manufacturers Life Insurance Company of New York Notes to Financial Statements (continued) 6. RELATED-PARTY TRANSACTIONS The Company utilizes various services administered by its Parent and affiliates such as legal, personnel, investment accounting and other corporate services. In 1995, NAL charged the Company approximately $456,000 and, in 1996, MLI and MNA charged the Company approximately $661,000 for those services. At December 31, 1996, the Company had a net liability of $1,965,338 to MLI and MNA for these charges. For the first nine months of 1997, MLI and MNA charged the Company approximately $623,000. Effective October 1, 1997, pursuant to a new Plan of Operations, all intercompany expenses were billed through MLI. For the fourth quarter of 1997, MLI billed the Company expenses of $869,000. At December 31, 1997, the Company had a net liability to MLI of $2,977,176 for these services. For the nine months ended September 30, 1997 and the two years ended December 31, 1996 and 1995, the Company paid underwriting commissions to NASL Financial of $8,421,182, $7,049,687 and $5,348,500, respectively. NASL Financial then reimbursed Wood Logan for promotional agent services. Effective October 1, 1997, MSS replaced NASL Financial as underwriter. Thereafter, all commissions were paid to MSS by the Company, and Wood Logan marketing services were paid by MLI who was reimbursed by the Company. Underwriting commissions and marketing services expense of $4,431,068 was incurred during the fourth quarter of 1997. At December 31, 1997 and 1996, the Company had a net liability of $1,367,857 and $51,308, respectively, for these services. The financial statements have been prepared from the records maintained by the Company and may not necessarily be indicative of the financial conditions or results of operations that would have occurred if the Company had been operated as an unaffiliated corporation (see also Notes 1, 4, 5 and 8 for additional related-party transactions). 7. NOTES PAYABLE The Company has an unsecured line of credit with State Street Bank and Trust in the amount of $5,000,000, bearing interest at the bank's money market rate plus 50 basis points. There were no outstanding advancements under the line of credit at December 31, 1997 and 1996. 64 69 The Manufacturers Life Insurance Company of New York Notes to Financial Statements (continued) 8. RETIREMENT PLANS MLI, and formerly NAL prior to the merger, sponsors a defined benefit pension plan (the Plan) covering substantially all of the Company's employees. The benefits are based on years of service and the employee's compensation during the last five years of employment. MLI's funding policy is to contribute annually the normal cost up to the maximum amount that can be deducted for federal income tax purposes and to charge each subsidiary for its allocable share of such contributions based on a percentage of payroll. No pension costs were allocated to the Company in 1997, 1996 or 1995, as the Plan was subject to the full funding limitation under the Internal Revenue Code. The Company participates in a defined contribution retirement plan sponsored by the Parent pursuant to regulation 401(k) of the Internal Revenue Code. All employees who are 21 years old are eligible after one year of service. The Company contributes two percent of base pay plus fifty percent of the employee savings contribution. The employee savings contribution is limited to six percent of base pay. 9. LEASES The Company leases office space under an operating lease agreement which expires in 1999 and is subject to a renewal option at market rates prevailing at the time of renewal. For the years ended December 31, 1997, 1996 and 1995, the Company incurred rent expense of $83,809, $79,950 and $72,695, respectively. The minimum lease payments associated with the office space are as follows:
MINIMUM LEASE PAYMENTS -------------- Year ended: 1998 $ 81,648 1999 61,236 --------- Total $ 142,884 =========
65 70 The Manufacturers Life Insurance Company of New York Notes to Financial Statements (continued) 10. FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107 (SFAS 107), "Disclosures About Fair Value of Financial Instruments," requires disclosure of fair value information about financial instruments, whether or not recognized in the consolidated balance sheet, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. SFAS No. 107 also excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements and allows companies to forego the disclosures when those estimates can only be made at excessive cost. Accordingly, the aggregate fair value amounts presented herein are limited by each of these factors and do not purport to represent the underlying value of the Company. The following methods and assumptions were used by the Company in estimating the fair value disclosures for financial instruments: Fixed maturities: Fair values for fixed maturities are obtained from an independent pricing service. Short-term investments and cash and cash equivalents: The carrying amounts reported in the accompanying balance sheet for short-term investments, cash and cash equivalents approximate their fair values. Policy loans: The carrying amount in the balance sheet for policy loans approximates the fair value. Policyholder funds: Fair values of the Company's liabilities under contracts not involving significant mortality risk (deferred annuities) are estimated to be the cash surrender value, or the cost the Company would incur to extinguish the liability. 66 71 The Manufacturers Life Insurance Company of New York Notes to Financial Statements (continued) 10. FINANCIAL INSTRUMENTS (CONTINUED) The carrying values and estimated fair values of the Company's financial instruments are as follows:
DECEMBER 31, 1997 DECEMBER 31, 1996 ----------------------------------------------------------------------------- CARRYING VALUE FAIR CARRYING VALUE FAIR VALUE VALUE ----------------------------------------------------------------------------- Assets: Fixed maturities $129,150,862 $129,150,862 $83,466,225 $83,466,225 Short-term investments 9,998,179 9,998,179 3,984,370 3,984,370 Policy loans 398,270 398,270 183,070 183,070 Cash and cash equivalents 1,431,114 1,431,114 4,104,731 4,104,731 Liabilities: Policyholder funds 86,611,035 81,715,263 80,033,667 74,985,163
11. YEAR 2000 ISSUES (UNAUDITED) Like other business organizations and individuals, the Company would be adversely affected if its computer systems and those of its service providers do not properly process and calculate date-related information and data from and after January 1, 2000. The Company is completing an assessment of the Year 2000 impact on its systems and business processes. Management believes that the Company will complete its Year 2000 project for all critical systems and processes by September 30, 1998, prior to any anticipated impact on the critical systems and processes. The date on which the Company believes it will complete the Year 2000 project is based on management's best estimates, which were derived utilizing numerous assumptions of future events. However, there can be no guarantee that these estimates will be achieved and actual results could differ materially from those anticipated. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer code, and other similar uncertainties. 67 72 APPENDIX A SAMPLE ILLUSTRATIONS OF POLICY VALUES, CASH SURRENDER VALUES AND DEATH BENEFITS The following tables have been prepared to help show how values under the Policy change with investment performance. The tables include both Policy Values and Cash Surrender Values as well as Death Benefits. The Policy Value is the sum of the values in the Investment Accounts, as the tables assume no values in the Guaranteed Interest Account or Loan Account. The Cash Surrender Value is the Policy Value less any applicable surrender charges. The tables illustrate how Policy Values and Cash Surrender Values, which reflect all applicable charges and deductions, and Death Benefits of the Policy on an insured of a given age would vary over time if the return on the assets of the Portfolio was a uniform, gross, after-tax, annual rate of 0%, 6% or 12%. The Policy Values, Death Benefits and Cash Surrender Values would be different from those shown if the returns averaged 0%, 6% or 12%, but fluctuated over and under those averages throughout the years. The charges reflected in the tables include those for: deferred underwriting and sales charges, and monthly deductions for administration, cost of insurance and mortality and expense risks. The amounts shown for the Policy Value, Death Benefit and Cash Surrender Value as of each policy year reflect the fact that the net investment return on the assets held in the sub-accounts is lower than the gross, after-tax return. This is because the expenses and fees borne by the Portfolios are deducted from the gross return. The illustrations reflect an average of the Trusts' expenses, which is approximately 0.938% on an annual basis. The gross annual rates of return of 0%, 6% and 12% correspond to approximate net annual rates of return of - -0.933%, 5.011% and 10.955%. The tables assume that no premiums have been allocated to the Guaranteed Interest Account, that planned premiums are paid on the policy anniversary and that no transfers, partial withdrawals, policy loans, changes in death benefit options or changes in face amount have been made. The tables reflect the fact that no charges for Federal, state or local taxes are currently made against the Separate Account. If such a charge is made in the future, it would take a higher gross rate of return to produce after-tax returns of 0%, 6% and 12% than it does now. There are two tables shown for each combination of age and death benefit option for male non-smokers, one based on current cost of insurance and monthly administration charges and the other based on the maximum administration charges, deductions from premiums and cost of insurance charges based on the 1980 Commissioners Standard Ordinary Smoker/Nonsmoker Mortality Tables. The current waiver of deductions from premiums and current monthly administration charges and cost of insurance charges are not guaranteed and may be changed. Upon request, Manulife New York will furnish a comparable illustration based on the proposed life insured's age, sex (unless unisex rates are required by law) and risk class, any additional ratings and the death benefit option, face amount and planned premium requested. Illustrations for smokers would show less favorable results than the illustrations shown below. From time to time, in advertisements or sales literature for the Policies that quote performance data of one or more of the Portfolios, the Company may include cash surrender values and death benefit figures computed using the same methodology as that used in the following illustrations, but with the average annual total return of the Portfolios for which performance data is shown in the advertisement replacing the hypothetical rates of return shown in the following tables. This information may be shown in the form of graphs, charts, tables and examples. 68 73 FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY MALE NON-SMOKER ISSUE AGE 35 (STANDARD) $500,000 FACE AMOUNT DEATH BENEFIT OPTION 1 $5,960 ANNUAL PLANNED PREMIUM ASSUMING CURRENT CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical Gross Investment Return Gross Investment Return Gross Investment Return -------------------------------- ------------------------------ ------------------------------- End of Accumulated Cash Cash Cash Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender Death Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3) Benefit 1 $ 6,258 $ 4,614 $ 0 $500,000 $ 4,926 $ 0 $500,000 $ 5,238 $ 8 $ 500,000 2 12,829 9,409 2,932 500,000 10,326 3,849 500,000 11,281 4,804 500,000 3 19,728 14,073 7,596 500,000 15,903 9,426 500,000 17,883 11,406 500,000 4 26,973 18,604 12,127 500,000 21,659 15,182 500,000 25,097 18,619 500,000 5 34,579 22,993 16,516 500,000 27,592 21,114 500,000 32,973 26,496 500,000 6 42,566 27,267 21,437 500,000 33,733 27,904 500,000 41,606 35,777 500,000 7 50,953 31,389 26,207 500,000 40,055 34,873 500,000 51,035 45,853 500,000 8 59,758 35,363 30,829 500,000 46,566 42,032 500,000 61,345 56,811 500,000 9 69,004 39,183 35,296 500,000 53,266 49,380 500,000 72,618 68,732 500,000 10 78,712 42,851 39,612 500,000 60,168 56,929 500,000 84,960 81,721 500,000 15 135,039 58,691 58,691 500,000 97,745 97,745 500,000 166,837 166,837 500,000 20 206,927 69,614 69,614 500,000 140,660 140,660 500,000 297,801 297,801 500,000 25 298,676 74,682 74,682 500,000 189,924 189,924 500,000 509,341 509,341 682,517 30 415,774 71,195 71,195 500,000 250,643 250,643 500,000 862,995 862,995 1,052,853
- ---------- (1) All values shown are as of the end of the policy year indicated, have been rounded to the nearest dollar, and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the No Lapse Guarantee Cumulative Premium Test has been and continues to be met, the No Lapse Guarantee will keep the Policy in force until the end of the first 5 Policy Years. Provided the Cumulative Premium Test or the Fund Value Test has been and continues to be met, if elected the Death Benefit Guarantee will keep the Policy in force on all policies for the first three years and until age 100 on Policies issued and maintained with a minimum face amount of $250,000 and Death Benefit Option 1; to age 85 on policies issued and maintained with a face amount of at least $250,000 and if Death benefit Option 2 is selected at any time. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANUFACTURERS INVESTMENT TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 69 74 FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY MALE NON-SMOKER ISSUE AGE 35 (STANDARD) $500,000 FACE AMOUNT DEATH BENEFIT OPTION 1 $5,960 ANNUAL PLANNED PREMIUM ASSUMING GUARANTEED CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical Gross Investment Return Gross Investment Return Gross Investment Return ------------------------------ -------------------------------- -------------------------------- End of Accumulated Policy Cash Death Policy Cash Death Policy Cash Death Policy Premiums Value Surrender Benefit Value Surrender Benefit Value Surrender Benefit Year(1) (2) Value(3) Value(3) Value(3) 1 $ 6,258 $ 4,339 $ 0 $500,000 $ 4,636 $ 0 $500,000 $ 4,934 $ 0 $500,000 2 12,829 8,865 2,388 500,000 9,736 3,259 500,000 10,643 4,166 500,000 3 19,728 13,264 6,787 500,000 14,999 8,521 500,000 16,877 10,400 500,000 4 26,973 17,534 11,057 500,000 20,427 13,950 500,000 23,684 17,207 500,000 5 34,579 21,668 15,191 500,000 26,020 19,543 500,000 31,115 24,638 500,000 6 42,566 25,665 19,836 500,000 31,782 25,952 500,000 39,231 33,402 500,000 7 50,953 29,515 24,334 500,000 37,706 32,524 500,000 48,090 42,908 500,000 8 59,758 33,222 28,688 500,000 43,803 39,269 500,000 57,771 53,237 500,000 9 69,004 36,774 32,888 500,000 50,069 46,182 500,000 68,348 64,462 500,000 10 78,712 40,177 36,938 500,000 56,513 53,274 500,000 79,919 76,681 500,000 15 135,039 54,621 54,621 500,000 91,347 91,347 500,000 156,432 156,432 500,000 20 206,927 63,788 63,788 500,000 130,394 130,394 500,000 278,219 278,219 500,000 25 298,676 64,780 64,780 500,000 172,503 172,503 500,000 474,575 474,575 635,931 30 415,774 54,180 54,180 500,000 221,329 221,329 500,000 802,301 802,301 978,807
- ---------- (1) All values shown are as of the end of the policy year indicated, have been rounded to the nearest dollar, and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the No Lapse Guarantee Cumulative Premium Test has been and continues to be met, the No Lapse Guarantee will keep the Policy in force until the end of the first 5 Policy Years. Provided the Cumulative Premium Test or the Fund Value Test has been and continues to be met, if elected the Death Benefit Guarantee will keep the Policy in force on all policies for the first three years and until age 100 on Policies issued and maintained with a minimum face amount of $250,000 and Death Benefit Option 1; to age 85 on policies issued and maintained with a face amount of at least $250,000 and if Death benefit Option 2 is selected at any time. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANUFACTURERS INVESTMENT TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 70 75 FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY MALE NON-SMOKER ISSUE AGE 35 (STANDARD) $500,000 FACE AMOUNT DEATH BENEFIT OPTION 2 $7,450 ANNUAL PLANNED PREMIUM ASSUMING CURRENT CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical Gross Investment Return Gross Investment Return Gross Investment Return ------------------------------ ----------------------------- ------------------------------------- End of Accumulated Cash Cash Cash Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender Death Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3) Benefit 1 $ 7,823 $ 6,069 $ 94 $506,069 $ 6,467 $ 492 $506,467 $ 6,867 $ 892 $ 506,867 2 16,036 12,282 5,805 512,282 13,462 6,985 513,462 14,690 8,213 514,690 3 24,660 18,330 11,852 518,330 20,686 14,209 520,686 23,235 16,758 523,235 4 33,716 24,208 17,730 524,208 28,143 21,666 528,143 32,569 26,092 532,569 5 43,224 29,908 23,430 529,908 35,831 29,353 535,831 42,757 36,279 542,757 6 53,208 35,456 29,627 535,456 43,782 37,952 543,782 53,909 48,079 553,909 7 63,691 40,815 35,633 540,815 51,965 46,783 551,965 66,077 60,895 566,077 8 74,698 45,987 41,453 545,987 60,389 55,855 560,389 79,363 74,828 579,363 9 86,255 50,965 47,078 550,965 69,052 65,166 569,052 93,864 89,978 593,864 10 98,391 55,751 52,512 555,751 77,964 74,725 577,964 109,704 106,465 609,704 15 168,798 76,522 76,522 576,522 126,175 126,175 626,175 213,629 213,629 713,629 20 258,658 91,111 91,111 591,111 180,008 180,008 680,008 374,927 374,927 874,927 25 373,345 98,388 98,388 598,388 238,836 238,836 738,836 626,371 626,371 1,126,371 30 519,718 95,660 95,660 595,660 304,150 304,150 804,150 1,038,425 1,038,425 1,538,425
- ---------- (1) All values shown are as of the end of the policy year indicated, have been rounded to the nearest dollar, and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the No Lapse Guarantee Cumulative Premium Test has been and continues to be met, the No Lapse Guarantee will keep the Policy in force until the end of the first 5 Policy Years. Provided the Cumulative Premium Test or the Fund Value Test has been and continues to be met, if elected the Death Benefit Guarantee will keep the Policy in force on all policies for the first three years and until age 100 on Policies issued and maintained with a minimum face amount of $250,000 and Death Benefit Option 1; to age 85 on policies issued and maintained with a face amount of at least $250,000 and if Death benefit Option 2 is selected at any time. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANUFACTURERS INVESTMENT TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 71 76 FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY MALE NON-SMOKER ISSUE AGE 35 (STANDARD) $500,000 FACE AMOUNT DEATH BENEFIT OPTION 2 $7,450 ANNUAL PLANNED PREMIUM ASSUMING GUARANTEED CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical Gross Investment Return Gross Investment Return Gross Investment Return ----------------------------- --------------------------------- ------------------------------------- End of Accumulated Cash Cash Cash Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender Death Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3) Benefit 1 $ 7,823 $5,741 $ 0 $505,741 $ 6,122 $ 147 $506,122 $ 6,504 $ 529 $ 506,504 2 16,036 11,635 5,158 511,635 12,759 6,282 512,759 13,929 7,452 513,929 3 24,660 17,368 10,891 517,368 19,611 13,133 519,611 22,037 15,560 522,037 4 33,716 22,937 16,460 522,937 26,680 20,203 526,680 30,889 24,412 530,889 5 43,224 28,336 21,858 528,336 33,965 27,488 533,965 40,550 34,073 540,550 6 53,208 33,562 27,732 533,562 41,471 35,641 541,471 51,094 45,264 551,094 7 63,691 38,604 33,422 538,604 49,190 44,008 549,190 62,593 57,411 562,593 8 74,698 43,465 38,931 543,465 57,131 52,597 557,131 75,143 70,609 575,143 9 86,255 48,134 44,248 548,134 65,289 61,402 565,289 88,833 84,947 588,883 10 98,391 52,615 49,376 552,615 73,672 70,433 573,672 103,777 100,538 603,777 15 168,798 71,810 71,810 571,810 118,751 118,751 618,751 201,528 201,528 701,528 20 258,658 84,481 84,481 584,481 168,237 168,237 668,237 352,334 352,334 852,334 25 373,345 87,346 87,346 587,346 218,672 218,672 718,672 583,336 583,336 1,083,336 30 519,718 77,359 77,359 577,359 269,816 269,816 769,816 957,183 957,183 1,457,183
- ---------- (1) All values shown are as of the end of the policy year indicated, have been rounded to the nearest dollar, and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the No Lapse Guarantee Cumulative Premium Test has been and continues to be met, the No Lapse Guarantee will keep the Policy in force until the end of the first 5 Policy Years. Provided the Cumulative Premium Test or the Fund Value Test has been and continues to be met, if elected the Death Benefit Guarantee will keep the Policy in force on all policies for the first three years and until age 100 on Policies issued and maintained with a minimum face amount of $250,000 and Death Benefit Option 1; to age 85 on policies issued and maintained with a face amount of at least $250,000 and if Death benefit Option 2 is selected at any time. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANUFACTURERS INVESTMENT TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 72 77 FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY MALE NON-SMOKER ISSUE AGE 55 (STANDARD) $500,000 FACE AMOUNT DEATH BENEFIT OPTION 1 $15,095 ANNUAL PLANNED PREMIUM ASSUMING CURRENT CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical Gross Investment Return Gross Investment Return Gross Investment Return ------------------------------- -------------------------------- ---------------------------------- End of Accumulated Cash Cash Cash Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender Death Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3) Benefit 1 $ 15,850 $ 10,720 $ 922 $500,000 $ 11,480 $ 1,683 $500,000 $ 12,243 $ 2,446 $ 500,000 2 32,492 21,329 6,523 500,000 23,525 8,719 500,000 25,815 11,010 500,000 3 49,966 31,493 16,688 500,000 35,816 21,011 500,000 40,508 25,703 500,000 4 68,314 41,492 26,686 500,000 48,652 33,846 500,000 56,738 41,932 500,000 5 87,580 51,346 36,541 500,000 62,079 47,274 500,000 74,694 59,889 500,000 6 107,809 61,033 49,189 500,000 76,106 64,261 500,000 94,546 82,702 500,000 7 129,049 70,396 61,512 500,000 90,605 81,722 500,000 116,352 107,469 500,000 8 151,351 79,367 73,444 500,000 105,541 99,619 500,000 140,281 134,359 500,000 9 174,768 87,997 85,036 500,000 120,993 118,032 500,000 166,638 163,677 500,000 10 199,356 96,286 96,286 500,000 136,994 136,994 500,000 195,720 195,720 500,000 15 342,015 137,180 137,180 500,000 233,448 233,448 500,000 405,872 405,872 500,000 20 524,087 158,276 158,276 500,000 349,972 349,972 500,000 759,762 759,762 812,945 25 756,463 116,567 116,567 500,000 498,372 498,372 523,290 1,331,351 1,331,351 1,397,918 30 1,053,039 0 (4) 0(4) 500,000(5) 691,765 691,765 726,354 2,237,092 2,237,092 2,348,947
- ---------- (1) All values shown are as of the end of the policy year indicated, have been rounded to the nearest dollar, and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the No Lapse Guarantee Cumulative Premium Test has been and continues to be met, the No Lapse Guarantee will keep the Policy in force until the end of the first 5 Policy Years. Provided the Cumulative Premium Test or the Fund Value Test has been and continues to be met, if elected the Death Benefit Guarantee will keep the Policy in force on all policies for the first three years and until age 100 on Policies issued and maintained with a minimum face amount of $250,000 and Death Benefit Option 1; to age 85 on policies issued and maintained with a face amount of at least $250,000 and if Death benefit Option 2 is selected at any time. (4) In the absence of additional premium payments, the Policy will lapse, unless the Death Benefit Guarantee is in effect. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANUFACTURERS INVESTMENT TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 73 78 FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY MALE NON-SMOKER ISSUE AGE 55 (STANDARD) $500,000 FACE AMOUNT DEATH BENEFIT OPTION 1 $15,095 ANNUAL PLANNED PREMIUM ASSUMING GUARANTEED CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical Gross Investment Return Gross Investment Return Gross Investment Return ------------------------------ ---------------------------------- ------------------------------------ End of Accumulated Cash Cash Cash Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender Death Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3) Benefit 1 $ 15,850 $ 10,044 $ 246 $500,000 $ 10,767 $ 970 $500,000 $ 11,494 $ 1,696 $ 500,000 2 32,492 19,896 5,091 500,000 21,974 7,168 500,000 24,143 9,337 500,000 3 49,966 29,254 14,448 500,000 33,328 18,522 500,000 37,753 22,948 500,000 4 68,314 38,105 23,299 500,000 44,824 30,019 500,000 52,422 37,617 500,000 5 87,580 46,416 31,610 500,000 56,438 41,632 500,000 68,241 53,435 500,000 6 107,809 54,155 42,310 500,000 68,147 56,302 500,000 85,321 73,477 500,000 7 129,049 61,288 52,404 500,000 79,929 71,045 500,000 103,794 94,911 500,000 8 151,351 67,758 61,835 500,000 91,743 85,821 500,000 123,797 117,875 500,000 9 174,768 73,499 70,537 500,000 103,543 100,582 500,000 145,492 142,531 500,000 10 199,356 78,438 78,438 500,000 115,282 115,282 500,000 169,080 169,080 500,000 15 342,015 91,123 91,123 500,000 176,267 176,267 500,000 334,624 334,624 500,000 20 524,087 68,400 68,400 500,000 233,986 233,986 500,000 628,104 628,104 672,072 25 756,463 0(4) 0(4) 500,000(4) 281,220 281,220 500,000 1,111,012 1,111,012 1,166,563 30 1,053,039 0(4) 0(4) 500,000(4) 310,816 310,816 500,000 1,871,555 1,871,555 1,965,132
- ---------- (1) All values shown are as of the end of the policy year indicated, have been rounded to the nearest dollar, and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the No Lapse Guarantee Cumulative Premium Test has been and continues to be met, the No Lapse Guarantee will keep the Policy in force until the end of the first 5 Policy Years. Provided the Cumulative Premium Test or the Fund Value Test has been and continues to be met, if elected the Death Benefit Guarantee will keep the Policy in force on all policies for the first three years and until age 100 on Policies issued and maintained with a minimum face amount of $250,000 and Death Benefit Option 1; to age 85 on policies issued and maintained with a face amount of at least $250,000 and if Death benefit Option 2 is selected at any time. (4) In the absence of additional premium payments, the Policy will lapse, unless the Death Benefit Guarantee is in effect. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANUFACTURERS INVESTMENT TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 74 79 FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY MALE NON-SMOKER ISSUE AGE 55 (STANDARD) $500,000 FACE AMOUNT DEATH BENEFIT OPTION 2 $17,920 ANNUAL PLANNED PREMIUM ASSUMING CURRENT CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical Gross Investment Return Gross Investment Return Gross Investment Return ----------------------------- ------------------------------- -------------------------------- End of Cash Cash Cash Policy Accumulated Policy Surrender Death Policy Surrender Death Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3) Benefit 1 $ 18,816 $ 13,397 $ 2,187 $513,397 $ 14,318 $ 3,108 $514,318 $ 15,241 $ 4,031 $ 515,241 2 38,573 26,539 11,733 526,539 29,207 14,401 529,207 31,988 17,183 531,988 3 59,317 39,080 24,275 539,080 44,329 29,523 544,329 50,019 35,214 550,019 4 81,099 51,316 36,511 551,316 59,987 45,182 559,987 69,764 54,959 569,764 5 103,970 63,270 48,465 563,270 76,221 61,416 576,221 91,413 76,607 591,413 6 127,985 74,918 63,073 574,918 93,024 81,180 593,024 115,124 103,279 615,124 7 153,200 86,074 77,191 586,074 110,224 101,340 610,224 140,900 132,016 640,900 8 179,676 96,654 90,732 596,654 127,738 121,816 627,738 168,846 162,924 668,846 9 207,476 106,710 103,749 606,710 145,623 142,661 645,623 199,223 196,262 699,223 10 236,666 116,233 116,233 616,233 163,874 163,874 663,874 232,253 232,253 732,253 15 406,022 161,066 161,066 661,066 268,695 268,695 768,695 459,483 459,483 959,483 20 622,169 174,545 174,545 674,545 367,854 367,854 867,854 797,626 797,626 1,297,626 25 898,033 102,063 102,063 602,063 393,411 393,411 893,411 1,240,333 1,240,333 1,740,333 30 1,250,113 0(4) 0(4) 500,000(4) 325,090 325,090 825,090 1,852,936 1,852,936 2,352,936
- ---------- (1) All values shown are as of the end of the policy year indicated, have been rounded to the nearest dollar, and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the No Lapse Guarantee Cumulative Premium Test has been and continues to be met, the No Lapse Guarantee will keep the Policy in force until the end of the first 5 Policy Years. Provided the Cumulative Premium Test or the Fund Value Test has been and continues to be met, if elected the Death Benefit Guarantee will keep the Policy in force on all policies for the first three years and until age 100 on Policies issued and maintained with a minimum face amount of $250,000 and Death Benefit Option 1; to age 85 on policies issued and maintained with a face amount of at least $250,000 and if Death benefit Option 2 is selected at any time. (4) Provided the Death Benefit Guarantee has been in effect, the Policy will have been kept in force until the end of the policy year in which the life insured reached attained age 85, at which time the Death Benefit Guarantee will expire and in the absence of additional premium payments, the Policy will lapse. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANUFACTURERS INVESTMENT TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 75 80 FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY MALE NON-SMOKER ISSUE AGE 55 (STANDARD) $500,000 FACE AMOUNT DEATH BENEFIT OPTION 2 $17,920 ANNUAL PLANNED PREMIUM ASSUMING GUARANTEED CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical Gross Investment Return Gross Investment Return Gross Investment Return ------------------------------ --------------------------------- ---------------------------------- End of Accumulated Cash Cash Cash Policy Accumulated Policy Surrender Death Policy Surrender Death Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3) Benefit 1 $ 18,816 $ 12,623 $ 1,413 $512,623 $ 13,502 $ 2,292 $513,502 $ 14,383 $ 3,173 $ 514,383 2 38,573 24,914 10,109 524,914 27,447 12,641 527,447 30,088 15,283 530,088 3 59,317 36,557 21,751 536,557 41,521 26,716 541,521 46,907 32,101 546,907 4 81,099 47,528 32,722 547,528 55,695 40,889 555,695 64,912 50,106 564,912 5 103,970 57,780 42,975 557,780 69,909 55,104 569,909 84,158 69,353 584,158 6 127,985 67,269 55,424 567,269 84,106 72,262 584,106 104,708 92,863 604,708 7 153,200 75,942 67,059 575,942 98,219 89,335 598,219 126,621 117,738 626,621 8 179,676 83,727 77,805 583,727 112,151 106,229 612,151 149,940 144,018 649,940 9 207,476 90,536 87,574 590,536 125,789 122,828 625,789 174,693 171,732 674,694 10 236,666 96,277 96,277 596,277 139,008 139,008 639,008 200,909 200,909 700,909 15 406,022 108,944 108,944 608,944 199,201 199,201 699,201 363,876 363,876 863,876 20 622,169 79,427 79,427 579,427 226,985 226,985 726,985 577,602 577,602 1,077,602 25 898,033 0(4) 0(4) 500,000(4) 181,773 181,733 681,773 837,122 837,122 1,337,122 30 1,250,113 0(4) 0(4) 0(4) 9,447 9,447 509,447 1,130,810 1,130,810 1,630,810
- ---------- (1) All values shown are as of the end of the policy year indicated, have been rounded to the nearest dollar, and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the No Lapse Guarantee Cumulative Premium Test has been and continues to be met, the No Lapse Guarantee will keep the Policy in force until the end of the first 5 Policy Years. Provided the Cumulative Premium Test or the Fund Value Test has been and continues to be met, if elected the Death Benefit Guarantee will keep the Policy in force on all policies for the first three years and until age 100 on Policies issued and maintained with a minimum face amount of $250,000 and Death Benefit Option 1; to age 85 on policies issued and maintained with a face amount of at least $250,000 and if Death benefit Option 2 is selected at any time. (4) Provided the Death Benefit Guarantee has been in effect, the Policy will have been kept in force until the end of the policy year in which the life insured reached attained age 85, at which time the Death Benefit Guarantee will expire and in the absence of additional premium payments, the Policy will lapse. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANUFACTURERS INVESTMENT TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 76 81 APPENDIX B DEFINITIONS The following terms have the following meanings when used in this Prospectus: ADDITIONAL RATING -- an addition to the cost of insurance rate for insureds who do not meet at least the underwriting requirements of the standard risk class. BUSINESS DAY -- any day that the New York Stock Exchange is open for trading and trading is not restricted. The net asset value of the underlying shares of a sub-account of the Separate Account will be determined at the end of each Business Day. CASH SURRENDER VALUE -- the Policy Value less the deferred sales charge, the deferred underwriting charge and any outstanding monthly deductions due. DEATH BENEFIT GUARANTEE CUMULATIVE PREMIUM TEST -- a test that, if satisfied in the first three policy years and, where applicable, if satisfied in subsequent policy years, will maintain the Death Benefit Guarantee. To satisfy the Death Benefit Guarantee Cumulative Premium Test, the sum of premiums paid, less withdrawals, and less policy loans, must equal or exceed the sum of Death Benefit Guarantee Premiums since issue as at the beginning of each policy month. DEATH BENEFIT GUARANTEE -- Manulife New York's guarantee that the Policy will not go into default even if a combination of policy loans, adverse investment experience or other factors should cause the Policy's Net Cash Surrender Value to be insufficient to meet the monthly deductions due at the beginning of a policy month. DEATH BENEFIT GUARANTEE PREMIUM -- a measure of premium used in determining compliance with the Cumulative Premium Test. The Death Benefit Guarantee Premium as an annual amount is established by the Company based on issue age, sex, risk class, death benefit option, supplementary benefits and additional ratings. EFFECTIVE DATE -- the date that Manulife New York becomes obligated under the Policy and when the first monthly deductions are taken. FUND VALUE TEST -- a test which, if satisfied in applicable policy years will maintain the Death Benefit Guarantee feature. To satisfy the Fund Value Test, the Gross Single Premium at the beginning of any applicable policy month must not be greater than the Net Policy Value. GROSS SINGLE PREMIUM -- the amount of premium needed to endow the Policy to the expiration of the Death Benefit Guarantee assuming 4% interest and current charges. GUARANTEED INTEREST ACCOUNT -- that part of the Policy Value which reflects the value the policyowner has in the general account of Manulife New York. GUIDELINE ANNUAL PREMIUM (GAP) -- used to determine the proportion of premiums and the Policy Value attributable to an increase in Face Amount for the purpose of calculating the new Deferred Sales Charge after such increase. INITIAL PREMIUM -- at least 1/12 of the Target Premium. The Initial Premium must be received within 60 days after the policy date. INVESTMENT ACCOUNT -- that part of the Policy Value which reflects the value the policyowner has in one of the sub-accounts of the Separate Account. ISSUE AGE -- the age on the nearest birthday, at policy date, as shown in the Policy. LOAN ACCOUNT -- that part of the Policy Value which reflects the value the policyowner has transferred from the Guaranteed Interest Account or the Investment Accounts as collateral for a policy loan. MODIFIED POLICY DEBT -- as of any date, the Policy Debt plus the amount of interest to be charged to the next policy anniversary, all discounted from the next policy anniversary to such date at an annual rate of 4%. MONTHLY DEATH BENEFIT GUARANTEE PREMIUM -- 1/12 of the Death Benefit Guarantee Premium. MONTHLY NO LAPSE GUARANTEE PREMIUM -- 1/12 of the No Lapse Guarantee Premium. 77 82 NET CASH SURRENDER VALUE -- the Cash Surrender Value less Policy Debt. NET POLICY VALUE -- the Policy Value less the value in the Loan Account. NET PREMIUM -- amount of premium allocated to the Investment Accounts or Guaranteed Interest Account. It equals gross premiums less the deduction for state, local and Federal taxes. NO LAPSE GUARANTEE -- Manulife New York guarantees that the Policy will not go into default even if a combination of Policy loans, adverse investment experience and other factors should cause the Policy's Net Cash Surrender Value to be insufficient to meet the monthly deductions due at the beginning of a policy month. NO LAPSE GUARANTEE CUMULATIVE PREMIUM TEST -- a test that, if satisfied in the No Lapse Guarantee Period, will maintain the No Lapse Guarantee. To satisfy the No Lapse Guarantee Cumulative Premium Test, the sum of premiums paid, less withdrawals, and less Policy loans must equal or exceed the sum of No Lapse Guarantee Premiums since issue as at the beginning of each policy month. NO LAPSE GUARANTEE PERIOD -- is the first 5 policy years for life insureds with an issue age up to and including 85. It is not offered to life insureds whose Issue Age exceeds 85. NO LAPSE GUARANTEE PREMIUM -- is a measure of premium used in determining compliance with the No Lapse Guarantee Cumulative Premium Test. The No Lapse Guarantee premium for each policyowner is set forth in the Policy. PLANNED PREMIUM -- The premium the policyowner plans to pay periodically. Subject to certain requirements of law, the Planned Premium may be changed at any time. POLICY DATE -- The date from which policy years, policy months and policy anniversaries are determined. Monthly deductions are due on the policy date. If a check for at least the Initial Premium accompanies the application, the policy date is the date the application and check are received at the Service office. If an application accepted by the Company is not accompanied by a check for the Initial Premium, the policy will be issued with a policy date which is 7 days after issuance of the policy. POLICY DEBT -- as of any date, the aggregate amount of policy loans, including borrowed interest, less any loan repayments. POLICY VALUE -- the sum of the values in the Loan Account, the Guaranteed Interest Account and the Investment Accounts. SELECT LOAN -- A loan on which the differential between the interest credited and the interest charged is currently 0%; provided, however, if at some time in the future it is determined that the current differential could cause the loan to be treated as a taxable distribution under any applicable ruling, regulation or court decision, Manulife New York has the right to increase the differential on all subsequent Select Loans either (i) to an amount that may be presented in such ruling, regulation or court decision that would result in the transaction being treated as a loan under Federal tax law or (ii) if no amount is prescribed, to an amount that Manulife New York feels would be more likely to result in the transaction being treated as a loan under Federal tax law. SELECT LOAN AMOUNT -- the amount of any Select Loan. SERVICE OFFICE -- the office designated to service the Policies, which is shown on the cover page of this prospectus. SURRENDER CHARGE PERIOD -- the period (usually 15 years) following issuance of the Policy or any increase in face amount during which surrender charges may be assessed if the Policy is surrendered or lapsed, the face amount is decreased or a partial withdrawal takes place. TARGET PREMIUM -- a premium amount used to measure the maximum deferred sales charge under a Policy. The Target Premium for the initial face amount is set forth in the Policy. The policyowner will be advised of the Target Premium for any increase in face amount. WITHDRAWAL TIER AMOUNT -- as of any date, the net Cash Surrender Value at the previous anniversary multiplied by 10%. 78 83 PART II OTHER INFORMATION UNDERTAKINGS Undertaking to File Reports. Subject to the terms and conditions of Section 15(d) of the Securities Exchange Act of 1934, the undersigned registrant hereby undertakes to file with the Securities and Exchange Commission such supplementary and periodic information, documents, and reports as may be prescribed by any rule or regulation of the Commission heretofore or hereafter duly adopted pursuant to authority conferred in that section. Representation of Insurer Pursuant to Section 26 of the Investment Company Act of 1940, as amended. The Manufacturers Life Insurance Company of New York (the "Company") hereby represents that the fees and charges deducted under the contracts issued pursuant to this registration statement, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the Company. Rule 484 Undertaking. Article 10 of the Charter of the Company provides as follows: TENTH: No director of the Corporation shall be personally liable to the Corporation or any of its shareholders for damages for any breach of duty as a director; provided, however, the foregoing provision shall not eliminate or limit (i) the liability of a director if a judgment or other final adjudication adverse to such director established his or her such acts or omissions were in bad faith or involved intentional misconduct or were acts or omissions (a) which he or she knew or reasonably should have known violated the New York Insurance Law or (b) which violated a specific standard of care imposed on directors directly, and not by reference, by a provision of the New York Insurance Law (or any regulations promulgated thereunder) or (c) which constituted a knowing violation of any other law, or establishes that the director personally gained in fact a financial profit or other advantage to which the director was not legally entitled or (ii) the liability of a director for any act or omission prior to the adoption of this Article by the shareholders of the Corporation. Any repeal or modification of this Article by the shareholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such repeal or modification. Article VII of the By-laws of the Company provides as follows: Section VII.1. Indemnification of Directors and Officers. The Corporation may indemnify any person made, or threatened to be made, a party to an action by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he or she, his or her testator, testatrix or intestate, is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of any other corporation of any type or kind, domestic or foreign, of any partnership, joint venture, trust, employee benefit plan or other enterprise, against amounts paid in settlement and reasonable expenses, including attorneys' fees, actually and necessarily incurred by him or her in connection with the defense or settlement of such action, or in connection with an appeal therein, if such director or officer acted, in good faith, for a purpose which he or she reasonably believed to be in, or, in the case of service for any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise, not opposed to, 84 the best interests of the Corporation, except that no indemnification under this Section shall be made in respect of (1) a threatened action, or a pending action which is settled or is otherwise disposed of, or (2) any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation, unless and only to the extent that the court in which the action was brought, or, if no action was brought, any court of competent jurisdiction, determines upon application that, in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such portion of the settlement amount and expenses as the court deems proper. The Corporation may indemnify any person made, or threatened to be made, a party to an action or proceeding (other than one by or in the right of the Corporation to procure a judgment in its favor), whether civil or criminal, including an action by or in the right of any other corporation of any type or kind, domestic or foreign, or any partnership, joint venture, trust, employee benefit plan or other enterprise, which any director or officer of the Corporation served in any capacity at the request of the Corporation, by reason of the fact that he or she, his or her testator, testatrix or intestate, was a director or officer of the Corporation, or served such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys' fees actually and necessarily incurred as a result of such action or proceeding, or any appeal therein, if such director or officer acted, in good faith, for a purpose which he or she reasonably believed to be in, or, in the case of service for any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise, not opposed to, the best interests of the Corporation and, in criminal actions or proceedings, in addition, had no reasonable cause to believe that his or her conduct was unlawful. The termination of any such civil or criminal action or proceeding by judgment, settlement, conviction or upon a plea of nolo contendere, of its equivalent, shall not in itself create a presumption that any such director or officer did not act, in good faith, for a purpose which he or she reasonably believed to be in, or, in the case of service for any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise, not opposed to, the best interest of the Corporation or that he or she had reasonable cause to believe that his or her conduct was unlawful. Notwithstanding the foregoing, Registrant hereby makes the following undertaking pursuant to Rule 484 under the Securities Act of 1933: Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 85 CONTENTS OF REGISTRATION STATEMENT This registration statement comprises the following papers and documents: The facing sheet; The Prospectus, consisting of 76 pages; Undertaking to file reports; Representation pursuant to Section 26 of the Investment Company Act of 1940; Rule 484 Undertaking; The signatures; Written consents of the following persons: Tracy A. Kane, Esq., Counsel John G. Vrysen, Chief Actuary Ernst & Young LLP Cooper & Lybrand L.L.P. Jones & Blouch L.L.P. The following exhibits are filed as part of this Registration Statement: 1. Copies of all exhibits required by paragraph A of the instructions as to exhibits in Form N-8B-2 are set forth below under designations based on such instructions: A(1) Resolutions of Board of Directors of First North American Life Assurance Company establishing FNAL Variable Life Account I were previously filed in the Registrant's initial registration statement on Form S-6 (File No. 333-33351) as filed with the Commission on August 8, 1997. A(2) Not applicable. A(3)(a) Underwriting and Distribution Agreement between The Manufacturers Life Insurance Company of New York (Depositor) and Manufacturers Securities Services, LLC (Underwriter) is incorporated by reference to Exhibit (b)(3)(a) to post-effective amendment No. 7 to the Registration Statement on Form N-4, file number 33-46217, filed February 25, 1998 on behalf of The Manufacturers Life Insurance Company of New York Separate Account A. A(3)(b) Selling Agreement between The Manufacturers Life Insurance Company of New York, Manufactures Securities Services, LLC (Underwriter), Selling Broker Dealers, and General Agent is incorporated by reference to Exhibit (b)(3)(b) to post-effective amendment No. 7 to the Registration Statement on Form N-4, file number 33-46217, filed February 25, 1998 on behalf of The Manufacturers Life Insurance Company of New York Separate Account A. A(3)(c) Not applicable. A(4) Not applicable. A(5) Form of Flexible Premium Variable Life Insurance Policy is filed herewith. 86 A(6)(a)(i) Declaration of Intention and Charter of First North American Life Assurance Company is incorporated by reference to Exhibit (b)(6)(i) to post-effective amendment No. 7 to the Registration Statement on Form N-4, file number 33-46217, filed February 25, 1998 on behalf of The Manufacturers Life Insurance Company of New York Separate Account A. A(6)(a)(ii) Certificate of amendment of the Declaration of Intention and Charter of First North American Life Assurance Company is incorporated by reference to Exhibit (b)(6)(i) to post-effective amendment No. 7 to the Registration Statement on Form N-4, file number 33-46217, filed February 25, 1998 on behalf of The Manufacturers Life Insurance Company of New York Separate Account A. A(6)(a)(iii) Certificate of amendment of the Declaration of Intention and Charter of The Manufacturers Life Insurance Company of New York is incorporated by reference to Exhibit (b)(6)(i) to post-effective amendment No. 7 to the Registration Statement on Form N-4, file number 33-46217, filed February 25, 1998 on behalf of The Manufacturers Life Insurance Company of New York Separate Account A. (A)(6)(b) By-laws of The Manufacturers Life Insurance Company of New York are incorporated by reference to Exhibit (b)(6)(i) to post-effective amendment No. 7 to the Registration Statement on Form N-4, file number 33-46217, filed February 25, 1998 on behalf of The Manufacturers Life Insurance Company of New York Separate Account A. A(7) Not applicable. A(8)(a) Form of Reinsurance Agreement between The Manufacturers Life Insurance Company of New York and The Manufacturers Life Insurance Company (USA) is filed herein. A(8)(b) Administrative Services Agreement between The Manufacturers Life Insurance Company and The Manufacturers Life Insurance Company of New York is incorporated by reference to Exhibit (b)(8)(a) to post-effective amendment No. 7 to the Registration Statement on Form N-4, file number 33-46217, filed February 25, 1998 on behalf of The Manufacturers Life Insurance Company of New York Separate Account A. A(8)(c) Investment Services Agreement between The Manufacturers Life Insurance Company of New York and The Manufacturers Life Insurance Company is field herewith. A(9) Not applicable. A(10)(a) Form of Application for Flexible Premium Variable Life Insurance Policy is filed herewith. A(10)(b) Form of supplement to the Application for Flexible Premium Variable Life 87 Insurance Policy is filed herewith. 2. Consents of the following: A Opinion and consent of Tracy A. Kane, Esq., Secretary and Counsel of The Manufacturers Life Insurance Company of New York B Consent of John G. Vrysen, Chief Actuary of The Manufacturers Life Insurance Company of New York C Consent of Jones & Blouch LLP D Consent of Ernst & Young LLP E Consent of Coopers & Lybrand, L.L.P. 3. No financial statements are omitted from the prospectus pursuant to instruction 1(b) or (c) of Part I. 4. Not applicable. 5. Not applicable. 6. Memorandum Regarding Issuance, Face Amount Increase, Redemption and Transfer Procedures for the Policies is incorporated by reference to the Registrant's registration statement on Form S-6 (File No. 333-33351) as filed with the Commission on August 8, 1997. 7. Powers of Attorney are filed herewith. 88 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 the registrant, THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK SEPARATE ACCOUNT B has duly caused this registration statement to be signed on its behalf by the undersigned thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the city of Boston, and Commonwealth of Massachusetts, on the 13th day of March, 1998. THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK SEPARATE ACCOUNT B (Registrant) By: THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK (Depositor) By: /s/ A. SCOTT LOGAN ----------------------------- A. Scott Logan President Attest /s/ TRACY A. KANE - ----------------- Tracy A. Kane Secretary 89 SIGNATURES Pursuant to the requirements of the Securities Act of l933, this registration statement has been signed by the following persons in the capacities indicated on this 13th day of March, 1998. SIGNATURE TITLE DATE /s/ A. SCOTT LOGAN Director and President March 13, 1998 - ---------------------- (Principal Executive -------------- A. Scott Logan Officer) (Date) Chairman of the Board March 13, 1998 *--------------------- of Directors --------------- John D. Richardson (Date) Director March 13, 1998 *--------------------- -------------- John D. DesPrez, III (Date) Director March 13, 1998 *--------------------- --------------- Ruth Ann Flemming (Date) Director March 13, 1998 *--------------------- -------------- Neil M. Merkl (Date) Director March 13, 1998 *--------------------- --------------- Robert C. Perez (Date) Director March 13, 1998 *--------------------- --------------- James K. Robinson (Date) Director March 13, 1998 *--------------------- --------------- Theodore Kilkuskie (Date) Director March 13, 1998 *--------------------- --------------- Bruce Avedon (Date) Director March 13, 1998 *--------------------- --------------- Bruce Gordon (Date) /s/ David W. LIBBEY Treasurer (Principal March 13, 1998 - ---------------------- Financial and Accounting --------------- David W. Libbey Officer) (Date) *By: /s/ TRACY A. KANE March 13, 1998 ------------------------- --------------- Tracy A. Kane (Date) Attorney-in-Fact Pursuant to Powers of Attorney 90 EXHIBIT INDEX Exhibit No. Description 1(A)(5) Form of Flexible Premium Variable Life Insurance Policy 1(A)(8)(a) Form of Reinsurance Agreement between The Manufacturers Life Insurance Company of New York and The Manufacturers Life Insurance Company (USA) 1(A)(8)(c) Investment Services Agreement between The Manufacturers Life Insurance Company of New York and The Manufacturers Life Insurance Company 1(A)(10)(a) Form of Application for Flexible Premium Variable Life Insurance Policy 1(A)(10)(b) Form of supplement to the Application for Flexible Premium Variable Life Insurance Policy 2A Opinion and consent of Tracy A. Kane, Esq., Secretary and Counsel of The Manufacturers Life Insurance Company of New York 2B Consent of John G. Vrysen, Chief Actuary of The Manufacturers Life Insurance Company of New York 2C Consent of Jones & Blouch LLP 2D Consent of Ernst & Young LLP 2E Consent of Coopers & Lybrand, L.L.P. 7 Powers of Attorney EX-99.(A)(5) 2 FORM OF FLEXIBLE PREMIUM 1 Exhibit (A)(5)(b) - -------------------------------------------------------------------------------- LIFE INSURED JOHN M DOE POLICY NUMBER 12 345 678 - -------------------------------------------------------------------------------- FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY. ADJUSTABLE DEATH BENEFIT. FLEXIBLE PREMIUMS PAYABLE TO AGE 100 DURING THE LIFE INSURED'S LIFETIME. POLICY VALUES ALLOCATED TO AN INVESTMENT ACCOUNT REFLECT THE INVESTMENT EXPERIENCE OF THE UNDERLYING SUB-ACCOUNT. INVESTMENT OPTIONS ARE DESCRIBED IN THE "POLICY VALUE COMPOSITION" AND THE "INVESTMENT OPTIONS" PROVISIONS. NON-PARTICIPATING (NOT ELIGIBLE FOR DIVIDENDS). - -------------------------------------------------------------------------------- In this policy "you" and "your" refer to the owner of the policy. "We", "us" and "our" refer to The Manufacturers Life Insurance Company of New York. If the life insured dies while the policy is in force, we will pay the Insurance Benefit to the beneficiary, subject to the provisions of the policy. The life insured and the beneficiary are named on page 3 and in the application for this policy, a copy of which is attached to this policy. The Death Benefit is described in the "Insurance Benefit" provision. YOUR NET PREMIUMS ARE ADDED TO YOUR POLICY VALUE. YOU MAY ALLOCATE THEM TO ONE OR MORE OF THE INVESTMENT ACCOUNTS AND TO THE GUARANTEED INTEREST ACCOUNT. THE PORTION OF YOUR POLICY VALUE THAT IS IN AN INVESTMENT ACCOUNT WILL VARY FROM DAY TO DAY. THE AMOUNT IS NOT GUARANTEED; IT MAY INCREASE OR DECREASE, DEPENDING ON THE INVESTMENT EXPERIENCE OF THE UNDERLYING SUB-ACCOUNTS FOR THE INVESTMENT ACCOUNTS THAT YOU HAVE CHOSEN. THE PORTION OF YOUR POLICY VALUE THAT IS IN THE GUARANTEED INTEREST ACCOUNT WILL ACCUMULATE, AFTER DEDUCTIONS, AT RATES OF INTEREST WE DETERMINE. SUCH RATES WILL NOT BE LESS THAN 4% PER YEAR. THE AMOUNT OF THE INSURANCE BENEFIT, OR THE DURATION OF THE INSURANCE COVERAGE, OR BOTH, MAY BE VARIABLE OR FIXED UNDER SPECIFIED CONDITIONS AND MAY INCREASE OR DECREASE AS DESCRIBED IN THE "PAYMENT OF PREMIUMS" PROVISION AND THE "INSURANCE BENEFIT" PROVISION. READ YOUR POLICY CAREFULLY. IT IS A CONTRACT BETWEEN YOU AND US. RIGHT TO RETURN POLICY. WITHIN EITHER (1) TEN DAYS AFTER YOU RECEIVE YOUR POLICY; OR (2) FORTY-FIVE DAYS AFTER YOU SIGN THE APPLICATION; OR (3) TEN DAYS AFTER WE MAIL OR DELIVER A NOTICE OF RIGHT OF WITHDRAWAL, YOU CAN RETURN THE POLICY FOR CANCELLATION BY DELIVERING OR MAILING IT TO US OR THE AGENT WHO SOLD IT. IMMEDIATELY ON DELIVERY OR MAILING, THE POLICY WILL BE VOID FROM THE BEGINNING. WE WILL REFUND IN FULL THE PAYMENT MADE. - -------------------------------------------------------------------------------- [LOGO] MANULIFE FINANCIAL THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK International Corporate Center at Rye, 555 Theodore Fremd Avenue, Rye, NY 01580 /s/ A Scott Logan /s/ Tracy A Kane President Secretary - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS PAGE Policy Information......................................................... 3 Table Of Guaranteed Maximum Cost Of Insurance Rates........................ 4 Definitions................................................................ 5 Payment Of Premiums........................................................ 6 Termination................................................................ 7 Reinstatement.............................................................. 7 Insurance Benefit.......................................................... 7 Policy Value............................................................... 8 Policy Value Composition................................................... 9 Investment Options.........................................................11 Policy Loan Conditions.....................................................12 Changing The Death Benefit Option Or The Face Amount.......................14 Surrender For Cash.........................................................17 Right To Postpone Payment Of Benefits......................................19 Right To Return Policy Or Cancel Increases.................................20 Age And Sex................................................................20 Suicide....................................................................20 Beneficiary................................................................20 Ownership And Assignment...................................................21 Protection Against Creditors...............................................21 Currency And Place Of Payment..............................................21 Contract...................................................................21 Validity...................................................................22 Non-Participating..........................................................22 Flexible Factors...........................................................22 How Values Are Computed....................................................22 Annual Statement...........................................................22 Tax Considerations.........................................................23 A copy of the application, any supplementary benefits, and any endorsements will follow page 23. Page 2 3 POLICY INFORMATION LIFE INSURED JOHN M DOE AGE AT POLICY DATE: 35 POLICY NUMBER 12 345 678 POLICY DATE: JAN 1 1998 OWNER JOHN M DOE ISSUE DATE: FEB 1 1998 BENEFICIARY AS DESIGNATED IN THE APPLICATION OR SUBSEQUENTLY CHANGED PLAN FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE, NON-PARTICIPATING FACE AMOUNT $50,000 DEATH BENEFIT OPTION 1 SEX MALE PREMIUM MODE ANNUALLY BEGINNING ON MON DAY YEAR PLANNED PREMIUM JAN 01 1998 $600 RATE CLASS NON-SMOKER, STANDARD CLASS ADDITIONAL $0.00 PER $1,000 OF FACE AMOUNT RATE $0.00 PER $1,000 OF FACE AMOUNT FOR 0 YEARS 0% OF THE COST OF INSURANCE THIS POLICY PROVIDES LIFE INSURANCE COVERAGE FOR THE LIFETIME OF THE LIFE INSURED IF SUFFICIENT PREMIUMS ARE PAID. PREMIUM PAYMENTS IN ADDITION TO THE PLANNED PREMIUM SHOWN MAY NEED TO BE MADE TO KEEP THIS POLICY AND COVERAGE IN FORCE. PAGE 3.0 4 POLICY INFORMATION (CONTINUED) - POLICY 12 345 678 TABLE OF EXPENSE CHARGES CHARGE FOR APPLICABLE TAXES (OTHER THAN TAXES DESCRIBED IN THE POLICY VALUE COMPOSITION PROVISION): TWO DEDUCTIONS ARE MADE FROM EACH PREMIUM PAYMENT. THE DEDUCTIONS ARE GUARANTEED NEVER TO EXCEED: 2.35% FOR STATE AND LOCAL TAXES, AND 1.25% FOR FEDERAL TAXES MONTHLY ADMINISTRATIVE CHARGE: AN AMOUNT IS DEDUCTED MONTHLY FROM THE POLICY VALUE. THE AMOUNT IS GUARANTEED NEVER TO EXCEED: (A) $0.01 PER $1,000 OF FACE AMOUNT, PLUS $35 DURING THE FIRST POLICY YEAR, AND (B) $0.01 PER $1,000 OF FACE AMOUNT, PLUS $10 DURING EACH SUBSEQUENT YEAR MORTALITY AND EXPENSE RISKS CHARGE: THE FOLLOWING AMOUNT IS DEDUCTED MONTHLY FROM THE INVESTMENT ACCOUNT VALUE: (A) 0.075% UNTIL THE LATER OF THE TENTH POLICY ANNIVERSARY AND THE LIFE INSURED'S AGE 60 (B) 0.0375% AFTER THE LATER OF THE TENTH POLICY ANNIVERSARY AND THE LIFE INSURED'S AGE 60 PAGE 3.1 5 POLICY INFORMATION (CONTINUED) - POLICY 12 345 678 TABLE OF EXPENSE CHARGES (CONTINUED) DEFERRED UNDERWRITING CHARGE: $4.50 FOR EACH $1,000 OF FACE AMOUNT, TO A MAXIMUM CHARGE OF $2,250 FOR EACH LEVEL OF COVERAGE. (LEVEL OF COVERAGE REFERS TO THE INITIAL FACE AMOUNT AND EACH SUBSEQUENT INCREASE IN FACE AMOUNT.) THIS AMOUNT WILL BE DEDUCTED FROM THE POLICY VALUE UNDER CERTAIN CONDITIONS. IT WILL REDUCE OVER TIME ACCORDING TO THE GRADING PERCENTAGES SHOWN ON PAGE 3.4. SEE THE POLICY VALUE, CHANGING THE DEATH BENEFIT OPTION OR THE FACE AMOUNT, AND SURRENDER FOR CASH PROVISIONS FOR DETAILS. DEFERRED SALES CHARGE: THE MAXIMUM AMOUNT IS 50% OF PREMIUMS PAID, UP TO A CERTAIN NUMBER OF TARGET PREMIUMS, AS SHOWN ON PAGE 3.3. THE DEFERRED SALES CHARGE WILL BE DEDUCTED FROM THE POLICY VALUE UNDER CERTAIN CONDITIONS, EXCEPT AS DESCRIBED BELOW FOR AGES 0 AND 1. THE AMOUNT CHANGES OVER TIME ACCORDING TO THE GRADING PERCENTAGES SHOWN ON PAGE 3.4. SEE THE FOLLOWING PROVISIONS FOR DETAILS: POLICY VALUE, CHANGING THE DEATH BENEFIT OPTION OR THE FACE AMOUNT, AND SURRENDER FOR CASH. page 3.2 6 POLICY INFORMATION (CONTINUED) - POLICY 12 345 678 TABLE OF EXPENSE CHARGES (CONTINUED) DEFERRED SALES CHARGE (CONTINUED): NUMBER OF TARGET PREMIUMS SUBJECT TO DEFERRED SALES CHARGE ---------------------------------------------------------- (APPLICABLE TO THE INITIAL FACE AMOUNT AND INCREASES)
$250,000 UNDER $250,000 UNDER $250,000 UNDER AGE OR MORE $250,000 AGE OR MORE $250,000 AGE OR MORE $250,000 - --- -------- -------- --- -------- -------- --- -------- -------- 0 -2.00* 1.68 30 1.56 2.15 60 2.06 2.43 1 -0.52* 1.46 31 1.61 2.19 61 2.06 2.43 2 0.06 1.45 32 1.67 2.23 62 2.05 2.43 3 0.24 1.45 33 1.72 2.27 63 2.05 2.43 4 0.62 1.46 34 1.78 2.30 64 2.05 2.42 5 0.63 1.47 35 1.83 2.33 65 2.05 2.41 6 0.67 1.49 36 1.86 2.38 66 2.03 2.41 7 0.69 1.51 37 1.89 2.41 67 2.03 2.41 8 0.72 1.52 38 1.91 2.45 68 1.96 2.41 9 0.75 1.54 39 1.94 2.49 69 1.83 2.30 10 0.78 1.55 40 1.96 2.52 70 1.71 2.17 11 0.82 1.58 41 1.98 2.55 71 1.58 2.05 12 0.85 1.60 42 2.01 2.59 72 1.46 1.92 13 0.88 1.61 43 2.04 2.57 73 1.35 1.80 14 0.92 1.63 44 2.06 2.55 74 1.25 1.70 15 0.88 1.52 45 2.08 2.54 75 1.16 1.60 16 0.90 1.53 46 2.12 2.53 76 1.08 1.50 17 0.94 1.58 47 2.16 2.51 77 1.01 1.40 18 0.99 1.64 48 2.20 2.50 78 0.93 1.30 19 1.03 1.68 49 2.21 2.49 79 0.87 1.22 20 1.07 1.72 50 2.19 2.48 80 0.82 1.14 21 1.11 1.77 51 2.17 2.47 81 0.76 1.07 22 1.16 1.82 52 2.16 2.47 82 0.71 1.01 23 1.20 1.86 53 2.15 2.46 83 0.67 0.95 24 1.25 1.91 54 2.13 2.46 84 0.62 0.89 25 1.30 1.95 55 2.12 2.45 85 0.58 0.83 26 1.35 1.99 56 2.10 2.44 86 0.56 0.78 27 1.40 2.04 57 2.09 2.44 87 0.54 0.73 28 1.46 2.08 58 2.08 2.43 88 0.52 0.68 29 1.51 2.12 59 2.07 2.43 89 0.50 0.64 90 0.50 0.63
* THE NEGATIVE NUMBER OF TARGET PREMIUMS PRODUCES A NEGATIVE DEFERRED SALES CHARGE. WHEN COMBINED WITH THE DEFERRED UNDERWRITING CHARGE, THE NEGATIVE DEFERRED SALES CHARGE REDUCES THE TOTAL SURRENDER CHARGE. PAGE 3.3 7 POLICY INFORMATION (CONTINUED) - POLICY 12 345 678 TABLE OF EXPENSE CHARGES (CONTINUED) TABLE OF GRADING PERCENTAGES FOR THE DEFERRED UNDERWRITING CHARGE AND THE DEFERRED SALES CHARGE
AGES MONTH* 0-50 51 52 53 54 55+ 12 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 24 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 36 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 48 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 60 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 72 90.00% 88.89% 87.50% 85.71% 83.33% 80.00% 84 80.00% 77.78% 75.00% 71.43% 66.67% 60.00% 96 70.00% 66.67% 62.50% 57.14% 50.00% 40.00% 108 60.00% 55.56% 50.00% 42.86% 33.33% 20.00% 120 50.00% 44.44% 37.50% 28.57% 16.67% 0% 132 40.00% 33.33% 25.00% 14.28% 0% 144 30.00% 22.22% 12.50% 0% 156 20.00% 11.11% 0% 168 10.00% 0% 180 0%
* FOR POLICY MONTHS NOT SHOWN, THE GRADING PERCENTAGE CAN BE FOUND BY INTERPOLATION. PAGE 3.4 8 POLICY INFORMATION (CONTINUED) - POLICY 12 345 678 TABLE OF VALUES REFER TO YOUR POLICY PROVISIONS FOR DETAILS ON THE TERMS AND VALUES SHOWN IN THIS TABLE. GUIDELINE ANNUAL PREMIUM (GAP) $651.57 TARGET PREMIUM $369.50 GUIDELINE SINGLE PREMIUM $9,320.52 GUIDELINE LEVEL PREMIUM $753.49 DEATH BENEFIT GUARANTEE PREMIUM $596.00 NO LAPSE GUARANTEE PREMIUM $396.50 MINIMUM FACE AMOUNT $50,000 MINIMUM FACE AMOUNT INCREASE OR DECREASE $50,000 MINIMUM PAYMENT AMOUNT $50.00 - - IF PAYABLE BY PRE-AUTHORIZED PLAN $10.00 TRANSFER FEE $25.00 MAXIMUM GUARANTEED INTEREST ACCOUNT TRANSFER PERCENTAGE 15% MINIMUM PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL $500.00 PARTIAL WITHDRAWAL PERCENTAGE 10% MINIMUM LOAN AMOUNT $500.00 GUARANTEED INTEREST ACCOUNT MINIMUM ANNUAL RATE 4% ANNUAL LOAN INTEREST RATE 5.75% CURRENT LOAN INTEREST CREDITED DIFFERENTIAL - - REGULAR LOAN AMOUNTS 1.75% - - SELECT LOAN AMOUNTS 0.00% GUARANTEED MAXIMUM LOAN INTEREST CREDITED DIFFERENTIAL 2% DEATH BENEFIT DISCOUNT FACTOR 1.0032737 FIRST YEAR GUARANTEED MONTHLY COST OF INSURANCE RATE PER THOUSAND 0.140
PAGE 3.5 9 N.0644.NY2(0598) POLICY INFORMATION (CONTINUED) - POLICY 12 345 678 LIST OF INVESTMENT FUNDS THE SEPARATE ACCOUNT IS AUTHORIZED TO INVEST IN SHARES OF MANUFACTURERS INVESTMENT TRUST OR ANOTHER INVESTMENT COMPANY. EACH SUB-ACCOUNT OF THE SEPARATE ACCOUNT PURCHASES SHARES IN THE FUNDS LISTED BELOW. WE WILL INFORM YOU OF ANY CHANGES IN THE AVAILABLE FUNDS. YOU MAY ALLOCATE NET PREMIUMS TO ANY OF THE FUNDS. YOUR INITIAL INVESTMENT ALLOCATION IS SHOWN IN THE APPLICATION FOR THE POLICY. SEE THE FOLLOWING PROVISIONS FOR DETAILS: POLICY VALUE, POLICY VALUE COMPOSITION, AND INVESTMENT OPTIONS. MANUFACTURERS INVESTMENT TRUST PORTFOLIOS AND INVESTMENT OBJECTIVES (1) THE PACIFIC RIM EMERGING MARKETS TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL. (2) THE SCIENCE AND TECHNOLOGY TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL. CURRENT INCOME IS INCIDENTAL TO THE PORTFOLIO'S OBJECTIVE. (3) THE INTERNATIONAL SMALL CAP TRUST SEEKS TO PROVIDE LONG-TERM CAPITAL APPRECIATION. (4) THE EMERGING GROWTH TRUST SEEKS TO PROVIDE MAXIMUM CAPITAL APPRECIATION. (5) THE PILGRIM BAXTER GROWTH TRUST SEEKS TO PROVIDE CAPITAL APPRECIATION. (6) THE SMALL/MID CAP TRUST SEEKS TO PROVIDE LONG-TERM CAPITAL APPRECIATION. (7) THE INTERNATIONAL STOCK TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL. (8) THE WORLDWIDE GROWTH TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL. (9) THE GLOBAL EQUITY TRUST SEEKS TO PROVIDE LONG-TERM CAPITAL APPRECIATION. (10) THE SMALL COMPANY VALUE TRUST SEEKS LONG-TERM GROWTH OF CAPITAL. (11) THE EQUITY TRUST SEEKS TO PROVIDE GROWTH OF CAPITAL. CURRENT INCOME IS A SECONDARY CONSIDERATION ALTHOUGH GROWTH OF INCOME MAY ACCOMPANY GROWTH OF CAPITAL. (12) THE GROWTH TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL. (13) THE QUANTITATIVE EQUITY TRUST SEEKS TO ACHIEVE INTERMEDIATE AND LONG-TERM GROWTH THROUGH CAPITAL APPRECIATION AND CURRENT INCOME. PAGE 3.6A 10 POLICY INFORMATION (CONTINUED) - POLICY 12 345 678 LIST OF INVESTMENT FUNDS (14) THE EQUITY INDEX TRUST SEEKS TO ACHIEVE INVESTMENT RESULTS WHICH APPROXIMATE THE TOTAL RETURN OF PUBLICLY TRADED COMMON STOCKS IN THE AGGREGATE, AS REPRESENTED BY THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX. (15) THE BLUE CHIP GROWTH TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL. CURRENT INCOME IS A SECONDARY OBJECTIVE, AND MANY OF THE STOCKS IN THE PORTFOLIO ARE EXPECTED TO PAY DIVIDENDS. (16) THE REAL ESTATE SECURITIES TRUST SEEKS TO ACHIEVE A COMBINATION OF LONG-TERM CAPITAL APPRECIATION AND SATISFACTORY CURRENT INCOME. (17) THE VALUE TRUST SEEKS TO PROVIDE AN ABOVE-AVERAGE TOTAL RETURN OVER A MARKET CYCLE OF THREE TO FIVE YEARS, CONSISTENT WITH REASONABLE RISK. (18) THE INTERNATIONAL GROWTH AND INCOME TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL AND INCOME. (19) THE GROWTH AND INCOME TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL AND INCOME CONSISTENT WITH PRUDENT INVESTMENT RISK. (20) THE EQUITY-INCOME TRUST SEEKS TO PROVIDE SUBSTANTIAL DIVIDEND INCOME AND ALSO LONG-TERM CAPITAL APPRECIATION. (21) THE BALANCED TRUST SEEKS TO PROVIDE CURRENT INCOME AND CAPITAL APPRECIATION. (22) THE AUTOMATIC ASSET ALLOCATION TRUSTS (AGGRESSIVE, MODERATE AND CONSERVATIVE) SEEK TO OBTAIN THE HIGHEST POTENTIAL TOTAL RETURN CONSISTENT WITH A SPECIFIED LEVEL OF RISK TOLERANCE -- AGGRESSIVE, MODERATE AND CONSERVATIVE. (23) 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. (24) THE STRATEGIC BOND TRUST SEEKS TO PROVIDE A HIGH LEVEL OF TOTAL RETURN CONSISTENT WITH PRESERVATION OF CAPITAL. (25) THE GLOBAL GOVERNMENT BOND TRUST SEEKS TO PROVIDE A HIGH LEVEL OF TOTAL RETURN BY PLACING PRIMARY EMPHASIS ON HIGH CURRENT INCOME AND THE PRESERVATION OF CAPITAL. (26) THE CAPITAL GROWTH BOND TRUST SEEKS TO ACHIEVE GROWTH OF CAPITAL BY INVESTING IN MEDIUM-GRADE OR BETTER DEBT SECURITIES, WITH INCOME AS A SECONDARY CONSIDERATION. (27) THE INVESTMENT QUALITY BOND TRUST SEEKS TO PROVIDE A HIGH LEVEL OF CURRENT INCOME CONSISTENT WITH THE MAINTENANCE OF PRINCIPAL AND LIQUIDITY. PAGE 3.6B 11 POLICY INFORMATION (CONTINUED) - 12 345 678 LIST OF INVESTMENT FUNDS (28) THE U.S. GOVERNMENT SECURITIES TRUST SEEKS TO OBTAIN A HIGH LEVEL OF CURRENT INCOME CONSISTENT WITH PRESERVATION OF CAPITAL AND MAINTENANCE OF LIQUIDITY. (29) THE MONEY MARKET TRUST SEEKS TO OBTAIN MAXIMUM CURRENT INCOME CONSISTENT WITH THE PRESERVATION OF PRINCIPAL AND LIQUIDITY. (30) THE LIFESTYLE AGGRESSIVE 1000 TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL. CURRENT INCOME IS NOT A CONSIDERATION. (31) THE LIFESTYLE GROWTH 820 TRUST SEEKS TO PROVIDE LONG-TERM GROWTH OF CAPITAL WITH CONSIDERATION ALSO GIVEN TO CURRENT INCOME. (32) 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. (33) THE LIFESTYLE MODERATE 460 TRUST SEEKS TO PROVIDE A BALANCE BETWEEN A HIGH LEVEL OF CURRENT INCOME AND GROWTH OF CAPITAL WITH A GREATER EMPHASIS GIVEN TO HIGH INCOME. (34) THE LIFESTYLE CONSERVATIVE 280 TRUST SEEKS TO PROVIDE A HIGH LEVEL OF CURRENT INCOME WITH SOME CONSIDERATION ALSO GIVEN TO GROWTH OF CAPITAL. PAGE 3.6C 12 N.0644.37NY POLICY INFORMATION (CONTINUED) - POLICY 12 345 678 SUPPLEMENTARY BENEFIT BENEFIT ADDITIONAL LIFE LIFE INSURED JAMES M DOE AGE AT EFFECTIVE DATE 35 EFFECTIVE DATE AUG 1 1997 BENEFICIARY AS DESIGNATED IN THE APPLICATION OR SUBSEQUENTLY CHANGED AMOUNT $50,000 SEX MALE RATE CLASS STANDARD NON-SMOKER ADDITIONAL $0.00 PER $1,000 OF AMOUNT RATE $0.00 PER $1,000 OF AMOUNT FOR 0 YEARS 0% OF THE BENEFIT COST PAGE 3.7 13 TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES GUARANTEED MAXIMUM MONTHLY RATES PER $1,000 OF NET AMOUNT AT RISK MALE, NON-SMOKER, STANDARD
LIFE LIFE LIFE INSURED'S INSURED'S INSURED'S ATTAINED MONTHLY ATTAINED MONTHLY ATTAINED MONTHLY AGE RATE AGE RATE AGE RATE $ $ $ 0 0.3483 35 0.1408 70 2.8858 1 0.0891 36 0.1475 71 3.1925 2 0.0825 37 0.1566 72 3.5466 3 0.0816 38 0.1666 73 3.9533 4 0.0791 39 0.1783 74 4.4100 5 0.0750 40 0.1908 75 4.9000 6 0.0716 41 0.2058 76 5.4216 7 0.0666 42 0.2208 77 5.9700 8 0.0633 43 0.2383 78 6.5391 9 0.0616 44 0.2558 79 7.1433 10 0.0608 45 0.2766 80 7.8058 11 0.0641 46 0.2991 81 8.5433 12 0.0708 47 0.3233 82 9.3766 13 0.0825 48 0.3491 83 10.3158 14 0.0958 49 0.3783 84 11.3425 15 0.1075 50 0.4091 85 12.4333 16 0.1191 51 0.4458 86 13.5666 17 0.1283 52 0.4883 87 14.7325 18 0.1333 53 0.5358 88 15.9075 19 0.1383 54 0.5908 89 17.1075 20 0.1400 55 0.6516 90 18.3491 21 0.1391 56 0.7191 91 19.6533 22 0.1366 57 0.7908 92 21.0625 23 0.1341 58 0.8683 93 22.6358 24 0.1308 59 0.9558 94 24.6375 25 0.1266 60 1.0533 95 27.4966 26 0.1233 61 1.1616 96 32.0458 27 0.1216 62 1.2850 97 40.0166 28 0.1200 63 1.4258 98 54.8316 29 0.1200 64 1.5850 99 83.3333 30 0.1200 65 1.7608 31 0.1225 66 1.9500 32 0.1250 67 2.1550 33 0.1291 68 2.3750 34 0.1341 69 2.6150
The above rates will be adjusted for any Additional Rate shown in the Policy Information section. Page 4 14 DEFINITIONS AGE at a specific date means age on the nearest birthday. If no specific date is mentioned, age means the life insured's age on the Policy Anniversary nearest to the birthday. BUSINESS DAY is any day that the New York Stock Exchange is open for trading, and trading is not restricted. The net asset value of the underlying shares of a sub-account will be determined on each Business Day. CASH SURRENDER VALUE is the Policy Value less the deferred sales charge, the deferred underwriting charge and any outstanding monthly deductions due. EFFECTIVE DATE is the date we become obligated under this policy and when we take the first monthly deductions. It is the later of the date our underwriters approve issuance of this policy, or the date we receive at least the initial premium at our Service Office. GUARANTEED INTEREST ACCOUNT is that part of the Policy Value that reflects the value you have in our general account. GROSS SINGLE PREMIUM is the amount of premium necessary to endow the policy at the age the Death Benefit Guarantee terminates, assuming an annual interest rate of 4% and current charges. GUIDELINE ANNUAL PREMIUM (GAP) is used to determine the proportion of premiums and the Policy Value attributable to an increase in Face Amount for the purpose of calculating the new Deferred Sales Charge after such increase. INVESTMENT ACCOUNT is that part of the Policy Value that reflects the value you have in one of the sub-accounts. LOAN ACCOUNT is that part of the Policy Value that reflects the value you have transferred from the Guaranteed Interest Account or the Investment Accounts as collateral for a policy loan. NET CASH SURRENDER VALUE is the Cash Surrender Value less the Policy Debt. NET POLICY VALUE is the Policy Value less the value in the Loan Account. NET PREMIUM is the gross premium less the deductions for state, local and federal taxes. It is the amount of premium allocated to the Guaranteed Interest Account or Investment Accounts. POLICY DEBT as of any date equals (a) plus (b), minus (c), where: (a) is the total amount of loans borrowed as of such date; (b) is the total amount of any unpaid loan interest charges which have been borrowed against the policy on a Policy Anniversary, and any interest charges accrued from the last Policy Anniversary to the current date; and (c) is the total amount of loan repayments as of such date. POLICY VALUE is the sum of the values in the Loan Account, the Guaranteed Interest Account and the Investment Accounts. POLICY YEARS, POLICY MONTHS and POLICY ANNIVERSARIES are determined from the Policy Date shown on Page 3. SEPARATE ACCOUNT refers to Separate Account B of The Manufacturers Life Insurance Company of New York. SERVICE OFFICE is the office that we designate to service this policy. SUB-ACCOUNT refers to one of the sub-accounts of the Separate Account. SURRENDER CHARGE PERIOD is the period following issuance of the policy or following any increase in Face Amount during which we will assess surrender charges. Surrender charges will apply during this period if you surrender or lapse the policy, decrease the Face Amount or make a partial withdrawal. (continued) Page 5 15 DEFINITIONS (continued) WRITTEN REQUEST must be in a form satisfactory to us, signed and dated by you, and filed at our Service Office. PAYMENT OF PREMIUMS Premiums are payable during the life insured's lifetime. They are payable on or before their due dates at our Service Office. On request, we will give you a receipt signed by one of our officers. The Planned Premium you requested in the application is shown in the Policy Information Section. The initial premium is due on the Policy Date. The minimum amount required for the initial premium is one-twelfth of the Target Premium shown in the Policy Information section. You may pay subsequent premiums in any amount and at any frequency, subject to the following: (a) premium payments are due at the beginning of each Policy Month; (b) no premium payment may be less than the Minimum Payment Amount shown in the Policy Information section. We may change this amount 90 days after we send you written notice of the change; (c) we have the right to refuse or refund any premium payments that may cause this policy to fail to qualify as life insurance under applicable tax law; (d) we reserve the right to request that you provide us with satisfactory evidence of insurability if a premium payment would result in an increase in the Death Benefit that is greater than the increase in Policy Value; and (e) the sum of the premiums paid into this policy at any time may not exceed the guideline premium limitation as of such time. The guideline premium limitation is, as of any date, the greater of: (1) the Guideline Single Premium, or (2) the sum of the Guideline Level Premiums to such date. The Guideline Single Premium and the Guideline Level Premium are shown in the Policy Information section. DEFAULT. Unless the No Lapse Guarantee or the Death Benefit Guarantee is in effect, the policy will go into default if, at the beginning of any Policy Month, the Net Cash Surrender Value would go below zero after we take the Monthly Deductions that are due. The policy will not go into default if it qualifies for the No Lapse Guarantee or the Death Benefit Guarantee. GRACE PERIOD. We will allow 61 days from the date that the policy goes into default, for you to pay the amount that is required to bring the policy out of default. We will send you and the life insured a notice specifying the required amount. The amount is equal to (a) plus (b), where: (a) is the amount necessary to bring the Net Cash Surrender Value to zero, if it is less than zero at the date of default; and (b) is the monthly deductions due, plus the next two monthly deductions. If the life insured dies during the grace period, we will pay the Insurance Benefit. The amount of the benefit will be as defined in the Insurance Benefit provision, with the following modifications: (a) we will reduce the Insurance Benefit by any outstanding Monthly Deductions due; and (b) in calculating the Death Benefit, we will use the Policy Value as of the default date. Page 6 16 TERMINATION This policy terminates on the earliest of the following dates: (a) at the end of the grace period for which you have not paid any amount that is due; (b) on the date you surrender the policy for its Net Cash Surrender Value; or (c) on the date the life insured dies. If you surrender the policy for its Net Cash Surrender Value, as in (b) above, we will pay you the Net Cash Surrender Value as of the date of termination, less the Monthly Deductions then due. REINSTATEMENT You can reinstate this policy only if it terminated at the end of a grace period in which you did not make a required payment. You can reinstate the policy within five years of the termination date if you: (a) make a Written Request for reinstatement; (b) provide us with written evidence of the life insured's insurability that is satisfactory to us; (c) pay a premium equal to the amount that was required during the 61-day grace period following default plus the amount required to carry your policy to the next desired billing date; and (d) repay any amount we had paid in connection with the termination of the policy. If we approve your request, (a) the reinstatement date will be the later of the date of your request or the date we receive the required payment at our Service Office; and (b) any Deferred Underwriting Charges or Deferred Sales Charges will be reinstated to the amount they were at the date of default. The Policy Value on the date of reinstatement, prior to the crediting of any Net Premium paid on the reinstatement, will be equal to the Policy Value on the date the policy terminated. If the policy is in a Surrender Charge Period when it terminates, upon reinstatement the period will be the same as at the date of default. INSURANCE BENEFIT If the life insured dies while the policy is in force, we will pay the Insurance Benefit to the beneficiary on receiving due proof of death, subject to the Age And Sex, Suicide and Validity provisions. If the life insured dies after we receive your request for surrender, there will be no Insurance Benefit. We will pay the amount payable under the Surrender For Cash provision instead. INSURANCE BENEFIT. The Insurance Benefit payable is: (a) the Death Benefit as described below, plus (b) any amounts payable under any Supplementary Benefits that are a part of the policy, less (c) the value of the Policy Debt at the date of death. DEATH BENEFIT. The Death Benefit will depend on whether Death Benefit Option 1 or 2 is in effect on the date of death. Under Option 1, the Death Benefit is the greater of (a) and (b), where: (a) is the Face Amount of the policy at the date of the life insured's death, and (b) is the Policy Value at the date of death, multiplied by the applicable percentage as shown in the table below. (continued) Page 7 17 INSURANCE BENEFIT (continued) Under Option 2, the Death Benefit is the greater of (a) and (b), where: (a) is the Face Amount of the policy, plus the Policy Value at the date of the life insured's death, and (b) is the Policy Value at the date of death, multiplied by the applicable percentage as shown in the table below.
* Age Applicable Percentage --- --------------------- 40 and under 250% 45 215% 50 185% 55 150% 60 130% 65 120% 70 115% 75 105% 90 105% 95 and above 100%
* For ages not shown, the Applicable Percentage can be found by interpolation. POLICY VALUE NET PREMIUMS ADDED. On the Business Day we receive your premium payments at our Service Office, we add your Net Premium to your Policy Value. We will do this before we take any deductions due on that Business Day. On the Business Day coincident with or next following the Effective Date, we will add Net Premiums received before the Effective Date into your Policy Value. MONTHLY DEDUCTIONS. A deduction is due from your Policy at the beginning of each Policy Month. The deduction covers monthly administrative charges and the cost to provide the insurance coverage. Monthly Deductions are due until the life insured's age 100. On the Effective Date, we will take the Monthly Deductions that are due prior to the Effective Date. We will take the Monthly Deductions that are due on or after the Effective Date on the date they are due. The deduction for any Policy Month is the sum of the following amounts determined at the beginning of that month: (a) The Monthly Administrative Charge shown in the Table Of Expense Charges in the Policy Information section, (b) The Mortality and Expense Risks Charge shown in the Table Of Expense Charges in the Policy Information section, (c) The monthly Cost of Insurance for the life insured, and (d) The monthly cost of any Supplementary Benefits that are a part of this policy, as determined in accordance with such Supplementary Benefit. COST OF INSURANCE. The Cost Of Insurance for a specific Policy Month is the rate for the Cost Of Insurance for that month, as described below, multiplied by the net amount at risk. The net amount at risk is equal to the result of (a) minus (b), where: (a) is the Death Benefit on the first day of the Policy Month, divided by the Death Benefit Discount Factor shown in the Policy Information section; and (b) is the Policy Value on the first day of the Policy Month prior to the deduction of the monthly cost of insurance for the life insured. (continued) Page 8 18 POLICY VALUE (continued) The rates for the Cost of Insurance, on the Policy Date, and subsequently for each increase, are based on the life insured's age, sex, rate class, and the duration that the coverage has been in force. We will determine Cost of Insurance rates from time to time, on a basis that does not discriminate unfairly within any class of lives insured. The rates for the Cost of Insurance are intended to cover future mortality costs under the policy. These rates may be higher in early Policy Years due to recovery of initial acquisition costs. The Cost of Insurance calculation will reflect any Additional Rate shown in the Policy Information section. The Cost of Insurance rates will never exceed those shown in the Table Of Guaranteed Maximum Cost Of Insurance Rates on page 4, plus any Additional Rate. OTHER DEDUCTIONS. We also make the following deductions from your Policy Value as they occur. We deduct a Deferred Underwriting Charge and a Deferred Sales Charge if any of the following occurs during the Surrender Charge Period. If you, (a) give up the policy for its Net Cash Surrender Value, (b) make a partial withdrawal of the Net Cash Surrender Value, (c) reduce the face amount of insurance, or (d) do not pay an amount due at the end of a grace period, and the policy terminates. See the Surrender For Cash provision for details. POLICY VALUE COMPOSITION Your Policy Value at any time is equal to the sum of the values you have in the Loan Account, the Guaranteed Interest Account and the Investment Accounts. LOAN ACCOUNT VALUE. You can get a loan on this policy under certain conditions. When you take out a loan, we transfer the amount of the loan from the Guaranteed Interest Account and/or one or more of the Investment Accounts, into the Loan Account. For details of the Loan Account see the Policy Loan Conditions provision. GUARANTEED INTEREST ACCOUNT VALUE. The amount you have in the Guaranteed Interest Account at any time equals: (a) Net Premiums allocated to it, plus (b) amounts transferred to it, plus (c) interest credited to it, less (d) amounts deducted from it, less (e) amounts transferred from it, less (f) amounts withdrawn from it. We will credit interest to amounts in the Guaranteed Interest Account, at an annual rate of no less than 4%. We will set the actual rates from time to time. For all transactions, we calculate interest from the date of the transaction. INVESTMENT ACCOUNTS VALUE. The amount you have in an Investment Account at any time equals the number of units in that Investment Account, multiplied by the unit value of the corresponding Sub-Account at that time. The number of units in an Investment Account at any time equals (a) minus (b), where: (a) is the number of units credited to the Investment Account because of (1) Net Premiums allocated to it, (2) amounts transferred to it; and (continued) Page 9 19 POLICY VALUE COMPOSITION (continued) (b) is the number of units canceled from the Investment Account because of (1) amounts deducted from it, (2) amounts transferred from it, and (3) amounts withdrawn from it. The number of units credited or canceled for a given transaction is equal to the dollar amount of the transaction, divided by the unit value on the Business Day of the transaction. SEPARATE ACCOUNT AND SUB ACCOUNTS. The Separate Account is authorized to invest in the shares of Manufacturers Investment Trust or another management investment company. Each Sub-Account of the Separate Account purchases shares of a corresponding Fund of Manufacturers Investment Trust or another management investment company. The Funds are listed in the Policy Information section. FUND SUBSTITUTION. A Fund might, in our judgment, become unsuitable for investment by a Sub-Account. This might happen because of a change of investment policy; or a change in the applicable laws or regulations; or because the shares are no longer available for investment; or for some other reason. If a Fund becomes unsuitable for investment, we have the right to substitute another Fund or another management investment company. Before doing this, we would first seek, where required, approval from the Securities and Exchange Commission and the Commissioner of Insurance of the state of New York. To the extent permitted by applicable federal and state law, we also have the right, without your approval, to: (a) create new separate accounts; (b) combine any two or more separate accounts including the Separate Account; (c) make available additional Sub-Accounts investing in additional Funds of Manufacturers Investment Trust, or another management investment company; (d) operate the Separate Account as a management investment company under the Investment Company Act of 1940 or in any other form permitted by law; (e) de-register the Separate Account under the Investment Company Act of 1940; and (f) transfer assets between the Separate Account and other separate accounts. The investment objectives of the Separate Account will not be changed materially without first filing the change with the Insurance Commissioner of our state of domicile and with the Commissioner of Insurance of the state of New York. We will inform you of any changes deemed to be material. UNIT VALUES. We will determine the unit values for each Sub-Account at the end of each Business Day. We will deem each Business Day to end at the time we determine the net asset value of the underlying shares held by the Sub-Account. When we need to determine a Policy Value or an amount after the end of a Business Day, or on a day that is not a Business Day, we will do so on the next Business Day. (continued) Page 10 20 POLICY VALUE COMPOSITION (continued) The unit value for each Sub-Account was established at $10 for the first Business Day that an amount was allocated, or transferred to the particular Sub-Account. For any subsequent Business Day, the unit value for that Sub-Account is obtained by multiplying the unit value for the immediately preceding Business Day by the net investment factor for the particular Sub-Account on such subsequent Business Day. NET INVESTMENT FACTOR. The net investment factor for a Sub-Account on any Business Day is equal to (a) divided by (b), where: (a) is the net asset value of the underlying Fund shares held by that Sub-Account at the end of such Business Day before any policy transactions are made on that day; and (b) is the net asset value of the underlying Fund shares held by that Sub-Account at the end of the immediately preceding Business Day after all policy transactions were made for that day. We reserve the right to adjust the above formula for any taxes determined by us to be attributable to the operations of the Sub-Account. Before making any such changes, we will first seek the approval of the Commissioner of Insurance of the state of New York. ASSETS. The assets held in each Sub-Account are used to support the Policy Values of Single and Flexible Premium Variable Life Insurance policies. The Separate Account will be used to fund only variable life insurance benefits. Income, gains and losses of the Separate Account are credited to, or charged against, the applicable Sub-Accounts without regard to our other income, gains and losses. The assets of the Separate Account are our property. The part of the assets that is equal to the Investment Account values in respect of all Single and Flexible Premium Variable Life Insurance policies will not be charged with liabilities from any other business we conduct. We can transfer to our general account Separate Account assets in excess of the liabilities of the Separate Account arising under the Single and Flexible Premium Variable Life Insurance policies supported by the Separate Account. INVESTMENT OPTIONS ALLOCATIONS. You may allocate Net Premiums to the Guaranteed Interest Account or any of the Investment Accounts. Unless you change the initial premium allocation specified in your application for this policy, it will continue to apply to subsequent premium payments. Allocation percentages must be zero or a whole number not greater than 100. The sum of the allocation percentages must equal 100. You may change the allocation percentages by Written Request to our Service Office. The change will take effect on the date we receive your request at our Service Office. We will take monthly deductions from the Guaranteed Interest Account and the Investment Accounts in the same proportion that the Policy Value in each of these accounts bears to the Net Policy Value. TRANSFERS. By Written Request you may transfer portions of your Policy Value among the Investment Accounts and the Guaranteed Interest Account. We will also permit telephone transfers if a currently valid authorization form is on file with us. You may transfer the Policy Value from all of the Investment Accounts to the Guaranteed Interest account, while this policy is in force, during the following prescribed time periods: (a) within 18 months after the Issue Date; or (b) within 60 days of the effective date of a material change in the investment objectives of the Separate Account, or within 60 days of the date of the notification of such change. (continued) Page 11 21 INVESTMENT OPTIONS (continued) Provisions regarding Transfer Fee charges do not apply to transfers under the above conditions. Otherwise, all transfers are subject to the following restrictions. (a) You can make as many transfers in a Policy Year as you want. There is no charge for the first twelve transfers in any Policy Year. If you make more than twelve transfers in any Policy Year, the Transfer Fee shown in the Table of Values in the Policy Information section will apply to each subsequent transfer in that Policy Year. We will consider all transfer requests received on the same Business Day as one transfer. (b) The maximum amount that you can transfer out of the Guaranteed Interest Account in any one Policy Year is limited to the greater of: (1) the Maximum Guaranteed Interest Account Transfer Percentage shown in the Policy Information section, multiplied by the value in the Guaranteed Interest Account at the previous Policy Anniversary; or (2) $500.00. (c) Any transfer out of the Guaranteed Interest Account may not involve a transfer to the Investment Account for the Money-Market Fund. (d) There will be no change in the Issue Age or the rate class of the life insured, or in the Face Amount as a result of any transfer. CONVERSION PRIVILEGE. You may convert your policy to a fixed paid-up benefit at any Policy Anniversary, without evidence of insurability. Such conversion does not count as a transfer for the purposes of the Transfers section. The conversion is subject to the following conditions: (a) no further Monthly Deductions will be taken from the Policy Value after the date of conversion; (b) the Death Benefit, the Policy Value, other values based on the Policy Value, and the Investment Account values will be determined as of the Business Day on which we receive your Written Request for conversion; (c) the basis for determining the Policy Value will be the Commissioners 1980 Standard Ordinary Smoker or Non-Smoker Mortality Table and an interest rate of 4% per year; and (d) the Flexible Premium Variable Life coverage cannot be reinstated after the date of the conversion. POLICY LOAN CONDITIONS While this policy is in force, you may obtain a loan from us by Written Request. We may require a loan agreement from you as the policy is the only security for the loan. AVAILABLE LOAN VALUE. The available loan value on any date is the Net Cash Surrender Value, less the monthly deductions due to the next Policy Anniversary. A loan must be for at least the Minimum Loan Amount shown in the Policy Information section. You should consult your tax adviser before making a decision to take out a new loan. (continued) Page 12 22 POLICY LOAN CONDITIONS (continued) TYPES OF LOAN. Select and Regular loans are available under this policy. Select Loans are available beginning on the later of the tenth Policy Anniversary and the life insured's Age 55. The amount available annually on a Select Loan basis is equal to 12% of the Net Cash Surrender Value at the previous Policy Anniversary. This amount applies to existing and new loan amounts. Regular Loans are all loans taken out prior to the Select Loan period, and loans taken out at any time in excess of the Select Loan amount. LOAN ACCOUNT. When you take out a loan, or when loan interest charges are borrowed, we transfer amounts from the Guaranteed Interest Account and/ or one or more of the Investment Accounts into the Loan Account. You may tell us how much of the transfer you wish to allocate to your value in the Guaranteed Interest Account and each of the Investment Accounts. If you do not tell us, we will allocate the transfer based on the proportion that your value in the Guaranteed Interest Account and your value in the Investment Accounts bear to the Net Policy Value. When a transfer is allocated to an Investment Account, we will cancel units of that Investment Account sufficient in value to cover the allocated amount. These transfers do not count as a transfer for purposes of the Transfers section of the Investment Options provision. LOAN INTEREST CHARGED. Interest will accrue daily on the policy debt, and is charged to the Loan Account annually in arrears at each Policy Anniversary. In the event that you do not pay the loan interest charged in any Policy Year, it will be borrowed against the policy and added to the Policy Debt in arrears at the Policy Anniversary. The annual Loan Interest Charged rate is 5.75%. LOAN INTEREST CREDITED. We will credit interest daily to amounts in the Loan Account at an annual rate of no less than 4%. The actual interest will accrue at a rate which is below the rate at which it is being charged. The actual interest will accrue at a different rate on Regular and Select Loan amounts. The difference between the rate at which the interest is credited and the rate at which it is charged is the Loan Interest Credited Differential shown in the Policy Information section. The Loan Credited Differential is guaranteed not to exceed 2%. We may reduce the Loan Interest Credited Differential on Regular Loans 90 days after we send you written notice of the change. We will increase the Loan Interest Credited Differential on Select Loans if at any time it is determined that the differential would cause a Select Loan to be taxable under any applicable ruling, regulation or court decision. We will increase the differential to either of the following amounts, and send you written notice of the change: (a) the amount that may be prescribed in the ruling, regulation or court decision; or (b) if no amount is prescribed, an amount that we consider to be more likely to result in the transaction being treated as loan under federal tax law. (continued) Page 13 23 POLICY LOAN CONDITIONS (continued) LOAN ACCOUNT ADJUSTMENTS. A loan repayment may be implicit in that the policy debt is effectively repaid upon termination of the policy. The policy terminates upon the death of the life insured, or upon the surrender or lapse of the policy. In each of these instances, we will adjust the Loan Account with any excess of the Loan Account over the Policy Debt. This policy will terminate if the value of the Loan Account exceeds the Cash Surrender Value. If this were to occur, you would receive advance notice, as described in the Default and Grace Period sections of the Payment of Premiums provision. Except as noted below in the Loan Repayment section, amounts transferred from the Loan Account will be allocated to the Guaranteed Interest Account and to the Investment Accounts in the same proportion that the value in the corresponding loan sub-account bears to the value of the Loan Account. A loan sub-account exists for each Investment Account and for the Guaranteed Interest Account. Amounts transferred to the Loan Account are allocated to the appropriate loan sub-account to reflect the account from which the transfer was made. LOAN REPAYMENT. You may repay the policy debt in whole or in part at any time prior to the death of the life insured, and while the policy is in force. When you repay a loan, we credit the amount to the Loan Account, and make a transfer to the Guaranteed Interest Account or the Investment Accounts. We will allocate loan repayments as follows: (a) first to the Guaranteed Interest Account, until the associated Loan Sub-Account is reduced to zero, (b) then to each Investment Account in the same proportion that the value in the corresponding Loan Sub-Account bears to the value of the Loan Account. While a loan exists, we will treat the amounts you pay as premiums unless you request in writing that they be treated as loan repayments. CHANGING THE DEATH BENEFIT OPTION OR THE FACE AMOUNT You may change your Death Benefit Option or your Face Amount of insurance by Written Request. The applicable restrictions and conditions are noted below for each type of change. A change in Death Benefit Option or Face Amount of insurance will cause a change in the Guideline Single Premium and Guideline Level Premium. We will inform you of the new Guideline Single Premium and Guideline Level Premium amounts. We reserve the right to limit any changes that would cause this policy to fail to qualify as life insurance for tax purposes. Page 14 24 CHANGING THE DEATH BENEFIT OPTION OR THE FACE AMOUNT CHANGES IN DEATH BENEFIT OPTION. You may change your Death Benefit Option after the first Policy Anniversary. Changes will take effect at the beginning of the Policy Month following the date we receive your Written Request, provided we receive at least 30 days prior notice. CHANGE FROM DEATH BENEFIT OPTION 1 TO OPTION 2. The face amount of insurance after the change from Option 1 to Option 2 will be (a) minus (b), where: (a) is the Face Amount of insurance immediately before the change, and (b) is the Policy Value on the effective date of the change. We will not allow the change in Death Benefit Option if it would cause the Face Amount to decrease below the minimum shown in the Policy Information section. CHANGE FROM DEATH BENEFIT OPTION 2 TO OPTION 1. The Face Amount of insurance after the change from Option 2 to Option 1 will be (a) plus (b), where: (a) is the Face Amount of insurance immediately before the change, and (b) is the Policy Value on the effective date of the change. An increase in Face Amount resulting from a change in death benefit will not have any Deferred Underwriting Charge or Deferred Sales Charge associated with it. DECREASE IN FACE AMOUNT. You may decrease the Face Amount of insurance once during each Policy Year after the first Policy Anniversary. A decrease in Face Amount will take effect at the beginning of the Policy Month following the date we receive your Written Request, provided we had at least 30 days prior notice. If we did not get sufficient notice, the decrease will be effective on the next Policy Month. The minimum Face Amount Decrease is shown in the Policy Information section. We may change this amount 90 days after we send you written notice of the change. We will not allow a decrease if it would cause the Face Amount to go below the Minimum Face Amount shown in the Policy Information section. A decrease in Face Amount will reduce the Face Amount in the following order: (a) the Face Amount provided by the most recent increase will decrease first, followed by (b) the next most recent increase until all increases are reduced, then (c) the initial Face Amount. If you decrease the initial Face Amount or an increase in Face Amount during the Surrender Charge Period, we will deduct a Deferred Underwriting Charge and a Deferred Sales Charge from the Policy Value. See the Decreases in Face Amount Section of the Surrender For Cash provision for details. (continued) Page 15 25 CHANGING THE DEATH BENEFIT OPTION OR THE FACE AMOUNT (continued) INCREASE IN FACE AMOUNT. You may increase the Face Amount of insurance once during each Policy Year after the first Policy Anniversary. You will need to provide us with satisfactory evidence of insurability. An increase in Face Amount will take effect at the beginning of the Policy Month following the date we approve your request. We reserve the right to refuse increases if the life insured's age at the effective date of the increase is greater than the maximum issue age for new policies at that time. The Minimum Face Amount Increase is shown in the Policy Information section. We may change this amount 90 days after we send you written notice of the change. The amount of insurance will increase in the following order: (a) we will restore the amount reduced by the most recent decrease first, followed by (b) the next most recent decrease until all decreases are restored, then (c) we will add the new amount of insurance. There will be no new Deferred Underwriting Charge or Deferred Sales Charge associated with increases due to (a) or (b) above. However, there will be a new GAP and Target Premium amount, as well as a new Deferred Underwriting Charge and Deferred Sales Charge associated with the increase in Face Amount under (c). We will inform you of the new amounts at the time of the increase in Face Amount. You will not necessarily have to pay additional premium with an increase in Face Amount. If the Death Benefit Guarantee is not in force, the new Deferred Underwriting Charge and Deferred Sales Charge may require an additional premium payment to prevent the policy from going into default. For Deferred Sales Charge purposes, the premiums attributable to the increase in Face Amount at any time will be equal to (a) plus (b), where: (a) is the proportion of the Policy Value on the date of the increase attributable to the increase; and (b) is the proportion of the premiums received on or after the date of increase attributable to the increase. The proportion of Policy Value or premiums attributable to the increase will equal the ratio of (a) to (b),where: (a) is the GAP for the increase, and (b) is the sum of the GAPs for the initial Face Amount and all increases, including the requested increase. After an increase in Face Amount the proportion of each premium attributable to the initial Face Amount is equal to the ratio of (a) to (b), where: (a) is the GAP for the initial Face Amount, and (b) is the sum of the GAPs for the initial Face Amount and all increases in effect at that time. Page 16 26 SURRENDER FOR CASH CASH SURRENDER VALUE. The Cash Surrender Value on any date is equal to (a) minus (b), where: (a) is the Policy Value on that date, and (b) is the sum of any Deferred Sales Charge, Deferred Underwriting Charge, and any outstanding monthly deductions. NET CASH SURRENDER VALUE. The Net Cash Surrender Value is equal to the Cash Surrender Value, less the Policy Debt. You may surrender this policy for its Net Cash Surrender Value at any time while the life insured is living. We will determine the Net Cash Surrender Value at the end of the Business Day on which we receive the policy and your Written Request for surrender at our Service Office. After the date of surrender, no insurance will be in force. DEFERRED UNDERWRITING CHARGE. If you surrender this policy for its Net Cash Surrender Value or if it terminates at the end of a grace period during the Surrender Charge Period, we will deduct a Deferred Underwriting Charge from the Policy Value. A description of the Deferred Underwriting Charge is in the Policy Information section. DEFERRED SALES CHARGE. If you surrender this policy for its Net Cash Surrender Value or if it terminates at the end of a grace period during the Surrender Charge Period, we will deduct a Deferred Sales Charge from the Policy Value. A description of the Deferred Sales Charge is in the Policy Information section. DECREASES IN FACE AMOUNT. If you reduce the Face Amount of insurance during the Surrender Charge Period, we will deduct a pro-rata Deferred Underwriting Charge and a pro-rata Deferred Sales Charge from the Policy Value. We will allocate this deduction to the Guaranteed Interest Account and the Investment Accounts in the same manner as monthly deductions. See the Allocations section of the Investment Options provision. A decrease in Face Amount caused by a change from Death Benefit Option 1 to Option 2 will not incur the pro-rata Deferred Underwriting Charge or the Pro-rata Deferred Sales Charge described below. CHARGES DEDUCTED FOR DECREASES. The amount of the charges deducted for a decrease in Face Amount is equal to the sum of the pro-rata Deferred Underwriting Charge and the pro-rata Deferred Sales Charge for the initial Face Amount and any previous increase in Face Amount. This amount is the result of (a) divided by (b), multiplied by (c), where: (a) is the amount of the decrease in the initial Face Amount or previous increase in Face Amount; (b) is the amount of the corresponding initial Face Amount or previous increase in Face Amount, prior to the decrease; and (c) is the Deferred Underwriting Charge and Deferred Sales Charge for the corresponding initial Face Amount or previous increase in Face Amount, immediately prior to the decrease. See the Charges Remaining After Face Amount Decreases Or Partial Withdrawals section of this provision for a description of the charges remaining after deduction of the pro-rata charges. (continued) Page 17 27 SURRENDER FOR CASH (continued) PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL. You may request a partial Net Cash Surrender Value withdrawal once each Policy Month after the first Policy Anniversary. You may make this request provided there is a Net Cash Surrender Value for the policy. The partial Net Cash Surrender Value withdrawal will be made as of the end of the Business Day on which we receive your Written Request. The minimum amount that you may withdraw is the Minimum Partial Net Cash Surrender Value Withdrawal Amount shown in the Policy Information section. You may specify the accounts from which we should make the partial Net Cash Surrender Value withdrawal. If you do not specify, we will make the withdrawal in the same proportion that the value in the Guaranteed Interest Account and the Investment Accounts bears to the Net Policy Value. If a partial Net Cash Surrender Value withdrawal is above the Withdrawal Tier Amount and occurs during the Surrender Charge Period, we will deduct a pro-rata Deferred Underwriting Charge and a pro-rata Deferred Sales Charge from the Policy Value. The Withdrawal Tier Amount at any date is determined as (a) multiplied by (b), where: (a) is the Partial Withdrawal Percentage shown in the Policy Information section; and (b) is the Net Cash Surrender Value at the previous Policy Anniversary. The portion of a partial Net Cash Surrender Value withdrawal that is considered above the Withdrawal Tier Amount includes all previous partial Net Cash Surrender Value withdrawals that have occurred in the current Policy Year. If Death Benefit Option 1 is in effect at the time of the withdrawal, then the Face Amount will be reduced by, (a) the amount of the withdrawal plus the pro-rata Deferred Underwriting Charge and the pro-rata Deferred Sales Charge, if at the time of the withdrawal the Death Benefit equals the Face Amount, otherwise (b) the amount, if any, by which the withdrawal plus the pro-rata Deferred Underwriting Charge and the pro-rata Deferred Sales Charge exceeds the difference between the Death Benefit and the Face Amount. If there has been a prior increase in Face Amount, then the Face Amount will be decreased in the same order as if you had requested the decrease. See the Decrease in Face Amount section of the Changing The Death Benefit Option Or The Face Amount provision. CHARGES DEDUCTED FOR PARTIAL WITHDRAWALS. The amount of the charges deducted for the partial withdrawal will equal the sum of the pro-rata Deferred Underwriting Charge and the pro-rata Deferred Sales Charge for the initial Face Amount and any previous increase in Face Amount. This amount is the result of (a) divided by (b), multiplied by (c), where: (a) is the amount of the partial Net Cash Surrender Value withdrawal in excess of the Withdrawal Tier Amount; (b) is the Net Cash Surrender Value prior to the withdrawal, in excess of the Withdrawal Tier Amount; and (c) is the Deferred Underwriting Charge and Deferred Sales Charge for the corresponding initial face amount or previous increase in Face Amount, immediately prior to the withdrawal. (continued) Page 18 28 SURRENDER FOR CASH (continued) We will allocate the charges among the Guaranteed Interest Account and the Investment Accounts in the same proportion that the withdrawal from each account bears to the total withdrawal. If the withdrawal plus the pro-rata Deferred Underwriting Charge and the pro-rata Deferred Sales Charge allocated to a particular account are greater than the value of that account, we will reduce the portion of the withdrawal allocated to that account. We will reduce the allocated portion so that the withdrawal plus the pro-rata charges allocated to the account equal the value of the account. See the Charges Remaining After Face Amount Decreases Or Partial Withdrawals section of this provision for a description of the charges remaining after deduction of the pro-rata charges. CHARGES REMAINING AFTER FACE AMOUNT DECREASES OR PARTIAL WITHDRAWALS. Each time we deduct the pro-rata Deferred Underwriting Charge or the pro-rata Deferred Sales Charge for a Face Amount decrease or for a partial withdrawal, we will reduce the remaining Deferred Underwriting Charge and Deferred Sales Charge proportionately. The remaining Deferred Underwriting Charge will be calculated using the table on Page 3.4 in the Policy Information Section. The actual remaining charge will be the result of (a) divided by (b), multiplied by (c), where: (a) is the grading percentage applicable to the life insured's issue age and policy duration; (b) is the grading percentage applicable to the life insured's issue age at the time of the last decrease or partial withdrawal; and (c) is the remaining Deferred Underwriting Charge prior to the last decrease or partial withdrawal, less the Deferred Underwriting Charge deducted for that decrease or partial withdrawal. The remaining Deferred Sales Charge will be calculated using the tables on Page 3.3 and Page 3.4 in the Policy Information Section. The actual remaining charge will be the result of (a) divided by (b), multiplied by (c), where: (a) is the grading percentage applicable to the policy duration; (b) is the grading percentage at the time of the last decrease or partial withdrawal; and (c) is the remaining Deferred Sales Charge prior to the last decrease or partial withdrawal, less the Deferred Sales Charge deducted for that decrease or partial withdrawal. Until the sum of premiums paid equals or exceeds the Number Of Target Premiums Subject To Deferred Sales Charge multiplied by the Target Premium, subsequent premium payments will increase the remaining Deferred Sales Charge. RIGHT TO POSTPONE PAYMENT OF BENEFITS We reserve the right to postpone the payment of Net Cash Surrender Values, partial Net Cash Surrender Value withdrawals, policy loans and the portion of Insurance Benefit that depend on Investment Account values, for any period during which: (a) the New York Stock Exchange (Exchange) is closed for trading (other than customary week-end and holiday closings), or trading on the Exchange is otherwise restricted; (b) an emergency exists as defined by the Securities and Exchange Commission (SEC), or the SEC requires that trading be restricted; or (c) the SEC permits a delay for the protection of policyholders. (continued) Page 19 29 RIGHT TO POSTPONE PAYMENT OF BENEFITS (continued) We also reserve the right to postpone payments for up to six months if such payments are based on values that do not depend on the investment performance of the Sub-Accounts. In addition, we may deny transfers under the circumstances stated in (a), (b) and (c) above, and in the Transfers section of the Investment Options provision. RIGHT TO RETURN POLICY OR CANCEL INCREASES Within either (1) ten days after you receive your policy; or (2) forty-five days after you sign the application; or (3) ten days after we mail or deliver a notice of right of withdrawal, you can return the policy for cancellation by delivering or mailing it to us or to the agent who sold it. Immediately on delivery or mailing, the policy will be void from the beginning. We will refund in full the premium paid. If you request an increase in Face Amount which results in a new Deferred Underwriting Charge or Deferred Sales Charge, you have the same rights as described above to cancel the increase. If canceled, the Policy Value, the Deferred Underwriting Charge and the Deferred Sales Charge will be recalculated to the amounts they would have been, had the increase not taken place. You may request a refund for all or a portion of premiums paid during this period. Upon payment of the refund, we will recalculate the Policy Value, the Deferred Underwriting Charge and the Deferred Sales Charge to the amounts they would have been, had the premiums not been paid. AGE AND SEX If the life insured's age or sex was misstated in the application, we will change the Face Amount of insurance. The new Face Amount will be determined so that the Death Benefit will be that which the most recent Cost of Insurance deduction would have purchased for the correct age and sex. SUICIDE If the life insured dies by suicide, within two years after the Issue Date, we will pay only the premiums paid, less any partial Net Cash Surrender Value withdrawals, less the amount of the Policy Debt. If the life insured dies by suicide, within two years after the date an increase in Face Amount takes effect, the Death Benefit for that increase will be limited to the monthly deductions for the increase. BENEFICIARY The following four sections will apply unless there is a beneficiary appointment in force that provides otherwise. BENEFICIARY CLASSIFICATION. You can appoint beneficiaries for any Insurance Benefit in three classes: primary, secondary and final. Beneficiaries in the same class will share equally in any Insurance Benefit payable to them. PAYMENT TO BENEFICIARIES. We will pay the Insurance Benefit: (a) to any primary beneficiaries who are alive when the life insured dies; or (b) if no primary beneficiary is then alive, to any secondary beneficiaries who are then alive; or (c) if no primary or secondary beneficiary is then alive, to any final beneficiaries who are then alive. (continued) Page 20 30 BENEFICIARY (continued) CHANGE OF BENEFICIARY. During the life insured's lifetime you can change the beneficiary by Written Request unless you make an irrevocable designation. We are not responsible if the change does not achieve your purpose. DEATH OF BENEFICIARY. If no beneficiary is alive when the life insured dies, the Insurance Benefit will belong to you; or to your estate if you are the life insured. If a beneficiary dies before the seventh day after the death of the life insured, we will pay the Insurance Benefit as if the beneficiary had died before the life insured. OWNERSHIP AND ASSIGNMENT While the life insured is living, you as owner can, without any beneficiary's consent: (a) receive any amount payable under your policy; (b) exercise all rights and privileges granted by the policy; and (c) assign the policy. An assignment does not bind us until we receive it in writing at our Service Office. We are not responsible for its validity or its effects. It should be filed with us in duplicate. We will return a copy. TRUSTEE OWNER. Should the owner be a trustee, payment to the trustee(s) of any amount to which the trustee(s) is (are) entitled under the policy, either by death or otherwise, will fully discharge us from all liability under the policy to the extent of the amount so paid. SUCCESSOR OWNER. Upon the owner's death during the life insured's lifetime, a named successor owner will, if then living, have all the owner's rights and interest in the policy. During the life insured's lifetime, the owner, without the consent of any beneficiary or any successor owner, can cancel or change the designation of successor owner. This may be done from time to time by agreement in writing with us. PROTECTION AGAINST CREDITORS If permitted by state law, all payments shall be exempt from the debts and contracts of the owners and beneficiaries, and from seizure by court order. CURRENCY AND PLACE OF PAYMENT All payments to or by us will be in U.S. currency. We will make payments from our Service Office. We may require proof that the person claiming any payment is entitled to it. CONTRACT The policy, application, supplementary benefits, and any endorsements form your whole contract. A copy of the application is attached to the policy and deemed a part of it. We will not be bound by any statement that is not in the application or the policy. Only our President or one of our Vice-Presidents can agree to amend or modify the policy or waive any of its provisions. Any change must be in writing. Statements made by you or the life insured are representations, not warranties. We will not use any statement by you or the life insured to deny a claim, unless it is written in the application. Page 21 31 VALIDITY We cannot contest the validity of your policy after it has been in force during the life insured's lifetime for two years from the Issue Date. We cannot contest the validity of an increase in face amount or an addition of a Supplementary Benefit after such increase or addition has been in force during the life insured's lifetime for two years from the date of such increase or addition. We can contest after that time limit if the policy has been reinstated and has been in force during the life insured's lifetime for less than two years from the reinstatement date. If this is the case, we can only contest the validity in respect of any fact material to the reinstatement that was misrepresented. NON-PARTICIPATING Your policy is non-participating. It does not earn dividends. FLEXIBLE FACTORS When determining the rate of interest to be used in crediting interest to the portion of the Policy Value in the Guaranteed Interest Account, and any changes in that rate, we will consider the following factors: expected mortality and persistency experience; expected investment earnings; and expected operating expenses. We will consider the same factors when we determine the actual cost of insurance; the deductions from premiums for federal, state and local taxes; administrative charges; and whenever changes are made to any of these charges. We will not try to recover any losses in earlier years by increasing your charges in later years. Adjustments to flexible factors will be by class and be determined by us from time to time based on future expectations for such factors. Any change will be determined in accordance with procedures and standards on file with the Insurance Commissioner of the State of New York. HOW VALUES ARE COMPUTED We provide Cash Surrender Values that are at least equal to those required by law. A detailed statement of the method of computing the values of this policy has been filed with the insurance department of the state in which this policy is delivered. This statement is available on request from our Service Office. We base minimum Cash Surrender Values and reserves on the Commissioners 1980 Standard Ordinary Smoker/Non-Smoker Mortality Table. We also use these tables as the basis for determining maximum Cost of Insurance rates. Values are computed at an interest rate of 4% per year. ANNUAL STATEMENT Within 30 days after each Policy Anniversary, we will send you a report showing: (a) the Death Benefit; (b) the Policy Value; (c) the current allocation of money in the Guaranteed Interest Account, the Loan Account and each of the Investment Accounts; (d) the value of the units in each chosen Investment Account; (e) any Policy Debt balance and loan interest charged since the last report; (f) the premiums paid and policy transactions for the year; and (g) any further information required by law. Page 22 32 TAX CONSIDERATIONS It is the intent that this policy be considered as life insurance for tax purposes. The Death Benefit is designed to comply with Section 7702 of the Internal Revenue Code of 1986, or any other equivalent section of the Code. We do not give tax advice and this provision should not be construed to mean that the Death Benefit and Policy Value will be exempt from the future actions of any tax authority. Page 23 33 SUPPLEMENTARY BENEFIT NO LAPSE GUARANTEE This benefit is part of your policy. Should any provisions in your policy conflict with this benefit, the provisions of this benefit will prevail. EFFECTIVE DATE. The benefit takes effect on the Policy Date. NO LAPSE GUARANTEE PERIOD. This benefit applies during the first five Policy Years. BENEFIT. Provided this benefit is in effect, we guarantee that your policy will not go into default during the No Lapse Guarantee Period. As provided under your policy, we will take the monthly deduction due from your Net Policy Value at the beginning of each Policy Month. The No Lapse Guarantee ensures that your policy does not go into default even if the policy's Net Cash Surrender Value falls below the amount needed to pay the monthly deduction due. If there is any outstanding amount due after we take a monthly deduction, we will deduct the outstanding amount from subsequent premium payments. To keep this benefit in effect, your policy must satisfy the No Lapse Guarantee Cumulative Premium Test described below. NO LAPSE GUARANTEE PREMIUM. The No Lapse Guarantee Premium is the minimum amount due at the beginning of each Policy Month to satisfy the No Lapse Guarantee Cumulative Premium Test. It is shown as an annualized amount on Page 3.5 in the Policy Information Section. This amount will change if any of the following changes occur under your policy: (a) the face amount of insurance changes; (b) a Supplementary Benefit is added, changed or terminated; (c) the life insured's rate class changes; (d) a temporary Additional Rate is added (due to a face amount increase), or terminated. We will inform you of any change to the No Lapse Guarantee Premium. NO LAPSE GUARANTEE CUMULATIVE PREMIUM TEST. We will apply a cumulative premium test to your policy at the beginning of each Policy Month. Your policy will satisfy the test if (a) is greater than or equal to (b), where: (a) is the sum of all premiums paid, less any partial withdrawals and less any Policy Debt; and (b) is the sum of monthly No Lapse Guarantee Premiums due since the Policy Date. If in any Policy Month your policy does not satisfy the cumulative premium test, we will notify you and allow a 61-day grace period for you to make a premium payment. The premium payment must be sufficient to keep the No Lapse Guarantee in effect. The amount due will be the No Lapse Guarantee Premium for that Policy Month and the next two Policy Months. If we do not receive the amount due by the end of the 61-day grace period, we will terminate the No Lapse Guarantee. The policy may then go into default. TERMINATION. The No Lapse Guarantee terminates on the earliest of the following dates: (a) at the end of the first five Policy Years; (b) the date you change the Death Benefit Option under your policy; (c) the date you decrease the total face amount of your basic policy amount to less than $250,000; and (d) at the end of the grace period for which you have not made the required premium payment. By Written Request, you can terminate this benefit at the end of the Policy Month in which we receive your request. The No Lapse Guarantee cannot be reinstated once it has been terminated. THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK /s/ A Scott Logan President EX-99.(A)(8)(A) 3 REINSURANCE AGREEMENT 1 EXHIBIT (A)(8)(a) REINSURANCE AGREEMENT Between THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK of Rye, New York and THE MANUFACTURERS LIFE INSURANCE COMPANY (USA) of Bloomfield Hills, Michigan YRT of VUL 2 TABLE OF CONTENTS Page ---- A. REINSURANCE COVERAGE 1 B. PAYMENTS BY CEDING COMPANY 2 C. PAYMENTS BY REINSURER 2 D. REPORTS AND ACCOUNTING FOR REINSURANCE 2 E. TERMS OF REINSURANCE 3 F. MATERIAL CHANGES 5 G. ARBITRATION 5 H. INSOLVENCY 6 I. REPRESENTATIONS 7 J. TERMINATION 7 K. PAYMENTS AND ACCOUNTING UPON 7 TERMINATION OF AGREEMENT L. OFFSET 8 M. MISCELLANEOUS 8 N. EXECUTION 10 DEFINITION OF TERMS 11 3 TABLE OF CONTENTS (CONTINUED) Page SCHEDULE I QUOTA SHARE AND POLICIES SUBJECT 13 TO REINSURANCE SCHEDULE II, PART A SUMMARY OF MONETARY TRANSACTIONS 14 SCHEDULE II, PART B SUMMARY OF MONETARY TRANSACTIONS 15 SCHEDULE III ANNUAL REPORT 16 SCHEDULE IV ALLOWANCES 17 SCHEDULE V ARBITRATION SCHEDULE 18 4 YEARLY RENEWABLE TERM REINSURANCE AGREEMENT between THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK of Rye, New York referred to as the "CEDING COMPANY" and THE MANUFACTURERS LIFE INSURANCE COMPANY (USA) of Bloomfield Hills, Michigan referred to as the "REINSURER." A. REINSURANCE COVERAGE 1. The CEDING COMPANY shall cede, and the REINSURER shall accept, reinsurance of a Quota Share (as defined in the Definition of Terms) of the net amount at risk on each Policy (as defined in the Definition of Terms) on a yearly renewable term (YRT) basis. The Quota Share for a Policy is determined as defined in Schedule I. 2. The liability of the REINSURER shall begin simultaneously with that of the CEDING COMPANY, but in no event prior to the Effective Date or until this Agreement has been executed by both the CEDING COMPANY and the REINSURER. 3. The Effective Date of this Agreement is __________, 1998. 4. Reinsurance of a Policy shall be maintained in force without reduction so long as the liability of the CEDING COMPANY under such Policy remains in force without reduction, unless reinsurance is terminated or reduced as provided herein. 5. In no event shall reinsurance be in force under this Agreement for a Policy unless the Policy's issue and delivery complies with the laws of all applicable jurisdictions and the CEDING COMPANY's corporate charter. -1- 5 6. As provided in section E. paragraph 5. below, the REINSURER shall maintain a letter of credit in favor of the CEDING COMPANY in accordance with the terms of New York State Insurance Department Regulation 133 to allow the CEDING COMPANY to take credit for the reserves ceded. B. PAYMENTS BY CEDING COMPANY 1. The CEDING COMPANY shall pay the REINSURER ongoing reinsurance premiums according to Schedule IV. C. PAYMENTS BY REINSURER 1. The REINSURER shall reimburse the CEDING COMPANY for its Quota Shares of the following amounts on the Policies incurred by the CEDING COMPANY during the Accounting Period: a) Death Benefits b) Unusual Expenses 2. The REINSURER shall pay commission allowances as specified in Schedule IV. D. REPORTS AND ACCOUNTING FOR REINSURANCE 1. The CEDING COMPANY shall summarize all monetary transactions under this Agreement by submitting a written report within forty (40) days following the end of each month. The report shall be formatted as set forth in Schedule II, parts A and B. Any net amounts shown in such reports as due from the CEDING COMPANY shall be due and payable by the CEDING COMPANY when submitting the reports to the REINSURER. If a report shows a net amount due from the REINSURER, the net amount shall be due and payable by the REINSURER within thirty (30) days of its receipt of such report. Payments made after that time frame shall be subject to interest charges for the late period using the 90 day Treasury rate of the Wall Street Journal on the date payment was due as an annual interest rate. 2. The CEDING COMPANY shall provide the REINSURER with information which the REINSURER may need to prepare its tax, statutory and GAAP financial statements with respect to the Policies reinsured under this Agreement, including but not limited to information described in Schedule II and III. Such information shall be -2- 6 submitted at the end of each calendar year. A preliminary report shall be provided within twenty-five (25) days following the end of each calendar year and a final report shall be provided within forty (40) days following the end of the calendar year. 3. If the parties determine the summary of monetary transactions for an Accounting Period as required in this section did not accurately reflect the actual experience of the Policies during the Accounting Period, the CEDING COMPANY shall promptly submit a revised summary to the REINSURER. Any amount shown by the revised summary as owed by either the CEDING COMPANY or the REINSURER to the other shall be paid within 30 days. 4. The REINSURER may change the information required in Schedule II and III in order to obtain the data it reasonably needs to properly administer this Agreement or to prepare its financial statements. Such schedule change shall become effective only upon sixty (60) days prior written notice to the CEDING COMPANY. E. TERMS OF REINSURANCE 1. All monetary amounts expressed in this Agreement are expressed in United States dollars and all amounts payable pursuant to this Agreement are payable in United States dollars. 2. This is an Agreement for indemnity reinsurance solely between the CEDING COMPANY and the REINSURER. The acceptance of reinsurance hereunder shall not create any right or legal relation whatever between the REINSURER and any person other than the CEDING COMPANY. 3. The REINSURER shall not participate in capital gains and losses of the CEDING COMPANY. 4. The REINSURER shall provide a Letter of Credit (as defined in section A. paragraph 6) to the CEDING COMPANY until the REINSURER becomes properly licensed to conduct business in the state of domicile of the CEDING COMPANY or becomes an accredited reinsurer therein. (a) Such Letter of Credit will be issued in conformity with Regulation 133 of the New York State Insurance Department and may be drawn upon at any time, notwithstanding any other provisions herein, and be utilized by the CEDING COMPANY or any successor by operation of law of the CEDING COMPANY, including, without limitation, any liquidator, rehabilitator, receiver or conservator of such insurer for the following purposes: (i) to reimburse the CEDING COMPANY for -3- 7 the REINSURER'S share of premiums returned to the owners of Policies reinsured under this Agreement on account of cancellations of such policies; (ii) to reimburse the CEDING COMPANY for the REINSURER'S share of surrenders and benefits or losses paid by the CEDING COMPANY under the terms and provisions of the Policies reinsured hereunder; (iii) to fund an account with the CEDING COMPANY in an amount at least equal to the deduction, for reinsurance ceded, from the CEDING COMPANY'S liabilities for Policies ceded under this Agreement. Such amount shall include, but not be limited to, amounts for Policy reserves, reserves for claims and losses incurred, (including losses incurred but not reported), loss adjustment expenses and unearned premiums; and (iv) to pay any other amounts the CEDING COMPANY claims are due under this Agreement. (b) All of the foregoing shall be applied without diminution because of insolvency on the part of the CEDING COMPANY or the REINSURER. (c) Notwithstanding the above, the CEDING COMPANY shall be required to return any amounts drawn on the Letter of Credit in excess of the amounts required for subparagraphs (a)(i), (ii) and (iii) of this section, or in the case of subparagraph (a)(iv), any amounts that are subsequently determined not to be due. 5. The CEDING COMPANY may, at its sole option, recapture some or all of the business ceded under this Agreement from the REINSURER if the CEDING COMPANY increases its retention limit. The amount recaptured shall be that which causes the CEDING COMPANY to hold its full retention limit. The CEDING COMPANY shall pay to the REINSURER a fair price for the present value of future profits on the business recaptured, as the two companies shall reasonably agree. The terms and conditions of any such recapture shall be subject to review by the New York Insurance Department pursuant to Section 1505 of the New York Insurance Law. 6. If a policy lapses for nonpayment of premiums or other reason and is reinstated under the CEDING COMPANY'S terms and rules, the reinsurance will be reinstated by the REINSURER. THE CEDING COMPANY SHALL PAY THE BALANCE OF ARREARS OF PREMIUMS DUE UNDER A REINSTATED CESSION. 7. The CEDING COMPANY and the REINSURER agree to the DAC Tax Election pursuant to Section 1.848-2(g)(8) of the Income Tax Regulation under Section 848 of the Internal Revenue code of 1986, as amended, whereby: (a) the party with the net positive consideration for this Agreement for each taxable year will capitalize specified policy acquisition expenses with respect to this Agreement without regard to the general deductions limitation of Section 848(c)(1); and -4- 8 (b) both parties agree to exchange information pertaining to the amount of net consideration under this Agreement each year to ensure consistency. The term "net consideration" will refer to either net consideration as defined in Regulation Section 1.848-2(f) or gross amount of premiums and other consideration as defined in Regulation Section 1.848-3(b), as appropriate. This DAC Tax Election shall be effective for all years for which this Agreement remains in effect. The CEDING COMPANY and the REINSURER represent and warrant that they are subject to U.S. taxation under either the provisions of subchapter L of Chapter 1 or the provisions of subpart F of subchapter N of Chapter 1 of the Internal Revenue Code of 1986, as amended. F. MATERIAL CHANGES 1. The CEDING COMPANY shall promptly notify the REINSURER of any proposed Material Change in the terms of the Policies. 2. Following a Material Change, other than that which is required by statute, regulation or insurance department action, the REINSURER may in its sole discretion (a) continue to reinsure the Policies under current terms, or (b) renegotiate the agreement. Any amendment to this Agreement which results from such negotiation shall be subject to review by the New York Insurance Department pursuant to Section 1505 of the New York Insurance Law. G. ARBITRATION 1. If the CEDING COMPANY and the REINSURER cannot mutually resolve a dispute regarding the interpretation or operation of this Agreement, the dispute shall be decided through arbitration as set forth in Schedule V. The arbitrators shall base their decision on the terms and conditions of this Agreement. However, if the terms and conditions of this Agreement do not explicitly dispose of an issue in dispute between the parties, the arbitrators may base their decision on the customs and practices of the insurance and reinsurance industry rather than solely on an interpretation of applicable law. The arbitrators' decision shall take into account the right to offset mutual debts and credits as provided in this Agreement. There shall be no appeal from the arbitrators' decision. Any court having jurisdiction over the subject matter and over the parties may reduce the arbitrators' decision to judgment. 2. The parties intend this section to be enforceable in accordance with the Federal Arbitration Act (9 U.S.C., Section 1) including any amendments to that Act which are -5- 9 subsequently adopted. In the event that either party refuses to submit to arbitration as required by paragraph 1, the other party may request a United States Federal District Court to compel arbitration in accordance with the Federal Arbitration Act. Both parties consent to the jurisdiction of such court to enforce this section and to confirm and enforce the performance of any award of the arbitrators. H. INSOLVENCY 1. For the purpose of this Agreement, the CEDING COMPANY or the REINSURER shall be deemed "insolvent" as determined by laws of its domiciliary state. 2. In the event of the insolvency of the CEDING COMPANY, all reinsurance made, ceded, renewed or otherwise becoming effective under this Agreement shall be payable by the REINSURER directly to the CEDING COMPANY or to its liquidator, receiver or statutory successor on the basis of the liability of the CEDING COMPANY under the Policies reinsured without diminution because of the insolvency of the CEDING COMPANY. 3. The CEDING COMPANY'S receiver, liquidator, or statutory successor shall give the REINSURER written notice of the pendency of a claim against the CEDING COMPANY on the Policy reinsured within a reasonable time after such claim is filed in the insolvency proceeding. During the pendency of such claim, the REINSURER may interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defense or defenses which the REINSURER may deem available to the CEDING COMPANY, or its receiver, liquidator or statutory successor. 4. Any expense incurred by the REINSURER pursuant to Section H paragraph 3, above, shall be payable subject to court approval out of the estate of the CEDING COMPANY as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the CEDING COMPANY in liquidation, solely as a result of the defense undertaken by the REINSURER. Where two or more reinsurers are participating in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of this Agreement as though such expense had been incurred by the CEDING COMPANY. 5. In the event of the insolvency of the REINSURER, the CEDING COMPANY may, at its option, recapture all reinsurance in force under this Agreement pursuant to section E paragraph 7, or may cancel this Agreement with respect to new business by promptly providing the REINSURER, its rehabilitator, receiver, liquidator or statutory successor with written notice of the cancellation effective the date on which the REINSURER'S insolvency is established by the authority responsible for such determination. Any requirement for a notification period prior to the cancellation of the Agreement would not apply under such circumstances. -6- 10 I. REPRESENTATIONS 1. The CEDING COMPANY and the REINSURER each acknowledges its responsibility for independently forming its own conclusions regarding: (a) the compliance of this Agreement with the laws and regulations of any particular state or jurisdiction; (b) the statutory or other accounting impact of this Agreement on the CEDING COMPANY'S and the REINSURER'S financial statements, and (c) the tax impact of this Agreement on the CEDING COMPANY and the REINSURER. 2. Unless otherwise explicitly provided for herein, the CEDING COMPANY and the REINSURER shall each be solely responsible for determining and discharging any state or federal income tax liability resulting from this Agreement, including any tax liability resulting from the initial monetary transactions. J. TERMINATION 1. Except as otherwise provided in this section, this Agreement shall be unlimited in duration. 2. Upon 90 days' notice, either party may terminate this Agreement with respect to new business not yet issued at the end of the 90 day notification period. 3. If none of the Policies are in force as of the end of the any Accounting Period, this Agreement shall automatically terminate as of the day the last Policy terminated. 4. The termination of this Agreement or of any reinsurance hereunder shall not affect any rights or obligations or either party applicable to the period prior to the effective date of termination. K. PAYMENTS AND ACCOUNTING UPON TERMINATION OF AGREEMENT 1. If this Agreement is terminated, the CEDING COMPANY shall summarize all monetary transactions for the Terminal Accounting Period and report its summary to the REINSURER within forty (40) days of the later of the effective date of -7- 11 termination or of notice of termination. The report shall be in the form of Schedule II, Parts A and B. 2. The CEDING COMPANY shall provide the REINSURER with information the REINSURER may need to prepare its tax, statutory and GAAP financial statements for the Terminal Accounting Period as required by section D. 3. If the CEDING COMPANY ever becomes aware that its summary of monetary transactions for the Terminal Accounting Period as required in this section did not accurately reflect the actual experience of the Policies during the Terminal Accounting Period, it shall promptly submit a revised summary to the REINSURER, and the terminal payment shall be recalculated. Any amount shown by the revised summary as owed by either the CEDING COMPANY or the REINSURER to the other shall be paid promptly. L. OFFSET Any debts or credits, matured or unmatured, liquidated or unliquidated, regardless of when they arose or were incurred, in favor of or against either the CEDING COMPANY or the REINSURER with respect to this Agreement are deemed to be mutual debts and credits and shall be set off, and only the balance shall be allowed or paid. M. MISCELLANEOUS 1. Certain terms used in this Agreement are defined in the Definitions of Terms schedule and are to be interpreted in accordance with such definitions. In the absence of a specific definition, a term used in this Agreement is to be interpreted in accordance with customary insurance and reinsurance industry practices. 2. Any Error made by either the CEDING COMPANY or the REINSURER in the administration of reinsurance under this Agreement shall be corrected by the submission of revised reports and restoring both the CEDING COMPANY and the REINSURER to the positions they would have occupied had no Error occurred. 3. The REINSURER may audit, at any reasonable time and at its own expense, all records and procedures relating to reinsurance under this Agreement. The CEDING COMPANY shall cooperate in the audit, including providing any information requested by the REINSURER in advance of the audit. Further, the CEDING COMPANY agrees to complete, at the request of the REINSURER and in a manner acceptable to the REINSURER, a process which confirms the existence of the Policies. -8- 12 4. Neither the CEDING COMPANY nor the REINSURER may assign any of the rights and obligations under this Agreement, nor may either party sell, assumption reinsure or transfer the Policies without the prior written consent of the other party. Consent will not be withheld if the assignment, sale, assumption reinsurance or transfer does not have a material effect on the risks transferred or the expected economic results to the party requested to consent. This provision shall not prohibit the REINSURER from reinsuring the Policies on an indemnity basis. 5. This Agreement represents the entire agreement between the CEDING COMPANY and the REINSURER and supersedes, with respect to its subject matter, any prior oral or written agreements between the parties. Any amendments to this Agreement shall be set forth in writing and signed by all required parties. 6. No modification or waiver of any provision of this Agreement shall be effective unless set forth in a written amendment to this Agreement which is executed by both parties. A waiver shall constitute a waiver only with respect to the particular circumstance for which it is given and not a waiver of any future circumstance. -9- 13 N. EXECUTION IN WITNESS WHEREOF, THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK of Rye, New York and THE MANUFACTURERS LIFE INSURANCE COMPANY (USA) of Bloomfield Hills, Michigan have by their respective officers executed this Agreement in duplicate on the dates shown below. THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK Signed at __________________ By _________________________ By ________________________ Title _______________________ Title _____________________ Date ________________________ Date ______________________ THE MANUFACTURERS LIFE INSURANCE COMPANY (USA) Signed at ______________________ By _________________________ By ________________________ Title _________________________ Title _____________________ Date _________________________ Date ______________________ -10- 14 DEFINITION OF TERMS ACCOUNTING PERIOD - for the month in which this Agreement becomes effective, the period beginning on the Effective Date and ending on the Last Day of The Current Accounting Period. Thereafter, the period beginning on the day following the Last Day Of The Preceding Accounting Period and ending on the Last Day Of The Current Accounting Period. AGREEMENT - this document and all schedules and amendments to it. BENEFITS - the death benefits provided by the CEDING COMPANY pursuant to the Policies. CONTINUATION POLICY - a new Policy changing or replacing a Policy made or issued both (1) not in compliance with the terms of the Policy and (2) without the same new underwriting information that the CEDING COMPANY would obtain in the absence of the Policy, without a suicide exclusion period or contestable period as long as those contained in new issues of the CEDING COMPANY, or without the payment of the same commissions in the first year that the CEDING COMPANY would have paid in the absence of the Policy. For purposes of Section F, "MATERIAL CHANGES," a creation of a continuation policy shall constitute a material change. EFFECTIVE DATE - the date set forth in Section A, paragraph 3. ERROR - any isolated, inadvertent deviation from the terms of this Agreement resulting from the act or omission of an employee of either the CEDING COMPANY or the REINSURER whose principal function is administrative in nature. EXECUTION DATE - the date this Agreement is signed by the last of the parties to sign it. LAST DAY OF THE CURRENT ACCOUNTING PERIOD - shall refer to the last day of the month for which the calculation is being made. LAST DAY OF THE PRECEDING ACCOUNTING PERIOD - shall refer to the last day of the preceding month. MATERIAL CHANGE - a change that a prudent insurance executive would consider as likely to have a material impact on the REINSURER'S experience under this Agreement. NET AMOUNT AT RISK - the excess of the Death Benefit over the Account Value on the Policy. -11- 15 DEFINITION OF TERMS (CONTINUED) POLICY(IES) - the insurance policy(ies) identified in Schedule I which are reinsured pursuant to this Agreement. QUOTA SHARE - the percentage of the Net Amount at Risk (as determined according to Schedule I) which is ceded by the CEDING COMPANY to the REINSURER pursuant to this Agreement. TERMINAL ACCOUNTING PERIOD - the period commencing on the day following the Last Day Of The Preceding Accounting Period and ending on the effective date of termination pursuant to any notice of termination given under this Agreement or such other date as shall be mutually agreed to in writing. UNUSUAL EXPENSES - non-routine charges incurred by the CEDING COMPANY in defending or investigating a claim for policyholder benefits or in rescinding a Policy, including penalties, attorney's fees, and interest imposed automatically by statute against the CEDING COMPANY and arising solely out of a judgment rendered against the CEDING COMPANY in a suit for policyholder benefits, provided that the following categories of expenses or liabilities shall not be considered "Unusual Expenses:" (a) routine investigative or administrative expenses; (b) expenses incurred in connection with a dispute or contest arising out of conflicting claims of entitlement to policyholder benefits which the CEDING COMPANY admits are payable; (c) expenses, fees, settlements, or judgments arising out of or in connection with claims against the CEDING COMPANY for punitive or exemplary damages; and (d) expenses, fees, settlements, or judgments arising out of or in connection with claims made against the CEDING COMPANY and based on alleged or actual bad faith, failure to exercise good faith, or tortious conduct. -12- 16 SCHEDULE I QUOTA SHARE AND POLICIES SUBJECT TO REINSURANCE The Quota Share of a Policy issued by the CEDING COMPANY that is reinsured is the ratio of the Policy's Face Amount at issue in excess of $100,000 (or the CEDING COMPANY'S retention on the Policy if less than $100,000 because other insurance is already in force on the insured), if any, divided by the Policy's Face Amount at issue. ACCIDENTAL DEATH BENEFIT RIDERS SHALL BE QUOTA SHARE REINSURED. The Policies to be ceded are those issued after the effective date on the following policy forms: Policy Form Number N.0644.ny -13- 17 SCHEDULE II, PART A SUMMARY OF MONETARY TRANSACTIONS for the period from ________________ to __________________ with respect to the Quota Shares of the Policies 1. Reinsurance premiums at the Quota Shares 2. Death Benefits at the Quota Shares 3. Other Reimbursements at the Quota Shares (a) unusual expenses (b) commission allowances specified in Schedule IV 4. Number of, and Face Amount of, Policies in Force at End of Period at the Quota Shares -14- 18 SCHEDULE II, PART B SUMMARY OF MONETARY TRANSACTIONS for the period from _____________ to _____________ A. Due REINSURER at Quota Shares 1. Reinsurance premiums at the Quota Shares 2. Total due REINSURER B. Due CEDING COMPANY 1. Death Benefits at Quota Shares 2. Other Reimbursements at Quota Shares Unusual Expenses Commission allowances 3. Total Due CEDING COMPANY C. Amount Due REINSURER (if positive) or Due CEDING COMPANY (if negative) (A less B) D. Amounts Previously Paid for Accounting Period E. Net Amount Due (C less D) -15- 19 SCHEDULE III ANNUAL REPORT The annual report shall provide the following information for both General and Separate Accounts: - - Exhibits 1, 8 and 11 from the NAIC - prescribed annual statement - - "Analysis of Increase in Reserves" from the NAIC - prescribed annual statement - - "Exhibit of Life Insurance" from the NAIC - prescribed annual statement - - documentation of the calculation of the reported reserves - - tax reserves and required interest -16- 20 SCHEDULE IV ALLOWANCES Commission Allowances On the Net Amount at Risk corresponding to the first $100,000 Face Amount ceded at issue on a Policy ("Basic Quota Share"), 100% of the reinsurance premium ceded in the first policy year, plus 6.25% of the reinsurance premium ceded in the second and later policy years. On the Net Amount at Risk corresponding to the excess of the full Quota Share over the Basic Quota Share, (that is to ceded amounts beyond the first $100,000 Face Amount ceded at issue on a Policy), 50% of the reinsurance premium ceded in the first policy year, plus 3.125% of the reinsurance premium ceded in the second and later policy years. For cases with aggregate coverage in excess of $30 million, these allowances are subject to individual facultative underwriting adjustment. Premium Rates 1. For the Net Amount at Risk reinsured in a year (that is, the Quota Share of the Net Amount at Risk), the reinsurance premium (before commission allowances) is 96% of Table III, subject to any necessary rate increase. Premiums are to be paid annually. 2. The reinsurance premium rates are not guaranteed for more than one year at a time. If actual death claims are expected to exceed the reinsurance premiums, the REINSURER may increase the reinsurance premium rates, but not beyond the appropriate one year term premiums calculated on the 1980 C.S.O. smoker/non-smoker mortality table at 4.5% interest. 3. Each month the new amount at risk will be calculated on the current fund and will be compared to the net amount at risk used to calculate the premium. Whenever there is a fluctuation that is greater than $50,000, the system will recalculate the reinsurance net amount at risk from that month forward to the next policy anniversary and will adjust the premiums accordingly. 4. REINSURANCE PREMIUM RATES FOR THE ACCIDENTAL DEATH BENEFIT RIDER SHALL BE THE SAME AS THE RATES CHARGED BY THE CEDING COMPANY. -17- 21 SCHEDULE V ARBITRATION SCHEDULE To initiate arbitration, either the CEDING COMPANY or the REINSURER shall notify the other party in writing of its desire to arbitrate, stating the nature of its dispute and the remedy sought. The party to which the notice is sent shall respond to the notification in writing within ten (10) days of its receipt. The arbitration hearing shall be before a panel of three arbitrators, each of whom must be a present or former officer of a life insurance company. An arbitrator may not be a present or former officer, attorney, or consultant of the CEDING COMPANY or the REINSURER or either's affiliates. The CEDING COMPANY and the REINSURER shall each name five (5) candidates to serve as an arbitrator. The CEDING COMPANY and the REINSURER shall each choose one candidate from the other party's list, and these two candidates shall serve as the first two arbitrators. If one or more candidates so chosen shall decline to serve as an arbitrator, the party which named such candidate shall add an additional candidate to its list, and the other party shall again choose one candidate from the list. This process shall continue until two arbitrators have been chosen and have accepted. The CEDING COMPANY and the REINSURER shall each present their initial lists of five (5) candidates by written notification to the other party within twenty-five (25) days of the date of the mailing of the notification initiating the arbitration. Any subsequent additions to the list which are required shall be presented within ten (10) days of the date the naming party receives notice that a candidate that has been chosen declines to serve. The two arbitrators shall then select the third arbitrator from the eight (8) candidates remaining on the lists of the CEDING COMPANY and the REINSURER within fourteen (14) days of the acceptance of their positions as arbitrators. If the two arbitrators cannot agree on the choice of a third, then this choice shall be referred back to the CEDING COMPANY and the REINSURER. The CEDING COMPANY and the REINSURER shall take turns striking the name of one of the remaining candidates from the initial eight (8) candidates until only one candidate remains. If the candidate so chosen shall decline to serve as the third arbitrator, the candidate whose name was stricken last shall be nominated as the third arbitrator. This process shall continue until a candidate has been chosen and has accepted. This candidate shall serve as the third arbitrator. The first turn at striking the name of a candidate shall belong to the party that is responding to the other party's initiation of the arbitration. Once chosen, the arbitrators are empowered to decide all substantive and procedural issues by a majority of votes. -18- 22 SCHEDULE V (CONTINUED) It is agreed that each of the three arbitrators should be impartial regarding the dispute and should resolve the dispute on the basis described in the "ARBITRATION" section. Therefore, at no time will either the CEDING COMPANY or the REINSURER contact or otherwise communicate with any person who is to be or has been designated as a candidate to serve as an arbitrator concerning the dispute, except upon the basis of jointly drafted communications (which may include independently prepared statements) provided by both the CEDING COMPANY and the REINSURER to inform those candidates actually chosen as arbitrators of the nature and facts of the dispute. Likewise, any written or oral arguments provided to the arbitrators concerning the dispute shall be coordinated with the other party or shall take place in the presence of the other party. Further, at no time shall any arbitrator be informed that the arbitrator has been named or chosen by one party or the other. The arbitration hearing shall be held on the date fixed by the arbitrators. In no event shall this date be later than six (6) months after the appointment of the third arbitrator. The arbitration hearing shall be held in the city where the administrative home office of the party responding to the arbitration is located. IN ANY EVENT, THE ARBITRATION SHALL TAKE PLACE IN THE STATE OF NEW YORK. As soon as possible, the arbitrators shall establish prearbitration procedures as warranted by the facts and issues of the particular case. At least ten (10) days prior to the arbitration hearing, each party shall provide the other party and the arbitrators with a detailed statement of the facts and arguments it will present at the arbitration hearing. The arbitrators may consider any relevant evidence; they shall give the evidence such weight as they deem it entitled to after consideration of any objections raised concerning it. The party initiating the arbitration shall have the burden of proving its case by a preponderance of the evidence. Each party may examine any witnesses who testify at the arbitration hearing. Within twenty (20) days following the end of the arbitration hearing, the arbitrators shall issue a written decision which shall set forth their decision and the factual basis for their decision. In their written decision the arbitrators shall demonstrate that they have offset mutual debts and credits as provided in this Agreement. In no event, however, may the arbitrators award punitive or exemplary damages. In their decision, the arbitrators shall also apportion the costs of arbitration, which shall include, but not be limited to, their own fees and expenses. -19- EX-99.(A)(8)(C) 4 INVESTMENT SERVICES AGREEMENT 1 EXHIBIT (A)(8)(c) INVESTMENT SERVICES AGREEMENT This Investment Services Agreement (this "Agreement") is made effective as of 12:01 a.m., Eastern Standard Time, on the 1st day of October, 1997 ("Effective Date"), by and between THE MANUFACTURERS LIFE INSURANCE COMPANY, a corporation organized under the Insurance Company Act (Canada) ("Provider") and THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK, a New York stock life insurance corporation ("Company"). WHEREAS, Provider has extensive experience in investment operations; and WHEREAS, the Company is a party to an Investment Services Agreement effective July 8, 1992 with Elliott & Page, a subsidiary of Provider (the "Prior Agreement"); and WHEREAS, Company desires Provider to perform certain investment advisory services ("services") for Company in its investment operations; and WHEREAS, Provider and Company contemplate that such an arrangement will achieve certain operating economies and improve services to the mutual benefit of both; and WHEREAS, Provider and Company wish to assure that all charges for services and the use of facilities incurred hereunder are reasonable; and WHEREAS, Provider and Company wish to identify the services to be rendered to Company by Provider and its subsidiaries and to provide a formula for determining the charges to be made to Company: NOW, THEREFORE, in consideration of the premises and of the mutual promises set forth herein, and intending to be legally bound hereby, Provider and Company agree as follows: 2 1. PERFORMANCE OF SERVICES. Subject to the terms, conditions and limitations of this Agreement, Provider agrees to the extent requested by Company to perform diligently and in a professional manner such services for Company as Company determines to be reasonably necessary in the conduct of its investment operations. Provider agrees at all times to maintain sufficient facilities and trained personnel of the kind necessary to perform this Agreement. 2. CAPACITY OF PERSONNEL AND STATUS OF FACILITIES. Whenever Provider utilizes its personnel to perform services for Company pursuant to this Agreement, such personnel shall at all times remain employees of Provider subject solely to its direction and control, and Provider shall alone retain full liability to such employees for their welfare, salaries, fringe benefits, legally required employer contributions and tax obligations. No facility of Provider used in performing services for or subject to use by Company shall be deemed to be transferred, assigned, conveyed or leased by performance or use pursuant to this Agreement. 3. EXERCISE OF JUDGMENT IN RENDERING SERVICES. In providing any services hereunder which require the exercise of judgment by Provider, Provider shall perform any such services in accordance with any standards and guidelines Company develops and communicates to Provider. In performing any services hereunder, Provider shall at all times act in a manner reasonably calculated to be in or not opposed to the best interests of Company. 4. CONTROL. The performance of services by Provider for Company pursuant to this Agreement shall in no way impair the absolute control of the business and operations of Provider or Company by their respective Boards of Directors. Provider shall act hereunder so as to assure the separate operating identity of Company. 2 3 5. SERVICES. The performance of Provider under this Agreement with respect to the business and operations of Company, including without limitation the kinds of investments to be purchased and sold for the account of Company hereunder, shall at all times be subject to the direction and control of the Board of Directors of Company. Subject to the terms, conditions and limitations of this Agreement, Provider shall provide to Company the services set forth in Appendix A, which is attached hereto and made a part of this Agreement. 6. CHARGES. Charges for the services provided hereunder shall include all direct and directly allocable expenses, reasonably and equitably determined to be attributable to Company by Provider, plus a reasonable charge for direct overhead, the amount of such charge for overhead to be agreed upon by the parties from time to time. Subject to New York Insurance Department Regulation 33, the bases for determining such charges to Company shall be those used by Provider for internal cost distribution. Such bases shall be modified and adjusted by mutual agreement where necessary or appropriate to reflect fairly and equitably the actual incidence of cost incurred by Provider on behalf of Company. Cost analyses will be made from time to time by Provider to determine, as closely as possible, the actual cost of services rendered and facilities made available to Company hereunder. Provider shall forward to Company the information developed by these analyses, and such information shall be used to develop bases for the distribution of expenses which more currently reflect the actual incidence of cost incurred by Provider on behalf of Company. Provider's determination of charges hereunder shall be presented to Company, and if Company objects to any such determination, it shall so advise Provider within thirty (30) days of receipt of notice of said determination. Unless the parties can reconcile any such objection, 3 4 they shall agree to the selection of a firm of independent certified public accountants which shall determine the charges properly allocable to Company and shall, within a reasonable time, submit such determination, together with the basis therefor, in writing to Provider and Company whereupon such determination shall be binding. The expenses of such a determination by a firm of independent certified public accountants shall be borne equally by Provider and Company. 4. In addition, at the first regular Board of Directors meeting of the Company immediately following the end of each calendar year during the term of this Agreement, the Board of Directors of Company shall review the fees charged by Provider for the preceding calendar year. If, pursuant to any such review, the Board of Directors of Company shall determine that the fee charged by Provider for the preceding calendar year is not reflective of the cost to Provider of performing the services provided for hereunder, the Company shall so notify the Provider, and such notice shall specify the amount of the fee that is reflective of Provider's actual costs of performing the services. In such event, the fee for the Provider's performing the services hereunder beginning on October 1 of such year and continuing until later modified pursuant to this section (whether by mutual agreement or pursuant to an independent accountant's determination) shall be the amount specified in the Company's notice to Provider. Fees will be paid quarterly in arrears. 7. PAYMENT. Provider shall submit to Company within thirty (30) days of the end of each calendar quarter a written statement of the amount owed by Company for services pursuant to this Agreement in that calendar quarter, and Company shall pay to Provider within fifteen (15) days following receipt of such written statement the amount set forth in the statement. 4 5 8. ACCOUNTING RECORDS AND DOCUMENTS. Provider shall be responsible for maintaining full and accurate accounts and records of all services rendered pursuant to this Agreement and such additional information as Company may reasonably request for purposes of its internal bookkeeping and accounting operations. Provider shall keep such accounts and records insofar as they pertain to the computation of charges hereunder available at its principal offices for audit, inspection and copying by Company and persons authorized by it or any governmental agency having jurisdiction over Company during all reasonable business hours. 9. OTHER RECORDS AND DOCUMENTS. All books, records, and files established and maintained by Provider by reason of its performance under this Agreement which, absent this Agreement, would have been held by Company, shall be deemed the property of Company, and shall be subject to examination at all times by Company and persons authorized by it or any governmental agency having jurisdiction over Company, and shall be delivered to Company at least quarterly. With respect to original documents other than those provided for in Section 5 hereof which would otherwise be held by Company and which may be obtained by Provider in performing under this Agreement, Provider shall deliver such documents to Company within thirty (30) days of their receipt by Provider except where continued custody of such original documents is necessary to perform hereunder. 10. RIGHT TO CONTRACT WITH THIRD PARTIES. Nothing herein shall be deemed to grant Provider an exclusive right to provide services to Company, and Company retains the right to contract with any third party, affiliated or unaffiliated, for the performance of services as are available to or have been requested by Company pursuant to this Agreement. 5 6 11. CONTACT PERSON(S). Company and Provider each shall appoint one or more individuals who shall serve as contact person(s) for the purpose of carrying out this Agreement. Such contact person(s) shall be authorized to act on behalf of their respective parties as to the matters pertaining to this Agreement. Effective upon execution of this Agreement, the initial contact person(s) shall be those set forth in Appendix B. Each party shall notify the other, in writing, as to the name, address and telephone number of any replacement for any such designated contact person. 12. TERMINATION. This Agreement shall remain in effect until terminated by either Provider or Company upon giving thirty (30) days or more advance written notice. Upon termination, Provider shall promptly deliver to Company all books and records that are, or are deemed by this Agreement to be, the property of Company. 13. SETTLEMENT ON TERMINATION. No later than sixty (60) days after the effective date of termination of this Agreement, Provider shall deliver to Company a detailed written statement for all charges due and not included in any previous statement to the effective date of termination. The amount owed shall be due and payable within fifteen (15) days of receipt of such statement. 14. ASSIGNMENT. This Agreement and any rights pursuant hereto shall not be assignable by either party hereto, except as set forth herein or by operation of law. Except as and to the extent specifically provided in this Agreement, nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto, or their respective legal successors, any rights, remedies, obligations or liabilities, or to relieve any person other than the parties hereto, or their respective legal successors, from any obligations or liabilities that would otherwise be applicable. The representations, warranties, covenants and agreements 6 7 contained in this Agreement shall be binding upon, extend to and inure to the benefit of the parties hereto, their, and each of their, successors and assigns respectively. 15. GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York applicable to contracts made and to be performed in that State, without regard to principles of conflict of laws. 16. ARBITRATION. Any unresolved dispute or difference between the parties arising out of or relating to this Agreement, or the breach thereof, except as provided in Section 3, shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association and the Expedited Procedures thereof. The award rendered by the Arbitrator shall be final and binding upon the parties, and judgment upon the award rendered by the Arbitrator may be entered in any Court having jurisdiction thereof. The arbitration shall take place in New York, New York. 17. NOTICE. All notices, statements or requests provided for hereunder shall be deemed to have been duly given when delivered by hand to an officer of the other party, or when deposited with the U.S. Postal Service, as first class certified or registered mail, postage prepaid, overnight courier service, telex or telecopier, addressed (a) If to Provider to: The Manufacturers Life Insurance Company 200 Bloor Street East Toronto Ontario Canada M4W 1E5 Attention: Senior Vice President, Investments Attention: Portfolio Manager, The Manufacturers Life Insurance Company of New York 7 8 If to Company to: The Manufacturers Life Insurance Company of New York International Corporate Center at Rye 555 Theodore Fremd Avenue Rye, New York 10580 Attention: Vice President or to such other persons or places as each party may from time to time designate by written notice sent as aforesaid. 19. ENTIRE AGREEMENT. This Agreement, together with such amendments as may from time to time be executed in writing by the parties in accordance with Section 1505 of the New York Insurance Law, constitutes the entire agreement and understanding between the parties in respect of the transactions contemplated hereby and supersedes the Prior Agreement, as well as all other prior agreements, arrangements and understandings relating to the subject matter hereof. 20. PRIOR AGREEMENT. The Company represents that the Prior Agreement will be terminated and appropriate authorizations will be given to custodians of Company's assets to permit Provider to perform investment services pursuant to this Agreement as of the Effective Date hereof. 21. SECTION HEADINGS. Section headings contained herein are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 22. COUNTERPARTS. This Agreement may be executed in separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 8 9 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed in duplicate by their respective officers duly authorized so to do, and their respective corporate seals to be affixed hereto, as of the date and year first above written. (Seal) THE MANUFACTURERS LIFE INSURANCE COMPANY BY /s/ JOHN D. RICHARDSON ----------------------------------------- John D. Richardson Senior Vice President and General Manager, U.S. Operations Attest:/s/ KIMBERLY CICCARELLI (Seal) THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK BY /s/ JOSEPH M. SCOTT ----------------------------------------- Joseph M. Scott President 9 10 APPENDIX A INVESTMENT SERVICES Pursuant to Paragraph 2 of the Investment Services Agreement of which this is Appendix A, Company does hereby appoint Provider to act for Company as its investment advisor and authorizes Provider to provide asset management services as described herein as to all monies, stocks, bonds, securities and mortgages held in the Company's General Account provided that: 1. All investments made by Provider on behalf of Company shall be approved or preauthorized by the Board of Directors of Company or by such committee of the Board charged with supervision of investments and shall be in accordance with investment policies and objectives, rules and regulations established periodically by the Board of Directors of Company or by such committee of the Board charged with the supervision thereof. Provider shall acquire or dispose of any specific investment if so directed by the Board of Directors of Company. 2. All investments made by Provider on behalf of Company shall be in those classes of investments prescribed by Section 1405 of the New York Insurance Law or as otherwise permitted Company by law; provided, however, that nothing contained herein shall authorize the Provider to purchase or dispose of on the Company's behalf without its prior written approval any interest in real property, mortgages or any investment not included within one of the following categories: (a) Cash Balances - Cash may be invested in U.S. Treasury bills and A1, P1-rated commercial paper, bankers acceptances and certificates of deposit. 10 11 (b) Corporate Bonds - The purchase of corporate bonds may include bonds, notes, debentures and other evidences of indebtedness issued, assumed or guaranteed by a corporation incorporated under the laws of the United States of America, or of any state, district or territorial possession thereof; or of the Dominion of Canada or any province thereof, provided that the bonds are rated class 1 or 2 by the Securities Valuation Office of the National Association of Insurance Commissioners. (c) Government Obligations - The purchase of government obligations will include bonds, notes, bills and other evidences of indebtedness issued, assumed or guaranteed by the U.S. Government, its agencies or instrumentalities or of any state or municipality thereof; or of the Dominion of Canada or any province thereof; provided the bonds are investment grade as defined by Moody's and S&P. (d) Mortgage-Backed Securities - The purchase of mortgage-backed securities will be limited to: i. The Government National Mortgage Association (GNMA); ii. The Federal National Mortgage Association (FNMA); iii. The Federal Home Loan Mortgage Corporation (FHLMC); or iv. Any other entity provided that all the underlying loans are FHA-insured or VA guaranteed loans, or are any other U.S. government guaranteed loans. (e) Equity Securities - Equity securities are defined to include preferred stocks that are rated class 1 or 2 by the Securities Valuation Office of the National Association of Insurance Commissioners, mutual fund shares and common stocks which are traded on a national stock exchange. 11 12 Securities shall be held in New York State in behalf of and in the name of Company in a custodial account with a qualified fiduciary agent or in book-entry form in the Federal Reserve of New York, all such securities, stocks, bonds and evidences of indebtedness, to which access shall be permitted to the proper officers of Company, and such representatives of Provider as shall be authorized from time to time by Company. 4. Provider shall keep and maintain books and records wherein shall be recorded the business transacted by it on behalf of, in the name of, or on account of Company. Provider shall furnish the Company a monthly statement of all investment activities. Provider shall also submit, on a monthly basis, a statement of all investment activities occurring within the period in question, as well as a summary of all investments maintained on behalf of Company. Any and all records maintained by Provider hereunder on behalf of Company shall be and remain the property of Company. 5. Provider is authorized and agrees as follows: (b) To analyze, promptly upon receipt, all assets it manages for the Company pursuant to this Agreement and thereafter, from time to time or as requested by Company, to analyze such assets, and upon completion of such analysis, to report to the Company its recommendations as to the sale or other disposition of any of said assets and as to the investment of cash available for such purpose in accordance with investment policies and objectives established periodically by the Board of Directors of Company or by such committee thereof charged with supervision of investments, and in connection therewith to advise Company of any investments proposed to be made by Provider in any assets for its own account and to permit Company the opportunity to purchase its proportionate share of any such assets, provided that any investment in assets to be jointly held by Company and any parent, affiliate, or subsidiary of 12 13 Company may be made only under a separate agreement that has been submitted to and approved by the New York Insurance Department; (c) To execute the specific instructions of the chief executive officer of Company or officers designated by him with respect to the sale, exchange, investment or other disposition of the assets managed hereunder; (d) To receive and collect on behalf of Company and for Company's account all sums due on the sale of any investment items held on behalf of Company under this Agreement, regardless of whether a profit or loss is realized, and to receive and collect for the account of Company all interest payments, dividends, of every kind or character, receipts, income items, profits, commissions, and other sums due or accruing under investments made pursuant to this Agreement and in connection therewith, to reinvest, deposit, or otherwise dispose of such monies or assets in accordance with the provisions of this Agreement and applicable New York Insurance Laws and Regulations; and (e) To surrender promptly for redemption any securities managed pursuant to this Agreement with respect to which notice of redemption is published, and to prepare, sign and file in the name of the Company any proper certificate or other statement with respect to the ownership of any of said assets which may be required by law upon receiving payment of any income or principal, and to exchange temporary for definitive securities, and to exchange securities in recapitalization and reorganizations, and to deliver securities upon sales thereof. 6. To facilitate the delivery of securities held by Provider, Company does hereby constitute and appoint Provider the true and lawful attorney of Company and authorize Provider in Company's name, place and stead to register all securities from time to time managed by Provider pursuant to this Agreement, other than securities in bearer form, in Company's name 13 14 and execute endorsements, assignments or other instruments of transfer of securities so registered and due bills and dividend orders as Provider may deem proper in connection with the transfer of any such securities, Provider being expressly authorized to execute any such instruments either by signing Company's name alone without any designation of itself as attorney-in-fact, or it may sign Company's name as such attorney. 7. Whenever Provider receives and collects monies for the account of Company, Provider will not commingle such monies with its own, but will deposit such monies in an appropriate separate account in the name of Company in a bank domiciled and located in the State of New York. 14 15 APPENDIX B CONTACT PERSON(S) FOR PROVIDER Joseph B. Mounsey Senior Vice President, Investments John MacIntyre Portfolio Manager, The Manufacturers Life Insurance Company of New York CONTACT PERSON(S) FOR COMPANY Joseph Scott President 15 EX-99.(A)(10)(A) 5 FORM OF APPLICATION FLEXIBLE PREMUIM 1 EXHIBIT (A)(10)(a) APPLICATION FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK [LOGO] MANULIFE FINANCIAL THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK Manulife Financial and the block design are registered service marks of The Manufacturers Life Insurance Company and are used by it and its subsidiaries. 2 [LOGO] MANULIFE FINANCIAL THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK Application for Flexible Premium Variable Life Insurance To THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK (hereinafter referred to as The Company) APPLICATION NO. PLEASE PRINT & USE BLACK INK. ANY CHANGES MUST BE INITIALLED BY THE PROPOSED INSURED AND/OR OWNER. POLICY NO.
PROPOSED LIFE INSURED: 1a. Name (first, middle, last) 1b. Date of Birth (mmm/dd/yyyy) 1c. Place of Birth 1d. Soc. Sec.No./Tax I.D. No. 1e. Sex 1f. Occupation 1g. Specific Duties 1h. How Long? 1i. Home Address City State Zip 1j. How Long? 1k. Employer Name and Address City State Zip 1l. How Long? OWNER IF OTHER THAN PROPOSED LIFE INSURED: 2a. Name (first, middle, last) 2b. Date of Birth (mmm/dd/yyyy) 2c. Occupation 2d. Relationship to Proposed Life Insured 2e. Address City State Zip 2f. Employer Name and Address City State Zip 2g. If home address or employer has changed in last 2 years, give details: SUCCESSOR OWNER - RECOMMENDED FOR JUVENILE INSURANCE - NOT RECOMMENDED FOR BUY-SELL OR CORPORATE-OWNED 3a. Name 3b. Relationship to Owner 3c. Soc. Sec. No./Tax I.D. No. BENEFICIARY(IES) SUBJECT TO CHANGE BY OWNER: 4a. Primary 4b. Relationship to Proposed Life Insured 4c. Secondary 4d. Relationship to Proposed Life Insured SEND PREMIUM NOTICES TO: 5a. / / Insured / / Owner / / Business / / Residence / / Other(give details below): 5b. Name Address City State Zip
LIFE INSURANCE IN FORCE: 6a. Total insurance in force on the Proposed Life Insured's life $_________ 6b. Total insurance currently pending with all companies, including this application $__________________. Of this total, what amount of insurance do you intend to accept? $__________________________________ 6c. LIST POLICIES IN FORCE
Year of Accidental GI Option (X) COMPANY Issue Group? Face Amount Death Amount Business Personal ------- ----- ------ ----------- ----- ------ -------- --------
7. Have you ever been declined for insurance, or been offered insurance YES NO with restricted benefits or at other than standard rates? / / / / 8. Is this insurance to replace, or will it cause a change in, or involve a loan under, any insurance or annuity policy on any Proposed Life Insured's life or in any insurance or annuity policy owned by the Owner? IF "YES", TO EITHER 7 OR 8, GIVE DETAILS BELOW: / / / /
Page 1 Manulife Financial and the block design are registered service marks of The Manufacturers Life Insurance Company and are used by it and its subsidiaries. 3 APPLICATION NO. PLEASE PRINT POLICY APPLIED FOR 9a. Plan (non-participating): 9b. Face Amount (policy only, excluding Supplementary Benefits): $ 9c. If an additional or optional policy is being applied for in a separate application, state plan and amount. 9d. Loan Interest Rate (Check /X/ loan rate applicable to the policy being applied for) / / 5.75% / / 8% / / Variable 9e. If a supplementary benefit applied for cannot be approved, should the policy be issued without it? / / Yes / / NO / / Not Applicable 9f. Is a policy guarantee being applied for? / / Yes / / No / / Not Applicable If "Yes", indicate type of policy guarantee: / / No Lapse Guarantee / / Death Benefit Guarantee SUPPLEMENTARY BENEFITS
SINGLE-LIFE PLANS SURVIVORSHIP PLANS 10. / / Total Disability Waiver of Monthly Deductions 11. / / Policy Split Option / / Guaranteed Policy Value / / Four Year Term (EPR) / / Additional Life (number of lives maximum 6) / / Other (State which) / / Other (State which)
PREMIUMS 11a. Frequency / / Annual / / Semi / / Quarterly / / Monthly 11b. If monthly / / Manumatic Transfer 11c. Planned Premium $ 11d. Additional "once only" premium $ 11e. Amount paid with application $ DEATH BENEFIT 12. / / Option 1: Face Amount / / Option 2: Face Amount Plus Policy Value SPECIAL REQUESTS 13. HOME OFFICE NOTES 14. Page 2 4 APPLICATION NO. PLEASE PRINT SMOKING QUESTIONS
YES NO 15a. Have you used tobacco in any form during the past 2 years (including / / / / cigars, cigarillos, a pipe, chewing tobacco or cigarettes)? If "Yes" what type of tobacco? 15b. Do you use any medication or product containing nicotine? If "Yes", / / / / give details: 15c. Have you smoked any cigarettes during the past 12 months? If "Yes", how many? / / / / 15d. Were you previously a cigarette smoker but have now stopped? / / / / If "Yes", when did you stop? Give month and year: AVOCATION QUESTIONS YES NO 16a. Do you have any part-time or seasonal occupation? / / / / 16b. Do you expect to change your occupation? / / / / 16c. Do you expect to change your country of residence? / / / / If "Yes", give details: 17a. Have you flown as a student pilot, licensed pilot or crew member in any aircraft (including ultralight planes) in the past 2 years? / / / / 17b. Are any such flights planned in the future? / / / / 17c. Have you engaged in any form of motor vehicle or power boat racing, sky diving, skin or scuba diving, parachuting, hang-gliding, mountain climbing or ballooning in the last 2 years? / / / / 18a. What is your Drivers License Number? State / / / / 18b. Have you been convicted of 3 or more moving violations within the past 3 years? / / / / 18c. Have you been convicted of driving while intoxicated or while otherwise impaired? If "Yes", give details. / / / /
FINANCIAL QUESTIONS COMPLETE WHEN AMOUNT OF INSURANCE IS $250,000 AND MORE, OR WHEN APPLYING FOR BUSINESS INSURANCE FOR ANY AMOUNT, OR INSURANCE ON THE LIFE OF A JUVENILE FOR ANY AMOUNT. 19. What is the purpose of this insurance? (e.g. estate conservation, buy-sell, keyman) 20. How was the need for this amount determined? (Please submit copies of financial statement(s), estate analysis, contractual agreements, etc.) 21a. Gross annual earned income (salary, commissions, bonuses, etc.) $ 21b. Gross annual unearned income (dividends, interest, net real estate income, etc.) $ 21c. Total Assets $ 21d. Total Liabilities? $ 21e. Personal Net Worth?$
JUVENILE INSURANCE: 22a. Are all brothers and sisters equally insured? / / Yes / / No If "No", give details: 22b. Are parent(s)/guardians covered by life insurance? / / Yes / / No If "Yes", how much is in force? If "No", why not? 22c. Occupation or other independent source of income of proposed Life Insured, if applicable: BUSINESS INSURANCE: Provide the following information on your company
Current Year Previous Year 23a. Assets $ $ 23b. Liabilities $ $ 23c. Gross Sales $ $ 23d. Net Income after taxes $ $ 23e. Fair Market Value of the business $ 23f. What percentage of the business is owned by the proposed Life Insured? %
23g. Are other partners/owners/executives being insured? Give details: 24. In the past 5 years, has the Proposed Life Insured or the business had any major financial problems (bankruptcy,etc.)? / / Yes / / No If "Yes", give details: Page 3 5 APPLICATION NO. PLEASE PRINT MEDICAL QUESTIONS-PLEASE PROVIDE DETAILS TO "YES" ANSWERS IN THE SPACE BELOW 25. Have 2 or more of your immediate family members (parents, brothers and sisters) prior to age 65, died of or been diagnosed as having coronary artery disease, stroke or kidney disease? / / Yes / / No
26. FAMILY HISTORY L AGE GIVE DETAILS OF PRESENT HEALTH D AGE CAUSE OF DEATH I E Father V C Mother I E Brothers N A and G S Sisters E D
27a. Your Height 27b. Your Weight 27c. Any weight loss in the last year? / / Yes / / No 28a. Name and address of personal or attending doctor: 28b. Date last consulted? 28c. Reason and any medication/treatment given:
28d. List any medications you are taking currently: YES NO 29. SO FAR AS YOU KNOW, WITHIN THE LAST 10 YEARS HAVE YOU EVER BEEN DIAGNOSED BY A MEMBER OF THE MEDICAL PROFESSION AS HAVING: a.) Chest pain, shortness of breath, heart murmur, high blood pressure, stroke, irregular heart beat, or any other disease or disorder of the heart or arteries? / / / / b.) Diabetes or disease of any glands? / / / / c.) Mental or emotional disorder, nervous breakdown, convulsions, epilepsy, paralysis or any other disorder of the brain or nervous system? / / / / d.) Arthritis, gout, or any bone, joint, muscle or skin disorder? / / / / e.) Asthma, bronchitis, pneumonia, emphysema or any lung disorder? / / / / f.) Cirrhosis, hepatitis, ulcer, colitis, diverticulitis, ileitis, or other disease of the liver, gall bladder, pancreas, stomach or intestines? / / / / g.) Prostate or testicular disease, disease of the uterus, ovaries or breast? / / / / h.) Anemia, leukemia, clotting disorders, platelet disorders, infections, or sources of blood loss? / / / / i.) Disorder of the urinary tract or kidneys - sugar, albumin or blood in the urine? / / / / j.) Cancer or tumors? / / / / k.) An operation or admission to a hospital or any other health care facility for observation, treatment of any illness or diagnostic tests, including treadmill stress test for insurance (excluding an HIV test)? / / / / l.) Any other health impairment or medically treated condition? / / / / m.) Treatment or advice from a physician, or licensed practitioner, regarding alcohol or drug use? / / / / 30. Within the last 10 years have you been diagnosed by a member of the medical profession as having Acquired Immune Deficiency Syndrome (AIDS) or AIDS Related Complex (ARC)? / / / /
PLEASE PROVIDE DETAILS TO ANY "YES" ANSWERS (IF MORE SPACE IS REQUIRED, USE THE MEDICAL QUESTIONS CONTINUATION SHEET)
QUESTION NAME, ADDRESS AND PHONE NO. OF DURATION NUMBER DATE ATTENDING DOCTOR AND HOSPITAL OF CONDITION REASON AND ANY TREATMENT GIVEN - ------ ---- ----------------------------- ------------ ------------------------------
Page 4 6 APPLICATION NO. REQUEST FOR TAXPAYER IDENTIFICATION NUMBER AND CERTIFICATION (TO BE COMPLETED BY OWNER/TAXPAYER) In order to comply with IRS regulations regarding Tax Identification Numbers and Social Security Number Backup Tax Withholding, individuals and sole proprietors MUST give their Social Security Number. Other entities MUST give their Employer Identification Number. If you have no number or you have applied for a number and are waiting for one Employer Identification Number to be issued, write "APPLIED FOR" in the boxes. You then have 60 days to supply your TIN number to us. After 60 days, The Company must begin Backup Tax Withholding.
CERTIFICATION - UNDER PENALTIES OF PERJURY, I CERTIFY THAT: (1) The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), AND (2) I am not subject to Backup Tax Withholding either because I have not been notified by the Internal Revenue Service (IRS) that I am subject to Backup Tax Withholding as a result of a failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to Backup Tax Withholding (does not apply to real estate transactions, mortgage interest paid, the acquisition or abandonment of secured property, contributions to an individual retirement arrangement (IRA), and payments other than interest and dividends). CERTIFICATION INSTRUCTIONS - You MUST cross out item (2) above if you have been notified by the IRS that you are currently subject to Backup Tax Withholding because of underreporting interest or dividends on your tax return. Signed at ____________________________ this ______ day of ___________ __________ City / State Month Year (X)____________________________________ SIGNATURE OF OWNER / TAXPAYER Page 5 7 APPLICATION NO. SIGNATURES THE PROPOSED LIFE INSURED (OR PARENT OR GUARDIAN) HAS READ THE STATEMENTS AND ANSWERS TO THE MEDICAL EVIDENCE PORTION AND THEY ARE COMPLETE AND TRUE TO THE BEST OF HIS/HER KNOWLEDGE AND BELIEF. THE PROPOSED LIFE INSURED HEREBY AGREES THAT THEY SHALL FORM PART OF THE APPLICATION FOR LIFE INSURANCE FOR WHICH SUCH MEDICAL EVIDENCE WAS REQUIRED BY THE COMPANY. THE PROPOSED LIFE INSURED (OR PARENT OR GUARDIAN) ACKNOWLEDGES RECEIPT OF THE NOTICE OF DISCLOSURE OF INFORMATION. THE PROPOSED LIFE INSURED AND OWNER (OR PARENT OR GUARDIAN) AGREE THAT: 1.) THE STATEMENTS AND ANSWERS IN THIS APPLICATION ARE COMPLETE AND TRUE TO THE BEST OF THEIR KNOWLEDGE AND BELIEF. 2.) UNLESS THE TERMS AND CONDITIONS OF THE TEMPORARY LIFE INSURANCE AGREEMENT ARE SATISFIED SO THAT INSURANCE IS PROVIDED UNDER THAT AGREEMENT, INSURANCE UNDER ANY POLICY ISSUED ON THE APPLICATION WILL BECOME EFFECTIVE ONLY WHEN THE FIRST PREMIUM HAS BEEN PAID IN FULL AND THE POLICY HAS BEEN DELIVERED; PROVIDED THAT AT THE TIME OF DELIVERY THERE HAS BEEN NO DETERIORATION IN THE INSURABILITY OF ANY PERSON PROPOSED FOR LIFE INSURANCE AS STATED IN THE APPLICATION, SINCE THE DATE OF THE APPLICATION. THEY ARE AWARE THE COMPANY HAS UNDERWRITING RULES TO DETERMINE INSURABILITY. THE PROPOSED LIFE INSURED AND OWNER (OR PARENT OR GUARDIAN) UNDERSTAND THAT UNDER THE POLICY APPLIED FOR, THE AMOUNT OF THE INSURANCE BENEFITS, THE DURATION OF THE INSURANCE COVERAGE, AND THE POLICY VALUE MAY INCREASE OR DECREASE DEPENDING ON THE INVESTMENT EXPERIENCE OF THE CHOSEN INVESTMENT ACCOUNT AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT. ILLUSTRATIONS OF BENEFITS, INCLUDING DEATH BENEFITS, POLICY VALUES AND CASH SURRENDER VALUES ARE AVAILABLE UPON REQUEST. Signed at ____________________________ this ______ day of _____________ ________ City / State Month Year (X)___________________________________ (X)______________________________________ WITNESS SIGNATURE OF PROPOSED LIFE INSURED (X)___________________________________ (X)______________________________________ WITNESS SIGNATURE OF OWNER, IF OTHER THAN PROPOSED LIFE INSURED (X)___________________________________ (X)______________________________________ WITNESS SIGNATURE OF ANY PROPOSED JUVENILE LIFE INSURED OVER AGE 10 (X)___________________________________ (X)______________________________________ SIGNATURE OF REGISTERED REPRESENTATIVE CONSENT OF PARENT OR GUARDIAN, IF OTHER IF OTHER THAN WITNESS THAN OWNER / / FATHER / / MOTHER / / GUARDIAN All other Registered Representatives sharing commissions for this policy must also sign here. (X)___________________________________ (X)______________________________________ SIGNATURE OF REGISTERED REPRESENTATIVE PLACE AND DATE (X)___________________________________ (X)______________________________________ SIGNATURE OF REGISTERED REPRESENTATIVE PLACE AND DATE (X)___________________________________ COUNTERSIGNATURE OF LICENSED RESIDENT AGENT (WHERE REQUIRED BY LAW) Page 6 8 APPLICATION NO. PLEASE PRINT TO BE ANSWERED BY THE REGISTERED REPRESENTATIVE (REQUIRED FOR ALL APPLICATIONS) 1. If the Owner is a Corporation, Partnership, Trust or other legal entity, the NASD requires such entity to provide The Company with documentation detailing the name(s) of all individuals authorized to transact business on behalf of the entity. This requirement will be satisfied by submitting a copy of the Corporation Resolution, Partnership Agreement, or Certification by Trustee form. List the name(s) of individual(s) authorized to transact business on behalf of the entity: 2. Temporary Life Insurance Agreement Issued? / / Yes / / No 3. TO THE BEST OF YOUR KNOWLEDGE, IS THIS INSURANCE INTENDED TO REPLACE, OR WILL IT CAUSE A CHANGE IN, OR INVOLVE A LOAN UNDER, ANY INSURANCE OR ANNUITY POLICY ON THE LIFE OF ANY PROPOSED LIFE INSURED OR IN ANY INSURANCE OR ANNUITY POLICY OWNED BY THE OWNER? / / YES / / NO IF "YES", GIVE DETAILS AND COMPLETE ANY REPLACEMENT FORMS THAT ARE REQUIRED. ADVISE WHETHER ANY POLICY BEING REPLACED WAS ITSELF A REPLACEMENT POLICY WITHIN THE PAST 5 YEARS. 4. Is this a 1035 exchange? / / Yes / / No If "Yes", how many policies will be exchanged? LIST POLICIES:
Type of Contract Company Name Policy No. (Annuity, Life, Term, Annuitant / Insured Owner Endowment)
5. Additional information to be used in assessing suitability. (Please give explanation if annual premium is more than 3% of annual income, if spouse's income is to be included in determining suitability, if answers to income and net worth have not been provided, etc.): 6. If you are sharing the commissions for this policy with another agent(s) or entity(ies), please complete the following:
NAME OF AGENT / ENTITY AGENT CODE SHARE REMARKS TOTAL 100%
I certify that I have truly and accurately recorded on the application all the information supplied by the Proposed Life Insured (or Parent or Guardian). I CERTIFY THAT A CURRENT PROSPECTUS (AND ANY SUPPLEMENT) FOR THE POLICY APPLIED FOR HAS BEEN GIVEN TO THE PROPOSED LIFE INSURED, AND TO THE OWNER IF OTHER THAN THE PROPOSED LIFE INSURED, AND THAT NO SALES MATERIALS OTHER THAN THOSE APPROVED BY THE APPROPRIATE REGULATING AUTHORITIES HAVE BEEN USED. (X)_____________________________________ (X)____________________________________ SIGNATURE OF REGISTERED REPRESENTATIVE Place and Date All other Registered Representatives sharing commissions for this policy must also sign here. (X)_____________________________________ (X)____________________________________ SIGNATURE OF REGISTERED REPRESENTATIVE Place and Date (X)_____________________________________ (X)____________________________________ SIGNATURE OF REGISTERED REPRESENTATIVE Place and Date OFFICE Has this application been approved by the Office of Supervisory Jurisdiction? / / Yes / / No SUPERVISORY If answer is "Yes", Office of Supervisory Jurisdiction approval date is: JURISDICTION If answer is "No", explain:
_________________________________ _____________________________________ ____________________ _____ NAME OF BROKER/DEALER REGISTERED PRINCIPAL SIGNATURE DATE (Month / Day / Year)
Page 7 9 [LOGO] ----------------------------------------------------- THE MANUFACTURERS LIFE Notice Regarding Temporary Life Insurance Agreement INSURANCE COMPANY OF and Receipt NEW YORK THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK (hereinafter referred to as The Company) DO NOT DETACH - -------------------------------------------------------------------------------- Application No. Policy No. Name of Proposed Life Insured - -------------------------------------------------------------------------------- HEALTH QUESTIONS. HAS THE PROPOSED LIFE INSURED UNDER THIS APPLICATION: YES NO (a) WITHIN THE LAST 12 MONTHS BEEN TREATED OR HAD TREATMENT RECOMMENDED BY A MEMBER OF THE MEDICAL PROFESSION FOR ANY HEART PROBLEM, STROKE, CANCER OR PNEUMONIA?......................... / / / / (b) WITHIN THE LAST 60 DAYS HAD OR BEEN ADVISED TO HAVE ANY ADDITIONAL MEDICAL DIAGNOSTIC TEST, TREATMENT OR SURGERY NOT YET PERFORMED (EXCLUDING AN HIV TEST)?............................................ / / / / (c) WITHIN THE LAST 2 YEARS, BEEN DECLINED FOR LIFE OR DISABILITY INCOME INSURANCE?.......................................................... / / / / If any of questions (a), (b), or (c) above is answered "Yes" or left blank, or if the Proposed Life Insured is under 15 days of age or over age 70 (nearest birthday) as at the date below, do not pay any money as no coverage will be provided under the Temporary Insurance Agreement. I have read and understand the terms and conditions of the Temporary Life Insurance Agreement. The Proposed Life Insured agrees that to the best of his/her knowledge and belief the answers to the above Health Questions are true. Signed at this day of --------------------------------- --- -------------- ----- City/State Month Year (X) (X) - ---------------------------------- ------------------------------------------ WITNESS SIGNATURE OF PROPOSED LIFE INSURED (X) (X) - ---------------------------------- ----------------------------------------- WITNESS SIGNATURE OF OWNER (IF OTHER THAN PROPOSED LIFE INSURED) (X) (X) - ---------------------------------- ------------------------------------------- WITNESS SIGNATURE OF PARENT OR GUARDIAN (IF MINOR CHILD IS PROPOSED LIFE INSURED) - -------------------------------------------------------------------------------- [BAR CODE] Manulife Financial and the block design are registered service marks of The Manufacturers Life Insurance Company and are used by it and its subsidiaries. ................................................................................ DETACH AND GIVE TO OWNER [LOGO] ----------------------------------------------------- THE MANUFACTURERS LIFE Temporary Life Insurance Agreement and Receipt INSURANCE COMPANY OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK NEW YORK (hereinafter referred to as The Company) The Company acknowledges receipt of $ as a premium for life ------------- insurance applied for on the life of ------------------------------------------- for Application number --------------------------------------------------------- (X) - ---------------------------------- ------------------------------------------- Date Signature of Agent or Registered Representative ALL PREMIUM CHECKS MUST BE MADE PAYABLE TO THE COMPANY AND ADDRESSED TO: P.O. BOX 40, BUFFALO, NEW YORK 14240-0040. The Company will pay a death benefit to the beneficiary named in the Application if any Proposed Life Insured dies while this Agreement is in effect, subject to the terms and conditions set out below. 1. LIMITED AMOUNT OF INSURANCE. THE AMOUNT OF COVERAGE UNDER THIS AGREEMENT WILL BE THE LESSER OF: (a) THE AMOUNT OF INSURANCE APPLIED FOR INCLUDING ANY SUPPLEMENTARY BENEFITS AND ACCIDENTAL DEATH BENEFIT IF THE PROPOSED LIFE INSURED'S DEATH IS CAUSED BY AN ACCIDENT; AND (b) $1,000,000 ($200,000 FOR JUVENILE INSURANCE). THIS MAXIMUM AMOUNT OF COVERAGE APPLIES TO THE TOTAL AMOUNT UNDER THIS AGREEMENT AND ANY OTHER TEMPORARY LIFE INSURANCE AGREEMENT WITH THE COMPANY COVERING THE PROPOSED LIFE INSURED. IF THERE ARE TWO OR MORE PERSONS PROPOSED FOR INSURANCE, THIS MAXIMUM AMOUNT APPLIES TO THE TOTAL COVERAGE. (See Over) - -------------------------------------------------------------------------------- ManuLife Financial and the block design are registered service marks of The Manufacturers Life Insurance Company and are used by it and its subsidiaries. 10 2. ACCIDENTAL DEATH BENEFIT LIMITATION. If the benefits applied for include an accidental death benefit, no such benefit will be paid in respect of a death caused by: (a) voluntarily taking or absorbing of any drug, medicine, sedative or poison (except in connection with any Proposed Life Insured's employment) unless prescribed by a licensed doctor other than the Proposed Life Insured; (b) suicide whether sane or insane or (c) travel in any aircraft other than as a passenger. 3. TEMPORARY LIFE INSURANCE AGREEMENT. If any questions (a), (b), or (c) in the Notice Regarding Temporary Life Insurance Agreement and Receipt is answered "yes" or left blank, no money will be accepted and no coverage will be provided under this Agreement. 4. DATE INSURANCE BEGINS. Insurance under this Agreement will begin on the date of this Agreement if The Company's Application for Life Insurance has been completed and a payment has been received by The Company for at least one-twelfth of the annual premium for the basic plan and any riders or supplementary benefits requested in the Application. If payment is made by check or draft, no insurance will be provided by this Agreement unless the check or draft is honored when first presented for payment. 5. DATE INSURANCE ENDS -- 90 DAY MAXIMUM. Insurance under this Agreement will end on the earliest of: (a) the 90th day after the date of this Agreement; (b) the day before the date insurance takes effect under the policy applied for; (c) the date The Company offers insurance other than as applied for; or (d) the date 5 days after the Company mails notice to the applicant that the Application is declined and refunds the premium paid. 6. SUICIDE. If any person proposed for insurance, commits suicide, The Company will only be liable for a refund of the premium paid. 7. MISREPRESENTATION. If there is any material misrepresentation in the answers to the Health Questions in the Notice Regarding Temporary Life Insurance Agreement and Receipt, the Application or in any Medical Evidence Exam form submitted to The Company related to any Proposed Life Insured, The Company will only be liable for a refund of the premium paid. 8. OTHER CONDITIONS. No one is authorized to: (a) accept any premium for any Proposed Life Insured under 15 days of age or over age 70 (nearest birthday) as at the date of this Agreement; or (b) change or waive any provision of this Agreement. THE ABOVE EXCLUSIONS APPLY EXCEPT AS OTHERWISE PROVIDED BY APPLICABLE STATE LAW. 11 [MANULIFE FINANCIAL LOGO] ----------------------------------------------------- Authorization To Obtain Information THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK (hereinafter referred to as The Company) APPLICATION NO. I hereby give permission to any physician, medical care provider, hospital, clinic, laboratory, insurance company or MIB Inc. (The Medical Information Bureau) or any other similar person or organization to give The Company and to its reinsurers, information about me or any of my minor children who are to be insured. The information collected by The Company may relate to the symptoms, examination, diagnosis, treatment or prognosis of any physical or mental condition. Although information related to drug or alcohol abuse is protected from disclosure by Federal Regulation 42 CFR Part 2, I give permission to The Company to collect this information for those purposes which are described below. I understand that I can revoke this permission to collect information related to drug or alcohol abuse at any time, but any revocation will not affect such information that has already been collected and relied on by The Company. I authorize The Company to obtain an investigative consumer report on me. Information collected under this Authorization will be used by The Company to evaluate my application for insurance, to evaluate a claim for benefits, or for reinsurance or other insurance purposes. I understand that I have a right to receive a copy of this form. I agree that a photocopy of this form will be as valid as the original. This Authorization will be valid for two years from the date shown below. I acknowledge receipt of the Notice of Disclosure of Information. Date (mmm/dd/yyyy) (X) --------------------- ------------------------------------- SIGNATURE OF PROPOSED LIFE INSURED Names of minor child(ren) proposed for insurance (X) ------------------------ -------------------------------------- WITNESS - ---------------------------------------- (X) -------------------------------------- SIGNATURE OF PARENT OR GUARDIAN (IF MINOR CHILDREN PROPOSED FOR INSURANCE) - -------------------------------------------------------------------------------- [BAR CODE] ManuLife Financial and the block design are registered service marks of The Manufacturers Life Insurance Company and are used by it and its subsidiaries. Form NB4116NY(1097) ................................................................................ DETACH AND GIVE TO PROPOSED LIFE INSURED [MANULIFE FINANCIAL LOGO] ----------------------------------------------------- Notice of Disclosure of Information THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK (hereinafter referred to as The Company) APPLICATION NO. This brief description of our underwriting process is designed to help you understand how an application for life insurance is handled, the types and sources of information we may collect about you, the circumstances under which we may disclose that information to others and your right to learn the nature and substance of that information upon written request. The purpose of the underwriting process is to make sure that you qualify for life insurance under the rules of The Company and, assuming you do, establish the proper premium charge for that insurance. The underwriting process assures that the cost of insurance is distributed equitably among all policyowners, and that each individual pays his or her fair share. The information necessary to evaluate your application is dependent upon your age, the amount of insurance you are applying for, your medical history, your occupation, your avocations and other personal information. Your answers on the application are the principal source of information, however additional sources of information may be required. Information given in your application may be made available to other insurance companies to which you make application for life or health insurance coverage or to which a claim is being submitted. Information you provide will be treated as confidential. The Company may, however, make a brief report thereon to the MEDICAL INFORMATION BUREAU (M.I.B.), a non-profit membership organization of life insurance companies which operates an information exchange on behalf of its members. Upon request by another member insurance company to which you have applied for life or health insurance coverage or to which a claim is submitted, M.I.B. will supply such company with the information it may have in its files. Upon receipt of a request from you, the Bureau will arrange disclosure of any information it may have in your file. (Medical information will be disclosed only to your attending physician). If you question the accuracy of information in the Bureau's file, you may contact the Bureau and seek a correction in accordance with the procedures set forth in the Federal Fair Credit Reporting Act. THE ADDRESS OF THE BUREAU'S INFORMATION OFFICE IS POST OFFICE BOX 105, ESSEX STATION, BOSTON, MASSACHUSETTS 02112; TELEPHONE NUMBER (617) 426-3660. The Company may also release information in its file to other life insurance companies to whom you may apply for life or health insurance, or to whom a claim for benefits may be submitted. As part of our normal procedure, an investigative consumer report may be prepared concerning character, general reputation, personal characteristics and mode of living, except as may be related directly or indirectly to your sexual orientation. This information will be obtained through a personal interview and/or interviews with friends, neighbors and associates. On request to the SENIOR UNDERWRITING CONSULTANT, THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK, P.O. BOX 40, BUFFALO, NEW YORK 14240-0040, we will disclose to you whether or not a consumer report was done. We will give you the name and address of the consumer reporting firm so that you may request a copy of the report. - -------------------------------------------------------------------------------- ManuLife Financial and the block design are registered service marks of The Manufacturers Life Insurance Company and are used by it and its subsidiaries. 12 [LOGO] MANULIFE FINANCIAL THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK GENERAL AVOCATION QUESTIONNAIRE THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK (hereinafter referred to as The Company) APPLICATION NO. ANSWER ONLY THOSE QUESTIONS WHICH RELATE TO THE ACTIVITIES OF THE PROPOSED INSURED. A SIGNATURE IS REQUIRED ON THE REVERSE IF ANY OF THE QUESTIONS ARE ANSWERED. - ----------------------------------------------------------------------------------------------------------------------------------- Proposed Life Insured Name Policy Number - ----------------------------------------------------------------------------------------------------------------------------------- Hang Gliding Questions - ----------------------------------------------------------------------------------------------------------------------------------- 1. How frequently do you hang glide? - ----------------------------------------------------------------------------------------------------------------------------------- 2. Are you a member of an organized club? / / Yes / / No Do you hang glide professionally? / / Yes / / No How high do you usually fly?____________ feet - ----------------------------------------------------------------------------------------------------------------------------------- 3. What is the greatest height _____________ distance ___________________ duration ___________________________________ flown? - ----------------------------------------------------------------------------------------------------------------------------------- 4. Have you or do you intend to attempt any height, distance, or duration records? / / Yes / / No If "Yes" give details: - ----------------------------------------------------------------------------------------------------------------------------------- 5. Have you ever flown or do you intend to fly experimental hang gliding equipment of either a manufacturer's or your own design? / / Yes / / No If "Yes" give details: - ----------------------------------------------------------------------------------------------------------------------------------- Sky Diving Questions - ----------------------------------------------------------------------------------------------------------------------------------- 1. How long have you been sky diving? ________ years. Are you a member of a recognized Parachute Club? / / Yes / / No If "Yes" give details: - ----------------------------------------------------------------------------------------------------------------------------------- 2. How many jumps (a) have you made in the last 12 months? ______________ (b) did you make 12 to 24 months ago? _________________ (c) do you expect to make in the next 12 months? _______________ - ----------------------------------------------------------------------------------------------------------------------------------- 3. From what altitude do you normally jump? __________________ feet - ----------------------------------------------------------------------------------------------------------------------------------- 4. Do you participate in sky diving exhibitions and/or competitions? / / Yes / / No If "Yes" give details: - ----------------------------------------------------------------------------------------------------------------------------------- 5. Do you receive remuneration for sky diving activity? / / Yes / / No If "Yes" give details: - ----------------------------------------------------------------------------------------------------------------------------------- 6. Are you a member of a military parachutist organization? / / Yes / / No If "Yes" give details: - ----------------------------------------------------------------------------------------------------------------------------------- Organized Automobile and Motorcycle Racing Questions - ----------------------------------------------------------------------------------------------------------------------------------- 1. Do you engage in organized automobile racing? / / Yes / / No Organized Motorcycle racing? / / Yes / / No Type of vehicle used in races: - ----------------------------------------------------------------------------------------------------------------------------------- 2. How many races did you enter in the last 12 months? _________ The last 12 to 24 months? _________ Next 12 months? ________ - ----------------------------------------------------------------------------------------------------------------------------------- 3. What is the maximum speed attained? _______________ 4. The average speed? ______________ - ----------------------------------------------------------------------------------------------------------------------------------- 5. If drag racing, elapsed time ________________ - ----------------------------------------------------------------------------------------------------------------------------------- 6. What class of racing or competition do you engage in? (e.g.: Automobile - midget, sports car, stock car, championship, drag, sprint, etc. Motorcycle - hill climbing, cross country, drag, track) - ----------------------------------------------------------------------------------------------------------------------------------- 7. Indicate type of track and surface used: - ----------------------------------------------------------------------------------------------------------------------------------- 8. Purpose of racing: / / Professional / / Amateur / / Both (give details): - ----------------------------------------------------------------------------------------------------------------------------------- 9. Have you ever done or do you intend to do any stunt driving? / / Yes / / No If "Yes" give details: - ----------------------------------------------------------------------------------------------------------------------------------- 10. Have you had any accidents related to driving? / / Yes / / No If "Yes" give details: (See Over) - -----------------------------------------------------------------------------------------------------------------------------------
[BAR CODE] Manulife Financial and the block design are registered service marks of The Manufacturers Life Insurance Company and are used by it and its subsidiaries. 13 Aviation Questions 1. Flying time as pilot: (a) Number of hours flown in command ________ hours (b) Date of last flight _________________________________________________ (c) Type of license currently held [] Student [] Private [] Commercial [] Senior Commercial [] ATR (d) Do you hold a valid instrument rating? [] Yes [] No - -------------------------------------------------------------------------------- 2. As pilot, student or air crew on nonscheduled flights: Number of hours flown in last 12 months _____ hours Last 12-24 months _____ hours Next 12 months _____ hours - -------------------------------------------------------------------------------- 3. Purpose of Flying (Present and Future) [] Pleasure [] Commercial [] Military [] Business [] Other (give details): - -------------------------------------------------------------------------------- 4. Category, class and type of aircraft flown: - -------------------------------------------------------------------------------- 5. Have you ever had an accident, been grounded, fined or reprimanded for violation of air regulations? [] Yes [] No If "Yes" give details: - -------------------------------------------------------------------------------- 6. Do you engage or expect to engage in charter flying, freight transport, instructing, testing, crop-dusting, survey and patrol, sightseeing, photography? [] Yes [] No [] Other If "Yes" or "Other" give details: - -------------------------------------------------------------------------------- Skin and Scuba Diving Questions 1. Do you dive for pleasure? [] Yes [] No Commercial purposes? [] Yes [] No [] Snorkel [] Scuba - -------------------------------------------------------------------------------- 2. Indicate type of diving (if applicable) [] Instruction [] Construction [] Salvage [] Search work [] Ice diving [] Night diving - -------------------------------------------------------------------------------- 3. Where do you dive? [] Inland Waters [] Sea or Ocean [] Other (give details): - -------------------------------------------------------------------------------- 4. Diving History: 5. Do you dive alone? (in feet) Last 12 months Next 12 months [] Yes [] No ---------------------------------- If "Yes" give details: No. of Average No. of Average Dives Time Dives Time -------------------------- ----------------------------------------------- 6. (a) Are you a certified Less than 50 diver? ----------------------------------------------- [] Yes [] No 50-75 ----------------------------------------------- (b) Are you a member of 75-100 an organized club? ----------------------------------------------- [] Yes [] No 100 & over If "Yes" give ----------------------------------------------- details: - -------------------------------------------------------------------------------- 7. Have you ever had an accident related to diving? [] Yes [] No If "Yes" give details: - -------------------------------------------------------------------------------- Mountain Climbing Questions 1. How long have you been mountain climbing? - -------------------------------------------------------------------------------- 2. At what level do you currently climb? - -------------------------------------------------------------------------------- 3. How often do you climb? - -------------------------------------------------------------------------------- 4. During which seasons? - -------------------------------------------------------------------------------- 5. Give locations including names of mountains and their corresponding level of difficulty: - -------------------------------------------------------------------------------- 6. What attempts do you have planned in the future? - -------------------------------------------------------------------------------- I HAVE READ THE ABOVE STATEMENTS AND ANSWERS AND THEY ARE COMPLETE AND TRUE TO THE BEST OF MY KNOWLEDGE AND BELIEF. I UNDERSTAND THEY WILL FORM A PART OF THE APPLICATION TO THE COMPANY FOR INSURANCE ON MY LIFE. Signed at ________________________ this _____ day of ______________________ ____ City/State Month Year (X) (X) - -------------------------------------- -------------------------------------- WITNESS SIGNATURE OF PROPOSED LIFE INSURED (X) (X) - -------------------------------------- -------------------------------------- WITNESS SIGNATURE OF OWNER, IF OTHER THAN PROPOSED LIFE INSURED (X) (X) - -------------------------------------- -------------------------------------- WITNESS SIGNATURE OF PARENT OR GUARDIAN, IF MINOR CHILD IS PROPOSED LIFE INSURED EX-99.(A)(10)(B) 6 FORM OF SUPPLEMMENT TO APPLICATION 1 Exhibit (A)(10)(b) [LOGO] MANULIFE FINANCIAL THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK Application Supplement for Investment Allocation and Investor Suitability THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK (hereinafter referred to as The Company) REQUIRED WITH ALL APPLICATIONS FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE. PLEASE PRINT AND USE BLACK INK. ANY CHANGES MUST BE INITIALLED BY THE OWNER. A SIGNATURE IS REQUIRED ON THE REVERSE SIDE. THIS FORM IS TO BE USED AT THE TIME OF INITIAL APPLICATION ONLY. PLEASE USE INVESTMENT OPTION CHANGES FORM (IM5085CF) FOR CHANGES AFTER THE POLICY HAS BEEN ISSUED. This Application Supplement is deemed to be part of Application No. ____________ Policy No.: ____________ Name of Proposed Life Insured _________________________ (Same as shown on the Application for Flexible Premium Variable Life Insurance) - -------------------------------------------------------------------------------- INVESTMENT ALLOCATION OF NEW PREMIUMS - -------------------------------------------------------------------------------- Choose one or more of the accounts listed below by indicating percentages of net premium. There are no minimum percentages, but allocation percentages must be whole numbers. TOTAL MUST BE 100%.
VARIABLE ACCOUNTS AGGRESSIVE GROWTH PORTFOLIOS BALANCED PORTFOLIOS / / Pacific Rim Emerging Markets Trust ________% / / Balanced Trust ________% / / Science & Technology Trust ________% Automatic Asset Allocation Trusts: / / International Small Cap Trust ________% / / Aggressive ________% / / Emerging Growth Trust ________% / / Moderate ________% / / Pilgrim Baxter Growth Trust ________% / / Conservative ________% / / Small/Mid Cap Trust ________% / / International Stock Trust ________% BOND PORTFOLIOS: / / High Yield Trust ________% GROWTH PORTFOLIOS: / / Strategic Bond Trust ________% / / Worldwide Growth Trust ________% / / Global Government Bond Trust ________% / / Global Equity Trust ________% / / Capital Growth Bond Trust ________% / / Small Company Value Trust ________% / / Investment Quality Bond Trust ________% / / Equity Trust ________% / / U.S. Government Securities Trust ________% / / Growth Trust ________% / / Quantitative Equity Trust ________% MONEY MARKET PORTFOLIO: / / Equity Index Trust ________% / / Money Market Trust ________% / / Blue Chip Growth Trust ________% / / Real Estate Securities Trust ________% LIFESTYLE PORTFOLIOS: / / Lifestyle Aggressive 1000 Trust ________% GROWTH & INCOME PORTFOLIOS: / / Lifestyle Growth 820 Trust ________% / / Value Trust ________% / / Lifestyle Balanced 640 Trust ________% / / International Growth and Income Trust ________% / / Lifestyle Moderate 460 Trust ________% / / Growth and Income Trust ________% / / Lifestyle Conservative 280 Trust ________% / / Equity-Income Trust ________% GUARANTEED ACCOUNT / / Guaranteed Interest Account _________% NOTE: The maximum amount that may be transferred from the Guaranteed Interest Account (GIA) in any one policy year is the greater of $500 or 15% of the GIA value at the previous policy anniversary. (See Over)
- -------------------------------------------------------------------------------- Page 1 of 2 [BAR CODE] Manulife Financial and the block design are registered service marks of The Manufacturers Life Insurance Company and are used by it and its subsidiaries. 2 - ------------------------------------------------------------------------------- INVESTOR SUITABILITY - ------------------------------------------------------------------------------- THESE QUESTIONS APPLY TO THE OWNER OF THE POLICY. ALL QUESTIONS MUST BE ANSWERED. Yes No 1. Have you received a current prospectus for the policy applied for? ............. / / / / Date of prospectus __________________ Date of supplement _______________________ 2. DO YOU UNDERSTAND THAT UNDER THE POLICY APPLIED FOR: (a) THE AMOUNT OF THE INSURANCE BENEFITS, OR THE DURATION OF THE INSURANCE COVERAGE, OR BOTH, MAY BE VARIABLE OR FIXED?................................. / / / / (b) THE AMOUNT OF THE INSURANCE BENEFITS, THE DURATION OF THE INSURANCE COVERAGE, AND YOUR POLICY VALUE, MAY INCREASE OR DECREASE DEPENDING ON THE INVESTMENT EXPERIENCE OF THE CHOSEN INVESTMENT ACCOUNTS AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT? .............................................................. / / / / 3. With that in mind, is the policy in accord with your insurance objectives and your anticipated financial needs? ............................................... / / / / 4. PURPOSE OF INSURANCE PERSONAL: / / Estate creation / / Estate conservation BUSINESS: / / Buy-sell / / Deferred compensation / / Keyman / / Pension trust / / Other: ____________________________________________________________________________ ___________________________________________________________________________________ 5. ANNUAL INCOME OF OWNER / / $ 250,000 plus / / $ 35,000 to $ 49,999 / / $ 15,000 to $ 19,999 / / $ 100,000 to $ 249,999 / / $ 25,000 to $ 34,999 / / $ 10,000 to $ 14,999 / / $ 50,000 to $ 99,999 / / $ 20,000 to $ 24,999 / / Under $10,000 6. NET WORTH OF OWNER / / $ 1,000,000 plus / / $ 100,000 to $ 249,999 / / $ 500,000 to $ 999,999 / / Under $100,000 / / $ 250,000 to $ 499,999 - ------------------------------------------------------------------------------- SIGNATURES - ------------------------------------------------------------------------------- Signed at __________________________________________ this _______ day of _______________ ________________ City/State Month Year (X) (X) ____________________________________________________ ______________________________________________________ WITNESS (REGISTERED REPRESENTATIVE) SIGNATURE OF OWNER (X) (X) ____________________________________________________ ______________________________________________________ NAME OF REGISTERED REPRESENTATIVE (PRINT NAME) ALL REGISTERED REPRESENTATIVES SHARING COMMISSIONS MUST SIGN THIS FORM.
- ------------------------------------------------------------------------------- TELEPHONE TRANSFER/ALLOCATION CHANGE AUTHORIZATION - ------------------------------------------------------------------------------- I UNDERSTAND AND AGREE THAT: Telephone transfers and allocation changes will be subject to the conditions of the policy, the administrative requirements, The Company, and the provisions of the policy's prospectus. The Company, its agents, representatives or employees who act on its behalf will not be subject to any claim, liability, loss, expense or cost if it acted upon telephone instructions it reasonably believes to be genuine in reliance on this signed authorization. The Company will employ reasonable procedures to confirm the instructions communicated by telephone are genuine. Such procedures shall consist of confirming a valid telephone authorization form is on file, tape recording conversations, and providing written confirmation thereof. The Company, at its option alone and without prior or subsequent notice to the Owner, or any other person or representative of the Owner, may record all or part of any telephone conversation containing telephone transfer and/or allocation change instructions. All terms of authorization are binding upon the agents, heirs and assignees of the Owner. This Telephone Transfer/Allocation Change Authorization will be effective until such time as: (a) written revocation is received by the Company's Service Office, or (b) The Company discontinues this privilege, whichever occurs first. PLEASE CHECK (X) ONLY ONE BOX: / / I authorize The Company to accept telephone instructions from me or any co-owner. / / I authorize The Company to accept telephone instructions from me, any co-owner, or our registered representative. (Registered Representatives should contact their broker/dealer for procedures regarding this authorization). (X) (X) ____________________________________________________ ______________________________________________________ DATE (MMM/DD/YYYY) SIGNATURE OF OWNER(S)
- ------------------------------------------------------------------------------- Page 2 of 2 EX-99.2A 7 OPINION AND CONSENT OF TRACY A. KANE 1 Exhibit 2A The Manufacturers Life Insurance Company of New York Corporate Center at Rye 555 Theodore Fremd Avenue Rye, New York 10580 March 13, 1998 To whom it may concern, This opinion is written in reference to the flexible premium variable life insurance policy (the "Policy") to be issued by The Manufacturers Life Insurance Company of New York, a New York corporation (the "Company"), with respect to the variable portion of which a Registration Statement on Form S-6 (the "Registration Statement") is being filed under the Securities Act of 1933, as amended (the"Act"). As Counsel to the Company, I have examined such records and documents and reviewed such question of law as I deemed necessary for purposes of this opinion. 1. The Company has been duly incorporated under the laws of the state of New York and is a validly existing corporation. 2. The Manufacturers Life Insurance Company of New York Separate Account B (the "Variable Life Account") is a separate account of the Company and is duly created and validly existing pursuant to Article 42, Section 4240 of the New York Insurance Laws. 3. The portion of the assets to be held in the Variable Life Account equal to the reserves and other liabilities under the Policy is not chargeable with liabilities arising out of any other business the Company may conduct. 4. The Policy, when issued in accordance with the prospectus contained in the effective Registration Statement and upon compliance with applicable local law, will be legal and binding obligations of the Company. I consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement and to the reference to my name in the prospectus included as part of this Registration Statement on Form S-6. Very truly yours, /s/ TRACY A. KANE Tracy A. Kane Secretary and Counsel EX-99.2B 8 CONSENT OF JOHN G. VRYSEN 1 Exhibit 2B The Manufacturers Life Insurance Company of New York Corporate Center at Rye 555 Theodore Fremd Avenue Rye, New York 10580 March 13, 1998 Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549 Re: Actuarial Opinion on Illustrations in Registration Statement Dear Sirs: This opinion is furnished in connection with the registration statement under the Securities Act of 1933, as amended, of a flexible premium variable life insurance policy (the "Policy") that will be offered and sold by The Manufacturers Life Insurance Company of New York (the "Company"). The hypothetical illustrations of death benefits, contract values and surrender values used in this registration statement 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 contract is sold. I hereby consent to the use of this opinion as an exhibit to the Securities Act Registration Statement on Form S-6. Sincerely, /s/ John G. Vrysen John G. Vrysen Chief Actuary EX-99.2C 9 CONSENT OF JONES & BLOUCH LLP 1 Jones & Blouch L.L.P. 1025 Thomas Jefferson Street, N.W. Washington, DC 20007 (202)223-3500 March 13, 1998 The Board of Directors The Manufacturers Life Insurance Company of New York Corporate Center at Rye 555 Theodore Fremd Avenue Rye, NY 10580 Dear Sirs: We hereby consent to the reference to this firm under the caption "Legal Matters" in the prospectus contained in pre-effective amendment No. 1 to the registration statement on Form S-6 of The Manufacturers Life Insurance Company of New York Separate Account B, File No. 333-33351, to be filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933. Very truly yours, /s/ Jones & Blouch L.L.P. Jones & Blouch L.L.P. EX-99.2D 10 CONSENT OF ERNST & YOUNG LLP 1 Exhibit 2D CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated February 18, 1998 with respect to the financial statements of The Manufacturers Life Insurance Company of New York, in Pre-Effective Amendment No. 1 to the Registration Statement (form S-6 File No. 333-33351) and in the prospectus of The Manufacturers Life Insurance Company of New York Separate Account B. Ernst & Young LLP Boston, Massachusetts March 12, 1998 EX-99.2E 11 CONSENT OF COOPERS & LYBRAND LLP 1 Exhibit 2E CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in the Registration Statement under the Securities Act of 1933 on Form S-6 (File No. 333-33351) of our report which includes an explanatory paragraph, regarding the adoption of Financial Accounting Standards Board Interpretation No. 40 and Statement of Financial Accounting Standards No. 120, dated January 22, 1998 on our audit of the financial statements of The Manufacturers Life Insurance Company of New York (formerly First North American Life Assurance Company). We also consent to the reference to our firm under the caption "Experts." COOPERS & LYBRAND L.L.P. Boston Massachusetts March 13, 1998 EX-99.7 12 POWERS OF ATTORNEY 1 Exhibit 7 POWER OF ATTORNEY We, the undersigned Directors of The Manufacturers Life Insurance Company of New York (the "Company"), do hereby constitute and appoint John D. Richardson, A. Scott Logan, John G. Vrysen, David Libbey, Stephanie Elliman or Tracy Anne Kane, or any of them, our true and lawful attorneys to sign or execute (i) registration statements and reports and other filings to be filed with the Securities and Exchange Commission ("SEC") under the Securities Act of 1933, as amended (the "1933 Act") and/or the Investment Company Act of 1940, as amended (the "1940 Act") and (ii) reports and other filings to be filed with the SEC (or any other regulatory entity) pursuant to the Securities Exchange Act of 1934 (the "1934 Act") and to do any and all acts and things and to sign or execute any and all instruments for me, in my name, in the capacities indicated below, which said attorney, may deem necessary or advisable to enable the Company to comply with the 1933 Act, the 1940 Act and the 1934 Act, and any rules, regulations and requirements of the SEC, in connection with such registration statements, reports and filings made under the 1933 Act, the 1940 Act and the 1934 Act, including specifically, but without limitation, power and authority to sign or execute for me, in my name, and in the capacities indicated below, (i) any and all amendments (including post-effective amendments) to such registration statements and (ii) Form 10-Ks and Form 10-Qs filed under the 1934 Act; and I do hereby ratify and confirm all that the said attorneys, or any of them, shall do or cause to be done by virtue of this power of attorney. This Power of Attorney is intended to supersede any and all prior Power of Attorneys in connection with the above mentioned acts. Executed below by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ JOHN D. RICHARDSON Chairman of the 2/26/98 - ----------------------------- Board of Directors John D. Richardson /s/ A. SCOTT LOGAN Director; President 2/26/98 - ----------------------------- A. Scott Logan /s/ JOHN D. DESPREZ, III Director 2/26/98 - ----------------------------- John D. DesPrez, III /s/ THEODORE KILKUSKIE Director 2/26/98 - ----------------------------- Theodore Kilkuskie
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SIGNATURE TITLE DATE - --------- ----- ---- /s/ H. BRUCE GORDON Director 2/26/98 - ----------------------------- H. Bruce Gordon /s/ RUTH ANN FLEMING Director 2/26/98 - ----------------------------- Ruth Ann Fleming /s/ NEIL M. MERKL Director 2/26/98 - ----------------------------- Neil M. Merkl /s/ ROBERT C. PEREZ Director 2/26/98 - ----------------------------- Robert C. Perez /s/ JAMES K. ROBINSON Director 2/26/98 - ----------------------------- James K. Robinson /s/ BRUCE AVEDON Director 2/26/98 - ----------------------------- Bruce Avedon
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