-----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, LDhmKl5+7eNup07xK8X+EGbmJUXO/MSggyDynYac8LCfZiE1zGCwD8QexjdTrZ/M 9Z0N/5V+vFam+2ZyGDEeWA== 0000906287-95-000075.txt : 19951215 0000906287-95-000075.hdr.sgml : 19951215 ACCESSION NUMBER: 0000906287-95-000075 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19951214 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INS CO OF AM CENTRAL INDEX KEY: 0000813572 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 232030787 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-13774 FILM NUMBER: 95601656 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-05130 FILM NUMBER: 95601657 BUSINESS ADDRESS: STREET 1: 200 BLOOR STREET EAST NT 10 STREET 2: TORONTO M4W 1EF CITY: ONTARIO CANADA STATE: A6 BUSINESS PHONE: 4169266302 MAIL ADDRESS: STREET 1: P O BOX 600 CITY: BUFFALO STATE: NY ZIP: 14201-0600 485APOS 1 Registration No. 33-13774 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-6 POST-EFFECTIVE AMENDMENT NO. 19 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF l933 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA (Exact name of trust) THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA (Name of depositor) 500 N. Woodward Avenue Bloomfield Hills, Michigan 48304 (Address of depositor's principal executive offices) STEPHEN C. NESBITT Secretary and General Counsel Notice to: The Manufacturers Life J. Sumner Jones, Esq. Insurance Company of America Jones & Blouch 500 N. Woodward Avenue 1025 Thomas Jefferson St., N.W. Bloomfield Hills, Michican 48304 Washington, D.C. 20007 (Name and Address of Agent for Service) It is proposed that this filing will become effective: ___ immediately upon filing pursuant to paragraph (b) of Rule 485 ___ on February 14, 1996 pursuant to paragraph (b) of Rule 485 ___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485 _x_ on February 14, 1996 pursuant to paragraph (a)(1) of Rule 485 ___ 75 days after filing pursuant to paragraph (a)(2) of Rule 485 Registrant has registered, pursuant to Rule 24f-2 under the Investment Company Act of 1940, an indefinite number of individual variable annuity contracts for sale under the Securities Act of 1933 and filed a Rule 24f-2 notice on February 28, 1995 for its its fiscal year ended December 31, 1994. SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA Registration Statement on Form S-6 Cross-Reference Sheet Form N-8B-2 Item No. Caption in Prospectus 1 ----- Cover Page; General Information About Manufacturers Life of America, Separate Account Four, Manulife Series Fund and NASL Series Trust (What Is Manufacturers Life of America's Separate Account Four?) 2 ----- Cover Page; General Information About Manufacturers Life of America, Separate Account Four, Manulife Series Fund and NASL Series Trust (Who Are Manufacturers Life Of America And Manufacturers Life?) 3 ----- * 4 ----- Other Matters (Who Sells The Policies And What Are The Sales Commissions?) 5 ----- General Information About Manufacturers Life Of America, Separate Account Four, Manulife Series Fund and NASL Series Trust (What Is Manufacturers Life of America's Separate Account Four?) 6 ----- General Information About Manufacturers Life of America, Separate Account Four, Manulife Series Fund and NASL Series Trust (What Is Manufacturers Life of America's Separate Account Four?) 7 ----- * 8 ----- * 9 ----- Other Matters (Is There Any Litigation Pending?) 10 ----- Detailed Information About The Policies 11 ----- General Information About Manufacturers Life Of America, Separate Account Four, Manulife Series Fund and NASL Series Trust (What Is Manulife Series Fund, Inc.?) 12 ----- General Information About Manufacturers Life Of America, Separate Account Four, Manulife Series Fund and NASL Series Trust (What Are Manulife Series Fund and NASL Series Trust?) - 3 - Form N-8B-2 Item No. Caption in Prospectus 13 ----- Detailed Information About The Policies (Charges) 14 ----- Detailed Information About the Policies (Premium Provisions -- What Are the Requirements and Procedures for Issuance of a Policy?); Other Matters (What Responsibilities Has Manufacturers Life Assumed?) 15 ----- Detailed Information About The Policies (Premium Provisions -- What Are the Requirements and Procedures for Issuance of a Policy?) 16 ----- ** 17 ----- Detailed Information About The Policies (Policy Values -- How May a Policyowner Obtain the Net Cash Surrender Value?; Other Provisions -- When Are Proceeds Paid?) 18 ----- General Information About Manufacturers Life Of America, Separate Account Four, Manulife Series Fund, and NASL Series Trust 19 ----- Detailed Information About The Policies (Other Provisions -- What Reports Will Be Sent To Policyowners?); Other Matters (What Responsibilities Has Manufacturers Life Assumed?) 20 ----- * 21 ----- Detailed Information About The Policies 22 ----- * 23 ----- ** 24 ----- Detailed Information About the Policies (Other Provisions -- What Are The Other General Policy Provisions?) 25 ----- General Information About Manufacturers Life Of America, Separate Account Four, Manulife Series Fund and NASL Series Trust (Who Are Manufacturers Life Of America And Manufacturers Life?) 26 ----- * 27 ----- ** * Omitted since answer is negative or item is not applicable. ** Omitted. - 4 - Form N-8B-2 Item No. Caption in Prospectus 28 ----- Other Matters (Who Are The Directors And Officers Of Manufacturers Life Of America?) 29 ----- General Information About Manufacturers Life Of America, Separate Account Four, Manulife Series Fund and NASL Series Trust (Who Are Manufacturers Life Of America And Manufacturers Life?) 30 ----- * 31 ----- * 32 ----- * 33 ----- * 34 ----- * 35 ----- ** 36 ----- * 37 ----- * 38 ----- Other Matters (Who Sells The Policies And What Are The Sales Commissions?; What Responsibilities Has Manufacturers Life Assumed?) 39 ----- Other Matters (Who Sells The Policies And What Are The Sales Commissions?) 40 ----- * 41 ----- ** 42 ----- * 43 ----- * 44 ----- Detailed Information About The Policies (Policy Values -- What Is the Policy Value and How Is It Determined?) 45 ----- * 46 ----- Detailed Information About The Policies (Policy Values -- How May a Policyowner Obtain the Net Cash Surrender Value?; Other Provisions -- When Are Proceeds Paid?) 47 ----- General Information About Manufacturers Life Of America, Separate Account Four, Manulife Series Fund and NASL Series Trust (What Are Manulife Series Fund and NASL Series Trust?) 48 ----- * 49 ----- * * Omitted since answer is negative or item is not applicable. ** Omitted. - 5 - Form N-8B-2 Item No. Caption in Prospectus 50 ----- General Information About Manufacturers Life Of America, Separate Account Four, Manulife Series Fund and NASL Series Trust (What Is Manufacturers Life Of America's Separate Account Four?) 51 ----- Detailed Information About The Policies 52 ----- Detailed Information About The Policies (Other Provisions -- Under What Circumstances May Fund Shares Be Substituted?) 53 ----- ** 54 ----- * 55 ----- * 56 ----- * 57 ----- * 58 ----- * 59 ----- Financial Statements * Omitted since answer is negative or item is not applicable. ** Omitted. - 6 - PART I PROSPECTUS - 7 - Prospectus for Flexible Premium Variable Life Insurance Issued by The Manufacturers Life Insurance Company of America - 8 - Prospectus The Manufacturers Life Insurance Company of America Separate Account Four Flexible Premium Variable Life Insurance Policy This prospectus describes the flexible premium variable life insurance policy (the "Policy") issued by The Manufacturers Life Insurance Company of America ("Manufacturers Life of America" or the "Company"), a stock life insurance company that is an indirect wholly-owned subsidiary of The Manufacturers Life Insurance Company ("Manufacturers Life"). The Policies are designed to provide lifetime insurance protection together with flexibility as to the timing and amount of premium payments, the investments underlying the Policy Value and the amount of insurance coverage. This flexibility allows the policyowner to pay premiums and adjust insurance coverage in light of his or her current financial circumstances and insurance needs. The Policies provide for: (1) a Net Cash Surrender Value that can be obtained by surrendering the Policy; (2) policy loans; and (3) an insurance benefit payable at the life insured's death. As long as a Policy remains in force, the death benefit will not be less than the current face amount of the Policy. A Policy's Policy Value may be accumulated on a fixed basis or vary with the investment performance of the sub-accounts of Manufacturers Life of America's Separate Account Four (the "Separate Account") to which the policyowner allocates net premiums. The assets of each sub-account will be used to purchase shares of a particular investment portfolio ( a "Portfolio") of Manulife Series Fund, Inc. ("Manulife Series Fund") or NASL Series Trust. The accompanying prospectuses for Manulife Series Fund and NASL Series Trust, and the corresponding statements of additional information, describe the investment objectives of the Portfolios in which net premiums may be invested. The Portfolios available for allocation of net premiums are the following Portfolios of Manulife Series Fund: the Emerging Growth Equity Fund, the Balanced Assets Fund, the Capital Growth Bond Fund, the Money-Market Fund, the Common Stock Fund, the Real Estate Securities Fund, the International Fund, the Pacific Rim Emerging Markets Fund, and, subject to regulatory approval, the Equity Index Fund (collectively the "Manulife Funds") and the following Portfolios of NASL Series Trust: the Value Equity Trust, the U.S. Government Securities Trust, the Growth and Income Trust, the Equity Trust, the Conservative Asset Allocation Trust, the Moderate Asset Allocation Trust and the Aggressive Asset Allocation Trust (collectively the "NASL - 9 - Trusts"). Other sub-accounts and Portfolios may be added in the future. Prospective purchasers should note that it may not be advisable to purchase a Policy as a replacement for existing insurance. Because of the substantial nature of the surrender charges, the Policy is not suitable for short-term investment purposes. A policyowner contemplating surrender of a Policy should pay special attention to the refund rights described in this prospectus, which are available only during the first two years following issuance of the Policy or following an increase in face amount. Also, policyowners should note that their Policy could be a modified endowment contract under federal tax law and any policy loan or surrender may result in adverse tax consequences and a penalty. PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT IS VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS FOR MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The Manufacturers Life Insurance Company of America 500 North Woodward Avenue, Bloomfield Hills, Michigan 48304 Service Office: 200 Bloor Street East Toronto, Ontario, Canada M4W 1E5 TELEPHONE: 1 (800) 827-4546 1 (800) VARILIN(E) The date of this Prospectus is February 14, 1996. - 10 - Prospectus Contents Page Definitions Introduction To Policies General Information About Manufacturers Life of America, Separate Account Four, Manulife Series Fund and NASL Series Trust Who Are Manufacturers Life of America And Manufacturers Life? What Is Manufacturers Life of America's Separate Account Four? What Are Manulife Series Fund And NASL Series Trust? What Are The Investment Objectives Of The Portfolios? Detailed Information About The Policies PREMIUM PROVISIONS What Are The Requirements And Procedures For Issuance Of A Policy? What Limitations Apply To Premium Amounts? Is There A Death Benefit Guarantee? When Does A Policy Go Into Default? How Can A Terminated Policy Be Reinstated? How May Net Premiums Be Invested? Is There A Short-Term Cancellation Right, Or "Free Look"? What Are The Conversion Privileges Of The Policy? INSURANCE BENEFIT What Is The Insurance Benefit? What Death Benefit Options Are Available? Can The Death Benefit Option Be Changed? Can The Face Amount Of A Policy Be Changed? POLICY VALUES What Is The Policy Value And How Is It Determined? Transfers Of Policy Value What Are The Provisions Governing Policy Loans? How May A Policyowner Obtain The Net Cash Surrender Value? CHARGES What Deductions Are Made From Premiums? What Are The Surrender Charges? What Are The Monthly Deductions? Are There Special Provisions For Group Or Sponsored Arrangements? Are There Special Provisions For Exchanges? - 11 - Page What Are The Risk Charges Assessed Against Separate Account Assets? Are There Other Relevant Charges? THE GENERAL ACCOUNT What Is The General Account? OTHER PROVISIONS What Supplementary Benefits Are Available? Under What Circumstances May Fund Shares Be Substituted? What Are The Other General Policy Provisions? When Are Proceeds Paid? What Reports Will Be Sent To Policyowners? Other Matters What Is The Federal Tax Treatment Of The Policies? Tax Status Of The Policy What Is The Tax Treatment Of Policy Benefits? What Are The Company's Tax Considerations? Who Sells The Policies And What Are The Sales Commissions? What Responsibilities Has Manufacturers Life Assumed? What Are The Voting Rights? Who Are The Directors And Officers Of Manufacturers Life of America? What State Regulations Apply? Is There Any Litigation Pending? Where Can Further Information Be Found? Legal Considerations Legal Matters Experts Financial Statements Appendix What Are Some Illustrations Of Policy Values, Cash Surrender Values And Death Benefits? THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE PROSPECTUS OF MANULIFE SERIES FUND OR NASL SERIES TRUST, OR THE STATEMENT OF ADDITIONAL INFORMATION OF MANULIFE SERIES FUND OR NASL SERIES TRUST. You are urged to examine this prospectus carefully. The INTRODUCTION TO POLICIES will briefly describe the Flexible Premium Variable Life Insurance Policy. More detailed information will be found further in the prospectus. - 12 - Definitions Business Day-any day that the net asset value of the underlying shares of a sub-account of the Separate Account is determined. Cash Surrender Value-the Policy Value less the deferred sales charge, the deferred underwriting charge and any outstanding monthly deductions due. Guaranteed Interest Account-that part of the Policy Value which reflects the value the policyowner has in the general account of Manufacturers Life of America. Investment Account-that part of the Policy Value which reflects the value the policyowner has in one of the sub-accounts of the Separate Account. Loan Account-that part of the Policy Value which reflects policy loans and interest credited to the Policy Value in connection with such loans. Modified Policy Debt-as of any date the Policy Debt plus the amount of interest to be charged to the next policy anniversary, all discounted from the next policy anniversary to such date at an annual rate of 4%. Net Cash Surrender Value-the Cash Surrender Value less the value in the Loan Account. Net Policy Value-the Policy Value less the value in the Loan Account. Policy Debt-as of any date the aggregate amount of policy loans, including borrowed interest, less any loan repayments. Policy Value-the sum of the values in the Loan Account, the Guaranteed Interest Account and the Investment Accounts. Service Office-the office we designate to service the Policies, which is shown on the cover page of this prospectus. Target Premium-a premium amount used to measure the maximum deferred sales charge under a Policy. The Target Premium for the initial face amount is set forth in the Policy. The policyowner will be advised of the Target Premium for any increase in face amount. Withdrawal Tier Amount-as of any date the product of the Net Cash Surrender Value at the previous policy anniversary multiplied by 10%. - 13 - Introduction To Policies The following summary is intended to provide a general description of the most important features of the Policy. It is not comprehensive and is qualified in its entirety by the more detailed information contained in this prospectus. Unless otherwise indicated or required by the context, the discussion throughout this prospectus assumes that the Policy has not gone into default, there is no outstanding Policy Debt and the death benefit is not determined by the corridor percentage test. General. The Policy provides a death benefit in the event of the death of the life insured. There are two death benefit options. The policyowner may change death benefit options and may increase or decrease the face amount of the Policy. Premium payments may be made at any time and in any amount, subject to certain limitations. After certain deductions, premiums will be allocated, according to the policyowner's instructions, to one or more of the general account and the sub-accounts of Manufacturers Life of America's Separate Account Four. Assets of the sub-accounts of Separate Account Four are invested in shares of a particular Portfolio of Manulife Series Fund or NASL Series Trust. Allocation instructions may be changed at any time and transfers among the accounts may be made. The Manulife Funds currently offered are the: Emerging Growth Equity Fund, Common Stock Fund, Real Estate Securities Fund, Balanced Assets Fund, Capital Growth Bond Fund, Money-Market Fund, International Fund, Pacific Rim Emerging Markets Fund, and, subject to regulatory approval, the Equity Index Fund. The NASL Trusts currently offered are the: Value Equity Trust, U.S. Government Securities Trust, Growth and Income Trust, Equity Trust, Conservative Asset Allocation Trust, Moderate Asset Allocation Trust and Aggressive Asset Allocation Trust. The Policy has a Policy Value reflecting premiums paid, certain charges for expenses and cost of insurance, and the investment performance of the accounts to which the policyowner has allocated premiums. The policyowner may obtain a portion of the Policy Value by taking a policy loan or a partial withdrawal, or by full surrender of the Policy. Death Benefit. Death Benefit Options. The policyowner elects to have the Policy's death benefit determined under one of two options: - 14 - . a death benefit equal to the face amount of the Policy, and . a death benefit equal to the face amount of the Policy plus the Policy Value. Under either option, the death benefit may be increased to a multiple of the Policy Value to satisfy the corridor percentage test under the definition of life insurance in the Internal Revenue Code. (See Detailed Information About The Policies: Insurance Benefit "What Is The Insurance Benefit?" and "What Death Benefit Options Are Available?") The Policyowner May Change The Death Benefit Option. A change in the death benefit option may be requested after the Policy has been in force for two years. A change in death benefit option will be effective on a policy anniversary. (See Detailed Information About The Policies; Insurance Benefit "Can The Death Benefit Option Be Changed?") The Policyowner May Increase The Face Amount. After the Policy has been in force for one year, an increase in the face amount of the Policy may be requested once per policy year. An increase in the face amount is subject to satisfactory evidence of insurability and will usually result in the Policy's being subject to new surrender charges. (See Detailed Information About The Policies; Insurance Benefit "Can The Face Amount Of A Policy Be Changed?") The Policyowner May Decrease The Face Amount. A decrease in the face amount may be requested after the Policy has been in force for one year, except during the one-year period following any increase in face amount. In addition, during the two-year period following an increase in face amount, the policyowner may elect at any time to cancel the increase and have the deferred sales charge for the increase reduced by the refund of any excess sales load attributable to the increase. A decrease in face amount will be effective only on a policy anniversary and may result in certain surrender charges being deducted from the Policy Value. (See Detailed Information About The Policies; Insurance Benefit "Can The Face Amount Of A Policy Be Changed?") Premium Payments Are Flexible. The policyowner may pay premiums at any time and in any amount, subject to certain limitations. (See Detailed Information About The Policies; Premium Provisions "What Are The Requirements And Procedures For Issuance Of A Policy?" and "What Limitations Apply To Premium Amounts?") - 15 - In the first two policy years the policyowner must pay a minimum premium to keep the Policy in force. (See Detailed Information About The Policies; Premium Provisions "What Limitations Apply To Premium Amounts?" and "Is There A Death Benefit Guarantee?") After the second policy year there is no minimum premium required; however, by complying with the minimum premium schedule for the Policy, the policyowner can ensure the Policy will not go into default prior to the life insured's reaching age 70. (See Detailed Information About The Policies; Premium Provisions "Is There A Death Benefit Guarantee?") Certain maximum premium limitations apply to the Policy, ensuring the Policy qualifies as life insurance under rules defined in the Internal Revenue Code. (See Detailed Information About The Policies; Premium Provisions "What Limitations Apply To Premium Amounts?") Summary of Charges And Deductions. Charges under the Policy are assessed as: (1) deductions from premiums . 3% sales charge . 2% state premium tax (2) surrender charges upon surrender, partial withdrawal, decrease in face amount or lapse . deferred underwriting charge of $2-$6 for each $1,000 of face amount . deferred sales charge of up to 47% of two Target Premiums (3) monthly deductions . administration charge of $6 . cost of insurance charge (including $1 per $1,000 of face amount for policies less than $25,000) . supplementary benefits charge (4) Certain transfers . a Dollar Cost Averaging transfer charge of $5 when Policy Value does not exceed $15,000 . an Asset Allocation Balancer transfer charge of $15 (5) Separate Account charges . mortality and expense risk charge of .65% per annum assessed daily against the value of the Separate Account assets (6) Other Charges For the Manulife Funds: - 16 - . investment management fee of .50% per annum assessed against the assets of the Emerging Growth Equity Fund, Common Stock Fund, Real Estate Securities Fund, Balanced Assets Fund, Capital Growth Bond Fund and Money-Market Fund . investment management fee of (i) .85% per annum assessed against the first $100 million of assets and (ii) .70% per annum assessed against the assets over $100 million of each of the International Fund and the Pacific Rim Emerging Markets Fund . investment management fee of .25% per assum assessed against the assets of the Equity Index Fund . expenses of up to .50% and .65% per annum assessed against the assets of the International Fund and the Pacific Rim Emerging Markets Fund, respectively . expenses of up to .15% per annum assessed against the assets of the Equity Index Fund For the NASL Trusts: . investment management fee of .800% assessed against the assets of the Value Equity Trust . investment management fee of .650% assessed against the assets of the U.S. Government Securities Trust . investment management fee of .750% assessed against the assets of the Growth and Income Trust . investment management fee of .750% assessed against the assets of the Equity Trust . investment management fee of .750% assessed against the assets of the Conservative Asset Allocation Trust . investment management fee of .750% assessed against the assets of the Moderate Asset Allocation Trust . investment management fee of .750% assessed against the assets of the Conservative Asset Allocation Trust . expenses of up to .50% assessed against the assets of the NASL Trusts. For a complete discussion of charges and deductions see the heading Charges And Deductions in this Introduction and the references therein. Investment Options. After deductions for sales charges of 3% and state premium taxes of 2%, net premiums will be allocated, according to the policyowner's instructions, to any combination of the general account or one or more of the sub-accounts of Manufacturers Life of America's Separate Account Four. Each of the sub-accounts of Separate Account Four invests its assets in the shares of one of the following: - 17 - For the Manulife Funds: . Emerging Growth Equity Fund . Balanced Assets Fund . Capital Growth Bond Fund . Money-Market Fund . Common Stock Fund . Real Estate Securities Fund . International Fund . Pacific Rim Emerging Markets Fund . subject to regulatory approval, Equity Index Fund For the NASL Trusts: . Value Equity Trust . U.S. Government Securities Trust . Growth and Income Trust . Equity Trust . Conservative Asset Allocation Trust . Moderate Asset Allocation Trust . Aggressive Asset Allocation Trust The policyowner may change the allocation of net premiums among the general account and the sub-accounts at any time. (See General Information About Manufacturers Life of America, Separate Account Four, Manulife Series Fund And Nasl Series Trust and Detailed Information About The Policies; Premium Provisions "How May Net Premiums Be Invested?" and Policy Values "What Is The Policy Value And How Is It Determined?") The Policy Value. The Policy has a Policy Value which reflects the following: premium payments made; deduction of charges described under "Charges And Deductions" below; investment performance of the sub-accounts to which amounts have been allocated; and interest credited by the Company to amounts allocated to the general account. The Policy Value is the sum of the values in the Investment Accounts, the Guaranteed Interest Account and the Loan Account. Investment Account. An Investment Account is established under the Policy for each sub-account of the Separate Account to which net premiums or transfer amounts have been allocated. An Investment Account measures the interest of the Policy in the corresponding sub-account. The value of each Investment Account under the Policy varies each Business Day and reflects the investment performance of the Portfolio shares held in the corresponding sub-account. - 18 - (See Detailed Information About The Policies; Policy Values "What Is The Policy Value And How Is It Determined?") Guaranteed Interest Account. The Guaranteed Interest Account consists of that portion of the Policy Value based on net premiums allocated to and amounts transferred to the general account of the Company. Manufacturers Life of America credits interest on amounts in the Guaranteed Interest Account at an effective annual rate guaranteed to be at least 4%. (See Detailed Information About The Policies; The General Account "What Is The General Account?") Loan Account. When a policy loan is made, Manufacturers Life of America will establish a Loan Account under the Policy and will transfer an amount from the Investment Accounts and the Guaranteed Interest Account to the Loan Account. The Company will credit interest to amounts in the Loan Account at an effective annual rate of at least 4%. The actual rate credited will be the rate charged on policy loans less an interest rate differential, which is currently 1.25%. Under certain conditions the Company will credit interest to a portion of the amounts in the Loan Account at an effective annual rate equal to the rate charged on policy loans less 0.50%. (See Detailed Information About The Policies; Policy Values "What Are The Provisions Governing Policy Loans?") Transfers Are Permitted. A policyowner may change the extent to which the Policy Value is based upon any specific sub-account of Separate Account Four or the Company's general account by requesting a transfer of a portion or all amounts in one account to another account. One transfer per policy month may be made. All transfer requests received at the same time are treated as a single transfer request. The minimum amount that may be transferred is the lesser of $500 or the entire account value. In addition transfers may be effected through the Dollar Cost Averaging or Asset Allocation Balancer transfer programs. Certain restrictions may apply to transfer requests. (See Detailed Information About The Policies; Policy Values "What Is The Policy Value And How Is It Determined?" (Transfer of Policy Value)) Using The Policy Value. - 19 - Borrowing Against The Policy Value. After the first policy anniversary, the policyowner may borrow against the Policy Value. The minimum loan amount is $500. Loan interest will be charged either on a fixed basis or on a variable basis. Interest on a fixed basis will be at an effective annual rate of 8%. Interest on a variable basis will be at an effective annual rate equal to the greater of 6% or the Moody's Corporate Bond Yield Average Monthly Average Corporates. (See Detailed Information About The Policies; Policy Values "What Are The Provisions Governing Policy Loans?") A Policyowner May Make A Partial Withdrawal Of The Policy Value. After a Policy has been in force for two years the policyowner may make a partial withdrawal of the Policy Value. The minimum withdrawal amount is $500. The policyowner may specify that the withdrawal is to be made from a specific Investment Account or the Guaranteed Interest Account. A partial withdrawal may result in a reduction in the face amount of the Policy. A partial withdrawal may also result in the assessment of a portion of the surrender charges to which the Policy is subject. (See Detailed Information About The Policies; Policy Values "How May A Policyowner Obtain The Net Cash Surrender Value?" and Charges "What Are The Surrender Charges?") The Policy May Be Surrendered For Its Net Cash Surrender Value. A Policy may be surrendered for its Net Cash Surrender Value at any time while the life insured is living. The Net Cash Surrender Value is equal to the Policy Value less surrender charges and outstanding monthly deductions due minus the value of the Loan Account. Surrender of a Policy within 15 years after policy issue or following an increase in the face amount will usually result in assessment of surrender charges. (See Detailed Information About The Policies; Policy Values "How May A Policyowner Obtain The Net Cash Surrender Value?" and Charges "What Are The Surrender Charges?") Charges And Deductions. Charges Made From Premium Payments. Two deductions are made when premiums are paid: . a sales charge of 3% of premium, and . a charge of 2% for state premium taxes. - 20 - The 3% sales charge and the deferred sales charge described below compensate the Company for some of the expenses of selling and distributing the Policies. (See Detailed Information About The Policies; Charges "What Deductions Are Made From Premiums?") A portion of the sales charge and the deferred sales charge may be subject to refund under certain circumstances. (See Detailed Information About The Policies; Charges "What Are The Surrender Charges?"; Refund Of Excess Sales Charges) Charges On Surrender. Manufacturers Life of America will usually deduct a deferred underwriting charge and a deferred sales charge if, during the 15 years following Policy issue or an increase in the face amount: . the Policy is surrendered for its Net Cash Surrender Value, . a partial withdrawal is made in excess of the Withdrawal Tier Amount, . a decrease in face amount is requested, or . the Policy lapses. The deferred underwriting charge ranges from $2.00 to $6.00 for each $1,000 of face amount depending on the age of the life insured. The charge is guaranteed not to exceed $1,000 for each level of coverage. The maximum deferred sales charge is 47% of premiums paid up to two Target Premiums. The full amount of charges will be in effect for up to five years following issue of the Policy. Beginning no later than the sixth year these charges grade downward each month over a 10-year period. In the event of a face amount increase, the charges applicable to the increase, which will be at the same rates that would apply if a Policy were issued to the life insured at his or her then attained age, will be in effect for up to five years following such increase and thereafter grade downward over a 10-year period. (See Detailed Information About The Policies; Charges "What Are The Surrender Charges?") Sales Charge Refund. If the Policy is surrendered at any time during the first two years following issuance or following an increase in face amount or if the increase is cancelled during the two-year period following the increase or face amount decreased during the second year after issuance or after increase in face amount, Manufacturers Life of America will - 21 - refund the difference, if any, between total sales charges deducted and the maximum sales charge allowable with respect to the Policy or the increase, as applicable. (See Detailed Information About The Policies; Charges "What Are The Surrender Charges?") If the Policy is surrendered after such two- year period, no refund will be available and the full amount of the surrender charge will apply. Monthly Charges. At the beginning of each month Manufacturers Life of America deducts from the Policy Value: . an administration charge of $6, . a charge for the cost of insurance (plus, if applicable, $1 per $1,000 of face amount for policies with a face amount of less than $25,000), and . a charge for any supplementary benefits added to the Policy. The cost of insurance charge varies based on the net amount at risk under the Policy and the applicable cost of insurance rate. Cost of insurance rates vary according to age, amount of coverage, duration of coverage, and sex and risk class of the life insured. The maximum cost of insurance rate that can be charged is guaranteed not to exceed the 1980 Commissioners Standard Ordinary Smoker/ Nonsmoker Mortality Tables. Currently, the cost of insurance rates assessed under the Policies are less than the maximum rates that can be charged. The cost of insurance charge will reflect any extra charges for additional ratings as indicated in the Policy. (See Detailed Information About The Policies; Charges "What Are The Monthly Deductions?") Charges For Certain Transfers. Charges will be imposed on certain transfers of Policy Values, including a $15 charge for each Asset Allocation Balancer transfer and a $5 charge for each Dollar Cost Averaging transfer when Policy Value does not exceed $15,000. See Policy Values "Transfers of Policy Value." Charges Assessed Against Assets Of The Separate Account. Manufacturers Life of America makes a daily charge to the Separate Account at an annual rate of .65% of the value of the Separate Account assets for the mortality and expense risks it assumes under the Policies. (See Detailed Information About The Policies; Charges "What Are The Risk Charges Assessed Against Separate Account Assets?") Other Charges. Manufacturers Life of America reserves the right to charge or establish a provision for any federal, state or local taxes that may be attributable to the Separate - 22 - Account or the operations of the Company with respect to the Policies. No such charge is currently made. Certain expenses are, or will be, assessed against the assets of Portfolios, as follows: For Manulife Series Fund: (1) an investment management fee of (1) .50% per annum assessed against the assets of the Emerging Growth Equity Fund, Common Stock Fund, Real Estate Securities Fund, Balanced Assets Fund, Capital Growth Bond Fund and Money-Market Fund; (2) an investment management fee of .85% per annum assessed against the first $100 million of assets and .70% per annum assessed against the assets over $100 million of each of the International Fund and the Pacific Rim Emerging Markets Fund, (3) an investment management fee of .25% per annum assessed against the assets of the Equity Index Fund, and (4) expenses of up to .50% and .65% per annum assessed against the assets of the International Fund and the Pacific Rim Emerging Markets Fund, respectively, and up to .15% per annum against the assets of the Equity Index Fund. (See Detailed Information About The Policies; Charges "Are There Other Relevant Charges?") For NASL Series Trust: (1) investment management fee of .800% assessed against the assets of the Value Equity Trust (2) investment management fee of .650% assessed against the assets of the U.S. Government Securities Trust (3) investment management fee of .750% assessed against the assets of the Growth and Income Trust (4) investment management fee of .750% assessed against the assets of the Equity Trust (5) investment management fee of .750% assessed against the assets of the Conservative Asset Allocation Trust (6) investment management fee of .750% assessed against the assets of the Moderate Asset Allocation Trust (7) investment management fee of .750% assessed against the assets of the Conservative Asset Allocation Trust (8) expenses of up to .50% assessed against the assets of each of the NASL Trusts. Supplementary Benefits. A policyowner may choose to include certain supplementary benefits to the Policy. These supplementary benefits include an accidental death benefit, life insurance for additional - 23 - insured persons, an option to purchase additional insurance, a disability benefit to waive the cost of monthly deductions, a change of life insured option and an option to ensure a guaranteed Policy Value. The cost of any supplementary benefits will be deducted from the Policy Value monthly. (See Detailed Information About The Policies; Other Provisions "What Supplementary Benefits Are Available?") Default. The Policy will go into default (a) during the first two policy years, if the policyowner does not pay the required minimum premiums, or (b) after the second policy anniversary, if at the beginning of any policy month the Policy's Net Cash Surrender Value would go below zero after deducting the monthly charges then due. The Company will notify the policyowner in the event the Policy goes into default, and will allow a grace period in which the policyowner may make a premium payment sufficient to bring the Policy out of default. If the required premium is not paid during the grace period the Policy will terminate. (See Detailed Information About The Policies; Premium Provisions "When Does A Policy Go Into Default?") Death Benefit Guarantee. As long as the premiums paid by the policyowner at least equal the minimum premiums for the Policy, the Company guarantees that the Policy will not go into default prior to the life insured's age 70, regardless of the investment performance of the Funds underlying the Policy Value. (See Detailed Information About The Policies; Premium Provisions "Is There A Death Benefit Guarantee?") - 24 - Reinstatement. A terminated policy may be reinstated by the policyowner within the five-year period following the date of termination, providing certain conditions are met. (See Detailed Information About The Policies; Premium Provisions "How Can A Terminated Policy Be Reinstated?") Free Look. A Policy may be returned for a full refund within the later of: . 10 days after it is received . 45 days after the application for the Policy is signed . 10 days after Manufacturers Life of America mails or delivers a notice of this right of withdrawal. If a policyowner requests an increase in face amount which results in new surrender charges, these rights to cancel the increase will also apply. (See Detailed Information About The Policies; Premium Provisions "Is There A Short-Term Cancellation Right, Or `Free Look'?") Conversion. At any time, the policyowner may convert the Policy to a fixed benefit Policy with a Policy Value, other values based on the Policy Value and a death benefit which is determinable and guaranteed. The conversion is effected by transferring the Policy Value in all of the Investment Accounts to the Guaranteed Interest Account. (See Detailed Information About The Policies; Premium Provisions "What Are The Conversion Privileges Of The Policy?") Federal Tax Matters. Manufacturers Life of America believes that a Policy issued on a standard risk class basis should meet the definition of a life insurance contract as set forth in Section 7702 of the Internal Revenue Code of 1986. With respect to a Policy issued on a substandard basis, there is less guidance available to determine if such a Policy would satisfy the Section 7702 definition of a life insurance contract, particularly if the policyowner pays the full amount of premiums permitted under such a Policy. Assuming that a Policy qualifies as a life insurance contract for federal income tax payments, a policyowner should not be deemed to be in constructive receipt of Policy Value under a Policy until there is a distribution from the Policy. Moreover, death benefits payable under a - 25 - Policy should be completely excludable from the gross income of the beneficiary. As a result, the beneficiary generally should not be taxed on these proceeds. See Other Matters "What Is The Federal Tax Treatment Of The Policies?" (Tax Status Of The Policy). Under certain circumstances, a Policy may be treated as a "Modified Endowment Contract." If the Policy is a Modified Endowment Contract, then all pre-death distributions, including Policy loans, will be treated first as a distribution of taxable income and then as a return of investment in the Policy. In addition, prior to age 59 1/2 any such distributions generally will be subject to a 10% penalty tax. See Other Matters "What Is The Tax Treatment Of Policy Benefits?" (Tax Treatment Of Policy Benefits). If the Policy is not a Modified Endowment Contract, distributions generally will be treated first as a return of investment in the Policy and then a disbursement of taxable income. Moreover, loans will not be treated as distributions. A policyowner considering the use of systematic policy loans as one element of a comprehensive retirement income plan should consult his or her personal tax adviser regarding the potential tax consequences if such loans were to so reduce Policy Value that the Policy would lapse, absent additional payments. The premium payment necessary to avert lapse would increase with the age of the insured. Finally, neither distributions nor loans under a Policy that is not a Modified Endowment Contract are subject to the 10% penalty tax. See Other Matters "What Is The Tax Treatment Of Policy Benefits?" (Distributions From Policies Not Classified As Modified Endowment Contracts). General Information About Manufacturers Life of America, Separate Account Four, Manulife Series Fund And NASL Series Trust Who Are Manufacturers Life of America And Manufacturers Life? Manufacturers Life of America, a wholly-owned subsidiary of The Manufacturers Life Insurance Company of Michigan, is a stock life insurance company organized under the laws of Pennsylvania on April 11, 1977 and redomesticated under the laws of Michigan on December 9, 1992. It is a licensed life insurance company in the District of Columbia and all states of the United States except New York. The Manufacturers Life Insurance Company of Michigan is a life insurance company organized in 1983 under the laws of Michigan and is a wholly-owned subsidiary of Manufacturers Life, a mutual life insurance company based in Toronto, Canada. Manufacturers Life and its subsidiaries, together, constitute one of the largest - 26 - life insurance companies in North America as measured by assets. What Is Manufacturers Life of America's Separate Account Four? Manufacturers Life of America established its Separate Account Four on March 17, 1987 as a separate account under Pennsylvania law. Since December 9, 1992, it has been operated under Michigan law. The Separate Account holds assets that are segregated from all of Manufacturers Life of America's other assets. The Separate Account is currently used only to support variable life insurance policies. Manufacturers Life of America is the legal owner of the assets in the Separate Account. The income, gains and losses of the Separate Account, whether or not realized, are, in accordance with applicable contracts, credited to or charged against the Account without regard to the other income, gains or losses of Manufacturers Life of America. Manufacturers Life of America will at all times maintain assets in the Separate Account with a total market value at least equal to the reserves and other liabilities relating to variable benefits under all policies participating in the Separate Account. These assets may not be charged with liabilities which arise from any other business Manufacturers Life of America conducts. However, all obligations under the variable life insurance policies are general corporate obligations of Manufacturers Life of America. The Separate Account is registered with the Securities and Exchange Commission ("S.E.C.") under the Investment Company Act of 1940 ("1940 Act") as a unit investment trust. A unit investment trust is a type of investment company which invests its assets in specified securities, such as the shares of one or more investment companies, rather than in a portfolio of unspecified securities. Registration under the 1940 Act does not involve any supervision by the S.E.C. of the management or investment policies or practices of the Separate Account. For state law purposes the Separate Account is treated as a part or division of Manufacturers Life of America. What Are Manulife Series Fund And NASL Series Trust? Each sub-account of the Separate Account will purchase shares only of a particular Manulife Fund or NASL Trust. Manulife Series Fund and NASL Series Trust are registered under the 1940 Act as open-end management investment companies. The Separate Account will purchase and redeem shares of the Manulife Funds and the NASL Trusts at net asset value. Shares will be redeemed to the extent necessary for Manufacturers Life of America to provide benefits under the Policies, to transfer assets from one sub-account to another - 27 - or to the general account as requested by policyowners, and for other purposes not inconsistent with the Policies. Any dividend or capital gain distribution received from a Portfolio with respect to the Policies will be reinvested immediately at net asset value in shares of that Portfolio and retained as assets of the corresponding sub-account. Manulife Series Fund and NASL Series Trust shares are issued to fund benefits under both variable annuity contracts and variable life insurance policies issued by the Company and, with respect to Manufacturers Life of America only, shares of the Manulife Series Fund are issued to 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 Manulife Series Fund prospectus and the accompanying NASL Series Trust prospectus. The Series Fund receives investment management services from Manufacturers Adviser Corporation. Manufacturers Adviser Corporation is a registered investment adviser under the Investment Advisers Act of 1940. NASL Series Trust receives investment advisory services from NASL Financial Services, Inc. NASL Financial Services, Inc. is a registered investment adviser under the Investment Advisers Act of 1940. NASL Series Trust also employs subadvisers. Fidelity Management Trust Company provides investment subadvisory services to the Equity, Conservative Asset Allocation, Moderate Asset Allocation and Aggressive Asset Allocation Trusts. Goldman Sachs Asset Management provides investment subadvisory services to the Value Equity Trust. Wellington Management Company provides investment subadvisory services to the Growth and Income Trust and Salomon Brothers Asset Management Inc provides investment subadvisory services to the U.S. Government Securities Trust. What Are The Investment Objectives Of The Portfolios? The investment objectives 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. Manulife Funds Emerging Growth Equity Fund. The investment objective of the Emerging Growth Equity Fund is to achieve growth of capital by investing primarily in equity securities of companies believed to offer growth potential over both the intermediate and the long term. Current income is not a significant consideration. In selecting investments, emphasis will be placed on securities of progressive companies with aggressive and - 28 - competent managements. A substantial portion of the Fund's assets may be invested in emerging growth companies, which at the time of the Fund's investment may be paying no dividends to their shareholders. Balanced Assets Fund. The investment objective of the Balanced Assets Fund is to achieve intermediate and long-term growth through capital appreciation and income by investing in both debt and equity securities. The Fund will maintain at all times a balance between debt securities or preferred stocks, on the one hand, and common stocks, on the other. At least 25% of the Fund's assets will be invested in each of the two basic categories. Capital Growth Bond Fund. The investment objective of the Capital Growth Bond Fund is to achieve growth of capital by investing in medium-grade or better debt securities with income as a secondary consideration. The Capital Growth Bond Fund differs from most "bond" funds in that its primary objective is capital appreciation, not income. The Fund will be carefully positioned in relation to the term of debt obligations and the anticipated movement of interest rates. Money-Market Fund. The investment objective of the Money-Market Fund is to provide maximum current income consistent with capital preservation and liquidity by investing in a portfolio of high-quality money market instruments. Common Stock Fund. The investment objective of the Common Stock Fund 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. In selecting investments, emphasis will be placed on companies with good financial resources, strong balance sheet, satisfactory rate of return on capital, good industry position, superior management skills, and earnings that tend to grow consistently. The Fund's investments are not limited to any particular type or size of company, but high-quality growth stocks are emphasized. Real Estate Securities Fund. The investment objective of the Real Estate Securities Fund is to achieve a combination of long-term capital appreciation and satisfactory current income by investing in real estate related equity and debt securities. In pursuit of its objective, the Real Estate Securities Fund will invest principally in real estate investment trust equity and debt securities and other securities issued by companies which invest in real estate or interests therein. The Fund may also purchase the common - 29 - stocks, preferred stocks, convertible securities and bonds of companies operating in industry groups relating to the real estate industry. This would include companies engaged in the development of real estate, building and construction, and other market segments related to real estate. The Fund will not invest directly in real property nor will it purchase mortgage notes directly. Under normal circumstances, at least 65% of the value of the Fund's total assets will be invested in real estate related equity and debt securities. International Fund. The investment objective of the International Fund is to achieve long-term growth of capital by investing in a diversified portfolio that is comprised primarily of common stocks and equity-related securities of companies domiciled in countries other than the United States and Canada. It invests primarily in the securities markets of Western European countries, Australia, the Far East, Mexico and South America. The Fund will, under normal conditions, invest at least 65% of its net assets in common stocks and equity-related securities of established larger-capitalization companies that have attractive long-term prospects for growth of capital. Pacific Rim Emerging Markets Fund. The investment objective of the Pacific Rim Emerging Markets Fund is to achieve long-term growth of capital by investing in a diversified portfolio that is comprised primarily of common stocks and equity-related securities of companies domiciled in the countries of the Pacific Rim region. The Fund will, under normal conditions, invest at least 65% of its net assets in common stocks and equity-related securities of established larger-capitalization companies that have attractive long-term prospects for growth of capital. Equity Index Fund. The investment objective of the Equity Index Fund 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. A full description of the Manulife Series Fund, its investment objectives, policies and restrictions, its expenses, the risks associated therewith, and other aspects of its operation, is contained in the accompanying Manulife Series Fund prospectus, which should be read together with this prospectus. NASL Trusts Equity Trust. The investment objective of the Equity Trust is to seek growth of capital by investing primarily in common stocks of United States issuers and securities convertible into or carrying the right to buy common stocks. - 30 - Value Equity Trust. The investment objective of the Value Equity Trust is to seek long-term growth of capital by investing primarily in common stocks and securities convertible into or carrying the right to buy common stocks. Growth and Income Trust. The investment objective of the Growth and Income Trust is to seek long-term growth of capital and income, consistent with prudent investment risk, by investing primarily in a diversified portfolio of common stocks of U.S. issuers which the subadviser believes are of high quality. U.S. Government Securities Trust. The investment objective of the U.S. Government Securities Trust is to seek a high level of current income consistent with preservation of capital and maintenance of liquidity by investing in debt obligations and mortgage-backed securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities and derivative securities such as collateralized mortgage obligations backed by such securities. Automatic Asset Allocation Trusts. The investment objective of the Automatic Asset Allocation Trusts is to seek the highest potential return consistent with a specified level of risk tolerance -- conservative, moderate or aggressive -- by investing primarily in debt, equity, and money market securities. . The Aggressive Asset Allocation Trust seeks the highest total return consistent with an aggressive level of risk tolerance. The Trust attempts to limit the decline in portfolio value in very adverse market conditions to 15% over any twelve month period. . The Moderate Asset Allocation Trust seeks the highest total return consistent with a moderate level of risk tolerance. The Trust attempts to limit the decline in portfolio value in very adverse market conditions to 10% over any twelve month period. . The Conservative Asset Allocation Trust seeks the highest total return consistent with a conservative level of risk tolerance. The Trust attempts to limit the decline in portfolio value in very adverse market conditions to 5% over any twelve month period. A full description of the NASL Series Trust, its investment objectives, policies and restrictions, the risks associated therewith, its expenses, and other aspects of its operation is contained in the accompanying NASL Series Trust prospectus, which should be read together with this prospectus. - 31 - Detailed Information About The Policies Premium Provisions What Are The Requirements And Procedures For Issuance Of A Policy? To purchase a Policy, an applicant must submit a completed application. Manufacturers Life of America will issue a Policy only if it has a face amount of at least $25,000, except for Policies issued under group or sponsored arrangements in which case the minimum face amount is $10,000. A Policy will generally be issued to persons between ages 0 and 80. In certain circumstances the Company may at its sole discretion issue a Policy to persons above age 80. Before issuing a Policy, Manufacturers Life of America will require evidence of insurability satisfactory to it. A life insured meeting standard underwriting rules will have a risk class of either "standard" or "nonsmoker." Persons failing to meet standard underwriting requirements may be eligible for a Policy with an additional rating assigned to it. Acceptance of an application is subject to the Company's insurance underwriting rules. Each Policy is issued with a policy date from which policy years, policy months and policy anniversaries are all determined. Each Policy also has an effective date which is the date the Company becomes obligated under the Policy and when the first monthly deductions are taken. If an application is accompanied by a check for all or a portion of the initial premium and the application is accepted, the policy date will be the date the application and check were received at the Manufacturers Life of America Service Office and the effective date will be the date Manufacturers Life of America's underwriters approve issuance of the Policy. If an application is accompanied by a check for all or a portion of the initial premium, the life insured may be covered under the terms of a conditional insurance agreement until the effective date. If an application accepted by the Company is not accompanied by a check for the initial premium, the Policy will be issued with a policy date which is seven days after issuance of the Policy and with an effective date which is the date the Service Office receives at least the initial planned premium. In certain situations a different policy date may be used. The initial planned premium must be received within 60 days after the policy date. If the premium is not paid or if the application is rejected, the Policy will be cancelled and any partial premiums paid will be returned to the applicant. Under certain circumstances a Policy may be issued with a backdated policy date. A Policy will not be backdated more than six months before the date of the application for the Policy. Monthly deductions will be made for the period the policy date is backdated. - 32 - 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 Fund. On the effective date, the premiums paid plus interest credited, net of deductions for federal, state and local taxes, will be allocated among the Investment Accounts or the Guaranteed Interest Account in accordance with the policyowner's instructions. All premiums received on or after the effective date will be allocated among Investment Accounts or the Guaranteed Interest Account as of the date the premiums were received at the Manufacturers Life of America Service Office. Monthly deductions are due on the policy date and at the beginning of each policy month thereafter. However, if due prior to the effective date, they will be taken on the effective date instead of the dates they were due. What Limitations Apply To Premium Amounts? After the payment of the initial premium, premiums may be paid at any time and in any amount during the lifetime of the life insured, subject to the limitations on premium amount and the minimum premium requirement described below. Premiums after the first must be paid to the Manufacturers Life of America Service Office. Unlike traditional insurance, premiums are not payable at specified intervals and in specified amounts. A Policy will be issued with a planned premium, which is based on the amount of premium the policyowner wishes to pay. The planned premium during the first two policy years must be such that the minimum premium requirement will be met. Manufacturers Life of America will send notices to the policyowner setting forth the planned premium at the payment interval selected by the policyowner, unless payment is being made pursuant to a pre-authorized payment plan. However, the policyowner is under no obligation to make the indicated payment. Manufacturers Life of America will not accept any premium payment which is less than $50, unless the premium is payable pursuant to a pre-authorized payment plan. In that case the Company will accept a payment of as little as $10. Manufacturers Life of America may change these minimums on 90 days' written notice. The Policies also limit the sum of the premiums that may be paid at any time so as to preserve the qualification of the Policies as life insurance for federal tax purposes. These limitations are set forth in each Policy. Manufacturers Life of America reserves the right to refuse or refund any premium payments that may cause the Policy to fail to qualify as life insurance under applicable tax law. - 33 - Minimum Premium Requirement. The Policy provides for a minimum premium requirement. The minimum premium requirement is met if at the beginning of each policy month the sum of all premiums paid less any partial withdrawals and any Policy Debt is at least equal to the sum of the minimum monthly premiums since the policy date. The minimum premium as an annualized amount is set forth in the Policy. It is subject to change if the face amount of the Policy or the death benefit option is changed (see Insurance Benefit "Can The Death Benefit Option Be Changed?" and "Can The Face Amount Of A Policy Be Changed?") or if there is any change in the supplementary benefits added to the Policy or in the rate classification of the life insured. Is There A Death Benefit Guarantee? If the minimum premium requirement is met, Manufacturers Life of America will guarantee that the Policy will not go into default even if a combination of policy loans, adverse investment experience or other factors should cause the Policy's Net Cash Surrender Value to be insufficient to meet the monthly deduction due at the beginning of a policy month. If the guarantee is in effect, Manufacturers Life of America will not allow the Net Policy Value to go below zero, although it will continue to assess a monthly deduction at the beginning of each policy month until the Net Policy Value should fall to zero. The guarantee provides assurance to the policyowner that the Policy will remain in force regardless of the investment performance of the sub-accounts selected by the policyowner, provided the policyowner has satisfied the minimum premium requirement. The death benefit guarantee will expire on the policy anniversary on which the life insured is 70 years old, or two years after the policy date if later. While the guarantee is in effect, Manufacturers Life of America will determine at the beginning of each policy month whether the minimum premium requirement has been met. If it has not been met, the Company will notify the policyowner of that fact and allow a 61-day grace period in which the policyowner may make a premium payment sufficient to keep the death benefit guarantee in effect. The required payment will be equal to the minimum premium due at the date the minimum premium requirement was not met plus the minimum premium due for the next two policy months. If the required payment is not received by the end of the grace period, the death benefit guarantee will terminate. Once it is terminated, it cannot be reinstated. When Does A Policy Go Into Default? Default Prior To Second Policy Anniversary. If the minimum premium requirement should not be met at the beginning of any - 34 - policy month during the first two policy years, the Policy will go into default. Manufacturers Life of America will notify the policyowner of the default and allow a 61-day grace period in which the policyowner may make a premium payment sufficient to bring the Policy out of default. The required premium will be equal to the minimum premium due at the date of default plus the minimum premium due for the next two policy months. If the required payment is not received by the end of the grace period, the Policy will terminate and the Net Cash Surrender Value as of the date of default less the monthly deduction then due will be paid to the policyowner together with any refund of excess sales loading to which the policyowner is entitled. See Charges "What Are The Surrender Charges?" Default After Second Policy Anniversary. If the death benefit guarantee is no longer in effect, a Policy will go into default after the second policy anniversary if at the beginning of any policy month the Policy's Net Cash Surrender Value would go below zero after deducting the monthly deduction then due. As with a default during the first two policy years, Manufacturers Life of America will notify the policyowner of the default and will allow a 61-day grace period in which the policyowner may make a premium payment sufficient to bring the Policy out of default. The required payment will be equal to the amount necessary to bring the Net Cash Surrender Value to zero, if it was less than zero at the date of default, plus the monthly deductions due at the date of default and payable at the beginning of each of the two policy months thereafter. If the required payment is not received by the end of the grace period, the Policy will terminate and the Net Cash Surrender Value as of the date of default less the monthly deduction then due will be paid to the policyowner together with any refund of excess sales loading to which the policyowner is entitled. See Charges "What Are The Surrender Charges?" If the life insured should die during the grace period following a Policy's going into default, the Policy Value used in the calculation of the death benefit will be the Policy Value as of the date of default and the insurance benefit payable will be reduced by any outstanding monthly deductions due at the time of death. How Can A Terminated Policy Be Reinstated? A policyowner can reinstate a Policy which has terminated after going into default at any time within the five-year period following the date of termination subject to the following conditions: (a) The Policy must not have been surrendered for its Net Cash Surrender Value; - 35 - (b) Evidence of the life insured's insurability satisfactory to Manufacturers Life of America is furnished to it; (c) A premium equal to the payment required during the grace period following default to keep the Policy in force is paid to Manufacturers Life of America; and (d) An amount equal to any amounts paid by Manufacturers Life of America in connection with the termination of the Policy is repaid to Manufacturers Life of America. If the reinstatement is approved, the date of reinstatement will be the later of the date of the policyowner's written request or the date the required payment is received at the Manufacturers Life of America Service Office. How May Net Premiums Be Invested? Net premiums (gross premiums less the premium tax deduction and sales charge) may be allocated to either the Guaranteed Interest Account for accumulation at a rate of interest equal to at least 4% or to one or more of the Investment Accounts for investment in the Portfolio shares held by the corresponding sub-account of the Separate Account. Allocations among the Investment Accounts and the Guaranteed Interest Account are made as a percentage of the net premium. The percentage allocation to any account may be any whole number between zero and 100, provided the total percentage allocations equal 100. A policyowner may change the way in which net premiums are allocated at any time without charge. The change will take effect on the date a written or telephonic request for change satisfactory to the Company is received at the Manufacturers Life of America Service Office. Is There A Short-Term Cancellation Right, Or "Free Look"? A Policy may be returned for a full refund within 10 days after it is received, within 45 days after the application for the Policy is signed, or within 10 days after Manufacturers Life of America mails or delivers a notice of right of withdrawal, whichever is latest. The Policy can be mailed or delivered to the Manufacturers Life of America agent who sold it or to the Manufacturers Life of America Service Office. Immediately on such delivery or mailing, the Policy shall be deemed void from the beginning. Within seven days after receipt of the returned Policy at its Service Office, Manufacturers Life of America will refund any premium paid. Manufacturers Life of America reserves the right to delay the refund of any premium paid by check until the check has cleared. - 36 - If a policyowner requests an increase in face amount which results in new surrender charges, he or she will have the same rights as described above to cancel the increase. If cancelled, the Policy Value and the surrender charges will be recalculated to the amounts they would have been had the increase not taken place. A policyowner may request a refund of all or any portion of premiums paid during the free look period, and the Policy Value and the surrender charges will be recalculated to the amounts they would have been had the premiums not been paid. What Are The Conversion Privileges Of The Policy? The policyowner may effectively convert his or her Policy to a fixed benefit policy by transferring the Policy Value in all of the Investment Accounts to the Guaranteed Interest Account and by changing his or her allocation of net premiums entirely to the Guaranteed Interest Account. As long as the entire Policy Value is allocated to the Guaranteed Interest Account, the Policy Value, other values based thereon and the death benefit will be determinable and guaranteed. The Investment Account values to be transferred to the Guaranteed Interest Account will be determined as of the Business Day on which Manufacturers Life of America receives the request for conversion. There will be no change in the issue age, risk class of the life insured or face amount as a result of the conversion. A transfer of any or all of the Policy Value to the Guaranteed Interest Account can be made at any time, even if a prior transfer has been made during the policy month. Insurance Benefit What Is The Insurance Benefit? If the Policy is in force at the time of the life insured's death, Manufacturers Life of America will pay an insurance benefit based on the death benefit option selected by the policyowner upon receipt of due proof of death. The amount payable will be the death benefit under the selected option, plus any amounts payable under any supplementary benefits added to the Policy, less the value of the Loan Account at the date of death. The insurance benefit will be paid in one sum unless another form of settlement option is agreed to by the beneficiary and the Company. If the insurance benefit is paid in one sum, Manufacturers Life of America will pay interest from the date of death to the date of payment. If the life insured should die after the Company's receipt of a request for surrender, no insurance benefit will be payable, and Manufacturers Life of America will pay only the Net Cash Surrender Value. What Death Benefit Options Are Available? - 37 - The Policies permit the policyowner to select one of two death benefit options Option 1 and Option 2. Under Option 1 the death benefit is the face amount of the Policy at the date of death or, if greater, the Policy Value at the date of death multiplied by the applicable percentage in the table set forth below. Under Option 2 the death benefit is the face amount of the Policy plus the Policy Value at the date of death or, if greater, the Policy Value at the date of death multiplied by the applicable percentage in the following table: - 38 -
Attained Corridor Age Percentage 40 & below 250% 41 243 42 236 43 229 44 222 45 215 46 209 47 203 48 197 49 191 50 185 51 178 52 171 53 164 54 157 55 150 56 146 57 142 58 138 59 134 60 130 61 128 62 126 63 124 64 122 65 120 66 119
- 39 -
Attained Corridor Age Percentage 67 118 68 117 69 116 70 115 71 113 72 111 73 109 74 107 75-90 105 91 104 92 103 93 102 94 101 95 & above 100
Regardless of which death benefit option is in effect, the relationship of Policy Value to death benefit will change whenever the "corridor percentages" are used to determine the amount of the death benefit, in other words, whenever multiplying the Policy Value by the applicable percentage set forth in the above table results in a greater death benefit than would otherwise apply under the selected option. For example, assume the life insured under a Policy with a face amount of $100,000 has an attained age of 40. If Option 1 is in effect, the corridor percentage will produce a greater death benefit whenever the Policy Value exceeds $40,000 (250% X $40,000 = $100,000). If the Policy Value is less than $40,000, an incremental change in Policy Value, up or down, will have no effect on the death benefit. If the Policy Value is greater than $40,000, an incremental change in Policy Value will result in a change in the death benefit by a factor of 2.5. Thus, if the Policy Value were to increase to $40,010, the death benefit would be increased to $100,025 (250% X $40,010 = $100,025). If Option 2 were in effect in the above example, the corridor percentage would produce a greater death benefit whenever the Policy Value exceeded $66,667. At that point the death benefit produced by multiplying the Policy Value by 250% would result in a greater amount than adding the Policy Value to the face amount of the Policy. If the Policy Value is less than $66,667, an incremental change in Policy Value will have a dollar-for-dollar effect on the death benefit. If the Policy Value is greater than $66,667, an incremental change in Policy - 40 - Value will result in a change in the death benefit by a factor of 2.5 in the same manner as would be the case under Option 1 when the corridor percentage determined the death benefit. Can The Death Benefit Option Be Changed? The death benefit option is selected initially by the policyowner in the application. After the Policy has been in force for two years the death benefit option may be changed effective with a policy anniversary. Written request for a change must be received by Manufacturers Life of America at least 30 days prior to a policy anniversary in order to become effective on that date. The Company reserves the right to limit a request for change if the change would cause the Policy to fail to qualify as life insurance for tax purposes. A change in death benefit option will result in a change in the Policy's face amount in order to avoid any change in the amount of the death benefit. If the change in death benefit is from Option 1 to Option 2, the new face amount will be equal to the face amount prior to the change minus the Policy Value on the effective date of the change. If the change in death benefit is from Option 2 to Option 1, the new face amount will be equal to the face amount prior to the change plus the Policy Value on the effective date of the change. The increase in face amount resulting from a change to Option 1 will not affect the amount of surrender charges to which a Policy may be subject. A change to Option 2 will be subject to satisfactory evidence of insurability and will not be allowed if it would cause the face amount of the Policy to go below the minimum face amount of $25,000. Policyowners who wish to have level insurance coverage should generally select Option 1. Under Option 1, increases in Policy Value usually will reduce the net amount of risk under a Policy which will reduce cost of insurance charges. This means that favorable investment performance should result in a faster increase in Policy Value than would occur under an identical Policy with Option 2 in effect. However, the larger Policy Value which may result under Option 1 will not affect the amount of the death benefit unless the corridor percentages are used to determine the death benefit. Policyowners who want to have the Policy Value reflected in the death benefit so that any increases in Policy Value will increase the death benefit should generally select Option 2. Under Option 2 the net amount at risk will remain level unless the corridor percentages are used to determine death benefit, in which case increases in Policy Value will increase the net amount at risk. - 41 - Can The Face Amount Of A Policy Be Changed? Subject to certain limitations, a policyowner may, upon written request, increase or decrease the face amount of the Policy. A change in face amount will usually affect the minimum premium requirement, the monthly deduction and surrender charges (see "Charges"). Currently, a change in face amount must be at least $10,000, except in the case of group or sponsored arrangements where the minimum change is $5,000. Manufacturers Life of America reserves the right to increase or decrease the minimum face amount change on 90 days' written notice to the policyowner. The Company also reserves the right to limit a change in face amount so as to prevent the Policy from failing to qualify as life insurance for tax purposes. Increases. Increases in face amount are subject to satisfactory evidence of insurability. Increases may be made only once per policy year and only after the first policy year. An increase will become effective at the beginning of the policy month following the date Manufacturers Life of America approves the requested increase. The Company reserves the right to refuse a requested increase if the life insured's age at the effective date of the increase would be greater than the maximum issue age for new Policies at that time. An increase in face amount will usually result in the Policy's being subject to new surrender charges. The new surrender charges will be computed as if a new Policy were being purchased for the increase in face amount. For purposes of determining the new deferred sales charge, a portion of the Policy Value at the time of the increase, and a portion of the premiums paid on or subsequent to the increase, will be deemed to be premiums attributable to the increase. See Charges "What Are The Surrender Charges?" Any increase in face amount to a level less than the highest face amount previously in effect will have no effect on the surrender charges to which the Policy is subject, since surrender charges, if applicable, will have been assessed in connection with the prior decrease in face amount. As with the purchase of a Policy, a policyowner will have free look and refund rights with respect to any increase resulting in new surrender charges. No additional premium is required for a face amount increase. However, a premium payment may be necessary to avoid the Policy's going into default, since new surrender charges resulting from an increase would automatically reduce the Net Cash Surrender Value of the Policy. Moreover, a new minimum premium will be determined for purposes of the death benefit guarantee. The insurance coverage eliminated by the decrease of the oldest face amount will be deemed to be restored first. - 42 - Decreases. A decrease in the face amount may be requested after the Policy has been in force for one year, except during the one-year period following any increase in face amount. In addition, during the two-year period following an increase in face amount, the policyowner may elect at any time to cancel the increase and have the deferred sales charge for the increase reduced by the refund of any excess sales load attributable to the increase. A decrease in face amount will be effective only on a policy anniversary. Written request for a decrease must be received by Manufacturers Life of America at least 30 days prior to a policy anniversary in order to become effective on that date. A decrease will not be allowed if it would cause the face amount to go below the minimum face amount of $25,000, or $10,000 in the case of group or sponsored arrangements. A decrease in face amount during the 15-year period following issuance of the Policy or any increase in face amount will usually result in surrender charges being deducted from the Policy Value. See Charges "What Are The Surrender Charges?" For purposes of determining surrender and cost of insurance charges, a decrease will reduce face amount in the following order: (a) the face amount provided by the most recent increase, then (b) the face amounts provided by the next most recent increases successively, and finally (c) the initial face amount. Policy Values What Is The Policy Value And How Is It Determined? A Policy has a Policy Value, a portion of which is available to the policyowner by making a policy loan or partial withdrawal or upon surrender of the Policy. See "What Are The Provisions Governing Policy Loans?" and "How May A Policyowner Obtain The Net Cash Surrender Value?" below. The Policy Value may also affect the amount of the death benefit (see Insurance Benefit "What Death Benefit Options Are Available?"). The Policy Value at any time is equal to the sum of the Values in the Investment Accounts, the Guaranteed Interest Account and the Loan Account. The following discussion relates only to the Investment Accounts. Policy loans are discussed under "What Are The Provisions Governing Policy Loans?" and the Guaranteed Interest Account is discussed under "The General Account." The portion of the Policy Value based on the Investment Accounts is not guaranteed and will vary each Business Day with the investment performance of the underlying Portfolios. An Investment Account is established under each Policy for each sub-account of the Separate Account to which net premiums or transfer amounts have been allocated. Each Investment Account under a Policy measures the interest of the Policy in - 43 - the corresponding sub-account. The value of the Investment Account established for a particular sub-account is equal to the number of units of that sub-account credited to the Policy times the value of such units. Units of a particular sub-account are credited to a Policy when net premiums are allocated to that sub-account or amounts are transferred to that sub-account. Units of a sub-account are cancelled whenever amounts are deducted, transferred or withdrawn from the sub-account. The number of units credited or cancelled for a specific transaction is based on the dollar amount of the transaction divided by the value of the unit on the Business Day on which the transaction occurs. The number of units credited with respect to a premium payment will be based on the applicable unit values for the Business Day on which the premium is received at the Manufacturers Life of America Service Office, except for any premiums received before the policy date as to which the applicable unit values will be the values determined on such date. Units are valued at the end of each Business Day, which is any day that the net asset value of the Fund shares held by the applicable sub-account is determined. A Business Day is deemed to end at the time of such determination. When an order involving the crediting or cancelling of units is received at the Manufacturers Life of America Service Office after the end of a Business Day or on a day which is not a Business Day, the order will be processed on the basis of unit values determined on the next Business Day. Similarly, any determination of Policy Value, Investment Account value or death benefit to be made on a day which is not a Business Day will be made on the next Business Day. The value of a unit of each sub-account was initially fixed at $10.00. For each subsequent Business Day the unit value is determined by taking the value of the adjusted net assets of the particular sub-account at the end of the Business Day divided by the total number of units. The value of a unit may increase, decrease or remain the same, depending on the investment performance of a sub-account from one Business Day to the next. The unit value for a sub-account for any Business Day is equal to (a) minus (b), divided by (c), where: (a) is the net asset value of the sub-account at the end of such Business Day; (b) is a charge not exceeding 0.000017866 for each calendar day since the preceding Business Day, multiplied by the net assets of the sub-account as of the end of such Business Day, corresponding to a charge not exceeding 0.65% per year for mortality and expense risks; and - 44 - (c) is the total number of units of the sub-account. Manufacturers Life of America reserves the right to adjust the above formula for any taxes determined by it to be attributable to the operations of the sub-account. Transfers Of Policy Value. Under the Policies a policyowner may change the extent to which his or her Policy Value is based upon any specific sub-account of the Separate Account or the Company's general account. Such changes are made by transferring amounts from one or more Investment Accounts or the Company's general account to other Investment Accounts or the Company's general account. A policyowner is permitted to make one transfer each policy month. For this purpose all transfer requests received by Manufacturers Life of America on the same Business Day are treated as a single transfer. Transfers are free of charge. The minimum amount that may be transferred from an account is the lesser of $500 or the entire account value. 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 Fund. Transfer requests must be in a format satisfactory to Manufacturers Life of America and in writing, or by telephone if a currently valid telephone transfer authorization form is on file. Although failure to follow reasonable procedures may result in Manufacturers Life of America's liability for any losses resulting from unauthorized or fraudulent telephone transfers, Manufacturers Life of America will not be liable for following instructions communicated by telephone that it reasonably believes to be genuine. Manufacturers Life of America will employ reasonable procedures to confirm that instructions communicated by telephone are genuine. Such procedures shall consist of confirming a valid telephone authorization form is on file, tape recording all telephone transactions and providing written confirmation thereof. The policyowner may effectively convert his or her Policy to a fixed benefit policy by transferring the Policy Value in all of the Investment Accounts to the Guaranteed Interest Account and by changing his or her allocation of net premiums entirely to the Guaranteed Interest Account. As long as the entire Policy Value is allocated to the Guaranteed Interest Account, the Policy Value, other values based thereon and the death benefit will be determinable and guaranteed. The Investment Account values to be transferred to the Guaranteed Interest - 45 - Account will be determined as of the Business Day on which Manufacturers Life of America receives the request for conversion. There will be no change in the issue age, risk class of the life insured or face amount as a result of the conversion. A transfer of any or all of the Policy Value to the Guaranteed Interest Account can be made at any time, even if a prior transfer has been made during the policy month. Dollar Cost Averaging. Manufacturers Life of America will offer policyowners a Dollar Cost Averaging program. Under this program amounts will be automatically transferred at predetermined intervals from one Investment Account to any other Investment Account(s) or the Guaranteed Interest Account. Under the Dollar Cost Averaging program the policyowner will designate an amount to be transferred each month from one Investment Account into any other Investment Account(s) or the Guaranteed Interest Account. Each transfer under the Dollar Cost Averaging program must be of a minimum amount as set by Manufacturers Life of America. Once set, this minimum may be changed at any time at the discretion of Manufacturers Life of America. Currently, no charge will be made for this program if the Policy Value exceeds $15,000 on the date of transfer. Otherwise, there will be a charge of $5 for each transfer under this program. The charge will be deducted from the value of the Investment Account out of which the transfer occurs. If insufficient funds exist to effect a Dollar Cost Averaging transfer, including the charge, if applicable, the transfer will not be effected and the policyowner will be so notified. Manufacturers Life of America reserves the right to cease to offer this program on 90 days' written notice to the policyowner. Asset Allocation Balancer Transfers. Manufacturers Life of America will also offer policyowners the ability to have amounts automatically transferred among stipulated Investment Accounts to maintain an allocated percentage in each stipulated Investment Account. Under the Asset Allocation Balancer program the policyowner will designate an allocation of Policy Value among Investment Accounts. On the policy anniversary, and at six month intervals thereafter, Manufacturers Life of America will move amounts among the Investment Accounts as necessary to maintain the policyowner's chosen allocation. Currently, the charge for this program is $15 per transfer or series of transfers occurring on the same transfer date. This charge will be deducted from all accounts affected by the Asset Allocation Balancer transfer in the same proportion that the value in each account bears to the Policy Value immediately after the transfer. Manufacturers Life of America reserves the right to - 46 - cease to offer this program on 90 days' written notice to the policyowner. What Are The Provisions Governing Policy Loans? On or after the first policy anniversary, while the Policy is in force, the policyowner may borrow against the Policy Value of his or her Policy. The one-year waiting period for borrowing against the Policy Value is waived in the case of policies which are exchanged for Manufacturers Life of America Policies and a policy loan will be permitted in an amount equal to the lesser of (a) the amount rolled over into the Manufacturers Life of America Policy and (b) the loan value of the Policy. The Policy serves as the only security for the loan. The amount of any loan must be at least $500 and cannot exceed the amount which would cause the Modified Policy Debt to equal the loan value of the Policy on the date of the loan. The loan value is the Policy's Cash Surrender Value less the monthly deductions due to the next policy anniversary. The Modified Policy Debt as of any date is the Policy Debt (the aggregate amount of policy loans, including borrowed interest, less any loan repayments) plus the amount of interest to be charged to the next policy anniversary, all discounted from the next policy anniversary to such date at an annual rate of 4%. An amount equal to the Modified Policy Debt is transferred to the Loan Account to ensure that a sufficient amount will be available to pay interest on the Policy Debt at the next policy anniversary. For example, assume a Policy with a loan value of $5,000, no outstanding policy loans and a loan interest rate of 8%. The maximum amount that can be borrowed is an amount that will cause the Modified Policy Debt to equal $5,000. If the loan is made on a policy anniversary, the maximum loan will be $4,815. This amount at 8% interest will equal $5,200 one year later; $5,200 discounted to the date of the loan at 4% (the Modified Policy Debt) equals $5,000. Because the minimum rate of interest credited to the Loan Account is 4%, $5,000 must be transferred to the Loan Account to ensure that $5,200 will be available at the next policy anniversary to cover the interest accrued on the Policy Debt. When a loan is made, Manufacturers Life of America will deduct from the Investment Accounts or the Guaranteed Interest Account, and transfer to the Loan Account, an amount which will result in the Loan Account value being equal to the Modified Policy Debt. The policyowner may designate how the amount to be transferred to the Loan Account is allocated among the accounts from which the transfer is to be made. In the absence of instructions, the amount to be transferred will be allocated to each account in the same proportion as the value in each Investment Account and the Guaranteed Interest - 47 - Account bears to the Net Policy Value. A transfer from an Investment Account will result in the cancellation of units of the underlying sub-account equal in value to the amount transferred from the Investment Account. However, since the Loan Account is part of the Policy Value, transfers made in connection with a loan will not change the Policy Value. A policy loan may result in a Policy's failing to satisfy the minimum premium requirement, since the Policy Debt is subtracted from the sum of the premiums Paid in determining whether the minimum premium requirement is met. See Premium Provisions "What Limitations Apply To Premium Amounts?; Minimum Premium Requirement." As a result, the Policy may go into default if the minimum premium requirement is not met during the first two policy years, or the death benefit guarantee may terminate if the minimum premium requirement is not met either before or after the second policy anniversary. See Premium Provisions "Is There A Death Benefit Guarantee?" and "When Does A Policy Go Into Default?" Moreover, if the death benefit guarantee is not in force, a policy loan may cause a Policy to be more susceptible to going into default, since a policy loan will be reflected in the Net Cash Surrender Value. See Premium Provisions "When Does A Policy Go Into Default?" A policy loan will also have an effect on future Policy Values, since that portion of the Policy Value in the Loan Account will increase in value at the crediting interest rate rather than varying with the performance of the underlying Funds selected by the policyowner or increasing in value at the rate of interest credited for amounts allocated to the Guaranteed Interest Account. Finally, a policy loan will affect the amount payable on the death of the life insured, since the death benefit is reduced by the value of the Loan Account at the date of death in arriving at the insurance benefit. Interest Charged On Policy Loans. Interest on the Policy Debt will accrue daily and be payable annually on the policy anniversary. The rate of interest charged will be either on a fixed basis or a variable basis as selected by the policyowner in the application. The policyowner may change the interest basis on any policy anniversary provided a written request for change is received by the Company at least 60 days before the anniversary on which such change is to be effective. If the policyowner elects to have interest charged on a fixed basis, interest will be at an effective annual rate of 8%. If the policyowner elects to have interest charged on a variable basis, the rate will be determined by Manufacturers Life of America at the beginning of each policy year, and the rate so determined will be effective until the next policy anniversary at which time it will be recalculated. Except as described below, the variable rate will not exceed the greater of 6% per - 48 - year or the Moody's Corporate Bond Yield Average Monthly Average Corporates for the calendar month ending two months before the beginning of the month in which the policy anniversary falls. On each policy anniversary, the annual rate of interest may be adjusted up or down, but no adjustment will be made unless the Moody's Average for the month ending two months before the date of determination is at least one-half of one percent greater or less than the rate in effect for the year then ending. If the interest due on a policy anniversary is not paid by the policyowner, the interest will be borrowed against the policy. Interest Credited To The Loan Account. Manufacturers Life of America will credit interest to any amount in the Loan Account at an effective annual rate of at least 4%. The actual rate credited is: . the rate of interest charged on the policy loan less .50% on amounts up to the Policy's "loan tier amount"; and . the rate of interest charged on the policy loan less an interest rate differential (currently 1.25%) on amounts in excess of the "loan tier amount." Manufacturers Life of America may change the interest rate differential on 90 days' written notice to the policyowner. The loan tier amount at any time is equal to 25% of (a) minus (b) where (a) is the Policy's Cash Surrender Value at the previous policy anniversary and (b) is the sum of the minimum monthly premiums since issuance of the Policy to that date (see Premium Provisions "What Limitations Apply To Premium Amounts?"). The loan tier amount cannot be a negative number. To illustrate the application of the loan tier amount, assume a Policy with a Cash Surrender Value at the previous policy anniversary of $10,000, the sum of the minimum monthly premiums since issuance to the previous policy anniversary of $6,000 and a Loan Account value of $8,000. The loan tier amount is $1,000 [25% X ($10,000 - $6,000)]. If loan interest is being charged at the fixed rate of 8%, $1,000 of the Loan Account value will accrue interest at 7.5% and the remaining $7,000 will accrue interest at 6.75%. Loan Account Adjustments. When a loan is first taken out, and at specified events thereafter, the value of the Loan Account is adjusted. Whenever the Loan account is adjusted, the difference between (i) the Loan Account before any adjustment and (ii) the Modified Policy Debt at the time of adjustment, is transferred between the Loan Account and the Investment Accounts or the Guaranteed Interest Account. The amount transferred to or from the Loan Account will be such that the - 49 - value of the Loan Account is equal to the Modified Policy Debt after the adjustment. The specified events which cause an adjustment to the Loan Account are (i) a policy anniversary, (ii) a partial or full loan repayment, (iii) a new loan being taken out, or (iv) when an amount is needed to meet a monthly deduction. A loan repayment may be implicit in that policy debt is effectively repaid upon termination, that is upon death of the life insured, surrender or lapse of the policy. In each of these instances, the Loan Account will be adjusted with any excess of the Loan Account over the Modified Policy Debt after the repayment being included in the termination proceeds. Except as noted below in the Loan Repayments section, amounts transferred from the Loan Account will be allocated to the Investment Accounts and the Guaranteed Interest Account in the same proportion as the value in the corresponding "loan sub-account" bears to the value of the Loan Account. A "loan sub-account" exists for each Investment Account and for the Guaranteed Interest Account. Amounts transferred to the Loan Account are allocated to the appropriate loan sub-account to reflect the account from which the transfer was made. Loan Account Illustration. The operation of the Loan Account may be illustrated by consideration of the Policy previously described with a loan value of $5,000, a loan interest rate of 8%, and a maximum loan amount on a policy anniversary of $4,815. For purposes of the illustration, assume that the loan tier amount is zero. If a loan in the maximum amount of $4,815 is made, an amount equal to the Modified Policy Debt, $5,000, is transferred to the Loan Account. At the next policy anniversary the value of the Loan Account will have increased to $5,337.50 ($5,000 X 1.0675) reflecting interest credited at an effective annual rate of 6.75%. At that time the loan will have accrued interest charges of $385 ($4,815 X .08) bringing the Policy Debt to $5,200. If the accrued interest charges are paid on the policy anniversary, the Policy Debt will continue to be $4,815, and the Modified Policy Debt, reflecting interest for the next policy year and discounting the Policy Debt and such interest at 4%, will be $5,000. An amount will be transferred from the Loan Account to the Guaranteed Interest Account or the Investment Accounts so that the Loan Account value will equal the Modified Policy Debt. Since the Loan Account value was $5,337.50, a transfer of $337.50 will be required ($5,337.50 - $5,000). If, however, the accrued interest charges of $385 are borrowed, an amount will be transferred from the Investment - 50 - Accounts and the Guaranteed Interest Account so that the Loan Account value will equal the Modified Policy Debt recomputed at the policy anniversary. The new Modified Policy Debt is the Policy Debt, $5,200, plus loan interest to be charged to the next policy anniversary, $416 ($5,200 X .08), discounted at 4%, which results in a figure of $5,400. Since the value of the Loan Account was $5,337.50, a transfer of $62.50 will be required. This amount is equivalent to the 1.25% interest rate differential on the $5,000 transferred to the Loan Account on the previous policy anniversary. Loan Repayments. Policy Debt may be repaid in whole or in part at any time prior to the death of the life insured provided the Policy is in force. When a repayment is made, the amount is credited to the Loan Account and a transfer is made to the Guaranteed Interest Account or the Investment Accounts so that the Loan Account at that time equals the Modified Policy Debt. Loan repayments will first be allocated to the Guaranteed Interest Account until the associated loan sub-account is reduced to zero. Any other amounts transferred from the Loan Account will be allocated to the Guaranteed Interest Account and each Investment Account in the same proportion as the value in the corresponding loan sub-account bears to the value of the Loan Account. Amounts paid to the Company not specifically designated in writing as loan repayments will be treated as premiums. How May A Policyowner Obtain The Net Cash Surrender Value? A Policy may be surrendered for its Net Cash Surrender Value at any time while the life insured is living. The Net Cash Surrender Value is equal to the Policy Value less any surrender charges and outstanding monthly deductions due (the "Cash Surrender Value") minus the value of the Loan Account. The Net Cash Surrender Value will be determined at the end of the Business Day on which Manufacturers Life of America receives the Policy and a written request for surrender at its Service Office. After a Policy is surrendered, the insurance coverage and all other benefits under the Policy will terminate. Surrender of a Policy within 15 years of issuance or an increase in face amount will usually result in the assessment by Manufacturers Life of America of surrender charges. (See Charges "What Are The Surrender Charges?") After a Policy has been in force for two policy years, the policyowner may make a partial withdrawal of the Net Cash Surrender Value. The minimum amount that may be withdrawn is $500. The policyowner should specify the portion of the withdrawal to be taken from each Investment Account and the Guaranteed Interest Account. In the absence of instructions, the withdrawal will be allocated among such accounts in the same proportion as the Policy Value in each account bears to - 51 - the Net Policy Value. No more than one partial withdrawal may be made in any one policy month. Like surrender of a Policy, a partial withdrawal made within 15 years following issuance of the Policy or a face amount increase will result in the assessment of a portion of the surrender charges to which the Policy is subject if the withdrawal is in excess of the Withdrawal Tier Amount. The Withdrawal Tier Amount is equal to 10% of the Net Cash Surrender Value determined as of the previous policy anniversary. In determining what, if any, portion of a partial Net Cash Surrender Value withdrawal is in excess of the Withdrawal Tier Amount, all previous partial Net Cash Surrender Value withdrawals that have occurred in the current policy year are included. The portion of the surrender charges assessed will be based on the ratio of the amount of the withdrawal which exceeds the Withdrawal Tier Amount to the Net Cash Surrender Value of the Policy immediately prior to the withdrawal. The surrender charges will be deducted from each Investment Account and the Guaranteed Interest Account in the same proportion as the amount of the withdrawal taken from such account bears to the total amount of the withdrawal (see Charges "What Are The Surrender Charges?"). If the amount in the account is not sufficient to pay the portion of the surrender charges allocated to that account, then the portion of the withdrawal allocated to that account will be reduced so that the withdrawal plus the portion of the surrender charges allocated to that account equal the value of that account. Units equal to the amount of the partial withdrawal taken, and surrender charges deducted, from each Investment Account will be cancelled based on the value of such units determined at the end of the Business Day on which Manufacturers Life of America receives a written request for withdrawal at its Service Office. If the Option 1 death benefit is in effect under a Policy from which a partial withdrawal is made, the face amount of the Policy will be reduced. If the death benefit is equal to the face amount at the time of withdrawal, the face amount will be reduced by the amount of the withdrawal plus the portion of the surrender charges assessed. If the death benefit is based upon the Policy Value times the applicable percentage set forth under Insurance Benefit "What Death Benefit Options Are Available?" above, the face amount will be reduced only to the extent that the amount of the withdrawal plus the portion of the surrender charges assessed exceeds the difference between the death benefit and the face amount. Reductions in face amount resulting from partial withdrawals will not incur any surrender charges above the surrender charges applicable to the withdrawal. When the face amount of a Policy is based on one or more increases subsequent to issuance of the Policy, a reduction resulting from a partial withdrawal will be applied - 52 - in the same manner as a requested decrease in face amount, i.e., against the face amount provided by the most recent increase, then against the next most recent increases successively and finally against the initial face amount. Charges Charges under the Policies are assessed as (i) deductions from premiums when made, (ii) surrender charges upon surrender, partial withdrawals, decreases in face amount or termination following default, (iii) monthly deductions from the Policy Value, and (iv) risk charges assessed against Separate Account assets. These charges are described below. What Deductions Are Made From Premiums? Manufacturers Life of America deducts a sales charge of 3% of each premium payment. A deferred sales charge in the maximum amount of 47% of premiums paid up to two Target Premiums is deducted from the Policy Value upon certain transactions. See "What Are The Surrender Charges?" below. These charges compensate the Company for some of the expenses of selling and distributing the Policies, including agents' commissions, advertising, agent training and the printing of prospectuses and sales literature. The sales charges deducted in any policy year are not specifically related to sales expenses incurred in that year. Instead, the Company expects that the major portion of the sales expenses attributable to a Policy will be incurred during the first policy year, although the sales charge deducted from premiums and any deferred sales charge may be spread out over the period the Policy is in force. Manufacturers Life of America anticipates that the aggregate amounts received under the Policies for sales loading will be insufficient to cover aggregate sales expenses. To the extent that sales expenses exceed sales charges, Manufacturers Life of America will pay the excess from its other assets or surplus, including amounts derived from the mortality and expense risks charge described below. A portion of the sales charge and the deferred sales charge may be subject to refund if the Policy is surrendered for its Net Cash Surrender Value at any time during the first two years following issuance or following an increase in face amount or if the increase is cancelled during the two-year period following the increase. See "What Are The Surrender Charges?" (Refund Of Excess Sales Charges). Manufacturers Life of America deducts a premium tax charge of 2% of each premium payment. State and local premium taxes differ from state to state. The 2% rate, which cannot be - 53 - changed, is expected to be sufficient, on average, to pay premium taxes where required. What Are The Surrender Charges? Manufacturers Life of America will assess surrender charges upon surrender or lapse of a Policy, a partial withdrawal of Policy Value in excess of the Withdrawal Tier Amount or a requested decrease in face amount. The charges will be assessed if any of the above transactions occurs within 15 years after issuance of the Policy or any increase in face amount unless the charges have been previously deducted. There are two surrender charges a deferred underwriting charge and a deferred sales charge. Deferred Underwriting Charge. The deferred underwriting charge is a dollar amount for each $1,000 of face amount of insurance in accordance with the following schedule: - 54 - Age: 0-20 21-40 41-50 51-60 61 & above Charge Per $1,000: $2.00 $3.00 $4.00 $5.00 $6.00
The charge per $1,000 will be determined on the basis of the age of the life insured at issue or upon increase of the face amount, as applicable. The deferred underwriting charge applicable to each level of insurance coverage cannot exceed $1,000. The amount of the charge remains level for five years. Following the fifth year after issuance of the Policy or a face amount increase, the charge applicable to the initial face amount or increase will decrease each month by .83%, or 10% per year. After the monthly deduction is taken for the last policy month preceding the end of the fifteenth year after issuance or face amount increase, the charge will have decreased to zero. The applicable percentage of the surrender charges to which the Policy would otherwise be subject is illustrated on an annual basis by the following table: Transaction Occurs After Monthly Deduction Taken for Last Month Percent of Preceding End of Year Surrender Charges 5 & below 100% 6 90% 7 80% 8 70% 9 60% 10 50% 11 40% 12 30% 13 20% 14 10% 15 & above 0% The surrender charges begin to grade downward before the beginning of the sixth year for issue ages above 69. For issue ages 70, 71, 72, 73, and issue ages 74 to 80, the surrender charges begin to grade downward at the beginning of the fifth, fourth, third, second, and first years, respectively. The deferred underwriting charge is designed to cover the administrative expenses associated with underwriting and policy issue, including the costs of processing applications, conducting medical examinations, determining the life insured's risk class and establishing policy records. Manufacturers Life of America does not expect to recover from the deferred underwriting charge any amount in excess of its expenses associated with underwriting and policy issue. - 55 - Deferred Sales Charge. The maximum deferred sales charge is equal to 47% of the premiums paid under the Policy up to two Target Premiums described below. For life insureds over age 69 at issue or face amount increase, the applicable percentage of premiums will be reduced in accordance with the following table: Applicable Age Percentage of Premiums 70 45% 71 43% 72 41% 73 39% 74 37% 75 35% 76 34% 77 33% 78 32% 79 31% 80 30% Like the deferred underwriting charge, the percentage deferred sales charge applicable to the initial face amount or face amount increase will remain level for five years (or less for issue ages above 69) and following such period will decrease .83% per month, or 10% per year, from the charge that would otherwise apply. See chart under "Deferred Underwriting Charge" above. As noted above, the deferred sales charge may not exceed 47% of two Target Premiums. The Target Premium for the initial face amount is set forth in the Policy. A Target Premium will be computed for each increase in face amount above the highest face amount of coverage previously in effect, and the policyowner will be advised of such Target Premium. Target Premiums are determined on the basis of a target premium rate and the face amount of insurance provided at issue or by the increase. The applicable rate varies with the issue age and sex (unless unisex rates are required by law) of the life insured and, in the case of certain Policies issued in group or sponsored arrangements providing for reduction in cost of insurance charges (see "Are There Special Provisions For Group Or Sponsored Arrangements?"), the amount of insurance coverage. In order to determine the deferred sales charge applicable to a face amount increase, Manufacturers Life of America will treat a portion of the Policy Value on the date of increase as a premium attributable to the increase. In addition, a portion of each premium paid subsequent to the increase will be attributed to the increase. In each case, the portion attributable to the increase will be the ratio of the guideline annual premium (described below) for the increase to - 56 - the sum of the guideline annual premiums for the initial face amount and all increases including the requested increase. Refund Of Excess Sales Charges. If a Policy is surrendered for its Net Cash Surrender Value at any time during the first two years following issuance or following an increase in face amount or the face amount decreased during the second year after issuance or after increase in face amount, Manufacturers Life of America will refund that part of the total sales charges deducted (the sum of the deferred sales charge and the sales charge deducted from premiums) with respect to "premiums" paid for the initial face amount or such increase (including premiums allocated to the increase as described in the preceding paragraph), whichever is applicable, which is in excess of (i) the sum of 30% of the "premiums" paid up to one guideline annual premium plus 10% of the "premiums" paid in excess of one guideline annual premium up to two guideline annual premiums and (ii) up to 9% of the "premiums" paid in excess of two guideline annual premiums. Since Target Premiums are always less than guideline annual premiums, with the deferred sales charge structure described above, there will be no refund with respect to "premiums" paid in excess of two guideline annual premiums and these excess "premiums" will not reduce the refund applicable to "premiums" paid up to two guideline annual premiums. A policyowner may also elect to cancel an increase in face amount during the first two years following the increase and have the deferred sales charge for the increase reduced by the refund of any excess sales load attributable to the increase. The guideline annual premium, which is set forth in the Policy, is the level annual premium that would be payable for the life of the Policy for a specific amount of coverage if premiums were fixed as to both timing and amount and based on the 1980 Commissioners Standard Ordinary Smoker/Nonsmoker Mortality Tables, net investment earnings at an effective annual rate of 5% and fees and charges as set forth in the Policy. In determining the maximum sales charge allowable, "premiums" will be attributed to the initial face amount and each increase in the same manner as used in determining the deferred sales charge applicable to the face amount and each increase, and the guideline annual premium will be determined separately for the initial face amount and each increase. The operation of the maximum sales charge allowable is illustrated by the following example. Assume that the policyowner has paid $3,000 in premiums under a Policy with a guideline annual premium of $2,000 and a Target Premium of $1,500 and decides to surrender his or her Policy during the second policy year. In the absence of the refund right, the deferred sales charge would be $1,410 (47% of $3,000). - 57 - However, under the formula described above, the maximum sales charge allowable is the sum of $600 (30% of $2,000) and $100 (10% of $1,000), or $700. Since a sales load of $90 (3% of $3,000) was deducted from the premiums when received, and therefore only $610 ($700 - $90) of the deferred sales charge may be retained by the Company, a refund of $800 ($1,410 - $610) will be payable to the policyowner. Since a deferred sales charge is deducted in the event a Policy terminates for failure to make the required payment following the Policy's going into default, the refund right will apply if such termination occurs during the two-year period following issuance of the Policy or any increase in face amount. If the Policy terminates during the two years after a face amount increase, the refund will relate only to the sales charges assessed against premiums attributable to the increase. Charges On Partial Withdrawals. As noted above, both the deferred sales charge and the deferred underwriting charge are applicable in the event of a partial withdrawal of the Net Cash Surrender Value in excess of the Withdrawal Tier Amount. A portion of the surrender charges applicable to the initial face amount and to each increase in face amount will be deducted as a result of the withdrawal. The portion to be deducted will be the same as the ratio of the amount of the withdrawal to the Net Cash Surrender Value prior to the withdrawal. The charges will be deducted from the Policy Value, and the amount so deducted will be allocated among the Investment Accounts and the Guaranteed Interest Account in the same proportion that the withdrawal is allocated among such accounts. Whenever a portion of the surrender charges are deducted as a result of a partial withdrawal, the Policy's remaining surrender charges will be reduced by the amount of the charges taken. The surrender charges not assessed as a result of the 10% free withdrawal provision remain in effect under the Policy and may be assessed upon surrender or lapse, other partial withdrawals or a requested decrease in face amount. Charges On Decreases In Face Amount. As with partial withdrawals, a portion of a Policy's surrender charges will be deducted upon a decrease in or cancellation of face amount requested by the policyowner. Since surrender charges are determined separately for the initial face amount and each face amount increase and since a decrease in face amount will have a different impact on each level of insurance coverage, the portion of the surrender charges to be deducted with respect to each level of insurance coverage will be determined separately. Such portion will be the same as the ratio of the amount of the reduction in such coverage to the amount of such coverage prior to the reduction. As noted under Insurance - 58 - Benefit "Can The Face Amount Of A Policy Be Changed?" decreases are applied to the most recent increase first and thereafter to the next most recent increases successively. The charges will be deducted from the Policy Value, and the amount so deducted will be allocated among the Investment Accounts and the Guaranteed Interest Account in the same proportion as the Policy Value in each bears to the Net Policy Value. Whenever a portion of the surrender charges is deducted as a result of a decrease in face amount, the Policy's remaining surrender charges will be reduced by the amount of the charges taken. What Are The Monthly Deductions? On the policy date and at the beginning of each policy month, a deduction is due from the Policy Value to cover certain charges in connection with the Policy. Monthly deductions due prior to the effective date will be taken on the effective date instead of the dates they were due. The charges consist of (i) a monthly administration charge, (ii) a monthly charge for the cost of insurance, and (iii) a monthly charge for any supplementary benefits added to the Policy (see Other Provisions "What Supplementary Benefits Are Available?"). The monthly deduction will be allocated among the Investment Accounts and the Guaranteed Interest Account in the same proportion as the Policy Value in each bears to the Net Policy Value. The monthly administration charge is $6.00. The charge is designed to cover certain administrative expenses associated with the Policy, including maintaining policy records, collecting premiums and processing death claims, surrender and withdrawal requests and various changes permitted under a Policy. Manufacturers Life of America does not expect to recover from the monthly administration charge any amount in excess of its accumulated administrative expenses relating to the Policies and the Separate Account. Even though administrative expenses may increase, the Company guarantees that it will not increase the amount of the monthly administration charge. The monthly charge for the cost of insurance is determined by multiplying the applicable cost of insurance rate times the net amount at risk at the beginning of each policy month. The charge for the cost of insurance will reflect any extra charges for additional ratings indicated in the Policy. The cost of insurance rate is based on the life insured's age, sex (unless unisex rates are required by law), risk class, the duration of the insurance coverage and, in the case of certain Policies issued in group or sponsored arrangements providing for reduction in cost of insurance charges (see "Are There Special Provisions For Group Or Sponsored Arrangements?"), the - 59 - face amount of the Policy. See Other Matters Legal Considerations. The rate is determined separately for the initial face amount and for each increase in face amount. Cost of insurance rates will generally increase with the life insured's age. The cost of insurance rates used by Manufacturers Life of America reflect its expectations as to future mortality experience. The rates may be changed from time to time on a basis which does not unfairly discriminate within the class of lives insured. In no event will the cost of insurance rate exceed the guaranteed rates set forth in the Policy except to the extent that an extra charge is imposed because of an additional rating applicable to the life insured or if simplified underwriting is granted in a group or sponsored arrangement (see "Are There Special Provisions For Group Or Sponsored Arrangements?"). The guaranteed rates are based on the 1980 Commissioners Standard Ordinary Smoker/Nonsmoker Mortality Tables. The net amount at risk to which the cost of insurance rate is applied is the difference between the death benefit, divided by 1.0032737 (a factor which reduces the net amount at risk for cost of insurance charge purposes by taking into account assumed monthly earnings at an annual rate of 4%), and the Policy Value. Because different cost of insurance rates may apply to different levels of insurance coverage, the net amount at risk will be calculated separately for each level of insurance coverage. When the Option 1 death benefit is in effect, for purposes of determining the net amount at risk applicable to each level of insurance coverage, the Policy Value is attributed first to the initial face amount and then, if the Policy Value is greater than the initial face amount, to each increase in face amount in the order made. Because the calculation of the net amount at risk is different under the death benefit options when more than one level of insurance coverage is in effect, a change in the death benefit option may result in a different net amount at risk for each level of insurance coverage than would have occurred had the death benefit option not been changed. Since the cost of insurance is calculated separately for each level of insurance coverage, any change in the net amount at risk for a level of insurance coverage resulting from a change in the death benefit option may affect the amount of the charge for the cost of insurance. Partial withdrawals and decreases in face amount will also affect the manner in which the net amount at risk for each level of insurance coverage is calculated. In group or sponsored arrangements where Manufacturers Life of America issues Policies with a face amount of less than $25,000 but not less than $10,000, Policies issued with a face - 60 - amount of less than $25,000 may be subject to an additional premium deduction equal to $1.00 per $1,000 face amount. This amount is added to the cost of insurance and deducted monthly. The amount so added will not cause the cost of insurance deducted to exceed the guaranteed rates set forth in the Policy. Are There Special Provisions For Group Or Sponsored Arrangements? Where permitted by state insurance laws, Policies may be purchased under group or sponsored arrangements, as well as on an individual basis. As noted previously, the minimum face amount and minimum change in face amount are reduced to $10,000 and $5,000, respectively, for Policies issued pursuant to such arrangements. A "group arrangement" includes a program under which a trustee, employer or similar entity purchases Policies covering a group of individuals on a group basis. In California all participants of group arrangements will be individually underwritten. A "sponsored arrangement" includes a program under which an employer permits group solicitation of its employees or an association permits group solicitation of its members for the purchase of Policies on an individual basis. The sales charge, monthly deductions, surrender charges, and other charges described above may be reduced for Policies issued in connection with group or sponsored arrangements. Such arrangements may include sales without withdrawal charges and deductions to employees, officers, directors, agents, immediate family members of the foregoing, and employees of agents of Manufacturers Life and its subsidiaries. Manufacturers Life of America will reduce the above charges in accordance with its rules in effect as of the date an application for a Policy is approved. To qualify for such a reduction, a group or sponsored arrangement must satisfy certain criteria as to, for example, size of the group, expected number of participants and anticipated premium payments from the group. Generally, the sales contacts and effort, administrative costs and mortality cost per Policy vary based on such factors as the size of the group or sponsored arrangements, the purposes for which Policies are purchased and certain characteristics of its members. The amount of reduction and the criteria for qualification will reflect the reduced sales effort and administrative costs resulting from, and the different mortality experience expected as a result of, sales to qualifying groups and sponsored arrangements. Manufacturers Life of America may modify from time to time, on a uniform basis, both the amounts of reductions and the criteria for qualification. Reductions in these charges will - 61 - not be unfairly discriminatory against any person, including the affected policyowners and all other policyowners funded by the Separate Account. In addition, groups or persons purchasing under a sponsored arrangement may apply for simplified underwriting. If simplified underwriting is granted, the cost of insurance charge may increase as a result of higher anticipated mortality experience. In addition, groups or persons purchasing under a sponsored arrangement may request increases and decreases in face amount at any time after issue and decreases in face amount at any time after an increase in face amount. Increases in face amount requested by groups or persons purchasing under a sponsored arrangement are not subject to a minimum amount. Decreases in face amount may involve imposition of a surrender charge. Are There Special Provisions For Exchanges? Manufacturers Life of America will permit owners of certain fixed benefit life insurance policies issued either by the Company or Manufacturers Life to exchange their policies for the Policies described in this prospectus. A portion of the cash values transferred from such policies will be credited to the Policies without deduction of the 3% sales charge. Moreover, surrender charges under the policies being exchanged or the Policies issued in exchange therefor may be reduced or eliminated. Policy loans made under policies being exchanged may be carried over to the new Policies without repayment at the time of exchange. Policyowners considering an exchange should consult their tax advisers as to the tax consequences of an exchange. Manufacturers Life of America has obtained an order from the Securities and Exchange Commission dated November 28, 1990 pursuant to which holders of Manufacturers Life of America's scheduled premium variable life ("Director 2000") insurance policies may elect to exchange those policies for the Policies described in this prospectus (the "Exchange Offer"). The terms and conditions under which Director 2000 policyowners may exchange their policies for the Policies differ from the terms and conditions set forth in this prospectus and are available only to Director 2000 policyowners who accept the Exchange Offer. Those Director 2000 policyowners who accept the Exchange Offer will be able to exchange their existing policies for Policies of like face amount without any new evidence of insurability. No direct or deferred sales charge will be imposed on the cash values rolled over into the Policy. No deferred sales charges or underwriting charges will be imposed on surrenders of - 62 - Policies acquired through this Exchange Offer except in connection with premium payments attributable to an increase in face amount. Increases in the face amount of a Policy issued pursuant to the Exchange Offer will be permitted one month after issuance. In addition, a Policy may be issued with a face amount less than $25,000 if issued pursuant to the Exchange Offer. What Are The Risk Charges Assessed Against Separate Account Assets? Manufacturers Life of America makes a daily charge to the Separate Account for the mortality and expense risks it assumes under the Policies. This charge is made each Business Day at an annual rate of .65% of the value of the Separate Account's assets. The mortality risk assumed is that lives insured may live for a shorter period of time than the Company estimated. The expense risk assumed is that expenses incurred in issuing and administering the Policies will be greater than the Company estimated. Manufacturers Life of America will realize a gain from this charge to the extent it is not needed to provide benefits and pay expenses under the Policies. Are There Other Relevant Charges? Currently, Manufacturers Life of America makes no charge against the Separate Account for federal, state or local taxes that may be attributable to the Separate Account or to the operations of the Company with respect to the Policies. However, if Manufacturers Life of America incurs any such taxes, it may make a charge or establish a provision for those taxes. Charges will be imposed on certain transfers of Policy Values, including a $15 charge for each Asset Allocation Balancer transfer and a $5 charge for each Dollar Cost Averaging transfer when Policy Value does not exceed $15,000. See Policy Values "Transfers Of Policy Value." The Separate Account purchases shares of the Portfolios at net asset value. The net asset value of those shares reflects: For the Manulife Funds: (i) an investment management fee equivalent to an annual rate of .50% of the value of the average daily net assets of the Emerging Growth Equity Fund, Common Stock Fund, Real Estate Securities Fund, Balanced Assets Fund, Capital Growth Bond Fund and Money-Market Fund; - 63 - (ii) an investment management fee equivalent to an annual rate of (a) .85% of the value of the first $100 million of average daily net assets and (b) .70% of the value of the average daily net assets over $100 million of each of the International Fund and the Pacific Rim Emerging Markets Fund; (iii) an investment management fee equivalent to an annual rate of .25% of the average of daily net assets of the Equity Index Fund, (iv) expenses of up to .50% and .65% per annum assessed against the assets of the International Fund and the Pacific Rim Emerging Markets Fund, respectively; and (v) expenses of up to .15% per annum assessed against the assets of the Equity Index Fund; and (vi) other expenses already deducted from the assets of the Manulife Funds. For the NASL Trusts: (i) investment management fee equivalent to an annual rate of .800% of the value of the average daily net assets of the Value Equity Trust; (ii) investment management fee equivalent to an annual rate of .650% of the value of the average daily net assets of the U.S. Government Securities Trust; (iii) investment management fee equivalent to an annual rate of .750% of the value of the average daily net assets of the Growth and Income Trust; (iv) investment management fee equivalent to an annual rate of .750% of the value of the average daily net assets of the Equity Trust; (v) investment management fee equivalent to an annual rate of .750% of the average daily net assets of the Conservative Asset Allocation Trust; - 64 - (vi) investment management fee equivalent to an annual rate of .750% of the average daily net assets of the Moderate Asset Allocation Trust; (vii) investment management fee equivalent to an annual rate of .750% of the average daily net assets of the Conservative Asset Allocation Trust; and (viii) expenses of up to .50% per annum assessed against the assets of each of the NASL Trusts; and (ix) other expenses already deducted from the assets of the NASL Trusts. Detailed information concerning such fees and expenses is set forth under the caption "Management Of The Funds" in the Prospectus for the Manulife Series Fund that accompanies this Prospectus and under the caption "Management of The Trust" in the Prospectus for the NASL Series Trust that accompanies this Prospectus. The General Account By virtue of exclusionary provisions, interests in the general account of Manufacturers Life of America have not been registered under the Securities Act of 1933 and the general account has not been registered as an investment company under the Investment Company Act of 1940. Accordingly, neither the general account nor any interests therein are subject to the provisions of these acts, and as a result the staff of the Securities and Exchange Commission has not reviewed the disclosures in this prospectus relating to the general account. Disclosures regarding the general account may, however, be subject to certain generally applicable provisions of the federal securities laws relating to the accuracy and completeness of statements made in a prospectus. What Is The General Account? The general account of Manufacturers Life of America consists of all assets owned by the Company other than those in the Separate Account and other separate accounts of the Company. Subject to applicable law, Manufacturers Life of America has sole discretion over the investment of the assets of the general account. A policyowner may elect to allocate net premiums to the Guaranteed Interest Account or to transfer all or a portion of - 65 - the Policy Value to the Guaranteed Interest Account from the Investment Accounts. Manufacturers Life of America will hold the reserves required for any portion of the Policy Value allocated to the Guaranteed Interest Account in its general account. However, an allocation of Policy Value to the Guaranteed Interest Account does not entitle the policyowner to share in the investment experience of the general account. Instead, Manufacturers Life of America guarantees that the Policy Value in the Guaranteed Interest Account will accrue interest daily at an effective annual rate of at least 4%, without regard to the actual investment experience of the general account. Consequently, if a policyowner pays the planned premiums, allocates all net premiums only to the general account and makes no transfers, partial withdrawals, or policy loans, the minimum amount and duration of his or her death benefit will be determinable and guaranteed. Transfers from the Guaranteed Interest Account to the Investment Accounts are subject to restrictions (see Policy Values "What Is The Policy Value And How Is It Determined?"). The Policy Value in the Guaranteed Interest Account is equal to the portion of the net premiums allocated to it, plus any amounts transferred to it and interest credited to it minus any charges deducted from it or partial withdrawals or amounts transferred from it. Manufacturers Life of America guarantees that the interest credited to the Policy Value in the Guaranteed Interest Account will not be less than an effective annual rate of 4%. The Company may, at its sole discretion, credit a higher rate of interest, although it is not obligated to do so. The policyowner assumes the risk that interest credited may not exceed the guaranteed minimum rate of 4% per year. Other Provisions What Supplementary Benefits Are Available? Subject to certain requirements, one or more supplementary benefits may be added to a Policy, including those providing term insurance for various persons, guaranteeing insurability, providing accidental death coverage, waiving monthly deductions upon disability, guaranteeing the Policy Value and, in the case of corporate-owned Policies, permitting a change of the life insured. The guarantee of Policy Value is a supplementary benefit which guarantees that at the life insured's age 65 the Policy Value will at least equal the value that would have accumulated if all net premiums had been allocated to the Guaranteed Interest Account with interest credited at an effective annual rate of 5.5% and maximum charges for cost of insurance and supplementary benefits, where appropriate. This supplementary benefit must be made a part of the Policy at issue, and the minimum premium - 66 - requirement of the Policy must be satisfied at all times for the guarantee to remain in effect. The cost of the benefit for each $1,000 of face amount ranges from 1 cent to 4 cents per month, depending on the current age of the life insured. More detailed information concerning this and other supplementary benefits may be obtained from an authorized agent of the Company. The cost of any supplementary benefits will be deducted as part of the monthly deduction. See Charges "What Are The Monthly Deductions?" Under What Circumstances May Fund Shares Be Substituted? Although Manufacturers Life of America believes it to be highly unlikely, it is possible that in the judgment of its management, one or more of the Funds may become unsuitable for investment by the Separate Account because of a change in investment policy or a change in the applicable laws or regulations, because the shares are no longer available for investment, or for some other reason. In that event, Manufacturers Life of America may seek to substitute the shares of another Fund or of an entirely different mutual fund. Before this can be done, the approval of the S.E.C. and one or more state insurance departments may be required. Manufacturers Life of America also reserves the right to combine other separate accounts with the Separate Account, to establish additional sub-accounts within the Separate Account, to operate the Separate Account as a management investment company or other form permitted by law, and to de-register the Separate Account under the 1940 Act. Any such change would be made only if permissible under applicable federal and state law. The investment objective of the Separate Account will not be changed materially without the approval of the Insurance Commissioner of the Commonwealth of Pennsylvania. Policyowners will be advised of any such change at the time it is made. What Are The Other General Policy Provisions? Beneficiary. One or more beneficiaries of the Policy may be appointed by the policyowner by naming them in the application. Beneficiaries may be appointed in three classes primary, secondary and final. There after the beneficiary may be changed by the policyowner during the life insured's lifetime by giving written notice to Manufacturers Life of America in a form satisfactory to it unless an irrevocable designation has been elected. If the life insured dies and there is no surviving beneficiary, the policyowner, or the policyowner's estate if the policyowner is the life insured, will be the beneficiary. If a beneficiary dies before the seventh day after the death of the life insured, the Company - 67 - will pay the insurance benefit as if the beneficiary had died before the life insured. Incontestability. Manufacturers Life of America will not contest the validity of a Policy after it has been in force during the life insured's lifetime for two years from the policy date. It will not contest the validity of an increase in face amount or the addition of a supplementary benefit after such increase or addition has been in force during the life insured's lifetime for two years. If a Policy has been reinstated and been in force for less than two years from the reinstatement date, the Company can contest any misrepresentation of a fact material to the reinstatement. Misstatement Of Age Or Sex. If the life insured's stated age or sex or both in the Policy are incorrect, Manufacturers Life of America will change the face amount of insurance so that the death benefit will be that which the most recent monthly charge for the cost of insurance would have bought for the correct age and sex. Suicide Exclusion. If the life insured, whether sane or insane, dies by suicide within one year from the policy date, Manufacturers Life of America will pay only the premiums paid less any partial withdrawals of the Net Cash Surrender Value and any amount in the Loan Account. If the life insured should die by suicide within one year after a face amount increase, the death benefit for the increase will be limited to the monthly deduction for the increase. Assignment. Manufacturers Life of America will not be bound by an assignment until it receives a copy of it at its Service Office. Manufacturers Life of America assumes no responsibility for the validity or effects of any assignment. When Are Proceeds Paid? As long as the Policy is in force, Manufacturers Life of America will ordinarily pay any policy loans, partial withdrawals, Net Cash Surrender Value or any insurance benefit within seven days after receipt at the Manufacturers Life of America Service Office of all the documents required for such a payment. The Company may delay the payment of any policy loans, partial withdrawals, Net Cash Surrender Value or the portion of any insurance benefit that depends on Investment Account values for up to six months if such payments are based on values which do not depend on the investment performance of the sub-accounts; otherwise for any period during which the New York Stock Exchange is closed for trading (except for normal holiday closings) or when the Securities and Exchange Commission has determined that a state of emergency exists which may make such payment impracticable. - 68 - What Reports Will Be Sent To Policyowners? Within 30 days after each policy anniversary, Manufacturers Life of America will send the policyowner a statement showing, among other things, the amount of the death benefit, the Policy Value and its allocation among the Investment Accounts, the Guaranteed Interest Account and the Loan Account, the value of the units in each Investment Account to which the Policy Value is allocated, any Loan Account balance and any interest charged since the last report, the premiums paid and policy transactions made during the period since the last statement and any other information required by law. Each policyowner will also be sent an annual and a semi-annual report for the Series Fund which will include a list of the securities held in each Fund as required by the 1940 Act. Other Matters What Is The Federal Tax Treatment Of Policies? The following summary provides a general description of the federal income tax considerations associated with the Policy and does not purport to be complete or to cover all situations. This discussion is not intended as tax advice. Counsel or other competent tax advisers should be consulted for more complete information. This discussion is based upon the Company's understanding of the present federal income tax laws as they are currently interpreted by the Internal Revenue Service (the "Service"). No representation is made as to the likelihood of continuation of the present federal income tax laws nor of the current interpretations by the Service. WE DO NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY POLICY OR ANY TRANSACTION REGARDING THE POLICIES. Tax Status Of The Policy Section 7702 of the Internal Revenue Code of 1986, as amended (the "Code") sets forth a definition of a life insurance contract for federal tax purposes. The Secretary of Treasury (the "Treasury") is authorized to prescribe regulations implementing Section 7702. However, while proposed regulations and other interim guidance have been issued, final regulations have not been adopted and guidance as to how Section 7702 is to be applied is limited. If a Policy were determined not to be a life insurance contract for purposes of Section 7702, such Policy would not provide the tax advantages normally provided by a life insurance policy. With respect to a Policy issued on the basis of a standard rate class, the Company believes (largely in reliance on IRS Notice 88-128 and the proposed mortality charge regulations - 69 - 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 the Series Fund, intends to comply with the diversification requirements prescribed in Treas. Reg. Sec.1.817-5, which affect how the Series Fund's assets are to be invested. The Company believes that the Separate Account will thus meet the diversification requirement, and the Company will monitor continued compliance with the requirement. In certain circumstances, owners of variable life insurance Policies may be considered the owners, for federal income tax purposes, of the assets of the separate account used to support their Policies. In those circumstances, income and gains from the separate account assets would be includible in the variable policyowner's gross income. The IRS has stated in published rulings that a variable policyowner will be considered the owner of separate account assets if the policyowner possesses incidents of ownership in those assets, such as the ability to exercise investment control over the assets. The Treasury Department has also announced, in connection with the issuance of regulations concerning diversification, that those regulations "do not provide guidance concerning the circumstances in which investor control of the investments of a segregated asset account may cause the investor (i.e., the policyowner), rather than the insurance company, to be treated as the owner of the assets in the account." This announcement also stated that guidance - 70 - would be issued by way of regulations or rulings on the "extent to which policyowners may direct their investments to particular subaccounts without being treated as owners of the underlying assets." As of the date of this Prospectus, no such guidance has been issued. The ownership rights under the Policy are similar to, but different in certain respects from, those described by the IRS in rulings in which it was determined that policyowners were not owners of separate account assets. For example, the owner has additional flexibility in allocating premium payments and Policy Values. These differences could result in an owner being treated as the owner of a pro rata portion of the assets of the Separate Account. In addition, the Company does not know what standards will be set forth, if any, in the regulations or rulings which the Treasury Department has stated it expects to issue. The Company therefore reserves the right to modify the Policy as necessary to attempt to prevent an owner from being considered the owner of a pro rata share of the assets of the Separate Account. The following discussion assumes that the Policy will qualify as a life insurance contract for federal income tax purposes. What Is The Tax Treatment Of Policy Benefits? In General. The Company believes that the proceeds and cash value increases of a Policy should be treated in a manner consistent with a fixed-benefit life insurance policy for federal income tax purposes. Thus, the death benefit under the Policy should be excludable from the gross income of the beneficiary under Section 101(a)(1) of the Code. Depending on the circumstances, the exchange of a Policy, a change in the Policy's death benefit option, a Policy loan, a partial withdrawal, a surrender, a change in ownership, a change of insured, the addition of an accelerated death benefit rider, or an assignment of the Policy may have federal income tax consequences. In addition, federal, state and local transfer, and other tax consequences of ownership or receipt of Policy proceeds depend on the circumstances of each policyowner or beneficiary. Generally, the policyowner will not be deemed to be in constructive receipt of the Policy Value, including increments thereof, until there is a distribution. The tax consequences of distributions from, and loans taken from or secured by, a Policy depend on whether the Policy is classified as a "Modified Endowment Contract." Upon a complete surrender or lapse of a Policy or when benefits are paid at a Policy's maturity date, if the amount received plus the amount of indebtedness exceeds the total investment in the Policy, the - 71 - excess will generally be treated as ordinary income subject to tax, regardless of whether the Policy is or is not a Modified Endowment Contract. Modified Endowment Contracts. Section 7702A establishes a class of life insurance contracts designated as "Modified Endowment Contracts," which applies to Policies entered into or materially changed after June 20, 1988. Because of the Policy's flexibility, classification as a Modified Endowment Contract will depend on the individual circumstances of each Policy. In general, a Policy will be a Modified Endowment Contract if the accumulated premiums paid at any time during the first seven policy years exceed the sum of the net level premiums which would have been paid on or before such time if the Policy provided for paid-up future benefits after the payment of seven level annual premiums. The determination of whether a Policy will be a Modified Endowment Contract after a material change generally depends upon the relationship of the death benefit and Policy Value at the time of such change and the additional premiums paid in the seven years following the material change. If a premium is credited or transaction conducted which would cause the Policy to become a Modified Endowment Contract, the Company will notify the policyowner that unless a refund of the excess premium is requested by the policyowner within 45 days of the policy anniversary next occurring, thereafter the Policy will become a Modified Endowment Contract. The rules relating to whether a Policy will be treated as a Modified Endowment Contract are extremely complex and cannot be adequately described in the limited confines of this summary. Therefore, a current or prospective policyowner should consult with a competent adviser to determine whether a transaction will cause the Policy to be treated as a Modified Endowment Contract. Distributions From Policies Classified As Modified Endowment Contracts. Policies classified as Modified Endowment Contracts will be subject to the following tax rules: First, all partial withdrawals from such a Policy are treated as ordinary income subject to tax up to the amount equal to the excess (if any) of the Policy Value immediately before the distribution over the investment in the Policy (described below) at such time. Second, loans taken from or secured by such a Policy are treated as partial withdrawals from the Policy and taxed accordingly. Past-due loan interest that is added to the loan amount is treated as a loan. Third, a 10% additional income tax is imposed on the portion of any distribution (including distributions upon surrender) from, or loan taken from or secured by, such a Policy that is included in income except where the distribution or loan is made on or after the - 72 - policyowner attains age 59 1/2, is attributable to the policyowner's becoming disabled, or is part of a series of substantially equal periodic payments for the life (or life expectancy) of the policyowner or the joint lives (or joint life expectancies) of the policyowner and the policyowner's beneficiary. Distributions From Policies Not Classified As Modified Endowment Contracts. A distribution from a Policy that is not a Modified Endowment Contract is generally treated as a tax-free recovery by the policyowner of the investment in the Policy (described below) to the extent of such investment in the Policy, and as a distribution of taxable income only to the extent the distribution exceeds the investment in the Policy. An exception to this general rule occurs in the case of a decrease in the Policy's death benefit or any other change that reduces benefits under the Policy in the first 15 years after the Policy is issued and that results in a cash distribution to the policyowner in order for the Policy to continue complying with the Section 7702 definitional limits. Such a cash distribution will be taxed in whole or in part as ordinary income (to the extent of any gain in the Policy) under rules prescribed in Section 7702. Loans from, or secured by, a Policy that is not a Modified Endowment Contract are not treated as distributions. Instead, such loans are treated as indebtedness of the policyowner. Select Loans may, however, be treated as a distribution. Finally, neither distributions (including distributions upon surrender) nor loans from, or secured by, a Policy that is not a Modified Endowment Contract are subject to the 10% additional tax. Policy Loan Interest. Generally, personal interest paid on any loan under a Policy which is owned by an individual is not deductible. In addition, interest on any loan under a Policy owned by a taxpayer and covering the life of any individual who is an officer or employee of or is financially interested in the business carried on by that taxpayer will not be tax deductible to the extent the aggregate amount of such loans with respect to contracts covering such individual exceeds $50,000. The deduction of interest on Policy loans may also be subject to other restrictions under Section 264 of the Code. Investment In The Policy. Investment in the Policy means (i) the aggregate amount of any premiums or other consideration paid for a Policy, minus (ii) the aggregate amount received under the Policy which has been excluded from gross income of the policyowner (except that the amount of any loan from, or secured by, a Policy that is a Modified Endowment Contract, to the extent such amount has been excluded from gross income, - 73 - will be disregarded), plus (iii) the amount of any loan from, or secured by, a Policy that is a Modified Endowment Contract to the extent that such amount has been included in the gross income of the policyowner. Multiple Policies. All Modified Endowment Contracts that are issued by the Company (or its affiliates) to the same policyowner during any calendar year are treated as one Modified Endowment Contract for purposes of determining the amount includible in the gross income under Section 72(e) of the Code. What Are The Company's Tax Considerations? As a result of the Omnibus Budget Reconciliation Act of 1990, insurance companies are generally required to capitalize and amortize certain policy acquisition expenses over a 10-year period rather than currently deducting such expenses. This treatment applies to the deferred acquisition expenses of a Policy and results in a significantly higher corporate income tax liability for the Company. At the present time, the Company makes no charge to the Separate Account for any federal, state or local taxes that the Company incurs that may be attributable to such Account or to the Policies. The Company, however, reserves the right in the future to make a charge for any such tax or other economic burden resulting from the application of the tax laws that it determines to be properly attributable to the Separate Account or to the Policies. Who Sells The Policies And What Are The Sales Commissions? ManEquity, Inc., an indirect wholly-owned subsidiary of Manufacturers Life, will act as the principal underwriter of, and continuously offer, the Policies pursuant to a Distribution Agreement with Manufacturers Life of America. ManEquity, Inc. is registered as a broker-dealer under the Securities Exchange Act of 1934 and is a member of the National Association of Securities Dealers. The Policies will be sold by registered representatives of either ManEquity, Inc. or other broker-dealers having distribution agreements with ManEquity, Inc. who are also authorized by state insurance departments to do so. A registered representative will receive first-year commissions not to exceed 50% of premiums paid up to the "target commissionable premium," commissions of 3% of premiums in excess thereof and, on and after the third anniversary, 0.15% of the Policy Value per annum. In addition, representatives may be eligible for bonuses of up to 90% of first-year commissions. Representatives who meet certain productivity standards with regard to the sale of the Policies and certain other policies - 74 - issued by Manufacturers Life of America or Manufacturers Life will be eligible for additional compensation. What Responsibilities Has Manufacturers Life Assumed? Manufacturers Life has entered into an agreement with ManEquity, Inc. pursuant to which Manufacturers Life, on behalf of ManEquity, Inc., will pay the sales commissions in respect of the Policies and certain other policies issued by Manufacturers Life of America, prepare and maintain all books and records required to be prepared and maintained by ManEquity, Inc. with respect to the Policies and such other policies, and send all confirmations required to be sent by ManEquity, Inc. with respect to the Policies and such other policies. ManEquity, Inc. will promptly reimburse Manufacturers Life for all sales commissions paid by Manufacturers Life and will pay Manufacturers Life for its other services under the agreement in such amounts and at such times as agreed to by the parties. Manufacturers Life has also entered into a Service Agreement with Manufacturers Life of America pursuant to which Manufacturers Life will provide to Manufacturers Life of America in Toronto, Ontario, Canada all issue, administrative, general services and recordkeeping functions on behalf of Manufacturers Life of America with respect to all of its insurance policies including the Policies. Finally, Manufacturers Life has entered into a Stoploss Reinsurance Agreement with Manufacturers Life of America under which Manufacturers Life reinsures all aggregate claims in excess of 110% of the expected claims for all Flexible Premium Variable Life Insurance Policies. Under the agreement Manufacturers Life will automatically reinsure the risk for any one life up to a maximum of $7,500,000, except in the case of aviation risks where the maximum will be $5,000,000. However, Manufacturers Life may also consider reinsuring any non-aviation risk in excess of $7,500,000 and any aviation risk in excess of $5,000,000. What Are The Voting Rights? As stated above, all of the assets held in the sub-accounts of the Separate Account will be invested in shares of a particular Portfolio of Manulife Series Fund or NASL Series Trust. Manufacturers Life of America is the legal owner of those shares and as such has the right to vote upon certain matters that are required by the 1940 Act to be approved or ratified by the shareholders of a mutual fund and to vote upon any other matters that may be voted upon at a shareholders' meeting. However, Manufacturers Life of America will vote shares held in the sub-accounts in accordance with - 75 - instructions received from policyowners having an interest in such sub-accounts. Shares held in each sub-account for which no timely instructions from policyowners are received, including shares not attributable to Policies, will be voted by Manufacturers Life of America in the same proportion as those shares in that sub-account for which instructions are received. Should the applicable federal securities laws or regulations change so as to permit Manufacturers Life of America to vote shares held in the Separate Account in its own right, it may elect to do so. 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 Manulife Fund or NASL Trust. The number will be determined as of a date chosen by Manufacturers Life of America, but not more than 90 days before the shareholders' meeting. Fractional votes are counted. Voting instructions will be solicited in writing at least 14 days prior to the meeting. Manufacturers Life of America may, if required by state insurance officials, disregard voting instructions if such instructions would require shares to be voted so as to cause a change in the sub-classification or investment policies of one or more of the Portfolios, or to approve or disapprove an investment management contract. In addition, Manufacturers Life of America itself may disregard voting instructions that would require changes in the investment policies or investment adviser, provided that Manufacturers Life of America reasonably disapproves such changes in accordance with applicable federal regulations. If Manufacturers Life of America does disregard voting instructions, it will advise policyowners of that action and its reasons for such action in the next communication to policyowners. Who Are The Directors And Officers Of Manufacturers Life of America? The directors and executive officers of Manufacturers Life of America, together with their principal occupations during the past five years, are as follows: - 76 -
Position With Manufacturers Life Name of America Principal Occupation Sandra M. Cotter Director Attorney 1989-present, Dykema Gossett Leonard V. Day, Jr. Director General Manager, Philadelphia Branch 1970-present, The Manufacturers Life Insurance Company Donald A. Guloien President and Director Senior Vice President, Business Development 1994-present, The Manufacturers Life Insurance Company; Vice President, U.S. Individual Business 1990-1994, The Manufacturers Life Insurance Company Stephen C. Nesbitt Secretary, General Legal Vice President 1990-present, Counsel and Director The Manufacturers Life Insurance Company Joseph J. Pietroski Director Senior Vice President, General Counsel and Corporate Secretary 1988-present, The Manufacturers Life Insurance Company
- 77 -
Position With Manufacturers Life Name of America Principal Occupation John D. Richardson Chairman and Director Senior Vice President and General Manager, U.S. Operations 1995-present, The Manufacturers Life Insurance Company; Senior Vice President and General Manager, Canadian Operations 1992-1994, The Manufacturers Life Insurance Company; Senior Vice President, Financial Services 1992, The Manufacturers Life Insurance Company; Executive Vice Chairman and CFO 1989-1991, Canada Trust Diane M. Schwartz Director Senior Vice President, International Operations 1992-present, The Manufacturers Life Insurance Company; Senior Vice President and General Manager, U.S. Operations 1988-1992, The Manufacturers Life Insurance Company John R. Ostler Vice President, Chief Financial Vice President 1992- Actuary and Treasurer present, The Manufacturers Life Insurance Company; Vice President, Insurance Products 1990-1992, The Manufacturers Life Insurance Company
- 78 -
Position With Manufacturers Life Name of America Principal Occupation Douglas H. Myers Vice President, Assistant Vice President and Finance and Compliance Controller, U.S. Operations 1988- Controller present, The Manufacturers Life Insurance Company
What State Regulations Apply? Manufacturers Life of America is subject to regulation and supervision by the Michigan Department of Insurance, which periodically examines its financial condition and operations. It is also subject to the insurance laws and regulations of all jurisdictions in which it is authorized to do business. The Policies have been filed with insurance officials, and meet all standards set by law, in each jurisdiction where they are sold. Manufacturers Life of America is required to submit annual statements of its operations, including financial statements, to the insurance departments of the various jurisdictions in which it does business for the purposes of determining solvency and compliance with local insurance laws and regulations. Is There Any Litigation Pending? No litigation is pending that would have a material effect upon the Separate Account or the Series Fund. Where Can Further Information Be Found? A registration statement under the Securities Act of 1933 has been filed with the S.E.C. relating to the offering described in this prospectus. This prospectus does not include all the information set forth in the registration statement. The omitted information may be obtained from the S.E.C.'s principal office in Washington, D.C. upon payment of the prescribed fee. For further information you may also contact Manufacturers Life of America's Service Office, the address and telephone number of which are on the first page of this prospectus. - 79 - Legal Considerations On July 6, 1983, the Supreme Court of The United States held in Arizona Governing Committee v. Norris that certain annuity benefits provided by employers' retirement and fringe benefit programs may not, under Title VII of the Civil Rights Act of 1964, vary between men and women. Unless requested by the applicant, the Policy which will be issued by Manufacturers Life of America will be based on actuarial tables which distinguish between men and women and thus provide different benefits to men and women of the same age. Accordingly, employers and employee organizations should consider, in consultation with legal counsel, the effect of Norris or any other applicable law on any employment-related insurance benefit program before purchasing a Policy. If requested by the applicant, Manufacturers Life of America may offer the Policy with provisions based on actuarial tables that do not differentiate on the basis of sex to such prospective purchasers in states where the unisex version of the Policy has been approved. The State of Montana currently prohibits the use of actuarial tables that distinguish between men and women in determining premiums and policy benefits for policies issued on the life of any of its residents. Consequently, a Policy will be issued pursuant to the offer contained in this prospectus to a Montana resident having premiums and benefits which are based on actuarial tables that do not differentiate on the basis of sex. Legal Matters The legal validity of the policies has been passed on by Stephen C. Nesbitt, Esq., Secretary and General Counsel of Manufacturers Life of America. Jones & Blouch L.L.P., Washington D.C., has passed on certain matters relating to the federal securities laws. Experts The financial statements of the Manufacturers Life Insurance Company of America and the Manufacturers Life Insurance Company of America Separate Account Four appearing in this prospectus for the period ended September 30, 1995 are unaudited. The financial statements of The Manufacturers Life Insurance Company of America and of The Manufacturers Life Insurance Company of America Separate Account Four appearing in this prospectus for the periods ending December 31 have been audited by Ernst & Young LLP, independent auditors to the extent indicated in their reports thereon also appearing - 80 - elsewhere herein. Such financial statements have been included herein in reliance upon such reports given upon the authority of such firm as experts in auditing and accounting. Actuarial matters included in this prospectus have been examined by John Ostler, Vice President, Chief Actuary and Treasurer of Manufacturers Life of America, whose opinion is filed as an exhibit to the registration statement. - 81 - FINANCIAL STATEMENTS The financial statements of Manufacturers Life of America included herein should be distinguished from the financial statements of the Account and should be considered only as bearing upon the ability of Manufacturers Life of America to meet its obligations under the Policies. - 82 - The following financial statements for Separate Account Four for the period ended September 30, 1995 only are unaudited. - 83 - SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 1995 (Unaudited)
Emerging Common Real Growth Stock Estate Equity Sub- Securities Sub-Account Account S u b - Account ASSETS Investment in Manulife Series Fund, Inc. at market value Emerging Growth Equity Fund, $49,066,212 2,145,195 shares (cost $41,029,701) Common Stock Fund, $17,783,825 1,096,703 shares (cost $15,687,052) Real Estate Securities Fund, $13,262,787 904,053 shares (cost $12,822,773) Balanced Assets Fund, 2,204,515 shares (cost $32,995,887) Capital Growth Bond Fund, 986,200 shares (cost $11,076,668) Money Market Fund, 573,328 shares (cost $5,978,646) International Fund, 145,624 shares (cost $1,442,979) Pacific Rim Emerging Markets Fund, 112,980 shares (cost $1,060,074) 49,066,212 17,783,825 13,262,787 Receivable for Policy-related Transactions (131,780) 7,112 3,785 NET ASSETS $48,934,432 $17,790,937 $13,266,572 Units Outstanding 951,476 692,524 511,236 Net asset value per unit $51.43 $25.69 $25.95
See accompanying notes. - 84 - SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 1995 (Unaudited)
Capital Balanced Growth Money- Asset Bond Market Sub-Account Sub-Account Sub-Account ASSETS Investment in Manulife Series Fund, Inc. at market value Emerging Growth Equity Fund, 2,145,195 shares (cost $41,029,701) Common Stock Fund, 1,096,703 shares (cost $15,687,052) Real Estate Securities Fund, 904,053 shares (cost $12,822,773) Balanced Assets Fund, $35,843,819 2,204,515 shares (cost $32,995,887) Capital Growth Bond Fund, $11,424,057 986,200 shares (cost $11,076,668) Money Market Fund, $6,132,336 573,328 shares (cost $5,978,646) International Fund, 145,624 shares (cost $1,442,979) Pacific Rim Emerging Markets Fund, 112,980 shares (cost $1,060,074) 35,843,819 11,424,057 6,132,336 Receivable for Policy-related Transations 381,506 71,807 (167,714) NET ASSETS $36,225,325 $11,495,864 $5,964,622 Units Outstanding 1,654,124 612,459 409,377 Net asset value per unit $21.90 $18.77 $14.57
See accompanying notes. - 85 - SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 1995 (Unaudited)
Pacific Rim Inter- Emerging national Markets Sub-Account Sub-Account Total ASSETS Investment in Manulife Series Fund, Inc. at market value Emerging Growth Equity Fund, $49,066,212 2,145,195 shares (cost $41,029,701) Common Stock Fund, 17,783,825 1,096,703 shares (cost $15,687,052) Real Estate Securities Fund, 13,262,787 904,053 shares (cost $12,822,773) Balanced Assets Fund, 35,843,819 2,204,515 shares (cost $32,995,887) Capital Growth Bond Fund, 11,424,057 986,200 shares (cost $11,076,668) Money Market Fund, 6,132,336 573,328 shares (cost $5,978,646) International Fund, 1,528,862 1,528,862 145,624 shares (cost $1,442,979) Pacific Rim Emerging Markets Fund, $1,133,144 $1,133,144 112,980 shares (cost $1,060,074) 1,528,862 1,133,144 136,175,042 Receivable for Policy-related Transaction 11,456 11,983 188,155 NET ASSETS $1,540,318 $1,145,127 $136,363,197 Units Outstanding 148,823 114,513 Net asset value per unit $10.35 $10.00
See accompanying notes. - 86 - SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF CHANGES IN NET ASSETS PERIOD ENDED SEPTEMBER 30, 1995 and DECEMBER 31, 1994 (Unaudited)
Emerging Growth Equity Sub-Account Period Ended Year Ended Sept. 30/95 Dec. 31/94 FROM OPERATIONS Net investment income (loss) $1,034,415 ($53,653) Net realized gain (loss) 357,276 259,712 Unrealized appreciation (depreciation) of investments during the period Increase (decrease) in net assets 7,925,450 (1,227,841) derived from operations 9,317,141 (1,021,782) FROM CAPTIAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums 12,226,601 14,531,343 Transfer of terminations (3,504,188) (2,706,223) Transfer of policy loans (390,374) (308,656) Net interfund transfers 284,071 322,712 8,616,110 11,839,176 Net increase in net assets 17,933,251 10,817,394 NET ASSETS Beginning of Year 31,001,181 20,183,787 End of Period $48,934,432 $31,001,181
See accompanying notes. - 87 - SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF CHANGES IN NET ASSETS PERIOD ENDED SEPTEMBER 30, 1995 and DECEMBER 31, 1994 (Unaudited)
Common Stock Sub-Account Period Ended Year Ended Sept. 30/95 Dec. 31/94 FROM OPERATIONS Net investment income (loss) ($74,049) $554,517 Net realized gain (loss) 141,436 92,981 Unrealized appreciation (depreciation) of investments during the period Increase (decrease) in net assets 2,880,841 (1,183,509) derived from operations 2,948,228 (536,011) FROM CAPTIAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums 3,871,912 5,946,303 Transfer of terminations (1,786,901) (1,073,532) Transfer of policy loans (121,761) (97,701) Net interfund transfers 142,840 (252,248) 2,106,090 4,522,822 Net increase in net assets 5,054,318 3,986,811 NET ASSETS Beginning of Year 12,736,619 8,749,808 End of Period $17,790,937 $12,736,619
See accompanying notes. - 88 - SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF CHANGES IN NET ASSETS PERIOD ENDED SEPTEMBER 30, 1995 and DECEMBER 31, 1994 (Unaudited)
Real Estate Securities Sub-Account Period Ended Year Ended Sept. 30/95 Dec. 31/94 FROM OPERATIONS Net investment income (loss) $169,867 $177,093 Net realized gain (loss) 153,651 108,207 Unrealized appreciation (depreciation) of investments during the period Increase (decrease) in net assets 1,007,361 (691,776) derived from operations 1,330,879 (406,476) FROM CAPTIAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums 3,246,554 4,968,671 Transfer of terminations (1,082,526) (931,394) Transfer of policy loans (40,583) (85,424) Net interfund transfers (815,694) 267,605 1,307,751 4,219,458 Net increase in net assets 2,638,630 3,812,982 NET ASSETS Beginning of Year 10,627,942 6,814,960 End of Period $13,266,572 $10,627,942
See accompanying notes. - 89 - SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF CHANGES IN NET ASSETS PERIOD ENDED SEPTEMBER 30, 1995 and DECEMBER 31, 1994 (Unaudited)
Balanced Assets Sub-Account Period Ended Year Ended Sept. 30/95 Dec. 31/94 FROM OPERATIONS Net investment income (loss) ($104,582) $1,257,677 Net realized gain (loss) 84,992 72,510 Unrealized appreciation (depreciation) of investments during the period 5,103,606 (2,560,365) Increase (decrease) in net assets derived from operations 5,084,016 (1,230,178) FROM CAPTIAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums 8,467,229 11,014,712 Transfer of terminations (2,480,132) (3,111,863) Transfer of policy loans (278,336) (287,843) Net interfund transfers (1,505,927) (396,171) 4,202,834 7,218,835 Net increase in net assets 9,286,850 5,988,657 NET ASSETS Beginning of Year 26,938,475 20,949,818 End of Period $36,225,325 $26,938,475
See accompanying notes. - 90 - SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF CHANGES IN NET ASSETS PERIOD ENDED SEPTEMBER 30, 1995 and DECEMBER 31, 1994 (Unaudited)
Capital Growth Bond Sub-Account Period Ended Year Ended Sept. 30/95 Dec. 31/94 FROM OPERATIONS Net investment income (loss) ($47,077) $492,509 Net realized gain (loss) (21,982) (29,791) Unrealized appreciation (depreciation) of investments during the period Increase (decrease) in net assets 1,360,541 (822,528) derived from operations 1,291,482 (359,810) FROM CAPTIAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums 2,279,651 3,088,112 Transfer of terminations (979,185) (628,592) Transfer of policy loans (56,737) (55,847) Net interfund transfers 508,887 (86,125) 1,752,616 2,317,548 Net increase in net assets 3,044,098 1,957,738 NET ASSETS Beginning of Year 8,451,766 6,494,028 End of Period $11,495,864 $8,451,766
See accompanying notes. - 91 - SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF CHANGES IN NET ASSETS PERIOD ENDED SEPTEMBER 30, 1995 and DECEMBER 31, 1994 (Unaudited)
Money-Market Sub-Account Period Ended Year Ended Sept. 30/95 Dec. 31/94 FROM OPERATIONS Net investment income (loss) ($26,185) $120,825 Net realized gain (loss) 40,736 11,641 Unrealized appreciation (depreciation) of investments during the period Increase (decrease) in net assets 185,114 (19,907) derived from operations 199,665 112,559 FROM CAPTIAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums 1,753,522 2,895,838 Transfer of terminations (547,311) (1,071,814) Transfer of policy loans (29,895) (42,089) Net interfund transfers 11,223 (234,848) 1,187,539 1,547,087 Net increase in net assets 1,387,204 1,659,646 NET ASSETS Beginning of Year 4,577,418 2,917,772 End of Period $5,964,622 $4,577,418
See accompanying notes. - 92 - SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF CHANGES IN NET ASSETS PERIOD ENDED SEPTEMBER 30, 1995 and DECEMBER 31, 1994 (Unaudited)
*International Sub-Account Period Ended Period Ended Sept. 30/95 Dec. 31/94 FROM OPERATIONS Net investment income (loss) ($4,465) $533 Net realized gain (loss) 537 (215) Unrealized appreciation (depreciation) of investments during the period Increase (decrease) in net assets 86,807 (924) derived from operations 82,879 (606) FROM CAPTIAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums 349,308 36,857 Transfer of terminations (61,827) (2,007) Transfer of policy loans (6,014) 0 Net interfund transfers 904,565 237,163 1,186,032 272,013 Net increase in net assets 1,268,911 271,407 NET ASSETS Beginning of Year 271,407 0 End of Period $1,540,318 $271,407
See accompanying notes. - 93 - SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF CHANGES IN NET ASSETS PERIOD ENDED SEPTEMBER 30, 1995 and DECEMBER 31, 1994 (Unaudited)
*Pacific Rim Emerging Markets Sub-Account Period Ended Period Ended Sept. 30/95 Dec. 31/94 FROM OPERATIONS Net investment income (loss) ($2,485) $572 Net realized gain (loss) (290) (31) Unrealized appreciation (depreciation) of investments during the period Increase (decrease) in net assets 78,555 (5,485) derived from operations 75,780 (4,944) FROM CAPTIAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums 244,039 37,942 Transfer of terminations (46,572) (1,460) Transfer of policy loans (4,216) 0 Net interfund transfers 701,053 143,505 894,304 179,987 Net increase in net assets 970,084 175,043 NET ASSETS Beginning of Year 175,043 0 End of Period $1,145,127 $175,043
* Reflects the period from commencement of operations October 4, 1994 through December 31, 1994. See accompanying notes. - 94 - SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF CHANGES IN NET ASSETS PERIOD ENDED SEPTEMBER 30, 1995 and DECEMBER 31, 1994 (Unaudited)
Total Period Ended Year Ended Sept. 30/95 Dec. 31/94 FROM OPERATIONS Net investment income (loss) $945,439 $2,550,073 Net realized gain (loss) 756,356 515,014 Unrealized appreciation (depreciation) of investments during the period Increase (decrease) in net assets 18,628,275 (6,512,335) derived from operations 20,330,070 (3,447,248) FROM CAPTIAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums 32,438,816 42,519,778 Transfer of terminations (10,488,642) (9,526,885) Transfer of policy loans (927,916) (877,560) Net interfund transfers 231,018 1,593 21,253,276 32,116,926 Net increase in net assets 41,583,346 28,669,678 NET ASSETS Beginning of Year 94,779,851 66,110,173 End of Period $136,363,197 $94,779,851
See accompanying notes. - 95 - SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF OPERATIONS PERIOD ENDED SEPTEMBER 30, 1995 (Unaudited)
Emerging Growth Common Stock Equity Sub-Account Sub-Account Investment income: Dividend Income $1,225,634 $0 Expenses Mortality and expense risk charge 191,219 74,049 Net investment income (loss) 1,034,415 (74,049) Realized and unrealized gain (loss) from security transactions: Proceeds from sales 2,005,042 1,064,936 Cost of securities sold 1,647,766 923,500 Net realized gain (loss) 357,276 141,436 Unrealized appreciation (depreciation) of Investments Beginning of Year 111,061 (784,068) End of Period 8,036,511 2,096,773 Net unrealized depreciation during the period 7,925,450 2,880,841 Net realized and unrealized gain (loss) on investments 8,282,726 3,022,277 Net increase (decrease) in net assets derived from operations $9,317,141 $2,948,228
See accompanying notes. - 96 - SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF OPERATIONS PERIOD ENDED SEPTEMBER 30, 1995 (Unaudited)
Real Estate Securities Balanced Assets Sub-Account Sub-Account Investment income: Dividend Income $226,773 $46,122 Expenses Mortality and expense risk charge 56,906 150,704 Net investment income (loss) 169,867 (104,582) Realized and unrealized gain (loss) from security transactions: Proceeds from sales 1,113,564 2,716,959 Cost of securities sold 959,913 2,631,967 Net realized gain (loss) 153,651 84,992 Unrealized appreciation (depreciation) of Investments Beginning of Year (567,347) (2,255,674) End of Period 440,014 2,847,932 Net unrealized depreciation during the period 1,007,361 5,103,606 Net realized and unrealized gain (loss) on investments 1,161,012 5,188,598 Net increase (decrease) in net assets derived from operations $1,330,879 $5,084,016
See accompanying notes. - 97 - SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF OPERATIONS PERIOD ENDED SEPTEMBER 30, 1995 (Unaudited)
Capital Growth Money-Market Bond Sub-Account Sub-Account Investment income: Dividend Income $1,636 $268 Expenses Mortality and expense risk charge 48,713 26,453 Net investment income (loss) (47,077) (26,185) Realized and unrealized gain (loss) from security transactions: Proceeds from sales 771,922 1,770,898 Cost of securities sold 793,904 1,730,162 Net realized gain (loss) (21,982) 40,736 Unrealized appreciation (depreciation) of Investments Beginning of Year (1,013,152) (31,424) End of Period 347,389 153,690 Net unrealized depreciation during the period 1,360,541 185,114 Net realized and unrealized gain (loss) on investments 1,338,559 225,850 Net increase (decrease) in net assets derived from operations $1,291,482 $199,665
See accompanying notes. - 98 - SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF OPERATIONS PERIOD ENDED SEPTEMBER 30, 1995 (Unaudited)
Pacific Rim International Emerging Markets Sub-Account Sub-Account Investment income: Dividend Income $423 $1,174 Expenses Mortality and expense risk charge 4,888 3,659 Net investment income (loss) (4,465) (2,485) Realized and unrealized gain (loss) from security transactions: Proceeds from sales 31,316 25,464 Cost of securities sold 30,779 25,754 Net realized gain (loss) 537 (290) Unrealized appreciation (depreciation) of Investments Beginning of Year (924) (5,485) End of Period 85,883 73,070 Net unrealized depreciation during the period 86,807 78,555 Net realized and unrealized gain (loss) on investments 87,344 78,265 Net increase (decrease) in net assets derived from operations $82,879 $75,780
See accompanying notes. - 99 - SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF OPERATIONS PERIOD ENDED SEPTEMBER 30, 1995 (Unaudited)
Total Investment income: Dividend Income $1,502,030 Expenses Mortality and expense risk charge 556,591 Net investment income (loss) 945,439 Realized and unrealized gain (loss) from security transactions: Proceeds from sales 9,500,101 Cost of securities sold 8,743,745 Net realized gain (loss) 756,356 Unrealized appreciation (depreciation) of Investments Beginning of Year (4,547,013) End of Period 14,081,262 Net unrealized depreciation during the period 18,628,275 Net realized and unrealized gain (loss) on investments 19,384,631 Net increase (decrease) in net assets derived from operations $20,330,070
See accompanying notes. - 100 - Separate Account Four of The Manufacturers Life Insurance Company of America Notes to Financial Statements September 30, 1995 1. Organization Separate Account Four of The Manufacturers Life Insurance Company of America (the "Separate Account") is a unit investment trust registered under the Investment Company Act of 1940, as amended. The Separate Account is currently comprised of eight investment sub-accounts, one for each series of shares of Manulife Series Fund, Inc., available for allocation of net premiums under variable universal life insurance policies (the "Policies") issued by The Manufacturers Life Insurance Company of America ("Manufacturers Life of America"). The Separate Account was established by Manufacturers Life of America, a wholly-owned subsidiary of The Manufacturers Life Insurance Company of Michigan ("MLIM"), as a separate investment account on March 17, 1987. MLIM is a life insurance holding company organized in 1983 under Michigan law and a wholly-owned subsidiary of The Manufacturers Life Insurance Company ("Manulife Financial"), a mutual life insurance company based in Toronto, Canada. The assets of the Separate Account are the property of Manufacturers Life of America. The portion of the Separate Account's assets applicable to the Policies will not be chargeable with liabilities arising out of any other business Manufacturers Life of America may conduct. The net assets may not be less than the amount required under state insurance law to provide for death (without regard to the minimum death benefit guarantee) and other Policy benefits. Additional assets are held in Manufacturers Life of America's general account to cover the contingency that the guaranteed minimum death benefit might exceed the death benefit which would have been payable in the absence of such guarantee. - 101 - Separate Account Four of The Manufacturers Life Insurance Company of America Notes to Financial Statements (continued) 2. Significant Accounting Policies The following is a summary of significant accounting policies followed by the Separate Account in preparation of its financial statements: a. Valuation of Investments - Investments are made among the eight Funds of Manulife Series Fund, Inc. and are valued at the reported net asset values of these Funds. Transactions are recorded on the trade date. b. Realized gains and losses on the sale of investments are computed on the first-in, first-out basis. c. Dividend income is recorded on the ex-dividend date. d. Federal Income Taxes - Manufacturers Life of America, the Separate Account's sponsor, is taxed as a "life insurance company" under the Internal Revenue Code. Under these provisions of the Code, the operations of the Separate Account form part of the sponsor's total operations and are not taxed separately. The current year's operations of the Separate Account are not expected to affect the sponsor's tax liabilities and, accordingly, no charges were made against the Separate Account for federal, state and local taxes. However, in the future, should the sponsor incur significant tax liabilities related to Separate Account operations, it intends to make a charge or establish a provision within the Separate Account for such taxes. 3. Mortality and Expense Risks Charge Manufacturers Life of America deducts from the assets of the Separate Account a daily charge equivalent to an annual rate of 0.65% of the average net value of the Separate Account's assets for mortality and expense risks. 4. Premium Deductions Manufacturers Life of America deducts a sales charge of 3% and a charge of 2% to cover state premium taxes from the gross single premium and any additional premiums before placing the remaining net premiums in the sub-accounts. - 102 - Separate Account Four of The Manufacturers Life Insurance Company of America Notes to Financial Statements (continued) 5. Purchases and Sales of Manulife Series Fund, Inc. Shares Purchases and sales of the shares of common stock of Manulife Series Fund, Inc. for the period ended September 30, 1995 were $31,775,830 and $9,500,101 respectively, and for the year ended December 31, 1994 were $41,461,367 and $7,038,820 respectively. 6. Related Party Transactions ManEquity, Inc., a registered broker-dealer and indirect wholly-owned subsidiary of Manulife Financial, acts as the principal underwriter of the Policies pursuant to a Distribution Agreement with Manufacturers Life of America. Registered representatives of either ManEquity, Inc. or other broker-dealers having distribution agreements with ManEquity, Inc. who are also authorized as variable life insurance agents under applicable state insurance laws, sell the Policies. Registered representatives are compensated on a commission basis. Manufacturers Life of America has a formal service agreement with its affiliates, Manulife Financial, which can be terminated by either party upon two months' notice. Under this Agreement, Manufacturers Life of America pays for legal, actuarial, investment and certain other administrative services. - 103 - Report of Independent Auditors To the Board of Directors The Manufacturers Life Insurance Company of America We have audited the statement of assets and liabilities as of December 31, 1994 and the statement of operations and the statements of changes in net assets for each of the periods presented herein of Separate Account Four of The Manufacturers Life Insurance Company of America (comprising, respectively, the Emerging Growth Equity Sub-Account, Common Stock Sub-Account, Real Estate Securities Sub-Account, Balanced Assets Sub-Account, Capital Growth Bond Sub-Account, Money Markets Sub-Account, International Sub-Account, and Pacific Rim Emerging Markets Sub-Account). These financial statements are the responsibility of the management of The Manufacturers Life Insurance Company of America. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the respective sub-accounts constituting Separate Account Four of The Manufacturers Life Insurance Company of America at December 31, 1994, and the results of their operations and changes in their net assets for each of the periods presented herein, in conformity with generally accepted accounting principles. Ernst & Young LLP Philadelphia, Pennsylvania February 6, 1995 - 104 - Separate Account Four of The Manufacturers Life Insurance Company of America Statement of Assets and Liabilities December 31, 1994
Emerging Growth Common Stock Real Estate Securities Equity Sub-Account Sub-Account Sub-Account Assets Investment in Manulife Series Fund, Inc. -- at market value: Emerging Growth Equity Fund, 1,669,953 shares (cost $30,867,826) $30,978,887 Common Stock Fund, 952,286 shares (cost $13,509,634) $12,725,566 Real Estate Securities Fund, 795,505 shares (cost $11,183,037) $10,615,690 Balanced Assets Fund, 1,943,930 shares (cost $29,032,874) Capital Growth Bond Fund, 836,856 shares (cost $9,464,548) Money Market Fund, 440,414 shares (cost $4,551,021) International Fund, 27,640 shares (cost $272,301) Pacific Rim Emerging Markets Fund, 18,600 shares (cost $180,453) 30,978,887 12,725,566 10,615,690 Receivable for policy- related transactions 22,294 11,053 12,252 Net assets $31,001,181 $12,736,619 $10,627,942 Units outstanding $758,547 $598,807 $455,939 Net asset value per unit $40.87 $21.27 $23.31 See accompanying notes.
- 105 - Separate Account Four of The Manufacturers Life Insurance Company of America Statement of Assets and Liabilities (continued) December 31, 1994
Balanced Assets Capital Growth Money Market Sub-Account Bond Sub-Account Sub-Account Assets Investment in Manulife Series Fund, Inc. -- at market value: Emerging Growth Equity Fund, 1,669,953 shares (cost $30,867,826) Common Stock Fund, 952,286 shares (cost $13,509,634) Real Estate Securities Fund, 795,505 shares (cost $11,183,037) Balanced Assets Fund, 1,943,930 shares (cost $29,032,874) $26,777,200 Capital Growth Bond Fund, 836,856 shares (cost $9,464,548) $8,451,396 Money Market Fund, 440,414 shares (cost $4,551,021) $4,519,597 International Fund, 27,640 shares (cost $272,301) Pacific Rim Emerging Markets Fund, 18,600 shares (cost $180,453) 26,777,200 $8,451,396 $4,519,597 Receivable for policy- related transactions 161,275 370 57,821 Net assets $26,938,475 $8,451,766 $4,577,418 Units outstanding 1,446,749 514,098 326,027 Net asset value per unit $18.62 $16.44 $14.04 See accompanying notes.
- 106 - Separate Account Four of The Manufacturers Life Insurance Company of America Statement of Assets and Liabilities (continued) December 31, 1994
International Pacific Rim Sub-Account Emerging Markets Sub-Account Total Assets Investment in Manulife Series Fund, Inc. -- at market value: Emerging Growth Equity Fund, 1,669,953 shares (cost $30,867,826) $30,978,887 Common Stock Fund, 952,286 shares (cost $13,509,634) 12,725,566 Real Estate Securities Fund, 795,505 shares (cost $11,183,037) 10,615,690 Balanced Assets Fund, 1,943,930 shares (cost $29,032,874) 26,777,200 Capital Growth Bond Fund, 836,856 shares (cost $9,464,548) 8,451,396 Money Market Fund, 440,414 shares (cost $4,551,021) 4,519,597 International Fund, 27,640 shares (cost $272,301) $271,377 271,377 Pacific Rim Emerging Markets Fund, 18,600 shares (cost $180,453) $174,968 174,968 271,377 174,968 94,514,681 Receivable for policy- related transactions 30 75 265,170 Net assets $271,407 175,043 $94,779,851 Units outstanding 27,894 18,582 Net asset value per unit $9.73 $9.42 See accompanying notes.
- 107 - Separate Account Four of The Manufacturers Life Insurance Company of America Statement of Operations December 31, 1994
Emerging Growth Common Stock Real Estate Securities Equity Sub-Account Sub-Account Sub-Account Investment Income: Dividend income $109,977 $624,444 $235,629 Expenses: Mortality and expense risks charge 163,630 69,927 58,536 Net investment (loss) income (53,653) 554,517 177,093 Realized and unrealized gain (loss) on investments: Realized gain (loss) from security transactions: Proceeds from sales 1,283,379 726,604 471,250 Cost of securities sold 1,023,667 633,623 363,043 Net realized gain (loss) 259,712 92,981 108,207 Unrealized appreciation (depreciation) of investments: Beginning of year 1,338,902 399,441 124,429 End of year 111,061 (784,068) (567,347) Net unrealized depreciation during the year (1,227,841) (1,183,509) (691,776) Net realized and unrealized loss on investments (968,129) (1,090,528) (583,569) Net (decrease) increase in net assets derived from operations $(1,021,782) $(536,011) $(406,476)
See accompanying notes. - 108 - Separate Account Four of The Manufacturers Life Insurance Company of America Statement of Operations (continued) December 31, 1994
Balanced Assets Capital Growth Money-Market Sub-Account Bond Sub-Account Sub-Account Investment Income: Dividend income $1,417,788 $539,847 $143,363 Expenses: Mortality and expense risks charge 160,111 47,338 22,538 Net investment (loss) income 1,257,677 492,509 120,825 Realized and unrealized gain (loss) on investments: Realized gain (loss) from security transactions: Proceeds from sales 1,213,103 483,080 2,855,562 Cost of securities sold 1,140,593 512,871 2,843,921 Net realized gain (loss) 72,510 (29,791) 11,641 Unrealized appreciation (depreciation) of investments: Beginning of year 304,691 (190,624) (11,517) End of year (2,255,674) (1,013,152) (31,424) Net unrealized depreciation during the year (2,560,365) (822,528) (19,907) Net realized and unrealized loss on investments (2,487,855) (852,319) (8,266) Net (decrease) increase in net assets derived from operations $(1,230,178) $(359,810) $112,559 See accompanying notes.
- 109 - Separate Account Four of The Manufacturers Life Insurance Company of America Statement of Operations (continued) December 31, 1994
*Pacific Rim *International Emerging Markets Sub-Account Sub-Account Total Investment Income: Dividend income $ 704 $ 624 $3,072,376 Expenses: Mortality and expense risks charge 171 52 522,303 Net investment (loss) income 533 572 2,550,073 Realized and unrealized gain (loss) on investments: Realized gain (loss) from security transactions: Proceeds from sales 5,218 624 7,038,820 Cost of securities sold 5,433 655 6,523,806 Net realized gain (loss) (215) (31) 515,014 Unrealized appreciation (depreciation) of investments: Beginning of year -- -- 1,965,322 End of year (924) (5,485) (4,547,013) Net unrealized depreciation during the year (924) (5,485) (6,512,335) Net realized and unrealized loss on investments (1,139) (5,516) (5,997,321) Net (decrease) increase in net assets derived from operations $(606) $(4,944) $(3,447,248) *Reflects the period from commencement of operations October 4, 1994 through December 31, 1994.
- 110 - Separate Account Four of The Manufacturers Life Insurance Company of America Statements of Changes in Net Assets Years ended December 31, 1994 and 1993
Emerging Growth Common Stock Equity Sub-Account Sub-Account Year ended Year ended Year ended Year ended Dec. 31/94 Dec. 31/93 Dec. 31/94 Dec. 31/93 From operations Net investment (loss) income $(53,653) $2,072,766 $554,517 $431,862 Net realized gain (loss) 259,712 326,893 92,981 103,985 Unrealized (depreciation) appreciation of investments during the period (1,227,841) 559,356 (1,183,509) 147,571 Increase (decrease) in net assets derived from operations (1,021,782) 2,959,015 (536,011) 683,418 From capital transactions Additions (deductions) from: Transfer of net premiums 14,531,343 10,608,613 5,946,303 4,791,211 Transfer of terminations (2,706,223) (1,527,711) (1,073,532) (646,557) Transfer of policy loans (308,656) (277,430) (97,701) (72,082) Net interfund transfers 322,712 776,331 (252,248) 235,452 11,839,176 9,579,803 4,522,822 4,308,024 Net increase in net assets 10,817,394 12,538,818 3,986,811 4,991,442 Net Assets Beginning of year 20,183,787 7,644,969 8,749,808 3,758,366 End of year $31,001,181 $20,183,787 $12,736,619 $8,749,808
See accompanying notes. - 111 - Separate Account Four of The Manufacturers Life Insurance Company of America Statements of Changes in Net Assets (continued) Years ended December 31, 1994 and 1993
Real Estate Securities Balanced Assets Sub-Account Sub-Account Year ended Year ended Year ended Year ended Dec. 31/94 Dec. 31/93 Dec. 31/94 Dec. 31/93 From operations Net investment (loss) income $177,093 $545,615 $1,257,677 $1,183,263 Net realized gain (loss) 108,207 64,725 72,510 169,830 Unrealized (depreciation) appreciation of investments during the period (691,776) (60,818) (2,560,365) 61,409 Increase (decrease) in net assets derived from operations (406,476) 549,522 (1,230,178) 1,414,502 From capital transactions Additions (deductions) from: Transfer of net premiums 4,968,671 4,225,128 11,014,712 11,670,937 Transfer of terminations (931,394) (407,115) (3,111,863) (1,726,315) Transfer of policy loans (85,424) (94,310) (287,843) (146,296) Net interfund transfers 267,605 1,150,615 (396,171) 639,550 4,219,458 4,874,318 7,218,835 10,437,876 Net increase in net assets 3,812,982 5,423,840 5,988,657 11,852,378 Net Assets Beginning of year 6,814,960 1,391,120 20,949,818 9,097,440 End of year $10,627,942 $6,814,960 $26,938,475 $20,949,818
See accompanying notes. - 112 - Separate Account Four of The Manufacturers Life Insurance Company of America Statements of Changes in Net Assets (continued) Years ended December 31, 1994 and 1993
Capital Growth Money-Market Bond Sub-Account Sub-Account Year ended Year ended Year ended Year ended Dec. 31/94 Dec. 31/93 Dec. 31/94 Dec. 31/93 From operations Net investment (loss) income $492,509 $394,202 $120,825 $53,886 Net realized gain (loss) (29,791) 27,300 11,641 (1,285) Unrealized (depreciation) appreciation of investments during the period (822,528) (160,971) (19,907) 1,684 Increase (decrease) in net assets derived from operations (359,810) 260,531 112,559 54,285 From capital transactions Additions (deductions) from: Transfer of net premiums 3,088,112 4,597,900 2,895,838 3,473,746 Transfer of terminations (628,592) (379,641) (1,071,814) (439,675) Transfer of policy loans (55,847) (135,497) (42,089) (31,176) Net interfund transfers (86,125) (23,707) (234,848) (2,531,629) 2,317,548 4,059,055 1,547,087 471,266 Net increase in net assets 1,957,738 4,319,586 1,659,646 525,551 Net Assets Beginning of year 6,494,028 2,174,442 2,917,772 2,392,221 End of year $8,451,766 $6,494,028 $4,577,418 $2,917,772
See accompanying notes. - 113 - Separate Account Four of The Manufacturers Life Insurance Company of America Statements of Changes in Net Assets (continued) Years ended December 31, 1994 and 1993
Pacific Rim International Emerging Markets Sub-Account Sub-Account Total Period ended Period ended Year ended Year ended Dec. 31/94* Dec. 31/94* Dec. 31/94* Dec. 31/93 From operations Net investment (loss) income $ 533 $ 572 $2,550,073 $4,681,594 Net realized gain (loss) (215) (31) 515,014 691,448 Unrealized (depreciation) appreciation of investments during the period (924) (5,485) (6,512,335) 548,231 Increase (decrease) in net assets derived from operations (606) (4,944) (3,447,248) 5,921,273 From capital transactions Additions (deductions) from: Transfer of net premiums 36,857 37,942 42,519,778 39,367,535 Transfer of terminations (2,007) (1,460) (9,526,885) (5,127,014) Transfer of policy loans --- --- (877,560) (756,791) Net interfund transfers 237,163 143,505 1,593 246,612 272,013 179,987 32,116,926 33,730,342 Net increase in net assets 271,407 175,043 28,669,678 39,651,615 Net Assets Beginning of year --- --- 66,110,173 26,458,558 End of year $271,407 $175,043 $94,779,851 $66,110,173
*Reflects the period from commencement of operations October 4, 1994 through December 31, 1994. See accompanying notes. - 114 - Separate Account Four of The Manufacturers Life Insurance Company of America Notes to Financial Statements December 31, 1994 1. Organization Separate Account Four of The Manufacturers Life Insurance Company of America (the "Separate Account") is a unit investment trust registered under the Investment Company Act of 1940, as amended. The Separate Account is currently comprised of eight investment sub-accounts, one for each series of shares of Manulife Series Fund, Inc., available for allocation of net premiums under variable universal life insurance policies (the "Policies") issued by The Manufacturers Life Insurance Company of America ("Manufacturers Life of America"). The Separate Account was established by Manufacturers Life of America, a wholly-owned subsidiary of The Manufacturers Life Insurance Company of Michigan ("MLIM"), as a separate investment account on March 17, 1987. MLIM is a life insurance holding company organized in 1983 under Michigan law and a wholly-owned subsidiary of The Manufacturers Life Insurance Company ("Manulife Financial"), a mutual life insurance company based in Toronto, Canada. The assets of the Separate Account are the property of Manufacturers Life of America. The portion of the Separate Account's assets applicable to the Policies will not be chargeable with liabilities arising out of any other business Manufacturers Life of America may conduct. The net assets may not be less than the amount required under state insurance law to provide for death (without regard to the minimum death benefit guarantee) and other Policy benefits. Additional assets are held in Manufacturers Life of America's general account to cover the contingency that the guaranteed minimum death benefit might exceed the death benefit which would have been payable in the absence of such guarantee. - 115 - Separate Account Four of The Manufacturers Life Insurance Company of America Notes to Financial Statements (continued) 2. Significant Accounting Policies The following is a summary of significant accounting policies followed by the Separate Account in preparation of its financial statements. a. Valuation of Investments - Investments are made among the eight Funds of Manulife Series Fund, Inc. and are valued at the reported net asset values of these Funds. Transactions are recorded on the trade date. b. Realized gains and losses on the sale of investments are computed on the first-in, first-out basis. c. Dividend income is recorded on the ex-dividend date. d. Federal Income Taxes - Manufacturers Life of America, the Separate Account's sponsor, is taxed as a "life insurance company" under the Internal Revenue Code. Under these provisions of the Code, the operations of the Separate Account form part of the sponsor's total operations and are not taxed separately. The current year's operations of the Separate Account are not expected to affect the sponsor's tax liabilities and, accordingly, no charges were made against the Separate Account for federal, state and local taxes. However, in the future, should the sponsor incur significant tax liabilities related to Separate Account operations, it intends to make a charge or establish a provision within the Separate Account for such taxes. 3. Mortality and Expense Risks Charge Manufacturers Life of America deducts from the assets of the Separate Account a daily charge equivalent to an annual rate of 0.65% of the average net value of the Separate Account's assets for mortality and expense risks. 4. Premium Deductions Manufacturers Life of America deducts a sales charge of 3% and a charge of 2% to cover state premium taxes from the gross single premium and any additional premiums before placing the remaining net premiums in the sub-accounts. - 116 - 5. Purchases and Sales of Manulife Series Fund, Inc. Shares Purchases and sales of the shares of common stock of Manulife Series Fund, Inc. for the year ended December 31, 1994 were $41,461,367 and $7,038,820, respectively, and for the year ended December 31, 1993 were $45,471,528 and $6,994,499, respectively. 6. Related Party Transactions ManEquity, Inc., a registered broker-dealer and indirect wholly-owned subsidiary of Manulife Financial, acts as the principal underwriter of the Policies pursuant to a Distribution Agreement with Manufacturers Life of America. Registered representatives of either ManEquity, Inc. or other broker-dealers having distribution agreements with ManEquity, Inc. who are also authorized as variable life insurance agents under applicable state insurance laws, sell the Policies. Registered representatives are compensated on a commission basis. Manufacturers Life of America has a formal service agreement with its affiliate, Manulife Financial, which can be terminated by either party upon two months' notice. Under this Agreement, Manufacturers Life of America pays for legal, actuarial, investment and certain other administrative services. - 117 - The following financial statements for The Manufacturers Life Insurance Company of America for the period ended September 30, 1995 only are unaudited. - 118 - The Manufacturers Life Insurance Company of America Balance Sheets
September 30 December 31 1995 1994 (Unaudited) Assets Bonds, at amortized cost (market $60,296,680 -1995 and $51,080,395 - 1994) $57,902,241 $52,149,080 Stocks (Note 7) 24,052,190 25,629,580 Short-term investments 189,672 10,914,561 Policy loans 6,582,470 4,494,390 Total investments 88,726,573 93,187,611 Cash on hand and on deposit 3,584,824 5,069,197 Life insurance premiums deferred and uncollected 247,393 13,646 Accrued investment income 1,047,513 796,333 Separate account assets 439,258,680 302,736,198 Funds receivable on reinsurance assumed 421,666 880,284 Receivable for undelivered securities 15,682 69,003 Other assets 156,570 333,651 Total assets $533,458,901 $403,085,923 Liabilities, capital and surplus Aggregate policy reserves $33,749,082 $29,761,174 Contract deposit funds 2,750,817 3,938,425 Interest maintenance and asset valuation reserves 4,209,156 111,566 Policy and contract claims 77,415 94,346 Provision for policyholder dividends payable 2,379,081 1,385,409 Amounts due to affiliates 6,872,260 7,377,108 Accrued liabilities 3,803,608 4,773,565 Amounts payable for undelivered securities 7,841 3,512,459 Separate account liablilities 439,258,680 302,736,198 Total liabilities 493,107,940 353,690,250 Capital and surplus: Common shares, par value $ 1.00; authorized, 5,000,000 shares; issued and outstanding shares (4,501,856- - 1995 and 4,501,855- -1994) 4,501,856 4,501,855 Preferred shared, par value $ 1.00; authorized, 5,000,000 shares; issued and outstanding shares 105,000- - 1995 and 1994) 10,500,000 10,500,000 Capital paid in excess of par value 54,999,997 49,849,998 Surplus (29,650,892) (15,456,180) Total capital and surplus 40,350,961 49,395,673 Total liablilities, capital, and surplus $533,458,901 $403,085,923 - 119 -
See accompanying notes. - 120 - The Manufacturers Life Insurance Company of America Statement of Operations (Unaudited)
Three Months Ended Nine Months Ended September 30 September 30 1995 1994 1995 1994 Revenues: Life premiums $26,544,818 $21,796,303 $87,786,742 $73,901,637 Annuity deposits 9,176,744 15,984,688 29,606,973 63,516,003 Investment income, net of investment expenses 1,197,939 595,134 3,854,192 2,193,338 Amortization of interest maintenance reserve 8,353 (11,691) 14,172 27,901 Foreign exchange gain (loss) (329,945) 492,338 (329,662) 128,130 Other revenue 37,106 12,096 92,821 29,638 Total revenues 36,635,015 38,868,868 121,025,238 139,796,647 Benefits paid or provided: Increase (decrease) in aggregate policy reserves (2,172,807) (2,690,406) 3,987,908 (4,359,854) Increase (decrease) in liability for deposit funds (701,354) (2,211,032) (1,187,608) 773,375 Transfers to separate accounts, net 21,999,494 31,050,361 73,046,861 112,599,442 Death benefits 694,831 207,720 2,163,196 329,505 Annuity benefits (506,892) (21,953) 30,802 224,706 Surrender benefits 6,683,913 707,625 12,938,150 2,100,743 25,997,185 27,042,315 90,979,309 111,667,917 Insurance expenses: Intercompany service fee 5,289,000 5,895,734 16,764,000 16,358,143 Commissions 4,471,643 5,562,635 13,449,277 17,953,310 General expenses 4,665,024 1,726,021 9,470,575 4,609,828 Commission and expense allowances on reinsurance assumed 13,329 53,332 942,979 583,192 14,438,996 13,237,722 40,626,831 39,504,473 Loss before policyholders' dividends and federal income tax benefit (3,801,166) (1,411,169) (10,580,902)(11,375,743) Dividends to policyholders 263,345 (152,804) 2,172,621 593,435 Loss before federal income tax benefit (4,064,511) (1,258,365) (12,753,523)(11,969,178) Federal income tax benefit - 99,969 - 499,393 Net loss from operations after policyholders' dividends and federal income tax (4,064,511) (1,358,334) (12,753,523)(12,468,571) Net realized capital gain (loss) net of transfer to interest maintenance reserve 38,348 (75) 630,788 (554,046) - 121 - ($4,026,163)($1,358,409)($12,122,735)($13,022,617)
See accompanying notes. - 122 - The Manufacturers Life Insurance Company of America Statements of Cash Flows (Unaudited)
Nine Months Ended September 30 1995 1994 Operating activities: Premiums collected, net $ll7,l59,968 $137,421,718 Policy benefits paid, net (15,137,221) (2,797,112) Commissions and other expenses paid (43,854,220) (35,341,889) Net investment income 3,569,190 2,179,963 Dividends paid to policyholders (1,178,949) (724,935) Other income and expenses (172,880) (786,657) Transfers to separate accounts, net (72,596,690) (112,179,755) Net cash used in operating activities (12,210,802) (12,228,667) Investing activities Sale, maturity, or repayment of investments 62,744,420 36,295,459 Purchase of investments (67,892,880) (27,311,651) Net cash (used in) provided by investing activities (5,148,460) 8,983,808 Financing Activities Issuance of stock 5,150,000 - Net increase in cash and short-term investments (12,209,262) (3,244,859) Cash and short-term investments at beginning of year 15,983,758 9,058,136 Cash and short-term investments at end of year $3,774,496 $5,813,277
See accompanying notes. - 123 - The Manufacturers Life Insurance Company of America Statement of Changes in Capital and Surplus (Unaudited)
Capital Paid in Excess of Capital Par Value Surplus Total Balance, December 31, 1994 $15,001,855 $49,849,998 ($15,456,180)$49,395,673 Net loss from operations (12,122,735)(12,122,735) Issuance of common stock 1 5,149,999 5,150,000 Increase in asset valuation reserve (2,869,008) (2,869,008) Increase in nonadmitted assets (1,710,551) (1,710,551) Change in liability for reinsurance in unauthorized companies (54,935) (54,935) Change in net unrealized capital gains 2,562,517 2,562,517 Balance, September 30, 1995 15,001,856 $54,999,997 ($29,650,892)$40,350,961
See accompanying notes. - 124 - The Manufacturers Life Insurance Company of America Notes to Financial Statements (Unaudited) September 30, 1995 1. Organization The Manufacturers Life Insurance Company of America ("Manufacturers Life of America" or the "Company") is a wholly-owned subsidiary of The Manufacturers Life Insurance Company of Michigan (the "Parent"), which is in turn a wholly- owned subsidiary of The Manufacturers Life Insurance Company ("Manulife Financial"), a Canadian-based mutual life insurance company (Notes 4 and 5). During the nine months ended September 30, 1995, the Company received a capital contribution of $5,150,000 from the Parent in return for one share of common stock (par value $1). Subsequent to the end of the period the Company received a capital contribution of $7,420,000 from the Parent in return for one share of common stock (par value $1). 2. Significant Accounting Policies Basis of Presentation The accompanying unaudited financial statements of The Manufacturers Life Insurance Company of America have been prepared in accordance with accounting practices prescribed or permitted for interim financial information by the Insurance Department of Michigan (statutory practices) and with the instructions to Form 1O-Q and Article 10 Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements for mutual life insurance companies and their wholly-owned and indirect subsidiaries. Statutory practices differ in certain respects from generally accepted accounting principles followed by stock life insurance companies in determining financial position and results of operations. In general, the differences are: (1) commissions and other costs of acquiring and writing policies are charged to expense in the year incurred rather than being amortized over the related policy term; (2) certain non- admitted assets are excluded from the balance sheet; (3) deferred income taxes are not provided for timing differences in recording certain items for financial statement and tax purposes; (4) certain transactions are reflected directly to surplus rather than reflected in net income from operations, and (5) debt securities are carried at amortized cost. Operating results for the nine month period ended September 30, 1995 are not necessarily indicative of the results that may be expected for the year ended December 31, 1995. For - 125 - further information, refer to the financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1994. - 126 - The Manufacturers Life Insurance Company of America Notes to Financial Statements (continued) (Unaudited) 2. Significant Accounting Policies (continued) In April 1993, the Financial Accounting Standard Board issued Interpretation 40, "Applicability of Generally Accepted Accounting Principles to Mutual Life Insurance and Other Enterprises." The interpretation, which has been amended to be effective for 1996 annual financial statements and thereafter, will no longer allow statutory financial statements to be described as being prepared in conformity with generally accepted accounting principles (GAAP). This will require life insurance companies to adopt all applicable standards promulgated by the FASB in any general purpose financial statements such companies may issue. While GAAP standards have recently been developed for mutual life insurance companies, the Company has not yet quantified the effects of the Interpretation on its general purpose financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. All amounts presented are expressed in U.S. Dollars. Certain amounts from prior years have been restated to conform to the current year's presentation. Stocks Stocks are carried at market value. Bonds Bonds are carried at amortized cost. Discounts and premiums on investments are amortized using the effective interest method. Gains and losses on sales of bonds are calculated on the specific identification method and recognized into income based on NAIC prescribed formulas. Short-term investments include investments with maturities of less than one year at the date of acquisition. Market values disclosed are based on NAIC quoted values. Asset Valuation Reserve and Interest Maintenance Reserve The Asset Valuation Reserve and Interest Maintenance Reserve were determined by NAIC prescribed formulas and are reported as liabilities rather than as valuation allowances or appropriations of surplus. Policy and Contract Claims - 127 - Policy and contract claims are determined on an individual case basis for reported losses. Estimates of incurred but not reported losses are developed on the basis of past experience. - 128 - The Manufacturers Life Insurance Company of America Notes to Financial Statements (continued) (Unaudited) 2. Significant Accounting Policies (continued) Separate Accounts Separate account assets and liabilities reported in the accompanying financial statements represent funds that are separately administered, principally for variable annuity and variable life contracts, and for which the contract holder, rather than the Company, bears the investment risk. Separate account assets are recorded at market value. Operations of the separate accounts are not included in the accompanying financial statements. Revenue Recognition Both premium and investment income are recorded when due. Reinsurance Reinsurance premiums and claims are accounted for on a basis consistent with that used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums and claims are reported net of reinsured amounts. Policy Reserves Certain policy reserves are calculated based on statutorily required interest and mortality assumptions. 3. Investments and Investment Income The amortized cost and market value of investments in fixed maturities (bonds) as of September 30, 1995 is summarized as follows:
Quoted or Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value U.S. Government Securities $21,034,081 $706,256 $(49,695) $21,690,642 Foreign Government Securities 7,116,744 299,468 (13,898) 7,402,314 Corporate Securities 29,751,416 1,530,866 (78,558) 31,203,724 $57,902,241 $2,536,590 (142,151) $60,296,680
- 129 - The Manufacturers Life Insurance Company of America Notes to Financial Statements (continued) (Unaudited) 3. Investments and Investment Income (continued) Proceeds from sales of investments in debt securities during the first nine months of 1995 were $58,728,738. Gross gains of $2,416,264 and gross losses of $199,627 were realized on those sales. The amortized cost and market value of investments in fixed maturities (bonds) as of December 31, 1994 is summarized as follows:
Quoted or Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value U.S. Government securities $34,265,152 $243,971 $(441,592) $34,067,531 Foreign Government securities 7,388,458 (294,385) 7,094,073 Corporate securities 10,495,470 2,457 (577,136) 9,920,791 $52,149,080 $246,428 $(1,313,113) $51,082,395
The amortized cost and market value of fixed maturities at September 30, 1995 by contractual maturities, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without prepayment penalties.
Years to Maturity Amortized Cost Market Value One year or less $675,639 $679,474 Greater than 1; up to 5 years 5,706,420 5,786,646 Greater than 5; up to 1O years 17,870,070 19,000,568 Due after IO years 33,650,112 34,829,992
$57,902,241 60,296,680 At September 30, 1995, $5,696,857 of bonds at amortized costs were on deposit with government insurance departments to satisfy regulatory regulations. - 130 - The Manufacturers Life Insurance Company of America Notes to Financial Statements (continued) (Unaudited) 3. Investments and Investment Income (continued) Major categories of net investment income for the nine months ended September 30, 1995 were as follows:
Net Investment Income 1995 1994 Gross investment income: Bond Income $3,190,652 $1,311,007 Dividends: Manulife Series Fund, Inc. (Note 7) 7,848 407,610 Policy Loans 296,205 192,491 Short-term investments 624,593 366,387 4,119,298 2,277,495 Investment Expenses (265,106) (84,157) Net investment income $3,854,192 $2,193,338
4. Related Party Transactions Manufacturers Life of America has a formal service agreement with Manulife Financial which can be terminated by either party upon two months' notice. Under the Agreement, Manufacturers Life of America will pay direct operating expenses incurred each year by Manulife Financial on behalf of Manufacturers Life of America. Services provided under the Agreement include legal, actuarial, investment, data processing and certain other administrative services. Costs incurred under this Agreement, for the nine months ended September 30, 1995 and 1994, were $17,029,106 and $16,442,300 respectively. In addition, the Company has several reinsurance agreements with Manulife Financial which may be terminated upon the specified notice by either party. These agreements are summarized as follows: (a) The Company assumes two blocks of insurance from Manulife Financial under coinsurance treaties. The Company's risk is limited to $100,000 of initial face amount per claim plus a prorata share of any increase in face amount. - 131 - (b) The Company cedes the risk in excess of $25,000 per life to Manulife Financial under the terms of an automatic reinsurance agreement. - 132 - The Manufacturers Life Insurance Company of America Notes to Financial Statements (continued) (Unaudited) 4. Related Party Transactions (continued) (c) The Company cedes a substantial portion of its risk on its Flexible Premium Variable Life policies to Manulife Financial under the terms of a stop loss reinsurance agreement. (d) Under the terms of an automatic coinsurance agreement, the Company cedes its risk on structured settlements to Manulife Financial. Selected amounts for the nine months ended September 30, 1995 and 1994 relating to the above treaties reflected in the financial statements are as follows:
1995 1994 Life and annuity premiums assumed $5,540,617 $2,577,230 Other life and annuity consideration ceded (431,357) (544,056) Commissions and expense allowances on reinsurance assumed (942,979) (583,192) Policy reserves assumed 50,651,383 25,896,167 Policy reserves ceded 3,862,617 3,763,793
5. Federal Income Tax The Company joins the Parent and another wholly-owned life insurance subsidiary in filing a U.S. consolidated income tax return as a life insurance group under provisions of the Internal Revenue Code. In accordance with an income tax- sharing agreement dated December 29, 1983, the Company's income tax provision (or benefit) is computed as if the Company filed a separate income tax return. The Company receives no surtax exemption. Tax benefits from operating losses are provided at the U.S. statutory rate plus any tax credits attributable to the Company, provided the consolidated group utilizes such benefits currently. The tax provision or benefit is the estimated amount that the Company will receive from the consolidated group under the tax sharing agreement. - 133 - The Manufacturers Life Insurance Company of America Notes to Financial Statements (continued) (Unaudited) 6. Statutory Restrictions on Dividends The Company is subject to statutory limitations on the payment of dividends to its Parent. The Company cannot pay dividends during 1995 without the prior approval of insurance regulatory authorities. 7. Investment in Manulife Series Fund, Inc. The Company markets variable life insurance and variable annuity products through Separate Accounts which use Manulife Series Fund, Inc. as its investment vehicle. Common stock represents the Company's seed money investment in Manulife Series Fund, Inc. - 134 - Report of Independent Auditors The Board of Directors The Manufacturers Life Insurance Company of America We have audited the accompanying balance sheets of The Manufacturers Life Insurance Company of America as of December 31, 1994 and 1993, and the related statements of operations, changes in capital and surplus, and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Manufacturers Life Insurance Company of America at December 31, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles and with reporting practices prescribed or permitted by the Insurance Department of the State of Michigan. Also in our opinion, the related financial statement schedules when considered in relation to the basic financial statements taken as a whole present fairly in all material respects the information set forth therein. Philadelphia, Pennsylvania ERNST & YOUNG LLP February 20, 1995 - 135 - The Manufacturers Life Insurance Company of America Balance Sheets
December 31 1994 1993 Assets Bonds, at amortized cost (market) $51,082,395--1994 and $24,120,198--1993) $52,149,080 $23,375,773 Stocks (note 9) 25,629,580 40,549,278 Short-term investments 10,914,561 797,875 Policy loans 4,494,390 3,023,275 Total investments 93,187,611 67,746,201 Cash 5,069,197 8,260,261 Life insurance premiums deferred and uncollected 13,646 31,574 Accrued investment income 796,333 468,968 Separate account assets 302,736,198 174,182,746 Funds receivable on reinsurance assumed 880,284 2,240,200 Receivable for undelivered securities 69,003 353,576 Other assets 333,651 108,260 Total assets $ 403,085,923 $253,391,786 Liabilities, capital and surplus Aggregate policy reserves $ 29,761,174 $13,019,605 Other contract deposits 3,938,425 3,284,211 Interest maintenance and asset valuation reserves 111,566 431,400 Policy and contract claims 94,346 153,709 Provision for policyholder dividends payable 1,385,409 1,016,502 Amounts due to affiliates 7,377,108 7,953,242 Payable for undelivered securities 3,512,459 - Accrued liabilities 4,773,565 2,694,433 Separate account liabilities 302,736,198 174,182,746 Total liabilities 353,690,250 202,735,848 Capital and surplus: Common shares, par value $1.00; authorized, 5,000,000 shares; issued and outstanding 4,501,855 shares (1,501,854 shares in 1993) 4,501,855 1,501,854 Preferred shares, par value $100; authorized 5,000,000 shares; issued and outstanding 105,000 shares (335,000 shares in 1993) 10,500,000 33,500,000
- 136 - The Manufacturers Life Insurance Company of America Balance Sheets (continued)
December 31 1994 1993 Capital paid in excess of par value 49,849,998 9,849,999 Surplus (deficit) (15,456,180) 5,804,085 Total capital and surplus 49,395,673 50,655,938 Total liabilities, capital and surplus $ 403,085,923 $253,391,786
See accompanying notes. - 137 - The Manufacturers Life Insurance Company of America Statements of Operations
Year ended December 31 Revenues: 1994 1993 1992 Life and annuity premiums, principally reinsurance assumed $ 25,385,628 $12,745,981 $6,579,233 Other life and annuity considerations 168,075,003 113,332,974 33,268,869 Investment income, net of investment expenses ($106,908 in 1994, $89,186 in 1993, $58,423 in 1992) 3,588,629 3,323,962 1,430,454 Amortization of interest maintenance reserve 19,527 32,866 7,707 Commission and expense allowance on reinsurance ceded 187,694 - - Foreign exchange gain (loss) 114,728 (197,971) 24,657 Other revenue 54,763 33,935 4,903 Total revenues 197,425,972 129,271,747 41,315,823 Benefits paid or provided: Increase in aggregate policy reserves 16,741,569 5,168,484 3,625,964 Increase in liability for deposit funds 654,214 2,820,520 422,369 Transfers to separate accounts, net 136,896,150 98,601,141 26,789,260 Death benefits 640,875 582,534 286,278 Maturity benefits 580,615 79,253 - Surrender benefits 3,701,591 2,319,926 1,596,434 159,215,014 109,571,858 32,720,305 Insurance expenses: Management fee 21,222,310 12,378,288 4,861,244 Commissions 23,416,110 14,742,130 5,192,462 General expenses 8,260,467 5,108,104 2,744,475 Commissions and expense allowances on reinsurance assumed 810,252 329,634 269,141 53,709,139 32,558,156 13,067,322 Loss before policyholders' dividends and federal income tax (15,498,181) (12,858,267) (4,471,804) Dividends to policyholders 1,149,719 837,454 634,652 Loss before federal income tax (16,647,900) (13,695,721) (5,106,456)
- 138 - The Manufacturers Life Insurance Company of America Statements of Operations (continued)
Year ended December 31 Revenues: 1994 1993 1992 Federal income tax provision (benefit) - (324,643) 339,539 Net loss from operations after policyholders' dividends and federal income tax (16,647,900) (13,371,078) (5,445,995) Net realized capital gains (net of capital gains tax of $0 in 1994, $236,415 in 1993, and $0 in 1992 and $(554,000) in 1994, $347,292 in 1993, and $68,401 in 1992 transferred to (from) the interest maintenance reserve) (3,012,485) 93,618 139,261 Net loss from operations $(19,660,385) $(13,277,460)$(5,306,734)
See accompanying notes. - 139 - The Manufacturers Life Insurance Company of America Statements of Changes in Capital and Surplus
Capital Paid in Excess of Surplus Capital Par Value (Deficit) Total Balance, December 31, 1991 $29,001,853 $4,000,000 $19,650,265 $52,652,118 Net loss from operations (5,306,734) (5,306,734) Issuance of preferred shares 6,000,000 6,000,000 Increase in asset valuation reserve (8,813) (8,813) Increase in nonadmitted assets (1,025,556) (1,025,556) Change in liability for reinsurance in unauthorized companies (7,166) (7,166) Company's share of increase in separate account assets, net 3,240,199 3,240,199 Balance, December 31, 1992 35,001,853 4,000,000 16,542,195 55,544,048 Net loss from operations (13,277,460) (13,277,460) Issuance of common stocks 1 5,849,999 5,850,000 Increase in asset valuation reserve (13,076) (13,076) Increase in nonadmitted assets (133,575) (133,575) Change in net unrealized capital losses (1,592,242) (1,592,242) Change in liability for reinsurance in unauthorized companies (29,905) (29,905) Company's share of increase in separate account assets, net 4,308,148 4,308,148 Balance, December 31, 1993 35,001,854 9,849,999 5,804,085 50,655,938 Net loss from operations (19,660,385)(19,660,385) Issuance of common shares 1 19,999,999 20,000,000 Capital restructuring of preference shares (20,000,000) 20,000,000 - Increase in asset valuation reserve (55,286) (55,286) Increase in nonadmitted assets (1,021,357) (1,021,357) Change in net unrealized capital losses (425,082) (425,082) Change in liability for reinsurance in unauthorized companies (98,155) (98,155) Company's share of increase in - 140 - separate account assets, net - - Balance, December 31, 1994 $15,001,855 $49,849,998$(15,456,180) $49,395,673
See accompanying notes. - 141 - The Manufacturers Life Insurance Company of America Statements of Cash Flows
Year ended December 31 1994 1993 1992 Operating activities Premiums collected, net $193,478,637 $126,075,035 $39,842,600 Policy benefits paid, net (4,982,444) (2,829,812) (1,932,712) Commissions and other expenses paid (48,141,400) (35,203,997) (9,431,344) Net investment income 3,343,515 3,197,892 1,356,553 Other income and expenses (1,946,063) (1,592,957) (1,849,180) Transfers to separate accounts, net (136,950,482) (98,220,292) (26,266,436) Net cash provided by (used in) operating activities 4,801,763 (8,574,131) 1,719,481 Investing activities Sale, maturity, or repayment of investments 73,187,733 28,248,633 11,975,475 Purchase of investments (91,063,874) (73,688,735) (24,400,135) Net cash used in investing activities (17,876,141) (45,440,102) (12,424,660) Financing activities Issuance of shares 20,000,000 5,850,000 6,000,000 Surplus withdrawn from separate account - 48,701,076 6,000,000 Net cash provided by financing activities 20,000,000 54,551,076 12,000,000 Net increase in cash and short-term investments 6,925,622 536,843 1,294,821 Cash and short-term investments at beginning of year 9,058,136 8,521,293 7,226,472 Cash and short-term investments at end of year $15,983,758 $9,058,136 $8,521,293
See accompanying notes. - 142 - The Manufacturers Life Insurance Company of America Notes to Financial Statements (continued) December 31, 1994 1. Organization Organization The Manufacturers Life Insurance Company of America (Manufacturers Life of America or the Company) is a wholly-owned subsidiary of The Manufacturers Life Insurance Company of Michigan (the Parent), which is in turn a wholly-owned subsidiary of The Manufacturers Life Insurance Company (Manulife Financial), a Canadian-based mutual life insurance company (Notes 4 and 5). During 1994, the Company's parent contributed $20,000,000 capital in return for 1 share of the Company's common stock par value $1 with the remaining $19,999,999 being recorded as contributed surplus. During 1994 the Company restructured its capital by exchanging 230,000 shares of preferred stock with a par value of $23,000,000 for 3,000,000 shares of common stock par value $3,000,000 with the remaining $20,000,000 being recorded as contributed surplus. The Parent contributed $5,850,000 in capital in return for 1 share of common stock during 1993, $6,000,000 in capital in return for 60,000 shares of preferred stock during 1992. During 1991, the Company invested $1,800,000 to fund initial branch operations in Taiwan. This investment in Taiwan was increased by $6,000,000 in 1992 and a further investment of $5,200,000 in 1993. There was no new funding in 1994 for the Taiwan branch. 2. Significant Accounting Policies Basis of Presentation The accompanying financial statements of Manufacturers Life of America have been prepared in accordance with accounting practices prescribed or permitted by the Insurance Department of Michigan, which are considered generally accepted accounting principles for mutual life insurance companies and their wholly-owned direct and indirect subsidiaries. Such practices differ in certain respects from generally accepted accounting principles followed by stock life insurance companies in determining financial position and results of operations. In general, the differences are: (1) commissions and other costs of acquiring and writing policies are charged to expense in the year incurred rather than being amortized over the related policy term; (2) certain non-admitted assets are excluded from the balance sheet; (3) deferred income taxes are not provided for timing differences in recording certain items for financial statement and tax purposes; (4) certain transactions are reflected directly to surplus rather than reflected in net income from operations (for example, certain - 143 - transactions related to the separate accounts); and (5) debt securities are carried at amortized cost. - 144 - The Manufacturers Life Insurance Company of America Notes to Financial Statements (continued) 2. Significant Accounting Policies (continued) Basis of Presentation (continued) In April 1993, the Financial Accounting Standards Board issued Interpretation 40, "Applicability of Generally Accepted Accounting Principles to Mutual Life Insurance and Other Enterprises." The interpretation, which has been amended to be effective for 1996 annual financial statements and thereafter, will no longer allow statutory financial statements to be described as being prepared in conformity with generally accepted accounting principles (GAAP). This will require life insurance companies to adopt all applicable standards promulgated by the FASB in any general purpose financial statements such companies may issue. While GAAP standards have recently been developed for mutual life insurance companies, the Company has not yet completed the complex and extensive historical calculations and thus is unable to quantify the effects of the Interpretation on its financial statements. All amounts presented are expressed in U.S. Dollars. Certain amounts from prior periods have been reclassified to conform with current period presentation. Stocks Stocks are carried at market value. Bonds Bonds are carried at amortized cost. Discounts and premiums on investments are amortized using the effective interest method. Gains and losses on sales of bonds are calculated on the specific identification method and recognized into income based on NAIC prescribed formulas. Short-term investments include investments with maturities of less than one year at the date of acquisition. Market values disclosed are based on NAIC quoted values. Asset Valuation Reserve and Interest Maintenance Reserve The Asset Valuation Reserve and Interest Maintenance Reserve were determined by NAIC prescribed formulas and are reported as liabilities rather than as valuation allowances or appropriations of surplus. Policy and Contract Claims - 145 - Policy and contract claims are determined on an individual case basis for reported losses. Estimates of incurred but not reported losses are developed on the basis of past experience. - 146 - The Manufacturers Life Insurance Company of America Notes to Financial Statements (continued) 2. Significant Accounting Policies (continued) Separate Accounts Separate account assets and liabilities reported in the accompanying financial statements represent funds that are separately administered, principally for variable annuity and variable life contracts. For the majority of these contracts the contractholder, rather than the Company, bears the investment risk. Separate account assets are recorded at market value. Operations of the separate accounts are not included in the accompanying financial statements. Revenue Recognition Both premium and investment income are recorded when due. Reinsurance Reinsurance premiums and claims are accounted for on a basis consistent with that used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums and claims are reported net of reinsured amounts. Policy Reserves Certain policy reserves are calculated based on statutorily required interest and mortality assumptions. 3. Investments and Investment Income The amortized cost and market value of investments in fixed maturities (bonds) as of December 31, 1994 are summarized as follows:
Quoted or Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value U.S. Government securities $34,265,152 $243,971 $(441,592) $34,067,531 Foreign government securities 7,388,458 - (294,385) 7,094,073 Corporate securities 10,495,470 2,457 (577,136) 9,920,791 $52,149,080 $246,428 $(1,313,113) $51,082,395
- 147 - Proceeds from sales of investments in debt securities during 1994 were $43,175,845. Gross gains of $167,738 and gross losses of $1,006,702 were realized on those sales. - 148 - The Manufacturers Life Insurance Company of America Notes to Financial Statements (continued) 3. Investments and Investment Income (continued) The amortized cost and market value of investments in fixed maturities (bonds) as of December 31, 1993 are summarized as follows:
Quoted or Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value U.S. Government securities $15,473,821 725,851 $(19,830) $16,179,842 Foreign government securities 3,277,886 39,710 (5,316) 3,312,280 Corporate securities 4,624,066 47,402 (43,392) 4,628,076 $23,375,773 $812,963 $(68,538) $24,120,198
Proceeds from sales of investments in debt securities during 1993 were $28,248,633. Gross gains of $694,800 and gross losses of $17,715 were realized on those sales. The investments above are valued, for financial statement purposes, as described in Note 2 to these financial statements. The amortized cost and market value of fixed maturities at December 31, 1994 by contractual maturities, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without prepayment penalties.
Years to Maturity Amortized Cost Market Value One year or less $107,413 $108,160 Greater than 1; up to 5 years 5,213,296 5,217,002 Greater than 5; up to 10 years 24,217,449 23,599,525 Due after 10 years 22,610,922 22,157,708 $52,149,080 $51,082,395
At December 31, 1994, $4,447,934 of bonds at amortized cost were on deposit with government insurance departments to satisfy regulatory regulations. - 149 - The Manufacturers Life Insurance Company of America Notes to Financial Statements (continued) 3. Investments and Investment Income (continued) Major categories of net investment income for each year were as follows:
Net Investment Income 1994 1993 1992 Gross investment income: Dividends; Manulife Series Fund, Inc. (Note 9) $ 1,244,794 $1,440,392 $ - Bond income 1,712,294 1,422,064 1,043,273 Policy loans 236,972 166,514 131,606 Short-term investments 501,477 384,178 313,998 3,695,537 3,413,148 1,488,877 Investment expenses (106,908) (89,786) (58,423) Net investment income $3,588,629 $3,323,962 $1,430,454
4. Related Party Transactions The Company has a formal service agreement with Manulife Financial which can be terminated by either party upon two months' notice. Under the Agreement, the Company will pay direct operating expenses incurred each year by Manulife Financial on behalf of the Company. Services provided under the Agreement include legal, actuarial, investment, data processing and certain other administrative services. Costs incurred under this Agreement were $21,326,446 in 1994, $12,467,474 in 1993, and $4,919,667 in 1992. In addition, there were $7,795,184 agents' bonuses in 1994, $5,363,558 in 1993, and $1,871,799 in 1992 which were allocated to the Company and are included in commissions. In addition, the Company has several reinsurance agreements with Manulife Financial which may be terminated upon the specified notice by either party. These agreements are summarized as follows: (a) The Company assumes two blocks of insurance from Manulife Financial under coinsurance treaties. The Company's risk is limited to $100,000 of initial face amount per claim plus a pro-rata share of any increase in face amount. (b) The Company cedes the risk in excess of $25,000 per life to Manulife Financial under the terms of an automatic reinsurance agreement. - 150 - The Manufacturers Life Insurance Company of America Notes to Financial Statements (continued) 4. Related Party Transactions (continued) (c) The Company cedes a substantial portion of its risk on its Flexible Premium Variable Life policies to Manulife Financial under the terms of a stop loss reinsurance agreement. (d) Under the terms of an automatic coinsurance agreement, the Company cedes its risk on structured settlements to Manulife Financial. Selected amounts relating to the above treaties reflected in the financial statements are as follows:
1994 1993 1992 Life and annuity premiums assumed $25,385,628 $12,745,981 $6,579,233 Other life and annuity considerations ceded (437,650) (201,685) (114,505) Commissions and expense allowances on reinsurance assumed (810,252) (329,634) (269,141) Policy reserves assumed 47,672,591 23,070,952 10,799,350 Policy reserves ceded 3,786,647 3,782,156 3,662,930
During 1992 and 1993 the Company assumed the first $50,000 of initial face amount on two blocks of business. This resulted in transfers of $5,031,000 and $10,837,000, respectively, to establish the initial reserves. In 1994 the treaties were amended to assume the first $100,000 of initial face amount for the same blocks of business. This resulted in a transfer of $21,477,000 to establish the additional reserve. Commissions equal to 17% are charged for all renewed premiums related to these contracts. During 1994, the Company terminated another treaty resulting in a premium to Manulife Financial to transfer the reserve of $799,874. - 151 - The Manufacturers Life Insurance Company of America Notes to Financial Statements (continued) 5. Federal Income Tax The Company joins the Parent, The Manufacturers Life Insurance Co. (U.S.A.) and Manufacturers Reinsurance Limited in filing a U.S. consolidated income tax return as a life insurance group under provisions of the Internal Revenue Code. In accordance with an income tax-sharing agreement dated December 29, 1983, the Company's income tax provision (or benefit) is computed as if the Company filed a separate income tax return. The Company receives no surtax exemption. Tax benefits from operating losses are provided at the U.S. statutory rate plus any tax credits attributable to the Company, provided the consolidated group utilizes such benefits currently. In 1994, 1993, and 1992, the Company's provision (benefit) based upon the above agreement will be paid to one or more members of the consolidated group in accordance with the income tax-sharing agreement. The Company, Parent and The Manufacturers Life Insurance Co. (U.S.A.) have available consolidated net operating losses of approximately $92,600,000 which will expire in the years 2007 to 2009, and capital loss carryforwards of $129,600,000 which will expire in 1999. The losses of the Company, Parent and The Manufacturers Life Insurance Co. (U.S.A.) may be used to offset the ordinary and capital gain income of Manufacturers Reinsurance Limited. However, losses of Manufacturers Reinsurance Limited may not be used to offset the income of the other members of the consolidated group. 6. Statutory Restrictions on Dividends The Company is subject to statutory limitations on the payment of dividends to its Parent. The Company cannot pay dividends during 1995 without the prior approval of insurance regulatory authorities. 7. Reinsurance The Company cedes reinsurance as a party to several reinsurance treaties with major unrelated insurance companies. Summary financial information related to these reinsurance activities is as follows: - 152 -
1994 1993 1992 Life insurance premiums assumed $ - $ - $28,887,669 Life insurance premiums ceded (218,767) (130,913) (28,809,307)
During 1992, the Company assumed and ceded a significant block of business on a yearly renewable term basis. This contract was not renewed in 1993. - 153 - The Manufacturers Life Insurance Company of America Notes to Financial Statements (continued) 8. Aggregate Policy Reserves Aggregate policy reserves for life policies including variable life are based on statutory mortality tables and interest assumptions using either the net level or commissioners' reserve valuation method. The composition of the aggregate policy reserves at December 31, 1994 and 1993 is as follows:
Mortality Interest Aggregate Reserves Table Rates 1994 1993 $ - $758,158 1958 CSO 4% 28,553,885 11,792,874 1980 CSO 4% (189,080) (62,228) Reinsurance ceded 1,396,369 530,801 Miscellaneous $29,761,174 $13,019,605
9. Investment in Separate Accounts During 1984, the Company initiated plans to market variable life insurance products through Separate Account One of The Manufacturers Life Insurance Company of America ("Separate Account One") using Manulife Series Fund, Inc. as its investment vehicle. Initial capitalization was $15,000,000. Through 1988, the Company provided an additional capitalization of $6,000,000. In December 1993, the Company transferred all of its shares, related to seed money, in Manulife Series Fund, Inc. out of Separate Account One to the General Account. At December 31, 1994, the $25,629,580 common stock represents the Company's seed money investment in Manulife Series Fund, Inc. During 1994, 1993, and 1992, the following dividends were received from Manulife Series Fund, Inc.: - 154 -
1994 1993 1992 Separate Account One $38,732 $1,610,693 $3,166,712 Separate Account Two 4,574,620 7,377,861 1,706,218 Separate Account Three 1,490,374 666,141 277,830 Separate Account Four 3,072,376 4,966,559 1,578,932 General Account 1,244,794 1,440,392 -
- 155 - The Manufacturers Life Insurance Company of America Notes to Financial Statements (continued) 9. Investment in Separate Accounts (continued) Dividends have been reinvested by the Company in Manulife Series Fund, Inc. During 1993, the Company withdrew $8,000,000 of its seed money and accumulated earnings from Separate Account One and the Manulife Series Fund, Inc. and utilized these funds to pay down its intercompany debt. During 1994, the Company withdrew $13,011,137 of its seed money and accumulated earnings from the Manulife Series Fund, Inc. and utilized these funds to pay down its intercompany debt. - 156 - APPENDIX What Are Some Illustrations Of Policy Values, Cash Surrender Values And Death Benefits? The following tables have been prepared to help show how values under the Policy change with investment performance. The tables include both Policy Values and Cash Surrender Values as well as Death Benefits. The Policy Value is the sum of the values in the Investment Accounts, as the tables assume no values in the Guaranteed Interest Account or Loan Account. The Cash Surrender Value is the Policy Value less the deferred sales charge and deferred underwriting charge. The tables illustrate how Policy Values and Cash Surrender Values, which reflect the deduction of all applicable charges including the premium tax charge and the sales charge, and death benefits of the Policy on an insured of a given age would vary over time if the return on the assets of the Portfolios was a uniform, gross, after-tax, annual rate of 0%, 6% or 12%. The Policy Values, death benefits and Cash Surrender Values would be different from those shown if the returns averaged 0%, 6% or 12%, but fluctuated over and under those averages throughout the years. The amounts shown for the Policy Value, death benefit and Cash Surrender Value as of each policy year reflect the fact that the net investment return on the assets held in the sub-accounts is lower than the gross, after-tax return. This is because the daily charge to the Separate Account for assuming mortality and expense risks (0.65% on an annual basis) and the expenses and fees borne by the Manulife Series Fund and NASL Series Trust are deducted from the gross return. The illustrations reflect an average of those Portfolios' expenses, which is approximately .76% on an annual basis. The gross annual rates of return of 0%, 6% and 12% correspond to approximate net annual rates of return of -1.40%, 4.52%, and 10.43%. The tables assume that no premiums have been allocated to the Guaranteed Interest Account, that planned premiums are paid on the policy anniversary and that no transfers, partial withdrawals, policy loans, changes in death benefit options or changes in face amount have been made. The tables reflect the fact that no charges for federal, state or local taxes are currently made against the Separate Account. If such a charge is made in the future, it will take a higher gross rate of return to produce after-tax returns of 0%, 6% and 12% than it does now. There are two tables shown for each combination of age and death benefit option for male nonsmokers, one based on current - 157 - cost of insurance charges assessed by the Company and the other based on the maximum cost of insurance charges based on the 1980 Commissioners Standard Ordinary Smoker/ Nonsmoker Mortality Tables. Current cost of insurance charges are not guaranteed and may be changed. Upon request, Manufacturers Life of America will furnish a comparable illustration based on the proposed life insured's age, sex and risk class, any additional ratings and the death benefit option, face amount and planned premium requested. Illustrations for smokers would show less favorable results than the illustrations shown below. From time to time, in advertisements or sales literature for the Policies that quote performance data of one or more of the Portfolios, the Company may include cash surrender values and death benefit figures computed using the same methodology as that used in the following illustrations, but with the average annual total return of the Portfolio for which performance data is shown in the advertisement replacing the hypothetical rates of return shown in the following tables. The Policies were first sold to the public on December 7, 1987. However, total return data may be advertised for as long a period of time as the underlying Portfolio has been in existence. The results for any period prior to the Policies being offered would be calculated as if the Policies had been offered during that period of time, with all charges assumed to be the same as for the first full year the Policies were offered. - 158 - FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY Male Nonsmoker Issue Age 25 $100,000 Face Amount Death Benefit Option 1 $575 Annual Planned Premium ASSUMING CURRENT CHARGES 0% Hypothetical Gross Investment Return
End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $604 $383 $0 $100,000 2 1,238 756 0 100,000 3 1,903 1,115 348 100,000 4 2,602 1,462 695 100,000 5 3,336 1,798 1,031 100,000 6 4,107 2,122 1,432 100,000 7 4,916 2,433 1,820 100,000 8 5,765 2,735 2,198 100,000 9 6,657 3,027 2,567 100,000 10 7,594 3,306 2,923 100,000 15 13,028 4,498 4,498 100,000 20 19,964 5,284 5,284 100,000 25 28,815 5,482 5,482 100,000 30 40,112 4,881 4,881 100,000
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION - 159 - 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 MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. - 160 -
6% Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $604 $411 $0 $100,000 2 1,238 834 67 100,000 3 1,903 1,269 501 100,000 4 2,602 1,716 949 100,000 5 3,336 2,177 1,410 100,000 6 4,107 2,651 1,960 100,000 7 4,916 3,138 2,524 100,000 8 5,765 3,642 3,105 100,000 9 6,657 4,164 3,704 100,000 10 7,594 4,701 4,318 100,000 15 13,028 7,622 7,622 100,000 20 19,964 10,929 10,929 100,000 25 28,815 14,531 14,531 100,000 30 40,112 18,305 18,305 100,000
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR - 161 - 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. - 162 -
12%Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $604 $438 $0 $100,000 2 1,238 916 149 100,000 3 1,903 1,435 668 100,000 4 2,602 2,002 1,235 100,000 5 3,336 2,622 1,854 100,000 6 4,107 3,298 2,607 100,000 7 4,916 4,037 3,423 100,000 8 5,765 4,848 4,311 100,000 9 6,657 5,739 5,279 100,000 10 7,594 6,715 6,331 100,000 15 13,028 13,209 13,209 100,000 20 19,964 23,590 23,590 100,000 25 28,815 40,338 40,338 100,000 30 40,112 67,830 67,830 106,493
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT - 163 - THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. - 164 - FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY Male Nonsmoker Issue Age 25 $100,000 Face Amount Death Benefit Option 1 $575 Annual Planned Premium ASSUMING GUARANTEED CHARGES
0% Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $604 $383 $0 $100,000 2 1,238 700 0 100,000 3 1,903 1,015 247 100,000 4 2,602 1,327 560 100,000 5 3,336 1,636 869 100,000 6 4,107 1,940 1,250 100,000 7 4,916 2,238 1,625 100,000 8 5,765 2,530 1,993 100,000 9 6,657 2,813 2,353 100,000 10 7,594 3,087 2,703 100,000 15 13,028 4,271 4,271 100,000 20 19,964 5,031 5,031 100,000 25 28,815 5,181 5,181 100,000 30 40,112 4,388 4,388 100,000
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE - 165 - POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. - 166 -
6% Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $604 $411 0 $100,000 2 1,238 777 9 100,000 3 1,903 1,162 394 100,000 4 2,602 1,567 800 100,000 5 3,336 1,991 1,223 100,000 6 4,107 2,434 1,744 100,000 7 4,916 2,896 2,282 100,000 8 5,765 3,376 2,839 100,000 9 6,657 3,873 3,413 100,000 10 7,594 4,388 4,005 100,000 15 13,028 7,204 7,204 100,000 20 19,964 10,359 10,359 100,000 25 28,815 13,742 13,742 100,000 30 40,112 17,092 17,092 100,000
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY - 167 - 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. - 168 -
12% Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $604 $438 $0 $100,000 2 1,238 857 90 100,000 3 1,903 1,322 555 100,000 4 2,602 1,838 1,071 100,000 5 3,336 2,409 1,642 100,000 6 4,107 3,041 2,350 100,000 7 4,916 3,736 3,123 100,000 8 5,765 4,502 3,965 100,000 9 6,657 5,345 4,885 100,000 10 7,594 6,271 5,887 100,000 15 13,028 12,445 12,445 100,000 20 19,964 22,274 22,274 100,000 25 28,815 38,078 38,078 100,000 30 40,112 63,903 63,903 100,328
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD - 169 - 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. - 170 -
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY Male Nonsmoker Issue Age 25 $100,000 Face Amount Death Benefit Option 2 $575 Annual Planned Premium ASSUMING CURRENT CHARGES 0% Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $604 $383 $0 $100,383 2 1,238 754 0 100,754 3 1,903 1,112 345 101,112 4 2,602 1,458 691 101,458 5 3,336 1,792 1,025 101,792 6 4,107 2,113 1,423 102,113 7 4,916 2,422 1,808 102,422 8 5,765 2,720 2,183 102,720 9 6,657 3,007 2,547 103,007 10 7,594 3,282 2,898 103,282 15 13,028 4,437 4,437 104,437 20 19,964 5,162 5,162 105,162 25 28,815 5,265 5,265 105,265 30 40,112 4,533 4,533 104,533
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION - 171 - 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 MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. - 172 -
6% Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $604 $410 $0 $100,410 2 1,238 833 65 100,833 3 1,903 1,266 499 101,266 4 2,602 1,711 944 101,711 5 3,336 2,169 1,402 102,169 6 4,107 2,639 1,949 102,639 7 4,916 3,122 2,508 103,122 8 5,765 3,621 3,084 103,621 9 6,657 4,136 3,675 104,136 10 7,594 4,664 4,280 104,664 15 13,028 7,509 7,509 107,509 20 19,964 10,651 10,651 110,651 25 28,815 13,912 13,912 113,912 30 40,112 17,023 17,023 117,023
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD - 173 - 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. - 174 -
12% Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $604 $438 $0 $100,438 2 1,238 914 147 100,914 3 1,903 1,432 665 101,432 4 2,602 1,997 1,229 101,997 5 3,336 2,612 1,845 102,612 6 4,107 3,283 2,593 103,283 7 4,916 4,015 3,401 104,015 8 5,765 4,817 4,280 104,817 9 6,657 5,697 5,237 105,697 10 7,594 6,658 6,275 106,658 15 13,028 12,998 12,998 112,998 20 19,964 22,945 22,945 122,945 25 28,815 38,525 38,525 138,525 30 40,112 63,014 63,014 163,014
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD - 175 - 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. - 176 -
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY Male Nonsmoker Issue Age 25 $100,000 Face Amount Death Benefit Option 2 $575 Annual Planned Premium ASSUMING GUARANTEED CHARGES 0% Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $604 383 $0 $100,383 2 1,238 698 0 100,698 3 1,903 1,011 244 101,011 4 2,602 1,322 555 101,322 5 3,336 1,628 861 101,628 6 4,107 1,930 1,240 101,930 7 4,916 2,225 1,611 102,225 8 5,765 2,512 1,975 102,512 9 6,657 2,791 2,331 102,791 10 7,594 3,060 2,676 103,060 15 13,028 4,210 4,210 104,210 20 19,964 4,909 4,909 104,909 25 28,815 4,965 4,965 104,965 30 40,112 4,040 4,040 104,040
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE - 177 - 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 MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. - 178 -
6% Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $604 $410 $0 $100,410 2 1,238 775 8 100,775 3 1,903 1,158 391 101,158 4 2,602 1,560 793 101,560 5 3,336 1,981 1,214 101,981 6 4,107 2,421 1,730 102,421 7 4,916 2,877 2,263 102,877 8 5,765 3,351 2,814 103,351 9 6,657 3,842 3,381 103,842 10 7,594 4,348 3,964 104,348 15 13,028 7,090 7,090 107,090 20 19,964 10,082 10,082 110,082 25 28,815 13,129 13,129 113,129 30 40,112 15,810 15,810 115,810
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD - 179 - 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. - 180 -
12% Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $604 $438 $0 $100,438 2 1,238 855 88 100,855 3 1,903 1,318 550 101,318 4 2,602 1,831 1,064 101,831 5 3,336 2,398 1,630 102,398 6 4,107 3,023 2,333 103,023 7 4,916 3,711 3,098 103,711 8 5,765 4,468 3,931 104,468 9 6,657 5,298 4,838 105,298 10 7,594 6,209 5,825 106,209 15 13,028 12,231 12,231 112,231 20 19,964 21,631 21,631 121,631 25 28,815 36,284 36,284 136,284 30 40,112 59,070 59,070 159,070
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD - 181 - 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. - 182 -
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY Male Nonsmoker Issue Age 45 $100,000 Face Amount Death Benefit Option 1 $1,325 Annual Planned Premium ASSUMING CURRENT CHARGES 0% Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $1,391 $896 $0 $100,000 2 2,852 1,762 202 100,000 3 4,386 2,591 1,031 100,000 4 5,996 3,382 1,822 100,000 5 7,688 4,128 2,568 100,000 6 9,463 4,830 3,426 100,000 7 11,328 5,482 4,234 100,000 8 13,285 6,092 5,000 100,000 9 15,341 6,652 5,716 100,000 10 17,499 7,165 6,385 100,000 15 30,021 8,936 8,936 100,000 20 46,003 8,941 8,941 100,000 25 66,400 4,663 4,663 100,000 30 92,433 0(4) 0(4) 0(4)
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. (4) In the absence of additional premium payments, the Policy will lapse. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION - 183 - 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 MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. - 184 -
6% Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $1,391 $960 $0 $100,000 2 2,852 1,945 385 100,000 3 4,386 2,949 1,389 100,000 4 5,996 3,973 2,413 100,000 5 7,688 5,008 3,448 100,000 6 9,463 6,058 4,654 100,000 7 11,328 7,116 5,868 100,000 8 13,285 8,190 7,098 100,000 9 15,341 9,275 8,339 100,000 10 17,499 10,371 9,591 100,000 15 30,021 15,997 15,997 100,000 20 46,003 21,557 21,557 100,000 25 66,400 24,883 24,883 100,000 30 92,433 23,366 23,366 100,000
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. (4) In the absence of additional premium payments, the Policy will lapse. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY - 185 - 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. - 186 -
12% Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $1,391 $1,023 $0 $100,000 2 2,852 2,135 575 100,000 3 4,386 3,338 1,778 100,000 4 5,996 4,640 3,080 100,000 5 7,688 6,044 4,484 100,000 6 9,463 7,563 6,159 100,000 7 11,328 9,204 7,956 100,000 8 13,285 10,987 9,895 100,000 9 15,341 12,923 11,987 100,000 10 17,499 15,031 14,251 100,000 15 30,021 28,881 28,881 100,000 20 46,003 51,063 51,063 100,000 25 66,400 87,773 87,773 101,816 30 92,433 149,516 149,516 159,982
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. (4) In the absence of additional premium payments, the Policy will lapse. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY - 187 - 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. - 188 -
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY Male Non-Smoker Issue Age 45 $100,000 Face Amount Death Benefit Option 1 $1,325 Annual Planned Premium ASSUMING GUARANTEED CHARGES 0% Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $1,391 $896 $0 $100,000 2 2,852 1,705 145 100,000 3 4,386 2,477 917 100,000 4 5,996 3,212 1,652 100,000 5 7,688 3,907 2,347 100,000 6 9,463 4,560 3,156 100,000 7 11,328 5,166 3,918 100,000 8 13,285 5,719 4,627 100,000 9 15,341 6,214 5,278 100,000 10 17,499 6,645 5,865 100,000 15 30,021 7,635 7,635 100,000 20 46,003 5,834 5,834 100,000 25 66,400 0(4) 0(4) 100,000(4) 30 92,433 0(5) 0(5) 0(5)
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. (4) Provided the Minimum Premium Requirement has been met, the death benefit guarantee will have kept the Policy in force until this point, i.e. the policy anniversary on which the life insured is 70 years old, at which time the death benefit guarantee will expire and in the absence of additional premium payments the Policy will lapse. (5) In the absence of additional premium payments, the Policy will lapse. - 189 - 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 MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. - 190 -
6% Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) enefit 1 $1,391 $960 $0 $100,000 2 2,852 1,886 326 100,000 3 4,386 2,828 1,268 100,000 4 5,996 3,787 2,227 100,000 5 7,688 4,759 3,199 100,000 6 9,463 5,744 4,340 100,000 7 11,328 6,737 5,489 100,000 8 13,285 7,732 6,640 100,000 9 15,341 8,724 7,788 100,000 10 17,499 9,708 8,928 100,000 15 30,021 14,280 14,280 100,000 20 46,003 17,398 17,398 100,000 25 66,400 16,666 16,666 100,000 30 92,433 6,831 6,831 100,000
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. (4) Provided the Minimum Premium Requirement has been met, the death benefit guarantee will have kept the Policy in force until this point, i.e. the policy anniversary on which the life insured is 70 years old, at which time the death benefit guarantee will expire and in the absence of additional premium payments the Policy will lapse. (5) In the absence of additional premium payments, the Policy will lapse. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION - 191 - 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 MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. - 192 -
12% Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $1,391 $1,023 $0 $100,000 2 2,852 2,074 515 100,000 3 4,386 3,210 1,650 100,000 4 5,996 4,438 2,878 100,000 5 7,688 5,764 4,204 100,000 6 9,463 7,200 5,796 100,000 7 11,328 8,750 7,502 100,000 8 13,285 10,424 9,332 100,000 9 15,341 12,229 11,293 100,000 10 17,499 14,176 13,396 100,000 15 30,021 26,540 26,540 100,000 20 46,003 45,313 45,313 100,000 25 66,400 75,844 75,844 100,000 30 92,433 129,308 129,308 138,360
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. (4) Provided the Minimum Premium Requirement has been met, the death benefit guarantee will have kept the Policy in force until this point, i.e. the policy anniversary on which the life insured is 70 years old, at which time the death benefit guarantee will expire and in the absence of additional premium payments the Policy will lapse. (5) In the absence of additional premium payments, the Policy will lapse. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. - 193 - 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 MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. - 194 -
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY Male Nonsmoker Issue Age 45 $100,000 Face Amount Death Benefit Option 2 $1,325 Annual Planned Premium ASSUMING CURRENT CHARGES 0% Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $1,391 $893 $0 $100,893 2 2,852 1,754 194 101,754 3 4,386 2,573 1,014 102,573 4 5,996 3,352 1,792 103,352 5 7,688 4,081 2,521 104,081 6 9,463 4,761 3,357 104,761 7 11,328 5,387 4,139 105,387 8 13,285 5,965 4,873 105,965 9 15,341 6,487 5,551 106,487 10 17,499 6,956 6,176 106,956 15 30,021 8,409 8,409 108,409 20 46,003 7,901 7,901 107,901 25 66,400 2,922 2,922 102,922 30 92,433 0(4) 0(4) 0(4)
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. (4) In the absence of additional premium payments, the Policy will lapse. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. - 195 - 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 MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. - 196 -
6% Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $1,391 $956 $0 $100,956 2 2,852 1,935 375 101,935 3 4,386 2,929 1,369 102,929 4 5,996 3,937 2,377 103,937 5 7,688 4,950 3,390 104,950 6 9,463 5,969 4,565 105,969 7 11,328 6,988 5,740 106,988 8 13,285 8,012 6,920 108,012 9 15,341 9,034 8,098 109,034 10 17,499 10,054 9,274 110,054 15 30,021 15,002 15,002 115,002 20 46,003 19,051 19,051 119,051 25 66,400 18,949 18,949 118,949 30 92,433 11,089 11,089 111,089
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. (4) In the absence of additional premium payments, the Policy will lapse. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY - 197 - 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. - 198 -
12% Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $1,391 $1,020 $0 $101,020 2 2,852 2,125 565 102,125 3 4,386 3,314 1,755 103,314 4 5,996 4,597 3,037 104,597 5 7,688 5,971 4,411 105,971 6 9,463 7,449 6,045 107,449 7 11,328 9,032 7,784 109,032 8 13,285 10,739 9,647 110,739 9 15,341 12,574 11,638 112,574 10 17,499 14,551 13,771 114,551 15 30,021 27,004 27,004 127,004 20 46,003 45,043 45,043 145,043 25 66,400 68,784 68,784 168,784 30 92,433 98,875 98,875 198,875
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. (4) In the absence of additional premium payments, the Policy will lapse. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY - 199 - 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. - 200 -
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY Male Nonsmoker Issue Age 45 $100,000 Face Amount Death Benefit Option 2 $1,325 Annual Planned Premium ASSUMING GUARANTEED CHARGES 0% Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $1,391 $893 $0 $100,893 2 2,852 1,695 135 101,695 3 4,386 2,458 898 102,458 4 5,996 3,178 1,618 103,178 5 7,688 3,855 2,295 103,855 6 9,463 4,485 3,081 104,485 7 11,328 5,062 3,814 105,062 8 13,285 5,582 4,490 105,582 9 15,341 6,027 5,101 106,037 10 17,499 6,421 5,641 106,421 15 30,021 7,058 7,058 107,058 20 46,003 4,728 4,728 104,728 25 66,400 0(4) 0(4) 100,000(4) 30 92,433 0(5) 0(5) 0(5)
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. (4) In the absence of additional premium payments, the Policy will lapse. (5) In the absence of additional premium payments, the Policy will lapse. - 201 - 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 MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. - 202 -
6% Hypothetical Gross Investment Return End of Cash Policy Aaccumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $1,391 $956 $0 $100,956 2 2,852 1,875 315 101,875 3 4,386 2,806 1,246 102,806 4 5,996 3,746 2,186 103,746 5 7,688 4,694 3,134 104,694 6 9,463 5,647 4,243 105,647 7 11,328 6,597 5,349 106,597 8 13,285 7,539 6,447 107,539 9 15,341 8,465 7,529 108,465 10 17,499 9,365 8,585 109,365 15 30,021 13,176 13,176 113,176 20 46,003 14,577 14,577 114,577 25 66,400 10,545 10,545 110,545 30 92,433 0(5) 0(5) 0(5)
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. (4) In the absence of additional premium payments, the Policy will lapse. (5) In the absence of additional premium payments, the Policy will lapse. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF - 203 - FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. - 204 -
12% Hypothetical Gross Investment Return End of Cash Policy Accumulated Policy Surrender Death Year(1) Premiums(2) Value Value(3) Benefit 1 $1,391 $1,020 $0 $101,020 2 2,852 2,063 503 102,063 3 4,386 3,184 1,624 103,184 4 5,996 4,389 2,829 104,389 5 7,688 5,684 4,124 105,684 6 9,463 7,074 5,670 107,074 7 11,328 8,563 7,315 108,563 8 13,285 10,154 9,062 110,154 9 15,341 11,851 10,915 111,851 10 17,499 13,655 12,875 113,655 15 30,021 24,438 24,438 124,438 20 46,003 38,309 38,309 138,309 25 66,400 54,457 54,457 154,457 30 92,433 70,144 70,144 170,144
(1) All values shown are as of the end of the policy year indicated and assume that (a) premiums paid after the initial premium are received on the policy anniversary, (b) no policy loan has been made, (c) no partial withdrawal of the Cash Surrender Value has been made and (d) no premiums have been allocated to the Guaranteed Interest Account. (2) Assumes net interest of 5% compounded annually. (3) Provided the Minimum Premium Requirement has been and continues to be met, the death benefit guarantee will keep the Policy in force until the policy anniversary on which the life insured is 70 years old. (4) In the absence of additional premium payments, the Policy will lapse. (5) In the absence of additional premium payments, the Policy will lapse. THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE - 205 - POLICYOWNER, AND THE INVESTMENT RETURNS FOR THE FUNDS OF MANULIFE SERIES FUND, INC. AND NASL SERIES TRUST. THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. - 206 - PART II. OTHER INFORMATION CONTENTS OF REGISTRATION STATEMENT This registration statement comprises the following papers and documents: The facing sheet; The Prospectus, consisting of _____ pages; The signatures; Written consents of the following persons: Jones & Blouch L.L.P. Ernst & Young LLP John R. Ostler The following exhibits, filed as part of this Post-Effective Amendment No. 9 are incorporated herein by reference to the designated filings: 1. Copies of all exhibits required by paragraph A of the instructions as to exhibits in Form N-8B-2 are set forth below under designations based on such instructions: A(1) Resolutions of Board of Directors of The Manufacturers Life Insurance Company of America establishing Separate Account Four, previously filed as Exhibit A(1) to Registrant's registration statement on Form S-6, April 24, 1987. A(3) (a)(i) Distribution Agreement between The Manufacturers Life Insurance Company of America and ManEquity, Inc., previously filed as Exhibit (A)(3)(a) to Pre- Effective Amendment No. 1, August 13, 1987. A(3)(a)(ii) Amendment to Distribution Agreement, previously filed as Exhibit A(3)(a)(ii) to - 207 - Post-Effective Amendment No. 9, February 28, 1992. A(3)(b)(i) Specimen agreement between ManEquity, Inc. and registered representatives, previously filed as Exhibit A(3)(b)(i) to Post- Effective Amendment No.9, February 28, 1992. A(3)(b)(ii) Specimen agreement between ManEquity, Inc. and dealers, previously filed as Exhibit A(3)(b)(ii) to Post-Effective Amendment No. 11, February 26, 1993. A(3)(c) Schedule of Sales Commissions, previously filed as Exhibit A(3)(c) to Post-Effective Amendment No. 9, February 28, 1992. A(5)(a) Form of Flexible Premium Variable Life Insurance Policy, as amended, previously filed as Exhibit A(5) to Pre-Effective Amendment No. 2, November 19, 1987. A(5)(b) Endorsement to Flexible Premium Variable Life Insurance Policy, previously filed as Exhibit A(5)(b) to Post-Effective Amendment No. 9, February 28, 1992. A(5)(c) Endorsement to Flexible Premium Variable Life Insurance Policy re redomestication, previously filed as Exhibit A(5)(c) to Post-Effective Amendment No. 11, February 26, 1993. A(6)(a) Restated Articles of Redomestication of The Manufacturers Life Insurance Company of America, previously filed as Exhibit A(6)(a) to Post-Effective Amendment No. 11, February 26, 1993. A(6)(b) By-Laws of The Manufacturers Life Insurance Company of America, previously filed as Exhibit A(6)(b) to Post-Effective Amendment No. 11, February 26, 1993. A(8)(a) Service Agreement between The Manufacturers Life Insurance Company of America and The Manufacturers Life Insurance Company, previously filed as Exhibit 1.A(8)(a) to Post-Effective Amendment No. 7 to the registration - 208 - statement on Form N-4 of Separate Account One of The Manufacturers Life Insurance Company of America (File No. 2-88607), March 2, 1989. A(8)(a)(i) Amendment to Service Agreement, previously filed as Exhibit A(8)(a)(i) to Post- Effective Amendment No. 11, February 26, 1993. A(8)(a)(ii) Amendments to Service Agreement: May 31, 1993 and June 30, 1993. Previously filed as Exhibit A(8)(a)(ii) to Post-Effective Amendment No. 13, March 1, 1994. A(8)(b) Stoploss Reinsurance Agreement between The Manufacturers Life Insurance Company of America and The Manufacturers Life Insurance Company, previously filed as Exhibit A(8)(b) to Pre-Effective Amendment No. 1, August 13, 1987. A(8)(c) Automatic Coinsurance Agreement between The Manufacturers Life Insurance Company of America and The Manufacturers Life Insurance Company, previously filed as Exhibit (7) to Pre-Effective Amendment No. 1 to the registration statement on Form N- 4 of Separate Account Two of The Manufacturers Life Insurance Company of America (File No. 33-14499), September 4, 1987. A(8)(d) Service Agreement between between The Manufacturers Life Insurance Company and ManEquity, Inc. dated January 2, 1991 as amended March 1, 1994, previously filed as Exhibit A(8)(d) to Post-Effective Amendment No. 14, April 26, 1994. A(10)(a) Form of Application for Flexible Premium Variable Life Insurance Policy, previously filed as Exhibit A(10) to Pre-Effective Amendment No. 1, August 13, 1987. A(10)(b) Form of Streamlined Application for Flexible Premium Variable Life Insurance Policy, previously filed as Exhibit A(10)(b) to Post-Effective Amendment No. 5, March 2, 1990. - 209 - A(10)(c) Form of Short Form Application for Flexible Premium Variable Life Insurance Policy, previously filed as Exhibit A(10)(c) to Post-Effective Amendment No. 5, March 2, 1990. A(10)(d) Form of Application Supplement for Flexible Premium Variable Life Insurance Policy, previously filed as Exhibit A(10)(d) to Post-Effective Amendment No. 7, March 1, 1991. 2. See Exhibit A(5). 3. Opinion and consent of Stephen C. Nesbitt, Esq., General Counsel of The Manufacturers Life Insurance Company of America, previously filed as Exhibit 3 to Pre-Effective Amendment No. 1, August 13, 1987. 4. No financial statements are omitted from the prospectus pursuant to instruction 1(b) or (c) of Part I. 5. Not applicable. 6. Opinion and consent of John R. Ostler, Vice-President, Chief Actuary and Treasurer of The Manufacturers Life Insurance Company of America.** 7. Form of notice of short term cancellation right and request for refund, previously filed as Exhibit 7 to pre-Effective Amendment No. 1, August 13, 1987. 8(a). Form of notice of right of surrender and refund, previously filed as Exhibit 8 to Pre-Effective Amendment No. 1, August 13, 1987. 8(b). Form of notice of right of surrender and refund (face amount increase), previously filed as Exhibit 8(b) to Post-Effective Amendment No. 9, February 28, 1992. 9. Memorandum Regarding Issuance, Face Amount Increase, Redemption and Transfer Procedures for the Policies, previously filed as Exhibit 9 to Post-Effective Amendment No. 18, April 27, 1995. 10. Consent of Ernst & Young LLP.** 11. Consent of Jones & Blouch L.L.P.** 12. Financial Data Schedule.** ** Filed Herewith Electronically - 210 - SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of l940, the registrant, SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA, and its depositor, THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA, have caused this amended registration statement to be signed on their behalf in the City of Toronto, Province of Ontario, Canada, on the 13th day of December, 1995. [SEAL] SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA (Registrant) By: THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA (Depositor) By: Donald A. Guloien ----------------------------- DONALD A. GULOIEN President THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA By: Donald A. Guloien ----------------------------- DONALD A.GULOIEN President Attest Sheri L. Kocen ---------------- (60)SA4-486(a) - 211 - SIGNATURES Pursuant to the requirements of the Securities Act of l933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date Donald A. Guloien President and Director December 13, 1995 DONALD A. GULOIEN (Principal Executive Officer) Director SANDRA M. COTTER Director LEONARD V. DAY, Jr. Stephen C. Nesbitt Director December 13, 1995 STEPHEN C. NESBITT Joseph J. Pietroski Director December 13, 1995 JOSEPH J. PIETROSKI John D. Richardson Director and Chairman December 13, 1995 JOHN D. RICHARDSON Diane M. Schwartz Director December 13, 1995 DIANE M. SCHWARTZ Douglas H. Myers Vice President, Finance December 13, 1995 DOUGLAS H. MYERS (Principal Financial and Accounting Officer)
- 212 - EXHIBITS - 213 -
Page in Sequential Numbering System Where Exhibit Exhibit No. Description Located A(1) Resolutions of Board Previously filed as of Directors of The Exhibit A(1) to Regis- Manufacturers Life trant's registration Insurance Company of statement on Form S-6, America establishing April 24, 1987. Separate Account Four A(3)(a)(i) Distribution Agreement Previously filed as between The Manufacturers Exhibit (A)(3)(a) to Life Insurance Company of Pre-Effective Amendment America and ManEquity, Inc. No. 1, August 13, 1987. A(3)(a)(ii) Amendment to Distribution Previously filed as Agreement. Exhibit A(3)(a)(ii) to Post-Effective Amendment No.9, February 28, 1992. A(3)(b)(i) Specimen agreement Previously filed as between ManEquity, Inc. Exhibit A(3)(b)(i) to and registered repre- Post-Effective Amendment sentatives. No. 9, February 28, 1992. A(3)(b)(ii) Specimen agreement Previously filed as between ManEquity, Inc. Exhibit A(3)(b)(ii) to and dealers. Post-Effective Amendment No. 11, February 26, 1993. A(3)(c) Schedule of Sales Previously filed as Commissions. Exhibit A(3)(c) to Post-Effective Amendment No. 9, February 28, 1992. A(5)(a) Form of Flexible Premium Previously filed as Variable Life Insurance Exhibit A(5) to Pre- Policy, as amended Effective Amendment No. 2, November 19, 1987. A(5)(b) Endorsement to Flexible Previously filed as Premium Variable Life Exhibit A(5)(b) to Post- Insurance Policy. Effective Amendment No. 9, February 28, 1992.
- 214 -
Page in Sequential Numbering System Where Exhibit Exhibit No. Description Located A(5)(c) Endorsement to Flexible Previously filed as Premium Variable Life Exhibit A(5)(c) to Post- Insurance Policy re Effective Amendment No. 11, redomestication. February 26, 1993. A(6)(a) Restated Articles of Previously filed as Redomestication of The Exhibit A(6)(a) to Manufacturers Life Post-Effective Amendment Insurance Company of No. 11, February 26, 1993. America. A(6)(b) By-Laws of The Manu- Previously filed as facturers Life Insurance Exhibit A(6)(b) to Company of America. Post-Effective Amendment No. 11, February 26, 1993. A(8)(a) Service Agreement between Previously filed as The Manufacturers Life Exhibit 1.A(8)(a) to Insurance Company of Post-Effective Amend- America and The Manu- ment No. 7 to the facturers Life Insurance registration statement Company. on Form N-4 of Separate Account One of The Manufacturers Life Insurance Company of America (File No. 2-88607), March 2, 1989. A(8)(a)(i) Amendment to Service Previously filed as Agreement Exhibit A(8)(a)(i) to Post-Effective Amendment No. 11, February 26, 1993. A(8)(a)(ii) Amendments to Service Previously filed as Agreement: May 31, 1993 Exhibit A(8)(a)(ii) to and June 30, 1993 Post-Effective Amendment No. 13, March 1, 1994. A(8)(b) Stoploss Reinsurance Previously filed as Agreement between The Exhibit A(8)(b) to Manufacturers Life Pre-Effective Amend- Insurance Company of ment No. 1, August 13, 1987 America and The Manu- facturers Life Insurance Company.
- 215 -
Page in Sequential Numbering System Where Exhibit Exhibit No. Description Located A(8)(c) Automatic Coinsurance Previously filed as Agreement between The Exhibit (7) to Pre- Manufacturers Life Effective Amendment Insurance Company of No. 1 to the regis- America and The Manu- tration statement on facturers Life Insurance Form N-4 of Separate Company. Account Two of The Manu- facturers Life Insurance Company of America (File No. 33-14499), September 4, 1987. A(8)(d) Service Agreement between Previously filed as between The Manufacturers Exhibit A(8)(d) to Post- Life Insurance Company and Effective Amendment ManEquity, Inc. dated No. 14, April 26, 1994. January 2, 1991 as amended March 1, 1994. A(10)(a) Form of Application for Previously filed as Flexible Premium Variable Exhibit A(10) to Pre- Life Insurance Policy. Effective Amendment No. 1, August 13, 1987. A(10)(b) Form of Streamlined Previously filed as Application for Flexible Exhibit A(10)(b) to Premium Variable Life Post-Effective Amend- Insurance Policy. ment No. 5, March 2, 1990.
- 216 -
Page in Sequential Numbering System Where Exhibit Exhibit No. Description Located A(10)(c) Form of Short Form Previously filed as Application for Flexible Exhibit A(10)(c) to Premium Variable Life Post-Effective Amend- Insurance Policy. ment No. 5, March 2, 1990. A(10)(d) Form of Application Previously filed as Supplement for Flexible Exhibit A(10)(d) to Premium Variable Life Post-Effective Amend- Insurance Policy. ment No. 7, March 1, 1991. 2. See Exhibit A(5). 3. Opinion and consent of Previously filed as Stephen C. Nesbitt, Esq., Exhibit 3 to Pre- General Counsel of The Effective Amendment Manufacturers Life Insurance No. 1, August 13, 1987. Company of America. 4. No financial statements are omitted from the prospectus pursuant to instruction 1(b) or (c) of Part I. 5. Not applicable. 6. Opinion and consent of John R. Ostler, Vice- President, Chief Actuary and Treasurer of The Manu- facturers Life Insurance Company of America.** 7. Form of notice of short- Previously filed as term cancellation right Exhibit 7 to Post- and request for refund. Effective Amendment No. 9, February 28, 1992. 8(a). Form of notice of right Previously filed as of surrender and refund. Exhibit 8 to Pre- Effective Amendment No. 1, August 13, 1987.
** Filed Herewith Electronically - 217 -
Page in Sequential Numbering System Where Exhibit Exhibit No. Description Located 8(b). Form of notice of right Previously filed as of surrender and refund Exhibit 8(b) to Post- (face amount increase). Effective Amendment No. 9, February 28, 1992. 9. Memorandum Regarding Previously filed as Issuance, Face Amount Exhibit 9 to Post- Increase, Redemption Effective Amendment and Transfer Procedures No. 18, April 27, for the Policies. 1995. 10. Consent of Ernst & Young LLP.** 11. Consent of Jones & Blouch L.L.P.** 12. Financial Data Schedule.**
Filed Herewith Electronically. - 218 - - 219 - EX-99.6 2 EXHIBIT 99-6 December 13, 1995 The Manufacturers Life Insurance Company of America 500 N. Woodward Avenue Suite 250 Bloomfield Hills Michigan 48304 U.S.A. Gentlemen: This opinion is furnished in connection with the filing of Post- Effective Amendment No. 19 to Registration Statement No. 33-13774 on Form S-6 ("Registration Statement") which covers premiums expected to be received under Flexible Premium Variable Life Insurance Policies ("Policies") to be offered by The Manufacturers Life Insurance Company of America ("Company"). The prospectus included in the Registration Statement describes Policies which will be offered by the Company in each State where they have been approved by appropriate State insurance authorities. The Policy form was prepared under my direction, and I am familiar with the amended Registration Statement and Exhibits thereto. In my opinion: (l) The table of corridor percentages shown under the caption "What Death Benefit Options Are Available?" is consistent with the Policy's provisions. (2) The illustrations of death benefits based on Policy Value multiplied by corridor percentage shown under the caption "What Death Benefit Options Are Available?", based on the assumptions stated in the illustrations, are consistent with the provisions of the Policy. (3) The illustration of Modified Policy Debt shown in the second paragraph under the caption "What Are The Provisions Governing Policy Loans?", based on the assumptions stated in the illustration, is consistent with the Policy's provisions. (4) The illustration of an application of the loan tier amount shown under the sub-caption "Interest Credited to the Loan Account" of the caption "What Are The Provisions Governing Policy Loans?", based on the assumptions stated in the illustration, is consistent with the provisions of the Policy. (5) The Loan Account illustration shown as a sub-caption under the caption "What Are The Provisions Governing Policy Loans", based on the assumption stated in the illustration, isconsistent with the Policy'sprovisions. (6) The schedule of deferred underwriting charges shown under the sub-caption "Deferred Underwriting Charge" of the caption "What Are The Surrender Charges?" is consistent with the Policy's provisions. (7) The table under the sub-caption "Deferred Underwriting Charge" of the caption "What Are The Surrender Charges?" showing, on an annual basis, the surrender charge applied to the Policy five years or more after issuance of the Policy or a face amount increase, is consistent with the provisions of the Policy. (8) The table under sub-section "Deferred Sales Charge" of the caption "What Are The Surrender Charges?" showing for life insureds over age 69 at issue or face amount increase the applicable percent of premium reduction against which the deferred sales charge is applied is consistent with the Policy's sales charge structure. (9) The illustration of the operation of the maximum sales charge under the sub-caption "Refund of Excess Sales Charge" of the caption "What Are The Surrender Charges?", based on the assumptions stated in the illustration, is consistent with the Policy's sales charge structure. (10) The illustrations of Accumulated Premiums, Policy Values, Cash Surrender Values, and Death Benefits for the Policy shown in the Appendix under the caption "What Are Some Illustration Of Policy Values, Cash Surrender Values and Death Benefits?", based on the assumptions stated in the illustrations, are consistent with the provisions of the Policy. The rate structure of the Policy has not been designed so as to make the relationship between premiums and benefits, as shown in these illustrations, appear to be correspondingly more favorable to a prospective purchaser of the Policy for male ages 25 and 35, than to prospective purchasers of the Policy for females or males at other ages. I hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the reference to my name under the heading "Experts" in the Prospectus. Very truly yours, John R. Ostler John R. Ostler Vice President, Treasurer and Chief Actuary EX-99.10 3 EXHIBIT 99-10 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 20, 1995 accompanying the financial statements of The Manufacturers Life Insurance Company of America and to the use of our report dated February 6, 1995 accompanying the financial statements of Separate Account Four of The Manufacturers Life Insurance Company of America, in the Registration Statement on Form S-6 and related prospectus of Separate Account Four of The Manufacturers Life Insurance Company of America. Ernst & Young LLP ERNST & YOUNG LLP Philadelphia, Pennsylvania December 13, 1995 EX-99.11 4 EXHIBIT 99-11 Jones & Blouch L.L.P. 1025 THOMAS JEFFERSON STREET, N.W. WASHINGTON, D.C. 20007 (202) 965-8110 December 13, 1995 The Board of Directors The Manufacturers Life Insurance Company of America 500 N. Woodward Avenue Bloomfield Hills, MI 48304 Dear Sirs: We hereby consent to the reference to this firm under the caption "Legal Matters" in the prospectus contained in post- effective amendment No. 19 to the registration statement on Form S-6 of Separate Account Four of The Manufacturers Life Insurance company of America, File No. 33-13774, to be filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933. Very truly yours, Jones & Blouch L.L.P. Jones & Blouch L.L.P. EX-27.1 5 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 0000813572 Separate Account Four of The Manufacturers Life Insurance Company of America 01 Emerging Growth Equity Sub-account 1 9-mos Dec-31-1995 Jan-01-1995 Sep-30-1995 41,029,701 49,066,212 (131,780) 0 0 48,934,432 0 0 0 0 0 35,255,827 951,476 758,547 3,989,604 0 1,652,490 0 8,036,511 48,934,432 1,225,634 0 0 (191,219) 1,034,415 357,276 7,925,450 9,317,141 0 0 0 192,929 0 0 17,933,251 2,955,189 403,530 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27.2 6 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 0000813572 Separate Account Four of The Manufacturers Life Insurance Company of America 02 Common Stock 1 9-mos Dec-31-1995 Jan-01-1995 Sep-30-1995 15,687,052 17,783,825 7,112 0 0 17,790,937 0 0 0 0 0 14,105,266 692,524 598,807 1,043,932 0 544,966 0 2,096,773 17,790,937 0 0 0 (74,049) (74,049) 141,436 2,880,841 2,948,228 0 0 0 0 0 0 5,054,318 1,117,981 403,530 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27.3 7 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 0000813572 Separate Account Four of The Manufacturers Life Insurance Company of America 03 Real Estate Securities 1 9-mos Dec-31-1995 Jan-01-1995 Sep-30-1995 12,822,773 13,262,787 3,785 0 0 13,266,572 0 0 0 0 0 11,480,261 511,236 455,939 982,166 0 364,131 0 440,014 13,266,572 226,773 0 0 (56,906) 169,867 153,651 1,007,361 1,330,879 0 0 0 0 0 0 2,638,630 812,299 210,480 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27.4 8 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 0000813572 Separate Account Four of The Manufacturers Life Insurance Company of America 04 Balanced Assets 1 9-mos Dec-31-1995 Jan-01-1995 Sep-30-1995 32,995,887 35,843,819 381,506 0 0 36,225,325 0 0 0 0 0 29,604,170 1,654,124 1,446,749 3,074,912 0 698,311 0 2,847,932 36,225,325 46,122 0 0 (150,704) (104,582) 84,992 5,103,606 5,084,016 0 0 0 0 0 0 9,286,850 3,179,494 613,319 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27.5 9 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 0000813572 Separate Account Four of The Manufacturers Life Insurance Company of America 05 Capital Growth Bond 1 9-mos Dec-31-1995 Jan-01-1995 Sep-30-1995 11,076,668 11,424,057 71,807 0 0 11,495,864 0 0 0 0 0 9,951,834 612,459 514,098 1,159,903 0 36,738 0 347,389 11,495,864 1,636 0 0 (48,713) (47,077) (21,982) 1,360,541 1,291,482 0 0 0 0 0 0 3,044,098 1,206,980 58,720 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27.6 10 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 0000813572 Separate Account Four of The Manufacturers Life Insurnace Company of America 06 Money Market 1 9-mos Dec-31-1995 Jan-01-1995 Sep-30-1995 5,978,646 6,132,336 (167,714) 0 0 5,964,622 0 0 0 0 0 5,489,626 409,377 326,027 274,343 0 46,963 0 153,690 5,964,622 268 0 0 (26,453) (26,185) 40,736 185,114 199,665 0 0 [DISTRIBUTIONS-OF-INCOME] 0 0 0 0 1,387,204 300,528 6,227 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27.7 11 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 0000813572 Separate Account Four of The Manufacturers Life Insurnace Company of America 07 International Fund 1 9-mos Dec-31-1995 Jan-01-1995 Sep-30-1995 1,442,979 1,528,862 11,456 0 0 1,540,318 0 0 0 0 0 1,458,045 148,823 27,894 (3,932) 0 322 0 85,883 1,540,318 423 0 0 (4,888) (4,465) 537 86,807 82,879 0 0 [DISTRIBUTIONS-OF-INCOME] 0 0 0 0 1,268,911 533 (215) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27.8 12 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 0000813572 Separate Account Four of The Manufacturers Life Insurance Company of America 08 Pacific Rim Emerging Markets Fund 1 9-mos Dec-31-1995 Jan-01-1995 Sep-30-1995 1,060,074 1,133,144 11,983 0 0 1,145,127 0 0 0 0 0 1,074,291 114,513 18,582 (1,913) 0 (321) 0 73,070 1,145,127 1,174 0 0 (3,659) (2,485) (290) 78,555 75,780 0 0 0 0 0 0 970,084 572 (31) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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