-----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, BLggfT+xOPDhwcHVbhb0paB5ZXd9H4JeJZ+w31MEhGKQyaWq4HSUD+Jbgo6tv7Pl Kd44l3JPq1GrXoUcWr639g== 0000950135-98-004952.txt : 19980831 0000950135-98-004952.hdr.sgml : 19980831 ACCESSION NUMBER: 0000950135-98-004952 CONFORMED SUBMISSION TYPE: S-6/A PUBLIC DOCUMENT COUNT: 25 FILED AS OF DATE: 19980828 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: S-6/A SEC ACT: SEC FILE NUMBER: 333-51293 FILM NUMBER: 98700144 BUSINESS ADDRESS: STREET 1: 200 BLOOR STREET EAST ST 10 STREET 2: TORONTO M4W 1EF CITY: ONTARIO CANADA STATE: A6 ZIP: 48304 BUSINESS PHONE: 4169266302 MAIL ADDRESS: STREET 1: P O BOX 600 CITY: BUFFALO STATE: NY ZIP: 14201-0600 S-6/A 1 THE MANUFACTURERS LIFE INSURANCE COMPANY 1 As filed with the Securities and Exchange Commission on August 28, 1998. Registration No. 333-51293 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-6 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 PRE-EFFECTIVE AMENDMENT NO. 1 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA (Exact name of Registrant) THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA (Name of Depositor) 500 N. Woodward Avenue Bloomfield Hills, Michigan 48304 (Address of Depositor's Principal Executive Offices) James D. Gallagher Copy to: Secretary and General Counsel J. Sumner Jones, Esq. The Manufacturers Life Insurance Company Jones & Blouch L.L.P. of America 1025 Thomas Jefferson Street, NW 73 Tremont Street Washington, DC 20007 Boston, MA 02108 (Name and Address of Agent for Service) Title of Securities Being Registered: Variable Life Insurance Contracts Approximate date of commencement of proposed public offering: As soon after the effective date of this Registration Statement as is practicable. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that the Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. 2 Separate Account Four of The Manufacturers Life Insurance Company of America Registration Statement on Form S-6 Cross-Reference Sheet FORM N-8B-2 ITEM NO. CAPTION IN PROSPECTUS 1 Cover Page; General Information About Manufacturers (Separate Account Four) 2 Cover Page; General Information About Manufacturers (Manufacturers Life of America) 3 * 4 Other Information (Distribution of the Policy) 5 General Information About Manufacturers Life (Separate Account Four) 6 General Information About Manufacturers (Separate Account Four) 7 * 8 * 9 Other Information (Litigation) 10 Death Benefits; Premium Payments; Charges and Deductions; Policy Value; Policy Loans; Policy Surrender and Partial Withdrawals; Lapse and Reinstatement; Other Provisions of the Policy; Other Information 11 General Information About Manufacturers (Manufacturers Investment Trust) 12 General Information About Manufacturers (Manufacturers Investment Trust) 13 Charges and Deductions 14 Issuing A Policy; Other Information (Responsibilities Assumed By Manufacturers Life) 15 Issuing A Policy 16 ** 17 Policy Surrender and Partial Withdrawals 18 General Information About Manufacturers 19 Other Information (Reports to Policyholders; Responsibilities Assumed By Manufacturers Life) 20 * 21 Policy Loans 3 22 * 23 ** 24 Other Provisions of the Policy 25 General Information About Manufacturers (Manufacturers Life of America) 26 * 27 ** 28 Other Information (Officers and Directors) 29 General Information About Manufacturers (Manufacturers Life of America) 30 * 31 * 32 * 33 * 34 * 35 ** 36 * 37 * 38 Other Information (Distribution of the Policies; Responsibilities of Manufacturers Life) 39 Other Information (Distribution of the Policies) 40 * 41 ** 42 * 43 * 44 Policy Values --Determination of Policy Value; Units and Unit Values) 45 * 46 Policy Surrender and Partial Withdrawals; Other Information -- Payment of Proceeds) 47 General Information About Manufacturers (Manufacturers Investment Trust) 48 * 4 49 * 50 General Information About Manufacturers 51 Issuing a Policy; Death Benefits; Premium Payments; Charges and Deductions; Policy Value; Policy Loans; Policy Surrender and Partial Withdrawals; Lapse and Reinstatement; Other Policy Provisions 52 Other Information (Substitution of Portfolio Shares) 53 ** 54 * 55 * 56 * 57 * 58 * 59 Financial Statements * Omitted since answer is negative or item is not applicable. **Omitted. 5 PART I PROSPECTUS 6 COVER PAGE This prospectus describes Corporate VUL, a flexible premium variable universal life insurance policy (the "Policy") offered by The Manufacturers Life Insurance Company of America (the "Company" or "Manufacturers Life Of America"), a stock life insurance company that is an indirect wholly-owned subsidiary of The Manufacturers Life Insurance Company ("Manufacturers Life"). The Policy is designed for use by corporations and other employers, to provide life insurance and to fund other employee benefits. The Policy is designed to provide lifetime insurance protection together with flexibility as to the timing and amount of premium payments, the investments underlying the Policy Value, and the amount of insurance coverage. The Policy provides for: (1) a Net Cash Surrender Value that can be obtained by surrendering the Policy; (2) policy loans and partial withdrawals; and (3) an insurance benefit payable at the life insured's death. The Policy will remain in force so long as the Net Cash Surrender Value is sufficient to cover charges assessed against the Policy. Policy Value may be accumulated on a fixed basis or vary with the investment performance of the sub-accounts of Manufacturer Life of America's Separate Account Four (the "Separate Account") to which the policyholder allocates net premiums. The assets of each sub-account will be used to purchase shares of a particular investment portfolio (a "Portfolio") of Manufacturers Investment Trust (the "Trust"). The accompanying prospectus for the Trust, and the corresponding statement of additional information, describe the investment objectives of the Portfolios. The Portfolios available for allocation of net premiums are shown in the Policy Summary under "Investment Options and Fees". Other sub-accounts and Portfolios may be added in the future. BECAUSE OF THE SUBSTANTIAL NATURE OF THE SURRENDER CHARGES, THE POLICY IS NOT SUITABLE FOR SHORT-TERM INVESTMENT PURPOSES. ALSO, PROSPECTIVE PURCHASERS SHOULD NOTE THAT IT MAY NOT BE ADVISABLE TO PURCHASE A POLICY AS A REPLACEMENT FOR EXISTING INSURANCE. The Securities and Exchange Commission maintains a web site (http://www.sec.gov) that contains material incorporated by reference and other information regarding registrants that file electronically with the Commission. PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT IS VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE TRUST. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The Manufacturers Life Insurance Company of America 500 North Woodward Avenue Bloomfield Hills, Michigan 48304 The date of this Prospectus is _____, 1998. 7 TABLE OF CONTENTS Cover Page.................................................................... 1 Table of Contents............................................................. 2 Definitions................................................................... 4 Policy Summary................................................................ 5 General.................................................................... 5 Death Benefits............................................................. 6 Premiums................................................................... 6 Policy Value............................................................... 6 Policy Loans............................................................... 6 Surrender and Partial Withdrawals.......................................... 6 Lapse and Reinstatement.................................................... 6 Charges and Deductions..................................................... 7 Investment Options and Investment Advisers................................. 7 Table of Charges and Deductions............................................ 8 Table of Investment Management Fees and Expenses........................... 9 Table of Investment Options and Investment Advisers........................10 General Information about Manufacturers.......................................13 Manufacturers Life of America..............................................13 Separate Account Four......................................................13 Manufacturers Investment Trust.............................................14 Investment Objectives of the Portfolios....................................14 Issuing A Policy..............................................................19 Use of the Policy..........................................................19 Requirements...............................................................19 Temporary Insurance Agreement..............................................20 Underwriting...............................................................20 Right to Examine the Policy................................................20 Death Benefits................................................................21 Life Insurance Qualification...............................................21 Death Benefit Options......................................................23 Changing the Face Amount...................................................23 Premium Payments..............................................................25 Initial Premiums...........................................................25 Subsequent Premiums........................................................25 Maximum Premium Limitation.................................................25 Premium Allocation.........................................................26 Charges and Deductions........................................................26 Premium Loads..............................................................26 Surrender Charges..........................................................26 Monthly Charges............................................................27 Charges Assessed Against Assets of the Investment Accounts.................28 Charges for Transfers......................................................28 Company Tax Considerations Policy Value..................................................................29 Determination of the Policy Value..........................................29 Units and Unit Values......................................................29 Transfers of Policy Value..................................................30 Policy Loans..................................................................31 Maximum Loan...............................................................31 Effect of Policy Loan......................................................31 2 8 Interest Charged on Policy Loans...........................................31 Loan Account...............................................................31 Policy Surrender and Partial Withdrawals......................................32 Policy Surrender...........................................................32 Partial Withdrawals........................................................32 Lapse and Reinstatement.......................................................33 Lapse......................................................................33 Reinstatement..............................................................33 The General Account...........................................................33 Guaranteed Interest Account................................................34 Other Provisions of the Policy................................................34 Policyholder Rights........................................................34 Beneficiary................................................................35 Incontestability...........................................................35 Misstatement of Age or Sex.................................................35 Suicide Exclusion..........................................................35 Supplementary Benefits.....................................................35 Tax Treatment of the Policy...................................................35 Life Insurance Qualification...............................................36 Tax Treatment of Policy Benefits...........................................37 Alternate Minimum Tax......................................................40 Income Tax Reporting.......................................................40 Other Information.............................................................40 Payment of Proceeds........................................................40 Reports to Policyholders...................................................40 Distribution of the Policies...............................................40 Responsibilities of Manufacturers Life.....................................40 Voting Rights..............................................................40 Substitution of Portfolio Shares...........................................40 Records and Accounts.......................................................40 State Regulations..........................................................40 Litigation.................................................................40 Experts....................................................................40 Further Information........................................................40 Officers and Directors.....................................................40 Impact of Year 2000........................................................40 Death Benefit Schedule with Flexible Term Insurance Option.................40 Illustrations..............................................................40 Assumptions................................................................40 Financial Statements.......................................................50 THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE PROSPECTUS OF MANUFACTURERS INVESTMENT TRUST, OR THE STATEMENT OF ADDITIONAL INFORMATION OF MANUFACTURERS INVESTMENT TRUST. Examine this prospectus carefully. The Policy Summary will briefly describe the Policy. More detailed information will be found further in the prospectus. 3 9 DEFINITIONS Attained Age is the Issue Age of the life insured plus the number of completed Policy Years. Business Day is any day that the New York Stock Exchange is open for business. A Business Day ends at the close of regularly scheduled trading of the New York Stock Exchange (currently 4:00 p.m. Eastern Time) on that day. Case is a group of Policies covering individuals with common employment or other relationship, independent of the Policies. Cash Surrender Value is the Policy Value less the Surrender Charge and any outstanding monthly deductions due. Due Proof of Death Due Proof of Death is required upon the death of the insured. One of the following must be received at the Service Office: (a) A certified copy of a death certificate; (b) A certified copy of a decree of a court of competent jurisdiction as to the finding of death; or (c) Any other proof satisfactory to the Company. Effective Date is the date the Company becomes obligated under the Policy, and when the first monthly deductions are taken. The Effective Date is the later of: (a) the date the Company approves issuance of the Policy; and (b) the date the Company receives at least the initial premium. Guaranteed Interest Account is that part of the Policy Value which reflects the value the policyholder has in the general account of the Company. Home Office is the main office of the Company. Investment Account is that part of the Policy Value which reflects the value the policyholder has in one of the sub-accounts of the Separate Account. Issue Age is the life insured's age on the birthday closer to the Policy Date. Issue Date is the date the Company issued the Policy. The Issue Date is also the date from which the Suicide and Validity provisions of the Policy are measured. 4 10 Loan Account is that part of the Policy Value which reflects policy loans and interest credited to the Policy Value in connection with such loans. Net Cash Surrender Value is the Cash Surrender Value less the Policy Debt. Net Policy Value is the Policy Value less the value in the Loan Account. Net Premium is the premium paid less the Premium Load. Policy Anniversary is the same date each year as the Policy Date. Policy Date is the date from which charges for the first monthly deduction are calculated, and the date from which Policy Years, Policy Months, and Policy Anniversaries are determined. Policy Debt as of any date is the aggregate amount of policy loans, including borrowed and accrued interest, less any loan repayments. Policy Year is a period beginning on a Policy Anniversary and ending on the day immediately preceding the next Policy Anniversary Policy Value is the sum of the values in the Loan Account, the Guaranteed Interest Account, and the Investment Accounts. Service Office is McCamish Systems, L.L.C., 6425 Powers Ferry Road, Atlanta, Georgia 30339, or such other service center or address as the Company may hereafter specify to the policyholder by written notice. Target Premium is an amount used to measure the Surrender Charge under a Policy. The Target Premium is based on the Face Amount, as well as the insured's age at issue and sex, and is set forth in the Policy. POLICY SUMMARY GENERAL The Policy is a flexible premium variable universal life insurance policy. The following summary is intended to provide a general description of the most important features of the Policy. It is not comprehensive and is qualified in its entirety by the more detailed information contained in this prospectus. Unless otherwise indicated or required by the context, the discussion throughout this prospectus assumes that the Policy has not gone into default, there is no outstanding Policy Debt, and the death benefit is not determined by the minimum death benefit percentage. The Policy's provisions may vary in some states. 5 11 DEATH BENEFITS The Policy provides a death benefit in the event of the death of the life insured. There are two death benefit options. Under Option 1 the death benefit is the Face Amount of the Policy at the date of death or, if greater, the Minimum Death Benefit. Under Option 2 the death benefit is the Face Amount plus the Policy Value of the Policy at the date of death or, if greater, the Minimum Death Benefit. The policyholder may change the death benefit option and increase or decrease the Face Amount. PREMIUMS Premium payments may be made at any time and in any amount, subject to certain limitations as described under "Premium Payments - Subsequent Premiums." Net Premiums will be allocated, according to the policyholder's instructions, to one or more of the general account and the sub-accounts of Manufacturers Life of America's Separate Account Four. Allocation instructions may be changed at any time and transfers among the accounts may be made. POLICY VALUE The Policy has a Policy Value reflecting premiums paid, certain charges for expenses and cost of insurance, and the investment performance of the accounts to which the policyholder has allocated premiums. The policyholder may obtain a portion of the Policy Value by taking a policy loan or a partial withdrawal, or by full surrender of the Policy. POLICY LOANS The policyholder may borrow against the Cash Surrender Value of the Policy. Loan interest at a rate of 5.00% is due and payable in arrears on each Policy Anniversary. All outstanding Policy Debt will be deducted from proceeds payable at the insured's death, or upon surrender. SURRENDER AND PARTIAL WITHDRAWALS The policyholder may make a partial withdrawal of the Policy Value. A partial withdrawal may result in a reduction in the Face Amount of the Policy and an assessment of a portion of the surrender charges to which the Policy is subject. A Policy may be surrendered for its Net Cash Surrender Value at any time while the life insured is living. The Net Cash Surrender Value is equal to the Policy Value less Surrender Charges and outstanding monthly deductions due minus the Policy Debt. LAPSE AND REINSTATEMENT A Policy will lapse (and terminate without value) when the Net Cash Surrender Value is insufficient to pay the next monthly deduction and a grace period of 61 days expires without an adequate payment being made by the policyholder. The Policies, therefore, differ in two important respects from conventional life insurance policies. First, the failure to make planned premium payments will not itself cause a Policy to lapse. Second, a Policy can lapse even if planned premiums have been paid. A lapsed Policy may be reinstated by the policyholder at any time within the five year period following lapse if the Policy was not surrendered for its Net Cash Surrender Value. Evidence of insurability is required, along with a certain amount of premium as described under "Reinstatement." 6 12 CHARGES AND DEDUCTIONS The Company assesses certain charges and deductions in connection with the Policy. These include charges assessed monthly for cost of insurance and administration expenses, charges assessed daily against the assets invested in the Investment Account, and loads deducted from premiums paid. These charges are summarized in the Table of Charges and Deductions. INVESTMENT OPTIONS AND INVESTMENT ADVISERS Net Premiums may be allocated to the general account or to one or more of the sub-accounts of Manufacturers Life of America's Separate Account Four. Each of the sub-accounts invests in the shares of one of the Portfolios of the Trust. The Trust receives investment advisory services from Manufacturers Securities Services, LLC ("MSS"). MSS is a registered investment adviser under the Investment Advisers Act of 1940. The Trust also employs subadvisers. The Table of Investment Options and Investment Advisers shows the subadvisers that provide investment subadvisery services to the indicated Portfolios. INVESTMENT MANAGEMENT FEES AND EXPENSES The Separate Account purchases shares of the Portfolios at net asset value. The net asset value of those shares reflects investment management fees and certain expenses. The fees and expenses of each Portfolio for the Trust's last fiscal year are shown in the Table of Investment Management Fees and Expenses. These fees and expenses are described in detail in the accompanying Trust prospectus to which reference should be made. 7 13 TABLE OF CHARGES AND DEDUCTIONS Premium Load 2.00% of the premium paid. Surrender Charges The following charges will be assessed on a surrender or lapse. Charges are expressed as a percentage of total premiums paid from the Effective Date to the Policy Year shown. However, premiums paid in any year in excess of the Target Premium, and premiums paid after the fifth Policy Year are not included in the determination of total premiums paid. Percentages are as follows:
Policy Year Percentage Policy Year Percentage 1 10.00% 6 5.00% 2 7.50% 7 4.00% 3 5.00% 8 3.00% 4 5.00% 9 2.00% 5 5.00% 10+ 0.00%
A portion of this charge may be assessed on a partial withdrawal or a decrease in the Face Amount. Monthly Deductions The following charges will be deducted from Net Policy Value: An administration charge of $12. The cost of insurance charge. Any additional charges for supplementary benefits. Investment Account Charges A mortality and expense risk charge is assessed daily against the value of the Investment Account assets. This charge varies by Policy Year as follows:
Annual Mortality and Policy Years Expense Risk Charge 1-10 0.75% 11+ 0.40%
Loan Charges A fixed loan interest rate of 5.00%. Interest credited to amounts in the Loan Account will be equal to the 5.00% rate charged to the loan less the following Loan Spread:
Policy Years Loan Spread 1-10 1.00% 11-20 0.50% 21+ 0.25%
Transfer Charge A charge of $25 per transfer for each transfer in excess of 12 8 14 in a Policy Year. 9 15 TABLE OF INVESTMENT MANAGEMENT FEES AND EXPENSES ANNUAL EXPENSES OF EACH PORTFOLIO (as a percentage of a Portfolio's average net assets)
OTHER EXPENSES MANAGEMENT (AFTER EXPENSE TOTAL TRUST PORTFOLIO FEES REIMBURSEMENT)*** ANNUAL EXPENSES - ------------------------------------------------------------------------------------- Aggressive Growth Pacific Rim Emerging Markets 0.850% 0.570% 1.420% Science & Technology 1.100% 0.160% 1.260% International Small Cap 1.100% 0.210% 1.310% Emerging Growth 1.050% 0.060% 1.110% Pilgrim Baxter Growth 1.050% 0.130% 1.180% Small/Mid Cap 1.000% 0.050% 1.050% International Stock 1.050% 0.330% 1.380% Growth Worldwide Growth 1.000% 0.320% 1.320% Global Equity 0.900% 0.110% 1.010% Small Company Value 1.050% 0.100%* 1.150% Equity 0.750% 0.050% 0.800% Growth 0.850% 0.100% 0.950% Quantitative Equity 0.700% 0.070% 0.770%*** Blue Chip Growth 0.925% 0.050% 0.975% Real Estate Securities 0.700% 0.070% 0.770%*** Value 0.800% 0.160% 0.960% International Growth and Income 0.950% 0.170% 1.120% Growth and Income Growth and Income 0.750% 0.040% 0.790% Equity-Income 0.800% 0.050% 0.850% Balanced Balanced 0.800% 0.080% 0.880% Aggressive Asset Allocation 0.750% 0.150% 0.900% Bond High Yield 0.775% 0.110% 0.885% Moderate Asset Allocation 0.750% 0.100% 0.850% Conservative Asset Allocation 0.750% 0.140% 0.890% Strategic Bond 0.775% 0.100% 0.875% Global Government Bond 0.800% 0.130% 0.930% Capital Growth Bond 0.650% 0.080% 0.730%*** Investment Quality Bond 0.650% 0.090% 0.740% U.S. Government Securities 0.650% 0.070% 0.720% Money Market Money Market 0.500% 0.040% 0.540%
10 16 Lifestyle Lifestyle Aggressive 1000# 0% 1.116%** 1.116% Lifestyle Growth 820# 0% 1.048%** 1.048% Lifestyle Balanced 640# 0% 0.944%** 0.944% Lifestyle Moderate 460# 0% 0.850%** 0.850% Lifestyle Conservative 280# 0% 0.708%** 0.708%
#Each Lifestyle Trust will invest in shares of the Underlying Portfolios. Therefore, each Lifestyle Trust will bear its pro rata share of the fees and expenses incurred by the Underlying Portfolios and the investment return of each Lifestyle Trust will be net of the Underlying Portfolio expenses. Each Lifestyle Portfolio must also bear its own expenses. However, the Adviser is currently paying these expenses as described in footnote ** below. *Based on estimates of payments to be made during the current fiscal year. ** Reflects expenses of the other portfolios of the Trust in which the Lifestyle Trust invests ("Underlying Portfolios". MSS has voluntarily agreed to pay the expenses of each Lifestyle Trust (excluding the expenses of the Underlying Portfolios). This voluntary expense reimbursement may be terminated at any time. If such expense reimbursement was not in effect, Total Trust Annual Expenses would be .04% higher (based on expenses of the Lifestyle Trusts for the fiscal year ended December 31, 1997) as noted in the chart below:
MANAGEMENT OTHER TOTAL TRUST TRUST PORTFOLIO FEES EXPENSES ANNUAL EXPENSES Lifestyle Aggressive 1000 0% 1.156% 1.156% Lifestyle Growth 820 0% 1.088% 1.088% Lifestyle Balanced 640 0% 0.984% 0.984% Lifestyle Moderate 460 0% 0.890% 0.890% Lifestyle Conservative 280 0% 0.748% 0.748%
***During the one year period ended December 31, 1997, MSS voluntarily waived fees payable to it and/or reimbursed expenses to the extent necessary to prevent "Total Trust Annual Expenses" for the Quantitative Equity, Real Estate and Capital Growth Bond Trusts from exceeding .50% of the Trust's average net assets. This voluntary fee waiver was terminated effective January 1, 1998. Expenses shown in the table for these three Trusts do not reflect the fee waiver. 11 17 TABLE OF INVESTMENT OPTIONS AND INVESTMENT ADVISERS
Portfolio Subadviser Aggressive Growth Pacific Rim Emerging Market Trust Manufacturers Adviser Corporation* Science and Technology Trust T. Rowe Price Associates, Inc. International Small Cap Trust Founders Asset Management, Inc. Emerging Growth Trust Warburg, Pincus Counsellors, Inc. Pilgrim Baxter Growth Trust Pilgrim, Baxter & Associates, Ltd. Small/Mid Cap Trust Fred Alger Management, Inc. International Stock Trust Rowe Price-Fleming International, Inc. Growth Worldwide Growth Trust Founders Asset Management LLC Global Equity Trust Morgan Stanley Asset Management, Inc. Small Company Value Trust Rosenberg Institutional Equity Management Equity Trust Fidelity Management Trust Company Growth Trust Founders Asset Management, Inc. Quantitative Equity Trust Manufacturers Adviser Corporation* Equity Index Trust Manufacturers Adviser Corporation* Blue Chip Growth Trust T. Rowe Price Associates, Inc. Real Estate Securities Trust Manufacturers Adviser Corporation* Growth and Income Value Trust Miller Anderson & Sherrerd, LLP International Growth and Income Trust J.P. Morgan Investment Management, Inc. Growth and Income Trust Wellington Management Company Equity Income Trust T. Rowe Price Associates, Inc. Balanced Balanced Trust Founders Asset Management LLC Aggressive Asset Allocation Trust Fidelity Management Trust Company Moderate Asset Allocation Trust Fidelity Management Trust Company Conservative Asset Allocation Trust Fidelity Management Trust Company Bond High Yield Trust Miller Anderson & Sherrerd, LLP Strategic Bond Trust Salomon Brothers Asset Management, Inc. Global Government Bond Trust Oechsle International Advisors, L.P. Capital Growth Bond Trust Manufacturers Adviser Corporation* Investment Quality Bond Trust Wellington Management Company U.S. Government Securities Trust Salomon Brothers Asset Management, Inc. Money Market Money Market Trust Manufacturers Adviser Corporation* Lifestyle Lifestyle Aggressive Growth 1000 Trust Manufacturers Adviser Corporation* Lifestyle Growth 820 Trust Manufacturers Adviser Corporation* Lifestyle Balanced 640 Trust Manufacturers Adviser Corporation* Lifestyle Moderate 460 Trust Manufacturers Adviser Corporation* Lifestyle Conservative 280 Trust Manufacturers Adviser Corporation*
*Manufacturers Adviser Corporation is an indirect wholly-owned subsidiary of Manufacturers Life. 12 18 GENERAL INFORMATION ABOUT MANUFACTURERS MANUFACTURERS LIFE OF AMERICA Manufacturers Life of America is a stock life insurance company organized under the laws of Pennsylvania on April 11, 1977 and redomesticated under the laws of Michigan on December 9, 1992. It is a licensed life insurance company in the District of Columbia and all states of the United States except New York. The ultimate parent of Manufacturers Life of America is Manufacturers Life, a mutual life insurance company based in Toronto, Canada. Manufacturers Life and its subsidiaries, together, constitute one of the largest life insurance companies in North America and rank among the 60 largest life insurers in the world as measured by assets. However, neither Manufacturers Life of America nor Manufacturers Life guarantees the investment performance of the Separate Account. On January 20, 1998, the Board of Directors of Manulife asked the management of Manulife to prepare a plan for conversion of Manulife from a mutual life insurance company to an investor owned, publicly traded stock company. Any demutualization plan for Manulife is subject to the approval of the Manulife Board of Directors and policyholders as well as regulatory approval. RATINGS Manufacturers Life and Manufacturers Life of America have received the following ratings from independent rating agencies: Standard and Poor's Insurance Ratings Service: AA+ (for claims paying ability) A.M.Best Company: A++ (for financial strength) Duff & Phelps Credit Rating Co.: AAA (for claims paying ability) Moody's Investors Service, Inc.: Aa2 (for financial strength) SEPARATE ACCOUNT FOUR Manufacturers Life of America established its Separate Account Four on March 17, 1987 as a separate account under Pennsylvania Law. Since December 9, 1992, it has been operated under Michigan Law. The Separate Account holds assets that are segregated from all of Manufacturers Life of America's other assets. The Separate Account is currently used only to support variable life insurance policies. ASSETS OF THE SEPARATE ACCOUNT Manufacturers Life of America is the legal owner of the assets in the Separate Account. The income, gains, and losses of the Separate Account, whether or not realized, are, in accordance with applicable contracts, credited to or charged against the Account without regard to the other income, gains, or losses of Manufacturers Life of America. Manufacturers Life of America will at all times maintain assets in the Separate Account with a total market value at least equal to the reserves and other liabilities relating to variable benefits under all policies participating in the Separate Account. These assets may not be charged with liabilities which arise from any other business Manufacturers Life of America conducts. However, all obligations under the variable life insurance policies are general corporate obligations of Manufacturers Life of America. REGISTRATION The Separate Account is registered with the Securities and Exchange Commission ("S.E.C.") under the Investment Company Act of 1940 ("1940 Act") as a unit investment trust. A unit investment trust is a type of investment company which invests its assets in specified securities, such as the shares of one or more investment companies, rather than in a portfolio of unspecified securities. Registration under the 1940 Act does not involve any supervision by the S.E.C. of the management or investment policies or practices of 13 19 the Separate Account. For state law purposes the Separate Account is treated as a part or division of Manufacturers Life of America. MANUFACTURERS INVESTMENT TRUST Each sub-account of the Separate Account will purchase shares only of a particular Portfolio. The Trust is registered under the 1940 Act as an open-end management investment company. The Separate Account will purchase and redeem shares of the Portfolios at net asset value. Shares will be redeemed to the extent necessary for Manufacturers Life of America to provide benefits under the Policies, to transfer assets from one sub-account to another or to the general account as requested by policyholders, and for other purposes not inconsistent with the Policies. Any dividend or capital gain distribution received from a Portfolio with respect to the policies will be reinvested immediately at net asset value in shares of that Portfolio and retained as assets of the corresponding sub-account. The Trust shares are issued to fund benefits under both variable annuity contracts and variable life insurance policies issued by the Company or life insurance companies affiliated with the Company. Manufacturers Life of America will also purchase shares through its general account for certain limited purposes including initial portfolio seed money. For a description of the procedures for handling potential conflicts of interest arising from the funding of such benefits see the accompanying Trust prospectus. INVESTMENT OBJECTIVES OF THE PORTFOLIOS The investment objectives and certain policies of the Portfolios currently available to policyholders through corresponding sub-accounts are set forth below. There is, of course, no assurance that these objectives will be met. A full description of the Trust, its investment objectives, policies and restrictions, the risks associated therewith, its expenses, and other aspects of its operation is contained in the accompanying Trust prospectus, which should be read together with this prospectus. AGGRESSIVE GROWTH PORTFOLIOS PACIFIC RIM EMERGING MARKETS TRUST. The investment objective of the Pacific Rim Emerging Markets Trust is to achieve long-term growth of capital. Manufacturers Adviser Corporation ("MAC") manages the Pacific Rim Emerging Markets Trust and seeks to achieve this investment objective by investing in a diversified portfolio that is comprised primarily of common stocks and equity-related securities of corporations domiciled in countries of the Pacific Rim region. SCIENCE & TECHNOLOGY TRUST The investment objective of the Science and Technology Trust is long-term growth of capital. Current income is incidental to the portfolio's objective. T. Rowe Price Associates, Inc. manages the Science & Technology Trust. INTERNATIONAL SMALL CAP TRUST The investment objective of the International Small Cap Trust is to seek long-term capital appreciation. Founders Asset Management LLC ("Founders") manages the International Small Cap Trust and will pursue this objective by investing primarily in securities issued by foreign companies which have total market capitalizations or annual revenues of $1 billion or less. These securities may represent companies in both established and emerging economies throughout the world. EMERGING GROWTH TRUST The investment objective of the Emerging Growth Trust is maximum capital appreciation. Warburg, Pincus Counsellors, Inc. manages the Emerging Growth Trust and will pursue this objective by investing primarily in a portfolio of equity securities of domestic companies. The Emerging Growth Trust ordinarily 14 20 will invest at least 65% of its total assets in common stocks or warrants of emerging growth companies that represent attractive opportunities for maximum capital appreciation. PILGRIM BAXTER GROWTH TRUST The investment objective of the Pilgrim Baxter Growth Trust is capital appreciation. Pilgrim, Baxter & Associates, Ltd. ("PBHG") manages the Pilgrim Baxter Growth Trust and seeks to achieve its objective by investing in companies believed by PBHG to have an outlook for strong earnings growth and potential for significant capital appreciation. SMALL/MID CAP TRUST The investment objective of the Small/Mid Cap Trust is to seek long-term capital appreciation. Fred Alger Management, Inc. manages the Small/Mid Cap Trust and will pursue this objective by investing at least 65% of the portfolio's total assets (except during temporary defensive periods) in small/mid cap equity securities. INTERNATIONAL STOCK TRUST The investment objective of the International Stock Trust is to achieve long-term growth of capital. Rowe Price-Fleming International, Inc. manages the International Stock Trust and seeks to obtain this objective by investing primarily in common stocks of established, non-U.S. companies. GROWTH PORTFOLIOS WORLDWIDE GROWTH TRUST The investment objective of the Worldwide Growth Trust is long-term growth of capital. Founders manages the Worldwide Growth Trust and seeks to attain this objective by normally investing at least 65% of its total assets in equity securities of growth companies in a variety of markets throughout the world. GLOBAL EQUITY TRUST The investment objective of the Global Equity Trust is long-term capital appreciation. Morgan Stanley Asset Management Inc. manages the Global Equity Trust and intends to pursue this objective by investing primarily in equity securities throughout the world, including U.S. issuers. SMALL COMPANY VALUE TRUST The investment objective of the Small Company Value Trust is to seek long-term growth of capital. Rosenberg Institutional Equity Management ("Rosenberg") manages the Small Company Value Trust and intends to pursue this objective by investing in equity securities of smaller companies which are traded principally in the markets of the United States. EQUITY TRUST The principal investment objective of the Equity Trust is growth of capital. Current income is a secondary consideration although growth of income may accompany growth of capital. Fidelity Management Trust Company manages the Equity Trust and seeks to attain the foregoing objective by investing primarily in common stocks of United States issuers or securities convertible into or which carry the right to buy common stocks. GROWTH TRUST The investment objective of the Growth Trust is to seek long-term growth of capital. Founders manages the Growth Trust and will pursue this objective by investing, under normal market conditions, at least 65% of its total assets in common stocks of well-established, high-quality growth companies that Founders believes have the potential to increase earnings faster than the rest of the market. 15 21 QUANTITATIVE EQUITY TRUST The investment objective of the Quantitative Equity Trust (formerly the "Common Stock Fund") is to achieve intermediate and long-term growth through capital appreciation and current income by investing in common stocks and other equity securities of well established companies with promising prospects for providing an above-average rate of return. MAC manages the Quantitative Equity Trust. EQUITY INDEX TRUST The investment objective of the Equity Index Trust is to achieve investment results which approximate the total return of publicly traded common stocks in the aggregate, as represented by the Standard & Poor's 500 Composite Stock Price Index. MAC manages the Equity Index Trust. BLUE CHIP GROWTH TRUST The primary investment objective of the Blue Chip Growth Trust is to provide long-term growth of capital. Current income is a secondary objective, and many of the stocks in the Portfolio are expected to pay dividends. T. Rowe Price Associates, Inc. manages the Blue Chip Growth Trust. REAL ESTATE SECURITIES TRUST The investment objective of the Real Estate Securities Trust is to achieve a combination of long-term capital appreciation and satisfactory current income by investing in real estate related equity and debt securities. MAC manages the Real Estate Securities Trust. GROWTH & INCOME PORTFOLIOS VALUE TRUST The investment objective of the Value Trust is to realize an above-average total return over a market cycle of three to five years, consistent with reasonable risk. Miller Anderson & Sherrerd, LLP ("MAS") manages the Value Trust and seeks to attain this objective by investing primarily in common and preferred stocks, convertible securities, rights and warrants to purchase common stocks, ADRs and other equity securities of companies with equity capitalizations usually greater than $300 million. INTERNATIONAL GROWTH AND INCOME TRUST The investment objective of the International Growth and Income Trust is to seek long-term growth of capital and income. The portfolio is designed for investors with a long-term investment horizon who want to take advantage of investment opportunities outside the United States. J.P. Morgan Investment Management Inc. manages the International Growth and Income Trust. GROWTH AND INCOME TRUST The investment objective of the Growth and Income Trust is to provide long-term growth of capital and income consistent with prudent investment risk. Wellington Management Company manages the Growth and Income Trust and seeks to achieve the Trust's objective by investing primarily in a diversified portfolio of common stocks of U.S. issuers which Wellington Management Company believes are of high quality. EQUITY-INCOME TRUST The investment objective of the Equity-Income Trust (prior to December 31, 1996, the "Value Equity Trust") is to provide substantial dividend income and also long-term capital appreciation. T. Rowe Price Associates, Inc. manages the Equity-Income Trust and seeks to attain this objective by investing primarily in dividend-paying common stocks, particularly of established companies with favorable prospects for both increasing dividends and capital appreciation. 16 22 BALANCED PORTFOLIOS BALANCED TRUST The investment objective of the Balanced Trust is current income and capital appreciation. Founders is the manager of the Balanced Trust and seeks to attain this objective by investing in a balanced portfolio of common stocks, U.S. and foreign government obligations and a variety of corporate fixed-income securities. AUTOMATIC ASSET ALLOCATION TRUSTS (AGGRESSIVE, MODERATE, AND CONSERVATIVE) The investment objective of each of the Automatic Asset Allocation Trusts is to realize the highest potential total return consistent with a specified level of risk tolerance - conservative, moderate, or aggressive. The amount of each Portfolio's assets invested in each category of securities - debt, equity, and money market - is dependent upon the judgment of Fidelity Management Trust Company as to what percentages of each Portfolio's assets in each category will contribute to the limitation of risk and the achievement of its investment objective. BOND PORTFOLIOS HIGH YIELD TRUST The investment objective of High Yield Trust is to realize an above-average total return over a market cycle of three to five years, consistent with reasonable risk. MAS manages the High Yield Trust and seeks to attain this objective by investing primarily in high yield debt securities, including corporate bonds and other fixed-income securities. STRATEGIC BOND TRUST The investment objective of the Strategic Bond Trust is to seek a high level of total return consistent with preservation of capital. The Strategic Bond Trust seeks to achieve its objective by giving its Subadviser, Salomon Brothers Asset Management Inc ("SBAM") broad discretion to deploy the Strategic Bond Trust's assets among certain segments of the fixed-income market as SBAM believes will best contribute to the achievement of the portfolio's objective. GLOBAL GOVERNMENT BOND TRUST The investment objective of the Global Government Bond Trust is to seek a high level of total return by placing primary emphasis on high current income and the preservation of capital. Oechsle International Advisors, L.P. manages the Global Government Bond Trust and intends to pursue this objective by investing primarily in a selected global portfolio of high-quality, fixed-income securities of foreign and U.S. governmental entities and supranational issuers. CAPITAL GROWTH BOND TRUST The investment objective of the Capital Growth Bond Trust is to achieve growth of capital by investing in medium-grade or better debt securities, with income as a secondary consideration. MAC manages the Capital Growth Bond Trust. The Capital Growth Bond Trust differs from most "bond" funds in that its primary objective is capital appreciation, not income. INVESTMENT QUALITY BOND TRUST The investment objective of the Investment Quality Bond Trust is to provide a high level of current income consistent with the maintenance of principal and liquidity. Wellington Management Company manages the Investment Quality Bond Trust and seeks to achieve the Trust's objective by investing primarily in a diversified portfolio of investment grade corporate bonds and U.S. Government bonds with intermediate to longer term maturities. 17 23 U.S. GOVERNMENT SECURITIES TRUST The investment objective of the U.S. Government Securities Trust is to obtain a high level of current income consistent with preservation of capital and maintenance of liquidity. SBAM manages the U.S. Government Securities Trust and seeks to attain its objective by investing a substantial portion of its assets in debt obligations and mortgage-backed securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities and derivative securities such as collateralized mortgage obligations backed by such securities. MONEY MARKET PORTFOLIO MONEY MARKET TRUST The investment objective of the Money Market Trust is to obtain maximum current income consistent with preservation of principal and liquidity. MAC manages the Money Market Trust and seeks to achieve this objective by investing in high quality, U.S. dollar denominated money market instruments. LIFESTYLE PORTFOLIOS LIFESTYLE AGGRESSIVE 1000 TRUST The investment objective of the Lifestyle Aggressive 1000 Trust is to provide long-term growth of capital. Current income is not a consideration. MAC manages the Lifestyle Aggressive 1000 Trust and seeks to achieve this objective by investing approximately 100% of the Lifestyle Trust's assets in Underlying Portfolios which invest primarily in equity securities. LIFESTYLE GROWTH 820 TRUST The investment objective of the Lifestyle Growth 820 Trust is to provide long-term growth of capital with consideration also given to current income. MAC manages the Lifestyle Growth 820 Trust and seeks to achieve this objective by investing approximately 20% of the Lifestyle Trust's assets in Underlying Portfolios which invest primarily in fixed-income securities and approximately 80% of the assets in Underlying Portfolios which invest primarily in equity securities. LIFESTYLE BALANCED 640 TRUST The investment objective of the Lifestyle Balanced 640 Trust is to provide a balance between high level of current income and growth of capital with a greater emphasis given to capital growth. MAC manages the Lifestyle Balanced 640 Trust and seeks to achieve this objective by investing approximately 40% of the Lifestyle Trust's assets in Underlying Portfolios which invest primarily in fixed-income securities and approximately 60% of its assets in Underlying Portfolios which invest primarily in equity securities. LIFESTYLE MODERATE 460 TRUST The investment objective of the Lifestyle Moderate 460 Trust is to provide a balance between high level of current income and growth of capital with a greater emphasis given to high income. MAC manages the Lifestyle Moderate 460 Trust and seeks to achieve this objective by investing approximately 60% of the Lifestyle Trust's assets in Underlying Portfolios which invest primarily in fixed-income securities and approximately 40% of its assets in Underlying Portfolios which invest primarily in equity securities. LIFESTYLE CONSERVATIVE 280 TRUST The investment objective of the Lifestyle Conservative 280 Trust is to provide a high level of current income with some consideration also given to growth of capital. MAC manages the Lifestyle Conservative 280 Trust and seeks to achieve this objective by investing approximately 80% of the Lifestyle Trust's assets in Underlying Portfolios which invest primarily in fixed-income securities and approximately 20% of its assets in Underlying Portfolios which invest primarily in equity securities. 18 24 ISSUING A POLICY USE OF THE POLICY The Policy is designed to provide to corporations and other entities life insurance coverage on their employees or other persons in whose lives they have an insurable interest. The Policy may be owned individually or by a corporation, trust, association, or similar entity. The Policy may be used for such purposes as funding non-qualified executive deferred compensation or salary continuation plans, as a means of funding death benefit liabilities incurred under executive retirement plans, or as a source for funding cash flow obligations under such plans. REQUIREMENTS To purchase a Policy, an applicant must submit a completed application. A Policy will not be issued until the underwriting process has been completed to the Company's satisfaction. Policies may be issued on a basis which does not distinguish between the insured's sex and/or smoking status, with prior approval from the Company. A Policy will only be issued on the lives of insureds from ages 20 through 80. Each Policy is issued with a Policy Date, an Effective Date and an Issue Date. The Policy Date is the date from which the first monthly deductions are calculated and from which Policy Years, Policy Months and Policy Anniversaries are determined. The Effective Date is the date the Company becomes obligated under the Policy and when the first monthly deductions are deducted from the Policy Value. The Issue Date is the date from which the Suicide and Incontestability are measured. If an application is accompanied by a check for the initial premium and the application is accepted: (i) the Policy Date will be the date the application and check were received at the Service Office (unless a special Policy Date is requested (See "Backdating a Policy" below); (ii) the Effective Date will be the date the Company's underwriters approve issuance of the Policy; and (iii) the Issue Date will be the date the Company issues the Policy. If an application accepted by the Company is not accompanied by a check for the initial premium: (i) the Policy Date will be the date the Company issues the Policy (unless a special Policy Date is requested (See "Backdating a Policy" below); (ii) the Effective Date will be the date the Service Office receives the initial premium; and (iii) the Issue Date will be the date the Company issues the Policy. The initial premium must be received within 60 days after the Policy Date. If the premium is not paid or if the application is rejected, the Policy will be cancelled and any partial premiums paid will be returned to the applicant. MINIMUM INITIAL FACE AMOUNT Manufacturers Life of America will issue a Policy only if it has a Face Amount of at least $50,000. 19 25 BACKDATING A POLICY Under limited circumstances, the Company may backdate a Policy, upon request, by assigning a Policy Date earlier than the date the application is signed. However, in no event will a Policy be backdated earlier than the earliest date allowed by state law, which is generally three months to one year prior to the date of application for the Policy. Monthly deductions will be made for the period the Policy Date is backdated. Regardless of whether or not a policy is backdated, Net Premiums received prior to the Effective Date of a Policy will be credited with interest from the date of receipt at the rate of return then being earned on amounts allocated to the Money Market portfolio. As of the Effective Date, the premiums paid plus interest credited, net of the premium load, will be allocated among the Investment Accounts and/or Guaranteed Interest Account in accordance with the policyholder's instructions unless such amount is first allocated to the Money Market portfolio for the duration of the Right to Examine period. TEMPORARY INSURANCE AGREEMENT In accordance with the Company's underwriting practices, temporary insurance coverage may be provided under the terms of a Temporary Insurance Agreement. Generally, temporary life insurance may not exceed $1,000,000 and may not be in effect for more than 90 days. This temporary insurance coverage will be issued on a conditional receipt basis, which means that any benefits under such temporary coverage will only be paid if the life insured meets the Company's usual and customary underwriting standards for the coverage applied for. UNDERWRITING The policies are offered on three underwriting bases, which vary by the amount of information required of the prospective insured. These bases are: short form underwriting, simplified underwriting, and regular (medical) underwriting. These are described in more detail below. Regardless of which underwriting procedure is used, the acceptance of an application is subject to the Company's underwriting rules, and the Company reserves the right to request additional information or to reject an application for any reason. SHORT FORM UNDERWRITING Generally, the availability of short form underwriting depends on the characteristics of the Case, such as the number of lives to be insured and the amounts of insurance. Under Short Form underwriting, a proposed Insured is required to answer qualifying questions in the application, but is not required to submit to a medical or paramedical exam. Short form underwriting is generally available only up to issue age 65. SIMPLIFIED UNDERWRITING Like short form underwriting the availability of simplified underwriting depends on the characteristics of the Case. Under Simplified Underwriting, the proposed insured is required to respond satisfactorily to certain health questions in the application. Medical records, such as "Attending Physician's Statements" (APS's) are generally required. In some instances, a blood test may also be required. REGULAR UNDERWRITING If the requirements for short form or simplified underwriting are not satisfied, the Company will require satisfactory evidence of insurability. This may include medical exams and other information. Persons failing to meet standard underwriting classification may be eligible for a Policy with an additional rating assigned to it. RIGHT TO EXAMINE THE POLICY A Policy may be returned for a refund within 10 days after it is received. Some states provide a longer period of time to exercise this right. The Policy will indicate if the policyholder has a longer time. The Policy can be mailed or delivered to the Manufacturers Life of America agent who sold it or to the Service Office. Immediately on such delivery or mailing, the Policy shall be deemed void from the beginning. 20 26 Within seven days after receipt of the returned Policy at its Service Office, the Company will refund to the policyholder an amount equal to: (a) the difference between payments made and amounts allocated to the Separate Account and the Guaranteed Interest Account; plus (b) the value of the amount allocated to the Separate Account and the Guaranteed Interest Account as of the date the returned Policy is received by the Company; minus (c) any partial withdrawals made and policy loans taken. Some state laws require the refund of all premiums paid, without adjustment for the investment gains and losses of the Separate Account. In these states, all Net Premiums will be allocated to the Money Market Trust during the right to examine period, and the policyholder will receive a refund of all payments made less any partial withdrawals and policy loans taken. If a policyholder requests an increase in face amount which results in new surrender charges, he or she will have the same rights as described above to cancel the increase. If cancelled, the Policy Value and the surrender charges will be recalculated to the amounts they would have been had the increase not taken place. A policyholder may request a refund of all or any portion of premiums paid during the free look period, and the Policy Value and the surrender charges will be recalculated to the amounts they would have been had the premiums not been paid. The Company reserves the right to delay the refund of any premium paid by check until the check has cleared. DEATH BENEFITS If the Policy is in force at the time of the life insured's death, the Company will pay an insurance benefit upon receipt of Due Proof of Death. The amount payable will be the death benefit under the selected death benefit option, plus any amounts payable under any supplementary benefits added to the Policy, less the Policy Debt and any outstanding monthly deductions due. The insurance benefit will be paid in one lump sum unless another form of settlement option is agreed to by the beneficiary and the Company. If the insurance benefit is paid in one sum, the Company will pay interest from the date of death to the date of payment. If the life insured should die after the Company's receipt of a request for surrender, no insurance benefit will be payable, and the Company will pay only the Net Cash Surrender Value. LIFE INSURANCE QUALIFICATION A Policy must satisfy either of two tests to qualify as a life insurance contract for purposes of Section 7702 of the Internal Revenue Code of 1986, as amended. At the time of application, the policyholder may choose a Policy which uses either the Cash Value Accumulation Test or the Guideline Premium Test. The test cannot be changed once the Policy is issued. CASH VALUE ACCUMULATION TEST Under the Cash Value Accumulation Test ("CVA Test"), the Policy's death benefit must be at least equal to the Minimum Death Benefit. There is no restriction on the amount of premiums that may be paid into a Policy. GUIDELINE PREMIUM TEST The Guideline Premium Test ("GLP Test") restricts the maximum premiums that may be paid into a life insurance policy for a given death benefit. The policy's death benefit must also be at least equal to the Minimum Death Benefit (described below). However, the Minimum Death Benefit Percentages are lower than those required under the Cash Value Accumulation Test. Changes to the Policy may affect the maximum amount of premiums, such as: 21 27 - - A change in the policy's Face Amount. - - A change in the death benefit option. - - Partial Withdrawals. Any of the above changes could cause the total premiums paid to exceed the new maximum limit. In this situation, the Company will require the policyholder to take a partial withdrawal. In addition, these changes could reduce the future premium limitations. MINIMUM DEATH BENEFIT Both the Cash Value Accumulation Test and the Guideline Premium Test require a life insurance policy to meet minimum ratios of life insurance coverage to policy value. This is achieved by ensuring that the death benefit is at all times at least equal to the Minimum Death Benefit. The Minimum Death Benefit on any date is defined as the Policy Value on that date times the applicable Minimum Death Benefit Percentage for the Attained Age of the life insured. The Minimum Death Benefit Percentages for each test are shown in the Table of Minimum Death Benefit Percentages. TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES
CVA Test Percent CVA Test Percent --------------------- --------------------- GLP Test GLP Test Age Percent Male Female Age Percent Male Female 20 250% 653% 779% 60 130% 192% 221% 21 250% 634% 754% 61 128% 187% 214% 22 250% 615% 730% 62 126% 182% 208% 23 250% 597% 706% 63 124% 178% 203% 24 250% 580% 684% 64 122% 174% 197% 25 250% 562% 662% 65 120% 170% 192% 26 250% 545% 640% 66 119% 166% 187% 27 250% 528% 619% 67 118% 162% 182% 28 250% 511% 599% 68 117% 159% 177% 29 250% 494% 580% 69 116% 155% 173% 30 250% 479% 561% 70 115% 152% 169% 31 250% 463% 542% 71 113% 149% 164% 32 250% 448% 525% 72 111% 146% 160% 33 250% 433% 507% 73 109% 144% 156% 34 250% 419% 491% 74 107% 141% 153% 35 250% 406% 475% 75 105% 139% 149% 36 250% 392% 459% 76 105% 136% 146% 37 250% 380% 444% 77 105% 134% 143% 38 250% 367% 430% 78 105% 132% 140% 39 250% 356% 416% 79 105% 130% 138% 40 250% 344% 403% 80 105% 129% 135% 41 243% 333% 390% 81 105% 127% 133% 42 236% 323% 378% 82 105% 125% 130% 43 229% 313% 366% 83 105% 124% 128% 44 222% 303% 355% 84 105% 122% 126% 45 215% 294% 344% 85 105% 121% 124% 46 209% 285% 333% 86 105% 120% 123%
22 28 47 203% 277% 323% 87 105% 119% 121% 48 197% 268% 313% 88 105% 118% 119% 49 191% 260% 304% 89 105% 116% 118% 50 185% 253% 295% 90 105% 116% 117% 51 178% 245% 286% 91 104% 115% 115% 52 171% 238% 278% 92 103% 114% 114% 53 164% 232% 270% 93 102% 112% 113% 54 157% 225% 262% 94 101% 111% 112% 55 150% 219% 254% 95 100% 110% 110% 56 146% 213% 247% 96 100% 109% 109% 57 142% 207% 240% 97 100% 107% 107% 58 138% 202% 233% 98 100% 106% 106% 59 134% 197% 227% 99 100% 105% 105%
DEATH BENEFIT OPTIONS There are two death benefit options, described below. DEATH BENEFIT OPTION 1 Under Option 1 the death benefit is the Face Amount of the Policy at the date of death or, if greater, the Minimum Death Benefit. DEATH BENEFIT OPTION 2 Under Option 2 the death benefit is the Face Amount plus the Policy Value of the Policy at the date of death or, if greater, the Minimum Death Benefit. CHANGING THE DEATH BENEFIT OPTION The death benefit option may be changed on the first day of any Policy month. The change will occur on the first day of the next Policy month which is 30 days after a written request for a change is received at the Service Office. The Company reserves the right to limit a request for a change if the change would cause the Policy to fail to qualify as life insurance for tax purposes. A change in the death benefit option will result in a change in the Policy's Face Amount, in order to avoid any change in the amount of the death benefit, as follows: CHANGE FROM OPTION 1 TO OPTION 2 The new Face Amount will be equal to the Face Amount prior to the change minus the Policy Value on the date of the change. The Policy will not be assessed a Surrender Charge for a reduction in Face Amount solely due to a change in the death benefit option. CHANGE FROM OPTION 2 TO OPTION 1 The new Face Amount will be equal to the Face Amount prior to the change plus the Policy Value on the date of the change. No new Surrender Charges will apply to an increase in Face Amount solely due to a change in the death benefit option. CHANGING THE FACE AMOUNT Subject to the limitations stated in this Prospectus, a policyholder may, upon written request, increase or decrease the Face Amount of the Policy. The Company reserves the right to limit a change in Face Amount so as to prevent the Policy from failing to qualify as life insurance for tax purposes. 23 29 INCREASE IN FACE AMOUNT Increases in Face Amount are subject to satisfactory evidence of insurability. An increase will become effective at the beginning of the Policy month following the date Manufacturers Life of America approves the requested increase. The Company reserves the right to refuse a requested increase if the life insured's Attained Age at the effective date of the increase would be greater than the maximum Issue Age for new Policies at that time. NEW SURRENDER CHARGES FOR AN INCREASE An increase in Face Amount will result in the Policy's being subject to new Surrender Charges. The new Surrender Charges will be computed as if a new Policy were being purchased for the increase in Face Amount. For purposes of determining the new Surrender Charges a portion of the premiums paid on or subsequent to the increase will be deemed to be premiums attributable to the increase. The portion attributable to the increase in any Policy Year will be the amount of premiums in excess of the sum of the Target Premiums for the (i) initial Face Amount during the first five Policy Years and (ii) all prior increases that are in effect at the time of the increase in Face Amount and have been in effect for less than five years. INCREASE WITH PRIOR DECREASES If, at the time of the increase, there have been prior decreases in Face Amount, these prior decreases will be restored first. There will be no new Surrender Charges associated with these increases, since Surrender Charges will have already been assessed at the time of the prior decrease. DECREASE IN FACE AMOUNT A written request from a policyholder for a decrease in the Face Amount must be received by Manufacturers Life of America at least 30 days prior to the first day of a policy month for the change to take effect on the first day of that policy month. If there have been previous increases in Face Amount, the decrease will be applied to the most recent increase first and thereafter to the next most recent increases successively. SURRENDER CHARGES ASSESSED ON A DECREASE A portion of a Policy's Surrender Charge will be deducted from the Policy Value on a decrease in Face Amount. Since Surrender Charges are determined separately for the initial Face Amount and each Face Amount Increase, the portion of the Surrender Charges to be deducted with respect to each level of insurance coverage will be determined separately. The portion of the Surrender Charge deducted with respect to a level of coverage will be equal to: (a) the amount of the decrease; divided by (b) the amount of the coverage prior to the decrease; multiplied by (c) the Surrender Charge for the coverage. The charges will be allocated among the Investment Accounts and the Guaranteed Interest Account in the same proportion as the Policy Value in each bears to the Net Policy Value. Whenever a portion of the surrender charges are deducted as a result of a decrease in Face Amount, the Policy's remaining surrender charges will be reduced in the same proportion that the surrender charge deducted bears to the total surrender charge immediately prior to the decrease in Face Amount. 24 30 PREMIUM PAYMENTS INITIAL PREMIUMS No premiums will be accepted prior to receipt of a completed application by the Company. All premiums received prior to the Effective Date of the Policy will be held in the general account and credited with interest from the date of receipt at the rate of return then being earned on amounts allocated to the Money Market Trust. On the Effective Date, the Net Premiums paid plus interest credited will be allocated among the Investment Accounts or the Guaranteed Interest Account in accordance with the policyholder's instructions. All Net Premiums received on or after the Effective Date will be allocated among Investment Accounts or the Guaranteed Interest Account as of the date the premiums were received at the Service Office. Monthly deductions are due on the Policy Date and at the beginning of each policy month thereafter. However, if due prior to the Effective Date, they will be taken on the Effective Date instead of the dates they were due. EXCEPTION FOR CERTAIN STATES Some state laws require the refund of all premiums paid, without adjustment for gains and losses of the Separate Account, if a Policy is returned during the right to examine period. In these states, all Net Premiums will be allocated to the Money Market Trust during the right to examine period. At the end of this period, the Policy Value in the Money Market Trust will be allocated among the Investment Accounts or the Guaranteed Interest Account. The Policy will state if a return of premiums is required. SUBSEQUENT PREMIUMS After the payment of the initial premium, premiums may be paid at any time and in any amount during the lifetime of the life insured, subject to the limitations on premium amount described below. A Policy will be issued with a planned premium, which is based on the amount of premium the policyholder wishes to pay. Manufacturers Life of America will send notices to the policyholder setting forth the planned premium at the payment interval selected by the policyholder. However, the policyholder is under no obligation to make the indicated payment. Payment of premiums will not guarantee that the Policy will stay in force. Conversely, failure to pay premiums will not necessarily cause the Policy to lapse. MAXIMUM PREMIUM LIMITATION If the Policy is issued under the Guideline Premium Test, in no event may the total of all premiums paid exceed the then-current maximum premium limitations established by federal income tax law for a Policy to qualify as life insurance. If, at any time, a premium is paid which would result in total premiums exceeding the above maximum premium limitation, the Company will only accept that portion of the premium which will make the total premiums equal to the maximum. Any part of the premium in excess of that amount will be returned and no further premiums will be accepted until allowed by the then-current maximum premium limitation. The maximum premium limitations are set forth in the Policy. 25 31 PREMIUM ALLOCATION Premiums may be allocated to either the Guaranteed Interest Account for accumulation at a rate of interest equal to at least 4% or to one or more of the Investment Accounts for investment in the Portfolio shares held by the corresponding sub-account of the Separate Account. Allocations among the Investment Accounts and the Guaranteed Interest Account are made as a percentage of the premium. The percentage allocation to any account may be any number between zero and 100, provided the total allocation equals 100. Alternatively, a policyholder may specify the allocation of a specific premium payment in dollar amounts, so long as the total allocation among the Investment Accounts equals the Net Premium paid. A policyholder may change the way in which premiums are allocated at any time without charge. The change will take effect on the date a written request for change satisfactory to the Company is received at the Service Office. CHARGES AND DEDUCTIONS PREMIUM LOADS Manufacturers Life of America deducts a Premium Load from each premium payment, equal to 2.00% of the premium. Premium Loads are deducted in order to cover federal, state and local taxes on premium payments. SURRENDER CHARGES The Company will deduct a Surrender Charge if during the first 10 years following the Policy Date, or the effective date of a Face Amount increase: - - the Policy is surrendered for its Net Cash Surrender Value, - - a partial withdrawal is made in excess of the Free Partial Withdrawal Amount, - - the Face Amount is decreased, - - or the Policy lapses. The Surrender Charge is expressed as a percentage of the total premiums paid from the Effective Date. However, premiums paid in any Policy Year in excess of the Target Premium, and premiums paid after the fifth Policy Year, are not counted in the determination of total premiums paid. Therefore, the timing of premium payments may affect the amount of the Surrender Charge. The percentages vary by Policy Year as follows:
Policy Year Percentage 1 10.00% 2 7.50% 3 5.00% 4 5.00% 5 5.00% 6 5.00% 7 4.00% 8 3.00% 9 2.00% 10+ 0.00%
Although the percentages remain level or decrease as the Policy Year increases, the total dollar amount of Surrender Charges may increase, as the total premium paid increases. 26 32 SURRENDER CHARGES ON A PARTIAL WITHDRAWAL A partial withdrawal will result in the assessment of a portion of the Surrender Charges to which the Policy is subject. The portion of the Surrender Charges assessed will be based on the ratio of the amount of the withdrawal which exceeds the Free Withdrawal Amount to the Net Cash Surrender Value of the Policy immediately prior to the withdrawal. The Surrender Charges will be deducted on a pro-rata basis from each of the Investment Accounts and the Guaranteed Interest Account. If the amount in the accounts are not sufficient to pay the Surrender Charges assessed, then the amount of the withdrawal will be reduced. Whenever a portion of the surrender charges are deducted as a result of a partial withdrawal, the Policy's remaining surrender charges will be reduced in the same proportion that the surrender charge deducted bears to the total surrender charge immediately before the partial withdrawal. FREE WITHDRAWAL AMOUNT The Free Withdrawal Amount is equal to 10% of the Net Cash Surrender Value at the time of the withdrawal. In determining what, if any, portion of a partial withdrawal is in excess of the Free Withdrawal Amount, all previous partial withdrawals that have occurred in the current Policy Year are included. MONTHLY CHARGES On the Policy Date and at the beginning of each policy month, a deduction is due from the Policy Value to cover certain charges in connection with the Policy until the insured reaches age 100. Monthly deductions due prior to the Effective Date will be taken on the Effective Date instead of the dates they were due. The charges consist of: (i) a monthly administration charge; (ii) a monthly charge for the cost of insurance; (iii) a monthly charge for any supplementary benefits added to the Policy. Unless otherwise allowed by the Company and specified by the policyholder, the monthly deduction will be allocated among the Investment Accounts and the Guaranteed Interest Account in the same proportion as the Policy value in each bears to the Net Policy Value. ADMINISTRATION CHARGE This charge will be equal to $12 per policy month, which is guaranteed not to increase. The charge is designed to cover certain administrative expenses associated with the Policy, including maintaining policy records, collecting premiums and processing death claims, surrender and withdrawal requests and various change permitted under a Policy. COST OF INSURANCE CHARGE The monthly charge for the cost of insurance is determined by multiplying the applicable cost of insurance rate times the net amount at risk at the beginning of each policy month. The cost of insurance rate and the net amount at risk are determined separately for the initial Face Amount and for each increase in Face Amount. In determining the net amount at risk, if there have been increases in the Face Amount, the Policy Value shall first be considered a part of the initial Face Amount. If the Policy Value exceeds the initial Face Amount, it shall then be considered a part of the additional increases in Face Amount resulting from the increases in the order of the increases. The net amount at risk is equal to the greater of zero, or the result of (a) minus (b) where: (a) is the death benefit as of the first day of the month, divided by 1.0032737; and (b) is the Policy Value as of the first day of the month. 27 33 The cost of insurance rate is based upon the following factors: - - the issue age, sex (unless unisex rates are required by law) and smoking status of the life insured; - - the underwriting class of the Policy; - - the number of years since issue or since an increase in Face Amount; - - the amount of the Death Benefit in excess of the Face Amount, - - any extra charges for additional ratings indicated in the Policy. Cost of insurance rates will generally increase with the life insured's age. The cost of insurance rates reflect the Company's expectations as to future mortality experience. The rates may be changed from time to time on a basis which does not unfairly discriminate within the class of lives insured. In no event will the cost of insurance rate exceed the guaranteed rates set forth in the Policy except to the extent that an extra charge is imposed because of an additional rating applicable to the life insured. The guaranteed rates are based on the 1980 Commissioners Standard Ordinary Mortality Tables. CHARGES FOR SUPPLEMENTARY BENEFITS If the Policy includes Supplementary Benefits, a charge will be made applicable to such Supplementary Benefit. CHARGES ASSESSED AGAINST ASSETS OF THE INVESTMENT ACCOUNTS A daily charge is assessed against amounts in the Investment Accounts equal to a percentage of the value of the Investment Account. This charge is to compensate the Company for the mortality and expense risks it assumes under the Policy. The mortality risk assumed is that lives insured may live for a shorter period of time than the Company estimated. The expense risk assumed is that expenses incurred in issuing and administering the Policy will be greater than the Company estimated. The Company will realize a gain from this charge to the extent it is not needed to provide benefits and pay expenses under the Policy. The charge varies by Policy Year as follows:
Equivalent Annual Daily Mortality and Mortality and Expense Policy Year Expense Risk Charge Risk Charge 1-10 0.000020625% 0.75% 11+ 0.000010981% 0.40%
CHARGES FOR TRANSFERS A charge of $25 will be imposed on each transfer in excess of twelve in a policy year. REDUCTION IN CHARGES The Policy is available for purchase by corporations and other groups or sponsoring organizations for multiple life sales. Manufacturers Life of America reserves the right to reduce any of the Policy's loads or charges on certain Cases where it is expected that the amount or nature of such Cases will result in savings of sales, underwriting, administrative or other costs. Eligibility for these reductions and the amount of reductions will be determined by a number of factors, including the number of lives to be insured, the total premiums expected to be paid, total assets under management for the policyholder, the nature of the relationship among the insured individuals, the purpose for which the policies are being purchased, expected persistency of the individual policies, and any other circumstances which 28 34 Manufacturers Life of America believes to be relevant to the expected reduction of its expenses. Some of these reductions may be guaranteed and others may be subject to withdrawal or modification, on a uniform Case basis. Reductions in charges will not be unfairly discriminatory to any policyholders. COMPANY TAX CONSIDERATIONS At the present time, the Company makes no charge to the Separate Account for any federal, state, or local taxes that the Company incurs that may be attributable to such Account or to the Policies. The Company, however, reserves the right in the future to make a charge for any such tax or other economic burden resulting from the application of the tax laws that it determines to be properly attributable to the Separate Account or to the Policies. POLICY VALUE DETERMINATION OF THE POLICY VALUE A Policy has a Policy Value, a portion of which is available to the policyholder by making a policy loan or partial withdrawal, or upon surrender of the Policy. The Policy Value may also affect the amount of the death benefit. The Policy Value at any time is equal to the sum of the values in the Investment Accounts, the Guaranteed Interest Account, and the Loan Account. INVESTMENT ACCOUNTS An Investment Account is established under each Policy for each sub-account of the Separate Account to which net premiums or transfer amounts have been allocated. Each Investment Account under a Policy measures the interest of the Policy in the corresponding sub-account. The value of the Investment Account established for a particular sub-account is equal to the number of units of that sub-account credited to the Policy times the value of such units. GUARANTEED INTEREST ACCOUNT Amounts in the Guaranteed Interest Account do not vary with the investment performance of any sub-account. Instead, these amounts are credited with interest at a rate determined by Manufacturers Life of America. For a detailed description of the Guaranteed Interest Account, see "The General Account - Guaranteed Interest Account". LOAN ACCOUNT Amounts borrowed from the Policy are transferred to the Loan Account. Amounts in the Loan Account do not vary with the investment performance of any sub-account. Instead, these amounts are credited with interest at a rate which is equal to the amount charged on the outstanding Policy Debt less the Loan Spread. For a detailed description of the Loan Account, see "Policy Loans - Loan Account". UNITS AND UNIT VALUES CREDITING AND CANCELING UNITS Units of a particular sub-account are credited to a Policy when net premiums are allocated to that sub-account or amounts are transferred to that sub-account. Units of a sub-account are cancelled whenever amounts are deducted, transferred or withdrawn from the sub-account. The number of units credited or cancelled for a specific transaction is based on the dollar amount of the transaction divided by the value of the unit on the Business Day on which the transaction occurs. The number of units credited with respect to a premium payment will be based on the applicable unit values for the Business Day on which the premium is received at the Service Office, except for any premiums received before the Effective Date. For premiums received before the Effective Date, the values will be determined on the Effective Date. 29 35 Units are valued at the end of each Business Day. When an order involving the crediting or canceling of units is received after the end of a Business Day, or on a day which is not a Business Day, the order will be processed on the basis of unit values determined on the next Business Day. Similarly, any determination of Policy Value, Investment Account value or death benefit to be made on a day which is not a Business Day will be made on the next Business Day. UNIT VALUES The value of a unit of each sub-account was initially fixed at $10.00. For each subsequent Business Day the unit value for that sub-account is determined by multiplying the unit value for the immediately preceding Business Day by the net investment factor for the that sub-account on such subsequent Business Day. The net investment factor for a sub-account on any Business Day is equal to (a) divided by (b) minus (c), where: (a) is the net asset value of the underlying Portfolio shares held by that sub-account as of the end of such Business Day before any policy transaction are made on that day; (b) is the net asset value of the underlying Portfolio shares held by that sub-account as of the end of the immediately preceding Business Day after all policy transaction were made for that day; and (c) is a charge not exceeding the daily mortality and expense risk charge shown in the "Charges and Deductions - Charges Assessed Against Assets of the Investment Accounts" section. The value of a unit may increase, decrease, or remain the same, depending on the investment performance of a sub-account from one Business Day to the next. Due to the fact that the daily mortality and expense risk charge varies by Policy Years, two unit values will be calculated for each sub-account commencing 10 years after the effective date of the first Policy. TRANSFERS OF POLICY VALUE At any time, a policyholder may transfer Policy Value from one sub-account to another or to the Guaranteed Interest Account. Transfer requests must be in writing in a format satisfactory to the Company, or by telephone if a currently valid telephone transfer authorization form is on file. These transfer privileges are subject to the Company's consent. The Company reserves the right to impose limitations on transfers, including the maximum amount that may be transferred. In addition, transfer privileges are subject to any restrictions that may be imposed by the Trust. TRANSFER CHARGES A policyholder may make up to twelve transfers each policy year free of charge. Additional transfers in each policy year may be made at a cost of $25 per transfer. This charge will be allocated among the Investment Accounts and the Guaranteed Interest Account in the same proportion as the amount transferred from each bears to the total amount transferred. All transfer requests received by the Company on the same Business Day are treated as a single transfer request. 30 36 TRANSFERS INVOLVING GUARANTEED INTEREST ACCOUNT The maximum amount that may be transferred from the Guaranteed Interest Account in any one policy year is the greater of $500 or 15% of the Guaranteed Interest Account Value at the previous Policy Anniversary. Any transfer which involves a transfer out of the Guaranteed Interest Account may not involve a transfer to the Investment Account for the Money Market Trust. TELEPHONE TRANSFERS Although failure to follow reasonable procedures may result in the Company being liable for any losses resulting from unauthorized or fraudulent telephone transfers, Manufacturers Life of America will not be liable for following instructions communicated by telephone that the Company reasonably believes to be genuine. The Company will employ reasonable procedures to confirm that instructions communicated by telephone are genuine. Such procedures shall consist of confirming that a valid telephone authorization form is on file, tape recording of all telephone transactions and providing written confirmation thereof. POLICY LOANS At any time while this Policy is in force, a policyholder may borrow against the Policy Value of the Policy. The Policy serves as the only security for the loan. Policy loans may have tax consequences, see "Tax Treatment of Policy Benefits - Policy Loan Interest." MAXIMUM LOAN The amount of any loan cannot exceed the amount which would cause the Policy Debt to equal the Loan Value of the Policy on the date of the loan. LOAN VALUE The Loan Value is equal to the Policy's Cash Surrender Value less the monthly deductions due to the next Policy Anniversary. EFFECT OF POLICY LOAN A policy loan will have an effect on future Policy Values, since that portion of the Policy Value in the Loan Account will increase in value at the crediting interest rate rather than varying with the performance of the underlying Portfolios or increasing in value at the rate of interest credited for amounts allocated to the Guaranteed Interest Account. A policy loan may cause a Policy to be more susceptible to going into default since a policy loan will be reflected in the Net Cash Surrender Value. See "Lapse and Reinstatement." Finally, a policy loan will affect the amount payable on the death of the life insured, since the death benefit is reduced by the Policy Debt at the date of death in arriving at the insurance benefit. INTEREST CHARGED ON POLICY LOANS Interest on the Policy Debt will accrue daily and be payable annually on the Policy Anniversary. The rate of interest charged will be an effective annual rate of 5.00%. LOAN ACCOUNT When a loan is made, an amount equal to the loan will be deducted from the Investment Accounts or the Guaranteed Interest Account and transferred to the Loan Account. The policyholder may designate how the amount to be transferred to the Loan Account is allocated among the accounts from which the transfer is to be made. In the absence of instructions, the amount to be transferred will be allocated to each account in the same proportion as the value in each Investment Account and the Guaranteed Interest Account bears to the Net Policy Value. A transfer from an Investment Account will result in the cancellation of units of the underlying sub-account equal in value to the amount transferred from the Investment Account. However, since the Loan Account is part of the Policy Value, transfers made in connection with a loan will not change the Policy Value. 31 37 INTEREST CREDITED TO THE LOAN ACCOUNT Interest will be credited to amounts in the Loan Account at an effective annual rate of at least 4.00%. The actual rate credited is equal to the rate of interest charged on the policy loan less the Loan Spread. The Loan Spread varies by policy year as follows:
Policy Year Loan Spread 1-10 1.00% 11-20 0.50% 21+ 0.25%
LOAN ACCOUNT ADJUSTMENTS On the first day of each policy month the difference between the Loan Account and the Policy Debt is transferred to the Loan Account from the Investment Accounts or the Guaranteed Interest Account. Amounts transferred from the Loan Account will be allocated to the Investment Accounts and the Guaranteed Interest Account in the same proportion as the value in each Investment Account and the Guaranteed Interest Account bears to the Net Policy Value. LOAN REPAYMENTS Policy Debt may be repaid in whole or in part at any time prior to the death of the life insured, provided that the Policy is in force. When a repayment is made, the amount is credited to the Loan Account and transferred to the Guaranteed Interest Account or the Investment Accounts. Loan repayments will be allocated to the Guaranteed Interest Account and each Investment Account in the same proportion as the value in each Investment Account and the Guaranteed Interest Account bears to the Net Policy Value. Amounts paid to the Company not specifically designated in writing as loan repayments will be treated as premiums. POLICY SURRENDER AND PARTIAL WITHDRAWALS POLICY SURRENDER A Policy may be surrendered for its Net Cash Surrender Value at any time while the life insured is living. The Net Cash Surrender Value is equal to the Policy Value less any surrender charges and outstanding monthly deductions due (the "Cash Surrender Value") minus the Policy Debt. The Net Cash Surrender Value will be determined at the end of the Business Day on which Manufacturers Life of America receives the Policy and a written request for surrender at its Service Office. After a Policy is surrendered, the insurance coverage and all other benefits under the Policy will terminate. PARTIAL WITHDRAWALS A policyholder may make a partial withdrawal of the Net Cash Surrender Value. The policyholder may specify the portion of the withdrawal to be taken from each Investment Account and the Guaranteed Interest Account. In the absence of instructions, the withdrawal will be allocated among such accounts in the same proportion as the Policy Value in each account bears to the Net Policy Value. For information on Surrender Charges on a Partial Withdrawal see "Charges and Deductions - Surrender Charges." REDUCTION IN FACE AMOUNT DUE TO A PARTIAL WITHDRAWAL If Death Benefit Option 1 is in effect when a partial withdrawal is made, the Face Amount of the Policy will be reduced by the amount of the withdrawal plus any applicable Surrender Charges. Reductions in Face Amount resulting from partial withdrawals will not incur any Surrender Charges above the Surrender Charges applicable to the withdrawal. 32 38 If the death benefit is based upon the Policy Value times the minimum death benefit percentage set forth under "Death Benefit - Minimum Death Benefit," the Face Amount will be reduced only to the extent that the amount of the withdrawal plus the portion of the Surrender Charge assessed exceeds the difference between the death benefit and the Face Amount. When the Face Amount of a Policy is based on one or more increases subsequent to issuance of the Policy, a reduction resulting from a partial withdrawal will be applied in the same manner as a requested decrease in Face Amount, i.e., against the Face Amount provided by the most recent increase, then against the next most recent increases successively and finally against the initial Face Amount. LAPSE AND REINSTATEMENT LAPSE A Policy will go into default if at the beginning of any policy month the Policy's Net Cash Surrender Value would go below zero after deducting the monthly deduction then due. Therefore, a Policy could lapse eventually if increases in Policy Value (prior to deduction of Policy charges) are not sufficient to cover Policy charges. A lapse could have adverse tax consequences as described under "Tax Treatment of the Policy - Tax Treatment of Policy Benefits Surrender or Lapse." Manufacturers Life of America will notify the policyholder of the default and will allow a 61 day grace period in which the policyholder may make a premium payment sufficient to bring the Policy out of default. The required payment will be equal to the amount necessary to bring the Net Cash Surrender Value to zero, if it was less than zero on the date of default, plus the monthly deductions due at the date of default and payable at the beginning of each of the two policy months thereafter, plus any applicable premium load. If the required payment is not received by the end of the grace period, the Policy will terminate with no value. DEATH DURING GRACE PERIOD If the life insured should die during the grace period, the Policy Value used in the calculation of the death benefit will be the Policy Value as of the date of default and the insurance benefit will be reduced by any outstanding monthly deductions due at the time of death. REINSTATEMENT A policyholder can reinstate a Policy which has terminated after going into default at any time within the five year period following the date of termination subject to the following conditions: (a) The Policy must not have been surrendered for its Net Cash Surrender Value; (b) Evidence of the life insured's insurability satisfactory to Manufacturers Life of America is furnished to the Company; and (c) A premium equal to the payment required during the grace period following default to keep the Policy in force is paid to the Company. THE GENERAL ACCOUNT The general account of Manufacturers Life of America consists of all assets owned by the Company other than those in the Separate Account and other separate accounts of the Company. Subject to applicable law, Manufacturers Life of America has sole discretion over the investment of the assets of the general account. By virtue of exclusionary provisions, interests in the general account of Manufacturers Life of America have not been registered under the Securities Act of 1933 and the general account has not been registered as an investment company under the Investment Company Act of 1940. Accordingly, neither the general account nor any interests therein are subject to the provisions of these acts, and as a result the staff of the S.E.C. has not reviewed the disclosures in this prospectus relating to the general account. Disclosures regarding the general account may, however, be subject to certain generally applicable 33 39 provisions of the federal securities laws relating to the accuracy and completeness of statements made in a prospectus. GUARANTEED INTEREST ACCOUNT A policyholder may elect to allocate net premiums to the Guaranteed Interest Account or to transfer all or a portion of the Policy Value to the Guaranteed Interest Account from the Investment Accounts. Manufacturers Life of America will hold the reserves required for any portion of the Policy Value allocated to the Guaranteed Interest Account in its general account. Transfers from the Guaranteed Interest Account to the Investment Accounts are subject to restrictions. POLICY VALUE IN THE GUARANTEED INTEREST ACCOUNT The Policy Value in the Guaranteed Interest Account is equal to: (a) the portion of the net premiums allocated to it; plus (b) any amounts transferred to it; plus (c) interest credited to it; less (d) any charges deducted from it; less (e) any partial withdrawals from it; less (f) any amounts transferred from it. INTEREST ON THE GUARANTEED INTEREST ACCOUNT An allocation of Policy Value to the Guaranteed Interest Account does not entitle the policyholder to share in the investment experience of the general account. Instead, Manufacturers Life of America guarantees that the Policy Value in the Guaranteed Interest Account will accrue interest daily at an effective annual rate of at least 4%, without regard to the actual investment experience of the general account. Consequently, if a policyholder pays the planned premiums, allocates all net premiums only to the general account and makes no transfers, partial withdrawals, or policy loans, the minimum amount and duration of the death benefit of the Policy will be determinable and guaranteed. OTHER PROVISIONS OF THE POLICY POLICYHOLDER RIGHTS Unless otherwise restricted by a separate agreement, the policyholder may: - - Vary the premiums paid under the Policy. - - Change the death benefit option. - - Change the premium allocation for future premiums. - - Transfer amounts between sub-accounts. - - Take loans and/or partial withdrawals. - - Surrender the contract. - - Transfer ownership to a new owner. - - Name a contingent owner that will automatically become owner if the policyholder dies before the insured. - - Change or revoke a contingent owner. - - Change or revoke a beneficiary. ASSIGNMENT OF RIGHTS Manufacturers Life of America will not be bound by an assignment until it receives a copy of the assignment at its Service Office. Manufacturers Life of America assumes no responsibility for the validity or effects of any assignment. 34 40 BENEFICIARY One or more beneficiaries of the Policy may be appointed by the policyholder by naming them in the application. Beneficiaries may be appointed in three classes - - primary, secondary, and final. Beneficiaries may also be revocable or irrevocable. Unless an irrevocable designation has been elected, the beneficiary may be changed by the policyholder during the life insured's lifetime by giving written notice to Manufacturers Life of America in a form satisfactory to the Company. If the life insured dies and there is no surviving beneficiary, the policyholder, or the policyholder's estate if the policyholder is the life insured, will be the beneficiary. If a beneficiary dies before the seventh day after the death of the life insured, the Company will pay the insurance benefit as if the beneficiary had died before the life insured. INCONTESTABILITY Manufacturers Life of America will not contest the validity of a Policy after it has been in force during the life insured's lifetime for two years from the Issue Date. It will not contest the validity of an increase in Face Amount, after such increase or addition has been in force during the life insured's lifetime for two years. If a Policy has been reinstated and been in force for less than two years from the reinstatement date, the Company can contest any misrepresentation of a fact material to the reinstatement. MISSTATEMENT OF AGE OR SEX If the life insured's stated age or sex or both in the Policy are incorrect, Manufacturers Life of America will change the Face Amount, and if applicable, so that the death benefit will be that which the most recent monthly charge for the cost of insurance would have purchased for the correct age and sex. SUICIDE EXCLUSION If the life insured, whether sane or insane, dies by suicide within two years from the Issue Date (or within the maximum period permitted by the state in which the Policy was delivered, if less than two years), Manufacturers Life of America will pay only the premiums paid less any partial withdrawals and any Policy Debt. If the life insured should die by suicide within two year after a Face Amount increase, the death benefit for the increase will be limited to the monthly deduction for the increase. At the discretion of the Company, this provision may be waived under some circumstances, such as policies purchased in conjunction with certain existing benefit plans. SUPPLEMENTARY BENEFITS Subject to certain requirements, one or more supplementary benefits may be added to a Policy, including, in the case of a Policy owned by a corporation or other similar entity, a benefit permitting a change in the life insured. More detailed information concerning these supplementary benefits may be obtained from an authorized agent of the Company. The cost of any supplementary benefits will be deducted as part of the monthly deduction. TAX TREATMENT OF THE POLICY The following summary provides a general description of the federal income tax considerations associated with the Policy and does not purport to be complete or to cover all situations. This discussion is not intended as tax advice. Counsel or other competent tax advisers should be consulted for more complete information. This discussion is based upon the Company's understanding of the present federal income tax laws as they are currently interpreted by the Internal Revenue Service (the "Service"). No representation is made as to the likelihood of continuation of the present federal income tax laws nor of the current interpretations by the Service. MANUFACTURERS LIFE OF AMERICA DOES NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY POLICY OR ANY TRANSACTION REGARDING THE POLICIES. The Policies may be used in various arrangements, including non-qualified deferred compensation or salary continuation plans, split dollar insurance plans, executive bonus plans, retiree medical benefit plans 35 41 and others. The tax consequences of such plans may vary depending on the particular facts and circumstances of each individual arrangement. Therefore, if the use of such Policies in any such arrangement, the value of which depends in part on the tax consequences, is contemplated, a qualified tax adviser should be consulted for advice on the tax attributes of the particular arrangement. LIFE INSURANCE QUALIFICATION There are several requirements that must be met for a Policy to be considered a Life Insurance Contract under the Internal Revenue Code, and thereby to enjoy the tax benefits of such a contract: 1. The Policy must satisfy the definition of life insurance under Section 7702 of the Internal Revenue Code of 1986 (the "Code"). 2. The investments of the Separate Account must be "adequately diversified" in accordance with Section 817(h) of the Code and Treasury Regulations. 3. The Policy must be a valid life insurance contract under applicable state law. 4. The Policyholder must not possess "incidents of ownership" in the assets of the Separate Account. These four items are discussed in detail below. DEFINITION OF LIFE INSURANCE Section 7702 of the Code sets forth a definition of a life insurance contract for federal tax purposes. For a Policy to be a life insurance contract, it must satisfy either the Cash Value Accumulation Test or the Guideline Premium Test. The Cash Value Accumulation Test requires a minimum death benefit for a given Policy Value. The Guideline Premium Test also requires a minimum death benefit, but in addition limits the total premiums that can be paid into a Policy for a given amount of death benefit. With respect to a Policy which is issued on the basis of a standard rate class, the Company believes (largely in reliance on IRS Notice 88-128 and the proposed mortality charge regulations under Section 7702, issued on July 5, 1991) that such a Policy should meet the Section 7702 definition of a life insurance contract. With respect to a Policy that is issued on a substandard basis (i.e., a rate class involving higher-than-standard mortality risk), there is less guidance, in particular as to how mortality and other expense requirements of Section 7702 are to be applied in determining whether such a Policy meets the Section 7702 definition of a life insurance contract. Thus it is not clear whether or not such a Policy would satisfy Section 7702, particularly if the policyholder pays the full amount of premiums permitted under the Policy. The Secretary of the Treasury (the "Treasury") is authorized to prescribe regulations implementing Section 7702. However, while proposed regulations and other interim guidance have been issued, final regulations have not been adopted and guidance as to how Section 7702 is to be applied is limited. If a Policy were determined not to be a life insurance contract for purposes of Section 7702, such a Policy would not provide the tax advantages normally provided by a life insurance policy. If it is subsequently determined that a Policy does not satisfy Section 7702, the Company may take whatever steps are appropriate and reasonable to attempt to cause such a Policy to comply with Section 7702. For these reasons, the Company reserves the right to restrict Policy transactions as necessary to attempt to qualify it as a life insurance contract under Section 7702. DIVERSIFICATION Section 817(h) of the Code requires that the investments of the Separate Account be "adequately diversified" in accordance with Treasury regulations in order for the Policy to qualify as a life insurance contract under Section 7702 of the code (discussed above). The Separate Account, through the Trust, intends to comply with the diversification requirements prescribed in Treas. Reg. Sec. 1.817-5, which 36 42 affect how the Trust's assets are to be invested. The Company believes that the Separate Account will thus meet the diversification requirement, and the Company will monitor continued compliance with the requirement. STATE LAW State regulations require that the policyholder have appropriate insurable interest in the life insured. Failure to establish an insurable interest may result in the Policy not qualifying as a life insurance contract for federal tax purposes. INVESTOR CONTROL In certain circumstances, owners of variable life insurance Policies may be considered the owners, for federal income tax purposes, of the assets of the separate account used to support their policies. In those circumstances, income and gains from the separate account assets would be includible in the variable policyholder's gross income. The IRS has stated in published rulings that a variable policyholder will be considered the owner of separate account assets if the policyholder possesses incidents of ownership in those assets, such as the ability to exercise investment control over the assets. The Treasury Department has also announced, in connection with the issuance of regulations concerning diversification, that those regulations "do not provide guidance concerning the circumstances in which investor control of the investments of a segregated asset account may cause the investor (i.e., the policyholder), rather than the insurance company, to be treated as the owner of the assets in the account." This announcement also stated that guidance would be issued by way of regulations or rulings on the "extent to which policyholders may direct their investments to particular sub-accounts without being treated as owners of the underlying assets". As of the date of this prospectus, no such guidance has been issued. The ownership rights under the Policy are similar to, but different in certain respects from, those described by the IRS in rulings in which it was determined that policyholders were not owners of separate account assets. For example, the policyholder has additional flexibility in allocating premium payments and Policy Values. These differences could result in an owner being treated as the owner of a pro-rata portion of the assets of the Separate Account. In addition, the Company does not know what standards will be set forth, if any, in the regulations or rulings which the Treasury Department has stated it expects to issue. The company therefore reserves the right to modify the Policy as necessary to attempt to prevent an owner from being considered the owner of a pro rata share of the assets of the Separate Account. TAX TREATMENT OF POLICY BENEFITS The following discussion assumes that the Policy will qualify as a life insurance contract for federal income tax purposes. The Company believes that the proceeds and cash value increases of a Policy should be treated in a manner consistent with a fixed-benefit life insurance policy for federal income tax purposes. Depending on the circumstances, the exchange of a Policy, a change in the Policy's death benefit option, a Policy loan, partial withdrawal, surrender, change in ownership, the addition of an accelerated death benefit rider, or an assignment of the Policy may have federal income tax consequences. In addition, federal, state and local transfer, and other tax consequences of ownership or receipt of Policy proceeds depend on the circumstances of each policyholder or beneficiary. DEATH BENEFIT The death benefit under the Policy should be excludable from the gross income of the beneficiary under Section 101(a)(1) of the Code. CASH VALUES Generally, the policyholder will not be deemed to be in constructive receipt of the Policy Value until there is a distribution. This includes additions attributable to interest, dividends, appreciation or gains realized on transfers among sub-accounts. 37 43 INVESTMENT IN THE POLICY Investment in the Policy means: (a) the aggregate amount of any premiums or other consideration paid for a Policy; minus (b) the aggregate amount, other than loan amounts, received under the Policy which has been excluded from the gross income of the policyholder (except that the amount of any loan from, or secured by, a Policy that is a MEC, to the extent such amount has been excluded from gross income, will be disregarded); plus (c) the amount of any loan from, or secured by a Policy that is a MEC to the extent that such amount has been included in the gross income of the policyholder. The repayment of a policy loan, or the payment of interest on a loan, does not affect the Investment in the Policy. SURRENDER OR LAPSE Upon a complete surrender or lapse of a Policy or when benefits are paid at a Policy's maturity date, if the amount received plus the amount of Policy Debt exceeds the total investment in the Policy, the excess will generally be treated as ordinary income subject to tax. If, at the time of lapse, a Policy has a loan, the loan is extinguished and the amount of the loan is a deemed payment to the policyholder. If the amount of this deemed payment exceeds the investment in the contract, the excess is taxable income and is subject to Internal Revenue Service reporting requirements. DISTRIBUTIONS The tax consequences of distributions from, and loans taken from or secured by, a Policy depend on whether the Policy is classified as a "Modified Endowment Contract" or "MEC". DISTRIBUTIONS FROM NON-MEC'S A distribution from a non-MEC is generally treated as a tax-free recovery by the policyholder of the Investment in the Policy to the extent of such Investment in the Policy, and as a distribution of taxable income only to the extent the distribution exceeds the Investment in the Policy. Loans from, or secured by, a non-MEC are not treated as distributions. Instead, such loans are treated as indebtedness of the policyholder. Force Outs An exception to this general rule occurs in the case of a decrease in the Policy's death benefit or any other change that reduces benefits under the Policy in the first 15 years after the Policy is issued and that results in a cash distribution to the policyholder in order for the Policy to continue to comply with the Section 7702 definitional limits. Such a cash distribution will be taxed in whole or in part as ordinary income (to the extent of any gain in the Policy) under rules prescribed in Section 7702. Changes include partial withdrawals and death benefit option changes. DISTRIBUTIONS FROM MEC'S Policies classified as MEC's will be subject to the following tax rules: (a) First, all partial withdrawals from such a Policy are treated as ordinary income subject to tax up to the amount equal to the excess (if any) of the Policy Value immediately before the distribution over the Investment in the Policy at such time. 38 44 (b) Second, loans taken from or secured by such a Policy are treated as partial withdrawals from the Policy and taxed accordingly. Past-due loan interest that is added to the loan amount is treated as a loan. (c) Third, a 10% additional income tax is imposed on the portion of any distribution (including distributions on surrender) from, or loan taken from or secured by, such a policy that is included in income except where the distribution or loan: (i) is made on or after the policyholder attains age 59 1/2; (ii) is attributable to the policyholder becoming disabled; or (iii) is part of a series of substantially equal periodic payments for the life (or life expectancy) of the policyholder or the joint lives (or joint life expectancies) of the policyholder and the policyholder's beneficiary. These exceptions are not likely to apply in situations where the Policy is not owned by an individual. Definition of Modified Endowment Contracts Section 7702A establishes a class of life insurance contracts designated as "Modified Endowment Contracts," which applies to Policies entered into or materially changed after June 20, 1988. In general, a Policy will be a Modified Endowment Contract if the accumulated premiums paid at any time during the first seven policy years exceed the "seven-pay premium limit". The seven-pay premium limit on any date is equal to the sum of the net level premiums that would have been paid on or before such date if the policy provided for paid-up future benefits after the payment of seven level annual premiums (the "seven-pay premium"). The rules relating to whether a Policy will be treated as a MEC are extremely complex and cannot be adequately described in the limited confines of this summary. Therefore, a current or prospective policyholder should consult with a competent adviser to determine whether a transaction will cause the Policy to be treated as a MEC. Material Changes A policy that is not a MEC may become a MEC if it is "materially changed". If there is a material change to the policy, the seven year testing period for MEC status is restarted. The material change rules for determining whether a Policy is a MEC are complex. In general, however, the determination of whether a Policy will be a MEC after a material change generally depends upon the relationship among the death benefit of the Policy at the time of such change, the Policy Value at the time of the change, and the additional premiums paid into the Policy during the seven years starting with the date on which the material change occurs. Reductions in Face Amount If there is a reduction in benefits during the first seven policy years, the seven-pay premium limit is recalculated as if the policy had been originally issued at the reduced benefit level. Failure to comply would result in classification as a MEC regardless of any efforts by the Company to provide a payment schedule that will not violate the seven pay test. Exchanges A life insurance contract received in exchange for a MEC will also be treated as a MEC. Processing of Premiums If a premium is received which would cause the Policy to become a MEC within 23 days of the next Policy Anniversary, the Company will not apply the portion of the premium which would cause MEC status ("excess premium") to the Policy when received. The excess premium will be placed in a suspense account until the next anniversary date, at which point the excess premium, along with interest, earned on 39 45 the excess premium at a rate of 3.5% from the date the premium was received, will be applied to the Policy. The policyholder will be advised of this action and will be offered the opportunity to have the premium credited as of the original date received or to have the premium returned. If the policyholder does not respond, the premium and interest will be applied to the Policy as of the first day of the next anniversary. If a premium is received which would cause the Policy to become a MEC more than 23 days prior to the next Policy Anniversary, the Company will refund any excess premium to the policyholder. The portion of the premium which is not excess will be applied as of the date received. The policyholder will be advised of this action and will be offered the opportunity to return the premium and have it credited to the account as of the original date received. Multiple Policies All MEC's that are issued by a Company (or its affiliates) to the same policyholder during any calendar year are treated as one MEC for purposes of determining the amount includible in gross income under Section 72(e) of the Code. POLICY LOAN INTEREST Generally, personal interest paid on any loan under a Policy which is owned by an individual is not deductible. For policies purchased on or after January 1, 1996, interest on any loan under a Policy owned by a taxpayer and covering the life of any individual who is an officer or employee of or is financially interested in the business carried on by the taxpayer will not be tax deductible unless the employee is a key person within the meaning of Section 264 of the Code. A deduction will not be permitted for interest on a loan under a Policy held on the life of a key person to the extent the aggregate of such loans with respect to contracts covering the key person exceed $50,000. The number of employees who can qualify as key persons depends in part on the size of the employer but cannot exceed 20 individuals. Furthermore, if a non-natural person owns a Policy, or is the direct or indirect beneficiary under a Policy, section 264(f) of the Code disallows a pro-rata portion of the taxpayer's interest expense allocable to unborrowed Policy cash values attributable to insurance held on the lives of individuals who are not 20% (or more) owners of the taxpayer-entity, officers, employees, or former employees of the taxpayer. The portion of the interest expense that is allocable to unborrowed Policy cash values is an amount that bears the same ratio to that interest expense as the taxpayer's average unborrowed Policy cash values under such life insurance policies bear to the average adjusted bases for all assets of the taxpayer. If the taxpayer is not the Policyholder, but is the direct or indirect beneficiary under the Policy, then the amount of unborrowed cash value of the Policy taken into account in computing the portion of the taxpayer's interest expense allocable to unborrowed Policy cash values cannot exceed the benefit to which the taxpayer is directly or indirectly entitled under the Policy. POLICY EXCHANGES A policyholder generally will not recognize gain upon the exchange of a Policy for another life insurance policy issued by the Company or another insurance company, except to the extent that the policyholder receives cash in the exchange or is relieved of Policy indebtedness as a result of the exchange. In no event will the gain recognized exceed the amount by which the Policy Value (including any unpaid loans) exceeds the policyholder's Investment in the Policy. OTHER TRANSACTIONS A transfer of the Policy, a change in the owner, a change in the beneficiary, and certain other changes to the Policy, as well as particular uses of the Policy (including use in a so called "split-dollar" arrangement) may have tax consequences depending upon the particular circumstances and should not be undertaken 40 46 prior to consulting with a qualified tax adviser. For instance, if the owner transfers the Policy or designates a new owner in return for valuable consideration (or, in some cases, if the transferor is relieved of a liability as a result of the transfer), then the Death Benefit payable upon the death of the Insured may in certain circumstances be includible in taxable income to the extent that the Death Benefit exceeds the prior consideration paid for the transfer and any premiums or other amounts subsequently paid by the transferee. Further, in such a case, if the consideration received exceeds the transferor's Investment in the Policy, the difference will be taxed to the transferor as ordinary income. Federal estate and state and local estate, inheritance and other tax consequences of ownership or receipt of Policy proceeds depend on the individual circumstances of each policyholder and beneficiary. ALTERNATE MINIMUM TAX Corporate owners may be subject to Alternate Minimum Tax on the annual increases in Cash Surrender Values and on the Death Benefit proceeds. INCOME TAX REPORTING In certain employer-sponsored life insurance arrangements, including equity split dollar arrangements, participants may be required to report for income tax purposes, one or more of the following: (a) the value each year of the life insurance protection provided; (b) an amount equal to any employer-paid premiums; or (c) some or all of the amount by which the current value exceeds the employer's interest in the Policy. Participants should consult with their tax adviser to determine the tax consequences of these arrangements. OTHER INFORMATION PAYMENT OF PROCEEDS As long as the Policy is in force, Manufacturers Life of America will ordinarily pay any policy loans, surrenders, partial withdrawals or insurance benefit within seven days after receipt at its Service Office of all the documents required for such a payment. The Company may delay the payment of any policy loans, surrenders, partial withdrawals, or insurance benefit that depends on Guaranteed Interest Account values for up to six months or in the case of any Investment Account for any period during which (i) the New York Stock Exchange is closed for trading (except for normal weekend and holiday closings), (ii) trading on the New York Stock Exchange is restricted (iii) an emergency exists as a result of which disposal of securities held in the Separate Account is not reasonably practicable or it is not reasonably practicable to determine the value of the Separate Account's net assets or (iv) the SEC, by order, so permits for the protection of security holders; provided that applicable rules and regulations of the SEC shall govern as to whether the conditions described in (2) and (3) exist. REPORTS TO POLICYHOLDERS Within 30 days after each Policy Anniversary, Manufacturers Life of America will send the policyholder a statement showing, among other things: - - the amount of death benefit; - - the Policy Value and its allocation among the Investment Accounts, the Guaranteed Interest Account and the Loan Account; - - the value of the units in each Investment Account to which the Policy Value is allocated; - - the Policy Debt and any loan interest charged since the last report; - - the premiums paid and other Policy transactions made during the period since the last report; and 41 47 - - any other information required by law. Each policyholder will also be sent an annual and a semi-annual report for the Trust which will include a list of the securities held in each Portfolio as required by the 1940 Act. DISTRIBUTION OF THE POLICIES ManEquity, Inc., an indirect wholly-owned subsidiary of Manufacturers Life, will act as the principal underwriter of, and continuously offer, the Policies pursuant to a Distribution Agreement with Manufacturers Life of America. ManEquity, Inc. is registered as a broker-dealer under the Securities Exchange Act of 1934 and is a member of the National Association of Securities Dealers. ManEquity, Inc. is located at 200 Bloor Street East, Toronto, Ontario, Canada, M4W 1E5 and was organized under the laws of Colorado on May 4, 1970. The directors of ManEquity, Inc. are: John Richardson, Roy Bubbs, Bruce Gordon, Gary Buchanan and Douglas Myers. The officers of ManEquity, Inc. are: (i) Douglas Myers - President, (ii) Gary Buchanan - Vice President, Compliance, (iii) Thomas Reives - Treasurer, (iv) Brian Buckley - Secretary and General Counsel. The principal business address of each director and officer of ManEquity, Inc., except Brian Buckley, is Manulife Financial, 200 Bloor Street East, Toronto, Ontario, Canada, M4W 1E5. The principal business address of Brian Buckley is Manulife Financial, 73 Tremont Street, Boston, MA 02108. The Policies will be sold by registered representatives of either ManEquity or other broker-dealers having distribution agreements with ManEquity who are also authorized by state insurance departments to do so. A registered representative will receive commissions not to exceed 15% of premiums paid up to the Target Premium, and 2.5% of premiums paid in excess of the Target Premium in Policy Years 1 through 5, commissions of 2.5% of premiums paid in Policy Years 6 and later, and after the fifth anniversary 0.20% of the Policy Value per year. In addition representatives may be eligible for an additional commission of $100 per Policy per year. Representatives who meet certain productivity standards with regard to the sale of the Policies and certain other policies issued by Manufacturers Life of America or Manufacturers Life will be eligible for additional compensation. RESPONSIBILITIES OF MANUFACTURERS LIFE Manufacturers Life and Manufacturers USA have entered into an agreement with ManEquity, Inc. pursuant to which Manufacturers Life or Manufacturers USA, on behalf of ManEquity, Inc. will pay the sales commissions in respect of the Policies and certain other policies issued by Manufacturers Life of America, prepare and maintain all books and records required to be prepared and maintained by ManEquity, Inc. with respect to the policies and such other policies, and send all confirmations required to be sent by ManEquity, Inc. with respect to the Policies and such other policies. ManEquity, Inc. will promptly reimburse Manufacturers Life or Manufacturers USA for all sales commissions paid by Manufacturers Life or Manufacturers USA and will pay Manufacturers Life or Manufacturers USA for its other services under the agreement in such amounts and at such times as agreed to by the parties. Manufacturers Life and Manufacturers USA have also entered into a Service Agreement with Manufacturers Life of America pursuant to which Manufacturers Life and Manufacturers USA will provide to Manufacturers Life of America all issue, administrative, general services and recordkeeping functions on behalf of Manufacturers Life of America with respect to all of its insurance policies including the Policies. Finally, Manufacturers USA has entered into a Stoploss Reinsurance Agreement with Manufacturers Life of America under which Manufacturers Life (or Manufacturers USA) reinsures all aggregate claims in excess of 110% of the expected claims for all flexible premium variable life insurance policies issued by Manufacturers Life of America. Under the agreement, Manufacturers USA will automatically reinsure the risk for any one life up to a maximum of $7,500,000, except in the case of aviation risks where the maximum will be $5,000,000. However, Manufacturers USA may also consider reinsuring any non-aviation risk in excess of $7,500,000 and any aviation risk in excess of $5,000,000. 42 48 VOTING RIGHTS As stated previously, all of the assets held in the sub-accounts of the Separate Account will be invested in shares of a particular Portfolio of the Trust. Manufacturers Life of America is the legal owner of those shares and as such has the right to vote upon certain matters that are required by the 1940 Act to be approved or ratified by the shareholders of a mutual fund and to vote upon any other matters that may be voted upon at a shareholders' meeting. However, Manufacturers Life of America will vote shares held in the sub-accounts in accordance with instructions received from policyholders having an interest in such sub-accounts. Shares held in each sub-account for which no timely instructions from policyholders are received, including shares not attributable to the Policies, will be voted by Manufacturers Life of America in the same proportion as those shares in that sub-account for which instructions are received. Should the applicable federal securities laws or regulations change so as to permit Manufacturers Life of America to vote shares held in the Separate Account in its own right, it may elect to do so. The number of shares in each sub-account for which instructions may be given by a policyholder is determined by dividing the portion of the Policy Value derived from participation in that sub-account, if any, by the value of one share of the corresponding Portfolio. The number will be determined as of a date chosen by Manufacturers Life of America, but not more than 90 days before the shareholders' meeting. Fractional votes are counted. Voting instructions will be solicited in writing at least 14 days prior to the meeting. Manufacturers Life of America may, if required by state officials, disregard voting instructions if such instructions would require shares to be voted so as to cause a change in the sub-classification or investment policies of one or more of the Portfolios, or to approve or disapprove an investment management contract. In addition, the Company itself may disregard voting instructions that would require changes in the investment policies or investment adviser, provided that Manufacturers Life of America reasonably disapproves such changes in accordance with applicable federal regulations. If Manufacturers Life of America does disregard voting instructions, it will advise policyholders of that action and its reasons for such action in the next communication to policyholders. SUBSTITUTION OF PORTFOLIO SHARES It is possible that in the judgment of the management of Manufacturers Life of America, one or more of the Portfolios may become unsuitable for investment by the Separate Account because of a change in investment policy or a change in the applicable laws or regulation, because the shares are no longer available for investment, or for some other reason. In that event, Manufacturers Life of America may seek to substitute the shares of another Portfolio or of an entirely different mutual fund. Before this can be done, the approval of the S.E.C. and one or more state insurance departments may be required. Manufacturers Life of America also reserves the right (i) to combine other separate accounts with the Separate Account, (ii) to create new separate accounts, (iii) to establish additional sub-accounts within the Separate Account to invest in additional portfolios of the Trust or another management investment company, (iv) to eliminate existing sub-accounts and to stop accepting new allocations and transfers into the corresponding portfolio, (v) to combine sub-accounts or to transfer assets in one sub-account to another sub-account or (vi) to transfer assets from the Separate Account to another separate account and from another separate account to the Separate Account. The Company also reserves the right to operate the Separate Account as a management investment company or other form permitted by law, and to de-register the Separate Account under the 1940 Act. Any such change would be made only if permissible under applicable federal and state law. RECORDS AND ACCOUNTS McCamish Systems, L.L.C., 6425 Powers Ferry Road, Atlanta, Georgia 30339, will act as a Transfer Agent on behalf of Manufacturers Life of America as it relates to the Policies described in this Prospectus. 43 49 In the role of a Transfer Agent, McCamish Systems will perform administrative functions, such as decreases, increases, surrenders and partial withdrawals, fund transfers on behalf of the Company. All records and accounts relating to the Separate Account and the Portfolios will be maintained by the Company. All financial transactions will be handled by the Company. All reports required to be made and information required to be given will be provided by McCamish Systems on behalf of the Company. STATE REGULATIONS Manufacturers Life of America is subject to the regulation and supervision by the Michigan Department of Insurance, which periodically examines its financial condition and operations. It is also subject to the insurance laws and regulations of all jurisdictions in which it is authorized to do business. The Policies have been filed with insurance officials, and meet all standards set by law, in each jurisdiction where they are sold. Manufacturers Life of America is required to submit annual statements of its operations, including financial statements, to the insurance departments of the various jurisdictions in which it does business for the purposes of determining solvency and compliance with local insurance laws and regulations. LITIGATION No litigation is pending that would have a material effect upon the Separate Account or the Trust. EXPERTS The financial statements of The Manufacturers Life Insurance Company of America and Separate Account Four of The Manufacturers Life Insurance Company of America at December 31, 1997 and for the three years then ended appearing in this prospectus have been audited by Ernst & Young LLP, independent auditors, to the extent indicated in their reports thereon also appearing elsewhere herein. Such financial statements have been included herein in reliance upon such reports given upon the authority of such firm as experts in auditing and accounting. FURTHER INFORMATION A registration statement under the Securities Act of 1933 has been filed with the S.E.C. relating to the offering described in this prospectus. This prospectus does not include all the information set forth in the registration statement. The omitted information may be obtained from the S.E.C.'s principal office in Washington D.C. upon payment of the prescribed fee. The Commission also maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission which is located at http://www.sec.gov. For further information you may also contact Manufacturers Life of America's Home Office, the address and telephone number of which are on the first page of the prospectus.
OFFICERS AND DIRECTORS Position with Manufacturers Life Name of America Principal Occupation Sandra M. Cotter (35) Director Attorney at Dykema Gosset - 1989 - present (since December 1992) James D. Gallagher (43) Director, Secretary and Vice President, Secretary and General Counsel - General Counsel (since May January 1997- present, ManUSA; Vice President, 1996) Legal Services U.S. Operations - January 1996 - present, The Manufacturers Life Insurance Company; Vice President, Secretary and General Counsel - 1994 - present, The Manufacturers Life Insurance Company of North America; Vice President and Associate
44 50 General Counsel - 1991 - 1994, The Prudential Insurance Company of America Bruce Gordon (54) Director Vice President, U.S. Operations - Pensions - (since May 1996) 1990 - present, The Manufacturers Life Insurance Company Donald A. Guloien (41) Director and President Senior Vice President, Business Development - (since August 1990) 1994 - present, The Manufacturers Life Insurance Company; Vice President, U.S. Individual Business - 1990 - 1994, The Manufacturers Life Insurance Company Theodore Kilkuskie, Jr. (42) Director, Vice President U.S. Vice President, U.S. Individual Insurance - Individual Insurance January 1997 - present, ManUSA; Vice President, U.S. Individual Insurance June 1995 - present, The Manufacturers Life Insurance Company; Executive Vice President, Mutual Funds - January 1995 - May 1995, State Street Research, Vice President, Mutual Funds - 1987 - 1994, Metropolitan Life Insurance Company Joseph J. Pietroski (59) Director (since July 1992) Senior Vice President, General Counsel and Corporate Secretary - 1988 - present, The Manufacturers Life Insurance Company John D. Richardson (60) Chairman and Director Executive Vice President and General Manager, (since January 1995) U.S. Operations - 1995 - present, The Manufacturers Life Insurance Company; Senior Vice President and General Manager, Canadian Operations 1992 - 1994. John R. Ostler (45) Vice President Financial Vice President - 1992 - present, The and Treasurer Manufacturers Life Insurance Company. Douglas H. Myers (43) Vice President, Finance and Assistant Vice President and Controller, U.S. Compliance Controller Operations - 1988 - present, The Manufacturers Life Insurance Company Victor Apps (49) Senior Vice President, Asia Senior Vice President and General Manager, Greater China Division - 1995 - present, The Manufacturers Life Insurance Company; Vice President and General Manager, Greater China Division - 1993 - 1995, The Manufacturers Life Insurance Company; International Vice President - 1988 - 1993, Asia Pacific Division, The Manufacturers Life Insurance Company. Robert A. Cook (43) Vice President, Marketing Vice President, Product Management - 1996 - present, The Manufacturers Life Insurance Company; Sales and Marketing Director, U.S. Division - 1994 - 1995, The Manufacturers Life Insurance Company; Vice President, Corporation Strategic Review - 1992 - 1993, The Manufacturers Life Insurance Company Felix Chee (51) Vice President, Investments Executive Vice President--1997 to present, The Manufacturers Life Insurance Company; Chief Investment Officer--1997 to present, The Manufacturers Life Insurance Company; Senior Vice President and Treasurer--1993-1994, The Manufacturers Life Insurance Company; Senior Vice President, Corporate Finance--April 1993 to September 1993, Ontario Hydro Hugh C. McHaffie (39) Vice President Vice President, U.S. Annuities and Product Development--1996 to present, The Manufacturers Life Insurance Company; Vice President U.S. Annuities and Development--1994 to present, The Manufacturers Life Insurance Company of North America; Product Development Executive--1990 to 1994, The Manufacturers Life Insurance Company of North America
45 51 John G. Vrysen (42) Vice President, Appointed Vice President and Chief Financial Officer, Actuary U.S. Operations--1996 to present, The Manufacturers Life Insurance Company; Vice President and Chief Actuary--1996 to present, The Manufacturers Life Insurance Company of North America; Vice President and Chief Actuary, The Manufacturers Life Insurance Company of North America--1986 to present.
46 52 IMPACT OF YEAR 2000 Preparing computer systems to deal with the Year 2000 risk has become a major issue for businesses throughout the world. Within Manufacturers Life, a group-wide program has been underway since 1996 to make all critical systems compliant by the end of 1998 and other systems compliant by the end of 1999. Included in this program are all system applicable to and shared by the Company with Manufacturers Life. Based on a detailed assessment, Manufacturers Life determined that a portion of its software needs to be modified or replaced so that its computer systems will function properly into the Year 2000 and beyond. Like most companies, the Year 2000 issue represents a significant challenge for Manufacturers Life and extensive resources have been dedicated to modifying existing software and to converting to new software. However, there can be no assurances that Manufacturers Life's systems, nor those of other companies on which Manufacturers Life relies, will be fully converted on a timely basis and therefore that all adverse effect on the Company due to the Year 2000 risk will be avoided. Manufacturers Life is presently consulting with vendors, customers, subsidiaries, third-parties and other businesses with which it deals to ensure that no material aspect of its, or the Company's, operations will be hindered by the Year 2000 risk. The costs of the project and the date on which Manufacturers Life plans to complete the modifications are based on management's best estimates and are subject to some uncertainty. Manufacturers Life is using both internal and external resources to reprogram, or replace, and test the software for Year 2000 modifications. The total cost of this program to Manufacturers Life is estimated to be $64 million, comprised of $55 million for specifically budgeted programs and $9 million for general contingencies. Manufacturers Life has incurred $15 million as at December 31, 1997 of which the Company will receive an allocation due to its shared systems. The costs allocated are not expected to have a material effect on the net operating income of the Company. DEATH BENEFIT SCHEDULE WITH FLEXIBLE TERM INSURANCE OPTION A Policy can be issued with a schedule of death benefits which may vary by Policy Year. The entire schedule is called the Death Benefit Schedule. The Death Benefit Schedule will provide flexible term insurance to age 100. The amount of death benefit shown in the Death Benefit Schedule for any Policy Year is called the Scheduled Annual Death Benefit for that Policy Year. Any amount of Scheduled Annual Death Benefit over and above the death benefit provided by the Policy will be provided by Flexible Term Insurance (the "Rider"). The combined death benefit of the Policy and Rider may be the Scheduled Annual Death Benefit alone (similar to Death Benefit Option 1), or the Scheduled Annual Death Benefit plus the Policy Value (similar to Death Benefit Option 2). A Policy may be combined with the Rider to result in an initial Scheduled Annual Death Benefit equal to the same Face Amount that could be acquired under the Policy alone. Depending upon the amount of premium paid into the Policy, combining the Policy and the Rider may result in a surrender charge for the Policy that is lower than the surrender charge provided under the Policy alone. In addition, current cost of insurance rates for the Rider are less than those for the Policy in the first fifteen Policy years, but greater than the rates for the Policy in Policy Year 16 and later. A policyholder may, upon written request, change the Death Benefit Schedule. A written request for a change which results in a decrease to the Scheduled Annual Death Benefit must be received at least 30 days prior to the first day of a policy month for the change to take effect as of that policy month. A written request for a change which results in an increase to the Scheduled Annual Death Benefit in any Policy Year will take effect at the beginning of the month following the date the Company approves the request. Increases in the Death Benefit Schedule are subject to evidence of insurability satisfactory to the Company, A requested decrease in the Schedule will require a decrease in the Policy's Face Amount if the new Death Benefit Schedule in any year is less than the Face Amount. In this case, the Face Amount will be reduced to the Scheduled Annual Death Benefit. If a decrease in Face Amount is required, 47 53 Surrender Charges will be assessed as provided under "Decrease in Face Amount - Surrender Charges Assessed on a Decrease". If the policyholder changes the Death Benefit Option of the Policy from Death Benefit Option 2 to Death Benefit Option 1 and if the Face Amount of the Policy after the change would be greater than the Scheduled Annual Death Benefit in effect at the time of the change, then the Face Amount after the change will be equal to the Scheduled Annual Death Benefit. If the Face Amount of the Policy is increased then the Scheduled Annual Death Benefit for all Policy Years after and including the effective date of the change will be increased by the same amount. If the Face Amount of the Policy is decreased then the Scheduled Annual Death Benefit for all Policy Years after and including the effective date of the change will be decreased by the same amount. This provision does not apply to increases or decreases in Face Amount due to a change in the Death Benefit Option. If in any Policy Year, the Face Amount is greater than the Scheduled Annual Death Benefit for that Policy Year, the Face Amount will be reduced to be equal to the Scheduled Annual Death Benefit. If the Face Amount is decreased, Surrender Charges will be assessed as provided under "Decrease in Face Amount - Surrender Charged Assessed on a Decrease." Year to year changes within the Death Benefit Schedule, as well as a change in the Death Benefit Schedule itself, may also have an effect on the maximum amount of premium that a policyholder may pay into a Policy. The Company will inform you of any such change. The Company reserves the right to limit a change in the Death Benefit Schedule so as to prevent the Policy from failing to qualify as life insurance for tax purposes. The Rider is subject to the same Incontestability, Misstatement of Age or Sex, and Suicide Exclusion provisions as the Policy. The Rider terminates on the termination date of the Policy. The policyholder may, however, terminate the Rider prior to the termination date of the Policy by sending the Company a written request to terminate the Rider. The Rider will then terminate at the end of the month in which the Company receives the request. ILLUSTRATIONS The following tables illustrate the way in which a Policy's Death Benefit, Policy Value, and Cash Surrender Value could vary over an extended period of time. ASSUMPTIONS - - Hypothetical gross annual investment returns for the Portfolios (i.e., investment income and capital gains and losses, realized or unrealized) equivalent to constant gross annual rates of 0%, 6%, and 12% over the periods indicated. - - An Insured who is a male, Issue Age 45, non-smoker. - - A Face Amount of $365,000 in all Policy Years. - - Payment of an annual premium of $20,000 each year for the first seven Policy Years. - - Premiums are paid on the Policy Anniversary. All Premiums are allocated to and remain in the Variable Account for the entire period shown. - - There are no transfers, partial withdrawals, or policy loans. - - Tables 1, 2, and 3 assume regular underwriting. Tables 4, 5, and 6 assume short form underwriting. - - The Cash Value Accumulation Test is used. - - The illustrations assume all charges currently assessed against the Policy, including monthly cost of insurance charges and administrative charges and mortality and expense risk charges. The first set of columns in each table, under the heading "Current Charges", assumes cost of insurance rates 48 54 currently expected to be charged. The second set of columns, under the heading "Guaranteed Charges", assumes maximum cost of insurance rates. - - The amounts shown in the Tables also take into account the Portfolios' advisory fees and operating expenses, which are assumed to be at an annual rate of 0.954% of the average daily net assets of the portfolio. The Death Benefits, Policy Values, and Cash Surrender Values would be different from those shown if the returns averaged 0%, 6%, and 12%, but fluctuated over and under those averages throughout the years. The values would also be different depending on the allocation of a Policy's total Policy Value among the sub-accounts, if the actual rates of return averaged 0%, 6%, or 12%, but the rates of each Portfolio varied above and below such averages. The gross annual rates of returns correspond to net annual rates of return according to the table below: Gross Rate of Return Policy Year 0.00% 6.00% 12.00% Net Rate 1-10 -1.692% 4.206% 10.105% of Return 11+ -1.346% 4.574% 10.493% Current cost of insurance charges are not guaranteed and may be changed. Upon request, Manufacturers Life of America will furnish a comparable illustration based on the proposed life insured's Issue Age, sex and risk class, any additional ratings and the death benefit option, Face Amount, Death Benefit Schedule (if applicable), and planned premium requested. Illustrations for smokers would show less favorable results than the illustration shown in this prospectus. From time to time, in advertisements or sales literature for the Policies that quote performance data of one or more of the Portfolios, the Company may include cash surrender values and death benefit figures computed or using the same methodology as that used in the following illustrations, but with the average annual total return of the Portfolio for which performance data is shown in the advertisement replacing the hypothetical rates of return shown in the following tables. The Policies were first sold to the public on [ ]. However, total return data may be advertised for as long a period of time as the underlying Portfolio has been in existence. The results for any period prior to the Policies being offered would be calculated as if the Policies had been offered during that period of time, with all charges assumed to be the same as for the first full year the Policies were offered. 49 55
Table 1 Regular Underwriting Hypothetical Gross Investment Return of 0.00% Current Charges -------------------------------------------------------------------------------- Premiums Policy Plus Less Less Plus Policy Net Cash Death Policy Annual Accum Value Net Admin Cost of Invest Value Sur Surrender Benefit Year Premium at 5% Beg Yr Premium Fees Ins Earnings End Yr Charges Value End Yr 1 20,000 21,000 0 19,600 144 732 -324 18,400 2,000 16,400 365,000 2 20,000 43,050 18,400 19,600 144 980 -633 36,243 3,000 33,243 365,000 3 20,000 66,203 36,243 19,600 144 1,198 -933 53,569 3,000 50,569 365,000 4 20,000 90,513 53,569 19,600 144 1,285 -1,225 70,514 4,000 66,514 365,000 5 20,000 116,038 70,514 19,600 144 1,320 -1,512 87,138 5,000 82,138 365,000 6 20,000 142,840 87,138 19,600 144 1,381 -1,792 103,421 5,000 98,421 365,000 7 20,000 170,982 103,421 19,600 144 1,432 -2,068 119,378 4,000 115,378 365,000 8 0 179,531 119,378 0 144 1,598 -2,004 115,631 3,000 112,631 365,000 9 0 188,508 115,631 0 144 1,794 -1,939 111,754 2,000 109,754 365,000 10 0 197,933 111,754 0 144 2,035 -1,871 107,704 0 107,704 365,000 11 0 207,830 107,704 0 144 2,082 -1,433 104,045 0 104,045 365,000 12 0 218,221 104,045 0 144 2,089 -1,384 100,427 0 100,427 365,000 13 0 229,132 100,427 0 144 2,042 -1,336 96,906 0 96,906 365,000 14 0 240,589 96,906 0 144 1,859 -1,289 93,614 0 93,614 365,000 15 0 252,619 93,614 0 144 1,518 -1,248 90,704 0 90,704 365,000 16 0 265,249 90,704 0 144 1,680 -1,207 87,673 0 87,673 365,000 17 0 278,512 87,673 0 144 1,855 -1,165 84,508 0 84,508 365,000 18 0 292,438 84,508 0 144 2,049 -1,121 81,194 0 81,194 365,000 19 0 307,059 81,194 0 144 2,248 -1,075 77,727 0 77,727 365,000 20 0 322,412 77,727 0 144 2,455 -1,027 74,101 0 74,101 365,000 25 0 411,489 57,002 0 144 4,371 -734 51,752 0 51,752 365,000 30 0 525,176 24,565 0 144 8,479 -268 15,675 0 15,675 365,000 Guaranteed Charges -------------------------------------------------------------------------------- Policy Plus Less Less Plus Policy Net Cash Death Policy Value Net Admin Cost of Invest Value Sur Surrender Benefit Year Beg Yr Premium Fees Ins Earnings End Yr Charges Value End Yr 1 0 19,600 144 1,570 -316 17,570 2,000 15,570 365,000 2 17,570 19,600 144 1,612 -613 34,800 3,000 31,800 365,000 3 34,800 19,600 144 1,653 -904 51,700 3,000 48,700 365,000 4 51,700 19,600 144 1,687 -1,190 68,279 4,000 64,279 365,000 5 68,279 19,600 144 1,723 -1,470 84,542 5,000 79,542 365,000 6 84,542 19,600 144 1,753 -1,745 100,499 5,000 95,499 365,000 7 100,499 19,600 144 1,792 -2,015 116,148 4,000 112,148 365,000 8 116,148 0 144 1,986 -1,946 112,072 3,000 109,072 365,000 9 112,072 0 144 2,210 -1,875 107,843 2,000 105,843 365,000 10 107,843 0 144 2,466 -1,801 103,432 0 103,432 365,000 11 103,432 0 144 2,747 -1,371 99,170 0 99,170 365,000 12 99,170 0 144 3,057 -1,311 94,658 0 94,658 365,000 13 94,658 0 144 3,389 -1,248 89,877 0 89,877 365,000 14 89,877 0 144 3,755 -1,181 84,797 0 84,797 365,000 15 84,797 0 144 4,158 -1,110 79,386 0 79,386 365,000 16 79,386 0 144 4,616 -1,034 73,592 0 73,592 365,000 17 73,592 0 144 5,140 -952 67,356 0 67,356 365,000 18 67,356 0 144 5,748 -864 60,600 0 60,600 365,000 19 60,600 0 144 6,457 -767 53,231 0 53,231 365,000 20 53,231 0 144 7,272 -662 45,153 0 45,153 365,000 25 3,597 0 48 3,544 -5 0 0 0 0 30 0 0 0 0 0 0 0 0 0 - - THE POLICY VALUE, CASH SURRENDER VALUE, AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. - - IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYHOLDER, AND THE INVESTMENT RETURN FOR THE PORTFOLIOS OF MANUFACTURERS INVESTMENT TRUST. - - THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. - - NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
56
Table 2 Regular Underwriting Hypothetical Gross Investment Return of 6.00% Current Charges -------------------------------------------------------------------------------- Premiums Policy Plus Less Less Plus Policy Net Cash Death Policy Annual Accum Value Net Admin Cost of Invest Value Sur Surrender Benefit Year Premium at 5% Beg Yr Premium Fees Ins Earnings End Yr Charges Value End Yr 1 20,000 21,000 0 19,600 144 731 805 19,529 2,000 17,529 365,000 2 20,000 43,050 19,529 19,600 144 973 1,621 39,633 3,000 36,633 365,000 3 20,000 66,203 39,633 19,600 144 1,179 2,462 60,372 3,000 57,372 365,000 4 20,000 90,513 60,372 19,600 144 1,246 3,332 81,914 4,000 77,914 365,000 5 20,000 116,038 81,914 19,600 144 1,253 4,238 104,355 5,000 99,355 365,000 6 20,000 142,840 104,355 19,600 144 1,272 5,182 127,722 5,000 122,722 365,000 7 20,000 170,982 127,722 19,600 144 1,273 6,165 152,070 4,000 148,070 372,571 8 0 179,531 152,070 0 144 1,370 6,362 156,918 3,000 153,918 373,464 9 0 188,508 156,918 0 144 1,486 6,564 161,851 2,000 159,851 375,495 10 0 197,933 161,851 0 144 1,620 6,768 166,855 0 166,855 375,424 11 0 207,830 166,855 0 144 1,598 7,589 172,702 0 172,702 378,218 12 0 218,221 172,702 0 144 1,547 7,857 178,869 0 178,869 380,991 13 0 229,132 178,869 0 144 1,457 8,142 185,410 0 185,410 383,798 14 0 240,589 185,410 0 144 1,288 8,445 192,423 0 192,423 388,694 15 0 252,619 192,423 0 144 1,030 8,772 200,020 0 200,020 394,040 16 0 265,249 200,020 0 144 1,111 9,118 207,883 0 207,883 399,136 17 0 278,512 207,883 0 144 1,195 9,475 216,020 0 216,020 403,957 18 0 292,438 216,020 0 144 1,284 9,845 224,437 0 224,437 408,475 19 0 307,059 224,437 0 144 1,389 10,228 233,132 0 233,132 414,974 20 0 322,412 233,132 0 144 1,499 10,623 242,112 0 242,112 421,274 25 0 411,489 280,777 0 144 2,308 12,782 291,106 0 291,106 451,215 30 0 525,176 334,652 0 144 3,682 15,213 346,038 0 346,038 487,914 Guaranteed Charges -------------------------------------------------------------------------------- Policy Plus Less Less Plus Policy Net Cash Death Policy Value Net Admin Cost of Invest Value Sur Surrender Benefit Year Beg Yr Premium Fees Ins Earnings End Yr Charges Value End Yr 1 0 19,600 144 1,568 786 18,674 2,000 16,674 365,000 2 18,674 19,600 144 1,602 1,570 38,098 3,000 35,098 365,000 3 38,098 19,600 144 1,627 2,387 58,314 3,000 55,314 365,000 4 58,314 19,600 144 1,637 3,237 79,370 4,000 75,370 365,000 5 79,370 19,600 144 1,638 4,123 101,310 5,000 96,310 365,000 6 101,310 19,600 144 1,620 5,046 124,193 5,000 119,193 365,000 7 124,193 19,600 144 1,592 6,009 148,066 4,000 144,066 365,000 8 148,066 0 144 1,702 6,186 152,406 3,000 149,406 365,000 9 152,406 0 144 1,824 6,366 156,805 2,000 154,805 365,000 10 156,805 0 144 1,960 6,548 161,249 0 161,249 365,000 11 161,249 0 144 2,097 7,320 166,328 0 166,328 365,000 12 166,328 0 144 2,236 7,549 171,496 0 171,496 365,287 13 171,496 0 144 2,372 7,782 176,762 0 176,762 365,897 14 176,762 0 144 2,513 8,019 182,124 0 182,124 367,891 15 182,124 0 144 2,658 8,261 187,583 0 187,583 369,539 16 187,583 0 144 2,815 8,507 193,132 0 193,132 370,813 17 193,132 0 144 2,981 8,757 198,764 0 198,764 371,688 18 198,764 0 144 3,158 9,010 204,472 0 204,472 372,138 19 204,472 0 144 3,379 9,266 210,215 0 210,215 374,183 20 210,215 0 144 3,616 9,523 215,977 0 215,977 375,800 25 239,240 0 144 4,768 10,822 245,149 0 245,149 379,982 30 268,399 0 144 6,391 12,116 273,979 0 273,979 386,311 - - THE POLICY VALUE, CASH SURRENDER VALUE, AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. - - IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYHOLDER, AND THE INVESTMENT RETURN FOR THE PORTFOLIOS OF MANUFACTURERS INVESTMENT TRUST. - - THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. - - NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
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Table 3 Regular Underwriting Hypothetical Gross Investment Return of 12.00% Current Charges -------------------------------------------------------------------------------------- Premiums Policy Plus Less Less Plus Policy Net Cash Death Policy Annual Accum Value Net Admin Cost of Invest Value Sur Surrender Benefit Year Premium at 5% Beg Yr Premium Fees Ins Earnings End Yr Charges Value End Yr 1 20,000 21,000 0 19,600 144 730 1,933 20,659 2,000 18,659 365,000 2 20,000 43,050 20,659 19,600 144 967 4,008 43,157 3,000 40,157 365,000 3 20,000 66,203 43,157 19,600 144 1,158 6,271 67,726 3,000 64,726 365,000 4 20,000 90,513 67,726 19,600 144 1,203 8,751 94,730 4,000 90,730 365,000 5 20,000 116,038 94,730 19,600 144 1,176 11,482 124,492 5,000 119,492 365,000 6 20,000 142,840 124,492 19,600 144 1,188 14,489 157,250 5,000 152,250 397,842 7 20,000 170,982 157,250 19,600 144 1,357 17,790 193,140 4,000 189,140 473,192 8 0 179,531 193,140 0 144 1,479 19,430 210,946 3,000 207,946 502,053 9 0 188,508 210,946 0 144 1,619 21,222 230,405 2,000 228,405 534,540 10 0 197,933 230,405 0 144 1,769 23,180 251,672 0 251,672 566,262 11 0 207,830 251,672 0 144 1,785 26,301 276,044 0 276,044 604,537 12 0 218,221 276,044 0 144 1,783 28,859 302,976 0 302,976 645,339 13 0 229,132 302,976 0 144 1,766 31,686 332,752 0 332,752 688,796 14 0 240,589 332,752 0 144 1,701 34,814 365,721 0 365,721 738,756 15 0 252,619 365,721 0 144 1,617 38,279 402,238 0 402,238 792,409 16 0 265,249 402,238 0 144 1,940 42,093 442,247 0 442,247 849,115 17 0 278,512 442,247 0 144 2,318 46,270 486,056 0 486,056 908,925 18 0 292,438 486,056 0 144 2,762 50,843 533,993 0 533,993 971,866 19 0 307,059 533,993 0 144 3,315 55,842 586,376 0 586,376 1,043,749 20 0 322,412 586,376 0 144 3,954 61,304 643,582 0 643,582 1,119,832 25 0 411,489 930,031 0 144 8,221 97,129 1,018,795 0 1,018,795 1,579,133 30 0 525,176 1,459,981 0 144 16,745 152,268 1,595,360 0 1,595,360 2,249,458 Guaranteed Charges -------------------------------------------------------------------------------------- Policy Plus Less Less Plus Policy Net Cash Death Policy Value Net Admin Cost of Invest Value Sur Surrender Benefit Year Beg Yr Premium Fees Ins Earnings End Yr Charges Value End Yr 1 0 19,600 144 1,566 1,888 19,779 2,000 17,779 365,000 2 19,779 19,600 144 1,591 3,886 41,529 3,000 38,529 365,000 3 41,529 19,600 144 1,600 6,083 65,468 3,000 62,468 365,000 4 65,468 19,600 144 1,582 8,503 91,844 4,000 87,844 365,000 5 91,844 19,600 144 1,541 11,170 120,930 5,000 115,930 365,000 6 120,930 19,600 144 1,505 14,112 152,994 5,000 147,994 387,074 7 152,994 19,600 144 1,889 17,332 187,893 4,000 183,893 460,337 8 187,893 0 144 2,134 18,865 204,480 3,000 201,480 486,663 9 204,480 0 144 2,430 20,526 222,432 2,000 220,432 516,043 10 222,432 0 144 2,746 22,323 241,865 0 241,865 544,197 11 241,865 0 144 3,118 25,199 263,803 0 263,803 577,729 12 263,803 0 144 3,533 27,478 287,604 0 287,604 612,597 13 287,604 0 144 3,974 29,952 313,438 0 313,438 648,817 14 313,438 0 144 4,491 32,634 341,437 0 341,437 689,703 15 341,437 0 144 5,054 35,541 371,780 0 371,780 732,407 16 371,780 0 144 5,680 38,690 404,646 0 404,646 776,921 17 404,646 0 144 6,374 42,101 440,228 0 440,228 823,227 18 440,228 0 144 7,148 45,792 478,728 0 478,728 871,284 19 478,728 0 144 8,111 49,778 520,251 0 520,251 926,047 20 520,251 0 144 9,183 54,076 565,000 0 565,000 983,100 25 781,355 0 144 15,979 81,099 846,331 0 846,331 1,311,813 30 1,156,814 0 144 28,264 119,817 1,248,223 0 1,248,223 1,759,995 - - THE POLICY VALUE, CASH SURRENDER VALUE, AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. - - IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYHOLDER, AND THE INVESTMENT RETURN FOR THE PORTFOLIOS OF MANUFACTURERS INVESTMENT TRUST. - - THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. - - NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
58
Table 4 Short Form Issue Hypothetical Gross Investment Return of 0.00% Current Charges -------------------------------------------------------------------------------- Premiums Policy Plus Less Less Plus Policy Net Cash Death Policy Annual Accum Value Net Admin Cost of Invest Value Sur Surrender Benefit Year Premium at 5% Beg Yr Premium Fees Ins Earnings End Yr Charges Value End Yr 1 20,000 21,000 0 19,600 144 840 -323 18,293 2,000 16,293 365,000 2 20,000 43,050 18,293 19,600 144 1,023 -631 36,095 3,000 33,095 365,000 3 20,000 66,203 36,095 19,600 144 1,236 -930 53,386 3,000 50,386 365,000 4 20,000 90,513 53,386 19,600 144 1,455 -1,221 70,167 4,000 66,167 365,000 5 20,000 116,038 70,167 19,600 144 1,624 -1,503 86,496 5,000 81,496 365,000 6 20,000 142,840 86,496 19,600 144 1,678 -1,779 102,496 5,000 97,496 365,000 7 20,000 170,982 102,496 19,600 144 1,686 -2,050 118,216 4,000 114,216 365,000 8 0 179,531 118,216 0 144 1,841 -1,982 114,249 3,000 111,249 365,000 9 0 188,508 114,249 0 144 2,031 -1,914 110,160 2,000 108,160 365,000 10 0 197,933 110,160 0 144 2,248 -1,842 105,926 0 105,926 365,000 11 0 207,830 105,926 0 144 2,287 -1,408 102,087 0 102,087 365,000 12 0 218,221 102,087 0 144 2,276 -1,356 98,310 0 98,310 365,000 13 0 229,132 98,310 0 144 2,222 -1,306 94,639 0 94,639 365,000 14 0 240,589 94,639 0 144 2,044 -1,258 91,193 0 91,193 365,000 15 0 252,619 91,193 0 144 1,723 -1,214 88,113 0 88,113 365,000 16 0 265,249 88,113 0 144 1,873 -1,171 84,925 0 84,925 365,000 17 0 278,512 84,925 0 144 2,036 -1,127 81,618 0 81,618 365,000 18 0 292,438 81,618 0 144 2,207 -1,081 78,187 0 78,187 365,000 19 0 307,059 78,187 0 144 2,372 -1,034 74,637 0 74,637 365,000 20 0 322,412 74,637 0 144 2,541 -985 70,967 0 70,967 365,000 25 0 411,489 53,902 0 144 4,415 -692 48,650 0 48,650 365,000 30 0 525,176 21,397 0 144 8,557 -225 12,471 0 12,471 365,000 Guaranteed Charges -------------------------------------------------------------------------------- Policy Plus Less Less Plus Policy Net Cash Death Policy Value Net Admin Cost of Invest Value Sur Surrender Benefit Year Beg Yr Premium Fees Ins Earnings End Yr Charges Value End Yr 1 0 19,600 144 1,570 -316 17,570 2,000 15,570 365,000 2 17,570 19,600 144 1,612 -613 34,800 3,000 31,800 365,000 3 34,800 19,600 144 1,653 -904 51,700 3,000 48,700 365,000 4 51,700 19,600 144 1,687 -1,190 68,279 4,000 64,279 365,000 5 68,279 19,600 144 1,723 -1,470 84,542 5,000 79,542 365,000 6 84,542 19,600 144 1,753 -1,745 100,499 5,000 95,499 365,000 7 100,499 19,600 144 1,792 -2,015 116,148 4,000 112,148 365,000 8 116,148 0 144 1,986 -1,946 112,072 3,000 109,072 365,000 9 112,072 0 144 2,210 -1,875 107,843 2,000 105,843 365,000 10 107,843 0 144 2,466 -1,801 103,432 0 103,432 365,000 11 103,432 0 144 2,747 -1,371 99,170 0 99,170 365,000 12 99,170 0 144 3,057 -1,311 94,658 0 94,658 365,000 13 94,658 0 144 3,389 -1,248 89,877 0 89,877 365,000 14 89,877 0 144 3,755 -1,181 84,797 0 84,797 365,000 15 84,797 0 144 4,158 -1,110 79,386 0 79,386 365,000 16 79,386 0 144 4,616 -1,034 73,592 0 73,592 365,000 17 73,592 0 144 5,140 -952 67,356 0 67,356 365,000 18 67,356 0 144 5,748 -864 60,600 0 60,600 365,000 19 60,600 0 144 6,457 -767 53,231 0 53,231 365,000 20 53,231 0 144 7,272 -662 45,153 0 45,153 365,000 25 3,597 0 48 3,544 -5 0 0 0 0 30 0 0 0 0 0 0 0 0 0 - - THE POLICY VALUE, CASH SURRENDER VALUE, AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. - - IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYHOLDER, AND THE INVESTMENT RETURN FOR THE PORTFOLIOS OF MANUFACTURERS INVESTMENT TRUST. - - THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. - - NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
59
Table 5 Short Form Issue Hypothetical Gross Investment Return of 6.00% Current Charges -------------------------------------------------------------------------------- Premiums Policy Plus Less Less Plus Policy Net Cash Death Policy Annual Accum Value Net Admin Cost of Invest Value Sur Surrender Benefit Year Premium at 5% Beg Yr Premium Fees Ins Earnings End Yr Charges Value End Yr 1 20,000 21,000 0 19,600 144 839 802 19,419 2,000 17,419 365,000 2 20,000 43,050 19,419 19,600 144 1,017 1,615 39,474 3,000 36,474 365,000 3 20,000 66,203 39,474 19,600 144 1,216 2,454 60,168 3,000 57,168 365,000 4 20,000 90,513 60,168 19,600 144 1,411 3,320 81,534 4,000 77,534 365,000 5 20,000 116,038 81,534 19,600 144 1,541 4,216 103,665 5,000 98,665 365,000 6 20,000 142,840 103,665 19,600 144 1,546 5,147 126,721 5,000 121,721 365,000 7 20,000 170,982 126,721 19,600 144 1,495 6,118 150,800 4,000 146,800 369,461 8 0 179,531 150,800 0 144 1,573 6,304 155,387 3,000 152,387 369,822 9 0 188,508 155,387 0 144 1,674 6,495 160,064 2,000 158,064 371,350 10 0 197,933 160,064 0 144 1,780 6,689 164,830 0 164,830 370,867 11 0 207,830 164,830 0 144 1,743 7,493 170,435 0 170,435 373,253 12 0 218,221 170,435 0 144 1,669 7,751 176,372 0 176,372 375,673 13 0 229,132 176,372 0 144 1,568 8,025 182,685 0 182,685 378,158 14 0 240,589 182,685 0 144 1,398 8,318 189,461 0 189,461 382,710 15 0 252,619 189,461 0 144 1,148 8,634 196,802 0 196,802 387,700 16 0 265,249 196,802 0 144 1,213 8,968 204,413 0 204,413 392,473 17 0 278,512 204,413 0 144 1,282 9,314 212,302 0 212,302 397,004 18 0 292,438 212,302 0 144 1,349 9,674 220,482 0 220,482 401,278 19 0 307,059 220,482 0 144 1,425 10,046 228,959 0 228,959 407,547 20 0 322,412 228,959 0 144 1,505 10,432 237,741 0 237,741 413,670 25 0 411,489 275,728 0 144 2,258 12,553 285,879 0 285,879 443,112 30 0 525,176 328,684 0 144 3,601 14,942 339,881 0 339,881 479,232 Guaranteed Charges ---------------------------------------------------------------------------------- Policy Plus Less Less Plus Policy Net Cash Death Policy Value Net Admin Cost of Invest Value Sur Surrender Benefit Year Beg Yr Premium Fees Ins Earnings End Yr Charges Value End Yr 1 0 19,600 144 1,568 786 18,674 2,000 16,674 365,000 2 18,674 19,600 144 1,602 1,570 38,098 3,000 35,098 365,000 3 38,098 19,600 144 1,627 2,387 58,314 3,000 55,314 365,000 4 58,314 19,600 144 1,637 3,237 79,370 4,000 75,370 365,000 5 79,370 19,600 144 1,638 4,123 101,310 5,000 96,310 365,000 6 101,310 19,600 144 1,620 5,046 124,193 5,000 119,193 365,000 7 124,193 19,600 144 1,592 6,009 148,066 4,000 144,066 365,000 8 148,066 0 144 1,702 6,186 152,406 3,000 149,406 365,000 9 152,406 0 144 1,824 6,366 156,805 2,000 154,805 365,000 10 156,805 0 144 1,960 6,548 161,249 0 161,249 365,000 11 161,249 0 144 2,097 7,320 166,328 0 166,328 365,000 12 166,328 0 144 2,236 7,549 171,496 0 171,496 365,287 13 171,496 0 144 2,372 7,782 176,762 0 176,762 365,897 14 176,762 0 144 2,513 8,019 182,124 0 182,124 367,891 15 182,124 0 144 2,658 8,261 187,583 0 187,583 369,539 16 187,583 0 144 2,815 8,507 193,132 0 193,132 370,813 17 193,132 0 144 2,981 8,757 198,764 0 198,764 371,688 18 198,764 0 144 3,158 9,010 204,472 0 204,472 372,138 19 204,472 0 144 3,379 9,266 210,215 0 210,215 374,183 20 210,215 0 144 3,616 9,523 215,977 0 215,977 375,800 25 239,240 0 144 4,768 10,822 245,149 0 245,149 379,982 30 268,399 0 144 6,391 12,116 273,979 0 273,979 386,311 - - THE POLICY VALUE, CASH SURRENDER VALUE, AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. - - IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYHOLDER, AND THE INVESTMENT RETURN FOR THE PORTFOLIOS OF MANUFACTURERS INVESTMENT TRUST. - - THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. - - NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
60
Table 6 Short Form Issue Hypothetical Gross Investment Return of 12.00% Current Charges -------------------------------------------------------------------------------------- Premiums Policy Plus Less Less Plus Policy Net Cash Death Policy Annual Accum Value Net Admin Cost of Invest Value Sur Surrender Benefit Year Premium at 5% Beg Yr Premium Fees Ins Earnings End Yr Charges Value End Yr 1 20,000 21,000 0 19,600 144 837 1,928 20,546 2,000 18,546 365,000 2 20,000 43,050 20,546 19,600 144 1,010 3,995 42,987 3,000 39,987 365,000 3 20,000 66,203 42,987 19,600 144 1,195 6,252 67,500 3,000 64,500 365,000 4 20,000 90,513 67,500 19,600 144 1,362 8,720 94,314 4,000 90,314 365,000 5 20,000 116,038 94,314 19,600 144 1,446 11,425 123,749 5,000 118,749 365,000 6 20,000 142,840 123,749 19,600 144 1,440 14,401 156,166 5,000 151,166 395,099 7 20,000 170,982 156,166 19,600 144 1,613 17,667 191,676 4,000 187,676 469,607 8 0 179,531 191,676 0 144 1,727 19,269 209,074 3,000 206,074 497,597 9 0 188,508 209,074 0 144 1,867 21,019 228,083 2,000 226,083 529,152 10 0 197,933 228,083 0 144 2,002 22,933 248,869 0 248,869 559,956 11 0 207,830 248,869 0 144 2,016 25,994 272,704 0 272,704 597,222 12 0 218,221 272,704 0 144 2,003 28,496 299,054 0 299,054 636,984 13 0 229,132 299,054 0 144 1,977 31,263 328,196 0 328,196 679,365 14 0 240,589 328,196 0 144 1,901 34,325 360,476 0 360,476 728,161 15 0 252,619 360,476 0 144 1,794 37,719 396,256 0 396,256 780,624 16 0 265,249 396,256 0 144 2,110 41,456 435,457 0 435,457 836,078 17 0 278,512 435,457 0 144 2,475 45,549 478,387 0 478,387 894,584 18 0 292,438 478,387 0 144 2,899 50,031 525,375 0 525,375 956,183 19 0 307,059 525,375 0 144 3,399 54,934 576,766 0 576,766 1,026,643 20 0 322,412 576,766 0 144 3,984 60,294 632,932 0 632,932 1,101,301 25 0 411,489 914,629 0 144 8,085 95,521 1,001,921 0 1,001,921 1,552,977 30 0 525,176 1,435,788 0 144 16,467 149,744 1,568,921 0 1,568,921 2,212,178 Guaranteed Charges -------------------------------------------------------------------------------------- Policy Plus Less Less Plus Policy Net Cash Death Policy Value Net Admin Cost of Invest Value Sur Surrender Benefit Year Beg Yr Premium Fees Ins Earnings End Yr Charges Value End Yr 1 0 19,600 144 1,566 1,888 19,779 2,000 17,779 365,000 2 19,779 19,600 144 1,591 3,886 41,529 3,000 38,529 365,000 3 41,529 19,600 144 1,600 6,083 65,468 3,000 62,468 365,000 4 65,468 19,600 144 1,582 8,503 91,844 4,000 87,844 365,000 5 91,844 19,600 144 1,541 11,170 120,930 5,000 115,930 365,000 6 120,930 19,600 144 1,505 14,112 152,994 5,000 147,994 387,074 7 152,994 19,600 144 1,889 17,332 187,893 4,000 183,893 460,337 8 187,893 0 144 2,134 18,865 204,480 3,000 201,480 486,663 9 204,480 0 144 2,430 20,526 222,432 2,000 220,432 516,043 10 222,432 0 144 2,746 22,323 241,865 0 241,865 544,197 11 241,865 0 144 3,118 25,199 263,803 0 263,803 577,729 12 263,803 0 144 3,533 27,478 287,604 0 287,604 612,597 13 287,604 0 144 3,974 29,952 313,438 0 313,438 648,817 14 313,438 0 144 4,491 32,634 341,437 0 341,437 689,703 15 341,437 0 144 5,054 35,541 371,780 0 371,780 732,407 16 371,780 0 144 5,680 38,690 404,646 0 404,646 776,921 17 404,646 0 144 6,374 42,101 440,228 0 440,228 823,227 18 440,228 0 144 7,148 45,792 478,728 0 478,728 871,284 19 478,728 0 144 8,111 49,778 520,251 0 520,251 926,047 20 520,251 0 144 9,183 54,076 565,000 0 565,000 983,100 25 781,355 0 144 15,979 81,099 846,331 0 846,331 1,311,813 30 1,156,814 0 144 28,264 119,817 1,248,223 0 1,248,223 1,759,995 - - THE POLICY VALUE, CASH SURRENDER VALUE, AND THE DEATH BENEFIT WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. - - IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL INVESTMENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICYHOLDER, AND THE INVESTMENT RETURN FOR THE PORTFOLIOS OF MANUFACTURERS INVESTMENT TRUST. - - THE POLICY VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. - - NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
61 FINANCIAL STATEMENTS SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA Six months ended June 30, 1998 (with December 31, 1997 comparative) 62 THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1998 (UNAUDITED)
NET ASSET UNITS NAV PER ASSETS VALUE OUTSTANDING UNIT Investment in Manufacturers Investment Trust at market value Emerging Growth Trust, 2,490,957 shares (cost $52,574,158 ) $62,946,479 944,272 66.66 Quantitative Equity Trust, 1,667,582 shares (cost $29,395,669 ) 38,170,961 808,932 47.19 Real Estate Securities Trust, 1,407,557 shares (cost $22,428,162 ) 23,717,338 594,529 39.89 Balanced Trust, 3,000,009 shares (cost $49,244,893 ) 55,800,175 1,723,913 32.37 Capital Growth Bond Trust, 1,275,407 shares (cost $14,124,154 ) 14,794,726 663,447 22.30 Money Market Trust, 1,176,946 shares (cost $11,769,459 ) 11,769,460 716,717 16.42 International Stock Trust, 750,148 shares (cost $9,117,393 ) 9,766,918 725,896 13.45 Pacific Rim Emerging Markets Trust, 333,785 shares (cost $3,363,471 ) 2,022,732 322,031 6.28 Equity Index Trust, 812,870 shares (cost $10,788,098 ) 11,705,332 659,237 17.76 International Small Cap Trust 60,640 shares (cost $941,082 ) 1,007,228 66,144 15.23 Equity Trust, 379,282 shares (cost $7,783,589 ) 7,543,912 505,886 14.91 Value Equity Trust, 572,958 shares (cost $9,482,099 ) 9,923,631 642,881 15.44 Growth and Income Trust, 504,806 shares (cost $11,712,843 ) 13,215,822 738,331 17.90 U.S. Government Securities Trust, 62,625 shares (cost $835,921 ) 832,285 73,605 11.31 Conservative Asset Allocation Trust, 59,411 shares (cost $683,708 ) 676,696 55,003 12.30 Moderate Asset Allocation Trust, 218,743 shares (cost $2,767,057 ) 2,804,281 207,623 13.51 Aggressive Asset Allocation Trust, 147,182 shares (cost $2,161,809 ) 2,147,387 147,168 14.59 Blue Chip Growth Trust, 588,762 shares (cost $9,103,504 ) 10,156,152 545,481 18.62 Science & Technology Trust, 281,943 shares (cost $4,151,923) 4,502,631 275,129 16.37 Pilgram Baxter Growth Trust, 28,972 shares (cost $367,744 ) 379,530 25,105 15.12 Small / Mid Cap Trust, 90,711 shares (cost $1,466,517 ) 1,677,245 92,270 18.18 Worldwide Growth Trust, 8,482 shares (cost $127,444 ) 134,353 8,764 15.33 Global Equity Trust, 51,918 shares (cost $1,090,705 ) 1,061,215 65,122 16.30 Growth Trust, 103,546 shares (cost $1,820,521 ) 2,039,854 115,263 17.70 Value Trust, 311,317 shares (cost $4,746,175 ) 4,850,323 321,097 15.11 International Growth & Income Trust, 16,763 shares (cost $204,367 ) 198,637 14,181 14.01 High Yield Trust, 152,839 shares (cost $2,144,314 ) 2,155,034 150,344 14.33 Strategic Bond Trust, 103,462 shares (cost $1,249,085 ) 1,228,097 88,518 13.87 Global Government Bond Trust, 5,615 shares (cost $78,109 ) 72,548 5,463 13.28 Investment Quality Bond Trust, 155,009 shares (cost $1,864,788 ) 1,850,812 131,723 14.05 Lifestyle Aggressive 1000 Trust, 38,622 shares (cost $523,381 ) 536,458 34,775 15.43 Lifestyle Growth 820 Trust, 231,374 shares (cost $3,233,289 ) 3,271,629 214,514 15.25 Lifestyle Balanced 640 Trust, 88,012 shares (cost $1,186,191 ) 1,205,772 80,928 14.90 Lifestyle Moderate 460 Trust, 6,553 shares (cost $87,558 ) 89,641 6,107 14.68 Lifestyle Conservative 280 Trust, 250 shares (cost $3,321 ) 3,255 227 14.34 Small Company Value Trust 2,996 shares (cost $37,871 ) 37,301 3,998 9.33 =============== TOTAL $304,295,850 ===============
63 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF OPERATIONS FOR PERIOD ENDING JUNE 30, 1998 (Unaudited)
Emerging Growth Quantitative Equity Real Estate Securities Balanced Sub-Account Sub-Account Sub-Account Sub-Account ------------------------------------------------------------------------------- Investment income: Dividend Income $879,733 $4,420,030 $2,921,055 $6,701,569 Expenses Mortality and expense risk charge 200,249 120,149 77,283 173,612 ------------------------------------------------------------------------------ Net investment income (loss) 679,484 4,299,881 2,843,772 6,527,957 ------------------------------------------------------------------------------ Realized and unrealized gain (loss) from security transactions: Proceeds from sales 5,750,469 2,665,659 1,809,568 2,048,850 Cost of securities sold 4,645,612 1,751,313 1,428,564 1,624,763 ------------------------------------------------------------------------------ Net realized gain (loss) 1,104,857 914,346 381,004 424,087 ------------------------------------------------------------------------------ Unrealized appreciation (depreciation) of Investments Beginning of Year 8,747,614 9,076,188 5,733,444 8,870,245 End of Period 10,372,322 8,775,292 1,289,176 6,555,280 ------------------------------------------------------------------------------ Net unrealized depreciation during the period 1,624,708 (300,896) (4,444,268) (2,314,965) ------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments 2,729,565 613,450 (4,063,264) (1,890,878) ------------------------------------------------------------------------------ Net increase (decrease) in net assets derived from operations $3,409,049 $4,913,331 ($1,219,492) $4,637,079 ==============================================================================
See accompanying notes. 64
International Pacific Rim Capital Growth Money Market Stock Emerging Markets Bond Sub-Account Sub-Account Sub-Account Sub-Account - -------------------------------------------------------------------------------- $789,202 $262,635 $477 $0 45,961 33,345 27,453 7,616 - ----------------------------------------------------------------------------- 743,241 229,290 (26,976) (7,616) - ----------------------------------------------------------------------------- 522,637 5,257,223 2,385,911 288,309 509,890 5,257,223 2,126,262 474,147 - ----------------------------------------------------------------------------- 12,747 0 259,649 (185,838) - ----------------------------------------------------------------------------- 969,325 0 (52,878) (1,155,601) 670,572 0 649,527 (1,340,740) - ----------------------------------------------------------------------------- (298,753) 0 702,405 (185,139) - ----------------------------------------------------------------------------- (286,006) 0 962,054 (370,977) - ----------------------------------------------------------------------------- $457,235 $229,290 $935,078 ($378,593) ============================================================================
65 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF OPERATIONS FOR PERIOD ENDING JUNE 30, 1998 (Unaudited)
International Value Equity Index Small Cap Equity Equity Sub-Account Sub-Account Sub-Account Sub-Account --------------------------------------------------------------------------- Investment income: Dividend Income $196,554 $1,473 $1,580,782 $439,236 Expenses Mortality and expense risk charge 31,390 1,991 26,862 24,920 ----------------------------------------------------------------------- Net investment income (loss) 165,164 (518) 1,553,920 414,316 ----------------------------------------------------------------------- Realized and unrealized gain (loss) from security transactions: Proceeds from sales 1,455,159 315,945 2,324,502 744,053 Cost of securities sold 1,108,316 289,311 2,397,820 587,099 ----------------------------------------------------------------------- Net realized gain (loss) 346,843 26,634 (73,318) 156,954 ----------------------------------------------------------------------- Unrealized appreciation (depreciation) of Investments Beginning of Year 13,995 (15,134) 292,111 659,769 End of Period 917,232 66,147 (239,675) 441,531 ----------------------------------------------------------------------- Net unrealized depreciation during the period 903,237 81,281 (531,786) (218,238) ------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments 1,250,080 107,915 (605,104) (61,284) ----------------------------------------------------------------------- Net increase (decrease) in net assets derived from operations $1,415,244 $107,397 $948,816 $353,032 =======================================================================
See accompanying notes. 66
Growth U.S. Government Conservative Moderate Aggressive and Income Securities Asset Allocation Asset Allocation Asset Allocation Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account - ------------------------------------------------------------------------------------------------ $687,431 $34,788 $61,639 $276,382 $445,314 34,861 2,237 2,035 7,746 11,277 - --------------------------------------------------------------------------------------------- 652,570 32,551 59,604 268,636 434,037 - --------------------------------------------------------------------------------------------- 1,046,064 137,927 20,693 91,375 2,677,310 744,837 136,305 18,608 81,810 2,567,473 - --------------------------------------------------------------------------------------------- 301,227 1,622 2,085 9,565 109,837 - --------------------------------------------------------------------------------------------- 926,995 9,987 17,238 94,990 100,678 1,502,981 (3,635) (7,013) 37,224 (14,421) - --------------------------------------------------------------------------------------------- 575,986 (13,622) (24,251) (57,766) (115,099) - --------------------------------------------------------------------------------------------- 877,213 (12,000) (22,166) (48,201) (5,262) - --------------------------------------------------------------------------------------------- $1,529,783 $20,551 $37,438 $220,435 $428,775 =============================================================================================
67 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF OPERATIONS FOR PERIOD ENDING JUNE 30, 1998 (UNAUDITED)
Science and Pilgram Blue Chip Growth Technology Baxter Growth Small/Mid Cap Sub-Account Sub-Account Sub-Account Sub-Account -------------------------------------------------------------------- Investment income: Dividend Income $163,206 $0 $0 $0 Expenses Mortality and expense risk charge 25,951 8,337 1,129 6,546 ------------------------------------------------------------------ Net investment income (loss) 137,255 (8,337) (1,129) (6,546) ------------------------------------------------------------------ Realized and unrealized gain (loss) from security transactions: Proceeds from sales 1,097,257 108,456 43,406 1,008,646 Cost of securities sold 876,153 107,605 39,221 929,571 ------------------------------------------------------------------ Net realized gain (loss) 221,104 851 4,185 79,075 ------------------------------------------------------------------ Unrealized appreciation (depreciation) of Investments Beginning of Year 235,927 (31,717) (1,826) (41,211) End of Period 1,052,647 350,710 11,786 210,728 ------------------------------------------------------------------ Net unrealized depreciation during the period 816,720 382,427 13,612 251,939 ------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments 1,037,824 383,278 17,797 331,014 ------------------------------------------------------------------ Net increase (decrease) in net assets derived from operations $1,175,079 $374,941 $16,668 $324,468 ==================================================================
See accompanying notes. 68
Worldwide International Growth Growth Global Equity Growth Value and Income High Yield Strategic Bond Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account - --------------------------------------------------------------------------------------------------------------------- $0 $283,512 $88,404 $0 $2,310 $3,120 $41,408 602 11,252 6,753 10,895 294 4,020 2,168 - ------------------------------------------------------------------------------------------------------------------ (602) 272,260 81,651 (10,895) 2,016 (900) 39,240 - ------------------------------------------------------------------------------------------------------------------ 189,623 3,622,876 711,780 422,563 4,476 223,942 36,429 169,139 3,245,520 637,625 371,627 4,223 218,019 34,465 - ------------------------------------------------------------------------------------------------------------------ 20,484 377,356 74,155 50,936 253 5,923 1,964 - ------------------------------------------------------------------------------------------------------------------ (1,636) 142,878 42,938 (5,269) (1,097) (22,649) 10,671 6,910 (29,491) 219,334 104,147 (5,730) 10,720 (20,989) - ------------------------------------------------------------------------------------------------------------------ 8,546 (172,369) 176,396 109,416 (4,633) 33,369 (31,660) - ------------------------------------------------------------------------------------------------------------------ 29,030 204,987 250,551 160,352 (4,380) 39,292 (29,696) - ------------------------------------------------------------------------------------------------------------------ $28,428 $477,247 $332,202 $149,457 ($2,364) $38,392 $9,544 =================================================================================================================
69 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF OPERATIONS FOR PERIOD ENDING JUNE 30, 1998 (UNAUDITED)
Global Government Investment Lifestyle Aggressive Bond Quality Bond 1000 Sub-Account Sub-Account Sub-Account --------------------------------------------------------------- Investment income: Dividend Income $5,515 $62,454 $26,598 Expenses Mortality and expense risk charge 175 3,663 1,609 ----------------------------------------------------------- Net investment income (loss) 5,340 58,791 24,989 ----------------------------------------------------------- Realized and unrealized gain (loss) from security transactions: Proceeds from sales 842 166,517 90,919 Cost of securities sold 838 164,930 84,732 ----------------------------------------------------------- Net realized gain (loss) 4 1,587 6,187 ----------------------------------------------------------- Unrealized appreciation (depreciation) of Investments Beginning of Year 186 5,485 1,104 End of Period (5,560) (13,976) 13,076 ----------------------------------------------------------- Net unrealized depreciation during the period (5,746) (19,461) 11,972 ----------------------------------------------------------- Net realized and unrealized gain (loss) on investments (5,742) (17,874) 18,159 ----------------------------------------------------------- Net increase (decrease) in net assets derived from operations $(402) $40,917 $43,148 ===========================================================
See accompanying notes. 70
Lifestyle Growth Lifestyle Balanced Lifestyle Moderate Lifestyle Conservative 820 640 460 280 Sub-Account Sub-Account Sub-Account Sub-Account - ---------------------------------------------------------------------------------------- $151,143 $56,358 $4,450 $142 9,054 3,400 333 6 - -------------------------------------------------------------------------------- 142,089 52,958 4,117 136 - -------------------------------------------------------------------------------- 129,836 13,214 22,583 265 121,168 12,370 21,990 270 - -------------------------------------------------------------------------------- 8,668 844 593 (5) - -------------------------------------------------------------------------------- 7,721 17,177 361 0 38,343 19,580 2,083 (66) - -------------------------------------------------------------------------------- 30,622 2,403 1,722 (66) - -------------------------------------------------------------------------------- 39,290 3,247 2,315 (71) - -------------------------------------------------------------------------------- $181,379 $56,205 $6,432 $65 ================================================================================
71 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF OPERATIONS FOR PERIOD ENDING JUNE 30, 1998 (UNAUDITED)
**Small Company Value Trust Sub-Account TOTAL ---------------------------------------------- Investment income: Dividend Income $0 $20,586,920 Expenses Mortality and expense risk charge 16 925,190 ----------------------------------------------- Net investment income (loss) (16) 19,661,730 ----------------------------------------------- Realized and unrealized gain (loss) from security transactions: Proceeds from sales 83 37,435,367 Cost of securities sold 87 32,788,906 ----------------------------------------------- Net realized gain (loss) (4) 4,646,461 ----------------------------------------------- Unrealized appreciation (depreciation) of Investments Beginning of Year 0 34,648,009 End of Period (570) 31,635,482 ----------------------------------------------- Net unrealized depreciation during the period (570) (3,012,527) ----------------------------------------------- Net realized and unrealized gain (loss) on investments (574) 1,633,934 ----------------------------------------------- Net increase (decrease) in net assets derived from operations $(590) $21,295,664 ===============================================
** Reflects the period from commencement of operations May 1, 1998 through June 30, 1998. See accompanying notes. 72 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIOD ENDING JUNE 30, 1998 AND DECEMBER 31, 1997 (UNAUDITED)
Quantitative Emerging Growth Equity Sub-Account Sub-Account ------------------------------------------------------------------ Period Ended Year Ended Period Ended Year Ended June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 ------------------------------------------------------------------ FROM OPERATIONS Net investment income (loss) $679,484 $(373,014) $4,299,881 $(197,730) Net realized gain (loss) 1,104,857 942,356 914,346 1,013,649 Unrealized appreciation (depreciation) of investments during the period 1,624,708 8,161,227 (300,896) 6,681,076 ------------------------------------------------------------------ Increase (decrease) in net assets derived from operations 3,409,049 8,730,569 4,913,331 7,496,995 ------------------------------------------------------------------ FROM CAPITAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums 4,962,989 10,968,515 1,909,881 5,269,678 Transfer of terminations (5,145,992) (5,398,115) (1,808,822) (3,038,289) Transfer of policy loans (185,848) (624,209) (128,072) (229,614) Net interfund transfers (2,176,689) (10,114,334) (1,328,199) (447,386) ------------------------------------------------------------------ (2,545,540) (5,168,143) (1,355,212) 1,554,389 ------------------------------------------------------------------ Net increase in net assets 863,509 3,562,426 3,558,119 9,051,384 NET ASSETS Beginning of Year 62,082,970 58,520,544 34,612,842 25,561,458 ------------------------------------------------------------------ End of Period $62,946,479 $62,082,970 $38,170,961 $34,612,842 ==================================================================
See accompanying notes. 73
Real Estate Securities Balanced Capital Growth Bond Sub-Account Sub-Account Sub-Account - ------------------------------------------------------------------------------------------------------ Period Ended Year Ended Period Ended Year Ended Period Ended Year Ended June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 - ------------------------------------------------------------------------------------------------------ $2,843,772 $(138,789) $6,527,957 $(312,899) $743,241 $(88,739) 381,004 409,362 424,087 1,177,705 12,747 (166,789) (4,444,268) 3,375,616 (2,314,965) 6,637,188 (298,753) 1,292,079 - ------------------------------------------------------------------------------------------------------- (1,219,492) 3,646,189 4,637,079 7,501,994 457,235 1,036,551 - ------------------------------------------------------------------------------------------------------- 1,671,062 3,087,313 4,410,308 7,548,194 1,108,695 1,927,024 (1,225,978) (2,187,862) (2,443,099) (5,118,735) (544,690) (1,630,139) (85,811) (150,861) (50,849) (520,775) (36,205) (60,413) 15,125 1,362,290 (359,934) (5,272,252) 106,969 (1,458,915) - ------------------------------------------------------------------------------------------------------- 374,398 2,110,880 1,556,426 (3,363,568) 634,769 (1,222,443) - ------------------------------------------------------------------------------------------------------- (845,094) 5,757,069 6,193,505 4,138,426 1,092,004 (185,892) 24,562,432 18,805,363 49,606,670 45,468,244 13,702,722 13,888,614 - ------------------------------------------------------------------------------------------------------- $23,717,338 $24,562,432 $55,800,175 $49,606,670 $14,794,726 $13,702,722 =======================================================================================================
74 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIOD ENDING JUNE 30, 1998 AND DECEMBER 31, 1997 (UNAUDITED)
Pacific Rim Money Market International Stock Emerging Markets Sub-Account Sub-Account Sub-Account ------------------------------------------------------------------------------------------- Period Ended Year Ended Period Ended Year Ended Period Ended Year Ended June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 ------------------------------------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) $229,290 $316,526 $(26,976) $60,175 $(7,616) $(15,403) Net realized gain (loss) 0 (275,816) 259,649 265,602 (185,838) (93,881) Unrealized appreciation (depreciation) of investments during the period 0 275,826 702,405 (284,063) (185,139) (1,160,926) ------------------------------------------------------------------------------------------- Increase (decrease) in net assets derived from operations 229,290 316,536 935,078 41,714 (378,593) (1,270,210) ------------------------------------------------------------------------------------------- FROM CAPITAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums 6,376,047 3,105,289 2,117,289 2,524,804 355,836 858,191 Transfer of terminations (398,781) (1,271,291) (477,262) (503,518) (93,660) (808,786) Transfer of policy loans (197,414) 17,308 (21,881) (88,083) (4,102) (65,080) Net interfund transfers (756,515) (2,379,177) 502,611 871,148 (200,213) (58,053) ------------------------------------------------------------------------------------------- 5,023,337 (527,871) 2,120,757 2,804,351 57,861 (73,728) ------------------------------------------------------------------------------------------- Net increase in net assets 5,252,627 (211,335) 3,055,835 2,846,065 (320,732) (1,343,938) NET ASSETS Beginning of Year 6,516,833 6,728,168 6,711,083 3,865,018 2,343,464 3,687,402 ------------------------------------------------------------------------------------------- End of Period $11,769,460 $6,516,833 $9,766,918 $6,711,083 $2,022,732 $2,343,464 ===========================================================================================
See accompanying notes. 75
International Value Equity Index Small Cap Equity Equity Sub-Account Sub-Account Sub-Account Sub-Account - ------------------------------------------------------------------------------------------------------------------------------------ Period Ended Year Ended Period Ended Year Ended Period Ended Year Ended Period Ended Year Ended June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 - ------------------------------------------------------------------------------------------------------------------------------------ $165,164 $847,432 $(518) $(2,769) $1,553,920 $1,034,760 $414,316 $381,070 346,843 36,960 26,634 10,150 (73,318) 24,440 156,954 74,851 903,237 (32,178) 81,281 (15,134) (531,786) 21,454 (218,238) 497,341 - ------------------------------------------------------------------------------------------------------------------------------------ 1,415,244 852,214 107,397 (7,753) 948,816 1,080,654 353,032 953,262 - ------------------------------------------------------------------------------------------------------------------------------------ 3,075,746 3,106,131 81,870 78,736 1,044,855 3,023,077 2,074,383 856,465 (914,124) (166,672) (33,314) (20,504) (378,393) (778,177) (422,305) (394,553) (178,882) (3,054) (9,234) (2,010) (8,503) (30,340) (6,054) (21,910) 1,392,649 1,961,503 306,221 505,819 (2,076,652) 582,252 2,323,019 2,113,454 - ------------------------------------------------------------------------------------------------------------------------------------ 3,375,389 4,897,908 345,543 562,041 (1,418,693) 2,796,812 3,969,043 2,553,456 - ------------------------------------------------------------------------------------------------------------------------------------ 4,790,633 5,750,122 452,940 554,288 (469,877) 3,877,466 4,322,075 3,506,718 6,914,699 1,164,577 554,288 0 8,013,789 4,136,323 5,601,556 2,094,838 - ------------------------------------------------------------------------------------------------------------------------------------ $11,705,332 $6,914,699 $1,007,228 $554,288 $7,543,912 $8,013,789 $9,923,631 $5,601,556 ====================================================================================================================================
76 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIOD ENDING JUNE 30, 1998 AND DECEMBER 31, 1997 (UNAUDITED)
Growth U.S. Government and Income Securities Sub-Account Sub-Account -------------------------------------------------------------- Period Ended Year Ended Period Ended Year Ended June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 -------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) $652,570 $241,574 $32,551 $17,253 Net realized gain (loss) 301,227 206,751 1,622 10,335 Unrealized appreciation (depreciation) of investments during the period 575,986 781,276 (13,622) 6,207 -------------------------------------------------------------- Increase (decrease) in net assets derived from operations 1,529,783 1,229,601 20,551 33,795 -------------------------------------------------------------- FROM CAPITAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums 1,806,189 2,327,523 116,052 112,190 Transfer of terminations (892,502) (494,932) (23,565) (28,622) Transfer of policy loans (10,780) (11,939) (467) (10,083) Net interfund transfers 2,546,194 3,120,002 58,862 378,086 -------------------------------------------------------------- 3,449,101 4,940,654 150,882 451,571 -------------------------------------------------------------- Net increase in net assets 4,978,884 6,170,255 171,433 485,366 NET ASSETS Beginning of Year 8,236,938 2,066,683 660,852 175,486 -------------------------------------------------------------- End of Period $13,215,822 $8,236,938 $832,285 $660,852 =============================================================
See accompanying notes. 77
Conservative Moderate Aggressive Asset Allocation Asset Allocation Asset Allocation Blue Chip Growth Sub-Account Sub-Account Sub-Account Sub-Account - ------------------------------------------------------------------------------------------------------------------------------------ Period Ended Year Ended Period Ended Year Ended Period Ended Year Ended Period Ended Year Ended June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 - ------------------------------------------------------------------------------------------------------------------------------------ $59,604 $32,395 $268,636 $89,913 $434,037 $57,231 $137,255 $48,890 2,085 774 9,565 34,682 109,837 18,481 221,104 (12,123) (24,251) 10,030 (57,766) 58,528 (115,099) 80,807 816,720 235,927 - ---------------------------------------------------------------------------------------------------------------------------------- 37,438 43,199 220,435 183,123 428,775 156,519 1,175,079 272,694 - ---------------------------------------------------------------------------------------------------------------------------------- 53,790 107,136 517,319 887,517 789,131 2,451,770 4,331,335 3,002,085 (20,897) (13,120) (113,681) (176,631) (141,132) (230,373) (378,540) (121,898) 0 0 1,352 (10) (647) (296) (10,109) (545) 40,438 285,503 318,592 254,676 (2,139,807) 471,051 521,319 1,364,732 - --------------------------------------------------------------------------------------------------------------------------------- 73,331 379,519 723,582 965,552 (1,492,455) 2,692,152 4,464,005 4,244,374 - --------------------------------------------------------------------------------------------------------------------------------- 110,769 422,718 944,017 1,148,675 (1,063,680) 2,848,671 5,639,084 4,517,068 565,927 143,209 1,860,264 711,589 3,211,067 362,396 4,517,068 0 - ---------------------------------------------------------------------------------------------------------------------------------- $676,696 $565,927 $2,804,281 $1,860,264 $2,147,387 $3,211,067 $10,156,152 $4,517,068 =================================================================================================================================
78 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIOD ENDING JUNE 30, 1998 AND DECEMBER 31, 1997 (UNAUDITED)
Science and Pilgram Technology Baxter Growth Sub-Account Sub-Account ----------------------------------------------------------------- Period Ended *Period Ended Period Ended *Period Ended June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 ----------------------------------------------------------------- FROM OPERATIONS Net investment income (loss) $(8,337) $22,028 $(1,129) $(764) Net realized gain (loss) 851 1,545 4,185 433 Unrealized appreciation (depreciation) of investments during the period 382,427 (31,717) 13,612 (1,826) ----------------------------------------------------------------- Increase (decrease) in net assets derived from operations 374,941 (8,144) 16,668 (2,157) ----------------------------------------------------------------- FROM CAPITAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums 1,476,335 1,280,093 60,529 52,430 Transfer of terminations (133,409) (8,796) 217 (3,413) Transfer of policy loans (3,320) 0 (10,357) 0 Net interfund transfers 1,338,769 186,162 22,928 242,685 ----------------------------------------------------------------- 2,678,375 1,457,459 73,317 291,702 ----------------------------------------------------------------- Net increase in net assets 3,053,316 1,449,315 89,985 289,545 NET ASSETS Beginning of Year 1,449,315 0 289,545 0 ----------------------------------------------------------------- End of Period $4,502,631 $1,449,315 $379,530 $289,545 =================================================================
* Reflects the period from commencement of operations May 1, 1997 through December 31, 1997 See accompanying notes. 79
Worldwide Small/Mid Cap Growth Global Equity Growth Sub-Account Sub-Account Sub-Account Sub-Account - ---------------------------------------------------------------------------------------------------------------------------------- Period Ended *Period Ended Period Ended *Period Ended Period Ended *Period Ended Period Ended *Period Ended June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 - ---------------------------------------------------------------------------------------------------------------------------------- $(6,546) $(1,669) $(602) $1,584 $272,260 $(2,697) $81,651 $(1,748) 79,075 (767) 20,484 25 377,356 1,042 74,155 464 251,939 (41,211) 8,546 (1,636) (172,369) 142,878 176,396 42,938 - ------------------------------------------------------------------------------------------------------------------------------- 324,468 (43,647) 28,428 (27) 477,247 141,223 332,202 41,654 - ------------------------------------------------------------------------------------------------------------------------------ 272,384 1,504,311 25,868 3,589 639,692 3,088,398 369,523 1,408,136 (71,728) (24,555) (24,656) (385) (90,322) (47,709) (39,275) (22,975) (6,816) 0 0 0 (12,390) 0 (3,926) 0 (638,615) 361,443 (96,563) 198,099 (3,351,518) 216,594 (373,192) 327,707 - ------------------------------------------------------------------------------------------------------------------------------- (444,775) 1,841,199 (95,351) 201,303 (2,814,538) 3,257,283 (46,870) 1,712,868 - ------------------------------------------------------------------------------------------------------------------------------- (120,307) 1,797,552 (66,923) 201,276 (2,337,291) 3,398,506 285,332 1,754,522 1,797,552 0 201,276 0 3,398,506 0 1,754,522 0 - ------------------------------------------------------------------------------------------------------------------------------- $1,677,245 $1,797,552 $134,353 $201,276 $1,061,215 $3,398,506 $2,039,854 $1,754,522 ===============================================================================================================================
80 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIOD ENDING JUNE 30, 1998 AND DECEMBER 31, 1997 (Unaudited)
International Growth Value and Income Sub-Account Sub-Account ---------------------------------------------------------------------- Period Ended *Period Ended Period Ended *Period Ended June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 FROM OPERATIONS Net investment income (loss) ($10,895) $40,098 $2,016 ($61) Net realized gain (loss) 50,936 1,134 253 (260) Unrealized appreciation (depreciation) of investments during the period 109,416 (5,269) (4,633) (1,097) ---------------------------------------------------------------------- Increase (decrease) in net assets derived from operations 149,457 35,963 (2,364) (1,418) ---------------------------------------------------------------------- FROM CAPITAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums 2,775,319 811,955 24,499 1,816 Transfer of terminations (183,463) (29,096) (185) (376) Transfer of policy loans (5,184) (4,630) 0 0 Net interfund transfers 741,256 558,746 155,629 21,036 ---------------------------------------------------------------------- 3,327,928 1,336,975 179,943 22,476 ---------------------------------------------------------------------- Net increase in net assets 3,477,385 1,372,938 177,579 21,058 NET ASSETS Beginning of Year 1,372,938 0 21,058 0 ---------------------------------------------------------------------- End of Period $4,850,323 $1,372,938 $198,637 $21,058 ======================================================================
* Reflects the period from commencement of operations May 1, 1997 through December 31, 1997 See accompanying notes. 81
Global Government Investment High Yield Strategic Bond Bond Quality Bond Sub-Account Sub-Account Sub-Account Sub-Account - ------------------------------------------------------------------------------------------------------------------------------------ Period Ended *Period Ended Period Ended *Period Ended Period Ended *Period Ended Period Ended *Period Ended June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 - ------------------------------------------------------------------------------------------------------------------------------------ ($900) $30,182 $39,240 ($827) $5,340 ($17) $58,791 ($391) 5,923 4,384 1,964 286 4 3 1,587 67 33,369 (22,649) (31,660) 10,671 (5,746) 186 (19,461) 5,485 - --------------------------------------------------------------------------------------------------------------------------------- 38,392 11,917 9,544 10,130 (402) 172 40,917 5,161 - --------------------------------------------------------------------------------------------------------------------------------- 503,854 563,344 225,364 174,730 6,754 185 713,478 298,577 (45,774) (17,818) (19,710) (7,767) (2,362) (187) (51,531) (8,387) (3,714) (2,703) (7,847) (83) 0 (52) (7,581) 0 823,383 284,153 613,796 229,940 60,472 7,968 685,716 174,462 - --------------------------------------------------------------------------------------------------------------------------------- 1,277,749 826,976 811,603 396,820 64,864 7,914 1,340,082 464,652 - --------------------------------------------------------------------------------------------------------------------------------- 1,316,141 838,893 821,147 406,950 64,462 8,086 1,380,999 469,813 838,893 0 406,950 0 8,086 0 469,813 0 - --------------------------------------------------------------------------------------------------------------------------------- 2,155,034 $838,893 $1,228,097 $406,950 $72,548 $8,086 $1,850,812 $469,813 =================================================================================================================================
82 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIOD ENDING JUNE 30, 1998 AND DECEMBER 31, 1997 (Unaudited)
Lifestyle Aggressive Lifestyle Growth 1000 820 Sub-Account Sub-Account ------------------------------------------------------------------------ Period Ended *Period Ended Period Ended *Period Ended June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 ------------------------------------------------------------------------ FROM OPERATIONS Net investment income (loss) $24,989 $156 $142,089 $10,545 Net realized gain (loss) 6,187 1,617 8,668 6,507 Unrealized appreciation (depreciation) of investments during the period 11,972 1,104 30,622 7,721 ---------------------------------------------------------------------- Increase (decrease) in net assets derived from operations 43,148 2,877 181,379 24,773 ---------------------------------------------------------------------- FROM CAPITAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums 33,310 33,139 165,990 104,216 Transfer of terminations (19,236) (7,521) (165,014) (42,295) Transfer of policy loans (9,792) (10,340) 76,453 (91,693) Net interfund transfers 18,321 452,552 698,488 2,319,332 ---------------------------------------------------------------------- 22,603 467,830 775,917 2,289,560 ---------------------------------------------------------------------- Net increase in net assets 65,751 470,707 957,296 2,314,333 NET ASSETS Beginning of Year 470,707 0 2,314,333 0 ---------------------------------------------------------------------- End of Period $536,458 $470,707 $3,271,629 $2,314,333 ======================================================================
* Reflects the period from commencement of operations May 1, 1997 through December 31, 1997 See accompanying notes. 83
Lifestyle Balanced Lifestyle Moderate Lifestyle Conservative 640 460 280 Sub-Account Sub-Account Sub-Account - ----------------------------------------------------------------------------------------------------------------- Period Ended *Period Ended Period Ended *Period Ended Period Ended *Period Ended June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 June 30/98 Dec. 31/97 - ---------------------------------------------------------------------------------------------------------------- $52,958 $4,341 $4,117 $621 $136 $0 844 440 593 (2) (5) 0 2,403 17,177 1,722 361 (66) 0 - ---------------------------------------------------------------------------------------------------------------- 56,205 21,958 6,432 980 65 0 - ---------------------------------------------------------------------------------------------------------------- 106,531 30,549 8,428 890 4,110 0 (16,415) (8,966) (2,636) (274) (920) 0 0 0 (20,717) 0 0 0 209,234 806,676 702 95,836 0 0 - ---------------------------------------------------------------------------------------------------------------- 299,350 828,259 (14,223) 96,452 3,190 0 - ---------------------------------------------------------------------------------------------------------------- 355,555 850,217 (7,791) 97,432 3,255 0 850,217 0 97,432 0 0 0 - ---------------------------------------------------------------------------------------------------------------- $1,205,772 $850,217 $89,641 $97,432 $3,255 $0 ================================================================================================================
84 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIOD ENDING JUNE 30, 1998 AND DECEMBER 31, 1997 (Unaudited)
**Small Company Value Trust TOTAL Sub-Account ------------------------------------------------------ Period Ended Period Ended Year Ended June 30/98 June 30/98 Dec. 31/97 ------------------------------------------------------ FROM OPERATIONS Net investment income (loss) ($16) $19,661,730 $2,099,257 Net realized gain (loss) (4) 4,646,461 3,694,407 Unrealized appreciation (depreciation) of investments during the period (570) (3,012,527) 26,745,397 --------------------------------------------------- Increase (decrease) in net assets derived from operations (590) 21,295,664 32,539,061 --------------------------------------------------- FROM CAPITAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums 9,866 44,224,611 60,597,996 Transfer of terminations 60 (16,323,096) (22,612,737) Transfer of policy loans 0 (948,697) (1,911,415) Net interfund transfers 27,965 30,761 23,790 --------------------------------------------------- 37,891 26,983,579 36,097,634 -------------------------------------------------- Net increase in net assets 37,301 48,279,243 68,636,695 NET ASSETS Beginning of Year 0 256,016,607 187,379,912 -------------------------------------------------- End of Period $37,301 $304,295,850 $256,016,607 ===================================================
** Reflects the period from commencement of operations May 1, 1998 through June 30, 1998 See accompanying notes. 85 Separate Account Four of The Manufacturers Life Insurance Company of America Notes to Financial Statements June 30, 1998 1. ORGANIZATION Separate Account Four of The Manufacturers Life Insurance Company of America (the "Separate Account") is a unit investment trust registered under the Investment Company Act of 1940, as amended. The Separate Account is comprised of investment sub-accounts available for allocation of net premiums under variable universal life insurance policies (the "policies") issued by The Manufacturers Life Insurance Company of America ("Manufacturers Life of America"). The Separate Account was established by Manufacturers Life of America, a life insurance company organized in 1983 under Michigan law. Manufacturers Life of America is an indirect, wholly-owned subsidiary of The Manufacturers Life Insurance Company ("Manulife Financial"), a Canadian mutual life insurance company. On January 1, 1996, Manulife Financial merged with North American Life Assurance Company and, as a result, acquired control of NASL Series Trust which, effective October 31, 1997, was renamed Manufacturers Investment Trust. Each investment sub-account invests solely in shares of a particular Manufacturers Investment Trust and, prior to the merger, Manulife Series Fund are registered under the Investment Company Act of 1940 as open-end management investment companies. The Small Company Value Trust was added to the Separate Account on May 1, 1998, and the International Small Cap and Blue Chip Growth Trusts were added to the Separate Account on January 1, 1997 as investment options for variable universal life policy holders of Manufacturers Life of America. The Science & Technology, Pilgram Baxter Growth, Small/Mid Cap, Worldwide Growth, Global Equity, Growth, Value, International Growth and Income, High Yield, Strategic Bond, Global Government Bond, Investment Quality Bond, Lifestyle Aggressive 1000, Lifestyle Growth 820, Lifestyle Balanced 640 and Lifestyle Moderate 460 Trusts were added to the Separate Account on May 1, 1997 as investment options for variable universal life policy holders of Manufacturers Life of America. The Equity Index Fund, Equity, Value Equity, Growth and Income, U.S. Government Securities, Conservative Asset Allocation, Moderate Asset Allocation and Aggressive Asset Allocation Trusts were added to the Separate Account on February 14, 1996 as investment options for policy holders of Manufacturers Life of America. Effective December 31, 1996, Manulife Series Fund, Inc. was merged into the Manufacturers Investment Trust (formerly the NASL Series Trust). As a result, the following sub-accounts of the Separate Account were renamed to correspond with the fund names of the Manufacturers Investment Trust. 86 Separate Account Four of The Manufacturers Life Insurance Company of America Notes to Financial Statements (continued) 1. ORGANIZATION (continued) MANULIFE SERIES FUND, INC. MANUFACTURERS INVESTMENT TRUST SUB-ACCOUNTS SUB-ACCOUNTS Emerging Growth Equity Fund Emerging Growth Trust Common Stock Fund Quantitative Equity Trust Real Estate Securities Fund Real Estate Securities Trust Balanced Asset Fund Balanced Trust Capital Growth Bond Fund Capital Growth Bond Trust Money Market Fund Money Market Trust International Fund International Stock Trust Pacific Rim Emerging Markets Fund Pacific Rim Emerging Markets Trust Equity Index Fund Equity Index Trust All references hereinafter to Manufacturers Investment Trust would have been to Manulife Series Fund, Inc. prior to December 31, 1996. Manufacturers Life of America is the legal owner of the Separate Account. Manufacturers Life of America is required to maintain assets in the Separate Account with a total market value at least equal to the reserves and other liabilities relating to the 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 policies are general corporate obligations of Manufacturers Life of America. 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. 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 thirty-six Trusts of Manufacturers Investment Trust and are valued at the reported net asset values of these Trusts. Transactions are recorded on the trade date. Net investment income and net realized gains on investments in Manufacturers Investment Trust are reinvested. 87 Separate Account Four of The Manufacturers Life Insurance Company of America Notes to Financial Statements (continued) 2. SIGNIFICANT ACCOUNTING POLICIES (continued) b. Realized gains and losses on the sale of investments are computed on the first-in, first-out basis. c. Dividend income is recorded on the ex-dividend date. d. Federal Income Taxes - Manufacturers Life of America, the Separate Account's sponsor, is taxed as a "life insurance company" under the Internal Revenue Code. Under these provisions of the Code, the operations of the Separate Account form part of the sponsor's total operations and are not taxed separately. The current year's operations of the Separate Account are not expected to affect the sponsor's tax liabilities and, accordingly, no charges were made against the Separate Account for federal, state and local taxes. However, in the future, should the sponsor incur significant tax liabilities related to the Separate Account's operations, it intends to make a charge or establish a provision within the Separate Account for such taxes. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. MORTALITY AND EXPENSE RISKS CHARGE Manufacturers Life of America deducts from the assets of the Separate Account a daily charge equivalent to an annual rate of 0.65% of the average net value of the Separate Account's assets for mortality and expense risks. 4. PREMIUM DEDUCTIONS Manufacturers Life of America deducts certain charges for state, local and federal taxes from the gross single premium and any additional premiums before placing the remaining net premiums in the sub-accounts. 88 Separate Account Four of The Manufacturers Life Insurance Company of America Notes to Financial Statements (continued) 5. PURCHASES AND SALES OF MANUFACTURERS INVESTMENT TRUST SHARES Purchases and sales of the shares of common stock of Manufacturers Investment Trust for the period ended June 30, 1998 were $63,493,756 and $37,435,367 respectively, and for the year ended December 31, 1997 were $82,099,182 and $43,206,372 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 and The Manufacturers Life Insurance Company (U.S.A.), 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. 89 Financial Statements Separate Account Four of The Manufacturers Life Insurance Company of America Three years ended December 31, 1997 with Report of Independent Auditors F-1 90 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA FINANCIAL STATEMENTS Three years ended December 31, 1997 CONTENTS Report of Independent Auditors.............................. F-3 Audited Financial Statements Statement of Assets and Liabilities......................... F-4 Statements of Operations.................................... F-6 Statements of Changes in Net Assets......................... F-16 Notes to Financial Statements............................... F-25
F-2 91 REPORT OF INDEPENDENT AUDITORS To the Board of Directors THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA We have audited the accompanying statement of assets and liabilities of Separate Account Four of The Manufacturers Life Insurance Company of America as of December 31, 1997 and the related statements of operations and changes in net assets for each of the three years in the period then ended. These financial statements are the responsibility of The Manufacturers Life Insurance Company of America's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1997, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Separate Account Four of The Manufacturers Life Insurance Company of America at December 31, 1997 and the results of its operations and the changes in its net assets for each of the three years in the period then ended, in conformity with generally accepted accounting principles. /S/ ERNST & YOUNG LLP Philadelphia, Pennsylvania January 30, 1998 F-3 92 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENT OF ASSETS AND LIABILITIES December 31, 1997
SUB-ACCOUNT NET ASSET UNITS NET ASSET VALUE OUTSTANDING VALUE PER UNIT ------------ ----------- -------------- Assets Investment in NASL Series Trust -- at market value: Emerging Growth Trust, 2,572,854 shares (cost $53,335,356) .......................................... $ 62,082,970 985,538 $62.99 Quantitative Equity Trust, 1,538,349 shares (cost $25,536,654)........................................... 34,612,842 838,471 41.28 Real Estate Securities Trust, 1,223,838 shares (cost $18,828,988)........................................... 24,562,432 585,031 41.98 Balanced Trust, 2,566,305 shares (cost $40,736,425)...... 49,606,670 1,673,314 29.65 Capital Growth Bond Trust, 1,156,348 shares ($12,733,397) 13,702,722 634,378 21.60 Money Market Trust, 651,683 shares (cost $6,516,833)..... 6,516,833 405,767 16.06 International Stock Trust 585,099 shares (cost $6,763,961)............................................ 6,711,083 564,394 11.89 Pacific Rim Emerging Markets Trust, 327,300 shares (cost $3,499,065)............................................ 2,343,464 314,757 7.45 Equity Index Trust, 554,062 shares (cost $6,900,704)..... 6,914,699 456,400 15.15 Equity Trust, 372,734 shares (cost $7,721,678)........... 8,013,789 598,385 13.39 Value Equity Trust, 324,916 shares (cost $4,941,787)..... 5,601,556 384,812 14.56 Growth and Income Trust, 344,786 shares (cost $7,309,943) 8,236,938 534,426 15.41 U.S. Government Securities Trust, 48,952 shares (cost $650,865).............................................. 660,852 60,219 10.97 Conservative Asset Allocation Trust, 48,041 shares (cost $548,689).............................................. 565,927 48,861 11.58 Moderate Asset Allocation Trust, 143,650 shares (cost $1,765,274)............................................ 1,860,264 151,848 12.25 Aggressive Asset Allocation Trust, 223,612 shares (cost $3,110,389)............................................ 3,211,067 249,829 12.85 International Small Cap Trust, 40,459 shares (cost $569,422).............................................. 554,288 44,121 12.56 Blue Chip Growth Trust, 301,138 shares (cost $4,281,141)............................................ 4,517,068 283,306 15.94 Science & Technology Trust, 106,411 shares (cost $1,481,032)............................................ 1,449,315 103,504 14.00 Pilgram Baxter Growth Trust, 23,164 shares (cost $291,371) ............................................. 289,545 20,008 14.47 Small/Mid Cap Trust, 116,648 shares (cost $1,838,763).... 1,797,552 118,271 15.20 Worldwide Growth Trust, 14,336 shares (cost $202,912).... 201,276 14,765 13.63 Global Equity Trust, 175,361 shares (cost $3,255,628).... 3,398,506 234,026 14.52 Growth Trust, 101,948 shares (cost $1,711,584)........... 1,754,522 117,710 14.91 Value Trust, 92,766 shares (cost $1,378,207)............. 1,372,938 95,372 14.40 International Growth and Income Trust, 1,913 shares (cost $22,155)............................................... 21,058 1,694 12.43 High Yield Trust, 61,865 shares (cost $861,542).......... 838,893 60,819 13.79 Strategic Bond Trust, 32,872 shares (cost $396,279)...... 406,950 30,002 13.56 Global Government Bond Trust, 575 shares (cost $7,900)... 8,086 615 13.15 Investment Quality Bond Trust, 38,731 shares (cost $464,328).............................................. 469,813 34,727 13.53 Lifestyle Aggressive 1000 Trust, 34,945 shares (cost $469,603).............................................. 470,707 33,008 14.26 Lifestyle Growth 820 Trust, 168,071 shares (cost $2,306,612)............................................ 2,314,333 163,331 14.17 Lifestyle Balanced 640 Trust, 62,700 shares (cost $833,040) ............................................. 850,217 60,557 14.04 Lifestyle Moderate 460 Trust, 7,298 shares (cost $97,071)............................................... 97,432 7,065 13.79 ------------ Net assets................................................. $256,016,607 ============
See accompanying notes. F-4 93 (This page intentionally left blank.) F-5 94 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENTS OF OPERATIONS
EMERGING GROWTH QUANTITATIVE EQUITY SUB-ACCOUNT SUB-ACCOUNT -------------------------------------- ------------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/97 DEC. 31/96 DEC. 31/95 DEC. 31/97 DEC. 31/96 DEC. 31/95 ----------- ----------- ---------- ---------- ---------- ---------- Investment income: Dividend income................................. $ -- $ 8,843,524 $1,225,634 $ -- $3,890,071 $ -- Expenses: Mortality and expense risks charge.............. 373,014 368,823 270,835 197,730 151,076 105,143 ----------- ----------- ---------- ---------- ---------- ---------- Net investment (loss) income...................... (373,014) 8,474,701 954,799 (197,730) 3,738,995 (105,143) ----------- ----------- ---------- ---------- ---------- ---------- Realized and unrealized gain (loss) on investments: Realized gain (loss) from security transactions: Proceeds from sales........................... 10,933,692 6,561,190 2,832,896 3,733,685 3,065,148 1,361,365 Cost of securities sold....................... 9,991,336 4,628,761 2,206,988 2,720,036 2,226,724 1,152,296 ----------- ----------- ---------- ---------- ---------- ---------- Net realized gain (loss)........................ 942,356 1,932,429 625,908 1,013,649 838,424 209,069 ----------- ----------- ---------- ---------- ---------- ---------- Unrealized appreciation (depreciation) of investments: Beginning of year............................. 586,387 8,388,250 111,061 2,395,112 3,250,703 (784,068) End of year................................... 8,747,614 586,387 8,388,250 9,076,188 2,395,112 3,250,703 ----------- ----------- ---------- ---------- ---------- ---------- Net unrealized appreciation (depreciation) during the year............................... 8,161,227 (7,801,863) 8,277,189 6,681,076 (855,591) 4,034,771 ----------- ----------- ---------- ---------- ---------- ---------- Net realized and unrealized gain (loss) on investments..................................... 9,103,583 (5,869,434) 8,903,097 7,694,725 (17,167) 4,243,840 ----------- ----------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets derived from operations...................................... $ 8,730,569 $ 2,605,267 $9,857,896 $7,496,995 $3,721,828 $4,138,697 =========== =========== ========== ========== ========== ==========
* Reflects the period from commencement of operations February 14, 1996 through December 31, 1996. ** Reflects the period from commencement of operations May 1, 1997 through December 31, 1997. See accompanying notes. F-6 95 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENTS OF OPERATIONS (CONTINUED)
REAL ESTATE SECURITIES BALANCED CAPITAL GROWTH BOND SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------------------------ -------------------------------------- ------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/97 DEC. 31/96 DEC. 31/95 DEC. 31/97 DEC. 31/96 DEC. 31/95 DEC. 31/97 DEC. 31/96 DEC. 31/95 ---------- ---------- ---------- ---------- ----------- ----------- ---------- ---------- ----------- $ -- $3,089,196 $ 226,773 $ -- $ 6,191,018 $ 46,122 $ -- $ 813,220 $ 886,880 138,789 97,165 78,656 312,899 274,346 212,093 88,739 86,787 68,677 ---------- ---------- ---------- ---------- ----------- ----------- ---------- ---------- ----------- (138,789) 2,992,031 148,117 (312,899) 5,916,672 (165,971) (88,739) 726,433 818,203 ---------- ---------- ---------- ---------- ----------- ----------- ---------- ---------- ----------- 2,341,949 2,069,989 1,615,880 7,720,982 3,782,322 3,475,264 2,670,789 2,257,680 933,993 1,932,587 1,848,111 1,447,729 6,543,277 3,146,020 3,283,870 2,837,578 2,354,529 952,316 ---------- ---------- ---------- ---------- ----------- ----------- ---------- ---------- ----------- 409,362 221,878 168,151 1,177,705 636,302 191,394 (166,789) (96,849) (18,323) ---------- ---------- ---------- ---------- ----------- ----------- ---------- ---------- ----------- 2,357,828 829,392 (567,347) 2,233,057 4,756,710 (2,255,674) (322,754) 29,751 (1,013,152) 5,733,444 2,357,828 829,392 8,870,245 2,233,057 4,756,710 969,325 (322,754) 29,751 ---------- ---------- ---------- ---------- ----------- ----------- ---------- ---------- ----------- 3,375,616 1,528,436 1,396,739 6,637,188 (2,523,653) 7,012,384 1,292,079 (352,505) 1,042,903 ---------- ---------- ---------- ---------- ----------- ----------- ---------- ---------- ----------- 3,784,978 1,750,314 1,564,890 7,814,893 (1,887,351) 7,203,778 1,125,290 (449,354) 1,024,580 ---------- ---------- ---------- ---------- ----------- ----------- ---------- ---------- ----------- $3,646,189 $4,742,345 $1,713,007 $7,501,994 $ 4,029,321 $ 7,037,807 $1,036,551 $ 277,079 $ 1,842,783 ========== ========== ========== ========== =========== =========== ========== ========== ===========
F-7 96 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENTS OF OPERATIONS (CONTINUED)
MONEY MARKET INTERNATIONAL STOCK SUB-ACCOUNT SUB-ACCOUNT ------------------------------------ ------------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/97 DEC. 31/96 DEC. 31/95 DEC. 31/97 DEC. 31/96 DEC. 31/95 ---------- ---------- ---------- ---------- ---------- ---------- Investment income: Dividend income................................... $ 363,575 $ 522,633 $ 268 $ 91,567 $102,007 $ 42,811 Expenses: Mortality and expense risks charge................ 47,049 38,258 36,426 31,392 18,357 7,535 ---------- ---------- ---------- ---------- -------- -------- Net investment (loss) income........................ 316,526 484,375 (36,158) 60,175 83,650 35,276 ---------- ---------- ---------- ---------- -------- -------- Realized and unrealized gain (loss) on investments: Realized gain (loss) from security transactions: Proceeds from sales............................. 6,596,321 4,574,935 3,529,055 1,816,518 481,615 71,517 Cost of securities sold......................... 6,872,137 4,366,887 3,419,405 1,550,916 416,277 69,179 ---------- ---------- ---------- ---------- -------- -------- Net realized gain (loss).......................... (275,816) 208,048 109,650 265,602 65,338 2,338 ---------- ---------- ---------- ---------- -------- -------- Unrealized appreciation (depreciation) of investments: Beginning of year............................... (275,826) 165,832 (31,424) 231,185 110,424 (924) End of year..................................... -- (275,826) 165,832 (52,878) 231,185 110,424 ---------- ---------- ---------- ---------- -------- -------- Net unrealized appreciation (depreciation) during the year........................................ 275,826 (441,658) 197,256 (284,063) 120,761 111,348 ---------- ---------- ---------- ---------- -------- -------- Net realized and unrealized gain (loss) on investments....................................... 10 (233,610) 306,906 (18,461) 186,099 113,686 ---------- ---------- ---------- ---------- -------- -------- Net increase (decrease) in net assets derived from operations........................................ $ 316,536 $ 250,765 $ 270,748 $ 41,714 $269,749 $148,962 ========== ========== ========== ========== ======== ========
* Reflects the period from commencement of operations February 14, 1996 through December 31, 1996. ** Reflects the period from commencement of operations May 1, 1997 through December 31, 1997. See accompanying notes. F-8 97 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENTS OF OPERATIONS (CONTINUED)
PACIFIC RIM EMERGING MARKETS EQUITY INDEX EQUITY VALUE EQUITY VALUE EQUITY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------------------------------- -------------------------- -------------------------- ------------ ------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED *PERIOD ENDED YEAR ENDED *PERIOD ENDED YEAR ENDED *PERIOD ENDED DEC. 31/97 DEC. 31/96 DEC. 31/95 DEC. 31/97 DEC. 31/96 DEC. 31/97 DEC. 31/96 DEC. 31/97 DEC. 31/96 ------------ ----------- ---------- ---------- ------------- ---------- ------------- ------------ ------------- $ 6,802 $ 152,468 $ 16,639 $868,880 $ 79,858 $1,074,319 $ 37,137 $406,015 $ 14,881 22,205 18,290 5,651 21,448 4,113 39,559 12,389 24,945 6,019 ----------- --------- -------- -------- -------- ---------- -------- -------- -------- (15,403) 134,178 10,988 847,432 75,745 1,034,760 24,748 381,070 8,862 ----------- --------- -------- -------- -------- ---------- -------- -------- -------- 1,610,390 936,603 56,135 170,943 42,748 1,651,482 646,845 573,549 90,317 1,704,271 774,951 56,923 133,983 39,927 1,627,042 622,356 498,698 88,968 ----------- --------- -------- -------- -------- ---------- -------- -------- -------- (93,881) 161,652 (788) 36,960 2,821 24,440 24,489 74,851 1,349 ----------- --------- -------- -------- -------- ---------- -------- -------- -------- 5,325 114,318 (5,485) 46,173 -- 270,657 -- 162,428 -- (1,155,601) 5,325 114,318 13,995 46,173 292,111 270,657 659,769 162,428 ----------- --------- -------- -------- -------- ---------- -------- -------- -------- (1,160,926) (108,993) 119,803 (32,178) 46,173 21,454 270,657 497,341 162,428 ----------- --------- -------- -------- -------- ---------- -------- -------- -------- (1,254,807) 52,659 119,015 4,782 48,994 45,894 295,146 572,192 163,777 ----------- --------- -------- -------- -------- ---------- -------- -------- -------- $(1,270,210) $ 186,837 $130,003 $852,214 $124,739 $1,080,654 $319,894 $953,262 $172,639 =========== ========= ======== ======== ======== ========== ======== ======== ========
F-9 98 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENTS OF OPERATIONS (CONTINUED)
U.S. GOVERNMENT CONSERVATIVE GROWTH AND INCOME SECURITIES ASSET ALLOCATION SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------------------- -------------------------- -------------------------- YEAR ENDED *PERIOD ENDED YEAR ENDED *PERIOD ENDED YEAR ENDED *PERIOD ENDED DEC. 31/97 DEC. 31/96 DEC. 31/97 DEC. 31/96 DEC. 31/97 DEC. 31/96 ---------- ------------- ---------- ------------- ---------- ------------- Investment income: Dividend income.......................... $ 274,008 $ 461 $ 19,990 $ -- $34,960 $ -- Expenses: Mortality and expense risks charge....... 32,434 4,797 2,737 849 2,565 685 ---------- -------- -------- -------- ------- ------- Net investment (loss) income............... 241,574 (4,336) 17,253 (849) 32,395 (685) ---------- -------- -------- -------- ------- ------- Realized and unrealized gain (loss) on investments: Realized gain (loss) from security transactions: Proceeds from sales.................... 912,556 376,632 590,817 322,161 13,446 43,255 Cost of securities sold................ 705,805 332,811 580,482 317,325 12,672 40,504 ---------- -------- -------- -------- ------- ------- Net realized gain (loss)................. 206,751 43,821 10,335 4,836 774 2,751 ---------- -------- -------- -------- ------- ------- Unrealized appreciation (depreciation) of investments: Beginning of year...................... 145,719 -- 3,780 -- 7,208 -- End of year............................ 926,995 145,719 9,987 3,780 17,238 7,208 ---------- -------- -------- -------- ------- ------- Net unrealized appreciation (depreciation) during the year......... 781,276 145,719 6,207 3,780 10,030 7,208 ---------- -------- -------- -------- ------- ------- Net realized and unrealized gain (loss) on investments.............................. 988,027 189,540 16,542 8,616 10,804 9,959 ---------- -------- -------- -------- ------- ------- Net increase (decrease) in net assets derived from operations.................. $1,229,601 $185,204 $ 33,795 $ 7,767 $43,199 $ 9,274 ========== ======== ======== ======== ======= =======
* Reflects the period from commencement of operations February 14, 1996 through December 31, 1996. ** Reflects the period from commencement of operations May 1, 1997 through December 31, 1997. See accompanying notes. F-10 99 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENTS OF OPERATIONS (CONTINUED)
**PILGRAM MODERATE AGGRESSIVE INTERNATIONAL BLUE CHIP **SCIENCE & BAXTER ASSET ALLOCATION ASSET ALLOCATION SMALL CAP GROWTH TECHNOLOGY GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ----------------------------- ----------------------------- ------------- ------------- ------------- ------------- YEAR ENDED *PERIOD ENDED YEAR ENDED *PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED DEC. 31/97 DEC. 31/96 DEC. 31/97 DEC. 31/96 DEC. 31/97 DEC. 31/97 DEC. 31/97 DEC. 31/97 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- $ 98,004 $ -- $ 63,599 $ 2,110 $ 46 $ 55,879 $ 22,881 $ -- 8,091 2,050 6,368 1,342 2,815 6,989 853 764 -------- ------- -------- ------- -------- -------- -------- ------- 89,913 (2,050) 57,231 768 (2,769) 48,890 22,028 (764) -------- ------- -------- ------- -------- -------- -------- ------- 474,116 31,213 294,332 86,943 461,080 205,667 19,777 4,772 439,434 29,641 275,851 82,784 450,930 217,790 18,232 4,339 -------- ------- -------- ------- -------- -------- -------- ------- 34,682 1,572 18,481 4,159 10,150 (12,123) 1,545 433 -------- ------- -------- ------- -------- -------- -------- ------- 36,462 -- 19,871 -- -- -- -- -- 94,990 36,462 100,678 19,871 (15,134) 235,927 (31,717) (1,826) -------- ------- -------- ------- -------- -------- -------- ------- 58,528 36,462 80,807 19,871 (15,134) 235,927 (31,717) (1,826) -------- ------- -------- ------- -------- -------- -------- ------- 93,210 38,034 99,288 24,030 (4,984) 223,804 (30,172) (1,393) -------- ------- -------- ------- -------- -------- -------- ------- $183,123 $35,984 $156,519 $24,798 $ (7,753) $272,694 $ (8,144) $(2,157) ======== ======= ======== ======= ======== ======== ======== =======
F-11 100 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENTS OF OPERATIONS (CONTINUED)
**GLOBAL **SMALL/MID **WORLDWIDE EQUITY **GROWTH CAP GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ----------- ----------- ------------ ------------ PERIOD PERIOD PERIOD ENDED PERIOD ENDED ENDED ENDED DEC. 31/97 DEC. 31/97 DEC. 31/97 DEC. 31/97 ------------ ------------ ----------- ----------- Investment income: Dividend income........................................ $ -- $ 1,726 $ -- $ -- Expenses: Mortality and expense risks charge..................... 1,669 142 2,697 1,748 -------- ------- -------- ------- Net investment (loss) income................................ (1,669) 1,584 (2,697) (1,748) -------- ------- -------- ------- Realized and unrealized gain (loss) on investments: Realized gain (loss) from security transactions: Proceeds from sales............................... 95,793 3,228 28,974 4,007 Cost of securities sold........................... 96,560 3,203 27,932 3,543 -------- ------- -------- ------- Net realized gain (loss)............................... (767) 25 1,042 464 -------- ------- -------- ------- Unrealized appreciation (depreciation) of investments: Beginning of year................................. -- -- -- -- End of year....................................... (41,211) (1,636) 142,878 42,938 -------- ------- -------- ------- Net unrealized appreciation (depreciation) during the year................................................. (41,211) (1,636) 142,878 42,938 -------- ------- -------- ------- Net realized and unrealized gain (loss) on investments...... (41,978) (1,611) 143,920 43,402 -------- ------- -------- ------- Net increase (decrease) in net assets derived from operations................................................ $(43,647) $ (27) $141,223 $41,654 ======== ======= ======== =======
* Reflects the period from commencement of operations February 14, 1996 through December 31, 1996. ** Reflects the period from commencement of operations May 1, 1997 through December 31, 1997. See accompanying notes. F-12 101 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENTS OF OPERATIONS (CONTINUED)
**INTERNATIONAL **GLOBAL GROWTH AND **STRATEGIC GOVERNMENT **INVESTMENT **VALUE INCOME **HIGH YIELD BOND BOND QUALITY BOND SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT - ------------ --------------- ------------ ------------ ------------ ------------ PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED DEC. 31/97 DEC. 31/97 DEC. 31/97 DEC. 31/97 DEC. 31/97 DEC. 31/97 - ------------ --------------- ------------ ------------ ------------ ------------ $42,077 $ -- $ 31,277 $ -- $ -- $ -- 1,979 61 1,095 827 17 391 ------- ------- -------- ------- ---- ------ 40,098 (61) 30,182 (827) (17) (391) ------- ------- -------- ------- ---- ------ 10,858 4,308 80,117 6,519 131 2,867 9,724 4,568 75,733 6,233 128 2,800 ------- ------- -------- ------- ---- ------ 1,134 (260) 4,384 286 3 67 ------- ------- -------- ------- ---- ------ -- -- -- -- -- -- (5,269) (1,097) (22,649) 10,671 186 5,485 ------- ------- -------- ------- ---- ------ (5,269) (1,097) (22,649) 10,671 186 5,485 ------- ------- -------- ------- ---- ------ (4,135) (1,357) (18,265) 10,957 189 5,552 ------- ------- -------- ------- ---- ------ $35,963 $(1,418) $ 11,917 $10,130 $172 $5,161 ======= ======= ======== ======= ==== ======
F-13 102 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENTS OF OPERATIONS (CONTINUED)
**LIFESTYLE **LIFESTYLE **LIFESTYLE **LIFESTYLE AGGRESSIVE GROWTH BALANCED MODERATE 1000 820 640 460 SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT TOTAL ------------ ------------ ------------ ------------ --------------------------------------- PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/97 DEC. 31/97 DEC. 31/97 DEC. 31/97 DEC. 31/97 DEC. 31/96 DEC. 31/95 ------------ ------------ ------------ ------------ ----------- ----------- ----------- Investment income: Dividend income........... $ 954 $ 16,099 $ 6,641 $653 $ 3,479,952 $23,738,584 $ 2,445,127 Expenses: Mortality and expense risks charge............ 798 5,554 2,300 32 1,380,695 1,085,346 785,016 ------ -------- ------- ---- ----------- ----------- ----------- Net investment (loss) income.................... 156 10,545 4,341 621 2,099,257 22,653,238 1,660,111 ------ -------- ------- ---- ----------- ----------- ----------- Realized and unrealized gain (loss) on investments: Realized gain (loss) from security transactions: Proceeds from sales..... 22,090 139,748 10,642 227 43,206,372 25,369,596 13,876,105 Cost of securities sold.................. 20,473 133,241 10,202 229 39,511,965 21,316,576 12,588,706 ------ -------- ------- ---- ----------- ----------- ----------- Net realized gain (loss).................. 1,617 6,507 440 (2) 3,694,407 4,053,020 1,287,399 ------ -------- ------- ---- ----------- ----------- ----------- Unrealized appreciation (depreciation) of investments: Beginning of year....... -- -- -- -- 7,902,612 17,645,380 (4,547,013) End of year............. 1,104 7,721 17,177 361 34,648,009 7,902,612 17,645,380 ------ -------- ------- ---- ----------- ----------- ----------- Net unrealized appreciation (depreciation) during the year................ 1,104 7,721 17,177 361 26,745,397 (9,742,768) 22,192,393 ------ -------- ------- ---- ----------- ----------- ----------- Net realized and unrealized gain (loss) on investments............... 2,721 14,228 17,617 359 30,439,804 (5,689,748) 23,479,792 ------ -------- ------- ---- ----------- ----------- ----------- Net increase (decrease) in net assets derived from operations................ $2,877 $ 24,773 $21,958 $980 $32,539,061 $16,963,490 $25,139,903 ====== ======== ======= ==== =========== =========== ===========
* Reflects the period from commencement of operations February 14, 1996 through December 31, 1996. ** Reflects the period from commencement of operations May 1, 1997 through December 31, 1997. See accompanying notes. F-14 103 (This page intentionally left blank) F-15 104 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENTS OF CHANGES IN NET ASSETS
EMERGING GROWTH QUANTITATIVE EQUITY SUB-ACCOUNT SUB-ACCOUNT ---------------------------------------- --------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/97 DEC. 31/96 DEC. 31/95 DEC. 31/97 DEC. 31/96 DEC. 31/95 ------------ ----------- ----------- ----------- ----------- ----------- FROM OPERATIONS Net investment (loss) income..................... $ (373,014) $ 8,474,701 $ 954,799 $ (197,730) $ 3,738,995 $ (105,143) Net realized gain (loss)..... 942,356 1,932,429 625,908 1,013,649 838,424 209,069 Net unrealized appreciation (depreciation) of investments during the year....................... 8,161,227 (7,801,863) 8,277,189 6,681,076 (855,591) 4,034,771 ------------ ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets derived from operations................. 8,730,569 2,605,267 9,857,896 7,496,995 3,721,828 4,138,697 ------------ ----------- ----------- ----------- ----------- ----------- FROM CAPITAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums... 10,968,515 14,023,834 15,756,405 5,269,678 4,853,989 5,345,309 Transfer of terminations... (5,398,115) (5,184,577) (4,775,355) (3,038,289) (1,960,658) (2,397,088) Transfer of policy loans... (624,209) (629,038) (383,960) (229,614) (199,046) (139,168) Net interfund transfers.... (10,114,334) (4,559,177) 808,068 (447,386) (1,140,965) 601,941 ------------ ----------- ----------- ----------- ----------- ----------- (5,168,143) 3,651,042 11,405,158 1,554,389 1,553,320 3,410,994 ------------ ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets................. 3,562,426 6,256,309 21,263,054 9,051,384 5,275,148 7,549,691 NET ASSETS Beginning of year............ 58,520,544 52,264,235 31,001,181 25,561,458 20,286,310 12,736,619 ------------ ----------- ----------- ----------- ----------- ----------- End of year.................. $ 62,082,970 $58,520,544 $52,264,235 $34,612,842 $25,561,458 $20,286,310 ============ =========== =========== =========== =========== ===========
* Reflects the period from commencement of operations February 14, 1996 through December 31, 1996. ** Reflects the period from commencement of operations May 1, 1997 through December 31, 1997. See accompanying notes. F-16 105 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENTS OF CHANGES IN NET ASSETS
REAL ESTATE SECURITIES BALANCED CAPITAL GROWTH BOND SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------------------------------- --------------------------------------- --------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/97 DEC. 31/96 DEC. 31/95 DEC. 31/97 DEC. 31/96 DEC. 31/95 DEC. 31/97 DEC. 31/96 DEC. 31/95 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- $ (138,789) $ 2,992,031 $ 148,117 $ (312,899) $ 5,916,672 $ (165,971) $ (88,739) $ 726,433 $ 818,203 409,362 221,878 168,151 1,177,705 636,302 191,394 (166,789) (96,849) (18,323) 3,375,616 1,528,436 1,396,739 6,637,188 (2,523,653) 7,012,384 1,292,079 (352,505) 1,042,903 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 3,646,189 4,742,345 1,713,007 7,501,994 4,029,321 7,037,807 1,036,551 277,079 1,842,783 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 3,087,313 2,765,182 4,283,407 7,548,194 8,726,978 10,932,103 1,927,024 2,665,999 3,119,374 (2,187,862) (1,467,190) (1,478,397) (5,118,735) (3,748,227) (3,544,462) (1,630,139) (923,256) (1,316,692) (150,861) (101,471) (43,920) (520,775) (345,242) (305,026) (60,413) (81,852) (67,747) 1,362,290 (1,015,253) (1,220,289) (5,272,252) (2,422,119) (1,831,364) (1,458,915) (809,388) 730,548 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 2,110,880 181,268 1,540,801 (3,363,568) 2,211,390 5,251,251 (1,222,443) 851,503 2,465,483 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 5,757,069 4,923,613 3,253,808 4,138,426 6,240,711 12,289,058 (185,892) 1,128,582 4,308,266 18,805,363 13,881,750 10,627,942 45,468,244 39,227,533 26,938,475 13,888,614 12,760,032 8,451,766 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- $24,562,432 $18,805,363 $13,881,750 $49,606,670 $45,468,244 $39,227,533 $13,702,722 $13,888,614 $12,760,032 =========== =========== =========== =========== =========== =========== =========== =========== ===========
F-17 106 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
MONEY MARKET INTERNATIONAL STOCK SUB-ACCOUNT SUB-ACCOUNT -------------------------------------- ------------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/97 DEC. 31/96 DEC. 31/95 DEC. 31/97 DEC. 31/96 DEC. 31/95 ----------- ----------- ---------- ---------- ---------- ---------- FROM OPERATIONS Net investment (loss) income...................... $ 316,526 $ 484,375 $ (36,158) $ 60,175 $ 83,650 $ 35,276 Net realized gain (loss)...... (275,816) 208,048 109,650 265,602 65,338 2,338 Net unrealized appreciation (depreciation) of investments during the year........................ 275,826 (441,658) 197,256 (284,063) 120,761 111,348 ----------- ----------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets derived from operations.................. 316,536 250,765 270,748 41,714 269,749 148,962 ----------- ----------- ---------- ---------- ---------- ---------- FROM CAPITAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums.... 3,105,289 2,628,791 2,577,889 2,524,804 870,119 468,861 Transfer of terminations.... (1,271,291) (956,767) (782,380) (503,518) (194,570) (114,292) Transfer of policy loans.... 17,308 (13,756) (36,007) (88,083) (27,661) (8,567) Net interfund transfers..... (2,379,177) (1,146,057) (642,476) 871,148 1,135,964 1,045,046 ----------- ----------- ---------- ---------- ---------- ---------- (527,871) 512,211 1,117,026 2,804,351 1,783,852 1,391,048 ----------- ----------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets...................... (211,335) 762,976 1,387,774 2,846,065 2,053,601 1,540,010 NET ASSETS Beginning of year............. 6,728,168 5,965,192 4,577,418 3,865,018 1,811,417 271,407 ----------- ----------- ---------- ---------- ---------- ---------- End of year................... $ 6,516,833 $ 6,728,168 $5,965,192 $6,711,083 $3,865,018 $1,811,417 =========== =========== ========== ========== ========== ==========
* Reflects the period from commencement of operations February 14, 1996 through December 31, 1996. ** Reflects the period from commencement of operations May 1, 1997 through December 31, 1997. See accompanying notes. F-18 107 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
PACIFIC RIM EMERGING MARKETS EQUITY INDEX EQUITY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------------------------- -------------------------- -------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED *PERIOD ENDED YEAR ENDED *PERIOD ENDED DEC. 31/97 DEC. 31/96 DEC. 31/95 DEC. 31/97 DEC. 31/96 DEC. 31/97 DEC. 31/96 ----------- ---------- ---------- ---------- ------------- ---------- ------------- $ (15,403) $ 134,178 $ 10,988 $ 847,432 $ 75,745 $1,034,760 $ 24,748 (93,881) 161,652 (788) 36,960 2,821 24,440 24,489 (1,160,926) (108,993) 119,803 (32,178) 46,173 21,454 270,657 ----------- ---------- ---------- ---------- ---------- ---------- ---------- (1,270,210) 186,837 130,003 852,214 124,739 1,080,654 319,894 ----------- ---------- ---------- ---------- ---------- ---------- ---------- 858,191 683,676 339,577 3,106,131 279,042 3,023,077 961,034 (808,786) (201,928) (84,460) (166,672) (38,180) (778,177) (85,993) (65,080) (20,049) (7,956) (3,054) (3,251) (30,340) (8,149) (58,053) 1,647,145 839,514 1,961,503 802,227 582,252 2,949,537 ----------- ---------- ---------- ---------- ---------- ---------- ---------- (73,728) 2,108,844 1,086,675 4,897,908 1,039,838 2,796,812 3,816,429 ----------- ---------- ---------- ---------- ---------- ---------- ---------- (1,343,938) 2,295,681 1,216,678 5,750,122 1,164,577 3,877,466 4,136,323 3,687,402 1,391,721 175,043 1,164,577 -- 4,136,323 -- ----------- ---------- ---------- ---------- ---------- ---------- ---------- $ 2,343,464 $3,687,402 $1,391,721 $6,914,699 $1,164,577 $8,013,789 $4,136,323 =========== ========== ========== ========== ========== ========== ==========
F-19 108 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
U.S. GOVERNMENT VALUE EQUITY GROWTH AND INCOME SECURITIES SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------------------- --------------------------- --------------------------- YEAR ENDED *PERIOD ENDED YEAR ENDED *PERIOD ENDED YEAR ENDED *PERIOD ENDED DEC. 31/97 DEC. 31/96 DEC. 31/97 DEC. 31/96 DEC. 31/97 DEC. 31/96 ---------- ------------- ---------- ------------- ---------- ------------- FROM OPERATIONS Net investment (loss) income........ $ 381,070 $ 8,862 $ 241,574 $ (4,336) $ 17,253 $ (849) Net realized gain (loss)............ 74,851 1,349 206,751 43,821 10,335 4,836 Net unrealized appreciation (depreciation) of investments during the year................... 497,341 162,428 781,276 145,719 6,207 3,780 ---------- ---------- ---------- ---------- -------- --------- Net increase (decrease) in net assets derived from operations.... 953,262 172,639 1,229,601 185,204 33,795 7,767 ---------- ---------- ---------- ---------- -------- --------- FROM CAPITAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums.......... 856,465 351,584 2,327,523 316,929 112,190 18,521 Transfer of terminations.......... (394,553) (35,519) (494,932) (36,051) (28,622) (299,154) Transfer of policy loans.......... (21,910) (4,090) (11,939) (439) (10,083) -- Net interfund transfers........... 2,113,454 1,610,224 3,120,002 1,601,040 378,086 448,352 ---------- ---------- ---------- ---------- -------- --------- 2,553,456 1,922,199 4,940,654 1,881,479 451,571 167,719 ---------- ---------- ---------- ---------- -------- --------- Net increase (decrease) in net assets............................ 3,506,718 2,094,838 6,170,255 2,066,683 485,366 175,486 NET ASSETS Beginning of year................... 2,094,838 -- 2,066,683 -- 175,486 -- ---------- ---------- ---------- ---------- -------- --------- End of year......................... $5,601,556 $2,094,838 $8,236,938 $2,066,683 $660,852 $ 175,486 ========== ========== ========== ========== ======== =========
* Reflects the period from commencement of operations February 14, 1996 through December 31, 1996. ** Reflects the period from commencement of operations May 1, 1997 through December 31, 1997. See accompanying notes. F-20 109 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
CONSERVATIVE MODERATE AGGRESSIVE INTERNATIONAL BLUE CHIP ASSET ALLOCATION ASSET ALLOCATION ASSET ALLOCATION SMALL CAP GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------------------- -------------------------- -------------------------- ------------- ----------- YEAR ENDED *PERIOD ENDED YEAR ENDED *PERIOD ENDED YEAR ENDED *PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31/97 DEC. 31/96 DEC. 31/97 DEC. 31/96 DEC. 31/97 DEC. 31/96 DEC. 31/97 DEC. 31/97 ---------- ------------- ---------- ------------- ---------- ------------- ------------- ----------- $ 32,395 $ (685) $ 89,913 $ (2,050) $ 57,231 $ 768 $ (2,769) $ 48,890 774 2,751 34,682 1,572 18,481 4,159 10,150 (12,123) 10,030 7,208 58,528 36,462 80,807 19,871 (15,134) 235,927 -------- -------- ---------- -------- ---------- -------- -------- ---------- 43,199 9,274 183,123 35,984 156,519 24,798 (7,753) 272,694 -------- -------- ---------- -------- ---------- -------- -------- ---------- 107,136 44,311 887,517 131,528 2,451,770 67,783 78,736 3,002,085 (13,120) (5,606) (176,631) (12,696) (230,373) (10,117) (20,504) (121,898) -- -- (10) (1,206) (296) (1,206) (2,010) (545) 285,503 95,230 254,676 557,979 471,051 281,138 505,819 1,364,732 -------- -------- ---------- -------- ---------- -------- -------- ---------- 379,519 133,935 965,552 675,605 2,692,152 337,598 562,041 4,244,374 -------- -------- ---------- -------- ---------- -------- -------- ---------- 422,718 143,209 1,148,675 711,589 2,848,671 362,396 554,288 4,517,068 143,209 -- 711,589 -- 362,396 -- -- -- -------- -------- ---------- -------- ---------- -------- -------- ---------- $565,927 $143,209 $1,860,264 $711,589 $3,211,067 $362,396 $554,288 $4,517,068 ======== ======== ========== ======== ========== ======== ======== ==========
F-21 110 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
**PILGRAM **SCIENCE & BAXTER **SMALL/MID **WORLDWIDE **GLOBAL TECHNOLOGY GROWTH CAP GROWTH EQUITY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------ ------------ ------------ ------------ ------------ PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED DEC. 31/97 DEC. 31/97 DEC. 31/97 DEC. 31/97 DEC. 31/97 ------------ ------------ ------------ ------------ ------------ FROM OPERATIONS Net investment (loss) income..................... $ 22,028 $ (764) $ (1,669) $ 1,584 $ (2,697) Net realized gain (loss)......................... 1,545 433 (767) 25 1,042 Net unrealized appreciation (depreciation) of investments during the year.................... (31,717) (1,826) (41,211) (1,636) 142,878 ---------- -------- ---------- -------- ---------- Net increase (decrease) in net assets derived from operations................................ (8,144) (2,157) (43,647) (27) 141,223 ---------- -------- ---------- -------- ---------- FROM CAPITAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums....................... 1,280,093 52,430 1,504,311 3,589 3,088,398 Transfer of terminations....................... (8,796) (3,413) (24,555) (385) (47,709) Transfer of policy loans....................... -- -- -- -- -- Net interfund transfers........................ 186,162 242,685 361,443 198,099 216,594 ---------- -------- ---------- -------- ---------- 1,457,459 291,702 1,841,199 201,303 3,257,283 ---------- -------- ---------- -------- ---------- Net increase (decrease) in net assets............ 1,449,315 289,545 1,797,552 201,276 3,398,506 NET ASSETS Beginning of year................................ -- -- -- -- -- ---------- -------- ---------- -------- ---------- End of year...................................... $1,449,315 $289,545 $1,797,552 $201,276 $3,398,506 ========== ======== ========== ======== ==========
* Reflects the period from commencement of operations February 14, 1996 through December 31, 1996. ** Reflects the period from commencement of operations May 1, 1997 through December 31, 1997 See accompanying notes. F-22 111 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
**INTERNATIONAL **GLOBAL GROWTH AND **HIGH **STRATEGIC GOVERNMENT **GROWTH **VALUE INCOME YIELD BOND BOND SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT - ------------ ------------ --------------- ------------ ------------ ------------ PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED DEC. 31/97 DEC. 31/97 DEC. 31/97 DEC. 31/97 DEC. 31/97 DEC. 31/97 - ------------ ------------ --------------- ------------ ------------ ------------ $ (1,748) $ 40,098 $ (61) $ 30,182 $ (827) $ (17) 464 1,134 (260) 4,384 286 3 42,938 (5,269) (1,097) (22,649) 10,671 186 ---------- ---------- ------- -------- -------- ------ 41,654 35,963 (1,418) 11,917 10,130 172 ---------- ---------- ------- -------- -------- ------ 1,408,136 811,955 1,816 563,344 174,730 185 (22,975) (29,096) (376) (17,818) (7,767) (187) -- (4,630) -- (2,703) (83) (52) 327,707 558,746 21,036 284,153 229,940 7,968 ---------- ---------- ------- -------- -------- ------ 1,712,868 1,336,975 22,476 826,976 396,820 7,914 ---------- ---------- ------- -------- -------- ------ 1,754,522 1,372,938 21,058 838,893 406,950 8,086 -- -- -- -- -- -- ---------- ---------- ------- -------- -------- ------ $1,754,522 $1,372,938 $21,058 $838,893 $406,950 $8,086 ========== ========== ======= ======== ======== ======
F-23 112 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
**LIFESTYLE **LIFESTYLE **LIFESTYLE **LIFESTYLE **INVESTMENT AGGRESSIVE GROWTH BALANCED MODERATE QUALITY BOND 1000 820 640 460 SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT TOTAL ------------- ------------ ------------ ------------ ------------ ------------ PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED DEC. 31/97 DEC. 31/97 DEC. 31/97 DEC. 31/97 DEC. 31/97 DEC. 31/97 ------------- ------------ ------------ ------------ ------------ ------------ FROM OPERATIONS Net investment (loss) income...... $ (391) $ 156 $ 10,545 $ 4,341 $ 621 $ 2,099,257 Net realized gain (loss).......... 67 1,617 6,507 440 (2) 3,694,407 Net unrealized appreciation (depreciation) of investments during the year................. 5,485 1,104 7,721 17,177 361 26,745,397 -------- -------- ---------- -------- ------- ------------ Net increase (decrease) in net assets derived from operations...................... 5,161 2,877 24,773 21,958 980 32,539,061 -------- -------- ---------- -------- ------- ------------ FROM CAPITAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums........ 298,577 33,139 104,216 30,549 890 60,597,996 Transfer of terminations........ (8,387) (7,521) (42,295) (8,966) (274) (22,612,737) Transfer of policy loans........ -- (10,340) (91,693) -- -- (1,911,415) Net interfund transfers......... 174,462 452,552 2,319,332 806,676 95,836 23,790 -------- -------- ---------- -------- ------- ------------ 464,652 467,830 2,289,560 828,259 96,452 36,097,634 -------- -------- ---------- -------- ------- ------------ Net increase (decrease) in net assets.......................... 469,813 470,707 2,314,333 850,217 97,432 68,636,695 NET ASSETS Beginning of year................. -- -- -- -- -- 187,379,912 -------- -------- ---------- -------- ------- ------------ End of year....................... $469,813 $470,707 $2,314,333 $850,217 $97,432 $256,016,607 ======== ======== ========== ======== ======= ============ TOTAL --------------------------- YEAR ENDED YEAR ENDED DEC. 31/96 DEC. 31/95 ------------ ------------ FROM OPERATIONS Net investment (loss) income...... $ 22,653,238 $ 1,660,111 Net realized gain (loss).......... 4,053,020 1,287,399 Net unrealized appreciation (depreciation) of investments during the year................. (9,742,768) 22,192,393 ------------ ------------ Net increase (decrease) in net assets derived from operations...................... 16,963,490 25,139,903 ------------ ------------ FROM CAPITAL TRANSACTIONS Additions (deductions) from: Transfer of net premiums........ 39,389,300 42,822,925 Transfer of terminations........ (15,160,489) (14,493,126) Transfer of policy loans........ (1,436,456) (992,351) Net interfund transfers......... 35,877 330,988 ------------ ------------ 22,828,232 27,668,436 ------------ ------------ Net increase (decrease) in net assets.......................... 39,791,722 52,808,339 NET ASSETS Beginning of year................. 147,588,190 94,779,851 ------------ ------------ End of year....................... $187,379,912 $147,588,190 ============ ============
* Reflects the period from commencement of operations February 14, 1996 through December 31, 1996. ** Reflects the period from commencement of operations May 1, 1997 through December 31, 1997. See accompanying notes. F-24 113 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA NOTES TO FINANCIAL STATEMENTS December 31, 1997 1. ORGANIZATION Separate Account Four of The Manufacturers Life Insurance Company of America (the "Separate Account") is a unit investment trust registered under the Investment Company Act of 1940, as amended. The Separate Account is comprised of investment sub-accounts available for allocation of net premiums under variable universal life insurance policies (the "Policies") issued by The Manufacturers Life Insurance Company of America ("Manufacturers Life of America"). The Separate Account was established by Manufacturers Life of America, a life insurance company organized in 1983 under Michigan law. Manufacturers Life of America is an indirect, wholly-owned subsidiary of The Manufacturers Life Insurance Company ("Manulife Financial"), a Canadian mutual life insurance company. On January 1, 1996, Manulife Financial merged with North American Life Assurance Company and, as a result, acquired control of the NASL Series Trust which, effective October 31, 1997, was renamed Manufacturers Investment Trust. Each investment sub-account invests solely in shares of a particular Manufacturers Investment Trust or, prior to the merger, a Manulife Series Fund. Manufacturers Investment Trust and, prior to the merger, Manulife Series Fund are registered under the Investment Company Act of 1940 as open-end management investment companies. The International Small Cap and Blue Chip Growth Trusts were added to the Separate Account on January 1, 1997 as investment options for variable universal life policy holders of Manufacturers Life of America. The Science & Technology, Pilgram Baxter Growth, Small/Mid Cap, Worldwide Growth, Global Equity, Growth, Value, International Growth and Income, High Yield, Strategic Bond, Global Government Bond, Investment Quality Bond, Lifestyle Aggressive 1000, Lifestyle Growth 820, Lifestyle Balanced 640 and Lifestyle Moderate 460 Trusts were added to the Separate Account on May 1, 1997 as investment options for valuable universal life policy holders of Manufacturers Life of America. The Equity Index Fund, Equity, Value Equity, Growth and Income, U.S. Government Securities, Conservative Asset Allocation, Moderate Asset Allocation, and Aggressive Asset Allocation Trusts, were added to the Separate Account on February 14, 1996 as investment options for policy holders of Manufacturers Life of America. Effective December 31, 1996, Manulife Series Fund, Inc. was merged into the Manufacturers Investment Trust (formerly the NASL Series Trust). As a result, the following sub-accounts of the Separate Account were renamed to correspond with the fund names of the Manufacturers Investment Trust.
MANULIFE SERIES FUND, INC. MANUFACTURERS INVESTMENT TRUST SUB-ACCOUNTS SUB-ACCOUNTS -------------------------- ------------------------------ Emerging Growth Equity Fund Emerging Growth Trust Common Stock Fund Quantitative Equity Trust Real Estate Securities Fund Real Estate Securities Trust Balanced Assets Fund Balanced Trust Capital Growth Bond Fund Capital Growth Bond Trust Money Market Fund Money Market Trust International Fund International Stock Trust Pacific Rim Emerging Markets Fund Pacific Rim Emerging Markets Trust Equity Index Fund Equity Index Trust
All references hereinafter to Manufacturers Investment Trust would have been to Manulife Series Fund, Inc. prior to December 31, 1996. F-25 114 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Manufacturers Life of America is the legal owner of the Separate Account. Manufacturers Life of America is required to maintain assets in the Separate Account with a total market value at least equal to the reserves and other liabilities relating to the 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 policies are general corporate obligations of Manufacturers Life of America. 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. 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 thirty-four Trusts of Manufacturers Investment Trust and are valued at the reported net asset values of these Trusts. Transactions are recorded on the trade date. Net investment income and net realized gains on investments in Manufacturers Investment Trust are reinvested. b. Realized gains and losses on the sale of investments are computed on the first-in, first-out basis. c. Dividend income is recorded on the ex-dividend date. d. Federal Income Taxes -- Manufacturers Life of America, the Separate Account's sponsor, is taxed as a "life insurance company" under the Internal Revenue Code. Under these provisions of the Code, the operations of the Separate Account form part of the sponsor's total operations and are not taxed separately. The current year's operations of the Separate Account are not expected to affect the sponsor's tax liabilities and, accordingly, no charges were made against the Separate Account for federal, state and local taxes. However, in the future, should the sponsor incur significant tax liabilities related to the Separate Account's operations, it intends to make a charge or establish a provision within the Separate Account for such taxes. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. MORTALITY AND EXPENSE RISKS CHARGE Manufacturers Life of America deducts from the assets of the Separate Account a daily charge equivalent to an annual rate of 0.65% of the average net value of the Separate Account's assets for mortality and expense risks. 4. PREMIUM DEDUCTIONS Manufacturers Life of America deducts a sales charge of 3% and a charge of 2% to cover state premium taxes from the gross single premium and any additional premiums before placing the remaining net premiums in the sub-accounts. F-26 115 SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 5. PURCHASES AND SALES OF MANUFACTURERS INVESTMENT TRUST SHARES Purchases and sales of the shares of common stock of Manufacturers Investment Trust for the year ended December 31, 1997 were $82,099,182 and $43,206,372, respectively, and for the year ended December 31, 1996 were $70,957,210 and $25,369,596, 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 and The Manufacturers Life Insurance Company (U.S.A.), 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. F-27 116 CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 WITH REPORT OF INDEPENDENT AUDITORS CONTENTS Report of Independent Auditors.............................. F-29 Audited Consolidated Financial Statements Consolidated Balance Sheets................................. F-30 Consolidated Statements of Income........................... F-31 Consolidated Statements of Changes in Capital And Surplus... F-32 Consolidated Statements of Cash Flows....................... F-33 Notes to Consolidated Financial Statements.................. F-34
F-28 117 REPORT OF INDEPENDENT AUDITORS The Board of Directors THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA We have audited the accompanying consolidated balance sheets of The Manufacturers Life Insurance Company of America as of December 31, 1997 and 1996, and the related consolidated statements of income, changes in capital and surplus and cash flows for each of the three years in the period ended December 31, 1997. 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 financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Manufacturers Life Insurance Company of America at December 31, 1997 and 1996, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP ERNST & YOUNG LLP Philadelphia, Pennsylvania March 20, 1998 F-29 118 THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31 ----------------------- 1997 1996 ---------- ---------- ASSETS ($ THOUSANDS) Investments: Securities available-for-sale, at fair value: (note 4) Fixed maturity (amortized cost: 1997 $66,565; 1996 $50,456).............................................. $ 67,893 $ 51,708 Equity (cost: 1997 $20,153; 1996 $19,450).............. 19,460 21,572 Mortgage loans......................................... 131 645 Policy loans........................................... 14,673 9,822 Cash and short-term investments........................ 22,012 17,493 ---------- ---------- Total investments........................................... $ 124,169 $ 101,240 ========== ========== Guaranteed annuity contracts (note 5)....................... $ -- $ 171,691 Deferred acquisition costs (note 6)......................... 130,355 102,610 Income taxes recoverable.................................... 5,679 10,549 Deferred income taxes (note 7).............................. -- 1,041 Other assets................................................ 9,364 7,378 Separate account assets..................................... 897,044 668,094 ---------- ---------- Total assets................................................ $1,166,611 $1,062,603 ========== ========== LIABILITIES, CAPITAL AND SURPLUS ($ THOUSANDS) Liabilities: Policyholder liabilities and accruals.................. $ 94,477 $ 91,915 Bonds payable (note 5)................................. -- 158,760 Notes payable (note 8)................................. 41,500 8,500 Due to affiliates...................................... 13,943 11,122 Deferred income taxes (note 7)......................... 1,174 -- Other liabilities...................................... 11,704 7,582 Separate account liabilities........................... 897,044 668,094 ---------- ---------- Total liabilities........................................... $1,052,842 $ 945,973 Capital and Surplus: Common shares (note 9)................................. $ 4,502 $ 4,502 Preferred shares (note 9).............................. 10,500 10,500 Contributed surplus.................................... 98,569 98,569 Retained earnings (deficit)............................ (1,910) 1,726 Foreign currency translation adjustment................ (5,272) -- Net unrealized gains on securities available-for-sale (note 4).............................................. 380 1,333 ---------- ---------- Total capital and surplus................................... $ 106,769 $ 116,630 ---------- ---------- Total liabilities, capital and surplus...................... $1,166,611 $1,062,603 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. F-30 119 THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31 --------------------------------- 1997 1996 1995 --------- --------- --------- ($ THOUSANDS) Revenue: Premiums............................................... $ 5,334 $ 12,898 $ 15,293 Fee income............................................. 41,955 40,434 24,986 Net investment income (note 4)......................... 8,275 19,651 18,729 Realized investment gains (losses)..................... 118 (119) 3,084 Other.................................................. 544 668 82 ------- -------- -------- Total Revenue............................................... $56,226 $ 73,532 $ 62,174 ------- -------- -------- Benefits and expenses: Policyholder benefits and claims....................... $ 6,733 $ 14,473 $ 16,905 Operating costs and expenses........................... 41,742 34,581 30,728 Commissions............................................ 2,838 10,431 5,859 Amortization of deferred acquisition costs (note 6).... 4,860 13,240 5,351 Interest expense....................................... 2,750 12,251 12,251 Policyholder dividends................................. 1,416 872 1,886 ------- -------- -------- Total benefits and expenses................................. 60,339 85,848 72,980 ------- -------- -------- Loss before income taxes.................................... (4,113) (12,316) (10,806) ------- -------- -------- Income tax benefit (note 7)................................. 477 3,909 3,960 ------- -------- -------- Net loss.................................................... $(3,636) $ (8,407) $ (6,846) ======= ======== ========
The accompanying notes are an integral part of these consolidated financial statements. F-31 120 THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
NET UNREALIZED FOREIGN TOTAL RETAINED GAINS (LOSSES) CURRENCY CAPITAL CAPITAL CONTRIBUTED EARNINGS ON SECURITIES TRANSLATION AND STOCK SURPLUS (DEFICIT) AVAILABLE-FOR-SALE ADJUSTMENT SURPLUS ------- ----------- --------- ------------------ ----------- -------- ($ THOUSANDS) FOR THE YEARS ENDED DECEMBER 31 1997 Balance, January 1.................... $15,002 $98,569 $ 1,726 $1,333 -- $116,630 Net loss during the year......... (3,636) (3,636) Change in unrealized gain (loss) net of taxes (note 4).......... (953) (953) Other............................ (5,272) (5,272) ------- ------- ------- ------ ------- -------- Balance, December 31 (Note 9)......... $15,002 $98,569 $(1,910) $ 380 $(5,272) $106,769 ------- ------- ------- ------ ------- -------- 1996 Balance, January 1.................... $15,002 $83,569 $10,133 $1,816 -- $110,520 Net loss during the year......... (8,407) (8,407) Change in unrealized gain (loss), net of taxes (note 4).......... (483) (483) Issuance of shares (note 9)...... 15,000 15,000 ------- ------- ------- ------ ------- -------- Balance, December 31.................. $15,002 $98,569 $ 1,726 $1,333 -- $116,630 ------- ------- ------- ------ ------- -------- 1995 Balance, January 1.................... $15,002 $70,999 $16,979 $(1,141) -- $101,839 Net loss during the year......... (6,846) (6,846) Change in unrealized gain (loss), net of taxes................... 0 2,957 2,957 Issuance of shares (note 9)...... 12,570 12,570 ------- ------- ------- ------ ------- -------- Balance, December 31.................. $15,002 $83,569 $10,133 $1,816 -- $110,520 ------- ------- ------- ------ ------- --------
The accompanying notes are an integral part of these consolidated financial statements. F-32 121 THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31 -------------------------------- 1997 1996 1995 --------- --------- -------- ($ THOUSANDS) OPERATING ACTIVITIES: Net Loss.................................................... $ (3,636) $ (8,407) $ (6,846) Adjustments to reconcile net loss to net cash used in operating activities: Additions (decreases) to policy liabilities............ (2,147) 3,287 7,329 Deferred acquisition costs............................. (33,544) (36,024) (28,147) Amortization of deferred acquisition costs............. 4,860 13,240 5,351 Realized (gains) losses on investments................. (118) 119 (3,084) Decreases to deferred income taxes..................... 2,730 777 1,168 Other.................................................. 7,144 6,540 (5,336) --------- --------- -------- Net cash used in operating activities....................... (24,711) (20,468) (29,565) INVESTING ACTIVITIES: Fixed maturity securities sold.............................. 73,772 120,234 67,507 Fixed maturity securities purchased......................... (89,763) (108,401) (76,402) Equity securities sold...................................... 10,586 25,505 6,500 Equity securities purchased................................. (11,289) (22,203) (1,726) Mortgage loans repaid....................................... 514 6,669 77,086 Policy loans advanced....................................... (4,851) (2,867) (2,461) Guaranteed annuity contracts................................ 171,691 (16,356) (79,710) --------- --------- -------- Cash provided by (used in) investing activities............. 150,660 2,581 (9,206) FINANCING ACTIVITIES: Receipts from variable life and annuity policies credited to policyholder account balances............................. 7,582 5,493 9,017 Withdrawals of policyholder account balances on variable life and annuity policies................................. (3,252) (2,994) (3,173) Bonds payable repaid........................................ (158,760) -- -- Issuance of shares.......................................... -- 15,000 12,570 Issuance of promissory note................................. 33,000 -- -- Issuance of surplus notes................................... -- -- 8,500 --------- --------- -------- Cash provided by (used in) financing activities............. (121,430) 17,499 26,914 --------- --------- -------- CASH AND SHORT-TERM INVESTMENTS: Increase (decrease) during the year......................... 4,519 (388) (11,857) Balance, beginning of year.................................. 17,493 17,881 29,738 --------- --------- -------- BALANCE, END OF YEAR........................................ $ 22,012 $ 17,493 $ 17,881 ========= ========= ========
The accompanying notes are an integral part of these consolidated financial statements. F-33 122 THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 (IN THOUSANDS OF DOLLARS) 1. ORGANIZATION The Manufacturers Life Insurance Company of America ("ManAmerica" or the "Company") is a wholly-owned subsidiary of The Manufacturers Life Insurance Company (U.S.A.) ("ManUSA" or the "Parent"), which is in turn an indirectly owned subsidiary of The Manufacturers Life Insurance Company ("Manulife Financial"), a Canadian-based mutual life insurance company. The Company markets variable annuity and variable life products in the United States and traditional insurance products in Taiwan. 2. BASIS OF PRESENTATION a) Adoption of Generally Accepted Accounting Principles The accompanying consolidated financial statements of The Manufacturers Life Insurance Company of America and its wholly-owned subsidiaries have been prepared in accordance with generally accepted accounting principles ("GAAP"). Prior to 1996, the Company prepared its financial statements in conformity with statutory accounting practices prescribed or permitted by the Insurance Department of the State of Michigan which practices were considered GAAP for mutual life insurance companies and their wholly-owned direct and indirect subsidiaries. Financial Accounting Standard Board Interpretation 40, "Applicability of Generally Accepted Accounting Principles to Mutual Life Insurance and Other Enterprises" ("FIN 40") as amended, which is effective for 1996 annual financial statements and thereafter, no longer permits statutory based financial statements to be described as being prepared in conformity with GAAP. Accordingly, the Company has adopted GAAP including Statement of Financial Accounting Standards 120 ("FAS 120"), "Accounting and Reporting by Mutual Life Insurance Enterprises and by Insurance Enterprises for Certain Long Duration Participating Contracts", which addresses the accounting for long-duration insurance and reinsurance contracts, including all participating business. Pursuant to the requirements of FIN 40 and FAS 120, the effect of the changes in accounting have been applied retroactively and the previously issued 1995 financial statements have been restated for the change. The adoption had the effect of increasing net income for 1995 by approximately $6,859. b) Recent Accounting Standards In 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("FAS") No. 129 "Disclosure of Information about Capital Structure," FAS No. 130 "Reporting Comprehensive Income," and FAS No. 131 "Disclosures about Segments of an Enterprise and Related Information." These new accounting standards, which will be effective for the 1998 financial statements, will result primarily in additional disclosures in the Company's financial statements and are not expected to have a material effect on the Company's financial position and results of operations. c) Reorganization On December 20, 1995, Manulife Reinsurance Corporation (U.S.A.) ("MRC") transferred to the Company all of the common and preferred shares of Manufacturers Adviser Corporation ("MAC"), an investment adviser registered under the Investment Advisers Act of 1940. On December 31, 1996, ManUSA transferred to the Company all of the common and preferred shares of Manulife Holding Corporation ("Holdco"), an investment holding company. Holdco has primarily two wholly-owned subsidiaries, ManEquity Inc., a registered broker/dealer, and the Manufacturers Life Mortgage F-34 123 THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Securities Corporation ("MLMSC"), an issuer of mortgage-backed US Dollar bonds. The Company then transferred all the common and preferred shares of MAC to Holdco for two shares of $1 common stock of Holdco. These transfers have been accounted for using the pooling-of-interests method of accounting. Under this method, the assets, liabilities, capital and surplus, revenues and expenses of each separate entity are combined retroactively at their historical carrying values to form the financial statements of the Company for all periods presented to give effect to the reorganization as if the structure in place at December 31, 1996 had been in place as of the earliest period presented in these consolidated financial statements. The accounts of all subsidiary companies are therefore combined and all significant inter-company balances and transactions are eliminated on combination. In addition, the capital and surplus of the Company has been restated retroactively to reflect the capital structure in place at December 31, 1996. The revenues and net income reported by the separate entities and the combined amounts presented in the accompanying consolidated financial statements are as follows:
FOR THE YEARS ENDED DECEMBER 31 ------------------- 1996 1995 -------- -------- ($ THOUSANDS) Revenue: ManAmerica................................... $54,404 $45,655 Holdco....................................... 15,543 13,828 MAC.......................................... 3,585 2,691 ------- ------- Total revenue.................................. $73,532 $62,174 ======= ======= Net Income (loss): ManAmerica................................... $(8,676) $(7,402) Holdco....................................... (670) (10) MAC.......................................... 939 566 ------- ------- Total net loss................................. $(8,407) $(6,846) ======= =======
In October 1997, MLMSC was absorbed into Holdco subsequent to the maturity and repayment of the mortgage-backed US dollar bonds. All assets and liabilities of MLMSC were transferred to Holdco at their respective book values. 3. SIGNIFICANT ACCOUNTING POLICIES a) Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from reported results using those estimates. b) Investments The Company classifies all of its fixed maturity and equity securities as available-for-sale and records these securities at fair value. Realized gains and losses on sales of securities classified as available-for-sale are recognized in net income using the specific identification method. Changes in the fair value of securities available-for-sale are reflected directly in surplus after adjustments for deferred taxes and deferred acquisition costs. Discounts and premiums on investments are amortized using the effective interest method. F-35 124 THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Mortgage loans are reported at amortized cost, net of a provision for losses. The provision for losses is established for mortgage loans which are considered to be impaired when the Company has determined that it is probable that all amounts due under contractual terms will not be collected. Impaired loans are reported at the lower of unpaid principal or fair value of the underlying collateral. Policy loans are reported at aggregate unpaid balances which approximate fair value. Short-term investments include investments with maturities of less than one year at the date of acquisition. c) Deferred Acquisition Costs (DAC) Commissions and other expenses which vary with and are primarily related to the production of new business are deferred to the extent recoverable and included as an asset. DAC associated with variable annuity and variable life insurance contracts is charged to expense in relation to the estimated gross profits of those contracts. The amortization is adjusted retrospectively when estimates of current or future gross profits are revised. DAC associated with traditional life insurance policies is charged to expense over the premium paying period of the related policies. DAC is adjusted for the impact on estimated future gross profits assuming the unrealized gains or losses on securities had been realized at year-end. The impact of any such adjustments is included in net unrealized gains (losses) in Capital and Surplus. DAC is reviewed annually to determine recoverability from future income and, if not recoverable, it is immediately expensed. d) Policyholder Liabilities For variable annuity and variable life contracts, reserves equal the policyholder account value. Account values are increased for deposits received and interest credited and are reduced by withdrawals, mortality charges and administrative expenses charged to the policyholders. Policy charges which compensate the Company for future services are deferred and recognized in income over the period earned, using the same assumptions used to amortize DAC. Policyholder liabilities for traditional life insurance policies sold in Taiwan are computed using the net level premium method and are based upon estimates as to future mortality, persistency, maintenance expense and interest rate yields that were established in the year of issue. e) Separate Accounts Separate account assets and liabilities represent funds that are separately administered, principally for variable annuity and variable life contracts, and for which the contract holder, rather than the Company, bears the investment risk. Separate account contract holders have no claim against the assets of the general account of the Company. Separate account assets are recorded at market value. Operations of the separate accounts are not included in the accompanying financial statements. f) Revenue Recognition Fee income from variable annuity and variable life insurance policies consists of policy charges for the cost of insurance, expenses and surrender charges that have been assessed against the policy account balances. Policy charges that are designed to compensate the company for future services are deferred and recognized in income over the period benefited, using the same assumptions used to amortize DAC. Premiums on long-duration life insurance contracts are recognized as revenue when due. Investment income is recorded when due. F-36 125 THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) g) Expenses Expenses for variable annuity and variable life insurance policies include interest credited to policy account balances and benefit claims incurred during the period in excess of policy account balances. h) Reinsurance The Company is routinely involved in reinsurance transactions in order to minimize exposure to large risks. Life reinsurance is accomplished through various plans including yearly renewable term, co-insurance and modified co-insurance. Reinsurance premiums and claims are accounted for on a basis consistent with that used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums and claims are reported net of reinsured amounts. Amounts paid with respect to ceded reinsurance contracts are reported as reinsurance receivables in other assets. i) Foreign Exchange The Company's Taiwanese branch balance sheet and statement of income are translated at the current exchange and average exchange rates for the year respectively. The resultant translation adjustments are included as a separate component in capital and surplus. In prior years, there were no reported translation adjustments as there were no significant movements in foreign currency exchange rates. j) Income Tax Income taxes have been provided for in accordance with Statement of Financial Accounting Standards 109 ("FAS109") "Accounting for Income Taxes." The Company joins ManUSA, MRC, Capitol Bankers Life Insurance Company and Manulife Reinsurance Limited ("MRL") in filing a U.S. consolidated income tax return as a life insurance group under provisions of the Internal Revenue Code. In accordance with an income tax sharing agreement, the Company's income tax provision (or benefit) is computed as if the Company filed a separate income tax return. Tax benefits from operating losses are provided at the U.S. statutory rate plus any tax credits attributable to the Company, provided the consolidated group utilizes such benefits currently. Deferred income taxes result from temporary differences between the tax basis of assets and liabilities and their recorded amounts for financial reporting purposes. Income taxes recoverable represents amounts due from ManUSA in connection with the consolidated return. 4. INVESTMENTS AND INVESTMENT INCOME a) Fixed Maturity and Equity Securities At December 31, 1997, all fixed maturity and equity securities have been classified as available-for-sale and reported at fair value. The amortized cost and fair value is summarized as follows:
GROSS GROSS UNREALIZED AMORTIZED COST UNREALIZED GAINS LOSSES FAIR VALUE ----------------- ----------------- --------------- ----------------- 1997 1996 1997 1996 1997 1996 1997 1996 ------- ------- ------- ------- ------- ----- ------- ------- ($ THOUSANDS) AS AT DECEMBER 31, Fixed maturity securities: U.S. government......... $51,694 $ 9,219 $ 937 $ 386 $ (135) $ (98) $52,496 $ 9,507 Foreign governments..... 6,922 9,227 203 221 (14) (8) 7,111 9,440 Corporate............... 7,949 32,010 415 981 (78) (230) 8,286 32,761 ------- ------- ------ ------ ------- ----- ------- ------- Total fixed maturity securities........... $66,565 $50,456 $1,555 $1,588 $ (227) $(336) $67,893 $51,708 Equity securities....... $20,153 $19,450 $1,496 $2,134 $(2,189) $ (12) $19,460 $21,572 ------- ------- ------ ------ ------- ----- ------- -------
F-37 126 THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Proceeds from sales of fixed maturity securities during 1997 were $73,772 (1996 $120,234; 1995 $67,507). Gross gains of $955 and gross losses of $837 were realized on those sales (1996 $1,858 and $1,837; 1995 $2,630 and $218 respectively). Proceeds from sale of equity securities during 1997 were $10,586 (1996 $25,505; 1995 $6,500). Gross gains of $NIL and gross losses of $NIL were realized on those sales (1996 $NIL and $140; 1995 $785 and $113 respectively). The contractual maturities of fixed maturity securities at December 31, 1997 are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without prepayment penalties. Corporate requirements and investment strategies may result in the sale of investments before maturity.
AMORTIZED COST FAIR VALUE -------------- ---------- ($ THOUSANDS) Fixed maturity securities One year or less................................ $ 1,654 $ 1,651 Greater than 1; up to 5 years................... 3,876 3,953 Greater than 5; up to 10 years.................. 50,353 50,655 Due after 10 years.............................. 10,682 11,634 ------- ------- Total fixed maturity securities................... $66,565 $67,893 ======= =======
UNREALIZED GAINS (LOSSES) ON SECURITIES AVAILABLE-FOR-SALE Net unrealized gains (losses) on fixed maturity and equity securities included in capital and surplus were as follows:
AS AT DECEMBER 31 --------------------- 1997 1996 ------- ------- ($ THOUSANDS) Gross unrealized gains............................ $ 3,051 $ 3,722 Gross unrealized losses........................... (2,416) (348) DAC and other fair value adjustments.............. (50) (1,321) Deferred income taxes............................. (205) (720) ------- ------- Net unrealized gains (losses) on securities available-for-sale.............................. $ 380 $ 1,333 ------- -------
F-38 127 THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) b) Investment Income Income by type of investment was as follows:
FOR THE YEARS ENDED DECEMBER 31 ---------------------------------- 1997 1996 1995 ------ ------- ------- ($ THOUSANDS) Fixed maturity securities............................ $4,545 $ 4,447 $ 4,430 Mortgage loans....................................... 67 278 3,076 Equity securities.................................... 331 671 646 Guaranteed annuity contracts......................... 2,796 13,196 9,691 Other investments.................................... 705 1,419 1,235 ------ ------- ------- Gross investment income.............................. 8,444 20,011 19,078 ------ ------- ------- Investment expenses.................................. 169 360 349 ------ ------- ------- Net Investment Income................................ $8,275 $19,651 $18,729 ====== ======= =======
5. GUARANTEED ANNUITY CONTRACTS AND BONDS PAYABLE The Company's wholly-owned subsidiary, Manufacturers Life Mortgage Securities Corporation, has historically invested amounts received as repayments of mortgage loans in annuities issued by ManUSA. These annuities were collateral for the 8 1/4% mortgage-backed bonds payable. On March 1, 1997 the annuities matured and the proceeds were used to repay the bonds payable. In October 1997, MLMSC was absorbed into Manulife Holding Corporation. 6. DEFERRED ACQUISITION COSTS The components of the change in DAC were as follows:
FOR THE YEARS ENDED DECEMBER 31 --------------------------------- 1997 1996 1995 --------- --------- --------- ($ THOUSANDS) Balance at January 1,................................. $102,610 $ 78,829 $ 60,124 Capitalization........................................ 33,544 36,024 28,147 Accretion of interest................................. 9,357 6,344 4,992 Amortization.......................................... (16,864) (19,159) (10,852) Effect of net unrealized gains (losses) on securities available for sale.................................. 1,268 996 (4,091) Other................................................. 440 (424) 509 -------- -------- -------- Balance at December 31................................ $130,355 $102,610 $ 78,829 ======== ======== ========
F-39 128 THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 7. INCOME TAXES Components of income tax benefit were as follows:
FOR THE YEARS ENDED DECEMBER 31 --------------------------------- 1997 1996 1995 --------- --------- --------- ($ THOUSANDS) Current expense (benefit)................... $(3,207) $(4,686) $(5,128) Deferred expense (benefit).................. 2,730 777 1,168 ------- ------- ------- Total Benefit............................... $ (477) $(3,909) $(3,960) ======= ======= =======
The Company's deferred income tax liability, which results from tax effecting the differences between financial statement values and tax values of assets and liabilities at each balance sheet date, relates to the following:
AS OF DECEMBER 31 ------------------- 1997 1996 -------- -------- ($ THOUSANDS) Deferred tax assets: Differences in computing policy reserves.......... $34,291 $28,508 Policyholder dividends payable.................... 240 283 Investments....................................... 793 -- ------- ------- Deferred tax assets.................................... $35,324 $28,791 ======= ======= Deferred tax liabilities: Deferred acquisition costs........................ $30,682 $25,522 Investments....................................... 166 928 Other deferred tax liabilities.................... 5,650 1,300 ------- ------- Deferred tax liabilities............................... 36,498 27,750 ------- ------- Net deferred tax assets (liabilities).................. $(1,174) $ 1,041 ======= =======
The Company and its US insurance affiliates have available capital loss carryforwards of $4,800 which will begin to expire in 1999 and can only be used by Capitol Bankers Life Insurance Company. 8. NOTES PAYABLE a) The Company has an outstanding surplus debenture in the amount of $8,500 plus interest at 6.7% issued on December 31, 1995 to ManUSA which matures on December 31, 2005. Payments of principal and interest cannot be made without prior approval of the Insurance Commissioner of the State of Michigan and the Company's Board of Directors, and to the extent the Company has sufficient unassigned surplus on a statutory basis available for such payment. b) The Company has an outstanding promissory note in the amount of $33,000 plus interest at 6.95% issued on December 5, 1997 payable to ManUSA which matures on February 1, 2007. F-40 129 THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 9. CAPITAL AND SURPLUS The Company has two classes of capital stock, as follows:
AS OF DECEMBER 31: ------------------------- 1997 1996 ----------- ----------- ($ THOUSANDS) Authorized: 5,000,000 Common shares, Par value $1.00 5,000,000 Preferred shares, Par value $100.00 Issued and Outstanding: 4,501,860 Common shares.......................... $ 4,501,860 $ 4,501,860 105,000 Preferred shares......................... 10,500,000 10,500,000 ----------- ----------- Total.............................................. $15,001,860 $15,001,860 =========== ===========
During 1996, the Company issued two common shares to its Parent Company in return for a capital contribution of $15,000. During 1995, the Company issued one common share to its Parent Company in return for a capital contribution of $12,570. The Company is subject to statutory limitations on the payment of dividends to its Parent. Under Michigan Insurance Law, the payment of dividends to shareholders is restricted to the surplus earnings of the Company, unless prior approval is obtained from the Michigan Insurance Bureau. The aggregate statutory capital and surplus of the Company at December 31, 1997 was $56,598 (1996 $76,202). The aggregate statutory net loss of the Company for the year ended 1997 was $2,550 (1996 $15,961; 1995 $13,705). State regulatory authorities prescribe statutory accounting practices that differ in certain respects from generally accepted accounting principles followed by stock life insurance companies. The significant differences relate to investments, deferred acquisition costs, deferred income taxes, non-admitted asset balances and reserve calculation assumptions. 10. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying values and the estimated fair values of certain of the Company's financial instruments at December 31, 1997 were as follows:
CARRYING FAIR VALUE VALUE -------- -------- ($ THOUSANDS) Assets: Fixed maturity and equity securities............ $87,353 $87,353 Mortgage loans.................................. 131 131 Policy loans.................................... 14,673 14,673 Liabilities: Promissory note................................. 33,000 33,000 Surplus note.................................... 8,500 8,220
The following methods and assumptions were used to estimate the fair values of the above financial instruments: F-41 130 THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA UNAUDITED FINANCIAL STATEMENTS Consolidated Balance Sheets as at June 30, 1998 and December 31, 1997 Consolidated Statements of Income for the three and six month periods ended June 30, 1998 and 1997 Statement of Cash Flows for the six months ended June 30, 1998 and 1997 Notes to Financial Statements 131 The Manufacturers Life Insurance Company of America Consolidated Balance Sheets (Unaudited)
As at As at June 30 December 31 ASSETS ($ thousands) 1998 1997 - --------------------------------------------------------------------------------------------------- INVESTMENTS: (UNAUDITED) Securities available-for-sale, at fair value: Fixed maturity (amortized cost: 1998 $48,248; 1997 $66,565) $ 50,421 $ 67,893 Equity (cost: 1998 $20,419; 1997 $20,153) 20,642 19,460 Mortgage loans 85 131 Policy loans 16,978 14,673 Cash and short-term investments 22,106 22,012 - --------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS $ 110,232 $ 124,169 - --------------------------------------------------------------------------------------------------- Deferred acquisition costs 149,112 130,355 Income taxes recoverable 3,488 5,679 Other assets 9,205 9,364 Separate account assets 1,014,979 897,044 - --------------------------------------------------------------------------------------------------- TOTAL ASSETS $ 1,287,016 $ 1,166,611 =================================================================================================== LIABILITIES, CAPITAL AND SURPLUS ($ thousands) 1998 1997 - --------------------------------------------------------------------------------------------------- LIABILITIES: Policyholder liabilities and accruals $ 96,625 $ 94,477 Notes payable 8,500 41,500 Due to affiliates 10,195 13,943 Deferred income taxes 2,762 1,174 Other liabilities 14,330 11,704 Separate account liabilities 1,014,979 897,044 - --------------------------------------------------------------------------------------------------- TOTAL LIABILITIES $ 1,147,391 $ 1,059,842 =================================================================================================== CAPITAL AND SURPLUS: Common shares 4,502 4,502 Preferred shares 10,500 10,500 Contributed surplus 132,887 98,569 Retained earnings (deficit) (3,573) (1,910) Foreign currency translation adjustment (6,061) (5,272) Net unrealized gain on securities available-for-sale 1,370 380 - --------------------------------------------------------------------------------------------------- TOTAL CAPITAL AND SURPLUS 139,625 106,769 - --------------------------------------------------------------------------------------------------- TOTAL LIABILITIES, CAPITAL AND SURPLUS $ 1,287,016 $ 1,166,611 ===================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 3 132 The Manufacturers Life Insurance Company of America Consolidated Statements of Income (unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 ($ thousands) 1998 1997 1998 1997 - -------------------------------------------------------------------------------------------------- REVENUE: Premiums $ 2,208 $ 1,687 $ 4,158 $ 3,642 Fee income 13,344 11,674 26,011 22,405 Net investment income 985 3,406 2,619 6,688 Realized investment gains (losses) 74 (371) (8) (205) Other 47 48 104 143 - -------------------------------------------------------------------------------------------------- TOTAL REVENUE $ 16,658 $ 16,444 $ 32,884 $ 32,673 ================================================================================================== BENEFITS AND EXPENSES: Policyholder benefits and claims $ 2,406 $ (1,054) $ 7,582 $ 1,693 Operating costs and expenses 9,117 7,538 19,473 16,064 Commissions 743 1,013 1,296 2,346 Amortization of deferred acquisition costs 3,158 3,724 4,486 7,324 Interest expense 976 -- 1,884 2,156 Policyholder dividends 138 411 794 1,233 - -------------------------------------------------------------------------------------------------- TOTAL BENEFITS AND EXPENSES $ 16,538 $ 11,632 $ 35,515 $ 30,816 - -------------------------------------------------------------------------------------------------- INCOME (LOSS) BEFORE INCOME TAXES 120 4,812 (2,631) 1,857 - -------------------------------------------------------------------------------------------------- INCOME TAX BENEFIT (EXPENSE) (22) (2,096) 968 (1,060) - -------------------------------------------------------------------------------------------------- NET INCOME (LOSS) $ 98 $ 2,716 $ (1,663) $ 797 - --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements. 4 133 The Manufacturers Life Insurance Company of America Consolidated Statements of Cash Flows (Unaudited)
SIX MONTHS ENDED JUNE 30 ($ thousands) 1998 1997 - -------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES: Net income (loss) $ (1,663) $ 797 Adjustments to reconcile net income to net cash used in operating activities: Additions (decreases) to policy liabilities 304 (835) Deferred acquisition costs (24,055) (15,209) Amortization of deferred acquisition costs 4,486 7,324 Realized losses on investments 8 205 Decreases to deferred income taxes 1,110 77 Other 2,674 (6,086) - -------------------------------------------------------------------------------------------------------- Net cash used in operating activities $ (17,136) $ (13,727) - -------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES: Fixed maturity securities sold $ 23,438 $ 60,461 Fixed maturity securities purchased (5,538) (46,244) Equities sold 4,922 4,359 Equities purchased (5,177) (4,555) Mortgage loans repaid 46 (43) Policy loans advanced, net (2,305) (2,868) Guaranteed annuity contracts -- 171,691 - -------------------------------------------------------------------------------------------------------- Cash provided by investing activities $ 15,386 $ 182,801 - -------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES: Receipts from variable life and annuity policies credited to policyholder account balances $ 4,080 $ 4,048 Withdrawals of policyholder account balances on variable life and annuity policies (2,236) (1,219) Repayment of bonds payable -- (158,760) Reduction of notes payable (34,318) -- Conversion of notes payable to contributed surplus 34,318 -- - -------------------------------------------------------------------------------------------------------- Cash provided by (used in) financing activities $ 1,844 $(155,931) - -------------------------------------------------------------------------------------------------------- CASH AND SHORT-TERM INVESTMENTS: Increase during the period $ 94 $ 13,143 Balance, beginning of year 22,012 17,493 - -------------------------------------------------------------------------------------------------------- BALANCE, END OF PERIOD $ 22,106 $ 30,636 ========================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 5 134 The Manufacturers Life Insurance Company of America Notes to Consolidated Financial Statements June 30, 1998 (Unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of The Manufacturers Life Insurance Company of America and its wholly-owned subsidiaries have been prepared in accordance with generally accepted accounting principles ("GAAP"), except that they do not contain complete notes. However, in the opinion of management, these statements include all normal recurring adjustments necessary for a fair presentation of the results. These financial statements should be read in conjunction with the financial statements and the related notes included in ManAmerica's annual report on Form 10-K for the year ended December 31, 1997. Operating results for the six months ended June 30, 1998 are not necessarily indicative of the results that may be expected for the full year ending December 31, 1998. 2. COMPREHENSIVE INCOME The Company adopted Statement of Financial Accounting Standards (SFAS) 130, "Reporting Comprehensive Income". SFAS 130 establishes standards for reporting and displaying comprehensive income and its components in a full set of general-purpose annual financial statements. Comprehensive income includes all changes in capital and surplus during a period except those resulting from investments by, and distributions to shareholders. The adoption of SFAS 130 resulted in revised and additional disclosures but had no effect on the financial position, results of operations, or liquidity of the Company. Total comprehensive income for the six months ended June 30, 1998 and 1997 was as follows: SIX MONTHS ENDED JUNE 30 COMPREHENSIVE INCOME: 1998 1997 - ------------------------------------------------------------------------------- NET INCOME (LOSS) $(1,663) $ 797 OTHER COMPREHENSIVE INCOME, NET OF TAX: Unrealized holding gains on available-for-sale securities 990 1,068 Foreign currency translation (789) - - ------------------------------------------------------------------------------- Other comprehensive income $ 201 $1,068 - ------------------------------------------------------------------------------- COMPREHENSIVE INCOME (LOSS) $(1,462) $1,865 - ------------------------------------------------------------------------------- Other comprehensive income is reported net of taxes of $533 and $575 respectively for the six months ended June 30, 1998 and 1997. 6 135 3. CAPITAL CONTRIBUTION On June 30, 1998 an outstanding promissory note issued by the Company on December 5, 1997 to ManUSA in the amount of $34.3 million ($33 million principal plus $1.3 million accrued interest) was converted to capital and reported as contributed surplus. 4. COMPARATIVE FIGURES Certain amounts in the 1997 financial statements have been reclassified to conform to the 1998 financial statement presentation. 7 136 PART II. OTHER INFORMATION Representation of Insurer Pursuant to Section 26 of the Investment Company Act of 1940 The Manufacturers Life Insurance Company of America hereby represents that the fees and charges deducted under the contract issued pursuant to this registration statement in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the Company. CONTENTS OF REGISTRATION STATEMENT This registration statement comprises the following papers and documents: The facing sheet; The Prospectus, consisting of 54 pages Representation pursuant to Section 26 of the Investment Company Act of 1940; the Signatures; Written consents of the following persons: Ernst & Young LLP Vic Bertolozzi (Actuary) James D. Gallagher, Secretary and General Counsel of the Company The following exhibits are filed herewith or are incorporated herein by reference to the designated filings: 1. Copies of all exhibits required by paragraph A of the instructions as to exhibits in Form N-8B-2 are set forth below under designations based on such instructions: A(1) Resolutions of Board of Directors of The Manufacturers Life Insurance Company of America establishing Separate Account Four. Filed herewith. A(3)(a)(i) Distribution Agreement between The Manufacturers Life Insurance Company of America and ManEquity, Inc. dated August 11, 1987. Filed herewith. A(3)(a)(ii) Amendment to Distribution Agreement between The Manufacturers Life Insurance Company of America and ManEquity, Inc. dated July 2, 1991. Filed herewith. A(3)(a)(iii) Supplemental Agreement to Distribution Agreement between The Manufacturers Life Insurance Company of America and ManEquity, Inc. dated October 1, 1992. Filed herewith. A(3)(b)(i) Specimen agreement between ManEquity, Inc. and registered representatives. Filed herewith. A(3)(b)(ii) Specimen agreement between The Manufacturers Life Insurance Company of America and registered representatives. Filed herewith. A(3)(b)(iii) Specimen agreement between ManEquity, Inc. and dealers. Filed herewith. A(3)(b)(iv) Specimen agreement between The Manufacturers Life Insurance Company of America and dealers. Filed herewith. A(3)(c) Schedule of Sales Commissions. Filed herewith. 137 A(5)(a) Form of Flexible Premium Variable Universal Life Insurance Policy FTIO Rider form 121 and Unisex endorsement form. Previously filed as Exhibit A(5)(a) to the initial registration statement on Form S-6, file number 333-51293, filed April 29, 1998. A(6)(a) Restated Articles of Redomestication of the Company. Incorporated by reference to Exhibit A(6)(a) to post-effective amendment no. 20 to the registration statement on Form S-6, file number 33-13774, filed April 26, 1996. A(6)(b) By-Laws of the Company. Incorporated by reference to Exhibit A(6)(b) to post-effective amendment no. 20 to the registration statement on Form S-6, file number 33-13774, filed April 26, 1996. A(8)(a)(i) Service Agreement between The Manufacturers Life Insurance Company and The Manufacturers Life Insurance Company of America dated June 1, 1988. Filed herewith. A(8)(a)(ii) Amendment to Service Agreement between The Manufacturers Life Insurance Company and The Manufacturers Life Insurance Company of America dated December 31, 1992. Filed herewith. A(8)(a)(iii) Amendment to Service Agreement between The Manufacturers Life Insurance Company and The Manufacturers Life Insurance Company of America dated May 31, 1993. Filed herewith. A(8)(a)(iv) Amendment to Service Agreement between The Manufacturers Life Insurance Company and The Manufacturers Life Insurance Company of America dated June 30, 1993. Filed herewith. A(8)(a)(v) Amendment to Service Agreement between The Manufacturers Life Insurance Company and The Manufacturers Life Insurance Company of America dated December 31, 1996. Filed herewith. A(8)(a)(vi) Amendment to Service Agreement between The Manufacturers Life Insurance Company and The Manufacturers Life Insurance Company of America dated May 31, 1998. Filed herewith. A(8)(b) Stoploss Reinsurance Agreement between The Manufacturers Life Insurance Company of America and The Manufacturers Life Insurance Company dated January 1, 1988. Filed herewith. A(8)(c)(i) Service Agreement between The Manufacturers Life Insurance Company and ManEquity, Inc. dated January 2, 1991. Filed herewith. A(8)(c)(ii) Amendment to Service Agreement between The Manufacturers Life Insurance Company and ManEquity, Inc. dated March 1, 1994. Filed herewith. A(8)(d) Service Agreement with McCamish Systems, L.L.C. Filed herewith. A(10) Form of Application for Flexible Premium Variable Life Insurance Policy. Filed herewith. 2. Consents of the following are filed herewith: A. Opinion and consent of James D. Gallagher, Esq., Secretary and General Counsel of the Manufacturers Life Insurance Company of America. B. Consent of Vic Bertolozzi, Actuary. C. Consent of Ernst & Young, LLP. 138 3 No financial statements are omitted from the prospectus pursuant to instruction 1(b) or (c) of Part I. 4 Not Applicable 6 Memorandum Regarding Issuance, Face Amount Increase, Redemption and Transfer Procedures for the Policies. Filed herewith. 7 Power of Attorney. Incorporated by reference to Exhibit 12 to post-effective amendment no. 10 to the registration statement on Form S-6, file number 33-52310, filed February 28, 1997. 139 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant and the Depositor have caused this amendment to their Registration Statement to be signed on their behalf in the City of Toronto, Province of Ontario, Canada, on this 27th day of August, 1998. SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA (Registrant) By: THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA (Depositor) By: /s/ DONALD A. GULOIEN -------------------------------- DONALD A. GULOIEN President THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA By: /s/ DONALD A. GULOIEN -------------------------------- DONALD A. GULOIEN President 140 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, this amended Registration Statement has been signed by the following persons in the capacities indicated on this 27th day of August, 1998. Signature Title *___________________________________ Chairman and Director JOHN D. RICHARDSON *___________________________________ President and Director DONALD A. GULOIEN (Principal Executive Officer) *___________________________________ Director SANDRA M. COTTER /s/ JAMES D. GALLAGHER Director ____________________________________ JAMES D. GALLAGHER *___________________________________ Director BRUCE GORDON *___________________________________ Director JOSEPH J. PIETROSKI *___________________________________ Director THEODORE KILKUSKIE, JR. *___________________________________ Vice President, Finance DOUGLAS H. MYERS (Principal Financial and Accounting Officer) * /s/ JAMES D. GALLAGHER _______________________________ JAMES D. GALLAGHER Pursuant to Power of Attorney 141 EXHIBIT INDEX Item No. Description A(1) Resolutions of Board of Directors of The Manufacturers Life Insurance Company of America establishing Separate Account Four A(3)(a)(i) Distribution Agreement between The Manufacturers Life Insurance Company of America and ManEquity, Inc. dated August 11, 1987 A(3)(a)(ii) Amendment to Distribution Agreement between The Manufacturers Life Insurance Company of America and ManEquity, Inc. dated July 2, 1991 A(3)(a)(iii) Supplemental Agreement to Distribution Agreement between The Manufacturers Life Insurance Company of America and ManEquity, Inc. dated October 1, 1992 A(3)(b)(i) Specimen agreement between ManEquity, Inc. and registered representatives A(3)(b)(ii) Specimen agreement between The Manufacturers Life Insurance Company of America and registered representatives A(3)(b)(iii) Specimen agreement between ManEquity, Inc. and dealers A(3)(b)(iv) Specimen agreement between The Manufacturers Life Insurance Company of America and dealers A(3)(c) Schedule of Sales Commissions A(8)(a)(i) Service Agreement between The Manufacturers Life Insurance Company and The Manufacturers Life Insurance Company of America dated June 1, 1988 A(8)(a)(ii) Amendment to Service Agreement between The Manufacturers Life Insurance Company and The Manufacturers Life Insurance Company of America dated December 31, 1992 A(8)(a)(iii) Amendment to Service Agreement between The Manufacturers Life Insurance Company and The Manufacturers Life Insurance Company of America dated May 31, 1993 A(8)(a)(iv) Amendment to Service Agreement between The Manufacturers Life Insurance Company and The Manufacturers Life Insurance Company of America dated June 30, 1993 A(8)(a)(v) Amendment to Service Agreement between The Manufacturers Life Insurance Company and The Manufacturers Life Insurance Company of America dated December 31, 1996 A(8)(a)(vi) Amendment to Service Agreement between The Manufacturers Life Insurance Company and The Manufacturers Life Insurance Company of America dated May 31, 1998 A(8)(b) Stoploss Reinsurance Agreement between The Manufacturers Life Insurance Company of America and The Manufacturers Life Insurance Company dated January 1, 1988. A(8)(c)(i) Service Agreement between The Manufacturers Life Insurance Company and ManEquity, Inc. dated January 2, 1991 A(8)(c)(ii) Amendment to Service Agreement between The Manufacturers Life Insurance Company 142 and ManEquity, Inc. dated March 1, 1994 A(8)(d) Service Agreement with McCamish Systems, L.L.C. A(10) Form of Application for Flexible Premium Variable Life Insurance Policy 2A Opinion and Consent of James D. Gallagher, Esq., Secretary and General Counsel of The Manufacturers Life Insurance Company of America 2B Consent of Vic Bertolozzi, Actuary 2C Consent of Ernst & Young, LLP 6. Memorandum Regarding Issuance, Face Amount Increase, Redemption and Transfer Procedures for the Policies EX-99.A1 2 RESOLUTIONS OF BOARD OF DIRECTORS 1 Exhibit (A) (i) THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA RECORD OF UNANIMOUS ACTION OF THE BOARD OF DIRECTORS MARCH 17, 1987 We, the undersigned, being all the Directors of The Manufacturers Life Insurance Company of America, a Pennsylvania Corporation (the "Company"), hereby unanimously consent to the adoption of the following resolution as and for the action of the Board of Directors taken in lieu of a meeting: RESOLVED, That a Separate Account designated "separate Account Four" be, and it is hereby established, in accordance with the provisions of Section 406.2, Chapter 2, Title 31, of the Pennsylvania Code, for the purpose of providing a funding medium to support reserves under flexible premium variable life insurance policies as may be issued by the Company and as the Officers may designate for such purpose. The Officers may, from time to time, change the designation of "Separate Account Four" to such other designation as they may deem necessary and appropriate. FURTHER RESOLVED, That the income, gains and losses (whether or not realized) from assets allocated to Separate Account Four shall, in accordance with any single premium variable life insurance policies issued by the Company, be credited to or charged against such Separate Account without regard to the other income gains or losses of the Company. FURTHER RESOLVED, That the fundamental investment policy of Separate Account Four shall be to invest or reinvest the assets of Separate Account Four in securities issued by an investment company or investment companies registered under the Investment Company Act of 1940, as amended, as the Officers may designate pursuant to the provisions of the single premium variable life insurance policies issued by the Company. FURTHER RESOLVED, That the Officers are hereby authorized and directed to take all actions to register Separate Account Four as a unit investment trust under the Investment Company Act of 1940, as amended, and to take such related actions as they deem necessary and appropriate to carry out the foregoing. FURTHER RESOLVED, That the Officers are authorized to establish criteria by which the Company shall institute procedures to provide for a pass-through of voting rights to the owners of any flexible premium variable life insurance policies issued by the Company as required by applicable laws with respect to the shares of any investment companies which are held in Separate Account Four. FURTHER RESOLVED, That Stephen C. Nesbitt, Secretary and General Counsel of this Company, be and is hereby constituted and appointed agent for service of process for this Company to receive notices and communications from the Securities and Exchange Commission with respect to such registration statements as may be filed on behalf of the Company concerning Separate Account Four and to exercise the powers given to such 2 agent in the rules and regulations of the Securities and Exchange Commission under the Securities Act of 1933, as amended. FURTHER RESOLVED, That the Officers be, and they are hereby authorized to do or cause to be done all things necessary or desirable, as may be advised by counsel to comply with , or obtain exemptions from, Federal and State laws and regulations that may be applicable to the issuance and sale of single premium variable life insurance by the Company. FURTHER RESOLVED, That in order that a suitable custodian may be designated to hold the assets allocated to Separate Account Four in connection with the issuance of any single premium variable life insurance policies by the Company, the Officers are authorized in their discretion either to: 1. Enter into such agreements as may be necessary in order to obtain regulatory approval for the Company or the Company's parent, The Manufacturers Life Insurance Company, to serve as custodian for the assets of Separate Account Four pursuant to the Investment Company Act of 1940, as amended; or 2. Enter into an agreement with a banking institution, which the Officers find to be suitable, whereby such bank will act as custodian and depository for assets allocated to Separate Account Four; all of such terms are subject to the conditions as the officers deem necessary or appropriate to effectuate the foregoing. FURTHER RESOLVED, That the Officers are authorized to do all things as they deem necessary and appropriate to carry out any of the foregoing resolutions. IN WITNESS WHEREOF, the undersigned, being all the Directors of The Manufacturers Life Insurance Company of America have hereunto set our hands this 17th day of March, 1987. /s/ FREDERICK A. SIMONS /s/ JACQUELINE B. DiGIOVANNI - --------------------------- ------------------------------ Frederick A. Simons Jacqueline B. Digiovanni /s/ L. ELVON HARRIS /s/ JAMES D. GALLAGHER - --------------------------- ------------------------------ L. Elvon Harris James D. Gallagher /s/ JOSEPH J. PIETROSKI /s/ STEPHEN C. NESBITT - --------------------------- ------------------------------ Joseph J. Pietroski Stephen C. Nesbitt EX-99.A3(A)(I) 3 DISTRIBUTION AGREEMENT 1 Exhibit (A)(3)(a)(i) DISTRIBUTION AGREEMENT AGREEMENT made this 11th day of August, 1987 between The Manufacturers Life Insurance Company of America ("ManuLife America") a stock life insurance company domiciled in the Commonwealth of Pennsylvania, on its own behalf and on behalf of Separate Account Four ("Account") of ManuLife America and ManEquity, Inc., ("ManEquity"), a Colorado corporation; WITNESSETH WHEREAS, the Account is an account established and maintained by ManuLife America pursuant to the laws of the Commonwealth of Pennsylvania for flexible premium variable life insurance policies issued by ManuLife America (the "Policies"), under which income, gains and losses, whether or not realized, from assets allocated to such account, are, in accordance with the Policies, credited to or charged against such account without regard to other income, gains, or losses of ManuLife America; WHEREAS, ManuLife America has filed a registration statement for the Account as a unit investment trust under the Investment Company Act of 1940 (the "Investment Company Act"); WHEREAS, ManEquity is registered as a broker-dealer under the Securities Exchange Act of 1934 ("Securities Exchange Act") and is a member of the National Association of Securities Dealers, Inc. (the "NASD"); and WHEREAS, ManuLife America has filed a registration statement for the policies under the Securities Act of 1933 (the "Securities Act") and proposes to issue and sell the Policies through the Account to the public through ManEquity acting as principal underwriter for the Account; 2 NOW, THEREFORE in consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the parties do hereby agree as follows: Section 1. Principal Underwriter (a) Appointment. ManuLife America grants to ManEquity the exclusive right during the term of this Agreement, subject to the registration requirements of the Securities Act and the Investment Company Act and the provisions of the Securities Exchange Act, to be the distributor and principal underwriter of the Policies issued through the Account in each state or other jurisdiction where the Policies may legally be sold, including any supplementary benefits which ManuLife America may make available in connection therewith. ManEquity shall offer the Policies for sale and distribution at premium rates to be set by ManuLife America. (b) Responsibilities. ManEquity will assume full responsibility for the securities activities of, and for securities law compliance by, its associated persons, (as that term is defined in Section 3(a)(18) of the Securities Exchange Act) including, as applicable, compliance with the NASD Rules of Fair Practice and Federal and State Laws and Regulations. ManEquity, directly or through ManuLife America as its agent, will: (i) make timely filings with the SEC, NASD, and other regulatory authorities, of any sales literature or materials relating to the Account, as required by law to be filed; and 3 (ii) make available to ManuLife America copies of any agreements or plans intended for use in connection with the sale of the Policies in sufficient number and in adequate time for clearance by the appropriate regulatory authorities before they are used, and it is agreed that the parties will use their best efforts to obtain such clearance by the appropriate regulatory authorities before they are used and that the parties will use their best efforts to obtain such clearance as expeditiously as reasonably possible. ManEquity will train the associated persons, use its best efforts to prepare them to complete satisfactorily any and all applicable NASD and state qualification examinations, register the associated persons as its registered representatives before they engage in securities activities, and supervise and control them in the performance of such activities. ManEquity shall be under no obligation to effectuate any particular amount of sales of Policies or to promote or make sales, except to the extent ManEquity deems advisable or to the extent otherwise mutually agreed to by ManEquity and ManuLife America. Section 2. Dealer Agreements. (a) Authority ManEquity is hereby authorized to enter into separate written dealer agreements, on such terms and conditions as ManEquity may determine not inconsistent with the Agreement, with organizations which agree to participate in the distribution of the Policies and to use their best efforts to solicit applications for the Policies. Such organizations and their agents or representatives soliciting applications for Policies shall be duly and appropriately licensed, registered or otherwise qualified for the sale of such Policies (and the riders and other policies offered in connection therewith) under the Insurance Laws and any applicable Blue Sky Laws of each state or other jurisdiction in which such Policies may be lawfully sold and in which ManuLife America is licensed to 4 sell the Policies. Each such organization shall be both registered as a broker/dealer under the Securities Exchange Act and a member of the NASD, or if not so registered or not such a member, then the agents and representatives of such organization soliciting applications for the Policies shall be agents and registered representatives of a broker/dealer and NASD member which is the parent of such organization and which maintains full responsibility for the training, supervision, and control of the agents or representatives selling the Policies. (b) Responsibilities. ManEquity shall have the responsibility for the supervision of all such organizations to the extent required by law and shall assume any legal responsibilities of ManuLife America for the acts, commissions, or defalcations of any such organizations. Applications for the Policies solicited by such organizations through their agents or representatives shall be forwarded to ManEquity. All payments for the Policies shall be made by check to ManuLife America and remitted promptly by such organizations to ManEquity. Section 3. Payments and Costs. In connection with the sale of the Policies, ManEquity is responsible for all amounts (including the sales commissions described in the prospectus for the Policies) due to the sales representatives or to broker/dealers who have entered into dealer agreements with ManEquity. (b) As between ManuLife America and ManEquity, ManuLife America will bear the cost of all services and expenses, including legal services and expenses and registration, filing and other fees, in connection with: 5 (i) registering and qualifying the Account, the Policies and (to the extent requested by ManEquity) the associated persons with Federal and state regulatory authorities and the NASD, and (ii) printing and distributing all registration statements and prospectuses (including amendments), Policies, notices, periodic reports, proxy solicitation material, sales literature and advertising filed or distributed in connection with the sale of the Policies. Section 4. Life Insurance Agents. (a) ManEquity is authorized to appoint the organizations described in Section 2(a) above as independent general agents of ManuLife America for the sale of the Policies and any supplementary benefits or policies in connection therewith. ManuLife America will undertake to apply for life insurance agent licenses in the appropriate states or jurisdictions of the designated agents or representatives of those organizations so appointed by ManEquity; provided that ManuLife America reserves the right to refuse to appoint any proposed agent, or once appointed to terminate the same. (b) ManuLife America retains the right to appoint and discharge any life insurance agents, general agents or organizations appointed by ManuLife America. (c) Anyone or any party selling the Policies must be duly licensed insurance producers. ManuLife America shall have the responsibility for arranging for such licenses. (d) All premium funds collected by ManEquity or any organization appointed by ManEquity pursuant to Section 2(a) above, or their representatives, shall be held at all times in a fiduciary capacity and promptly be forwarded to ManuLife America. ManEquity will advise ManuLife America of the amount of gross premiums received. 6 Section 5. Suitability. (a) ManuLife America wishes to ensure that the Policies distributed by ManEquity will be issued to purchasers for whom the Policy will be suitable. ManEquity shall take reasonable steps to ensure that the various agents appointed by it or by organizations appointed by ManEquity pursuant to 2(a) above shall not make recommendations to an applicant to purchase a Policy and shall not issue a Policy in the absence of reasonable grounds to believe that the purchase of the Policy is suitable for such applicant. ManEquity shall adhere to the Standards of Suitability for the Policy adopted by ManuLife America. The Standards of Suitability are set forth in Schedule A, which schedule is incorporated herein. While not limited to the following, a determination of suitability shall be based on information furnished to an agent after reasonable inquiry of such applicant concerning the applicant's insurance and investment objectives, financial situation and needs, and the likelihood that the applicant will persist with the Policy for such a period of time that ManuLife America's acquisition costs are amortized over a reasonable period to time. (b) ManuLife America, however, retains the ultimate right of control over and responsibility for, marketing the Policies. (c) ManuLife America also retains the right to reject applications for the Policies and maintains responsibility for all insurance underwriting aspects in connection with such applications. Section 6. Promotion Materials. ManEquity shall have the responsibility for consulting with respect to the design and the drafting and legal review and filing of sales promotion materials, and for the preparation of individual sales proposals related to the sale of the Policies. All sales and 7 promotional materials for the Policies must first be reviewed and approved by ManuLife America. ManEquity and any organization appointed by ManEquity pursuant to Section 2(a) above shall not give any information or make any representations concerning any aspect of the Policies or ManuLife America's operations to any person or entity unless such information or representations are contained in the prospectuses for the Policies, or are contained in sales or promotional materials approved by ManuLife America. Section 7. Reports. ManEquity shall have the responsibility for: maintaining the records of agents licensed, registered and otherwise qualified to sell the Policies; calculating and furnishing periodic reports to ManuLife America of the commissions and service fees payable to agents, brokers, general agents and sales managers of ManuLife America and its affiliates; and for furnishing periodic reports to ManuLife America as to the sale of Policies made pursuant to this Agreement. Section 8. Records. ManEquity shall maintain and preserve such accounts, books, and other documents as are required of it by applicable laws and regulations. The books, accounts and records of ManuLife America, the Account and ManEquity as to all transactions hereunder shall be maintained so as to clearly and accurately disclose the nature and details of the transactions, including such accounting information as necessary to support the reasonableness of the amounts to be paid by ManuLife America hereunder. Without limiting the foregoing, ManEquity will: (a) maintain and preserve in accordance with Rules 17a-3 and 17a-4 under the Securities Exchange Act all books and records required to be maintained in connection with the offer and sale of the Policies, which books and records shall remain the property of ManEquity and shall be subject to inspection by the securities and 8 Exchange Commission ("SEC") in accordance with Section 17(a) of the Securities Exchange Act; and (b) before or upon completion of each transaction for which a confirmation is legally required, send a written confirmation for each such transaction reflecting the facts of the transaction. Section 9. Compensation. For the services rendered, expenses assumed and the continuing obligations set forth herein, ManEquity shall receive from ManuLife America such amounts and at such times as may from time to time be agreed upon by ManEquity and ManuLife America. Section 10. Liability for Other Party. Neither party to this Agreement shall be liable to the other for any action taken or omitted by it, or any of its officers, agents or employees, in performing their responsibilities under this Agreement in good faith and without gross negligence, willful misfeasance or reckless disregard of such responsibilities, unless otherwise mutually agreed in writing. Section 11. Notification of Parties. Both parties to this Agreement shall advise the other promptly of: (a) Any action of the SEC or any authorities of any state or other jurisdiction, of which it has knowledge, affecting registration or qualification of the Account or the Policies, or the right to offer the Policies for sale; and 9 (b) the happening of any event which makes untrue any statement, or which requires the making of any change, in the registration statements or prospectuses in order to make the statements therein not misleading. Section 12. Investigation and Proceedings. (a) ManEquity and ManuLife America agree to cooperate fully in any insurance regulatory investigation or proceeding or judicial proceeding arising in connection with the Policies distributed under this Agreement. ManEquity and ManuLife America further agree to cooperate fully in any securities regulatory investigation or proceeding or judicial proceeding with respect to ManuLife America, ManEquity, their affiliates and their agents or representatives to the extent that such investigation or proceeding is in connection with Policies distributed under this Agreement. Without limiting the foregoing: (i) ManEquity will be notified promptly of any customer complaint or notice of any regulatory investigation or proceeding or judicial proceeding received by ManuLife America with respect to ManEquity or any agent or representative or which may affect ManuLife America's issuance of any Policy marketed under this Agreement; (ii) ManEquity will promptly notify ManuLife America of any customer complaint or notice of any regulatory investigation or proceeding received by ManEquity or its affiliates with respect to ManEquity or any agent or representative in connection with any Policy distributed under this Agreement or any activity in connection with any such Policy. (b) In the case of a customer complaint, ManEquity and 10 ManuLife America will cooperate in investigating such complaint and any response to such complaint will be sent to the other party to this Agreement for approval not less than five business days prior to its being sent to the customer or regulatory authority, except that if a more prompt response is required, the proposed response shall be communicated by telephone or fax. Section 13. Guarantee. ManuLife America undertakes to guarantee the performance of any obligations ManEquity may have pursuant to Section 27(f) of the Investment Company Act, as amended, and paragraph (b) of Rule 27d-2 adopted by the Securities and Exchange Commission, to make refunds of charges required of the principal underwriter of Policies issued in connection with the Account. Section 14. Termination. This Agreement shall terminate automatically if it shall be assigned. This Agreement may be terminated at any time by either party hereto on 60 days' written notice to the other party hereto, without the payment of any penalty. Upon termination of this Agreement all authorizations, rights and obligations shall cease except: (a) the obligation to settle accounts hereunder, including commissions on premiums subsequently received for Policies in effect at the time of termination; and (b) the agreements contained in paragraphs 11 and 12 hereof. Section 15. Regulation. This Agreement shall be subject to the provisions of the Investment Company Act and the Securities Exchange Act and the rules, regulations, and rulings thereunder and to 11 the NASD, from time to time in effect, including such exemptions from the Investment Company Act as the SEC may grant, and the terms hereof shall be interpreted and construed in accordance therewith. ManEquity shall submit to all regulatory and administrative bodies having jurisdiction over the operations of the Account, present or future, any information, reports or other material which any such body by reason of this Agreement may request or require pursuant to applicable laws and regulations. Section 16. Severability. Should any portion of this Agreement for any reason be held to be void in law or in equity, the Agreement shall be construed, insofar as is possible, as if such portion had never been contained therein. Section 17. Governing Law. This Agreement shall be construed in accordance with, and governed by, the laws of the Commonwealth of Pennsylvania. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed under seal by their duly authorized officers as of the date first mentioned above. Attest: THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA ______________________________ By: _______________________________ Its: ______________________________ 12 Attest: MANEQUITY, INC. ______________________________ By: _______________________________ Its: ______________________________ EX-99.A3(A)(II) 4 AMENDMENT TO DISTRIBUTION AGREEMENT 1 Exhibit (A)(3)(a)(ii) AMENDMENT TO DISTRIBUTION AGREEMENT This amendment made this 2nd day of July, 1991 to the Distribution Agreement between The Manufacturers Life Insurance Company of America ("Manulife America") on its own behalf and on behalf of Separate Account Four (the "Account") of Manulife America and ManEquity, Inc. ("ManEquity") dated August 11, 1987 (the "Agreement"). Manulife America and ManEquity agree to amend the Agreement as follows: There shall be added to Section 8 of the Agreement, after the conclusion of clause (b) thereof, the following paragraph: "Manulife America shall have access to the books and records maintained by ManEquity pursuant to this Agreement and shall have the right to inspect, audit, and copy same." All other terms and conditions of the Agreement shall remain unchanged and in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed under seal by their duly authorized officers as of the date first above-mentioned. THE MANUFACTURERS LIFE INSURANCE Attest: COMPANY OF AMERICA ______________________________ By: _______________________________ 2 Its: ______________________________ Attest: MANEQUITY, INC. ______________________________ By: _______________________________ Its: ______________________________ EX-99.A3(A)(III) 5 SUPPLEMENTAL AGREEMENT TO DISTRIBUTION AGREEMENT 1 Exhibit (A)(3)(a)(iii) SUPPLEMENTAL AGREEMENT TO DISTRIBUTION AGREEMENT This Supplemental Agreement is made this 1st day of October, 1992 to the Distribution Agreement between The Manufacturers Life Insurance Company of America ("Manulife America") on its own behalf of Separate Account Four (the "Account") of Manulife America and ManEquity, Inc. ("ManEquity") dated August 11, 1987 (the "Agreement"). WHEREAS, Manulife America will file a registration statement on Form S-1 under the Securities Act of 1933 to permit it to offer flexible payment variable annuity contracts with certain fixed account options and guarantees ("Combination Policies"); and WHEREAS, assets attributable to the fixed accounts will be maintained in a non-unitized, non-registered Separate Account established under the laws of Michigan; and WHEREAS, other non-unitized separate accounts may be established in the future to account for fixed assets supporting the Policies; WHEREAS, Manulife America desires to make subject to the Agreement the underwriting and distribution of the Combination Policies issued by it; and WHEREAS, Manulife America has filed an application to redomesticate under the laws of the State of Michigan; NOW THEREFORE Manulife America and ManEquity agree as follows: 2 1. Section 16 of the Agreement shall be amended effective upon the approval of the redomestication of Manulife America from Pennsylvania to Michigan to read as follows: "Section 16. Governing Law. This Agreement shall be construed in accordance with, and governed by, the laws of the State of Michigan". 2. All other terms and conditions of the Agreement shall remain unchanged and in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed under seal by their duly authorized officers as of the date first above-mentioned. THE MANUFACTURERS LIFE INSURANCE Attest: COMPANY OF AMERICA ______________________________ By: _______________________________ Its: ______________________________ Attest: MANEQUITY, INC. ______________________________ By: _______________________________ Its: ______________________________ EX-99.A3(B)(I) 6 SPECIMEN AGREEMENT-MANAGED EQUITY 1 Exhibit (A)(3)(b)(i) Manulife Logo MANEQUITY, INC. AGREEMENT THIS AGREEMENT made this ______________________ day of _______________ 19______ BETWEEN: MANEQUITY, INC., a Colorado corporation with its Home Office at Toronto, Canada (hereinafter called the "Company") (hereinafter called the "Sales Representative") WITNESSETH:___________________________________________________________________ WHEREAS, the Sales Representative agrees to sell and the Company agrees to authorize him/her to sell such securities as the Sales Representative is licensed to sell with the Company and the Company desires to and has the lawful authority to sell. NOW, THEREFORE, in consideration of these premises, it is hereby agreed between the parties as follows: 1. Warranty of Qualification The Sales Representative hereby represents and warrants that all representations made on all Federal, State and National Association of Securities Dealers, Inc. (NASD) Registration Forms are current, accurate and correct and that he/she has read, understands and agrees to abide by the provisions of this Agreement to the extent that such terms and conditions govern his/her performance within his/her respective registration category. The authority of the Sales Representative is limited by the registration category designated by the Sales Representative with respect to his/her association with the Company as indicated on all Federal, State and NASD Registration Forms. The Sales Representative hereby represents and warrants that he/she is a Registered Representative in good standing with the NASD and is duly authorized and licensed under the applicable state securities laws. The Sales Representative further represents and warrants that he/she is thoroughly familiar with the Securities Laws, Codes and Rules and Regulations of the United States and of the state(s) in which he/she is qualified to do business and of the Rules and Regulations of the NASD and Regulations of the Company, and as such that he/she shall transact all authorized Company business in strict accordance therewith. 2. Sales Practices The Sales Representative agrees to adhere strictly to the NASD Rules of the Association with regard to sales literature and other advertising material. All such literature must be submitted to and approved by the Company prior to its use by the Sales Representative. The Sales Representative is not authorized to and may not send any written correspondence to customers of the Company or prospective investors unless he/she forwards, on a quarterly basis for review and approval by a Registered Principal, copies of all such correspondence to the Home Office of the Company. It is also agreed and understood that the Sales Representative shall keep and maintain such records as will comply with the Rules and Regulations of the NASD and shall open such records to inspections and review by the Company as the Company shall deem advisable from time to time. The Sales Page 1 of 4 - -------------------------------------------------------------------------------- Manulife Financial and the block design are registered service marks of The Manufacturers Life Insurance Company and are used by it and its subsidiaries: The Manufacturers Life Insurance Company (U.S.A.), The Manufacturers Life Insurance Company of America, and ManEquity, Inc. Form AG0176US(0797) 2 Representative in addition acknowledges receipt of the ManEquity Policy Statement and agrees to follow the rules and regulations contained therein. Said Policy Statement and other publications, as amended and modified from time to time, are incorporated in this Agreement by reference as though fully set out herein. 3. License Fees All initial and renewal license and registration fees shall be paid by the Sales Representative 4. (a)Authority The Sales Representative shall be free to exercise his/her discretion as to the manner, time and place and the persons from whom he/she shall choose to solicit and sell securities as aforesaid subject only to the provisions of this Agreement and such Rules and Regulations herein before set forth and as may be prescribed from time to time hereafter. The Sales Representative further agrees not to engage in the business of selling securities for any other broker/dealer during the term of this Agreement without the expressed written consent of each employing broker/dealer. (b)Status The Sales Representative shall have no greater than is herein expressly granted and no greater authority shall be implied from the grant or denial of authority specifically mentioned herein. Nothing herein contained shall be construed to create the relationship of employer and employee between the Company and the Sales Representative. 5. (a)Limit of Warranty The Sales Representative shall have no authority of any kind for or on behalf of the Company to accept any transactions of any kind or to make, modify or discharge contracts on behalf of the Company or in any way to bind the Company to any statement, promise, or representation, or to waive any of the Company's rights or requirements, rules or regulations, or to receive any money due or to become due to the Company except payments, made pursuant to sales solicited by him/her in the manner prescribed by the Company or except as may be authorized by the Company in writing. The Sales Representative shall have no power to bind the credit of the Company in any manner and further agrees to pay any and all expenses incurred by him/her in the performance of this Agreement. The Sales Representative shall have no authority to make any settlement or agreement regarding any claim that may be made against the Company unless specifically authorized in writing by an Officer of the Company in each such case. All orders for the purchase of any security shall be subject to the acceptance thereof by the Company at its Home Office in Toronto, Canada. The Sales Representative shall have no authority to appoint or employ on behalf of the Company other Sales Representatives or employees without the prior written consent of an Officer of the Company and any such appointee shall have no authority to incur any expense or obligation of any kind or nature in the name or on behalf of the Company. (b)Indemnification The Sales Representative shall have no authority to settle or institute any legal proceeding for any cause in connection with a transaction of the Company's business unless such action shall have been approved in advance in writing by an Officer of the Company and it is agreed and understood that the Sales Representative shall indemnify and save the Company harmless from any and all expenses, costs and damages resulting from or growing out of any unauthorized acts or transactions by said Sales Representative. 6. Bond Requirement The Sales Representative shall furnish a bond, or bonds, as the Company may require. Upon failure or inability of the Sales Representative to renew such bond or bonds at any time as the Company may Page 2 of 4 - -------------------------------------------------------------------------------- Manulife Financial and the block design are registered service marks of The Manufacturers Life Insurance Company and are used by it and its subsidiaries: The Manufacturers Life Insurance Company (U.S.A.), The Manufacturers Life Insurance Company of America, and ManEquity, Inc. Form AG0176US(0797) 3 require, this Agreement shall automatically terminate. the Sales Representative agrees in addition to the foregoing, to promote the best interests of the Company as contemplated by this Agreement and so to conduct himself/herself as not to affect adversely the business, good standing or reputation of himself/herself or the Company. 7. Return of Records and Material Upon Termination of this Agreement, the Sales Representative shall return to the Company any and all sales materials, records, correspondence and other data belonging to the Company. 8. Statement of Account The Company will furnish to the Sales Representative a statement of his/her sales and all compensation earned together with payment for all compensation due and payable in accordance with such statement less any indebtedness due to the Company as indicated by said statement or other instrument. 9. Amendments It is expressly agreed and understood that the Company retains the right to amend or modify this Agreement in writing to the Sales Representative as it shall deem necessary from time to time. 10. Transmittal of Monies, Orders and Applications The Sales Representative shall transmit to the Company or its designated fiduciary, immediately upon receipt, all monies, orders and applications received from all sales. The Sales Representative may not under any circumstances commingle monies received from sales with any other monies. 11. (a) Compensation For all sales sold by the Sales Representative and for all other services rendered by him/her under this Agreement, the Company shall pay to the Sales Representative the compensation set out in the attached schedule(s). Such schedule(s), as modified or amended from time to time, is/are incorporated in this Agreement by reference as though fully set out. (b) The Sales Representative hereby agrees that, upon termination of this Agreement, he/she will be entitled to receive commissions on variable life and annuity policies sold by the Sales Representative to the extent that such commissions are payable under the terms of his/her Agreement with the insurance company issuing such policies and to the extent permitted by federal or state laws. 12. Provisions Not Waived Failure of the Company at any time to declare a breach or termination of this Agreement because of any violation or violations of its provisions shall not be deemed a waiver or waivers of said provisions on the part of the Company in case of any subsequent violations by the Sales Representatives. 13. Assignment This Agreement is not transferable. No rights or interest issuing herefrom shall be subject to assignment, except with the prior written consent of an Officer of the Company. 14. Termination and Amendment - Effective Notice This Agreement may be terminated by either party hereto, or amended by the Company, at any time, with or without cause, upon 10 days written notice given to the other party, provided that if the Sales Representative shall at any time fail in the performance of any of the conditions, promises or agreements contained herein upon his/her part to be performed, then at the option of the Company, this Agreement may be terminated immediately and without notice. In the event the Company terminates the Agreement with notice or amends this Agreement in writing, said notice or amendment shall be Page 3 of 4 - -------------------------------------------------------------------------------- Manulife Financial and the block design are registered service marks of The Manufacturers Life Insurance Company and are used by it and its subsidiaries: The Manufacturers Life Insurance Company (U.S.A.), The Manufacturers Life Insurance Company of America, and ManEquity, Inc. Form AG0176US(0797) 4 delivered personally or mailed to the last known address of the Sales Representative appearing on the Company's records and shall be an effective notice of termination or amendment of this Agreement as of the time the notice of amendment is deposited in the United States Mail or the time of actual receipt, if earlier. In the event the Sales Representative terminates this Agreement, the notice of said termination shall be delivered personally or addressed and mailed to the Home Office of the Company in Toronto, Canada, with a copy to the Sales Representative's NASD Supervisor and shall be an effective notice of termination of this Agreement as of the time the same is deposited in the United States Mail, or the time of actual receipt, if earlier. 15. Execution and Interpretation of Entire Agreement This Agreement shall take effect upon the date of the execution hereof and shall revoke and cancel all prior Agreements which have existed between the parties hereto relative to the sale of securities. The construction and interpretation of this Agreement shall be determined in accordance with the laws of the State of Colorado and any and all representations made by the parties hereto unless otherwise amended as provided herein. 16. Effective Date This Agreement become effective the ___________day of _____________ 19 _____ IN WITNESS WHEREOF the parties hereto affix their signatures on the year and day first above written. ______________________________ Sales Representative ______________________________ NASD Supervisor Accepted by ManEquity, Inc., this _________________ day of ____________ 19 ____ By __________________________ Page 4 of 4 - -------------------------------------------------------------------------------- Manulife Financial and the block design are registered service marks of The Manufacturers Life Insurance Company and are used by it and its subsidiaries: The Manufacturers Life Insurance Company (U.S.A.), The Manufacturers Life Insurance Company of America, and ManEquity, Inc. Form AG0176US(0797) EX-99.A3(B)(II) 7 SPECIMEN AGREEMENT-MANULIFE & REGISTERED REPS 1 Exhibit (A)(3)(b)(ii) Producer Agreement (Manulife Logo) THIS AGREEMENT made this _______________day of __________________ ________ Year BETWEEN: THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA (hereinafter called the "Company") -and- (herein after called the "Producer") Witness that in consideration of the mutual covenants of the parties herein contained, the parties hereto agree as follows: 1. STATUS The Producer is hereby appointed an agent of the Company. It is understood that nothing in this Agreement shall be construed to create an employer-employee relationship between the Company and the Producer. In creating this Agreement, the parties do not contemplate that the Producer will solicit insurance primarily for the Company. Nothing in this Agreement shall be construed to prohibit the Producer from selling policies or contracts issued by any other insurance company. If the Producer desires to sell any variable life, annuity, or endowment products ("variable products") produced currently or in the future by the Company or one of its affiliates, he/she must also hold a valid ManEquity, Inc. Agreement and a valid Manufacturers Life Insurance Company (U.S.A) Producer Agreement. 2. RESPONSIBILITIES (a) The Producer shall be authorized to secure applications for insurance and services offered by the Company and collect, in exchange for receipts furnished by the Company, money due or to become due to the Company in respect to such applications of policies. (b) The Producer shall comply with all applicable insurance laws and regulations. The Producer is required to obtain, and from time to time renew, a license to sell insurance within the states(s) in which the Producer intends to carry on business. If the Producer desires to sell any variable products offered by the Company, additional licensing is required under his/her ManEquity, Inc. Agreement. (c) When requested by the Company, the Producer shall also purchase errors and omissions coverage in an amount acceptable to the Company. (d) The Producer shall be free to exercise his own judgment as to the persons from whom he will solicit applications for insurance and services offered by the Company and the time and place of solicitation. Page 1 of 5 2 (e) The Producer shall provide his own facilities including office space and furnishings. The Producer shall not be entitled to be reimbursed by the Company for the cost of such facilities. In the event the Company offers the Producer use of a portion of its office space and/or furnishings, the Producer shall pay to the Company a fair market rental for such office space and/or furnishings. 3. GENERAL CONDUCT AND REPRESENTATIONS (a) The Producer shall not transact any business for the Company unless duly licensed as required by law. The Producer shall transact any variable products business for the Company unless contracted to do so by Man Equity, Inc. (b) The Producer is not authorized to make contracts on behalf of the Company, or to alter or amend any of the provisions of the Company's contracts, or to waive forfeitures or bind the Company in any way not specifically authorized in writing by the Company. The Producer is not authorized to pay any premium or premiums or other payments on behalf of an applicant, policyholder, or beneficiary. (c) The Producer shall not induce other producers, agents or brokers to leave the Company, or persuade policyholders to discontinue their policies, or otherwise do anything prejudicial to the Company's interest or that of it's policyholders. 4. COMPENSATION (a) Subject to clause 5 "Regulations Governing Compensation and Credit" and Clause 6 "Joint Business", compensation shall be determined and shall be payable to the Producer while this Agreement is in force in accordance with (1) the Company's Schedule of Commissions in force when an application for insurance is submitted to the Company and (2) any Schedule of Supplemental Income which may be entered into by the Producer and the Company and any amendments or supplements to those schedules. (b) The Producer's basic compensation shall be by commission which shall be determined in accordance with the Schedule of Commissions. Other forms of compensation above and beyond those set out in the Schedule of Commissions and in the Schedule of Supplemental Income, if any, may be specifically provided for or allowed as an option by the Company at its discretion. Commissions earned on the sale of variable products are paid on behalf of ManEquity. Inc. (c) The Schedule of Commissions and the Schedule of Supplemental Income, if any, and any amendments or supplements thereto, are subject to change by the Company at any time. No change shall affect commissions on individual insurance products offered by the Company for which applications were submitted to the Company prior to the effective date of the change. 5. REGULATIONS GOVERNING COMPENSATION AND CREDIT (a) When a policy is changed, the compensation, if any, shall be determined by the Company. (b) The Company shall determine the compensation on any new policy when: i) A policy issued by the Company on the same life has been surrendered or lapsed within six (6) months of the application for the new policy; or ii) The new policy appears to have replaced an existing policy or part of a policy within six (6) months of the date of application. Page 2 of 5 3 The Producer shall immediately refund to the Company any excess compensation received on the new policy. (c) If the Company returns any part of or all of any premiums(s) paid in respect to an issued policy, the Producer shall lose all right to any compensation of such premiums. The Producer shall also immediately refund to the Company the amount of any compensation received on the returned premium. (d) Where a policy has lapsed and the premium remains unpaid for sixty (60) days beyond the expiration of the grace period, the Company shall have the right to take such policy out of the Producer's account of business. The Producer shall immediately refund any compensation paid in relation to such premiums not received by the Company and no further compensation shall be payable to the Producer thereon. (e) Where a policy has lapsed the Producer shall immediately refund to the Company any compensation received on the lapsed policy pursuant to the Bonus provisions of the Schedule of Supplemental Income, if any. (f) The Company may adjust compensation so that compensation paid does not exceed the sales and surrender charges permitted by federal and state securities laws. 6. JOINT BUSINESS (a) Any policy other than those policies issued by the Company that are deemed to be securities subject to regulation by the Security and Exchange Commission, effected by the Producer in conjunction with any other producer, agent or broker of the Company shall be considered as joint business and, unless otherwise agreed to, the amount of compensation shall be apportioned equally to each producer, agent or broker. The Company requires written notice from the agent of record of any such joint business and of the existence of any Agreement providing for unequal apportionment of compensation. (b) Any policy issued by the Company that is deemed a security subject to regulation by the Securities and Exchange Commission may not be sold jointly with any individual or firm not registered with the National Association if Security Dealers and not contracted with ManEquity, Inc. Any joint cases must be specified as such at the time the application is delivered to the Company. 7. RIGHT OF OFFSET The Company may set off against any claims by the Producer under this Agreement, and/or any attachment thereto, any debt or obligation or liability due at any time to the Company or any affiliates, from the Producer as agent or otherwise, including, but not limited to, compensation due the Company pursuant to Clause 5 of this Agreement. The Producer shall be personally liable for the portion of any debit balance to advances unearned compensation which appears in the Producer's Advance. Said portion of the debit balance shall be payable by the Producer upon demand of the Company. At the option of the Company, interest at the maximum rate permissible by state law will accrue on said portion of the debit balance from the time a debit balance occurs in such account. The ledger account of the Company shall be competent and conclusive evidence of the state of accounts between the parties concerned. The right of offset shall be in addition to and shall not limit the Company's use of any other remedy available to it. Page 3 of 5 4 8. COMPANY RECORDS The Producer shall promptly deliver to the Company all applications whether reported on favorably of unfavorably by the medical examiner and shall keep regular and accurate accounts of all transactions with or for the Company. All books of accounts, letters, documents, vouchers, status and service notices and other books and papers connected with the business of the Company and maintained by or in possession of the Producer shall be open to the Company or its representative for the purpose of examination. 9. COLLECTIONS AND REMITTANCES The Producer shall immediately remit to the Company all monies received or collected by the Producer on behalf of the Company. The Producer shall not use any such monies for any other purpose whatsoever. 10. TERMINATION Either party may terminate this Agreement at any time with or without cause by giving the other party fifteen (15) days' notice in writing. Termination shall not, however, release the Producer from any debt due the Company and until such debt shall have been paid, the obligations and covenants of the Producer as set out in this Agreement shall remain in full force and effect. The Producer agrees that, in addition to the foregoing, the happening of any of the following events will also cause termination of this Agreement: (a) The death of the Producer; (b) The bankruptcy or insolvency of the Producer; (c) The Producer ceasing to hold a valid state license to sell insurance products for the Company; (d) The Producer ceasing to have his/her license sponsored by the Company; (e) The Producer ceasing to hold a valid Agreement with ManEquity, Inc., or with The Manufacturers Life Insurance Company (U.S.A.) 11. EFFECT OF TERMINATION ON COMPENSATION To the extent permitted by federal or state securities laws, upon termination of this Agreement, the Company shall pay the Producer or his/her successors and assigns, or his/her estate commissions premiums paid to the Company after the termination of this Agreement on any policies put in force by the Producer under this Agreement. 12. ASSIGNMENT No rights or interest of the Producer in or under or by virtue of this Agreement shall be merged, or assigned, or subject to sale or assignment without the prior written consent of the Company. 13. MEDICAL EXAMINATION AND FEES All medical examinations shall be made by a duly appointed medical examiner of the Company and the Company shall pay only such medical fees as are authorized by it. 14. CURRENCY All amounts payable under this Agreement shall be payable in the lawful currency of the United States of America. Page 4 of 5 5 15. EFFECT The Company shall have no responsibility for the effect this Agreement may have on federal, state or local taxes of the Producer. It is further agreed that the Producer is not relying on the Company for any advice relating to the effect of this Agreement on such taxes. 16. EXISTING AGREEMENTS In consideration of this Agreement, all existing agreements between the Company and the Producer shall terminate from the effective date of this Agreement, except as to compensation payable in accordance with such agreements. 17. APPLICABLE LAW This Agreement shall be governed by and construed according to the laws of the state of __________. 18. EFFECTIVE DATE This Agreement becomes effective the ______________day of_____________ _____ Year IN WITNESS WHEREOF the parties to this Agreement have set their hands as of the day and year first above written. WITNESS:_______________________________ ________________________________ Authorized signature THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA WITNESS:_______________________________ ________________________________ Producer Page 5 of 5 EX-99.A3(B)(III) 8 SPECIMEN AGREEMENT-MANAGED EQUITY AND DEALERS 1 Exhibit (A)(3)(b)(iii) Manulife Logo ManEquity, Inc. MANEQUITY BROKER/DEALER AGREEMENT THIS AGREEMENT made this _____________________ day of ___________________ 19____ BETWEEN: MANEQUITY, INC. ("MANEQUITY") a Colorado Corporation - and - ________________________________________________________________________________ ("Broker") a _________________________________________________________________ Corporation. WITNESSETH WHEREAS, The Manufactures Life Insurance Company of America ("Manufacturers Life of America") has granted to ManEquity, the exclusive right to be the distributor and principal underwriter of its Variable Life, Variable Annuity, Single Premium Variable Life, and Variable Universal Life Policies ("Policies" or "Policy") issued through Separate Account One, Two, Three and Four, of Manufacturers Life of America or any other Separate Accounts which Manufacturers Life of America may create in the future ("Accounts") or by or in conjunction with Manufacturers Life of America in each state or other jurisdiction where the Policies may legally be sold; WHEREAS, ManEquity is authorized by Manufacturers Life of America to enter into separate written agreements with organizations which agree to participate in the distribution of the Policies and to use their best efforts to solicit applications for the Policies; AND WHEREAS, Broker, a registered broker-dealer with the Securities and Exchange Commission under the Securities Act of 1934 and a member of the National Association of Securities Dealers, Inc. wishes to participate in the distribution of the Policies and to use its best efforts to solicit applications for the Policies; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the parties do hereby agree as follows: SECTION 1 - DEFINITION (a) REGISTRATION STATEMENTS - the respective Registration Statements and amendments thereto relating to each of the Policies, the Accounts, including financial statements and all exhibits. (b) PROSPECTUS OR PROSPECTUSES - the Prospectuses included within the Registration Statements. (c) 1933 ACT - the Securities Act of 1933, as amended. (d) 1934 ACT - the Securities Exchange Act of 1934, as amended. (e) 1940 ACT - the Investment Company Act of 1940, as amended. (f) SEC - the Securities and Exchange Commission. (g) NASD - the National Association of Securities Dealers, Inc. Page 1 of 6 - -------------------------------------------------------------------------------- Form AG0164US(0397) 2 SECTION 2 - BROKER (a) APPOINTMENT Pursuant to the authority granted to it by Manufacturers Life of America, ManEquity hereby authorizes Broker during the term of this Agreement to solicit from eligible persons, applications for Polices, including any riders Manufacturers Life of America may make available in connection with any of the Policies. Broker hereby accepts such appointment and agrees to use its best efforts to find purchasers for the Policies acceptable to Manufacturers Life of America. Before the Broker solicits applications for Policies there must be effective Registration Statement for the Policies and Brokers must have been notified by ManEquity that the Policies are qualified for sale under all applicable securities and insurance laws of the state or other jurisdiction in which application will be solicited. (b) RESPONSIBILITIES (i) Broker agrees that all agents or representative of Broker who will be soliciting applications for the Policies will be duly registered representatives of Broker having achieved an appropriate NASD designation for the sale of the Policies and duly licensed under any applicable state securities law. No agent or representative of Broker shall solicit applications for any of the Policies until duly licensed and appointed by Manufacturers Life of America as a Life Insurance and Variable Contracts Broker or Agent in the appropriate states or other jurisdiction. (ii) Broker shall be responsible for the training, supervision and control of all of its agents or representatives soliciting applications for the Policies so as to ensure compliance with all applicable provisions of, any rules and regulations under, Federal and State Securities Laws and State Insurance Laws and with all applicable rules of the NASD. (iii) In connection with its performance under this Agreement, Broker shall, during the term of this Agreement, engage in the following activities: (a) Utilize only sales and promotional materials which have either been provided or approved in writing by Manufacturers Life of America; (b) Establish and implement reasonable procedures for periodic inspection and supervision of sales practices of its agents or representatives and submit reports to ManEquity as may be requested on the results of such inspections and the compliance with such procedures; and (c) Take reasonable steps to insure the various representatives appointed by it shall not make recommendations to an applicant to purchase any of the Policies in the absence of reasonable grounds to believe that the purchase of any such Policy is suitable for such applicant. Determination of suitability for variable life policies shall be made at least in compliance with Manufacturers Life of America's established Standards of SUITABILITY, which are set forth in Schedule A, which Schedule is incorporated herein. (iv) All payments for the Policies collected by agents or representatives of Broker shall be held at all times in a fiduciary capacity and shall be promptly, but in no event more than two business days after receipt, remitted in full together with such applications, forms and other required documentation to an office of Manufacturers Life of America designated by ManEquity. Broker, its agents or representatives, shall not withhold or deduct any part of any payments it shall receive for any reason. Checks representing any payments shall be drawn to the order of "The Manufacturers Life Insurance Company of America" or "Manufacturers Life of America". Cash is not an acceptable form of payment under any circumstances. (v) Broker acknowledges that Manufacturers Life of America retains the ultimate right to control the sale of the Policies and that ManEquity or Manufacturers Life of America shall have the unconditional right to reject, in whole or part, any application for any of the Policies. In the event Manufacturers Life of America or ManEquity rejects an application, Manufacturers Life of America will immediately return all payments to the applicant and Broker will be notified of such action. In the event that any Policyowner or applicant for any Policy elects to surrender or return any such Policy pursuant to the Policy's provisions or nay applicable Federal or State Law, including but not limited to rule 6e-2(b)(13)(viii) and Rule 6e-3(T)(13)(vii) or (viii) of the 1940 Act or any amendments or successor rules thereto, any payment required to be refunded will be refunded directly to the purchaser. Page 2 of 6 - -------------------------------------------------------------------------------- Form AG0164US(0397) 3 (vi) Broker shall act as an independent contractor, and nothing herein contained shall constitute Broker, its agents or representatives, or any employees thereof as employees of Manufacturers Life of America or ManEquity in connection with the solicitation of applications for Policies. Broker, its agents or representatives, and its employees shall not hold themselves out to be employees of Manufacturers Life of America or ManEquity in this connection or in any dealings with the public and, except as specifically provided otherwise in this Agreement, Broker shall not possess or exercise any authority on behalf of Manufacturers Life of America, ManEquity or the Accounts. (vii) Solicitation and other activities by Broker shall be only in accordance with applicable laws and regulations. Broker understands and acknowledges that neither it nor its agents or representatives are authorized by ManEquity or Manufacturers Life of America to give any information or make any representation in connection with the offering of the Policies other than those contained in Prospectuses or other solicitation material authorized by Manufacturers Life of America. (viii) Broker shall not have authority on behalf of ManEquity or Manufacturers Life of America to: (a) Make, alter or discharge any Policy or other form; (b) Waive any forfeiture or extend the time of paying any premium; or (c) Receive any monies or payments to Manufacturers Life of America, except as set forth in Section 2(b)(iv) of this Agreement. (ix) Broker shall have the responsibility for maintaining the records of its representatives engaged in the sale of the Policies. Broker shall maintain and preserve such accounts, books, and other documents as are required of it by applicable laws and regulations. Without limiting the foregoing, such books, accounts, and records shall be maintained so as to clearly and accurately disclose the nature and details of the transactions. Broker shall keep confidential any information obtained pursuant to this Agreement and shall disclose such information, only if such disclosure is expressly required by applicable Federal or State authorities. SECTION 3 - MANEQUITY During the term of this Agreement, ManEquity will notify Broker of the issuance by the SEC of any stop order with respect to any of the Registration Statements, or any amendments thereto, or the institution of any proceedings for that purpose or for any other purpose relating to any such registration and or offering of the policies and of any action or circumstances that may prevent the lawful sale of any of the Policies in any state or jurisdiction. During the term of this Agreement, ManEquity shall advise Broker of any amendment to any of the Registration Statement or any amendment or supplement to any Prospectus. SECTION 4 - COMPENSATION ManEquity shall cause Manufacturers Life of America to arrange for the payment of commissions to Broker as compensation for the sale of each Policy sold by a registered representative of Broker. The amount of compensation shall be based on a schedule to be determined by Agreement of Manufacturers Life of America, ManEquity, and Broker. Manufacturers Life of America shall identify to Broker with each such payment, the name of the registered representative of Broker who solicited each Policy covered by the payment. Any such compensation received by Broker on account of any Policy which is tendered for redemption within seven (7) business days after acceptance of the Policy application shall be returned promptly to Manufacturers Life of America. SECTION 5 - COMPLAINTS AND INVESTIGATIONS Broker and ManEquity agree to co-operate fully in any insurance regulatory investigation or proceeding or judicial proceeding arising in connection with the Policies distributed under this Agreement. Broker and ManEquity further agree to co-operate fully in any securities regulatory investigation or proceeding or judicial proceeding with respect to Broker, ManEquity, their affiliates and their agents or representatives to the extent that such investigation or proceeding is in connection with policies distributed under this Agreement. Broker shall furnish applicable Federal and State regulatory authorities with any information or reports in connection with its services under this Agreement which such authorities may Page 3 of 6 - -------------------------------------------------------------------------------- Form AG0164US(0397) 4 request in order to ascertain whether Manufacturers Life of America's operations are being conducted in a manner consistent with any applicable law or regulation. Without limiting the foregoing: (a) Broker will promptly notify ManEquity of any customer complaint (as defined by Section IM-3110(e) of the NASD Rules of the Association) or notice of any regulatory investigation or proceeding or judicial proceeding received by Broker with respect to the policies distributed under this Agreement or which may affect Manufacturers Life of America's issuance of any of the policies distributed under this Agreement:; (b) ManEquity will promptly notify Broker of any customer complaint or notice of any regulatory investigation or proceeding received by ManEquity or its affiliates with respect to Broker or any agent or representative in connection with any of the Policies distributed under this Agreement. (c) In the case of a customer complaint, ManEquity and Broker will co-operate in investigating such complaint and any response to such complaint will be sent to the other party to this Agreement for approval not less than five business days prior to it being sent to the customer or regulatory authority, except that if a more prompt response is required, the proposed response shall be communicated by telephone or telecopy. SECTION 6 - INDEMNITY (a) ManEquity agrees to indemnify and hold-harmless Broker and each other officer, director or employee of Broker against any losses, claims, damages or liabilities, joint or several, to which Broker or such officer of director become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof)arise out of or are based upon any untrue statement or alleged untrue statement of a material fact, required to be stated therein or necessary to make the statements therein not misleading, contained in any of the Registration Statements, Prospectuses, supplements to the Prospectuses, or sale and promotional materials approved by Manufacturers Life of America. (b) Broker agrees to indemnify and hold harmless Manufacturers Life of America and ManEquity and each of their current and former directors, officers and employees and each person, if any, who controls or has controlled Manufacturers Life of America or ManEquity within the meaning of the 1933 Act or the 1934 Act, against any losses, claims, damages or liabilities to which Manufacturers Life of America or ManEquity or any such director, officer, employee or controlling person may become subject, under the 1933 Act of otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) Any unauthorized use of sales and promotional materials or any verbal or written misrepresentations or any unlawful sales practices or other improper conduct concerning any of the Policies by Broker, its agents or representatives; (ii) Claims by agents or representatives or employees of Broker for commissions, service fees, development allowances or other compensation or remuneration of any type; or (iii) The failure of Broker, its officers, employees, agents or representatives to comply with the provisions of this Agreement. Broker will reimburse Manufacturers Life of America and ManEquity and any director, officer, employee or controlling person of them for any legal or other expenses reasonably incurred by Manufacturers Life of America, ManEquity, or such director, officer, employee, or controlling person of either for any legal or other expenses reasonably incurred by Manufacturers Life of America, ManEquity, or such director, officer, employee, or controlling person in connection with investigating or defending any such loss, claim, damage, liability or action. This indemnity Agreement will be in addition to any liability which Broker may otherwise have. SECTION 7 - REGULATION This Agreement shall be subject to the provisions of the 1940 Act, the 1934 Act and the rules , regulations, and rulings thereunder and of the NASD, from time to time in effect including such exemptions or other relief from such Acts as the SEC may grant, and the terms hereof shall be interpreted and construed in accordance therewith. Broker shall submit to all Page 4 of 6 - -------------------------------------------------------------------------------- Form AG0164US(0397) 5 regulatory and administrative bodies having jurisdiction over the sales of the Policies or operations of the Accounts, present or future, any information, reports or other material which any such body by reason of this Agreement may request or require pursuant to applicable laws and regulations. SECTION 8 - SEVERABILITY Should any portion of this Agreement for any reason be held to be void in law or in equity, the Agreement shall be construed, insofar as is possible, as if such portion had never been contained therein. SECTION 9 - TERMINATION This Agreement shall continue in force for one year from its effective date and thereafter shall automatically be renewed every year for a further one-year period, provided that wither party hereto may terminate this Agreement on sixty (60) days' written notice to the other party hereto, without the payment of any penalty. Upon termination of this Agreement all authorizations, rights and obligations shall cease except: (a) The obligation to settle accounts hereunder, including commissions on payments subsequently received for Policies in effect at the time of termination; and (b) The Agreements contained in Sections 5, 6,7, and the last sentence of Section 4 hereof. SECTION 10 - ASSIGNMENT Unless Broker and ManEquity specifically agree in writing, this Agreement shall not be assigned. SECTION 11 - GOVERNING LAW This Agreement shall be construed in accordance with and governed by, the laws of the Commonwealth of Colorado. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed under seal by their duly authorized officers as of the date first mentioned above. ManEquity, Inc. By___________________________________________ Its Broker By ___________________________________________ Its Broker Tax I.D. # __________________________________________ Page 5 of 6 - -------------------------------------------------------------------------------- Form AG0164US(0397) 6 Exhibit A STANDARD'S OF SUITABILITY VARIABLE LIFE POLICIES Resolved, that the following Standards of Suitability which express the policy of the Company with respect to determining the suitability for applicants for variable life insurance policies be adopted: (a) No recommendations shall be made to a potential applicant to purchase a variable life insurance policy and no variable life insurance policy shall be issued in the absence of reasonable grounds to believe that the purchase of such policy is not unsuitable for such applicant on the basis of information furnished after reasonable inquiry of such applicant concerning the applicant's insurance and investment objectives, financial situation and needs, and any other information known to the Company or to the agent making the recommendation. (b) Lapse rates for variable life insurance within the first two policy years which are significantly higher than both those encountered by the Company or any Affiliates for corresponding fixed benefit life insurance policies and lapse rates of other insurers issuing variable life insurance policies shall be considered in determining whether the above guidelines adopted by the Company are reasonable and also whether the Company and its agents are engaging as a general business practice in the sale of variable life insurance to persons for whom it is unsuitable. For purposes of this Clause (2), conversions from variable life insurance to fixed benefit insurance policies pursuant to the NAIC Model Variable Life Insurance Regulation shall not be considered lapses. Page 6 of 6 - -------------------------------------------------------------------------------- Form AG0164US(0397) EX-99.A3(B)(IV) 9 SPECIMEN AGREEMENT-MANULIFE AND DEALERS 1 Exhibit (A)(3)(b)(iv) Manulife Logo BROKER/DEALER PRODUCER AGREEMENT THIS AGREEMENT made this _____________ day of ____________19___________ BETWEEN: THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA (HEREINAFTER CALLED THE "COMPANY") - AND - ________________________________________________________________________________ (hereinafter called the "Producer") Witness that in consideration of the mutual covenants of the parties herein contained, the parties hereto agree as follow: 1. STATUS The Producer is hereby appointed an agent of the Company. It is understood and agreed that there is no corporate affiliation between the Company and the Producer and nothing contained herein shall be construed to create such relationship. In this Agreement, "Representative" refers to an individual who is a shareholder, associate or employee of the Producer, and who acts in the name of and on behalf of the Producer in soliciting, negotiating, or accepting from the public applications for life insurance products offered by the Company. In order for the Producer to remain sponsored by the Company, the Producer must have at least one (1) full-time Representative at all times. All Representative(s) of the Producer must hold appropriate licenses and must be appointed by the Company at all times. If the Producer through any of its Representative(s) desires to sell any variable life, annuity, or endowment products ("variable products") produced currently or in the future by the Company or one of its affiliates, it must also hold a valid dealer agreement with ManEquity, Inc. 2. RESPONSIBILITIES (a) The Producer through its Representative(s) shall canvass for applications for insurance and services offered by the Company and collect, in exchange for receipts furnished by the Company, money due or to become due to the Company in respect to applications and policies obtained by or through the Producer. (b) All applications for insurance products and services shall be signed by a licensed Representative(s) of the Agency. (c) The Producer shall ensure that its Representative(s) maintain a standard of knowledge and competence in the sale of the Company's products which is satisfactory to the Company. (d) The Producer and its Representative(s) shall comply with all applicable insurance laws and regulations. The Producer is required to obtain, and from time to time renew, a license to sell insurance within the state(s) in which the Producer intends to carry on business. The Producer shall also be required to obtain, and from time to time renew, a license for all of its Representative(s). If the Producer desires to sell any variable products offered by the Company, additional licensing is required under a ManEquity, Inc. dealer agreement. Page 1 of 5 - -------------------------------------------------------------------------------- Form AG0189US(0397) 2 (e) When requested by the Company, the Producer and/or its Representative(s) shall also purchase errors and omissions coverage in an amount acceptable to the Company. 3. GENERAL CONDUCT AND REPRESENTATIVES (a) The Producer and its Representative(s) shall not transact any business for the Company unless duly licensed as required by law. The Producer and its Representative(s) shall not transact any variable products business for the Company unless contracted to do so by ManEquity, Inc. (b) The Producer and its Representative(s) are not authorized to make contracts on behalf of the Company, or to alter or amend any of the provisions of the Company's contracts, or to waive forfeitures or bind the Company in any way not specifically authorized in writing by the Company. The Producer and its Representative(s) are not authorized to pay any premium or premiums or other payments on behalf of an applicant, policyholder, or beneficiary. (c) Neither the Producer not its Representative(s) shall induce producers, agents or brokers to leave the Company, or persuade policyholders to discontinue their policies, or otherwise do anything prejudicial to the Company's interest or that of its policyholders. 4. COMPENSATION (a) Subject to Clause 5 "Regulations Governing Compensation and Credit" and Clause 6 "Joint Business", compensation shall be determined and shall be payable to the Producer while this Agreement is in force, in accordance with (1) the Company's Schedule of Commissions in force when an application for insurance is submitted to the Company and (2) any Schedule of Supplemental Income which may be entered into by the Producer and the Company and any amendments or supplements to those schedules. (b) The Producer's basic compensation shall be by commission which shall be determined in accordance with the Schedule of Commissions. Other forms of compensation above and beyond those set out in the Schedule of Commissions and the Schedule of Supplemental Income, if any, may be specifically provided for or allowed as an option by the Company at its discretion. Commissions earned on the sale of variable products are paid by or on the behalf of ManEquity, Inc. (c) The Schedule of Commissions and the Schedule of Supplemental Income, if any, and any amendments or supplements thereto, are subject to change by the Company at any time. No change shall affect commissions on Individual insurance products offered by the Company for which applications were submitted to the Company prior to the effective date of the change. 5. REGULATIONS GOVERNING COMPENSATION AND CREDIT (a) When a policy is changed, the compensation, if any, shall be determined by the Company. (b) The Company shall determine the compensation on any new policy when: i) A policy on the same life has been surrendered or; lapsed within six (6) months of the application for the new policy; or ii) The new policy appears to have replaced an existing policy or part of a policy within six (6) months of the date of application. The Producer shall immediately refund to the Company any excess compensation received on the new policy. Page 2 of 5 - -------------------------------------------------------------------------------- Form AG0189US(0397) 3 (c) If the Company returns any part of or all of premium(s) paid in respect to an issued policy, the Producer shall lose all right to any compensation on such premiums. The Producer shall also immediately refund to the Company the amount of any compensation received on the returned premium. (d) Where a policy has lapsed and the premium remains unpaid sixty (60) days beyond the expiration of the grace period, the Company shall have the right to take such policy out of the Producer's account of business. The Producer shall immediately refund any compensation paid in relation to such premiums not received by the Company and no further compensation shall be payable to the Producer thereon. (e) Where a policy has lapsed, the Producer shall immediately refund to the Company any compensation received on the lapsed policy pursuant to the Bonus provisions of the Schedule of Supplemental Income, if any. (f) The Company may adjust compensation so that compensation does not exceed the sales and surrender charges permitted by federal and state securities laws. 6. JOINT BUSINESS (a) Any policy other than those policies issued by the Company that are deemed to be securities subject to regulation by the Securities and Exchange Commission, effected by the Producer in conjunction with any other producer, agent or broker of the Company, shall be considered as joint business and, unless otherwise agreed to, the amount of compensation shall be apportioned equally to each producer, agent or broker. The Company requires written notice from the agent of record of any such joint business and of the existence of any Agreement providing for unequal apportionment of compensation. (b) Any policy issued by the Company that is deemed a security subject to regulation by the Securities and Exchange Commission may not be sold jointly with any individual or firm not registered with the National Association of Securities Dealers and contracted with ManEquity, Inc. Any joint cases must be specified as such at the time the application is delivered to the company. 7. RIGHT OF OFFSET The Company may set off against any claims by the Producer under this Agreement, and/or any attachment thereto, any debt or obligation or liability due at any time to the Company, or any of its affiliates, from the Producer as agent or otherwise, including but not limited to, compensation due the Company pursuant to Clause 5 of this Agreement. The Producer and/or its Representative(s) will become personally liable for the portion of any debit balance equal to advances on unearned compensation which appears in the Producer's Advance Account. Said portion of the debit balance shall be payable by the Producer upon demand of the Company. At the option of the Company, interest at the maximum rate permissible by state law will accrue on said portion of the debit balance from the time a debit balance occurs in such an account. The ledger account of the Company shall be competent and conclusive evidence of the state of accounts between the parties concerned. This right of offset shall be in addition to and shall not limit the Company's use of any other remedy available to it. 8. COMPANY RECORDS The Producer shall promptly deliver to the Company all applications whether reported on favorably or unfavorably by the medical examiner and shall keep regular and accurate accounts of Page 3 of 5 - -------------------------------------------------------------------------------- Form AG0189US(0397) 4 all transactions with or for the Company. All books of account, letters, documents, vouchers, status and service notices and other books and papers connected with the business of the Company and maintained by or in the possession of the Producer shall be open to the Company or its representative for the purposes of examination. 9. COLLECTIONS AND REMITTANCES The Producer shall immediately remit to the Company all monies received or collected by the Producer on behalf of the Company. The Producer shall not use any such monies for any other purpose. 10. LICENSED REPRESENTATIVE(S) The Producer undertakes to notify the Company immediately in writing of any new Representative(s) or of any change in the employment status of any of the Producer's Representative(s). The Producer shall not add any new Representative(s) without first notifying the Company. Should the Company cease to sponsor the license of a Representative of the Producer for any reason, the Company shall give the Producer and the Representative fifteen (15) days notice in writing. Upon the effective date of the notice, the Representative shall immediately cease to act on behalf of, or in the name of, the Producer. 11. TERMINATION Either party may terminate this Agreement at any time with or without cause by giving the other party fifteen (15) days' notice in writing. Termination shall not, however, release the Producer from any debt due the Company and until such debt shall have been paid, the obligations and covenants of the Producer as set out in this Agreement shall remain in force and effect. The Producer agrees that, in addition to the foregoing, the happening of any of the following events will also cause termination of this Agreement: (a) the bankruptcy or insolvency of the Producer; (b) the winding up or dissolution of the Producer; (c) the Producer ceasing to have its license sponsored by the Company; (d) the Producer ceasing to hold a valid state license to sell insurance products for the Company; (e) the Producer ceasing to hold a valid dealer agreement with ManEquity, Inc. 12. EFFECT OF TERMINATION OF COMPENSATION To the extent permitted by federal or state security laws, upon termination of this Agreement, the Company shall pay the Producer or his/her successors and assigns, or his/her estate commissions on premiums paid to the Company after the termination of this Agreement on any policies put in force by the Producer under this Agreement. 13. ASSIGNMENT No rights or interest of the Producer in or under or by virtue of this Agreement shall be merged, or subject to sale or assignment without the prior consent of the Company. Page 4 of 5 - -------------------------------------------------------------------------------- Form AG0189US(0397) 5 14. MEDICAL EXAMINATION AND FEES All medical examination shall be made by a duly appointed medical examiner of the Company and the Company shall pay only such medical fees as are authorized by it. 15. CURRENCY All amounts payable under this Agreement shall be payable in the lawful currency of the United States of America. 16. EFFECT The Company shall have no responsibility for the effect this Agreement may have on the federal, state or local taxes of the Producer. It is further agreed that the Producer is not relying on the Company for any advice relating to the effect of this Agreement on such taxes. 17. EXISTING AGREEMENTS In consideration of this Agreement, all existing agreements between the Company and the Producer shall terminate from the effective date of this Agreement, except as to compensation payable in accordance with such agreements. 18. APPLICABLE LAW This Agreement shall be governed by and construed according to the laws of the state of CT . 19. EFFECTIVE DATE This Agreement becomes effective the _________ day of _________ 19____ IN WITNESS WHEREOF the parties to this Agreement have set their hands as of the day and year first written above. WITNESS:____________________________ ________________________________________ Authorized Signature THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA WITNESS:____________________________ ________________________________________ Producer Signature By: ____________________________________ Name/Title Page 5 of 5 - -------------------------------------------------------------------------------- Form AG0189US(0397) EX-99.A3(C) 10 SCHEDULE OF SALES COMMISIONS 1 EXHIBIT (A)(3)(C) COMMISSION SCHEDULE First Year Two schedules will be available. Commission Schedule II will be available to qualifying producers only: Schedule I: 10% of premiums paid up to the Target Premium in each of policy years 1-5. Schedule II: 12.25% of premiums paid up to the Target Premium in policy year 1. 9.25% of premiums paid up to the Target Premium in each of policy years 2 - 5. Renewal 2.5% of premiums paid in excess of the Commission Target Premium in policy years 1 - 5. 2.5% of all premiums paid in policy years 6 and later. Per Policy $100 per policy, paid at the beginning Service Fee of each policy year. Asset Builder A percentage of the non-loaned policy Compensation value at the beginning of the year. This percentage varies by policy year as follows: Policy Year Percentage 1-5 0.00% 6-10 0.10% 11+ 0.20% Commission on First year commission at the rate Increases shown above is paid on premium allocated to the increase up to the Target Premium for the increase. EX-99.A8(A)(I) 11 SERVICE AGREEMENT DATED JUNE 1,1988 1 Exhibit (A)(8)(a)(i) SERVICE AGREEMENT THIS AGREEMENT, effective as of 12:01 A.M. (EDT), June 1, 1988, between The Manufacturers Life Insurance Company, a mutual life insurance company organized under the laws of Canada ("Manufacturers"), and The Manufacturers Life Insurance Company of America, a stock life insurance company domiciled in the Commonwealth of Pennsylvania ("Manufacturers of America"). WITNESSETH WHEREAS, Manufacturers carries on the business of life insurance and it's related products; AND WHEREAS, Manufacturers of America carries on the business of life insurance and its related products and is an indirect wholly-owned subsidiary of Manufacturers; AND WHEREAS, Manufacturers of America wishes to have Manufacturers service its life insurance business operations, including both general account and separate account operations; AND WHEREAS, Manufacturers and Manufacturers of America desire that an agreement be made between them concerning the operation of their businesses for their mutual benefit; NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter expressed, and other good and valuable consideration, the Parties agree as follows: Section 1. GENERAL SERVICES. Manufacturers shall provide Manufacturers of America, as required by Manufacturers of America, with the services of both Manufacturers' departments and branches, including but not limited to, data processing, claims, legal, tax, accounting, internal audit, corporate compliance, human resources, payroll, purchasing and supply, office planning, printing and art, reinsurance, investments, marketing and actuarial. Section 2. PERSONNEL. (a) Manufacturers shall determine which of its employees are available to perform services for Manufacturers of America and Manufacturers of America shall designate certain of these employees as employees, officers or directors of Manufacturers of America. Manufacturers shall pay the full salaries and benefits of Manufacturers of America's staff. (b) It is understood and agreed that the employees of Manufacturers (including those who are also employees, officers or directors of Manufacturers of America) in performing services pursuant to this Agreement for Manufacturers of America shall, with respect to all other forms of their compensation, be acting as employees of Manufacturers. The remuneration of such directors, officers and employees received from Manufacturers shall constitute payment in full for any services they perform for Manufacturers of America and in no event shall such officers and employees have a claim for remuneration from Manufacturers of America. Manufacturers agrees to hold-harmless and indemnify Manufacturers of America as a result of any claim for remuneration by any officer or employee of Manufacturers. Section 3. OFFICE SPACE, EQUIPMENT AND SUPPLIES. Manufacturers shall provide Manufacturers of America with and pay for certain office space, equipment, supplies and data processing services as may be required by Manufacturers of America from time to time. Manufacturers also shall directly pay certain operating expenses and miscellaneous business expenses of Manufacturers of America as may be required by Manufacturers of America and agreed to at 2 the time by Manufacturers. Manufacturers shall also provide Manufacturers of America with office equipment which both Parties determine to be necessary for the operation of Manufacturers of America. Section 4. ADMINISTRATIVE SERVICES. (a) Subject to the provisions of Section 10 herein, Manufacturers agrees to act, in the name of Manufacturers of America, as Administrative Manager for Manufacturers of America with respect to the business of life insurance and its related products (both general account and separate account) carried on by Manufacturers of America and to perform all administrative, marketing and technical functions in connection with the development, management, marketing and processing of the business related thereto including, by not limited to, billing and collection of premiums, processing of claims, answering policyowner correspondence, maintenance of necessary data processing and other records, payment of producer's commissions (including the responsibility for an expense of computation of any contingent commissions), underwriting, appointment and cancellation of agencies and cancellation of policies. Manufacturers shall manage the investment of all general account assets of Manufacturers of America. (b) Manufacturers and Manufacturers of America shall not sell the same policy simultaneously in the same jurisdiction. Furthermore, Manufacturers shall not knowingly be in a position of having conflicting interests with Manufacturers of America due to activities which actually amount to business competition with Manufacturers of America. (c) Premiums collected by Manufacturers on behalf of Manufacturers of America shall be held by Manufacturers in fiduciary capacity with respect to Manufacturers of America and shall be paid over to Manufacturers of America immediately following collection. Section 5. RECORDS. (a) Manufacturers of America shall own and control all files, documents, correspondence, papers and other records of every kind and description maintained and prepared by Manufacturers in connection with the services provided by Manufacturers hereunder and Manufacturers shall prepare and maintain such basic policy records and other business records as are usual and customarily prepared and necessary for Manufacturers of America to perform in its proper function as an insurer and to meet all regulatory requirements. Manufacturers shall not disclose or use any records prepared by reason of this Agreement in any manner except as expressly authorized herein or directed by Manufacturers of America and shall keep confidential any information obtained by reason of this Agreement. Upon termination of this Agreement and if requested by Manufacturers of America, Manufacturers shall promptly return to Manufacturers of America or its designee all such records. (b) Manufacturers shall furnish the Commissioner of Insurance of Pennsylvania (the "Commissioner") with any information or reports in connection with any of the services provided hereunder which the Commissioner may request. (c) Manufacturers of America shall have access to the books and records of Manufacturers and shall have the right to examine and audit the books and records pertaining to the business operations serviced under this agreement. 3 Section 6. COMPLIANCE WITH LAW. In the performance of such services as described in Section 1, 4 and 5(a) herein, Manufacturers shall comply with applicable laws, rules and regulations of the Pennsylvania Insurance Department and the insurance regulatory authorities of other jurisdictions in which the policies serviced under this Agreement are issued. Manufacturers shall submit to all regulatory and administrative bodies having jurisdiction over the services provided pursuant to this Agreement, present of future, any information, reports or other material which any such body by reason of this Agreement may request or require pursuant to applicable laws and regulations. Section 7. PERFORMANCE OF SERVICES. The services to be performed by Manufacturers hereunder will be performed at the Home Office of Manufacturers in Toronto, Ontario, Canada as well as the United States Branch Offices of Manufacturers. In the event Manufacturers of America wishes to directly perform the functions handled by Manufacturers under this Agreement, Manufacturers of America shall be entitled to terminate this Agreement at any time. Section 8. COMPENSATION. (a) Manufacturers of America shall reimburse Manufacturers for the reasonable cost of the services provided by Manufacturers' internal departments and branches under Sections 1, 4, and 5(a) hereof. Manufacturers of America shall also fully reimburse Manufacturers for the expenses it reasonable incurs or payments it reasonably makes on behalf of Manufacturers of America under any provisions of this Agreement. (b) Manufacturers shall submit statements from time to time, but no less often than annually, to Manufacturers of America for all amounts payable under the terms of this Agreement, and payment shall be made by Manufacturers of America as soon thereafter as is reasonably possible. Section 9. CLAIM SETTLEMENT. Pursuant to claim settlement policies utilized by Manufacturers of America and subject to Manufacturers of America's right to review at any time the procedures followed by Manufacturers in implementing said settlement policies, Manufacturers shall be authorized to pay, compromise or settle any claim or other cause of action arising from the insurance operations serviced hereby. Section 10. RESERVATION OF AUTHORITY. (a) Manufacturers is not authorized by this Agreement to (i) extend credit for Manufacturers of America nor (ii) alter, waive or modify any of the terms, conditions, or limitations of any policy serviced hereunder. (b) The officers and Board of Directors of Manufacturers of America retain the right to supervise and control all functions performed by Manufacturers on behalf of Manufacturers of America. (c) Manufacturers of America shall retain custody of responsibility for and control of all investments while Manufacturers manages the investment of all general account assets of Manufacturers of America. (d) Manufacturers of America has the ultimate right to control all matters relating to policy development, underwriting, marketing, cancellation of policies, cancellation of agency appointments and the determination of agents commissions. (e) Any duties not delegated to Manufacturers hereunder are retained by Manufacturers of America. 4 Section 11. LIABILITY. Manufacturers shall be liable for its own misconduct, negligence and gross negligence in providing the services set forth in this Agreement. Section 12. ASSIGNMENT. The rights, obligations, and interests of the Parties under this Agreement shall not be assignable in whole or in part. Section 13. SEVERABILITY. Should any portion of this Agreement for any reason be held to be void in law or in equity, the Agreement shall be construed, so far as is possible, as if such portion had never been contained herein. Section 14. ENTIRE AGREEMENT. This Agreement contains the entire understanding of the Parties and may not be amended except by an agreement in writing of subsequent date signed by the Parties. Section 15. HEADINGS. The headings in the sections of this Agreement are inserted for convenience of reference only and shall not constitute a part thereof. Section 16. TERMINATION. Either Party may terminate this Agreement without penalty, by 60 days' notice in writing, delivered personally or addressed to the other at its Home Office. In any event, however, this Agreement shall terminate no later than five years after its effective date. Section 17. GOVERNING LAW. This Agreement shall be governed by and construed according to the laws of the Commonwealth of Pennsylvania. IN WITNESS WHEREOF, The Manufacturers Life Insurance Company and The Manufacturers Life Insurance Company of America have caused this Agreement to be executed and their Corporate Seals affixed hereto effective the date first mentioned above. THE MANUFACTURERS LIFE INSURANCE COMPANY By:_____________________________________ Its: THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA By:_____________________________________ Its: EX-99.A8(A)(II) 12 AMENDMENT TO SERVICE AGREEMENT 1 Exhibit (A)(8)(a)(ii) AMENDMENT TO SERVICE AGREEMENT This Amendment to the Service Agreement dated as of June 1, 1988 is entered into this 31st day of December, 1992 between The Manufacturers Life Insurance Company, a mutual life insurance company organized under the laws of Canada ("Manufacturers") and The Manufacturers Life Insurance Company of America, a stock life insurance company domiciled in the Commonwealth of Pennsylvania ("Manufacturers of America"). WITNESSETH WHEREAS, Manufacturers of America is in the process of redomesticating from the Commonwealth of Pennsylvania to the State of Michigan; and WHEREAS, Manufacturers of America is introducing new products which may involve the use of non-insulated, non-unitized separate accounts; and WHEREAS, under Michigan law these non-insulated, non-unitized separate accounts are subject to the same investment laws as the general account; NOW THEREFORE Manufacturers and Manufacturers of America hereby agree as follows: 1. Effective upon approval of the redomestication of Manufacturers of America to the State of Michigan, Section 17 of the Agreement shall be deemed to be amended to read as follows: "Section 17. Governing Law. This Agreement shall be governed by and construed according to the laws of the State of Michigan". 2. Effective upon the date Manufacturers of America first offers to the public products registered on Form S-1 of the Securities and Exchange Commission, the last sentence of Section 4(a) of the Agreement shall be deemed to be amended to read as follows: "Manufacturers shall manage the investment of all general account assets of Manufacturers of America and assets of any separate accounts which are subject to the same investment regulations as the general account". IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed under seal by their duly authorized officers as of the date first above-mentioned. THE MANUFACTURERS LIFE INSURANCE [Seal] COMPANY _________________________________ By:__________________________________ Its:_________________________________ THE MANUFACTURERS LIFE INSURANCE [Seal] COMPANY OF AMERICA _________________________________ By:__________________________________ Its:_________________________________ EX-99.A8(A)(III) 13 AMENDMENT TO SERVICE AGREEMENT 1 Exhibit (A)(8)(a)(iii) AMENDMENT TO SERVICE AGREEMENT This Amendment to the Service Agreement dated as of June 1, 1988 is entered into this 31st day of May, 1993 between The Manufacturers Life Insurance Company, a mutual life insurance company organized under the laws of Canada ("Manufacturers") and The Manufacturers Life Insurance Company of America, a stock life insurance company domiciled in the State of Michigan ("Manufacturers of America"). WITNESSETH WHEREAS, the Service Agreement is scheduled to terminate May 31, 1993; and WHEREAS, Manufacturers and Manufacturers of America wish to extend the term of the Service Agreement; NOW THEREFORE Manufacturers and Manufacturers of America hereby agree as follows: 1. Effective as of 12:01 A.M. (EDT), June 1, 1993, Section 16 of the Agreement shall be deemed to be amended to read as follows: "SECTION 16. TERMINATION. Either party may terminate this Agreement without penalty, by 60 days' notice in writing, delivered personally or addressed to the other at its home office. In any event, however, this Agreement shall terminate no later than five years after its effective date." IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed under seal by their duly authorized officers as of the date first above-mentioned. THE MANUFACTURERS LIFE INSURANCE COMPANY By:_________________________________ Its:________________________________ THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA By:_________________________________ Its:________________________________ EX-99.A8(A)(IV) 14 AMENDMENT TO SERVICE AGREEMENT 1 Exhibit (A)(8)(a)(iv) AMENDMENT TO SERVICE AGREEMENT This Amendment to the Service Agreement dated as of June 1, 1988 is entered into this 30th day of June, 1993 between The Manufacturers Life Insurance Company, a mutual life insurance company organized under the laws of Canada ("Manufacturers") and The Manufacturers Life Insurance Company of America, a stock life insurance company domiciled in the State of Michigan ("Manufacturers of America"). WITNESSETH WHEREAS, Manufacturers of America has redomesticated from the Commonwealth of Pennsylvania to the State of Michigan; NOW THEREFORE Manufacturers and Manufacturers of America hereby agree as follows: 1. Section 5(b) of the Agreement shall be deemed to be amended to read as follows: "SECTION 5. RECORDS. Manufacturers shall furnish the Commissioner of Insurance of Michigan (the "Commissioner") with any information or reports in connection with any of the services provided hereunder which the Commissioner may request." 2. Section 6 of the Agreement shall be deemed to be amended by substituting "Michigan Insurance Department" for "Pennsylvania Insurance Department" in the third line thereof. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed under seal by their duly authorized officers as of the date first above-mentioned. THE MANUFACTURERS LIFE INSURANCE [Seal] COMPANY _________________________________ By:_________________________________ Its:________________________________ THE MANUFACTURERS LIFE INSURANCE [Seal] COMPANY OF AMERICA _________________________________ By:_________________________________ Its:________________________________ EX-99.A8(A)(V) 15 AMENDMENT TO SERVICE AGREEMENT 1 Exhibit (A)(8)(a)(v) AMENDMENT TO SERVICE AGREEMENT BETWEEN THE MANUFACTURERS LIFE INSURANCE COMPANY AND THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA THIS AMENDMENT is made as of December 31, 1996; WHEREAS, THE MANUFACTURERS LIFE INSURANCE COMPANY ("Manulife") and THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA ("ManAmerica") entered into a Service Agreement dated June 1, 1988 (the "Agreement") under which Manulife provided certain services to ManAmerica both in the United States and at Manulife's head office in Toronto, Ontario; NOW THEREFORE, the parties hereto agree as follows: 1. Except as otherwise expressly provided herein, capitalized terms used herein which are defined in the Amendment shall have the meanings specified for such terms in the Agreement (as amended by the Amendment). 2. The Agreement is hereby amended by adding The Manufacturers Life Insurance Company (U.S.A.) ("Manulife (USA)") as a party to the Agreement. 3. All Services previously performed in the United States by Manulife shall now be performed by Manulife (USA). 4. This Amendment is not intended to increase the services provided to ManAmerica under the Agreement. 5. Manulife and Manulife (USA) shall provide a single accounting for all services provided under the Agreement which shall separately identify the services and costs associated with such services provided by each company. 6. The services provided under this Amendment shall be provided at cost. 7. Except as amended herein, the Agreement shall continue in full force and effect. 8. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument, and all signatures need not appear on any one counterpart. 2 IN WITNESS WHEREOF, each party hereto has executed this Amendment by its duly authorized officer as of the date first written above. THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA By:_________________________________________ Name: Title: THE MANUFACTURERS LIFE INSURANCE COMPANY By:_________________________________________ Name: Title: Accepted on the date first above written by: THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) By:_________________________________________ Name: Title: EX-99.A8(A)(VI) 16 AMENDMENT TO SERVICE AGREEMENT 1 Exhibit (A)(8)(a)(vi) AMENDMENT TO SERVICE AGREEMENT This Amendment to the Service Agreement dated as of June 1, 1988 is entered into as of the 31st day of May, 1998 between The Manufacturers Life Insurance Company ("Manufacturers"), a mutual life insurance company organized under the laws of Canada, The Manufacturers Life Insurance Company (U.S.A.) ("Manufacturers USA") and The Manufacturers Life Insurance Company of America ("Manufacturers of America"), both of which being a stock life insurance company domiciled in the State of Michigan. WITNESSETH WHEREAS, Manufacturers and Manufacturers USA have entered into a Service Agreement with Manufacturers of America (the "Service Agreement") pursuant to which Manufacturers or Manufacturers USA will provide to Manufacturers of America all issue, administrative, investment, general services and recording functions with respect to all of its insurance policies; and WHEREAS by an agreement dated May 31, 1993, the Service Agreement was extended for a period of 5 years, which extension is due to expire on May 31, 1998; WHEREAS, the Board of Directors of Manufacturers of America voted to extend the terms of the Agreement NOW, THEREFORE, Manufacturers, Manufacturers USA and Manufacturers of America hereby agree that the Agreement shall be extended for 5 years effective as of 12:01 A.M. (EDT), June 1, 1998 and shall expire at Midnight, May 31, 2003 provided that either party may terminate the Agreement prior thereto without penalty, by 60 days' notice in writing, delivered personally or addressed to the other at its home office. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed under seal by their duly authorized officers as of the 31st day of May, 1998. THE MANUFACTURERS LIFE INSURANCE COMPANY By: __________________________________ Its: ________________________________ 2 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) By: _____________________________________________ Its: ___________________________________________ THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA By: _____________________________________________ Its: ___________________________________________ EX-99.A8(B) 17 STOPLOSS REINSURANCE AGREEMENT 1 EXHIBIT A(8)(b) STOPLOSS REINSURANCE AGREEMENT BETWEEN THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA (The Ceding Company, hereinafter referred to as "ManAmerica") AND THE MANUFACTURERS LIFE INSURANCE COMPANY OF TORONTO, ONTARIO, CANADA (The Reinsuring Company, hereinafter referred to as "Manufacturers Life") 2 I - SCOPE This Agreement applies to stop-loss reinsurance of standard and substandard insurance arising from Base Plan and attaching Benefit Riders issued by ManAmerica, as described in Schedule A and later referred to as Flexible Premium Variable Life (FPVL). II - AUTOMATIC REINSURANCE This coverage is automatically provided for all FPVL policies issued by ManAmerica, up to the amounts shown in Schedule B, and sold in any calendar year starting at the effective date specified in section XV. Amounts over those shown in Schedule B will be submitted facultatively to Manufacturers Life. III - LIABILITY For reinsurance under this Agreement, the exposure to liability of Manufacturers Life will commence simultaneously with the liability of ManAmerica. Subject to the provisions of this section and section VII and conditional to the payment of reinsurance premiums as provided for in section VI of this Agreement, Manufacturers Life's exposure will continue as long as ManAmerica is liable under the original policies and shall cease when the liability of ManAmerica ceases. IV - PLAN OF REINSURANCE Manufacturers Life will reimburse the total death claims less the associated policy values plus 100% of the total monthly deductions waived on the policies reinsured in excess of the Attachment Point, as set in Schedule C, on a calendar quarter basis in arrears. Manufacturers Life shall not reimburse surrender benefits paid by ManAmerica. Death claims shall exclude any amounts reimbursed under any other reinsurance agreement on the policies reinsured hereunder. V - PREMIUMS The reinsurance premiums will be computed for each calendar quarter in arrears as set out in Schedule D attached hereto. If there is a reduction in liability due to any other reinsurance agreement on the policies reinsured hereunder, the total premium will be reduced by the premium associated with that liability. VI - PAYMENTS/REPORTING Within 15 days after the end of each calendar quarter, ManAmerica will send to Manufacturers Life an itemized statement of account, in substantial accord with Schedule E, together with any remittance for the balance due to Manufacturers Life as stated therein. Manufacturers Life will have 15 days after receipt of the statement of account to pay any amounts owing to ManAmerica. 2 3 ManAmerica will supply Manufacturers Life with details as outlined in Schedule E. All policy details will be housed with ManAmerica. VII - OVERSIGHTS It is expressly understood and agreed that if non-payment of premiums or failure to comply with any terms of this contract is shown to be unintentional and the result of misunderstanding or oversights on the part of either Manufacturers Life or ManAmerica, both Manufacturers Life and ManAmerica shall be restored to the position they would have occupied had no such error or oversights occurred. VIII - CLAIMS ManAmerica shall give Manufacturers Life a copy of the total death benefit claims, the policy value of those policies as well as total monthly deductions waived on the policies reinsured hereunder net of any amount reimbursed under any other reinsurance agreement. Manufacturers Life shall be liable to ManAmerica for the total claims in excess of the Attachment Point as defined in Schedule C. Any liability of Manufacturers Life shall be settled in one lump-sum. IX - CURRENCY Reinsurance under this Agreement will be effected on an original currency basis whereby the risk and premium amounts will be expressed in U.S. Dollars. Settlements for all amounts due to either party by the other as a result of transactions under the provisions of this Agreement shall be paid in U.S. Dollars. X - INSOLVENCY In the event of the insolvency of ManAmerica, all reinsurance under this Agreement will be paid by Manufacturers Life directly to ManAmerica, its liquidator, receiver or statutory successor, on the basis of the liability of ManAmerica under the policies reinsured without diminution because of the insolvency of ManAmerica, or because the Company has failed to pay all or a portion of any claims. XI - INSPECTION OF RECORDS Manufacturers Life shall have the right, at any reasonable time, at the office of ManAmerica to examine all books and documents relating to reinsurance under this Agreement. XII - ARBITRATION All disputes and differences between the two contracting parties upon which an amicable understanding cannot be reached are to be decided by arbitration and the arbitrators, one is to be appointed by ManAmerica, the second by Manufacturers Life and the third is to be selected by these two representatives. Should the two arbitrators be unable to agree on the choice of a third, the appointment shall be left to the President of the American Council of Life insurance, or its successor. 3 4 The arbitrators are not bound by any rules of law. They shall decide by a majority of votes and from their written decision there can be no appeal. The cost of arbitration, including the fees of the arbitrators, shall be shared by each party unless the arbitrators shall decide otherwise. XIII - SEVERABILITY In the event that any of the provisions herein contained shall be invalid or unenforceable, such declaration or adjudication shall in no manner affect or impair the validity or the enforceability of the other provisions and the remaining provisions shall remain in full force and effect as though such invalid or unenforceable provisions or clauses had not been herein included or made part of the Agreement. XIV - DURATION OF AGREEMENT This Agreement will be effective on and after the effective date stated in section XV. This Agreement may be amended only be mutual consent of ManAmerica and Manufacturers Life. ManAmerica and Manufacturers Life may terminate this Agreement by giving ninety (90) days prior written notice of termination. The day the notice is received in the mail at the other party's Home Office, or, if the mail is not used, the day it is delivered to the other party's Home Office or to an Officer of the other party, as the case may be, shall be the first day of the ninety (90) day period. During the ninety (90) day period, this Agreement shall continue to operate in accordance with its terms. Manufacturers Life and ManAmerica shall remain liable after termination, in accordance with the terms and conditions of this Agreement, with respect to all reinsurance which was effective prior to termination of this Agreement. 4 5 XV - EXECUTION In witness of the above, this Agreement is signed in duplicate on the dates and at the places indicated below. The effective date of this Agreement is, the 1st day of January, 1988. Date: ___________________________ For: ___________________________ Place ___________________________ By: ____________________________ Attest: _________________________ Title: _________________________ Date: ___________________________ For: ___________________________ Place ___________________________ By: ____________________________ Attest: _________________________ Title: _________________________ 5 6 SCHEDULE A POLICY SUBJECT TO REINSURANCE Base Plan: Flexible Premium Variable Life Riders: - Accidental Death Benefit - Guaranteed Insurability Benefit - Additional Life Benefit - Supplementary Insurance Benefit - Contingent Life Benefit - Total Disability Waiver of Monthly Deductions Benefit 6 7 SCHEDULE B RETENTION LIMITS OF MANUFACTURERS LIFE Life $7,500,000 Aviation Risk $5,000,000 Accidental Death $1,000,000 Total Disability Waiver of Monthly Deductions $5,000 per month 7 8 SCHEDULE C ATTACHMENT POINT The Attachment Point shall be 110% of the expected claims. Expected claims, for a given period, are defined as 75% of the total insurance charges for the base plan and riders, as described in Schedule A, deducted during that period for the coverages reinsured hereunder. 8 9 SCHEDULE D REINSURANCE PREMIUMS Reinsurance premiums shall be paid at the end of each calendar quarter, in arrears, and shall be computed as 5% of the expected claims as defined in Schedule C. 9 10 SCHEDULE E STOPLOSS REINSURANCE AGREEMENT BETWEEN MANAMERICA AND MANUFACTURERS LIFE Statement of account for the period XX/XX/XX TO XX/XX/XX A. Total insurance charges (base plans and riders) deducted during the period: X,XXX.xx B. Expected claims (75% of A): X,XXX.xx C. Attachment point (110% of B): X,XXX.xx D. Actual claims: X,XXX.xx E. Policy values of policies at time of death X,XXX.xx F. Reinsured claims (excess, if any, of D-E) over C X,XXX.xx G. Reinsurance premium (5% of B): X,XXX.xx Net amount due (owing) = F-G X,XXX.xx ======== 10 EX-99.A8(C)(I) 18 SERVICE AGREEMENT 1 Exhibit (A)(8)(c)(i) SERVICE AGREEMENT AGREEMENT, made this 2nd day of January, 1991 between The Manufacturers Life Insurance Company, a mutual life insurance company organized under the laws of Canada ("Manulife Financial"), and ManEquity, Inc., a Colorado corporation ("ManEquity"); W I T N E S S E T H: WHEREAS, ManEquity is an indirect wholly-owned subsidiary of Manulife Financial; AND WHEREAS, ManEquity is registered as a broker/dealer under the Securities Exchange Act of 1934 (the "Securities Exchange Act") and is a member of the National Association of Securities Dealers Inc. (the "NASD"); AND WHEREAS, ManEquity sponsors as its registered representatives producers for Manulife Financial (including producers associated with Manulife Financial's affiliate, The Manufacturers Life Insurance Company of America ("Manufacturers of America")), as may be selected by Manulife Financial or Manufacturers of America and approved by ManEquity; AND WHEREAS, ManEquity assumes the responsibility to direct the training and supervision of such producers with respect to their sales through ManEquity of certain variable contracts issued by Manufacturers America; AND WHEREAS, ManEquity is the principal underwriter of certain variable contracts issued by Manufacturers of America; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the parties do hereby agree as follows: Section 1. Termination of Prior Agreements. This Agreement cancels and terminates, as of its effective date, all prior agreements between the parties hereto covering any of the services covered hereby. Section 2. Sales and Training Material. Both parties agree to submit all applicable sales and training material to the other for approval prior to use. With respect to sales literature or material prepared by Manulife Financial used in connection with variable contracts issued by Manufacturers of America and distributed by ManEquity, ManEquity shall make timely filings with the Securities and Exchange Commission, NASD, and other regulatory authorities. Section 3. Appointment of Registered Representatives. ManEquity agrees that, unless otherwise agreed to by Manulife Financial, it will appoint as registered representatives only individuals who are employed by Manulife Financial or are 2 under contract with Manulife Financial or Manufacturers of America as life insurance producers, agents, or brokers. Section 4. Duties of Manulife Financial. (a) Personnel, Office Space, Equipment, and Reimbursement of Variable Contract Costs. Manulife Financial shall provide ManEquity with its personnel, office space, supplies and equipment as required by ManEquity. Manulife Financial shall determine which of its employees is available to perform services for ManEquity and shall pay the full salaries and benefits of all employees who provide services for ManEquity. Manulife Financial may, but is not obligated to, pay the cost of training and qualifying Manulife Financial's employees and procedures and agents of Manulife Financial or Manufacturers of America to become registered representatives or registered principals of ManEquity. Manulife Financial may, but is not obligated to, reimburse ManEquity for all reasonable costs incurred in connection with ManEquity's administrative and operational performance as a principal underwriter of variable contracts issued by Manufacturers of America. (b) Manufacturers of America Variable Contract Sales Commissions. On ManEquity's behalf, Manulife Financial shall pay the sales commissions earned by registered representatives selling variable contracts issued by Manufacturers of America and distributed by or through ManEquity and shall prepare and maintain all necessary records of such payments. On ManEquity's behalf, Manulife Financial shall calculate and furnish periodic reports to Manufacturers of America of the commissions and service fees payable to agents, brokers, general agents and sales managers of Manufacturers of America in connection with sales of variable contracts issued by Manufacturers of America. Manulife Financial is not authorized to offset any debit balances owed by agents or producers of Manulife Financial or Manufacturers of America by crediting commissions earned by such agents of producers in connection with their sales of variable contracts issued by Manufacturers of America, except for debit balances related to sales by Manufacturers of America agents and producers of variable contracts issued by Manufacturers of America. Payment of advances against sales of variable contracts issued by Manufacturers of America is prohibited. (c) Records. Manulife Financial shall prepare and maintain all books and records required to be prepared and maintained by ManEquity with respect to variable contracts issued by Manufacturers of America and distributed by or through ManEquity. Such records shall include the records required to be maintained and preserved by Rules 17a-3 and 17a-4 under the Securities Exchange Act. ManEquity shall own and control all files, documents, correspondence, records and papers of every kind and description prepared and maintained by Manulife Financial in connection with the services provided by Manulife Financial's personnel hereunder. Manulife Financial shall submit to all regulatory and administrative bodies having jurisdiction over the services provided pursuant to this Agreement, present or future, any information, reports or other material which any such body by reason of this Agreement may request or require pursuant to applicable laws and 2 3 regulations. Manulife Financial and its personnel shall not disclose or use any records prepared by reason of this Agreement in any manner except as expressly authorized herein or directed by ManEquity and shall keep confidential any information obtained by reason of this Agreement. Unless otherwise directed by ManEquity, upon termination of this Agreement, Manulife Financial shall promptly return to ManEquity or its designee all such records maintained and prepared by reason of this Agreement. (d) Confirmation Procedures: Policies Issued by Manufacturers of America. Pursuant to Rule 10b-10 under the Securities Exchange Act, ManEquity and Manufacturers of America must confirm the receipt and allocation of premiums payable under variable life and variable annuity policies issued by Manufacturers of America. Manulife Financial shall prepare these confirmation statements in accordance with the applicable rules and regulations on behalf of ManEquity and Manufacturers of America and prepare and maintain all necessary books and records in connection with such procedures. ManEquity and ManAmerica shall approve the form of any such statement used by Manulife Financial. If a Policyowner wishes to change his allocation, an appropriate form or instructions for utilizing Manulife Financial's telephone request line will be provided by Manulife Financial. Within seven days after receipt of such request, Manulife Financial will send the Policyowner a statement setting forth the revised allocation. If a Policyowner wishes to transfer amounts attributable to his policy from one subaccount of a Separate Account to another, he may do so by completing a form furnished for that purpose by Manulife Financial or by utilizing Manulife Financial's telephone request line. Within seven days of receipt of a request to transfer, a statement will be sent to the Policyowner by Manulife Financial showing the amount allocated to each subaccount of the appropriate Separate Account before and after the transfer. Manulife Financial shall also send any and all other notices required by law or by contract. Section 5. Duties of ManEquity. ManEquity shall remit all sales commissions in connection with sales of variable contracts issued by Manufacturers of America to Manulife Financial for proper disbursement by Manulife Financial on behalf of ManEquity in accordance with the terms of this Agreement. Section 6. Compensation. (a) Personnel, Office Space and Equipment. ManEquity shall reimburse Manulife Financial for the reasonable cost of services provided by Manulife Financial's personnel and for the costs related to ManEquity's use of office space, supplies and equipment provided by Manulife Financial. Manulife Financial shall submit statements from time to time, but no less often than annually, to ManEquity for all costs payable in connection with these services provided by Manulife Financial 3 4 under the terms of this Agreement, and payment shall be made by ManEquity as soon thereafter as is reasonably possible. (b) No Additional Compensation. This Agreement does not entitle Manulife Financial to any compensation beyond reimbursement for payment of sales commissions and its costs in providing services, supplies, equipment and office space. Section 7. Compliance With Law. In the performance of such services as are provided for hereunder, Manulife Financial's personnel shall comply with applicable laws, rules and regulations, including but not limited to the Securities and Exchange Act. Section 8. Reservation of Control and Authority. ManEquity retains the ultimate responsibility and authority for direction and control of the services provided by Manulife Financial pursuant to this Agreement. Section 9. Limitation of Liability of Manulife Financial. Manulife Financial will not be liable as a result of any error of judgment or mistake of law for any loss suffered by ManEquity in connection with the matters dealt with under this Agreement. Nothing contained in this Agreement shall be construed to protect Manulife Financial against liability to which Manulife Financial shall otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of its duties to ManEquity, reckless disregard of Manulife Financial's obligations and duties under this Agreement, or the violation of any applicable law. Section 10. Termination of Agreement. This Agreement shall become effective as of the date first above written. This Agreement may be terminated at any time without the payment of any penalty, by ManEquity or by Manulife Financial, on sixty days' written notice to the other party. Section 11. Headings The headings in the sections of this Agreement are inserted for convenience of reference only and shall not constitute a part thereof. Section 12. Entire Agreement. This Agreement contains the entire understanding and agreement of the parties. Section 13. Severability. Should any portion of this Agreement for any reason be held to be void in law or in equity, the Agreement shall be construed, insofar as is possible, as if such portion had never been contained therein. 4 5 Section 14. Governing Law. This Agreement shall be construed in accordance with, and governed by, the laws of the State of Colorado. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be execute under seal by their duly authorized officers as of the date first mentioned above. THE MANUFACTURERS LIFE INSURANCE COMPANY Attest: By:___________________________ Title: MANEQUITY, INC. Attest: By:___________________________ Title: 5 EX-99.A8(C)(II) 19 AMENDMENT TO SERVICE AGREEMENT 1 Exhibit (A)(8)(c)(ii) AMENDMENT TO SERVICE AGREEMENT BETWEEN THE MANUFACTURERS LIFE INSURANCE COMPANY AND MANEQUITY, INC. This Amendment to the Service Agreement dated January 2, 1991 is entered into this 1st day of March, 1994 between The Manufacturers Life Insurance Company, a mutual life insurance company organized under the laws of Canada ("Manufacturers") and ManEquity, Inc., a Colorado Corporation ("ManEquity"). WITNESSETH WHEREAS, Manufacturers and ManEquity hereby mutually agree to amend the terms of the Service Agreement; NOW THEREFORE Manufacturers and ManEquity hereby agree as follows: 1. Section 5 of the Agreement is hereby amended to read as follows: "SECTION 5. DUTIES OF MANEQUITY ManEquity shall remit all sales commissions in connection with sales of variable contracts issued by Manufacturers of America to Manulife Financial for proper disbursement by Manulife Financial on behalf of ManEquity in accordance with the terms of this Agreement; provided, however, ManEquity shall not be required to remit to Manulife Financial any sales commissions it has not received from Manufacturers of America. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed under seal by their duly authorized officers as of the date first above-mentioned. THE MANUFACTURERS LIFE INSURANCE COMPANY By: _________________________ Its: _________________________ MANEQUITY, INC. By: __________________________ Its: __________________________ EX-99.A8(D) 20 SERVICE AGREEMENT 1 Exhibit (A)(8)(d) MASTER ADMINISTRATION AGREEMENT between McCamish Systems, L.L.C. and The Manufacturers Life Insurance Company (U.S.A.) and its subsidiaries, including, but not limited to The Manufacturers Life Insurance Company of America and The Manufacturers Life Insurance Company of New York dated as of _________ __, 1998 2 TABLE OF CONTENTS SECTION 1 Definitions ................................................... 1 1.01 Books and Records ............................................. 1 1.02 Case .......................................................... 2 1.03 End User ...................................................... 2 1.04 Effective Date ................................................ 2 1.05 Initial Term .................................................. 2 1.06 Policy Administration Services ................................ 2 1.07 Plan Administration Services .................................. 3 1.08 Policies ...................................................... 3 1.09 Products ...................................................... 3 1.10 Participants .................................................. 3 SECTION 2 Term .......................................................... 3 SECTION 3 Policy or Plan Administration ................................. 3 3.01 Administrative Services ....................................... 4 3.02 Performance Criteria .......................................... 4 3.03 Authorized Personnel .......................................... 4 3.04 Records ....................................................... 4 SECTION 4 Fees and Expenses ............................................. 5 4.01 Administration Fees ........................................... 5 4.02 Expenses ...................................................... 5 4.03 System Enhancements ........................................... 6 4.04 Payment ....................................................... 6 SECTION 5 Representations and Warranties of McCamish .................... 7 SECTION 6 Representations and Warranties of Company ..................... 8 7.01 Independent Contractor ........................................ 9 7.02 Confidentiality and Disclosure ................................ 9 7.03 Indemnification ............................................... 11 7.04 Arbitration ................................................... 12 7.05 Compliance .................................................... 12 i 3 7.06 Actions ....................................................... 13 7.07 Records ....................................................... 14 7.08 Audit ......................................................... 14 7.09 Security of Operations ........................................ 14 7.10 Insurance Coverage ............................................ 14 SECTION 8 Termination of Agreement ...................................... 15 8.01 By Mutual Agreement ........................................... 15 8.02 By Non-renewal ................................................ 15 8.03 For Cause ..................................................... 15 SECTION 9 Assignment .................................................... 16 9.01 Assignment by Company ......................................... 16 9.02 Assignment by McCamish ........................................ 16 SECTION 10 Miscellaneous ................................................. 16 10.01 Governing Law ................................................. 16 10.02 Notices ....................................................... 16 10.03 Entire Agreement .............................................. 17 10.04 Binding Effect ................................................ 17 10.05 Severability .................................................. 17 10.06 No Third Party Beneficiaries .................................. 18 10.07 Headings ...................................................... 18 10.08 Counterparts .................................................. 18 10.09 Waiver ........................................................ 18 10.10 Construction .................................................. 18 10.11 Taxes ......................................................... 19 ii 4 TABLE OF EXHIBITS A Policy Administration Services B Plan Administration Services C Performance Criteria D Fee Schedule E Products F Schedule of Authorized Personnel G Insurance Coverage H Sample Escrow Agreement I Sample Software License Agreement for Escrow Agreement K Sample Software License Agreement L Schedule of Authorized Personnel iii 5 MASTER ADMINISTRATION AGREEMENT This MASTER ADMINISTRATION AGREEMENT is made and entered into as of the __ day of _________, 1998, by and among McCamish Systems, L.L.C., a Georgia limited liability company, having its principal address and place of business at 6425 Powers Ferry Road, Third Floor, Atlanta, Georgia, 30339 (hereinafter referred to as "McCamish"); and, The Manufacturers Life Insurance Company (U.S.A.) and its subsidiaries, including, but not limited to The Manufacturers Life Insurance Company of America and The Manufacturers Life Insurance Company of New York, a stock company registered under the laws of the state of Michigan, having its principal place of business at 200 Bloor Street East, Toronto, Ontario, Canada (hereinafter collectively referred to as "Manulife (U.S.A.)"). W I T N E S S E T H: WHEREAS, the parties hereto desire to enter into this Agreement to provide for the provision by McCamish, as an independent subcontractor, of insurance policy administration services and non-qualified plan administration services to Manulife (U.S.A.) on the terms and conditions hereinafter set forth, NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereto hereby agree as follows: SECTION 1 DEFINITIONS. As used in this Agreement, the following terms shall have the meaning set forth: 1.01 BOOKS AND RECORDS. "Books and Records" means all books and records in the possession or control of McCamish that contain information related to the Policies (defined in Section 1.09 below) and Participants Policies (defined in Section 1.11 below), including without limitation, to the extent any of the following exist, (i) hard copy and microfiche records; (ii) all paper files; (iii) all electronic images; (iv) all computer data files; (v) all correspondence between 1 6 McCamish and owners of Policies; (vi) administrative records; (vii) claim records; (viii) sales records; (ix) reinsurance records, (x) underwriting records and (xi) accounting records; provided, however, that Books and Records shall not include any of McCamish's internal documentation of its own programs, systems and procedures or any of McCamish's books and records which are not directly related to the Policies. 1.02 CASE. "Case" means a group of Policies that have a common owner and payor, have a common corporate objective, and/or a group of Participants that are part of a common benefit plan. 1.03 CPI INDEX. "CPI Index" means the Consumer Price Index - All Urban Consumers, Metropolitan Atlanta, Georgia, Area, Services (1982 to 1984 = 100), as published by the United States Bureau of Labor Statistics; provided, however, that if such Consumer Price Index shall cease to be published or issued, Manulife (U.S.A.) and McCamish shall agree on a reasonable substitute therefor. 1.04 END USER. "End User" means a party for whom Manulife (U.S.A.) has agreed to provide Plan Administration Services which are the subject of this Agreement. 1.05 EFFECTIVE DATE. "Effective Date" means the date stated in the first paragraph of this Agreement. 1.06 INITIAL TERM. "Initial Term" means the five (5) year period commencing on the Effective Date of this Agreement and ending at 11:59 p.m. on the day prior to the fifth anniversary of the Effective Date. 1.07 POLICY ADMINISTRATION SERVICES. "Policy Administration Services" means the services set forth in EXHIBIT A attached hereto and designated as "Policy Administration Services". 1.08 PLAN ADMINISTRATION SERVICES. "Plan Administration Services" means the services set forth in EXHIBIT B attached hereto and designated as "Plan Administration Services". 2 7 1.09 POLICIES. "Policies" means, collectively, the insurance policies included within one of the Products and "Policy" means any one of the Policies. 1.10 PRODUCTS. "Products" means the insurance products described in Exhibit E attached hereto and made a part hereof. A "Product" is limited to a single policy form of an insurance company. Exhibit E may be amended during the Term by mutual written agreement of the parties hereto. 1.11 PARTICIPANT. "Participant" means, collectively, the individuals included within a non-qualified benefit plan for which service is provided under terms of this Agreement. SECTION 2 TERM. 2.01 TERM. This Agreement shall commence on the Effective Date and shall continue in effect for the Initial Term; thereafter this Agreement shall continue in full force and effect from year to year until terminated as herein provided, each such additional year being an "Additional Term" of this Agreement. The Initial Term and any Additional Terms hereunder are herein collectively referred to as the "Term". 2.02 CONVERSION OPTION. At any time after the first year of this Agreement, Manulife (U.S.A.) may, at its sole option, choose to convert this Agreement to a software system license agreement on substantially the terms and conditions set out in Exhibit K, attached hereto. The license fees shall be based on McCamish's then current fee schedule. SECTION 3 ADMINISTRATION SERVICES. 3.01 ADMINISTRATION SERVICES. During the Term, McCamish shall perform Policy Administration Services. At its option, Manulife (U.S.A.) can request, in writing, for McCamish to perform Plan Administration Services for an individual Case. Policy Administration Services and Plan Administration Services are collectively sometimes referred to as the "Administration Services". 3 8 3.02 PERFORMANCE CRITERIA. The manner and method of performing Administration Services is set forth in EXHIBIT C. 3.03 AUTHORIZED PERSONNEL. At any time McCamish may apply to a person indicated on the "Schedule of Authorized Personnel", attached hereto as EXHIBIT F, as a person authorized to give instructions under this section with respect to any matter arising in connection with this Agreement. McCamish shall not be liable for, and shall be indemnified and held harmless by Manulife (U.S.A.) against any loss, cost, damage or expense arising from, any action taken or omitted by McCamish to the extent McCamish can demonstrate that the action or omission was taken or omitted in good faith in reliance upon such instruction. Manulife (U.S.A.) may at any time provide McCamish with written notice of any change of authority of persons authorized and enumerated in EXHIBIT F to provide McCamish with instructions or directions relating to services to be performed by McCamish under this Agreement. The McCamish employees listed on Exhibit L attached hereto, shall be the sole authorized individuals in the performance of the Policy Administration Services and Plan Administration Services and any other services or matters arising under this Agreement. This list and any changes thereto shall be approved in writing by Manulife (U.S.A.) prior to any performance hereunder. McCamish shall provide Manulife (U.S.A.) with written notice of any change to Exhibit L. Manulife (U.S.A.) reserves the right to review and approve any change to Exhibit L prior to the implementation of such change. 3.04 RECORDS. During the Term, McCamish shall keep true and correct Books and Records relating to the performance of all Administration Services hereunder. McCamish shall deliver the Books and Records and copies thereof to Manulife (U.S.A.) both in hard copy and in machine readable form, if so requested by Manulife (U.S.A.), within thirty (30) days upon termination of this Agreement. Anything herein to the contrary notwithstanding, McCamish shall be allowed to make and retain copies of the Books and Records, at its own expense, upon termination of this Agreement. It is acknowledged and agreed that any such Books and Records may be maintained on magnetic media, electronic media, microfiche, CD and other non-paper media. It is acknowledged and 4 9 agreed that the copies of the Books and Records retained by McCamish on termination of this agreement shall be sealed and shall only be used for such purposes required by law. SECTION 4 FEES AND EXPENSES. 4.01 ADMINISTRATION FEES. (a) During the Initial Term of this Agreement, provided that a minimum of one (1) policy has been entered into the System, Manulife (U.S.A.) shall pay to McCamish, as compensation for all Administration Services rendered pursuant to this Agreement, the amounts set forth on EXHIBIT D. In no event, except as provided below, will the fees payable by Manulife (U.S.A.) to McCamish hereunder be less than the fees determined by the application of the Minimum Charges set forth on EXHIBIT D. (b) At least one hundred and eighty (180) days prior to the end of the Initial Term or any Additional Term, McCamish shall provide Manulife (U.S.A.) with a schedule of compensation for Administrative Services, such fees and charges as shall be agreed to by the parties and attached hereto as an amended EXHIBIT D prior to commencement of such Additional Term. For each Additional Term of this Agreement, Manulife (U.S.A.) shall pay to McCamish, as compensation for all Administration Services rendered pursuant to this Agreement, such fees and charges. 4.02 EXPENSES. Manulife (U.S.A.) will promptly reimburse McCamish for all reasonable out-of-pocket expenses incurred by McCamish in the performance of this Agreement. Out-of-pocket expenses include, but are not limited to the following: (a) Travel related costs for travel requested by Manulife (U.S.A.). (b) Postage and forms cost of special mailings requested by Manulife (U.S.A.), (c) Charges for telephone line(s) dedicated to service of Manulife (U.S.A.) customers, agents and brokers. 5 10 (d) Charges for dedicated voice/data lease line(s) providing wide area network access from Manulife (U.S.A.) site(s) to McCamish site(s). 4.03 SYSTEM ENHANCEMENTS. Requests by Manulife (U.S.A.) for enhancements to systems or procedures for support of new products or new functional capabilities will be performed and billed by McCamish to Manulife (U.S.A.) on a time and expense basis at the then current rates in effect. McCamish agrees that any increase in consulting rates shall not exceed the percentage increase in the Consumer Price Index, Urban Consumers, Metropolitan Atlanta, Georgia Area, Services (1982-1984=100) as published by the Bureau of Labor Statistics (the "CPI Index") since the last increase in consulting; provided, however, that if the CPI Index shall cease to be published during the term hereof, the parties shall agree on a reasonable substitute therefor. Such Manulife (U.S.A.) requests will be in writing. McCamish will provide, in writing, a design specification which will include a detailed description of the requested enhancement, an estimate of cost and an estimated implementation schedule. McCamish will undertake the project upon receipt of the signed acceptance of the design specification by Manulife (U.S.A.). 4.04 PAYMENT. During the Term of this Agreement, Manulife (U.S.A.) shall pay McCamish within thirty (30) days of the date of McCamish's invoice. Late payments shall be subject to McCamish's standard late payment charges as set forth on McCamish's invoice. SECTION 5 REPRESENTATIONS AND WARRANTIES OF MCCAMISH. McCamish hereby represents and warrants to Manulife (U.S.A.) as follows: (a) It is a limited liability company duly organized and existing and in good standing under the laws of the State of Georgia. (b) It is empowered under applicable laws and by its articles of organization and operating agreement to enter into and perform the services contemplated in this Agreement. 6 11 (c) All requisite proceedings have been taken to authorize it to enter into and perform the services contemplated in, and execute and deliver, this Agreement. (d) It has duly executed and delivered this Agreement and such execution and delivery nor the performance by it of any of its obligations under any Agreement will (i) violate any provision of its certificate of incorporation or by-laws, (ii) result in a violation or breach of, or constitute a default or an event of default under, any indenture, mortgage, bond or other contract, license, agreement, permit, instrument or other commitment or obligation to which it is a party or (iii) violate any law, rule or regulation of any governmental body, writ, judgment, injunction or court decree (collectively, "Laws") applicable to it or its business. (e) It has all licenses, permits, registrations and other governmental approvals necessary or advisable for the performance of its obligations under this Agreement. (f) Its business operations have been conducted, are now, and will continue to be in compliance in all material respects with all Laws. (g) In its reasonable business judgment, it has the facilities, equipment and personnel necessary to carry out its duties and obligations under this Agreement. (h) That the Software, as defined in Exhibit I attached hereto, is designed to be used prior to, during and after the year 2000 and that the Software will operate during each such time period without error relating to date data, specifically including any error relating to, or the product of, date data which represents or references different centuries or more than one century. Without limiting the foregoing, McCamish also represents and warrants that the Software will not abnormally end or provide invalid or incorrect results as a result of date data and it has been designed to ensure year 2000 compatibility including, but not limited to, date data century recognition, calculations which accommodate same century and multi-century formulas and date values and date data interface values that reflect the century. The above warranty shall not be 7 12 subject to any disclaimer or exclusion of warranties or to any limitation of McCamish's liability under this Agreement. SECTION 6 REPRESENTATIONS AND WARRANTIES OF MANULIFE (U.S.A.). Manulife (U.S.A.) hereby represents and warrants to McCamish as follows: (a) It is a registered stock life insurance company organized and existing and in good standing under the laws of the State of Michigan. (b) It is empowered under the applicable laws and regulations and by its governing documents to enter into and perform this Agreement. (c) All requisite proceedings have been taken to authorize it to enter into and perform this Agreement. (d) It has duly executed and delivered this Agreement and neither such execution and delivery nor the performance by it of any of its obligations under any Agreement will (i) violate any provision of its governing documents, (ii) result in a violation or breach of, or constitute a default or an event of default under, any indenture, mortgage, bond or other contract, license, agreement, permit, instrument or other commitment or obligation to which it is a party or (iii) violate any Law applicable to it or its business. SECTION 7 ADDITIONAL COVENANTS. 7.01 INDEPENDENT CONTRACTOR. It is understood and agreed that all Administration Services performed hereunder by McCamish shall be performed solely for Manulife (U.S.A.) by McCamish in the capacity of an independent sub-contractor of Manulife (U.S.A.). Nothing contained herein shall be construed to create between McCamish and Manulife (U.S.A.) a partnership, joint venture, association or other legal entity or relationship other than that of independent sub-contractor. 8 13 7.02 CONFIDENTIALITY AND DISCLOSURE. (a) Each Party ("Disclosing Party") may disclose to the other ("Recipient") certain proprietary and confidential information including, without limitation, policyholder information, procedures, Manulife (U.S.A.) customer lists, prospect lists, contracted broker and agent lists, and material related to policy design, pricing, filings, marketing and sales administration and systems information ("Information"). (b) Recipient agrees to maintain, during the Term and thereafter, the Information of the Disclosing Party in confidence using at least the same degree of care as it uses in maintaining as secret its own trade secret, confidential and proprietary information, but always at least a reasonable degree of care. (c) Disclosing Party agrees that Recipient shall have no obligation under the provisions of this Section 7.02 with respect to any Information which: 1. is now or hereafter becomes publicly known other than through a breach hereof, 2. is disclosed to Recipient by a third party that Recipient reasonably believes is legally entitled to disclose such information, 3. is known by Recipient prior to its receipt of the Information, without any obligation of confidentiality with respect thereto, 4. subject to paragraph (g) below, is disclosed with the Disclosing Party's written consent, 5. is disclosed by the Disclosing Party to a third party without the same or similar restrictions as set forth herein, 9 14 6. is required to be disclosed by Recipient by a court of competent jurisdiction, administrative agency or governmental body, or by law, rule or regulation, or by applicable regulatory or professional standards, 7. is disclosed by Recipient in connection with any judicial or other legal proceeding involving this Agreement, or 8. subject to paragraph (g) below, is not identified or marked as "Confidential and Proprietary" as provided in paragraph (a). (d) Recipient shall use reasonable efforts to limit access to Information received from the Disclosing Party to only those personnel of Recipient who have need of such access for the performance of any obligation of Recipient under this Agreement. (e) Information shall be used by Recipient only for purposes of fulfilling its obligations under this Agreement. (f) Except as expressly provided in this Agreement, Disclosing Party grants no license, right or interest to Recipient under any copyrights, patents, trademarks, trade secrets or other property rights of Disclosing Party by reason of the disclosure of the Information. (g) Each party acknowledges that some Information may, under applicable law, be deemed to be confidential information of third parties (such as natural persons whose lives are insured under a Policy) and agrees to preserve the confidentiality of all Information which under applicable Law must be treated as confidential. The terms and conditions of this SECTION 7.02 shall survive the termination of this Agreement. 7.03 INDEMNIFICATION. Each party shall indemnify and hold harmless the other party and its officers, directors, partners, principals, independent contractors, 10 15 employees, member firms, subcontractors and affiliates and their respective personnel from and against any and all liabilities, losses, damages, costs, expenses (including, without limitation, reasonable attorneys' fees and court costs), interest, penalties or other loss directly or indirectly arising out of, in connection with or with respect to any breach of this Agreement or any fraudulent, criminal, negligent and/or bad faith acts or omissions by such party or its officers, directors, partners, principals, independent contractors, employees, member firms, subcontractors and affiliates and their respective personnel under this Agreement. If a party is named in any lawsuit or other proceeding for which such party believes it may be entitled to indemnification hereunder (other than any action or proceeding described in Section 7.06), such party shall promptly give notice thereof to the other party, such notice to include a description in reasonable detail of such lawsuit or proceeding and the basis for such party's belief that it may be entitled to indemnification hereunder. The parties shall cooperate in all reasonable respects with each other in defending such lawsuit or proceeding. McCamish agrees not to settle any such lawsuit or proceeding without the written consent of Manulife (U.S.A.). The terms and conditions of this SECTION 7.03 shall survive the termination of this Agreement. 7.04 ARBITRATION. In the event of any dispute between Manulife (U.S.A.) and McCamish with respect to the subject matter of this Agreement or the enforcement of rights hereunder, either party may, by written notice to the other, require such dispute or difference to be submitted to arbitration. This provision, however, shall not be applicable to any dispute that involves a claim by or against a Third Party. The arbitrator or arbitrators shall be selected by agreement of the parties or, if they cannot agree on an arbitrator or arbitrators within twenty (20) days after the notice of such party's desire to have the question settled by arbitration, then the arbitrator or arbitrators shall be selected by the American Arbitration Association (the "AAA") in Atlanta, Georgia. The determination reached, or award granted, in such arbitration shall be final and binding, to the extent not in violation of law or public policy, on all parties hereto. Enforcement of the arbitration award or determination may be sought in any court of competent jurisdiction. The arbitrators shall not be bound by judicial formalities and may abstain from following the strict rules of evidence. The parties hereby mutually instruct the arbitrators to limit the time and scope of discovery to the greatest extent practicable and request the arbitrators to provide a decision as rapidly as practicable, in each case 11 16 consistent with the interests of justice, it being the intention of the parties that any arbitration under this Section 7.04 be commenced, conducted and completed, and a decision rendered, as rapidly as practicable. Pending such decision, each party will continue to perform its obligations under this Agreement. Unless otherwise agreed by the parties, any such arbitration shall be conducted in accordance with the rules of the AAA. In the event of any litigation or arbitration as provided under this Agreement, or the enforcement of rights hereunder, each party shall bear its own costs and expenses relating to such litigation or arbitration, including reasonable attorney's fees and expenses, unless otherwise provided by the arbitration award or determination. In no event shall the arbitrators have the right or authority to award consequential, incidental, indirect, special or punitive damages relating to this Agreement. The terms and conditions of this SECTION 7.04 shall survive the termination of this Agreement. 7.05 COMPLIANCE. McCamish shall provide staff with the skills necessary to perform the Administration Services, as determined by McCamish using its reasonable business judgment. McCamish shall obtain and maintain for itself, all licenses necessary for performance under this Agreement. 7.06 ACTIONS. (a) Each party (the "Notifying Party") shall promptly notify the other party of any threatened or pending lawsuit or governmental or regulatory agency inquiry or complaint relating to Policies of which the Notifying Party has actual knowledge and shall promptly transmit to such other party a copy of any applicable service of process or other instrument related to a court proceeding or any correspondence or other document transmitted to or from any governmental or regulatory agency relating to the Policies which shall be actually received by the Notifying Party. 12 17 (b) McCamish shall make no response to any governmental or regulatory agency's inquiry or complaint relating to Policies without first obtaining MANULIFE (U.S.A.)'s approval and consent to the response to such inquiry or complaint; provided, however, that if MANULIFE (U.S.A.) fails to give its approval or consent or delays its approval or consent and such failure or delay would subject McCamish to any fine, penalty, liability or sanction, then McCamish may make a response. (c) Manulife (U.S.A.) reserves the right to control the defense of any litigation, threatened or pending, by or against it, or to respond on its own behalf to any governmental or regulatory agency's inquiry or complaint; provided, however, that if MANULIFE (U.S.A.) shall exercise this right in such a manner as shall subject McCamish to any fine, penalty, liability or sanction for failure to follow procedure, or otherwise in a manner which, in the reasonable opinion of McCamish or its legal counsel may have a material adverse effect on McCamish, then McCamish shall have the right to defend itself with counsel of its choice at its own expense. (d) McCamish reserves the right to control the defense of any litigation, threatened or pending, by or against it, or, subject to subsection (b) above, to respond on its own behalf to any governmental or regulatory agency's inquiry or complaint; provided, however, that if McCamish shall exercise this right in such a manner as shall subject MANULIFE (U.S.A.) to any fine, penalty, liability or sanction for failure to follow procedure, or otherwise in a manner which, in the reasonable opinion of MANULIFE (U.S.A.) or its legal counsel may have a material adverse effect on MANULIFE (U.S.A.), then MANULIFE (U.S.A.) shall have the right to defend itself with counsel of its choice at its own expense. (e) The parties shall cooperate with each other in responding to or defending any such lawsuit, threat, demand, inquiry, complaint, administrative or regulatory investigation or proceeding. 7.07 RECORDS. Each party to this Agreement shall maintain, following the termination of this Agreement for any reason, its Books and Records with respect to business 13 18 produced under this Agreement for such period of time as may be required by law. It is acknowledged and agreed that any such books and records may be maintained on magnetic media, electronic media, microfiche or other non-paper media. 7.08 INSPECTION. Upon forty-eight (48) hours advanced notice to McCamish, Manulife (U.S.A.) will have the right under this Agreement to perform on-site inspection and analyses of the Books and Records in accordance with reasonable procedures and at reasonable frequencies. At the request of Manulife (U.S.A.), McCamish will make available to Manulife (U.S.A.) representatives of the appropriate regulatory agencies all reasonable requested Books and Records and access to operating procedures. 7.09 SECURITY OF OPERATIONS. McCamish shall maintain such off-site backup of its systems, procedures, and Books and Records as Manulife (U.S.A.) may reasonably request. McCamish shall maintain at all times during the Term a disaster recovery capability materially consistent with that currently maintained by McCamish. 7.10 INSURANCE COVERAGE. McCamish shall use its reasonable efforts to continue in effect the insurance coverages described in Exhibit G attached hereto provided that such coverage is available from a domestic insurance carrier at a reasonable cost to McCamish. McCamish shall not voluntarily cause any termination, reduction, or alteration of these coverages without 30 days prior written notice to Manulife (U.S.A.). SECTION 8 TERMINATION OF AGREEMENT. 8.01 BY MUTUAL AGREEMENT. This Agreement may be terminated or amended by mutual written agreement of the parties at any time. 8.02 BY NON-RENEWAL. At least one hundred and eighty (180) days prior to the end of the Initial Term and any Additional Term hereof, either party may give the other notice if the party delivering such notice desires to change any term of this Agreement. If McCamish and Manulife (U.S.A.) do not agree in writing with respect to the matters described in such notice 14 19 before the end of the Term during which such notice is given by McCamish, this Agreement shall terminate at the end of such Term. 8.03 FOR CAUSE. If either of the parties hereto shall materially breach this Agreement or be materially in default hereunder (the Defaulting Party), the other party hereto may give written notice thereof to the Defaulting Party and if such default or breach shall not have been remedied within thirty (30) days after such written notice is given, then the party giving such written notice may terminate this Agreement by giving thirty (30) days written notice of such termination to the Defaulting Party. Termination of this Agreement by default or breach by a party shall not constitute a waiver of any rights of the other party in reference to services performed prior to such termination, rights to be reimbursed for out-of-pocket expenditures or any other rights such other party might have under this Agreement at law, in equity or otherwise. Material default under this Agreement includes, but is not limited to, the material breach of any provision of this Agreement, insolvency, a declaration of bankruptcy or an assignment for the benefit of creditors. SECTION 9 ASSIGNMENT. 9.01 ASSIGNMENT BY MANULIFE (U.S.A.). Manulife (U.S.A.) shall not, directly or indirectly, in whole or in part, assign any of its rights or obligations hereunder without the prior written consent of McCamish, which consent shall not be unreasonably withheld. 9.02 ASSIGNMENT BY MCCAMISH. McCamish shall not directly or indirectly, in whole or in part, delegate its duties or assign its rights under this Agreement without the prior written consent of Manulife (U.S.A.), which consent shall not be unreasonably withheld. SECTION 10 MISCELLANEOUS. 10.01 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Georgia, without giving effect to the principles of conflicts of laws thereof. 15 20 10.02 NOTICES. Any notice, consent, approval or other communication required or permitted hereunder shall be in writing and shall be delivered personally, or sent by facsimile transmission, overnight courier service or by registered or certified mail, postage prepaid, return receipt requested, and addressed as follows: (a) If to McCamish: McCamish Systems, L.L.C. 6425 Powers Ferry Road Third Floor Atlanta, GA 30339 Attention: President Facsimile Number: (770) 690-1800 (b) If to Manulife (U.S.A.): The Manufacturers Life Insurance Company (U.S.A.), for it and its subsidiaries including, but not limited to The Manufacturers Life Insurance Company of America and The Manufacturers Life Insurance Company of New York 200 Bloor Street East Toronto, ON Attention: Maureen Beechinor Facsimile Number: (416) 926-5353 Any such notice shall be deemed given when so delivered (in the case of personal delivery or overnight courier service) or sent by facsimile transmission or, if mailed, upon receipt as evidenced by the return receipt. If the address of any party hereunto is changed, written notice of such change shall be given to the other party, in accordance with this Section, and said new address shall be used for purposes of this Agreement. 10.03 ENTIRE AGREEMENT. This Agreement, the Exhibits which are attached hereto and made a part hereof, and the documents executed pursuant hereto, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and no 16 21 representation, warranty, covenant or agreement not embodied herein or therein, oral or otherwise, shall be of any force or effect whatsoever with respect to the subject matter hereof or thereof. Further, no change, amendment or modification of this Agreement shall be effective unless in writing and signed by both parties hereto. 10.04 BINDING EFFECT. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. 10.05 SEVERABILITY. In the event any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement. 10.06 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement is intended or shall be construed to give any person, other than the parties hereto, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 10.07 HEADINGS. The Section headings of this Agreement are for convenience only and shall not affect the construction or interpretation of this Agreement. 10.08 COUNTERPARTS. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original but all of which will constitute one and the same document. 17 22 10.09 WAIVER. (a) A waiver of any default or breach hereunder granted by any party hereto shall not constitute a waiver by such party of any other default or breach or a waiver by such party of the same default or breach at a later time. Further, to be effective, any such waiver must be in writing and be signed by the party granting such waiver. (b) Subject to the last sentence of Section 10.09(a), the forbearance or neglect by Manulife (U.S.A.) or McCamish to insist upon strict compliance with any of the provision of this Agreement, or to declare a forfeiture or termination, shall not be construed as a waiver of any right or privilege hereunder. No waiver of any right or privilege arising from any default or failure of performance hereunder shall affect the rights or privileges of either party in the event of a further default or failure of performance hereunder. 10.10 CONSTRUCTION. All parties hereto have participated, directly or indirectly, in the negotiations and preparation of this Agreement. In no event shall this Agreement be construed more or less stringently against any party hereto by reason of either party being construed as the principal drafting party hereto. 10.11 TAXES. All sales, use, excise or other similar taxes or duties which may be or become payable on account of goods or services provided hereunder shall be payable by Manulife (U.S.A.) to McCamish Systems upon the receipt by Manulife (U.S.A.) of McCamish Systems' invoice therefor. In lieu of paying such taxes, Manulife (U.S.A.) may provide McCamish Systems with a tax exemption certificate acceptable in form and substance to the appropriate taxing authorities. 10.12 SOFTWARE ESCROW AGREEMENT. As soon as is practicable after the execution of this Agreement, (i) the parties hereto shall execute and deliver an Escrow Agreement substantially in the form of Exhibit H attached hereto and made a part hereof (the "Escrow Agreement") for the purpose of protecting Manulife (U.S.A.) in the event of a breach of this Agreement 18 23 by McCamish or the termination of this Agreement by Manulife (U.S.A.) for Cause, pursuant to Section 8 hereof, prior to the end of the Term; and (ii) upon execution of the Escrow Agreement by all parties thereto, McCamish shall deposit with the Escrow Agent a copy of the Software to be held in accordance with the terms and conditions of the Escrow Agreement. 10.13 SOFTWARE LICENSE IN ESCROW. As soon as is practicable after execution of the Escrow Agreement, the parties hereto shall execute and deliver to the Escrow Agent, to be held in accordance with the terms and conditions of the Escrow Agreement, a License Agreement substantially in the form of Exhibit I attached hereto and made a part hereof (the "License Agreement"), which shall provide that in the event the Software shall be released by the Escrow Agent to Manulife (U.S.A.), upon the occurrence of a Release Event (as defined in the Escrow Agreement), but only in such event, McCamish grants to Manulife (U.S.A.), effective upon receipt of the Software from the Escrow Agent, a license to use the Software (and such modifications, enhancements, improvements, updates, corrections or changes as Manulife (U.S.A.) shall elect to make to the Software) (the "Software License") for a period of twenty-four months following the termination of this Agreement, solely on the terms and conditions of the License Agreement. At the expiration of the license term, the Manulife (U.S.A.) shall have no further rights with respect to the Software. IN WITNESS WHEREOF, the parties hereto have caused this Administration Agreement to be executed and delivered by their duly authorized partners and officers, all as of the date first above written. McCamish Systems, L.L.C. By:___________________________ Manulife (U.S.A.) By:___________________________ 19 EX-99.A(10) 21 FORM OF APPLICATION FOR FLEXIBLE 1 EXHIBIT (A)(10) APPLICATION FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA [MANULIFE LOGO] Manulife Financial and the block design are registered service marks of The Manufacturers Life Insurance Company and are used by it and its subsidiaries. NB0777UA(0296) 2 EXHIBIT INSTRUCTIONS TO REGISTERED REPRESENTATIVE 1. The agent or broker using this form must be a Registered Representative of an NASD firm. 2. This package contains the following forms: a) Application for Life Insurance including a Request for Taxpayer Identification Number b) Authorization to Obtain Information and the Notice of Disclosure of Information c) Temporary Life Insurance Agreement and Receipt d) General Avocation Questionnaire e) Request form for Automatic Premium Payment 3. All questions on the application must be answered. If a CHANGE is made to an answer given by the Proposed Life Insured, the CHANGE MUST BE INITIALLED BY THE PROPOSED LIFE INSURED. The same holds true for questions answered by the Proposed Owner. 4. Whenever the PROPOSED POLICY IS TO BE OWNED BY SOMEONE OTHER THAN THE PROPOSED LIFE INSURED, the Proposed Owner must sign the application. If the proposed Owner is a CORPORATION, the application must be signed by one of the corporation's Officers. In addition, under the signature, the corporation's exact name and the title of the signing officer must be PRINTED or the Corporate seal stamped. The Proposed Life Insured may only sign if he/she is the majority stockholder and signs a such (e.g. "President and majority stockholder of the XYZ corporation"). 5. The AUTHORIZATION to OBTAIN INFORMATION must always be signed by the Proposed Life Insured, or by the parent or guardian in the case of juvenile insurance. The Notice of Disclosure of Information MUST always be given to the Proposed Life Insured, or to the parent or guardian of a Juvenile Proposed Insured. 6. To qualify for TEMPORARY LIFE INSURANCE, the Proposed Life Insured must be able to answer all 3 questions on the Notice Portion "No" and the Proposed Life Insured must be age 70 or younger. If ANY answer is "Yes" and/or the Proposed Life Insured is over age 70, DO NOT collect any money and DO NOT detach the receipt. If the Proposed Life Insured qualifies for Temporary Life Insurance, collect at least one-twelfth of the annual premium, complete the ENTIRE NOTICE AND RECEIPT PORTION, detach the RECEIPT PORTION and give it to the Proposed Owner. IN ALL CASES, answer the appropriate question in the "Registered Representative" Section, so that the Service Office knows whether the agreement has been issued or not. NOTE: COVERAGE UNDER THE TEMPORARY LIFE INSURANCE AGREEMENT IS LIMITED TO A MAXIMUM OF $1,000,000 ON INDIVIDUAL LIFE PLANS, $5,000,000 ON SURVIVORSHIP PLANS, AND $200,000 FOR INSURANCE ON JUVENILES. 7. Life Insurance applications on JUVENILES must be completed by one of the child's parents or a legally appointed guardian. All questions pertaining to the Proposed Life Insured and Owner must be answered. If the payor applies for disability waiver benefit, a separate and full application must be completed by him/her, including the medical section, as well as any applicable questionnaires. If neither the owner nor the payor is one of the child's parents or a legal guardian, then a PARENT OR GUARDIAN MUST CONSENT to the application by signing on the last line of the "Signatures" section on page 6 of the application and check off the appropriate box to show whether mother, father or guardian. NOTE: APPLICATIONS WILL NOT BE ACCEPTED UNTIL THE CHILD IS AT LEAST 15 DAYS OLD. 8. The Request for TAXPAYER IDENTIFICATION NUMBER AND CERTIFICATION must be completed as part of every application. The Internal Revenue Service requires life insurance companies and other financial institutions that make interest and/or dividend payments to maintain a file of certified Tax Identification Numbers for all policyowners. APPLICATION SUPPLEMENT FOR INVESTMENT ALLOCATION AND INVESTOR SUITABILITY, FORM NB0031UA, MUST BE COMPLETED AND SUBMITTED WITH THIS APPLICATION 3 EXHIBIT APPLICATION FOR LIFE INSURANCE TO THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA [MANULIFE LOGO] (hereinafter referred to as The Company) APPLICATION NO. PLEASE PRINT & USE BLACK INK. ANY CHANGES MUST BE INITIALLED BY THE PROPOSED INSURED AND/OR OWNER. POLICY NO. | | | | | | | | | | -------------------- PROPOSED LIFE INSURED 1a. Name (first, middle, last) 1b. Date of Birth (mmm/dd/yyyy) 1c. Place of Birth 1d. Soc. Sec. No./Tax I.D. No. - --------------------------------------------------------------------------------------------------------------------------- 1e. Sex 1f. Occupation 1g. Specific Duties 1h. How Long? - --------------------------------------------------------------------------------------------------------------------------- 1i. Home Address City State Zip 1j. How Long? - --------------------------------------------------------------------------------------------------------------------------- 1k. Employer Name and Address City State Zip 1l. How Long? - --------------------------------------------------------------------------------------------------------------------------- OWNER IF OTHER THAN PROPOSED LIFE INSURED 2a. Name (first, middle, last) - --------------------------------------------------------------------------------------------------------------------------- 2b. Date of Birth (mmm/dd/yyyy) 2c. Occupation 2d. Relationship to Proposed Life Insured - --------------------------------------------------------------------------------------------------------------------------- 2e. Address City State Zip - --------------------------------------------------------------------------------------------------------------------------- 2f. Employer Name and Address City State Zip - --------------------------------------------------------------------------------------------------------------------------- 2g. If home address or employer has changed in last 2 years, give details: - --------------------------------------------------------------------------------------------------------------------------- SUCCESSOR OWNER - RECOMMENDED FOR JUVENILE INSURANCE - NOT RECOMMENDED FOR BUY-SELL OR CORPORATE-OWNED 3a. Name 3b. Relationship to Owner 3c. Soc. Sec. No./Tax I.D. No. - --------------------------------------------------------------------------------------------------------------------------- BENEFICIARY(IES) SUBJECT TO CHANGE BY OWNER 4a. Primary 4b. Relationship to Proposed Life Insured - --------------------------------------------------------------------------------------------------------------------------- 4c. Secondary 4d. Relationship to Proposed Life Insured - --------------------------------------------------------------------------------------------------------------------------- SEND PREMIUM NOTICES TO: 5a. / / Insured / / Owner / / Business / / Residence / / Other (give details below): 5b. Name Address City State Zip - --------------------------------------------------------------------------------------------------------------------------- LIFE INSURANCE IN FORCE: 6a. Total insurance in force on the Proposed Life Insured's life $ ------------------------------------- 6b. Total insurance currently pending with all companies, including this application $ . Of this ----------------- total, what amount of insurance do you intend to accept? $__________________________________ 6c. LIST POLICIES IN FORCE YEAR OF ACCIDENTAL GI OPTION COMPANY ISSUE GROUP? FACE AMOUNT DEATH AMOUNT BUSINESS PERSONAL - ---------------------------------------------------------------------------------------------------------------------------
YES NO 7. Have you ever been declined for insurance, or been offered insurance with restricted benefits or at other than standard rates? / / / / 8. Is this insurance to replace, or will it cause a change in, or involve a loan under, any insurance or annuity policy on any Proposed Life Insured's life or in any insurance or annuity policy owned by the ? IF "YES", TO EITHER 7 OR 8, GIVE DETAILS BELOW: / / / / PAGE 1 Manulife Financial and the block design are registered service marks of The Manufacturers Life Insurance Company and are used by it and its subsidiaries. NB0777UA(0296) 4 EXHIBIT APPLICATION NO. PLEASE PRINT - -------------------------------------------------------------------------------- POLICY APPLIED FOR: 9a. Plan: ------------------------------------ 9b. Face Amount (policy only, excluding Supplementary Benefits): $ ----------- 9c. If an additional or optional policy is being applied for in a separate application, state plan and amount. - -------------------------------------------------------------------------------- 9d. Loan Interest Rate (Check / / loan rate applicable to the policy being applied for) / / 5.75% / / 8% / / Variable 9e. If a supplementary benefit applied for cannot be approved, should the policy be issued without it? / / Yes / /No / / Not Applicable 9f. Is a policy guarantee being applied for? / /Yes / /No / / Not Applicable If "Yes", indicate type of policy guarantee: / / No Lapse Guarantee / / Death Benefit Guarantee SUPPLEMENTARY BENEFITS SINGLE-LIFE PLANS 10. / / Total Disability Waiver of Monthly Deductions / / Guaranteed Policy Value / / Additional Life (number of lives maximum 6) ------------ (complete application NB0573UA for each additional life) / / Other (state which) ------------------------------------ -------------------------------------------------------- SURVIVORSHIP PLANS 11. / / Policy Split Option / / Four Year Term (EPR) / / Other (state which) ----------------------------------- ---------------------------------------------------------- PREMIUMS 11a. FREQUENCY: / /Annual / /Semi / /Quarterly / /Monthly 11b. If monthly, / / ManuMatic Transfer 11c. Planned Premium $ ------------------------ 11d. Additional "once only" premium $ -------------------- 11e. Amount paid with application $ -------------------- DEATH BENEFIT 12. / / OPTION 1: Face Amount / / OPTION 2: Face Amount Plus Policy Value SPECIAL REQUESTS 13. HOME OFFICE CORRECTIONS OR AMENDMENTS (NOT APPLICABLE IN WEST VIRGINIA) 14. Page 2 5 EXHIBIT APPLICATION NO. PLEASE PRINT SMOKING QUESTIONS YES NO 15a. Have you used tobacco in any form during the past 2 years (including cigars, cigarillos, a pipe, chewing tobacco or cigarettes)? .............................................. / / / / If "Yes" what type of tobacco? ------------------------------ 15b. Do you use any medication or product containing nicotine? ... / / / / If "Yes", give details: ----------------------------------- 15c. Have you smoked any cigarettes during the past 12 months? If "Yes", how many? ......................................... / / / / 15d. Were you previously a cigarette smoker but have now stopped? / / / / If "Yes", when did you stop? Give month and year: ----------- AVOCATION QUESTIONS YES NO 16a. Do you have any part-time or seasonal occupation? ........... / / / / 16b. Do you expect to change your occupation? .................... / / / / 16c. Do you expect to change your country of residence? .......... / / / / If "Yes", give details: ------------------------------------- / / / / 17a. Have you flown as a student pilot, licensed pilot or crew member in any aircraft (including ultralight planes) in the past 2 years? ........................................... / / / / 17b. Are any such flights planned in the future? ................. / / / / 17c. Have you engaged in any form of motor vehicle or power boat racing, sky diving, skin or scuba diving, parachuting, hang-gliding, mountain climbing or ballooning in the last 2 years? ........................................ / / / / 18a. What is your Drivers License Number? State / / / / ----------------- -- 18b. Have you been convicted of 3 or more moving violations within the past 3 years? .................................... / / / / 18c. Have you been convicted of driving while intoxicated or while otherwise impaired? If "Yes", give details. / / / / FINANCIAL QUESTIONS COMPLETE WHEN AMOUNT OF INSURANCE IS $250,000 AND MORE, OR WHEN APPLYING FOR BUSINESS INSURANCE FOR ANY AMOUNT, OR INSURANCE ON THE LIFE OF A JUVENILE FOR ANY AMOUNT. 19. What is the purpose of this insurance? (e.g. estate conservation, buy-sell, keyman) -------------------------------------------------------- 20. How was the need for this amount determined? (Please submit copies of financial statement(s), estate analysis, contractual agreements, etc.) -------------------------------------------------------- 21a. Gross annual earned income (salary, commissions, bonuses, etc.) $ --------------------------------------------------------- 21b. Gross annual unearned income (dividends, interest, net real estate income, etc.) $ ------------------------------------------- 21c. Total Assets $ 21d. Total Liabilities? $ -------------- ------------------ 21e. Personal Net Worth?$ ------------------------ JUVENILE INSURANCE: 22a. Are all brothers and sisters equally insured? / / Yes / / No If "No", give details: --------------------------------------------------- 22b. Are parent(s) / guardian covered by life insurance? / / Yes / / No If "Yes", how much is in force? ----------------------------------------- If "No", why not? ------------------------------------------------------- BUSINESS INSURANCE: Provide the following information on your company
Current Year Previous Year 23a. Assets $ $ 23b. Liabilities $ $ 23c. Gross Sales $ $ 23d. Net Income after taxes $ $ 23e. Fair Market Value of the business $
23f. What percentage of the business is owned by the proposed Life Insured? % ----------- 23g. Are other partners/owners/executives being insured? Give details: ----------------------------------------------------------- 24. In the past 5 years, has the Proposed Life Insured or the business had any major financial problems (bankruptcy, etc.)? / /Yes / / No If "Yes", give details: ------------------------------------------------ - ------------------------------------------------------------------------------- Page 3 6 EXHIBIT APPLICATION NO. PLEASE PRINT MEDICAL QUESTIONS: Please provide details to "Yes" answers in the space below 25. Have 2 or more of your immediate family members (parents, brothers and sisters) prior to age 65, died of or been diagnosed as having coronary artery disease, stroke or kidney disease? / / Yes / / No
26. FAMILY HISTORY AGE GIVE DETAILS OF PRESENT HEALTH AGE CAUSE OF DEATH - --------------------------------------------------------------------------------------------------------------------------- Father L D I E Mother V C I E Brothers N A and G S Sisters E D
27a. Your Height 27b. Your Weight ------------ ------------ 27c. Any weight loss in the last year? / /Yes / /No 28a. Name and address of personal or attending doctor: ------------------------ 28b. Date last consulted? -------------------- 28c. Reason and any medication/treatment given: ------------------------------ 28d. List any medications you are taking currently: --------------------------- YES NO 29. SO FAR AS YOU KNOW, WITHIN THE LAST 10 YEARS HAVE YOU HAD OR BEEN TOLD BY A DOCTOR THAT YOU HAD: a.) Chest pain, shortness of breath, heart murmur, high blood pressure, stroke, irregular heart beat, or any other disease or disorder of the heart or arteries? ................ / / / / b.) Diabetes or disease of any glands? ........................... / / / / c.) Mental or emotional disorder, nervous breakdown, convulsions, epilepsy, paralysis or any other disorder of the brain or nervous system? .............................................. / / / / d.) Arthritis, gout, or any bone, joint, muscle or skin disorder? / / / / e.) Asthma, bronchitis, pneumonia, emphysema or any lung disorder? / / / / f.) Cirrhosis, hepatitis, ulcer, colitis, diverticulitis, ileitis, or other disease of the liver, gall bladder, pancreas, stomach or intestines? ............................. / / / / g.) Prostate or testicular disease, disease of the uterus, ovaries or breast? ........................................... / / / / h.) Anemia, leukemia, clotting disorders, platelet disorders, infections, or sources of blood loss? ........................ / / / / i.) Disorder of the urinary tract or kidneys - sugar, albumin or blood in the urine? ....................................... / / / / j.) Cancer or tumors? ............................................ / / / / k.) An operation or admission to a hospital or any other health care facility for observation, treatment of any illness or diagnostic tests (including treadmill stress test for insurance)? .............................................. / / / / l.) Any other health impairment or medically treated condition? .. / / / / m.) Treatment or advice from a physician, or licensed practitioner, regarding alcohol or drug use? ................. / / / / 30. Within the last 10 years have you been diagnosed by a doctor as having Acquired Immune Deficiency Syndrome (Aids)? . / / / / PLEASE PROVIDE DETAILS TO ANY "YES" ANSWERS (IF MORE SPACE IS REQUIRED, USE THE MEDICAL QUESTIONS CONTINUATION SHEET)
QUESTION NAME, ADDRESS AND PHONE NO. OF DURATION NUMBER DATE ATTENDING DOCTOR AND HOSPITAL OF CONDITION REASON AND ANY TREATMENT GIVEN - ---------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Page 4 7 EXHIBIT APPLICATION NO. REQUEST FOR TAXPAYER IDENTIFICATION NUMBER AND CERTIFICATION (TO BE COMPLETED BY OWNER/TAXPAYER) In order to comply with IRS regulations regarding Tax Identification Numbers and Backup Tax Withholding, individuals and sole proprietors MUST give their Social Security Number. Other entities MUST give their Employer Identification Number. Social Security Number ___________-___________-___________ If you have no number or you have applied for a number and are waiting for one to be issued, write "APPLIED FOR" in the boxes. You then have 60 days to supply your TIN number to us. After 60 days, The Company must begin Backup Tax Withholding. Employer Identification Number ___________-______________________ CERTIFICATION - UNDER PENALTIES OF PERJURY, I CERTIFY THAT: (1) The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), AND (2) I am not subject to Backup Tax Withholding either because I have not been notified by the Internal Revenue Service (IRS) that I am subject to Backup Tax Withholding as a result of a failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to Backup Tax Withholding (does not apply to real estate transactions, mortgage interest paid, the acquisition or abandonment of secured property, contributions to an individual retirement arrangement (IRA), and payments other than interest and dividends). CERTIFICATION INSTRUCTIONS - You MUST cross out item (2) above if you have been notified by the IRS that you are currently subject to Backup Tax Withholding because of underreporting interest or dividends on your tax return. Signed at_________________________________this___________day of__________ ______ City / State Month Year (X)_______________________________________ SIGNATURE OF OWNER / TAXPAYER Page 5 8 EXHIBIT APPLICATION NO. SIGNATURES THE PROPOSED LIFE INSURED (OR PARENT OR GUARDIAN) HAS READ THE STATEMENTS AND ANSWERS TO THE MEDICAL EVIDENCE PORTION AND THEY ARE COMPLETE AND TRUE TO THE BEST OF HIS/HER KNOWLEDGE AND BELIEF. THE PROPOSED LIFE INSURED HEREBY AGREES THAT THEY SHALL FORM PART OF THE APPLICATION FOR LIFE INSURANCE FOR WHICH SUCH MEDICAL EVIDENCE WAS REQUIRED BY THE COMPANY. THE PROPOSED LIFE INSURED (OR PARENT OR GUARDIAN) ACKNOWLEDGES RECEIPT OF THE NOTICE OF DISCLOSURE OF INFORMATION. THE PROPOSED LIFE INSURED AND OWNER (OR PARENT OR GUARDIAN) AGREE THAT: 1.) THE STATEMENTS AND ANSWERS IN THIS APPLICATION ARE COMPLETE AND TRUE TO THE BEST OF THEIR KNOWLEDGE AND BELIEF. 2.) UNLESS THE TERMS AND CONDITIONS OF THE TEMPORARY LIFE INSURANCE AGREEMENT ARE SATISFIED SO THAT INSURANCE IS PROVIDED UNDER THAT AGREEMENT, INSURANCE UNDER ANY POLICY ISSUED ON THE APPLICATION WILL BECOME EFFECTIVE ONLY WHEN THE FIRST PREMIUM HAS BEEN PAID IN FULL AND THE POLICY HAS BEEN DELIVERED; PROVIDED THAT AT THE TIME OF DELIVERY THERE HAS BEEN NO DETERIORATION IN THE INSURABILITY OF ANY PERSON PROPOSED FOR LIFE INSURANCE AS STATED IN THE APPLICATION, SINCE THE DATE OF THE APPLICATION. THEY ARE AWARE THE COMPANY HAS UNDERWRITING RULES TO DETERMINE INSURABILITY. 3.) (NOT APPLICABLE IN WEST VIRGINIA) ACCEPTANCE OF THE POLICY WILL, WHERE PERMITTED BY LAW, CONSTITUTE AGREEMENT TO ITS TERMS AND RATIFICATION OF ANY CHANGES SPECIFIED BY THE COMPANY IN THE POLICY, EXCEPT THAT ANY CHANGE OF AMOUNT, CLASSIFICATION, PLAN, BENEFITS OR AGE AT ISSUE WILL BE MADE ONLY WITH THE OWNER'S WRITTEN CONSENT. THE PROPOSED LIFE INSURED AND OWNER (OR PARENT OR GUARDIAN) UNDERSTAND THAT UNDER THE POLICY APPLIED FOR, THE AMOUNT OF THE INSURANCE BENEFITS, THE DURATION OF THE INSURANCE COVERAGE, AND THE POLICY VALUE MAY INCREASE OR DECREASE DEPENDING ON THE INVESTMENT EXPERIENCE OF THE CHOSEN INVESTMENT ACCOUNT AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT. ANY PERSON WHO KNOWINGLY PRESENTS A FALSE OR FRAUDULENT CLAIM FOR PAYMENT OF A LOSS OR BENEFIT OR KNOWINGLY PRESENTS FALSE INFORMATION IN AN APPLICATION FOR INSURANCE IS GUILTY OF A CRIME AND MAY BE SUBJECT TO FINES AND CONFINEMENT IN PRISON. Signed at ______________________________ this __________ day of __________ _____ City / State Month Year (X)___________________________________ (X)___________________________________ WITNESS SIGNATURE OF PROPOSED LIFE INSURED (X)___________________________________ (X)___________________________________ WITNESS SIGNATURE OF OWNER, IF OTHER THAN PROPOSED LIFE INSURED (X)___________________________________ (X)___________________________________ WITNESS SIGNATURE OF ANY PROPOSED JUVENILE LIFE INSURED OVER AGE 10 (X)___________________________________ (X)___________________________________ SIGNATURE OF REGISTERED REPRESENTATIVE CONSENT OF PARENT OR GUARDIAN, IF OTHER THAN WITNESS IF OTHER THAN OWNER [ ]FATHER [ ]MOTHER [ ]GUARDIAN All other Registered Representatives sharing commissions for this policy must also sign here. (X)___________________________________ (X)___________________________________ SIGNATURE OF REGISTERED REPRESENTATIVE Place and Date (X)___________________________________ (X)___________________________________ SIGNATURE OF REGISTERED REPRESENTATIVE Place and Date (X)___________________________________ COUNTERSIGNATURE OF LICENSED RESIDENT AGENT (WHERE REQUIRED BY LAW) Page 6 9 EXHIBIT APPLICATION NO. PLEASE PRINT To be answered by the Registered Representative (Required for ALL applications) 1. If the Owner is a Corporation, Partnership, Trust or other legal entity, the NASD requires such entity to provide The Company with documentation detailing the name(s) of all individuals authorized to transact business on behalf of the entity. This requirement will be satisfied by submitting a copy of the Corporation Resolution, Partnership Agreement, or Certification by Trustee form. List the name(s) of individual(s) authorized to transact business on behalf of the entity: ______________________________________________________________________ ______________________________________________________________________ 2. Temporary Life Insurance Agreement Issued? [ ] Yes [ ] No 3. TO THE BEST OF YOUR KNOWLEDGE, IS THIS INSURANCE INTENDED TO REPLACE, OR WILL IT CAUSE A CHANGE IN, OR INVOLVE A LOAN UNDER, ANY INSURANCE OR ANNUITY POLICY ON THE LIFE OF ANY PROPOSED LIFE INSURED OR IN ANY INSURANCE OR ANNUITY POLICY OWNED BY THE OWNER? [ ] YES [ ] NO IF "YES", GIVE DETAILS AND COMPLETE ANY REPLACEMENT FORMS THAT ARE REQUIRED. ADVISE WHETHER ANY POLICY BEING REPLACED WAS ITSELF A REPLACEMENT POLICY WITHIN THE PAST 5 YEARS. 4. Is this a 1035 exchange? [ ] Yes [ ] No If "Yes", how many policies will be exchanged?________________________ LIST POLICIES:
___________________________________________________________________________________________________________________________ Type of Contract Company Name Policy No. (Annuity, Life, Term, Annuitant / Insured Owner Endowment) ___________________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________________
5. Additional information to be used in assessing suitability. (Please give explanation if annual premium is more than 3% of annual income, if spouse's income is to be included in determining suitability, if answers to income and net worth have not been provided, etc.): 6. If you are sharing the commissions for this policy with another agent(s) or entity(ies), please complete the following:
___________________________________________________________________________________________________________________________ NAME OF AGENT / ENTITY AGENT CODE SHARE REMARKS ___________________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________________ TOTAL 100% __________
I certify that I have truly and accurately recorded on the application all the information supplied by the Proposed Life Insured (or Parent or Guardian). I CERTIFY THAT A CURRENT PROSPECTUS (AND ANY SUPPLEMENT) FOR THE POLICY APPLIED FOR HAS BEEN GIVEN TO THE PROPOSED LIFE INSURED, AND TO THE OWNER IF OTHER THAN THE PROPOSED LIFE INSURED, AND THAT NO SALES MATERIALS OTHER THAN THOSE APPROVED BY THE APPROPRIATE REGULATING AUTHORITIES HAVE BEEN USED. (X)________________________________ (X)________________________________ SIGNATURE OF REGISTERED REPRESENTATIVE Place and Date All other Registered Representatives sharing commissions for this policy must also sign here. (X)________________________________ (X)________________________________ SIGNATURE OF REGISTERED REPRESENTATIVE Place and Date (X)________________________________ (X)________________________________ SIGNATURE OF REGISTERED REPRESENTATIVE Place and Date OFFICE OF SUPERVISORY JURISDICTION Has this application been approved by the Office of Supervisory Jurisdiction? [ ] Yes [ ] No If answer is "No", explain: _______________________________________________________________________________ _______________________________________________________________________________ _____________________ ______________________________ _____________________ NAME OF BROKER/DEALER REGISTERED PRINCIPAL SIGNATURE DATE (Month/ Day/ Year) Page 7 EX-99.2A 22 CONSENT OF JAMES D. GALLAGHER 1 EXHIBIT 2A The Manufacturers Life Insurance Company of America 200 Bloor Street East Toronto, Ontario, Canada M4W 1E5 August 27, 1998 To whom it may concern, This opinion is written in reference to the flexible premium variable universal life insurance contract (the "Contract") that will be offered and sold by The Manufacturers Life Insurance Company of America (the "Company") with respect to the variable portion of which a Registration Statement on Form S-6 (the "Registration Statement") is being filed under the Securities Act of 1933, as amended (the "Act"). As Counsel to the Company, I have examined such records and documents and reviewed such question of law as I deemed necessary for purposes of this opinion. 1. The Company has been duly incorporated under the laws of the state of Michigan and is a validly existing corporation. 2. Separate Account Four of The Manufacturers Life Insurance Company of America (the "Variable Life Account") is a separate account of the Company and is duly created and validly existing pursuant to The Insurance Code of 1956. 3. The portion of the assets to be held in Separate Account Four of the Company tequal to the reserves and other liabilities under the Policy is not chargeable with liabilities arising out of any other business the Company may conduct. 4. The Policy, when issued in accordance with the prospectus contained in the effective Registration Statement and upon compliance with applicable local law, will be legal and binding obligations of the Company. I consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement on Form S-6. Very truly yours, /s/ JAMES D. GALLAGHER James D. Gallagher Secretary and General Counsel EX-99.2B 23 OPINION & CONSENT OF VIC BERTALOZZI 1 August 27, 1998 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, DC 20549 Re: Actuarial Opinion on Illustrations in Registration Statement Dear Sirs: This opinion is furnished in connection with the registration statement under the Securities Act of 1933, as amended, of a flexible premium variable universal life insurance contract (the "Contract") that will be offered and sold by The Manufacturers Life Insurance Company of America. The hypothetical illustrations of death benefits, contract values and surrender values used in this registration statement are consistent with the provisions of the Contract and the Company's administrative procedures. The rate structure of the contract has not been designed so as to make the relationship between premiums and benefits, as shown in the illustrations, appear disproportionately more favorable to a prospective purchaser of the contract for the age and risk class illustrated than for any other prospective purchaser. The particular illustrations shown are for a commonly used risk class and for premium amounts and ages appropriate to the markets in which the contract is sold. I hereby consent to the use of this opinion as an exhibit to the Securities Act Registration Statement on Form S-6. Sincerely, Vic Bertolozzi Vic Bertolozzi, FSA, MAAA Actuary EX-99.2C 24 CONSENT OF ERNST & YOUNG LLP 1 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated March 20, 1998 accompanying the financial statements of The Manufacturers Life Insurance Company of America and to the use of our report dated January 30, 1998 accompanying the financial statements of Separate Account Four of The Manufacturers Life Insurance Company of America, in Pre-Effective Amendment No. 1 to the Registration Statement No. 333-51293 on Form S-6 and related prospectus of Seperate Account Four of The Manufacturers Life Insurance of America. Ernst & Young LLP Philadelphia, Pennsylvania August 27, 1998 EX-99.6 25 MEMORANDUM REGARDING ISSUANCE 1 Exhibit 6 EXHIBIT A.(11) THE MANUFACTURERS INSURANCE COMPANY OF AMERICA DESCRIPTION OF PURCHASE, TRANSFER AND REDEMPTION PROCEDURES This document sets forth, as required by Rule 6e-3(T)(b)(12)(ii), the administrative procedures that will be followed by The Manufacturers Insurance Company of America (the "Company") and any office the Company designates for the receipt of payments and processing of policyholder requests (the "Service Office") in connection with the issuance of its flexible premium variable universal life insurance contract described in this registration statement (1933 Act file no. 333-51293) (the "Policy"), the transfer of assets held thereunder, and the redemption by contract owners of their interests in said Policy. I. ISSUING A POLICY A. Premiums This Policy is a flexible premium variable universal life insurance contract. The Policy permits the policyholder to pay flexible premiums. After payment of the initial premium, premiums may be paid at any time and in any amount during the lifetime of the insured. A Policy will be issued with a planned premium, which is based on the amount of premium the policyholder wished to pay. In no event may the total of all premiums paid exceed the then-current maximum premium limitations established by federal income tax law for a Policy to qualify as life insurance. If, at any time, a premium is paid which would result in total premiums exceeding the above maximum premium limitation, the Company will only accept that portion of the premium which will make the total premiums equal to the maximum. Any part of the premium in excess of that amount will be returned and no further premiums will be accepted until allowed by the then-current maximum premium limitation. B. Underwriting The Polices are offered on three underwriting bases, which vary by the amount of information required of the prospective insured. These are described in more detail below. Regardless of which underwriting procedure is used, the acceptance of an application is subject to the Company's underwriting rules, and the Company reserves the right to request additional information or to reject an application for any reason. Generally, the availability of short form underwriting depends on the characteristics of the case, such as the number of lives to be insured and the amounts of insurance. Under Short Form underwriting, a proposed insured is required to answer qualifying questions in the application, but is not required to submit to a medical or paramedical exam. Short form underwriting is generally available only up to issue age 65. 2 Like short form underwriting the availability of simplified underwriting depends on the characteristics of the case. Under Simplified Underwriting, the proposed insured is required to respond satisfactorily to certain health questions in the application. Medical records, such as "Attending Physician's Statements" (APS's) are generally required. In some instances, a blood test may also be required. If the requirements for short form or simplified underwriting are not satisfied, the Company will require satisfactory evidence of insurability. This may include medical exams and other information. Persons failing to meet standard underwriting classification may be eligible for a Policy with an additional rating assigned to it. C. Application To purchase a Policy, an applicant must submit a completed application. A Policy will not be issued until the underwriting process has been completed to the Company's satisfaction. Policies may be issued on a basis which does not distinguish between the insured's sex and/or smoking status, with prior approval from the Company. A Policy will only be issued on the lives of insureds from ages 20 through 80. Each Policy is issued with a Policy Date, an Effective Date and an Issue Date. The Policy Date is the date from which the first monthly deductions are calculated and from which Policy Years, Policy Months and Policy Anniversaries are determined. The Effective Date is the date the Company becomes obligated under the Policy and when the first monthly deductions are deducted from the Policy Value. The Issue Date is the date from which the suicide and incontestability provisions are measured. If an application is accompanied by a check for the initial premium and the application is accepted: (i) the Policy Date will be the date the application and check were received at the Service Office (unless a special Policy Date is requested (See "Backdating a Policy" below); (ii) the Effective Date will be the date the Company's underwriters approve issuance of the Policy; and (iii) the Issue Date will be the date the Company issues the Policy. If an application accepted by the Company is not accompanied by a check for the initial premium: (i) the Policy Date will be the date the Company issues the Policy (unless a special Policy Date is requested (See "Backdating a Policy" below); 2 3 (ii) the Effective Date will be the date the Service Office receives the initial premium; and (iii) the Issue Date will be the date the Company issues the Policy. The initial premium must be received within 60 days after the Policy Date. If the premium is not paid or if the application is rejected, the Policy will be cancelled and any partial premiums paid will be returned to the applicant. D. Minimum Initial Face Amount The Company will issue a Policy only if it has a Face Amount of at least $50,000. E. Backdating a Policy Under limited circumstances, the Company may backdate a Policy, upon request, by assigning a Policy Date earlier than the date the application is signed. However, in no event will a Policy be backdated earlier than the earliest date allowed by state law, which is generally three months to one year prior to the date of application for the Policy. Monthly deductions will be made for the period the Policy Date is backdated. Regardless of whether or not a policy is backdated, Net Premiums (premium paid less premium load) received prior to the Effective Date of a Policy will be credited with interest from the date of receipt at the rate of return then being earned on amounts allocated to the Money Market portfolio. As of the Effective Date, the premiums paid plus interest credited, net of the premium load, will be allocated among the Investment Accounts (as described below under ("Policy Value Investment Accounts") and/or Guaranteed Interest Account in accordance with the policyholder's instructions unless such amount is first allocated to the Money Market portfolio for the duration of the Right to Examine period described below. F. Temporary Insurance In accordance with the Company's underwriting practices, temporary insurance coverage may be provided under the terms of a Temporary Insurance Agreement. Generally, temporary life insurance may not exceed $1,000,000 and may not be in effect for more than 90 days. This temporary insurance coverage will be issued on a conditional receipt basis, which means that any benefits under such temporary coverage will only be paid if the life insured meets the Company's usual and customary underwriting standards for the coverage applied for. G. Right to Examine the Policy 3 4 A Policy may be returned for a refund within 10 days after it is received. Some states provide a longer period of time to exercise this right. The Policy will indicate if the policyholder has a longer time. The Policy can be mailed or delivered to the Company's agent who sold it or to the Service Office. Immediately on such delivery or mailing, the Policy shall be deemed void from the beginning. Within seven days after receipt of the returned Policy at its Service Office, the Company will refund to the policyholder an amount equal to: (a) the difference between payments made and amounts allocated to separate account which supports the Policies (the "Separate Account") and the Guaranteed Interest Account; plus (b) the value of the amount allocated to the Separate Account and the Guaranteed Interest Account as of the date the returned Policy is received by the Company; minus (c) any partial withdrawals made and policy loans taken. Some state laws require the refund of all premiums paid, without adjustment for the investment gains and losses of the Separate Account. In these states, all Net Premiums will be allocated to the Money Market Trust during the right to examine period, and the policyholder will receive a refund of all payments made less any partial withdrawals and policy loans taken. If a policyholder requests an increase in face amount which results in new surrender charges, he or she will have the same rights as described above to cancel the increase. If cancelled, the Policy Value and the surrender charges will be recalculated to the amounts they would have been had the increase not taken place. A policyholder may request a refund of all or any portion of premiums paid during the free look period, and the Policy Value and the surrender charges will be recalculated to the amounts they would have been had the premiums not been paid. The Company reserves the right to delay the refund of any premium paid by check until the check has cleared. H. Premium Allocation No premiums will be accepted prior to receipt of a completed application by the Company. All premiums received prior to the Effective Date of the Policy will be held in the general account of the Company and credited with interest from the date of receipt at the rate of return then being earned on amounts allocated to the Money Market Trust. On the Effective Date, the Net Premiums paid plus interest credited will be allocated among the Investment Accounts or the Guaranteed Interest Account in accordance with the policyholder's instructions. 4 5 All Net Premiums received on or after the Effective Date will be allocated among Investment Accounts or the Guaranteed Interest Account as of the date the premiums were received at the Service Office. Monthly deductions are due on the Policy Date and at the beginning of each policy month thereafter. However, if due prior to the Effective Date, they will be taken on the Effective Date instead of the dates they were due. Some state laws require the refund of all premiums paid, without adjustment for gains and losses of the Separate Account, if a Policy is returned during the right to examine period. In these states, all Net Premiums will be allocated to the Money Market Trust during the right to examine period. At the end of this period, the Policy Value in the Money Market Trust will be allocated among the Investment Accounts or the Guaranteed Interest Account. The Policy will state if a return of premiums is required. Premiums may be allocated to either the Guaranteed Interest Account for accumulation at a rate of interest equal to at least 4% or to one or more of the Investment Accounts for investment in the Portfolio shares held by the corresponding sub-account of the Separate Account. Allocations among the Investment Accounts and the Guaranteed Interest Account are made as a percentage of the premium. The percentage allocation to any account may be any number between zero and 100, provided the total allocation equals 100. Alternatively, a policyholder may specify the allocation of a specific premium payment in dollar amounts, so long as the total allocation among the Investment Accounts equals the Net Premium paid. A policyholder may change the way in which premiums are allocated at any time without charge. The change will take effect on the date a written request for change satisfactory to the Company is received at the Service Office. II. DEATH BENEFIT OPTION CHANGES The death benefit option may be changed on the first day of any Policy month. The change will occur on the first day of the next Policy month which is 30 days after a written request for a change is received at the Service Office. The Company reserves the right to limit a request for a change if the change would cause the Policy to fail to qualify as life insurance for tax purposes. A change in the death benefit option will result in a change in the Policy's Face Amount, in order to avoid any change in the amount of the death benefit, as follows: Change from Option 1 to Option 2 The new Face Amount will be equal to the Face Amount prior to the change minus the Policy Value on the date of the change. The Policy will not be assessed a surrender charge for a reduction in Face Amount solely due to a change in the death benefit option. Change from Option 2 to Option 1 5 6 The new Face Amount will be equal to the Face Amount prior to the change plus the Policy Value on the date of the change. No new surrender charges will apply to an increase in Face Amount solely due to a change in the death benefit option. III. FACE AMOUNT CHANGES Subject to the limitations stated in this Prospectus, a policyholder may, upon written request, increase or decrease the Face Amount of the Policy. The Company reserves the right to limit a change in Face Amount so as to prevent the Policy from failing to qualify as life insurance for tax purposes. A. Increase in Face Amount Increases in Face Amount are subject to satisfactory evidence of insurability. An increase will become effective at the beginning of the Policy month following the date the Company approves the requested increase. The Company reserves the right to refuse a requested increase if the life insured's Attained Age (life insured's age on the birthday closer to the Policy Date plus the number of completed Policy Years*) at the effective date of the increase would be greater than the maximum Issue Age for new Policies at that time. *Policy Year is a period beginning on a Policy Anniversary and ending on the day immediately preceding the next Policy Anniversary. B. New Surrender Charges for an Increase An increase in Face Amount will result in the Policy's being subject to new surrender charges. The new surrender charges will be computed as if a new Policy were being purchased for the increase in Face Amount. For purposes of determining the new surrender charges a portion of the premiums paid on or subsequent to the increase will be deemed to be premiums attributable to the increase. The portion attributable to the increase in any Policy Year will be the amount of premiums in excess of the sum of the Target Premiums for the (i) initial Face Amount during the first five Policy Years and (ii) all prior increases that are in effect at the time of the increase in Face Amount and have been in effect for less than five years. C. Increase with Prior Decreases If, at the time of the increase, there have been prior decreases in Face Amount, these prior decreases will be restored first. There will be no new surrender charges associated with these increases, since surrender charges will have already been assessed at the time of the prior decrease. D. Decrease in Face Amount A written request from a policyholder for a decrease in the Face Amount must be received by Manufacturers Life of America at least 30 days prior to the first day of a policy month for the change to take effect on the first day of that policy month. If there have been previous increases in Face Amount, the decrease will be applied to the most recent increase first and thereafter to the next most recent increases successively. 6 7 E. Surrender Charges Assessed on a Decrease A portion of a Policy's surrender charge will be deducted from the Policy Value on a decrease in Face Amount. Since surrender charges are determined separately for the initial Face Amount and each Face Amount Increase, the portion of the surrender charges to be deducted with respect to each level of insurance coverage will be determined separately. The portion of the surrender charge deducted with respect to a level of coverage will be equal to: (a) the amount of the decrease; divided by (b) the amount of the coverage prior to the decrease; multiplied by (c) the surrender charge for the coverage. The charges will be allocated among the Investment Accounts and the Guaranteed Interest Account in the same proportion as the Policy Value in each bears to the Net Policy Value (Policy Value less the value in the Loan Account). Whenever a portion of the surrender charges are deducted as a result of a decrease in Face Amount, the Policy's remaining surrender charges will be reduced in the same proportion that the surrender charge deducted bears to the total surrender charge immediately prior to the decrease in Face Amount. IV. POLICY VALUE A. Determination of the Policy Value A Policy has a Policy Value, a portion of which is available to the policyholder by making a policy loan or partial withdrawal, or upon surrender of the Policy. The Policy Value may also affect the amount of the death benefit. The Policy Value at any time is equal to the sum of the values in the Investment Accounts, the Guaranteed Interest Account, and the Loan Account. B. Investment Accounts An Investment Account is established under each Policy for each sub-account of the Separate Account to which net premiums or transfer amounts have been allocated. Each Investment Account under a Policy measures the interest of the Policy in the corresponding sub-account. The value of the Investment Account established for a particular sub-account is equal to the number of units of that sub-account credited to the Policy times the value of such units. C. Guaranteed Interest Account Amounts in the Guaranteed Interest Account do not vary with the investment performance of any sub-account. Instead, these amounts are credited with interest at a rate determined by the Company. D. Loan Account Amounts borrowed from the Policy are transferred to the Loan Account. Amounts in the Loan Account do not vary with the investment performance of any sub-account. Instead, these amounts are credited with interest at a rate 7 8 which is equal to the amount charged on the outstanding Policy Debt (the aggregate amount of policy loans, including borrowed and accrued interest, less any loan repayments) less the Loan Spread set forth in the Policy. E. Units and Unit Values Crediting and Canceling Units Units of a particular sub-account are credited to a Policy when Net Premiums are allocated to that sub-account or amounts are transferred to that sub-account. Units of a sub-account are cancelled whenever amounts are deducted, transferred or withdrawn from the sub-account. The number of units credited or cancelled for a specific transaction is based on the dollar amount of the transaction divided by the value of the unit on the Business Day on which the transaction occurs. The number of units credited with respect to a premium payment will be based on the applicable unit values for the Business Day on which the premium is received at the Service Office, except for any premiums received before the Effective Date. For premiums received before the Effective Date, the values will be determined on the Effective Date. Units are valued at the end of each Business Day. When an order involving the crediting or canceling of units is received after the end of a Business Day, or on a day which is not a Business Day, the order will be processed on the basis of unit values determined on the next Business Day. Similarly, any determination of Policy Value, Investment Account value or death benefit to be made on a day which is not a Business Day will be made on the next Business Day. Unit Values The value of a unit of each sub-account was initially fixed at $10.00. For each subsequent Business Day the unit value for that sub-account is determined by multiplying the unit value for the immediately preceding Business Day by the net investment factor for the that sub-account on such subsequent Business Day. The net investment factor for a sub-account on any Business Day is equal to (a) divided by (b) minus (c), where: (a) is the net asset value of the underlying Portfolio shares of Manufacturers Investment Trust held by that sub-account as of the end of such Business Day before any policy transaction are made on that day; (b) is the net asset value of the underlying Portfolio shares held by that sub-account as of the end of the immediately preceding Business Day after all policy transaction were made for that day; and (c) is a charge not exceeding the daily mortality and expense risk charge. 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. 8 9 Due to the fact that the daily mortality and expense risk charge varies by Policy Years, two unit values will be calculated for each sub-account commencing 10 years after the effective date of the first Policy. V. TRANSFER OF POLICY VALUE A. General Transfers At any time, a policyholder may transfer policy value from one sub-account to another or to the Guaranteed Interest Account. Transfer requests must be in writing in a format satisfactory to the Company, or by telephone if a currently valid telephone transfer authorization form is on file. These transfer privileges are subject to the Company's consent. The Company reserves the right to impose limitations on transfers, including the maximum amount that may be transferred. In addition, transfer privileges are subject to any restrictions that may be imposed by Manufacturers Investment Trust. If a transfer would result in more than a 5% reduction in the number of shares outstanding at the close of the previous business day in the Equity Index sub-account, the Company may decline the transfer. If at a later date you wish to make a previously declined transfer, the Company will require a new transfer request. A policyholder may make up to twelve transfers each policy year free of charge. Additional transfers in each policy year may be made at a cost of per transfer as set forth in the currently effective prospectus. This charge will be allocated among the Investment Accounts and the Guaranteed Interest Account in the same proportion as the amount transferred from each bears to the total amount transferred. All transfer requests received by the Company on the same Business Day are treated as a single transfer request. The maximum amount that may be transferred from the Guaranteed Interest Account in any one policy year is the greater of $500 or 15% of the Guaranteed Interest Account Value at the previous Policy Anniversary. Any transfer which involves a transfer out of the Guaranteed Interest Account may not involve a transfer to the Investment Account for the Money Market Trust. Although failure to follow reasonable procedures may result in the Company being liable for any losses resulting from unauthorized or fraudulent telephone transfers, Manufacturers Life of America will not be liable for following instructions communicated by telephone that the Company reasonably believes to be genuine. The Company will employ reasonable procedures to confirm that instructions communicated by telephone are genuine. Such procedures shall consist of confirming that a valid telephone authorization form is on file, tape recording of all telephone transactions and providing written confirmation thereof. 9 10 VI. POLICY SURRENDER AND PARTIAL WITHDRAWALS A. Policy Surrender A Policy may be surrendered for its Net Cash Surrender Value at any time while the life insured is living. The Net Cash Surrender Value is equal to the Policy Value less any surrender charges and outstanding monthly deductions due (the "Cash Surrender Value") minus the Policy Debt. The Net Cash Surrender Value will be determined at the end of the Business Day on which Manufacturers Life of America receives the Policy and a written request for surrender at its Service Office. After a Policy is surrendered, the insurance coverage and all other benefits under the Policy will terminate. A policyholder may make a partial withdrawal of the Net Cash Surrender Value. The policyholder may specify the portion of the withdrawal to be taken from each Investment Account and the Guaranteed Interest Account. In the absence of instructions, the withdrawal will be allocated among such accounts in the same proportion as the Policy Value in each account bears to the Net Policy Value. If Death Benefit Option 1 is in effect when a partial withdrawal is made, the Face Amount of the Policy will be reduced by the amount of the withdrawal plus any applicable Surrender Charges. Reductions in Face Amount resulting from partial withdrawals will not incur any surrender charges above the surrender charges applicable to the withdrawal. If the death benefit is based upon the Policy Value times the minimum death benefit percentage, the Face Amount will be reduced only to the extent that the amount of the withdrawal plus the portion of the Surrender Charge assessed exceeds the difference between the death benefit and the Face Amount. When the Face Amount of a Policy is based on one or more increases subsequent to issuance of the Policy, a reduction resulting from a partial withdrawal will be applied in the same manner as a requested decrease in Face Amount, i.e., against the Face Amount provided by the most recent increase, then against the next most recent increases successively and finally against the initial Face Amount. As long as the Policy is in force, Manufacturers Life of America will ordinarily pay any policy loans, surrenders, partial withdrawals or insurance benefit within seven days after receipt at its Service Office of all the documents required for such a payment. The Company may delay the payment of any policy loans, surrenders, partial withdrawals, or insurance benefit that depends on Guaranteed Interest Account values for up to six months or in the case of any Investment Account for any period during which (i) the New York Stock Exchange is closed for trading (except for normal weekend and holiday closings), (ii) trading on the New York Stock Exchange is restricted (iii) an emergency exists as a result of which disposal of securities held in the Separate Account is not reasonably practicable or it is not reasonably practicable to determine the value of the 10 11 Separate Account's net assets or (iv) the SEC, by order, so permits for the protection of security holders; provided that applicable rules and regulations of the SEC shall govern as to whether the conditions described in (2) and (3) exist. B. Surrender Charges The Company will deduct a Surrender Charge if during the first 10 years following the Policy date, or the effective date of a Face Amount increase: - the Policy is surrendered for its Net Cash Surrender Value, - a partial withdrawal is made in excess of the Free Partial Withdrawal Amount, - the Face Amount is decreased, or - the Policy lapses. The surrender charge is expressed as a percentage of the total premiums paid from the Effective Date. However, premiums paid in any Policy Year in excess of the target premium, and premiums paid after the fifth Policy Year, are not counted in the determination of total premiums paid. Therefore, the timing of premium payments may affect the amount of the surrender charge. The percentages vary by Policy Year as follows: Policy Year Percentage 1 10.00% 2 7.50% 3 5.00% 4 5.00% 5 5.00% 6 5.00% 7 4.00% 8 3.00% 9 2.00% 10+ 0.00% Surrender Charges on a Partial Withdrawal A partial withdrawal will result in the assessment of a portion of the surrender charges to which the Policy is subject. The portion of the surrender charges assessed will be based on the ratio of the amount of the withdrawal which exceeds the Free Withdrawal Amount (defined below) to the Net Cash Surrender Value of the Policy immediately prior to the withdrawal. The Surrender Charges will be deducted on a pro-rata basis from each of the Investment Accounts and the Guaranteed Interest Account. If the amount in the accounts are not sufficient to pay the surrender charges assessed, then the amount of the withdrawal will be reduced. 11 12 Whenever a portion of the surrender charges are deducted as a result of a partial withdrawal, the Policy's remaining surrender charges will be reduced in the same proportion that the surrender charge deducted bears to the total surrender charge immediately before the partial withdrawal. Free Withdrawal Amount The Free Withdrawal Amount is equal to 10% of the Net Cash Surrender Value at the time of the withdrawal. In determining what, if any, portion of a partial withdrawal is in excess of the Free Withdrawal Amount, all previous partial withdrawals that have occurred in the current Policy Year are included. VII. LAPSE AND REINSTATEMENT A. Lapse A Policy will go into default if at the beginning of any policy month the Policy's Net Cash Surrender Value would go below zero after deducting the monthly deduction then due. The Company will notify the policyholder of the default and will allow a 61 day grace period in which the policyholder may make a premium payment sufficient to bring the Policy out of default. The required payment will be equal to the amount necessary to bring the Net Cash Surrender Value to zero, if it was less than zero on the date of default, plus the monthly deductions due at the date of default and payable at the beginning of each of the two policy months thereafter, plus any applicable premium load. If the required payment is not received by the end of the grace period, the Policy will terminate with no value. Death During Grace Period If the life insured should die during the grace period, the Policy Value used in the calculation of the death benefit will be the Policy Value as of the date of default and the insurance benefit will be reduced by any outstanding monthly deductions due at the time of death. B. Reinstatement A policyholder can reinstate a Policy which has terminated after going into default at any time within the five year period following the date of termination subject to the following conditions: (a) The Policy must not have been surrendered for its Net Cash Surrender Value; (b) Evidence of the life insured's insurability satisfactory to the Company is furnished to the Company; and (c) A premium equal to the payment required during the grace period following default to keep the Policy in force is paid to the Company. VIII. POLICY LOANS At any time while this Policy is in force, a policyholder may borrow against the Policy Value of the Policy. The Policy serves as the only security for the loan. 12 13 A. Maximum Loan The amount of any loan cannot exceed the amount which would cause the Policy Debt to equal the Loan Value of the Policy on the date of the loan. B. Loan Value The Loan Value is equal to the Policy's Cash Surrender Value less the monthly deductions due to the next Policy Anniversary. C. Interest Charged on Policy Loans Interest on the Policy Debt will accrue daily and be payable annually on the Policy Anniversary. The rate of interest charged will be an effective annual rate of 5.00%. D. Loan Account When a loan is made, an amount equal to the loan will be deducted from the Investment Accounts or the Guaranteed Interest Account and transferred to the Loan Account. The policyholder may designate how the amount to be transferred to the Loan Account is allocated among the accounts from which the transfer is to be made. In the absence of instructions, the amount to be transferred will be allocated to each account in the same proportion as the value in each Investment Account and the Guaranteed Interest Account bears to the Net Policy Value. A transfer from an Investment Account will result in the cancellation of units of the underlying sub-account equal in value to the amount transferred from the Investment Account. However, since the Loan Account is part of the Policy Value, transfers made in connection with a loan will not change the Policy Value. E. Interest Credited to the Loan Account Interest will be credited to amounts in the Loan Account at an effective annual rate of at least 4.00%. The actual rate credited is equal to the rate of interest charged on the policy loan less the Loan Spread. The Loan Spread varies by Policy Year as follows: Policy Year Loan Spread 1-10 1.00% 11-20 0.50% 21+ 0.25% F. Loan Account Adjustments On the first day of each policy month the difference between the Loan Account and the Policy Debt is transferred to the Loan Account from the Investment Accounts or the Guaranteed Interest Account. Amounts transferred from the Loan Account will be allocated to the Investment Accounts and the Guaranteed Interest Account in the same proportion as the value in each Investment Account and the Guaranteed Interest Account bears to the Net Policy Value. 13 14 G. Loan Repayments Policy Debt may be repaid in whole or in part at any time prior to the death of the life insured, provided that the Policy is in force. When a repayment is made, the amount is credited to the Loan Account and transferred to the Guaranteed Interest Account or the Investment Accounts. Loan repayments will be allocated to the Guaranteed Interest Account and each Investment Account in the same proportion as the value in each Investment Account and the Guaranteed Interest Account bears to the Net Policy Value. Amounts paid to the Company not specifically designated in writing as loan repayments will be treated as premiums. 14 -----END PRIVACY-ENHANCED MESSAGE-----