0000950152-95-002136.txt : 19950918 0000950152-95-002136.hdr.sgml : 19950918 ACCESSION NUMBER: 0000950152-95-002136 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19950915 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INS CO OF AM CENTRAL INDEX KEY: 0000813572 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 232030787 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-13774 FILM NUMBER: 95574334 BUSINESS ADDRESS: STREET 1: 200 BLOOR STREET EAST NT 10 STREET 2: TORONTO M4W 1EF CITY: ONTARIO CANADA STATE: A6 BUSINESS PHONE: 4169266302 MAIL ADDRESS: STREET 1: P O BOX 600 CITY: BUFFALO STATE: NY ZIP: 14201-0600 485APOS 1 MANULIFE FINANCIAL GENERAL 485APOS 1 Registration No. 33-13774 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ______________________ FORM S-6 POST-EFFECTIVE AMENDMENT NO. 18 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ______________________ SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA (Exact name of trust) THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA (Name of depositor) ______________________ 500 N. Woodward Avenue Bloomfield Hills, Michigan 48304 (Address of depositor's principal executive offices) STEPHEN C. NESBITT Secretary and General Counsel Notice to: The Manufacturers Life Insurance J. Sumner Jones, Esq. Company of America Jones & Blouch 500 N. Woodward Avenue 2100 Pennsylvania Ave., N.W. Bloomfield Hills, Michican 48304 Washington, D.C. 20037 (Name and Address of Agent for Service) It is proposed that this filing will become effective: ___ immediately upon filing pursuant to paragraph (b) of Rule 485 ___ on May 1, 1995 pursuant to paragraph (b) of Rule 485 ___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485 X on July 10, 1995 pursuant to paragraph (a)(1) of Rule 485 --- ___ 75 days after filing pursuant to paragraph (a)(2) of Rule 485 Registrant has registered, pursuant to Rule 24f-2 under the Investment Company Act of 1940, an indefinite number of individual variable annuity contracts for sale under the Securities Act of 1933 and filed a Rule 24f-2 notice on February 28, 1995 for its its fiscal year ended December 31, 1994. 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 Life of America, Separate Account Four and The Series Fund (What Is Manufacturers Life of America's Separate Account Four?) 2 ----- Cover Page; General Information About Manufacturers Life of America, Separate Account Four And The Series Fund (Who Are Manufacturers Life Of America And Manufacturers Life?) 3 ----- * 4 ----- Other Matters (Who Sells The Policies And What Are The Sales Commissions?) 5 ----- General Information About Manufacturers Life Of America, Separate Account Four And The Series Fund (What Is Manufacturers Life of America's Separate Account Four?) 6 ----- General Information About Manufacturers Life of America, Separate Account Four And The Series Fund (What Is Manufacturers Life of America's Separate Account Four?) 7 ----- * 8 ----- * 9 ----- Other Matters (Is There Any Litigation Pending?) 10 ----- Detailed Information About The Policies 11 ----- General Information About Manufacturers Life Of America, Separate Account Four And The Series Fund (What Is Manulife Series Fund, Inc.?) 12 ----- General Information About Manufacturers Life Of America, Separate Account Four And The Series Fund (What Is Manulife Series Fund, Inc.?) 13 ----- Detailed Information About The Policies (Charges) 14 ----- Detailed Information About the Policies (Premium Provisions -- What Are the Requirements and Procedures for Issuance of a Policy?); Other Matters (What Responsibilities Has Manufacturers Life Assumed?) 15 ----- Detailed Information About The Policies (Premium Provisions -- What Are the Requirements and Procedures for Issuance of a Policy?) 16 ----- ** 17 ----- Detailed Information About The Policies (Policy Values -- How May a Policyowner Obtain the Net Cash Surrender Value?; Other Provisions -- When Are Proceeds Paid?) ____________ * Omitted since answer is negative or item is not applicable. ** Omitted.
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Form N-8B-2 Item No. Caption in Prospectus ------- ------------------------------------------------------ 18 ----- General Information About Manufacturers Life Of America, Separate Account Four And The Series Fund 19 ----- Detailed Information About The Policies (Other Provisions -- What Reports Will Be Sent To Policyowners?); Other Matters (What Responsibilities Has Manufacturers Life Assumed?) 20 ----- * 21 ----- Detailed Information About The Policies 22 ----- * 23 ----- ** 24 ----- Detailed Information About the Policies (Other Provisions -- What Are The Other General Policy Provisions?) 25 ----- General Information About Manufacturers Life Of America, Separate Account Four And The Series Fund (Who Are Manufacturers Life Of America And Manufacturers Life?) 26 ----- * 27 ----- ** 28 ----- Other Matters (Who Are The Directors And Officers Of Manufacturers Life Of America?) 29 ----- General Information About Manufacturers Life Of America, Separate Account Four And The Series Fund (Who Are Manufacturers Life Of America And Manufacturers Life?) 30 ----- * 31 ----- * 32 ----- * 33 ----- * 34 ----- * 35 ----- ** 36 ----- * 37 ----- * 38 ----- Other Matters (Who Sells The Policies And What Are The Sales Commissions?; What Responsibilities Has Manufacturers Life Assumed?) 39 ----- Other Matters (Who Sells The Policies And What Are The Sales Commissions?) 40 ----- * 41 ----- ** 42 ----- * 43 ----- * 44 ----- Detailed Information About The Policies (Policy Values -- What Is the Policy Value and How Is It Determined?) 45 ----- * 46 ----- Detailed Information About The Policies (Policy Values -- How May a Policyowner Obtain the Net Cash Surrender Value?; Other Provisions -- When Are Proceeds Paid?) 47 ----- General Information About Manufacturers Life Of America, Separate Account Four And The Series Fund (What Is Manulife Series Fund, Inc.?) ------------ * Omitted since answer is negative or item is not applicable. ** Omitted.
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Form N-8B-2 Item No. Caption in Prospectus ------- ------------------------------------------------------ 48 ----- * 49 ----- * 50 ----- General Information About Manufacturers Life Of America, Separate Account Four And The Series Fund (What Is Manufacturers Life Of America's Separate Account Four?) 51 ----- Detailed Information About The Policies 52 ----- Detailed Information About The Policies (Other Provisions -- Under What Circumstances May Fund Shares Be Substituted?) 53 ----- ** 54 ----- * 55 ----- * 56 ----- * 57 ----- * 58 ----- * 59 ----- Financial Statements ------------ * Omitted since answer is negative or item is not applicable. ** Omitted.
5 PART I PROSPECTUS 6 PROSPECTUS FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE ISSUED BY THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA AND FOR MANULIFE SERIES FUND, INC. 7 PROSPECTUS THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA SEPARATE ACCOUNT FOUR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY This prospectus describes the flexible premium variable life insurance policy (the "Policy") issued by The Manufacturers Life Insurance Company of America ("Manufacturers Life of America" or the "Company"), a stock life insurance company that is an indirect wholly-owned subsidiary of The Manufacturers Life Insurance Company ("Manufacturers Life"). The Policies are designed to provide lifetime insurance protection together with flexibility as to the timing and amount of premium payments, the investments underlying the Policy Value and the amount of insurance coverage. This flexibility allows the policyowner to pay premiums and adjust insurance coverage in light of his or her current financial circumstances and insurance needs. The Policies provide for: (1) a Net Cash Surrender Value that can be obtained by surrendering the Policy; (2) policy loans; and (3) an insurance benefit payable at the life insured's death. As long as a Policy remains in force, the death benefit will not be less than the current face amount of the Policy. A Policy's Policy Value may be accumulated on a fixed basis or vary with the investment performance of the sub-accounts of Manufacturers Life of America's Separate Account Four (the "Separate Account") to which the policyowner allocates net premiums. The assets of each sub-account will be used to purchase shares of a particular portfolio ("Fund") of Manulife Series Fund, Inc. (the "Series Fund"). The accompanying prospectus for the Series Fund and the Series Fund's statement of additional information describe the investment objectives of the Funds in which net premiums may be invested: the Emerging Growth Equity Fund, the Balanced Assets Fund, the Capital Growth Bond Fund, the Money-Market Fund, the Common Stock Fund, the Real Estate Securities Fund, the International Fund, and the Pacific Rim Emerging Markets Fund. Other sub-accounts and Funds may be added in the future. Prospective purchasers should note that it may not be advisable to purchase a Policy as a replacement for existing insurance. BECAUSE OF THE SUBSTANTIAL NATURE OF THE SURRENDER CHARGES, THE POLICY IS NOT SUITABLE FOR SHORT-TERM INVESTMENT PURPOSES. A POLICYOWNER CONTEMPLATING SURRENDER OF A POLICY SHOULD PAY SPECIAL ATTENTION TO THE REFUND RIGHTS DESCRIBED IN THIS PROSPECTUS, WHICH ARE AVAILABLE ONLY DURING THE FIRST TWO YEARS FOLLOWING ISSUANCE OF THE POLICY OR FOLLOWING AN INCREASE IN FACE AMOUNT. ALSO, POLICYOWNERS SHOULD NOTE THAT THEIR POLICY COULD BE A MODIFIED ENDOWMENT CONTRACT UNDER FEDERAL TAX LAW AND ANY POLICY LOAN OR SURRENDER MAY RESULT IN ADVERSE TAX CONSEQUENCES AND A PENALTY. PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT IS VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS FOR MANULIFE SERIES FUND, INC. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The Manufacturers Life Insurance Company of America 500 North Woodward Avenue, Bloomfield Hills, Michigan 48304 Service Office: 200 Bloor Street East Toronto, Ontario, Canada M4W 1E5 TELEPHONE: 1 (800) 827-4546 1 (800) VARILIN(E) THE DATE OF THIS PROSPECTUS IS JULY 10, 1995. 8 PROSPECTUS CONTENTS
PAGE ---- DEFINITIONS........................................................... 1 INTRODUCTION TO POLICIES.............................................. 1 GENERAL INFORMATION ABOUT MANUFACTURERS LIFE OF AMERICA, SEPARATE ACCOUNT FOUR AND THE SERIES FUND.................................................. 7 Who Are Manufacturers Life of America And Manufacturers Life?.............................................. 7 What Is Manufacturers Life of America's Separate Account Four?..................................................... 7 What Is Manulife Series Fund, Inc.?................................... 7 What Are The Investment Objectives And Risks Of The Funds?........................................................ 8 Which Sub-account(s) Should Be Selected?.............................. 9 DETAILED INFORMATION ABOUT THE POLICIES............................... 10 PREMIUM PROVISIONS.................................................... 10 What Are The Requirements And Procedures For Issuance Of A Policy?............................................. 10 What Limitations Apply To Premium Amounts?.............................................................. 11 Is There A Death Benefit Guarantee?................................... 11 When Does A Policy Go Into Default?................................... 12 How Can A Terminated Policy Be Reinstated?............................ 12 How May Net Premiums Be Invested?..................................... 12 Is There A Short-Term Cancellation Right, Or "Free Look"?...................................................... 13 What Are The Conversion Privileges Of The Policy?..................... 13 INSURANCE BENEFIT..................................................... 13 What Is The Insurance Benefit?........................................ 13 What Death Benefit Options Are Available?............................. 14 Can The Death Benefit Option Be Changed?.............................. 14 Can The Face Amount Of A Policy Be Changed?........................... 15 POLICY VALUES......................................................... 15 What Is The Policy Value And How Is It Determined?.................... 15 Transfers Of Policy Value............................................. 16 What Are The Provisions Governing Policy Loans?................................................................ 17 How May A Policyowner Obtain The Net Cash Surrender Value?.................................................. 19 CHARGES............................................................... 20 What Deductions Are Made From Premiums?............................... 20 What Are The Surrender Charges?....................................... 20 What Are The Monthly Deductions?...................................... 22 Are There Special Provisions For Group Or Sponsored Arrangements?............................................... 23 Are There Special Provisions For Exchanges?........................... 23 What Are The Risk Charges Assessed Against Separate Account Assets?.............................................. 24 Are There Other Relevant Charges?..................................... 24 THE GENERAL ACCOUNT................................................... 24 What Is The General Account?.......................................... 24 OTHER PROVISIONS...................................................... 25 What Supplementary Benefits Are Available?............................ 25 Under What Circumstances May Fund Shares Be Substituted?...................................................... 25 What Are The Other General Policy Provisions?......................... 25 When Are Proceeds Paid?............................................... 26 What Reports Will Be Sent To Policyowners?............................ 26 OTHER MATTERS......................................................... 26 What Is The Federal Tax Treatment Of The Policies?.................... 26 Tax Status Of The Policy.............................................. 26 What Is The Tax Treatment Of Policy Benefits?......................... 27 What Are The Company's Tax Considerations?............................ 28 Who Sells The Policies And What Are The Sales Commissions?...................................................... 28 What Responsibilities Has Manufacturers Life Assumed?.......................................................... 29 What Are The Voting Rights?........................................... 29 Who Are The Directors And Officers Of Manufacturers Life of America?.................................... 30 What State Regulations Apply?......................................... 31 Is There Any Litigation Pending?...................................... 31 Where Can Further Information Be Found?............................... 31 Legal Considerations.................................................. 31 Legal Matters......................................................... 31 Experts............................................................... 31 Financial Statements.................................................. 32 Appendix.............................................................. 57 What Are Some Illustrations Of Policy Values, Cash Surrender Values And Death Benefits?.............................. 57
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 THE SERIES FUND OR THE STATEMENT OF ADDITIONAL INFORMATION OF THE SERIES FUND. You are urged to examine this prospectus carefully. The INTRODUCTION TO POLICIES will briefly describe the Flexible Premium Variable Life Insurance Policy. More detailed information will be found further in the prospectus. 9 DEFINITIONS Business Day -- any day that the net asset value of the underlying shares of a sub-account of the Separate Account is determined. Cash Surrender Value -- the Policy Value less the deferred sales charge, the deferred underwriting charge and any outstanding monthly deductions due. Guaranteed Interest Account -- that part of the Policy Value which reflects the value the policyowner has in the general account of Manufacturers Life of America. Investment Account -- that part of the Policy Value which reflects the value the policyowner has in one of the sub-accounts of the Separate Account. Loan Account -- that part of the Policy Value which reflects policy loans and interest credited to the Policy Value in connection with such loans. Modified Policy Debt -- as of any date the Policy Debt plus the amount of interest to be charged to the next policy anniversary, all discounted from the next policy anniversary to such date at an annual rate of 4%. Net Cash Surrender Value -- the Cash Surrender Value less the value in the Loan Account. Net Policy Value -- the Policy Value less the value in the Loan Account. Policy Debt -- as of any date the aggregate amount of policy loans, including borrowed interest, less any loan repayments. Policy Value -- the sum of the values in the Loan Account, the Guaranteed Interest Account and the Investment Accounts. Service Office -- the office we designate to service the Policies, which is shown on the cover page of this prospectus. Target Premium -- a premium amount used to measure the maximum deferred sales charge under a Policy. The Target Premium for the initial face amount is set forth in the Policy. The policyowner will be advised of the Target Premium for any increase in face amount. Withdrawal Tier Amount -- as of any date the product of the Net Cash Surrender Value at the previous policy anniversary multiplied by 10%. INTRODUCTION TO POLICIES The following summary is intended to provide a general description of the most important features of the Policy. It is not comprehensive and is qualified in its entirety by the more detailed information contained in this prospectus. Unless otherwise indicated or required by the context, the discussion throughout this prospectus assumes that the Policy has not gone into default, there is no outstanding Policy Debt and the death benefit is not determined by the corridor percentage test. GENERAL. The Policy provides a death benefit in the event of the death of the life insured. There are two death benefit options. The policyowner may change death benefit options and may increase or decrease the face amount of the Policy. Premium payments may be made at any time and in any amount, subject to certain limitations. After certain deductions, premiums will be allocated, according to the policyowner's instructions, to one or more of the general account and the sub-accounts of Manufacturers Life of America's Separate Account Four. Assets of the sub-accounts of Separate Account Four are invested in shares of a particular Fund of Manulife Series Fund, Inc. Allocation instructions may be changed at any time and transfers among the accounts may be made. The Funds currently offered by the Series Fund are the: Emerging Growth Equity Fund, Balanced Assets Fund, Capital Growth Bond Fund, Money-Market Fund, Common Stock Fund, Real Estate Securities Fund, International Fund, and Pacific Rim Emerging Markets Fund. The Policy has a Policy Value reflecting premiums paid, certain charges for expenses and cost of insurance, and the investment performance of the accounts to which the policyowner has allocated premiums. The policyowner may obtain a portion of the Policy Value by taking a policy loan or a partial withdrawal, or by full surrender of the Policy. DEATH BENEFIT. DEATH BENEFIT OPTIONS. The policyowner elects to have the Policy's death benefit determined under one of two options: - a death benefit equal to the face amount of the Policy, and - a death benefit equal to the face amount of the Policy plus the Policy Value. 1 EX-6 2 EXHIBIT 6 1 EXHIBIT 6 2 May 3, 1995 The Manufacturers Life Insurance Company of America 500 N. Woodward Avenue Suite 250 Bloomfield Hills Michigan 48304 U.S.A. Gentlemen: This opinion is furnished in connection with the filing of Post-Effective Amendment No. 19 to Registration Statement No. 33-13774 on Form S-6 ("Registration Statement") which covers premiums expected to be received under Flexible Premium Variable Life Insurance Policies ("Policies") to be offered by The Manufacturers Life Insurance Company of America ("Company"). The prospectus included in the Registration Statement describes Policies which will be offered by the Company in each State where they have been approved by appropriate State insurance authorities. The Policy form was prepared under my direction, and I am familiar with the amended Registration Statement and Exhibits thereto. In my opinion: (l) The table of corridor percentages shown under the caption "What Death Benefit Options Are Available?" is consistent with the Policy's provisions. (2) The illustrations of death benefits based on Policy Value multiplied by corridor percentage shown under the caption "What Death Benefit Options Are Available?", based on the assumptions stated in the illustrations, are consistent with the provisions of the Policy. (3) The illustration of Modified Policy Debt shown in the second paragraph under the caption "What Are The Provisions Governing Policy Loans?", based on the assumptions stated in the illustration, is consistent with the Policy's provisions. (4) The illustration of an application of the loan tier amount shown under the sub-caption "Interest Credited to the Loan Account" of the caption "What Are The Provisions Governing Policy Loans?", based on the assumptions stated in the illustration, is consistent with the provisions of the Policy. (5) The Loan Account illustration shown as a sub-caption under the caption "What Are The Provisions Governing Policy Loans", based on the assumption stated in the illustration, is consistent with the Policy's provisions. 3 - 2 - (6) The schedule of deferred underwriting charges shown under the sub-caption "Deferred Underwriting Charge" of the caption "What Are The Surrender Charges?" is consistent with the Policy's provisions. (7) The table under the sub-caption "Deferred Underwriting Charge" of the caption "What Are The Surrender Charges?" showing, on an annual basis, the surrender charge applied to the Policy five years or more after issuance of the Policy or a face amount increase, is consistent with the provisions of the Policy. (8) The table under sub-section "Deferred Sales Charge" of the caption "What Are The Surrender Charges?" showing for life insureds over age 69 at issue or face amount increase the applicable percent of premium reduction against which the deferred sales charge is applied is consistent with the Policy's sales charge structure. (9) The illustration of the operation of the maximum sales charge under the sub-caption "Refund of Excess Sales Charge" of the caption "What Are The Surrender Charges?", based on the assumptions stated in the illustration, is consistent with the Policy's sales charge structure. (10) The illustrations of Accumulated Premiums, Policy Values, Cash Surrender Values, and Death Benefits for the Policy shown in the Appendix under the caption "What Are Some Illustration Of Policy Values, Cash Surrender Values and Death Benefits?", based on the assumptions stated in the illustrations, are consistent with the provisions of the Policy. The rate structure of the Policy has not been designed so as to make the relationship between premiums and benefits, as shown in these illustrations, appear to be correspondingly more favorable to a prospective purchaser of the Policy for male ages 25 and 35, than to prospective purchasers of the Policy for females or males at other ages. I hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the reference to my name under the heading "Experts" in the Prospectus. Very truly yours, John R. Ostler John R. Ostler Vice President, Treasurer and Chief Actuary EX-9 3 EXHIBIT 9 1 EXHIBIT 9 2 May 1995 MEMORANDUM REGARDING ISSUANCE, FACE AMOUNT INCREASE, REDEMPTION AND TRANSFER PROCEDURES FOR THE POLICIES --------------------------------------------------- This document sets forth information called for by paragraph (b)(12)(iii) of Rule 6e-3(T) under the Investment Company Act of 1940 ("1940 Act") with respect to procedures relating to issuance, face amount increase, redemption and transfer transactions under Flexible Premium Variable Life Insurance Policies ("Policies") participating in Separate Account Four of The Manufacturers Life Insurance Company of America ("Manufacturers Life of America" or "Company"). Such paragraph provides exemptions from Sections 22(c), 22(d), 22(e) and 27(c)(1) of the 1940 Act, and Rule 22c-1 thereunder, to the extent necessary to comply with other provisions of Rule 6e-3(T) or with state insurance laws and regulations and established administrative procedures of the Company, provided the procedures are reasonable, fair and not discriminatory to policyholders and are disclosed in the Company's registration statement under the 1940 Act. 1. GENERAL Units of a particular sub-account of Separate Account Four 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 3 on the Business Day on which the transaction occurs or, in the case of errors, should have occurred, except as set forth under 2(a) below with respect to deductions when no units exist. The number of units credited with respect to a premium payment will be based on the applicable unit values for the Business Day on which the premium is received at the Manufacturers Life of America Service Office, except for any premiums received before the policy date as to which the applicable unit values will be the values determined on such date. Units are valued at the end of each Business Day, which is any day that the net asset value of the Fund shares held by the applicable sub-account is determined. A Business Day is deemed to end at the time of such determination. When an order involving the crediting or cancelling of units is received at the Manufacturers Life of America Service Office after the end of a Business Day or on a day which is not a Business Day, the order will be processed on the basis of unit values determined on the next Business Day. Similarly, any determination of Policy Value, Investment Account value or death benefit to be made on a day which is not a Business Day will be made on the next Business Day. 2. ISSUANCE AND RELATED TRANSACTIONS --------------------------------- (a) Applications and Policy Issuance. -------------------------------- To purchase a Policy, an applicant must submit a completed application. Manufacturers Life of America will issue a Policy only if it has a face amount of at least $25,000, except for 4 Policies issued under group or sponsored arrangements in which case the minimum face amount is $10,000. A Policy will generally be issued to persons between the ages 0 and 80. In certain circumstances the Company may in its sole discretion issue a Policy to persons above age 80. Upon receipt of a completed application, the Company will follow certain insurance underwriting (e.g. evaluation of risks) procedures designed to determine whether the applicant is insurable. This process may involve such verification procedures as medical examinations and blood testing and may require that further information be provided by the proposed insured before a determination can be made. A Policy will not be issued until the underwriting procedure has been completed. A life insured meeting standard underwriting rules will have a risk class of either "standard" or "nonsmoker". Persons failing to meet standard underwriting requirements may be eligible for a Policy with an additional rating assigned to it. Acceptance of an application is subject to the Company's insurance underwriting rules. Each Policy is issued with a policy date from which policy years, policy months and policy anniversaries are all determined. Each Policy has an effective date which is the date the Company becomes obligated under the Policy and when the first monthly deductions are taken. If an application is accompanied by a check for all or a portion of the initial premium and the application is accepted, the policy date will be the date the application and check were received at the Manufacturers Life of America Service Office and the effective date will be the date Manufacturers Life 5 of America's underwriters approve issuance of the Policy. A policy may be approved for issuance conditional upon receipt of additional information. (If an application is accompanied by a check for all or a portion of the initial premium, the life insured may be covered under the terms of a conditional insurance agreement until the effective date.) If an application accepted by the Company is not accompanied by a check for the initial premium, the Policy will be issued with a policy date which is seven days after issuance of the Policy and with an effective date which is the date the Service Office receives at least the initial planned premium. In certain situations a different policy date may be used1. The initial planned premium must be received within 60 days after the policy date. If the premium is not paid or if the application is rejected, the Policy will be cancelled and any partial premiums paid will be returned to the applicant. Under certain circumstances a Policy may be issued with a backdated policy date. A Policy will not be backdated more than six months before the date of the application for the Policy. Monthly deductions will be made for the period the policy date is backdated. ___________________ 1 The "different date" refers to those instances in which Manufacturers Life of America agrees to back date a Policy. 6 All premiums received prior to the effective date of a policy will be credited with interest from the date of receipt at the rate of return then being earned on amounts allocated to the Money-Market Fund. On the effective date, the premiums paid plus interest credited, net of deductions for federal, state and local taxes, will be allocated among the Investment Accounts or the Guaranteed Interest Account in accordance with the policyowner's instructions. All premiums received on or after the effective date, will be allocated among Investment Accounts or the Guaranteed Interest Account using unit values as of the date the premiums were received at the Manufacturers Life of America Service Office. Monthly deductions are due on the policy date and at the beginning of each policy month thereafter. However, if due prior to the effective date, they will be taken using unit values as of the effective date instead of the dates they were due. If in the unlikely scenario where a deduction is to be made as of a date when no units exist, the deduction will be taken as of the date following when units first exist. (b) Payment of 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 and the minimum premium requirement described hereinafter. Premiums after the first must be paid to the Manufacturers Life of America Service 7 Office. Manufacturers Life of America will not accept any premium payment which is less than $50, unless the premium is payable pursuant to a pre-authorized payment plan. In that case the Company will accept a payment for as little as $10. Manufacturers Life of America may change these minimums on 90 days' written notice. The Policies also limit the sum of the premiums that may be paid at any time so as to preserve the qualification of the Policies as life insurance for federal tax purposes. These limitations are set forth in each Policy. Manufacturers Life of America reserves the right to refuse or refund any premium payments that may cause the Policy to fail to qualify as life insurance under applicable tax law. (c) Deductions from Premiums. ------------------------- Manufacturers Life of America deducts a sales charge of 3% of each premium payment. (A deferred sales charge is deducted from the Policy Value upon certain transactions.) Manufacturers Life of America also deducts a premium tax charge of 2% of each premium payment. State and local premium taxes differ from state to state. The 2% rate, which cannot be changed, is expected to be sufficient, on average, to pay premium taxes where required. (d) Reinstatement. -------------- A policyowner can reinstate a Policy which has terminated after going into default (described hereinafter) at any time within the five year period following the date of termination subject to the following conditions: 8 (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 it; (c) A premium equal to the payment required during the grace period following default to keep the Policy in force is paid to Manufacturers Life of America; and (d) An amount equal to any amounts paid by Manufacturers Life of America in connection with the termination of the Policy is repaid to Manufacturers Life of America. If the reinstatement is approved, the date of reinstatement will be the later of the date of the policyowner's written request or the date the required payment is received at the Manufacturers Life of America Service Office. At reinstatement, the Policy Value, surrender charges, and loan account will be reinstated to what they were at the date of default. After reinstatement, surrender charges will remain in force for the remainder of the fifteen year period, as measured from the date of default. Cost of insurance charges after reinstatement will reflect the actual age of the life insured. 3. FACE AMOUNT INCREASES --------------------- Subject to certain limitations, a policyowner may, upon written request, increase the face amount of the Policy. Currently, an increase in face amount must be at least $10,000, except in the case of group or sponsored arrangements where the minimum change is $5,000. Manufacturers Life of America reserves the right to 9 increase or decrease the minimum face amount change on 90 days' written notice to the policyowner. Increases in face amount are subject to satisfactory evidence of insurability. Increases may be made only once per policy year and only after the first policy year. An increase will become effective at the beginning of the policy month following the date Manufacturers Life of America approves the requested increase. The Company reserves the right to refuse a requested increase if the life insured's age at the effective date of the increase would be greater than the maximum issue age for new Policies at that time. An increase in face amount will usually result in the Policy's being subject to new surrender charges. The new surrender charges will be computed as if a new Policy were being purchased for the increase in face amount. For purposes of determining the new deferred sales charge, a portion of the Policy Value at the time of the increase, and a portion of the premium paid on or subsequent to the increase, will be deemed to be premiums attributable to the increase. Any increase in face amount to a level less than the highest face amount previously in effect will have no effect on the surrender charges to which the Policy is subject, since surrender charges, if applicable, will have been assessed in connection with the prior decrease in face amount. The insurance coverage eliminated by the decrease of the oldest face amount will be deemed to be restored first. As with the purchase of a Policy, a policy-owner will have free look and 10 refund rights with respect to any increase resulting in new surrender charges. No additional premium is required for a face amount increase. However, a premium payment may be necessary to avoid the Policy's going into default, since new surrender charges resulting from an increase would automatically reduce the Net Cash Surrender Value of the Policy. However, a new minimum premium will be determined for purposes of the death benefit guarantee described hereinafter. 4. REDEMPTIONS AND RELATED TRANSACTIONS ------------------------------------ (a) Surrenders and Partial Withdrawals. ----------------------------------- A Policy may be surrendered for its Net Cash Surrender Value at any time while the life insured is living. The Net Cash Surrender Value is equal to the Policy Value less any surrender charges and outstanding monthly deductions due (the "Cash Surrender Value") minus the value of the Loan Account. The Net Cash Surrender Value will be determined as of the end of the Business Day on which Manufacturers Life of America received 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. After a Policy has been in force for two policy years, the policyowner may make a partial withdrawal of the Net Cash Surrender Value. The minimum amount that may be withdrawn is $500. The policyowner should specify the portion of the 11 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 that the Policy Value in each account bears to the Net Policy Value. No more than one partial withdrawal may be made in any one policy month. If the Option 1 death benefit is in effect under a Policy from which a partial withdrawal is made, the face amount of the Policy will be reduced. If the death benefit is equal to the face amount at the time of withdrawal, the face amount will be reduced by the amount of the withdrawal plus the portion of the surrender charges assessed. If the death benefit is based upon the Policy Value times the applicable percentage as set forth in the Policy, 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. Reductions in face amount resulting from partial withdrawals will not incur any surrender charges above the surrender charges applicable to the withdrawal. When the face amount of a Policy is based on one or more increases subsequent to issuance of the Policy, a reduction resulting from a partial withdrawal will be applied in the same manner as a requested decrease in face amount, i.e., against the face amount provided by the most recent increase, then against the next most recent increase successively and finally against the initial face amount. 12 (b) Decreases in Face Amount. ------------------------- Subject to certain limitations, a policyowner may, upon written request, decrease the face amount of the Policy. Currently, a decrease in face amount must be at least $10,000, except in the case of group or sponsored arrangements where the minimum change is $5,000. Manufacturers Life of America reserves the right to increase or decrease the minimum face amount change on 90 days' written notice to the policyowner. The Company reserves the right to limit a decrease in face amount so as to prevent the Policy from failing to qualify as life insurance for tax purposes. A decrease in the face amount may be requested after the Policy has been in force for two years, except during the two year period following any increase in face amount. In addition, during the two year period following an increase in the face amount the policyowner may elect at any time to cancel the increase. A decrease in face amount will only be effective on a policy anniversary. Written request for a decrease must be received by Manufacturers Life of America at least 30 days prior to a policy anniversary in order to become effective on that date. A decrease will not be allowed if it would cause the face amount to go below the minimum face amount of $25,000, or $10,000 in the case of group or sponsored arrangements. A decrease in face amount during the fifteen year period following issuance of the Policy or any increase in face amount will usually result in surrender charges being deducted from the Policy Value. For purposes of determining surrender and cost of 13 insurance charges, a decrease will reduce face amount in the following order: (a) the face amount provided by the most recent increase, then (b) the face amounts provided by the next recent increases successively, and finally (c) the initial face amount. (c) Default. -------- The Policy provides for a minimum premium requirement. It is subject to change if the face amount of the Policy or the death benefit option is changed or if there is any change in the supplementary benefits added to the Policy or in the rate classification of the life insured. If the minimum premium requirement is met, Manufacturers Life of America will guarantee that the Policy will not go into default even if a combination of policy loans, adverse investment experience or other factors should cause the Policy's Net Cash Surrender Value to be insufficient to meet the monthly deduction due at the beginning of a policy month ("death benefit guarantee"). If the death benefit guarantee is in effect, Manufacturers Life of America will not allow the Net Policy Value to go below zero, although it will continue to assess a monthly deduction at the beginning of each policy each month until the Net Policy Value should fall to zero. The death benefit guarantee will expire on the policy anniversary on which the life insured is 70 years old, or two years after the policy date if later. 14 If the minimum premium requirement should not be met at the beginning of any policy month during the first two policy years, the Policy will go into default. Manufacturers Life of America will notify the policyowner of the default and allow a 61 day grace period in which the policyowner may make a premium payment sufficient to bring the Policy out of default. The required premium will be equal to the minimum premium due at the date of default plus the minimum premium due for the next two policy months. If the required payment is not received by the end of the grace period, the Policy will terminate and the Net Cash Surrender Value as of the date of default less the monthly deduction then due will be paid to the policyowner together with any refund of excess sales loading to which the policyowner is entitled. If the death benefit guarantee is no longer in effect, a Policy will go into default after the second policy anniversary if at the beginning of any policy month the Policy's Net Cash Surrender Value would go below zero after deducting the monthly deduction then due. As with a default during the first two policy years, Manufacturers Life of America will notify the policyowner of the default and will allow a 61 day grace period in which the policyowner may make a premium payment sufficient to bring the Policy out of default. The required payment will be equal to the amount necessary to bring the Net Cash Surrender Value to zero, if it was less than zero at the date of default, plus the monthly deductions due at the date of default and payable at the beginning of each of the two policy months thereafter. If the required payment is not received by the end of the grace period, the Policy 15 will terminate and the Net Cash Surrender Value as of the date of default less the monthly deduction then due will be paid to the policyowner together with any refund of excess sales loading to which the policyowner is entitled. A payment made to bring a Policy out of default will be treated as a regular premium payment except that any monthly deductions then due will be taken immediately after the allocation of the payment among Investment Accounts or the Guaranteed Interest Account. Units cancelled in connection with the assessment of such monthly deductions will be based on the unit values as of the date the payment was made. (d) Surrender Charges ----------------- Manufacturers Life of America will assess surrender charges upon surrender or lapse of a Policy, a partial withdrawal of Policy Value above the Withdrawal Tier Amount or a requested decrease in face amount. The charges will be assessed if any of the above transactions occurs within fifteen years after issuance of the Policy or any increase in face amount unless the charges have been previously deducted. There are two surrender charges -- a deferred underwriting charge and a deferred sales charge. DEFERRED UNDERWRITING CHARGE. The deferred underwriting charge is a dollar amount for each $1,000 of face amount of insurance in accordance with the following schedule: 16 Age: 0-20 21-40 41-50 51-60 61 & above Charge Per $1,000: $2.00 $3.00 $4.00 $5.00 $6.00 The charge per $1,000 will be determined on the basis of the age of the life insured at issue or upon increase of the face amount, as applicable. The deferred underwriting charge applicable to each level of insurance coverage cannot exceed $1,000. The amount of the charge remains level for five years. Following the fifth year after issuance of the Policy or a face amount increase, the charge applicable to the initial face amount or increase will decrease each month by .83%, or 10% per year. After the monthly deduction is taken for the last policy month preceding the end of the fifteenth year after issuance or face amount increase, the charge will have decreased to zero. The applicable percentage of the surrender charges to which the Policy would otherwise be subject is illustrated on an annual basis by the following table: Transaction Occurs After Monthly Deduction Taken for Last Month Preceding Percent of Surrender End of Year Charges ---------------------------- -------------------- 5 & below 100% 6 90% 7 80% 8 70% 9 60% 10 50% 11 40% 12 30% 13 20% 14 10% 15 & above 0% DEFERRED SALES CHARGES. The maximum deferred sales charge is equal to 47% of the premiums paid under the Policy up to two Target 17 Premiums described below. For life insureds over age 69 at issue or face amount increase, the applicable percent of premiums will be reduced in accordance with the following table: Applicable Applicable Age Percent of Premiums Age Percent of Premiums --- ------------------- --- ------------------- 70 45% 76 34% 71 43% 77 33% 72 41% 78 32% 73 39% 79 31% 74 37% 80 30% 75 35% Like the deferred underwriting charge, the percentage deferred sales charge applicable to the initial face amount or face amount increase will remain level for five years and following such five year period will decrease .83% per month, or 10% per year, from the charge that would otherwise apply. The deferred sales charge may not exceed 47% of two Target Premiums. The Target Premium will be computed for each increase in face amount above the highest face amount of coverage previously in effect, and the policyowner will be advised of such Target Premium. Target Premiums are determined on the basis of a target premium rate and the face amount of insurance provided at issue or by the increase. The applicable rate varies with the issue age and sex (unless unisex rates are required by law) of the life insured and, in the case of certain Policies issued in group or sponsored arrangements providing for reduction in cost of insurance charges, the amount of insurance coverage. 18 In order to determine the deferred sales charge applicable to a face amount increase, Manufacturers Life of America will treat a portion of the Policy Value on the date of increase as a premium attributable to the increase. In addition, a portion of each premium paid subsequent to the increase will be attributed to the increase. In each case, the portion attributable to the increase will be the ratio of the guideline annual premium (described below) for the increase to the sum of the guideline annual premiums for the initial face amount and all increases including the requested increase. REFUND OF EXCESS SALES CHARGES. If a Policy is surrendered for its Net Cash Surrender Value at any time during the first two years following issuance or following an increase in face amount or if the face amount is decreased during the second year following issuance or increase in face amount, Manufacturers Life of America will refund that part of the total sales charges deducted (the sum of the deferred sales charge and the sales charge deducted from premiums) with respect to "premiums" paid for the initial face amount or such increase (including premiums allocated to the increase as described in the preceding paragraph), whichever is applicable, which is in excess of (i) the sum of 30% of the "premiums" paid in excess of one guideline annual premium up to two guideline annual premiums and (ii) 9% of the "premiums" paid in excess of two guideline annual premiums. A policyowner in electing to cancel an increase in face amount during the first two years following the increase will have the deferred sales charge for the increase reduced by the refund of any excess sales load attributable to the increase. The guideline annual 19 premium, which is set forth in the Policy, is the level annual premium that would be payable for the life of the Policy for a specific amount of coverage if premiums were fixed as to both timing and amount and based on the 1980 Commissioners Smoker/Nonsmoker Standard Ordinary Mortality Tables, net investment earnings at an effective annual rate of 5% and fees and charges as set forth in the Policy. In determining the maximum sales charge allowable, "premiums" will be attributed to the initial face amount and each increase in the same manner as used in determining the deferred sales charge applicable to the face amount and each increase, and the guideline annual premium will be determined separately for the initial face amount and each increase. Since a deferred sales charge is deducted in the event a Policy terminates for failure to make the required payment following the Policy's going into default, the refund right will apply if such termination occurs during the two year period following issuance of the Policy or any increase in face amount. If the Policy terminates during the two years after a face amount increase, the refund will relate only to the sales charges assessed against premiums attributable to the increase. CHARGES ON PARTIAL WITHDRAWALS. Both the deferred sales charge and the deferred underwriting charges are applicable in the event of a partial withdrawal of the Net Cash Surrender Value above the Withdrawal Tier Amount. A portion of the surrender charges applicable to the initial face amount and to each increase in face amount will be deducted as a result of the withdrawal. The portion 20 to be deducted will be the same as the ratio of the amount of the withdrawal above the Withdrawal Tier Amount to the Net Cash Surrender Value prior to the withdrawal. The charges will be deducted from the Policy Value, and the amount so deducted will be allocated among the Investment Accounts and the Guaranteed Interest Account in the same proportion that the withdrawal is allocated among such accounts. If the amount in the account is not sufficient to pay the portion of the surrender charges allocated to that account, then the portion of the withdrawal allocated to that account will be reduced so that the withdrawal plus the portion of the surrender charges allocated to that account equal the value of that account. Units equal to the amount of the partial withdrawal taken, and surrender charges deducted, from each Investment Account will be cancelled based on the value of such units determined at the end of the Business Day on which Manufacturers Life of America received a written request for withdrawal at its Service Office. Whenever a portion of the surrender charges are deducted as a result of a partial withdrawal, the Policy's remaining surrender charges will be reduced by the amount of the charges taken. The surrender charges not assessed as a result of the l0% free withdrawal provision remain in effect under the policy and may be assessed upon surrender or lapse, other partial withdrawals or a requested decrease in face amount. CHARGES ON DECREASES IN FACE AMOUNT. As with partial withdrawals, a portion of a Policy's surrender charges will be deducted upon a decrease in or cancellation of face amount requested by the policyowner. Since surrender charges are 21 determined separately for the initial face amount and each face amount increase and since a decrease in face amount will have a different impact on each level of insurance coverage, the portion of the surrender charges to be deducted with respect to each level of insurance coverage will be determined separately. Such portion will be the same as the ratio of the amount of the reduction in such coverage to the amount of such coverage prior to the reduction. Decreases are applied to the most recent increase first and thereafter to the next most recent increases successively. The charges will be deducted from the Policy Value, and the amount so deducted will be allocated among the Investment Accounts and the Guaranteed Interest Account in the same proportion that the Policy Value in each bears to the Net Policy Value. Whenever a portion of the surrender charges is deducted as a result of a decrease in face amount, the Policy's remaining surrender charges will be reduced by the amount of the charges taken. (e) Payment of Proceeds. -------------------- If the Policy is in force at the time of the life insured's death, Manufacturers Life of America will pay an insurance benefit based on the death benefit option selected by the policyowner upon receipt of due proof of death. The amount payable will be the death benefit under the selected option, plus any amounts payable under any supplementary benefits added to the Policy, less the value of the Loan Account at the date of death. The insurance benefit will be paid in one sum unless another form of settlement option is agreed to by the beneficiary and the Company. If the 22 insurance benefit is paid in one sum, Manufacturers Life of America will pay interest from the date of death to the date of payment. If the life insured should die after the Company's receipt of a request for surrender, no insurance benefit will be payable, and Manufacturers Life of America will pay only the Net Cash Surrender Value. If the life insured should die during the grace period following a Policy's going into default, the Policy Value used in the calculation of the death benefit will be the Policy Value as of the date of default and the insurance benefit payable will be reduced by any outstanding monthly deductions due at the time of death. If the life insured, whether sane or insane, dies by suicide within one year from the policy date, Manufacturers Life of America will pay only the premiums paid less any partial withdrawals of the Net Cash Surrender Value and any amount in the Loan Account. If the life insured should die by suicide within one year after a face amount increase, the death benefit for the increase will be limited to the monthly deductions for the increase. As long as the Policy is in force, Manufacturers Life of America will ordinarily pay any policy loans, partial withdrawals, Net Cash Surrender Value or any insurance benefit within seven days after receipt at the Manufacturers Life of America Service Office of all the documents required for such a payment. The Company may delay the payment of any policy loans, partial withdrawals, Net Cash Surrender Value or the portion of any insurance benefit that depends on Investment Account values for up to six months if such 23 payments are based on values which do not depend on the investment performance of the sub-accounts; otherwise for any period during which the New York Stock Exchange is closed for trading (except for normal holiday closings) or when the Securities and Exchange Commission has determined that a state of emergency exists which may make such payment impracticable. 5. TRANSFERS OF POLICY VALUES AND RELATED PROCEDURES ------------------------------------------------- (a) Transfers. ---------- Under the Policies a policyowner may change the extent to which his or her Policy Value is based upon any specific sub-account of the Separate Account or the Company's general account. Such changes are made by transferring amounts from one or more Investment Accounts or the Guaranteed Interest Account to other Investment Accounts or the Guaranteed Interest Account. A policyowner is permitted to make one transfer each policy month. For this purpose all transfer requests received by the Manufacturers Life of America Service Office on the same Business Day are treated as a single transfer. Transfers are free of charge. The minimum amount that may be transferred from an account is the lesser of $500 or the entire account value. The maximum amount that may be transferred from the Guaranteed Interest Account in any one policy year is the greater of $500 or 15% of the Guaranteed Interest Account value at the previous policy anniversary. Any transfer which involves a transfer out of the 24 Guaranteed Interest Account may not involve a transfer to the Investment Account for the Money-Market Fund. Transfer request formats must be satisfactory to Manufacturers Life of America and in writing or by telephone, if a currently valid telephone transfer request form is on file. Manufacturers Life of America may be permitted to delay the effective date of any transfer in certain circumstances. The policyowner may effectively convert his or her Policy to a fixed benefit policy by transferring the Policy Value in all of the Investment Accounts to the Guaranteed Interest Account and by changing his or her allocation of net premiums entirely to the Guaranteed Interest Account. As long as the entire Policy Value is allocated to the Guaranteed Account, the Policy Value, other values based thereon and the death benefit will be determinable and guaranteed. The Investment Account values to be transferred to the Guaranteed Account will be determined as of the Business Day on which Manufacturers Life of America receives the request for conversion. There will be no change in the issue age, risk class of the life insured or face amount as a result of the conversion. A transfer of any or all of the Policy Value to the Guaranteed Interest Account can be made at any time, even if a prior transfer has been made during the Policy Month. (b) Dollar Cost Averaging. ---------------------- Manufacturers Life of America will offer policyowners a Dollar Cost Averaging program. Under this program the policyowner will designate a dollar amount of available assets which will be 25 transferred at predetermined intervals from one Investment Account into any other Investment Account(s) or the Guaranteed Interest Account. Each transfer under the Dollar Cost Averaging program must be of a minimum amount as set by Manufacturers Life of America. Once set, this minimum may be changed at any time at the discretion of Manufacturers Life of America. Currently, no charge will be made for this program if the Policy Value exceeds $15,000 on the date of transfer. Otherwise, there will be a charge of $5.00 for each transfer under this program which fee will be deducted from the value of the sub-account out of which the transfer occurs. Manufacturers Life of America reserves the right to discontinue this program as of 90 days after written notice is sent to the policyowner. (c) Asset Allocation Balancer Transfers. ------------------------------------ Manufacturers Life of America will also offer policyowners the ability to have amounts automatically transferred among stipulated accounts to maintain an allocated percentage in each stipulated account. Under the Asset Allocation Balancer program the policyowner will designate an allocation of Policy Value among Investment Accounts. On the Policy Anniversary, and at six month intervals thereafter, Manufacturers Life of America will move amounts among the Investment Accounts as necessary to maintain the policyowner's chosen allocation. The charge for this program is currently $15.00 per Asset Allocation Balancer Transfer. Manufacturers Life of America reserves the right to discontinue this program as of 90 days after written notice is sent to the policyowner. 26 (d) Policy Loans. ------------- On or after the first policy anniversary, while the Policy is in force, the policyowner may borrow against the Policy Value of his or her Policy. The amount of the loan must be at least $500 and cannot exceed the amount which would cause the Modified Policy Debt to equal the loan value of the Policy on the date of the loan. The loan value is the Policy's Cash Surrender Value less the monthly deductions due to the next policy anniversary. The monthly deductions due for this purpose will be projected assuming no further premiums are paid, current cost of insurance rates and a 4% net interest rate. The Modified Policy Debt as of any date is the Policy Debt (the aggregate amount of policy loans, including borrowed interest, less any loan repayments) plus the amount of interest to be charged to the next policy anniversary, all discounted from the next policy anniversary to such date at an annual rate of 4 percent. When a loan is made, Manufacturers Life of America will deduct from the Investment Accounts or the Guaranteed Interest Account, and transfer to the Loan Account, an amount which will result in the Loan Account value being equal to the Modified Policy Debt. The policyowner may designate how the amount to be transferred to the Loan Account is allocated among the accounts from which the transfer is to be made. In the absence of instructions, the amount to be transferred will be allocated to each account in the same proportion that 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 27 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. When a loan is first taken out, and at specified events thereafter, the value of the Loan Account is adjusted. Whenever the Loan Account is adjusted the difference between (i) the Loan Account before any adjustment and (ii) the Modified Policy Debt at the time of adjustment, is transferred between the Loan Account and the Investment Accounts or the Guaranteed Interest Account. The amount transferred to or from the Loan Account will be such that the value of the Loan Account is equal to the Modified Policy Debt after the adjustment. The specified events which cause an adjustment to the Loan Account are (i) a policy anniversary, (ii) a partial or full loan repayment, (iii) a new loan being taken out, or (iv) when an amount is needed to meet a monthly deduction. A loan repayment may be implicit in that policy debt is effectively repaid upon termination, that is upon death of the life insured, surrender or lapse of the policy. In each of these instances, the Loan Account will be adjusted with any excess of the Loan Account over the Modified Policy Debt after the repayment being included in the termination proceeds. Except as noted below, amounts transferred from the Loan Account will be allocated to the Investment Accounts and the 28 Guaranteed Interest Account in the same proportion that the value in the corresponding "loan sub-account" exists for each Investment Account and for the Guaranteed Interest Account. Amounts transferred to the Loan Account are allocated to the appropriate loan sub-account to reflect the account from which the transfer was made. Policy Debt may be repaid in whole or in part at any time prior to the death of the life insured provided the Policy is in force. When a payment is made, the amount is credited to the Loan Account and a transfer is made to the Guaranteed Interest Account or the Investment Accounts so that the Loan Account at that time equals the Modified Policy Debt. Loan repayments will first be allocated to the Guaranteed Interest Account until the associated loan sub-account is reduced to zero. Any other amounts transferred from the Loan Account will be allocated to the Guaranteed Interest Account and each Investment Account in the same proportion that the value in the corresponding loan sub-account bears to the value of the Loan Account. Amounts paid to the Company not specifically designated in writing as loan repayments will be treated as premiums. 6. COST OF INSURANCE ----------------- As noted above, if the death benefit guarantee is no longer in effect, a Policy will go into default after the second policy anniversary if at the beginning of any policy month the Policy's Net Cash Surrender Value would go below zero after deducting the monthly deduction then due. The Net Cash Surrender Value reflects 29 a number of factors including premiums paid, investment performance of selected sub-accounts, policy loans and cost of insurance charges. The monthly charge for the cost of insurance rate times the net amount at risk at the beginning of each policy month. The charge for the cost of insurance will reflect any extra charges for additional ratings indicated in the Policy. The cost of insurance rate is based on the life insured's age, sex (unless unisex rates are required by law) and risk class, the duration of the insurance coverage, and, in the case of certain Policies issued in group or sponsored arrangements providing for reduction in the cost of insurance charges, the face amount of the Policy_*/. The rate is determined separately for the initial face amount and for each increase in face amount. Cost of insurance rates will generally increase with the life insured's age. The cost of insurance rates used by Manufacturers Life of America reflect its expectations as to future mortality experience. The rates may be changed from time to time on a basis which does not unfairly discriminate within the class of life insureds. 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 _*/ If the life insured's stated age or sex or both in the Policy are incorrect, Manufacturers Life of America will change the face amount of insurance so that the death benefit will be that which the most recent monthly charge for the cost of insurance would have bought for the correct age and sex. 30 is imposed because of an additional rating applicable to the life insured. The guaranteed rates are based on the 1980 Commissioners Smoker/Nonsmoker Standard Ordinary Mortality Tables. The net amount at risk to which the cost of insurance rate is applied is the difference between the death benefit, divided by 1.0032737 (a factor which reduces the net amount at risk for the cost of insurance charge purposes by taking into account assumed monthly earnings at an annual rate of 4%), and the Policy Value. Because different cost of insurance rates may apply to different levels of insurance coverage, the net amount at risk will be calculated separately for each level of insurance coverage. When the Option 1 death benefit is in effect, for purposes of determining the net amount at risk applicable to each level of insurance coverage, the Policy Value is attributed first to the initial face amount and then, if the Policy Value is greater than the initial face amount, to each increase in face amount in the order made. Because the calculation of the net amount at risk is different under the death benefit options when more than one level of insurance coverage is in effect, a change in the death benefit option may result in a different net amount at risk for each level of insurance coverage than would have occurred had the death benefit option not been changed. Since the cost of insurance is calculated separately for each level of insurance coverage, any change in the net amount at risk for a level of insurance coverage resulting from a change in the death benefit option may affect the amount of the charge for the cost of insurance. Partial 31 withdrawals and decreases in face amount will also affect the manner in which the net amount at risk for each level of insurance coverage is calculated. In group or sponsored arrangements where Manufacturers Life of America issues Policies with a face amount of less than $25,000 but not less than $10,000, Policies issued with a face amount of less than $25,000 may be subject to an additional premium deduction equal to $1.00 per $1,000 of face amount. This amount is added to the cost of insurance and deducted monthly. The amount so added will not cause the cost of insurance deducted to exceed the guaranteed rates set forth in the Policy. 7. ADJUSTMENTS TO CERTAIN CHARGES ------------------------------ (a) SPECIAL ARRANGEMENTS. Where permitted by state insurance laws, Policies may be purchased under group or sponsored arrangements, as well as on an individual basis. A "group arrangement" includes a program under which a trustee, employer or similar entity purchases Policies covering a group of individuals on a group basis. A "sponsored arrangement" includes a program under which an employer permits group solicitation of its employees or an association permits group solicitation of its members for the purchase of Policies on an individual basis. The sales charge, monthly deductions and surrender charges may be reduced for policies issued in connection with group or sponsored arrangements. (The monthly deductions consist of a monthly charge for the cost of insurance, a monthly charge for any supplementary 32 benefits added to the Policy, a monthly administration charge of $6.00 and, if applicable, $1.00 per $1,000 of face amount for policies less than $25,000) Manufacturers Life of America will reduce the above charges in accordance with its rules in effect as of the date an application for a Policy is approved. To qualify for such a reduction, a group or sponsored arrangement must satisfy certain criteria as to, for example, size of the group, expected number of participants and anticipated premium payments from the group. Generally, the sales contracts and effort, administrative costs and mortality cost per Policy vary based on such factors as the size of the group or sponsored arrangements, the purposes for which Policies are purchased and certain characteristics of its members. The amount of reduction and the criteria for qualification will reflect the reduced sales effort and administrative costs resulting from, and the different mortality experience expected as a result of, sales to qualifying groups and sponsored arrangements. Manufacturers Life of America may modify from time to time on a uniform basis, both the amounts of reductions and the criteria for qualification. Reductions in these charges will not be unfairly discriminatory against any person, including the affected policyowners and all other policyowners funded by the Separate Account. In addition, groups or persons purchasing under a sponsored arrangement may apply for simplified underwriting. If simplified underwriting is granted, the cost of insurance charge may increase as a result of higher anticipated mortality experience. However, 33 such higher cost of insurance charges will not cause the cost of insurance charge to exceed the guaranteed rates set forth in the Policy. (b) Exchanges. --------- Manufacturers Life of America will permit owners of certain fixed benefit life insurance policies issued either by the Company or Manufacturers Life to exchange their policies for the Policies. A portion of the cash values transferred from such policies will be credited to the Policies without deduction of the 3 percent sales charge. Moreover, surrender charges under the policies being exchanged or the Policies issued in exchange therefor may be reduced or eliminated. Policy loans made under policies being exchanged may be carried over to the new Policies without repayment at the time of exchange. 8. INCOMPLETE ALLOCATION REQUEST ----------------------------- If an incomplete change in premium allocation request is received future premium payments will be allocated in accordance with the previous valid allocation. A letter requesting a corrected allocation request will be sent to the policyowner. 9. UNPAID CHECKS ------------- When an unpaid item is received, a premium reversal will be made effective the date of the original premium payment and the General Account of the Company will absorb the gain or loss of this backdated transaction. The policyowner will be notified in writing of the unpaid item. EX-10 4 EXHIBIT 10 1 EXHIBIT 10 2 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated February 20, 1995 accompanying the financial statements of The Manufacturers Life Insurance Company of America and to the use of our report dated February 6, 1995 accompanying the financial statements of Separate Account Four of The Manufacturers Life Insurance Company of America, in the Registration Statement on Form S-6 and related prospectus of Separate Account Four of The Manufacturers Life Insurance Company of America. Ernst & Young LLP ERNST & YOUNG LLP Philadelphia, Pennsylvania May 2, 1995 EX-11 5 EXHIBIT 11 1 EXHIBIT 11 2 Jones & Blouch 2100 PENNSYLVANIA AVENUE, N.W. WASHINGTON, D.C. 20037 (202) 223-3500 May 4, 1995 The Board of Directors The Manufacturers Life Insurance Company of America 500 N. Woodward Avenue Bloomfield Hills, MI 48304 Dear Sirs: We hereby consent to the reference to this firm under the caption "Legal Matters" in the prospectus contained in post-effective amendment No. 18 to the registration statement on Form S-6 of Separate Account Four of The Manufacturers Life Insurance company of America, File No. 33-13774, to be filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933. Very truly yours, Jones & Blouch Jones & Blouch