1
As filed with the Securities and Exchange Commission on October 10, 2001
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED
ON FORM N-8B-2
SEPARATE ACCOUNT A OF
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
(Exact name of Registrant)
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
(Name of Depositor)
38500 Woodward Avenue
Bloomfield Hills, Michigan 48304
(Address of Depositor's Principal Executive Offices)
James D. Gallagher
Secretary and General Counsel
The Manufacturers Life Insurance Company (U.S.A.)
73 Tremont Street
Boston, MA 02108
(Name and Address of Agent for Service)
Copy to:
J. Sumner Jones, Esq.
Jones & Blouch L.L.P.
1025 Thomas Jefferson Street, NW
Washington, DC 20007
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.
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Separate Account A of
The Manufacturers Life Insurance Company (U.S.A.)
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 A)
2 Cover Page; General Information About Manufacturers
(Manufacturers (U.S.A.))
3 *
4 Other Information (Distribution of the Policy)
5 General Information About Manufacturers Life (Separate Account A)
6 General Information About Manufacturers (Separate Account A)
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 General Information About Manufacturers (Manufacturers Investment
Trust)
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
22 *
23 **
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24 Other Provisions of the Policy
25 General Information About Manufacturers (Manufacturers U.S.A.)
26 *
27 General Information About Manufacturers (Manufacturers U.S.A.);
Other Information (Distribution of the Policy)
28 Other Information (Officers and Directors)
29 General Information About Manufacturers (Manufacturers U.S.A.)
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 Other Information (Distribution of the Policy)
42 Other Information (Distribution of the Policy)
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 *
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
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52 Other Information (Substitution of Portfolio Shares)
53 General Information About Manufacturers Life (Separate Account
A); Tax Treatment of the Policy
54 *
55 *
56 *
57 *
58 *
59 Financial Statements
* Omitted since answer is negative or item is not applicable.
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PART I
INFORMATION REQUIRED IN PROSPECTUS
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PROSPECTUS
SEPARATE ACCOUNT A OF
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
VENTURE SURVIVORSHIP VUL
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
This prospectus describes Survivorship VUL, a flexible premium survivorship
variable universal life insurance policy (the "Policy") offered by The
Manufacturers Life Insurance Company (U.S.A.) (the "Company" or "Manufacturers
U.S.A.," "we" or "us"), a stock life insurance company that is an indirect
wholly-owned subsidiary of The Manufacturers Life Insurance Company
("Manufacturers Life").
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. 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 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 death of the last-to-die of the Lives
Insured.
Unless the No-Lapse Guarantee is in effect, the Policy will remain in force so
long as the Net Cash Surrender Value is sufficient to cover charges assessed
against the Policy. If the No-Lapse Guarantee is in effect, the Policy will
remain in force as long as the No-Lapse Guarantee Cumulative Premium Test has
been met.
Policy Value may be accumulated on a fixed basis or vary with the investment
performance of the sub-accounts of Manufacturers U.S.A.'s Separate Account A
(the "Separate Account") to which the policyowner allocates net premiums. The
assets of each sub-account will be used to purchase shares of a particular
investment portfolio (a "Portfolio") of 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 Investment Advisers." Other
sub-accounts and Portfolios may be added in the future.
BECAUSE OF THE SUBSTANTIAL NATURE OF THE SURRENDER CHARGES, THE POLICY IS NOT
SUITABLE FOR SHORT-TERM INVESTMENT PURPOSES. ALSO, PROSPECTIVE PURCHASERS SHOULD
NOTE THAT IT MAY NOT BE ADVISABLE TO PURCHASE A POLICY AS A REPLACEMENT FOR
EXISTING INSURANCE.
The Securities and Exchange Commission (the "SEC") maintains a web site
(http://www.sec.gov) that contains material incorporated by reference and other
information regarding registrants that file electronically with the 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.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Manufacturers Life Insurance Company (U.S.A.)
38500 Woodward Avenue
Bloomfield Hills, Michigan 48304
THE DATE OF THIS PROSPECTUS IS JANUARY 2, 2002
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TABLE OF CONTENTS
DEFINITIONS...............................................................
POLICY SUMMARY
General.................................................................
Death Benefits..........................................................
Premiums................................................................
Policy Value............................................................
Policy Loans............................................................
Surrender and Partial Withdrawals.......................................
Lapse and Reinstatement.................................................
Charges and Deductions..................................................
Investment Options and Investment Advisers..............................
Investment Management Fees and Expenses.................................
Table of Charges and Deductions.........................................
Table of Investment Management Fees and Expenses........................
Table of Investment Options and Investment Subadvisers..................
GENERAL INFORMATION ABOUT MANUFACTURERS U.S.A., THE SEPARATE
ACCOUNT, AND THE TRUST
Manufacturers U.S.A....................................................
The Separate Account....................................................
The Trust...............................................................
Investment Objectives of the Portfolios.................................
ISSUING A POLICY
Requirements............................................................
Temporary Insurance Agreement...........................................
Right to Examine the Policy.............................................
DEATH BENEFITS............................................................
Life Insurance Qualification............................................
Death Benefit Options...................................................
Changing the Face Amount................................................
PREMIUM PAYMENTS
Initial Premiums........................................................
Subsequent Premiums.....................................................
Maximum Premium Limitation..............................................
Premium Allocation......................................................
CHARGES AND DEDUCTIONS
Amount Deducted from Premium............................................
Surrender Charges.......................................................
Monthly Charges.........................................................
Charges for Transfers...................................................
Reduction in Charges....................................................
SPECIAL PROVISIONS FOR EXCHANGES..........................................
COMPANY TAX CONSIDERATIONS................................................
POLICY VALUE
Determination of the Policy Value.......................................
Units and Unit Values...................................................
Transfers of Policy Value...............................................
POLICY LOANS..............................................................
Effect of Policy Loan...................................................
Interest Charged on Policy Loans........................................
Loan Account............................................................
POLICY SURRENDER AND PARTIAL WITHDRAWALS
Policy Surrender........................................................
Partial Withdrawals.....................................................
LAPSE AND REINSTATEMENT
Lapse...................................................................
No-Lapse Guarantee......................................................
No-Lapse Guarantee Cumulative Premium Test..............................
Reinstatement...........................................................
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THE GENERAL ACCOUNT.......................................................
Fixed Account...........................................................
OTHER PROVISIONS OF THE POLICY
Policyowner Rights......................................................
Beneficiary.............................................................
Incontestability........................................................
Misstatement of Age or Sex..............................................
Suicide Exclusion.......................................................
Supplementary Benefits..................................................
TAX TREATMENT OF THE POLICY...............................................
Life Insurance Qualification............................................
Tax Treatment of Policy Benefits........................................
Alternate Minimum Tax...................................................
Income Tax Reporting....................................................
OTHER INFORMATION
Payment of Proceeds.....................................................
Reports to Policyowners.................................................
Distribution of the Policies............................................
Responsibilities of Manufacturers Life..................................
Voting Rights...........................................................
Substitution of Portfolio Shares........................................
Records and Accounts....................................................
State Regulations.......................................................
Litigation..............................................................
Independent Auditors....................................................
Further Information.....................................................
Officers and Directors..................................................
Optional Term Rider.....................................................
Illustrations...........................................................
APPENDIX A - SAMPLE ILLUSTRATIONS OF POLICY VALUES,
CASH SURRENDER VALUES AND DEATH BENEFITS................................. A-1
APPENDIX B - AUDITED FINANCIAL STATEMENTS................................. B-1
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.
THE PURPOSE OF THIS VARIABLE LIFE INSURANCE POLICY IS TO PROVIDE INSURANCE
PROTECTION FOR THE BENEFICIARY NAMED THEREIN. NO CLAIM IS MADE THAT THIS
VARIABLE LIFE INSURANCE POLICY IS IN ANY WAY SIMILAR OR COMPARABLE TO A
SYSTEMATIC INVESTMENT PLAN OF A MUTUAL FUND.
Examine this prospectus carefully. The Policy Summary will briefly describe the
Policy. More detailed information will be found further in the prospectus.
SVUL00(20)(10).PRO 01/2002
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DEFINITIONS
Additional Rating
is an increase to the Cost of Insurance Rate for any of the Lives Insured who do
not meet, at a minimum, the Company's underwriting requirements for the standard
Risk Classification.
Age
on any date is each of the Lives Insured's age on their birthday closest to the
policy date.
Attained Age
is the Age plus the number of whole years that have elapsed since the Policy
Date.
Business Day
is any day that the New York Stock Exchange is open for trading. The net asset
value of the underlying shares of a Sub-Account will be determined as of the end
of each Business Day. The Company will deem each Business Day to end at the
close of regularly scheduled trading of the New York Stock Exchange (currently
4:00 p.m. Eastern Time) on that day.
Cash Surrender Value
is the Policy Value less the Surrender Charge and any outstanding Monthly
Deductions due.
Effective Date
is the date the underwriters approve issuance of the policy. If the policy is
approved without the initial premium, the Effective Date will be the date the
Company receives at least the minimum initial premium at our Service Office. In
either case, the Company will take the first Monthly Deduction on the Effective
Date.
Fixed Account
is that part of the Policy Value which reflects the value the policyowner has in
the general account of the Company.
Gross Withdrawal
is the amount of partial Net Cash Surrender Value the policyowner requests plus
any Surrender Charge applicable to the withdrawal.
Investment Account
is that part of the Policy Value which reflects the value the policyowner has in
one of the sub-accounts of the Separate Account.
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.
Life Insured
is the last-to-die of the Lives Insured.
Lives Insured
are the persons whose lives are insured under this policy. References to the
youngest of the Lives Insured means the youngest person insured under this
policy when it is first issued.
Loan Account
is that part of the Policy Value which reflects the value transferred from the
Fixed Account or the Investment Accounts as collateral for a policy loan.
Net Cash Surrender Value
is the Cash Surrender Value less the Policy Debt.
Net Policy Value
is the Policy Value less the value in the Loan Account.
Net Premium
is the gross premium paid less any amounts deducted from the premium. It is the
amount of premium allocated to the Fixed Account and/or Investment Accounts.
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No-Lapse Guarantee
When the Policy is in the No-Lapse Guarantee Period, as long as the No-Lapse
Guarantee Cumulative Premium Test is met, the Policy will not lapse, even when
the Net Cash Surrender Value falls to or below zero.
No-Lapse Guarantee Period
is the period, set at issue, during which the No-Lapse Guarantee is provided.
The No-Lapse Guarantee period is fixed at the lesser of (a) twenty years [10
years] or (b) the number of years remaining until the life insured's age is 95,
depending upon applicable state law requirements. Certain states may have a
shorter guarantee period. (The No Lapse Guarantee Period for a particular Policy
is stated in the Policy.)
No-Lapse Guarantee Premium
is set at issue and is recalculated whenever there is a policy change.
No-Lapse Guarantee Cumulative Premium
is the minimum amount due to satisfy the No-Lapse Guarantee Cumulative Premium
Test. This amount will change if any of the following changes occur under the
Policy:
the face amount of insurance changes.
a Supplementary Benefit is added, changed or terminated.
the risk classification of any of the Lives Insured changes because of a
change in smoking status.
a temporary Additional Rating is added (due to a face amount increase), or
terminated.
the Death Benefit Option Changes.
No-Lapse Guarantee Cumulative Premium Test
is a test that is satisfied if the sum of all premiums paid, less any gross
partial withdrawals and less any Policy Debt, is greater than or equal to the
sum of the monthly No-Lapse Guarantee Premiums due since the Policy Date.
Policy Date
is the date coverage takes effect under the Policy, provided the Company
receives the minimum initial premium at its Service Office, and 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 equals (a) plus (b) plus (c) minus (d), where:
(a) is the total amount of loans borrowed as of such date;
(b) is the total amount of any unpaid loan interest charges which have
been borrowed against the policy on a Policy Anniversary;
(c) is any interest charges accrued from the last Policy Anniversary to
the current date; and
(d) is the total amount of loan repayments as of such date.
Policy Value
is the sum of the values in the Loan Account, the Fixed Account, and the
Investment Accounts.
Service Office Address
is 200 Bloor Street East, Toronto, Ontario, Canada M4W 1E5.
Surrender Charge Period
is the period following the Issue Date or following any increase in Face Amount
during which the Company will assess surrender charges. Surrender charges will
apply during this period if the policy terminates due to default, if the
policyowner surrenders the policy or makes a partial withdrawal.
Written Request
is the policyowner's request to the Company which must be in a form satisfactory
to the Company, signed and dated by the policyowner, and received at the Service
Office.
POLICY SUMMARY
GENERAL
The Policy is a flexible premium survivorship 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
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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 and the terms of your Policy and any
endorsement or rider, supersede the disclosure in this prospectus.
DEATH BENEFITS
The Policy provides a death benefit in the event of the death of the last-to-die
of the Lives 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 policyowner may change the death benefit option
and increase or decrease the Face Amount.
OPTIONAL TERM RIDER
The Policy may be issued with an optional term insurance rider (the "Term
Rider"). The benefit of the term rider is that the cost of insurance rates will
always be less than or equal to the cost of insurance rates on the Policy.
HOWEVER, UNLIKE THE DEATH BENEFIT UNDER THE POLICY, THE DEATH BENEFIT UNDER THE
TERM RIDER IS NOT PROTECTED BY THE NO-LAPSE GUARANTEE AFTER THE SECOND POLICY
YEAR AND TERMINATES AT AGE 100.
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 policyowner's instructions, to one
or more of the general account and the sub-accounts of Manufacturers U.S.A.'s
Separate Account A. 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 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.
POLICY LOANS
The policyowner may borrow against the Cash Surrender Value of the Policy. Loan
interest at a rate of 5.25% 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 policyowner 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
Unless the No-Lapse Guarantee is in effect, 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 policyowner. If the No-Lapse Guarantee is in effect,
the Policy will lapse if the No-Lapse Guarantee Cumulative Premium Test (see
definition) has not been met.
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 policyowner at any time within the five
year period following lapse provided none of the Lives Insured dies after the
policy termination and the Policy was not surrendered for its Net Cash Surrender
Value. Evidence of insurability is required, along with a certain amount of
premium as described under "Reinstatement."
CHARGES AND DEDUCTIONS
The Company assesses certain charges and deductions in connection with the
Policy. These include: (i) charges assessed monthly for mortality and expense
risks, cost of insurance, administration expenses, (ii) amounts deducted from
premiums paid (iii) and charges assessed on surrender or lapse. These charges
are summarized in the Table of Charges and Deductions.
In addition, there are charges deducted from each Portfolio of the Trust. These
charges are summarized in the Table of Investment Management Fees and Expenses.
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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 U.S.A.'s Separate Account A. Each of the
sub-accounts invests in the shares of one of the Portfolios of the Trust. The
Trust receives investment advisory services from Manufacturers Securities
Services, LLC ("MSS"). MSS is a registered investment adviser under the
Investment Advisers Act of 1940. The Trust also employs subadvisers. The Table
of Investment Options and Investment Subadvisers shows the subadvisers that
provide investment subadvisory services to the indicated Portfolios.
Allocating net premiums only to one or a small number of the investment options
(other than the Lifestyle Trusts) should not be considered a balanced investment
strategy. In particular, allocating net premiums to a small number of investment
options that concentrate their investments in a particular business or market
sector will increase the risk that the value of your policy will be more
volatile since these investment options may react similarly to business or
market specific events. Examples of business or market sectors where this risk
historically has been and may continue to be particularly high include: (a)
technology related businesses, including internet related businesses, (b) small
cap securities and (c) foreign securities. The Company does not provide advice
regarding appropriate investment allocations. Please discuss this matter with
your financial adviser.
INVESTMENT MANAGEMENT FEES AND EXPENSES
The Separate Account purchases shares of the Portfolios at net asset value. The
net asset value of those shares reflects investment management fees and certain
expenses. The fees and expenses for each Portfolio for the Trust's last fiscal
year are shown in the Table of Investment Management Fees and Expenses. These
fees and expenses are described in detail in the accompanying Trust prospectus
to which reference should be made.
TABLE OF CHARGES AND DEDUCTIONS
Amount Deducted from Premium 7.50% of each premium paid.
Surrender Charges A Surrender Charge is applicable during the first 15 Policy Years. The Surrender
Charge is determined by the following formula:
Surrender Charge = (Surrender Charge Rate) x (Grading Percentage)
The Grading Percentage is based on the issue age of the youngest insured and the
policy year in which the transaction causing the assessment of the charge occurs
and is set forth in the table under "Surrender Charges."
The Surrender Charge Rate is calculated as follows:
Surrender Charge Rate = (Factor) x (Surrender Face Amount / 1000) + (82.5%) x
(Surrender Charge Premium)
The Surrender Charge Premium is the lesser of:
(a) the premiums paid during the first policy year;
(b) the premium amount used to measure the maximum Surrender Charge under the
Policy;
(c) the net level annual premium required to provide level insurance to attained
age 100 of the younger insured based on guaranteed monthly mortality charges
and an interest rate of 4%; and
(d) $60 per $1000 of Face Amount.
A portion of this charge may be assessed on a partial withdrawal, as set forth
under "Charges and Deductions -- Surrender Charges on a Partial Withdrawal."
Monthly Deductions An administration charge of $30 plus $0.08 per $1,000 of current face amount per
policy month will be deducted in the first policy year. In subsequent years, the
administration charge will not exceed $15 plus $0.02 per $1,000 of current Face
Amount per policy month.
The cost of insurance charge.
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Any additional charges for supplementary benefits.
A mortality and expense risks charge. This charge varies by Policy Year as
follows:
CURRENT AND
GUARANTEED EQUIVALENT
MONTHLY ANNUAL
MORTALITY MORTALITY AND
AND EXPENSE EXPENSE
POLICY YEARS RISKS CHARGE RISK CHARGE
-------------------------------------------------------------------
1-20...................................... 0.063% 0.75%
21+....................................... 0.033% 0.40%
All of the above charges are deducted from the Net Policy Value.
Loan Charges A fixed loan interest rate of 5.25%. Interest credited to amounts in the Loan
Account will be equal to the 5.25% rate charged to the loan less the current and
maximum loan spread of 1.25%.
Transfer Charge A charge of $25 per transfer for each transfer in excess of 12 in a Policy Year.
TABLE OF INVESTMENT MANAGEMENT FEES AND EXPENSES
TRUST ANNUAL EXPENSES
(as a percentage of Trust average net assets for the fiscal year ended
December 31, 2000)*
TOTAL TRUST
OTHER EXPENSES ANNUAL EXPENSES
MANAGEMENT (AFTER EXPENSE (AFTER EXPENSE
TRUST PORTFOLIO FEES CLASS A RULE 12b-1 FEE REIMBURSEMENT) REIMBURSEMENT)
--------------------------------------------------------------------------------------------------------------------------
Internet Technologies.............. 1.000% 0.150% 0.130% 1.280%(E)
Pacific Rim Emerging Markets....... 0.700% 0.150% 0.180% 1.030%
Telecommunications................. 0.950% 0.150% 0.130% 1.230%(A)
Science & Technology............... 0.916%(f) 0.150% 0.040% 1.106%
International Small Cap............ 0.914% 0.150% 0.440% 1.504%
Health Sciences.................... 0.950%(f) 0.150% 0.130% 1.230%(A)
Aggressive Growth.................. 0.850% 0.150% 0.070% 1.070%
Emerging Small Company............. 0.896% 0.150% 0.050% 1.096%
Small Company Blend................ 0.900% 0.150% 0.140% 1.190%
Dynamic Growth..................... 0.850% 0.150% 0.070% 1.070%(E)
Mid Cap Growth..................... 0.850% 0.150% 0.280% 1.280%(A)
Mid Cap Opportunities.............. 0.850% 0.150% 0.230% 1.230%(A)
Mid Cap Stock...................... 0.775% 0.150% 0.075% 1.000%
All Cap Growth..................... 0.778% 0.150% 0.050% 0.978%
Financial Services................. 0.800% 0.150% 0.090% 1.040%(A)
Overseas........................... 0.800% 0.150% 0.200% 1.150%
International Stock................ 0.850%(f) 0.150% 0.180% 1.180%
International Value................ 0.850% 0.150% 0.180% 1.180%
Capital Appreciation............... 0.750% 0.150% 0.500%(H) 1.400%(H)
Strategic Opportunities ... ... ... 0.700% 0.150% 0.050% 0.900%
Quantitative Mid Cap............... 0.650% 0.150% 0.070% 0.870%(A)
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Global Equity.............. 0.750% 0.150% 0.120% 1.020%
Strategic Growth........... 0.750% 0.150% 0.120% 1.020%(A)
Growth..................... 0.683% 0.150% 0.050% 0.883%
Large Cap Growth........... 0.750% 0.150% 0.065% 0.965%
All Cap Value.............. 0.800% 0.150% 0.140% 1.090%(A)
Capital Opportunities...... 0.750% 0.150% 0.160% 1.060%(A)
Quantitative Equity........ 0.596% 0.150% 0.050% 0.796%
Blue Chip Growth........... 0.713%(f) 0.150% 0.035% 0.898%
Utilities.................. 0.750% 0.150% 0.270% 1.170%(A)
Real Estate Securities..... 0.650%(A) 0.150% 0.060% 0.860%
Small Company Value........ 0.900%(f) 0.150% 0.190% 1.240%
Mid Cap Value.............. 0.800% 0.150% 0.160% 1.110%(A)
Value...................... 0.650% 0.150% 0.060% 0.860%
Tactical Allocation........ 0.750% 0.150% 0.430% 1.330%(E)
Equity Index I............ 0.250% 0.000% 0.150% 0.400%
Fundamental Value.......... 0.800% 0.150% 0.130% 1.080%(A)
Growth & Income............ 0.524% 0.150% 0.040% 0.714%
U.S. Large Cap Value....... 0.725% 0.150% 0.055% 0.930%
Equity-Income.............. 0.725%(f) 0.150% 0.035% 0.910%
Income & Value............. 0.650% 0.150% 0.060% 0.860%
Balanced................... 0.554%(A) 0.150% 0.060% 0.764%
High Yield................. 0.625% 0.150% 0.065% 0.840%
Strategic Bond............. 0.625% 0.150% 0.095% 0.870%
Global Bond................ 0.600% 0.150% 0.200% 0.950%
Total Return............... 0.600% 0.150% 0.065% 0.815%
Investment Quality Bond.... 0.500% 0.150% 0.080% 0.730%
Diversified Bond........... 0.600% 0.150% 0.060% 0.810%
U.S. Government Securities. 0.550% 0.150% 0.070% 0.770%
Money Market............... 0.350% 0.150% 0.040% 0.540%
Small Cap Index............ 0.375% 0.150% 0.075%(G) 0.600%(E)
International Index........ 0.400% 0.150% 0.050%(G) 0.600%(E)
Mid Cap Index.............. 0.375% 0.150% 0.075%(G) 0.600%(E)
Total Stock Market Index... 0.375% 0.150% 0.075%(G) 0.600%(E)
500 Index.................. 0.375% 0.150% 0.025%(G) 0.550%(E)
Lifestyle Aggressive 1000D 0.070% 0.000% 1.089%(B) 1.159%(C)
Lifestyle Growth 820D...... 0.055% 0.000% 0.971%(B) 1.026%(C)
Lifestyle Balanced 640D.... 0.055% 0.000% 0.893%(B) 0.948%(C)
Lifestyle Moderate 460D.... 0.064% 0.000% 0.821%(B) 0.885%(C)
Lifestyle Conservative 280D 0.075% 0.000% 0.790%(B) 0.865%(C)
- ------------------------------------------------------------------------------------------------------------------------------
*Effective January 1, 2002, the Trust implemented a Class A Rule 12b-1
plan while simultaneously reducing its advisory fees and implementing
advisory fee breakpoints. The Trust Annual Expense chart reflects these
changes.
(A) Based on estimates to be made during the current fiscal year.
(B) Reflects expenses of the Underlying Portfolios.
(C) The investment adviser to the Trust, Manufacturers Securities
Services, LLC ("MSS" or the "Adviser") has voluntarily agreed to pay
certain expenses of each Lifestyle Trust as noted below. (For
purposes of the expense reimbursement, total expenses of a Lifestyle
Trust includes the advisory fee but excludes (a) the expenses of the
Underlying Portfolios, (b) taxes, (c) portfolio brokerage, (d)
interest, (e) litigation and (f) indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the
Trust's business.)
If total expenses of a Lifestyle Trust (absent reimbursement) exceed
0.075%, the Adviser will reduce the advisory fee or reimburse
expenses of that Lifestyle Trust by an amount such that total
expenses of the Lifestyle Trust equal 0.075%. If the total expenses
of the Lifestyle Trust (absent reimbursement) are equal to or less
than 0.075%, then no expenses will be reimbursed by the Adviser.
This voluntary expense reimbursement may be terminated at any time.
If such expense reimbursement was not in effect, Total Trust Annual
Expenses would be higher (based on current advisory fees and the
Other Expenses of the Lifestyle Trusts for the fiscal year ended
December 31, 2000) as noted in the chart below:
MANAGEMENT RULE 12b-1 OTHER TOTAL TRUST
TRUST PORTFOLIO FEES FEES EXPENSES ANNUAL EXPENSES
--------------------------------------------------------------------------------------------------
Lifestyle Aggressive 1000... 0.070% 0.000% 1.114% 1.184%
Lifestyle Growth 820........ 0.055% 0.000% 0.981% 1.036%
Lifestyle Balanced 640...... 0.055% 0.000% 0.903% 0.958%
Lifestyle Moderate 460...... 0.064% 0.000% 0.846% 0.910%
Lifestyle Conservative 280.. 0.075% 0.000% 0.822% 0.897%
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(D) Each Lifestyle Trust will invest in shares of the Underlying
Portfolios. Therefore, each Lifestyle Trust will bear its pro rata
share of the fees and expenses incurred by the Underlying Portfolios
in which it invests, and the investment return of each Lifestyle
Trust will be net of the Underlying Portfolio expenses. Each
Lifestyle Portfolio must bear its own expenses. However, the Adviser
is currently paying certain of these expenses as described in
footnote (C) above.
(E) Annualized - For the period May 1, 2000 (commencement of operations)
to December 31, 2000.
(F) Effective June 1, 2000, the Adviser voluntarily agreed to waive a
portion of its advisory fee for the Science & Technology Trust,
Health Sciences Trust, Small Company Value Trust, the Blue Chip
Growth Trust and the Equity-Income Trust. The fee reduction is based
on the combined asset level of all five portfolios and the
International Stock Trust. Once the combined assets exceed specified
amounts, the fee reduction is increased. The percentage fee
reduction for each asset level is as follows:
FEE REDUCTION
COMBINED ASSET LEVELS (AS A PERCENTAGE OF THE ADVISORY FEE)
First $750 million 0.00%
Between $750 million and $1.5 billion 2.50%
Between $1.5 billion and $3.0 billion 3.75%
Over $3.0 billion 5.00%
The fee reductions are applied to the advisory fees of each of the
five portfolios. This voluntary fee waiver may be terminated at any
time by the adviser. As of February 28, 2001, the combined asset
level for all four portfolios was approximately $4.469 billion
resulting in a fee reduction of 3.065%. There is no guarantee that
the combined asset level will remain at this amount. If the combined
asset level were to decrease to a lower breakpoint, the fee
reduction would decrease as well.
(G) MSS has voluntarily agreed to pay expenses of each Index Trust
(excluding the advisory fee) that exceed the following amounts:
0.050% in the case of the International Index Trust and 500 Index
Trust and 0.075% in the case of the Small Cap Index Trust, the Mid
Cap Index Trust and Total Stock Market Index Trust. If such expense
reimbursement were not in effect, it is estimated that "Other
Expenses" and "Total Trust Annual Expenses" would be 0.097% and
0.650%, respectively, for the International Index Trust, 0.125% and
0.650%, respectively, for the Small Cap Index Trust, and 0.164% and
0.690%, respectively, for the Mid Cap Index Trust and 0.090% and
0.620%, respectively, for the Total Stock Market Index Trust. It is
estimated that the expense reimbursement will not be effective
during the year end December 31, 2001 for the 500 Index Trust. The
expense reimbursement may be terminated at any time by MSS.
(H) Annualized - For period November 1, 2000 (commencement of
operations) to December 31, 2000. For all portfolios except the
Lifestyle Trusts, the Adviser reduces its advisory fee or reimburses
the portfolio if the total of all expenses (excluding advisory fees,
taxes, portfolio brokerage commissions, interest, litigation and
indemnification expenses and other extraordinary expenses not
incurred in the ordinary course of the portfolio's business) exceed
certain annual rates. In the case of the Capital Appreciation Trust,
the Adviser reimbursed the portfolio for certain expenses for the
year ended December 31, 2000. If such expense reimbursement were not
in effect, it is estimated that "Other Expenses" and "Total Trust
Annual Expenses" would be 0.700% and 1.600%, respectively. These
voluntary expense reimbursements may be terminated at any time.
(I) The Equity Index Trust is available only for Policies issued for
applications dated prior to May 1, 2000. Under the Advisory
Agreement, MSS has agreed to reduce its advisory fee or reimburse
the Equity Index Trust if the total of all expenses (excluding
advisory fees, taxes, portfolio brokerage commissions, interest,
litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Trust's
business) exceeds an annual rate of 0.15% of the average annual net
assets of the Equity Index Trust. The expense limitation may be
terminated at any time by MSS. If this expense reimbursement had not
been in effect, Total Trust Annual Expenses would have been 0.55%,
and Other Expenses would have been 0.30%, of the average annual net
assets of the Equity Index Trust.
TABLE OF INVESTMENT OPTIONS AND INVESTMENT SUBADVISERS
The Trust currently has twenty-five subadvisers who manage all of the
portfolios, one of which subadvisers is Manufacturers Adviser Corporation
("MAC"). Both MSS and MAC are affiliates of ours.
SUBADVISER PORTFOLIO
A I M Capital Management, Inc. All Cap Growth Trust
Aggressive Growth Trust
Brinson Advisors, Inc. Tactical Allocation Trust
(formerly, Mitchell Hutchins Asset Management Inc.)
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Subadviser Portfolio
Capital Guardian Trust Company Small Company Blend Trust
U.S. Large Cap Value Trust
Income & Value Trust
Diversified Bond Trust
Cohen & Steers Capital Management, Inc. Real Estate Securities Trust
Davis Select Advisers, L.P. Financial Services Trust
Fundamental Value Trust
The Dreyfus Corporation All Cap Value Trust
Fidelity Management & Research Company Strategic Opportunities Trust(A)
Large Cap Growth Trust
Overseas Trust
Founders Asset Management LLC International Small Cap Trust
Franklin Advisers, Inc. Emerging Small Company Trust
INVESCO Funds Group, Inc. Telecommunications Trust
Mid Cap Growth Trust
Janus Capital Corporation Dynamic Growth Trust
Jennison Associates LLC Capital Appreciation Trust
Lord, Abbett & Co. Mid Cap Value Trust
Manufacturers Adviser Corporation Pacific Rim Emerging Markets Trust
Quantitative Mid Cap Trust
Quantitative Equity Trust
Equity Index Trust
Money Market Trust
Index Trusts
Lifestyle Trusts(B)
Balanced Trust
Massachusetts Financial Services Company Strategic Growth Trust
Capital Opportunities Trust
Utilities Trust
Miller Anderson & Sherrerd, LLP Value Trust
High Yield Trust
Munder Capital Management Internet Technologies Trust
Pacific Investment Management Company Global Bond Trust
Total Return Trust
Putnam Investment Management, LLC Mid Cap Opportunities Trust
Global Equity Trust
Salomon Brothers Asset Management Inc U.S. Government Securities Trust
Strategic Bond Trust
SSgA Funds Management, Inc. Growth Trust
Lifestyle Trusts(B)
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Subadviser Portfolio
T. Rowe Price Associates, Inc. Science & Technology Trust
Small Company Value Trust
Health Sciences Trust
Blue Chip Growth Trust
Equity-Income Trust
T. Rowe Price International, Inc. International Stock Trust
Templeton Investment Counsel, Inc. International Value Trust
Wellington Management Company, LLP Growth & Income Trust
Investment Quality Bond Trust
Mid Cap Stock Trust
-----------------
(A) Formerly, the Mid Cap Blend Trust.
(B) SSgA Funds Management, Inc. provides subadvisory consulting
services to Manufacturers Adviser Corporation regarding management
of the Lifestyle Trusts.
GENERAL INFORMATION ABOUT MANUFACTURERS U.S.A., THE SEPARATE ACCOUNT AND THE
TRUST
MANUFACTURERS U.S.A.
We are a stock life insurance company incorporated in Maine on August 20,
1955 by a special act of the Maine legislature and redomesticated under the
laws of Michigan . We are a licensed life insurance company in the District of
Columbia and all states of the United States except New York. Our ultimate
parent is Manulife Financial Corporation ("MFC"), a publicly traded company,
based in Toronto, Canada. MFC is the holding company of The Manufacturers Life
Insurance Company and its subsidiaries, collectively known as Manulife
Financial. The Manufacturers Life Insurance Company is one of the largest life
insurance companies in North America and ranks among the 60 largest life
insurers in the world as measured by assets. However, neither Manufacturers Life
nor any of its affiliated companies guarantees the investment performance of the
Separate Account.
RATINGS
Manufacturers Life and Manufacturers U.S.A. have received the following ratings
from independent rating agencies:
Standard and Poor's Insurance Ratings Service: AA+ (for financial strength)
A.M. Best Company: A++ (for financial strength)
Fitch: AAA (for financial strength)
Moody's Investors Service, Inc.: Aa2 (for financial strength)
These ratings, which are current as of the date of this prospectus and are
subject to change, are assigned to Manufacturers U.S.A. as a measure of the
Company's ability to honor the death benefit and life annuitization guarantees
but not specifically to its products, the performance (return) of these
products, the value of any investment in these products upon withdrawal or to
individual securities held in any portfolio.
THE SEPARATE ACCOUNT
The Manufacturers Life Insurance Company of America ("ManAmerica")
established its Separate Account Three (the "Separate Account") on August 22,
1986 as a separate account under Pennsylvania law. Since December 9, 1992, it
has been operated under Michigan law. On January 1, 2002, ManAmerica
transferred substantially all of its assets and liabilities to Manufacturers
U.S.A. As a result of this transaction, Manufacturers U.S.A. became the owner of
all of ManAmerica's assets, including the assets of the Separate Account and
assumed all of ManAmerica's obligations including those under the Policies. The
ultimate parent of both ManAmerica and Manufacturers U.S.A. is Manulife
Financial Corporation ("MFC"). The Separate Account holds assets that are
segregated from all of Manufacturers U.S.A.'s other assets. The Separate
Account is currently used only to support variable life insurance policies.
ASSETS OF THE SEPARATE ACCOUNT
Manufacturers U.S.A. 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
U.S.A. Manufacturers U.S.A. 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
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policies participating in the Separate Account. These assets may not be charged
with liabilities which arise from any other business Manufacturers U.S.A.
conducts. However, all obligations under the variable life insurance policies
are general corporate obligations of Manufacturers U.S.A.
REGISTRATION
The Separate Account is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940 ("1940 Act") as a unit
investment trust. A unit investment trust is a type of investment company which
invests its assets in specified securities, such as the shares of one or more
investment companies, rather than in a portfolio of unspecified securities.
Registration under the 1940 Act does not involve any supervision by the SEC of
the management or investment policies or practices of the Separate Account. For
state law purposes the Separate Account is treated as a part or division of
Manufacturers U.S.A.
THE 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 U.S.A. to provide benefits under the
Policies, to transfer assets from one sub-account to another or to the general
account as requested by policyowners, and for other purposes 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 U.S.A. may also
purchase shares through its general account for certain limited purposes
including initial portfolio seed money. For a description of the procedures for
handling potential conflicts of interest arising from the funding of such
benefits see the accompanying Trust prospectus.
INVESTMENT OBJECTIVES OF THE PORTFOLIOS
The investment objectives and certain policies of the Portfolios currently
available to policyowners through corresponding sub-accounts are set forth
below. There is, of course, no assurance that these objectives will be met. A
full description of the Trust, its investment objectives, policies and
restrictions, the risks associated therewith, its expenses, and other aspects of
its operation is contained in the accompanying Trust prospectus, which should be
read together with this prospectus.
ELIGIBLE PORTFOLIOS
The Portfolios of the Trust available under the Policies are as follows:
The INTERNET TECHNOLOGIES TRUST seeks long-term capital appreciation by
investing the portfolio's assets primarily in companies engaged in
Internet-related business (such businesses also include Intranet-related
businesses).
The PACIFIC RIM EMERGING MARKETS TRUST seeks long-term growth of capital by
investing in a diversified portfolio that is comprised primarily of common
stocks and equity-related securities of corporations domiciled in countries in
the Pacific Rim region.
The TELECOMMUNICATIONS TRUST seeks capital appreciation (with earning income as
a secondary objective) by investing, under normal market conditions, primarily
in equity securities of companies engaged in the telecommunications sector, that
is, in the design, development, manufacture, distribution or sale of
communications services and equipment and companies that are involved in
supplying equipment or services to such companies.
The SCIENCE & TECHNOLOGY TRUST seeks long-term growth of capital by investing at
least 65% of the portfolio's total assets in common stocks of companies expected
to benefit from the development, advancement, and use of science and technology.
Current income is incidental to the portfolio's objective.
The INTERNATIONAL SMALL CAP TRUST seeks capital appreciation by investing
primarily in securities issued by foreign companies which have total market
capitalization or annual revenues of $1 billion or less. These securities may
represent companies in both established and emerging economies throughout the
world.
The HEALTH SCIENCES TRUST seeks long-term capital appreciation by investing,
under normal market conditions, at least 65% of the portfolio's total assets in
common stocks of companies engaged in the research, development, production, or
distribution of products or services related to health care, medicine, or the
life sciences (collectively termed "health sciences").
The AGGRESSIVE GROWTH TRUST seeks long-term capital appreciation by investing
the portfolio's asset principally in common stocks, convertible bonds,
convertible preferred stocks and warrants of companies which in the opinion of
the subadviser are
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expected to achieve earnings growth over time at a rate in excess of 15% per
year. Many of these companies are in the small and medium-sized category.
The EMERGING SMALL COMPANY TRUST seeks long-term growth of capital by investing,
under normal market conditions, at least 65% of the portfolio's total assets in
common stock equity securities of companies with market capitalizations that
approximately match the range of capitalization of the Russell 2000 Index
("small cap stocks") at the time of purchase.
The SMALL COMPANY BLEND TRUST seeks long-term growth of capital and income by
investing the portfolio's assets, under normal market conditions, primarily in
equity and equity-related securities of companies with market capitalizations
that approximately match the range of capitalization of the Russell 2000 Index
at the time of purchase.
The DYNAMIC GROWTH TRUST seeks long-term growth of capital by investing the
portfolio's assets primarily in equity securities selected for their growth
potential. Normally at least 50% of its equity assets are invested in
medium-sized companies.
The MID CAP GROWTH TRUST seeks capital appreciation by investing primarily in
common stocks of mid-sized companies - those with market capitalizations between
$2 billion and $15 billion at the time of purchase.
The MID CAP OPPORTUNITIES TRUST seeks capital appreciation by investing, under
normal market conditions, primarily in common stocks and other equity securities
of U.S. companies, with a focus on growth stocks of mid size companies.
The MID CAP STOCK TRUST seeks long-term growth of capital by investing primarily
in equity securities with significant capital appreciation potential, with
emphasis on medium-sized companies.
The ALL CAP GROWTH TRUST seeks long-term capital appreciation by investing the
portfolio's assets under normal market conditions, principally in common
stocks of companies that are likely to benefit from new or innovative products,
services or processes, as well as those that have experienced above average,
long-term growth in earnings and have excellent prospects for future growth.
The FINANCIAL SERVICES TRUST seeks growth of capital by investing primarily in
common stocks of financial companies. During normal market conditions, at least
65% of the portfolio's assets are invested in companies that are principally
engaged in financial services. A company is "principally engaged" in financial
services if it owns financial services-related assets constituting at least 50%
of the value of its total assets, or if at least 50% of its revenues are derived
from its provision of financial services.
The OVERSEAS TRUST seeks growth of capital by investing, under normal market
conditions, at least 65% of the portfolio's assets in foreign securities
(including American Depositary Receipts (ADRs) and European Depositary Receipts
(EDRs)). The portfolio expects to invest primarily in equity securities.
The INTERNATIONAL STOCK TRUST seeks long-term growth of capital by investing
primarily in common stocks of established, non-U.S. companies.
The INTERNATIONAL VALUE TRUST seeks long-term growth of capital by investing,
under normal market conditions, primarily in equity securities of companies
located outside the U.S., including emerging markets.
The CAPITAL APPRECIATION TRUST seeks long-term capital growth by investing at
least 65% of its total assets in equity-related securities of companies that
exceed $1 billion in market capitalization and that the subadviser believes have
above-average growth prospectus. These companies are generally medium-to-large
capitalization companies.
The STRATEGIC OPPORTUNITIES TRUST (formerly, Mid Cap Blend Trust) seeks growth
of capital by investing primarily in common stocks of U.S. issuers and
securities convertible into or carrying the right to buy common stocks.
The QUANTITATIVE MID CAP TRUST seeks long-term growth of capital by investing,
under normal market conditions, at least 65% of the portfolio's total assets in
U.S. mid-cap stocks, convertible preferred stocks, convertible bonds and
warrants.
The GLOBAL EQUITY TRUST seeks long-term capital appreciation by investing, under
normal market conditions, at least 65% of the portfolio's total assets in equity
securities of companies in at least three different countries, including the
U.S. The portfolio may invest in companies of any size but emphasizes mid- and
large-capitalization companies that the subadviser believes are undervalued.
The STRATEGIC GROWTH TRUST seeks capital appreciation by investing, under normal
market conditions, at least 65% of the portfolio's total assets in common stocks
and related securities (such as preferred stocks, bonds, warrants or rights
convertible into stock and depositary receipts for these securities) of
companies which the subadviser believes offer superior prospects for growth.
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The GROWTH TRUST seeks long-term growth of capital by investing primarily in
large capitalization growth securities (market capitalizations of approximately
$1 billion or greater).
The LARGE CAP GROWTH TRUST seeks long-term growth of capital by investing, under
normal market conditions, at least 65% of the portfolio's assets in equity
securities of companies with large market capitalizations.
The ALL CAP VALUE TRUST seeks capital appreciation by investing, under normal
market conditions, at least 65% of the portfolio's total assets in the stocks of
value companies of any size.
The CAPITAL OPPORTUNITIES TRUST seeks capital appreciation by investing, under
normal market conditions, at least 65% of the portfolio's total assets in common
stocks and related securities, such as preferred stock, convertible securities
and depositary receipts. The portfolio focuses on companies which the subadviser
believes have favorable growth prospects and attractive valuations based on
current and expected earnings or cash flow.
The QUANTITATIVE EQUITY TRUST seeks to achieve intermediate and long-term growth
through capital appreciation and current income by investing in common stocks
and other equity securities of well established companies with promising
prospects for providing an above average rate of return.
The BLUE CHIP GROWTH TRUST seeks to achieve long-term growth of capital (current
income is a secondary objective) by investing at least 65% of the portfolio's
total assets in the common stocks of large and medium-sized blue chip companies.
Many of the stocks in the portfolio are expected to pay dividends.
The UTILITIES TRUST seeks capital growth and current income (income above that
available from a portfolio invested entirely in equity securities) by investing,
under normal market conditions, at least 65% of the portfolio's total assets in
equity and debt securities of domestic and foreign companies in the utilities
industry.
The REAL ESTATE SECURITIES TRUST seeks to achieve a combination of long-term
capital appreciation and current income by investing, under normal market
conditions, substantially (at least 65% of total assets) in equity securities of
real estate companies, such as real estate investment trusts ("REITs").
The SMALL COMPANY VALUE TRUST seeks long-term growth of capital by investing,
under normal market conditions, primarily in small companies whose common stocks
are believed to be undervalued. Normally, the portfolio will invest at least 65%
of its total assets in companies with a market capitalization that do not exceed
the maximum market capitalization of any security in the Russell 2000 Index at
the time of purchase.
The MID CAP VALUE TRUST seeks capital appreciation by investing, under normal
market conditions, at least 65% of the portfolios total assets in equity
securities which the subadviser believes to be undervalued in the marketplace.
Normally, at least 65% of the portfolio's total assets will consist of
investments in mid-sized companies, with market capitalizations of roughly $500
million to $10 billion.
The VALUE TRUST seeks to realize an above-average total return over a market
cycle of three to five years, consistent with reasonable risk, by investing
primarily in common and preferred stocks, convertible securities, rights and
warrants to purchase common stocks, ADRs and other equity securities of
companies with equity capitalizations usually greater than $300 million.
The TACTICAL ALLOCATION TRUST seeks total return, consisting of long-term
capital appreciation and current income, by allocating the portfolio's assets
between (i) a stock portion that is designed to track the performance of the S&P
500 Composite Stock Price Index, and (ii) a fixed income portion that consists
of either five-year U.S. Treasury notes or U.S. Treasury bills with remaining
maturities of 30 days.
The EQUITY INDEX TRUST seeks to achieve investment results which approximate
the aggregate total return of publicly traded common stock which are included in
the Standard & Poor's 500 Composite Price Index. The Equity Index Trust is
available only for policies issued for applications dated prior to May 1, 2000.
The FUNDAMENTAL VALUE TRUST seeks growth of capital by investing, under normal
market conditions, primarily in common stocks of U.S. companies with market
capitalizations of at least $5 billion that the subadviser believes are
undervalued. The portfolio may also invest in U.S. companies with smaller
capitalizations.
The GROWTH & INCOME TRUST seeks long-term growth of capital and income,
consistent with prudent investment risk, by investing primarily in a diversified
portfolio of common stocks of U.S. issuers which the subadviser believes are of
high quality.
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The U.S. LARGE CAP VALUE TRUST seeks long-term growth of capital and income by
investing the portfolio's assets, under normal market conditions, primarily in
equity and equity-related securities of companies with market capitalization
greater than $500 million.
The EQUITY-INCOME TRUST seeks to provide substantial dividend income and also
long-term capital appreciation by investing primarily in dividend-paying common
stocks, particularly of established companies with favorable prospects for both
increasing dividends and capital appreciation.
The INCOME & VALUE TRUST seeks the balanced accomplishment of (a) conservation
of principal and (b) long-term growth of capital and income by investing the
portfolio's assets in both equity and fixed-income securities. The subadviser
has full discretion to determine the allocation between equity and fixed income
securities.
The BALANCED TRUST seeks current income and capital appreciation by investing
the portfolio's assets in a balanced portfolio of (i) equity securities and (ii)
fixed income securities.
The HIGH YIELD TRUST seeks to realize an above-average total return over a
market cycle of three to five years, consistent with reasonable risk, by
investing primarily in high yield debt securities, including corporate bonds and
other fixed-income securities.
The STRATEGIC BOND TRUST seeks a high level of total return consistent with
preservation of capital by giving its subadviser broad discretion to deploy the
portfolio's assets among certain segments of the fixed income market as the
subadviser believes will best contribute to achievement of the portfolio's
investment objective.
The GLOBAL BOND TRUST seeks to realize maximum total return, consistent with
preservation of capital and prudent investment management by investing the
portfolio's asset primarily in fixed income securities denominated in major
foreign currencies, baskets of foreign currencies (such as the ECU), and the
U.S. dollar.
The TOTAL RETURN TRUST seeks to realize maximum total return, consistent with
preservation of capital and prudent investment management by investing, under
normal market conditions, at least 65% of the portfolio's assets in a
diversified portfolio of fixed income securities of varying maturities. The
average portfolio duration will normally vary within a three- to six-year time
frame based on the subadviser's forecast for interest rates.
The INVESTMENT QUALITY BOND TRUST seeks a high level of current income
consistent with the maintenance of principal and liquidity, by investing
primarily in a diversified portfolio of investment grade corporate bonds and
U.S. Government bonds with intermediate to longer term maturities. The portfolio
may also invest up to 20% of its assets in non-investment grade fixed income
securities.
The DIVERSIFIED BOND TRUST seeks high total return consistent with the
conservation of capital by investing at least 75% of the portfolio's assets in
fixed income securities.
The U.S. GOVERNMENT SECURITIES TRUST seeks a high level of current income
consistent with preservation of capital and maintenance of liquidity, by
investing in debt obligations and mortgage-backed securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
derivative securities such as collateralized mortgage obligations backed by such
securities.
The MONEY MARKET TRUST seeks maximum current income consistent with preservation
of principal and liquidity by investing in high quality money market instruments
with maturities of 397 days or less issued primarily by U.S. entities.
The SMALL CAP INDEX TRUST seeks to approximate the aggregate total return of a
small cap U.S. domestic equity market index by attempting to track the
performance of the Russell 2000 Index.*
The INTERNATIONAL INDEX TRUST seeks to approximate the aggregate total return of
a foreign equity market index by attempting to track the performance of the
Morgan Stanley European Australian Far East Free Index (the "MSCI EAFE Index").*
The MID CAP INDEX TRUST seeks to approximate the aggregate total return of a mid
cap U.S. domestic equity market index by attempting to track the performance of
the S&P Mid Cap 400 Index.*
The TOTAL STOCK MARKET INDEX seeks to approximate the aggregate total return of
a broad U.S. domestic equity market index by attempting to track the performance
of the Wilshire 5000 Equity Index.*
The 500 INDEX TRUST seeks to approximate the aggregate total return of a broad
U.S. domestic equity market index by attempting to track the performance of the
S&P 500 Composite Stock Price Index.*
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The LIFESTYLE AGGRESSIVE 1000 TRUST seeks to provide long-term growth of capital
(current income is not a consideration) by investing 100% of the Lifestyle
Trust's assets in other portfolios of the Trust ("Underlying Portfolios") which
invest primarily in equity securities.
The LIFESTYLE GROWTH 820 TRUST seeks to provide long-term growth of capital with
consideration also given to current income by investing approximately 20% of the
Lifestyle Trust's assets in Underlying Portfolios which invest primarily in
fixed income securities and approximately 80% of its assets in Underlying
Portfolios which invest primarily in equity securities.
The LIFESTYLE BALANCED 640 TRUST seeks to provide a balance between a high level
of current income and growth of capital with a greater emphasis given to capital
growth by investing approximately 40% of the Lifestyle Trust's assets in
Underlying Portfolios which invest primarily in fixed income securities and
approximately 60% of its assets in Underlying Portfolios which invest primarily
in equity securities.
The LIFESTYLE MODERATE 460 TRUST seeks to provide a balance between a high level
of current income and growth of capital with a greater emphasis given to current
income by investing approximately 60% of the Lifestyle Trust's assets in
Underlying Portfolios which invest primarily in fixed income securities and
approximately 40% of its assets in Underlying Portfolios which invest primarily
in equity securities.
The LIFESTYLE CONSERVATIVE 280 TRUST seeks to provide a high level of current
income with some consideration also given to growth of capital by investing
approximately 80% of the Lifestyle Trust's assets in Underlying Portfolios which
invest primarily in fixed income securities and approximately 20% of its assets
in Underlying Portfolios which invest primarily in equity securities.
*"Standard & Poor's(R)," "S&P 500(R)," "Standard and Poor's 500(R)" and
"Standard and Poor's 400(R)" are trademarks of The McGraw-Hill Companies, Inc.
"Russell 2000(R)" is a trademark of Frank Russell Company. "Wilshire 5000(R)" is
a trademark of Wilshire Associates. "Morgan Stanley European Australian Far East
Free" and "EAFE(R)" are trademarks of Morgan Stanley & Co. Incorporated. None of
the Index Trusts are sponsored, endorsed, managed, advised, sold or promoted by
any of these companies, and none of these companies make any representation
regarding the advisability of investing in the Trust.
ISSUING A POLICY
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 generally be issued only on the lives of insureds from ages 0
through 90.
Each Policy is issued with a Policy Date, an Effective Date and an Issue Date
(see Definitions). The Issue Date is the date from which the Suicide and
Validity provisions of the Policy are determined and is the expected date of
actual delivery of the Policy to the policyowner. The Effective Date is the date
on which the first monthly deductions are taken, and is the date on which the
underwriters approve the Policy issuance. The Policy Date is the date coverage
takes effect under the Policy, provided the Company receives the minimum initial
premium at its Service Office, is the date from which charges for the first
monthly deduction are calculated, and is the date from which Policy Years,
Policy Months and Policy Anniversaries are determined.
If an application accepted by the Company is not accompanied by a check for the
initial premium and no request to backdate the Policy has been made:
(i) the Policy Date and the Effective Date will be the date the Company
receives the check at its service office, and
(ii) the Issue Date will be the date the Company issues the Policy.
The initial premium must be received within 60 days after the Issue Date, and
the policyowner must be in good health on the date the initial premium is
received. If the premium is not paid or if the application is rejected, the
Policy will be canceled and any partial premiums paid will be returned to the
applicant.
MINIMUM INITIAL FACE AMOUNT
Manufacturers U.S.A. will generally issue a Policy only if it has a Face Amount
of at least $250,000.
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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.
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 $5,000,000 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 Lives Insured meet the Company's
usual and customary underwriting standards for the coverage applied for.
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.
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 a longer time period applies. During the "Right to Examine the
Policy Period," premiums will be allocated to the Money Market Trust. After this
period has expired, premiums will then be allocated among the Investment
Accounts and or Fixed Account in accordance with the policyowner's instructions.
If the policyowner elects to cancel the Policy under this provision, the Policy
can be mailed or delivered to the Manufacturers U.S.A. agent who sold it or to
the Service Office. Immediately upon 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 in full the
payment made.
If a policyowner requests an increase in face amount which results in new
surrender charges, he or she will have the same rights as described above to
cancel the increase. If canceled, the Policy Value and the surrender charges
will be recalculated to the amounts they would have been had the increase not
taken place. A policyowner may request a refund of all or any portion of
premiums paid during the free look period, and the Policy Value and the
surrender charges will be recalculated to the amounts they would have been had
the premiums not been paid.
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 death of the last-to-die of the
Lives Insured, the Company will pay an insurance benefit. 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 less 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
This product uses the Guideline Premium Test to qualify as a life insurance
contract for purposes of Section 7702 of the Internal Revenue Code of 1986, as
amended.
GUIDELINE PREMIUM TEST
The Guideline Premium 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).
Changes to the Policy may affect the maximum amount of premiums, such as:
A change in the policy's Face Amount.
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A change in the death benefit option.
Partial Withdrawals.
Addition or deletion of supplementary benefits.
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 policyowner to
take a partial withdrawal. In addition, these changes could reduce the future
premium limitations.
MINIMUM DEATH BENEFIT
The Guideline Premium Test requires 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 youngest of the Lives Insured, or the Attained Age such person would
have reached if living. The Minimum Death Benefit Percentages are shown in the
Table of Minimum Death Benefit Percentages.
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES
ATTAINED AGE APPLICABLE PERCENTAGE
---------------------------------------------------------
40 and under.......................... 250%
45.................................... 215%
50.................................... 185%
55.................................... 150%
60.................................... 130%
65.................................... 120%
70.................................... 115%
75.................................... 105%
90.................................... 105%
95 and above.......................... 100%
To determine the Applicable Percentage in the above table, use the Attained Age
of the youngest of the Lives Insured, or the Attained Age such person would have
reached if living. For ages not shown, the Applicable Percentage can be found by
reducing the values proportionately
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
once each Policy Year after the first Policy Year. The change will occur on the
first day of the next Policy Month 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 as of 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 as of 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.
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CHANGING THE FACE AMOUNT
Subject to the limitations stated in this Prospectus, a policyowner may, upon
written request, increase or decrease the Face Amount of the Policy. The Company
reserves the right to limit a change in Face Amount so as to prevent the Policy
from failing to qualify as life insurance for tax purposes.
INCREASE IN FACE AMOUNT
Increases in Face Amount may be made once each Policy Year after the first
Policy Year. Any increase in Face Amount must be at least $50,000. An increase
will become effective at the beginning of the policy month following the date
Manufacturers U.S.A. approves the requested increase. Increases in Face Amount
are subject to satisfactory evidence of insurability. The Company reserves the
right to refuse a requested increase if any of the Lives Insureds' Attained Ages
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 usually result in the Policy being subject to
new surrender charges. There will be no new surrender charges associated with
restoration of a prior decrease in Face Amount. As with the purchase of a
Policy, a policyowner will have free look right with respect to any increase
resulting in new surrender charges.
An additional premium may be required for a face amount increase, and a new
No-Lapse Guarantee Premium will be determined, if the No-Lapse Guarantee is in
effect at the time of the face amount increase.
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. The insurance coverage eliminated
by the decrease of the oldest face amount will be deemed to be restored first.
DECREASE IN FACE AMOUNT
Decreases in Face Amount may be made once each Policy Year after the first
Policy Year. Any decrease in Face Amount must be at least $50,000. A written
request from a policy owner for a decrease in the Face Amount will be effective
at the beginning of the Policy Month following the date Manufacturers U.S.A.
approves the requested decrease. 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.
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.
The minimum initial premium is one-twelfth of the No-Lapse Guarantee Premium.
(For policies issued in the state of Florida, the minimum initial premium is
one-twelfth of the No-Lapse Guarantee Value Deduction (which is set forth in the
Table of Values in your policy).
On the Effective Date, the Net Premiums paid plus interest credited will be
allocated among the Investment Accounts or the Fixed Account in accordance with
the policyowner's instructions.
SUBSEQUENT PREMIUMS
After the payment of the initial premium, premiums may be paid at any time and
in any amount until the youngest of the Lives Insured has reached Attained Age
100, or the date such person would have reached Attained Age 100, if living,
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 policyowner wishes to pay. Manufacturers U.S.A. will send notices
to the policyowner setting forth the planned premium at the payment interval
selected by the policyowner. However, the policyowner is under no obligation to
make the indicated payment.
The Company may refuse any premium payment that would cause the Policy to fail
to qualify as life insurance under the Internal Revenue Code. The Company also
reserves the right to request evidence of insurability if a premium payment
would result in an increase in the Death Benefit that is greater than the
increase in Policy Value.
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.
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All Net Premiums received on or after the Effective Date will be allocated among
Investment Accounts or the Fixed Account as of the Business Day 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.
MAXIMUM PREMIUM LIMITATION
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.
PREMIUM ALLOCATION
Premiums may be allocated to either the Fixed 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 Fixed
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. A policyowner may change the way in which premiums are
allocated at any time without charge. The change will take effect on the date a
written request for change satisfactory to the Company is received at the
Service Office.
CHARGES AND DEDUCTIONS
AMOUNT DEDUCTED FROM PREMIUM
Manufacturers U.S.A. deducts an amount from each premium payment, equal to 7.50%
of the premium.
SURRENDER CHARGES
The Company will deduct a Surrender Charge if during the first 15 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 Withdrawal Tier Amount
(see below for a description of this amount),
- there is a decrease in Face Amount, or
- the Policy Lapses.
SURRENDER CHARGE CALCULATION
The Surrender Charge for the initial Face Amount or for the amount of any
increase in Face Amount is determined by the following formula (the calculation
is also described in words below):
Surrender Charge = (Surrender Charge Rate) x (Grading Percentage)
Surrender Charge Rate (the calculation is also described in words below)
Surrender Charge Rate = (Factor) x (Surrender Face Amount / 1000) + (82.5%) x
(Surrender Charge Premium)
DEFINITIONS OF THE FORMULA FACTORS ABOVE
Surrender Face Amount
If the Face Amount at the time of surrender is equal to or less than the initial
Face Amount, then the Surrender Face Amount is equal to the Face Amount at the
time of surrender. However, if the Face Amount has increased, then the surrender
charge is calculated separately on (a) the initial Face Amount and (b) on the
amount of Face Amount above the initial Face Amount. In the case of (a), the
Surrender Face Amount is equal to the initial Face Amount and in the case of (b)
the Surrender Face Amount is equal to the Face Amount above the initial Face
Amount.
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The Factor is set forth in the following chart:
ISSUE AGE FACTOR
------------------------------------------------
38 or younger...................... 3.75
39................................. 4.25
40................................. 4.75
41................................. 5.25
42................................. 5.75
43................................. 6.25
44................................. 6.75
45................................. 7.25
46................................. 7.75
47................................. 8.25
48 or older........................ 8.50
The Surrender Charge Premium is the lesser of:
(a) the premiums paid during the first policy year;
(b) the premium amount used to measure the maximum Surrender Charge under the
Policy;
(c) the net level annual premium ("Net Level Premium") required to provide
level insurance to attained age 100 of the younger insured based on
guaranteed maximum mortality charges and an interest rate of 4%; and
(d) $60 per $1000 of Face Amount.
Grading Percentage
The grading percentage is based on the issue age of the youngest insured and the
Policy Year in which the transaction causing the assessment of the charge occurs
as set forth in the table below:
SURRENDER CHARGE GRADING PERCENTAGE
---------------------------------------------------------
ISSUE AGES OF YOUNGER INSURED 0-75 76 77 78 79 80+
- -------------------------------------------------------------------------------------------------------
Policy Year 1.............................. 93% 92% 92% 91% 90% 90%
Policy Year 2.............................. 86% 85% 84% 83% 81% 80%
Policy Year 3.............................. 80% 78% 76% 75% 72% 70%
Policy Year 4.............................. 73% 71% 69% 66% 63% 60%
Policy Year 5.............................. 66% 64% 61% 58% 54% 50%
Policy Year 6.............................. 60% 57% 53% 50% 45% 40%
Policy Year 7.............................. 53% 50% 46% 41% 36% 30%
Policy Year 8.............................. 46% 42% 38% 33% 27% 20%
Policy Year 9.............................. 40% 35% 30% 25% 18% 10%
Policy Year 10............................. 33% 28% 23% 16% 9% 0%
Policy Year 11............................. 26% 21% 15% 8% 0%
Policy Year 12............................. 20% 14% 7% 0%
Policy Year 13............................. 13% 7% 0%
Policy Year 14............................. 6% 0%
Policy Year 15............................. 0%
Formulas Described in Words
Surrender Charge
The Surrender Charge is determined by multiplying the Surrender Charge Rate by
the Grading Percentage, a percent which starts at 100% and grades down each
policy year to zero over a period not to exceed 15 years.
Surrender Charge Rate
The Surrender Charge Rate is equal to the sum of (a) plus (b) where (a) equals
the Factor multiplied by the Surrender Face Amount divided by 1000 and (b)
equals 82.5% times the Surrender Charge Premium.
Illustration of Surrender Charge Calculation
Assumptions
50 year old male and 40 year old female (standard risks and nonsmoker
status)
Policy issued 7 years ago
$904 in premiums have been paid on the Policy in equal annual installments
over the 7 year period
the premium amount used to measure the maximum Surrender Charge under the
Policy is $2,188
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Net Level Premium for the Policy is $2,541
Face Amount of the Policy is $250,000
Policy is surrendered during the last month of the seventh policy year
Surrender Charge
The Surrender Charge to be assessed would be $1,025, determined as follows:
First, the Surrender Charge Rate is determined by applying the Surrender Charge
Rate formula as set forth below.
Surrender Charge Rate = (Factor) x (Surrender Face Amount / 1000) + (82.5%) x
(Surrender Charge Premium)
1933.30 = (4.75) x ($250,000 / 1000) + (82.5%) x (904)
The Surrender Charge Rate is equal to 1933.30.
Second, the Surrender Charge Rate is entered into the Surrender Charge formula
and the Surrender Charge is determined as set forth below.
Surrender Charge = (Surrender Charge Rate) x (Grading Percentage)
$1,025 = (1933.30) x (53%)
The Surrender Charge is equal to $1,025.
The following calculation illustrates the maximum Surrender Charge that would be
payable on a Policy under the assumptions set forth below.
Illustration of Maximum Surrender Charge Calculation
Assumptions
50 year old male and 40 year old female (standard risks and nonsmoker
status)
Policy issued 7 years ago
$2,188 in premiums have been paid on the Policy in equal annual
installments over the 7 year period
the premium amount used to measure the maximum Surrender Charge under the
Policy is $2,188
Net Level Premium for the Policy is $2,541
Face Amount of the Policy is $250,000
Policy is surrendered during the last month of the seventh policy year
Maximum Surrender Charge
The maximum Surrender Charge to be assessed would be $1,586, determined as
follows:
First, the Surrender Charge Rate is determined by applying the Surrender Charge
Rate formula as set forth below.
Surrender Charge Rate = (Factor) x (Surrender Face Amount / 1000) + (82.5%) x
(Surrender Charge Premium)
2,992.60 = (4.75) x ($250,000 / 1000) + (82.5%) x (2,188)
The Surrender Charge Rate is equal to 2,992.60.
Second, the Surrender Charge Rate is entered into the Surrender Charge formula
and the Surrender Charge is determined as set forth below.
Surrender Charge = (Surrender Charge Rate) x (Grading Percentage)
$1,586 = (2992.60) x (53%)
The maximum Surrender Charge payable on the Policy is equal to $1,586.
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Depending upon the Face Amount of the Policy, the age of the youngest insured at
issue, premiums paid under the Policy and the performance of the underlying
investment options, the Policy may have no Cash Surrender Value and therefore,
the policyowner may receive no surrender proceeds upon surrendering the Policy.
Manufacturers U.S.A. may reduce the surrender charge as described above on
policies where the anticipated annual premium is $100,000 or greater and the
Policy is issued as part of an employer sponsored split dollar or keyman
arrangement; 80% of the Surrender Charge will be waived during the first year of
the Policy, 60% during the second year and 40% during the third year. The full
Surrender Charge will be imposed if the surrender takes place in a fourth or
subsequent Policy Year.
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 Withdrawal Tier Amount to the Net Cash Surrender Value of the Policy
as at the date of the withdrawal. The Surrender Charges will be deducted from
the Policy Value at the time of the partial withdrawal on a pro-rata basis from
each of the Investment Accounts and the Fixed Account. If the amount in the
accounts is not sufficient to pay the Surrender Charges assessed, then the
amount of the withdrawal will be reduced. Whenever a portion of the surrender
charges is deducted as a result of a partial withdrawal, the Policy's remaining
surrender charges will be reduced in the same proportion that the surrender
charge deducted bears to the total surrender charge immediately before the
partial withdrawal.
WITHDRAWAL TIER AMOUNT
The Withdrawal Tier Amount is equal to 10% of the Net Cash Surrender Value as at
the last Policy Anniversary. In determining what, if any, portion of a partial
withdrawal is in excess of the Withdrawal Tier 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 Net Policy Value to cover certain charges in connection with the Policy
until the youngest of the Lives Insured reaches Attained Age 100, or the date
such person would have reached Attained Age 100, if living. If there is a Policy
Debt under the Policy, loan interest and principal will continue to be payable
at the beginning of each Policy Month. 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 mortality and expense risk charge;
(iv) a monthly charge for any supplementary benefits added to the Policy.
Unless otherwise allowed by the Company and specified by the policyowner, the
Monthly Deduction will be allocated among the Investment Accounts and the Fixed
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 $30 plus $0.08 per $1,000 of current face amount
per Policy Month in the first Policy Year. For all subsequent Policy Years, the
administration charge will not exceed $15 plus $0.02 per $1,000 of current face
amount per Policy Month. The charge is designed to cover certain administrative
expenses associated with the Policy, including maintaining policy records,
collecting premiums and processing death claims, surrender and withdrawal
requests and various changes permitted under the 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 the increases occurred.
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 Policy Month, divided by
1.0032737; and
(b) is the Policy Value as of the first day of the Policy Month prior to
deduction of monthly cost of insurance.
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The rates for the cost of insurance are blended and based upon the Attained Age,
sex, and Risk Classification of the Lives Insured.
Cost of insurance rates will generally increase with the age of each of the
Lives Insured. The first year cost of insurance rate is guaranteed.
The cost of insurance rates reflect the Company's expectations as to future
mortality experience. The rates may be re-determined 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 rates 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 Lives Insured. After the first Policy Year,
the cost of insurance will generally increase on each Policy Anniversary. The
guaranteed rates are based on the 1980 Commissioners Standard Ordinary
Smoker/Non-Smoker Mortality Tables.
CHARGES FOR SUPPLEMENTARY BENEFITS
If the Policy includes Supplementary Benefits, a charge will be made applicable
to such Supplementary Benefit.
MORTALITY AND EXPENSE RISK CHARGE
A monthly charge is assessed against the Policy Value equal to a percentage of
the Policy Value. 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:
CURRENT AND
GUARANTEED
MONTHLY MORTALITY EQUIVALENT ANNUAL
AND EXPENSE MORTALITY AND
POLICY YEAR RISKS CHARGE RISKS CHARGE
-------------------------------------------------------------------
1-20........................ 0.063% 0.75%
21+......................... 0.033% 0.40%
CHARGES FOR TRANSFERS
A charge of $25 will be imposed on each transfer in excess of twelve in a Policy
Year, other than transfers made pursuant to the Dollar Cost Averaging or Asset
Allocation Balancer programs.
REDUCTION IN CHARGES
The Policy is available for purchase by corporations and other groups or
sponsoring organizations. Group or sponsored arrangements may include reduction
or elimination of withdrawal charges and deductions for employees, officers,
directors, agents, immediate family members of the foregoing, and employees or
agents of Manufacturers Life and its subsidiaries. Manufacturers U.S.A.
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, commissions 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 policyowner,
the nature of the relationship among the insured individuals, the purpose for
which the policies are being purchased, expected persistency of the individual
policies, and any other circumstances which Manufacturers U.S.A. 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 policyowners. Manufacturers U.S.A. may
modify from time to time, on a uniform basis, both the amounts of reductions and
the criteria for qualification.
In addition, groups and 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.
SPECIAL PROVISIONS FOR EXCHANGES
The Company will permit owners of certain fixed life insurance contracts
issued by the Company to exchange their contracts for the Policies described
in this prospectus (and likewise, owners of Policies described in this
prospectus may also exchange their Policies for certain fixed life insurance
contracts issued by the Company). Policyowners considering an exchange should
consult their tax advisers as to the tax consequences of an exchange.
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COMPANY TAX CONSIDERATIONS
At the present time, the Company makes no specific 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 policyowner
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 Fixed 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.
FIXED ACCOUNT
Amounts in the Fixed 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 U.S.A. For a detailed description of the Fixed
Account, see "The General Account -- Fixed 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 canceled whenever amounts are deducted, transferred
or withdrawn from the sub-account. The number of units credited or canceled for
a specific transaction is based on the dollar amount of the transaction divided
by the value of the unit 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 and
$12.50 depending on the sub-account. 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) 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
transactions are made on that day; and
(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 transactions were made for that day;
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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.
TRANSFERS OF POLICY VALUE
At any time, a policyowner may transfer Policy Value from one sub-account to
another or to the Fixed 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.
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.
While the Policy is in force, the policyowner may transfer the Policy Value from
any of the Investment Accounts to the Fixed Account without incurring transfer
charges:
(a) within eighteen months after the Issue Date; or
(b) within 60 days of the effective date of a material change in the investment
objectives of any of the sub-accounts or within 60 days of the date of
notification of such change, whichever is later.
TRANSFER CHARGES
A policyowner 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 deducted from the Investment Account or the Fixed
Account to which the transfer is being made. All transfer requests received by
the Company on the same Business Day are treated as a single transfer request.
Transfers under the Dollar Cost Averaging and Asset Allocation Balancer programs
do not count against the number of free transfers permitted per Policy Year.
TRANSFERS INVOLVING FIXED ACCOUNT
The maximum amount that may be transferred from the Fixed Account in any one
Policy Year is the greater of $500 or 15% of the Fixed Account Value at the
previous Policy Anniversary. Any transfer which involves a transfer out of the
Fixed 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 U.S.A. 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.
DOLLAR COST AVERAGING
The Company will offer policyowners a Dollar Cost Averaging program. Under the
Dollar Cost Averaging program the policyowner will designate an amount which
will be transferred at predetermined intervals from one Investment Account into
any other Investment Account(s) or the Fixed Account. Currently, no charge will
be made for this program. If insufficient funds exist to effect a Dollar Cost
Averaging transfer, the transfer will not be effected and the policyowner will
be so notified.
The Company reserves the right to cease to offer this program as of 90 days
after written notice is sent to the policyowner.
ASSET ALLOCATION BALANCER TRANSFERS
Under the Asset Allocation Balancer program the policyowner will designate an
allocation of Policy Value among Investment Accounts. At six-month intervals
beginning six months after the Policy Date, the Company will move amounts among
the Investment Accounts as necessary to maintain the policyowner's chosen
allocation. A change to the policyowner premium allocation instructions will
automatically result in a change in Asset Allocation Balancer instructions so
that the two are identical unless the policyowner either instructs Manufacturers
U.S.A. otherwise or has elected the Dollar Cost Averaging program. Currently,
there is no charge for this program; however, the Company reserves the right to
institute a charge on 90 days' written notice to the policyowner.
The Company reserves the right to cease to offer this program as of 90 days
after written notice is sent to the policyowner.
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POLICY LOANS
At any time while this Policy is in force, a policyowner may borrow against the
Policy Value of the Policy. The amount of any loan cannot exceed 90% of the
Policy's Net Cash Surrender Value. 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."
LOAN VALUE
The Loan Value is equal to the Policy's Net 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 Fixed 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." In addition, a policy
loan may result in a Policy's failing to satisfy the No-Lapse Guarantee
Cumulative Premium Test since the Policy Debt is subtracted from the sum of the
premiums paid in determining whether this test is satisfied. Finally, a policy
loan will affect the amount payable on the death of the last-to-die of the Lives
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 5.25%. If the interest due on a Policy Anniversary is not paid by the
policyowner, the interest will be borrowed against the Policy.
The Policy will go into default at any time the Policy Debt exceeds the Policy
Value. At least 61 days prior to termination, the Company will send the
policyowner a notice of the pending termination. Payment of interest on the
Policy Debt during the 61 day grace period will bring the policy out of default.
LOAN ACCOUNT
When a loan is made, an amount equal to the loan, discounted by 4%, will be
deducted from the Investment Accounts or the Fixed Account and transferred to
the Loan Account. The policyowner may designate how the amount to be transferred
to the Loan Account is allocated among the accounts from which the transfer is
to be made. In the absence of instructions, the amount to be transferred will be
allocated to each account in the same proportion as the value in each Investment
Account and the Fixed Account bears to the Net Policy Value. A transfer from an
Investment Account will result in the cancellation of units of the underlying
sub-account equal in value to the amount transferred from the Investment
Account. However, since the Loan Account is part of the Policy Value, transfers
made in connection with a loan will not change the Policy Value.
INTEREST CREDITED TO THE LOAN ACCOUNT
Interest will be credited to amounts in the Loan Account at an effective annual
rate of at least 4.00%. The actual rate credited is equal to the rate of
interest charged on the policy loan less the Loan Interest Credited
Differential, which is currently 1.25% and is guaranteed not to exceed this
amount.
LOAN REPAYMENTS
Policy Debt may be repaid in whole or in part at any time prior to the death of
the last-to-die of the Lives 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 Fixed Account or the Investment Accounts. Loan repayments will be
allocated first to the Fixed Account until the associated Loan sub-account is
reduced to zero and then to each Investment Account in the same proportion as
the value in the corresponding Loan Sub-Account bears to the value of the Loan
Account.
Amounts paid to the Company not specifically designated in writing as loan
repayments will be treated as premiums.
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. If there have been any prior Face
Amount increases, the Surrender Charge will be the sum of the Surrender Charge
for the Initial Face Amount plus the Surrender Charge for each increase. The Net
Cash Surrender Value will be determined as of the end of the Business Day on
which Manufacturers U.S.A. 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.
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PARTIAL WITHDRAWALS
A policyowner may make a partial withdrawal of the Net Cash Surrender Value once
each Policy Month after the first Policy Anniversary. The policyowner may
specify the portion of the withdrawal to be taken from each Investment Account
and the Fixed 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.
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
Unless the No-Lapse Guarantee is in effect, a Policy will go into default if at
the beginning of any Policy Month the Policy's Net Cash Surrender Value would be
zero or below 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 U.S.A.
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 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.
NO-LAPSE GUARANTEE
(See below for provisions applicable for policies issued in Florida)
In those states where it is permitted, as long as the No-Lapse Guarantee
Cumulative Premium Test is satisfied during the No-Lapse Guarantee Period, as
described below, the Company will guarantee that the Policy will not go into
default, even if adverse investment experience or other factors should cause the
Policy's Net Cash Surrender Value to be insufficient to meet the monthly
deductions due at the beginning of a Policy Month.
The Monthly No-Lapse Guarantee Premium is one-twelfth of the No-Lapse Guarantee
Premium.
The No-Lapse Guarantee Premium is set at issue and reflects any Additional
Rating and Supplementary Benefits, if applicable. It is subject to change if the
face amount of the Policy is changed, if there is a Death Benefit Option change,
or if there is any change in the supplementary benefits added to the Policy or
in the risk classification of any Lives Insured because of a change in smoking
status.
The No-Lapse Guarantee Period is described under "Definitions".
While the No-Lapse Guarantee is in effect, the Company will determine at the
beginning of the Policy Month that the Policy would otherwise be in default,
whether the No-Lapse Guarantee Cumulative Premium Test, described below, has
been met. If it has not been satisfied, the Company will notify the policyowner
of that fact and allow a 61-day grace period in which the policyowner may make a
premium payment sufficient to keep the policy from going into default. This
required payment, as described in the notification to the policyowner, will be
equal to the lesser of:
(a) the outstanding premium requirement to satisfy the No-Lapse Guarantee
Cumulative Premium Test at the date of default, plus the Monthly No-Lapse
Guarantee Premium due for the next two Policy Months, or
(b) the amount necessary to bring the Net Cash Surrender Value to zero plus the
monthly deductions due, plus the next two monthly deductions plus the
applicable premium load.
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If the required payment is not received by the end of the grace period, the
No-Lapse Guarantee and the Policy will terminate.
Policies Issued in Florida. The following changes are applicable for
Policies issued in Florida:
A No-Lapse Guarantee Value Test (as opposed to a No-Lapse Guarantee Cumulative
Premium Test) is used to determine whether the No-Lapse Guarantee is in effect.
The No-Lapse Guarantee Value Test is satisfied if, as of the beginning of the
Policy Month that your Policy would otherwise be in default, the sum of all
premiums paid less:
(a) the sum of the No-Lapse Guarantee Value Deductions,
(b) any gross withdrawals, and
(c) any Policy Debt
is equal to or greater than zero.
The No-Lapse Guarantee Value Deduction is set forth in the Table of Values in
your Policy. It is set at issue and is recalculated, prospectively, whenever any
of the following changes occur under the Policy:
the face amount of insurance changes.
a supplementary benefit is added, changed or terminated.
the risk classification of the life insured changes.
a temporary Additional Rating is added (due to a face amount increase), or
terminated.
The Death Benefit Option changes.
If, during the No-Lapse Guarantee Period, the No-Lapse Guarantee Value Test has
not been met, the No-Lapse Guarantee Value Test (as opposed to the No-Lapse
Guarantee Cumulative Premium Test) will be used to determine the amount
necessary to keep your Policy from going into default. This required payment
will be equal to the lesser of:
(a) the amount necessary to satisfy the No-Lapse Guarantee Value Test at the
date of default, plus the sum of two monthly No-Lapse Guarantee Value
Deductions, or
(b) the amount necessary to bring the Net Cash Surrender Value to zero plus:
1. the monthly deductions due,
2. the next two monthly deductions, and
3. the applicable premium charge.
NO-LAPSE GUARANTEE CUMULATIVE PREMIUM TEST
The No-Lapse Guarantee Cumulative Premium Test is satisfied if, as of the
beginning of the Policy Month that the Policy would otherwise be in default, the
sum of all premiums paid to date less any gross withdrawals and less any Policy
Debt, is at least equal to the sum of the Monthly No-Lapse Guarantee Premiums
due from the Policy Date to the date of the test.
OPTIONAL EXTENDED NO-LAPSE GUARANTEE
In states where approved, an optional rider may be added to the Policy that
extends the No-Lapse Guarantee Period to the earlier of: (a) termination of the
Policy or the rider, (b) subject to any applicable state limitations, the number
of years selected by the Policyowner and (c) age 100 of the life insured's. (The
rider may be terminated at any time but cannot be reinstated once terminated.)
In order for the Extended No-Lapse Guarantee to be applicable a Cumulative
Premium Test must be satisfied. This test is described in the rider. The cost of
the rider varies by issue age and Face Amount and a change in the Face Amount of
the Policy may affect the cost of the rider. Neither the No-Lapse Guarantee nor
the Extended No-Lapse Guarantee apply to the Term Rider.
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 policyowner can reinstate a Policy which has terminated after going into
default at any time within 21 days following the date of termination without
furnishing evidence of insurability, subject to the following conditions:
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(a) All Lives Insured's risk classifications are standard or preferred, and
(b) All Lives Insured's Attained Ages are less than 46.
A policyowner can reinstate a Policy which has terminated after going into
default at any time within the five-year period following the date of
termination subject to the following conditions:
(a) Evidence of all Lives Insured's insurability, or on the survivor(s) who
were insured at the end of the grace period, satisfactory to the Company is
provided to the Company;
(b) A premium equal to the amount that was required to bring the Policy out of
default immediately prior to termination, plus the next two monthly
deductions;
(c) The Policy cannot be reinstated if any of the Lives Insured die after the
Policy has terminated.
If the reinstatement is approved, the date of reinstatement will be the later of
the date the Company approves the policyowner's request or the date the required
payment is received at the Company's Service Office. In addition, any surrender
charges will be reinstated to the amount they were at the date of default. The
Policy Value on the date of reinstatement, prior to the crediting of any Net
Premium paid on the reinstatement, will be equal to the Policy Value on the date
the Policy terminated.
THE GENERAL ACCOUNT
The general account of Manufacturers U.S.A. 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 U.S.A. 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 U.S.A. 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 provisions of
the federal securities laws relating to the accuracy and completeness of
statements made in a prospectus.
FIXED ACCOUNT
A policyowner may elect to allocate net premiums to the Fixed Account or to
transfer all or a portion of the Policy Value to the Fixed Account from the
Investment Accounts. Manufacturers U.S.A. will hold the reserves required for
any portion of the Policy Value allocated to the Fixed Account in its general
account. Transfers from the Fixed Account to the Investment Accounts are subject
to restrictions.
POLICY VALUE IN THE FIXED ACCOUNT
The Policy Value in the Fixed 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 FIXED ACCOUNT
An allocation of Policy Value to the Fixed Account does not entitle the
policyowner to share in the investment experience of the general account.
Instead, Manufacturers U.S.A. guarantees that the Policy Value in the Fixed
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
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policyowner pays the planned premiums, allocates all net premiums only to the
general account and makes no transfers, partial withdrawals, or policy loans,
the minimum amount and duration of the death benefit of the Policy will be
determinable and guaranteed.
OTHER PROVISIONS OF THE POLICY
POLICYOWNER RIGHTS
Unless otherwise restricted by a separate agreement, the policyowner 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
policyowner dies before the insured.
Change or revoke a contingent owner.
Change or revoke a beneficiary.
ASSIGNMENT OF RIGHTS
Manufacturers U.S.A. will not be bound by an assignment until it receives a copy
of the assignment at its Service Office. Manufacturers U.S.A. assumes no
responsibility for the validity or effects of any assignment.
BENEFICIARY
One or more beneficiaries of the Policy may be appointed by the policyowner by
naming them in the application. Beneficiaries may be appointed in three classes
- -- primary, secondary, and final. Beneficiaries may also be revocable or
irrevocable. Unless an irrevocable designation has been elected, the beneficiary
may be changed by the policyowner during the Lives Insured lifetime by giving
written notice to Manufacturers U.S.A. in a form satisfactory to the Company.
The change will take effect as of the date such notice is signed. If the Life
Insured dies and there is no surviving beneficiary, the policyowner, or the
policyowner's estate if the policyowner is the Life Insured, will be the
beneficiary. If a beneficiary dies before the seventh day after the death of the
Life Insured, the Company will pay the insurance benefit as if the beneficiary
had died before the Life Insured.
INCONTESTABILITY
Manufacturers U.S.A. will not contest the validity of a Policy after it has
been in force during any Lives 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 lifetime of the Lives Insured
for two years. If a Policy has been reinstated and been in force during the
lifetime of the Lives Insured 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 stated age or sex or both of any of the Lives Insured in the Policy are
incorrect, Manufacturers U.S.A. will change the Face Amount 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 any of the Lives Insured dies by suicide within two years after the Issue
Date, the Policy will terminate and the Company will pay only the premiums paid
less any partial Net Cash Surrender Value withdrawal and less any Policy Debt.
If any of the Lives Insured dies by suicide within two years after the effective
date of an applied for increase in Face Amount, the Company will credit the
amount of any Monthly Deductions taken for the increase and reduce the Face
Amount to what it was prior to the increase. If the last death is by suicide,
the Death Benefit for that increase will be limited to the Monthly Deductions
taken for the increase.
The Company reserves the right to obtain evidence of the manner and cause of
death of the Lives Insured.
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SUPPLEMENTARY BENEFITS
Subject to certain requirements, one or more supplementary benefits may be added
to a Policy, including the Estate Preservation Rider which provides additional
term insurance at no extra charge during the first four Policy Years to protect
against application of the "three year contemplation of death" rule and an
option to split the Policy into two individual policies upon divorce, or certain
federal tax law changes without evidence of insurability (the "Policy Split
Option"). 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. (For
policies issued in the state of Maryland, there is an additional charge of 6
cents per $1,000 of Face Amount for the Estate Preservation Rider.)
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 U.S.A. does not make any
guarantee regarding the tax status of any policy or any transaction regarding
the policies.
The Policies may be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if the use of such
Policies in any such arrangement, the value of which depends in part on the tax
consequences, is contemplated, a qualified tax adviser should be consulted for
advice on the tax attributes of the particular arrangement.
LIFE INSURANCE QUALIFICATION
There are several requirements that must be met for a Policy to be considered a
Life Insurance Contract under the Internal Revenue Code, and thereby to enjoy
the tax benefits of such a contract:
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 Policyowner 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 and
Cash Value Corridor Test. By limiting cash value at any time to the net single
premium that would be required in order to fund future benefits under the
Policy, the Cash Value Accumulation Test in effect 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 that 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 policyowner 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.
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If it is subsequently determined that a Policy does not satisfy Section 7702,
the Company may take whatever steps are appropriate and reasonable to attempt to
cause such a Policy to comply with Section 7702. For these reasons, the Company
reserves the right to restrict Policy transactions as necessary to attempt to
qualify it as a life insurance contract under Section 7702.
DIVERSIFICATION
Section 817(h) of the Code requires that the investments of the Separate Account
be "adequately diversified" in accordance with Treasury regulations in order for
the Policy to qualify as a life insurance contract under Section 7702 of the
Code (discussed above). The Separate Account, through the Trust, intends to
comply with the diversification requirements prescribed in Treas. Reg. Sec.
1.817-5, which affect how the Trust's assets are to be invested. The Company
believes that the Separate Account will thus meet the diversification
requirement, and the Company will monitor continued compliance with the
requirement.
STATE LAW
A policy must qualify as a valid life insurance contract under applicable state
law. State regulations require that the policyowner 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
policyowner's gross income. The IRS has stated in published rulings that a
variable policyowner will be considered the owner of separate account assets if
the policyowner possesses incidents of ownership in those assets, such as the
ability to exercise investment control over the assets. The Treasury Department
has also announced, in connection with the issuance of regulations concerning
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor (i.e., the policyowner), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyowners may direct their
investments to particular sub-accounts without being treated as owners of the
underlying assets". As of the date of this prospectus, no such guidance has been
issued.
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that policyowners were not owners of separate account assets. For example, the
Policy has many more portfolios to which policyowners may allocate premium
payments and Policy Values than were available in the policies described in the
rulings. These differences could result in an owner being treated as the owner
of a pro-rata portion of the assets of the Separate Account. In addition, the
Company does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. The Company therefore reserves the right to modify the Policy as
necessary to attempt to prevent an owner from being considered the owner of a
pro rata share of the assets of the Separate Account.
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 policyowner or beneficiary.
DEATH BENEFIT
The death benefit under the Policy should be excludible from the gross income of
the beneficiary under Section 101(a)(1) of the Code.
CASH VALUES
Generally, the policyowner will not be deemed to be in constructive receipt of
the Policy Value, including increments thereof, until there is a distribution.
This includes additions attributable to interest, dividends, appreciation or
gains realized on transfers among sub-accounts.
INVESTMENT IN THE POLICY
Investment in the Policy means:
the aggregate amount of any premiums or other consideration paid for a
Policy; minus
the aggregate amount, other than loan amounts, received under the Policy
which has been excluded from the gross income of
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the policyowner (except that the amount of any loan from, or secured by, a
Policy that is a modified endowment contract ("MEC"), to the extent such
amount has been excluded from gross income, will be disregarded); plus
the amount of any loan from, or secured by a Policy that is a MEC to the
extent that such amount has been included in the gross income of the
policyowner.
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, 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 or surrender, 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
policyowner 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 policyowner.
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 policyowner 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:
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.
Second, loans taken from or secured by such a Policy and assignments or
pledges of any part of its value are treated as partial withdrawals from
the Policy and taxed accordingly. Past-due loan interest that is added to
the loan amount is treated as a loan.
Third, a 10% additional income tax is imposed on the portion of any
distribution (including distributions on surrender) from, or loan taken
from or secured by, such a policy that is included in income except where
the distribution or loan:
- is made on or after the policyowner attains age 591/2;
- is attributable to the policyowner becoming disabled; or
- is part of a series of substantially equal periodic payments for the
life (or life expectancy) of the policyowner or the joint lives (or
joint life expectancies) of the policyowner and the policyowner's
beneficiary.
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").
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The rules relating to whether a Policy will be treated as a MEC are extremely
complex and cannot be adequately described in the limited confines of this
summary. Therefore, a current or prospective policyowner should consult with a
competent adviser to determine whether a transaction will cause the Policy to be
treated as a MEC.
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 any the first seven Policy Years, the
seven-pay premium limit is recalculated as if the policy had been originally
issued at the reduced benefit level. Failure to comply would result in
classification as a MEC regardless of any efforts by the Company to provide a
payment schedule that will not violate the seven pay test.
Exchanges
A life insurance contract received in exchange for a MEC will also be treated as
a MEC.
Processing of Premiums
If a premium is received which would cause the Policy to become a MEC within 23
days of the next Policy Anniversary, the Company will not apply the portion of
the premium which would cause MEC status ("excess premium") to the Policy when
received. The excess premium will be placed in a suspense account until the next
anniversary date, at which point the excess premium, along with interest, earned
on the excess premium at a rate of 3.5% from the date the premium was received,
will be applied to the Policy. (Any amount that would still be excess premium on
the next anniversary will be refunded to the policyowner.) The policyowner will
be advised of this action and will be offered the opportunity to have the
premium credited as of the original date received or to have the premium
returned. If the policyowner does not respond, the premium and interest will be
applied to the Policy as of the first day of the next anniversary.
If a premium is received which would cause the Policy to become a MEC more than
23 days prior to the next Policy Anniversary, the Company will refund any excess
premium to the policyowner. The portion of the premium which is not excess will
be applied as of the date received. The policyowner will be advised of this
action and will be offered the opportunity to return the premium and have it
credited to the account as of the original date received.
If in connection with the application or issue of the Policy, the policyowner
acknowledges that the policy is or will become a MEC, excess premiums that would
cause MEC status will be credited 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
policyowner 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 Split Options
This option permits a Policy to be split into two other individual Policies upon
the occurrence of a divorce of the lives insured or certain changes in federal
estate tax law. The purchase and exercise of the policy split option could have
adverse tax consequences. For example, it is not clear whether a policy split
will be treated as a nontaxable exchange under Sections 1031 through 1043 of the
Code. If a policy split is not treated as a nontaxable exchange, a split could
result in the recognition of taxable income in an amount up to any gain in the
Policy at the time of the split. It is also not clear whether the cost of the
policy split option, which is deducted monthly from Policy Value, will be
treated as a taxable distribution. Before purchasing the policy split option or
exercising rights provided by the policy split option, please consult with a
competent tax adviser regarding the possible consequences.
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.
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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 policyowner is an individual, and if the taxpayer is a business and is
not the policyowner, 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 policyowner generally will not recognize gain upon the exchange of a Policy
for another life insurance policy covering the same lives insured and issued by
the Company or another insurance company, except to the extent that the
policyowner receives cash in the exchange or is relieved of Policy indebtedness
as a result of the exchange. The receipt of cash or forgiveness of indebtedness
is treated as "boot" which is taxable up to the amount of the gain in the
policy. In no event will the gain recognized exceed the amount by which the
Policy Value (including any unpaid loans) exceeds the policyowner's Investment
in the Policy.
OTHER TRANSACTIONS
A transfer of the Policy, a change in the owner, a change in the beneficiary,
and certain other changes to the Policy, as well as particular uses of the
Policy (including use in a so called "split-dollar" arrangement) may have tax
consequences depending upon the particular circumstances and should not be
undertaken prior to consulting with a qualified tax adviser. For instance, if
the owner transfers the Policy or designates a new owner in return for valuable
consideration (or, in some cases, if the transferor is relieved of a liability
as a result of the transfer), then the Death Benefit payable upon the death of
the Insured may in certain circumstances be includible in taxable income to the
extent that the Death Benefit exceeds the prior consideration paid for the
transfer and any premiums or other amounts subsequently paid by the transferee.
Further, in such a case, if the consideration received exceeds the transferor's
Investment in the Policy, the difference will be taxed to the transferor as
ordinary income.
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the individual
circumstances of each policyowner 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 U.S.A. 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
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may delay for up to six months the payment from the Fixed Account of any policy
loans, surrenders, partial withdrawals, or insurance benefit. In the case of any
such payments from any Investment Account, the Company may delay payment during
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 (ii) and (iii)
exist.
REPORTS TO POLICYOWNERS
Within 30 days after each Policy Anniversary, Manufacturers U.S.A. will send
the policyowner a statement showing, among other things:
the amount of death benefit;
the Policy Value and its allocation among the Investment Accounts, the
Fixed Account and the Loan Account;
the value of the units in each Investment Account to which the Policy Value
is allocated;
the Policy Debt and any loan interest charged since the last report;
the premiums paid and other Policy transactions made during the period
since the last report; and
any other information required by law.
Each policyowner 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
Manulife Financial Services, LLC ("Manulife Securities"), an indirect
wholly-owned subsidiary of MFC, will act as the principal underwriter of, and
continuously offer, the Policies pursuant to a Distribution Agreement with
Manufacturers U.S.A. Manulife Securities is registered as a broker-dealer
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers. Manulife Securities. is located at 73
Tremont Street, Boston, MA 02108 and is organized as a Delaware limited
liability company. The managing member of Manulife Securities is Manufacturers
U.S.A. The Policies will be sold by registered representatives of either
Manulife Securities or other broker-dealers having distribution agreements
with Manulife Securities who are also authorized by state insurance
departments to do so. The Policies will be sold in all states of the United
States except New York.
A registered representative will receive commissions not to exceed 105% of
premiums in the first year, 2% of all premiums paid in the second year and
after, and after the second anniversary 0.15% of the Policy Value per year.
Representatives who meet certain productivity standards with regard to the sale
of the Policies and certain other policies issued by Manufacturers U.S.A. or
Manufacturers Life will be eligible for additional compensation.
RESPONSIBILITIES OF MANUFACTURERS LIFE
Manufacturers Life and The Manufacturers Life Insurance Company (U.S.A.),
("Manufacturers USA"), have entered into an agreement with Manulife Securities
pursuant to which Manufacturers Life or Manufacturers USA, on behalf of
Manulife Securities will pay the sales commissions in respect of the Policies
and certain other policies issued by Manufacturers U.S.A., prepare and
maintain all books and records required to be prepared and maintained by
Manulife Securities with respect to the policies and such other policies, and
send all confirmations required to be sent by Manulife Securities with respect
to the Policies and such other policies. Manulife Securities 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.
MFC has also entered into a Service Agreement with Manufacturers U.S.A. pursuant
to which MFC will provide to Manufacturers U.S.A. with issue, administrative,
general services and recordkeeping functions on behalf of Manufacturers U.S.A.
with respect to all of its insurance policies including the Policies.
Finally, Manufacturers U.S.A. may, from time to time in its sole discretion,
enter into one or more reinsurance agreements with other life insurance
companies under which policies issued by it may be reinsured, such that its
total amount at risk under a policy would be limited for the life of an insured.
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VOTING RIGHTS
As stated previously, all of the assets held in each sub-account of the Separate
Account will be invested in shares of a particular Portfolio of the Trust.
Manufacturers U.S.A. 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 U.S.A. will vote shares held in the sub-accounts in accordance
with instructions received from policyowners having an interest in such
sub-accounts. Shares held in each sub-account for which no timely instructions
from policyowners are received, including shares not attributable to the
Policies, will be voted by Manufacturers U.S.A. 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 U.S.A. to vote shares held in the Separate Account in its own
right, it may elect to do so.
The number of shares in each sub-account for which instructions may be given by
a policyowner is determined by dividing the portion of the Policy Value derived
from participation in that sub-account, if any, by the value of one share of the
corresponding Portfolio. The number will be determined as of a date chosen by
Manufacturers U.S.A., 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 U.S.A. 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 U.S.A. reasonably disapproves such changes in accordance
with applicable federal regulations. If Manufacturers U.S.A. does disregard
voting instructions, it will advise policyowners of that action and its reasons
for such action in the next communication to policyowners.
SUBSTITUTION OF PORTFOLIO SHARES
It is possible that in the judgment of the management of Manufacturers U.S.A.,
one or more of the Portfolios may become unsuitable for investment by the
Separate Account because of a change in investment policy or a change in the
applicable laws or regulations, because the shares are no longer available for
investment, or for some other reason. In that event, Manufacturers U.S.A. may
seek to substitute the shares of another Portfolio or of an entirely different
mutual fund. Before this can be done, the approval of the SEC. and one or more
state insurance departments may be required.
Manufacturers U.S.A. 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
The Service Office will perform administrative functions, such as decreases,
increases, surrenders and partial withdrawals, and fund transfers on behalf of
the Company.
All records and accounts relating to the Separate Account and the Portfolios
will be maintained by the Company. All financial transactions will be handled by
the Company. All reports required to be made and information required to be
given will be provided by the Company.
STATE REGULATIONS
Manufacturers U.S.A. 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 U.S.A. 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.
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INDEPENDENT AUDITORS
The consolidated financial statements of Manufacturers Life Insurance Company of
America and Separate Account Three of The Manufacturers Life Insurance Company
of America at December 31, 2000 and 1999, and for each of the three years in the
period ended December 31, 2000, appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon appearing elsewhere herein, and are included in
reliance upon such reports given on the authority of such firm as experts in
accounting and auditing.
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 SEC'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 U.S.A.'s Home
Office, the address and telephone number of which are on the first page of the
prospectus.
OFFICERS AND DIRECTORS
- --------------------------------------------------------------------------------
Position with
Name Manufacturers U.S.A. Principal Occupation
- ---- -------------------- --------------------
James Boyle Director President of U.S. Annuities, Manulife
(42)** Financial, July 1999 to present; Vice
President, Institutional Markets,
Manulife Financial, May 1998 to June
1999; Vice President, Administration of
U.S. Annuities, Manulife Financial,
September 1996 to May 1998; Vice
President, Treasurer and Chief
Administrative Officer, North American
Funds, June 1994 to September 1996.
Robert A. Cook Senior Vice President, Senior Vice President, U.S. Individual
(45)** U.S. Insurance; Director Insurance, The Manufacturers Life
Insurance Company, January 1999 to
present; Vice President, Product
Management, The Manufacturers Life
Insurance Company, January 1996 to
December 1998; Sales and Marketing
Director, The Manufacturers Life
Insurance Company, 1994 to 1995.
Peter Copestake Vice President, Finance Vice President & Treasurer, The
(45)*** Manufacturers Life Insurance Company,
November 1999 to present; Vice
President, Asset Liability Management,
Canadian Imperial Bank of Commerce
(CIBC), 1991 to 1999; Director, Capital
Management, Bank of Montreal, 1986-1990;
Inspector General of Banks, Department
of Finance, 1980-1985.
John D. DesPrez III Chairman and President Executive Vice President, U.S.
(43)** Operation, The Manufacturers Life
Insurance Company, January 1999 to date;
Senior Vice President, U.S. Annuities,
The Manufacturers Life Insurance
Company, September 1996 to December
1998; President of The Manufacturers
Life Insurance Company of North America,
September 1996 to December, 1998; Vice
President, Mutual Funds, North American
Security Life Insurance Company, ,
January 1995 to September 1996.
James D.Gallagher Vice President, Vice President, US Law and Government
(45)** Secretary and General Relations, U.S. Operations, The
Counsel Manufacturers Life Insurance Company,
January 1996 to present; President, The
Manufacturers Life Insurance Company of
New York, August 1999 to present, Vice
President, Secretary and General
Counsel, The Manufacturers Life
Insurance Company of America, January
1997 to present; Secretary and General
Counsel, Manufacturers Adviser
Corporation, January 1997 to present;
Vice President, Secretary and General
Counsel, The Manufacturers Life
Insurance Company of North America, 1994
to present.
Donald Guloien Executive Vice President Executive Vice President & Chief
(44)*** and Chief Investment Investment Officer, The Manufacturers
Officer Life Insurance Company, March 2001 to
Present; Executive Vice President,
Business Development, The Manufacturers
Life Insurance Company, January 1999 to
March 2001; Senior Vice President,
Business Development, The Manufacturers
Life Insurance Company, 1994 to December
1998.
41
46
- --------------------------------------------------------------------------------
Position with
Name Manufacturers U.S.A. Principal Occupation
- ---- -------------------- --------------------
Geoffrey Guy Director Executive Vice President and Chief
(53)*** Actuary, The Manufacturers Life
Insurance Company, February 2000 to
present; Senior Vice President and Chief
Actuary, The Manufacturers Life
Insurance Company, 1996 to 2000; Vice
President and Chief Actuary, The
Manufacturers Life Insurance Company,
1993 to 1996; Vice President and Chief
Financial Officer, U.S. Operations, The
Manufacturers Life Insurance Company,
1987 to 1993.
John Lyon Vice President and Chief Vice President & Chief Financial
(48) *** Financial Officer, Officer, Investments, The Manufacturers
Investments; Director Life Insurance Company; April 2001 to
Present; Vice President, Business
Development, The Manufacturers Life
Insurance Company, 1995-2001; Assistant
Vice President, Business Development,
The Manufacturers Life Insurance
Company, 1994-1995; Director/Manager,
Corporate Finance, The Manufacturers
Life Insurance Company, 1992-1994.
James O'Malley Senior Vice President, Senior Vice President, U.S. Pensions,
(54)*** U.S. Group Pension; The Manufacturers Life Insurance
Director Company, January 1999 to present; Vice
President, Systems New Business
Pensions, The Manufacturers Life
Insurance Company, 1984 to December
1998.
Rex Schaybaugh, Jr. Director Member, Dykema Gossett, PLLC, 1982
(51)**** to present
John Ostler Vice President and Vice President and Chief Financial
(47)** Chief Financial Officer Officer, U.S. Operations, The
Manufacturers Life Insurance Company,
October 1, 2000 to present; Vice
President and Corporate Actuary, The
Manufacturers Life Insurance Company,
March 1998 to September 2000; Vice
President & CFO U.S. Individual
Insurance, The Manufacturers Life
Insurance Company, 1992 to March 1998;
Vice President, U.S. Insurance Products,
The Manufacturers Life Insurance
Company, 1990 - 1992; Assistant Vice
President & Pricing Actuary, US
Insurance, The Manufacturers Life
Insurance Company, 1988-1990.
Warren Thomson Senior Vice President, Senior Vice President, Investments, The
(46)*** Investments Manufacturers Life Insurance Company,
May 2001 to Present; President, Norfolk
Capital Partners Inc. 2000 - May 2001;
Managing Director, Public Sector
Finance, New Capital Group Inc.
1995-2000; Tax Partner, Coopers &
Lybrand Chartered Accounts, 1994-1995;
Taxation Vice President, The
Manufacturers Life Insurance Company,
1987-1994.
Denis Turner Vice President and Vice President and Chief Accountant,
(44)*** Treasurer U.S. Division, The Manufacturers Life
Insurance Company, May 1999 to present;
Vice President and Treasurer, The
Manufacturers Life Insurance Company of
America, May 1999 to present; Assistant
Vice President, Financial Operations,
Reinsurance Division, The Manufacturers
Life Insurance Company, February 1998 to
April 1999; Assistant Vice President &
Controller, Reinsurance Division, The
Manufacturers Life Insurance Company,
November 1995, to January 1998,
Assistant Vice President, Corporate
Controllers, The Manufacturers Life
Insurance Company, January 1989 to
October 1995.
- --------------------------------------------------------------------------------
** Principal business address is Manulife Financial, 73 Tremont Street,
Boston, MA 02108.
*** Principal business address is Manulife Financial, 200 Bloor Street,
Toronto, Ontario Canada M4W 1E5.
**** Principal business address is Dykema Gossett, 800 Michigan National Tower,
Lansing, Michigan 48933.
42
47
OPTIONAL TERM RIDER
The Policy may be issued with an optional term insurance rider (the "Term
Rider"). The benefit of the term rider is that the cost of insurance rates will
always be less than or equal to the cost of insurance rates on the Policy.
HOWEVER, UNLIKE THE DEATH BENEFIT UNDER THE POLICY, THE DEATH BENEFIT UNDER THE
TERM RIDER IS NOT PROTECTED BY THE NO LAPSE GUARANTEE AFTER THE SECOND POLICY
YEAR AND TERMINATES AT AGE 100.
ILLUSTRATIONS
The tables set forth in Appendix A illustrate the way in which a Policy's Death
Benefit, Policy Value, and Cash Surrender Value could vary over an extended
period of time
43
48
Appendix A - Sample Illustrations of Policy Values, Cash Surrender Values and
Death Benefits
The following tables have been prepared to help show how values under the Policy
change with investment performance. The tables include both Policy Values and
Cash Surrender Values as well as Death Benefits. The Policy Value is the sum of
the values in the Investment Accounts, as the tables assume no values in the
Fixed Account or Loan Account. The Cash Surrender Value is the Policy Value less
any applicable surrender charges. The tables illustrate how Policy Values and
Cash Surrender Values, which reflect all applicable charges and deductions, and
Death Benefits of the Policy on an insured of given age would vary over time if
the return on the assets of the Portfolios was a uniform, gross, after-tax,
annual rate of 0%, 6% or 12%. The Policy Values, Death Benefits and Cash
Surrender Values would be different from those shown if the returns averaged 0%,
6% or 12%, but fluctuated over and under those averages throughout the years.
The charges reflected in the tables include those for deductions from premiums,
surrender charges, and monthly deductions.
The amounts shown for the Policy Value, Death Benefit and Cash Surrender Value
as of each Policy Year reflect the fact that the net investment return on the
assets held in the sub-accounts is lower than the gross, after-tax return. This
is because the expenses and fees borne by Manufacturers Investment Trust are
deducted from the gross return. The illustrations reflect an average of those
Portfolios' current expenses (excluding those of the Equity Index Trust), which
is approximately 0.981% per annum. The gross annual rates of return of 0%, 6%
and 12% correspond to approximate net annual rates of return of -0.976%, 4.965%
and 10.907%. The illustrations reflect the current expense reimbursements in
effect for the Lifestyle Trusts and the Index Trusts. In the absence of such
expense reimbursements, the average of the Portfolio's current expenses would
have been 0.991% per annum and the gross annual rates of return of 0%, 6% and
12% would have corresponded to approximate net annual rates of return of
- -0.986%, 4.955% and 10.896%. The expense reimbursements for certain of the
Trusts (as described in the "Trust Annual Expenses" table) are expected to
remain in effect during the fiscal year ended December 31, 2001. Were the
expense reimbursements to terminate, the average of the Portfolios' current
expenses would be higher and the approximate net annual rates of return would be
lower.
The tables assume that no premiums have been allocated to the Fixed Account,
that planned premiums are paid on the Policy Anniversary and that no transfers,
partial withdrawals, Policy loans, changes in death benefit options or changes
in face amount have been made. The tables reflect the fact that no charges for
federal, state or local taxes are currently made against the Separate Account.
If such a charge is made in the future, it would take a higher gross rate of
return to produce after-tax returns of 0%, 6% and 12% than it does now.
There are four tables shown for each combination of age and death benefit option
for a Policy issued to a male non-smoker:
20 Year [10 Year] No Lapse Guarantee
one based on current cost of insurance charges assessed by the Company
and reflecting a 20 year [10 Year] no lapse guarantee
one based on the maximum cost of insurance charges based on the 1980
Commissioners Smoker Distinct Mortality Tables and reflecting a 20 year
no lapse guarantee.
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 (unless unisex rates are
required by law, or are requested) and risk classes, any additional ratings and
the death benefit option, face amount and planned premium requested.
Illustrations for smokers would show less favorable results than the
illustrations shown below.
From time to time, in advertisements or sales literature for the Policies
that quote performance data of one or more of the Portfolios, the Company
may include Cash Surrender Values and Death Benefit figures computed using
the same methodology as that used in the following illustrations, but with
the average annual total return of the Portfolio for which performance data
is shown in the advertisement replacing the hypothetical rates of return
shown in the following tables. This information may be shown in the form of
graphs, charts, tables and examples.
The Policies have been offered to the public only since approximately May 1,
1999. 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 those
applicable to the Policies.
A-1
49
Illustrations with 10 Year NO LAPSE Guarantee
50
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 55 (STANDARD) AND
FEMALE NON-SMOKER ISSUE AGE 50 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 1
$7,500 ANNUAL PLANNED PREMIUM
ASSUMING CURRENT CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
-------------------------- ------------------------------- ---------------------------------
End Of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender Death
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3) Benefit
- ------- ----------- ------ --------- ------- -------- --------- --------- --------- --------- ---------
1 7,875 5,969 0 500,000 6,351 0 500,000 6,734 0 500,000
2 16,144 12,335 3,934 500,000 13,482 5,082 500,000 14,676 6,275 500,000
3 24,826 18,576 10,762 500,000 20,897 13,083 500,000 23,403 15,589 500,000
4 33,942 24,703 17,572 500,000 28,614 21,483 500,000 33,003 25,872 500,000
5 43,514 30,713 24,266 500,000 36,641 30,194 500,000 43,558 37,111 500,000
6 53,565 36,602 30,741 500,000 44,987 39,126 500,000 55,159 49,298 500,000
7 64,118 42,368 37,191 500,000 53,659 48,482 500,000 67,908 62,731 500,000
8 75,199 48,005 43,511 500,000 62,665 58,171 500,000 81,914 77,421 500,000
9 86,834 53,509 49,602 500,000 72,013 68,106 500,000 97,300 93,393 500,000
10 99,051 58,873 55,650 500,000 81,708 78,485 500,000 114,197 110,974 500,000
15 69,931 83,174 83,174 500,000 135,488 135,488 500,000 226,997 226,997 500,000
20 260,394 101,492 101,492 500,000 198,072 198,072 500,000 407,926 407,926 500,000
25 375,851 111,589 111,589 500,000 274,109 274,109 500,000 713,411 713,411 763,350
30 523,206 104,206 104,206 500,000 364,005 364,005 500,000 1,213,801 1,213,801 1,274,491
35 711,272 62,129 62,129 500,000 479,032 479,032 502,983 2,025,123 2,025,123 2,126,379
40 951,298 0 (4) 0 (4) 0 (4) 626,387 626,387 657,706 3,322,637 3,322,637 3,488,769
45 1,257,639 807,033 807,033 815,104 5,419,131 5,419,131 5,473,322
50 1,648,615 1,046,177 1,046,177 1,046,177 8,960,317 8,960,317 8,960,317
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the policy anniversary, (b)
no policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated
to the Fixed Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in
force until the
end of the first 10 Policy Years.
(4) In the absence of additional premium payments, the Policy will lapse.
The policy value, cash surrender value and the death benefit will differ if
premiums are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment returns are illustrative only and should not be deemed a
representation of past or future results. Actual investment returns may be more
or less than those shown and will depend on a number of factors, including the
investment allocation made by the policyowner, and the investment returns for
the funds of 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.
A-2
51
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 55 (STANDARD) AND
FEMALE NON-SMOKER ISSUE AGE 50 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 1
$7,500 ANNUAL PLANNED PREMIUM
ASSUMING MAXIMUM CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
-------------------------- ------------------------------- ---------------------------------
End Of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender Death
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3) Benefit
- ------- ----------- ------ --------- ------- -------- --------- --------- --------- --------- ---------
1 7,875 5,969 0 500,000 6,351 0 500,000 6,734 0 500,000
2 16,144 12,335 3,934 500,000 13,482 5,082 500,000 14,676 6,275 500,000
3 24,826 18,546 10,731 500,000 20,865 13,051 500,000 23,371 15,557 500,000
4 33,942 24,595 17,465 500,000 28,501 21,371 500,000 32,886 25,755 500,000
5 43,514 30,475 24,029 500,000 36,390 29,943 500,000 43,292 36,845 500,000
6 53,565 36,176 30,315 500,000 44,529 38,668 500,000 54,668 48,807 500,000
7 64,118 41,685 36,508 500,000 52,916 47,739 500,000 67,101 61,924 500,000
8 75,199 46,991 42,497 500,000 61,546 57,053 500,000 80,684 76,190 500,000
9 86,834 52,077 48,170 500,000 70,414 66,507 500,000 95,522 91,614 500,000
10 99,051 56,927 53,704 500,000 79,512 76,288 500,000 111,729 108,506 500,000
15 69,931 76,594 76,594 500,000 127,816 127,816 500,000 218,200 218,200 500,000
20 260,394 83,766 83,766 500,000 177,619 177,619 500,000 386,321 386,321 500,000
25 375,851 67,649 67,649 500,000 226,294 226,294 500,000 673,052 673,052 720,166
30 523,206 0 (4) 0 (4) 0 (4) 257,999 257,999 500,000 1,139,719 1,139,719 1,196,705
35 711,272 244,368 244,368 500,000 1,879,149 1,879,149 1,973,107
40 951,298 75,538 75,538 500,000 3,020,616 3,020,616 3,171,647
45 1,257,639 0 (4) 0 (4) 0 (4) 4,845,139 4,845,139 4,893,590
50 1,648,615 8,016,040 8,016,040 8,016,040
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the policy anniversary, (b)
no policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated
to the Fixed Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
ontinues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 10 Policy Years.
(4) In the absence of additional premium payments, the Policy will lapse.
The policy value, cash surrender value and the death benefit will differ if
premiums are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment returns are illustrative only and should not be deemed a
representation of past or future results. Actual investment returns may be more
or less than those shown and will depend on a number of factors, including the
investment allocation made by the policyowner, and the investment returns for
the funds of 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.
A-3
52
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 55 (STANDARD) AND
FEMALE NON-SMOKER ISSUE AGE 50 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 2
$8,200 ANNUAL PLANNED PREMIUM
ASSUMING CURRENT CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
-------------------------- ------------------------------- ---------------------------------
End Of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender Death
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3) Benefit
- ------- ----------- ------ --------- ------- -------- --------- --------- --------- --------- ---------
1 8,610 6,606 0 506,606 7,026 0 507,026 7,446 0 507,446
2 17,651 13,595 5,194 513,595 14,858 6,457 514,858 16,171 7,771 516,171
3 27,143 20,448 12,634 520,448 23,001 15,187 523,001 25,759 17,944 525,759
4 37,110 27,175 20,045 527,175 31,476 24,345 531,476 36,303 29,172 536,303
5 47,576 33,773 27,326 533,773 40,290 33,843 540,290 47,894 41,448 547,894
6 58,564 40,238 34,377 540,238 49,453 43,592 549,453 60,633 54,772 560,633
7 70,103 46,566 41,389 546,566 58,971 53,794 558,971 74,627 69,450 574,627
8 82,218 52,750 48,256 552,750 68,852 64,358 568,852 89,994 85,501 589,994
9 94,939 58,786 54,879 558,786 79,102 75,194 579,102 106,865 102,958 606,865
10 108,296 64,664 61,440 564,664 89,723 86,499 589,723 125,376 122,153 625,376
15 185,791 91,136 91,136 591,136 148,278 148,278 648,278 248,196 248,196 748,196
20 284,698 110,334 110,334 610,334 214,359 214,359 714,359 440,106 440,106 940,106
25 410,930 118,625 118,625 618,625 287,490 287,490 787,490 748,601 748,601 1,248,601
30 572,038 104,612 104,612 604,612 353,941 353,941 853,941 1,227,623 1,227,623 1,727,623
35 777,658 51,331 51,331 551,331 390,909 390,909 890,909 1,962,989 1,962,989 2,462,989
40 1,040,086 0 (4) 0 (4) 0 (4) 350,392 350,392 850,392 3,073,567 3,073,567 3,573,567
45 1,375,018 140,241 140,241 640,241 4,717,735 4,717,735 5,217,735
50 1,802,486 0 (4) 0 (4) 0 (4) 7,140,726 7,140,726 7,640,726
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the policy anniversary, (b)
no policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated
to the Fixed Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in force
until the end of the first 10 Policy Years.
(4) In the absence of additional premium payments, the Policy will lapse.
The policy value, cash surrender value and the death benefit will differ if
premiums are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment returns are illustrative only and should not be deemed a
representation of past or future results. Actual investment returns may be more
or less than those shown and will depend on a number of factors, including the
investment allocation made by the policyowner, and the investment returns for
the funds of 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.
A-4
53
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 55 (STANDARD) AND
FEMALE NON-SMOKER ISSUE AGE 50 (STANDARD)
$500,000 FACE AMOUNT DEATH BENEFIT OPTION 2
$8,200 ANNUAL PLANNED PREMIUM
ASSUMING MAXIMUM CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
-------------------------- ------------------------------- ---------------------------------
End Of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender Death
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3) Benefit
- ------- ----------- ------ --------- ------- -------- --------- --------- --------- --------- ---------
1 8,610 6,606 0 506,606 7,026 0 507,026 7,446 0 507,446
2 17,651 13,595 5,194 513,595 14,858 6,457 514,858 16,171 7,771 516,171
3 27,143 20,417 12,602 520,417 22,968 15,154 522,968 25,725 17,910 525,725
4 37,110 27,062 19,932 527,062 31,357 24,227 531,357 36,178 29,048 536,178
5 47,576 33,522 27,075 533,522 40,022 33,575 540,022 47,609 41,162 547,609
6 58,564 39,783 33,922 539,783 48,958 43,098 548,958 60,097 54,236 560,097
7 70,103 45,830 40,653 545,830 58,159 52,982 558,159 73,731 68,554 573,731
8 82,218 51,648 47,154 551,648 67,614 63,121 567,614 88,604 84,111 588,604
9 94,939 57,216 53,309 557,216 77,310 73,403 577,310 104,817 100,910 604,817
10 108,296 62,512 59,289 562,512 87,228 84,005 587,228 122,474 119,251 622,474
15 185,791 83,580 83,580 583,580 138,878 138,878 638,878 236,315 236,315 736,315
20 284,698 89,533 89,533 589,533 187,020 187,020 687,020 402,916 402,916 902,916
25 410,930 67,971 67,971 567,971 217,727 217,727 717,727 646,857 646,857 1,146,857
30 572,038 0 (4) 0 (4) 0 (4) 188,892 188,892 688,892 971,329 971,329 1,471,329
35 777,658 36,541 36,541 536,541 1,371,673 1,371,673 1,871,673
40 1,040,086 0 (4) 0 (4) 0 (4) 1,824,270 1,824,270 2,324,270
45 1,375,018 2,268,399 2,268,399 2,768,399
50 1,802,486 2,053,249 2,053,249 2,553,249
(1) All values shown are as of the end of the policy year indicated, have
been rounded to the nearest dollar, and assume that (a) premiums paid
after the initial premium are received on the policy anniversary, (b)
no policy loan has been made, (c) no partial withdrawal of the Cash
Surrender Value has been made and (d) no premiums have been allocated
to the Fixed Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the No Lapse Guarantee will keep the Policy in
force until the end of the first 10 Policy Years.
(4) In the absence of additional premium payments, the Policy will lapse.
The policy value, cash surrender value and the death benefit will differ if
premiums are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment returns are illustrative only and should not be deemed a
representation of past or future results. Actual investment returns may be more
or less than those shown and will depend on a number of factors, including the
investment allocation made by the policyowner, and the investment returns for
the funds of 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.
A-5
54
Illustrations with 20 Year NO LAPSE Guarantee
55
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 55 (Standard) and
Female Non-Smoker Issue Age 50 (Standard)
$500,000 Face Amount Death Benefit Option 1
$7,500 Annual Planned Premium
ASSUMING CURRENT CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
---------------------------- ------------------------------ --------------------------------
End Of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender Death
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3) Benefit
- ------- ----------- ------ --------- ------- ------ --------- ------- ------ --------- -------
1 7,875 5,969 0 500,000 6,351 0 500,000 6,734 0 500,000
2 16,144 12,335 3,690 500,000 13,482 4,837 500,000 14,676 6,031 500,000
3 24,826 18,546 10,504 500,000 20,865 12,823 500,000 23,371 15,329 500,000
4 33,942 24,595 17,257 500,000 28,501 21,163 500,000 32,886 25,547 500,000
5 43,514 30,486 23,851 500,000 36,400 29,765 500,000 43,303 36,668 500,000
6 53,565 36,219 30,188 500,000 44,574 38,542 500,000 54,714 48,683 500,000
7 64,118 41,792 36,464 500,000 53,027 47,699 500,000 67,216 61,888 500,000
8 75,199 47,201 42,577 500,000 61,768 57,144 500,000 80,916 76,292 500,000
9 86,834 52,460 48,440 500,000 70,821 66,800 500,000 95,949 91,928 500,000
10 99,051 57,571 54,254 500,000 80,198 76,881 500,000 112,453 109,135 500,000
15 69,931 80,535 80,535 500,000 132,087 132,087 500,000 222,618 222,618 500,000
20 260,394 99,346 99,346 500,000 194,038 194,038 500,000 400,738 400,738 500,000
25 375,851 114,515 114,515 500,000 272,624 272,624 500,000 702,510 702,510 751,685
30 523,206 122,185 122,185 500,000 369,786 369,786 500,000 1,198,281 1,198,281 1,258,195
35 711,272 113,260 113,260 500,000 493,665 493,665 518,349 2,007,633 2,007,633 2,108,015
40 951,298 66,247 66,247 500,000 648,903 648,903 681,348 3,317,846 3,317,846 3,483,738
45 1,257,639 0 (4) 0 (4) 0 (4) 839,180 839,180 847,572 5,441,080 5,441,080 5,495,491
50 1,648,615 1,086,335 1,086,335 1,086,335 8,996,427 8,996,427 8,996,427
(1) All values shown are as of the end of the policy year indicated, have been
rounded to the nearest dollar, and assume that (a) premiums paid after the
initial premium are received on the policy anniversary, (b) no policy loan
has been made, (c) no partial withdrawal of the Cash Surrender Value has
been made and (d) no premiums have been allocated to the Fixed Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the basic No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the basic No Lapse Guarantee will keep the Policy in
force until the end of the first 20 Policy Years.
(4) In the absence of additional premium payments, the Policy will lapse.
The policy value, cash surrender value and the death benefit will differ if
premiums are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment returns are illustrative only and should not be deemed a
representation of past or future results. Actual investment returns may be more
or less than those shown and will depend on a number of factors, including the
investment allocation made by the policyowner, and the investment returns for
the 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.
A-6
56
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 55 (Standard) and
Female Non-Smoker Issue Age 50 (Standard)
$500,000 Face Amount Death Benefit Option 1
$7,500 Annual Planned Premium
ASSUMING MAXIMUM CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
---------------------------- ------------------------------ --------------------------------
End Of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender Death
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3) Benefit
- ------- ----------- ------ --------- ------- ------ --------- ------- ------ --------- -------
1 7,875 5,969 0 500,000 6,351 0 500,000 6,734 0 500,000
2 16,144 12,335 3,690 500,000 13,482 4,837 500,000 14,676 6,031 500,000
3 24,826 18,546 10,504 500,000 20,865 12,823 500,000 23,371 15,329 500,000
4 33,942 24,595 17,257 500,000 28,501 21,163 500,000 32,886 25,547 500,000
5 43,514 30,475 23,841 500,000 36,390 29,755 500,000 43,292 36,657 500,000
6 53,565 36,176 30,144 500,000 44,529 38,497 500,000 54,668 48,637 500,000
7 64,118 41,685 36,358 500,000 52,916 47,588 500,000 67,101 61,773 500,000
8 75,199 46,991 42,367 500,000 61,546 56,922 500,000 80,684 76,059 500,000
9 86,834 52,077 48,056 500,000 70,414 66,393 500,000 95,522 91,501 500,000
10 99,051 56,927 53,610 500,000 79,512 76,195 500,000 111,729 108,412 500,000
15 69,931 76,594 76,594 500,000 127,816 127,816 500,000 218,200 218,200 500,000
20 260,394 83,766 83,766 500,000 177,619 177,619 500,000 386,321 386,321 500,000
25 375,851 67,649 67,649 500,000 226,294 226,294 500,000 673,052 673,052 720,166
30 523,206 0 (4) 0 (4) 0 (4) 257,999 257,999 500,000 1,139,719 1,139,719 1,196,705
35 711,272 244,368 244,368 500,000 1,879,149 1,879,149 1,973,107
40 951,298 75,538 75,538 500,000 3,020,616 3,020,616 3,171,647
45 1,257,639 0 (4) 0 (4) 0 (4) 4,845,139 4,845,139 4,893,590
50 1,648,615 8,016,040 8,016,040 8,016,040
(1) All values shown are as of the end of the policy year indicated, have been
rounded to the nearest dollar, and assume that (a) premiums paid after the
initial premium are received on the policy anniversary, (b) no policy loan
has been made, (c) no partial withdrawal of the Cash Surrender Value has
been made and (d) no premiums have been allocated to the Fixed Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the basic No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the basic No Lapse Guarantee will keep the Policy in
force until the end of the first 20 Policy Years.
(4) In the absence of additional premium payments, the Policy will lapse.
The policy value, cash surrender value and the death benefit will differ if
premiums are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment returns are illustrative only and should not be deemed a
representation of past or future results. Actual investment returns may be more
or less than those shown and will depend on a number of factors, including the
investment allocation made by the policyowner, and the investment returns for
the 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.
A-7
57
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 55 (Standard) and
Female Non-Smoker Issue Age 50 (Standard)
$500,000 Face Amount Death Benefit Option 2
$8,200 Annual Planned Premium
ASSUMING CURRENT CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
---------------------------- ------------------------------ --------------------------------
End Of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender Death
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3) Benefit
- ------- ----------- ------ --------- ------- ------ --------- ------- ------ --------- -------
1 8,610 6,606 0 506,606 7,026 0 507,026 7,446 0 507,446
2 17,651 13,595 4,950 513,595 14,858 6,213 514,858 16,171 7,526 516,171
3 27,143 20,417 12,375 520,417 22,968 14,927 522,968 25,725 17,683 525,725
4 37,110 27,062 19,724 527,062 31,357 24,019 531,357 36,178 28,840 536,178
5 47,576 33,533 26,898 533,533 40,034 33,399 540,034 47,620 40,986 547,620
6 58,564 39,830 33,798 539,830 49,008 42,976 549,008 60,148 54,117 560,148
7 70,103 45,946 40,618 545,946 58,282 52,954 558,282 73,861 68,533 573,861
8 82,218 51,878 47,254 551,878 67,863 63,239 567,863 88,872 84,248 588,872
9 94,939 57,640 53,619 557,640 77,772 73,751 577,772 105,321 101,300 605,321
10 108,296 63,230 59,913 563,230 88,021 84,704 588,021 123,350 120,033 623,350
15 185,791 88,144 88,144 588,144 144,236 144,236 644,236 242,653 242,653 742,653
20 284,698 107,990 107,990 607,990 209,771 209,771 709,771 431,479 431,479 931,479
25 410,930 122,789 122,789 622,789 288,915 288,915 788,915 742,467 742,467 1,242,467
30 572,038 127,608 127,608 627,608 377,440 377,440 877,440 1,242,199 1,242,199 1,742,199
35 777,658 110,808 110,808 610,808 463,863 463,863 963,863 2,036,918 2,036,918 2,536,918
40 1,040,086 50,449 50,449 550,449 520,585 520,585 1,020,585 3,285,621 3,285,621 3,785,621
45 1,375,018 0 (4) 0 (4) 0 (4) 453,863 453,863 953,863 5,184,052 5,184,052 5,684,052
50 1,802,486 125,140 125,140 625,140 8,023,748 8,023,748 8,523,748
(1) All values shown are as of the end of the policy year indicated, have been
rounded to the nearest dollar, and assume that (a) premiums paid after the
initial premium are received on the policy anniversary, (b) no policy loan
has been made, (c) no partial withdrawal of the Cash Surrender Value has
been made and (d) no premiums have been allocated to the Fixed Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the basic No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the basic No Lapse Guarantee will keep the Policy in
force until the end of the first 20 Policy Years.
(4) In the absence of additional premium payments, the Policy will lapse.
The policy value, cash surrender value and the death benefit will differ if
premiums are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment returns are illustrative only and should not be deemed a
representation of past or future results. Actual investment returns may be more
or less than those shown and will depend on a number of factors, including the
investment allocation made by the policyowner, and the investment returns for
the 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.
A-8
58
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
Male Non-Smoker Issue Age 55 (Standard) and
Female Non-Smoker Issue Age 50 (Standard)
$500,000 Face Amount Death Benefit Option 2
$8,200 Annual Planned Premium
ASSUMING MAXIMUM CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
---------------------------- ------------------------------ --------------------------------
End Of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender Death
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3) Benefit
- ------- ----------- ------ --------- ------- ------ --------- ------- ------ --------- -------
1 8,610 6,606 0 506,606 7,026 0 507,026 7,446 0 507,446
2 17,651 13,595 4,950 513,595 14,858 6,213 514,858 16,171 7,526 516,171
3 27,143 20,417 12,375 520,417 22,968 14,927 522,968 25,725 17,683 525,725
4 37,110 27,062 19,724 527,062 31,357 24,019 531,357 36,178 28,840 536,178
5 47,576 33,522 26,887 533,522 40,022 33,388 540,022 47,609 40,974 547,609
6 58,564 39,783 33,751 539,783 48,958 42,927 548,958 60,097 54,065 560,097
7 70,103 45,830 40,502 545,830 58,159 52,831 558,159 73,731 68,403 573,731
8 82,218 51,648 47,024 551,648 67,614 62,990 567,614 88,604 83,980 588,604
9 94,939 57,216 53,195 557,216 77,310 73,289 577,310 104,817 100,796 604,817
10 108,296 62,512 59,195 562,512 87,228 83,911 587,228 122,474 119,157 622,474
15 185,791 83,580 83,580 583,580 138,878 138,878 638,878 236,315 236,315 736,315
20 284,698 89,533 89,533 589,533 187,020 187,020 687,020 402,916 402,916 902,916
25 410,930 67,971 67,971 567,971 217,727 217,727 717,727 646,857 646,857 1,146,857
30 572,038 0 (4) 0 (4) 0 (4) 188,892 188,892 688,892 971,329 971,329 1,471,329
35 777,658 36,541 36,541 536,541 1,371,673 1,371,673 1,871,673
40 1,040,086 0 (4) 0 (4) 0 (4) 1,824,270 1,824,270 2,324,270
45 1,375,018 2,268,399 2,268,399 2,768,399
50 1,802,486 2,053,249 2,053,249 2,553,249
(1) All values shown are as of the end of the policy year indicated, have been
rounded to the nearest dollar, and assume that (a) premiums paid after the
initial premium are received on the policy anniversary, (b) no policy loan
has been made, (c) no partial withdrawal of the Cash Surrender Value has
been made and (d) no premiums have been allocated to the Fixed Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the basic No Lapse Guarantee Cumulative Premium Test has been and
continues to be met, the basic No Lapse Guarantee will keep the Policy in
force until the end of the first 20 Policy Years.
(4) In the absence of additional premium payments, the Policy will lapse.
The policy value, cash surrender value and the death benefit will differ if
premiums are paid in different amounts or frequencies. It is emphasized that the
hypothetical investment returns are illustrative only and should not be deemed a
representation of past or future results. Actual investment returns may be more
or less than those shown and will depend on a number of factors, including the
investment allocation made by the policyowner, and the investment returns for
the 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.
A-9
59
Audited Financial Statements
A-10
60
PART 2
OTHER INFORMATION
61
PART II. OTHER INFORMATION
Representation of Insurer Pursuant to Section 26 of the Investment Company Act
of 1940
The Manufacturers Life Insurance Company (U.S.A.) hereby represents
that the fees and charges deducted under the policies issued pursuant to this
registration statement in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks assumed
by the Company.
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet;
Cross-Reference Sheet;
The Prospectus, consisting of 52 pages;
Representation of Insurer Pursuant to Section 26 of the Investment Company Act
of 1940
The signatures;
Written consents of the following persons:
A. Ernst & Young LLP - TO BE FILED BY AMENDMENT
B. Opinion and Consent of Actuary - TO BE FILED BY AMENDMENT
C. Opinion and Consent of James D. Gallagher, Attorney - TO BE FILED BY
AMENDMENT
The following exhibits are filed as part of this Registration Statement:
1. Copies of all exhibits required by paragraph A of the instructions as to
exhibits in Form N-8B-2 are set forth below under designations based on such
instructions:
A(1) Resolutions of Board of Directors of The Manufacturers Life
Insurance Company (U.S.A.) establishing Separate Account
A - TO BE FILED BY AMENDMENT
A(3)(a)(i) Form of Distribution Agreement. Incorporated by reference
to Exhibit A(3)(a)(i) to the registration statement on
Form S-6, file number 333-66303 filed October 29, 1998
(the "SVUL Registration Statement").
A(3)(a)(ii) Form of Amendment to Distribution Agreement. Incorporated
by reference to Exhibit A(3)(a)(ii) to the SVUL
Registration Statement.
A(3)(a)(iii) Form of Amendment to Distribution Agreement. Incorporated
by reference to Exhibit A(3)(a)(iii) to the SVUL
Registration Statement.
62
A(3)(b) Form of broker-dealer agreement. Incorporated by reference
to Exhibit A(3)(b) to the initial registration statement on
Form S-6, File number 333-70950 filed October 4, 2001.
A(5)(a) Form of Flexible Premium Variable Life Insurance Policy -
Incorporated by reference to Exhibit A(5)(a) to
pre-effective amendment no. 1 to the registration statement
on Form S-6, file number 333-66303 filed February 5, 1999.
A(6)(a) Restated Articles of Redomestication of The Manufacturers
Life Insurance Company (U.S.A.) - Incorporated by reference
to Exhibit A(6) to the registration statement filed July
20, 2000 (File No. 333-41814) (the "Initial Registration
Statement")
A(6)(b) By-Laws of The Manufacturers Life Insurance Company
(U.S.A.) - Incorporated by reference to Exhibit A(6)(b) to
the Initial Registration Statement.
A(8)(a)(i) Form of Service Agreement between The Manufacturers Life
Insurance Company and The Manufacturers Life Insurance
Company of America dated June 1, 1988. Incorporated by
reference to Exhibit A(8)(a)(i) to pre-effective amendment
no. 1 to the registration statement on Form S-6, file
number 333-51293 filed August 28, 1998.
A(8)(a)(ii) Form of Amendment to Service Agreement between The
Manufacturers Life Insurance Company and The Manufacturers
Life Insurance Company of America dated December 31, 1992.
Incorporated by reference to Exhibit A(8)(a)(ii) to
pre-effective amendment no. 1 to the registration statement
on Form S-6, file number 333-51293 filed August 28, 1998.
A(8)(a)(iii) Form of Amendment to Service Agreement between The
Manufacturers Life Insurance Company and The Manufacturers
Life Insurance Company of America dated May 31, 1993.
Incorporated by reference to Exhibit A(8)(a)(iii) to
pre-effective amendment no. 1 to the registration statement
on Form S-6, file number 333-51293 filed August 28, 1998.
A(8)(a)(iv) Form of Amendment to Service Agreement between The
Manufacturers Life Insurance Company and The Manufacturers
Life Insurance Company of America dated June 30, 1993.
Incorporated by reference to Exhibit A(8)(a)(iv) to
pre-effective amendment no. 1 to the registration statement
on Form S-6, file number 333-51293 filed August 28, 1998.
A(8)(a)(v) Form of Amendment to Service Agreement between The
Manufacturers Life Insurance Company and The Manufacturers
Life Insurance Company of America dated December 31, 1996.
Incorporated by reference to Exhibit A(8)(a)(v) to
pre-effective amendment no. 1 to the registration statement
on Form S-6, file number 333-51293 filed August 28, 1998.
A(8)(a)(vi) Form of Amendment to Service Agreement between The
Manufacturers Life Insurance Company and The Manufacturers
Life Insurance Company of America dated May 31, 1998.
Incorporated by reference to Exhibit A(8)(a)(vi) to
pre-effective amendment no. 1 to the registration statement
on Form S-6, file number 333-51293 filed August 28, 1998.
A(8)(a)(vii) Form of Amendment to Service Agreement between The
Manufacturers Life Insurance Company and The Manufacturers
Life Insurance Company of America dated December 31, 1998.
Incorporated by reference to Exhibit A(8)(a)(vii) to
post-effective amendment No. 11 to the registration
statement on Form N-4, file number 33-57018 filed March 1,
1999.
A(8)(b) Form of Stoploss Reinsurance Agreement. Incorporated by
reference to Exhibit A(8)(b) to the SVUL Registration
Statement.
63
A(8)(c)(i) Form of Service Agreement. Incorporated by reference to
Exhibit A(8)(c)(i) to pre-effective amendment no. 1 to the
registration statement on Form S-6, file number 333-51293
filed August 28, 1998.
A(8)(c)(ii) Form of Amendment to Service Agreement. Incorporated by
reference to Exhibit A(8)(c)(ii) to pre-effective amendment
no. 1 to the registration statement on Form S-6, file
number 333-51293 filed August 28, 1998.
A(10)(a)(i) Form of Application for Flexible Premium Variable Life
Insurance Policy. Incorporated by reference to Exhibit
A(10) to post effective amendment no. 3 to the registration
statement on Form S-6, file number 33-77256, filed April
26, 1996.
A(10)(a)(ii) Form of Rider for Flexible Premium Variable Life Insurance
Policy Incorporated by reference to Exhibit A(10) to post
effective amendment no. 3 to the registration statement on
Form S-6, file number 333-66303, filed April 27, 2000.
A(10)(b) Form of Application Supplement for Flexible Premium
Variable Life Insurance Policy. Incorporated by reference
to Exhibit A(10)(a) to post effective amendment no. 5 to
the registration statement on Form S-6, file number
33-77256, filed December 23, 1996.
A(10)(c) Form of Assumption Reinsurance Agreement with The
Manufacturers Life Insurance Company (U.S.A.) and The
Manufacturers Life Insurance Company of America -
Incorporated by reference to Exhibit A(9)(a) to the initial
registration statement on Form S-6, file number 333-70950
filed October 4, 2001.
2. Consents of the following:
A. Opinion and consent of James D. Gallagher, Esq., Secretary and
General Counsel of The Manufacturers Life Insurance Company of
America - TO BE FILED BY AMENDMENT
B. Opinion and consent of Brian Koop, Actuary, of The Manufacturers
Life Insurance Company of America - TO BE FILED BY AMENDMENT
C. Consent of Ernst & Young LLP- TO BE FILED BY AMENDMENT
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. Incorporated by reference to Exhibit A(6)
to pre-effective amendment no. 1 to the registration statement on Form S-6, file
number 333-66303 filed February 5, 1999.
7. Powers of Attorney
(i) (Felix Chee, Robert A. Cook, John DesPrez III, Geoffrey Guy, James
O'Malley, Joseph J. Pietroski, Rex Schaybaugh) incorporated by
reference to exhibit 7 to initial registration statement on Form
S-6, file number 333- 41814 filed July 20, 2000 on behalf of The
Manufacturers Life Insurance Company (U.S.A.)
(ii) Powers of Attorney (John Ostler) - Incorporated by reference to
Exhibit 7(ii) of the initial registration statement on Form S-6,
file number 333-70950, filed October 4, 2001
(iii) Powers of Attorney (Jim Boyle, John Lyon) - Incorporated by
reference to Exhibit 7(iii) of the initial registration statement
on Form S-6, file number 333-70950, filed October 4, 2001.
8. Undertakings
As a condition to the grant of effectiveness of this Registration Statement
prior to the transfer of substantially all the assets and liabilities of The
Manufacturers Life Insurance Company of America to The Manufacturers Life
Insurance Company (U.S.A.), Registrant hereby undertakes not to offer or sell to
the public any securities of which Registrant is the issuer unless and until the
transfer of
64
assets and liabilities is consummated and a registration statement for
Registrant is filed pursuant to Section 8 of the Investment Company Act of 1940
to reflect the change in depositor, which registration statement may take the
form of an amendment to the Form N-8B-2 of Separate Account A of The
Manufacturers Life Insurance of America (File no. 811-4834).
65
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant and the Depositor and have caused this Registration Statement to be
signed on their behalf in the City of Boston, Massachusetts, on this 10th day of
October, 2001.
SEPARATE ACCOUNT M OF
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
(Registrant)
By: THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
(Depositor)
By: /s/ John D. DesPrez III
-----------------------------
John D. DesPrez III
President
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
By: /s/ John D. DesPrez III
-----------------------------
John D. DesPrez III
President
66
Signatures
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on this 10th day of October, 2001.
Signature Title
- --------- -----
/s/ John D. DesPrez III Chairman and President
- --------------------------------- (Principal Executive Officer)
John D. DesPrez III
* Vice President and
- --------------------------------- Chief Financial Officer
John Ostler
* Director
- ---------------------------------
James Boyle
* Director
- ---------------------------------
Robert A. Cook
* Director
- ---------------------------------
Geoffrey Guy
* Director
- ---------------------------------
James O'Malley
* Director
- ---------------------------------
John Lyon
* Director
- ---------------------------------
Rex Schaybaugh, Jr.
*/s/ James D. Gallagher
- ---------------------------------
JAMES D. GALLAGHER
Pursuant to Power of Attorney