As filed with the Securities and Exchange Commission on January 2, 2002
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
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
SEPARATE ACCOUNT N
(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.
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
SEPARATE ACCOUNT N
Registration Statement on Form S-6
Cross-Reference Sheet
Form
N-8B-2
Item No. Caption in Prospectus / (***Caption in Prospectus Supplement)
- -------- -------------------------------------------------------------
1 --- Cover Page; General Information About Manufacturers Life of
America, Separate Account Four, and Manufacturers Investment Trust
(What Is Manufacturers Life of America's Separate Account Four?);
(***General Information About Manulife USA, The Separate Accounts
and the Trust)
2 --- Cover Page; General Information About Manufacturers Life of
America, Separate Account Four, and Manufacturers Investment Trust
(Who Are Manufacturers Life Of America And Manufacturers Life?);
(***General Information About Manulife USA, The Separate Accounts
and the Trust)
3 ---*
4 --- Other Matters (Who Sells The Policies And What Are The Sales
Commissions?); (***Other Information - Distribution of the Policies)
5 --- General Information About Manufacturers Life Of America, Separate
Life of America's Separate Account Four?); (***General Information
About Manulife USA, The Separate Accounts and the Trust)
6 --- General Information About Manufacturers Life of America, Separate
Account Four, and Manufacturers Investment Trust (What Is
Manufacturers Life of America's Separate Account Four?); (***General
Information About Manulife USA, The Separate Accounts and the Trust)
7 ---*
8 ---*
9 --- Other Matters (Is There Any Litigation Pending?); (***Other
Information - Litigation)
10 --- Detailed Information About The Policies
11 --- General Information About Manufacturers Life Of America, Separate
Account Four, and Manufacturers Investment Trust (What Is
Manufacturers Investment Trust?); (***General Information About
Manulife USA, The Separate Accounts and the Trust)
12 --- General Information About Manufacturers Life Of America, Separate
Account Four, and Manufacturers Investment Trust (What Is
Manufacturers Investment Trust?); (***General Information About
Manulife USA, The Separate Accounts and the Trust)
13 --- Detailed Information About The Policies (Charges); (***Investment
Management Fees and Expenses)
14 --- Detailed Information About the Policies (Premium Provisions --
What Are the Requirements and Procedures for Issuance of a Policy?);
Other Matters (What Responsibilities Has Manufacturers Life
Assumed?); (***Other Information - Responsibilities of Manufacturers
Life)
Form
N-8B-2
Item No. Caption in Prospectus / (***Caption in Prospectus Supplement)
- -------- -------------------------------------------------------------
15 --- Detailed Information About The Policies (Premium Provisions --
What Are the Requirements and Procedures for Issuance of a Policy?)
16 ---**
17 --- Detailed Information About The Policies (Policy Values -- How May
a Policyowner Obtain the Net Cash Surrender Value?; Other Provisions
-- When Are Proceeds Paid?)
18 --- General Information About Manufacturers Life Of America, Separate
Account Four, and Manufacturers Investment Trust; (***General
Information About Manulife USA, The Separate Accounts and the Trust)
19 --- Detailed Information About The Policies (Other Provisions -- What
Reports Will Be Sent To Policyowners?); Other Matters (What
Responsibilities Has Manufacturers Life Assumed?); (***Other
Information - Responsibilities of Manufacturers Life)
20 ---*
21 --- Detailed Information About The Policies
22 ---*
23 ---**
24 --- Detailed Information About the Policies (Other Provisions -- What
Are The Other General Policy Provisions?)
25 --- General Information About Manufacturers Life Of America, Separate
Account Four, and Manufacturers Investment Trust (Who Are
Manufacturers Life Of America And Manufacturers Life?); (***General
Information About Manulife USA, The Separate Accounts and the Trust)
26 ---*
27 ---**
28 --- Other Matters (Who Are The Directors And Officers Of
Manufacturers Life Of America?); (***Other Information - Officers
and Directors of Manulife U.S.A.)
29 --- General Information About Manufacturers Life Of America, Separate
Account Four, and Manufacturers Investment Trust (Who Are
Manufacturers Life Of America And Manufacturers Life?); (***General
Information About Manulife USA, The Separate Accounts and the Trust)
30 ---*
31 ---*
32 ---*
33 ---*
34 ---*
35 ---**
36 ---*
37 ---*
Form
N-8B-2
Item No. Caption in Prospectus / (***Caption in Prospectus Supplement)
- -------- -------------------------------------------------------------
38 --- Other Matters (Who Sells The Policies And What Are The Sales
Commissions?; What Responsibilities Has Manufacturers Life
Assumed?); (***Other Information - Distribution of the Policies),
(***Other Information - Responsibilities of Manufacturers Life)
39 --- Other Matters (Who Sells The Policies And What Are The Sales
Commissions?); (***Other Information - Distribution of the Policies)
40 ---*
41 ---**
42 ---*
43 ---*
44 --- Detailed Information About The Policies (Policy Values -- What Is
the Policy Value and How Is It Determined?)
45 ---*
46 --- Detailed Information About The Policies (Policy Values -- How May
a Policyowner Obtain the Net Cash Surrender Value?; Other Provisions
-- When Are Proceeds Paid?)
47 --- General Information About Manufacturers Life Of America, Separate
Account Four, and Manufacturers Investment Trust (What Is
Manufacturers Investment Trust?); (***General Information About
Manulife USA, The Separate Accounts and the Trust)
48 ---*
49 ---*
50 --- General Information About Manufacturers Life Of America, Separate
Account Four, and Manufacturers Investment Trust (What Is
Manufacturers Life Of America's Separate Account Four?); (***General
Information About Manulife USA, The Separate Accounts and the Trust)
51 --- Detailed Information About The Policies
52 --- Detailed Information About The Policies (Other Provisions --
Under What Circumstances May Portfolio Shares Be Substituted?)
53 ---**
54 ---*
55 ---*
56 ---*
57 ---*
58 ---*
59 --- Financial Statements
* Omitted since answer is negative or item is not applicable. ** Omitted.
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
SEPARATE ACCOUNT A
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
SEPARATE ACCOUNT N
OF
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
38500 Woodward Avenue
Bloomfield Hills, Michigan 78304
SUPPLEMENT
DATED JANUARY 2, 2002 TO:
PROSPECTUS FOR THE MANUFACTURERS LIFE INSURANCE COMPANY
OF AMERICA SEPARATE ACCOUNT THREE DATED MAY 1, 1999
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE CONTRACTS
(VENTURE VUL)
PROSPECTUS FOR THE MANUFACTURERS LIFE INSURANCE COMPANY
OF AMERICA SEPARATE ACCOUNT THREE DATED MAY 1, 1998
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE UNIVERSAL LIFE CONTRACTS
(VENTURE SVUL)
PROSPECTUS FOR THE MANUFACTURERS LIFE INSURANCE COMPANY
OF AMERICA SEPARATE ACCOUNT FOUR DATED MAY 1, 1998
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE CONTRACTS
(VENTURE COLI VUL)
This supplement updates certain information in the attached prospectus
which you received for the variable life insurance policy (the "Policy") you
purchased from The Manufacturers Life Insurance Company of America
("ManAmerica"). This supplement, together with the prospectus described above,
constitutes the current prospectus ("Prospectus") for such Policy. The Policies
are no longer being offered for sale, but policyowners may continue to make
purchase payments under the Policies, make withdrawals from the separate
accounts in which the Policies are funded, and transfer amounts among the
sub-accounts available under the Policies.
THE DATE OF THIS PROSPECTUS IS JANUARY 2, 2002.
TABLE OF CONTENTS
PAGE
Change in Depositor for the Separate Accounts................. 2
Investment Management Fees and Expenses....................... 2
General Information about Manulife USA, the Separate
Accounts and the Trust........................................ 6
Investment Options and Subadvisers............................ 7
Other Information............................................. 13
Illustrations................................................. 16
Independent Auditors.......................................... 16
Financial Statements.......................................... 16
CHANGE IN DEPOSITOR FOR THE SEPARATE ACCOUNTS
Effective January 1, 2002, ManAmerica transferred substantially all of its
assets and liabilities to The Manufacturers Life Insurance Company (U.S.A.)
("Manulife USA", the "Company", "we" or "us"). As a result of the transfer, each
of the separate accounts of ManAmerica named below has been renamed as the
corresponding separate account of Manulife USA indicated below (the "Separate
Accounts"). In addition, Manulife USA became the depositor for each of the
Separate Accounts and the co-issuer with each Separate Account of the Policies
funded through that Separate Account.
Former Separate Account Corresponding New Separate
of ManAmerica Policies Account of Manulife USA
- ------------- -------- -----------------------
The Manufacturers Life Insurance Company Venture VUL The Manufacturers Life Insurance
of America Separate Account Three Venture SVUL Company (U.S.A.) Separate Account A
The Manufacturers Life Insurance Company Venture COLI VUL The Manufacturers Life Insurance
of America Separate Account Four Company (U.S.A.) Separate Account N
Except for the succession of Manulife USA to the role of depositor for
each of the Separate Accounts and to the liabilities and obligations arising
under the Policies, and the change in the name of each of the Separate Accounts
as set forth above, the merger and the transfer did not affect the Separate
Accounts or any provisions of, any rights and obligations under, or any of your
allocations among investment options under, the Policies.
INVESTMENT MANAGEMENT FEES AND EXPENSES
(Supplements information in the Prospectus under the captions "Introduction to
Policy - Charges and Deductions," "Summary of Policy -- Charges and Deductions"
or similar captions)
Each sub-account of the Separate Accounts purchases shares of one of
the separate investment portfolios ("Portfolios") of Manufacturers Investment
Trust (the "Trust") at net asset value. The net asset value of those shares
reflects investment management fees and certain expenses of the Portfolios. 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 below. These fees and
expenses are described in detail in the accompanying Trust prospectus to which
reference should be made.
2
TABLE OF INVESTMENT MANAGEMENT FEES AND EXPENSES
TRUST ANNUAL EXPENSES (CLASS A SHARES)
(as a percentage of Trust average net assets for the fiscal year ended December
31, 2000)(I)
TOTAL TRUST
CLASS A OTHER EXPENSES ANNUAL EXPENSES
MANAGEMENT RULE 12b-1 (BEFORE EXPENSE (BEFORE EXPENSE
TRUST PORTFOLIO FEES FEES REIMBURSEMENT) REIMBURSEMENT)
- ---------------------------------------------------------------------------------------------------
Internet Technologies...... 1.000% 0.150% 0.130% 1.280%(B)
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% 0.050% 1.116%
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%(B)
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% 0.190% 1.190%
International Value........ 0.850% 0.150% 0.180% 1.180%
Capital Appreciation....... 0.750% 0.150% 0.700%(H) 1.600%(H)
Strategic Opportunities ... 0.700% 0.150% 0.050% 0.900%
Quantitative Mid Cap....... 0.650% 0.150% 0.070% 0.870%(A)
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% 0.045% 0.908%
Utilities.................. 0.750% 0.150% 0.270% 1.170%(A)
Real Estate Securities..... 0.647%(A) 0.150% 0.060% 0.857%
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% 0.065% 0.940%
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%
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 six
portfolios. This voluntary fee waiver may be terminated at any time by
the adviser. As of September 30, 2001, the combined asset level for
all six portfolios was approximately $3.396 billion resulting in a fee
reduction of 3.408%. 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. With such expense
reimbursement in effect, "Other Expenses" and "Total Trust Annual
Expenses" for the fiscal year ended December 31, 2000 were 0.050% and
0.600%, respectively, for the International Index Trust, 0.075% and
0.600%, respectively, for the Small Cap Index Trust, 0.075% and
0.600%, respectively, for the Mid Cap Index Trust and 0.075% and
0.600%, respectively, for the Total Stock Market Index Trust. It is
estimated that the expense reimbursement will not be effective during
the year ending 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) exceeds 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.
As a result of such expense reimbursement, "Other Expenses" and "Total
Trust Annual Expenses" were 0.500% and 1.400%, respectively. These
voluntary expense reimbursements may be terminated at any time.
(I) The Liquidity Index Trust is available only for Policies issued for
applications dated prior to May 1, 2000.
(J) 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.
<Table>
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% 0.125% 0.650%(A)
International Index 0.400% 0.150% 0.100% 0.650%(B)
Mid Cap Index 0.375% 0.150% 0.165% 0.690%(B)
Total Stock Market Index 0.375% 0.150% 0.095% 0.620%(B)
500 Index 0.375% 0.150% 0.025% 0.550%(B)
Lifestyle Aggressive 1000 0.070% 0.000% 1.063% 1.133%(C)
Lifestyle Growth 820 0.055% 0.000% 0.976% 1.031%(C)
Lifestyle Balanced 640 0.055% 0.000% 0.902% 0.957%(C)
Lifestyle Moderate 460 0.064% 0.000% 0.851% 0.915%(C)
Lifestyle Conservative 280 0.075% 0.000% 0.816% 0.891%(C)
</Table>
(A) Based on estimates to be made during the current fiscal year.
(B) Reflects expenses of the Underlying Portfolios.
(C) The investment advisor 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. With
such expense reimbursement in effect for the fiscal year ended December 31,
2000, Total Trust Annual Expenses were reduced as set forth in the chart
below:
<Table>
<Caption>
TOTAL TRUST
MANAGEMENT RULE OTHER ANNUAL
TRUST PORTFOLIO FEES 12b-1 FEES EXPENSES EXPENSES
- --------------- ---------- ---------- -------- -----------
Lifestyle Aggressive 1000 0.070% 0.000% 1.038% 1.108%
Lifestyle Growth 820 0.055% 0.000% 0.966% 1.021%
Lifestyle Balanced 640 0.055% 0.000% 0.892% 0.947%
Lifestyle Moderate 460 0.064% 0.000% 0.826% 0.890%
Lifestyle Conservative 280 0.075% 0.000% 0.784% 0.859%
</Table>
(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, the
Equity-Income Trust 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%
5
GENERAL INFORMATION ABOUT MANULIFE USA, THE SEPARATE ACCOUNTS AND THE TRUST
(Replaces information in the Prospectus under a similar caption)
MANULIFE USA
Manulife USA is a stock life insurance company incorporated in Maine on
August 20, 1955 by a special act of the Maine legislature and re-domesticated
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 and
have our home office located at 38500 Woodward Avenue, Bloomfield Hills,
Michigan 48304. 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 ("Manufacturers Life") and its
subsidiaries, collectively known as Manulife Financial. Manufacturers Life 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 Accounts.
RATINGS
Manufacturers Life and Manulife USA 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 insurer 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 Manulife USA as a measure of the Company's
ability to honor the death benefit 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 ACCOUNTS
The Manufacturers Life Insurance Company (U.S.A.) Separate Account A,
formerly The Manufacturers Life Insurance Company of America Separate Account
Three, was established by ManAmerica 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, as a result of the transfer of substantially
all of the assets and liabilities of ManAmerica to Manulife USA, as described
above, Manulife USA became the owner of substantially all of ManAmerica's
assets, including all the assets of this Separate Account, and assumed
substantially all of ManAmerica's obligations, including all those under the
Policies funded through this Separate Account. This Separate Account is
currently used only to support variable life insurance policies.
The Manufacturers Life Insurance Company (U.S.A.) Separate Account N,
formerly The Manufacturers Life Insurance Company of America Separate Account
Four, was established by ManAmerica on March 17, 1987 as a separate account
under Pennsylvania law. Since December 9, 1992, it has been operated under
Michigan law. On January 1, 2002, as a result of the transfer of substantially
all of the assets and liabilities of ManAmerica to Manulife USA, as described
above, Manulife USA became the owner of substantially all of ManAmerica's
assets, including all the assets of this Separate Account, and assumed
substantially all of ManAmerica's obligations, including all those under the
Policies funded through this Separate Account. This Separate Account is
currently used only to support variable life insurance policies.
Manulife USA is the legal owner of the assets of each of the Separate
Accounts. The income, gains and losses of each of the Separate Accounts, whether
or not realized, are, in accordance with the applicable Policies, credited to or
charged against that Separate Account without regard to the other
6
income, gains or losses of Manulife USA. Manulife USA will at all times maintain
assets in each of the Separate Accounts with a total market value at least equal
to the reserves and other liabilities relating to variable benefits under all
policies participating in that Separate Account. These assets may not be charged
with liabilities which arise from any other business Manulife USA conducts.
However, all obligations under the Policies are general corporate obligations of
Manulife USA.
Each of the Separate Accounts is registered with the Securities and
Exchange Commission ("SEC") under the Investment Company Act of 1940 Act, as
amended (the "1940 Act"), as a unit investment trust. A unit investment trust is
a type of investment company which invests its assets in specified securities,
such as shares of one or more investment companies, rather than in a portfolio
of unspecified securities. Registration under the 1940 Act does not involve
supervision by the SEC of the management or investment policies or practices of
the Separate Accounts. For state law purposes, each of the Separate Accounts is
treated as a part or division of Manulife USA.
THE TRUST
Premiums under the Policies are allocated, in accordance with the
applicable Policy, to one or more of the sub-accounts of the applicable Separate
Account. Under certain Policies, premiums may also be allocated to a guaranteed
interest account or a fixed account. As stated above, the assets of each
sub-account of the Separate Accounts are used to purchase Class A shares of a
particular Portfolio of the Trust. The Trust is registered under the 1940 Act as
an open-end management investment company.
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, as amended. The ultimate parent of MSS is
MFC. The Trust also employs subadvisers.
INVESTMENT OPTIONS AND SUBADVISERS
The Trust currently has twenty-five subadvisers which manage all of the
Portfolios. One of the subadvisers is Manufacturers Adviser Corporation ("MAC"),
which is an affiliate of ours. The Table of Investment Options and Investment
Subadvisers shows the subadvisers that provide investment subadvisory services
to the indicated Portfolios.
TABLE OF INVESTMENT OPTIONS AND INVESTMENT SUBADVISERS
SUBADVISER / PORTFOLIO SUBADVISER/ PORTFOLIO
- ---------------------- ---------------------
A I M Capital Management, Inc. Manufacturers Adviser Corporation (cont'd)
All Cap Growth Trust Quantitative Mid Cap Trust
Aggressive Growth Trust Equity Index Trust
Money Market Trust
Brinson Advisors, Inc. (formerly, Mitchell Index Trusts
Hutchins Asset Management Inc.) Lifestyle TrustsB
Tactical Allocation Trust Balanced Trust
Capital Guardian Trust Company Massachusetts Financial Services Company
Small Company Blend Trust Strategic Growth Trust
U.S. Large Cap Value Trust Capital Opportunities Trust
Income & Value Trust Utilities Trust
Diversified Bond Trust
Miller Anderson & Sherrerd, LLP
Cohen & Steers Capital Management, Inc. Value Trust
Real Estate Securities Trust High Yield Trust
Davis Select Advisers, L.P. Munder Capital Management
Financial Services Trust Internet Technologies Trust
Fundamental Value Trust
7
Pacific Investment Management Company
The Dreyfus Corporation Global Bond Trust
All Cap Value Trust Putnam Investment Management, L.L.C.
Mid Cap Opportunities Trust
Fidelity Management & Research Company Global Equity Trust
Strategic Opportunities TrustA
Large Cap Growth Trust Salomon Brothers Asset Management Inc.
Overseas Trust U.S. Government Securities Trust
Strategic Bond Trust
Founders Asset Management LLC
International Small Cap Trust SSgA Funds Management, Inc.
Growth Trust
Franklin Advisers, Inc. Lifestyle TrustsB
Emerging Small Company Trust
T. Rowe Price Associates, Inc.
INVESCO Funds Group, Inc. Science & Technology Trust
Telecommunications Trust Small Company Value Trust
Mid Cap Growth Trust Health Sciences Trust
Blue Chip Growth Trust
Janus Capital Corporation Equity-Income Trust
Dynamic Growth Trust
T. Rowe Price International, Inc.
Jennison Associates LLC International Stock Trust
Capital Appreciation Trust
Templeton Investment Counsel, Inc.
Lord, Abbett & Co. International Value Trust
Mid Cap Value Trust
Wellington Management Company, LLP
Manufacturers Adviser Corporation Growth & Income Trust
Pacific Rim Emerging Markets Trust Investment Quality Bond Trust
Quantitative Equity 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.
ELIGIBLE PORTFOLIOS OF THE TRUST
The Portfolios of the Trust which are eligible investment options under
the Policies, and the investment objectives and certain policies of these
Portfolios, are set forth below.
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.
8
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 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 asset,s 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.
9
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.
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.
10
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
total return of publicly traded common stocks which are included in the S&P 500
Composite Stock Price Index.
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.
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.
11
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.* The 500 Index Trust is not an eligible
investment option under the Policies.
12
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 makes any representation
regarding the advisability of investing in the Trust.
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.
OTHER INFORMATION
(Supplements information in the Prospectus under the captions "Distribution of
the Policy," "Pending Litigation" and "Responsibilities of Manufacturers Life"
or similar captions)
DISTRIBUTION OF THE POLICIES
Manulife Financial Securities LLC ("Manulife Securities"), an indirect
wholly-owned subsidiary of MFC, is the principal underwriter of the Policies
pursuant to a Distribution Agreement with Manulife USA. 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 sole member of Manulife Securities is Manulife
USA, and the following officers of Manulife USA have power to act on behalf of
Manulife Securities: John DesPrez* (Chairman and President), John Ostler** (Vice
President and Chief Financial Officer) and James Gallagher* (Vice President,
Secretary and General Counsel). The board of managers of Manulife Securities
(consisting of Gary Buchanan**, Robert Cook* and John Vrysen***) may also act on
behalf of Manulife Securities.
* Principal business office is 73 Tremont Street, Boston, MA 02108
** Principal business office is 200 Bloor Street, Toronto, Canada M4W 1E5
13
***Principal business office is 680 Washington Blvd, Stamford, CT 06901
LITIGATION
There is no pending litigation that would have a material impact on
Manulife USA or the Separate Accounts.
RESPONSIBILITIES OF MANUFACTURERS LIFE
Manufacturers Life and Manulife USA have entered into an agreement with
Manulife Securities pursuant to which Manufacturers Life or Manulife USA, on
behalf of Manulife Securities, will pay the sales commissions in respect of the
Policies and certain other policies issued by Manulife USA, 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 Manulife USA for all sales commissions paid by
Manufacturers Life or Manulife U.S.A and will pay Manufacturers Life or Manulife
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 Manulife USA pursuant
to which MFC will provide Manulife USA with issue, administrative and general
services and recordkeeping functions on behalf of Manulife USA with respect to
all of its insurance policies, including the Policies.
Finally, Manulife USA may, from time to time in its sole discretion, enter
into one or more reinsurance agreements with other life insurance companies
under which contracts issued by it may be reinsured, such that its total amount
at risk under a policy would be limited for the life of the insured.
OFFICERS AND DIRECTORS OF MANULIFE USA
(Replaces information in the Prospectus under the similar caption)
Position with
Name Manulife USA Principal Occupation
- --------------------------------------------------------------------------------------------------------------
James Boyle (42)** Director President of U.S. Annuities, Manulife 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 Insurance, The
(45)** U.S. Insurance; Director 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 Manufacturers Life Insurance
(45)*** 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 Chairman and President Executive Vice President, U.S. Operation, The Manufacturers
III (44)** 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.
14
Position with
Name Manulife USA Principal Occupation
- --------------------------------------------------------------------------------------------------------------
James D. Gallagher Vice President, Vice President, US Law and Government Relations, U.S.
(45)** Secretary and General Operations, The Manufacturers Life Insurance Company, January
Counsel 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 Investment Officer, The
(44)*** and Chief Investment Manufacturers Life Insurance Company, March 2001 to Present;
Officer 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.
Geoffrey Guy Director Executive Vice President and Chief Actuary, The Manufacturers
(53)*** 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(48) *** Vice President and Chief Vice President & Chief Financial Officer, Investments, The
Financial Officer, Manufacturers Life Insurance Company; April 2001 to
Investments; Director 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, The Manufacturers Life
(54)*** U.S. Group Pension; Insurance Company, January 1999 to present; Vice President,
Director Systems New Business Pensions, The Manufacturers Life
Insurance Company, 1984 to December 1998.
Rex Schlaybaugh, Director Member, Dykema Gossett, PLLC, 1982 to present.
Jr. (51)****
John Ostler (47)** Vice President and Chief Vice President and Chief Financial Officer, U.S. Operations,
Financial Officer 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 Manufacturers Life
(46)*** Investments 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, U.S. Division, The
15
Position with
Name Manulife USA Principal Occupation
- --------------------------------------------------------------------------------------------------------------
(44)*** Treasurer 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.
- --------------------------------------------------------------------------------------------------------------
**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.
ILLUSTRATIONS
(Supplements the "Sample Illustrations of Policy Values, Cash Surrender Values
and Death Benefits" appearing in the Prospectus or an Appendix thereto)
The Company is not providing updated illustrations of policy values,
cash surrender values and death benefits because the Policies are no longer
being sold.
INDEPENDENT AUDITORS
(Replaces information in the Prospectus under the caption "Experts")
The consolidated financial statements of The Manufacturers Life
Insurance Company (U.S.A.) at December 31, 2000 and 1999 and for each of the
three years in the period ended December 31, 2000, and, as applicable, (i) the
financial statements of Separate Account Three of The Manufacturers Life
Insurance Company of America at December 31, 2000 and 1999, and for each of the
two years in the period ended December 31, 2000 (applicable with respect to the
Venture VUL and Venture SVUL Policies), or (ii) the financial statements of
Separate Account Four of The Manufacturers Life Insurance Company of America at
December 31, 2000 and 1999, and for each of the two years in the period ended
December 31, 2000 (applicable with respect to the Venture COLI VUL Policies),
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.
FINANCIAL STATEMENTS
The financial statements of Manulife USA included in this Prospectus
should be distinguished from the financial statements of the applicable Separate
Account and should be considered only as bearing upon the ability of Manulife
USA to meet its obligations under the Policies.
16
THE MANUFACTURERS LIFE INSURANCE COMPANY
(U.S.A.)
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
PREPARED IN CONFORMITY WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE
UNITED STATES
================================================================================
[MANULIFE FINANCIAL LOGO]
FINANCIAL STATEMENTS AND SCHEDULES
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
WITH REPORT OF INDEPENDENT AUDITORS
CONTENTS
Report of Independent Auditors............................................... 3
Audited Consolidated Financial Statements
Consolidated Balance Sheets............................................. 4
Consolidated Statements of Income....................................... 5
Consolidated Statements of Changes in Capital and Surplus............... 6
Consolidated Statements of Cash Flows................................... 7
Notes to Consolidated Financial Statements................................... 8
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A)
We have audited the accompanying consolidated balance sheets of The
Manufacturers Life Insurance Company (U.S.A) as of December 31, 2000 and 1999,
and the related consolidated statements of income, changes in capital and
surplus, and cash flows for each of the three years in the period ended December
31, 2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Manufacturers Life Insurance Company (U.S.A.) at December 31, 2000 and 1999, and
the consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 2000 in conformity with accounting
principles generally accepted in the United States.
Philadelphia, Pennsylvania /s/ ERNST & YOUNG LLP
March 23, 2001
3
The Manufacturers Life Insurance Company (U.S.A.)
Consolidated Balance Sheets
As at December 31 ($ millions)
ASSETS 2000 1999
- -----------------------------------------------------------------------------------------
INVESTMENTS:
Securities available-for-sale, at fair value:
Fixed-maturity (amortized cost: 2000 $9,580; 1999 $9,561) $ 9,797 $ 9,358
Equity (cost: 2000 $707; 1999 $622) 852 1,106
Mortgage loans 1,539 1,622
Real estate 986 1,027
Policy loans 1,998 1,843
Short-term investments 715 284
- -----------------------------------------------------------------------------------------
TOTAL INVESTMENTS $15,887 $15,240
- -----------------------------------------------------------------------------------------
Cash and cash equivalents $ 164 $ 131
Deferred acquisition costs 2,066 1,631
Deferred income taxes 125 151
Due from affiliates 261 504
Amount recoverable from reinsurers 572 679
Other assets 677 882
Separate account assets 29,681 27,329
- -----------------------------------------------------------------------------------------
TOTAL ASSETS $49,433 $46,547
=========================================================================================
LIABILITIES, CAPITAL AND SURPLUS
- -----------------------------------------------------------------------------------------
LIABILITIES:
Policyholder liabilities and accruals $16,240 $15,894
Note payable 200 200
Other liabilities 764 1,001
Separate account liabilities 29,681 27,329
- -----------------------------------------------------------------------------------------
TOTAL LIABILITIES $46,885 $44,424
=========================================================================================
CAPITAL AND SURPLUS:
Capital stock $ 5 $ 5
Retained earnings 2,260 1,990
Accumulated other comprehensive income 283 128
- -----------------------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS $ 2,548 $ 2,123
- -----------------------------------------------------------------------------------------
TOTAL LIABILITIES, CAPITAL AND SURPLUS $49,433 $46,547
=========================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
4
The Manufacturers Life Insurance Company (U.S.A.)
Consolidated Statements of Income
FOR THE YEARS ENDED DECEMBER 31
($ millions) 2000 1999 1998
- --------------------------------------------------------------------------------
REVENUE:
Premiums $ 814 $ 881 $ 848
Fee income 958 746 584
Net investment income 1,135 1,121 1,100
Realized investment gains 137 27 51
Other -- 5 5
- --------------------------------------------------------------------------------
TOTAL REVENUE $ 3,044 $ 2,780 $ 2,588
- --------------------------------------------------------------------------------
BENEFITS AND EXPENSES:
Policyholder benefits and claims $ 1,520 $ 1,412 $ 1,570
Operating expenses and commissions 617 494 389
Amortization of deferred acquisition costs 180 40 113
Interest expense 34 25 14
Policyholder dividends 339 323 265
Minority interest expense 16 16 15
- --------------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES $ 2,706 $ 2,310 $ 2,366
- --------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 338 470 222
- --------------------------------------------------------------------------------
INCOME TAXES 90 177 82
- --------------------------------------------------------------------------------
NET INCOME $ 248 $ 293 $ 140
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
5
The Manufacturers Life Insurance Company (U.S.A.)
Consolidated Statements of Changes in Capital And Surplus
ACCUMULATED OTHER TOTAL
FOR THE YEARS ENDED DECEMBER 31 CAPITAL RETAINED COMPREHENSIVE CAPITAL AND
($ millions) STOCK EARNINGS INCOME (LOSS) SURPLUS
- ---------------------------------------------------------------------------------------------
BALANCE AT JANUARY 1, 1998 $ 5 $1,707 $ 128 $ 1,840
Comprehensive income -- 140 21 161
Dividend to shareholder -- (150) -- (150)
- ---------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 $ 5 $1,697 $ 149 $ 1,851
Comprehensive income -- 293 (21) 272
- ---------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 $ 5 $1,990 $ 128 $ 2,123
- ---------------------------------------------------------------------------------------------
Comprehensive income -- 248 155 403
Contributed surplus 22 22
- ---------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2000 $ 5 $2,260 $ 283 $ 2,548
=============================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
6
The Manufacturers Life Insurance Company (U.S.A.)
Consolidated Statements of Cash Flows
FOR THE YEARS ENDED DECEMBER 31
($ millions) 2000 1999 1998
- ------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net Income $ 248 $ 293 $ 140
Adjustments to reconcile net income to net cash provided by
operating activities:
Additions to policyholder liabilities and accruals 330 404 410
Deferred acquisition costs (590) (463) (286)
Amounts recoverable from reinsurers 23 334 9
Amortization of deferred acquisition costs 180 40 113
Realized investment gains (137) (27) (51)
Decreases (additions) to deferred income taxes 34 194 7
Amounts due from (to) affiliates 259 22 (126)
Other assets and liabilities, net (158) 238 8
Other, net (62) 59 25
- ------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 127 $ 1,094 $ 249
- ------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Fixed-maturity securities sold, matured or repaid $ 6,584 $ 4,302 $ 3,906
Fixed-maturity securities purchased (6,792) (4,763) (3,730)
Equity securities sold 1,185 303 290
Equity securities purchased (1,012) (349) (284)
Mortgage loans advanced (187) (148) (453)
Mortgage loans repaid 274 314 274
Real estate sold 101 54 40
Real estate purchased (58) (219) (117)
Policy loans advanced, net (155) (133) (145)
Short-term investments (431) (251) 85
Separate account seed money -- 32 (2)
Other investments, net 196 (355) 25
- ------------------------------------------------------------------------------------------------------
Net cash used in investing activities $ (295) $ (1,213) $ (111)
- ------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Deposits and interest credited to policyholder account balances $ 1,336 $ 1,263 $ 668
Withdrawals from policyholder account balances (1,579) (987) (611)
Amounts due to affiliates 250 -- --
Net reinsurance (payable) recoverable 87 (158) (86)
Dividend to shareholder -- -- (150)
Borrowed funds 107 50 --
- ------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities $ 201 $ 168 $ (179)
- ------------------------------------------------------------------------------------------------------
CASH:
Increase (decrease) during the year 33 49 (41)
Balance, beginning of year 131 82 123
- ------------------------------------------------------------------------------------------------------
BALANCE, END OF YEAR $ 164 $ 131 $ 82
- ------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
7
The Manufacturers Life Insurance Company (U.S.A.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(IN MILLIONS OF DOLLARS)
1. ORGANIZATION
The Manufacturers Life Insurance Company (U.S.A.) ("ManUSA") is an
indirectly wholly-owned subsidiary of The Manufacturers Life Insurance
Company ("Manufacturers Life"), which in turn is a wholly owned subsidiary
of Manulife Financial Corporation, a Canadian-based publicly traded
company. . Manulife Financial Corporation and its subsidiaries are
collectively known as "Manulife Financial". ManUSA and its subsidiaries,
collectively known as the "Company", operate in the life insurance
industry, offering a broad range of insurance related products. These
products are offered both on an individual and group basis and are
marketed primarily in the United States.
In June of 1999, the Company increased its ownership interest in its
subsidiary, Manulife-Wood Logan Holding Co. Inc. ("MWL"), to 78.4% through
the purchase of the 15% outside party interest. The purchase was at fair
value and generated goodwill of $45.0, which is being amortized into
income on a straight-line basis over 15 years.
In December of 2000 and through an issue of shares, the Company acquired
the remaining 21.6% minority interest in MWL from MRL Holding, LLC
("MRL-LLC"), an affiliated company. As this was a related party
transaction, the purchase was accounted for at MRL-LLC's carrying value at
the time of purchase and no goodwill was generated.
2. SIGNIFICANT ACCOUNTING POLICIES
a) BASIS OF PRESENTATION
The accompanying consolidated financial statements of ManUSA have been
prepared in accordance with accounting principles generally accepted in
the United States ("GAAP") and include accounts and operations, after
intercompany eliminations, of ManUSA and its subsidiaries.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes.
Actual results could differ from these estimates.
b) RECENT ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities.
The statement also addresses contracts that contain embedded derivatives,
such as certain insurance contracts. In July 1999, the FASB issued
Statement No. 137, which delayed the effective date of SFAS No. 133 to
fiscal
8
years beginning after June 15, 2000. In June 2000, the FASB issued SFAS
No. 138 which made certain changes to the hedging provisions of SFAS No.
133, and is effective concurrent with SFAS No. 133.
Effective January 1, 2001, all derivatives instruments will be reported on
the Consolidated Balance Sheets at their fair value, with changes in fair
value recorded in income or equity, depending on the nature of the
derivative instrument. Changes in the fair value of derivatives that are
not designated as hedges will be recognized in current period earnings.
Based on the Company's derivative positions as at December 31, 2000, the
Company estimates that there will be no material impact to the income
statement upon adoption of this new accounting standard.
As formal interpretations of this new standard continue to be issued by
the FASB, the Company is continuing its analysis of insurance products in
order to identify embedded derivatives that may require bifurcation under
the statement. Any embedded derivatives identified and that require
bifurcation will be marked to market through earnings
c) INVESTMENTS
The Company classifies all of its fixed-maturity and equity securities as
available-for-sale and records these securities at fair value. Realized
gains and losses on sales of securities classified as available-for-sale
are recognized in net income using the specific identification method.
Temporary changes in the fair value of securities available-for-sale are
reflected directly in other comprehensive income after adjustments for
deferred taxes, deferred acquisition costs, policyholder liabilities and
unearned revenue liability. Discounts and premiums on investments are
amortized using the effective interest method.
Mortgage loans are reported at unpaid principal balances, net of a
provision for losses. The provision for losses is established for mortgage
loans which are considered to be impaired when the Company has determined
that it is probable that all amounts due under contractual terms will not
be collected. Impaired loans are reported at the lower of unpaid principal
or fair value of the underlying collateral.
Interest on fixed-maturity securities and performing mortgage loans is
recorded as income when earned and is adjusted for any amortization of
premiums or discount. Interest on restructured mortgage loans is recorded
as income based on the rate to be paid; interest on delinquent mortgage
loans is recorded as income on a cash basis. Dividends are recorded as
income on ex-dividend dates.
Real estate held for investment is carried at cost, less accumulated
depreciation and provisions for impairment and write-downs, if applicable.
Real estate held for sale is carried at the lower of cost or market value
where changes in estimates of market value are recognized as realized
gains or losses in the income statement.
Policy loans are reported at aggregate unpaid balances, which approximate
fair value.
Short-term investments include investments with maturities of less than
one year at the date of acquisition.
9
d) CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with an
original maturity date of three months or less to be cash equivalents.
Cash equivalents are stated at cost plus accrued interest, which
approximates fair value.
e) DEFERRED ACQUISITION COSTS ("DAC")
Commissions and other expenses, which vary with and are primarily related
to the production of new business, are deferred to the extent recoverable
from future gross profits and included as an asset. DAC associated with
variable annuity and variable life insurance contracts, universal life
insurance contracts, investment contracts, and participating life
insurance contracts is charged to expense in relation to the estimated
gross profits of those contracts. The amortization is adjusted
retrospectively when current gross profits or estimates of future gross
profits are revised. DAC associated with all other insurance contracts is
charged to expense over the premium paying period of the related policies.
DAC is adjusted for the impact on current and estimated future gross
profits assuming the unrealized gains or losses on securities had been
realized at year-end. The equity impact of any such adjustments is
included in net unrealized gains (losses) in other comprehensive income.
DAC is reviewed annually to determine recoverability from future income.
To the extent that the DAC is assessed as not recoverable, it is
immediately expensed.
f) POLICYHOLDER LIABILITIES
Policyholder liabilities for traditional non-participating life insurance
policies are computed using the net level premium method. The calculations
are based upon estimates as to future mortality, morbidity, persistency,
maintenance expenses, and interest rate yields that were applicable in the
year of issue. The assumptions include a provision for the risk of adverse
deviation.
For payout annuities in loss recognition, policyholder liabilities are
computed using estimates of expected mortality, expenses, and investment
yields as determined at the time these contracts first moved into loss
recognition. Payout annuity reserves are adjusted for the impact of net
unrealized gains associated with the underlying assets.
For variable annuity and variable life contracts, universal life insurance
contracts, and investment contracts with no substantial mortality or
morbidity risk, policyholder liabilities equal the policyholder account
values. Account values are increased for deposits received and interest
credited and are reduced by withdrawals, mortality charges, and
administrative expenses charged to the policyholders. Policy charges,
which compensate the Company for future services, are deferred and
recognized in income over the period earned, using the same assumptions
used to amortize DAC.
For traditional participating life insurance policies, policyholder
liabilities are computed using the net level premium reserve for death and
endowment policy benefits. Mortality and interest assumptions are the same
as the non-forfeiture benefit assumptions at the time the policy was
issued. Interest rate assumptions used in the calculation of the
liabilities for traditional participating life insurance policies range
from 2.5% to 7.0%.
10
As of December 31, 2000, participating insurance expressed as a percentage
of insurance in force is 66.3%. The amount of policyholders' dividends to
be paid is approved annually by Manulife Financial's Board of Directors.
The aggregate amount of policyholders' dividends is calculated based on
actual interest, mortality, morbidity and expense experience for the year,
and on management's judgment as to the appropriate level of equity to be
retained by the Company. The carrying value of this liability approximates
the earned amount and fair value as at December 31, 2000.
g) SEPARATE ACCOUNTS
Separate account assets and liabilities represent funds that are
separately administered, principally for investment contracts related to
group pension business as well as for variable annuity and variable life
contracts, and for which the contract holder, rather than the Company,
bears the investment risk. Separate account contract holders have no claim
against the assets of the general account of the Company. Separate account
assets are recorded at market value. Operations of the separate accounts
are not included in the accompanying financial statements.
h) REVENUE RECOGNITION
Premiums on long-duration life insurance contracts are recognized as
revenue when due. Premiums on short-duration contracts are earned over the
related contract period.
Receipts on variable annuity and variable life contracts, universal life
insurance contracts, and investment contracts are reported as deposits to
account values as described in note 2(f) and not as premiums. Revenue from
these policies consists of policy charges for the cost of insurance,
expenses and surrender charges that have been assessed against the
policyholder account values. Policy charges that are designed to
compensate the Company for future services are deferred and recognized in
income over the period benefited, using the same assumptions used to
amortize DAC.
Net premiums on limited-payment contracts are recognized as revenue and
the difference between the gross premium received and the net premium is
deferred and recognized in income based on either a constant relationship
to insurance in force or the present value of annuity benefits, depending
on the product type.
Investment income is recorded as revenue when due.
i) EXPENSES
Expenses for variable annuity and variable life contracts, and for
universal life insurance contracts include interest credited to
policyholder account values and benefit claims incurred during the period
in excess of policyholder account values.
11
j) REINSURANCE
The Company routinely utilizes reinsurance transactions to minimize
exposure to large risks. Life reinsurance is accomplished through various
plans including yearly renewable term, co-insurance, and modified
co-insurance. Reinsurance premiums, policy charges for cost of insurance,
and claims are accounted for on a basis consistent with that used in
accounting for the original policies issued and the terms of the
reinsurance contracts. Premiums, fees, and claims are reported net of
reinsured amounts. Amounts paid with respect to ceded reinsurance
contracts are reported as reinsurance receivables in other assets.
k) INCOME TAX
Income taxes have been provided for in accordance with Statement of
Financial Accounting Standards 109 ("SFAS 109"), "Accounting for Income
Taxes." ManUSA joins its direct parent, Manulife Reinsurance Corporation
(U.S.A.), its indirect parent, The Manufacturers Investment Corporation,
and its subsidiary, The Manufacturers Life Insurance Company of America,
in filing a U.S. consolidated income tax return as a life insurance group
under the provisions of the Internal Revenue Service. A separate life
insurance group for certain of ManUSA's subsidiaries is also in place. In
accordance with the income tax-sharing agreements, the Company's income
tax provision (or benefit) is computed as if ManUSA and the companies
within the two groups filed separate income tax returns. Tax benefits from
operating losses are provided at the U.S. statutory rate plus any tax
credits attributable, provided the consolidated group utilizes such
benefits currently. Deferred income taxes result from temporary
differences between the tax basis of assets and liabilities, and their
recorded amounts for financial reporting purposes.
l) FOREIGN EXCHANGE
The balance sheet and statement of income of the Company's foreign
operations as well as non-U.S. dollar investments are translated into U.S.
dollars using the current exchange and average exchange rates
respectively. Translation adjustments are included in accumulated other
comprehensive income (loss).
m) DERIVATIVES
The Company uses derivatives to manage exposures to foreign currency,
interest rate and other market risks arising from its on-balance sheet
financial instruments. These derivatives are designated and effective as
hedges, as there is a high correlation between changes in market value of
the derivative and the underlying hedged item at inception and over the
life of the hedge. Realized and unrealized gains and losses on these
derivatives are accounted for on the same basis as the underlying assets
and liabilities. Realized and unrealized gains and losses on derivative
transactions established as hedges but no longer considered hedges are
included in income from the date at which they are no longer considered to
be hedges.
The Company also uses derivatives to manage foreign currency exposures
associated with expected future policy maintenance and acquisition
expenses relating to the current inforce block of business. These
derivatives are designated as non-hedges. Realized and unrealized gains
and losses on these derivatives are included in income.
12
Derivative income and expenses are included in investment income in the
Consolidated Statements of Income. Cash flows relating to derivatives
associated with invested assets and financial liabilities are included in
the Consolidated Statements of Cash Flows on a basis consistent with the
cash flows from the underlying invested assets and financial liabilities.
Derivative assets and liabilities are included in other investments and
other liabilities, respectively, with deferred realized net gains
presented as such in the Consolidated Balance Sheets.
3. INVESTMENTS AND INVESTMENT INCOME
a) FIXED-MATURITY AND EQUITY SECURITIES
At December 31, 2000, all fixed-maturity and equity securities have been
classified as available-for-sale and reported at fair value. The amortized
cost and fair value is summarized as follows:
GROSS GROSS
AMORTIZED COST UNREALIZED GAINS UNREALIZED LOSSES FAIR VALUE
AS AT DECEMBER 31
($ millions) 2000 1999 2000 1999 2000 1999 2000 1999
- -------------------------------------------------------------------------------------------------------------------------------
Fixed-maturity securities:
U.S. government $ 1,240 $ 1,440 $ 103 $ 23 $ -- $ (57) $ 1,343 $ 1,406
Foreign governments 1,730 1,677 204 81 -- (16) 1,934 1,742
Corporate 5,561 5,323 111 56 (215) (254) 5,457 5,125
Asset - backed 1,049 1,121 21 4 (7) (40) 1,063 1,085
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED-MATURITY 9,580 9,561 439 164 (222) (367) 9,797 9,358
SECURITIES
- -------------------------------------------------------------------------------------------------------------------------------
Equity securities $ 707 $ 622 $ 210 $ 524 $ (65) $ (40) $ 852 $ 1,106
- -------------------------------------------------------------------------------------------------------------------------------
Proceeds from sales of fixed-maturity securities during 2000 were $6,583.5
(1999 - $4,302.4 and 1998 - $3,906.1). Gross gains and losses of $70.7 and
$241.9 respectively, were realized on those sales (1999 - $49.0 and $166.7
respectively, 1998 - $90.6 and $90.4 respectively).
Proceeds from the sale of equity securities during 2000 were $1,185.2
(1999 - $303.3 and 1998 - $290.0). Gross gains and losses of $319.2 and
$59.8 respectively, were realized on those sales (1999 - $84.0 and $38.7
respectively, 1998 - $47.4 and $45.0 respectively).
13
The contractual maturities of fixed-maturity securities at December 31,
2000 are shown below.
AS AT DECEMBER 31, 2000
($ millions)
AMORTIZED COST FAIR VALUE
- ----------------------------------------------------------------------------------------------------
Fixed-maturity securities, excluding mortgage-backed securities:
One year or less $ 230 $ 228
Greater than 1; up to 5 years 1,134 1,144
Greater than 5; up to 10 years 2,425 2,429
Due after 10 years 4,742 4,933
Asset - backed securities 1,049 1,063
- ----------------------------------------------------------------------------------------------------
TOTAL FIXED-MATURITY SECURITIES $ 9,580 $ 9,797
- ----------------------------------------------------------------------------------------------------
Expected maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
prepayment penalties. Corporate requirements and investment strategies may
result in the sale of investments before maturity.
b) MORTGAGE LOANS
Mortgage loans are reported at amortized cost, net of a provision for
losses. The impaired mortgage loans and the related allowance for mortgage
loan losses were as follows:
AS AT DECEMBER 31
($ millions) 2000 1999
- --------------------------------------------------------------------------------
IMPAIRED LOANS $ 80 $ 86
- --------------------------------------------------------------------------------
Allowance, January 1 $ 57 $106
Deductions (6) (49)
- --------------------------------------------------------------------------------
ALLOWANCE, DECEMBER 31 $ 51 $ 57
- --------------------------------------------------------------------------------
c) INVESTMENT INCOME
Income by type of investment was as follows:
FOR THE YEARS ENDED DECEMBER 31
($ MILLIONS) 2000 1999 1998
- --------------------------------------------------------------------------------
Fixed-maturity securities $ 727 $ 726 $ 729
Equity securities 60 18 16
Mortgage loans 126 149 156
Investment real estate 95 71 62
Other investments 184 195 164
- --------------------------------------------------------------------------------
Gross investment income 1,192 1,159 1,127
Investment expenses (57) (38) (27)
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME $ 1,135 $ 1,121 $ 1,100
- --------------------------------------------------------------------------------
14
4. COMPREHENSIVE INCOME
a) COMPREHENSIVE INCOME
Total comprehensive income was as follows:
FOR THE YEARS ENDED DECEMBER 31
($ millions) 2000 1999 1998
- -------------------------------------------------------------------------------------------
NET INCOME $ 248 $ 293 $ 140
- -------------------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME (LOSS), NET OF INCOME TAX:
Unrealized holding gains (losses) arising during the year 73 (4) 54
Foreign currency translation (7) 1 --
Less:
Reclassification adjustment for realized gains and losses
Included in net income (89) 18 33
- -------------------------------------------------------------------------------------------
Other comprehensive income (loss) 155 (21) 21
- -------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME $ 403 $ 272 $ 161
- -------------------------------------------------------------------------------------------
Other comprehensive income (loss) is reported net of tax (benefit) expense
of ($87), $30, and $(11) for 2000, 1999, and 1998, respectively.
Accumulated other comprehensive income is comprised of the following:
AS AT DECEMBER 31
($ millions) 2000 1999
- --------------------------------------------------------------------------------
UNREALIZED GAINS :
Beginning balance $ 132 $ 154
Current period change 158 (22)
- --------------------------------------------------------------------------------
Ending balance $ 290 $ 132
- --------------------------------------------------------------------------------
FOREIGN CURRENCY:
Beginning balance $ (4) $ (5)
Current period change (3) 1
- --------------------------------------------------------------------------------
Ending balance $ (7) $ (4)
- --------------------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE INCOME $ 283 $ 128
================================================================================
15
b) UNREALIZED GAINS (LOSSES) ON SECURITIES AVAILABLE-FOR-SALE
Net unrealized gains (losses) on fixed-maturity and equity securities
included in other comprehensive income were as follows:
AS AT DECEMBER 31
($ millions) 2000 1999
- --------------------------------------------------------------------------------
Gross unrealized gains $ 688 $ 753
Gross unrealized losses (340) (439)
DAC and other amounts required to satisfy policyholder 53 (117)
liabilities
Deferred income taxes (111) (65)
- --------------------------------------------------------------------------------
NET UNREALIZED GAINS ON SECURITIES AVAILABLE-FOR-SALE $ 290 $ 32
- --------------------------------------------------------------------------------
5. DEFERRED ACQUISITION COSTS
The components of the change in DAC were as follows:
FOR THE YEARS ENDED DECEMBER 31
($ millions) 2000 1999
- --------------------------------------------------------------------------------
Balance, January 1 $ 1,631 $ 1,078
Capitalization 590 463
Accretion of interest 92 82
Amortization (272) (122)
Effect of net unrealized gains on securities 25 130
available-for-sale
Currency Translation -- --
- --------------------------------------------------------------------------------
BALANCE, DECEMBER 31 $ 2,066 $ 1,631
================================================================================
6. INCOME TAXES
The components of income tax expense (benefit) were as follows:
FOR THE YEARS ENDED DECEMBER 31
($ millions) 2000 1999 1998
- --------------------------------------------------------------------------------
Current expense (benefit) $ 56 $ (17) $ 75
Deferred expense (benefit) 34 194 7
- --------------------------------------------------------------------------------
TOTAL EXPENSE $ 90 $ 177 $ 82
================================================================================
Income before federal income taxes differs from taxable income principally
due to tax-exempt investment income, dividends received tax deductions,
differences in the treatment of policy acquisition costs, and differences
in reserves for policy and contract liabilities for tax and financial
reporting purposes.
16
Included in the current benefit for 2000 is a $28.9 one time reduction of
tax expense for periods prior to 2000. This resulted from a new IRS
technical memorandum clarifying the treatment of dividends received
deduction for Separate Accounts. The tax benefit pertaining to 2000
earnings is $9.1.
The Company's deferred income tax asset (liability), which results from
tax effecting the differences between financial statement values and tax
values of assets and liabilities at each balance sheet date, relates to
the following:
FOR THE YEARS ENDED DECEMBER 31
($ millions) 2000 1999 1999
- -----------------------------------------------------------------------------------------
DEFERRED TAX ASSETS:
Differences in computing policy reserves $ 630 $ 635 $ 850
Investments -- -- 85
Policyholder dividends payable 11 9 11
Net capital loss 6 -- --
Net operating loss 41 -- --
Other deferred tax assets 19 -- 10
- -----------------------------------------------------------------------------------------
Deferred tax assets $ 707 $ 644 $ 956
- -----------------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES:
Deferred acquisition costs $ 340 $ 244 $ 103
Unrealized gains on securities available-for-sale 140 189 387
Premiums receivable 13 14 19
Investments 47 14 --
Other deferred tax liabilities 42 32 72
- -----------------------------------------------------------------------------------------
Deferred tax liabilities $ 582 $ 493 $ 581
- -----------------------------------------------------------------------------------------
NET DEFERRED TAX ASSETS $ 125 $ 151 $ 375
- -----------------------------------------------------------------------------------------
The Company files a consolidated federal income tax return. ManUSA and its
subsidiaries file separate state income tax returns. The method of
allocation among the companies is subject to a written tax sharing
agreement under which the tax liability is allocated to each member on a
pro rata basis based on the relationship that the member's tax liability
(computed on a separate return basis) bears to the tax liability of the
consolidated group. The tax charge to each of the respective companies
will not be more than that company would have paid on a separate return
basis. Settlements of taxes are made through an increase or reduction to
the payable to parent, subsidiaries and affiliates, which is settled
periodically.
At December 31, 2000, the Company has operating loss carry forwards of
$116 that will begin to expire in 2014, and capital loss carry forwards of
$18 that are available for carry back.
17
7. NOTE PAYABLE
On December 29, 1997, the Company issued a surplus debenture for $200,000
plus interest at 7.93% per annum to Manufacturers Investment Corporation
("MIC"), an indirect parent company. The surplus debenture matures on
February 1, 2022. Except in the event of insolvency or winding-up of the
Company, the instrument may not be redeemed by the Company during the
period of five years from date of issue without the approval of the Office
of the Superintendent of Financial Institutions of Canada. Interest
accrued and expensed was $16 for each of 2000, 1999, and 1998. Interest
paid was $9, $16, and $9 for 2000, 1999, and 1998, respectively.
8. CAPITAL AND SURPLUS
Capital Stock is comprised of the following:
AS AT DECEMBER 31
($ millions) 2000 1999
- --------------------------------------------------------------------------------
AUTHORIZED:
50,000,000 Preferred shares, Par value $1.00 - -
50,000,000 Common shares, Par value $1.00
- --------------------------------------------------------------------------------
ISSUED AND OUTSTANDING:
100,000 Preferred shares
4,711,772 Common shares (4,544,504 in 1999) 5 5
================================================================================
Pursuant to an agreement dated December 31, 2000, ManUSA purchased from
MRL-LLC all of MRL-LLC's 21.6% interest in Manulife Wood Logan Holdings.
In exchange, ManUSA transferred 167,268 of its common shares to MRL-LLC
and forgave a promissory note owed by MRL-LLC amounting to $52 plus
accrued interest. The result was a $22 addition to the Company's
contributed surplus. The agreement permits the use of estimates in
determining the value of the shares exchanged until, at a mutually agreed
upon date, a final valuation of the respective companies is performed. As
a result of the valuation, there may be a future adjustment to the number
of shares transferred.
ManUSA and its life insurance subsidiaries are subject to statutory
limitations on the payment of dividends. Dividend payments in excess of
prescribed limits cannot be paid without the prior approval of U.S.
insurance regulatory authorities.
Net (loss) income and capital and surplus, as determined in accordance
with statutory accounting principles for ManUSA and its life insurance
subsidiaries were as follows:
FOR THE YEARS ENDED DECEMBER 31
($ millions) 2000 1999 1998
- ------------------------------------------------------------------------------------------------
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A):
Net income $ 200 $ 132 $ 87
Net capital and surplus 1,384 1,560 1,305
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA:
Net (loss) income $ (59) $ (3) $ 28
Net capital and surplus 152 171 158
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA:
Net (loss) income $ (19) $ 6 $ (24)
Net capital and surplus 120 137 122
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK:
Net (loss) income (3) 1 (6)
Net capital and surplus 61 64 63
- ------------------------------------------------------------------------------------------------
18
The National Association of Insurance Commissioners has revised the
Accounting Practices and Procedure Manual in a process referred to as
Codification effective for January 1, 2001. The revised manual has
changed, to some extent, prescribed statutory accounting practices and
will result in changes to the accounting practices that ManUSA and its
life insurance subsidiaries use in preparing their statutory-basis
financial statements. The cumulative effect of such changes will be
reported as an adjustment to statutory-basis capital and surplus as of
January 1, 2001. The effect of adopting these changes has not resulted in
a significant reduction in the statutory-basis capital and surplus of
ManUSA nor of its life insurance subsidiaries.
As a result of the demutualization of Manufacturers Life, there are
regulatory restrictions on the amounts of profit that can be transferred
to shareholders. These restrictions generally take the form of a fixed
percentage of the policyholder dividends. The transfers are governed by
the terms of Manufacturers Life's Plan of Demutualization.
9. EMPLOYEE BENEFITS
a) EMPLOYEE RETIREMENT PLAN
The Company sponsors a non-contributory pension plan, the Cash Balance
Plan ("the Plan"), which provides pension benefits based on length of
service and final average earnings. Pension benefits are provided to those
participants after three years of vesting service, and the normal
retirement benefit is actuarially equivalent to the cash balance account
at normal retirement date. The normal form of payment under the Plan is a
life annuity, with various optional forms available. Vested benefits are
fully funded; current pension costs are funded as they accrue.
Actuarial valuation of accumulated plan benefits are based on projected
salaries and best estimates of investment yields on plan assets, mortality
of participants, employee termination and ages at retirement. Pension
costs that relate to current service are charged to earnings in the
current period. Experience gains and losses are amortized to income over
the estimated average remaining service lives of the participants. No
pension expense was recognized in 2000, 1999, or 1998 because the plan was
subject to the full funding limitation under the Internal Revenue Code.
At December 31, 2000, the projected benefit obligation of the plan based
on an assumed interest rate of 7.25% was $52. The fair value of plan
assets is $81.
The Company also sponsors an unfunded supplemental cash balance plan ("the
Supplemental Plan") for its executives. This non-qualified plan provides
defined pension benefits in excess of limits imposed by the law to those
retiring after age 50 with 10 or more years of vesting service. This plan
covers the Company employees and selected executives. Pension benefits are
provided to those who terminate after 5 years of vesting service, and the
pension benefit is a final average benefit based on the executive's
highest 5-year average earnings. Compensation is not limited, and benefits
are not restricted by the Internal Revenue Code Section 415. Contribution
credits vary by service, and interest credits are a function of the 1-year
U.S. Treasury Bond rate plus 0.50%, but no less than 5.25% per year. These
annual contribution credits are made in respect of the participant's
compensation that is in excess of the limit in Internal Revenue Code
Section 401(a)(17). In addition, a one-time contribution may be made for a
participant if it is determined at the time of their termination of
employment that the participant's pension benefit under the Plan is
limited
19
by Internal Revenue Code Section 415. Together, these contributions serve
to restore to the participant the benefit that he / she would have been
entitled to under the Plan's benefit formula but for the limitation in
Internal Revenue Code Sections 401(a)(17) and 415.
Benefits under the Supplemental Plan are provided to participants after
three years. The default form of payment under this plan is a lump sum
although participants may elect to receive payment in the form of an
annuity provided that such election is made within the time period
prescribed in the plan. If an annuity form of payment is elected, the
amount payable is equal to the actuarial equivalent of the participant's
balance under the Supplemental Plan, using the factors and assumptions for
determining immediate annuity amounts applicable to the participant under
the Plan.
At December 31, 2000, the projected benefit obligation to the participants
of the Supplemental Plan was $22. This is based on an assumed interest
rate of 7.25%.
Prior to July 1, 1998, the Company also participated in an unfunded
Supplemental Executive Retirement Plan ("Manulife SERP") sponsored by
Manufacturers Life for executives. This was a non qualified plan that
provided defined pension benefits in excess of limits imposed by the law
to those retiring after age 50 with 10 or more years of vesting service.
The Manulife SERP covered the Company's employees and selected executives
of MNA. Pension benefits were provided to those who terminate after 5
years of vesting service, and the pension benefit is a final average
benefit based on the executive's highest 5-year average earnings.
Compensation is not limited, and benefits are not restricted by the
Internal Revenue Code Section 415.
b) 401(K) PLAN
The Company sponsors a defined contribution 401(k) Savings Plan which is
subject to the provisions of the Employee Retirement Income Security Act
of 1974 (ERISA). The Company contributed $1 for each of 2000, 1999, and
1998.
c) DEFERRED COMPENSATION PLAN
The Company has deferred compensation incentive plans open to all branch
managers and qualified agents. There are no stock option plans involving
stock of ManUSA.
d) POSTRETIREMENT BENEFIT PLAN
In addition to the retirement plans, the Company sponsors a postretirement
benefit plan, which provides retiree medical and life insurance benefits
to those who have attained age 55 with 10 or more years of service. The
plan provides the medical coverage for retirees and spouses under age 65.
Medicare provides primary coverage and the plan provides secondary
coverage. There is no contribution for post-age 65 coverage and no
contributions are required for retirees for life insurance coverage. The
plan is unfunded.
The Company accounts for its retiree benefit plan using the accrual
method.
The postretirement benefit cost for the year ended December 31, 2000 was
$2. This amount includes the expected cost of postretirement benefits for
newly eligible employees and for vested employees, interest cost, and
gains and losses arising from differences between actuarial assumptions
and actual experience.
20
e) FINANCIAL INFORMATION REGARDING THE EMPLOYEE RETIREMENT PLAN AND THE
POSTRETIREMENT BENEFIT PLAN
Information applicable to the Employee Retirement Plan and the
Postretirement Benefit Plan, determined in accordance with GAAP as
estimated by a consulting actuary for the December 31 year end of the
respective plans, is as follows:
EMPLOYEE POSTRETIREMENT
RETIREMENT BENEFIT
PLAN PLAN
AS OF DECEMBER 31 ---------------------------------------------------
(in thousands) 2000 1999 2000 1999
- -----------------------------------------------------------------------------------------------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $(68,410) $(67,253) $(16,966) $(19,893)
Service cost (2,202) (2,288) (482) (613)
Interest cost (5,044) (4,575) (1,150) (1,082)
Amendments (1,011) -- -- --
Actuarial gain (loss) (2,629) (854) 60 3,903
Benefits paid 5,497 6,560 658 719
- -----------------------------------------------------------------------------------------------
Benefits obligation at end of year $(73,799) $(68,410) $(17,880) $(16,966)
- -----------------------------------------------------------------------------------------------
EMPLOYEE POSTRETIREMENT
RETIREMENT BENEFIT
PLAN PLAN
AS OF DECEMBER 31 ---------------------------------------------------
(in $thousands) 2000 1999 2000 1999
- ---------------------------------------------------------------------------------------------------------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year $ 86,777 $ 84,686 $ -- $ --
Actual return on plan assets (1,618) 7,428 -- --
Employer contribution 1,320 1,223 658 719
Benefits paid (5,497) (6,560) (658) (719)
- ---------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year $ 80,982 $ 86,777 $ -- $ --
- ---------------------------------------------------------------------------------------------------------
Funded status $ 7,183 $ 18,367 $(17,880) $(16,966)
Unrecognized transition obligation (asset) (8,455) (10,778) -- --
Unrecognized actuarial loss (gain) 15,580 4,303 (14,695) (15,621)
Unrecognized prior service cost 3,187 2,437 -- --
- ---------------------------------------------------------------------------------------------------------
Net amount recognized $ 17,495 $ 14,329 $(32,575) $(32,587)
- ---------------------------------------------------------------------------------------------------------
Amounts recognized in statement of financial
position of the Company consist of:
Prepaid benefit cost $ 34,082 $ 29,934 $ -- $ --
Accrued benefit liability (21,130) (20,741) (32,575) (32,587)
Intangible asset 928 1,172 -- --
Accumulated other comprehensive income 3,615 3,964 -- --
- ---------------------------------------------------------------------------------------------------------
Net amount recognized $ 17,495 $ 14,329 $(32,575) $(32,587)
- ---------------------------------------------------------------------------------------------------------
Other comprehensive income attributable to change $ (349) -- -- --
in additional minimum liability recognition
- ---------------------------------------------------------------------------------------------------------
* Amount is net of retiree contributions.
21
e) FINANCIAL INFORMATION REGARDING THE EMPLOYEE RETIREMENT PLAN AND THE
POSTRETIREMENT BENEFIT PLAN (CONTINUED)
EMPLOYEE POSTRETIREMENT
RETIREMENT BENEFIT
PLAN PLAN
-----------------------------------------
AS OF DECEMBER 31 2000 1999 2000 1999
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE ASSUMPTIONS
Discount rate 7.25% 7.50% 7.25% 7.50%
Expected return on plan assets 8.50% 8.50% n/a n/a
Rate of compensation increase 5.00% 5.00% 5.00% 5.00%
On December 31, 2000, the accrued postretirement benefit cost was $18. The
postretirement benefit obligation for eligible active employees was $2.
The amount of the postretirement benefit obligation for ineligible active
employees was $4. For measurement purposes as of December 31, 2000, an 8 %
and 10 % annual rate of increase in the per capita cost of covered health
care benefits was assumed for 2001 for pre-65 and post-65 coverages,
respectively. These rates were assumed to decrease gradually to 5 % in
2006 and 2010, respectively, and remain at those levels thereafter.
EMPLOYEE POSTRETIREMENT
AS OF DECEMBER 31 RETIREMENT BENEFIT
(IN THOUSANDS) PLAN PLAN
-----------------------------------------------
2000 1999 2000 1999
- ------------------------------------------------------------------------------------------------------------
COMPONENTS OF NET PERIODIC BENEFIT COST FOR PLAN SPONSOR
Service cost $ 2,202 $ 2,288 $ 483 $ 613
Interest cost 5,044 4,575 1,150 1,082
Expected return on plan assets (7,181) (7,088) -- --
Amortization of net transition obligation (2,323) (2,323) -- --
Amortization of prior service cost 262 221
Recognized actuarial loss (gain) 150 343 (986) (892)
- ------------------------------------------------------------------------------------------------------------
Net periodic (benefit) cost $ (1,846) $ (1,984) $ 647 $ 803
- ------------------------------------------------------------------------------------------------------------
The projected benefit obligation in excess of plan assets, the accumulated
benefit obligation in excess of plan assets, and the fair value of plan
assets for the Supplemental Plan were $22, $21, and $0 respectively, as of
December 31, 2000 and $21, $22, and $0 respectively, as of December 31,
1999.
The health care cost trend rate assumption has a significant effect on the
amounts reported. A one-percentage-point change in assumed health care
cost trend rates would have the following effects on 2000 values:
100 BASIS-POINT 100 BASIS-POINT
(in thousands) INCREASE DECREASE
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Effect on total of service and interest cost components $ 275 $ (214)
Effect on postretirement benefit obligation $ 2,521 $(2,036)
- -----------------------------------------------------------------------------------------------
22
10. DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses a variety of off-balance sheet financial instruments as
part of its efforts to manage exposures to foreign currency, interest rate
and other market risks arising from its on-balance sheet financial
instruments. Those instruments include interest rate exchange agreements
and foreign currency forward contracts. The contract or notional amounts
of those instruments reflect the extent of involvement in the various
types of financial instruments.
The Company's exposure to credit risk is the risk of loss from a
counterparty failing to perform according to the terms of the contract.
That exposure includes settlement risk (i.e., the risk that the
counterparty defaults after the Company has delivered funds or securities
under terms of the contract) that would result in an accounting loss and
replacement cost risk (i.e. the cost to replace the contract at current
market rates should the counterparty default prior to the settlement
date). To limit exposure associated with counterparty nonperformance on
interest rate exchange agreements, the Company enters into master netting
agreements with its counterparties.
INTEREST RATE EXCHANGE AGREEMENTS (SWAPS AND FLOORS)
The Company enters into interest rate exchange agreements to reduce and
manage interest rate risk associated with individual assets and
liabilities, and its overall aggregate portfolio. These interest rate
exchange agreements consist primarily of interest rate swap agreements and
interest rate floors. The amounts to be received or paid pursuant to these
agreements are accrued and recognized in the accompanying statements of
operations through an adjustment to investment income, as appropriate,
over the lives of the agreements. Gains or losses realized on closed or
terminated agreements accounted for as hedges are deferred and amortized
to investment income on a straight-line basis over the shorter of the
lives of the agreements or the expected remaining lives of the underlying
assets or liabilities.
FOREIGN CURRENCY FORWARDS
The Company uses foreign currency forward contracts to hedge some of the
foreign exchange risk resulting from the fact that it generates revenue
and holds assets in U.S. dollars, but incurs a significant portion of its
maintenance expense in Canadian dollars. A foreign currency forward
contract obligates the Company to deliver a specified amount of currency
on a future date at a specified exchange rate. The value of the foreign
exchange forward contracts at any given point fluctuates according to the
underlying level of exchange rate and interest rate differentials.
23
Outstanding derivatives with off-balance sheet risks are as follows:
NOTIONAL OR
AS AT DECEMBER 31 CONTRACT AMOUNTS CARRYING VALUE FAIR VALUE
($ millions) 2000 1999 2000 1999 2000 1999
- --------------------------------------------------------------------------------------------------------
Interest rate & currency swaps & floors $1,008 $ 869 $ 5 $ (2) $ 5 $ (2)
Interest rate option written 22 22 -- -- -- --
Equity Contracts 68 -- (1) -- (1) --
Currency forwards 1,125 973 5 32 5 32
- --------------------------------------------------------------------------------------------------------
TOTAL DERIVATIVES $2,223 $1,864 $ 9 $ 30 $ 9 $ 30
========================================================================================================
Fair value of off-balance sheet derivative financial instruments reflect
the estimated amounts that the Company would receive or pay to terminate
the contract at the balance sheet date, including the current unrealized
gains (losses) on the instruments. Fair values of the agreements were
based on estimates obtained from the individual counterparties.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values and the estimated fair values of the Company's
financial instruments at December 31, 2000 were as follows:
($ millions) CARRYING VALUE FAIR VALUE
- --------------------------------------------------------------------------------
ASSETS:
Fixed-maturity and equity securities $ 10,649 $ 10,649
Mortgage loans 1,539 1,626
Policy loans 1,998 1,998
Derivative financial instruments 9 9
Separate account assets 29,681 29,681
LIABILITIES:
Insurance investment contracts $ 1,550 $ 1,517
Separate account liabilities 29,681 29,681
- --------------------------------------------------------------------------------
The following methods and assumptions were used to estimate the fair
values of the above financial instruments:
FIXED-MATURITY AND EQUITY SECURITIES: Fair values of fixed-maturity and
equity securities were based on quoted market prices, where available.
Where no quoted market price was available, fair values were estimated
using values obtained from independent pricing services or, in the case of
private placements, by discounting expected future cash flows using a
current market rate applicable to yield, credit quality, and average life
of the investments.
MORTGAGE LOANS: Fair value of mortgage loans was estimated using
discounted cash flows and took into account the contractual maturities and
discount rates which were based on current market rates for similar
maturity ranges and adjusted for risk due to the property type.
24
POLICY LOANS: Carrying values approximate fair values.
DERIVATIVE FINANCIAL INSTRUMENTS: Fair values of derivative financial
instruments were based on estimates obtained from the individual
counterparties.
INSURANCE INVESTMENT CONTRACTS: Fair value of insurance investment
contracts which do not subject the Company to significant mortality or
morbidity risks was estimated using cash flows discounted at market rates.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The carrying amounts in the
balance sheet for separate account assets and liabilities approximate
their fair value.
12. RELATED PARTY TRANSACTIONS
The Company has formal service agreements with ManUSA's indirect parent,
Manufacturers Life, which can be terminated by either party upon two
months' notice. Under the various agreements, the Company will pay direct
operating expenses incurred by Manulife Financial on behalf of the
Company. Services provided under the agreements include legal, actuarial,
investment, data processing, accounting and certain other administrative
services. Costs incurred under the agreements were $243, $194, and $171 in
2000, 1999, and 1998, respectively.
Manulife Financial provides a claims paying guarantee to most U.S.
policyholders.
On September 23, 1997, the Company entered into a reinsurance agreement
with Manulife Reinsurance Limited ("MRL"), an affiliated life insurance
company domiciled in Bermuda, to reinsure a closed block of participating
life insurance business. As there was an insufficient transfer of
mortality risk between the Company and MRL, the agreement was classified
as financial reinsurance and given deposit-type accounting treatment.
Title to the assets supporting this block of business was transferred to
MRL under the terms of the agreement. Included in amounts due from
affiliates is $568 (1999 - $562) representing the receivable from MRL for
the transferred assets.
The Company loaned $20 to MRL pursuant to a promissory note dated
September 29, 2000. The loan is due on September 29, 2005 with interest
calculated at 7.30% per annum, payable quarterly starting December 15,
2000.
Pursuant to a promissory note dated June 12, 2000, the Company loaned $7
to MRL. Principal and accrued interest are payable on June 12, 2003.
Interest on the loan calculated at 7.65% is payable semi-annually starting
August 1, 2000.
Pursuant to a promissory note and a credit agreement dated December 19,
2000, the Company received a loan of $250 ($375 Canadian) from an
affiliate, Manulife Hungary Holdings KFT. The maturity date with respect
to any advances is set at 365 days after the date of the advancement.
Interest on the loan is calculated at the fluctuating rate to be
equivalent to LIBOR plus 25 basis points and is payable quarterly starting
March 28, 2001.
25
13. REINSURANCE
In the normal course of business, the Company assumes and cedes
reinsurance as a party to several reinsurance treaties with major
unrelated insurance companies. The Company remains liable for amounts
ceded in the event that reinsurers do not meet their obligations.
The effects of reinsurance on premiums with unrelated insurance companies
were as follows:
FOR THE YEARS ENDED DECEMBER 31 2000 1999 1998
($ millions)
- --------------------------------------------------------------------------------
Direct premiums $ 963 $ 976 $ 908
Reinsurance assumed 14 12 --
Reinsurance ceded (163) (107) (60)
- --------------------------------------------------------------------------------
TOTAL PREMIUMS $ 814 $ 881 $ 848
- --------------------------------------------------------------------------------
Reinsurance recoveries on ceded reinsurance contracts were $186.9, $32.9,
and $41.2 during 2000, 1999, and 1998, respectively.
14. CONTINGENCIES
In 1999, the Company settled a class action lawsuit related to policies
sold on a "vanishing premium" basis. As a result of the settlement, the
Company has agreed to pay special enhancements for certain policies
beginning on or after July 1, 1999. The present value of these payments
has an expected value of $150. In addition, the Company will pay $50 to
policyholders as part of a claims resolution process and has agreed,
subject to certain conditions, to not reduce dividends for a period of 3
years and to maintain the program of voluntary enhancements that was
previously implemented. The voluntary enhancements have an expected
present value of $300. Management believes that these provisions are also
adequate to address the remaining class actions and individual actions,
including actions that may result from policyholders who have opted out of
class settlement. However, there can be no assurance that these legal
proceedings or any further litigation relating to life insurance pricing
and sales practices will not have a material adverse effect on the
Company's business, financial conditions or results of operation.
The Company has provided for the estimated costs of settlement in these
consolidated financial statements based on the terms of the settlement.
The Company is subject to legal actions arising in the ordinary course of
business. These legal actions are not expected to have a material adverse
effect on the consolidated financial position of the Company.
26
THE MANUFACTURERS LIFE INSURANCE COMPANY
(U.S.A.)
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
PREPARED IN CONFORMITY WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE
UNITED STATES
================================================================================
[MANULIFE FINANCIAL LOGO]
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
CONSOLIDATED BALANCE SHEETS
AS AT AS AT
SEPTEMBER 30 DECEMBER 31
ASSETS ($ millions) 2001 2000
- --------------------------------------------------------------------------------------------------------
(UNAUDITED)
INVESTMENTS
Securities available-for-sale, at fair value
Fixed-maturity (amortized cost: 2001 $9,568 ; 2000 $9,580) $ 10,085 $ 9,797
Equity (cost: 2001 $ 956 ; 2000 $707) 833 852
Mortgage loans 1,629 1,539
Real estate 964 986
Policy loans 2,171 1,998
Short-term investments 863 715
- --------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $ 16,545 $ 15,887
- --------------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 26 $ 164
Deferred acquisition costs 2,224 2,066
Deferred income taxes 144 125
Due from affiliates 276 261
Amounts recoverable from reinsurers 821 572
Other assets 583 677
Separate account assets 26,228 29,681
- --------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 46,847 $ 49,433
========================================================================================================
LIABILITIES, CAPITAL AND SURPLUS ($ millions)
- --------------------------------------------------------------------------------------------------------
LIABILITIES:
Policyholder liabilities and accruals $ 17,331 $ 16,240
Note payable 200 200
Other liabilities 650 764
Separate account liabilities 26,228 29,681
- --------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES $ 44,409 $ 46,885
- --------------------------------------------------------------------------------------------------------
CAPITAL AND SURPLUS:
Capital stock $ 5 $ 5
Retained earnings 2,345 2,260
Accumulated other comprehensive income 88 283
- --------------------------------------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS $ 2,438 $ 2,548
- --------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES, CAPITAL AND SURPLUS $ 46,847 $ 49,433
========================================================================================================
See accompanying notes.
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
Consolidated Statements of (Loss) Income (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
($ millions) 2001 2000 2001 2000
- --------------------------------------------------------------------------------------------------
REVENUE:
Premiums $ 203 $ 196 $ 594 $ 613
Fee income 222 244 678 702
Net investment income 283 287 835 846
Realized investment gains (losses) 22 (24) 109 129
Other 1 2 3 --
- --------------------------------------------------------------------------------------------------
TOTAL REVENUE $ 731 $ 705 $2,219 $2,290
- --------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES:
Policyholder benefits and claims $ 443 $ 393 $1,191 $1,249
Operating expenses and commissions 135 148 427 446
Amortization of deferred acquisition costs 89 52 204 97
Interest expense 7 4 23 13
Policyholder dividends 91 87 258 251
Minority interest expense -- 13 -- 19
- --------------------------------------------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES $ 765 $ 697 $2,103 $2,075
- --------------------------------------------------------------------------------------------------
(LOSS) INCOME BEFORE INCOME TAX (RECOVERY) EXPENSE $ (34) $ 8 $ 116 $ 215
- --------------------------------------------------------------------------------------------------
INCOME TAX (RECOVERY) EXPENSE $ (14) $ (27) $ 31 $ 46
- --------------------------------------------------------------------------------------------------
NET (LOSS) INCOME $ (20) $ 35 $ 85 $ 169
- --------------------------------------------------------------------------------------------------
See accompanying notes.
2
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS (UNAUDITED)
ACCUMULATED
OTHER
CAPITAL RETAINED COMPREHENSIVE TOTAL CAPITAL
($millions) STOCK EARNINGS INCOME AND SURPLUS
- --------------------------------------------------------------------------------------
Balance at December 31, 2000 $ 5 $ 2,260 $ 283 $ 2,548
Comprehensive income -- 85 (195) (110)
- --------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 2001 $ 5 $ 2,345 $ 88 $ 2,438
======================================================================================
See accompanying notes.
3
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30
($ millions) 2001 2000
- ------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income $ 85 $ 169
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Additions to policyholder liabilities and accruals 306 237
Deferred acquisition costs (390) (446)
Amortization of deferred acquisition costs 204 97
Amounts recoverable from reinsurers (6) 72
Realized investment gains (109) (129)
Decreases (additions) to deferred income taxes 40 (25)
Amounts due from affiliates 34 367
Other assets and liabilities, net (173) (295)
Other, net 87 50
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities $ 78 $ 97
- ------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Fixed-maturity securities sold, matured or repaid $ 7,511 $ 4,355
Fixed-maturity securities purchased (7,454) (4,682)
Equity securities sold 180 692
Equity securities purchased (419) (458)
Mortgage loans advanced (212) (104)
Mortgage loans repaid 124 218
Real estate sold 42 50
Real estate purchased (20) (46)
Policy loans advanced, net (173) (108)
Short-term investments (147) (77)
Other investments, net (18) 218
- ------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities $ (586) $ 58
- ------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Deposits and interest credited to policyholder account balances $ 1,401 $ 910
Withdrawals from policyholder account balances (1,064) (1,175)
Net reinsurance recoverable 33 71
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities $ 370 $ (194)
- ------------------------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents during the period $ (138) $ (39)
Cash and cash equivalents at beginning of year 164 131
- ------------------------------------------------------------------------------------------------------------------------
BALANCE, END OF PERIOD $ 26 $ 92
========================================================================================================================
See accompanying notes.
4
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
(IN MILLIONS OF DOLLARS)
(UNAUDITED)
1. ORGANIZATION
The Manufacturers Life Insurance Company (U.S.A.) ("ManUSA") is an
indirectly wholly-owned subsidiary of Manulife Financial Corporation, a
Canadian-based publicly traded company. Manulife Financial Corporation and
its subsidiaries are collectively known as "Manulife Financial". ManUSA
and its subsidiaries, collectively known as the "Company", operate in the
life insurance industry, offering a broad range of insurance related
products. These products are offered both on an individual and group basis
and are marketed primarily in the United States.
In December of 2000 through an issue of shares, the Company acquired the
remaining 21.6% minority interest in Manulife-Wood Logan Holding Co. Inc,
a subsidiary of the Company, from MRL Holding, LLC ("MRL-LLC"), an
affiliated company. As this was a related party transaction, the purchase
was accounted for at MRL-LLC's carrying value and no goodwill was
generated.
2. SIGNIFICANT ACCOUNTING POLICIES
a) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of the
Company have been prepared in accordance with accounting principles
generally accepted in the United States ("GAAP"), except that they do not
contain complete notes. However, in the opinion of management, these
statements include all normal recurring adjustments necessary for a fair
presentation of the results. Operating results for the nine months ended
September 30, 2001 are not necessarily indicative of the results that may
be expected for the full year ending December 31, 2001.
Certain prior year amounts have been reclassified to conform to the
current year presentation.
b) RECENT ACCOUNTING STANDARDS
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations"
and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141
requires the purchase method of accounting to be used for all future
business combinations. SFAS No. 142 eliminates the practice of amortizing
goodwill through periodic charges to earnings and establishes a new
methodology for recognizing and measuring goodwill and other intangible
assets. Under this new accounting standard, the Company will cease
goodwill amortization on January 1, 2002. Goodwill amortization for full
year 2001 is not expected to be material and would have been approximately
the same amount in 2002 under accounting standards currently in effect.
The Company is currently considering the other provisions of the new
standard. The impact of adopting these two standards on the Company's
financial statements is not expected to be material.
5
3. DERIVATIVE FINANCIAL INSTRUMENTS
Effective January 1, 2001 with the adoption of the Financial Accounting
Standards Board Statement No. 133 - "Accounting for Derivative Instrument
and Hedging Activities", and Statement No. 138 "Accounting for Certain
Derivatives and Certain Hedging Activities", all derivative instruments
are reported on the Consolidated Balance Sheets at their fair value, with
changes in fair value recorded in income or equity, depending on the use
of the derivative instrument. Changes in the fair value of derivatives
that are not designated as hedges are recognized in current period
earnings.
The Company has entered into a reinsurance agreement with an unaffiliated
reinsurer to reinsure the risk associated with the "Guaranteed Retirement
Income Program", a rider offered on one of the variable annuity products
sold. This rider is designed to protect the policyholder against adverse
investment market movements. As a result, there is an embedded derivative
within this agreement that has an estimated fair market value of $276 as
at September 30, 2001, and is reflected in the Consolidated Balance Sheets
as part of "Amounts recoverable from reinsurers". The related $276
estimated fair value of the obligation to the policyholder has been
reflected in the Consolidated Balance Sheets as part of "Policyholder
liabilities and accruals". There was no cumulative effect on surplus in
the consolidated financial statements of the Company upon the adoption of
these accounting statements.
4. COMPREHENSIVE INCOME
Total comprehensive income was as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
COMPREHENSIVE INCOME (LOSS):
($ millions) 2001 2000 2001 2000
- ----------------------------------------------------------------------------------------------
NET (LOSS) INCOME $ (20) $ 35 $ 85 $ 169
- ----------------------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Unrealized holding gains (losses) arising
during the period 5 (38) (111) (32)
Foreign currency translation (16) -- (29) (5)
Less:
Reclassification adjustment for realized
gains (losses) included in net (loss) income (1) (43) 55 75
- ----------------------------------------------------------------------------------------------
Other comprehensive income (loss) (10) 5 (195) (112)
- ----------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME (LOSS) $ (30) $ 40 $ (110) $ 57
==============================================================================================
Other comprehensive loss is reported net of taxes payable (recoverable) of
$3 and $3 for the three months and ($89) and ($58) for the nine months
ended September 30, 2001 and 2000, respectively.
6
Accumulated other comprehensive income is comprised of the following:
AS AT AS AT
($ millions) SEPTEMBER 30, 2001 DECEMBER 31, 2000
- -----------------------------------------------------------------------------------
UNREALIZED GAINS :
Beginning balance $ 290 $ 132
Current period change (166) 158
- -----------------------------------------------------------------------------------
Ending balance $ 124 $ 290
- -----------------------------------------------------------------------------------
FOREIGN CURRENCY:
Beginning balance $ (7) $ (4)
Current period change (29) (3)
- -----------------------------------------------------------------------------------
Ending balance $ (36) $ (7)
- -----------------------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE INCOME $ 88 $ 283
===================================================================================
5. CONTINGENCIES
The Company has provided for the estimated costs of settlement in these
consolidated financial statements based on the terms of the settlement.
The Company and its subsidiaries are subject to legal actions arising in
the ordinary course of business. These legal actions are not expected to
have a material adverse effect on the consolidated financial position of
the Company.
6. CODIFICATION
In March 1998, the National Association of Insurance Commissioners adopted
codified statutory accounting principles ("Codification") effective
January 1, 2001. Codification changes prescribed statutory accounting
practices and results in changes to the accounting practices that the
Company's life insurance subsidiaries use to prepare their statutory-basis
financial statements. The states of domicile of these subsidiaries adopted
Codification as the prescribed basis of accounting on which insurers must
report their statutory-basis results. The cumulative effect of changes in
accounting principles adopted to conform to the requirements of
Codification was reported as an increase to surplus in the statutory-basis
financial statement of the respective life insurance subsidiaries. In
total, statutory-basis surplus of the life insurance entities within the
Company increased by $182.
7. SUBSEQUENT EVENT
Subject to the approval of state and federal regulators and effective for
January 1, 2002, it is the intention of management to merge all of the
operations of The Manufacturers Reinsurance Corporation (U.S.A.) ("MRC"),
the direct parent company of ManUSA, into the operations of ManUSA
beginning on that date. As a result, products currently sold and
administered under the name of MRC will be offered and administered under
the name of ManUSA.
7
MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA SEPARATE ACCOUNT FOUR
Audited Financial Statements
Years ended December 31, 2000 and 1999 with Report of Independent Auditors
The Manufacturers Life Insurance Company of America
Separate Account Four
Audited Financial Statements
Years ended December 31, 2000 and 1999
CONTENTS
Report of Independent Auditors............................................. 1
Audited Financial Statements
Statement of Assets and Contract Owners' Equity............................ 2
Statements of Operations and Changes in Contract Owners' Equity............ 3
Notes to Financial Statements.............................................. 23
Report of Independent Auditors
To the Contract Owners of
The Manufacturers Life Insurance Company
of America Separate Account Four
We have audited the accompanying statement of assets and contract owners' equity
of The Manufacturers Life Insurance Company of America Separate Account Four as
of December 31, 2000 and the related statements of operations and changes in
contract owners' equity for each of the periods presented therein. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Manufacturers Life
Insurance Company of America Separate Account Four at December 31, 2000, and the
results of its operations and the changes in its contract owners' equity for
each of the periods presented therein, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
February 2, 2001
1
The Manufacturers Life Insurance Company of America
Separate Account Four
Statement of Assets and Contract Owners' Equity
December 31, 2000
ASSETS
Investments at market value:
Sub-Accounts:
Aggressive Growth Trust - 300,889 shares (cost $6,141,202) $ 5,373,879
All Cap Growth Trust - 425,863 shares (cost $10,124,381) 8,794,079
Balanced Trust - 2,638,383 shares (cost $46,232,944) 40,789,397
Blue Chip Growth Trust - 1,957,148 shares (cost $39,429,130) 39,397,397
Diversified Bond Trust - 349,417 shares (cost $3,475,591) 3,658,397
Dynamic Growth Trust - 33,865 shares (cost $374,162) 270,246
Emerging Small Company Trust - 2,299,165 shares (cost $62,101,820) 80,516,767
Equity Income Trust - 466,855 shares (cost $7,487,637) 7,857,179
Equity Index Trust - 2,423,616 shares (cost $41,521,112) 39,747,312
Global Bond Trust - 34,960 shares (cost $401,273) 399,237
Global Equity Trust - 191,279 shares (cost $3,283,186) 3,534,825
Growth Trust - 859,958 shares (cost $21,343,839) 15,237,919
Growth and Income Trust - 950,065 shares (cost $28,384,264) 27,114,850
High Yield Trust - 346,829 shares (cost $4,435,148) 4,040,562
Income and Value Trust - 591,470 shares (cost $6,644,511) 6,245,927
International Index Trust - 4,003 shares (cost $47,519) 44,478
International Small Cap Trust - 258,498 shares (cost $6,015,951) 4,239,359
International Stock Trust - 1,375,295 shares (cost $18,983,001) 17,617,526
International Value Trust - 152,906 shares (cost $1,918,792) 1,844,045
Internet Technologies Trust - 18,787 shares (cost $219,319) 132,075
Investment Quality Bond Trust - 1,387,357 shares (cost $16,112,826) 16,287,580
Large Cap Growth Trust - 571,048 shares (cost $8,605,377) 7,183,787
Lifestyle Aggressive 1000 Trust - 51,475 shares (cost $663,185) 673,805
Lifestyle Balanced 640 Trust - 284,152 shares (cost $3,907,099) 3,847,425
Lifestyle Conservative 280 Trust - 22,283 shares (cost $280,470) 293,688
Lifestyle Growth 820 Trust - 111,045 shares (cost $1,550,839) 1,510,205
Lifestyle Moderate 460 Trust - 22,677 shares (cost $295,742) 295,033
Mid Cap Blend Trust - 832,240 shares (cost $15,761,726) 14,580,851
Mid Cap Index Trust - 18,697 shares (cost $251,375) 245,492
Mid Cap Stock Trust - 31,443 shares (cost $384,662) 380,467
Money Market Trust - 4,032,028 shares (cost $40,320,273) 40,320,273
Overseas Trust - 246,229 shares (cost $3,379,198) 2,932,587
Pacific Rim Emerging Markets Trust - 626,727 shares (cost $5,548,428) 5,139,164
Quantitative Equity Trust - 1,758,520 shares (cost $40,373,604) 46,178,737
Real Estate Securities Trust - 1,102,528 shares (cost $17,525,095) 17,166,358
Science and Technology Trust - 1,814,045 shares (cost $57,544,674) 42,158,414
Small Cap Index Trust - 3,870 shares (cost $46,471) 43,698
Small Company Blend Trust - 118,011 shares (cost $1,863,933) 1,334,707
Small Company Value Trust - 189,607 shares (cost $2,277,161) 2,461,108
Strategic Bond Trust - 94,202 shares (cost $1,031,755) 1,029,633
Total Return Trust - 346,092 shares (cost $4,353,305) 4,630,708
Total Stock Market Index Trust - 118,784 shares (cost $1,463,815) 1,323,263
U.S. Government Securities Trust - 189,671 shares (cost $2,474,332) 2,573,829
U.S. Large Cap Value Trust - 157,235 shares (cost $2,040,234) 2,058,204
Value Trust - 285,999 shares (cost $3,892,491) 4,713,260
500 Index Trust - 22,008 shares (cost $265,047) 248,261
------------
Total assets $526,465,993
============
CONTRACT OWNERS' EQUITY
Variable life contracts $526,465,993
============
See accompanying notes.
2
The Manufacturers Life Insurance Company of America
Separate Account Four
Statement of Operations and Changes in Contract Owners' Equity
Years ended December 31, 2000 and 1999
SUB-ACCOUNT
------------------------------------------------------------------------
AGGRESSIVE GROWTH ALL CAP GROWTH
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/00 DEC. 31/99 DEC. 31/00 DEC. 31/99
------------------------------------------------------------------------
Income:
Dividends $ -- $ -- $ 494,609 $ 424,170
Expenses:
Mortality and expense risks, and administrative
charges 19,680 4,009 52,700 23,442
----------- ----------- ----------- -----------
Net investment income (loss) during the year (19,680) (4,009) 441,909 400,728
Net realized gain (loss) during the year 445,778 4,279 719,966 279,819
Unrealized appreciation (depreciation) during the year (1,051,671) 231,555 (2,675,835) 903,615
----------- ----------- ----------- -----------
Net increase (decrease) in assets from operations (625,573) 231,825 (1,513,960) 1,584,162
----------- ----------- ----------- -----------
Changes from principal transactions:
Transfer of net premiums 2,017,555 264,328 2,987,565 800,199
Transfer on terminations (153,979) (53,536) (565,315) (141,560)
Transfer on policy loans (1,889) 1,030 (36,214) (23,845)
Net interfund transfers 3,035,625 165,704 2,348,259 883,131
----------- ----------- ----------- -----------
Net increase (decrease) in assets from principal
transactions 4,897,312 377,526 4,734,295 1,517,925
----------- ----------- ----------- -----------
Total increase (decrease) in assets 4,271,739 609,351 3,220,335 3,102,087
Assets beginning of year 1,102,140 492,789 5,573,744 2,471,657
----------- ----------- ----------- -----------
Assets end of year $ 5,373,879 $ 1,102,140 $ 8,794,079 $ 5,573,744
=========== =========== =========== ===========
See accompanying notes.
3
SUB-ACCOUNT
- ---------------------------------------------------------------------------------------------------
BALANCED BLUE CHIP GROWTH CAPITAL GROWTH BOND
- ---------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/00 DEC. 31/99 DEC. 31/00 DEC. 31/99 DEC. 31/99
- ---------------------------------------------------------------------------------------------------
$ 2,142,690 $ 3,948,555 $ 1,437,390 $ 852,462 $ 1,127,241
306,448 372,889 225,515 152,654 33,753
- ------------ ------------ ------------ ------------ ------------
1,836,242 3,575,666 1,211,875 699,808 1,093,488
1,164,938 1,671,479 2,219,612 955,115 (44,948)
(7,426,525) (6,565,173) (5,137,526) 2,787,049 (1,237,887)
- ------------ ------------ ------------ ------------ ------------
(4,425,345) (1,318,028) (1,706,039) 4,441,972 (189,347)
- ------------ ------------ ------------ ------------ ------------
5,624,260 7,828,360 13,245,945 10,118,553 923,685
(5,659,955) (5,350,233) (1,872,424) (1,220,684) (419,351)
(208,941) (437,651) 13 (90,784) (41,697)
(7,469,583) (6,044,490) (3,545,368) 5,500,388 (15,989,477)
- ------------ ------------ ------------ ------------ ------------
(7,714,219) (4,004,014) 7,828,166 14,307,473 (15,526,840)
- ------------ ------------ ------------ ------------ ------------
(12,139,564) (5,322,042) 6,122,127 18,749,445 (15,716,187)
52,928,961 58,251,003 33,275,270 14,525,825 15,716,187
- ------------ ------------ ------------ ------------ ------------
$ 40,789,397 $ 52,928,961 $ 39,397,397 $ 33,275,270 $ --
============ ============ ============ ============ ============
4
The Manufacturers Life Insurance Company of America
Separate Account Four
Statement of Operations and Changes in Contract Owners' Equity
Years ended December 31, 2000 and 1999
SUB-ACCOUNT
---------------------------------------------------
DIVERSIFIED BOND DYNAMIC GROWTH
---------------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED
DEC. 31/00 DEC. 31/99 DEC. 31/00**
---------------------------------------------------
Income:
Dividends $ 128,166 $ 102,127 $ --
Expenses:
Mortality and expense risks, and administrative charges 13,735 6,973 1,202
----------- ----------- ---------
Net investment income (loss) during the year 114,431 95,154 (1,202)
Net realized gain (loss) during the year (85,540) (11,663) (126,482)
Unrealized appreciation (depreciation) during the year 229,671 (79,430) (103,916)
----------- ----------- ---------
Net increase (decrease) in assets from operations 258,562 4,061 (231,600)
----------- ----------- ---------
Changes from principal transactions:
Transfer of net premiums 1,199,817 404,943 91,367
Transfer on terminations (244,178) (24,590) (13,110)
Transfer on policy loans (55,670) -- --
Net interfund transfers 1,131,179 98,839 423,589
Net increase (decrease) in assets from principal transactions 2,031,148 479,192 501,846
----------- ----------- ---------
Total increase (decrease) in assets 2,289,710 483,253 270,246
Assets beginning of year 1,368,687 885,434 --
----------- ----------- ---------
Assets end of year $ 3,658,397 $ 1,368,687 $ 270,246
=========== =========== =========
** Reflects the period from commencement of operations May 2, 2000 through
December 31, 2000.
See accompanying notes.
5
SUB-ACCOUNT
- --------------------------------------------------------------------------------------------------------------------
EMERGING SMALL COMPANY EQUITY INCOME EQUITY INDEX
- --------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/00 DEC. 31/99 DEC. 31/00 DEC. 31/99 DEC. 31/00 DEC. 31/99
- --------------------------------------------------------------------------------------------------------------------
$ 8,896,969 $ 803,802 $ 1,215,240 $ 781,192 $ 117,514 $ 909,767
594,318 379,062 52,959 64,646 258,059 186,998
- ------------ ------------ ----------- ----------- ------------ ------------
8,302,651 424,740 1,162,281 716,546 (140,545) 722,769
7,060,851 4,060,457 (999,933) 345,133 3,003,549 1,279,721
(19,474,370) 31,619,181 598,947 (675,079) (7,096,700) 3,317,397
- ------------ ------------ ----------- ----------- ------------ ------------
(4,110,868) 36,104,378 761,295 386,600 (4,233,696) 5,319,887
10,826,056 7,671,430 3,091,072 3,340,138 16,333,867 11,677,308
(10,744,665) (5,786,669) (1,003,040) (883,815) (2,849,902) (1,432,735)
(877,506) (593,870) 1,625 (74,633) (154,116) (55,679)
1,815,857 (12,504,266) (4,746,166) (2,322,477) (7,052,953) 4,026,837
- ------------ ------------ ----------- ----------- ------------ ------------
1,019,742 (11,213,375) (2,656,509) 59,213 6,276,896 14,215,731
- ------------ ------------ ----------- ----------- ------------ ------------
(3,091,126) 24,891,003 (1,895,214) 445,813 2,043,200 19,535,618
83,607,893 58,716,890 9,752,393 9,306,580 37,704,112 18,168,494
- ------------ ------------ ----------- ----------- ------------ ------------
$ 80,516,767 $ 83,607,893 $ 7,857,179 $ 9,752,393 $ 39,747,312 $ 37,704,112
============ ============ =========== =========== ============ ============
6
The Manufacturers Life Insurance Company of America
Separate Account Four
Statement of Operations and Changes in Contract Owners' Equity
Years ended December 31, 2000 and 1999
SUB-ACCOUNT
--------------------------------------------------------------------
GLOBAL BOND GLOBAL EQUITY
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/00 DEC. 31/99 DEC. 31/00 DEC. 31/99
--------------------------------------------------------------------
Income:
Dividends $ 10,543 $ 3,386 $ 327,718 $ 170,310
Expenses:
Mortality and expense risks, and administrative
charges 3,171 872 19,023 14,066
--------- --------- ----------- -----------
Net investment income (loss) during the year 7,372 2,514 308,695 156,244
Net realized gain (loss) during the year (30,994) (8,982) (199,982) (98,806)
Unrealized appreciation (depreciation) during the year 2,851 (5,265) 234,915 21,590
--------- --------- ----------- -----------
Net increase (decrease) in assets from operations (20,771) (11,733) 343,628 79,028
--------- --------- ----------- -----------
Changes from principal transactions:
Transfer of net premiums 139,169 13,248 1,194,857 850,651
Transfer on terminations (34,333) (5,238) (226,935) (126,551)
Transfer on policy loans (10,712) (292) (40,108) (30,830)
Net interfund transfers 2,695 284,481 (910,286) 998,353
--------- --------- ----------- -----------
Net increase (decrease) in assets from principal
transactions 96,819 292,199 17,528 1,691,623
--------- --------- ----------- -----------
Total increase (decrease) in assets 76,048 280,466 361,156 1,770,651
Assets beginning of year 323,189 42,723 3,173,669 1,403,018
--------- --------- ----------- -----------
Assets end of year $ 399,237 $ 323,189 $ 3,534,825 $ 3,173,669
========= ========= =========== ===========
See accompanying notes.
7
SUB-ACCOUNT
- -------------------------------------------------------------------------------------------------------------------
GROWTH GROWTH AND INCOME HIGH YIELD
- -------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/00 DEC. 31/99 DEC. 31/00 DEC. 31/99 DEC. 31/99 DEC. 31/99
- -------------------------------------------------------------------------------------------------------------------
$ 1,357,936 $ 180,570 $ 1,677,174 $ 683,192 $ 13,566 $ 274,823
97,447 31,123 178,922 148,390 25,447 17,262
- ------------ ----------- ------------ ------------ ----------- -----------
1,260,489 149,447 1,498,252 534,802 (11,881) 257,561
594,711 454,764 2,196,121 1,008,826 (127,211) (46,236)
(7,421,452) 1,040,751 (5,943,252) 2,180,310 (253,583) (7,289)
- ------------ ----------- ------------ ------------ ----------- -----------
(5,566,252) 1,644,962 (2,248,879) 3,723,938 (392,675) 204,036
- ------------ ----------- ------------ ------------ ----------- -----------
7,922,560 1,712,932 7,793,636 5,660,404 1,396,133 1,554,579
(1,151,699) (270,861) (3,678,743) (1,211,402) (236,289) (148,261)
(59,763) (22,232) (14,763) (206,558) (11,335) (12,933)
6,325,216 1,991,577 (4,080,097) 5,001,996 (172,527) (199,115)
- ------------ ----------- ------------ ------------ ----------- -----------
13,036,314 3,411,416 20,033 9,244,440 975,982 1,194,270
- ------------ ----------- ------------ ------------ ----------- -----------
7,470,062 5,056,378 (2,228,846) 12,968,378 583,307 1,398,306
7,767,857 2,711,479 29,343,696 16,375,318 3,457,255 2,058,949
- ------------ ----------- ------------ ------------ ----------- -----------
$ 15,237,919 $ 7,767,857 $ 27,114,850 $ 29,343,696 $ 4,040,562 $ 3,457,255
============ =========== ============ ============ =========== ===========
8
The Manufacturers Life Insurance Company of America
Separate Account Four
Statement of Operations and Changes in Contract Owners' Equity
Years ended December 31, 2000 and 1999
SUB-ACCOUNT
------------------------------------------------------
INCOME AND VALUE INTERNATIONAL INDEX
------------------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED
DEC. 31/00 DEC. 31/99 DEC. 31/00**
------------------------------------------------------
Income:
Dividends $ 952,189 $ 344,990 $ 624
Expenses:
Mortality and expense risks, and administrative charges 31,429 20,857 85
----------- ----------- --------
Net investment income (loss) during the year 920,760 324,133 539
Net realized gain (loss) during the year (302,448) (3,448) (309)
Unrealized appreciation (depreciation) during the year (418,733) (88,733) (3,041)
----------- ----------- --------
Net increase (decrease) in assets from operations 199,579 231,952 (2,811)
----------- ----------- --------
Changes from principal transactions:
Transfer of net premiums 2,354,495 1,201,432 3,789
Transfer on terminations (379,895) (426,670) (599)
Transfer on policy loans (80,612) 9,522 --
Net interfund transfers 710,007 (220,174) 44,099
----------- ----------- --------
Net increase (decrease) in assets from principal transactions 2,603,995 564,110 47,289
----------- ----------- --------
Total increase (decrease) in assets 2,803,574 796,062 44,478
Assets beginning of year 3,442,353 2,646,291 --
----------- ----------- --------
Assets end of year $ 6,245,927 $ 3,442,353 $ 44,478
=========== =========== ========
** Reflects the period from commencement of operations May 2, 2000 through
December 31, 2000.
See accompanying notes.
9
SUB-ACCOUNT
- -----------------------------------------------------------------------------------------------------------------
INTERNATIONAL SMALL CAP INTERNATIONAL STOCK INTERNATIONAL VALUE
- -----------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DEC. 31/00 DEC. 31/99 DEC. 31/00 DEC. 31/99 DEC. 31/00 DEC. 31/99*
- -----------------------------------------------------------------------------------------------------------------
$ 694,416 $ 3,477 $ 84,131 $ 1,366,973 $ 17,130 $ --
23,770 7,349 110,826 79,622 15,330 885
- ----------- ----------- ------------ ------------ ----------- ---------
670,646 (3,872) (26,695) 1,287,351 1,800 (885)
(138,612) 136,316 571,024 647,233 (106,248) (11,916)
(2,406,462) 667,674 (3,695,939) 1,684,577 (114,496) 39,749
- ----------- ----------- ------------ ------------ ----------- ---------
(1,874,428) 800,118 (3,151,610) 3,619,161 (218,944) 26,948
- ----------- ----------- ------------ ------------ ----------- ---------
1,799,696 187,515 5,040,119 4,383,338 1,289,123 40,220
(347,872) (90,713) (1,565,059) (745,024) (134,761) (7,916)
(2,578) (9,869) 22,239 (71,835) 7,727 (7,407)
2,678,076 (39,003) 720,414 (1,436,262) 406,659 442,396
- ----------- ----------- ------------ ------------ ----------- ---------
4,127,322 47,930 4,217,713 2,130,217 1,568,748 467,293
- ----------- ----------- ------------ ------------ ----------- ---------
2,252,894 848,048 1,066,103 5,749,378 1,349,804 494,241
1,986,465 1,138,417 16,551,423 10,802,045 494,241 --
- ----------- ----------- ------------ ------------ ----------- ---------
$ 4,239,359 $ 1,986,465 $ 17,617,526 $ 16,551,423 $ 1,844,045 $ 494,241
=========== =========== ============ ============ =========== =========
10
The Manufacturers Life Insurance Company of America
Separate Account Four
Statement of Operations and Changes in Contract Owners' Equity
Years ended December 31, 2000 and 1999
SUB-ACCOUNT
-----------------------------------------------------
INTERNET
TECHNOLOGIES INVESTMENT QUALITY BOND
-----------------------------------------------------
PERIOD ENDED YEAR ENDED YEAR ENDED
DEC. 31/00** DEC. 31/00 DEC. 31/99
-----------------------------------------------------
Income:
Dividends $ -- $ 1,309,195 $ 218,156
Expenses:
Mortality and expense risks, and administrative charges 707 109,903 95,809
--------- ------------ ------------
Net investment income (loss) during the year (707) 1,199,292 122,347
Net realized gain (loss) during the year (62,279) (240,339) (132,850)
Unrealized appreciation (depreciation) during the year (87,244) 437,793 (339,279)
--------- ------------ ------------
Net increase (decrease) in assets from operations (150,230) 1,396,746 (349,782)
--------- ------------ ------------
Changes from principal transactions:
Transfer of net premiums 69,573 2,734,616 3,725,347
Transfer on terminations (805) (2,078,469) (1,167,642)
Transfer on policy loans (40,607) 27,427 (56,091)
Net interfund transfers 254,144 (4,994,725) 14,066,025
--------- ------------ ------------
Net increase (decrease) in assets from principal transactions 282,305 (4,311,151) 16,567,639
--------- ------------ ------------
Total increase (decrease) in assets 132,075 (2,914,405) 16,217,857
Assets beginning of year -- 19,201,985 2,984,128
--------- ------------ ------------
Assets end of year $ 132,075 $ 16,287,580 $ 19,201,985
========= ============ ============
** Reflects the period from commencement of operations May 2, 2000 through
December 31, 2000.
See accompanying notes.
11
SUB-ACCOUNT
- ------------------------------------------------------------------------------------------------------------
LARGE CAP GROWTH LIFESTYLE AGGRESSIVE 1000 LIFESTYLE BALANCED 640
- ------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/00 DEC. 31/99 DEC. 31/00 DEC. 31/99 DEC. 31/00 DEC. 31/99
- ------------------------------------------------------------------------------------------------------------
$ 933,644 $ 321,797 $ 37,648 $ 40,136 $ 89,487 $ 60,854
42,374 25,655 4,794 4,878 14,134 7,273
- ----------- ----------- --------- --------- ----------- -----------
891,270 296,142 32,854 35,258 75,353 53,581
236,149 20,062 14,597 (11,996) 51,498 (7,766)
(2,285,423) 741,348 (84,082) 75,477 (151,961) 88,932
- ----------- ----------- --------- --------- ----------- -----------
(1,158,004) 1,057,552 (36,631) 98,739 (25,110) 134,747
- ----------- ----------- --------- --------- ----------- -----------
3,140,695 1,078,127 71,415 73,879 2,347,394 752,004
(990,185) (247,991) (84,132) (53,935) (156,204) (104,617)
(60,521) (13,546) (692) (4,406) (51,653) (221)
286,718 1,383,164 (82,072) (29,882) 167,632 (337,941)
- ----------- ----------- --------- --------- ----------- -----------
2,376,707 2,199,754 (95,481) (14,344) 2,307,169 309,225
- ----------- ----------- --------- --------- ----------- -----------
1,218,703 3,257,306 (132,112) 84,395 2,282,059 443,972
5,965,084 2,707,778 805,917 721,522 1,565,366 1,121,394
- ----------- ----------- --------- --------- ----------- -----------
$ 7,183,787 $ 5,965,084 $ 673,805 $ 805,917 $ 3,847,425 $ 1,565,366
=========== =========== ========= ========= =========== ===========
12
The Manufacturers Life Insurance Company of America
Separate Account Four
Statement of Operations and Changes in Contract Owners' Equity
Years ended December 31, 2000 and 1999
SUB-ACCOUNT
--------------------------------------------------------------------
LIFESTYLE CONSERVATIVE 280 LIFESTYLE GROWTH 820
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/00 DEC. 31/99 DEC. 31/00 DEC. 31/99
--------------------------------------------------------------------
Income:
Dividends $ 29,153 $ 10,742 $ 149,038 $ 146,899
Expenses:
Mortality and expense risks, and administrative charges 2,482 1,979 11,827 15,004
--------- --------- ----------- -----------
Net investment income (loss) during the year 26,671 8,763 137,211 131,895
Net realized gain (loss) during the year (10,067) 3,924 46,233 (73,346)
Unrealized appreciation (depreciation) during the year 5,241 5,136 (248,793) 232,254
--------- --------- ----------- -----------
Net increase (decrease) in assets from operations 21,845 17,823 (65,349) 290,803
--------- --------- ----------- -----------
Changes from principal transactions:
Transfer of net premiums 31,809 23,038 600,657 449,067
Transfer on terminations (102,927) (11,055) (179,618) (458,963)
Transfer on policy loans (56,838) (160) (27,215) (78,888)
Net interfund transfers (92,469) 382,542 (756,569) (1,234,984)
--------- --------- ----------- -----------
Net increase (decrease) in assets from principal transactions (220,425) 394,365 (362,745) (1,323,768)
--------- --------- ----------- -----------
Total increase (decrease) in assets (198,580) 412,188 (428,094) (1,032,965)
Assets beginning of year 492,268 80,080 1,938,299 2,971,264
--------- --------- ----------- -----------
Assets end of year $ 293,688 $ 492,268 $ 1,510,205 $ 1,938,299
========= ========= =========== ===========
** Reflects the period from commencement of operations May 2, 2000 through
December 31, 2000.
See accompanying notes.
13
SUB-ACCOUNT
- -----------------------------------------------------------------------------------------
LIFESTYLE MODERATE 460 MID CAP BLEND MID CAP INDEX
- -----------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DEC. 31/00 DEC. 31/99 DEC. 31/00 DEC. 31/99 DEC. 31/00**
- -----------------------------------------------------------------------------------------
$ 5,907 $ 2,368 $ 1,408,900 $ 945,696 $ 4,817
917 524 81,796 51,669 252
- --------- --------- ------------ ----------- ---------
4,990 1,844 1,327,104 894,027 4,565
1,296 11,079 (242,930) (60,193) 167
(4,375) 2,460 (2,200,855) 1,138,871 (5,883)
- --------- --------- ------------ ----------- ---------
1,911 15,383 (1,116,681) 1,972,705 (1,151)
- --------- --------- ------------ ----------- ---------
391,104 9,334 3,657,647 1,546,812 3,514
(34,414) (5,225) (2,369,868) (667,965) (1,484)
1,146 (1,053) (79,984) (87,722) --
(425,840) 309,004 5,347,608 (919,573) 244,613
- --------- --------- ------------ ----------- ---------
(68,004) 312,060 6,555,403 (128,448) 246,643
- --------- --------- ------------ ----------- ---------
(66,093) 327,443 5,438,722 1,844,257 245,492
361,126 33,683 9,142,129 7,297,872 --
- --------- --------- ------------ ----------- ---------
$ 295,033 $ 361,126 $ 14,580,851 $ 9,142,129 $ 245,492
========= ========= ============ =========== =========
14
The Manufacturers Life Insurance Company of America
Separate Account Four
Statement of Operations and Changes in Contract Owners' Equity
Years ended December 31, 2000 and 1999
SUB-ACCOUNT
----------------------------------------------------------------------
MID CAP STOCK MONEY MARKET
----------------------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
DEC. 31/00 DEC. 31/99* DEC. 31/00 DEC. 31/99
----------------------------------------------------------------------
Income:
Dividends $ -- $ -- $ 1,932,420 $ 961,677
Expenses:
Mortality and expense risks, and administrative
charges 2,347 462 212,370 138,259
--------- --------- ------------ ------------
Net investment income (loss) during the year (2,347) (462) 1,720,050 823,418
Net realized gain (loss) during the year (13,526) 19 -- --
Unrealized appreciation (depreciation) during the year (2,643) (1,552) -- --
--------- --------- ------------ ------------
Net increase (decrease) in assets from operations (18,516) (1,995) 1,720,050 823,418
--------- --------- ------------ ------------
Changes from principal transactions:
Transfer of net premiums 106,206 27,792 19,729,086 7,082,683
Transfer on terminations (21,708) (2,165) (6,012,717) (3,222,729)
Transfer on policy loans (223) (38) 204,008 (836,807)
Net interfund transfers 133,861 157,253 (3,132,123) 6,291,758
--------- --------- ------------ ------------
Net increase (decrease) in assets from principal
transactions 218,136 182,842 10,788,254 9,314,905
--------- --------- ------------ ------------
Total increase (decrease) in assets 199,620 180,847 12,508,304 10,138,323
Assets beginning of year 180,847 -- 27,811,969 17,673,646
--------- --------- ------------ ------------
Assets end of year $ 380,467 $ 180,847 $ 40,320,273 $ 27,811,969
========= ========= ============ ============
* Reflects the period from commencement of operations May 1, 1999 through
December 31, 1999.
See accompanying notes.
15
SUB-ACCOUNT
- ----------------------------------------------------------------------------------------------------------------
OVERSEAS PACIFIC RIM EMERGING MARKETS QUANTITATIVE EQUITY
- ----------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/00 DEC. 31/99 DEC. 31/00 DEC. 31/99 DEC. 31/00 DEC. 31/99
- ----------------------------------------------------------------------------------------------------------------
$ 118,152 $ -- $ 20,741 $ 91,583 $ 5,932,623 $ 3,879,881
12,911 2,131 35,497 21,588 309,403 274,779
- ----------- --------- ----------- ----------- ------------ ------------
105,241 (2,131) (14,756) 69,995 5,623,220 3,605,102
(59,142) 4,626 (85,747) (303,549) 2,793,944 4,912,245
(565,259) 135,006 (1,449,544) 1,953,611 (5,866,904) (30,408)
- ----------- --------- ----------- ----------- ------------ ------------
(519,160) 137,501 (1,550,047) 1,720,057 2,550,260 8,486,939
- ----------- --------- ----------- ----------- ------------ ------------
2,381,221 96,022 1,893,650 569,478 3,739,616 3,232,515
(239,365) (33,807) (669,458) (362,876) (4,929,423) (4,266,534)
(2,019) (2,559) (17,017) 3,238 (344,939) (385,967)
753,735 91,840 19,115 1,230,820 (605,234) (1,996,057)
- ----------- --------- ----------- ----------- ------------ ------------
2,893,572 151,496 1,226,290 1,440,660 (2,139,980) (3,416,043)
- ----------- --------- ----------- ----------- ------------ ------------
2,374,412 288,997 (323,757) 3,160,717 410,280 5,070,896
558,175 269,178 5,462,921 2,302,204 45,768,457 40,697,561
- ----------- --------- ----------- ----------- ------------ ------------
$ 2,932,587 $ 558,175 $ 5,139,164 $ 5,462,921 $ 46,178,737 $ 45,768,457
=========== ========= =========== =========== ============ ============
16
The Manufacturers Life Insurance Company of America
Separate Account Four
Statement of Operations and Changes in Contract Owners' Equity
Years ended December 31, 2000 and 1999
SUB-ACCOUNT
---------------------------------------------------------------------------
REAL ESTATE SECURITIES SCIENCE & TECHNOLOGY
---------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/00 DEC. 31/99 DEC. 31/00 DEC. 31/99
---------------------------------------------------------------------------
Income:
Dividends $ 548,910 $ 891,478 $ 1,118,209 $ 2,459,232
Expenses:
Mortality and expense risks, and administrative
charges 96,131 108,666 308,316 111,705
------------ ------------ ------------ ------------
Net investment income (loss) during the year 452,779 782,812 809,893 2,347,527
Net realized gain (loss) during the year (373,361) (225,546) 6,027,471 1,200,045
Unrealized appreciation (depreciation) during the year 3,308,154 (2,009,468) (27,894,294) 10,833,388
------------ ------------ ------------ ------------
Net increase (decrease) in assets from operations 3,387,572 (1,452,202) (21,056,930) 14,380,960
------------ ------------ ------------ ------------
Changes from principal transactions:
Transfer of net premiums 1,902,266 2,273,286 23,717,592 7,569,309
Transfer on terminations (1,529,570) (2,001,726) (3,000,348) (835,547)
Transfer on policy loans (152,860) (97,819) (129,110) (128,372)
Net interfund transfers (473,949) (3,836,514) 7,234,394 7,353,863
------------ ------------ ------------ ------------
Net increase (decrease) in assets from principal
transactions (254,113) (3,662,773) 27,822,528 13,959,253
------------ ------------ ------------ ------------
Total increase (decrease) in assets 3,133,459 (5,114,975) 6,765,598 28,340,213
Assets beginning of year 14,032,899 19,147,874 35,392,816 7,052,603
------------ ------------ ------------ ------------
Assets end of year $ 17,166,358 $ 14,032,899 $ 42,158,414 $ 35,392,816
============ ============ ============ ============
* Reflects the period from commencement of operations May 1, 1999 through
December 31, 1999.
** Reflects the period from commencement of operations May 2, 2000 through
December 31, 2000.
See accompanying notes.
17
SUB-ACCOUNT
- --------------------------------------------------------------------------------------
SMALL CAP INDEX SMALL COMPANY BLEND SMALL COMPANY VALUE
- --------------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
DEC. 31/00** DEC. 31/00 DEC. 31/99* DEC. 31/00 DEC. 31/99
- --------------------------------------------------------------------------------------
$ 1,534 $ 133,872 $ 4,498 $ 2,007 $ 248
58 5,510 530 11,945 4,096
-------- ----------- --------- ----------- -----------
1,476 128,362 3,968 (9,938) (3,848)
75 24,165 960 64,625 34,012
(2,773) (568,390) 39,165 82,411 99,631
-------- ----------- --------- ----------- -----------
(1,222) (415,863) 44,093 137,098 129,795
-------- ----------- --------- ----------- -----------
4,377 661,522 25,426 1,025,807 249,987
(373) (31,361) (2,182) (79,835) (30,096)
-- (10,610) (41) (11,079) (6,213)
40,916 894,978 168,745 262,214 704,288
-------- ----------- --------- ----------- -----------
44,920 1,514,529 191,948 1,197,107 917,966
-------- ----------- --------- ----------- -----------
43,698 1,098,666 236,041 1,334,205 1,047,761
-- 236,041 -- 1,126,903 79,142
-------- ----------- --------- ----------- -----------
$ 43,698 $ 1,334,707 $ 236,041 $ 2,461,108 $ 1,126,903
======== =========== ========= =========== ===========
18
The Manufacturers Life Insurance Company of America
Separate Account Four
Statement of Operations and Changes in Contract Owners' Equity
Years ended December 31, 2000 and 1999
SUB-ACCOUNT
-----------------------------------------------------------------------
STRATEGIC BOND TOTAL RETURN
-----------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DEC. 31/00 DEC. 31/99 DEC. 31/00 DEC. 31/99*
-----------------------------------------------------------------------
Income:
Dividends $ 85,997 $ 70,133 $ 27,495 $ --
Expenses:
Mortality and expense risks, and administrative charges 6,711 7,044 15,109 1,187
----------- ----------- ----------- ---------
Net investment income (loss) during the year 79,286 63,089 12,386 (1,187)
Net realized gain (loss) during the year (41,693) (32,990) 22,935 4,906
Unrealized appreciation (depreciation) during the year 28,826 (11,082) 277,035 368
----------- ----------- ----------- ---------
Net increase (decrease) in assets from operations 66,419 19,017 312,356 4,087
----------- ----------- ----------- ---------
Changes from principal transactions:
Transfer of net premiums 134,439 270,594 1,516,546 15,252
Transfer on terminations (42,241) (48,315) (75,925) (5,447)
Transfer on policy loans (3,131) (7,840) -- --
Net interfund transfers (404,574) (217,962) 2,577,623 286,216
----------- ----------- ----------- ---------
Net increase (decrease) in assets from principal
transactions (315,507) (3,523) 4,018,244 296,021
----------- ----------- ----------- ---------
Total increase (decrease) in assets (249,088) 15,494 4,330,600 300,108
Assets beginning of year 1,278,721 1,263,227 300,108 --
----------- ----------- ----------- ---------
Assets end of year $ 1,029,633 $ 1,278,721 $ 4,630,708 $ 300,108
=========== =========== =========== =========
* Reflects the period from commencement of operations May 1, 1999 through
December 31, 1999.
** Reflects the period from commencement of operations May 2, 2000 through
December 31, 2000.
See accompanying notes.
19
SUB-ACCOUNT
- -----------------------------------------------------------------------------------------------
TOTAL STOCK MARKET
INDEX U.S. GOVERNMENT SECURITIES U.S. LARGE CAP VALUE
- -----------------------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DEC. 31/00** DEC. 31/00 DEC. 31/99 DEC. 31/00 DEC. 31/99*
- -----------------------------------------------------------------------------------------------
$ 12,374 $ 162,231 $ 125,143 $ 7,307 $ --
2,888 14,820 19,463 9,544 4,379
----------- ----------- ----------- ----------- -----------
9,486 147,411 105,680 (2,237) (4,379)
(1,756) (46,024) (43,062) 67,805 (10,928)
(140,552) 123,103 (86,051) (30,733) 48,703
----------- ----------- ----------- ----------- -----------
(132,822) 224,490 (23,433) 34,835 33,396
----------- ----------- ----------- ----------- -----------
2,071 491,787 931,141 659,231 48,789
(24,855) (463,269) (111,231) (95,636) (37,726)
-- (31,242) (1,783) 14,332 (15,190)
1,478,869 (179,509) (1,908,556) 19,431 1,396,742
----------- ----------- ----------- ----------- -----------
1,456,085 (182,233) (1,090,429) 597,358 1,392,615
----------- ----------- ----------- ----------- -----------
1,323,263 42,257 (1,113,862) 632,193 1,426,011
-- 2,531,572 3,645,434 1,426,011 --
----------- ----------- ----------- ----------- -----------
$ 1,323,263 $ 2,573,829 $ 2,531,572 $ 2,058,204 $ 1,426,011
=========== =========== =========== =========== ===========
20
The Manufacturers Life Insurance Company of America
Separate Account Four
Statement of Operations and Changes in Contract Owners' Equity
Years ended December 31, 2000 and 1999
SUB-ACCOUNT
----------------------------------------------------
VALUE WORLDWIDE GROWTH
----------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/00 DEC. 31/99 DEC. 31/99
----------------------------------------------------
Income:
Dividends $ -- $ 104,384 $ 6,399
Expenses:
Mortality and expense risks, and administrative charges 24,109 29,270 1,502
----------- ----------- ---------
Net investment income (loss) during the year (24,109) 75,114 4,897
Net realized gain (loss) during the year (100,839) (107,245) 46,114
Unrealized appreciation (depreciation) during the year 1,097,226 25,016 (17,078)
----------- ----------- ---------
Net increase (decrease) in assets from operations 972,278 (7,115) 33,933
----------- ----------- ---------
Changes from principal transactions:
Transfer of net premiums 1,034,204 1,736,465 40,904
Transfer on terminations (224,326) (346,470) (13,226)
Transfer on policy loans 3,564 1,434 (2,288)
Net interfund transfers (394,919) (3,882,692) (568,190)
----------- ----------- ---------
Net increase (decrease) in assets from principal transactions 418,523 (2,491,263) (542,800)
----------- ----------- ---------
Total increase (decrease) in assets 1,390,801 (2,498,378) (508,867)
Assets beginning of year 3,322,459 5,820,837 508,867
----------- ----------- ---------
Assets end of year $ 4,713,260 $ 3,322,459 $ --
=========== =========== =========
** Reflects the period from commencement of operations May 2, 2000 through
December 31, 2000.
See accompanying notes.
21
SUB-ACCOUNT
- ---------------
500 INDEX TOTAL
- -----------------------------------------------------
PERIOD ENDED** YEAR ENDED YEAR ENDED
DEC. 31/00 DEC. 31/00 DEC. 31/99
- -----------------------------------------------------
$ 512 $ 33,640,178 $ 22,318,341
397 3,367,318 2,472,704
- --------- ------------- -------------
115 30,272,860 19,845,637
(2,289) 23,929,759 15,845,664
(16,787) (98,403,823) 48,759,040
- --------- ------------- -------------
(18,961) (44,201,204) 84,450,341
- --------- ------------- -------------
266,299 156,665,425 90,460,514
(6,826) (54,308,095) (32,383,279)
(21,009) (2,312,875) (3,391,895)
28,758 (132,679) (471,653)
- --------- ------------- -------------
267,222 99,911,776 54,213,687
- --------- ------------- -------------
248,261 55,710,572 138,664,028
-- 470,755,421 332,091,393
- --------- ------------- -------------
$ 248,261 $ 526,465,993 $ 470,755,421
========= ============= =============
22
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements
December 31, 2000
1. ORGANIZATION
The Manufacturers Life Insurance Company of America Separate Account Four (the
Account) is a separate account established by the Manufacturers Life Insurance
Company of America (the Company). The Account operates as a Unit Investment
Trust under the Investment Company Act of 1940, as amended and invests in
forty-seven sub-accounts of Manufacturers Investment Trust (the Trust). The
Account is a funding vehicle for allocation of net premiums under variable
universal life insurance contracts (the Contracts) issued by the Company. The
Account was established by the Company, a life insurance company organized in
1983 under Michigan law. The Company is an indirect, wholly-owned subsidiary of
The Manufacturers Life Insurance Company (Manulife Financial), a Canadian life
insurance company. Each investment sub-account invests solely in shares of a
particular portfolio of the Trust. The Trust is registered under the Investment
Company Act of 1940 as an open-end management investment company.
The Company is required to maintain assets in the Account with a total market
value at least equal to the reserves and other liabilities relating to the
variable benefits under all contracts participating in the Account. These assets
may not be charged with liabilities which arise from any other business the
Company conducts. However, all obligations under the variable contracts are
general corporate obligations of the Company.
Additional assets are held in the Company's general account to cover the
contingency that the guaranteed minimum death benefit might exceed the death
benefit which would have been payable in the absence of such guarantee.
As the result of portfolio changes, effective May 2, 2000 the following
sub-account of the Account has been replaced with a new fund as follows:
PREVIOUS FUND NEW FUND
--------------------------------------------------------
Mid Cap Growth Trust All Cap Growth Trust
23
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
1. ORGANIZATION (CONTINUED)
The following sub-accounts of the Account were added as investment options for
variable universal life insurance contract holders of Manufacturers Life of
America:
COMMENCEMENT OF OPERATIONS
OF THE SUB-ACCOUNTS
--------------------------
Dynamic Growth Trust May 2, 2000
International Index Trust May 2, 2000
International Value Trust May 1, 1999
Internet Technologies Trust May 2, 2000
Mid Cap Index Trust May 2, 2000
Mid Cap Stock Trust May 1, 1999
Small Cap Index Trust May 2, 2000
Small Company Blend Trust May 1, 1999
Tactical Allocation Trust May 2, 2000
Total Return Trust May 1, 1999
Total Stock Market Index Trust May 2, 2000
U.S. Large Cap Value Trust May 1, 1999
500 Index Trust May 2, 2000
2. SIGNIFICANT ACCOUNTING POLICIES
Investments are made in the portfolios of the Trust and are valued at the
reported net asset value of such portfolios. Transactions are recorded on the
trade date. Income from dividends is recorded on the ex-dividend date. Realized
gains and losses on the sales of investments are computed on the basis of the
identified cost of the investment sold.
In addition to the Account, a contract holder may also allocate funds to the
Fixed Account, which is part of the Company's general account. Because of
exemptive and exclusionary provisions, interests in the Fixed Account have not
been registered under the Securities Act of 1933, and the Company's general
account has not been registered as an investment company under the Investment
Company Act of 1940.
24
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The operations of the Account are included in the federal income tax return of
the Company, which is taxed as a life insurance company under the provisions of
the Internal Revenue Code (the Code). Under the current provisions of the Code,
the Company does not expect to incur federal income taxes on the earnings of the
Account to the extent the earnings are credited under the contracts. Based on
this, no charge is being made currently to the Account for federal income taxes.
The Company will review periodically the status of such decision based on
changes in the tax law. Such a charge may be made in future years for any
federal income taxes that would be attributable to the contract.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that could affect the amounts reported the financial statements
and accompanying notes. Such estimates and assumptions could change in the
future as more information becomes known, which could impact the amounts
reported and disclosed herein.
3. MORTALITY AND EXPENSE RISKS CHARGE
Manufacturers Life of America deducts from the assets of the Account a daily
charge equivalent to annual rates between 0.55% and 0.65% of the average net
value of the Account's assets for mortality and expense risks.
4. PREMIUM DEDUCTIONS
Manufacturers Life of America deducts certain charges for state, local, and
federal taxes from the gross premium before placing the remaining net premiums
in the sub-accounts.
25
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
5. PURCHASES AND SALES OF INVESTMENTS
The following table shows aggregate cost of shares purchased and proceeds from
sales of each Trust portfolio for the year ended December 31, 2000:
PURCHASES SALES
------------ ------------
Aggressive Growth Trust $ 6,428,746 $ 1,551,114
All Cap Growth Trust 9,192,300 4,016,095
Balanced Trust 6,824,658 12,702,636
Blue Chip Growth Trust 18,580,712 9,540,671
Diversified Bond Trust 4,554,026 2,408,446
Dynamic Growth Trust 1,126,965 626,320
Emerging Small Company Trust 23,899,597 14,577,205
Equity Income Trust 5,431,388 6,925,615
Equity Index Trust 20,140,491 14,004,140
Global Bond Trust 2,388,773 2,284,583
Global Equity Trust 4,179,869 3,853,646
Growth Trust 20,139,091 5,842,289
Growth and Income Trust 11,835,900 10,317,615
High Yield Trust 3,382,871 2,418,772
Income and Value Trust 6,217,937 2,693,183
International Index Trust 54,150 6,322
International Small Cap Trust 7,957,320 3,159,351
International Stock Trust 8,024,708 3,833,689
International Value Trust 3,673,844 2,103,297
Internet Technologies Trust 465,812 184,214
Investment Quality Bond Trust 4,420,045 7,531,905
Large Cap Growth Trust 6,941,387 3,673,409
Lifestyle Aggressive 1000 Trust 203,518 266,146
Lifestyle Balanced 640 Trust 3,395,241 1,012,718
Lifestyle Conservative 280 Trust 474,669 668,423
Lifestyle Growth 820 Trust 821,426 1,046,960
Lifestyle Moderate 460 Trust 524,928 587,943
Mid Cap Blend Trust 13,718,703 5,836,197
Mid Cap Index Trust 273,801 22,593
Mid Cap Stock Trust 478,661 262,873
Money Market Trust 36,597,319 24,089,015
26
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
5. PURCHASES AND SALES OF INVESTMENTS (CONTINUED)
PURCHASES SALES
------------ ------------
Overseas Trust $ 3,680,450 $ 681,636
Pacific Rim Emerging Markets Trust 3,847,573 2,636,040
Quantitative Equity Trust 10,886,892 7,403,653
Real Estate Securities Trust 3,223,659 3,024,995
Science and Technology Trust 42,431,391 13,798,970
Small Cap Index Trust 62,244 15,847
Small Company Blend Trust 2,187,892 545,001
Small Company Value Trust 1,833,051 645,883
Strategic Bond Trust 858,766 1,094,988
Total Return Trust 5,086,140 1,055,509
Total Stock Market Index 1,497,859 32,288
U.S. Government Securities Trust 1,615,381 1,650,203
U.S. Large Cap Value Trust 2,383,141 1,788,020
Value Trust 2,629,563 2,235,149
500 Index Trust 418,895 151,560
------------ ------------
Total $314,991,753 $184,807,127
============ ============
6. UNIT VALUES
A summary of the accumulation unit values at December 31, 2000 and 1999 and the
accumulation units and dollar value outstanding at December 31, 2000 for the
variable universal life contracts are as follows:
1999 2000
-------------------------------------------------------------------
UNIT VALUE UNIT VALUE UNITS DOLLARS
-------------------------------------------------------------------
Aggressive Growth Trust:
Individual Variable Life Type L Contracts $ 19.81 $ 20.28 198,853 $4,032,298
Corporate Variable Life Type K Contracts -- 14.69 91,301 1,341,581
----------
5,373,879
27
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
1999 2000
-------------------------------------------------------------------------
UNIT VALUE UNIT VALUE UNITS DOLLARS
-------------------------------------------------------------------------
All Cap Growth Trust:
Individual Variable Life Type L Contracts $ 27.85 $ 24.68 339,322 $ 8,375,757
Corporate Variable Life Type K Contracts -- 12.81 32,663 418,322
8,794,079
-----------
Balanced Trust:
Individual Variable Life Type L Contracts 32.88 29.62 1,375,338 40,736,519
Corporate Variable Life Type K Contracts -- 11.03 4,795 52,878
-----------
40,789,397
Blue Chip Growth Trust:
Individual Variable Life Type L Contracts 24.15 23.33 1,571,857 36,677,418
Corporate Variable Life Type K Contracts 12.90 12.48 217,979 2,719,979
-----------
39,397,397
Diversified Bond Trust:
Individual Variable Life Type L Contracts 12.75 13.97 160,579 2,243,401
Corporate Variable Life Type K Contracts 12.40 13.61 104,001 1,414,996
-----------
3,658,397
Dynamic Growth Trust:
Individual Variable Life Type L Contracts -- 7.95 22,876 181,774
Corporate Variable Life Type K Contracts -- 7.95 11,127 88,472
-----------
270,246
Emerging Small Company Trust:
Individual Variable Life Type L Contracts 107.98 102.67 774,559 79,526,051
Corporate Variable Life Type K Contracts -- 15.12 65,532 990,716
-----------
80,516,767
Equity Income Trust:
Individual Variable Life Type L Contracts 16.23 18.21 430,470 7,840,873
Corporate Variable Life Type K Contracts -- 13.40 1,217 16,306
-----------
7,857,179
Equity Index Trust:
Individual Variable Life Type L Contracts 23.18 20.90 1,798,688 37,584,072
Corporate Variable Life Type K Contracts 12.94 11.67 185,366 2,163,240
-----------
39,747,312
28
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
1999 2000
-------------------------------------------------------------------------
UNIT VALUE UNIT VALUE UNITS DOLLARS
-------------------------------------------------------------------------
Global Bond Trust:
Individual Variable Life Type L Contracts $ 13.04 $ 13.18 30,064 $ 396,180
Corporate Variable Life Type K Contracts -- 12.45 246 3,057
-----------
399,237
Global Equity Trust:
Individual Variable Life Type L Contracts 16.68 18.59 181,138 3,367,688
Corporate Variable Life Type K Contracts -- 14.13 11,832 167,137
-----------
3,534,825
Growth Trust:
Individual Variable Life Type L Contracts 25.02 18.08 772,053 13,956,563
Corporate Variable Life Type K Contracts -- 9.91 129,288 1,281,356
-----------
15,237,919
Growth and Income Trust:
Individual Variable Life Type L Contracts 22.88 21.11 1,251,734 26,429,434
Corporate Variable Life Type K Contracts 12.81 11.84 57,912 685,416
-----------
27,114,850
High Yield Trust:
Individual Variable Life Type L Contracts 15.11 13.67 281,021 3,841,408
Corporate Variable Life Type K Contracts 12.71 11.51 17,304 199,154
-----------
4,040,562
Income and Value Trust:
Individual Variable Life Type L Contracts 15.13 15.77 376,917 5,944,042
Corporate Variable Life Type K Contracts 12.66 13.21 22,852 301,885
-----------
6,245,927
International Index Trust:
Individual Variable Life Type L Contracts -- 11.22 3,964 44,478
International Small Cap Trust:
Individual Variable Life Type L Contracts 25.65 18.06 223,637 4,038,198
Corporate Variable Life Type K Contracts -- 11.28 17,832 201,161
-----------
4,239,359
29
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
1999 2000
-------------------------------------------------------------------------
UNIT VALUE UNIT VALUE UNITS DOLLARS
-------------------------------------------------------------------------
International Stock Trust:
Individual Variable Life Type L Contracts $ 17.50 $ 14.50 1,201,169 $17,419,755
Corporate Variable Life Type K Contracts -- 11.81 16,743 197,771
-----------
17,617,526
International Value Trust:
Individual Variable Life Type L Contracts 12.92 12.01 149,807 1,799,281
Corporate Variable Life Type K Contracts -- 12.42 3,603 44,764
-----------
1,844,045
Internet Technologies Trust:
Individual Variable Life Type L Contracts -- 7.00 18,568 129,976
Corporate Variable Life Type K Contracts -- 7.00 300 2,099
-----------
132,075
Investment Quality Bond Trust:
Individual Variable Life Type L Contracts 14.26 15.50 1,042,595 16,160,312
Corporate Variable Life Type K Contracts -- 13.48 9,444 127,268
-----------
16,287,580
Large Cap Growth Trust:
Individual Variable Life Type L Contracts 18.93 16.13 414,275 6,683,067
Corporate Variable Life Type K Contracts -- 11.49 43,563 500,720
-----------
7,183,787
Lifestyle Aggressive 1000 Trust:
Individual Variable Life Type K Contracts 16.92 15.95 42,247 673,805
Lifestyle Balanced 640 Trust:
Individual Variable Life Type L Contracts 16.47 16.78 219,761 3,687,280
Corporate Variable Life Type K Contracts -- 13.24 12,099 160,145
-----------
3,847,425
Lifestyle Conservative 280 Trust:
Individual Variable Life Type L Contracts 15.47 16.55 17,741 293,688
30
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
6. Unit Values (continued)
1999 2000
-------------------------------------------------------------------------
UNIT VALUE UNIT VALUE UNITS DOLLARS
-------------------------------------------------------------------------
Lifestyle Growth 820 Trust:
Individual Variable Life Type L Contracts $ 17.32 $ 16.69 87,705 $ 1,463,745
Corporate Variable Life Type K Contracts -- 12.85 3,616 46,460
-----------
1,510,205
Lifestyle Moderate 460 Trust:
Individual Variable Life Type L Contracts 16.12 16.70 9,690 161,825
Corporate Variable Life Type K Contracts -- 13.20 10,095 133,208
-----------
295,033
Mid-Cap Blend Trust:
Individual Variable Life Type L Contracts 18.48 17.19 803,981 13,817,796
Corporate Variable Life Type K Contracts 13.73 12.78 59,700 763,055
-----------
14,580,851
Mid Cap Index Trust:
Individual Variable Life Type L Contracts -- 13.34 18,407 245,492
Mid Cap Stock Trust:
Individual Variable Life Type L Contracts 12.55 11.97 31,783 380,467
Money Market Trust:
Individual Variable Life Type L Contracts 17.43 18.33 1,742,733 31,946,831
Corporate Variable Life Type K Contracts 12.57 13.23 632,823 8,373,442
-----------
40,320,273
Overseas Trust:
Individual Variable Life Type L Contracts 18.64 15.05 99,085 1,491,124
Corporate Variable Life Type K Contracts 14.38 11.62 124,012 1,441,463
-----------
2,932,587
Pacific Rim Emerging Markets Trust:
Individual Variable Life Type L Contracts 11.42 8.58 577,244 4,952,181
Corporate Variable Life Type K Contracts -- 10.47 17,853 186,983
-----------
5,139,164
31
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
6. Unit Values (continued)
1999 2000
-------------------------------------------------------------------------
UNIT VALUE UNIT VALUE UNITS DOLLARS
-------------------------------------------------------------------------
Quantitative Equity Trust:
Individual Variable Life Type L Contracts $ 62.97 $ 66.50 688,089 $45,758,095
Corporate Variable Life Type K Contracts -- 13.81 30,449 420,642
-----------
46,178,737
Real Estate Securities Trust:
Individual Variable Life Type L Contracts 31.86 39.79 430,066 17,111,430
Corporate Variable Life Type K Contracts -- 15.59 3,523 54,928
-----------
17,166,358
Science and Technology Trust:
Individual Variable Life Type L Contracts 39.51 25.89 1,488,326 38,529,162
Corporate Variable Life Type K Contracts 15.00 9.84 368,877 3,629,252
-----------
42,158,414
Small Cap Index Trust:
Individual Variable Life Type L Contracts -- 11.65 3,750 43,698
Small Company Blend Trust:
Individual Variable Life Type L Contracts 16.00 12.76 95,417 1,217,642
Corporate Variable Life Type K Contracts -- 11.21 10,439 117,065
-----------
1,334,707
Small Company Value Trust:
Individual Variable Life Type L Contracts 9.11 9.59 251,772 2,414,592
Corporate Variable Life Type K Contracts -- 14.19 3,278 46,516
-----------
2,461,108
Strategic Bond Trust:
Individual Variable Life Type L Contracts 13.87 14.79 69,600 1,029,633
Total Return Trust:
Individual Variable Life Type L Contracts 12.32 13.57 150,463 2,042,313
Corporate Variable Life Type K Contracts -- 13.60 190,299 2,588,395
-----------
4,630,708
32
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
6. Unit Values (continued)
1999 2000
-------------------------------------------------------------------------
UNIT VALUE UNIT VALUE UNITS DOLLARS
-------------------------------------------------------------------------
Total Stock Market Index Trust:
Individual Variable Life Type L Contracts $ -- $ 11.20 118,184 $ 1,323,263
U.S. Government Securities Trust:
Individual Variable Life Type L Contracts 11.62 12.80 172,286 2,204,750
Corporate Variable Life Type K Contracts -- 13.64 27,059 369,079
------------
2,573,829
U.S. Large Cap Value Trust:
Individual Variable Life Type L Contracts 12.78 13.06 143,921 1,879,014
Corporate Variable Life Type K Contracts -- 13.01 13,771 179,190
------------
2,058,204
Value Trust:
Individual Variable Life Type L Contracts 13.57 16.80 273,446 4,594,010
Corporate Variable Life Type K Contracts -- 14.99 7,955 119,250
------------
4,713,260
500 Index Trust:
Individual Variable Life Type L Contracts -- 11.26 9,628 108,369
Corporate Variable Life Type K Contracts -- 11.28 12,407 139,892
------------
248,261
------------
Total $526,465,993
============
7. RELATED PARTY TRANSACTIONS
ManEquity, Inc., a registered broker-dealer and indirect wholly-owned subsidiary
of Manulife Financial, acts as the principal underwriter of the Contracts
pursuant to a Distribution Agreement with Manufacturers Life of America.
Registered representatives of either ManEquity, Inc. or other broker-dealers
having distribution agreements with ManEquity, Inc. who are also authorized as
variable life insurance agents under applicable state insurance laws, sell the
Contracts. Registered representatives are compensated on a commission basis.
33
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
7. RELATED PARTY TRANSACTIONS (CONTINUED)
Manufacturers Life of America has a formal service agreement with its
affiliates, Manulife Financial and The Manufacturers Life Insurance Company
(U.S.A.), which can be terminated by either party upon two months notice. Under
this Agreement, Manufacturers Life of America pays for legal, actuarial,
investment and certain other administrative services.
34
MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
SEPARATE ACCOUNT FOUR
Financial Statements
Nine months ended September 30, 2001 (unaudited)
with December 31, 2000 comparative (audited)
The Manufacturers Life Insurance Company of America
Separate Account Four
Financial Statements
Nine months ended September 30, 2001 (unaudited)
with December 31, 2000 comparative (audited)
CONTENTS
Financial Statements
Statement of Assets and Contract Owners' Equity...............................1
Statements of Operations and Changes in Contract Owners' Equity...............3
Notes to Financial Statements................................................25
The Manufacturers Life Insurance Company of America
Separate Account Four
Statement of Assets and Contract Owners' Equity
September 30, 2001 (Unaudited)
The Manufacturers Life Insurance Company of America
ASSETS
Investments at market value:
Sub-Accounts:
Aggressive Growth Trust - 370,450 shares (cost $6,414,433) $ 4,293,517
All Cap Growth Trust - 757,170 shares (cost $14,331,711) 9,449,477
All Cap Value Trust - 940 shares (cost $11,001) 10,038
Balanced Trust - 2,356,572 shares (cost $41,011,019) 29,904,898
Blue Chip Growth Trust - 2,303,334 shares (cost $42,895,932) 32,108,476
Capital Appreciation Trust - 4,104 shares (cost $34,389) 31,557
Capital Opportunities Trust - 832 shares (cost $9,397) 7,599
Diversified Bond Trust - 594,774 shares (cost $6,111,052) 6,286,765
Dynamic Growth Trust - 118,303 shares (cost $813,373) 493,323
Emerging Small Company Trust - 2,440,853 shares (cost $64,421,136) 50,842,973
Equity Income Trust - 932,247 shares (cost $14,396,303) 13,098,069
Equity Index Trust - 2,701,627 shares (cost $43,897,603) 34,229,612
Financial Services Trust - 7,369 shares (cost $88,395) 78,036
Fundamental Value Trust - 20,833 shares (cost $247,146) 220,415
Global Bond Trust - 39,711 shares (cost $446,202) 468,195
Global Equity Trust - 269,814 shares (cost $4,332,393) 3,210,784
Growth Trust - 887,202 shares (cost $17,834,218) 10,823,868
Growth and Income Trust - 1,124,362 shares (cost $31,284,661) 24,454,869
Health Services Trust - 6,965 shares (cost $88,566) 83,647
High Yield Trust - 496,724 shares (cost $5,535,450) 4,743,719
Income and Value Trust - 920,558 shares (cost $9,397,459) 8,321,846
International Index Trust - 16,010 shares (cost $166,840) 130,162
International Small Cap Trust - 256,006 shares (cost $4,191,643) 2,560,063
International Stock Trust - 1,274,312 shares (cost $15,691,227) 11,213,942
International Value Trust - 201,424 shares (cost $2,407,714) 1,879,288
Internet Technologies Trust - 21,555 shares (cost $135,527) 59,708
Investment Quality Bond Trust - 1,654,080 shares (cost $19,285,262) 19,617,391
Large Cap Growth Trust - 765,004 shares (cost $9,660,323) 6,808,533
Lifestyle Aggressive 1000 Trust - 59,448 shares (cost $734,575) 542,164
Lifestyle Balanced 640 Trust - 511,679 shares (cost $6,391,499) 5,643,823
Lifestyle Conservative 280 Trust - 278,163 shares (cost $3,518,912) 3,529,891
Lifestyle Growth 820 Trust - 144,049 shares (cost $1,888,963) 1,462,101
Lifestyle Moderate 460 Trust - 92,374 shares (cost $1,139,883) 1,072,457
Mid Cap Growth Trust - 6,893 shares (cost $77,157) 56,105
Mid Cap Index Trust - 34,079 shares (cost $435,476) 373,506
Mid Cap Opportunities Trust - 582 shares (cost $5,585) 4,923
Mid Cap Stock Trust - 71,515 shares (cost $746,876) 637,912
Mid Cap Value Trust - 9,668 shares (cost $121,762) 111,759
Money Market Trust - 3,810,703 shares (cost $38,107,029) 38,107,029
Overseas Trust - 402,057 shares (cost $4,397,162) 3,188,311
Pacific Rim Emerging Markets Trust - 690,974 shares (cost $5,707,242) 4,056,015
Quantitative Equity Trust - 1,970,803 shares (cost $44,333,089) 30,429,193
Real Estate Securities Trust - 1,236,877 shares (cost $19,621,260) 18,602,629
Science and Technology Trust - 2,401,613 shares (cost $50,001,446) 22,791,309
Small Cap Index Trust - 12,838 shares (cost $145,603) 121,828
Small Company Blend Trust - 290,112 shares (cost $3,316,060) 2,509,467
Small Company Value Trust - 326,433 shares (cost $4,179,487) 3,907,403
Strategic Bond Trust - 199,128 shares (cost $2,108,921) 2,116,730
Strategic Growth Trust - 14,509 shares (cost $164,704) 133,922
Strategic Opportunities Trust - 866,862 shares (cost $13,776,854) 9,310,097
1
Separate Account Four
Statement of Assets and Contract Owners' Equity
September 30, 2001 (Unaudited)
ASSETS (CONTINUED)
Investments at market value:
Sub-Accounts:
Tactical Allocation Trust - 497 shares (cost $5,102) $ 4,557
Telecommunications Trust - 3,198 shares (cost $29,296) 21,173
Total Return Trust - 1,098,941 shares (cost $14,672,613) 15,275,285
Total Stock Market Index Trust - 293,377 shares (cost $3,146,814) 2,581,715
U.S. Government Securities Trust - 544,510 shares (cost $7,321,132) 7,497,903
U.S. Large Cap Value Trust - 279,055 shares (cost $3,610,975) 3,002,629
Utilities Trust - 5,381 shares (cost $58,808) 49,936
Value Trust - 610,381 shares (cost $9,604,996) 9,082,470
500 Index Trust - 70,150 shares (cost $746,980) 627,143
------------
Total assets $462,282,155
============
CONTRACT OWNERS' EQUITY
Variable life contracts $462,282,155
============
See accompanying notes.
2
The Manufacturers Life Insurance Company of America
Separate Account Four
Statements of Operations and Changes in Contract Owners' Equity (Unaudited)
SUB-ACCOUNT
-----------
AGGRESSIVE GROWTH ALL CAP GROWTH
----------------- --------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00
----------- ---------- ----------- ----------
Income:
Dividends $ -- $ -- $ 489,935 $ 494,609
Expenses:
Mortality and expense risks, and
administrative charges 23,484 19,680 42,496 52,700
----------- ----------- ----------- -----------
Net investment income (loss) during the period (23,484) (19,680) 447,439 441,909
Net realized gain (loss) during the period (715,050) 445,778 (782,667) 719,966
Unrealized appreciation (depreciation) during
the period (1,353,594) (1,051,671) (3,551,932) (2,675,835)
----------- ----------- ----------- -----------
Net increase (decrease) in assets from
operations (2,092,128) (625,573) (3,887,160) (1,513,960)
----------- ----------- ----------- -----------
Changes from principal transactions:
Transfer of net premiums 1,647,712 2,017,555 3,999,766 2,987,565
Transfer on terminations (297,073) (153,979) (478,511) (565,315)
Transfer on policy loans (16,723) (1,889) (16,906) (36,214)
Net interfund transfers (322,150) 3,035,625 1,038,209 2,348,259
----------- ----------- ----------- -----------
Net increase (decrease) in assets from
principal transactions 1,011,766 4,897,312 4,542,558 4,734,295
----------- ----------- ----------- -----------
Total increase (decrease) in assets (1,080,362) 4,271,739 655,398 3,220,335
Assets beginning of year 5,373,879 1,102,140 8,794,079 5,573,744
----------- ----------- ----------- -----------
Assets end of period $ 4,293,517 $ 5,373,879 $ 9,449,477 $ 8,794,079
=========== =========== =========== ===========
* Reflects the period from commencement of operations May 1, 2001 through
September 30, 2001.
See accompanying notes.
3
SUB-ACCOUNT
-----------
ALL CAP CAPITAL
VALUE BALANCED BLUE CHIP GROWTH APPRECIATION
----- -------- ---------------- ------------
PERIOD ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
SEPT. 30/01* SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00 SEPT. 30/01*
- ------------ ----------- ---------- ----------- ---------- ------------
$ -- $ 824,561 $ 2,142,690 $ 2,891,977 $ 1,437,390 $ --
12 180,203 306,448 171,619 225,515 13
- ------------------------------------------------------------------------------------------------------------------
(12) 644,358 1,836,242 2,720,358 1,211,875 (13)
(23) (1,375,110) 1,164,938 (3,014,053) 2,219,612 (13)
(964) (5,662,574) (7,426,525) (10,755,723) (5,137,526) (2,831)
- ------------------------------------------------------------------------------------------------------------------
(999) (6,393,326) (4,425,345) (11,049,418) (1,706,039) (2,857)
- ------------------------------------------------------------------------------------------------------------------
4,140 3,249,443 5,624,260 8,885,261 13,245,945 --
(1,135) (3,097,986) (5,659,955) (2,100,073) (1,872,424) (58)
-- 132,012 (208,941) (31,634) 13 --
8,032 (4,774,642) (7,469,583) (2,993,057) (3,545,368) 34,472
- ------------------------------------------------------------------------------------------------------------------
11,037 (4,491,173) (7,714,219) 3,760,497 7,828,166 34,414
- ------------------------------------------------------------------------------------------------------------------
10,038 (10,884,499) (12,139,564) (7,288,921) 6,122,127 31,557
-- 40,789,397 52,928,961 39,397,397 33,275,270 --
- ------------------------------------------------------------------------------------------------------------------
$10,038 $ 29,904,898 $ 40,789,397 $ 32,108,476 $ 39,397,397 $31,557
==================================================================================================================
4
The Manufacturers Life Insurance Company of America
Separate Account Four
Statements of Operations and Changes in Contract Owners' Equity (Unaudited)
(continued)
SUB-ACCOUNT
-----------
CAPITAL
OPPORTUNITIES DIVERSIFIED BOND
------------- ----------------
PERIOD ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/01* SEPT. 30/01 DEC. 31/00
------------ ----------- ----------
Income:
Dividends $ - $ 171,518 $ 128,166
Expenses:
Mortality and expense risks, and
administrative charges 9 21,560 13,735
---------------------------------------------
Net investment income (loss) during the period (9) 149,958 114,431
Net realized gain (loss) during the period (6) 186,216 (85,540)
Unrealized appreciation (depreciation) during
the period (1,798) (7,093) 229,671
---------------------------------------------
Net increase (decrease) in assets from
operations (1,813) 329,081 258,562
---------------------------------------------
Changes from principal transactions:
Transfer of net premiums -- 1,755,559 1,199,817
Transfer on terminations (46) (232,265) (244,178)
Transfer on policy loans -- (52,853) (55,670)
Net interfund transfers 9,458 828,846 1,131,179
---------------------------------------------
Net increase (decrease) in assets from
principal transactions 9,412 2,299,287 2,031,148
---------------------------------------------
Total increase (decrease) in assets 7,599 2,628,368 2,289,710
Assets beginning of year -- 3,658,397 1,368,687
---------------------------------------------
Assets end of period $ 7,599 $6,286,765 $3,658,397
=============================================
* Reflects the period from commencement of operations May 1, 2001 through
September 30, 2001.
** Reflects the period from commencement of operations May 2, 2000 through
December 31, 2000.
See accompanying notes.
5
SUB-ACCOUNT
-----------
DYNAMIC GROWTH EMERGING SMALL COMPANY EQUITY INCOME
-------------- ---------------------- -------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/01 DEC. 31/00** SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00
----------- ------------ ----------- ---------- ----------- ----------
$ 1,375 $ -- $ 2,633,803 $ 8,896,969 $ 1,021,642 $ 1,215,240
2,366 1,202 311,480 594,318 48,179 52,959
- -------------------------------------------------------------------------------------------------------------
(991) (1,202) 2,322,323 8,302,651 973,463 1,162,281
(58,538) (126,482) (1,103,505) 7,060,851 (254,621) (999,933)
(216,134) (103,916) (31,993,109) (19,474,370) (1,667,777) 598,947
- -------------------------------------------------------------------------------------------------------------
(275,663) (231,600) (30,774,291) (4,110,868) (948,935) 761,295
- -------------------------------------------------------------------------------------------------------------
224,724 91,367 6,768,766 10,826,056 2,695,534 3,091,072
(4,940) (13,110) (5,207,476) (10,744,665) (858,470) (1,003,040)
-- -- 38,120 (877,506) (12,219) 1,625
278,956 423,589 (498,913) 1,815,857 4,364,980 (4,746,166)
- -------------------------------------------------------------------------------------------------------------
498,740 501,846 1,100,497 1,019,742 6,189,825 (2,656,509)
- -------------------------------------------------------------------------------------------------------------
223,077 270,246 (29,673,794) (3,091,126) 5,240,890 (1,895,214)
270,246 -- 80,516,767 83,607,893 7,857,179 9,752,393
- -------------------------------------------------------------------------------------------------------------
$ 493,323 $ 270,246 $ 50,842,973 $ 80,516,767 $ 13,098,069 $ 7,857,179
=============================================================================================================
6
The Manufacturers Life Insurance Company of America
Separate Account Four
Statements of Operations and Changes in Contract Owners' Equity (Unaudited)
(continued)
SUB-ACCOUNT
-----------
FINANCIAL
EQUITY INDEX SERVICES
------------ --------
PERIOD ENDED YEAR ENDED PERIOD ENDED
SEPT. 30/01 DEC. 31/00 SEPT. 30/01*
----------- ---------- ------------
Income:
Dividends $ 949,563 $ 117,514 $ --
Expenses:
Mortality and expense risks, and
administrative charges 169,728 258,059 86
------------ ------------ --------
Net investment income (loss) during the period 779,835 (140,545) (86)
Net realized gain (loss) during the period (1,667,247) 3,003,549 (94)
Unrealized appreciation (depreciation) during
the period (7,894,191) (7,096,700) (10,360)
------------ ------------ --------
Net increase (decrease) in assets from
operations (8,781,603) (4,233,696) (10,540)
------------ ------------ --------
Changes from principal transactions:
Transfer of net premiums 9,402,253 16,333,867 587
Transfer on terminations (1,886,937) (2,849,902) (1,124)
Transfer on policy loans (6,368) (154,116) --
Net interfund transfers (4,245,045) (7,052,953) 89,113
------------ ------------ --------
Net increase (decrease) in assets from
principal transactions 3,263,903 6,276,896 88,576
------------ ------------ --------
Total increase (decrease) in assets (5,517,700) 2,043,200 78,036
Assets beginning of year 39,747,312 37,704,112 --
------------ ------------ --------
Assets end of period $ 34,229,612 $ 39,747,312 $ 78,036
============ ============ ========
* Reflects the period from commencement of operations May 1, 2001 through
September 30, 2001.
See accompanying notes.
7
SUB-ACCOUNT
-----------
FUNDAMENTAL
VALUE GLOBAL BOND GLOBAL EQUITY GROWTH
----- ----------- ------------- ------
PERIOD ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/01* SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00
- ------------ ----------- ---------- ----------- ---------- ----------- ----------
$ -- $ -- $ 10,543 $ 507,908 $ 327,718 $ -- $ 1,357,936
237 2,229 3,171 16,077 19,023 61,351 97,447
- -----------------------------------------------------------------------------------------------------------------------
(237) (2,229) 7,372 491,831 308,695 (61,351) 1,260,489
(171) (3,449) (30,994) (39,471) (199,982) (3,870,972) 594,711
(26,731) 24,029 2,851 (1,373,247) 234,915 (904,429) (7,421,452)
- -----------------------------------------------------------------------------------------------------------------------
(27,139) 18,351 (20,771) (920,887) 343,628 (4,836,752) (5,566,252)
- -----------------------------------------------------------------------------------------------------------------------
2,776 249,822 139,169 596,649 1,194,857 4,569,408 7,922,560
(2,533) (18,552) (34,333) (201,018) (226,935) (684,031) (1,151,699)
-- (3,375) (10,712) (1,937) (40,108) (28,874) (59,763)
247,311 (177,288) 2,695 203,152 (910,286) (3,433,802) 6,325,216
- -----------------------------------------------------------------------------------------------------------------------
247,554 50,607 96,819 596,846 17,528 422,701 13,036,314
- -----------------------------------------------------------------------------------------------------------------------
220,415 68,958 76,048 (324,041) 361,156 (4,414,051) 7,470,062
-- 399,237 323,189 3,534,825 3,173,669 15,237,919 7,767,857
- -----------------------------------------------------------------------------------------------------------------------
$220,415 $ 468,195 $399,237 $ 3,210,784 $3,534,825 $ 10,823,868 $ 15,237,919
=======================================================================================================================
8
The Manufacturers Life Insurance Company of America
Separate Account Four
Statements of Operations and Changes in Contract Owners' Equity (Unaudited)
(continued)
SUB-ACCOUNT
-----------
HEALTH
GROWTH AND INCOME SCIENCES
----------------- --------
PERIOD ENDED YEAR ENDED PERIOD ENDED
SEPT. 30/01 DEC. 31/00 SEPT. 30/01*
----------- ---------- ------------
Income:
Dividends $ 1,481,575 $ 1,677,174 $ --
Expenses:
Mortality and expense risks, and
administrative charges 123,543 178,922 90
------------------------------------------------
Net investment income (loss) during the period 1,358,032 1,498,252 (90)
Net realized gain (loss) during the period (1,417,760) 2,196,121 (54)
Unrealized appreciation (depreciation) during
the period (5,560,378) (5,943,252) (4,919)
------------------------------------------------
Net increase (decrease) in assets
from operations (5,620,106) (2,248,879) (5,063)
------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 6,021,196 7,793,636 20,270
Transfer on terminations (2,227,656) (3,678,743) (948)
Transfer on policy loans (36,375) (14,763) --
Net interfund transfers (797,040) (4,080,097) 69,388
------------------------------------------------
Net increase (decrease) in assets
from principal transactions 2,960,125 20,033 88,710
Total increase (decrease) in assets (2,659,981) (2,228,846) 83,647
Assets beginning of year 27,114,850 29,343,696 --
------------------------------------------------
Assets end of period $ 24,454,869 $ 27,114,850 $83,647
================================================
* Reflects the period from commencement of operations May 1, 2001 through
September 30, 2001.
** Reflects the period from commencement of operations May 2, 2000 through
December 31, 2000.
See accompanying notes.
9
SUB-ACCOUNT
-----------
HIGH YIELD INCOME & VALUE INTERNATIONAL INDEX
---------- -------------- -------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED
SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00**
----------- ---------- ----------- ---------- ----------- ------------
$ 364,655 $ 13,566 $ 313,451 $ 952,189 $ 44 $ 624
16,842 25,447 32,432 31,429 927 85
- -------------------------------------------------------------------------------------------------
347,813 (11,881) 281,019 920,760 (883) 539
(326,082) (127,211) (399,936) (302,448) 22,036 (309)
(397,145) (253,583) (677,029) (418,733) (33,637) (3,041)
- -------------------------------------------------------------------------------------------------
(375,414) (392,675) (795,946) 199,579 (12,484) (2,811)
- -------------------------------------------------------------------------------------------------
1,259,195 1,396,133 2,255,150 2,354,495 17,543 3,789
(206,026) (236,289) (415,177) (379,895) 3,830 (599)
(11,589) (11,335) (8,196) (80,612) -- --
36,991 (172,527) 1,040,088 710,007 76,795 44,099
- -------------------------------------------------------------------------------------------------
1,078,571 975,982 2,871,865 2,603,995 98,168 47,289
- -------------------------------------------------------------------------------------------------
703,157 583,307 2,075,919 2,803,574 85,684 44,478
4,040,562 3,457,255 6,245,927 3,442,353 44,478 --
- -------------------------------------------------------------------------------------------------
$4,743,719 $4,040,562 $8,321,846 $6,245,927 $130,162 $44,478
=================================================================================================
10
The Manufacturers Life Insurance Company of America
Separate Account Four
Statements of Operations and Changes in Contract Owners' Equity (Unaudited)
(continued)
SUB-ACCOUNT
-----------
INTERNATIONAL SMALL CAP INTERNATIONAL STOCK
----------------------- -------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00
----------- ---------- ----------- ----------
Income:
Dividends $ -- $ 694,416 $ 724,688 $ 84,131
Expenses:
Mortality and expense risks, and
administrative charges 15,703 23,770 67,638 110,826
------------------------------------------------------------------
Net investment income (loss) during the period (15,703) 670,646 657,050 (26,695)
Net realized gain (loss) during the period (1,719,239) (138,612) (2,531,535) 571,024
Unrealized appreciation (depreciation) during
the period 145,012 (2,406,462) (3,111,810) (3,695,939)
------------------------------------------------------------------
Net increase (decrease) in assets
from operations (1,589,930) (1,874,428) (4,986,295) (3,151,610)
------------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 925,625 1,799,696 2,917,539 5,040,119
Transfer on terminations (252,522) (347,872) (938,597) (1,565,059)
Transfer on policy loans (1,002) (2,578) 15,550 22,239
Net interfund transfers (761,467) 2,678,076 (3,411,781) 720,414
------------------------------------------------------------------
Net increase (decrease) in assets
from principal transactions (89,366) 4,127,322 (1,417,289) 4,217,713
------------------------------------------------------------------
Total increase (decrease) in assets (1,679,296) 2,252,894 (6,403,584) 1,066,103
Assets beginning of year 4,239,359 1,986,465 17,617,526 16,551,423
------------------------------------------------------------------
Assets end of period $ 2,560,063 $ 4,239,359 $ 11,213,942 $17,617,526
==================================================================
** Reflects the period from commencement of operations May 2, 2000 through
December 31, 2000.
See accompanying notes.
11
SUB-ACCOUNT
-----------
INTERNATIONAL VALUE INTERNET TECHNOLOGIES INVESTMENT QUALITY BOND
------------------- --------------------- -----------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00** SEPT. 30/01 DEC. 31/00
----------- ---------- ----------- ------------ ----------- ----------
$ 51,943 $ 17,130 $ -- $ -- $ 1,038,232 $ 1,309,195
9,136 15,330 392 707 82,904 109,903
- ----------------------------------------------------------------------------------------------------------
42,807 1,800 (392) (707) 955,328 1,199,292
(42,872) (106,248) (79,050) (62,279) 47,679 (240,339)
(453,680) (114,496) 11,426 (87,244) 157,376 437,793
- ----------------------------------------------------------------------------------------------------------
(453,745) (218,944) (68,016) (150,230) 1,160,383 1,396,746
- ----------------------------------------------------------------------------------------------------------
603,972 1,289,123 34,263 69,573 1,783,747 2,734,616
(69,743) (134,761) (46,597) (805) (1,260,018) (2,078,469)
(2,127) 7,727 38,323 (40,607) (40,320) 27,427
(43,114) 406,659 (30,340) 254,144 1,686,019 (4,994,725)
- ----------------------------------------------------------------------------------------------------------
488,988 1,568,748 (4,351) 282,305 2,169,428 (4,311,151)
- ----------------------------------------------------------------------------------------------------------
35,243 1,349,804 (72,367) 132,075 3,329,811 (2,914,405)
1,844,045 494,241 132,075 -- 16,287,580 19,201,985
- ----------------------------------------------------------------------------------------------------------
$1,879,288 $1,844,045 $ 59,708 $ 132,075 $19,617,391 $16,287,580
==========================================================================================================
12
The Manufacturers Life Insurance Company of America
Separate Account Four
Statements of Operations and Changes in Contract Owners' Equity (Unaudited)
(continued)
SUB-ACCOUNT
-----------
LARGE CAP GROWTH LIFESTYLE AGGRESSIVE 1000
---------------- -------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00
----------- ---------- ----------- ----------
Income:
Dividends $ 295,174 $ 933,644 $ 48,963 $ 37,648
Expenses:
Mortality and expense risks, and
administrative charges 35,064 42,374 3,169 4,794
---------------------------------------------------------------
Net investment income (loss) during the period 260,110 891,270 45,794 32,854
Net realized gain (loss) during the period (1,031,853) 236,149 (17,247) 14,597
Unrealized appreciation (depreciation) during
the period (1,430,201) (2,285,423) (203,030) (84,082)
---------------------------------------------------------------
Net increase (decrease) in assets
from operations (2,201,944) (1,158,004) (174,483) (36,631)
---------------------------------------------------------------
Changes from principal transactions:
Transfer of net premiums 1,976,040 3,140,695 174,849 71,415
Transfer on terminations (568,872) (990,185) (72,113) (84,132)
Transfer on policy loans (7,859) (60,521) (32,555) (692)
Net interfund transfers 427,381 286,718 (27,339) (82,072)
---------------------------------------------------------------
Net increase (decrease) in assets
from principal transactions 1,826,690 2,376,707 42,842 (95,481)
---------------------------------------------------------------
Total increase (decrease) in assets (375,254) 1,218,703 (131,641) (132,112)
Assets beginning of year 7,183,787 5,965,084 673,805 805,917
---------------------------------------------------------------
Assets end of period $ 6,808,533 $ 7,183,787 $ 542,164 $ 673,805
===============================================================
See accompanying notes.
13
SUB-ACCOUNT
-----------
LIFESTYLE BALANCED 640 LIFESTYLE CONSERVATIVE 280 LIFESTYLE GROWTH 820
---------------------- -------------------------- --------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00
----------- ---------- ----------- ---------- ----------- ----------
$ 331,915 $ 89,487 $ 14,490 $ 29,153 $ 138,327 $ 149,038
19,253 14,134 1,883 2,482 7,652 11,827
- ----------------------------------------------------------------------------------------------
312,662 75,353 12,607 26,671 130,675 137,211
(99,286) 51,498 2,210 (10,067) (60,724) 46,233
(688,002) (151,961) (2,240) 5,241 (386,227) (248,793)
- ----------------------------------------------------------------------------------------------
(474,626) (25,110) 12,577 21,845 (316,276) (65,349)
290,106 2,347,394 47,116 31,809 557,895 600,657
(253,812) (156,204) (15,980) (102,927) (155,060) (179,618)
292 (51,653) (719) (56,838) (18,841) (27,215)
2,234,438 167,632 3,193,209 (92,469) (115,822) (756,569)
- ----------------------------------------------------------------------------------------------
2,271,024 2,307,169 3,223,626 (220,425) 268,172 (362,745)
- ----------------------------------------------------------------------------------------------
1,796,398 2,282,059 3,236,203 (198,580) (48,104) (428,094)
3,847,425 1,565,366 293,688 492,268 1,510,205 1,938,299
- ----------------------------------------------------------------------------------------------
$5,643,823 $3,847,425 $3,529,891 $ 293,688 $1,462,101 $1,510,205
==============================================================================================
14
The Manufacturers Life Insurance Company of America
Separate Account Four
Statements of Operations and Changes in Contract Owners' Equity (Unaudited)
(continued)
SUB-ACCOUNT
------------------------------------------------
MID CAP
LIFESTYLE MODERATE 460 GROWTH
------------------------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED
SEPT. 30/01 DEC. 31/00 SEPT. 30/01*
------------------------------------------------
Income:
Dividends $ 45,109 $ 5,907 $ --
Expenses:
Mortality and expense risks, and
administrative charges 3,132 917 80
----------- --------- --------
Net investment income (loss) during the period 41,977 4,990 (80)
Net realized gain (loss) during the period (17,094) 1,296 (101)
Unrealized appreciation (depreciation) during
the period (66,717) (4,375) (21,052)
----------- --------- --------
Net increase (decrease) in assets
from operations (41,834) 1,911 (21,233)
----------- --------- --------
Changes from principal transactions:
Transfer of net premiums 243,850 391,104 566
Transfer on terminations (18,003) (34,414) (871)
Transfer on policy loans (1,577) 1,146 --
Net interfund transfers 594,988 (425,840) 77,643
----------- --------- --------
Net increase (decrease) in assets
from principal transactions 819,258 (68,004) 77,338
----------- --------- --------
Total increase (decrease) in assets 777,424 (66,093) 56,105
Assets beginning of year 295,033 361,126 --
----------- --------- --------
Assets end of period $ 1,072,457 $ 295,033 $ 56,105
=========== ========= ========
* Reflects the period from commencement of operations May 1, 2001 through
September 30, 2001.
** Reflects the period from commencement of operations May 2, 2000 through
December 31, 2000.
See accompanying notes.
15
SUB-ACCOUNT
- ----------------------------------------------------------------------------------------------------------------------
MID CAP MID CAP
MID CAP INDEX OPPORTUNITIES MID CAP STOCK VALUE
- ----------------------------------------------------------------------------------------------------------------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
SEPT. 30/01 DEC. 31/00** SEPT. 30/01* SEPT. 30/01 DEC. 31/00 SEPT. 30/01*
- ----------------------------------------------------------------------------------------------------------------------
$ 10 $ 4,817 $ -- $ -- $ -- $ --
991 252 2 2,498 2,347 150
- --------- --------- ------- --------- --------- ---------
(981) 4,565 (2) (2,498) (2,347) (150)
(16,636) 167 (1) (32,150) (13,526) (122)
(56,086) (5,883) (662) (104,770) (2,643) (10,003)
- --------- --------- ------- --------- --------- ---------
(73,703) (1,151) (665) (139,418) (18,516) (10,275)
- --------- --------- ------- --------- --------- ---------
139,862 3,514 5,649 258,538 106,206 2,369
(8,372) (1,484) (61) (33,959) (21,708) (4,852)
-- -- -- (816) (223) --
70,227 244,613 -- 173,100 133,861 124,517
- --------- --------- ------- --------- --------- ---------
201,717 246,643 5,588 396,863 218,136 122,034
- --------- --------- ------- --------- --------- ---------
128,014 245,492 4,923 257,445 199,620 111,759
245,492 -- -- 380,467 180,847 --
- --------- --------- ------- --------- --------- ---------
$ 373,506 $ 245,492 $ 4,923 $ 637,912 $ 380,467 $ 111,759
========= ========= ======= ========= ========= =========
16
The Manufacturers Life Insurance Company of America
Separate Account Four
Statements of Operations and Changes in Contract Owners' Equity (Unaudited)
(continued)
SUB-ACCOUNT
----------------------------------------------------------------------------
MONEY MARKET OVERSEAS
----------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00
----------------------------------------------------------------------------
Income:
Dividends $ 1,220,745 $ 1,932,420 $ 280,476 $ 118,152
Expenses:
Mortality and expense risks, and
administrative charges 188,806 212,370 14,663 12,911
------------ ------------ ----------- -----------
Net investment income (loss) during the period 1,031,939 1,720,050 265,813 105,241
Net realized gain (loss) during the period -- -- (549,957) (59,142)
Unrealized appreciation (depreciation) during
the period -- -- (762,241) (565,259)
------------ ------------ ----------- -----------
Net increase (decrease) in assets
from operations 1,031,939 1,720,050 (1,046,385) (519,160)
------------ ------------ ----------- -----------
Changes from principal transactions:
Transfer of net premiums 8,283,912 19,729,086 1,648,099 2,381,221
Transfer on terminations (3,361,867) (6,012,717) (132,228) (239,365)
Transfer on policy loans 60,341 204,008 (2,421) (2,019)
Net interfund transfers (8,227,569) (3,132,123) (211,341) 753,735
------------ ------------ ----------- -----------
Net increase (decrease) in assets
from principal transactions (3,245,183) 10,788,254 1,302,109 2,893,572
------------ ------------ ----------- -----------
Total increase (decrease) in assets (2,213,244) 12,508,304 255,724 2,374,412
Assets beginning of year 40,320,273 27,811,969 2,932,587 558,175
------------ ------------ ----------- -----------
Assets end of period $ 38,107,029 $ 40,320,273 $ 3,188,311 $ 2,932,587
============ ============ =========== ===========
See accompanying notes.
17
SUB-ACCOUNT
- ---------------------------------------------------------------------------------------------------------------------
PACIFIC RIM QUANTITATIVE EQUITY REAL ESTATE SECURITIES
- ---------------------------------------------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00
- ---------------------------------------------------------------------------------------------------------------------
$ 17,876 $ 20,741 $ 5,763,630 $ 5,932,623 $ 565,952 $ 548,910
21,955 35,497 191,695 309,403 83,908 96,131
- ----------- ----------- ------------ ------------ ------------ ------------
(4,079) (14,756) 5,571,935 5,623,220 482,044 452,779
(175,742) (85,747) 162,435 2,793,944 75,776 (373,361)
(1,241,962) (1,449,544) (19,709,029) (5,866,904) (659,894) 3,308,154
- ----------- ----------- ------------ ------------ ------------ ------------
(1,421,783) (1,550,047) (13,974,659) 2,550,260 (102,074) 3,387,572
- ----------- ----------- ------------ ------------ ------------ ------------
734,875 1,893,650 3,042,479 3,739,616 1,914,346 1,902,266
(321,157) (669,458) (3,682,900) (4,929,423) (1,543,522) (1,529,570)
6,134 (17,017) (190,597) (344,939) (95,582) (152,860)
(81,218) 19,115 (943,867) (605,234) 1,263,103 (473,949)
- ----------- ----------- ------------ ------------ ------------ ------------
338,634 1,226,290 (1,774,885) (2,139,980) 1,538,345 (254,113)
- ----------- ----------- ------------ ------------ ------------ ------------
(1,083,149) (323,757) (15,749,544) 410,280 1,436,271 3,133,459
5,139,164 5,462,921 46,178,737 45,768,457 17,166,358 14,032,899
- ----------- ----------- ------------ ------------ ------------ ------------
$ 4,056,015 $ 5,139,164 $ 30,429,193 $ 46,178,737 $ 18,602,629 $ 17,166,358
=========== =========== ============ ============ ============ ============
18
The Manufacturers Life Insurance Company of America
Separate Account Four
Statements of Operations and Changes in Contract Owners' Equity (Unaudited)
(continued)
SUB-ACCOUNT
----------------------------------------------------------------------
SCIENCE & TECHNOLOGY SMALL CAP INDEX
----------------------------------------------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED
SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00**
----------------------------------------------------------------------
Income:
Dividends $ 2,074,187 $ 1,118,209 $ -- $ 1,534
Expenses:
Mortality and expense risks, and
administrative charges 166,429 308,316 722 58
------------ ------------ --------- --------
Net investment income (loss) during the period 1,907,758 809,893 (722) 1,476
Net realized gain (loss) during the period (18,330,986) 6,027,471 (21,435) 75
Unrealized appreciation (depreciation) during
the period (11,823,877) (27,894,294) (21,001) (2,773)
------------ ------------ --------- --------
Net increase (decrease) in assets
from operations (28,247,105) (21,056,930) (43,158) (1,222)
------------ ------------ --------- --------
Changes from principal transactions:
Transfer of net premiums 13,889,354 23,717,592 79,040 4,377
Transfer on terminations (1,643,996) (3,000,348) (2,732) (373)
Transfer on policy loans (17,268) (129,110) (1,237) --
Net interfund transfers (3,348,090) 7,234,394 46,217 40,916
------------ ------------ --------- --------
Net increase (decrease) in assets
from principal transactions 8,880,000 27,822,528 121,288 44,920
------------ ------------ --------- --------
Total increase (decrease) in assets (19,367,105) 6,765,598 78,130 43,698
Assets beginning of year 42,158,414 35,392,816 43,698 --
------------ ------------ --------- --------
Assets end of period $ 22,791,309 $ 42,158,414 $ 121,828 $ 43,698
============ ============ ========= ========
** Reflects the period from commencement of operations May 2, 2000 through
December 31, 2000.
See accompanying notes.
19
SUB-ACCOUNT
- ----------------------------------------------------------------------------------------------------------------
SMALL COMPANY BLEND SMALL COMPANY VALUE STRATEGIC BOND
- ----------------------------------------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00
- ----------------------------------------------------------------------------------------------------------------
$ 9,171 $ 133,872 $ 6,135 $ 2,007 $ 80,052 $ 85,997
9,527 5,510 13,852 11,945 7,087 6,711
- ----------- ----------- ----------- ----------- ----------- -----------
(356) 128,362 (7,717) (9,938) 72,965 79,286
(308,531) 24,165 92,841 64,625 (22,681) (41,693)
(277,369) (568,390) (456,030) 82,411 9,931 28,826
- ----------- ----------- ----------- ----------- ----------- -----------
(586,256) (415,863) (370,906) 137,098 60,215 66,419
- ----------- ----------- ----------- ----------- ----------- -----------
841,229 661,522 939,327 1,025,807 207,415 134,439
(68,421) (31,361) (99,555) (79,835) (66,625) (42,241)
187 (10,610) (10,874) (11,079) (54,821) (3,131)
988,021 894,978 988,303 262,214 940,913 (404,574)
- ----------- ----------- ----------- ----------- ----------- -----------
1,761,016 1,514,529 1,817,201 1,197,107 1,026,882 (315,507)
- ----------- ----------- ----------- ----------- ----------- -----------
1,174,760 1,098,666 1,446,295 1,334,205 1,087,097 (249,088)
1,334,707 236,041 2,461,108 1,126,903 1,029,633 1,278,721
- ----------- ----------- ----------- ----------- ----------- -----------
$ 2,509,467 $ 1,334,707 $ 3,907,403 $ 2,461,108 $ 2,116,730 $ 1,029,633
=========== =========== =========== =========== =========== ===========
20
The Manufacturers Life Insurance Company of America
Separate Account Four
Statements of Operations and Changes in Contract Owners' Equity (Unaudited)
(continued)
SUB-ACCOUNT
-----------------------------------------------------------------------
STRATEGIC TACTICAL
GROWTH STRATEGIC OPPORTUNITIES ALLOCATION
-----------------------------------------------------------------------
PERIOD ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
SEPT. 30/01* SEPT. 30/01 DEC. 31/00 SEPT. 30/01*
-----------------------------------------------------------------------
Income:
Dividends $ -- $ 2,218,057 $ 1,408,900 $ 18
Expenses:
Mortality and expense risks, and
administrative charges 143 76,423 81,796 161
--------- ------------ ------------ --------
Net investment income (loss) during the period (143) 2,141,634 1,327,104 (143)
Net realized gain (loss) during the period (119) (4,072,695) (242,930) (11,004)
Unrealized appreciation (depreciation) during
the period (30,782) (3,285,881) (2,200,855) (545)
--------- ------------ ------------ --------
Net increase (decrease) in assets
from operations (31,044) (5,216,942) (1,116,681) (11,692)
--------- ------------ ------------ --------
Changes from principal transactions:
Transfer of net premiums 7,132 4,789,502 3,657,647 6,017
Transfer on terminations (1,409) (835,777) (2,369,868) (1,835)
Transfer on policy loans -- 10,473 (79,984) --
Net interfund transfers 159,243 (4,018,010) 5,347,608 12,067
--------- ------------ ------------ --------
Net increase (decrease) in assets
from principal transactions 164,966 (53,812) 6,555,403 16,249
--------- ------------ ------------ --------
Total increase (decrease) in assets 133,922 (5,270,754) 5,438,722 4,557
Assets beginning of year -- 14,580,851 9,142,129 --
--------- ------------ ------------ --------
Assets end of period $ 133,922 $ 9,310,097 $ 14,580,851 $ 4,557
========= ============ ============ ========
* Reflects the period from commencement of operations May 1, 2001 through
September 30, 2001.
** Reflects the period from commencement of operations May 2, 2000 through
December 31, 2000.
See accompanying notes.
21
SUB-ACCOUNT
- ------------------------------------------------------------------------------------------
TELE-
COMMUNICATIONS TOTAL RETURN TOTAL STOCK MARKET INDEX
- ------------------------------------------------------------------------------------------
PERIOD ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED
SEPT. 30/01* SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00**
- ------------------------------------------------------------------------------------------
$ -- $ 234,318 $ 27,495 $ -- $ 12,374
30 33,495 15,109 8,586 2,888
- -------- ------------ ----------- ----------- -----------
(30) 200,823 12,386 (8,586) 9,486
(21) 184,783 22,935 (58,115) (1,756)
(8,124) 325,269 277,035 (424,548) (140,552)
- -------- ------------ ----------- ----------- -----------
(8,175) 710,875 312,356 (491,249) (132,822)
- -------- ------------ ----------- ----------- -----------
-- 2,076,116 1,516,546 216,391 2,071
(89) (179,013) (75,925) (70,284) (24,855)
-- (51,927) -- -- --
29,437 8,088,526 2,577,623 1,603,594 1,478,869
- -------- ------------ ----------- ----------- -----------
29,348 9,933,702 4,018,244 1,749,701 1,456,085
- -------- ------------ ----------- ----------- -----------
21,173 10,644,577 4,330,600 1,258,452 1,323,263
-- 4,630,708 300,108 1,323,263 --
- -------- ------------ ----------- ----------- -----------
$ 21,173 $ 15,275,285 $ 4,630,708 $ 2,581,715 $ 1,323,263
======== ============ =========== =========== ===========
22
The Manufacturers Life Insurance Company of America
Separate Account Four
Statements of Operations and Changes in Contract Owners' Equity (Unaudited)
(continued)
SUB-ACCOUNT
------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES U.S. LARGE CAP VALUE
------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00
------------------------------------------------------------------------
Income:
Dividends $ 290,455 $ 162,231 $ 21,133 $ 7,307
Expenses:
Mortality and expense risks, and
administrative charges 24,393 14,820 11,973 9,544
----------- ----------- ----------- -----------
Net investment income (loss) during the period 266,062 147,411 9,160 (2,237)
Net realized gain (loss) during the period 36,821 (46,024) (30,603) 67,805
Unrealized appreciation (depreciation) during
the period 77,274 123,103 (626,316) (30,733)
----------- ----------- ----------- -----------
Net increase (decrease) in assets
from operations 380,157 224,490 (647,759) 34,835
----------- ----------- ----------- -----------
Changes from principal transactions:
Transfer of net premiums 1,212,440 491,787 1,792,317 659,231
Transfer on terminations (312,552) (463,269) (157,909) (95,636)
Transfer on policy loans (53,803) (31,242) (5,191) 14,332
Net interfund transfers 3,697,832 (179,509) (37,033) 19,431
----------- ----------- ----------- -----------
Net increase (decrease) in assets
from principal transactions 4,543,917 (182,233) 1,592,184 597,358
----------- ----------- ----------- -----------
Total increase (decrease) in assets 4,924,074 42,257 944,425 632,193
Assets beginning of year 2,573,829 2,531,572 2,058,204 1,426,011
----------- ----------- ----------- -----------
Assets end of period $ 7,497,903 $ 2,573,829 $ 3,002,629 $ 2,058,204
=========== =========== =========== ===========
* Reflects the period from commencement of operations May 1, 2001 through
September 30, 2001.
** Reflects the period from commencement of operations May 2, 2000 through
December 31, 2000.
See accompanying notes.
23
SUB-ACCOUNT
- -------------------------------------------------------------------------------------
UTILITIES VALUE 500 INDEX TOTAL
- ---------------------------------------------------------------------------------------------------------------------------------
PERIOD ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/01* SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00** SEPT. 30/01 DEC. 31/00
- ---------------------------------------------------------------------------------------------------------------------------------
$ -- $ 225,855 $ -- $ 7 $ 512 $ 27,348,925 $ 33,640,178
65 34,292 24,109 1,355 397 2,364,170 3,367,318
- -------- ----------- ----------- --------- --------- ------------- -------------
(65) 191,563 (24,109) (1,348) 115 24,984,755 30,272,860
(30) 391,169 (100,839) (8,623) (2,289) (43,065,308) 23,929,759
(8,871) (1,343,295) 1,097,226 (103,051) (16,787) (118,662,574) (98,403,823)
- -------- ----------- ----------- --------- --------- ------------- -------------
(8,966) (760,563) 972,278 (113,022) (18,961) (136,743,127) (44,201,204)
- -------- ----------- ----------- --------- --------- ------------- -------------
225 2,171,794 1,034,204 228,256 266,299 107,668,006 156,665,425
(197) (340,787) (224,326) (26,826) (6,826) (34,467,318) (54,308,095)
-- (696) 3,564 1,573 (21,009) (514,277) (2,312,875)
58,874 3,299,462 (394,919) 288,901 28,758 (127,122) (132,679)
- -------- ----------- ----------- --------- --------- ------------- -------------
58,902 5,129,773 418,523 491,904 267,222 72,559,289 99,911,776
- -------- ----------- ----------- --------- --------- ------------- -------------
49,936 4,369,210 1,390,801 378,882 248,261 (64,183,838) 55,710,572
-- 4,713,260 3,322,459 248,261 -- 526,465,993 470,755,421
- -------- ----------- ----------- --------- --------- ------------- -------------
$ 49,936 $ 9,082,470 $ 4,713,260 $ 627,143 $ 248,261 $ 462,282,155 $ 526,465,993
======== =========== =========== ========= ========= ============= =============
24
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements
September 30, 2001 (Unaudited)
1. ORGANIZATION
The Manufacturers Life Insurance Company of America Separate Account Four (the
Account) is a separate account established by the Manufacturers Life Insurance
Company of America (the Company). The Account operates as a Unit Investment
Trust under the Investment Company Act of 1940, as amended and invests in sixty
sub-accounts of Manufacturers Investment Trust (the Trust). The Account is a
funding vehicle for allocation of net premiums under variable universal life
insurance contracts (the Contracts) issued by the Company. The Account was
established by the Company, a life insurance company organized in 1983 under
Michigan law. The Company is an indirect, wholly-owned subsidiary of The
Manufacturers Life Insurance Company (Manulife Financial), a Canadian life
insurance company. Each investment sub-account invests solely in shares of a
particular portfolio of the Trust. The Trust is registered under the Investment
Company Act of 1940 as an open-end management investment company.
The Company is required to maintain assets in the Account with a total market
value at least equal to the reserves and other liabilities relating to the
variable benefits under all contracts participating in the Account. These assets
may not be charged with liabilities which arise from any other business the
Company conducts. However, all obligations under the variable contracts are
general corporate obligations of the Company.
Additional assets are held in the Company's general account to cover the
contingency that the guaranteed minimum death benefit might exceed the death
benefit which would have been payable in the absence of such guarantee.
As the result of portfolio changes, the following sub-accounts of the Account
have been replaced with new sub-accounts as follows:
PREVIOUS FUND NEW FUND EFFECTIVE DATE
------------- -------- --------------
Mid Cap Blend Trust Strategic Opportunities Trust May 1, 2001
Mid Cap Growth Trust All Cap Growth Trust May 2, 2000
25
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
1. ORGANIZATION (CONTINUED)
The following sub-accounts of the Account were added as investment options for
variable universal life insurance contract holders of the Company:
COMMENCEMENT OF OPERATIONS OF
THE SUB-ACCOUNTS
-----------------------------
All Cap Value Trust May 1, 2001
Capital Appreciation Trust May 1, 2001
Capital Opportunities Trust May 1, 2001
Dynamic Growth Trust May 2, 2000
Financial Services Trust May 1, 2001
Fundamental Value Trust May 1, 2001
Health Sciences Trust May 1, 2001
International Index Trust May 2, 2000
Internet Technologies Trust May 2, 2000
Mid Cap Growth Trust May 1, 2001
Mid Cap Index Trust May 2, 2000
Mid Cap Opportunities Trust May 1, 2001
Mid Cap Value Trust May 1, 2001
Quantitative Mid Cap Trust May 1, 2001
Small Cap Index Trust May 2, 2000
Strategic Growth Trust May 1, 2001
Tactical Allocation Trust May 2, 2000
Telecommunications Trust May 1, 2001
Total Stock Market Index Trust May 2, 2000
Utilities Trust May 1, 2001
500 Index Trust May 2, 2000
2. SIGNIFICANT ACCOUNTING POLICIES
Investments are made in the portfolios of the Trust and are valued at the
reported net asset value of such portfolios. Transactions are recorded on the
trade date. Income from dividends is recorded on the ex-dividend date. Realized
gains and losses on the sales of investments are computed on the basis of the
identified cost of the investment sold.
26
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In addition to the Account, a contract holder may also allocate funds to the
Fixed Account, which is part of the Company's general account. Because of
exemptive and exclusionary provisions, interests in the Fixed Account have not
been registered under the Securities Act of 1933, and the Company's general
account has not been registered as an investment company under the Investment
Company Act of 1940.
The operations of the Account are included in the federal income tax return of
the Company, which is taxed as a life insurance company under the provisions of
the Internal Revenue Code (the Code). Under the current provisions of the Code,
the Company does not expect to incur federal income taxes on the earnings of the
Account to the extent the earnings are credited under the contracts. Based on
this, no charge is being made currently to the Account for federal income taxes.
The Company will review periodically the status of such decision based on
changes in the tax law. Such a charge may be made in future years for any
federal income taxes that would be attributable to the contract.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that could affect the amounts reported the financial statements
and accompanying notes. Such estimates and assumptions could change in the
future as more information becomes known, which could impact the amounts
reported and disclosed herein.
3. MORTALITY AND EXPENSE RISKS CHARGE
Manufacturers Life of America deducts from the assets of the Account a daily
charge equivalent to annual rates between 0.40% and 0.65% of the average net
value of the Account's assets for mortality and expense risks.
4. PREMIUM DEDUCTIONS
Manufacturers Life of America deducts certain charges for state, local, and
federal taxes from the gross premium before placing the remaining net premiums
in the sub-accounts.
27
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
5. PURCHASES AND SALES OF INVESTMENTS
The following table shows aggregate cost of shares purchased and proceeds from
shares sold of each Trust portfolio for the period ended September 30, 2001:
PURCHASES SALES
------------ ------------
Aggressive Growth Trust $ 2,783,253 $ 1,794,972
All Cap Growth Trust 7,790,560 2,800,562
All Cap Value Trust 12,172 1,148
Balanced Trust 5,110,698 8,957,513
Blue Chip Growth Trust 25,488,038 19,007,184
Capital Appreciation Trust 34,472 71
Capital Opportunities Trust 9,458 56
Diversified Bond Trust 5,672,058 3,222,813
Dynamic Growth Trust 2,112,932 1,615,183
Emerging Small Company Trust 21,340,717 17,917,896
Equity Income Trust 10,771,571 3,608,283
Equity Index Trust 23,911,403 19,867,665
Financial Services Trust 89,259 770
Fundamental Value Trust 248,717 1,400
Global Bond Trust 361,072 312,695
Global Equity Trust 2,093,135 1,004,456
Growth Trust 5,997,371 5,636,020
Growth and Income Trust 14,820,880 10,502,723
Health Services Trust 89,450 829
High Yield Trust 5,041,010 3,614,626
Income and Value Trust 5,007,560 1,854,677
International Index Trust 632,561 535,276
International Small Cap Trust 1,785,078 1,890,147
International Stock Trust 11,949,451 12,709,691
International Value Trust 1,022,743 490,949
Internet Technologies Trust 79,595 84,338
Investment Quality Bond Trust 10,375,163 7,250,406
Large Cap Growth Trust 5,671,364 3,584,565
Lifestyle Aggressive 1000 Trust 433,378 344,742
Lifestyle Balanced 640 Trust 4,235,952 1,652,266
Lifestyle Conservative 280 Trust 3,407,250 171,018
Lifestyle Growth 820 Trust 782,559 383,710
Lifestyle Moderate 460 Trust 1,255,048 393,813
28
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
5. PURCHASES AND SALES OF INVESTMENTS (CONTINUED)
PURCHASES SALES
------------ ------------
Mid Cap Growth Trust 77,827 570
Mid Cap Index Trust 501,887 301,150
Mid Cap Opportunities Trust 5,598 13
Mid Cap Stock Trust 640,813 246,448
Mid Cap Value Trust 123,974 2,090
Money Market Trust 27,914,145 30,127,388
Overseas Trust 2,828,728 1,260,807
Pacific Rim Emerging Markets Trust 1,836,452 1,501,896
Quantitative Equity Trust 9,469,927 5,672,877
Real Estate Securities Trust 6,466,802 4,446,413
Science and Technology Trust 37,063,591 26,275,833
Small Cap Index Trust 690,835 570,268
Small Company Blend Trust 2,338,295 577,636
Small Company Value Trust 3,563,374 1,753,889
Strategic Bond Trust 2,375,763 1,275,916
Strategic Growth Trust 165,606 783
Strategic Opportunities Trust 9,108,514 7,020,691
Tactical Allocation Trust 112,886 96,780
Telecommunications Trust 29,437 120
Total Return Trust 13,956,190 3,821,666
Total Stock Market Index Trust 2,014,904 273,789
U.S. Government Securities Trust 6,649,287 1,839,308
U.S. Large Cap Value Trust 4,130,758 2,529,414
Utilities Trust 59,099 262
Value Trust 8,703,247 3,381,911
500 Index Trust 533,535 42,980
------------ ------------
Total $321,777,402 $224,233,361
============ ============
29
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
6. UNIT VALUES
A summary of the accumulation unit values at September 30, 2001 and at December
31, 2000 and the accumulation units and dollar value outstanding at September
30, 2001 for the variable universal life contracts are as follows:
2000 2001
----------------------------------------------------------------
UNIT VALUE UNIT VALUE UNITS DOLLARS
----------------------------------------------------------------
Aggressive Growth Trust:
Individual and Corporate Variable Life Type L Contracts $ 20.28 $ 13.09 226,726 $ 2,969,016
Corporate Variable Life Type K Contracts 14.69 9.50 139,475 1,324,501
-----------
4,293,517
All Cap Growth Trust:
Individual and Corporate Variable Life Type L Contracts 24.68 15.84 539,575 8,548,556
Corporate Variable Life Type K Contracts 12.81 8.23 109,514 900,921
-----------
9,449,477
All Cap Value Trust:
Individual and Corporate Variable Life Type L Contracts
-- 10.65 942 10,038
Balanced Trust:
Individual and Corporate Variable Life Type L Contracts 29.62 24.74 1,169,028 28,917,275
Corporate Variable Life Type K Contracts 11.03 9.22 3,383 31,186
Corporate Variable Life Type I Contracts -- 24.78 38,593 956,437
-----------
29,904,898
Blue Chip Growth Trust:
Individual and Corporate Variable Life Type L Contracts 23.33 17.46 1,191,851 20,811,038
Corporate Variable Life Type K Contracts 12.48 9.34 357,111 3,337,098
Corporate Variable Life Type I Contracts -- 17.49 455,027 7,960,340
-----------
32,108,476
Capital Appreciation Trust:
Individual and Corporate Variable Life Type L Contracts -- 9.51 3,318 31,557
Capital Opportunities Trust:
Individual and Corporate Variable Life Type L Contracts -- 9.11 835 7,599
30
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
2000 2001
----------------------------------------------------------------
UNIT VALUE UNIT VALUE UNITS DOLLARS
----------------------------------------------------------------
Diversified Bond Trust:
Individual and Corporate Variable Life Type L Contracts 13.97 14.86 353,205 5,248,827
Corporate Variable Life Type K Contracts 13.61 14.48 71,666 1,037,938
----------
6,286,765
Dynamic Growth Trust:
Individual and Corporate Variable Life Type L Contracts 7.95 4.14 101,020 418,166
Corporate Variable Life Type K Contracts 7.95 4.15 18,131 75,157
----------
493,323
Emerging Small Company Trust:
Individual and Corporate Variable Life Type L Contracts 102.67 63.50 669,388 42,509,755
Corporate Variable Life Type K Contracts 15.12 9.36 283,758 2,655,315
Corporate Variable Life Type I Contracts -- 63.62 89,245 5,677,903
----------
50,842,973
Equity Income Trust:
Individual and Corporate Variable Life Type L Contracts 18.21 17.05 580,810 9,903,002
Corporate Variable Life Type K Contracts 13.40 12.55 28,765 361,091
Corporate Variable Life Type I Contracts -- 17.08 165,891 2,833,976
----------
13,098,069
Equity Index Trust:
Individual and Corporate Variable Life Type L Contracts 20.90 16.51 1,522,356 25,136,817
Corporate Variable Life Type K Contracts 11.67 9.23 232,102 2,142,000
Corporate Variable Life Type I Contracts -- 16.54 420,193 6,950,795
----------
34,229,612
Financial Services Trust:
Individual and Corporate Variable Life Type L Contracts -- 10.56 7,388 78,036
Fundamental Value Trust:
Individual and Corporate Variable Life Type L Contracts -- 10.55 20,889 220,415
31
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
2000 2001
----------------------------------------------------------------
UNIT VALUE UNIT VALUE UNITS DOLLARS
----------------------------------------------------------------
Global Bond Trust:
Individual and Corporate Variable Life Type L Contracts 13.18 13.54 29,404 398,087
Corporate Variable Life Type K Contracts 12.45 12.80 5,477 70,108
----------
468,195
Global Equity Trust:
Individual and Corporate Variable Life Type L Contracts 18.59 14.21 215,459 3,061,962
Corporate Variable Life Type K Contracts 14.13 10.81 13,772 148,822
----------
3,210,784
Growth Trust:
Individual and Corporate Variable Life Type L Contracts 18.08 12.37 783,876 9,697,772
Corporate Variable Life Type K Contracts 9.91 6.79 165,900 1,126,096
----------
10,823,868
Growth and Income Trust:
Individual and Corporate Variable Life Type L Contracts 21.11 16.96 1,018,955 17,279,387
Corporate Variable Life Type K Contracts 11.84 9.51 309,055 2,939,990
Corporate Variable Life Type I Contracts -- 16.99 249,312 4,235,492
----------
24,454,869
Health Services Trust:
Individual and Corporate Variable Life Type L Contracts -- 11.98 6,983 83,647
High Yield Trust:
Individual and Corporate Variable Life Type L Contracts 13.67 12.43 258,264 3,209,892
Corporate Variable Life Type K Contracts 11.51 10.47 55,514 581,348
Corporate Variable Life Type I Contracts -- 12.45 76,502 952,479
----------
4,743,719
Income and Value Trust:
Individual and Corporate Variable Life Type L Contracts 15.77 14.14 473,553 6,697,194
Corporate Variable Life Type K Contracts 13.21 11.86 137,023 1,624,652
----------
8,321,846
32
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
2000 2001
-----------------------------------------------------------------
UNIT VALUE UNIT VALUE UNITS DOLLARS
-----------------------------------------------------------------
International Index Trust:
Individual and Corporate Variable Life Type L Contracts 11.22 8.17 15,927 130,162
International Small Cap Trust:
Individual and Corporate Variable Life Type L Contracts 18.06 10.96 194,656 2,132,824
Corporate Variable Life Type K Contracts 11.28 6.85 62,371 427,239
----------
2,560,063
International Stock Trust:
Individual and Corporate Variable Life Type L Contracts 14.50 10.39 664,188 6,901,445
Corporate Variable Life Type K Contracts 11.81 8.47 26,967 228,393
Corporate Variable Life Type I Contracts -- 10.41 392,306 4,084,104
----------
11,213,942
International Value Trust:
Individual and Corporate Variable Life Type L Contracts 12.01 9.53 190,922 1,818,643
Corporate Variable Life Type K Contracts 12.42 9.86 6,150 60,645
----------
1,879,288
Internet Technologies Trust:
Individual and Corporate Variable Life Type L Contracts 7.00 2.74 21,754 59,708
Corporate Variable Life Type K Contracts 7.00 -- -- --
----------
59,708
Investment Quality Bond Trust:
Individual and Corporate Variable Life Type L Contracts 15.50 16.57 1,155,979 19,153,757
Corporate Variable Life Type K Contracts 13.48 14.42 32,160 463,634
----------
19,617,391
Large Cap Growth Trust:
Individual and Corporate Variable Life Type L Contracts 16.13 11.87 521,815 6,195,623
Corporate Variable Life Type K Contracts 11.49 8.47 72,396 612,910
----------
6,808,533
33
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
2000 2001
------------------------------------------------------------
UNIT VALUE UNIT VALUE UNITS DOLLARS
------------------------------------------------------------
Lifestyle Aggressive 1000 Trust:
Individual and Corporate Variable Life Type L Contracts 15.95 12.08 44,862 542,164
Lifestyle Balanced 640 Trust:
Individual and Corporate Variable Life Type L Contracts 16.78 14.84 365,146 5,417,718
Corporate Variable Life Type K Contracts 13.24 11.71 19,302 226,105
---------
5,643,823
Lifestyle Conservative 280 Trust:
Individual and Corporate Variable Life Type L Contracts 16.55 16.66 211,146 3,517,564
Corporate Variable Life Type K Contracts -- 13.55 910 12,327
---------
3,529,891
Lifestyle Growth 820 Trust:
Individual and Corporate Variable Life Type L Contracts 16.69 13.63 101,719 1,386,480
Corporate Variable Life Type K Contracts 12.85 10.50 7,201 75,621
---------
1,462,101
Lifestyle Moderate 460 Trust:
Individual and Corporate Variable Life Type L Contracts 16.70 15.75 62,697 987,514
Corporate Variable Life Type K Contracts 13.20 12.45 6,820 84,943
---------
1,072,457
Mid Cap Growth Trust:
Individual and Corporate Variable Life Type L Contracts -- 8.12 6,911 56,105
Mid Cap Index Trust:
Individual and Corporate Variable Life Type L Contracts 13.34 11.08 27,357 303,104
Corporate Variable Life Type K Contracts -- 11.09 6,345 70,402
---------
373,506
Mid Cap Opportunities Trust:
Individual and Corporate Variable Life Type L Contracts -- 8.44 583 4,923
34
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
2000 2001
----------------------------------------------------------------
UNIT VALUE UNIT VALUE UNITS DOLLARS
----------------------------------------------------------------
Mid Cap Stock Trust:
Individual and Corporate Variable Life Type L Contracts 11.97 8.78 72,290 634,844
Corporate Variable Life Type K Contracts -- 9.28 331 3,068
----------
637,912
Mid Cap Value Trust:
Individual and Corporate Variable Life Type L Contracts -- 11.53 9,693 111,759
Money Market Trust:
Individual and Corporate Variable Life Type L Contracts 18.33 18.80 1,687,029 31,722,189
Corporate Variable Life Type K Contracts 13.23 13.58 166,311 2,259,408
Corporate Variable Life Type I Contracts -- 18.84 218,973 4,125,432
----------
38,107,029
Overseas Trust:
Individual and Corporate Variable Life Type L Contracts 15.05 10.95 147,659 1,616,450
Corporate Variable Life Type K Contracts 11.62 8.46 185,765 1,571,861
----------
3,188,311
Pacific Rim Emerging Markets Trust:
Individual and Corporate Variable Life Type L Contracts 8.58 6.14 626,979 3,847,406
Corporate Variable Life Type K Contracts 10.47 7.50 27,826 208,609
----------
4,056,015
Quantitative Equity Trust:
Individual and Corporate Variable Life Type L Contracts 66.50 45.77 653,926 29,931,661
Corporate Variable Life Type K Contracts 13.81 9.52 52,285 497,532
----------
30,429,193
35
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
2000 2001
-----------------------------------------------------------------
UNIT VALUE UNIT VALUE UNITS DOLLARS
-----------------------------------------------------------------
Real Estate Securities Trust:
Individual and Corporate Variable Life Type L Contracts 39.79 39.58 417,993 16,543,721
Corporate Variable Life Type K Contracts 15.59 15.52 10,599 164,518
Corporate Variable Life Type I Contracts -- 39.66 47,772 1,894,390
----------
18,602,629
Science and Technology Trust:
Individual and Corporate Variable Life Type L Contracts 25.89 11.19 1,317,449 14,749,530
Corporate Variable Life Type K Contracts 9.84 4.26 978,909 4,168,261
Corporate Variable Life Type I Contracts -- 11.22 345,370 3,873,518
----------
22,791,309
Small Cap Index Trust:
Individual and Corporate Variable Life Type L Contracts 11.65 9.75 12,498 121,828
Small Company Blend Trust:
Individual and Corporate Variable Life Type L Contracts 12.76 9.77 229,061 2,238,785
Corporate Variable Life Type K Contracts 11.21 8.59 31,493 270,682
----------
2,509,467
Small Company Value Trust:
Individual and Corporate Variable Life Type L Contracts 9.59 8.82 379,413 3,346,231
Corporate Variable Life Type K Contracts 14.19 13.06 7,965 104,010
Corporate Variable Life Type I Contracts -- 8.83 51,743 457,162
----------
3,907,403
Strategic Bond Trust:
Individual and Corporate Variable Life Type L Contracts 14.79 15.49 132,026 2,044,221
Corporate Variable Life Type K Contracts -- 14.04 5,163 72,509
----------
2,116,730
Strategic Growth Trust:
Individual and Corporate Variable Life Type L Contracts -- 9.21 14,548 133,922
36
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
2000 2001
----------------------------------------------------------
UNIT VALUE UNIT VALUE UNITS DOLLARS
----------------------------------------------------------
Strategic Opportunities Trust:
Individual and Corporate Variable Life Type L Contracts 17.19 12.32 681,216 8,389,729
Individual Variable Life Type K Contracts 12.78 9.17 100,414 920,368
----------
9,310,097
Tactical Allocation Trust:
Individual and Corporate Variable Life Type L Contracts -- 9.42 484 4,557
Telecommunications Trust:
Individual and Corporate Variable Life Type L Contracts -- 6.60 3,207 21,173
Total Return Trust:
Individual and Corporate Variable Life Type L Contracts 13.57 14.65 461,288 6,756,713
Corporate Variable Life Type K Contracts 13.60 14.69 436,546 6,412,625
Corporate Variable Life Type I Contracts -- 14.67 143,516 2,105,947
----------
15,275,285
Total Stock Market Index Trust:
Individual and Corporate Variable Life Type L Contracts 11.20 8.80 285,410 2,512,141
Corporate Variable Life Type K Contracts -- 8.81 7,894 69,574
----------
2,581,715
U.S. Government Securities Trust:
Individual and Corporate Variable Life Type L Contracts 12.80 13.68 340,103 4,652,734
Corporate Variable Life Type K Contracts 13.64 14.59 194,990 2,845,169
----------
7,497,903
U.S. Large Cap Value Trust:
Individual and Corporate Variable Life Type L Contracts 13.06 10.80 166,624 1,800,270
Corporate Variable Life Type K Contracts 13.01 10.78 111,578 1,202,359
----------
3,002,629
37
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
2000 2001
---------------------------------------------------------------
UNIT VALUE UNIT VALUE UNITS DOLLARS
---------------------------------------------------------------
Utilities Trust:
Individual and Corporate Variable Life Type L Contracts -- 9.26 5,395 49,936
Value Trust:
Individual and Corporate Variable Life Type L Contracts 16.80 15.62 530,475 8,286,837
Corporate Variable Life Type K Contracts 14.99 13.95 57,037 795,633
------------
9,082,470
500 Index Trust:
Individual Variable Life Contracts 11.26 8.88 33,258 295,275
Corporate Variable Life Type L Contracts 11.26 8.90 6,466 57,534
Corporate Variable Life Type K Contracts 11.28 8.91 30,787 274,334
------------
627,143
------------
Total $462,282,155
============
7. RELATED PARTY TRANSACTIONS
ManEquity, Inc., a registered broker-dealer and indirect wholly owned subsidiary
of Manulife Financial, acts as the principal underwriter of the Contracts
pursuant to a Distribution Agreement with the Company. Registered
representatives of either ManEquity, Inc. or other broker-dealers having
distribution agreements with ManEquity, Inc. who are also authorized as variable
life insurance agents under applicable state insurance laws, sell the Contracts.
Registered representatives are compensated on a commission basis.
38
The Manufacturers Life Insurance Company of America
Separate Account Four
Notes to Financial Statements (continued)
7. RELATED PARTY TRANSACTIONS (CONTINUED)
The Company has a formal service agreement with its affiliates, Manulife
Financial and The Manufacturers Life Insurance Company (U.S.A.) ("Manulife
USA"), which can be terminated by either party upon two months notice. Under
this Agreement, the Company pays for legal, actuarial, investment and certain
other administrative services.
8. SUBSEQUENT EVENT
Subject to the approval of state and federal regulators and effective for
January 1, 2002, it is the intention to transfer all of the Company's Variable
business to Manulife USA via an assumption reinsurance agreement. As a
result, products currently sold and administered under the name of the Company
will be offered and administered under the name of Manulife USA
39
PROSPECTUSES FOR
VUL
VARIABLE UNIVERSAL LIFE
A FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE POLICY
Issued by
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
And for
MANUFACTURERS INVESTMENT TRUST
Printed May 1998
[MANULIFE FINANCIAL LOGO]
PROSPECTUS
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
SEPARATE ACCOUNT FOUR
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
This prospectus describes the flexible premium variable life insurance policy
(the "Policy") issued by The Manufacturers Life Insurance Company of America
("Manufacturers Life of America" or the "Company"), a stock life insurance
company that is an indirect wholly-owned subsidiary of The Manufacturers Life
Insurance Company ("Manufacturers Life"). The Policies are designed to provide
lifetime insurance protection together with flexibility as to the timing and
amount of premium payments, the investments underlying the Policy Value and the
amount of insurance coverage. This flexibility allows the policyowner to pay
premiums and adjust insurance coverage in light of his or her current financial
circumstances and insurance needs. The Policies provide for: (1) a Net Cash
Surrender Value that can be obtained by surrendering the Policy; (2) policy
loans; and (3) an insurance benefit payable at the life insured's death. As long
as a Policy remains in force, the death benefit will not be less than the
current face amount of the Policy.
Policy Value may be accumulated on a fixed basis or vary with the investment
performance of the sub-accounts of Manufacturers Life of America's Separate
Account Four (the "Separate Account") to which the policyowner allocates net
premiums. The assets of each sub-account will be used to purchase shares of a
particular investment portfolio ( a "Portfolio") of Manufacturers Investment
Trust. The accompanying prospectus for Manufacturers Investment Trust, and the
corresponding statement of additional information, describe the investment
objectives of the Portfolios in which net premiums may be invested. The
Portfolios available for allocation of net premiums are the following: Pacific
Rim Emerging Markets Trust, Science & Technology Trust, International Small Cap
Trust, Emerging Growth Trust, Pilgrim Baxter Growth Trust, Small/Mid Cap Trust,
International Stock Trust, Worldwide Growth Trust, Global Equity Trust, Small
Company Value Trust, Equity Trust, Growth Trust, Quantitative Equity Trust
(formerly the Common Stock Fund), Equity Index Trust, Blue Chip Growth Trust,
Real Estate Securities Trust, Value Trust, International Growth and Income
Trust, Growth and Income Trust, Equity-Income Trust, Balanced Trust, Aggressive
Asset Allocation Trust, Moderate Asset Allocation Trust, Conservative Asset
Allocation Trust, High Yield Trust, Strategic Bond Trust, Global Government Bond
Trust, Capital Growth Bond Trust, Investment Quality Bond Trust, U.S. Government
Securities Trust, Money Market Trust, Lifestyle Aggressive 1000 Trust, Lifestyle
Growth 820 Trust, Lifestyle Balanced 640 Trust, Lifestyle Moderate 460 Trust and
Lifestyle Conservative 280 Trust (collectively the "Manufacturers Trusts").
Other sub-accounts and Portfolios may be added in the future.
Prospective purchasers should note that it may not be advisable to purchase a
Policy as a replacement for existing insurance.
BECAUSE OF THE SUBSTANTIAL NATURE OF THE SURRENDER CHARGES, THE POLICY IS NOT
SUITABLE FOR SHORT-TERM INVESTMENT PURPOSES. A POLICYOWNER CONTEMPLATING
SURRENDER OF A POLICY SHOULD PAY SPECIAL ATTENTION TO THE REFUND RIGHTS
DESCRIBED IN THIS PROSPECTUS, WHICH ARE AVAILABLE ONLY DURING THE FIRST TWO
YEARS FOLLOWING ISSUANCE OF THE POLICY OR FOLLOWING AN INCREASE IN FACE AMOUNT.
ALSO, POLICYOWNERS SHOULD NOTE THAT THEIR POLICY COULD BE A MODIFIED ENDOWMENT
CONTRACT UNDER FEDERAL TAX LAW AND ANY POLICY LOAN OR SURRENDER MAY RESULT IN
ADVERSE TAX CONSEQUENCES AND A PENALTY.
The Securities and Exchange Commission maintains a Web site (http://www.sec.gov)
that contains material incorporated by reference and other information regarding
registrants that file electronically with the Commission.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT IS
VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS FOR MANUFACTURERS INVESTMENT
TRUST.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Manufacturers Life Insurance
Company of America
500 North Woodward Avenue,
Bloomfield Hills, Michigan 48304
Service Office:
200 Bloor Street East
Toronto, Ontario, Canada M4W 1E5
TELEPHONE: 1 (800) 827-4546
1 (800) VARILIN(E)
THE DATE OF THIS PROSPECTUS IS MAY 1, 1998.
PROSPECTUS CONTENTS
PAGE
----
DEFINITIONS................................................. 1
INTRODUCTION TO POLICIES.................................... 1
GENERAL INFORMATION ABOUT MANUFACTURERS LIFE OF AMERICA,
SEPARATE ACCOUNT FOUR, AND MANUFACTURERS INVESTMENT
TRUST..................................................... 9
Who Are Manufacturers Life of America And Manufacturers
Life?................................................. 9
What Is Manufacturers Life of America's Separate
Account Four?......................................... 9
What Is Manufacturers Investment Trust?................ 10
What Are The Investment Objectives and Certain Policies
Of The Portfolios?.................................... 11
DETAILED INFORMATION ABOUT THE POLICIES..................... 15
PREMIUM PROVISIONS........................................ 15
What Are The Requirements And Procedures For Issuance
Of A Policy?.......................................... 15
What Limitations Apply To Premium Amounts?............. 16
Is There A Death Benefit Guarantee?.................... 16
When Does A Policy Go Into Default?.................... 17
How Can A Terminated Policy Be Reinstated?............. 17
How May Net Premiums Be Invested?...................... 17
Is There A Short-Term Cancellation Right, Or "Free
Look"?................................................ 18
What Are The Conversion Privileges Of The Policy?...... 18
INSURANCE BENEFIT......................................... 18
What Is The Insurance Benefit?......................... 18
What Death Benefit Options Are Available?.............. 18
Can The Death Benefit Option Be Changed?............... 19
Can The Face Amount Of A Policy Be Changed?............ 20
POLICY VALUES............................................. 21
What Is The Policy Value And How Is It Determined?..... 21
Transfers Of Policy Value.............................. 22
What Are The Provisions Governing Policy Loans?........ 23
How May A Policyowner Obtain The Net Cash Surrender
Value?................................................ 25
CHARGES................................................... 26
What Deductions Are Made From Premiums?................ 26
What Are The Surrender Charges?........................ 27
What Are The Monthly Deductions?....................... 30
Are There Special Provisions For Group Or Sponsored
Arrangements?......................................... 31
Are There Special Provisions For Exchanges?............ 31
What Are The Risk Charges Assessed Against Separate
Account Assets?....................................... 32
Are There Other Relevant Charges?...................... 32
THE GENERAL ACCOUNT....................................... 34
What Is The General Account?........................... 34
OTHER PROVISIONS.......................................... 34
What Supplementary Benefits Are Available?............. 34
Under What Circumstances May Portfolio Shares Be
Substituted?.......................................... 34
What Are The Other General Policy Provisions?.......... 35
When Are Proceeds Paid?................................ 35
What Reports Will Be Sent To Policyowners?............. 35
OTHER MATTERS............................................. 36
What Is The Federal Tax Treatment Of The Policies?..... 36
Tax Status Of The Policy............................... 36
What Is The Tax Treatment Of Policy Benefits?.......... 37
What Are The Company's Tax Considerations?............. 39
PAGE
----
Who Sells The Policies And What Are The Sales
Commissions?.......................................... 40
What Responsibilities Has Manufacturers Life
Assumed?.............................................. 40
What Are The Voting Rights?............................ 40
Who Are The Directors And Officers Of Manufacturers
Life of America?...................................... 41
What State Regulations Apply?.......................... 42
Is There Any Litigation Pending?....................... 42
Where Can Further Information Be Found?................ 42
Legal Considerations................................... 43
Legal Matters.......................................... 43
Experts................................................ 43
Year 2000 Issues....................................... 43
Financial Statements................................... F-1
Appendix...............................................
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, THE PROSPECTUS OF MANUFACTURERS INVESTMENT TRUST, OR THE
STATEMENT OF ADDITIONAL INFORMATION OF MANUFACTURERS INVESTMENT TRUST.
You are urged to examine this prospectus carefully. The INTRODUCTION TO POLICIES
will briefly describe the Flexible Premium Variable Life Insurance Policy. More
detailed information will be found further in the prospectus.
DEFINITIONS
BUSINESS DAY -- any day that the net asset value of the underlying shares of a
sub-account of the Separate Account is determined.
CASH SURRENDER VALUE -- the Policy Value less the deferred sales charge, the
deferred underwriting charge and any outstanding monthly deductions due.
GUARANTEED INTEREST ACCOUNT -- that part of the Policy Value which reflects the
value the policyowner has in the general account of Manufacturers Life of
America.
INVESTMENT ACCOUNT -- that part of the Policy Value which reflects the value the
policyowner has in one of the sub-accounts of the Separate Account.
LOAN ACCOUNT -- that part of the Policy Value which reflects policy loans and
interest credited to the Policy Value in connection with such loans.
MODIFIED POLICY DEBT -- as of any date the Policy Debt plus the amount of
interest to be charged to the next policy anniversary, all discounted from the
next policy anniversary to such date at an annual rate of 4%.
NET CASH SURRENDER VALUE -- the Cash Surrender Value less the value in the Loan
Account.
NET POLICY VALUE -- the Policy Value less the value in the Loan Account.
POLICY DEBT -- as of any date the aggregate amount of policy loans, including
borrowed interest, less any loan repayments.
POLICY VALUE -- the sum of the values in the Loan Account, the Guaranteed
Interest Account and the Investment Accounts.
SERVICE OFFICE -- the office we designate to service the Policies, which is
shown on the cover page of this prospectus.
TARGET PREMIUM -- a premium amount used to measure the maximum deferred sales
charge under a Policy. The Target Premium for the initial face amount is set
forth in the Policy. The policyowner will be advised of the Target Premium for
any increase in face amount.
WITHDRAWAL TIER AMOUNT -- as of any date the product of the Net Cash Surrender
Value at the previous policy anniversary multiplied by 10%.
INTRODUCTION TO POLICIES
The following summary is intended to provide a general description of the most
important features of the Policy. It is not comprehensive and is qualified in
its entirety by the more detailed information contained in this prospectus.
Unless otherwise indicated or required by the context, the discussion throughout
this prospectus assumes that the Policy has not gone into default, there is no
outstanding Policy Debt and the death benefit is not determined by the corridor
percentage test (see "What Death Benefit Options are Available").
GENERAL. The Policy provides a death benefit in the event of the death of the
life insured. There are two death benefit options. The policyowner may change
death benefit options and may increase or decrease the face amount of the
Policy.
Premium payments may be made at any time and in any amount, subject to certain
limitations (see "What Limitations Apply to Premium Amounts").
After certain deductions, premiums will be allocated, according to the
policyowner's instructions, to one or more of the general account and the
sub-accounts of Manufacturers Life of America's Separate Account Four. Assets of
the sub-accounts of Separate Account Four are invested in shares of a particular
Portfolio of Manufacturers Investment Trust. Allocation instructions may be
changed at any time and transfers among the accounts may be made (see "Transfers
of Policy Value").
1
The Portfolios currently offered are the: Pacific Rim Emerging Markets Trust,
Science & Technology Trust, International Small Cap Trust, Emerging Growth
Trust, Pilgrim Baxter Growth Trust, Small/Mid Cap Trust, International Stock
Trust, Worldwide Growth Trust, Global Equity Trust, Small Company Value Trust,
Equity Trust, Growth Trust, Quantitative Equity Trust (formerly the Common Stock
Fund), Equity Index Trust, Blue Chip Growth Trust, Real Estate Securities Trust,
Value Trust, International Growth and Income Trust, Growth and Income Trust,
Equity-Income Trust, Balanced Trust, Aggressive Asset Allocation Trust, Moderate
Asset Allocation Trust, Conservative Asset Allocation Trust, High Yield Trust,
Strategic Bond Trust, Global Government Bond Trust, Capital Growth Bond Trust,
Investment Quality Bond Trust, U.S. Government Securities Trust, Money Market
Trust, Lifestyle Aggressive 1000 Trust, Lifestyle Growth 820 Trust, Lifestyle
Balanced 640 Trust, Lifestyle Moderate 460 Trust and Lifestyle Conservative 280
Trust (collectively the "Manufacturers Trusts"). Other sub-accounts and
Portfolios may be added in the future.
The Policy has a Policy Value reflecting premiums paid, certain charges for
expenses and cost of insurance, and the investment performance of the accounts
to which the policyowner has allocated premiums. The policyowner may obtain a
portion of the Policy Value by taking a policy loan or a partial withdrawal, or
by full surrender of the Policy.
DEATH BENEFIT
DEATH BENEFIT OPTIONS. The policyowner elects to have the Policy's death
benefit determined under one of two options:
- a death benefit equal to the face amount of the Policy, and
- a death benefit equal to the face amount of the Policy plus the Policy
Value.
Under either option, the death benefit may be increased to a multiple of the
Policy Value to satisfy the corridor percentage test under the definition of
life insurance in the Internal Revenue Code. (See DETAILED INFORMATION ABOUT THE
POLICIES; INSURANCE BENEFIT -- "What Is The Insurance Benefit?" and "What Death
Benefit Options Are Available?")
THE POLICYOWNER MAY CHANGE THE DEATH BENEFIT OPTION. A change in the death
benefit option may be requested after the Policy has been in force for two
years. A change in death benefit option will be effective on a policy
anniversary. (See DETAILED INFORMATION ABOUT THE POLICIES; INSURANCE BENEFIT --
"Can The Death Benefit Option Be Changed?")
THE POLICYOWNER MAY INCREASE THE FACE AMOUNT. After the Policy has been in
force for one year, an increase in the face amount of the Policy may be
requested once per policy year. An increase in the face amount is subject to
satisfactory evidence of insurability and will usually result in the Policy's
being subject to new surrender charges. (See DETAILED INFORMATION ABOUT THE
POLICIES; INSURANCE BENEFIT -- "Can The Face Amount Of A Policy Be Changed?")
THE POLICYOWNER MAY DECREASE THE FACE AMOUNT. A decrease in the face amount may
be requested after the Policy has been in force for one year, except during the
one-year period following any increase in face amount. In addition, during the
two-year period following an increase in face amount, the policyowner may choose
to decrease the increased face amount and have the deferred sales charge for the
increase reduced by the refund of any excess sales load attributable to the
increase. A decrease in face amount will be effective only on a policy
anniversary and may result in certain surrender charges being deducted from the
Policy Value. (See DETAILED INFORMATION ABOUT THE POLICIES; INSURANCE BENEFIT --
"Can The Face Amount Of A Policy Be Changed?")
PREMIUM PAYMENTS ARE FLEXIBLE
The policyowner may pay premiums at any time and in any amount, subject to
certain limitations. (See DETAILED INFORMATION ABOUT THE POLICIES; PREMIUM
PROVISIONS -- "What Are The Requirements And Procedures For Issuance Of A
Policy?" and "What Limitations Apply To Premium Amounts?")
2
In the first two policy years the policyowner must pay a minimum premium to keep
the Policy in force. (See DETAILED INFORMATION ABOUT THE POLICIES; PREMIUM
PROVISIONS -- "What Limitations Apply To Premium Amounts?" and "Is There A Death
Benefit Guarantee?")
After the second policy year there is no minimum premium required; however, by
complying with the minimum premium schedule for the Policy, the policyowner can
ensure the Policy will not go into default prior to the life insured's reaching
age 70. (See DETAILED INFORMATION ABOUT THE POLICIES; PREMIUM PROVISIONS -- "Is
There A Death Benefit Guarantee?")
Certain maximum premium limitations apply to the Policy, ensuring the Policy
qualifies as life insurance under rules defined in the Internal Revenue Code.
(See DETAILED INFORMATION ABOUT THE POLICIES; PREMIUM PROVISIONS -- "What
Limitations Apply To Premium Amounts?")
SUMMARY OF CHARGES AND DEDUCTIONS
Charges under the Policy are assessed as:
(1) Deductions from premiums
- 3% sales charge
- 2% state premium tax (except for Oregon where no premium tax is
deducted)
(2) Surrender charges upon surrender, partial withdrawal, decrease in face
amount or lapse
- deferred underwriting charge of $2-$6 for each $1,000 of face amount
- deferred sales charge of up to 47% of two Target Premiums
(3) Monthly Deductions
- administration charge of $6
- cost of insurance charge (including $1 per $1,000 of face amount for
policies less than $25,000)
- supplementary benefits charge
(4) Certain Transfers
- a Dollar Cost Averaging transfer charge of $5 when Policy Value does not
exceed $15,000
- a charge of $25 per transfer for each transfer in excess of 12 in a
policy year
(5) Separate Account Charges
- mortality and expense risk charge of .65% per annum assessed daily
against the value of the Separate Account assets
(6) Other Charges
Investment management fees paid by Manufacturers Investment Trust (excluding the
Lifestyle Trusts) range from .25% to 1.10% of the assets of the Portfolios.
Maximum expenses range from .15% to .75% of the assets of the Portfolios
(excluding the Lifestyle Trusts). Because each Lifestyle Trust will invest in
shares of Underlying Portfolios (all of the Portfolios except the Lifestyle
Trusts) each will bear its pro rata share of the fees and expenses incurred by
the Underlying Portfolios.
For a complete discussion of charges and deductions see the heading Charges And
Deductions in this Introduction and the references therein.
3
INVESTMENT OPTIONS
After deductions for sales charges of 3% and state premium taxes of 2%, net
premiums will be allocated, according to the policyowner's instructions, to any
combination of the general account or one or more of the sub-accounts of
Manufacturers Life of America's Separate Account Four.
Each of the sub-accounts of Separate Account Four invests its assets in the
shares of one of the following:
- - - Pacific Rim Emerging Markets Trust
- - - Science & Technology Trust
- - - International Small Cap Trust
- - - Emerging Growth Trust
- - - Pilgrim Baxter Growth Trust
- - - Small/Mid Cap Trust
- - - International Stock Trust
- - - Worldwide Growth Trust
- - - Global Equity Trust
- - - Small Company Value Trust
- - - Equity Trust
- - - Growth Trust
- - - Quantitative Equity Trust
- - - Equity Index Trust
- - - Blue Chip Growth Trust
- - - Real Estate Securities Trust
- - - Value Trust
- - - International Growth and Income Trust
- - - Growth and Income Trust
- - - Equity-Income Trust
- - - Balanced Trust
- - - Aggressive Asset Allocation Trust
- - - Moderate Asset Allocation Trust
- - - Conservative Asset Allocation Trust
- - - High Yield Trust
- - - Strategic Bond Trust
- - - Global Government Bond Trust
- - - Capital Growth Bond Trust
- - - Investment Quality Bond Trust
- - - U.S. Government Securities Trust
- - - Money Market Trust
- - - Lifestyle Aggressive 1000 Trust
- - - Lifestyle Growth 820 Trust
- - - Lifestyle Balanced 640 Trust
- - - Lifestyle Moderate 460 Trust
- - - Lifestyle Conservative 280 Trust
The policyowner may change the allocation of net premiums among the general
account and the sub-accounts at any time. (See GENERAL INFORMATION ABOUT
MANUFACTURERS LIFE OF AMERICA, SEPARATE ACCOUNT FOUR, AND MANUFACTURERS
INVESTMENT TRUST AND DETAILED INFORMATION ABOUT THE POLICIES; Premium
Provisions -- "How May Net Premiums Be Invested?" and Policy Values -- "What Is
The Policy Value And How Is It Determined?")
THE POLICY VALUE
The Policy has a Policy Value which reflects the following: premium payments
made; deduction of charges described under "Charges And Deductions" below;
investment performance of the sub-accounts to which amounts have been allocated;
and interest credited by the Company to amounts allocated to the general
account.
The Policy Value is the sum of the values in the Investment Accounts, the
Guaranteed Interest Account and the Loan Account.
INVESTMENT ACCOUNT. An Investment Account is established under the Policy for
each sub-account of the Separate Account to which net premiums or transfer
amounts have been allocated. An Investment Account measures the interest of the
Policy in the corresponding sub-account.
The value of each Investment Account under the Policy varies each Business Day
and reflects the investment performance of the Portfolio shares held in the
corresponding sub-account.
(See DETAILED INFORMATION ABOUT THE POLICIES; Policy Values -- "What Is The
Policy Value And How Is It Determined?")
GUARANTEED INTEREST ACCOUNT. The Guaranteed Interest Account consists of that
portion of the Policy Value based on net premiums allocated to and amounts
transferred to the general account of the Company.
4
Manufacturers Life of America credits interest on amounts in the Guaranteed
Interest Account at an effective annual rate guaranteed to be at least 4%. (See
DETAILED INFORMATION ABOUT THE POLICIES; The General Account -- "What Is The
General Account?")
LOAN ACCOUNT. When a policy loan is made, Manufacturers Life of America will
establish a Loan Account under the Policy and will transfer an amount from the
Investment Accounts and the Guaranteed Interest Account to the Loan Account.
The Company will credit interest to amounts in the Loan Account at an effective
annual rate of at least 4%. The actual rate credited will be the rate charged on
policy loans less an interest rate differential, which is currently 1.25%.
Under certain conditions the Company will credit interest to a portion of the
amounts in the Loan Account at an effective annual rate equal to the rate
charged on policy loans less 0.50%. (See DETAILED INFORMATION ABOUT THE
POLICIES; Policy Values -- "What Are The Provisions Governing Policy Loans?")
TRANSFERS ARE PERMITTED. A policyowner may change the extent to which the
Policy Value is based upon any specific sub-account of Separate Account Four or
the Company's general account by requesting a transfer of a portion or all
amounts in one account to another account.
Twelve transfers per policy year may be made. Excess transfers will be permitted
at a cost of $25 per transfer. All transfer requests received at the same time
are treated as a single transfer request. In addition transfers may be effected
through the Dollar Cost Averaging or Asset Allocation Balancer transfer
programs.
Certain restrictions may apply to transfer requests. (See DETAILED INFORMATION
ABOUT THE POLICIES; Policy Values -- "What Is The Policy Value And How Is It
Determined?" (Transfer of Policy Value))
USING THE POLICY VALUE
BORROWING AGAINST THE POLICY VALUE. After the first policy anniversary, the
policyowner may borrow against the Policy Value. The minimum loan amount is
$500.
Loan interest will be charged either on a fixed basis or on a variable basis.
Interest on a fixed basis will be at an effective annual rate of 8%. Interest on
a variable basis will be at an effective annual rate equal to the greater of 6%
or the Moody's Corporate Bond Yield Average Monthly Average Corporates. (See
DETAILED INFORMATION ABOUT THE POLICIES; Policy Values "What Are The Provisions
Governing Policy Loans?")
A POLICYOWNER MAY MAKE A PARTIAL WITHDRAWAL OF THE POLICY VALUE. After a Policy
has been in force for two years the policyowner may make a partial withdrawal of
the Policy Value. The minimum withdrawal amount is $500. The policyowner may
specify that the withdrawal is to be made from a specific Investment Account or
the Guaranteed Interest Account.
A partial withdrawal may result in a reduction in the face amount of the Policy.
A partial withdrawal may also result in the assessment of a portion of the
surrender charges to which the Policy is subject. (See DETAILED INFORMATION
ABOUT THE POLICIES; Policy Values -- "How May A Policyowner Obtain The Net Cash
Surrender Value?" and Charges -- "What Are The Surrender Charges?")
THE POLICY MAY BE SURRENDERED FOR ITS NET CASH SURRENDER VALUE. A Policy may be
surrendered for its Net Cash Surrender Value at any time while the life insured
is living.
The Net Cash Surrender Value is equal to the Policy Value less surrender charges
and outstanding monthly deductions due minus the value of the Loan Account.
Surrender of a Policy within 15 years after policy issue or following an
increase in the face amount will usually result in assessment of surrender
charges. (See DETAILED INFORMATION ABOUT THE POLICIES; Policy Values -- "How May
A Policyowner Obtain The Net Cash Surrender Value?" and Charges -- "What Are The
Surrender Charges?")
5
CHARGES AND DEDUCTIONS
CHARGES MADE FROM PREMIUM PAYMENTS. Two deductions are made when premiums are
paid:
- a sales charge of 3% of premium, and
- a charge of 2% for state premium taxes (except for Oregon where no
premium tax is deducted).
The 3% sales charge and the deferred sales charge described below compensate the
Company for some of the expenses of selling and distributing the Policies. (See
DETAILED INFORMATION ABOUT THE POLICIES; Charges -- "What Deductions Are Made
From Premiums?") A portion of the sales charge and the deferred sales charge may
be subject to refund under certain circumstances. (See DETAILED INFORMATION
ABOUT THE POLICIES; Charges -- "What Are The Surrender Charges?"; Refund Of
Excess Sales Charges)
CHARGES ON SURRENDER. Manufacturers Life of America will usually deduct a
deferred underwriting charge and a deferred sales charge if, during the 15 years
following Policy issue or an increase in the face amount:
- the Policy is surrendered for its Net Cash Surrender Value,
- a partial withdrawal is made in excess of the Withdrawal Tier Amount,
- a decrease in face amount is requested, or
- the Policy lapses.
The deferred underwriting charge ranges from $2.00 to $6.00 for each $1,000 of
face amount depending on the age of the life insured. The charge is guaranteed
not to exceed $1,000 for each level of coverage.
The maximum deferred sales charge is 47% of premiums paid up to two Target
Premiums.
The full amount of charges will be in effect for up to five years following
issue of the Policy. Beginning no later than the sixth year these charges grade
downward each month over a 10-year period. In the event of a face amount
increase, the charges applicable to the increase, which will be at the same
rates that would apply if a Policy were issued to the life insured at his or her
then attained age, will be in effect for up to five years following such
increase and thereafter grade downward over a 10-year period. (See DETAILED
INFORMATION ABOUT THE POLICIES; Charges -- "What Are The Surrender Charges?")
SALES CHARGE REFUND. If the Policy is surrendered at any time during the first
two years following issuance or following an increase in face amount or if the
increase is cancelled during the two-year period following the increase or face
amount decreased during the second year after issuance or after increase in face
amount, Manufacturers Life of America will refund the difference, if any,
between total sales charges deducted and the maximum sales charge allowable with
respect to the Policy or the increase, as applicable. (See DETAILED INFORMATION
ABOUT THE POLICIES; Charges -- "What Are The Surrender Charges?") If the Policy
is surrendered after such two-year period, no refund will be available and the
full amount of the surrender charge will apply.
MONTHLY CHARGES. At the beginning of each month Manufacturers Life of America
deducts from the Policy Value:
- an administration charge of $6,
- a charge for the cost of insurance (plus, if applicable, $1 per $1,000
of face amount for policies with a face amount of less than $25,000),
and
- a charge for any supplementary benefits added to the Policy.
The cost of insurance charge varies based on the net amount at risk under the
Policy and the applicable cost of insurance rate. Cost of insurance rates vary
according to age, amount of coverage, duration of coverage, and sex and risk
class of the life insured. The maximum cost of insurance rate that can be
charged is guaranteed not to exceed the 1980 Commissioners Standard Ordinary
Smoker/Nonsmoker Mortality Tables. Currently, the cost of insurance rates
assessed under the Policies are less than the maximum rates that can be charged.
6
The cost of insurance charge will reflect any extra charges for additional
ratings as indicated in the Policy. (See DETAILED INFORMATION ABOUT THE
POLICIES; Charges -- "What Are The Monthly Deductions?")
CHARGES FOR CERTAIN TRANSFERS. Charges will be imposed on certain transfers of
Policy Values, including a $25 charge for each transfer in excess of twelve in a
policy year, and a $5 charge for each Dollar Cost Averaging transfer when Policy
Value does not exceed $15,000. See Policy Values "Transfers of Policy Value."
CHARGES ASSESSED AGAINST ASSETS OF THE SEPARATE ACCOUNT. Manufacturers Life of
America makes a daily charge to the Separate Account at an annual rate of .65%
of the value of the Separate Account assets for the mortality and expense risks
it assumes under the Policies. (See DETAILED INFORMATION ABOUT THE POLICIES;
Charges -- "What Are The Risk Charges Assessed Against Separate Account
Assets?")
OTHER CHARGES. Manufacturers Life of America reserves the right to charge or
establish a provision for any federal, state or local taxes that may be
attributable to the Separate Account or the operations of the Company with
respect to the Policies. No such charge is currently made.
Certain expenses are, or will be, assessed against the assets of Portfolios, as
follows:
INVESTMENT MANAGEMENT FEES AND EXPENSES
Investment management fees paid by Manufacturers Investment Trust (excluding the
Lifestyle Trusts) range from .25% to 1.10% of the assets of the Portfolios.
Maximum expenses range from .15% to .75% of the assets of the Portfolios
(excluding the Lifestyle Trusts). Because each Lifestyle Trust will invest in
shares of Underlying Portfolios each will bear its pro rata share of the fees
and expenses incurred by the Underlying Portfolios. See DETAILED INFORMATION
ABOUT THE POLICIES; Charges and Deductions -- "Other Charges."
SUPPLEMENTARY BENEFITS
A policyowner may choose to include certain supplementary benefits to the
Policy. These supplementary benefits include life insurance for additional
insured persons and a change of life insured option (corporate-owned Policies
only) for Policies purchased before October 1, 1996 and a change of life insured
option and flexible term insurance option for Policies purchased on or after
October 1, 1996 and, if permitted by applicable state law, an accelerated death
benefit. The cost of any supplementary benefits will be deducted from the Policy
Value monthly. (See DETAILED INFORMATION ABOUT THE POLICIES; Other Provisions --
"What Supplementary Benefits Are Available?")
DEFAULT
The Policy will go into default (a) during the first two policy years, if the
policyowner does not pay the required minimum premiums, or (b) after the second
policy anniversary, if at the beginning of any policy month the Policy's Net
Cash Surrender Value would go below zero after deducting the monthly charges
then due. The Company will notify the policyowner in the event the Policy goes
into default, and will allow a grace period in which the policyowner may make a
premium payment sufficient to bring the Policy out of default. If the required
premium is not paid during the grace period the Policy will terminate. (See
DETAILED INFORMATION ABOUT THE POLICIES; Premium Provisions -- "When Does A
Policy Go Into Default?")
DEATH BENEFIT GUARANTEE
As long as the premiums paid by the policyowner at least equal the minimum
premiums for the Policy, the Company guarantees that the Policy will not go into
default prior to the life insured's age 70, regardless of the investment
performance of the Funds underlying the Policy Value. (See DETAILED INFORMATION
ABOUT THE POLICIES; Premium Provisions -- "Is There A Death Benefit Guarantee?")
7
REINSTATEMENT
A terminated policy may be reinstated by the policyowner within the five-year
period following the date of termination, providing certain conditions are met.
(See DETAILED INFORMATION ABOUT THE POLICIES; Premium Provisions -- "How Can A
Terminated Policy Be Reinstated?")
FREE LOOK
A Policy may be returned for a full refund within the later of:
- 10 days after it is received
- 45 days after the application for the Policy is signed
- 10 days after Manufacturers Life of America mails or delivers a notice
of this right of withdrawal.
If a policyowner requests an increase in face amount which results in new
surrender charges, these rights to cancel the increase will also apply. (See
DETAILED INFORMATION ABOUT THE POLICIES; Premium Provisions -- "Is There A
Short-Term Cancellation Right, Or 'Free Look?")
CONVERSION
At any time, the policyowner may convert the Policy to a fixed benefit Policy
with a Policy Value, other values based on the Policy Value and a death benefit
which is determinable and guaranteed. The conversion is effected by transferring
the Policy Value in all of the Investment Accounts to the Guaranteed Interest
Account. (See DETAILED INFORMATION ABOUT THE POLICIES; Premium
Provisions -- "What Are The Conversion Privileges Of The Policy?")
FEDERAL TAX MATTERS
Manufacturers Life of America believes that a Policy issued on a standard risk
class basis should meet the definition of a life insurance contract as set forth
in Section 7702 of the Internal Revenue Code of 1986. With respect to a Policy
issued on a substandard basis, there is less guidance available to determine if
such a Policy would satisfy the Section 7702 definition of a life insurance
contract, particularly if the policyowner pays the full amount of premiums
permitted under such a Policy. Assuming that a Policy qualifies as a life
insurance contract for federal income tax payments, a policyowner should not be
deemed to be in constructive receipt of Policy Value under a Policy until there
is a distribution from the Policy. Moreover, death benefits payable under a
Policy should be completely excludable from the gross income of the beneficiary.
As a result, the beneficiary generally should not be taxed on these proceeds.
See Other Matters "What Is The Federal Tax Treatment Of The Policies?" (Tax
Status Of The Policy).
Under certain circumstances, a Policy may be treated as a "Modified Endowment
Contract." If the Policy is a Modified Endowment Contract, then all pre-death
distributions, including Policy loans, will be treated first as a distribution
of taxable income and then as a return of investment in the Policy. In addition,
prior to age 59 1/2 any such distributions generally will be subject to a 10%
penalty tax. See Other Matters "What Is The Tax Treatment Of Policy Benefits?"
(Tax Treatment Of Policy Benefits).
If the Policy is not a Modified Endowment Contract, distributions generally will
be treated first as a return of investment in the Policy and then a disbursement
of taxable income. Moreover, loans will not be treated as distributions. A
policyowner considering the use of systematic policy loans as one element of a
comprehensive retirement income plan should consult his or her personal tax
adviser regarding the potential tax consequences if such loans were to so reduce
Policy Value that the Policy would lapse, absent additional payments. The
premium payment necessary to avert lapse would increase with the age of the
insured. Finally, neither distributions nor loans under a Policy that is not a
Modified Endowment Contract are subject to the 10% penalty tax. See Other
Matters "What Is The Tax Treatment Of Policy Benefits?" (Distributions From
Policies Not Classified As Modified Endowment Contracts).
8
The United States Congress has in the past considered, and in the future may
consider legislation that, if enacted, could change the tax treatment of life
insurance policies. In addition, the Treasury Department may amend existing
regulations, or adopt new interpretations of existing laws, state tax laws or,
if the policyowner is not a United States resident, foreign tax laws, which may
affect the tax consequences to him or her, the lives insured or the beneficiary.
These laws may change from time to time without notice and, as a result, the tax
consequences may be altered. There is no way of predicting whether, when or in
what form any such change would be adopted. Any such change could have a
retroactive effect regardless of the date of enactment. The Company suggests
that a tax adviser be consulted.
ESTATE AND GENERATION-SKIPPING TAXES
The proceeds of this life insurance policy may be taxable under Estate and
Generation-Skipping Tax provisions of the Internal Revenue Code. The policyowner
should consult his or her tax adviser regarding these taxes.
GENERAL INFORMATION ABOUT MANUFACTURERS LIFE OF AMERICA, SEPARATE ACCOUNT FOUR,
AND MANUFACTURERS INVESTMENT TRUST
WHO ARE MANUFACTURERS LIFE OF AMERICA AND MANUFACTURERS LIFE?
Manufacturers Life of America, a wholly-owned subsidiary of The Manufacturers
Life Insurance Company (U.S.A.), ("Manufacturers USA") is a stock life insurance
company organized under the laws of Pennsylvania on April 11, 1977 and
redomesticated under the laws of Michigan on December 9, 1992. It is a licensed
life insurance company in the District of Columbia and all states of the United
States except New York. Manufacturers USA, a life insurance company organized in
1955 under the laws of Maine and redomesticated under the laws of Michigan on
December 30, 1992, is a wholly-owned subsidiary of Manulife Reinsurance
Corporation (U.S.A.), a life insurance company organized in 1983 under the laws
of Michigan which in turn is a wholly-owned subsidiary of Manufacturers Life, a
mutual life insurance company based in Toronto, Canada. Manufacturers Life and
its subsidiaries, together, constitute one of the largest life insurance
companies in North America and rank among the 60 largest life insurers in the
world as measured by assets. Manufacturers Life and Manufacturers Life of
America have received the following ratings from independent rating agencies:
Standard and Poor's Insurance Rating Service -- AA+ (for claims paying ability),
A.M. Best Company -- A++ (for financial strength), Duff & Phelps Credit Rating
Co. -- AAA (for claims paying ability), and Moody's Investors Service, Inc. --
Aa3 (for financial strength). However, neither Manufacturers Life of America nor
Manufacturers Life guarantees the investment performance of the Separate
Account.
WHAT IS MANUFACTURERS LIFE OF AMERICA'S SEPARATE ACCOUNT FOUR?
Manufacturers Life of America established its Separate Account Four on March 17,
1987 as a separate account under Pennsylvania law. Since December 9, 1992, it
has been operated under Michigan law. The Separate Account holds assets that are
segregated from all of Manufacturers Life of America's other assets. The
Separate Account is currently used only to support variable life insurance
policies.
Manufacturers Life of America is the legal owner of the assets in the Separate
Account. The income, gains and losses of the Separate Account, whether or not
realized, are, in accordance with applicable contracts, credited to or charged
against the Account without regard to the other income, gains or losses of
Manufacturers Life of America. Manufacturers Life of America will at all times
maintain assets in the Separate Account with a total market value at least equal
to the reserves and other liabilities relating to variable benefits under all
policies participating in the Separate Account. These assets may not be charged
with liabilities which arise from any other business Manufacturers Life of
America conducts. However, all obligations under the variable life insurance
policies are general corporate obligations of Manufacturers Life of America.
9
The Separate Account is registered with the Securities and Exchange Commission
("S.E.C.") under the Investment Company Act of 1940 ("1940 Act") as a unit
investment trust. A unit investment trust is a type of investment company which
invests its assets in specified securities, such as the shares of one or more
investment companies, rather than in a portfolio of unspecified securities.
Registration under the 1940 Act does not involve any supervision by the S.E.C.
of the management or investment policies or practices of the Separate Account.
For state law purposes the Separate Account is treated as a part or division of
Manufacturers Life of America.
WHAT IS MANUFACTURERS INVESTMENT TRUST?
Each sub-account of the Separate Account will purchase shares only of a
particular Portfolio of Manufacturers Investment Trust. Manufacturers Investment
Trust is registered under the 1940 Act as an open-end management investment
company. The Separate Account will purchase and redeem shares of the
Manufacturers Trust at net asset value. Shares will be redeemed to the extent
necessary for Manufacturers Life of America to provide benefits under the
Policies, to transfer assets from one sub-account to another or to the general
account as requested by 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.
Manufacturers Investment Trust shares are issued to fund benefits under both
variable annuity contracts and variable life insurance policies issued by the
Company or life insurance companies affiliated with the Company. Manufacturers
Life of America will also purchase shares through its general account for
certain limited purposes including initial Portfolio seed money. For a
description of the procedures for handling potential conflicts of interest
arising from the funding of such benefits see the accompanying Manufacturers
Investment Trust prospectus.
Manufacturers Investment Trust receives investment advisory services from
Manufacturers Securities Services, LLC ("MSS"). MSS is a registered investment
adviser under the Investment Advisers Act of 1940. Manufacturers Investment
Trust also employs subadvisers. The following subadvisers provide investment
subadvisory services to the indicated portfolios:
PORTFOLIO SUBADVISER
--------- ----------
AGGRESSIVE GROWTH PORTFOLIOS
Pacific Rim Emerging Markets Trust Manufacturers Adviser Corporation*
Science & Technology Trust T. Rowe Price Associates, Inc.
International Small Cap Trust Founders Asset Management, Inc.
Emerging Growth Trust Warburg, Pincus Counsellors, Inc.
Pilgrim Baxter Growth Trust Pilgrim Baxter & Associates, Ltd.
Small/Mid Cap Trust Fred Alger Management, Inc.
International Stock Trust Rowe Price-Fleming International, Inc.
GROWTH PORTFOLIOS
Worldwide Growth Trust Founders Asset Management, Inc.
Global Equity Trust Morgan Stanley Asset Management Inc.
Small Company Value Trust Rosenberg Institutional Equity Management
Equity Trust Fidelity Management Trust Company
Growth Trust Founders Asset Management, Inc.
Quantitative Equity Trust Manufacturers Adviser Corporation*
(formerly Common Stock Fund)
Equity Index Trust Manufacturers Adviser Corporation*
Blue Chip Growth Trust T. Rowe Price Associates, Inc.
Real Estate Securities Trust Manufacturers Adviser Corporation*
10
PORTFOLIO SUBADVISER
--------- ----------
GROWTH & INCOME PORTFOLIOS
Value Trust Miller Anderson & Sherrerd, LLP
International Growth and Income Trust J.P. Morgan Investment Management Inc.
Growth and Income Trust Wellington Management Company
Equity-Income Trust T. Rowe Price Associates, Inc.
BALANCED PORTFOLIOS
Balanced Trust Founders Asset Management, Inc.
Aggressive Asset Allocation Trust Fidelity Management Trust Company
Moderate Asset Allocation Trust Fidelity Management Trust Company
Conservative Asset Allocation Trust Fidelity Management Trust Company
BOND PORTFOLIOS
High Yield Trust Miller Anderson & Sherrerd, LLP
Strategic Bond Trust Salomon Brothers Asset Management Inc
Global Government Bond Trust Oechsle International Advisors, L.P.
Capital Growth Bond Trust Manufacturers Adviser Corporation*
Investment Quality Bond Trust Wellington Management Company
U.S. Government Securities Trust Salomon Brothers Asset Management Inc
MONEY MARKET PORTFOLIOS
Money Market Trust Manufacturers Adviser Corporation*
LIFESTYLE PORTFOLIOS
Lifestyle Aggressive 1000 Trust Manufacturers Adviser Corporation*
Lifestyle Growth 820 Trust Manufacturers Adviser Corporation*
Lifestyle Balanced 640 Trust Manufacturers Adviser Corporation*
Lifestyle Moderate 460 Trust Manufacturers Adviser Corporation*
Lifestyle Conservative 280 Trust Manufacturers Adviser Corporation*
* Manufacturers Adviser Corporation is an indirect wholly-owned subsidiary of
Manufacturers Life.
WHAT ARE THE INVESTMENT OBJECTIVES AND CERTAIN POLICIES OF THE PORTFOLIOS?
The investment objectives and certain policies of the Portfolios currently
available to policyowners through corresponding sub-accounts are set forth
below. There is, of course, no assurance that these objectives will be met.
AGGRESSIVE GROWTH PORTFOLIOS
PACIFIC RIM EMERGING MARKETS TRUST. The investment objective of the Pacific Rim
Emerging Markets Trust is to achieve long-term growth of capital. Manufacturers
Adviser Corporation ("MAC") manages the Pacific Rim Emerging Markets Trust and
seeks to achieve this investment objective by investing in a diversified
portfolio that is comprised primarily of common stocks and equity-related
securities of corporations domiciled in countries of the Pacific Rim region.
SCIENCE & TECHNOLOGY TRUST. The investment objective of the Science &
Technology Trust is long-term growth of capital. Current income is incidental to
the portfolio's objective. T. Rowe Price Associates, Inc. manages the Science &
Technology Trust.
INTERNATIONAL SMALL CAP TRUST. The investment objective of the International
Small Cap Trust is to seek long-term capital appreciation. Founders Asset
Management, Inc. ("Founders") manages the International Small Cap Trust and will
pursue this objective by investing primarily in securities issued by foreign
companies which have total market capitalizations or annual revenues of $1
billion or less. These securities may represent companies in both established
and emerging economies throughout the world.
11
EMERGING GROWTH TRUST. The investment objective of the Emerging Growth Trust is
maximum capital appreciation. Warburg, Pincus Counsellors, Inc. manages the
Emerging Growth Trust and will pursue this objective by investing primarily in a
portfolio of equity securities of domestic companies. The Emerging Growth Trust
ordinarily will invest at least 65% of its total assets in common stocks or
warrants of emerging growth companies that represent attractive opportunities
for maximum capital appreciation.
PILGRIM BAXTER GROWTH TRUST. The investment objective of the Pilgrim Baxter
Growth Trust is capital appreciation. Pilgrim Baxter & Associates, Ltd. ("PBHG")
manages the Pilgrim Baxter Growth Trust and seeks to achieve its objective by
investing in companies believed by PBHG to have an outlook for strong earnings
growth and the potential for significant capital appreciation.
SMALL/MID CAP TRUST. The investment objective of the Small/Mid Cap Trust is to
seek long term capital appreciation. Fred Alger Management, Inc. manages the
Small/Mid Cap Trust and will pursue this objective by investing at least 65% of
the portfolio's total assets (except during temporary defensive periods) in
small/mid cap equity securities.
INTERNATIONAL STOCK TRUST. The investment objective of the International Stock
Trust is to achieve long-term growth of capital. Rowe Price-Fleming
International, Inc. manages the International Stock Trust and seeks to obtain
this objective by investing primarily in common stocks of established, non-U.S.
companies.
GROWTH PORTFOLIOS
WORLDWIDE GROWTH TRUST. The investment objective of the Worldwide Growth Trust
is long-term growth of capital. Founders manages the Worldwide Growth Trust and
seeks to attain this objective by normally investing at least 65% of its total
assets in equity securities of growth companies in a variety of markets
throughout the world.
GLOBAL EQUITY TRUST. The investment objective of the Global Equity Trust is
long-term capital appreciation. Morgan Stanley Asset Management Inc. manages the
Global Equity Trust and intends to pursue this objective by investing primarily
in equity securities of issuers throughout the world, including U.S. issuers.
SMALL COMPANY VALUE TRUST. The investment objective of the Small Company Value
Trust is long-term growth of capital. Rosenberg Institutional Equity Management
manages the Small Company Value Trust and intends to pursue this objective by
investing in equity securities of smaller companies which are traded principally
in the markets of the United States.
EQUITY TRUST. The principal investment objective of the Equity Trust is growth
of capital. Current income is a secondary consideration although growth of
income may accompany growth of capital. Fidelity Management Trust Company
manages the Equity Trust and seeks to attain the foregoing objective by
investing primarily in common stocks of United States issuers or securities
convertible into or which carry the right to buy common stocks.
GROWTH TRUST. The investment objective of the Growth Trust is to seek long-term
growth of capital. Founders manages the Growth Trust and will pursue this
objective by investing, under normal market conditions, at least 65% of its
total assets in common stocks of well-established, high-quality growth companies
that Founders believes have the potential to increase earnings faster than the
rest of the market.
QUANTITATIVE EQUITY TRUST (FORMERLY COMMON STOCK FUND). The investment
objective of the Quantitative Equity Trust is to achieve intermediate and
long-term growth through capital appreciation and current income by investing in
common stocks and other equity securities of well established companies with
promising prospects for providing an above-average rate of return. MAC manages
the Quantitative Equity Trust.
EQUITY INDEX TRUST. The investment objective of the Equity Index Trust is to
achieve investment results which approximate the total return of publicly traded
common stocks in the aggregate, as represented by the Standard & Poor's 500
Composite Stock Price Index. MAC manages the Equity Index Trust.
12
BLUE CHIP GROWTH TRUST. The primary investment objective of the Blue Chip
Growth Trust is to provide long-term growth of capital. Current income is a
secondary objective, and many of the stocks in the Portfolio are expected to pay
dividends. T. Rowe Price Associates, Inc. manages the Blue Chip Growth Trust.
REAL ESTATE SECURITIES TRUST. The investment objective of the Real Estate
Securities Trust is to achieve a combination of long-term capital appreciation
and satisfactory current income by investing in real estate related equity and
debt securities. MAC manages the Real Estate Securities Trust.
GROWTH & INCOME PORTFOLIOS
VALUE TRUST. The investment objective of the Value Trust is to realize an
above-average total return over a market cycle of three to five years,
consistent with reasonable risk. Miller Anderson & Sherrerd, LLP ("MAS") manages
the Value Trust and seeks to attain this objective by investing primarily in
common and preferred stocks, convertible securities, rights and warrants to
purchase common stocks, ADRs and other equity securities of companies with
equity capitalizations usually greater than $300 million.
INTERNATIONAL GROWTH AND INCOME TRUST. The investment objective of the
International Growth and Income Trust is to seek long-term growth of capital and
income. The portfolio is designed for investors with a long-term investment
horizon who want to take advantage of investment opportunities outside the
United States. J.P. Morgan Investment Management Inc. manages the International
Growth and Income Trust.
GROWTH AND INCOME TRUST. The investment objective of the Growth and Income
Trust is to provide long-term growth of capital and income consistent with
prudent investment risk. Wellington Management Company manages the Growth and
Income Trust and seeks to achieve the Trust's objective by investing primarily
in a diversified portfolio of common stocks of U.S. issuers which Wellington
Management Company believes are of high quality.
EQUITY-INCOME TRUST. The investment objective of the Equity-Income Trust (prior
to December 31, 1996, the "Value Equity Trust") is to provide substantial
dividend income and also long term capital appreciation. T. Rowe Price
Associates, Inc. manages the Equity-Income Trust and seeks to attain this
objective by investing primarily in dividend-paying common stocks, particularly
of established companies with favorable prospects for both increasing dividends
and capital appreciation.
BALANCED PORTFOLIOS
BALANCED TRUST. The investment objective of the Balanced Trust is current
income and capital appreciation. Founders Asset Management, Inc. is the manager
of the Balanced Trust and seeks to attain this objective by investing in a
balanced portfolio of common stocks, U.S. and foreign government obligations and
a variety of corporate fixed-income securities.
AUTOMATIC ASSET ALLOCATION TRUSTS (AGGRESSIVE, MODERATE AND CONSERVATIVE). The
investment objective of each of the Automatic Asset Allocation Trusts is to
realize the highest potential total return consistent with a specified level of
risk tolerance -- conservative, moderate or aggressive. The amount of each
Portfolio's assets invested in each category of securities -- debt, equity, and
money market -- is dependent upon the judgment of Fidelity Management Trust
Company as to what percentages of each Portfolio's assets in each category will
contribute to the limitation of risk and the achievement of its investment
objective.
BOND PORTFOLIOS
HIGH YIELD TRUST. The investment objective of High Yield Trust is to realize an
above-average total return over a market cycle of three to five years,
consistent with reasonable risk. MAS manages the High Yield Trust and seeks to
attain this objective by investing primarily in high yield debt securities,
including corporate bonds and other fixed-income securities.
STRATEGIC BOND TRUST. The investment objective of the Strategic Bond Trust is
to seek a high level of total return consistent with preservation of capital.
The Strategic Bond Trust seeks to achieve its objective by giving its
Subadviser, Salomon Brothers Asset Management Inc ("SBAM") broad discretion to
deploy the Strategic
13
Bond Trust's assets among certain segments of the fixed-income market as SBAM
believes will best contribute to the achievement of the portfolio's objective.
GLOBAL GOVERNMENT BOND TRUST. The investment objective of the Global Government
Bond Trust is to seek a high level of total return by placing primary emphasis
on high current income and the preservation of capital. Oechsle International
Advisors, L.P. manages the Global Government Bond Trust and intends to pursue
this objective by investing primarily in a selected global portfolio of
high-quality, fixed-income securities of foreign and U.S. governmental entities
and supranational issuers.
CAPITAL GROWTH BOND TRUST. The investment objective of the Capital Growth Bond
Trust is to achieve growth of capital by investing in medium-grade or better
debt securities, with income as a secondary consideration. MAC manages the
Capital Growth Bond Trust. The Capital Growth Bond Trust differs from most
"bond" funds in that its primary objective is capital appreciation, not income.
INVESTMENT QUALITY BOND TRUST. The investment objective of the Investment
Quality Bond Trust is to provide a high level of current income consistent with
the maintenance of principal and liquidity. Wellington Management Company
manages the Investment Quality Bond Trust and seeks to achieve the Trust's
objective by investing primarily in a diversified portfolio of investment grade
corporate bonds and U.S. Government bonds with intermediate to longer term
maturities.
U.S. GOVERNMENT SECURITIES TRUST. The investment objective of the U.S.
Government Securities Trust is to obtain a high level of current income
consistent with preservation of capital and maintenance of liquidity. SBAM
manages the U.S. Government Securities Trust and seeks to attain its objective
by investing a substantial portion of its assets in debt obligations and
mortgage-backed securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and derivative securities such as collateralized
mortgage obligations backed by such securities.
MONEY MARKET PORTFOLIO
MONEY MARKET TRUST. The investment objective of the Money Market Trust is to
obtain maximum current income consistent with preservation of principal and
liquidity. MAC manages the Money Market Trust and seeks to achieve this
objective by investing in high quality, U.S. dollar denominated money market
instruments.
LIFESTYLE PORTFOLIOS
LIFESTYLE AGGRESSIVE 1000 TRUST. The investment objective of the Lifestyle
Aggressive 1000 Trust is to provide long term growth of capital. Current income
is not a consideration. MAC seeks to achieve this objective by investing
approximately 100% of the Lifestyle Trust's assets in Underlying Portfolios
which invest primarily in equity securities.
LIFESTYLE GROWTH 820 TRUST. The investment objective of the Lifestyle Growth
820 Trust is to provide long term growth of capital with consideration also
given to current income. MAC seeks to achieve this objective by investing
approximately 20% of the Lifestyle Trust's assets in Underlying Portfolios which
invest primarily in fixed income securities and approximately 80% of its assets
in Underlying Portfolios which invest primarily in equity securities.
LIFESTYLE BALANCED 640 TRUST. The investment objective of the Lifestyle
Balanced 640 Trust is to provide a balance between high level of current income
and growth of capital with a greater emphasis given to capital growth. MAC seeks
to achieve this objective by investing approximately 40% of the Lifestyle
Trust's assets in Underlying Portfolios which invest primarily in fixed income
securities and approximately 60% of its assets in Underlying Portfolios which
invest primarily in equity securities.
LIFESTYLE MODERATE 460 TRUST. The investment objective of the Lifestyle
Moderate 460 Trust is to provide a balance between a high level of current
income and growth of capital with a greater emphasis given to high income. MAC
seeks to achieve this objective by investing approximately 60% of the Lifestyle
Trust's assets in
14
Underlying Portfolios which invest primarily in fixed income securities and
approximately 40% of its assets in Underlying Portfolios which invest primarily
in equity securities.
LIFESTYLE CONSERVATIVE 280 TRUST. The investment objective of the Lifestyle
Conservative 280 Trust is to provide a high level of current income with some
consideration also given to growth of capital. MAC seeks to achieve this
objective by investing approximately 80% of the Lifestyle Trust's assets in
Underlying Portfolios which invest primarily in fixed income securities and
approximately 60% of its assets in Underlying Portfolios which invest primarily
in equity securities.
A full description of the Manufacturers Investment Trust, its investment
objectives, policies and restrictions, the risks associated therewith, its
expenses, and other aspects of its operation is contained in the accompanying
Manufacturers Investment Trust prospectus, which should be read together with
this prospectus.
DETAILED INFORMATION ABOUT THE POLICIES
PREMIUM PROVISIONS
WHAT ARE THE REQUIREMENTS AND PROCEDURES FOR ISSUANCE OF A POLICY?
To purchase a Policy, an applicant must submit a completed application.
Manufacturers Life of America will issue a Policy only if it has a face amount
of at least $25,000, except for Policies issued under group or sponsored
arrangements in which case the minimum face amount is $10,000. A Policy will
generally be issued to persons between ages 20 and 80. In certain circumstances
the Company may at its sole discretion issue a Policy to persons above age 80.
Before issuing a Policy, Manufacturers Life of America will require evidence of
insurability satisfactory to it. A life insured meeting standard underwriting
rules will have a risk class of either "standard" or "nonsmoker." Persons
failing to meet standard underwriting requirements may be eligible for a Policy
with an additional rating assigned to it. Acceptance of an application is
subject to the Company's insurance underwriting rules. Each Policy is issued
with a policy date from which policy years, policy months and policy
anniversaries are all determined. Each Policy also has an effective date which
is the date the Company becomes obligated under the Policy and when the first
monthly deductions are taken. If an application is accompanied by a check for
all or a portion of the initial premium and the application is accepted, the
policy date will be the date the application and check were received at the
Manufacturers Life of America Service Office and the effective date will be the
date Manufacturers Life of America's underwriters approve issuance of the
Policy. If an application is accompanied by a check for all or a portion of the
initial premium, the life insured may be covered under the terms of a
conditional insurance agreement until the effective date. If an application
accepted by the Company is not accompanied by a check for the initial premium,
the Policy will be issued with a policy date which is seven days after issuance
of the Policy and with an effective date which is the date the Service Office
receives at least the initial planned premium. In certain situations a different
policy date may be used. The initial planned premium must be received within 60
days after the policy date. If the premium is not paid or if the application is
rejected, the Policy will be cancelled and any partial premiums paid will be
returned to the applicant.
Under certain circumstances a Policy may be issued with a backdated policy date.
A Policy will not be backdated more than six months before the date of the
application for the Policy. Monthly deductions will be made for the period the
policy date is backdated.
All premiums received prior to the effective date of a Policy will be credited
with interest from the date of receipt at the rate of return then being earned
on amounts allocated to the Money Market Trust. On the effective date, the
premiums paid plus interest credited, net of deductions for federal, state and
local taxes, will be allocated among the Investment Accounts or the Guaranteed
Interest Account in accordance with the policyowner's instructions.
All premiums received on or after the effective date will be allocated among
Investment Accounts or the Guaranteed Interest Account as of the date the
premiums were received at the Manufacturers Life of America Service Office.
Monthly deductions are due on the policy date and at the beginning of each
policy
15
month thereafter. However, if due prior to the effective date, they will be
taken on the effective date instead of the dates they were due.
WHAT LIMITATIONS APPLY TO PREMIUM AMOUNTS?
After the payment of the initial premium, premiums may be paid at any time and
in any amount during the lifetime of the life insured, subject to the
limitations on premium amount and the minimum premium requirement described
below. Premiums after the first must be paid to the Manufacturers Life of
America Service Office. Unlike traditional insurance, premiums are not payable
at specified intervals and in specified amounts. A Policy will be issued with a
planned premium, which is based on the amount of premium the policyowner wishes
to pay. The planned premium during the first two policy years must be such that
the minimum premium requirement will be met. Manufacturers Life of America will
send notices to the policyowner setting forth the planned premium at the payment
interval selected by the policyowner, unless payment is being made pursuant to a
pre-authorized payment plan. However, the policyowner is under no obligation to
make the indicated payment.
Manufacturers Life of America will not accept any premium payment which is less
than $50, unless the premium is payable pursuant to a pre-authorized payment
plan. In that case the Company will accept a payment of as little as $10.
Manufacturers Life of America may change these minimums on 90 days' written
notice. The Policies also limit the sum of the premiums that may be paid at any
time so as to preserve the qualification of the Policies as life insurance for
federal tax purposes. These limitations are set forth in each Policy.
Manufacturers Life of America reserves the right to refuse or refund any premium
payments that may cause the Policy to fail to qualify as life insurance under
applicable tax law.
MINIMUM PREMIUM REQUIREMENT. The Policy provides for a minimum premium
requirement. The minimum premium requirement is met if at the beginning of each
policy month the sum of all premiums paid less any partial withdrawals and any
Policy Debt is at least equal to the sum of the minimum monthly premiums since
the policy date. The minimum premium as an annualized amount is set forth in the
Policy. It is subject to change if the face amount of the Policy or the death
benefit option is changed (see Insurance Benefit -- "Can The Death Benefit
Option Be Changed?" and "Can The Face Amount Of A Policy Be Changed?") or if
there is any change in the supplementary benefits added to the Policy or in the
rate classification of the life insured.
IS THERE A DEATH BENEFIT GUARANTEE?
If the minimum premium requirement is met, Manufacturers Life of America will
guarantee that the Policy will not go into default even if a combination of
policy loans, adverse investment experience or other factors should cause the
Policy's Net Cash Surrender Value to be insufficient to meet the monthly
deduction due at the beginning of a policy month. If the guarantee is in effect,
Manufacturers Life of America will not allow the Net Policy Value to go below
zero, although it will continue to assess a monthly deduction at the beginning
of each policy month until the Net Policy Value should fall to zero. The
guarantee provides assurance to the policyowner that the Policy will remain in
force regardless of the investment performance of the sub-accounts selected by
the policyowner, provided the policyowner has satisfied the minimum premium
requirement.
The death benefit guarantee will expire on the policy anniversary on which the
life insured is 70 years old, or two years after the policy date if later,
except for Policies issued in Massachusetts. The death benefit guarantee for
Policies issued in Massachusetts will expire five years after the policy date.
While the guarantee is in effect, Manufacturers Life of America will determine
at the beginning of each policy month whether the minimum premium requirement
has been met. If it has not been met, the Company will notify the policyowner of
that fact and allow a 61-day grace period in which the policyowner may make a
premium payment sufficient to keep the death benefit guarantee in effect. The
required payment will be equal to the minimum premium due at the date the
minimum premium requirement was not met plus the minimum premium due for the
next two policy months. If the required payment is not received by the end of
the grace period, the death benefit guarantee will terminate. Once it is
terminated, it cannot be reinstated.
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WHEN DOES A POLICY GO INTO DEFAULT?
DEFAULT PRIOR TO SECOND POLICY ANNIVERSARY. If the minimum premium requirement
should not be met at the beginning of any policy month during the first two
policy years, the Policy will go into default. Manufacturers Life of America
will notify the policyowner of the default and allow a 61-day grace period in
which the policyowner may make a premium payment sufficient to bring the Policy
out of default. The required premium will be equal to the minimum premium due at
the date of default plus the minimum premium due for the next two policy months.
If the required payment is not received by the end of the grace period, the
Policy will terminate and the Net Cash Surrender Value as of the date of default
less the monthly deduction then due will be paid to the policyowner together
with any refund of excess sales loading to which the policyowner is entitled.
See Charges -- "What Are The Surrender Charges?"
DEFAULT AFTER SECOND POLICY ANNIVERSARY. If the death benefit guarantee is no
longer in effect, a Policy will go into default after the second policy
anniversary if at the beginning of any policy month the Policy's Net Cash
Surrender Value would go below zero after deducting the monthly deduction then
due. As with a default during the first two policy years, Manufacturers Life of
America will notify the policyowner of the default and will allow a 61-day grace
period in which the policyowner may make a premium payment sufficient to bring
the Policy out of default. The required payment will be equal to the amount
necessary to bring the Net Cash Surrender Value to zero, if it was less than
zero at the date of default, plus the monthly deductions due at the date of
default and payable at the beginning of each of the two policy months
thereafter. If the required payment is not received by the end of the grace
period, the Policy will terminate and the Net Cash Surrender Value as of the
date of default less the monthly deduction then due will be paid to the
policyowner together with any refund of excess sales loading to which the
policyowner is entitled. See Charges -- "What Are The Surrender Charges?" If the
life insured should die during the grace period following a Policy's going into
default, the Policy Value used in the calculation of the death benefit will be
the Policy Value as of the date of default and the insurance benefit payable
will be reduced by any outstanding monthly deductions due at the time of death.
HOW CAN A TERMINATED POLICY BE REINSTATED?
A policyowner can reinstate a Policy which has terminated after going into
default at any time within the five-year period following the date of
termination subject to the following conditions:
(a) The Policy must not have been surrendered for its Net Cash Surrender Value;
(b) Evidence of the life insured's insurability satisfactory to Manufacturers
Life of America is furnished to it;
(c) A premium equal to the payment required during the grace period following
default to keep the Policy in force is paid to Manufacturers Life of
America; and
(d) An amount equal to any amounts paid by Manufacturers Life of America in
connection with the termination of the Policy is repaid to Manufacturers
Life of America.
If the reinstatement is approved, the date of reinstatement will be the later of
the date of the policyowner's written request or the date the required payment
is received at the Manufacturers Life of America Service Office.
HOW MAY NET PREMIUMS BE INVESTED?
Net premiums (gross premiums less the premium tax deduction and sales charge)
may be allocated to either the Guaranteed Interest Account for accumulation at a
rate of interest equal to at least 4% or to one or more of the Investment
Accounts for investment in the Portfolio shares held by the corresponding
sub-account of the Separate Account. Allocations among the Investment Accounts
and the Guaranteed Interest Account are made as a percentage of the net premium.
The percentage allocation to any account may be any whole number between zero
and 100, provided the total percentage allocations equal 100. A policyowner may
change the way in which net premiums are allocated at any time without charge.
The change will take effect on the date a
17
written or telephonic request for change satisfactory to the Company is received
at the Manufacturers Life of America Service Office.
IS THERE A SHORT-TERM CANCELLATION RIGHT, OR "FREE LOOK"?
A Policy may be returned for a full refund within 10 days after it is received,
within 45 days after the application for the Policy is signed, or within 10 days
after Manufacturers Life of America mails or delivers a notice of right of
withdrawal, whichever is latest. The Policy can be mailed or delivered to the
Manufacturers Life of America agent who sold it or to the Manufacturers Life of
America Service Office. Immediately on such delivery or mailing, the Policy
shall be deemed void from the beginning. Within seven days after receipt of the
returned Policy at its Service Office, Manufacturers Life of America will refund
any premium paid. Manufacturers Life of America reserves the right to delay the
refund of any premium paid by check until the check has cleared.
If a policyowner requests an increase in face amount which results in new
surrender charges, he or she will have the same rights as described above to
cancel the increase. If cancelled, the Policy Value and the surrender charges
will be recalculated to the amounts they would have been had the increase not
taken place. A policyowner may request a refund of all or any portion of
premiums paid during the free look period, and the Policy Value and the
surrender charges will be recalculated to the amounts they would have been had
the premiums not been paid.
WHAT ARE THE CONVERSION PRIVILEGES OF THE POLICY?
The policyowner may effectively convert his or her Policy to a fixed benefit
policy by transferring the Policy Value in all of the Investment Accounts to the
Guaranteed Interest Account and by changing his or her allocation of net
premiums entirely to the Guaranteed Interest Account. As long as the entire
Policy Value is allocated to the Guaranteed Interest Account, the Policy Value,
other values based thereon and the death benefit will be determinable and
guaranteed. The Investment Account values to be transferred to the Guaranteed
Interest Account will be determined as of the Business Day on which
Manufacturers Life of America receives the request for conversion. There will be
no change in the issue age, risk class of the life insured or face amount as a
result of the conversion. A transfer of any or all of the Policy Value to the
Guaranteed Interest Account can be made at any time, even if a prior transfer
has been made during the policy month.
INSURANCE BENEFIT
WHAT IS THE INSURANCE BENEFIT?
If the Policy is in force at the time of the life insured's death, Manufacturers
Life of America will pay an insurance benefit based on the death benefit option
selected by the policyowner upon receipt of due proof of death. The amount
payable will be the death benefit under the selected option, plus any amounts
payable under any supplementary benefits added to the Policy, less the value of
the Loan Account at the date of death. The insurance benefit will be paid in one
sum unless another form of settlement option is agreed to by the beneficiary and
the Company. If the insurance benefit is paid in one sum, Manufacturers Life of
America will pay interest from the date of death to the date of payment. If the
life insured should die after the Company's receipt of a request for surrender,
no insurance benefit will be payable, and Manufacturers Life of America will pay
only the Net Cash Surrender Value.
WHAT DEATH BENEFIT OPTIONS ARE AVAILABLE?
The Policies permit the policyowner to select one of two death benefit options,
Option 1 and Option 2. Under Option 1 the death benefit is the face amount of
the Policy at the date of death or, if greater, the Policy Value at the date of
death multiplied by the applicable percentage in the table set forth below.
Under Option 2 the
18
death benefit is the face amount of the Policy plus the Policy Value at the date
of death or, if greater, the Policy Value at the date of death multiplied by the
applicable percentage in the following table:
ATTAINED CORRIDOR
AGE PERCENTAGE
40 & below 250%
41 243
42 236
43 229
44 222
45 215
46 209
47 203
48 197
49 191
50 185
ATTAINED CORRIDOR
AGE PERCENTAGE
51 178%
52 171
53 164
54 157
55 150
56 146
57 142
58 138
59 134
60 130
61 128
ATTAINED CORRIDOR
AGE PERCENTAGE
62 126%
63 124
64 122
65 120
66 119
67 118
68 117
69 116
70 115
71 113
72 111
ATTAINED CORRIDOR
AGE PERCENTAGE
73 109%
74 107
75-90 105
91 104
92 103
93 102
94 101
95 & above 100
Regardless of which death benefit option is in effect, the relationship of
Policy Value to death benefit will change whenever the "corridor percentages"
are used to determine the amount of the death benefit, in other words, whenever
multiplying the Policy Value by the applicable percentage set forth in the above
table results in a greater death benefit than would otherwise apply under the
selected option. For example, assume the life insured under a Policy with a face
amount of $100,000 has an attained age of 40. If Option 1 is in effect, the
corridor percentage will produce a greater death benefit whenever the Policy
Value exceeds $40,000 (250% X $40,000 = $100,000). If the Policy Value is less
than $40,000, an incremental change in Policy Value, up or down, will have no
effect on the death benefit. If the Policy Value is greater than $40,000, an
incremental change in Policy Value will result in a change in the death benefit
by a factor of 2.5. Thus, if the Policy Value were to increase to $40,010, the
death benefit would be increased to $100,025 (250% X $40,010 = $100,025).
If Option 2 were in effect in the above example, the corridor percentage would
produce a greater death benefit whenever the Policy Value exceeded $66,667. At
that point the death benefit produced by multiplying the Policy Value by 250%
would result in a greater amount than adding the Policy Value to the face amount
of the Policy. If the Policy Value is less than $66,667, an incremental change
in Policy Value will have a dollar-for-dollar effect on the death benefit. If
the Policy Value is greater than $66,667, an incremental change in Policy Value
will result in a change in the death benefit by a factor of 2.5 in the same
manner as would be the case under Option 1 when the corridor percentage
determined the death benefit.
CAN THE DEATH BENEFIT OPTION BE CHANGED?
The death benefit option is selected initially by the policyowner in the
application. After the Policy has been in force for two years the death benefit
option may be changed effective with a policy anniversary. Written request for a
change must be received by Manufacturers Life of America at least 30 days prior
to a policy anniversary in order to become effective on that date. The Company
reserves the right to limit a request for change if the change would cause the
Policy to fail to qualify as life insurance for tax purposes.
A change in death benefit option will result in a change in the Policy's face
amount in order to avoid any change in the amount of the death benefit. If the
change in death benefit is from Option 1 to Option 2, the new face amount will
be equal to the face amount prior to the change minus the Policy Value on the
effective date of the change. If the change in death benefit is from Option 2 to
Option 1, the new face amount will be equal to the face amount prior to the
change plus the Policy Value on the effective date of the change. The increase
in face amount resulting from a change to Option 1 will not affect the amount of
surrender charges to which a Policy may be subject. A change to Option 2 will be
subject to satisfactory evidence of insurability and will not be allowed if it
would cause the face amount of the Policy to go below the minimum face amount of
$25,000.
Policyowners who wish to have level insurance coverage should generally select
Option 1. Under Option 1, increases in Policy Value usually will reduce the net
amount of risk under a Policy which will reduce cost of insurance charges. This
means that favorable investment performance should result in a faster increase
in Policy Value than would occur under an identical Policy with Option 2 in
effect. However, the larger Policy
19
Value which may result under Option 1 will not affect the amount of the death
benefit unless the corridor percentages are used to determine the death benefit.
Policyowners who want to have the Policy Value reflected in the death benefit so
that any increases in Policy Value will increase the death benefit should
generally select Option 2. Under Option 2 the net amount at risk will remain
level unless the corridor percentages are used to determine death benefit, in
which case increases in Policy Value will increase the net amount at risk.
CAN THE FACE AMOUNT OF A POLICY BE CHANGED?
Subject to certain limitations, a policyowner may, upon written request,
increase or decrease the face amount of the Policy. A change in face amount will
usually affect the minimum premium requirement, the monthly deduction and
surrender charges (see "Charges"). Currently, a change in face amount must be at
least $10,000, except in the case of group or sponsored arrangements where the
minimum change is $5,000. Manufacturers Life of America reserves the right to
increase or decrease the minimum face amount change on 90 days' written notice
to the policyowner. The Company also reserves the right to limit a change in
face amount so as to prevent the Policy from failing to qualify as life
insurance for tax purposes.
INCREASES. Increases in face amount are subject to satisfactory evidence of
insurability. Increases may be made only once per policy year and only after the
first policy year. An increase will become effective at the beginning of the
policy month following the date Manufacturers Life of America approves the
requested increase. The Company reserves the right to refuse a requested
increase if the life insured's age at the effective date of the increase would
be greater than the maximum issue age for new Policies at that time.
An increase in face amount will usually result in the Policy's being subject to
new surrender charges. The new surrender charges will be computed as if a new
Policy were being purchased for the increase in face amount. For purposes of
determining the new deferred sales charge, a portion of the Policy Value at the
time of the increase, and a portion of the premiums paid on or subsequent to the
increase, will be deemed to be premiums attributable to the increase. See
Charges -- "What Are The Surrender Charges?" Any increase in face amount to a
level less than the highest face amount previously in effect will have no effect
on the surrender charges to which the Policy is subject, since surrender
charges, if applicable, will have been assessed in connection with the prior
decrease in face amount. As with the purchase of a Policy, a policyowner will
have free look and refund rights with respect to any increase resulting in new
surrender charges.
No additional premium is required for a face amount increase. However, a premium
payment may be necessary to avoid the Policy's going into default, since new
surrender charges resulting from an increase would automatically reduce the Net
Cash Surrender Value of the Policy. Moreover, a new minimum premium will be
determined for purposes of the death benefit guarantee. The insurance coverage
eliminated by the decrease of the oldest face amount will be deemed to be
restored first.
DECREASES. A decrease in the face amount may be requested after the Policy has
been in force for one year, except during the one-year period following any
increase in face amount. In addition, during the two-year period following an
increase in face amount, the policyowner may choose to decrease the increased
face amount and have the deferred sales charge for the increase reduced by the
refund of any excess sales load attributable to the increase. A decrease in face
amount will be effective only on a policy anniversary. Written request for a
decrease must be received by Manufacturers Life of America at least 30 days
prior to a policy anniversary in order to become effective on that date. A
decrease will not be allowed if it would cause the face amount to go below the
minimum face amount of $25,000, or $10,000 in the case of group or sponsored
arrangements.
A decrease in face amount during the 15-year period following issuance of the
Policy or any increase in face amount will usually result in surrender charges
being deducted from the Policy Value. See Charges -- "What Are The Surrender
Charges?" For purposes of determining surrender and cost of insurance charges, a
decrease will reduce face amount in the following order: (a) the face amount
provided by the most recent increase, then
20
(b) the face amounts provided by the next most recent increases successively,
and finally (c) the initial face amount.
POLICY VALUES
WHAT IS THE POLICY VALUE AND HOW IS IT DETERMINED?
A Policy has a Policy Value, a portion of which is available to the policyowner
by making a policy loan or partial withdrawal or upon surrender of the Policy.
See "What Are The Provisions Governing Policy Loans?" and "How May A Policyowner
Obtain The Net Cash Surrender Value?" below. The Policy Value may also affect
the amount of the death benefit (see Insurance Benefit -- "What Death Benefit
Options Are Available?"). The Policy Value at any time is equal to the sum of
the Values in the Investment Accounts, the Guaranteed Interest Account and the
Loan Account. The following discussion relates only to the Investment Accounts.
Policy loans are discussed under "What Are The Provisions Governing Policy
Loans?" and the Guaranteed Interest Account is discussed under "The General
Account." The portion of the Policy Value based on the Investment Accounts is
not guaranteed and will vary each Business Day with the investment performance
of the underlying Portfolios.
An Investment Account is established under each Policy for each sub-account of
the Separate Account to which net premiums or transfer amounts have been
allocated. Each Investment Account under a Policy measures the interest of the
Policy in the corresponding sub-account. The value of the Investment Account
established for a particular sub-account is equal to the number of units of that
sub-account credited to the Policy times the value of such units.
Units of a particular sub-account are credited to a Policy when net premiums are
allocated to that sub-account or amounts are transferred to that sub-account.
Units of a sub-account are cancelled whenever amounts are deducted, transferred
or withdrawn from the sub-account. The number of units credited or cancelled for
a specific transaction is based on the dollar amount of the transaction divided
by the value of the unit on the Business Day on which the transaction occurs.
The number of units credited with respect to a premium payment will be based on
the applicable unit values for the Business Day on which the premium is received
at the Manufacturers Life of America Service Office or other office or entity so
designated by Manufacturers Life of America, except for any premiums received
before the policy date as to which the applicable unit values will be the values
determined on such date.
Units are valued at the end of each Business Day, which is any day that the net
asset value of the Fund shares held by the applicable sub-account is determined.
A Business Day is deemed to end at the time of such determination. When an order
involving the crediting or cancelling of units is received after the end of a
Business Day or on a day which is not a Business Day, the order will be
processed on the basis of unit values determined on the next Business Day.
Similarly, any determination of Policy Value, Investment Account value or death
benefit to be made on a day which is not a Business Day will be made on the next
Business Day.
The value of a unit of each sub-account was initially fixed at $10.00. For each
subsequent Business Day the unit value is determined by taking the value of the
adjusted net assets of the particular sub-account at the end of the Business Day
divided by the total number of units. The value of a unit may increase, decrease
or remain the same, depending on the investment performance of a sub-account
from one Business Day to the next. The unit value for a sub-account for any
Business Day is equal to (a) minus (b), divided by (c), where:
(a) is the net asset value of the sub-account at the end of such Business Day;
(b) is a charge not exceeding 0.000017866 for each calendar day since the
preceding Business Day, multiplied by the net assets of the sub-account as
of the end of such Business Day, corresponding to a charge not exceeding
0.65% per year for mortality and expense risks; and
(c) is the total number of units of the sub-account.
Manufacturers Life of America reserves the right to adjust the above formula for
any taxes determined by it to be attributable to the operations of the
sub-account.
21
TRANSFERS OF POLICY VALUE
Under the Policies a policyowner may change the extent to which his or her
Policy Value is based upon any specific subaccount of the Separate Account or
the Company's general account. Such changes are made by transferring amounts
from one or more Investment Accounts or the Company's general account to other
Investment Accounts or the Company's general account. A policyowner is permitted
to make twelve transfers each policy year free of charge. Additional transfers
in each policy year may be made at a cost of $25 per transfer. This charge will
be assessed against the Investment Account or Guaranteed Interest Account from
which the amount is being transferred. For this purpose all transfer requests
received by Manufacturers Life of America on the same Business Day are treated
as a single transfer request.
The maximum amount that may be transferred from the Guaranteed Interest Account
in any one policy year is the greater of $500 or 15% of the Guaranteed Interest
Account value at the previous policy anniversary. Any transfer which involves a
transfer out of the Guaranteed Interest Account may not involve a transfer to
the Investment Account for the Money Market Trust.
Transfer requests must be in a format satisfactory to Manufacturers Life of
America and in writing, or by telephone if a currently valid telephone transfer
authorization form is on file. Although failure to follow reasonable procedures
may result in Manufacturers Life of America's liability for any losses resulting
from unauthorized or fraudulent telephone transfers, Manufacturers Life of
America will not be liable for following instructions communicated by telephone
that it reasonably believes to be genuine. Manufacturers Life of America will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. Such procedures shall consist of confirming a valid
telephone authorization form is on file, tape recording all telephone
transactions and providing written confirmation thereof.
The policyowner may effectively convert his or her Policy to a fixed benefit
policy by transferring the Policy Value in all of the Investment Accounts to the
Guaranteed Interest Account and by changing his or her allocation of net
premiums entirely to the Guaranteed Interest Account. As long as the entire
Policy Value is allocated to the Guaranteed Interest Account, the Policy Value,
other values based thereon and the death benefit will be determinable and
guaranteed. The Investment Account values to be transferred to the Guaranteed
Interest Account will be determined as of the Business Day on which
Manufacturers Life of America receives the request for conversion. There will be
no change in the issue age, risk class of the life insured or face amount as a
result of the conversion. A transfer of any or all of the Policy Value to the
Guaranteed Interest Account can be made at any time, even if a prior transfer
has been made during the policy month.
DOLLAR COST AVERAGING. Manufacturers Life of America will offer policyowners a
Dollar Cost Averaging program. Under this program amounts will be automatically
transferred at predetermined intervals from one Investment Account to any other
Investment Account(s) or the Guaranteed Interest Account.
Under the Dollar Cost Averaging program the policyowner will designate an amount
to be transferred each month from one Investment Account into any other
Investment Account(s) or the Guaranteed Interest Account. Each transfer under
the Dollar Cost Averaging program must be of a minimum amount as set by
Manufacturers Life of America. Once set, this minimum may be changed at any time
at the discretion of Manufacturers Life of America. Currently, no charge will be
made for this program if the Policy Value exceeds $15,000 on the date of
transfer. Otherwise, there will be a charge of $5 for each transfer under this
program. The charge will be deducted from the value of the Investment Account
out of which the transfer occurs. If insufficient funds exist to effect a Dollar
Cost Averaging transfer, including the charge, if applicable, the transfer will
not be effected and the policyowner will be so notified. Manufacturers Life of
America reserves the right to cease to offer this program on 90 days' written
notice to the policyowner.
ASSET ALLOCATION BALANCER TRANSFERS. Manufacturers Life of America will also
offer policyowners the ability to have amounts automatically transferred among
stipulated Investment Accounts to maintain an allocated percentage in each
stipulated Investment Account.
22
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, Manufacturers Life of America will
move amounts among the Investment Accounts as necessary to maintain the
policyowner's chosen allocation. A change to the policyowner's premium
allocation instructions will automatically result in a change in Asset
Allocation Balancer instructions so that the two are identical unless the
policyowner instructs Manufacturers Life of America otherwise or a dollar cost
averaging request is in effect. Currently there is no charge for this program;
however, Manufacturers Life of America reserves the right to institute a charge
on 90 days' written notice to the policyowner. Manufacturers Life of America
reserves the right to cease to offer this program on 90 days' written notice to
the policyowner.
WHAT ARE THE PROVISIONS GOVERNING POLICY LOANS?
On or after the first policy anniversary, while the Policy is in force, the
policyowner may borrow against the Policy Value of his or her Policy. The
one-year waiting period for borrowing against the Policy Value is waived in the
case of policies which are exchanged for Manufacturers Life of America Policies
and a policy loan will be permitted in an amount equal to the lesser of (a) the
amount rolled over into the Manufacturers Life of America Policy and (b) the
loan value of the Policy. The Policy serves as the only security for the loan.
The amount of any loan must be at least $500 and cannot exceed the amount which
would cause the Modified Policy Debt to equal the loan value of the Policy on
the date of the loan. The loan value is the Policy's Cash Surrender Value less
the monthly deductions due to the next policy anniversary. The Modified Policy
Debt as of any date is the Policy Debt (the aggregate amount of policy loans,
including borrowed interest, less any loan repayments) plus the amount of
interest to be charged to the next policy anniversary, all discounted from the
next policy anniversary to such date at an annual rate of 4%. An amount equal to
the Modified Policy Debt is transferred to the Loan Account to ensure that a
sufficient amount will be available to pay interest on the Policy Debt at the
next policy anniversary.
For example, assume a Policy with a loan value of $5,000, no outstanding policy
loans and a loan interest rate of 8%. The maximum amount that can be borrowed is
an amount that will cause the Modified Policy Debt to equal $5,000. If the loan
is made on a policy anniversary, the maximum loan will be $4,815. This amount at
8% interest will equal $5,200 one year later; $5,200 discounted to the date of
the loan at 4% (the Modified Policy Debt) equals $5,000. Because the minimum
rate of interest credited to the Loan Account is 4%, $5,000 must be transferred
to the Loan Account to ensure that $5,200 will be available at the next policy
anniversary to cover the interest accrued on the Policy Debt.
When a loan is made, Manufacturers Life of America will deduct from the
Investment Accounts or the Guaranteed Interest Account, and transfer to the Loan
Account, an amount which will result in the Loan Account value being equal to
the Modified Policy Debt. The policyowner may designate how the amount to be
transferred to the Loan Account is allocated among the accounts from which the
transfer is to be made. In the absence of instructions, the amount to be
transferred will be allocated to each account in the same proportion as the
value in each Investment Account and the Guaranteed Interest Account bears to
the Net Policy Value. A transfer from an Investment Account will result in the
cancellation of units of the underlying sub-account equal in value to the amount
transferred from the Investment Account. However, since the Loan Account is part
of the Policy Value, transfers made in connection with a loan will not change
the Policy Value.
A policy loan may result in a Policy's failing to satisfy the minimum premium
requirement, since the Policy Debt is subtracted from the sum of the premiums
paid in determining whether the minimum premium requirement is met. See Premium
Provisions -- "What Limitations Apply To Premium Amounts?; Minimum Premium
Requirement." As a result, the Policy may go into default if the minimum premium
requirement is not met during the first two policy years, or the death benefit
guarantee may terminate if the minimum premium requirement is not met either
before or after the second policy anniversary. See Premium Provisions -- "Is
There A Death Benefit Guarantee?" and "When Does A Policy Go Into Default?"
Moreover, if the death benefit guarantee is not in force, a policy loan may
cause a Policy to be more susceptible to going into default, since a policy loan
will be reflected in the Net Cash Surrender Value. See Premium
Provisions -- "When Does A Policy Go Into Default?" A policy loan will also have
an effect on
23
future Policy Values, since that portion of the Policy Value in the Loan Account
will increase in value at the crediting interest rate rather than varying with
the performance of the underlying Funds selected by the policyowner or
increasing in value at the rate of interest credited for amounts allocated to
the Guaranteed Interest Account. Finally, a policy loan will affect the amount
payable on the death of the life insured, since the death benefit is reduced by
the value of the Loan Account at the date of death in arriving at the insurance
benefit.
INTEREST CHARGED ON POLICY LOANS. Interest on the Policy Debt will accrue daily
and be payable annually on the policy anniversary. The rate of interest charged
will be either on a fixed basis or a variable basis as selected by the
policyowner in the application. The policyowner may change the interest basis on
any policy anniversary provided a written request for change is received by the
Company at least 60 days before the anniversary on which such change is to be
effective.
If the policyowner elects to have interest charged on a fixed basis, interest
will be at an effective annual rate of 8%. If the policyowner elects to have
interest charged on a variable basis, the rate will be determined by
Manufacturers Life of America at the beginning of each policy year, and the rate
so determined will be effective until the next policy anniversary at which time
it will be recalculated. Except as described below, the variable rate will not
exceed the greater of 6% per year or the Moody's Corporate Bond Yield Average
Monthly Average Corporates for the calendar month ending two months before the
beginning of the month in which the policy anniversary falls. On each policy
anniversary, the annual rate of interest may be adjusted up or down, but no
adjustment will be made unless the Moody's Average for the month ending two
months before the date of determination is at least one-half of one percent
greater or less than the rate in effect for the year then ending. If the
interest due on a policy anniversary is not paid by the policyowner, the
interest will be borrowed against the policy.
INTEREST CREDITED TO THE LOAN ACCOUNT. Manufacturers Life of America will
credit interest to any amount in the Loan Account at an effective annual rate of
at least 4%. The actual rate credited is:
- the rate of interest charged on the policy loan less .50% on amounts up
to the Policy's "loan tier amount"; and
- the rate of interest charged on the policy loan less an interest rate
differential (currently 1.25%) on amounts in excess of the "loan tier
amount."
Manufacturers Life of America may change the interest rate differential on 90
days' written notice to the policyowner. The loan tier amount at any time is
equal to 25% of (a) minus (b) where (a) is the Policy's Cash Surrender Value at
the previous policy anniversary and (b) is the sum of the minimum monthly
premiums since issuance of the Policy to that date (see Premium Provisions --
"What Limitations Apply To Premium Amounts?"). The loan tier amount cannot be a
negative number.
To illustrate the application of the loan tier amount, assume a Policy with a
Cash Surrender Value at the previous policy anniversary of $10,000, the sum of
the minimum monthly premiums since issuance to the previous policy anniversary
of $6,000 and a Loan Account value of $8,000. The loan tier amount is $1,000
[25% X ($10,000 - $6,000)]. If loan interest is being charged at the fixed rate
of 8%, $1,000 of the Loan Account value will accrue interest at 7.5% and the
remaining $7,000 will accrue interest at 6.75%.
LOAN ACCOUNT ADJUSTMENTS. When a loan is first taken out, and at specified
events thereafter, the value of the Loan Account is adjusted. Whenever the Loan
account is adjusted, the difference between (i) the Loan Account before any
adjustment and (ii) the Modified Policy Debt at the time of adjustment, is
transferred between the Loan Account and the Investment Accounts or the
Guaranteed Interest Account. The amount transferred to or from the Loan Account
will be such that the value of the Loan Account is equal to the Modified Policy
Debt after the adjustment.
The specified events which cause an adjustment to the Loan Account are (i) a
policy anniversary, (ii) a partial or full loan repayment, (iii) a new loan
being taken out, or (iv) when an amount is needed to meet a monthly deduction. A
loan repayment may be implicit in that policy debt is effectively repaid upon
termination, that is upon death of the life insured, surrender or lapse of the
policy. In each of these instances,
24
the Loan Account will be adjusted with any excess of the Loan Account over the
Modified Policy Debt after the repayment being included in the termination
proceeds.
Except as noted below in the Loan Repayments section, amounts transferred from
the Loan Account will be allocated to the Investment Accounts and the Guaranteed
Interest Account in the same proportion as the value in the corresponding "loan
sub-account" bears to the value of the Loan Account. A "loan sub-account" exists
for each Investment Account and for the Guaranteed Interest Account. Amounts
transferred to the Loan Account are allocated to the appropriate loan
sub-account to reflect the account from which the transfer was made.
LOAN ACCOUNT ILLUSTRATION. The operation of the Loan Account may be illustrated
by consideration of the Policy previously described with a loan value of $5,000,
a loan interest rate of 8%, and a maximum loan amount on a policy anniversary of
$4,815. For purposes of the illustration, assume that the loan tier amount is
zero. If a loan in the maximum amount of $4,815 is made, an amount equal to the
Modified Policy Debt, $5,000, is transferred to the Loan Account. At the next
policy anniversary the value of the Loan Account will have increased to
$5,337.50 ($5,000 X 1.0675) reflecting interest credited at an effective annual
rate of 6.75%. At that time the loan will have accrued interest charges of $385
($4,815 X .08) bringing the Policy Debt to $5,200.
If the accrued interest charges are paid on the policy anniversary, the Policy
Debt will continue to be $4,815, and the Modified Policy Debt, reflecting
interest for the next policy year and discounting the Policy Debt and such
interest at 4%, will be $5,000. An amount will be transferred from the Loan
Account to the Guaranteed Interest Account or the Investment Accounts so that
the Loan Account value will equal the Modified Policy Debt.
Since the Loan Account value was $5,337.50, a transfer of $337.50 will be
required ($5,337.50 - $5,000).
If, however, the accrued interest charges of $385 are borrowed, an amount will
be transferred from the Investment Accounts and the Guaranteed Interest Account
so that the Loan Account value will equal the Modified Policy Debt recomputed at
the policy anniversary. The new Modified Policy Debt is the Policy Debt, $5,200,
plus loan interest to be charged to the next policy anniversary, $416 ($5,200 X
..08), discounted at 4%, which results in a figure of $5,400. Since the value of
the Loan Account was $5,337.50, a transfer of $62.50 will be required. This
amount is equivalent to the 1.25% interest rate differential on the $5,000
transferred to the Loan Account on the previous policy anniversary.
LOAN REPAYMENTS. Policy Debt may be repaid in whole or in part at any time
prior to the death of the life insured provided the Policy is in force. When a
repayment is made, the amount is credited to the Loan Account and a transfer is
made to the Guaranteed Interest Account or the Investment Accounts so that the
Loan Account at that time equals the Modified Policy Debt. Loan repayments will
first be allocated to the Guaranteed Interest Account until the associated loan
sub-account is reduced to zero. Any other amounts transferred from the Loan
Account will be allocated to the Guaranteed Interest Account and each Investment
Account in the same proportion as the value in the corresponding loan
sub-account bears to the value of the Loan Account. Amounts paid to the Company
not specifically designated in writing as loan repayments will be treated as
premiums.
HOW MAY A POLICYOWNER OBTAIN THE NET CASH SURRENDER VALUE?
A Policy may be surrendered for its Net Cash Surrender Value at any time while
the life insured is living. The Net Cash Surrender Value is equal to the Policy
Value less any surrender charges and outstanding monthly deductions due (the
"Cash Surrender Value") minus the value of the Loan Account. The Net Cash
Surrender Value will be determined at the end of the Business Day on which
Manufacturers Life of America receives the Policy and a written request for
surrender at its Service Office. After a Policy is surrendered, the insurance
coverage and all other benefits under the Policy will terminate. Surrender of a
Policy within 15 years of issuance or an increase in face amount will usually
result in the assessment by Manufacturers Life of America of surrender charges.
(See Charges -- "What Are The Surrender Charges?")
25
After a Policy has been in force for two policy years, the policyowner may make
a partial withdrawal of the Net Cash Surrender Value. The minimum amount that
may be withdrawn is $500. The policyowner should specify the portion of the
withdrawal to be taken from each Investment Account and the Guaranteed Interest
Account. In the absence of instructions, the withdrawal will be allocated among
such accounts in the same proportion as the Policy Value in each account bears
to the Net Policy Value. No more than one partial withdrawal may be made in any
one policy month.
Like surrender of a Policy, a partial withdrawal made within 15 years following
issuance of the Policy or a face amount increase will result in the assessment
of a portion of the surrender charges to which the Policy is subject if the
withdrawal is in excess of the Withdrawal Tier Amount. The Withdrawal Tier
Amount is equal to 10% of the Net Cash Surrender Value determined as of the
previous policy anniversary. In determining what, if any, portion of a partial
Net Cash Surrender Value withdrawal is in excess of the Withdrawal Tier Amount,
all previous partial Net Cash Surrender Value withdrawals that have occurred in
the current policy year are included. The portion of the surrender charges
assessed will be based on the ratio of the amount of the withdrawal which
exceeds the Withdrawal Tier Amount to the Net Cash Surrender Value of the Policy
immediately prior to the withdrawal. The surrender charges will be deducted from
each Investment Account and the Guaranteed Interest Account in the same
proportion as the amount of the withdrawal taken from such account bears to the
total amount of the withdrawal (see Charges -- "What Are The Surrender
Charges?"). If the amount in the account is not sufficient to pay the portion of
the surrender charges allocated to that account, then the portion of the
withdrawal allocated to that account will be reduced so that the withdrawal plus
the portion of the surrender charges allocated to that account equal the value
of that account. Units equal to the amount of the partial withdrawal taken, and
surrender charges deducted, from each Investment Account will be cancelled based
on the value of such units determined at the end of the Business Day on which
Manufacturers Life of America receives a written request for withdrawal at its
Service Office.
If the Option 1 death benefit is in effect under a Policy from which a partial
withdrawal is made, the face amount of the Policy will be reduced. If the death
benefit is equal to the face amount at the time of withdrawal, the face amount
will be reduced by the amount of the withdrawal plus the portion of the
surrender charges assessed. If the death benefit is based upon the Policy Value
times the applicable percentage set forth under Insurance Benefit "What Death
Benefit Options Are Available?" above, the face amount will be reduced only to
the extent that the amount of the withdrawal plus the portion of the surrender
charges assessed exceeds the difference between the death benefit and the face
amount. Reductions in face amount resulting from partial withdrawals will not
incur any surrender charges above the surrender charges applicable to the
withdrawal. When the face amount of a Policy is based on one or more increases
subsequent to issuance of the Policy, a reduction resulting from a partial
withdrawal will be applied in the same manner as a requested decrease in face
amount, i.e., against the face amount provided by the most recent increase, then
against the next most recent increases successively and finally against the
initial face amount.
CHARGES
Charges under the Policies are assessed as (i) deductions from premiums when
made, (ii) surrender charges upon surrender, partial withdrawals, decreases in
face amount or termination following default, (iii) monthly deductions from the
Policy Value, and (iv) risk charges assessed against Separate Account assets.
These charges are described below.
WHAT DEDUCTIONS ARE MADE FROM PREMIUMS?
Manufacturers Life of America deducts a sales charge of 3% of each premium
payment. A deferred sales charge in the maximum amount of 47% of premiums paid
up to two Target Premiums is deducted from the Policy Value upon certain
transactions. See "What Are The Surrender Charges?" below. These charges
compensate the Company for some of the expenses of selling and distributing the
Policies, including agents' commissions, advertising, agent training and the
printing of prospectuses and sales literature.
26
The sales charges deducted in any policy year are not specifically related to
sales expenses incurred in that year. Instead, the Company expects that the
major portion of the sales expenses attributable to a Policy will be incurred
during the first policy year, although the sales charge deducted from premiums
and any deferred sales charge may be spread out over the period the Policy is in
force. Manufacturers Life of America anticipates that the aggregate amounts
received under the Policies for sales loading will be insufficient to cover
aggregate sales expenses. To the extent that sales expenses exceed sales
charges, Manufacturers Life of America will pay the excess from its other assets
or surplus, including amounts derived from the mortality and expense risks
charge described below. A portion of the sales charge and the deferred sales
charge may be subject to refund if the Policy is surrendered for its Net Cash
Surrender Value at any time during the first two years following issuance or
following an increase in face amount or if the increase is cancelled during the
two-year period following the increase. See "What Are The Surrender Charges?"
(Refund Of Excess Sales Charges).
Manufacturers Life of America deducts a premium tax charge of 2% of each premium
payment (except for Oregon where no premium tax is deducted). State and local
premium taxes differ from state to state. The 2% rate, which cannot be changed,
is expected to be sufficient, on average, to pay premium taxes where required.
WHAT ARE THE SURRENDER CHARGES?
Manufacturers Life of America will assess surrender charges upon surrender or
lapse of a Policy, a partial withdrawal of Policy Value in excess of the
Withdrawal Tier Amount or a requested decrease in face amount. The charges will
be assessed if any of the above transactions occurs within 15 years after
issuance of the Policy or any increase in face amount unless the charges have
been previously deducted. There are two surrender charges -- a deferred
underwriting charge and a deferred sales charge.
DEFERRED UNDERWRITING CHARGE. The deferred underwriting charge is a dollar
amount for each $1,000 of face amount of insurance in accordance with the
following schedule:
Age:......................................... 0-20 21-40 41-50 51-60 61 & above
Charge Per $1,000: .......................... $2.00 $3.00 $4.00 $5.00 $6.00
The charge per $1,000 will be determined on the basis of the age of the life
insured at issue or upon increase of the face amount, as applicable. The
deferred underwriting charge applicable to each level of insurance coverage
cannot exceed $1,000. The amount of the charge remains level for five years.
Following the fifth year after issuance of the Policy or a face amount increase,
the charge applicable to the initial face amount or increase will decrease each
month by .83%, or 10% per year. After the monthly deduction is taken for the
last policy month preceding the end of the fifteenth year after issuance or face
amount increase, the charge will have decreased to zero. The applicable
percentage of the surrender charges to which the Policy would otherwise be
subject is illustrated on an annual basis by the following table:
PERCENT OF
TRANSACTION OCCURS AFTER MONTHLY DEDUCTION SURRENDER
TAKEN FOR LAST MONTH PRECEDING END OF YEAR CHARGES
------------------------------------------ ----------
5 & below................................................... 100%
6........................................................... 90%
7........................................................... 80%
8........................................................... 70%
9........................................................... 60%
10.......................................................... 50%
11.......................................................... 40%
12.......................................................... 30%
13.......................................................... 20%
14.......................................................... 10%
15 & above.................................................. 0%
27
The surrender charges begin to grade downward before the beginning of the sixth
year for issue ages above 69. For issue ages 70, 71, 72, 73, and issue ages 74
to 80, the surrender charges begin to grade downward at the beginning of the
fifth, fourth, third, second, and first years, respectively.
The deferred underwriting charge is designed to cover the administrative
expenses associated with underwriting and policy issue, including the costs of
processing applications, conducting medical examinations, determining the life
insured's risk class and establishing policy records.
DEFERRED SALES CHARGE. The maximum deferred sales charge is equal to 47% of the
premiums paid under the Policy up to two Target Premiums described below. For
life insureds over age 69 at issue or face amount increase, the applicable
percentage of premiums will be reduced in accordance with the following table:
APPLICABLE
PERCENTAGE OF
AGE PREMIUMS
--- -------------
70.......................................................... 45%
71.......................................................... 43%
72.......................................................... 41%
73.......................................................... 39%
74.......................................................... 37%
75.......................................................... 35%
76.......................................................... 34%
77.......................................................... 33%
78.......................................................... 32%
79.......................................................... 31%
80.......................................................... 30%
Like the deferred underwriting charge, the percentage deferred sales charge
applicable to the initial face amount or face amount increase will remain level
for five years (or less for issue ages above 69) and following such period will
decrease .83% per month, or 10% per year, from the charge that would otherwise
apply. See chart under "Deferred Underwriting Charge" above.
As noted above, the deferred sales charge may not exceed 47% of two Target
Premiums. The Target Premium for the initial face amount is set forth in the
Policy. A Target Premium will be computed for each increase in face amount above
the highest face amount of coverage previously in effect, and the policyowner
will be advised of such Target Premium. Target Premiums are determined on the
basis of a target premium rate and the face amount of insurance provided at
issue or by the increase. The applicable rate varies with the issue age and sex
(unless unisex rates are required by law) of the life insured and, in the case
of certain Policies issued in group or sponsored arrangements providing for
reduction in cost of insurance charges (see "Are There Special Provisions For
Group Or Sponsored Arrangements?"), the amount of insurance coverage. In order
to determine the deferred sales charge applicable to a face amount increase,
Manufacturers Life of America will treat a portion of the Policy Value on the
date of increase as a premium attributable to the increase. In addition, a
portion of each premium paid subsequent to the increase will be attributed to
the increase. In each case, the portion attributable to the increase will be the
ratio of the guideline annual premium (described below) for the increase to the
sum of the guideline annual premiums for the initial face amount and all
increases including the requested increase.
REFUND OF EXCESS SALES CHARGES. If a Policy is surrendered for its Net Cash
Surrender Value at any time during the first two years following issuance or
following an increase in face amount or the face amount decreased during the
second year after issuance or after increase in face amount, Manufacturers Life
of America will refund that part of the total sales charges deducted (the sum of
the deferred sales charge and the sales charge deducted from premiums) with
respect to "premiums" paid for the initial face amount or such increase
(including premiums allocated to the increase as described in the preceding
paragraph), whichever is applicable, which is in excess of (i) the sum of 30% of
the "premiums" paid up to one guideline annual premium plus 10% of the
"premiums" paid in excess of one guideline annual premium up to two guideline
28
annual premiums and (ii) up to 9% of the "premiums" paid in excess of two
guideline annual premiums. Since Target Premiums are always less than guideline
annual premiums, with the deferred sales charge structure described above, there
will be no refund with respect to "premiums" paid in excess of two guideline
annual premiums and these excess "premiums" will not reduce the refund
applicable to "premiums" paid up to two guideline annual premiums.
A policyowner may also choose to decrease an increased face amount during the
first two years following the increase and have the deferred sales charge for
the increase reduced by the refund of any excess sales load attributable to the
increase. The guideline annual premium, which is set forth in the Policy, is the
level annual premium that would be payable for the life of the Policy for a
specific amount of coverage if premiums were fixed as to both timing and amount
and based on the 1980 Commissioners Standard Ordinary Smoker/Nonsmoker Mortality
Tables, net investment earnings at an effective annual rate of 5% and fees and
charges as set forth in the Policy. In determining the maximum sales charge
allowable, "premiums" will be attributed to the initial face amount and each
increase in the same manner as used in determining the deferred sales charge
applicable to the face amount and each increase, and the guideline annual
premium will be determined separately for the initial face amount and each
increase.
The operation of the maximum sales charge allowable is illustrated by the
following example. Assume that the policyowner has paid $3,000 in premiums under
a Policy with a guideline annual premium of $2,000 and a Target Premium of
$1,500 and decides to surrender his or her Policy during the second policy year.
In the absence of the refund right, the deferred sales charge would be $1,410
(47% of $3,000).
However, under the formula described above, the maximum sales charge allowable
is the sum of $600 (30% of $2,000) and $100 (10% of $1,000), or $700. Since a
sales load of $90 (3% of $3,000) was deducted from the premiums when received,
and therefore only $610 ($700 - $90) of the deferred sales charge may be
retained by the Company, a refund of $800 ($1,410 - $610) will be payable to the
policyowner. Since a deferred sales charge is deducted in the event a Policy
terminates for failure to make the required payment following the Policy's going
into default, the refund right will apply if such termination occurs during the
two-year period following issuance of the Policy or any increase in face amount.
If the Policy terminates during the two years after a face amount increase, the
refund will relate only to the sales charges assessed against premiums
attributable to the increase.
CHARGES ON PARTIAL WITHDRAWALS. As noted above, both the deferred sales charge
and the deferred underwriting charge are applicable in the event of a partial
withdrawal of the Net Cash Surrender Value in excess of the Withdrawal Tier
Amount. A portion of the surrender charges applicable to the initial face amount
and to each increase in face amount will be deducted as a result of the
withdrawal. The portion to be deducted will be the same as the ratio of the
amount of the withdrawal to the Net Cash Surrender Value prior to the
withdrawal.
The charges will be deducted from the Policy Value, and the amount so deducted
will be allocated among the Investment Accounts and the Guaranteed Interest
Account in the same proportion that the withdrawal is allocated among such
accounts. Whenever a portion of the surrender charges are deducted as a result
of a partial withdrawal, the Policy's remaining surrender charges will be
reduced by the amount of the charges taken. The surrender charges not assessed
as a result of the 10% free withdrawal provision remain in effect under the
Policy and may be assessed upon surrender or lapse, other partial withdrawals or
a requested decrease in face amount.
CHARGES ON DECREASES IN FACE AMOUNT. As with partial withdrawals, a portion of
a Policy's surrender charges will be deducted upon a decrease in or cancellation
of face amount requested by the policyowner. Since surrender charges are
determined separately for the initial face amount and each face amount increase
and since a decrease in face amount will have a different impact on each level
of insurance coverage, the portion of the surrender charges to be deducted with
respect to each level of insurance coverage will be determined separately. Such
portion will be the same as the ratio of the amount of the reduction in such
coverage to the amount of such coverage prior to the reduction. As noted under
Insurance Benefit -- "Can The Face Amount Of A Policy Be Changed?" decreases are
applied to the most recent increase first and thereafter to the next most recent
increases successively. The charges will be deducted from the Policy Value,
29
and the amount so deducted will be allocated among the Investment Accounts and
the Guaranteed Interest Account in the same proportion as the Policy Value in
each bears to the Net Policy Value. Whenever a portion of the surrender charges
is deducted as a result of a decrease in face amount, the Policy's remaining
surrender charges will be reduced by the amount of the charges taken.
WHAT ARE THE MONTHLY DEDUCTIONS?
On the policy date and at the beginning of each policy month, a deduction is due
from the Policy Value to cover certain charges in connection with the Policy.
Monthly deductions due prior to the effective date will be taken on the
effective date instead of the dates they were due. The charges consist of (i) a
monthly administration charge, (ii) a monthly charge for the cost of insurance,
and (iii) a monthly charge for any supplementary benefits added to the Policy
(see Other Provisions -- "What Supplementary Benefits Are Available?"). The
monthly deduction will be allocated among the Investment Accounts and the
Guaranteed Interest Account in the same proportion as the Policy Value in each
bears to the Net Policy Value.
The monthly administration charge is $6.00. The charge is designed to cover
certain administrative expenses associated with the Policy, including
maintaining policy records, collecting premiums and processing death claims,
surrender and withdrawal requests and various changes permitted under a Policy.
Even though administrative expenses may increase, the Company guarantees that it
will not increase the amount of the monthly administration charge.
The monthly charge for the cost of insurance is determined by multiplying the
applicable cost of insurance rate times the net amount at risk at the beginning
of each policy month. The charge for the cost of insurance will reflect any
extra charges for additional ratings indicated in the Policy. The cost of
insurance rate is based on the life insured's age, sex (unless unisex rates are
required by law), risk class, the duration of the insurance coverage and, in the
case of certain Policies issued in group or sponsored arrangements providing for
reduction in cost of insurance charges (see "Are There Special Provisions For
Group Or Sponsored Arrangements?"), the face amount of the Policy. See Other
Matters -- Legal Considerations. The rate is determined separately for the
initial face amount and for each increase in face amount. Cost of insurance
rates will generally increase with the life insured's age.
The cost of insurance rates used by Manufacturers Life of America reflect its
expectations as to future mortality experience. The rates may be changed from
time to time on a basis which does not unfairly discriminate within the class of
lives insured. In no event will the cost of insurance rate exceed the guaranteed
rates set forth in the Policy except to the extent that an extra charge is
imposed because of an additional rating applicable to the life insured or if
simplified underwriting is granted in a group or sponsored arrangement (see "Are
There Special Provisions For Group Or Sponsored Arrangements?"). The guaranteed
rates are based on the 1980 Commissioners Standard Ordinary Smoker/Nonsmoker
Mortality Tables.
The net amount at risk to which the cost of insurance rate is applied is the
difference between the death benefit, divided by 1.0032737 (a factor which
reduces the net amount at risk for cost of insurance charge purposes by taking
into account assumed monthly earnings at an annual rate of 4%), and the Policy
Value. Because different cost of insurance rates may apply to different levels
of insurance coverage, the net amount at risk will be calculated separately for
each level of insurance coverage. When the Option 1 death benefit is in effect,
for purposes of determining the net amount at risk applicable to each level of
insurance coverage, the Policy Value is attributed first to the initial face
amount and then, if the Policy Value is greater than the initial face amount, to
each increase in face amount in the order made.
Because the calculation of the net amount at risk is different under the death
benefit options when more than one level of insurance coverage is in effect, a
change in the death benefit option may result in a different net amount at risk
for each level of insurance coverage than would have occurred had the death
benefit option not been changed. Since the cost of insurance is calculated
separately for each level of insurance coverage, any change in the net amount at
risk for a level of insurance coverage resulting from a change in the death
benefit option may affect the amount of the charge for the cost of insurance.
Partial withdrawals and decreases in face
30
amount will also affect the manner in which the net amount at risk for each
level of insurance coverage is calculated.
In group or sponsored arrangements where Manufacturers Life of America issues
Policies with a face amount of less than $25,000 but not less than $10,000,
Policies issued with a face amount of less than $25,000 may be subject to an
additional premium deduction equal to $1.00 per $1,000 face amount. This amount
is added to the cost of insurance and deducted monthly. The amount so added will
not cause the cost of insurance deducted to exceed the guaranteed rates set
forth in the Policy.
ARE THERE SPECIAL PROVISIONS FOR GROUP OR SPONSORED ARRANGEMENTS?
Where permitted by state insurance laws, Policies may be purchased under group
or sponsored arrangements, as well as on an individual basis. As noted
previously, the minimum face amount and minimum change in face amount are
reduced to $10,000 and $5,000, respectively, for Policies issued pursuant to
such arrangements. A "group arrangement" includes a program under which a
trustee, employer or similar entity purchases Policies covering a group of
individuals on a group basis. In California all participants of group
arrangements will be individually underwritten. A "sponsored arrangement"
includes a program under which an employer permits group solicitation of its
employees or an association permits group solicitation of its members for the
purchase of Policies on an individual basis.
The sales charge, monthly deductions, surrender charges, and other charges
described above may be reduced for Policies issued in connection with group or
sponsored arrangements. Such arrangements may include sales without withdrawal
charges and deductions to employees, officers, directors, agents, immediate
family members of the foregoing, and employees of agents of Manufacturers Life
and its subsidiaries. In addition, Manufacturers Life of America may issue
Policies in group or sponsored arrangements which Policies have a surrender
charge structure which increases over the life of the Policy. Manufacturers Life
of America will issue these Policies in accordance with its rules in effect as
of the date an application for a Policy is approved. To qualify for such a
reduction, a group or sponsored arrangement must satisfy certain criteria as to,
for example, size of the group, expected number of participants and anticipated
premium payments from the group. Generally, the sales contacts and effort,
administrative costs and mortality cost per Policy vary based on such factors as
the size of the group or sponsored arrangements, the purposes for which Policies
are purchased and certain characteristics of its members. The amount of
reduction and the criteria for qualification will reflect the reduced sales
effort and administrative costs resulting from, and the different mortality
experience expected as a result of, sales to qualifying groups and sponsored
arrangements.
Manufacturers Life of America may modify from time to time, on a uniform basis,
both the amounts of reductions and the criteria for qualification. Reductions in
these charges will not be unfairly discriminatory against any person, including
the affected policyowners and all other policyowners funded by the Separate
Account.
In addition, groups or persons purchasing under a sponsored arrangement may
apply for simplified underwriting. If simplified underwriting is granted, the
cost of insurance charge may increase as a result of higher anticipated
mortality experience. In addition, groups or persons purchasing under a
sponsored arrangement may request changes in death benefit option and increases
and decreases in face amount at any time after issue and decreases in face
amount at any time after an increase in face amount. Increases in face amount
requested by groups or persons purchasing under a sponsored arrangement are not
subject to a minimum amount and will be issued utilizing the flexible term
insurance option rider. Decreases in face amount may involve imposition of a
surrender charge.
ARE THERE SPECIAL PROVISIONS FOR EXCHANGES?
Manufacturers Life of America will permit owners of certain fixed benefit life
insurance policies issued either by the Company or Manufacturers Life to
exchange their policies for the Policies described in this prospectus. A portion
of the cash values transferred from such policies will be credited to the
Policies without deduction of
31
the 3% sales charge. Moreover, surrender charges under the policies being
exchanged or the Policies issued in exchange therefor may be reduced or
eliminated. Policy loans made under policies being exchanged may be carried over
to the new Policies without repayment at the time of exchange. Policyowners
considering an exchange should consult their tax advisers as to the tax
consequences of an exchange.
Manufacturers Life of America has obtained an order from the Securities and
Exchange Commission dated November 28, 1990 pursuant to which holders of
Manufacturers Life of America's scheduled premium variable life ("Director
2000") insurance policies may elect to exchange those policies for the Policies
described in this prospectus (the "Exchange Offer").
The terms and conditions under which Director 2000 policyowners may exchange
their policies for the Policies differ from the terms and conditions set forth
in this prospectus and are available only to Director 2000 policyowners who
accept the Exchange Offer.
Those Director 2000 policyowners who accept the Exchange Offer will be able to
exchange their existing policies for Policies of like face amount without any
new evidence of insurability. No direct or deferred sales charge will be imposed
on the cash values rolled over into the Policy. No deferred sales charges or
underwriting charges will be imposed on surrenders of Policies acquired through
this Exchange Offer except in connection with premium payments attributable to
an increase in face amount. Increases in the face amount of a Policy issued
pursuant to the Exchange Offer will be permitted one month after issuance. In
addition, a Policy may be issued with a face amount less than $25,000 if issued
pursuant to the Exchange Offer.
WHAT ARE THE RISK CHARGES ASSESSED AGAINST SEPARATE ACCOUNT ASSETS?
Manufacturers Life of America makes a daily charge to the Separate Account for
the mortality and expense risks it assumes under the Policies. This charge is
made each Business Day at an annual rate of .65% of the value of the Separate
Account's assets. The mortality risk assumed is that lives insured may live for
a shorter period of time than the Company estimated. The expense risk assumed is
that expenses incurred in issuing and administering the Policies will be greater
than the Company estimated. Manufacturers Life of America will realize a gain
from this charge to the extent it is not needed to provide benefits and pay
expenses under the Policies.
ARE THERE OTHER RELEVANT CHARGES?
Currently, Manufacturers Life of America makes no charge against the Separate
Account for federal, state or local taxes that may be attributable to the
Separate Account or to the operations of the Company with respect to the
Policies. However, if Manufacturers Life of America incurs any such taxes, it
may make a charge or establish a provision for those taxes.
Charges will be imposed on certain transfers of Policy Values, including a $25
charge for each transfer in excess of twelve in a policy year and a $5 charge
for each Dollar Cost Averaging transfer when Policy Value does not exceed
$15,000. See Policy Values "Transfers Of Policy Value."
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The Separate Account purchases shares of the Portfolios at net asset value. The
net asset value of those shares reflects:
INVESTMENT
MANAGEMENT EXPENSES
FEES OF UP TO
---------- ----------
Pacific Rim Emerging Markets Trust.......................... .850% .75%
Science & Technology Trust.................................. 1.100% .50%
International Small Cap Trust............................... 1.100% .75%
Emerging Growth Trust....................................... 1.050% .50%
Pilgrim Baxter Growth Trust................................. 1.050% .50%
Small/Mid Cap Trust......................................... 1.000% .50%
International Stock Trust................................... 1.050% .75%
Worldwide Growth Trust...................................... 1.000% .75%
Global Equity Trust......................................... .900% .75%
Small Company Value Trust................................... 1.050% .50%
Equity Trust................................................ .750% .50%
Growth Trust................................................ .850% .50%
Quantitative Equity Trust................................... .700% .50%
Equity Index Trust.......................................... .250% .15%
Blue Chip Growth Trust...................................... .925% .50%
Real Estate Securities Trust................................ .700% .50%
Value Trust................................................. .800% .50%
International Growth and Income Trust....................... .950% .75%
Growth and Income Trust..................................... .750% .50%
Equity-Income Trust......................................... .800% .50%
Balanced Trust.............................................. .800% .50%
Aggressive Asset Allocation Trust........................... .750% .50%
Moderate Asset Allocation Trust............................. .750% .50%
Conservative Asset Allocation Trust......................... .750% .50%
High Yield Trust............................................ .775% .50%
Strategic Bond Trust........................................ .775% .50%
Global Government Bond Trust................................ .800% .75%
Capital Growth Bond Trust................................... .650% .50%
Investment Quality Bond Trust............................... .650% .50%
U.S. Government Securities Trust............................ .650% .50%
Money Market Trust.......................................... .500% .50%
Lifestyle Aggressive 1000 Trust............................. None* N/A**
Lifestyle Growth 820 Trust.................................. None* N/A**
Lifestyle Balanced 640 Trust................................ None* N/A**
Lifestyle Moderate 460 Trust................................ None* N/A**
Lifestyle Conservative 280 Trust............................ None* N/A**
* Because each Lifestyle Trust invests in shares of Underlying Portfolios,
each bears its pro rata share of the fees and expenses incurred by the
Underlying Portfolios.
** The Adviser has voluntarily agreed to pay the expenses of each of the
Lifestyle Trusts (excluding the expenses of the Underlying Portfolios). This
voluntary expense reimbursement may be terminated at any time.
Detailed information concerning such fees and expenses is set forth under the
caption "Management of The Trust" in the Prospectus for the Manufacturers
Investment Trust that accompanies this Prospectus.
33
THE GENERAL ACCOUNT
By virtue of exclusionary provisions, interests in the general account of
Manufacturers Life of America have not been registered under the Securities Act
of 1933 and the general account has not been registered as an investment company
under the Investment Company Act of 1940. Accordingly, neither the general
account nor any interests therein are subject to the provisions of these acts,
and as a result the staff of the Securities and Exchange Commission has not
reviewed the disclosures in this prospectus relating to the general account.
Disclosures regarding the general account may, however, be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in a prospectus.
WHAT IS THE GENERAL ACCOUNT?
The general account of Manufacturers Life of America consists of all assets
owned by the Company other than those in the Separate Account and other separate
accounts of the Company. Subject to applicable law, Manufacturers Life of
America has sole discretion over the investment of the assets of the general
account.
A policyowner may elect to allocate net premiums to the Guaranteed Interest
Account or to transfer all or a portion of the Policy Value to the Guaranteed
Interest Account from the Investment Accounts. Manufacturers Life of America
will hold the reserves required for any portion of the Policy Value allocated to
the Guaranteed Interest Account in its general account. However, an allocation
of Policy Value to the Guaranteed Interest Account does not entitle the
policyowner to share in the investment experience of the general account.
Instead, Manufacturers Life of America guarantees that the Policy Value in the
Guaranteed Interest Account will accrue interest daily at an effective annual
rate of at least 4%, without regard to the actual investment experience of the
general account. Consequently, if a policyowner pays the planned premiums,
allocates all net premiums only to the general account and makes no transfers,
partial withdrawals, or policy loans, the minimum amount and duration of his or
her death benefit will be determinable and guaranteed. Transfers from the
Guaranteed Interest Account to the Investment Accounts are subject to
restrictions (see Policy Values -- "What Is The Policy Value And How Is It
Determined?").
The Policy Value in the Guaranteed Interest Account is equal to the portion of
the net premiums allocated to it, plus any amounts transferred to it and
interest credited to it minus any charges deducted from it or partial
withdrawals or amounts transferred from it. Manufacturers Life of America
guarantees that the interest credited to the Policy Value in the Guaranteed
Interest Account will not be less than an effective annual rate of 4%. The
Company may, at its sole discretion, credit a higher rate of interest, although
it is not obligated to do so. The policyowner assumes the risk that interest
credited may not exceed the guaranteed minimum rate of 4% per year.
OTHER PROVISIONS
WHAT SUPPLEMENTARY BENEFITS ARE AVAILABLE?
Subject to certain requirements, one or more supplementary benefits may be added
to a Policy, including those providing term insurance for various persons and,
in the case of corporate-owned Policies, permitting a change of the life insured
for Policies purchased before October 1, 1996 and a change of life insured
option and flexible term insurance option for Policies purchased on or after
October 1, 1996 and, if permitted by the applicable state, an accelerated death
benefit. 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. See
Charges -- "What Are The Monthly Deductions?"
UNDER WHAT CIRCUMSTANCES MAY PORTFOLIO SHARES BE SUBSTITUTED?
Although Manufacturers Life of America believes it to be highly unlikely, it is
possible that in the judgment of its management, one or more of the Trusts may
become unsuitable for investment by the Separate Account because of a change in
investment policy or a change in the applicable laws or regulations, because the
shares are no longer available for investment, or for some other reason. In that
event, Manufacturers Life of America may seek to substitute the shares of
another Trust or of an entirely different mutual fund. Before this can be done,
the approval of the S.E.C. and one or more state insurance departments may be
required.
34
Manufacturers Life of America also reserves the right to combine other separate
accounts with the Separate Account, to establish additional sub-accounts within
the Separate Account, to operate the Separate Account as a management investment
company or other form permitted by law, and to de-register the Separate Account
under the 1940 Act. Any such change would be made only if permissible under
applicable federal and state law.
The investment objective of the Separate Account will not be changed materially
without first filing the change with the Insurance Commissioner of the State of
Michigan. Policyowners will be advised of any such change at the time it is
made.
WHAT ARE THE OTHER GENERAL POLICY PROVISIONS?
BENEFICIARY. One or more beneficiaries of the Policy may be appointed by the
policyowner by naming them in the application. Beneficiaries may be appointed in
three classes -- primary, secondary and final. Thereafter the beneficiary may be
changed by the policyowner during the life insured's lifetime by giving written
notice to Manufacturers Life of America in a form satisfactory to it unless an
irrevocable designation has been elected. If the life insured dies and there is
no surviving beneficiary, the policyowner, or the policyowner's estate if the
policyowner is the life insured, will be the beneficiary. If a beneficiary dies
before the seventh day after the death of the life insured, the Company will pay
the insurance benefit as if the beneficiary had died before the life insured.
INCONTESTABILITY. Manufacturers Life of America will not contest the validity
of a Policy after it has been in force during the life insured's lifetime for
two years from the policy date. It will not contest the validity of an increase
in face amount or the addition of a supplementary benefit after such increase or
addition has been in force during the life insured's lifetime for two years. If
a Policy has been reinstated and been in force for less than two years from the
reinstatement date, the Company can contest any misrepresentation of a fact
material to the reinstatement.
MISSTATEMENT OF AGE OR SEX. If the life insured's stated age or sex or both in
the Policy are incorrect, Manufacturers Life of America will change the face
amount of insurance so that the death benefit will be that which the most recent
monthly charge for the cost of insurance would have bought for the correct age
and sex.
SUICIDE EXCLUSION. If the life insured, whether sane or insane, dies by suicide
within one year from the policy date, Manufacturers Life of America will pay
only the premiums paid less any partial withdrawals of the Net Cash Surrender
Value and any amount in the Loan Account. If the life insured should die by
suicide within one year after a face amount increase, the death benefit for the
increase will be limited to the monthly deduction for the increase.
ASSIGNMENT. Manufacturers Life of America will not be bound by an assignment
until it receives a copy of it at its Service Office. Manufacturers Life of
America assumes no responsibility for the validity or effects of any assignment.
WHEN ARE PROCEEDS PAID?
As long as the Policy is in force, Manufacturers Life of America will ordinarily
pay any policy loans, partial withdrawals, Net Cash Surrender Value or any
insurance benefit within seven days after receipt at the Manufacturers Life of
America Service Office of all the documents required for such a payment. The
Company may delay the payment of any policy loans, partial withdrawals, Net Cash
Surrender Value or the portion of any insurance benefit that depends on
Investment Account values for up to six months if such payments are based on
values which do not depend on the investment performance of the sub-accounts;
otherwise for any period during which the New York Stock Exchange is closed for
trading (except for normal holiday closings) or when the Securities and Exchange
Commission has determined that a state of emergency exists which may make such
payment impracticable.
WHAT REPORTS WILL BE SENT TO POLICYOWNERS?
Within 30 days after each policy anniversary, Manufacturers Life of America will
send the policyowner a statement showing, among other things, the amount of the
death benefit, the Policy Value and its allocation
35
among the Investment Accounts, the Guaranteed Interest Account and the Loan
Account, the value of the units in each Investment Account to which the Policy
Value is allocated, any Loan Account balance and any interest charged since the
last report, the premiums paid and policy transactions made during the period
since the last statement and any other information required by law.
Each policyowner will also be sent an annual and a semi-annual report for
Manufacturers Investment Trust which will include a list of the securities held
in each Portfolio as required by the 1940 Act.
OTHER MATTERS
WHAT IS THE FEDERAL TAX TREATMENT OF POLICIES?
The following summary provides a general description of the federal income tax
considerations associated with the Policy and does not purport to be complete or
to cover all situations. This discussion is not intended as tax advice. Counsel
or other competent tax advisers should be consulted for more complete
information. This discussion is based upon the Company's understanding of the
present federal income tax laws as they are currently interpreted by the
Internal Revenue Service (the "Service"). No representation is made as to the
likelihood of continuation of the present federal income tax laws nor of the
current interpretations by the Service. WE DO NOT MAKE ANY GUARANTEE REGARDING
THE TAX STATUS OF ANY POLICY OR ANY TRANSACTION REGARDING THE POLICIES.
The Policies may be used in various arrangements, including non-qualified
deferred compensation or salary continuance plans, split dollar insurance plans,
executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if the use of such
Policies in any such arrangement, the value of which depends in part on its tax
consequences, is contemplated, a qualified tax adviser should be consulted for
advice on the tax attributes of the particular arrangement.
TAX STATUS OF THE POLICY
Section 7702 of the Internal Revenue Code of 1986, as amended (the "Code") sets
forth a definition of a life insurance contract for federal tax purposes. The
Secretary of Treasury (the "Treasury") is authorized to prescribe regulations
implementing Section 7702. However, while proposed regulations and other interim
guidance have been issued, final regulations have not been adopted and guidance
as to how Section 7702 is to be applied is limited. If a Policy were determined
not to be a life insurance contract for purposes of Section 7702, such Policy
would not provide the tax advantages normally provided by a life insurance
policy.
With respect to a Policy issued on the basis of a standard rate class, the
Company believes (largely in reliance on IRS Notice 88-128 and the proposed
mortality charge regulations under Section 7702, issued on July 5, 1991) that
such a Policy should meet the Section 7702 definition of a life insurance
contract.
With respect to a Policy that is issued on a substandard basis (i.e., a premium
class involving higher-than-standard mortality risk), there is less guidance, in
particular as to how mortality and other expense requirements of Section 7702
are to be applied in determining whether such a Policy meets the Section 7702
definition of a life insurance contract. Thus, it is not clear whether or not
such a Policy would satisfy Section 7702, particularly if the policyowner pays
the full amount of premiums permitted under the Policy.
If it is subsequently determined that a Policy does not satisfy Section 7702,
the Company may take whatever steps are appropriate and reasonable to attempt to
cause such a Policy to comply with Section 7702. For these reasons, the Company
reserves the right to restrict Policy transactions as necessary to attempt to
qualify it as a life insurance contract under Section 7702.
Section 817(h) of the Code requires that the investments of the Separate Account
be "adequately diversified" in accordance with Treasury regulations in order for
the Policy to qualify as a life insurance contract under Section 7702 of the
Code (discussed above). The Separate Account, through Manufacturers Investment
Trust, intends to comply with the diversification requirements prescribed in
Treas. Reg. Sec. 1.817-5, which affect how Manufacturers Investment Trust's
assets are to be invested. The Company believes that the Separate Account will
thus meet the diversification requirement, and the Company will monitor
continued compliance with the requirement.
36
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 subaccounts without being treated as owners of the
underlying assets."
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that policyowners were not owners of separate account assets. For example, the
Policy has many more Portfolios to which policyowners may allocate premium
payments and Policy Values than were available in the policies described in the
rulings. These differences could result in an owner being treated as the owner
of a pro rata portion of the assets of the Separate Account. In addition, the
Company does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. The Company therefore reserves the right to modify the Policy as
necessary to attempt to prevent an owner from being considered the owner of a
pro rata share of the assets of the Separate Account.
The following discussion assumes that the Policy will qualify as a life
insurance contract for federal income tax purposes.
WHAT IS THE TAX TREATMENT OF POLICY BENEFITS?
IN GENERAL. The Company believes that the proceeds and cash value increases of
a Policy should be treated in a manner consistent with a fixed-benefit life
insurance policy for federal income tax purposes. Thus, the death benefit under
the Policy should be excludable from the gross income of the beneficiary under
Section 101(a)(1) of the Code.
Depending on the circumstances, the exchange of a Policy, a change in the
Policy's death benefit option, a Policy loan, a partial withdrawal, a surrender,
a change in ownership, a change of insured, the addition of an accelerated death
benefit rider, or an assignment of the Policy may have federal income tax
consequences. In addition, federal, state and local transfer, and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each policyowner or beneficiary.
Generally, the policyowner will not be deemed to be in constructive receipt of
the Policy Value, including increments thereof, until there is a distribution.
The tax consequences of distributions from, and loans taken from or secured by,
a Policy depend on whether the Policy is classified as a "Modified Endowment
Contract." Upon a complete surrender or lapse of a Policy or when benefits are
paid at a Policy's maturity date, if the amount received plus the amount of
indebtedness exceeds the total investment in the Policy, the excess will
generally be treated as ordinary income subject to tax, regardless of whether
the Policy is or is not a Modified Endowment Contract.
MODIFIED ENDOWMENT CONTRACTS. Section 7702A establishes a class of life
insurance contracts designated as "Modified Endowment Contracts," which applies
to Policies entered into or materially changed after June 20, 1988.
Because of the Policy's flexibility, classification as a Modified Endowment
Contract will depend on the individual circumstances of each Policy. In general,
a Policy will be a Modified Endowment Contract if the accumulated premiums paid
at any time during the first seven policy years exceed the sum of the net level
premiums which would have been paid on or before such time if the Policy
provided for paid-up future benefits after the payment of seven level annual
premiums. The determination of whether a Policy will be a Modified Endowment
Contract after a material change generally depends upon the relationship of the
death
37
benefit and Policy Value at the time of such change and the additional premiums
paid in the seven years following the material change. If a premium is received
which would cause the Policy to become a Modified Endowment Contract (MEC)
within 23 days of the next policy anniversary, the Company will not apply the
portion of the premium which would cause MEC status (excess premium) to the
Policy when received. The excess premium will be placed in a suspense account
until the next anniversary date, at which point the excess premium along with
interest, earned on the excess premium at a rate of 3.5% from the date the
premium was received, will be applied to the Policy. The policyowner will be
advised of this action and will be offered the opportunity to have the premium
credited as of the original date received or to have the premium returned. If
the policyowner does not respond, the premium and interest will be applied to
the Policy as of the first day of the next anniversary.
If a premium is received which would cause the Policy to become a MEC more than
23 days prior to the next policy anniversary, the Company will refund any excess
premium to the policyowner. The portion of the premium which is not excess will
be applied as of the date received. The policyowner will be advised of this
action and will be offered the opportunity to return the premium and have it
credited to the account as of the original date received.
If, in connection with the application or issue of the Policy, the policyowner
acknowledges that the Policy is or will become a MEC, excess premiums that would
cause MEC status will be credited as of the date received.
Further, if a transaction occurs which reduces the face amount of the Policy
during the first seven years, the Policy will be retested, retroactive to the
date of purchase, to determine compliance with the seven-pay test based on the
lower face amount. As well, if a reduction of the face amount occurs within
seven years of a material change, the Policy will be retested for compliance
retroactive to the date of the material change. Failure to comply would result
in classification as a Modified Endowment Contract regardless of any efforts by
the Company to provide a payment schedule that will not violate the seven-pay
test.
The rules relating to whether a Policy will be treated as a Modified Endowment
Contract are extremely complex and cannot be adequately described in the limited
confines of this summary. Therefore, a current or prospective policyowner should
consult with a competent adviser to determine whether a transaction will cause
the Policy to be treated as a Modified Endowment Contract.
DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS.
Policies classified as Modified Endowment Contracts will be subject to the
following tax rules: First, all partial withdrawals from such a Policy are
treated as ordinary income subject to tax up to the amount equal to the excess
(if any) of the Policy Value immediately before the distribution over the
investment in the Policy (described below) at such time. Second, loans taken
from or secured by such a Policy are treated as partial withdrawals from the
Policy and taxed accordingly. Past-due loan interest that is added to the loan
amount is treated as a loan. Third, a 10% additional income tax is imposed on
the portion of any distribution (including distributions upon surrender) from,
or loan taken from or secured by, such a Policy that is included in income
except where the distribution or loan is made on or after the policyowner
attains age 59 1/2, is attributable to the policyowner's becoming disabled, or
is part of a series of substantially equal periodic payments for the life (or
life expectancy) of the policyowner or the joint lives (or joint life
expectancies) of the policyowner and the policyowner's beneficiary.
DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS. A
distribution from a Policy that is not a Modified Endowment Contract is
generally treated as a tax-free recovery by the policyowner of the investment in
the Policy (described below) to the extent of such investment in the Policy, and
as a distribution of taxable income only to the extent the distribution exceeds
the investment in the Policy. An exception to this general rule occurs in the
case of a decrease in the Policy's death benefit or any other change that
reduces benefits under the Policy in the first 15 years after the Policy is
issued and that results in a cash distribution to the policyowner in order for
the Policy to continue complying with the Section 7702 definitional limits. Such
a cash distribution will be taxed in whole or in part as ordinary income (to the
extent of any gain in the Policy) under rules prescribed in Section 7702.
Loans from, or secured by, a Policy that is not a Modified Endowment Contract
are not treated as distributions. Instead, such loans are treated as
indebtedness of the policyowner. Select Loans may, however, be treated as a
distribution.
38
Finally, neither distributions (including distributions upon surrender) nor
loans from, or secured by, a Policy that is not a Modified Endowment Contract
are subject to the 10% additional tax.
POLICY LOAN INTEREST. Generally, personal interest paid on any loan under a
Policy which is owned by an individual is not deductible. In addition, except
for the transition rules described in the paragraph below, interest on any loan
under a Policy owned by a taxpayer and covering the life of any individual who
is an officer or employee of or is financially interested in the business
carried on by the taxpayer will not be tax deductible unless the employee is a
key person within the meaning of Section 264 of the Code. A deduction will not
be permitted for interest on a loan under a policy held on the life of a key
person to the extent the aggregate of such loans with respect to contracts
covering the key person exceeds $50,000. The number of employees who can qualify
as key persons depends in part on the size of the employer but cannot exceed 20
individuals.
For policies issued after June 20, 1986 and prior to January 1, 1994 a
transition rule permits all or a portion of the interest paid on policy debt
incurred before January 1, 1996 to be deducted. For policies issued in 1994 or
1995 the transition rule applies to indebtedness incurred before January 1,
1997. To be deducted the interest must be paid or accrued prior to January 1,
1999, and must meet other rules contained in Section 264 of the Code and section
501 of the Health Insurance Portability and Accountability Act of 1996.
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 bears to the average adjusted bases for all assets of the taxpayer.
If the taxpayer is not the owner, but is the direct or indirect beneficiary
under the contract, then the amount of unborrowed cash value of the policy taken
into account in computing the portion of the taxpayer's interest expense
allocable to unborrowed policy cash values cannot exceed the benefit to which
the taxpayer is directly or indirectly entitled under the policy.
INVESTMENT IN THE POLICY. Investment in the Policy means (i) the aggregate
amount of any premiums or other consideration paid for a Policy, minus (ii) the
aggregate amount received under the Policy which has been excluded from gross
income of the policyowner (except that the amount of any loan from, or secured
by, a Policy that is a Modified Endowment Contract, to the extent such amount
has been excluded from gross income, will be disregarded), plus (iii) the amount
of any loan from, or secured by, a Policy that is a Modified Endowment Contract
to the extent that such amount has been included in the gross income of the
policyowner.
MULTIPLE POLICIES. All Modified Endowment Contracts that are issued by the
Company (or its affiliates) to the same policyowner during any calendar year are
treated as one Modified Endowment Contract for purposes of determining the
amount includible in the gross income under Section 72(e) of the Code.
WHAT ARE THE COMPANY'S TAX CONSIDERATIONS?
As a result of the Omnibus Budget Reconciliation Act of 1990, insurance
companies are generally required to capitalize and amortize certain policy
acquisition expenses over a 10-year period rather than currently deducting such
expenses. This treatment applies to the deferred acquisition expenses of a
Policy and results in a significantly higher corporate income tax liability for
the Company. The Company makes a charge to premiums to compensate it for the
anticipated higher corporate income taxes.
At the present time, the Company makes no charge to the Separate Account for any
federal, state or local taxes that the Company incurs that may be attributable
to such Account or to the Policies. The Company, however, reserves the right in
the future to make a charge for any such tax or other economic burden resulting
from the application of the tax laws that it determines to be properly
attributable to the Separate Account or to the Policies.
39
WHO SELLS THE POLICIES AND WHAT ARE THE SALES COMMISSIONS?
ManEquity, Inc., an indirect wholly-owned subsidiary of Manufacturers Life, will
act as the principal underwriter of, and continuously offer, the Policies
pursuant to a Distribution Agreement with Manufacturers Life of America.
ManEquity, Inc. is registered as a broker-dealer under the Securities Exchange
Act of 1934 and is a member of the National Association of Securities Dealers.
The Policies will be sold by registered representatives of either ManEquity,
Inc. or other broker-dealers having distribution agreements with ManEquity, Inc.
who are also authorized by state insurance departments to do so. A registered
representative will receive first-year commissions not to exceed 50% of premiums
paid up to the "target commissionable premium," commissions of 5% of premiums in
excess thereof (3% prior to October 1, 1996) and, on and after the third
anniversary, 0.15% of the Policy Value per annum. In addition, representatives
may be eligible for bonuses of up to 90% of first-year commissions.
Representatives who meet certain productivity standards with regard to the sale
of the Policies and certain other policies issued by Manufacturers Life of
America or Manufacturers Life will be eligible for additional compensation.
WHAT RESPONSIBILITIES HAS MANUFACTURERS LIFE ASSUMED?
Manufacturers Life and Manufacturers USA have entered into an agreement with
ManEquity, Inc. pursuant to which Manufacturers Life or Manufacturers USA, on
behalf of ManEquity, Inc., will pay the sales commissions in respect of the
Policies and certain other policies issued by Manufacturers Life of America,
prepare and maintain all books and records required to be prepared and
maintained by ManEquity, Inc. with respect to the Policies and such other
policies, and send all confirmations required to be sent by ManEquity, Inc. with
respect to the Policies and such other policies. ManEquity, Inc. will promptly
reimburse Manufacturers Life or Manufacturers USA for all sales commissions paid
by Manufacturers Life or Manufacturers USA and will pay Manufacturers Life or
Manufacturers USA for their other services under the agreement in such amounts
and at such times as agreed to by the parties.
Manufacturers Life and Manufacturers USA have also entered into a Service
Agreement with Manufacturers Life of America pursuant to which Manufacturers
Life and Manufacturers USA will provide to Manufacturers Life of America all
issue, administrative, general services and recordkeeping functions on behalf of
Manufacturers Life of America with respect to all of its insurance policies
including the Policies.
Finally, Manulife Reinsurance Corporation (U.S.A.) has entered into a Stoploss
Reinsurance Agreement with Manufacturers Life of America under which Manulife
Reinsurance Corporation (U.S.A.) reinsures all aggregate claims in excess of
110% of the expected claims for all flexible premium variable life insurance
policies issued by Manufacturers Life of America. Under the agreement
Manufacturers Life of America will automatically reinsure the risk for any one
life up to a maximum of $7,500,000, except in the case of aviation risks where
the maximum will be $5,000,000. However, Manufacturers Life of America may also
consider reinsuring any non-aviation risk in excess of $7,500,000 and any
aviation risk in excess of $5,000,000.
WHAT ARE THE VOTING RIGHTS?
As stated above, all of the assets held in the sub-accounts of the Separate
Account will be invested in shares of a particular Portfolio of Manufacturers
Investment Trust. Manufacturers Life of America is the legal owner of those
shares and as such has the right to vote upon certain matters that are required
by the 1940 Act to be approved or ratified by the shareholders of a mutual fund
and to vote upon any other matters that may be voted upon at a shareholders'
meeting. However, Manufacturers Life of America will vote shares held in the
sub-accounts in accordance with instructions received from policyowners having
an interest in such sub-accounts. Shares held in each sub-account for which no
timely instructions from policyowners are received, including shares not
attributable to Policies, will be voted by Manufacturers Life of America in the
same proportion as those shares in that sub-account for which instructions are
received. Should the applicable federal securities laws or regulations change so
as to permit Manufacturers Life of America to vote shares held in the Separate
Account in its own right, it may elect to do so.
The number of shares in each sub-account for which instructions may be given by
a policyowner is determined by dividing the portion of the Policy Value derived
from participation in that sub-account, if any, by the value of one share of the
corresponding Manufacturers Trust. The number will be determined as of a date
chosen by
40
Manufacturers Life of America, but not more than 90 days before the
shareholders' meeting. Fractional votes are counted. Voting instructions will be
solicited in writing at least 14 days prior to the meeting.
Manufacturers Life of America may, if required by state insurance officials,
disregard voting instructions if such instructions would require shares to be
voted so as to cause a change in the sub-classification or investment policies
of one or more of the Portfolios, or to approve or disapprove an investment
management contract. In addition, Manufacturers Life of America itself may
disregard voting instructions that would require changes in the investment
policies or investment adviser, provided that Manufacturers Life of America
reasonably disapproves such changes in accordance with applicable federal
regulations. If Manufacturers Life of America does disregard voting
instructions, it will advise policyowners of that action and its reasons for
such action in the next communication to policyowners.
WHO ARE THE DIRECTORS AND OFFICERS OF MANUFACTURERS LIFE OF AMERICA?
The directors and executive officers of Manufacturers Life of America, together
with their principal occupations during the past five years, are as follows:
POSITION WITH
MANUFACTURERS LIFE
NAME OF AMERICA PRINCIPAL OCCUPATION
---- ------------------ --------------------
Sandra M. Cotter (35) Director Attorney 1989-present, Dykema Gossett
James D. Gallagher (43) Director, Secretary, and Vice President, Secretary and General Counsel --
General Counsel January 1997-present, ManUSA; Vice President, Legal
Services U.S. Operations -- January 1996-present, The
Manufacturers Life Insurance Company; Vice President,
Secretary and General Counsel -- 1994-present, The
Manufacturers Life Insurance Company of North America;
Vice President and Associate General Counsel --
1991-1994, The Prudential Insurance Company of America
Bruce Gordon (54) Director Vice President, U.S. Operations -- Pensions --
1990-present, The Manufacturers Life Insurance Company
Donald A. Guloien (41) Director and President Senior Vice President, Business Development
1994-present, The Manufacturers Life Insurance Company;
Vice President, U.S. Individual Business -- 1990-1994,
The Manufacturers Life Insurance Company
Theodore Kilkuskie, Jr. (42) Director, Vice President, Vice President, U.S. Individual Insurance -- January
U.S. Individual Insurance 1997- present, ManUSA; Vice President, U.S. Individual
Insurance -- June 1995-present, The Manufacturers Life
Insurance Company; Executive Vice President, Mutual
Funds -- January 1995-May 1995, State Street Research;
Vice President, Mutual Funds -- 1987-1994, Metropolitan
Life Insurance Company
Joseph J. Pietroski (59) Director Senior Vice President, General Counsel and Corporate
Secretary -- 1988-present, The Manufacturers Life
Insurance Company
John D. Richardson (60) Chairman and Director Executive Vice President and General Manager, U.S.
Operations 1995-present, The Manufacturers Life
Insurance Company; Senior Vice President and General
Manager, Canadian Operations 1992-1994
John R. Ostler (45) Vice President and Treasurer Financial Vice President -- 1992-present, The
Manufacturers Life Insurance Company
Douglas H. Myers (43) Vice President, Finance and Assistant Vice President and Controller, U.S.
Controller Operations -- 1988-present, The Manufacturers Life
Insurance Company
Victor Apps (49) Senior Vice President, Asia Senior Vice President and General Manager, Greater
China Division -- 1995-present, The Manufacturers Life
Insurance Company; Vice President and General Manger,
Greater China Division -- 1993-1995, The Manufacturers
Life Insurance Company; International Vice President --
1988-1993, Asia Pacific Division, The Manufacturers
Life Insurance Company
41
POSITION WITH
MANUFACTURERS LIFE
NAME OF AMERICA PRINCIPAL OCCUPATION
---- ------------------ --------------------
Felix Chee (51) Vice President, Investments Executive Vice President -- 1997 to present, The
Manufacturers Life Insurance Company; Chief Investment
Officer -- 1997 to present, The Manufacturers Life
Insurance Company, Senior Vice President and Treasurer
-- 1993-1994, The Manufacturers Life Insurance Company,
Senior Vice President, Corporate Finance -- April 1993
to September 1993, Ontario Hydro.
Robert A. Cook (43) Vice President, Marketing Vice President, Product Management -- 1996-present, The
Manufacturers Life Insurance Company; Sales and
Marketing Director, U.S. Division 1994-1995, The
Manufacturers Life Insurance Company; Vice President,
Corporation Strategic Review -- 1992-1993, The
Manufacturers Life Insurance Company
Hugh C. McHaffie (39) Vice President Vice President, U.S. Annuities and Product Development
--1996 to present, The Manufacturers Life Insurance
Company; Vice President U.S. Annuities and Product
Development -- 1994 to present, The Manufacturers Life
Insurance Company of North America; Product Development
Executive -- 1990 to 1994, The Manufacturers Life
Insurance Company of North America.
John G. Vrysen (42) Vice President and Appointed Vice President and Chief Financial Officer, U.S.
Actuary Operations -- 1996 to present, The Manufacturers Life
Insurance Company, Vice President and Chief Actuary --
1986 to present, The Manufacturers Life Insurance
Company of North America.
WHAT STATE REGULATIONS APPLY?
Manufacturers Life of America is subject to regulation and supervision by the
Michigan Department of Insurance, which periodically examines its financial
condition and operations. It is also subject to the insurance laws and
regulations of all jurisdictions in which it is authorized to do business. The
Policies have been filed with insurance officials, and meet all standards set by
law, in each jurisdiction where they are sold.
Manufacturers Life of America is required to submit annual statements of its
operations, including financial statements, to the insurance departments of the
various jurisdictions in which it does business for the purposes of determining
solvency and compliance with local insurance laws and regulations.
IS THERE ANY LITIGATION PENDING?
No litigation is pending that would have a material effect upon the Separate
Account or Manufacturers Investment Trust.
WHERE CAN FURTHER INFORMATION BE FOUND?
A registration statement under the Securities Act of 1933 has been filed with
the S.E.C. relating to the offering described in this prospectus. This
prospectus does not include all the information set forth in the registration
statement. The omitted information may be obtained from the S.E.C.'s principal
office in Washington, D.C. upon payment of the prescribed fee.
For further information you may also contact Manufacturers Life of America's
Service Office, the address and telephone number of which are on the first page
of this prospectus.
42
LEGAL CONSIDERATIONS
On July 6, 1983, the Supreme Court of The United States held in Arizona
Governing Committee v. Norris that certain annuity benefits provided by
employers' retirement and fringe benefit programs may not, under Title VII of
the Civil Rights Act of 1964, vary between men and women. Unless requested by
the applicant, the Policy which will be issued by Manufacturers Life of America
will be based on actuarial tables which distinguish between men and women and
thus provide different benefits to men and women of the same age. Accordingly,
employers and employee organizations should consider, in consultation with legal
counsel, the effect of Norris or any other applicable law on any
employment-related insurance benefit program before purchasing a Policy. If
requested by the applicant, Manufacturers Life of America may offer the Policy
with provisions based on actuarial tables that do not differentiate on the basis
of sex to such prospective purchasers in states where the unisex version of the
Policy has been approved.
The State of Montana currently prohibits the use of actuarial tables that
distinguish between men and women in determining premiums and policy benefits
for policies issued on the life of any of its residents. Consequently, a Policy
will be issued pursuant to the offer contained in this prospectus to a Montana
resident having premiums and benefits which are based on actuarial tables that
do not differentiate on the basis of sex.
LEGAL MATTERS
The legal validity of the policies has been passed on by James D. Gallagher,
Esq., Secretary and General Counsel of Manufacturers Life of America. Jones &
Blouch L.L.P., Washington D.C., has passed on certain matters relating to the
federal securities laws.
EXPERTS
The financial statements for the period ending December 31, 1997 of The
Manufacturers Life Insurance Company of America and Separate Account Four of the
The Manufacturers Life Insurance Company of America appearing in this prospectus
have been audited by Ernst & Young LLP, independent auditors to the extent
indicated in their reports thereon also appearing elsewhere herein. Such
financial statements have been included herein in reliance upon such reports
given upon the authority of such firm as experts in auditing and accounting.
YEAR 2000 ISSUES
Preparing computer systems to deal with Year 2000 risk has become a major issue
for businesses throughout the world. Within the group of companies made up of
Manufacturers Life and its subsidiaries ("Manulife Financial"), a group-wide
program has been underway since 1996 to make all critical systems compliant by
the end of 1998 and other systems compliant by the end of 1999. Included in this
program are all systems applicable to and shared by the Company with Manulife
Financial. Based on a detailed assessment, Manulife Financial determined that a
portion of its software needs to be modified or replaced so that its computer
systems will function properly into the Year 2000 and beyond. Like most
companies, the Year 2000 issue represents a significant challenge for Manulife
Financial, and extensive resources have been dedicated to modifying existing
software and to converting to new software. However, there can be no assurances
that Manulife Financial's systems, nor those of other companies on which
Manulife Financial relies, will be fully converted on a timely basis and
therefore that all adverse effects on the Company due to the Year 2000 risk will
be avoided. Manulife Financial is presently consulting with vendors, customers,
subsidiaries, third-parties and other businesses with which it deals to ensure
that no material aspect of its, or the Company's, operations will be hindered by
the Year 2000 risk.
The costs of the project and the date on which Manulife Financial plans to
complete the modifications are based on management's best estimates and are
subject to some uncertainty. Manulife Financial is using both internal and
external resources to reprogram, or replace, and test the software for Year 2000
modifications. The total cost of this program to Manulife Financial is estimated
to be $64 million, comprised of $55 million for specifically budgeted programs
and $9 million for general contingencies. Manulife Financial has incurred $15
million as at December 31, 1997 of which the Company will receive an allocation
due to its shared systems. The costs allocated are not expected to have a
material effect on the net operating income of the Company.
43
FINANCIAL STATEMENTS
The financial statements of Manufacturers Life of America included herein should
be distinguished from the financial statements of the Account and should be
considered only as bearing upon the ability of Manufacturers Life of America to
meet its obligations under the Policies.
44
APPENDIX
WHAT ARE SOME ILLUSTRATIONS OF POLICY VALUES, CASH SURRENDER VALUES AND DEATH
BENEFITS?
The following tables have been prepared to help show how values under the Policy
change with investment performance. The tables include both Policy Values and
Cash Surrender Values as well as Death Benefits. The Policy Value is the sum of
the values in the Investment Accounts, as the tables assume no values in the
Guaranteed Interest Account or Loan Account. The Cash Surrender Value is the
Policy Value less the deferred sales charge and deferred underwriting charge.
The tables illustrate how Policy Values and Cash Surrender Values, which reflect
the deduction of all applicable charges including the premium tax charge and the
sales charge, and death benefits of the Policy on an insured of a given age
would vary over time if the return on the assets of the Portfolios was a
uniform, gross, after-tax, annual rate of 0%, 6% or 12%. The Policy Values,
death benefits and Cash Surrender Values would be different from those shown if
the returns averaged 0%, 6% or 12%, but fluctuated over and under those averages
throughout the years.
The amounts shown for the Policy Value, death benefit and Cash Surrender Value
as of each policy year reflect the fact that the net investment return on the
assets held in the sub-accounts is lower than the gross, after-tax return. This
is because the daily charge to the Separate Account for assuming mortality and
expense risks (0.65% on an annual basis) and the expenses and fees borne by
Manufacturers Investment Trust are deducted from the gross return. The
illustrations reflect an average of those Portfolios' current expenses, which is
approximately 0.938% per annum. The gross annual rates of return of 0%, 6% and
12% correspond to approximate net annual rates of return of -1.577%, 4.328%, and
10.234%.
The tables assume that no premiums have been allocated to the Guaranteed
Interest Account, that planned premiums are paid on the policy anniversary and
that no transfers, partial withdrawals, policy loans, changes in death benefit
options or changes in the face amount have been made. The tables reflect the
fact that no charges for federal, state or local taxes are currently made
against the Separate Account. If such a charge is made in the future, it will
take a higher gross rate of return to produce after-tax returns of 0%, 6% and
12% than it does now.
There are two tables shown for each combination of age and death benefit option
for male nonsmokers, one based on current cost of insurance charges assessed by
the Company and the other based on the maximum cost of insurance charges based
on the 1980 Commissioners Standard Ordinary Smoker/Nonsmoker Mortality Tables.
Current cost of insurance charges are not guaranteed and may be changed. Upon
request, Manufacturers Life of America will furnish a comparable illustration
based on the proposed life insured's age, sex and risk class, any additional
ratings and the death benefit option, face amount and planned premium requested.
Illustrations for smokers would show less favorable results that the
illustration shown below.
From time to time, in advertisements or sales literature for the Policies that
quote performance data of one or more of the Portfolios, the Company may include
cash surrender values and death benefit figures computed using the same
methodology as that used in the following illustrations, but with the average
annual total return of the Portfolio for which performance data is shown in the
advertisement replacing the hypothetical rates of return shown in the following
tables.
The Policies were first sold to the public on December 7, 1987. However, total
return data may be advertised for as long a period of time as the underlying
Portfolio has been in existence. The results for any period prior to the
Policies being offered would be calculated as if the Policies had been offered
during that period of time, with all charges assumed to be the same as for the
first full year the Policies were offered.
THE FOLLOWING ILLUSTRATIONS OF POLICY VALUES, CASH SURRENDER
VALUES AND DEATH BENEFITS ARE APPLICABLE TO POLICIES PURCHASED ON
OR AFTER OCTOBER 1, 1996.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 25
$100,000 FACE AMOUNT DEATH BENEFIT OPTION 1
$575 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 $ 604 $ 320 $ 0 $100,000 $ 345 $ 0 $100,000 $ 370 $ 0 $100,000
2 1,238 638 0 100,000 709 0 100,000 783 16 100,000
3 1,903 955 188 100,000 1,092 325 100,000 1,241 474 100,000
4 2,602 1,268 501 100,000 1,493 726 100,000 1,748 981 100,000
5 3,336 1,576 809 100,000 1,912 1,145 100,000 2,307 1,540 100,000
6 4,107 1,880 1,190 100,000 2,349 1,659 100,000 2,924 2,234 100,000
7 4,916 2,177 1,564 100,000 2,804 2,190 100,000 3,603 2,989 100,000
8 5,765 2,468 1,931 100,000 3,277 2,740 100,000 4,350 3,813 100,000
9 6,657 2,750 2,289 100,000 3,766 3,306 100,000 5,170 4,709 100,000
10 7,594 3,022 2,638 100,000 4,271 3,887 100,000 6,068 5,685 100,000
15 13,028 4,235 4,235 100,000 7,062 7,062 100,000 12,074 12,074 100,000
20 19,964 5,069 5,069 100,000 10,213 10,213 100,000 21,584 21,584 100,000
25 28,815 5,636 5,636 100,000 13,927 13,927 100,000 37,033 37,033 100,000
30 40,112 5,447 5,447 100,000 17,844 17,844 100,000 62,005 62,005 100,000
- - ---------------
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the policy
anniversary, (b) no policy loan has been made, (c) no partial withdrawal of
the Cash Surrender Value has been made and (d) no premiums have been
allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old, or two years after
the policy date if later, except for Policies issued in Massachusetts. The
death benefit guarantee for Policies issued in Massachusetts will expire
five years after the policy date.
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.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 25
$100,000 FACE AMOUNT DEATH BENEFIT OPTION 1
$575 ANNUAL PLANNED PREMIUM
ASSUMING GUARANTEED CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
----------------------- ----------------------- -----------------------
End of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender Death
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3) Benefit
1 $ 604 $ 320 $ 0 $100,000 $ 345 $ 0 $100,000 $ 370 $ 0 $100,000
2 1,238 636 0 100,000 706 0 100,000 780 13 100,000
3 1,903 949 182 100,000 1,086 319 100,000 1,235 467 100,000
4 2,602 1,260 493 100,000 1,484 717 100,000 1,738 971 100,000
5 3,336 1,566 799 100,000 1,900 1,133 100,000 2,294 1,527 100,000
6 4,107 1,868 1,177 100,000 2,335 1,645 100,000 2,907 2,217 100,000
7 4,916 2,162 1,549 100,000 2,786 2,172 100,000 3,582 2,968 100,000
8 5,765 2,450 1,913 100,000 3,254 2,717 100,000 4,322 3,785 100,000
9 6,657 2,728 2,268 100,000 3,739 3,279 100,000 5,135 4,675 100,000
10 7,594 2,997 2,613 100,000 4,239 3,855 100,000 6,027 5,643 100,000
15 13,028 4,150 4,150 100,000 6,952 6,952 100,000 11,928 11,928 100,000
20 19,964 4,870 4,870 100,000 9,945 9,945 100,000 21,208 21,208 100,000
25 28,815 4,978 4,978 100,000 13,085 13,085 100,000 35,938 35,938 100,000
30 40,112 4,145 4,145 100,000 16,083 16,083 100,000 59,686 59,686 100,000
- - ---------------
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the policy
anniversary, (b) no policy loan has been made, (c) no partial withdrawal of
the Cash Surrender Value has been made and (d) no premiums have been
allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old, or two years after
the policy date if later, except for Policies issued in Massachusetts. The
death benefit guarantee for Policies issued in Massachusetts will expire
five years after the policy date.
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.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 25
$100,000 FACE AMOUNT DEATH BENEFIT OPTION 2
$575 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 $ 604 $ 319 $ 0 $100,319 $ 344 $ 0 $100,344 $ 370 $ 0 $100,370
2 1,238 637 0 100,637 707 0 100,707 781 14 100,781
3 1,903 952 185 100,952 1,088 321 101,088 1,237 470 101,237
4 2,602 1,263 496 101,263 1,487 720 101,487 1,741 973 101,741
5 3,336 1,569 802 101,569 1,903 1,136 101,903 2,296 1,528 102,296
6 4,107 1,870 1,180 101,870 2,337 1,646 102,337 2,908 2,217 102,908
7 4,916 2,164 1,551 102,164 2,787 2,173 102,787 3,579 2,966 103,579
8 5,765 2,451 1,914 102,451 3,254 2,716 103,254 4,317 3,780 104,317
9 6,657 2,729 2,269 102,729 3,736 3,275 103,736 5,125 4,665 105,125
10 7,594 2,996 2,613 102,996 4,233 3,849 104,233 6,010 5,626 106,010
15 13,028 4,178 4,178 104,178 6,957 6,957 106,957 11,878 11,878 111,878
20 19,964 4,959 4,959 104,959 9,964 9,964 109,964 21,011 21,011 121,011
25 28,815 5,456 5,456 105,456 13,424 13,424 113,424 35,576 35,576 135,576
30 40,112 5,155 5,155 105,155 16,824 16,824 116,824 58,263 58,263 158,263
- - ---------------
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the policy
anniversary, (b) no policy loan has been made, (c) no partial withdrawal of
the Cash Surrender Value has been made and (d) no premiums have been
allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old, or two years after
the policy date if later, except for Policies issued in Massachusetts. The
death benefit guarantee for Policies issued in Massachusetts will expire
five years after the policy date.
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.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 25
$100,000 FACE AMOUNT DEATH BENEFIT OPTION 2
$575 ANNUAL PLANNED PREMIUM
ASSUMING GUARANTEED CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
----------------------- ----------------------- -----------------------
End of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender Death
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3) Benefit
1 $ 604 $ 319 $ 0 $100,319 $ 344 $ 0 $100,344 $ 370 $ 0 $100,370
2 1,238 634 0 100,634 704 0 100,704 778 11 100,778
3 1,903 946 179 100,946 1,082 315 101,082 1,230 463 101,230
4 2,602 1,255 488 101,255 1,478 711 101,478 1,731 964 101,731
5 3,336 1,559 791 101,559 1,891 1,124 101,891 2,282 1,515 102,282
6 4,107 1,858 1,167 101,858 2,322 1,631 102,322 2,890 2,200 102,890
7 4,916 2,149 1,535 102,149 2,768 2,154 102,768 3,557 2,944 103,557
8 5,765 2,433 1,896 102,433 3,231 2,694 103,231 4,289 3,752 104,289
9 6,657 2,707 2,247 102,707 3,708 3,248 103,708 5,091 4,630 105,091
10 7,594 2,971 2,587 102,971 4,200 3,816 104,200 5,968 5,584 105,968
15 13,028 4,091 4,091 104,091 6,842 6,842 106,842 11,724 11,724 111,724
20 19,964 4,753 4,753 104,753 9,681 9,681 109,681 20,599 20,599 120,599
25 28,815 4,771 4,771 104,771 12,504 12,504 112,504 34,250 34,250 134,250
30 40,112 3,816 3,816 103,816 14,877 14,877 114,877 55,177 55,177 155,177
- - ---------------
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the policy
anniversary, (b) no policy loan has been made, (c) no partial withdrawal of
the Cash Surrender Value has been made and (d) no premiums have been
allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old, or two years after
the policy date if later, except for Policies issued in Massachusetts. The
death benefit guarantee for Policies issued in Massachusetts will expire
five years after the policy date.
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.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 45
$100,000 FACE AMOUNT DEATH BENEFIT OPTION 1
$1,325 ANNUAL PLANNED PREMIUM
ASSUMING 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 $ 1,391 $ 996 $ 0 $100,000 $ 1,063 $ 40 $100,000 $ 1,129 $ 107 $100,000
2 2,852 1,901 341 100,000 2,094 534 100,000 2,295 735 100,000
3 4,386 2,725 1,165 100,000 3,102 1,542 100,000 3,510 1,950 100,000
4 5,996 3,498 1,938 100,000 4,114 2,554 100,000 4,810 3,250 100,000
5 7,688 4,231 2,671 100,000 5,143 3,583 100,000 6,217 4,657 100,000
6 9,463 4,891 3,487 100,000 6,156 4,752 100,000 7,708 6,304 100,000
7 11,328 5,522 4,274 100,000 7,194 5,946 100,000 9,336 8,088 100,000
8 13,285 6,130 5,038 100,000 8,267 7,175 100,000 11,123 10,031 100,000
9 15,341 6,686 5,750 100,000 9,346 8,410 100,000 13,057 12,121 100,000
10 17,499 7,188 6,408 100,000 10,430 9,650 100,000 15,154 14,374 100,000
15 30,021 8,791 8,791 100,000 15,855 15,855 100,000 28,774 28,774 100,000
20 46,003 8,074 8,074 100,000 20,483 20,483 100,000 49,763 49,763 100,000
25 66,400 4,632 4,632 100,000 24,006 24,006 100,000 84,943 84,943 100,000
30 92,433 0(4) 0(4) 0(4) 23,052 23,052 100,000 143,776 143,776 153,841
- - ---------------
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the policy
anniversary, (b) no policy loan has been made, (c) no partial withdrawal of
the Cash Surrender Value has been made and (d) no premiums have been
allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old, or two years after
the policy date if later, except for Policies issued in Massachusetts The
death benefit guarantee for Policies issued in Massachusetts will expire
five years after the policy date.
(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.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 45
$100,000 FACE AMOUNT DEATH BENEFIT OPTION 1
$1,325 ANNUAL PLANNED PREMIUM
ASSUMING GUARANTEED CHARGES
0% Hypothetical 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(2) Benefit Value Value(3) Benefit
1 $ 1,391 $ 996 $ 0 $100,000 $ 1,063 $ 40 $100,000 $ 1,129 $ 107 $100,000
2 2,852 1,800 240 100,000 1,990 430 100,000 2,188 628 100,000
3 4,386 2,566 1,006 100,000 2,931 1,371 100,000 3,328 1,768 100,000
4 5,996 3,293 1,733 100,000 3,887 2,327 100,000 4,560 3,000 100,000
5 7,688 3,979 2,419 100,000 4,854 3,294 100,000 5,888 4,328 100,000
6 9,463 4,621 3,217 100,000 5,832 4,428 100,000 7,322 5,918 100,000
7 11,328 5,216 3,968 100,000 6,815 5,567 100,000 8,868 7,620 100,000
8 13,285 5,756 4,664 100,000 7,798 6,706 100,000 10,532 9,440 100,000
9 15,341 6,239 5,303 100,000 8,776 7,840 100,000 12,325 11,389 100,000
10 17,499 6,656 5,876 100,000 9,742 8,962 100,000 14,254 13,474 100,000
15 30,021 7,569 7,569 100,000 14,184 14,184 100,000 26,413 26,413 100,000
20 46,003 5,693 5,693 100,000 17,081 17,081 100,000 44,627 44,627 100,000
25 66,400 0(4) 0(4) 100,000(4) 16,008 16,008 100,000 73,778 73,778 100,000
30 92,433 0(5) 0(5) 0(5) 5,652 5,652 100,000 124,562 124,562 133,282
- - ---------------
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the policy
anniversary, (b) no policy loan has been made, (c) no partial withdrawal of
the Cash Surrender Value has been made and (d) no premiums have been
allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old, or two years after
the policy date if later, except for Policies issued in Massachusetts. The
death benefit guarantee for Policies issued in Massachusetts will expire
five years after the policy date.
(4) Provided the Minimum Premium Requirement has been met, the death benefit
guarantee will have kept the Policy in force until this point, i.e. the
policy anniversary on which the life insured is 70 years old, at which time
the death benefit guarantee will expire and in the absence of additional
premium payments the Policy will lapse.
(5) In the absence of additional premium payments, the Policy will lapse.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE
HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED
A REPRESENTATION 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.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 45
$100,000 FACE AMOUNT DEATH BENEFIT OPTION 2
$1,325 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 $ 1,391 $ 994 $ 0 $100,994 $ 1,061 $ 38 $101,061 $ 1,127 $ 105 $101,127
2 2,852 1,894 334 101,894 2,086 526 102,086 2,287 727 102,287
3 4,386 2,709 1,149 102,709 3,083 1,523 103,083 3,488 1,928 103,488
4 5,996 3,468 1,908 103,468 4,078 2,518 104,078 4,768 3,208 104,768
5 7,688 4,184 2,624 104,184 5,084 3,525 105,084 6,145 4,585 106,145
6 9,463 4,821 3,417 104,821 6,065 4,661 106,065 7,591 6,187 107,591
7 11,328 5,424 4,176 105,424 7,062 5,814 107,062 9,160 7,912 109,160
8 13,285 6,001 4,909 106,001 8,086 6,994 108,086 10,871 9,779 110,871
9 15,341 6,520 5,584 106,520 9,104 8,168 109,104 12,705 11,769 112,705
10 17,499 6,979 6,199 106,979 10,111 9,331 110,111 14,671 13,891 114,671
15 30,021 8,258 8,258 108,258 14,847 14,847 114,847 26,871 26,871 126,871
20 46,003 7,005 7,005 107,005 17,874 17,874 117,874 43,449 43,449 143,449
25 66,400 2,994 2,994 102,994 18,360 18,360 118,360 66,706 66,706 166,706
30 92,433 0(4) 0(4) 0(4) 11,721 11,721 111,721 96,234 96,234 196,234
- - ---------------
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the policy
anniversary, (b) no policy loan has been made, (c) no partial withdrawal of
the Cash Surrender Value has been made and (d) no premiums have been
allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old, or two years after
the policy date if later, except for Policies issued in Massachusetts. The
death benefit guarantee for Policies issued in Massachusetts will expire
five years after the policy date.
(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.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 45
$100,000 FACE AMOUNT DEATH BENEFIT OPTION 2
$1,325 ANNUAL PLANNED PREMIUM
ASSUMING GUARANTEED CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
----------------------- ----------------------- -----------------------
End of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender Death
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3) Benefit
1 $ 1,391 $ 994 $ 0 $100,994 $ 1,061 $ 38 $101,061 $ 1,127 $ 105 $101,127
2 2,852 1,791 231 101,791 1,980 420 101,980 2,177 617 102,177
3 4,386 2,547 987 102,547 2,909 1,349 102,909 3,303 1,743 103,303
4 5,996 3,259 1,699 103,259 3,846 2,286 103,846 4,511 2,951 104,511
5 7,688 3,926 2,366 103,926 4,788 3,229 104,788 5,806 4,246 105,806
6 9,463 4,546 3,142 104,546 5,734 4,330 105,734 7,195 5,791 107,195
7 11,328 5,112 3,864 105,112 6,675 5,427 106,675 8,679 7,431 108,679
8 13,285 5,619 4,527 105,619 7,604 6,512 107,604 10,261 9,169 110,261
9 15,341 6,061 5,125 106,061 8,515 7,580 108,515 11,945 11,009 111,945
10 17,499 6,432 5,652 106,432 9,399 8,619 109,399 13,732 12,952 113,732
15 30,021 6,997 6,997 106,997 13,088 13,088 113,088 24,322 24,322 124,322
20 46,003 4,608 4,608 104,608 14,307 14,307 114,307 37,726 37,726 137,726
25 66,400 0(4) 0(4) 0(4) 10,061 10,061 110,061 52,927 52,927 152,927
30 92,433 0(5) 0(5) 0(5) 0(4) 0(4) 0(4) 66,866 66,866 166,866
- - ---------------
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the policy
anniversary, (b) no policy loan has been made, (c) no partial withdrawal of
the Cash Surrender Value has been made and (d) no premiums have been
allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old, or two years after
the policy date if later, except for Policies issued in Massachusetts. The
death benefit guarantee for Policies issued in Massachusetts will expire
five years after the policy date.
(4) Provided the Minimum Premium Requirement has been met, the death benefit
guarantee will have kept the Policy in force until this point, i.e. the
policy anniversary on which the life insured is 70 years old, at which time
the death benefit guarantee will expire and in the absence of additional
premium payments the Policy will lapse.
(5) In the absence of additional premium payments, the Policy will lapse.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE
HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED
A REPRESENTATION 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.
THE FOLLOWING ILLUSTRATIONS OF POLICY VALUES,
CASH SURRENDER VALUES AND DEATH BENEFITS
ARE APPLICABLE TO POLICIES PURCHASED PRIOR TO
OCTOBER 1, 1996.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 25
$100,000 FACE AMOUNT DEATH BENEFIT OPTION 1
$575 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 $ 604 $ 382 $ 0 $100,000 $ 410 $ 0 $100,000 $ 437 $ 0 $100,000
2 1,238 753 0 100,000 831 64 100,000 913 146 100,000
3 1,903 1,110 343 100,000 1,263 496 100,000 1,429 662 100,000
4 2,602 1,455 687 100,000 1,706 939 100,000 1,991 1,224 100,000
5 3,336 1,787 1,020 100,000 2,162 1,395 100,000 2,604 1,837 100,000
6 4,107 2,106 1,416 100,000 2,630 1,940 100,000 3,272 2,581 100,000
7 4,916 2,413 1,799 100,000 3,111 2,497 100,000 4,000 3,386 100,000
8 5,765 2,709 2,172 100,000 3,606 3,069 100,000 4,797 4,260 100,000
9 6,657 2,996 2,535 100,000 4,118 3,658 100,000 5,672 5,211 100,000
10 7,594 3,269 2,885 100,000 4,644 4,260 100,000 6,627 6,244 100,000
15 13,028 4,423 4,423 100,000 7,480 7,480 100,000 12,941 12,941 100,000
20 19,964 5,164 5,164 100,000 10,648 10,648 100,000 22,922 22,922 100,000
25 28,815 5,316 5,316 100,000 14,035 14,035 100,000 38,837 38,837 100,000
30 40,112 4,671 4,671 100,000 17,491 17,491 100,000 64,665 64,665 101,524
- - ---------------
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the policy
anniversary, (b) no policy loan has been made, (c) no partial withdrawal of
the Cash Surrender Value has been made and (d) no premiums have been
allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old, or two years after
the policy date if later, except for Policies issued in Massachusetts. The
death benefit guarantee for Policies issued in Massachusetts will expire
five years after the policy date..
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.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 25
$100,000 FACE AMOUNT DEATH BENEFIT OPTION 1
$575 ANNUAL PLANNED PREMIUM
ASSUMING GUARANTEED CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
----------------------- ----------------------- -----------------------
End of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender Death
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3) Benefit
1 $ 604 $ 382 $ 0 $100,000 $ 410 $ 0 $100,000 $ 437 $ 0 $100,000
2 1,238 697 0 100,000 774 7 100,000 854 87 100,000
3 1,903 1,010 243 100,000 1,156 389 100,000 1,316 549 100,000
4 2,602 1,320 553 100,000 1,558 791 100,000 1,828 1,061 100,000
5 3,336 1,625 858 100,000 1,977 1,210 100,000 2,393 1,626 100,000
6 4,107 1,926 1,236 100,000 2,415 1,725 100,000 3,017 2,326 100,000
7 4,916 2,220 1,606 100,000 2,870 2,256 100,000 3,702 3,088 100,000
8 5,765 2,506 1,969 100,000 3,342 2,805 100,000 4,455 3,918 100,000
9 6,657 2,784 2,323 100,000 3,831 3,370 100,000 5,282 4,822 100,000
10 7,594 3,052 2,668 100,000 4,335 3,951 100,000 6,189 5,805 100,000
15 13,028 4,201 4,201 100,000 7,072 7,072 100,000 12,194 12,194 100,000
20 19,964 4,918 4,918 100,000 10,094 10,094 100,000 21,647 21,647 100,000
25 28,815 5,023 5,023 100,000 13,273 13,273 100,000 36,665 36,665 100,000
30 40,112 4,188 4,188 100,000 16,323 16,323 100,000 60,903 60,903 100,000
- - ---------------
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the policy
anniversary, (b) no policy loan has been made, (c) no partial withdrawal of
the Cash Surrender Value has been made and (d) no premiums have been
allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old, or two years after
the policy date if later, except for Policies issued in Massachusetts. The
death benefit guarantee for Policies issued in Massachusetts will expire
five years after the policy date.
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.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 25
$100,000 FACE AMOUNT DEATH BENEFIT OPTION 2
$575 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(3) Value Benefit Value Value(3) Benefit
1 $ 604 $ 382 $ 0 $100,382 $ 409 $ 0 $100,409 $ 437 $ 0 $100,437
2 1,238 752 0 100,752 830 63 100,830 911 144 100,911
3 1,903 1,108 340 101,108 1,260 493 101,260 1,426 659 101,426
4 2,602 1,451 684 101,451 1,702 935 101,702 1,986 1,218 101,986
5 3,336 1,781 1,014 101,781 2,155 1,388 102,155 2,595 1,827 102,595
6 4,107 2,098 1,407 102,098 2,619 1,929 102,619 3,257 2,567 103,257
7 4,916 2,401 1,788 102,401 3,095 2,481 103,095 3,979 3,365 103,979
8 5,765 2,694 2,157 102,694 3,585 3,048 103,585 4,767 4,230 104,767
9 6,657 2,976 2,516 102,976 4,090 3,630 104,090 5,630 5,170 105,630
10 7,594 3,244 2,861 103,244 4,607 4,223 104,607 6,572 6,188 106,572
15 13,028 4,363 4,363 104,363 7,370 7,370 107,370 12,736 12,736 112,736
20 19,964 5,045 5,045 105,045 10,378 10,378 110,378 22,298 22,298 122,298
25 28,815 5,105 5,105 105,105 13,438 13,438 113,438 37,094 37,094 137,094
30 40,112 4,336 4,336 104,336 16,267 16,267 116,267 60,067 60,067 160,067
- - ---------------
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the policy
anniversary, (b) no policy loan has been made, (c) no partial withdrawal of
the Cash Surrender Value has been made and (d) no premiums have been
allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old, or two years after
the policy date if later, except for Policies issued in Massachusetts. The
death benefit guarantee for Policies issued in Massachusetts will expire
five years after the policy date.
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.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 25
$100,000 FACE AMOUNT DEATH BENEFIT OPTION 2
$575 ANNUAL PLANNED PREMIUM
ASSUMING GUARANTEED CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
----------------------- ----------------------- -----------------------
End of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender Death
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3) Benefit
1 $ 604 $ 382 $ 0 $100,382 $ 409 $ 0 $100,409 $ 437 $ 0 $100,437
2 1,238 696 0 100,696 772 5 100,772 852 85 100,852
3 1,903 1,007 240 101,007 1,153 386 101,153 1,312 544 101,312
4 2,602 1,315 547 101,315 1,552 784 101,552 1,820 1,053 101,820
5 3,336 1,618 850 101,618 1,968 1,201 101,968 2,381 1,614 102,381
6 4,107 1,916 1,225 101,916 2,402 1,712 102,402 2,999 2,309 102,999
7 4,916 2,206 1,592 102,206 2,852 2,238 102,852 3,677 3,063 103,677
8 5,765 2,489 1,952 102,489 3,318 2,781 103,318 4,421 3,884 104,421
9 6,657 2,762 2,302 102,762 3,799 3,339 103,799 5,236 4,776 105,236
10 7,594 3,025 2,642 103,025 4,295 3,911 104,295 6,128 5,744 106,128
15 13,028 4,141 4,141 104,141 6,960 6,960 106,960 11,985 11,985 111,985
20 19,964 4,799 4,799 104,799 9,825 9,825 109,825 21,023 21,023 121,023
25 28,815 4,814 4,814 104,814 12,682 12,682 112,682 34,940 34,940 134,940
30 40,112 3,855 3,855 103,855 15,097 15,097 115,097 56,299 56,299 156,299
- - ---------------
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the policy
anniversary, (b) no policy loan has been made, (c) no partial withdrawal of
the Cash Surrender Value has been made and (d) no premiums have been
allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old, or two years after
the policy date if later, except for Policies issued in Massachusetts. The
death benefit guarantee for Policies issued in Massachusetts will expire
five years after the policy date.
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.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 45
$100,000 FACE AMOUNT DEATH BENEFIT OPTION 1
$1,325 ANNUAL PLANNED PREMIUM
ASSUMING 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 $ 1,391 $ 894 $ 0 $100,000 $ 957 $ 0 $100,000 $ 1,021 $ 0 $100,000
2 2,852 1,756 196 100,000 1,938 378 100,000 2,128 568 100,000
3 4,386 2,580 1,020 100,000 2,936 1,376 100,000 3,323 1,760 100,000
4 5,996 3,364 1,804 100,000 3,951 2,391 100,000 4,614 3,054 100,000
5 7,688 4,102 2,542 100,000 4,975 3,415 100,000 6,003 4,443 100,000
6 9,463 4,794 3,390 100,000 6,011 4,607 100,000 7,502 6,098 100,000
7 11,328 5,435 4,188 100,000 7,052 5,804 100,000 9,118 7,870 100,000
8 13,285 6,033 4,941 100,000 8,107 7,015 100,000 10,870 9,778 100,000
9 15,341 6,580 5,644 100,000 9,168 8,232 100,000 12,767 11,832 100,000
10 17,499 7,079 6,299 100,000 10,239 9,459 100,000 14,828 14,048 100,000
15 30,021 8,769 8,769 100,000 15,674 15,674 100,000 28,261 28,261 100,000
20 46,003 8,684 8,684 100,000 20,917 20,917 100,000 49,487 49,487 100,000
25 66,400 4,320 4,320 100,000 23,727 23,727 100,000 84,034 84,034 100,000
30 92,433 0(4) 0(4) 0(4) 21,361 21,361 100,000 142,104 142,104 152,051
- - ---------------
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the policy
anniversary, (b) no policy loan has been made, (c) no partial withdrawal of
the Cash Surrender Value has been made and (d) no premiums have been
allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old, or two years after
the policy date if later, except for Policies issued in Massachusetts. The
death benefit guarantee for Policies issued in Massachusetts will expire
five years after the policy date.
(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.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 45
$100,000 FACE AMOUNT DEATH BENEFIT OPTION 1
$1,325 ANNUAL PLANNED PREMIUM
ASSUMING GUARANTEED CHARGES
0% Hypothetical 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 $ 1,391 $ 894 $ 0 $100,000 $ 957 $ 0 $100,000 $ 1,021 $ 0 $100,000
2 2,852 1,699 139 100,000 1,879 319 100,000 2,067 508 100,000
3 4,386 2,466 906 100,000 2,816 1,256 100,000 3,196 1,636 100,000
4 5,996 3,195 1,635 100,000 3,766 2,206 100,000 4,413 2,853 100,000
5 7,688 3,881 2,321 100,000 4,727 3,167 100,000 5,725 4,165 100,000
6 9,463 4,525 3,121 100,000 5,699 4,295 100,000 7,141 5,737 100,000
7 11,328 5,121 3,873 100,000 6,676 5,428 100,000 8,668 7,420 100,000
8 13,285 5,662 4,570 100,000 7,652 6,560 100,000 10,311 9,219 100,000
9 15,341 6,145 5,209 100,000 8,623 7,687 100,000 12,079 11,143 100,000
10 17,499 6,563 5,783 100,000 9,581 8,801 100,000 13,981 13,201 100,000
15 30,021 7,479 7,479 100,000 13,974 13,974 100,000 25,947 25,947 100,000
20 46,003 5,604 5,604 100,000 16,802 16,802 100,000 43,808 43,808 100,000
25 66,400 0(4) 0(4) 100,000(4) 15,615 15,615 100,000 72,260 72,260 100,000
30 92,433 0(5) 0(5) 0(5) 5,050 5,050 100,000 121,959 121,959 130,437
- - ---------------
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the policy
anniversary, (b) no policy loan has been made, (c) no partial withdrawal of
the Cash Surrender Value has been made and (d) no premiums have been
allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old, or two years after
the policy date if later, except for Policies issued in Massachusetts. The
death benefit guarantee for Policies issued in Massachusetts will expire
five years after the policy date.
(4) Provided the Minimum Premium Requirement has been met, the death benefit
guarantee will have kept the Policy in force until this point, i.e. the
policy anniversary on which the life insured is 70 years old, at which time
the death benefit guarantee will expire and in the absence of additional
premium payments the Policy will lapse.
(5) In the absence of additional premium payments, the Policy will lapse.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE
HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED
A REPRESENTATION 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.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 45
$100,000 FACE AMOUNT DEATH BENEFIT OPTION 2
$1,325 ANNUAL PLANNED PREMIUM
ASSUMING CURRENT CHARGES
0% Hypothetical 6% Hypothetical
Gross Investment Return Gross Investment Return
----------------------- -----------------------
End of Accumulated Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit
1 $ 1,391 $ 891 $ 0 $ 100,891 $ 954 $ 0 $ 100,954
2 2,852 1,748 188 101,748 1,929 369 101,929
3 4,386 2,562 1,002 102,562 2,916 1,356 102,916
4 5,996 3,334 1,774 103,334 3,915 2,355 103,915
5 7,688 4,055 2,495 104,055 4,917 3,357 104,917
6 9,463 4,726 3,322 104,726 5,923 4,519 105,923
7 11,328 5,341 4,093 105,341 6,926 5,678 106,926
8 13,285 5,908 4,816 105,908 7,931 6,839 107,931
9 15,341 6,418 5,482 106,418 8,931 7,995 108,931
10 17,499 6,873 6,093 106,873 9,926 9,146 109,926
15 30,021 8,253 8,253 108,253 14,701 14,701 114,701
20 46,003 7,673 7,673 107,673 18,486 18,486 118,486
25 66,400 2,651 2,651 102,651 18,032 18,032 118,032
30 92,433 0(4) 0(4) 0(4) 9,776 9,776 109,776
12% Hypothetical
Gross Investment Return
-----------------------
End of Cash
Policy Policy Surrender Death
Year(1) Value Value(3) Benefit
1 $ 1,018 $ 0 $101,018
2 2,118 558 102,118
3 3,300 1,740 103,300
4 4,571 3,011 104,571
5 5,931 4,371 105,931
6 7,389 5,985 107,389
7 8,948 7,700 108,948
8 10,625 9,533 110,625
9 12,423 11,487 112,423
10 14,355 13,575 114,355
15 26,426 26,426 126,426
20 43,656 43,656 137,030
25 65,820 66,820 165,820
30 93,010 93,010 193,010
- - ---------------
(1)All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the policy
anniversary, (b) no policy loan has been made, (c) no partial withdrawal of
the Cash Surrender Value has been made and (d) no premiums have been
allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3)Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old, or two years after the
policy date if later, except for Policies issued in Massachusetts. The death
benefit guarantee for Policies issued in Massachusetts will expire five years
after the policy date.
(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.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
MALE NON-SMOKER ISSUE AGE 45
$100,000 FACE AMOUNT DEATH BENEFIT OPTION 2
$1,325 ANNUAL PLANNED PREMIUM
ASSUMING GUARANTEED CHARGES
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
----------------------- ----------------------- -----------------------
End of Accumulated Cash Cash Cash
Policy Premiums Policy Surrender Death Policy Surrender Death Policy Surrender Death
Year(1) (2) Value Value(3) Benefit Value Value(3) Benefit Value Value(3) Benefit
1 $ 1,391 $ 891 $ 0 $100,891 $ 954 $ 0 $100,954 $ 1,018 $ 0 $101,018
2 2,852 1,690 130 101,690 1,869 309 101,869 2,056 496 102,056
3 4,386 2,447 887 102,447 2,793 1,233 102,793 3,169 1,610 103,169
4 5,996 3,161 1,601 103,161 3,725 2,166 103,725 4,364 2,804 104,364
5 7,688 3,829 2,269 103,829 4,662 3,102 104,662 5,644 4,084 105,644
6 9,463 4,451 3,047 104,451 5,602 4,198 105,602 7,016 5,612 107,016
7 11,328 5,018 3,770 105,018 6,537 5,289 106,537 8,482 7,234 108,482
8 13,285 5,527 4,435 105,527 7,461 6,369 107,461 10,045 8,953 110,045
9 15,341 5,971 5,035 105,971 8,366 7,430 108,366 11,706 10,770 111,706
10 17,499 6,342 5,562 106,342 9,243 8,463 109,243 13,468 12,688 113,468
15 30,021 6,915 6,915 106,915 12,895 12,895 112,895 23,894 23,894 123,894
20 46,003 4,532 4,532 104,532 14,069 14,069 114,069 37,030 37,030 137,030
25 66,400 0(4) 0(4) 100,000(4) 9,768 9,768 109,768 51,794 51,794 151,794
30 92,433 0(5) 0(5) 0(5) 0(4) 0(4) 0(4) 65,023 65,023 165,023
- - ---------------
(1) All values shown are as of the end of the policy year indicated and assume
that (a) premiums paid after the initial premium are received on the policy
anniversary, (b) no policy loan has been made, (c) no partial withdrawal of
the Cash Surrender Value has been made and (d) no premiums have been
allocated to the Guaranteed Interest Account.
(2) Assumes net interest of 5% compounded annually.
(3) Provided the Minimum Premium Requirement has been and continues to be met,
the death benefit guarantee will keep the Policy in force until the policy
anniversary on which the life insured is 70 years old, or two years after
the policy date if later, except for Policies issued in Massachusetts. The
death benefit guarantee for Policies issued in Massachusetts will expire
five years after the policy date.
(4) Provided the Minimum Premium Requirement has been met, the death benefit
guarantee will have kept the Policy in force until this point, i.e. the
policy anniversary on which the life insured is 70 years old, at which time
the death benefit guarantee will expire and in the absence of additional
premium payments the Policy will lapse.
(5) In the absence of additional premium payments, the Policy will lapse.
THE POLICY VALUE, CASH SURRENDER VALUE AND THE DEATH BENEFIT WILL DIFFER IF
PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. IT IS EMPHASIZED THAT THE
HYPOTHETICAL INVESTMENT RETURNS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE DEEMED
A REPRESENTATION 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.
PART II.
OTHER INFORMATION
UNDERTAKINGS
(a) 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 contracts issued pursuant to this
registration statement in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks assumed
by the Company.
(b) Rule 484 Undertaking:
Article XII of the Restated Articles of Redomestication of The Manufacturers
Life Insurance Company (U.S.A.) provides as follows:
No director of this Corporation shall be personally liable to the Corporation or
its shareholders or policyholders for monetary damages for breach of the
director's fiduciary duty, provided that the foregoing shall not eliminate or
limit the liability of a director for any of the following:
i) a breach of the director's duty or loyalty to the Corporation or its
shareholders or policyholders;
ii) acts or omissions not in good faith or that involve intentional
misconduct or knowing violation of law;
iii) a violation of Sections 5036, 5276 or 5280 of the Michigan Insurance
Code, being MCLA 500.5036, 500.5276 and 500.5280;
iv) a transaction from which the director derived an improper personal
benefit; or
v) an act or omission occurring on or before the date of filing of
these Articles of Incorporation.
If the Michigan Insurance Code is hereafter amended to authorize the further
elimination or limitation of the liability of directors. then the liability of a
director of the Corporation, in addition to the limitation on personal liability
contained herein, shall be eliminated or limited to the fullest extent permitted
by the Michigan Insurance Code as so amended. No amendment or repeal of this
Article XII shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to the effective date of any such
amendment or repeal.
Notwithstanding the foregoing, Registrant hereby makes the following undertaking
pursuant to Rule 484 under the Securities Act of 1933:
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question
whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet;
The Prospectus Supplement, consisting of ___ pages;
The Prospectus dated May 1, 1998, consisting of 106 pages;
Representation pursuant to Section 26 of the Investment Company Act of 1940;
Rule 484 Undertaking;
The signatures;
Written consents of the following persons:
A. Ernst & Young LLP - FILED HEREWITH
B. Opinion and Consent of Actuary - Incorporated by reference.
C. Opinion and Consent of James D. Gallagher, Attorney - FILED HEREWITH
D. Consent of Jones & Blouch L.L.P. - FILED HEREWITH
The following exhibits are filed herewith or are incorporated herein by
reference to the designated filings:
1. Copies of all exhibits required by paragraph A of the instructions as to
exhibits in Form N-8B-2 are set forth below under designations based on such
instructions:
A(1)(a) Resolutions of Board of Directors of The Manufacturers Life Insurance Company of America
establishing Separate Account Four. Incorporated by reference to Exhibit A(1) to the registration
statement on Form S-6, filed April 24, 1987 (File No. 33-13774).
A(1)(b Resolutions of Board of Directors of The Manufacturers Life Insurance Company (U.S.A.) regarding
Separate Account N - FILED HEREWITH
A(3)(a)(i) Distribution Agreement between The Manufacturers Life Insurance Company of America and ManEquity,
Inc. Incorporated by reference to Exhibit (A)(3)(a) to Pre-Effective Amendment No. 1 to the
registration statement on Form S-6, filed August 13, 1987 (File No. 33-13774).
A(3)(a)(ii) Amendment to Distribution Agreement. Incorporated by reference to Exhibit (A)(3)(a)(ii) to
Pre-Effective Amendment No. 9 to the registration statement on Form S-6, filed February 28, 1992
(File No. 33-13774).
A(3)(b)(i) Form of broker-dealer agreement Incorporated by reference to
Exhibit 3 (iv) to the Registration Statement on Form N-4 for The
Manufacturers Life Insurance Company (U.S.A.) filed October 2,
2001 (File No. 333-70728).
A(3)(c) Schedule of Sales Commissions. Incorporated by reference to Exhibit A(3)(c) to Post-Effective
Amendment No. 9 to the registration statement on Form S-6, filed February 28, 1992 (File No.
33-13774).
A(5)(a) Form of Flexible Premium Variable Life Insurance Policy, as amended. Incorporated by reference to
Exhibit A(5) to Pre-Effective Amendment No. 2 to the registration statement on Form S-6, filed
November 19, 1987 (File No. 33-13774).
A(5)(b) Endorsement to Flexible Premium Variable Life Insurance Policy. Incorporated by reference to
Exhibit A(5)(b) to Post-Effective Amendment No. 9 to the registration statement on Form S-6, filed
February 28, 1992 (File No. 33-13774).
A(5)(c) Endorsement to Flexible Premium Variable Life Insurance Policy re redomestication. Incorporated by
reference to Exhibit A(5)(c) to Post-Effective Amendment No. 11 to the registration statement on
Form S-6, filed February 26, 1993 (File No. 33-13774).
A(5)(d) Endorsement No. 770-9ua to Flexible Premium Variable Life Insurance Policy. Incorporated by
reference to Exhibit A(5)(d) to Post-Effective Amendment No. 23 to the registration statement on
Form S-6, filed April 30, 1997 (File No. 33-13774).
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 on Form S-6 filed July 20,
2000 (file no. 333-41814).
A(6)(b) By-Laws of The Manufacturers Life Insurance Company (U.S.A.). Incorporated by reference to Exhibit
A(6)(b) to the Registration Statement on Form S-6 filed July 20, 2000 (file no. 333-41814).
A(8)(a) Service Agreement between The Manufacturers Life Insurance Company of America and The Manufacturers Life
Insurance Company. Incorporated by reference to Exhibit 1.A(8)(a) to Post-Effective Amendment No. 7 to the
registration statement on Form N-4 of Separate Account One of The Manufacturers Life Insurance Company of
America filed March 2, 1989. (File No. 2-88607).
A(8)(a)(i) Amendment to Service Agreement. Incorporated by reference to Exhibit A(8)(a)(i) to Post-Effective
Amendment No. 11 to the registration statement on Form S-6, filed February 26, 1993 (File No.
33-13774).
A(8)(a)(ii) Amendments to Service Agreement: May 31, 1993 and June 30, 1993. Incorporated by reference to
Exhibit A(8)(a)(ii) to Post-Effective Amendment No. 13 to the registration statement on Form S-6,
filed March 1, 1994 (File No. 33-13774).
A(8)(b) Stoploss Reinsurance Agreement between The Manufacturers Life Insurance Company of America and The
Manufacturers Life Insurance Company. Incorporated by reference to Exhibit A(8)(b) to Pre-Effective
Amendment No. 1 to the registration statement on Form S-6, filed August 13, 1987 (File No.
33-13774).
A(8)(c) Automatic Coinsurance Agreement between The Manufacturers Life Insurance Company of America and The
Manufacturers Life Insurance Company, previously filed as Exhibit (7) to Pre-Effective Amendment No. 1 to
the registration statement on Form N-4 of Separate Account Two of The Manufacturers Life Insurance Company
of America filed September 4, 1987 (File No. 33-14499).
A(8)(d) Service Agreement between The Manufacturers Life Insurance Company and ManEquity, Inc. dated
January 2, 1991 as amended March 1, 1994. Incorporated by reference to Exhibit A(8)(d) to
Post-Effective Amendment No. 14 to the registration statement on Form S-6 filed April 26, 1994.
(File No. 33-13774).
A(8)(e) Form of Assumption Reinsurance Agreement between The Manufacturers Life Insurance Company (U.S.A.)
and The Manufacturers Life Insurance Company of America - FILED HEREWITH
A(10)(a) Form of Application for Flexible Premium Variable Life Insurance Policy. Incorporated by reference
to Exhibit A(10)(a) to Post-Effective Amendment No. 20 to the registration statement on Form S-6
filed April 26, 1996 (File No. 33-13774).
A(10)(b) Form of Streamlined Application for Flexible Premium Variable Life Insurance Policy. Incorporated
by reference to Exhibit A(10)(b) to Post-Effective Amendment No. 5 to the
registration statement on Form S-6 filed March 2, 1990 (File No. 33-13774).
A(10)(c) Form of Short Form Application for Flexible Premium Variable Life Insurance Policy. Incorporated by
reference to Exhibit A(10)(c) to Post-Effective Amendment No. 5 to the registration statement on
Form S-6 filed March 2, 1990 (File No. 33-13774).
A(10)(d) Form of Application Supplement for Flexible Premium Variable Life Insurance Policy. Incorporated by
reference to Exhibit A(10)(d) to Post-Effective Amendment No. 22 to the registration statement on
Form S-6 filed December 23, 1996 (File No. 33-13774).
A (11) Not applicable.
2. Consents of the following:
A. Opinion and consent of James D. Gallagher, Esq., Secretary and
General Counsel of The Manufacturers Life Insurance Company (U.S.A.)
- FILED HEREWITH
B. Opinion and consent of Actuary. Incorporated by reference to
Exhibit 6 to Post-Effective Amendment No. 24 to the registration
statement on Form S-6 filed April 29, 1998 (File No. 33-13774).
C. Consent of Ernst & Young LLP- FILED HEREWITH
D. Consent of Jones & Blouch L.L.P. - FILED HEREWITH
3. No financial statements are omitted from the prospectus pursuant to
instruction 1(b) or (c) of Part I.
4. Not applicable.
5. Memorandum Regarding Issuance, Face Amount Increase, Redemption and
Transfer Procedures for the Policies. Incorporated by reference to
Exhibit 9 to Post-Effective Amendment No. 21 to the registration
statement on Form S-6 filed October 31, 1996 (File No. 33-13774).
6. Powers of Attorney
(i) (Robert A. Cook, John DesPrez III, Geoffrey Guy, James
O'Malley, Rex Schlaybaugh) incorporated by reference to
Exhibit 7 to the Registration Statement on Form S-6 of
The Manufacturers Life Insurance Company (U.S.A.), filed
July 20, 2000 (File No. 333-41814).
(ii) (John Ostler) i Incorporated by reference to Exhibit
15(ii) to the Registration Statement on Form N-4 for The
Manufacturers Life Insurance Company (U.S.A.) filed
October 2, 2001 (File No. 333-70728).
(iii) (Jim Boyle, John Lyon) i Incorporated by reference to
Exhibit 15(iii) to the Registration Statement on Form
N-4 for The Manufacturers Life Insurance Company
(U.S.A.) filed October 2, 2001 (File No. 333-70728).
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 1st day of
January, 2002.
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
SEPARATE ACCOUNT N
(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
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 1st day of January, 2002.
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 Schlaybaugh, Jr.
*/s/James D. Gallagher
- ----------------------
JAMES D. GALLAGHER
Pursuant to Power of Attorney
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
A(1)(b) Resolutions of Board of Directors of the Manufacturers
Life Insurance Company (U.S.A.)
(A)(8)(e) Form of Assumption Reinsurance Agreement
2 A Opinion and consent of James D. Gallagher, Esq.
2 C Consent of Ernst & Young LLP
2 D Consent of Jones & Blouch L.L.P.