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 L
(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 L
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 One and NASL Series Trust (What is
Manufacturers Life of America's Separate Account One?);
(***General Information About Manulife USA, The Separate
Account and the Trust)
2 Cover page: General Information About Manufacturers Life of
America, Separate Account One and NASL Series Trust (Who are
Manufacturers Life of America and Manufacturers Life?);
(***General Information About Manulife USA, The Separate
Account and the Trust)
3 *
4 Detailed Information about the Policy and Manufacturers Life
of America (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 Account One and NASL Series Trust (What is
Manufacturers Life of America's Separate Account One?);
(***General Information About Manulife USA, The Separate
Account and the Trust)
6 General Information About Manufacturers Life of America
Separate Account One and NASL Series Trust (What is
Manufacturers Life of America's Separate Account One?);
(***General Information About Manulife USA, The Separate
Account and the Trust)
7 *
8 *
9 Detailed Information About the Policy and Manufacturers Life
of America (Is There any Litigation Pending?); (***Other
Information - Litigation)
10 Detailed Information About the Policy and Manufacturers Life
of America; Appendix C; Appendix D
11 General Information About Manufacturers Life of America,
Separate Account One and NASL Series Trust (What is NASL
Series Trust?) (***General Information About Manulife USA,
The Separate Account and the Trust)
12 General Information About Manufacturers Life of America,
Separate Account One and NASL Series Trust (What is NASL
Series Trust?); (***General Information About Manulife USA,
The Separate Account and the Trust)
13 Detailed Information About the Policy and Manufacturers Life
of America (How Will Charges and Expenses Be Deducted?);
(***Investment Management Fees and Expenses)
14 Detailed Information About the Policy and Manufacturers Life
of America (How Do Premium Amounts Vary?; What
Responsibilities Has Manufacturers Life Assumed?); (***Other
Information - Responsibilities of Manufacturers Life)
15 Detailed Information About the Policy and Manufacturers Life
of America (When Are Net Premiums Allocated?; Are Transfers
Between Sub-Accounts Allowed?)
16 **
17 Detailed Information About the Policy and Manufacturers Life
of America (How Does The Surrender Of A Policy For Its Net
Value Work?; When Are Proceeds Paid?)
Form
N-8B-2
Item No. Caption in Prospectus / (*** Caption in Prospectus Supplement)
- -------- ------------------------------------------------------------
18 General Information About Manufacturers Life of Separate
Account One and NASL Series Trust; (***General Information
About Manulife USA, The Separate Account and the Trust)
19 Detailed Information About the Policy and Life of America
(Who Sells the Policies and What Are the Sales Commissions?;
What Reports Will Be Sent to Policyowners?; What
Responsibilities Has Manufacturers Life Assumed?); (***Other
Information - Responsibilities of Manufacturers Life)
20 *
21 Detailed Information About the Policy and Manufacturers Life
of America
22 *
23 **
24 Detailed Information About the Policy and Manufacturers Life
of America (What Are The Other General Policy Provisions?)
25 General Information About Manufacturers Life of America,
Separate Account One and NASL Series Trust (Who Are
Manufacturers Life of America and Manufacturers Life?);
(***General Information About Manulife USA, The Separate
Account and the Trust)
26 *
27 **
28 Detailed Information About the Policy and Manufacturers Life
of America (Who Are The Directors and Officers of
Manufacturers Life of America?); (***Other Information -
Officers and Directors of Manulife USA)
29 General Information About Manufacturers Life of America,
Separate Account One and NASL Series Trust (Who Are
Manufacturers Life of America and Manufacturers Life?);
(***General Information About Manulife USA, The Separate
Account and the Trust)
31 *
32 *
33 *
34 *
35 **
36 *
37 *
38 Detailed Information About the Policy and Life of America
(Who Sells the Policies and What Are the Sales Commissions?;
What Responsibilities Has Manufacturers Life Assumed?);
(***Other Information - Responsibilities of Manufacturers
Life)
39 Detailed Information about the Policy and Life of America
(Who Sells the Policies and What Are the Sales Commissions?);
(***Other Information - Distribution of the Policies)
40 *
41 **
42 *
43 *
44 Appendix D
45 *
46 Detailed Information About the Policy and Manufacturers Life
of America (How Does The Surrender Of A Policy For Its Net
Cash Value Work?; When Are Proceeds Paid?)
Form
N-8B-2
Item No. Caption in Prospectus / (*** Caption in Prospectus Supplement)
- -------- ------------------------------------------------------------
47 General Information About Manufacturers Life of America,
Separate Account One and NASL Series Trust (What is NASL
Series Trust?); (***General Information About Manulife USA,
The Separate Account and the Trust)
48 *
49 *
50 General Information About Manufacturers Life of America,
Separate Account One and NASL Series Trust (What is
Manufacturers Life of America's Separate Account One?);
(***General Information About Manulife USA, The Separate
Account and the Trust)
51 Detailed Information About the Policy and Manufacturers Life
of America
52 Detailed Information About the Policy and Manufacturers Life
of America (Under What Circumstances May Fund Shares Be
Substituted?)
53 **
54 *
55 *
56 *
57 *
58 *
59 Financial Statements
- ----------
* Omitted since answer is negative or item is not applicable.
** Omitted.
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
SEPARATE ACCOUNT L
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 ONE DATED DECEMBER 31, 1996
FIXED PREMIUM VARIABLE LIFE INSURANCE CONTRACTS
("Director 2000")
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 Account ............................ 2
Investment Management Fees and Expenses ................................. 2
General Information about Manulife USA, the
Separate Account and the Trust........................................... 3
Other Information ....................................................... 5
Illustrations ........................................................... 7
Independent Auditors .................................................... 7
Financial Statements .................................................... 8
CHANGE IN DEPOSITOR FOR THE SEPARATE ACCOUNT
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, The
Manufacturers Life Insurance Company of America Separate Account One has been
renamed as The Manufacturers Life Insurance Company (U.S.A.) Separate Account L
(the "Separate Account"). In addition, Manulife USA became the depositor for the
Separate Account and the co-issuer with the Separate Account of the Policies.
Except for the succession of Manulife USA to the role of depositor for
the Separate Account and to the liabilities and obligations arising under the
Policies, and the change in the name of the Separate Account as set forth above,
the transfer did not affect the Separate Account 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 "How Will Charges
and Expenses Be Deducted? - NASL Series Trust Charges")
Each sub-account of the Separate Account 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.
TABLE OF INVESTMENT MANAGEMENT FEES AND EXPENSES
TRUST ANNUAL EXPENSES
(as a percentage of Trust average net assets for the fiscal year ended December
31, 2000)(B)
MANAGEMENT CLASS A TOTAL TRUST
TRUST PORTFOLIO FEES RULE 12b-1 FEE OTHER EXPENSES ANNUAL EXPENSES
- --------------------------------------------------------------------------------------------------------------------
Emerging Small Company ...... 0.896% 0.150% 0.050% 1.096%
Quantitative Equity ......... 0.596% 0.150% 0.050% 0.796%
Real Estate Securities ...... 0.647%(A) 0.150% 0.060% 0.857%
Balanced .................... 0.554%(A) 0.150% 0.060% 0.764%
Investment Quality Bond ..... 0.500% 0.150% 0.080% 0.730%
Money Market ................ 0.350% 0.150% 0.040% 0.540%
2
- -----------------
(A) Based on estimates for the current fiscal year.
(B) Effective January 1, 2002, the Trust implemented a Class A Rule
12b-1 plan whiles simultaneously reducing its advisory fees and
implementing advisory fee breakpoints. The Trust Annual Expense chart
reflects these changes.
GENERAL INFORMATION ABOUT MANULIFE USA, THE SEPARATE ACCOUNT 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 Account.
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 ACCOUNT
The Manufacturers Life Insurance Company (U.S.A.) Separate Account L,
formerly The Manufacturers Life Insurance Company of America Separate Account
One, was established by ManAmerica on May 25, 1983 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 U.S.A., as described above,
Manulife USA became the owner of substantially all of ManAmerica's assets,
including all the assets of the Separate Account, and assumed substantially all
of ManAmerica's obligations, including all those under the Policies. The
Separate Account is currently used only to support variable life insurance
policies.
Manulife USA is the legal owner of the assets of the Separate Account.
The income, gains and losses of the Separate Account, whether or not realized,
are, in accordance with the Policies, credited to or charged against the
Separate Account without regard to the other income, gains or losses of Manulife
USA. Manulife USA 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 Manulife USA conducts. However, all obligations under the
Policies are general corporate obligations of Manulife USA.
3
The Separate Account 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 Account. For state law purposes, the Separate Account is treated as
a part or division of Manulife USA.
THE TRUST
Premiums under the Policies are allocated to one or more of the
sub-accounts of the Separate Account. As stated above, the assets of each
sub-account of the Separate Account 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 Trust also employs
subadvisers which manage all of the Portfolios. One of the subadvisers is
Manufacturers Adviser Corporation ("MAC"). The ultimate parent of MSS and MAC is
MFC. The following subadvisers provide investment subadvisory services to the
indicated Portfolios:
SUBADVISER PORTFOLIO(S)
---------- ------------
Cohen & Steers Capital Management, Inc.: Real Estate Securities Trust
Franklin Advisers, Inc.: Emerging Small Company Trust
Manufacturers Adviser Corporation: Quantitative Equity Trust
Balanced Trust
Money Market Trust
Wellington Management Company, LLP: Investment Quality Bond Trust
ELIGIBLE PORTFOLIOS OF THE TRUST
The Portfolios of the Trust which are available under the Policies are:
the Emerging Small Company Trust, Quantitative Equity Trust, Real Estate
Securities Trust, Balanced Trust, Investment Quality Bond Trust and Money Market
Trust. The investment objectives and certain policies of these Portfolios are
set forth below.
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 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 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 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.
4
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 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.
*"Russell 2000(R)" is a trademark of Frank Russell Company.
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 "Who Sells the
Policies?," "Is There Any Litigation Pending?" and "What Responsibilities Has
Manufacturers Life Assumed?")
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
***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 Account.
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 USA 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.
5
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.
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 Present;
Investments; Director Vice President, Business Development, The Manufacturers Life
Insurance Company, 1995-2001; Assistant Vice President, Business
Development, The Manufacturers Life Insurance Company, 1994-
6
Position with
Name Manulife USA Principal Occupation
- ---- ------------ --------------------
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
(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.
ILLUSTRATIONS
(Supplements the information in the Prospectus under the caption "What Are Some
Illustrations of Cash Values and Death Benefits")
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 certain 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 the financial statements
of Separate Account One 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,
7
2000, appearing in this Prospectus and Registration Statement have been audited
by Ernst & Young LLP, independent auditors, as set forth in their reports
thereon appearing elsewhere herein, and are included in reliance upon such
reports given on the authority of such firm as experts in accounting and
auditing.
FINANCIAL STATEMENTS
The financial statements of Manulife USA included in this Prospectus
should be distinguished from the financial statements of the Separate Account
and should be considered only as bearing upon the ability of Manulife USA to
meet its obligations under the Policies.
8
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
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA SEPARATE ACCOUNT ONE
Audited Financial Statements
Years ended December 31, 2000 and 1999 with Report of Independent Auditors
The Manufacturers Life Insurance Company of America
Separate Account One
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........................................... 7
2
Report of Independent Auditors
To the Contract Owners of
The Manufacturers Life Insurance Company
of America Separate Account One
We have audited the accompanying statement of assets and contract owners' equity
of The Manufacturers Life Insurance Company of America Separate Account One as
of December 31, 2000 and the related statements of operations and changes in
contract owners' equity for each of the years 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 One at December 31, 2000, and the
results period of its operations and the changes in its contract owners' equity
for each of the years 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 One
Statement of Assets and Contract Owners' Equity
December 31, 2000
ASSETS
Investments at market value:
Sub-Accounts:
Balanced Trust - 36,829 shares (cost $651,559) $ 600,290
Emerging Small Company Trust - 12,135 shares (cost $318,127) 424,981
Investment Quality Bond Trust - 13,402 shares (cost $156,200) 157,341
Money Market Trust - 1,043 shares (cost $10,425) 10,425
Quantitative Equity Trust - 3,635 shares (cost $96,575) 95,464
Real Estate Securities Trust - 358 shares (cost $5,711) 5,581
----------
Total assets $1,294,082
==========
CONTRACT OWNERS' EQUITY
Variable Life contracts $1,294,082
==========
See accompanying notes.
2
The Manufacturers Life Insurance Company of America
Separate Account One
Statements of Operations and Changes in Contract Owners' Equity
SUB-ACCOUNT
----------------------------------------------
CAPITAL GROWTH
BALANCED BOND
--------------------------- --------------
YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/00 DEC. 31/99 DEC. 31/99
---------- ---------- ----------
Income:
Dividends $ 29,392 $ 47,934 $ 13,444
Expenses:
Mortality and expense risks, and administrative charges 652 668 62
--------- --------- ---------
Net investment income (loss) during the year 28,740 47,266 13,382
Net realized gain (loss) during the year 1,283 11,131 (2,386)
Unrealized appreciation (depreciation) during the year (92,553) (70,107) (12,824)
--------- --------- ---------
Net increase (decrease) in assets from operations (62,530) (11,710) (1,828)
--------- --------- ---------
Changes from principal transactions:
Transfer of net premiums 50,164 49,368 6,999
Transfer on terminations (41,017) (74,169) (36,635)
Transfer on policy loans (2,589) (25,037) (1,424)
Net interfund transfers -- -- (163,462)
--------- --------- ---------
Net increase (decrease) in assets from principal transactions 6,558 (49,838) (194,522)
--------- --------- ---------
Total increase (decrease) in assets (55,972) (61,548) (196,350)
Assets beginning of year 656,262 717,810 196,350
--------- --------- ---------
Assets end of year $ 600,290 $ 656,262 $ --
========= ========= =========
* Reflects the period from commencement of operations May 1, 1999 through
December 31, 1999.
See accompanying notes.
3
SUB-ACCOUNT
- --------------------------------------------------------------
EMERGING SMALL COMPANY INVESTMENT QUALITY BOND
- --------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DEC. 31/00 DEC. 31/99 DEC. 31/00 DEC. 31/99*
- ---------- ---------- ---------- ------------
$ 45,023 $ 4,394 $ 11,214 $ --
463 305 154 113
- --------- --------- --------- ---------
44,560 4,089 11,060 (113)
30,561 14,052 (360) (925)
(98,389) 167,070 3,034 (1,893)
- --------- --------- --------- ---------
(23,268) 185,211 13,734 (2,931)
- --------- --------- --------- ---------
17,015 16,928 16,168 9,574
(2,868) (82,829) (5,959) (3,885)
(27,177) (6,486) (11,430) (2,503)
19,457 19,437 (18,889) 163,462
- --------- --------- --------- ---------
6,427 (52,950) (20,110) 166,648
- --------- --------- --------- ---------
(16,841) 132,261 (6,376) 163,717
441,822 309,561 163,717 --
- --------- --------- --------- ---------
$ 424,981 $ 441,822 $ 157,341 $ 163,717
========= ========= ========= =========
4
The Manufacturers Life Insurance Company of America
Separate Account One
Statements of Operations and Changes in Contract Owners' Equity (continued)
SUB-ACCOUNT
----------------------------------------------------------
MONEY MARKET QUANTITATIVE EQUITY
--------------------------- --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/00 DEC. 31/99 DEC. 31/00 DEC. 31/99
---------- ---------- ---------- ----------
Income:
Dividends $ 1,562 $ 478 $ 17,484 $ 6,923
Expenses:
Mortality and expense risks, and administrative charges 27 11 103 79
-------- -------- -------- --------
Net investment income (loss) during the year 1,535 467 17,381 6,844
Net realized gain (loss) during the year -- -- 19,319 673
Unrealized appreciation (depreciation) during the year -- -- (32,434) 8,413
-------- -------- -------- --------
Net increase (decrease) in assets from operations 1,535 467 4,266 15,930
-------- -------- -------- --------
Changes from principal transactions:
Transfer of net premiums 75 82 4,432 4,476
Transfer on terminations (301) (294) (1,571) (3,607)
Transfer on policy loans -- -- (204) (286)
Net interfund transfers (953) (19,436) 385 --
-------- -------- -------- --------
Net increase (decrease) in assets from principal transactions (1,179) (19,648) 3,042 583
-------- -------- -------- --------
Total increase (decrease) in assets 356 (19,181) 7,308 16,513
Assets beginning of year 10,069 29,250 88,156 71,643
-------- -------- -------- --------
Assets end of year $ 10,425 $ 10,069 $ 95,464 $ 88,156
======== ======== ======== ========
See accompanying notes.
5
SUB-ACCOUNT
- -------------------------------
REAL ESTATE SECURITIES TOTAL
- ------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/00 DEC. 31/99 DEC. 31/00 DEC. 31/99
---------- ---------- ---------- ----------
$ 165 $ 192 $ 104,840 $ 73,365
5 5 1,404 1,243
- ----------- ----------- ----------- -----------
160 187 103,436 72,122
(6) (16) 50,797 22,529
945 (504) (219,397) 90,155
- ----------- ----------- ----------- -----------
1,099 (333) (65,164) 184,806
- ----------- ----------- ----------- -----------
680 668 88,534 88,095
(125) (126) (51,841) (201,545)
(36) (43) (41,436) (35,779)
-- (1) -- --
- ----------- ----------- ----------- -----------
519 498 (4,743) (149,229)
- ----------- ----------- ----------- -----------
1,618 165 (69,907) 35,577
3,963 3,798 1,363,989 1,328,412
- ----------- ----------- ----------- -----------
$ 5,581 $ 3,963 $ 1,294,082 $ 1,363,989
=========== =========== =========== ===========
6
The Manufacturers Life Insurance Company of America
Separate Account One
Notes to Financial Statements
December 31, 2000
1. ORGANIZATION
The Manufacturers Life Insurance Company of America Separate Account One (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 six
sub-accounts of Manufacturers Investment Trust (the Trust). The account is a
funding vehicle for allocation of net premiums under variable life 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 Manufacturers
Investment Trust. Manufacturers Investment 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.
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.
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
7
The Manufacturers Life Insurance Company of America
Separate Account One
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 affect the amounts reported in 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
The Company deducts from the assets of the Account a daily charge equivalent to
an annual rate of 0.10% of the average net value of the Account's assets for
mortality and expense risks.
4. 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
--------- -----
Balanced Trust $ 56,166 $ 20,867
Emerging Small Company Trust 103,242 52,255
Investment Quality Bond Trust 21,486 30,536
Money Market Trust 46,386 46,029
Quantitative Equity Trust 65,545 45,121
Real Estate Securities Trust 703 24
-------- --------
Total $293,528 $194,832
======== ========
8
The Manufacturers Life Insurance Company of America
Separate Account One
Notes to Financial Statements (continued)
5. 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 life contracts are as follows:
1999 2000
------------- -----------------------------------------------
UNIT VALUE UNIT VALUE UNITS DOLLARS
---------- ---------- ----- -------
Balanced Trust $ 56.48 $ 51.16 11,733 $ 600,290
Emerging Small Company Trust 109.44 104.63 4,062 424,981
Investment Quality Bond Trust 12.31 13.46 11,693 157,341
Money Market Trust 23.40 24.75 421 10,425
Quantitative Equity Trust 52.91 56.19 1,699 95,464
Real Estate Securities Trust 30.39 38.17 146 5,581
----------
Total $1,294,082
==========
6. RELATED PARTY TRANSACTIONS
ManEquity, Inc., a registered broker-dealer and indirect wholly-owned subsidiary
of Manulife Financial, acts as the principal underwriter of the 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.
The Company 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, the
Company pays for legal, actuarial, investment and certain other administrative
services.
9
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA SEPARATE ACCOUNT ONE
Financial Statements
Nine months ended September 30, 2001 (unaudited)
with December 31, 2000
comparative (audited)
The Manufacturers Life Insurance Company of America
Separate Account One
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......... 2
Notes to Financial Statements........................................... 5
The Manufacturers Life Insurance Company of America
Separate Account One
Statement of Assets and Contract Owners' Equity
September 30, 2001 (Unaudited)
ASSETS
Investments at market value:
Sub-Accounts:
Balanced Trust - 36,530 shares (cost $612,069) $463,569
Emerging Small Company Trust - 10,369 shares (cost $280,710) 215,978
Investment Quality Bond Trust - 17,587 shares (cost $205,406) 208,579
Money Market Trust - 1,056 shares (cost $10,558) 10,558
Quantitative Equity Trust - 4,296 shares (cost $109,194) 66,336
Real Estate Securities Trust - 361 shares (cost $5,672) 5,425
--------
Total assets $970,445
========
CONTRACT OWNERS' EQUITY
Variable life contracts $970,445
========
See accompanying notes.
1
The Manufacturers Life Insurance Company of America
Separate Account One
Statements of Operations and Changes in Contract Owners' Equity
(Unaudited)
SUB-ACCOUNT
--------------------------------------------------------------
BALANCED EMERGING SMALL COMPANY
---------------------------- ----------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00
----------- ---------- ----------- ----------
Income:
Dividends $ 11,949 $ 29,392 $ 11,302 $ 45,023
Expenses:
Mortality and expense risks charges 413 652 221 463
--------- --------- --------- ---------
Net investment income (loss) during the period 11,536 28,740 11,081 44,560
Net realized gain (loss) during the period (7,617) 1,283 20,634 30,561
Unrealized appreciation (depreciation) during
the period (97,231) (92,553) (171,586) (98,389)
--------- --------- --------- ---------
Net increase (decrease) in assets from
operations (93,312) (62,530) (139,871) (23,268)
--------- --------- --------- ---------
Changes from principal transactions:
Transfer of net premiums 33,164 50,164 10,462 17,015
Transfer on terminations (61,541) (41,017) (25,788) (2,868)
Transfer on policy loans (15,032) (2,589) (8,504) (27,177)
Net interfund transfers -- -- (45,302) 19,457
--------- --------- --------- ---------
Net increase (decrease) in assets from
principal transactions (43,409) 6,558 (69,132) 6,427
--------- --------- --------- ---------
Total increase (decrease) in assets (136,721) (55,972) (209,003) (16,841)
Assets beginning of year 600,290 656,262 424,981 441,822
--------- --------- --------- ---------
Assets end of period $ 463,569 $ 600,290 $ 215,978 $ 424,981
========= ========= ========= =========
See accompanying notes.
2
SUB-ACCOUNT
- ------------------------------------------------------------------------------------------------
INVESTMENT QUALITY BOND MONEY MARKET QUANTITATIVE EQUITY
- ---------------------------- ---------------------------- ----------------------------
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
- ----------- ---------- ----------- ---------- ----------- ----------
$ 12,544 $ 11,214 $ 319 $ 1,562 $ 12,168 $ 17,484
154 154 7 27 62 103
--------- --------- --------- --------- --------- ---------
12,390 11,060 312 1,535 12,106 17,381
(113) (360) -- -- 46 19,319
2,032 3,034 -- -- (41,747) (32,434)
--------- --------- --------- --------- --------- ---------
14,309 13,734 312 1,535 (29,595) 4,266
--------- --------- --------- --------- --------- ---------
12,606 16,168 62 75 3,964 4,432
(4,350) (5,959) (241) (301) (2,997) (1,571)
(16,629) (11,430) -- -- (500) (204)
45,302 (18,889) -- (953) -- 385
--------- --------- --------- --------- --------- ---------
36,929 (20,110) (179) (1,179) 467 3,042
--------- --------- --------- --------- --------- ---------
51,238 (6,376) 133 356 (29,128) 7,308
157,341 163,717 10,425 10,069 95,464 88,156
--------- --------- --------- --------- --------- ---------
$ 208,579 $ 157,341 $ 10,558 $ 10,425 $ 66,336 $ 95,464
========= ========= ========= ========= ========= =========
3
The Manufacturers Life Insurance Company of America
Separate Account One
Statements of Operations and Changes in Contract Owners' Equity
(Unaudited) (continued)
SUB-ACCOUNT
-------------------------------
REAL ESTATE SECURITIES TOTAL
------------------------------- -------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
SEPT. 30/01 DEC. 31/00 SEPT. 30/01 DEC. 31/00
------------ ----------- ------------ -----------
Income:
Dividends $ 183 $ 165 $ 48,465 $ 104,840
Expenses:
Mortality and expense risks charges 4 5 861 1,404
----------- ----------- ----------- -----------
Net investment income (loss) during the period 179 160 47,604 103,436
Net realized gain (loss) during the period (54) (6) 12,896 50,797
Unrealized appreciation (depreciation) during
the period (117) 945 (308,649) (219,397)
----------- ----------- ----------- -----------
Net increase (decrease) in assets from operations 8 1,099 (248,149) (65,164)
----------- ----------- ----------- -----------
Changes from principal transactions:
Transfer of net premiums 511 680 60,769 88,534
Transfer on terminations (151) (125) (95,068) (51,841)
Transfer on policy loans (524) (36) (41,189) (41,436)
Net interfund transfers -- -- -- --
----------- ----------- ----------- -----------
Net increase (decrease) in assets from principal
transactions (164) 519 (75,488) (4,743)
----------- ----------- ----------- -----------
Total increase (decrease) in assets (156) 1,618 (323,637) (69,907)
Assets beginning of year 5,581 3,963 1,294,082 1,363,989
----------- ----------- ----------- -----------
Assets end of period $ 5,425 $ 5,581 $ 970,445 $ 1,294,082
=========== =========== =========== ===========
See accompanying notes.
4
The Manufacturers Life Insurance Company of America
Separate Account One
Notes to Financial Statements
September 30, 2001 (Unaudited)
1. ORGANIZATION
The Manufacturers Life Insurance Company of America Separate Account One (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 six
sub-accounts of Manufacturers Investment Trust (the Trust). The account is a
funding vehicle for allocation of net premiums under variable life 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 Manufacturers
Investment Trust. Manufacturers Investment 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.
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.
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
5
The Manufacturers Life Insurance Company of America
Separate Account One
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 affect the amounts reported in 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
The Company deducts from the assets of the Account a daily charge equivalent to
an annual rate of 0.10% of the average net value of the Account's assets for
mortality and expense risks.
4. 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
--------- -----
Balanced Trust $ 27,559 $ 59,433
Emerging Small Company Trust 15,172 73,224
Investment Quality Bond Trust 65,683 16,364
Money Market Trust 348 215
Quantitative Equity Trust 13,213 640
Real Estate Securities Trust 578 563
-------- --------
Total $122,553 $150,439
======== ========
6
The Manufacturers Life Insurance Company of America
Separate Account One
Notes to Financial Statements (continued)
5. UNIT VALUES
A summary of the accumulation unit values at September 30, 2001 and December 31,
2000 and the accumulation units and dollar value outstanding at September 30,
2001 for the variable life contracts are as follows:
2000 2001
---------- -----------------------------------------
UNIT VALUE UNIT VALUE UNITS DOLLARS
---------- ---------- ----- -------
Balanced Trust $ 51.16 $ 42.90 10,804 $463,569
Emerging Small Company Trust 104.63 64.98 3,323 215,978
Investment Quality Bond Trust 13.46 14.44 14,441 208,579
Money Market Trust 24.75 25.49 414 10,558
Quantitative Equity Trust 56.19 38.83 1,708 66,336
Real Estate Securities Trust 38.17 38.12 142 5,425
--------
Total $970,445
========
6. RELATED PARTY TRANSACTIONS
ManEquity, Inc., a registered broker-dealer and indirect wholly owned subsidiary
of Manulife Financial, acts as the principal underwriter of the 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.
The Company has a formal service agreement with its affiliates, Manulife
Financial and The Manufacturers Life Insurance Company (U.S.A.) ("Manulife
U.S.A."), 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.
7
________________________________________________________________________________
PROSPECTUS
________________________________________________________________________________
DIRECTOR 2000
PROSPECTUSES FOR
VARIABLE LIFE INSURANCE
ISSUED BY
THE MANUFACTURERS LIFE
INSURANCE COMPANY OF AMERICA
AND FOR
NASL SERIES TRUST
The Manufacturers Life
Insurance Company of America [ART WORK]
NOTE: The prospectus for Variable Life Insurance issued by The Manufacturers
Life Insurance Company of America and the prospectus for NASL Series Trust,
Inc. when used in conjunction with the Variable Life Insurance Prospectus is
intended for the information only of existing Variable Life Insurance
Policyowners and not for the solicitation of additional Policy purchases.
PROSPECTUS
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
SEPARATE ACCOUNT ONE
VARIABLE LIFE INSURANCE POLICY
This prospectus describes the variable life insurance policy (the "Policy")
issued by The Manufacturers Life Insurance Company of America ("Manufacturers
Life of America"), a stock life insurance company that is an indirect
wholly-owned subsidiary of The Manufacturers Life Insurance Company
("Manufacturers Life"). These Policies provide whole-life insurance protection.
That is, they provide lifetime insurance coverage, as long as premiums are
paid. They also provide a cash value for the Policyowner if the Policy is
terminated during the life insured's lifetime. A Policy's death benefit varies
with the investment performance of the sub-accounts of Manufacturers Life of
America's Separate Account One (the "Account") to which the Policyowner
allocates the net premiums. Whatever the investment performance, however, it
will not cause the death benefit to be less than the face amount specified in
the Policy. The cash value of a Policy varies daily. There is no guaranteed
minimum cash value.
A Policy's net premiums and earnings on those premiums will be held in one or
more of the sub-accounts of the Account. The assets of each sub-account will be
used to purchase shares of a particular portfolio ("Portfolio") of NASL Series
Trust. The accompanying prospectus for the NASL Series Trust describes the
investment objectives of the Trust in which net premiums may be invested: the
Emerging Growth Trust, the Balanced Trust, the Capital Growth Bond Trust, the
Money Market Trust, the Quantitative Equity Trust (formerly, the Common Stock
Fund), and the Real Estate Securities Trust (collectively, the "NASL Trusts").
Other sub-accounts and Portfolios may be added in the future.
This product is no longer being offered for sale.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT IS
VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS FOR NASL SERIES TRUST.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Manufacturers Life Insurance
Company of America
500 N. 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)
(i)
THE DATE OF THIS PROSPECTUS IS DECEMBER 31, 1996.
(ii)
PROSPECTUS CONTENTS
PAGE
INTRODUCTION TO POLICIES .................................................... 1
What Is Variable Life Insurance? ............................................ 1
How are Premiums Invested? .................................................. 1
What Amounts Are Deducted From Premiums? .................................... 2
What Other Policy Charges Are Made? ......................................... 2
How Often Do The Death Benefit And Cash Value Change? ....................... 2
What Is The Minimum Face Amount For Which A Policy Will Be Issued? .......... 2
GENERAL INFORMATION ABOUT MANUFACTURERS LIFE OF AMERICA, SEPARATE ACCOUNT
ONE AND NASL SERIES TRUST ................................................. 3
Who Are Manufacturers Life of America And Manufacturers Life? ............... 3
What Is Manufacturers Life of America's Separate Account One? ............... 3
What Is NASL Series Trust? .................................................. 4
What Are The Investment Objectives and Certain Policies Of The Portfolios? .. 4
DETAILED INFORMATION ABOUT THE POLICY AND MANUFACTURERS LIFE OF AMERICA ..... 6
What Are The Requirements For Issuance Of A Policy? ......................... 6
Is There A Short-Term Cancellation Right, Or "Free Look"? ................... 6
How Are Premiums Payable? ................................................... 6
How Do Premium Amounts Vary? ................................................ 6
What Happens If A Premium Is Not Paid When Due? ............................. 7
Is There Any Premium Adjustment On Death? ................................... 7
When Are Net Premiums Allocated? ............................................ 7
Are Transfers Between Sub-accounts Allowed? ................................. 8
How Will Charges And Expenses Be Deducted? .................................. 9
How Will A Policy's Death Benefit Vary? ..................................... 12
How Will A Policy's Cash Value Vary? ........................................ 14
How Does The Surrender Of A Policy For Its Net Cash Value Work? ............. 16
When Are Proceeds Paid? ..................................................... 16
What Are Some Illustrations Of Cash Values And Death Benefits? .............. 17
Under What Conditions Are Loans Available? .................................. 21
What Interest Is Charged On A Policy Loan? .................................. 21
How Are Loans And Loan Repayments Administered? ............................. 22
What Are The Exchange Privileges Of The Policy? ............................. 23
Who Sells The Policies And What Are The Sales Commissions? .................. 24
What Responsibilities Has Manufacturers Life Assumed? ....................... 24
What Is The Tax Treatment Of Policy Benefits? ............................... 25
What Are The Options On Lapse? .............................................. 26
What Are The Reinstatement Rules? ........................................... 27
What Are The Other General Policy Provisions? ............................... 27
What Are The Voting Rights? ................................................. 28
Who Are The Directors and Officers Of Manufacturers Life of America? ........ 29
Under What Circumstances May Fund Shares Be Substituted? .................... 31
What Reports Will Be Sent To Policyowners? .................................. 31
What State Regulations Apply? ............................................... 32
Is There Any Litigation Pending? ............................................ 32
(iii)
PAGE
Where Can Further Information Be Found? ..................................... 32
Legal Matters ............................................................... 32
Experts ..................................................................... 32
APPENDIX A .................................................................. 33
APPENDIX B .................................................................. 36
APPENDIX C .................................................................. 42
APPENDIX D .................................................................. 43
FINANCIAL STATEMENTS ........................................................ 46
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 AND THE PROSPECTUS OF NASL SERIES TRUST OR THE STATEMENT OF
ADDITIONAL INFORMATION OF NASL SERIES TRUST.
THE PURPOSE OF THE POLICIES IS TO PROVIDE INSURANCE PROTECTION FOR THE
BENEFICIARY NAMED IN A POLICY. NO CLAIM IS MADE THAT THE POLICIES ARE IN ANY
WAY SIMILAR OR COMPARABLE TO A SYSTEMATIC INVESTMENT PLAN OF A MUTUAL FUND.
You are urged to examine this prospectus carefully. Except as otherwise stated,
the discussion assumes all premiums are paid when due and there is no
outstanding Policy loan.
The INTRODUCTION TO POLICIES will briefly describe the Variable Life Insurance
Policy. More detailed information will be found later in the prospectus.
(iv)
INTRODUCTION TO POLICIES
WHAT IS VARIABLE LIFE INSURANCE?
The variable life insurance offered by Manufacturers Life of America is, in
many respects, similar to traditional "fixed-benefit" whole life insurance. In
other respects, it is quite different.
- -- The main similarities are:
- -- The Policyowner pays a level premium for a Policy that provides a death
benefit which is payable to the beneficiary upon the life insured's death.
- -- A minimum death benefit, the face amount, is guaranteed.
- -- The Policy has a cash value that the Policyowner may borrow against by
taking a Policy loan or may obtain by surrendering the Policy.
The main differences are:
- -- The Policyowner may allocate the Policy's premiums, after certain deductions
have been made, among one or more of the investment sub-accounts of
Manufacturers Life of America's Separate Account One. Each sub-account invests
in the shares of a particular Portfolio of NASL Series Trust. These Portfolios
are the Emerging Growth Portfolio, the Balanced Portfolio, the Capital Growth
Bond Portfolio, the Money Market Portfolio, the Quantitative Equity Portfolio
(formerly, the Common Stock Portfolio), and the Real Estate Securities
Portfolio.
- -- The death benefit under a Policy can increase or decrease depending on the
investment performance of the Portfolios underlying the sub-accounts to which
the Policy's net premiums are allocated; but the death benefit will never
decrease below the initial face amount of the Policy if the premiums are paid
when due and there is no outstanding Policy loan.
- -- The Policy offers the opportunity for appreciation of its cash value based
upon investment results. The cash value may increase or decrease each Business
Day. The Policyowner bears the risk of decreases in the cash value, since no
minimum amount is guaranteed.
HOW ARE PREMIUMS INVESTED?
Net premiums are allocated to the Account and invested in shares of NASL Series
Trust. NASL Series Trust has several Portfolios. The Portfolios currently
offered are the Emerging Growth Trust, Quantitative Equity Trust (formerly, the
Common Stock Fund), Real Estate Securities Trust, Balanced Trust, Capital Growth
Bond Trust and Money Market Trust. There are six sub-accounts of the Account,
each of which invests in a particular Portfolio of NASL Series Trust. The
Policyowner chooses the sub-account(s) of the Account into which the net
premiums will be placed.
1
WHAT AMOUNTS ARE DEDUCTED FROM PREMIUMS?
Manufacturers Life of America deducts certain charges from each premium payment
before placing any amount in the sub-account(s). These are for administrative
and sales expenses and state premium taxes, as well as for assuming certain
insurance risks, including the risk that the life insured will die when the
guaranteed face amount is more than would have been payable in the absence of
that guarantee. To compensate for sales expenses, there is deducted a sales
load of not more than 30% of the basic premium in the first Policy year, 10% of
the basic premium in the second through fourth years, and 7.5% thereafter. To
compensate for administrative expenses, there is a first year charge of not
more than $9 for each $1,000 of guaranteed face amount and an annual fee of
$30, provided premiums are payable on an annual basis. Also deducted are a
charge equal to 2% of each basic premium to pay state premium taxes and a
charge of not more than $1 per $1,000 of face amount, provided premiums are
payable on an annual basis, for the guarantee to pay not less than the face
amount of the Policy. In addition, a surcharge of not more than $7.30 per
$1,000 of face amount, provided premiums are payable on an annual basis, is
made for Policies issued to smokers, and an additional deduction of $1.50 per
$1,000 of face amount, provided premiums are payable on an annual basis, is
made for Policies issued with a face amount of less than $25,000. Finally,
additional premiums may be assessed for optional insurance benefits or extra
mortality risks. (See "How Will Charges and Expenses Be Deducted?").
WHAT OTHER POLICY CHARGES ARE MADE?
Manufacturers Life of America deducts from the assets of the Account a daily
charge equivalent to an annual rate of 0.10% of the average net value of the
Account's assets for mortality and expense risks. In addition, Manufacturers
Life of America deducts from assets in the Account relating to a Policy on each
premium due date for that Policy the cost of insurance attributable to the
period elapsed since the previous due date. When a Policy loan is made, a loan
administration fee not to exceed 0.20% per year is also deducted. Finally,
Manufacturers Life of America reserves the right to make a charge or other
provision for certain taxes. See "How Will Charges And Expenses Be Deducted?",
and "How Are Loans And Loan Repayments Administered?".
HOW OFTEN DO THE DEATH BENEFIT AND CASH VALUE CHANGE?
The death benefit is adjusted on each premium due date (but not below the face
amount) depending on the investment results of the Funds underlying the
sub-account(s) in which the Policy participates. It does not change simply
because a premium is paid. The cash value also changes at a rate that depends on
the investment results of the underlying Funds, but these changes take place on
each Business Day. For more detailed information about how the death benefit and
cash value change, see "How Will A Policy's Death Benefit Vary?" and "How Will A
Policy's Cash Value Vary?".
A Business Day is any day on which the New York Stock Exchange is open for
trading or any other day as of which the net asset value of a Fund is
determined. Currently, a Business Day ends at 4:00 P.M., Eastern Time. When a
Policy value or amount is to be determined after the end of a Business Day or
on a day which is not a Business Day, it will be determined on the next day
which is a Business Day. A Policy value or amount determined on a Business Day
will be determined as of the end of such day.
WHAT IS THE MINIMUM FACE AMOUNT FOR WHICH A POLICY WILL BE ISSUED?
Manufacturers Life of America will issue a Policy only if it has a face amount
of not less than $25,000, except for Policies purchased under group or
sponsored arrangements in which case the minimum face amount is $10,000.
2
For a limited time, a Policy may be returned for a refund in accordance with
the terms of its "free look" provision. (See "Is There A Short-Term
Cancellation Right, Or "Free Look"?".)
Each Policyowner should retain a copy of the Policy. The Policy, together with
the attached application, constitutes the entire agreement between the
Policyowner and Manufacturers Life of America.
GENERAL INFORMATION ABOUT MANUFACTURERS LIFE OF AMERICA, SEPARATE ACCOUNT ONE
AND THE SERIES FUND
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. The Manufacturers Life Insurance Company (U.S.A.), 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 ranks 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 ONE?
Manufacturers Life of America established its Separate Account One on May 25,
1983 as a separate account under Pennsylvania law. It is currently being
operated under Michigan Law. The Account holds assets that are segregated from
all of Manufacturers Life of America's other assets. The Account is currently
used only to support variable life insurance policies.
Manufacturers Life of America is the legal owner of the assets in the Account.
Manufacturers Life of America will at all times maintain assets in the Account
with a total market value at least equal to the reserves and other liabilities
relating to variable life insurance benefits under all the Policies
participating in the Account less the aggregate amount of Policy debts. These
assets may not be charged with liabilities which arise from any other business
Manufacturers Life of America conducts. However, all obligations under the
variable life insurance policies are general corporate obligations of
Manufacturers Life of America.
The 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 Account. For state
law purposes the Account is treated as a part or division of Manufacturers Life
of America.
3
WHAT IS NASL SERIES TRUST?
Each sub-account of the Account will purchase shares only of a particular
Portfolio of NASL Series Trust. NASL Series Trust is registered under the
1940 Act as an open-end management investment company. The Account will
purchase and redeem shares of NASL Series 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 as requested by Policyowners, and for other purposes not inconsistent
with the Policies. Any dividend or capital gain distribution received from a
Portfolio will be reinvested immediately at net asset value in shares of that
Portfolio with respect to the Policies and retained as assets of the
corresponding sub-account. NASL Series Trust shares are issued to fund
benefits under both variable annuity contracts and variable life insurance
policies issued by Manufacturers Life of America or life insurance companies
affiliated with Manufacturers Life of America. 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 NASL Series Trust prospectus.
NASL Series Trust receives investment advisory services from NASL Financial
Services, Inc. NASL Financial Services, Inc. is a registered investment
adviser under the Investment Advisers Act of 1940. NASL Series Trust also
employs subadvisers. The following subadvisers provide investment subadvisory
services to the indicated portfolios:
FUND SUBADVISER
Emerging Growth Trust Warburg, Pincus Counsellors, Inc.
Quantitative Equity Trust
(formerly, Common Stock Fund) Manufacturers Adviser Corporation*
Real Estate Securities Trust Manufacturers Adviser Corporation*
Balanced Trust Founders Asset Management, Inc.
Capital Growth Bond Trust Manufacturers Adviser Corporation*
Money Market Trust Manufacturers Adviser Corporation*
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.
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
* Manufacturers Adviser Corporation is an indirect wholly-owned subsidiary of
Manufacturers Life.
4
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.
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. Manufacturers
Adviser Corporation manages the Quantitative Equity 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. Manufacturers Adviser Corporation manages the Real Estate
Securities Trust.
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.
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. Manufacturers
Adviser Corporation 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.
Money Market Trust. The investment objective of the Money Market Trust is to
obtain maximum current income consistent with preservation of principal and
liquidity. Manufacturers Adviser Corporation manages the Money Market Trust
and seeks to achieve this objective by investing in high quality, U.S. dollar
denominated money market instruments.
A full description of the NASL Series Trust, its investment objectives,
policies and restrictions, the risks associated therewith, its expenses, and
other aspects of its operation is contained in the accompanying NASL Series
Trust prospectus, which should be read together with this prospectus.
5
DETAILED INFORMATION ABOUT THE POLICY AND MANUFACTURERS LIFE OF AMERICA
WHAT ARE THE REQUIREMENTS FOR ISSUANCE OF A POLICY?
Manufacturers Life of America will issue a Policy only if it has a face amount
of not less than $25,000, except for Policies purchased under group or
sponsored arrangements in which case the minimum face amount is $10,000. A
Policy may be issued on lives between the ages of 0 and 80. Before issuing any
Policy, Manufacturers Life of America will require evidence of insurability
satisfactory to it. Non-smokers who meet standard underwriting requirements are
offered a discount in computing the premium payable. A higher premium is
charged if an extra mortality risk is involved.
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 insurance 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.
HOW ARE PREMIUMS PAYABLE?
Premiums on the Policy are level, fixed, and payable in advance during the life
insured's lifetime on an annual, semiannual, quarterly or monthly basis. If
paid more often than annually, an extra fee will be charged. A Policyowner may
change the mode of payment originally selected, such change to be effective at
the next Policy Anniversary. A change in the mode of payment will change the
frequency of the determination of the death benefit.
HOW DO PREMIUM AMOUNTS VARY?
The premium amount depends on the Policy's face amount, the life insured's age
at issue, the frequency of premium payments, the life insured's risk
classification including whether he or she is a standard risk or a non-smoker,
whether the Policy is purchased under group or sponsored arrangement, and,
except in the case of Policies issued under an employer sponsored plan, the
life insured's sex. Additional premiums are charged if optional insurance
benefits are added by rider. Policyowners who pay premiums other than on a
monthly basis will have a notice that a premium is due mailed at least 15
calendar days prior to the due date.
The following table shows representative standard and non-smoker annual premium
amounts for various face amounts:
$25,000 FACE AMOUNT $100,000 FACE AMOUNT
----------------------------- ------------------------------
STANDARD NON-SMOKER STANDARD NON-SMOKER
-------- ---------- --------- ----------
Male, age 25 at issue $298.75 $270.75 $1,009.00 $903.00
Male, age 35 at issue $438.50 $369.00 $1,568.00 $1,299.00
Male, age 40 at issue $546.75 $442.00 $1,986.00 $1,584.00
6
The following table compares annual and monthly premiums for life insureds who
are non-smokers:
$25,000 FACE AMOUNT $100,000 FACE AMOUNT
---------------------------------- --------------------------------
MONTHLY MONTHLY
(MANUMATIC*) ANNUAL (MANUMATIC) ANNUAL
------------ ------- ----------- ---------
Male, age 25 at issue $23.50 $270.75 $77.00 $903.00
Male, age 35 at issue $31.75 $369.00 $111.00 $1,299.00
Male, age 40 at issue $38.00 $442.00 $135.00 $1,584.00
__________
* See definition under "How Will Charges And Expenses Be Deducted?"
WHAT HAPPENS IF A PREMIUM IS NOT PAID WHEN DUE?
There is a grace period of 31 days for each premium payment except the first
one. During the grace period, the Policy will continue in effect. A Policy will
lapse if a premium has not been paid by the end of the grace period by the
Policyowner or by the automatic premium loan option described on page 20. Upon
lapse, a notice will be sent to the Policyowner stating that the Policy has
lapsed and advising that the Policyowner will have several options provided the
Policy has a net cash value. These may include continuing the face amount of
insurance coverage, less any Policy debt, for a fixed period, continuing a
lesser amount of insurance for the lifetime of the life insured, or surrender
of the Policy for its net cash value. (See "What Are The Options On Lapse?".)
IS THERE ANY PREMIUM ADJUSTMENT ON DEATH?
If the life insured dies during the grace period before the premium is paid,
the portion of the unpaid premium that covers the period from the due date to
the end of the month in which death occurs will be deducted from the death
benefit. If the life insured dies while no premium is in default, Manufacturers
Life of America will increase the death benefit by the portion of the last
premium that covers the period subsequent to the end of the month in which
death occurs.
WHEN ARE NET PREMIUMS ALLOCATED?
Except in the case of a backdated Policy, the initial net premium -- that is,
the amount of the premium less the deductions described below under "How Will
Charges And Expenses Be Deducted?", page 10 -- will be allocated on the Policy
Date to one or more sub-accounts as directed by the Policyowner. The Policy
Date is the earlier of the date the Manufacturers Life of America Service
Office receives a completed application with the full first premium for the
Policy and the date Manufacturers Life of America's underwriters approve
issuance of the Policy. A backdated Policy is one for which the Policy Date is
deemed earlier than both the date the Service Office receives a completed
application with the full first premium and the date Manufacturers Life of
America's underwriters approve issuance of the Policy. For a backdated Policy,
the net premiums payable prior to the date Manufacturers Life of America's
underwriters approve issuance of the Policy, plus interest on such net premiums
at 4 1/2% per annum, minus accumulated cost of insurance deductions (See "How
Will Charges And Expenses Be Deducted?"), plus any net premium then due will be
allocated to the appropriate sub-account(s) on the date Manufacturers Life of
America's underwriters approve issuance of the Policy.
A Policy issued on the basis of a completed application without the full first
premium will be cancelled and any partial premiums paid will be returned to the
Policyowner if the full first premium is not received by the Service Office
within 31 days after the Issue Date. The Issue Date is the date 7 days after
Manufacturers Life of America's underwriters approve issuance of the Policy.
7
Subsequent net premiums are allocated to the appropriate sub-account(s) when
due (not when received).
Between the date Manufacturers Life of America receives an initial premium for
the Policy, either a full first premium or a partial premium, and the date
insurance coverage commences under the Policy, the life insured may be covered
under the terms of a conditional insurance agreement.
The Policyowner may change the way in which premiums are allocated, beginning
on the next premium due date, by giving not less than seven days' written
notice to the Manufacturers Life of America Service Office. Within seven days
of receiving such notice, Manufacturers Life of America will send the
Policyowner a statement setting forth the revised allocation. There is no
charge for reallocating future net premiums among sub-accounts. Any percentage
allocation of a net premium to a particular sub-account must be at least 10%,
and all percentage allocations must be in whole numbers. For example, 33% can
be selected but 33 1/3% cannot. An allocation can be expressed as a
dollar-amount, provided the amount is applicable to one sub-account only.
Within seven days of each Policy Anniversary, a statement will be mailed to the
Policyowner showing the amount of the death benefit, the net cash value, and
any Policy debt (including interest charged for the preceding Policy year) as
of the Policy Anniversary. The statement will also show the amount of the cash
value derived from each sub-account. As a reminder to the Policyowner, the
statement will also show how future premiums will be allocated among
sub-accounts.
ARE TRANSFERS BETWEEN SUB-ACCOUNTS ALLOWED?
The Policyowner may, up to eight times in each Policy year, transfer amounts
from one sub-account to another without charge. Currently, the Company will
permit additional transfers subject to a charge of $25 which will be billed
separately. All or a portion of the amount credited to a sub-account may be
transferred.
Transfer requests must be 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 due to 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.
Transfers will take effect on the Business Day on which a proper request is
received at the Manufacturers Life of America Service Office. The request may
be in terms of dollars, such as a request to transfer $10,000 from one
sub-account to another, or may be in terms of a percentage reallocation among
sub-accounts. In the latter case, as with premium reallocations, the
percentages must be in whole numbers. Within seven days of receipt of a proper
request by the Manufacturers Life of America Service Office, a statement will
be sent to the Policyowner showing the amount allocated to each sub-account
before and after the transfer.
8
HOW WILL CHARGES AND EXPENSES BE DEDUCTED?
PREMIUM DEDUCTIONS
The portion of each premium which may be allocated among the sub-accounts is
equal to the premium payable, adjusted for the smokers surcharge or non-smokers
discount described below, less the charges Manufacturers Life of America
deducts from the premium for certain risks and expenses it incurs in connection
with the Policy.
ANNUAL ADMINISTRATION FEE. If premiums are paid annually, there is an annual
administration fee of $30 for administrative expenses incurred for, among other
things, billing, collecting premiums, processing claims, paying cash values,
making Policy changes, keeping records, and communicating with Policyowners. If
premiums are paid more frequently, the annual administration fee will be higher
to reflect the additional expense incurred in collecting and processing more
frequent premiums. The fee will be $36 if premiums are paid semiannually, $42
if premiums are paid quarterly, and $54 if premiums are paid monthly. If
monthly premiums are paid by pre-authorized check ("ManuMatic"), the fee is
$36. Unless otherwise agreed to by Manufacturers Life of America, monthly
premiums must be paid by ManuMatic. A separate application for the ManuMatic
pre-authorized check service is available from a Manufacturers Life of America
agent.
FIRST-YEAR ADMINISTRATION CHARGE. There is a onetime administration charge in
the first Policy year which will not be more than $9 for each $1,000 of the
guaranteed face amount. This charge is designed to cover the cost of processing
applications, conducting medical examinations, determining insurability and the
life insured's risk class, and establishing Policy records.
SALES LOAD. There is a charge designed to compensate Manufacturers Life of
America for the cost of selling the Policy. The cost includes agents'
commissions, advertising, agent training, and the printing of prospectuses and
sales literature. The charge is generally called the "sales load". It is not
more than 30% of the basic premium (defined below) in the first Policy year,
not more than 10% of the basic premium in the second through fourth years, and
not more than 7.5% thereafter. Also, the sales charge will not exceed 9% of the
sum of the basic premiums to be paid during the period equal to the lesser of
(i) 20 years or (ii) the anticipated life expectancy of the life insured based
on the 1958 Commissioners Standard Ordinary Mortality Table. Moreover, the
sales charge is never more in any year than in a prior year. The basic premium
is the gross annual premium for the Policy less the annual administration fee
and the additional charge applicable to Policies with a face amount of less
than $25,000 described below. It does not include the premium for any optional
insurance benefits that may be chosen or any additional premium amounts for
extra mortality risks. The amount of the sales load in a Policy year is not
specifically related to sales expenses for that year. Manufacturers Life of
America expects to recover its total sales expenses over the periods the
Policies are in force. To the extent that sales expenses are more than the
sales load in any year, Manufacturers Life of America will pay them from its
other assets or surplus which may include any profits derived from the
mortality and expense risks charge.
PREMIUM TAX CHARGE. There is a charge equal to 2% of each basic premium to pay
state premium taxes. These taxes differ from state to state. The 2% rate is
expected to be enough, on average, to pay taxes in all states.
MINIMUM DEATH BENEFIT CHARGE. There is a charge of not more than $1 per $1,000
of face amount, if premiums are payable annually, to compensate Manufacturers
Life of America for the risk that a life insured may die at a time when the
death benefit exceeds the benefit that would have been payable in the absence
of a face amount guarantee.
9
SMOKERS SURCHARGE AND NON-SMOKERS DISCOUNT. For issue ages over 15, there is a
smokers surcharge of not more than $7.30 per $1,000 face amount and a non-
smokers discount of not more than $3.65 per $1,000 face amount, if premiums are
payable annually, reflecting the assumption made by Manufacturers Life of
America that smokers will suffer higher mortality than non-smokers.
WHERE PREMIUMS ARE PAYABLE MORE FREQUENTLY THAN ANNUALLY, THE ABOVE TWO CHARGES
AND THE FIRST-YEAR ADMINISTRATION CHARGE ARE PRORATED AGAINST PREMIUMS AND ARE
INCREASED USING AN ANNUAL INTEREST RATE OF 4 1/2% TO REFLECT THE FACT THAT THE
PREMIUMS ARE PAID THROUGHOUT THE YEAR RATHER THAN AT THE BEGINNING.
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. A "group
arrangement" includes a program under which a trustee, employer or similar
entity purchases Policies covering a group of individuals on a group basis. A
"sponsored arrangement" includes a program under which an employer permits
group solicitation of its employees or an association permits group
solicitation of its members for the purchase of Policies on an individual
basis.
The sales load described above may be reduced for Policies issued in connection
with group or sponsored arrangements. Manufacturers Life of America will reduce
the sales load 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
and number of years in existence. Generally, the sales contracts and effort,
administrative costs and mortality cost per Policy vary based on such factors
as the size of the group or sponsored arrangement, its stability as indicated
by its term of existence, 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, for Policies having a face amount of
$25,000 or above, 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
Account.
SMALL POLICY PREMIUM. In group or sponsored arrangements, Manufacturers Life
of America will issue 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 will
be subject to an additional premium deduction equal to $1.50 per $1,000 face
amount if premiums are payable annually (increased using an annual interest
rate of 4 1/2% if premiums are payable more frequently than annually). This
additional deduction is designed to cover the anticipated higher mortality
rates for the smaller Policies where less stringent underwriting rules apply.
In 1983 the United States Supreme Court held that certain insurance policies,
the benefits under which vary based on sex, may not be offered pursuant to
certain employer-sponsored benefit plans and fringe benefit programs. In group
or sponsored arrangements where sex-based premiums and benefits may not be
used, Manufacturers Life of America will issue the Policies described herein
for male life insureds to all members of the group, male and female, with
appropriate changes made by endorsement where the life insured is female.
Manufacturers Life of America recommends that any employer proposing to offer
the Policies to employees under a group or sponsored arrangement consult his or
her attorney before doing so.
10
ACCOUNT CHARGES
MORTALITY AND EXPENSE RISKS CHARGE. Apart from the deductions from gross
premiums just described, there is also a daily charge to the Account for the
mortality and expense risks that Manufacturers Life of America assumes. This
charge is made daily at an annual rate of 0.10% of the average net value of the
Account's assets. The mortality risk assumed is that life insureds may live for
a shorter period of time than Manufacturers Life of America estimated. The
expense risk assumed is that expenses incurred in issuing and administering the
Policies will be greater than Manufacturers Life of America 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. Where Account assets have been reduced as a result of a Policy loan,
the mortality and expense risks charge will be assessed against the Policy loan
account in addition to a loan administration fee. (See "How Are Loans And Loan
Repayments Administered?", page 21.)
COST OF INSURANCE. On each premium due date, Manufacturers Life of America
deducts from the assets in the Account relating to the Policy the cost of
insurance attributable to the period elapsed since the previous premium due
date. Such charge is based upon the 1958 Commissioners Standard Ordinary
Mortality Table. If premiums are payable annually, the cost of insurance will
be equal to an amount determined by multiplying the mortality rate set forth in
the table based on the age of the life insured by the difference between the
Policy's variable death benefit and the Policy's cash value. Any determination
of the cash value of the Policy, regardless of when made, will also reflect the
cost of insurance for the current premium period. A Policyowner may request in
the application for the Policy that the cost of insurance be deducted, to the
extent possible, against the assets in a single sub-account relating to the
Policy, or alternatively, that assets in a single sub-account be immunized, to
the extent possible, from any deduction for the cost of insurance. If no such
request is made, the cost of insurance will be deducted from all sub-accounts
in which the Policy participates in proportion to the value of the assets
relating to the Policy held in each sub-account.
The deductions and charges described above will not be increased by
Manufacturers Life of America with respect to any Policy in effect regardless
of any changes in longevity or increases in expenses.
PROVISION FOR TAXES. Currently, Manufacturers Life of America makes no charge
against the Account for federal, state or local taxes that may be attributable
to the 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.
NASL SERIES TRUST CHARGES. The Account purchases shares of NASL Series Trust
at net asset value. The net asset value of those shares reflects investment
management fees equivalent to an annual rate as set forth below and expenses
already deducted from the assets of NASL Series Trust. In addition detailed
information concerning such fees and expenses is set forth in the prospectus
for NASL Series Trust that accompanies this prospectus.
Investment management fees and expenses associated with the Portfolios of NASL
Series Trust are as follows:
(i) an investment management fee of 1.05% assessed against the assets of the
Emerging Growth Trust
(ii) an investment management fee of .70% assessed against the assets of
the Quantitative Equity Trust (formerly, the Common Stock Fund)*
11
(iii) an investment management fee of .70% assessed against the assets of
the Real Estate Securities Trust*
(iv) an investment management fee of .80% assessed against the assets of
the Balanced Trust
(v) an investment management fee of .65% assessed against the assets of
the Capital Growth Bond Trust *
(vi) an investment management fee of .50% assessed against the assets of
the Money Market Trust
(vii) expenses of up to .50% assessed against the assets of all the Trusts *
* NASL Financial Services, Inc. has voluntarily agreed to waive fees
payable to it and/or to reimburse expenses for a period of one year
beginning the effective date of this prospectus to the extent necessary to
prevent the total of advisory fees and expenses for the Common Stock
Trust, Real Estate Securities Trust and Capital Growth Bond Trust for such
period from exceeding .50% of average net assets.
HOW WILL A POLICY'S DEATH BENEFIT VARY?
Although a Policy's death benefit can never be less than the Policy's face
amount (assuming no outstanding Policy debt or premium in default), it will
vary each premium due date by an amount that depends on the investment
performance of the sub-accounts in which the Policy participates and with the
net interest earned on Policy loans. The first "premium period" starts on the
"Policy Date". Each succeeding premium period starts on the premium due date
and ends on the day before the next premium due date.
To simplify the following discussion, it is assumed that there is no Policy
debt, that no premium is in default and that all of the net premiums under a
Policy have been allocated to a single sub-account. If the value of the assets
relating to the Policy held in the sub-account has increased due to investment
performance during the premium period at greater than a net annual effective
rate of 4 1/2%, the Policy's death benefit will increase on the premium due
date; if the value of these assets decreases, or increases at less than a net
annual effective rate of 4 1/2%, the death benefit will decrease (but not below
the face amount). The reason the assets of the sub-account relating to a Policy
must increase from one premium due date to the next at a net annual effective
rate of more than 4 1/2% in order for the death benefit to increase is that
Manufacturers Life of America, in determining the premiums for the Policy, has
assumed that the value of the assets will increase due to investment performance
at a net annual effective rate of 4 1/2%.
The exact amount by which the death benefit changes is determined by an
actuarial computation that is based, among other things, upon the age of the
life insured and the number of years the Policy has been in effect, as well as
by the investment results of the sub-account in which the Policy participates
and interest charged for any Policy loan.
12
On each premium due date, Manufacturers Life of America determines the extent
to which the value of the assets relating to the Policy and the net interest
earned on any Policy loan differ from the amount which would have been earned
at the assumed annual rate of 4 1/2%. The difference, if positive, is applied
as a net single premium to buy "paid-up additions" at rates contained in the
Policy. If negative, the difference results in a reduction in the amount of
paid-up additions. Although a Policy may have negative paid-up additions, the
death benefit is never less than the face amount, assuming all premiums are
paid when due and there is no Policy loan. For an illustration of the manner in
which the death benefit is determined, see Appendix C.
A variation of a sub-account's net investment performance from the assumed
annual rate of 4 1/2% will tend to produce a larger change in the death benefit
for a younger life insured than for an older life insured. This is due to the
fact that the net single premium rates used to buy paid-up additions rise as
the life insured grows older. Because the assets relating to a Policy tend to
increase as net premiums are paid, the dollar change in the death benefit will
tend to be greater for a Policy that has been in effect for a long time than
for one that has been in effect for a short time, despite the fact that the
life insured is older. The following examples show what the amount of the
change in the death benefit would be under the facts assumed for purposes of
illustration. In these examples the changes are slightly greater for the Policy
issued on the older life insured because the premiums for a $100,000 Policy
issued at age 40 are greater than those for one issued at age 25, and the
dollar amount of the increase resulting from a 6.57% compounded net return upon
the assets in the Account relating to the Policy on the older life insured is
therefore larger. The changes in the death benefit are greater even though the
increase or decrease in the death benefit resulting from a $1.00 change in the
assets relating to the Policy is greater for a younger life insured.
EXAMPLE NO. 1. Non-smoker Policy with $100,000 face amount and annual premiums
in effect for 10 years, during which the value of the assets in the sub-account
increased due to investment performance at a uniform net annual rate of 6.57%.
DEATH BENEFIT DEATH BENEFIT DOLLAR
INSURED END OF YEAR 9 END OF YEAR 10 CHANGE
- - --------------------- ------------- -------------- ------
Male, age 25 at issue $102,983 $103,703 $ 720
Male, age 40 at issue $103,532 $104,357 $ 825
(Above figures derived from tables on pages 18 and 19.)
EXAMPLE NO. 2. Same assumptions as in Example No. 1 except that the value of
the assets increases by a uniform net annual rate of 1.64% in the 10th year.
DEATH BENEFIT DEATH BENEFIT DOLLAR
INSURED END OF YEAR 9 END OF YEAR 10 CHANGE
- - --------------------- ------------- -------------- ------
Male, age 25 at issue $102,983 $101,988 -$ 995
Male, age 40 at issue $103,532 $102,391 -$1,141
The following examples show how the same investment results affect the death
benefit more significantly for a younger life insured.
EXAMPLE NO. 3. Non-smoker Policy with a $1,500 annual premium, in effect for
10 years, during which the value of the assets in the sub-account increased due
to investment performance at a uniform net rate of 6.57% per year.
13
DEATH DEATH
BENEFIT BENEFIT
FACE END OF END OF DOLLAR
INSURED AMOUNT YEAR 9 YEAR 10 CHANGE
----------------------- -------- -------- -------- ------
Female, age 25 at issue $179,927 $185,295 $186,590 $1,295
Female, age 40 at issue $102,654 $106,280 $107,126 $ 846
EXAMPLE NO. 4. Same assumptions as Example No. 3 except that the value of the
assets increases by a uniform net rate of 1.64% in the 10th year.
DEATH DEATH
BENEFIT BENEFIT
FACE END OF END OF DOLLAR
INSURED AMOUNT YEAR 9 YEAR 10 CHANGE
----------------------- -------- -------- -------- -------
Female, age 25 at issue $179,927 $185,295 $183,503 -$1,792
Female, age 40 at issue $102,654 $106,280 $105,108 -$1,172
If the assets in the sub-account in which the Policy participates have earned
less than a net annual effective rate of 4 1/2%, and the death benefit
accordingly equals the guaranteed face amount, Manufacturers Life of America
will keep a record of what the death benefit would have been had there not been
a guaranteed minimum (namely, a record of the negative paid-up additions). If
later investment results are favorable, that is if the value of the assets in
the sub-account later increases at a net annual effective rate greater than 4
1/2% a year, the death benefit will not become more than the guaranteed face
amount until the earlier unfavorable investment results have been offset (in
other words, until the negative paid-up additions are offset in full by
positive paid-up additions). For example, suppose in the case of the female age
25 set forth in Example No. 3 above the value of the assets in the sub-account
increases due to investment performance at a gross annual rate of 2% for the
first three years. The death benefit will nevertheless remain at the guaranteed
face amount. If the value of the assets increases at a gross annual rate of
8.9% (i.e., 8.25% net annual rate) in the fourth year, this would be sufficient
to offset the earlier unfavorable investment results and the death benefit
would increase to $179,935.
For further information, see the tables under the caption "How will A Policy's
Death Benefit Vary?". They show for various life insureds how a Policy's death
benefit and cash value will change if the gross investment return is 0%, 4%, or
8%. Comparable information based on gross investment returns of 0%, 6% and 12%
is contained in Appendix A. Certain additional illustrations for females are
set forth in Appendix B.
HOW WILL A POLICY'S CASH VALUE VARY?
A Policy has a net cash value which the Policyowner may get by surrender of the
Policy while the life insured is living. Unlike traditional fixed-benefit whole
life insurance, however, a Policy's cash value is not known in advance even if
it is assumed that premiums are paid when due, because it varies daily with the
investment performance of the sub-account(s) in which the Policy participates
and with the net interest earned on Policy loans.
A Policy's value upon surrender is its "net cash value", which is the cash
value less any outstanding Policy debt. (See "Under What Conditions Are Loans
Available?", page 20.) The following discussion of cash values assumes that
there is no Policy debt, that no premium is in default, and that the net
premiums have all been allocated to a single sub-account.
During the first Policy year, the cash value will be very small or zero because
of the charges made in connection with issuance of the Policy. The cash value
on each premium due date will be equal to the cash
14
value on the preceding premium due date plus the net amount of the premium due
on such previous premium due date, increased or decreased by the change in the
value of the assets relating to the Policy, less the cost of insurance for the
period between the two dates. If a premium is not paid before the end of the
grace period and the Policy is surrendered before then, the cash value is
adjusted downward to take into account the failure to pay the premium on the
due date. For an illustration of the manner in which the cash value is
determined, see Appendix D.
An increase in the value of the assets in the Account at a specific net annual
rate will not result in an increase in Policy cash values at the same net
annual rate. Moreover, an increase over a premium period will not result in the
same end-of-period cash value for Policies having the same cash value at the
beginning of the premium period if the Policies are for life insureds of
different ages. This is because the cash value reflects the deduction of the
cost of insurance, which is different for life insureds of different ages.
The following examples show what the amount of the change in the cash value
will be under the stated assumptions.
EXAMPLE NO. 5. Non-smoker Policy with $100,000 face amount and annual premiums
in effect for 10 years, during which the value of the assets in the sub-account
increased at a uniform net annual rate of 6.57%.
CASH CASH
VALUE VALUE
END OF END OF DOLLAR
INSURED YEAR 9 YEAR 10 CHANGE
--------------------- ------- ------- ------
Male, age 25 at issue $7,131 $8,300 $1,169
Male, age 40 at issue $13,647 $15,707 $2,060
(Above figures derived from tables on pages 18 and 19.)
EXAMPLE NO. 6. Same assumptions as in Example No. 5 except that the value of
the assets increases by a net annual rate of 1.64% in the 10th year.
CASH CASH
VALUE VALUE
END OF END OF DOLLAR
INSURED YEAR 9 YEAR 10 CHANGE
--------------------- ------- ------- ------
Male, age 25 at issue $7,131 $7,905 $774
Male, age 40 at issue $13,647 $14,949 $1,302
The changes are greater for the older life insured because the premiums (and
hence the assets in the Account relating to the Policy on that life insured)
are greater and the same rate of increase therefore produces a greater dollar
amount change.
EXAMPLE NO. 7. Non-smoker Policy with a $1,500 annual premium, in effect for
10 years, during which time the value of the assets in the sub-account
increased at a uniform net annual rate of 6.57%.
CASH CASH
VALUE VALUE
FACE END OF END OF DOLLAR
INSURED AMOUNT YEAR 9 YEAR 10 CHANGE
----------------------- -------- ------- ------- ------
Female, age 25 at issue $179,927 $12,831 $14,934 $2,103
Female, age 40 at issue $102,654 $14,010 $16,124 $2,114
15
EXAMPLE NO. 8. Same assumptions as in Example No. 7 except that the value of
the assets increases by a net annual rate of 1.64% in the 10th year.
CASH CASH
VALUE VALUE
FACE END OF END OF DOLLAR
INSURED AMOUNT YEAR 9 YEAR 10 CHANGE
----------------------- -------- ------- ------- ------
Female, age 25 at issue $179,927 $12,831 $14,224 $1,393
Female, age 40 at issue $102,654 $14,010 $15,346 $1,336
In Example No. 8, the change is smaller for the older life insured
notwithstanding the higher cash value at the end of year 9 because the cost of
insurance is higher for the older life insured. The last two examples might be
compared with examples 3 and 4 on page 14. Note that while the same premium
results in a larger death benefit for the younger life insured, the cash values
for the younger and older lives insured are quite similar. Note also that, in
this example, while the death benefit decreases if the investment return is at
a net annual rate of 1.39%, the cash value increases. The death benefit does
not increase because the death benefit provisions assume a 4 1/2% net annual
growth.
Because a part of each premium is used to provide life insurance protection,
the cash values cannot meaningfully be compared with the amounts that would
have been available had the gross premiums been invested without obtaining life
insurance protection.
HOW DOES THE SURRENDER OF A POLICY FOR ITS NET CASH VALUE WORK?
A Policy may be surrendered in whole or in part for its net cash value while the
life insured is living. Surrendering a Policy in part involves splitting the
Policy into two Policies. One is surrendered for its net cash value; the other
is continued in force. The Policy continued must have a face amount of at least
$25,000 (or $10,000 for group or sponsored arrangements), and its premium will
be based on the new face amount and the original issue age.
To surrender a Policy in whole or in part, the Policyowner must deliver or mail
it, together with a written request in a form acceptable to Manufacturers Life
of America, to the Manufacturers Life of America Service Office. The net cash
value of a surrendered Policy will be determined as of the Business Day such
notice and the Policy are received at the Service Office, and thereafter the
Policyowner will have no further rights under the Policy or portion thereof
surrendered. No portion of any charges or expenses previously deducted will be
refunded as a result of a surrender in whole or in part.
WHEN ARE PROCEEDS PAID?
As long as the Policy is in force, other than as extended term or reduced
paid-up insurance (see "What Are The Options On Lapse?", page 25),
Manufacturers Life of America will ordinarily pay any death benefit, net cash
value, or Policy loan proceeds within seven days after receipt at the
Manufacturers Life of America Service Office of all the documents required for
such a payment. However, except as noted below, Manufacturers Life of America
may delay payment of any net cash value, Policy loan proceeds or death benefit
in excess of the guaranteed face amount for any period during which the New
York Stock Exchange is closed for trading (except for normal holiday closings)
or when the S.E.C. has determined that a state of emergency exists which may
make such payment impractical.
If a Policy is in force as extended term or reduced paid-up insurance for a
fixed amount, Manufacturers Life of America expects to pay any cash value
promptly. However, it has the right to delay payment of the cash value of such
insurance for up to six months. Manufacturers Life of America will pay interest
if it delays such a payment for more than 30 days.
16
WHAT ARE SOME ILLUSTRATIONS OF CASH VALUES AND DEATH BENEFITS?
The following tables have been prepared to help show how values under the
Policy change with investment performance. The tables illustrate how cash
values and death benefits of Policies with a given premium and face amount
issued on a life insured of a given age would vary over time if the return on
the assets held in the Funds was a uniform, gross, after-tax, annual rate of
0%, 4%, or 8%. The death benefits and cash values would be different from those
shown if the returns averaged 0%, 4%, or 8%, but fluctuated over and under
those averages throughout the years.
The amounts shown for the death benefit and cash 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 investment management fees and expenses incurred by NASL Series Trust, as
well as the daily charge to the Account for assuming mortality and expense
risks, which is equivalent to an annual charge of 0.10%, are deducted from the
gross return. For purposes of illustration the deduction of the investment
management fee has been set at 1.23% per annum (guaranteed charges). Gross
annual rates of return of 0%, 4% and 8% correspond to approximate net annual
rates of return of -1.32%, 2.62% and 6.57%.
The tables reflect the fact that no charges for federal, state or local taxes
are currently made against the 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%,
4% and 8% than it does now.
Upon request, Manufacturers Life of America will furnish a comparable
illustration based on the proposed life insured's age and sex and on the face
amount or premium amount requested. Such an illustration will assume that the
life insured is a standard (or, on request, a non-smoker) risk and that the
premium will be paid on an annual basis.
17
VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 25
$100,000 FACE AMOUNT
$903.00 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 4% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8%
- - ---- -------- -- -- -- -- -- --
1 $ 939 $100,000 $100,000 $100,019 $ 0 $ 0 $ 0
2 1,916 100,000 100,000 100,116 595 633 671
3 2,932 100,000 100,000 100,291 1,225 1,321 1,419
4 3,988 100,000 100,000 100,543 1,846 2,024 2,214
5 5,087 100,000 100,000 100,875 2,481 2,770 3,084
6 6,229 100,000 100,000 101,285 3,106 3,532 4,008
7 7,417 100,000 100,000 101,774 3,721 4,311 4,989
8 8,653 100,000 100,000 102,340 4,326 5,108 6,029
9 9,939 100,000 100,000 102,983 4,921 5,922 7,131
10 11,275 100,000 100,000 103,703 5,506 6,754 8,300
15 18,805 100,000 100,000 108,429 8,220 11,111 15,199
20 27,965 100,000 100,000 114,978 10,467 15,644 24,028
25 39,111 100,000 100,000 123,291 12,192 20,207 35,127
(1) If premiums are paid more frequently than annually, the payments would be
$459.00 semiannually, $232.50 quarterly, $78.50 monthly, or $77.00 monthly
ManuMatic. The death benefits and cash values would be slightly different
for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 4% AND 8% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
18
VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 40
$100,000 FACE AMOUNT
$1,584.00 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 4% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8%
- - ---- -------- -- -- -- -- -- --
1 $ 1,647 $100,000 $100,000 $100,032 $ 80 $ 97 $ 114
2 3,361 100,000 100,000 100,157 1,350 1,436 1,524
3 5,142 100,000 100,000 100,373 2,577 2,784 3,000
4 6,995 100,000 100,000 100,679 3,762 4,140 4,544
5 8,923 100,000 100,000 101,075 4,952 5,553 6,210
6 10,927 100,000 100,000 101,560 6,098 6,972 7,952
7 13,011 100,000 100,000 102,132 7,199 8,394 9,771
8 15,179 100,000 100,000 102,790 8,254 9,819 11,669
9 17,434 100,000 100,000 103,532 9,262 11,242 13,647
10 19,778 100,000 100,000 104,357 10,221 12,662 15,707
15 32,986 100,000 100,000 109,681 14,280 19,631 27,276
20 49,055 100,000 100,000 116,921 17,107 26,177 41,083
25 68,606 100,000 100,000 126,006 18,694 31,965 57,143
(1) If premiums are paid more frequently than annually, the payments would be
$804.00 semiannually, $405.50 quarterly, $136.50 monthly, or $135.00
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 4% AND 8% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
19
VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 55
$100,000 FACE AMOUNT
$3,278.00 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 4% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8%
- - ---- -------- -- -- -- -- -- --
1 $ 3,409 $100,000 $100,000 $100,089 $ 668 $ 746 $ 825
2 6,955 100,000 100,000 100,280 2,807 3,054 3,306
3 10,642 100,000 100,000 100,571 4,831 5,331 5,858
4 14,477 100,000 100,000 100,959 6,738 7,574 8,478
5 18,465 100,000 100,000 101,445 8,623 9,877 11,267
6 22,613 100,000 100,000 102,028 10,391 12,139 14,129
7 26,926 100,000 100,000 102,705 12,042 14,358 17,064
8 31,412 100,000 100,000 103,475 13,578 16,529 20,071
9 36,078 100,000 100,000 104,334 14,999 18,647 23,147
10 40,930 100,000 100,000 105,283 16,304 20,708 26,289
15 68,263 100,000 100,000 111,303 21,080 29,931 42,819
20 101,517 100,000 100,000 119,326 23,254 37,147 60,511
25 141,976 100,000 100,000 129,261 23,719 42,719 79,760
(1) If premiums are paid more frequently than annually, the payments would be
$1,660.00 semiannually, $835.50 quarterly, $280.50 monthly, or $279.00
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 4% AND 8% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
________________________________________________________________________________
20
UNDER WHAT CONDITIONS ARE LOANS AVAILABLE?
A Policyowner may borrow against the cash value of his or her Policy in an
amount not to exceed the "loan value" of the Policy reduced by any premium due
and any existing Policy debt. The loan value is 90% of the cash value, except
that if the Policy has been changed to extended term insurance, see "What Are
The Options On Lapse?", it has no loan value.
Manufacturers Life of America can postpone making the loan, unless it is used
to pay a premium, 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 impractical.
Manufacturers Life of America will automatically grant a loan to pay all or
part of an unpaid premium if:
(a) the premium is still unpaid at the end of the grace period;
(b) this loan option was requested in the application, or Manufacturers Life of
America receives the Policyowner's signed request for it before the end of the
grace period; and
(c) the cash value exceeds the Policy debt.
Manufacturers Life of America will loan the whole premium if at the end of the
premium period the Policy debt will not exceed the cash value. If loaning the
whole premium would make the Policy debt at the end of the premium period
greater than the cash value, Manufacturers Life of America will loan only a
part of the premium. The amount Manufacturers Life of America loans will keep
the Policy in force from the due date of the premium until the Policy debt
equals the cash value. Then, if the balance of the premium is still unpaid, the
Policy will terminate.
WHAT INTEREST IS CHARGED ON A POLICY LOAN?
A Policy will be issued with a loan provision providing for loan interest at
either a fixed rate or, if permitted in the state in which the Policy is
issued, a variable rate as selected in the application. Not all states have
laws permitting variable policy loan interest rates. Some states permit
variable rates but set maximums, and there are other variations from state to
state. For details about the policy loan interest rate laws in your state,
contact your registered representative or the Manufacturers Life of America
Service Office. Where permitted, either the fixed rate provisions or variable
rate provisions as follows will apply.
FIXED RATE PROVISIONS. Interest on all loans, including automatic premium
loans, under Policies containing the fixed rate provision will be at an annual
rate of 8%. At the end of each premium period any unpaid interest will be added
to the Policy debt to bear interest at the same rate.
VARIABLE RATE PROVISIONS. Interest on all loans under Policies containing the
variable rate provision will be determined by Manufacturers Life of America
when a Policy loan is made and the rate so determined will be effective until
the next Policy Anniversary at which time it will be recalculated. A Policy
Anniversary is the anniversary of the "Policy Date" set forth in the Policy.
The variable rate will not exceed the greater of 5.5% per year or the Moody's
Corporate Bond Yield Average--Monthly Average Corporates for the calendar month
ending two months before the date Manufacturers Life of America determines the
policy loan interest rate. On each Policy Anniversary, the annual rate of
interest may be adjusted up or down depending on changes in the Moody's
Average, but no downward adjustment is required unless such Average for the
month ending two months before the date of determination is at least one-half
of one percent less than the rate in effect for the year then ending. At the
end of each premium period any unpaid interest will be added to the Policy debt
to bear interest at the same rate.
21
HOW ARE LOANS AND LOAN REPAYMENTS ADMINISTERED?
When a loan is made, Manufacturers Life of America will deduct the amount of
the loan from the sub-accounts designated by the Policyowner or, in the absence
of such designation, from all sub-accounts in proportion to the allocation to
such sub-accounts of the assets in the Account relating to the Policy.
Manufacturers Life of America will also establish a loan account under the
Policy to reflect Policy indebtedness, interest accrued thereon, and certain
charges. Any net interest (accrued interest less a loan administration fee not
to exceed .20% per year and the mortality and expense risks charge of.10%) in
excess of the assumed rate of 4 1/2% will be combined with the aggregate net
investment performance of the sub-accounts in excess of the 4 1/2% rate, and
the resulting amount on each premium due date will be used to buy paid-up
additions and, after a deduction to reflect the cost of insurance, will be
added to the cash value of the Policy. For an illustration of the manner in
which the cash value varies in relation to net interest on the loan account,
see Appendix D.
When a loan repayment is made, Manufacturers Life of America will deduct an
equal amount from the loan account balance and credit the sub-account or sub-
accounts specified by the Policyowner. If no particular sub-accounts are
specified, Manufacturers Life of America will allocate the repayment in
proportion to the allocation to such sub-accounts of the assets in the Account
relating to the Policy.
If, as a result of poor investment performance of the sub-accounts to which the
net premiums of a Policy are allocated, the compounding effect of interest
charges, or any other reason, the Policy debt should equal or exceed the cash
value of the Policy, the Policy will then terminate. However, at least 31 days
prior to the termination, Manufacturers Life of America will mail a notice to
the Policyowner at his or her last known address and to any assignee of the
Policy known to Manufacturers Life of America of its intent to cancel the
Policy if the excess indebtedness is not repaid.
A loan, whether repaid or not, will have a permanent effect on the cash value
and amount of any paid-up additions, but will have no effect on the amount of
premiums.
22
WHAT ARE THE EXCHANGE PRIVILEGES OF THE POLICY?
THREE YEAR CONVERSION RIGHT. The Policy may be exchanged for a fixed benefit
insurance policy on the life of the life insured within 36 months after the
date of issue. No evidence of insurability will be required. However, in order
to exchange, all premiums due on the Policy must have been paid, and any Policy
debt must have been repaid in full. The date of exchange will be the date the
Policy is received by Manufacturers Life of America at its Service Office
together with a signed request for such an exchange. The exchange will be
subject to an equitable adjustment to reflect variances, if any, in the
premiums and cash values under the Policy and the new policy. The Policyowner
will receive the benefit of any amount due the Policyowner as a result of the
adjustment. If the adjustment results in an amount due Manufacturers Life of
America, Manufacturers Life of America must have received by the exchange date
the first premium on the new policy and an amount equal to the greater of (i)
the difference between the premiums which would have been paid on the new
policy and those actually paid on the Policy, plus interest on the difference
at 8% per year, and (ii) the difference between the cash values of the new
policy and the Policy.
The new policy will be a whole life policy offered by The Manufacturers Life
Insurance Company at the time the exchange is requested. The new policy will
have a face amount equal to the initial face amount of the Policy. It will have
the same policy date as the Policy, and premiums for the new policy will be
based on Manufacturers Life's rates in effect on the policy date for this same
class of risk as under the Policy. Any riders in the Policy will be included in
the new policy only if Manufacturers Life was offering them with the new policy
as of its date of issue.
CONVERSION RIGHT UPON MATERIAL CHANGE IN INVESTMENT OBJECTIVE. The Policy may
also be exchanged for a fixed benefit whole life insurance policy issued by
Manufacturers Life of America on the life of the life insured within six months
after the Policyowner receives notice of a material change in the investment
objective of the Account or within six months of the effective date of the
change, whichever is later. The Michigan Insurance Commissioner determines
whether a change in investment objective is material. No evidence of
insurability will be required.
If the Policy is in force on a premium paying basis when exchanged (i.e., if
there has been no lapse), the new policy will be issued, at the election of the
Policyowner, either:
(a) as of the original issue age of the life insured based on Manufacturers
Life of America's premium rates for fixed benefit insurance policies at the
original issue age, for a face amount not exceeding the death benefit of the
Policy on the date of exchange; or
(b) as of the attained age of the life insured for a face amount not exceeding
the excess of the death benefit of the Policy on the date of exchange over:
(i) its net cash value on the date of exchange if the Policyowner elects to
surrender the Policy for its net cash value; or
(ii) the death benefit payable under the paid-up insurance option if the
Policyowner elects such option under the Policy.
If the Policy is in force as paid-up insurance as a result of a Policy lapse,
the exchange will be a paid-up fixed benefit insurance policy for a face amount
not exceeding the death benefit of the Policy on the date of exchange.
A premium or net cash value adjustment will be made for exchanges under (a) or
(b) taking appropriate account of the premiums or net cash values under the
Policy and the new policy. Upon written request
23
received at Manufacturers Life of America's Service Office a detailed statement
of the method of computing this adjustment will be provided. This statement is
also on file with the Pennsylvania Insurance Commissioner.
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 the Policies pursuant to an
Underwriting 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 commissions not to exceed the percentage of premiums and dollar
limits for each Policy year set forth in the following schedule:
MAXIMUM
MAXIMUM $ PER
PERCENTAGE OF $1,000
POLICY YEAR PREMIUMS PAID FACE AMOUNT
- - ----------- ------------- -----------
1 55% $50.00
2 5% $15.00
3-10 5% $7.50
11 and later 2% $7.50
Additional commissions are paid with respect to benefits provided by rider.
Representatives who meet certain productivity and persistency standards with
regard to the sale of the Policies 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 and Manufacturers USA, on
behalf of ManEquity, Inc., will pay the sales commissions in respect of the
Policies, prepare and maintain all books and records required to be prepared and
maintained by ManEquity, Inc. with respect to the Policies, and send all
confirmations required to be sent by ManEquity, Inc. with respect to the
Policies. ManEquity, Inc. will promptly reimburse Manufacturers Life and
Manufacturers USA for all sales commissions paid by Manufacturers Life and
Manufacturers USA and will pay Manufacturers Life and Manufacturers USA for its
other services under the agreement in such amounts and at such times as agreed
to by the parties.
Manufacturers Life and Manufacturers USA have also entered into a Service
Agreement with Manufacturers Life of America pursuant to which Manufacturers
Life and Manufacturers USA will provide to Manufacturers Life of America all
issue, administrative, general services and recordkeeping functions on behalf of
Manufacturers Life of America with respect to all of its insurance policies
including the Policies.
Finally, Manufacturers USA has entered into an Automatic Reinsurance Agreement
with Manufacturers Life of America pursuant to which Manufacturers USA will
automatically reinsure any risk under a Policy where the net amount at risk
under any such Policy is in excess of $25,000 up to a maximum of $15,000,000.
Under the reinsurance agreement, Manufacturers Life may also consider reinsuring
any risk in excess of $15,000,000. Except for its obligations to Manufacturers
Life of America under the reinsurance agreement, Manufacturers USA has no
financial obligation for any Policy benefits.
24
WHAT IS THE TAX TREATMENT OF POLICY BENEFITS?
The Policy should receive the same federal income tax treatment as fixed
benefit life insurance. Section 7702 of the Internal Revenue Code of 1986 (the
"Code") provides that if certain tests are met, life insurance policies such as
this Policy will be treated as life insurance for tax purposes. This means that
(1) the death benefit should be excludable from the gross income of the
beneficiary under Section 101(a)(1) of the Code; and (2) the Policyowner should
not be taxed on any part of the Account's assets attributable to the Policy,
including additions attributable to interest, dividends or appreciation, until
actual surrender of the Policy.
In certain circumstances, distributions from the Policy prior to payment of the
death benefit under the Policy will be subject to adverse tax consequences.
Section 7702A of the Code provides that any life insurance policy failing to
satisfy a "7-pay" test will become a modified endowment contract. Under this
test, the cumulative premiums paid under a life insurance policy at any time
during the first seven policy years may not exceed the sum of the net level
premiums that would have been paid had the policy provided for paid-up future
benefits after the payment of seven level annual premiums. A "material change"
in the benefits under the Policy may subject the Policy to a re-test under the
"7-pay" test. A "material change" is defined to include any increase in the
death benefit under the Policy or any increase in, or addition of, a qualified
additional benefit under the Policy, excluding (1) any increase which is
attributable to the payment of premiums necessary to fund the lowest level of
the death benefit and qualified additional benefits during the first seven
Policy years and (2) certain cost-of-living increases based on an established
broad-based index.
Most withdrawals under a life insurance policy that becomes a modified
endowment contract will be taxed on an "income first" basis. Amounts received
by the owner of such a policy either directly or indirectly (including loans,
certain dividends, surrenders, partial withdrawals, or the pledge or assignment
of any portion of such a policy's value) will be includible in the owner's
gross income to a certain extent. In the case of a Policy offered by this
Prospectus becoming a modified endowment contract, amounts received will be
includible in a Policyowner's gross income to the extent that the Policy Value
exceeds gross premiums paid. Also, an additional 10% tax penalty will be
imposed on withdrawals includible in gross income, except in certain
circumstances. This penalty will not apply to withdrawals that are: (a)
received after the Policyowner has reached age 59 1/2; (b) attributable to the
Policyowner's becoming disabled; or (c) one of a series of substantially equal
periodic payments made at least annually for the life of the policyowner or
over the joint lives of the Policyowner and a designated beneficiary.
For purposes of determining the portion of an amount received upon a withdrawal
under the Policy that is includible in the Policyowner's gross income, all
modified endowment policies issued by the Company to the same Policyowner
during a calendar year will be aggregated with the Policy and treated as a
single policy.
In general, life insurance policies purchased before June 21, 1988 remain
subject to the provisions regarding withdrawals, such as loans and surrenders,
set forth in the next two paragraphs of this prospectus. However, in certain
circumstances, a Policy issued before June 21, 1988 may also become subject to
the "material change" rules and thus to the "7-pay" test. These circumstances
include the following:
(a) where on or after June 21, 1988, the death benefit under a policy is
increased and before June 21, 1988 the policyowner did not have a unilateral
right under a policy to obtain such an increase without providing additional
evidence of insurability; and
(b) where the death benefit under a policy increases by more than $150,000 over
the death benefit under a policy in effect on October 20, 1988. If a life
insurance policy, as of June 21, 1988, required at least 7 level annual
premiums and the owner of the policy makes at least seven level annual
payments, this provision
25
will not apply.
Loans received under a Policy that is not a modified endowment contract should
be treated as indebtedness of the owner, and no part of any loan under the
Policy should be income to the Policyowner when received under current tax law.
However, interest charged on policy loans, whether paid by the policyowner or
added to the amount of the loan, may not be tax deductible.
A surrender of a Policy that is not a modified endowment contract may have
other tax consequences. Upon any such surrender under current tax law, the
Policyowner will not be taxed on the cash value except for the amount, if any,
that exceeds the cost basis of the Policy, i.e., the gross premiums paid less
non-taxable withdrawals in previous years. A partial withdrawal will be treated
as a partial surrender subject to the cost recovery rules discussed above. Any
unpaid policy loan will be treated upon surrender as forgiveness of the loan
for tax purposes and thus taken into account in determining the extent, if any,
to which the Policyowner has received amounts in excess of his or her
investment that must be reported as taxable income.
Policyowners should consult with their tax advisers before making a policy loan
or surrendering.
In connection with the issuance of regulations relating to diversification
requirements for separate accounts or funds underlying variable life and
annuity policies, the Treasury Department has announced that such regulations
do not provide guidance concerning the extent to which Policyowners may direct
their investments to particular sub-accounts of the Account. Regulations in
this regard are expected in the future. It is not clear what these regulations
will provide or whether they will be prospective only. It is possible that when
regulations are issued, the Policy may need to be modified to comply with such
regulations.
The individual situation of each Policyowner or beneficiary will determine the
federal estate taxes and the state and local estate, inheritance and other
taxes due if the owner or life insured dies.
WHAT ARE THE OPTIONS ON LAPSE?
If a premium is not paid within the grace period of 31 days after the date it
was due and the Policy has a net cash value, a "guaranteed option" can be
chosen instead of resuming premium payments. The guaranteed options are (a),
(b), (c) and (d) below. If the Policy is in a special premium class, as
indicated in the Policy, option (a) is not available.
If a guaranteed option is not chosen before the end of the grace period and the
automatic premium loan option has not been requested, Manufacturers Life of
America will apply option (a) or, if (a) is not available, option (b). In
either case the Policyowner can choose instead any other available guaranteed
option; Manufacturers Life of America must receive a signed request for this
change no later than 60 days after the due date of the unpaid premium.
(a) Extended Term Insurance. The Policy can be continued as term insurance
for a fixed amount. That amount will be the face amount less any Policy
debt.
The term insurance will begin on the due date of the unpaid premium.
Manufacturers Life of America will use the cash value of the Policy on the
due date, less any Policy debt, as a net single premium on the due date to
compute the period of coverage. After that period no insurance will be in
force. Extended term insurance has a cash value but no loan value.
(b) Paid-up Whole Life Insurance (Fixed Amount). The Policy can be continued
as paid-up whole life insurance for a fixed amount, if it has a cash value
sufficient to provide at least $300 of such
26
insurance. Manufacturers Life of America will use the cash value of the
Policy on the due date, less any Policy debt, as a net single premium on
the due date to compute the amount of insurance. Paid-up whole life
insurance, whether for a fixed or variable amount, has a cash value and a
loan value.
(c) Paid-up Whole Life Insurance (Variable Amount). The Policy can be
continued as paid-up whole life insurance for an amount which can vary, if
it has a cash value sufficient to provide an initial amount of at least
$300 of such insurance. The initial amount will be calculated as in (b).
The assets relating to the Policy will remain in the Account. The amount
of insurance may then change on any subsequent Policy Anniversary,
depending on the investment performance of the Funds. There is no
guaranteed minimum death benefit.
(d) Surrender For Cash. The Policy can be surrendered for its net cash
value. If Manufacturers Life of America receives a request for surrender
within 60 days after the due date of the unpaid premium, the net cash
value will be the cash value on the due date increased or decreased by the
change in the value of the assets relating to the Policy since the due
date, less the Policy debt, if any. If the request is received after 60
days, the net cash value is the cash value of any extended term insurance
or paid-up insurance then in force less any Policy debt.
WHAT ARE THE REINSTATEMENT RULES?
If the policy terminates or is changed to extended term or paid-up insurance,
it can be reinstated within 7 years if:
(1) It has not been surrendered for cash;
(2) Manufacturers Life of America receives evidence of insurability
satisfactory to it; and
(3) Manufacturers Life of America receives payment of the larger of: (i) the
sum of all overdue premiums with interest at 6% per year compounded
annually or (ii) 110% of the increase in net cash value resulting from
reinstatement.
Upon reinstatement, the Policy will have the same cash value and death benefit
as if the termination or change had not occurred and a Policy debt equal to any
Policy debt in effect on the date any guaranteed option became effective, plus
interest thereon, and any loan arising after any guaranteed option became
effective, plus interest thereon.
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.
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.
INCONTESTABILITY. Manufacturers Life of America will not contest the Policy
after it has been in force during the life insured's lifetime for two years
from the Policy date, except for non-payment of premiums or as to certain
matters following reinstatement of the Policy after lapse. However, it may
contest at any time the validity of any rider adding a "total disability
waiver" benefit.
27
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
benefits payable to those which the premium 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 date the Policy is issued, Manufacturers Life
of America will pay only the sum of the premiums paid less any Policy debt.
ASSIGNMENT. Manufacturers Life of America will not be deemed to know of or be
bound by an assignment unless 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. In the event of the Policy's assignment for
collateral purposes, Manufacturers Life of America may require the written
consent of the Policyowner as well as the collateral assignee of the Policy
before treating as complete any request for a partial or full withdrawal of the
Policy's net cash value or a loan against the Policy's cash value.
SETTLEMENT OPTIONS. The Policy grants to most Policyowners, or to the
beneficiary, five optional ways of receiving Policy proceeds, other than in a
lump sum. The proceeds may be payable (i) in equal installments for a specified
period of not less than five years and not more than 30, (ii) in equal
installments for the life of the annuitant with the guarantee that if the
annuitant does not survive for a period of either 10 or 20 years or for a
period when the total payments made equal the proceeds payable, payments will
continue for the remainder of such period, (iii) in installments of a specified
amount together with interest until the proceeds are exhausted, (iv) in equal
installments for the joint lives of two annuitants with a guarantee that
payments will continue for at least 10 years, and (v) by leaving the proceeds
on deposit at interest with withdrawals permitted not more frequently than
monthly by the payee until the proceeds are exhausted. Any Manufacturers Life
of America agent authorized to sell the Policy can explain these options upon
request.
RIDERS. When the Policy is first issued, the Policyowner may be able to obtain
extra fixed benefits for an additional premium. These benefits will be
described in what is known as a "rider" to the Policy. The amounts of these
benefits are fully guaranteed at issue; they do not depend on the performance
of the Account. Certain restrictions may apply; they are described in the
applicable rider. Any Manufacturers Life of America agent authorized to sell
the Policy can explain these extra benefits further. Samples of the provisions
are available from Manufacturers Life of America upon written request.
WHAT ARE THE VOTING RIGHTS?
As stated above, all of the assets held in the sub-accounts of the Account will
be invested in shares of a particular Portfolio of NASL Series Trust.
Manufacturers Life of America is the legal owner of those shares and as such
has the right to vote upon 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 matter that may be voted upon at a shareholders' meeting. However,
Manufacturers Life of America will vote shares of NASL Series Trust held in the
Account in accordance with instructions received from Policyowners. Portfolio
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 Account in its own
right, it may elect to do so.
28
The number of Portfolio shares in each sub-account for which instructions may
be given by a Policyowner is determined by dividing the portion of that
Policy's net cash value derived from participation in that sub-account, if any,
by the value of one share of the corresponding Portfolio. The number will be
determined as of a date chosen by Manufacturers Life of America, but not more
than 90 days before the meeting of shareholders. Fractional votes are counted.
Voting instructions will be solicited in writing at least 14 days prior to the
meeting of the Series Fund.
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 Funds, or to approve or disapprove an investment
management contract for the Series Fund. In addition, Manufacturers Life of
America itself may disregard voting instructions that would require changes in
the investment policies or investment adviser of one or more of the Funds,
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 semi-annual report 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 Director Attorney 1989-present, Dykema
(34) Gossett
James D. Gallagher Director, Secretary, Vice President, Legal Services
(42) and General Counsel --January 1996-present, The
Manufacturers Life Insurance
Company; Vice President,
Secretary and General Counsel--
1994-present, North American
Security Life; Vice President
and Associate General Counsel--
1991-1994, The Prudential
Insurance Company of America
29
Position With
Manufacturers Life
Name of America Principal Occupation
Bruce Gordon Director Vice President, U.S. Operations
(53) - Pensions -- 1990-present, The
Manufacturers Life Insurance
Company
Donald A. Guloien Director and President Senior Vice President, Business
(39) Development 1994-present, The
Manufacturers Life Insurance
Company; Vice President, U.S.
Individual Business -- 1990-1994,
The Manufacturers Life Insurance
Company
Theodore Kilkuskie, Director Vice President, U.S. Individual
Jr. (41) 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, Metro-
politan Life Insurance Company
Joseph J. Pietroski Director Senior Vice President, General
(58) Counsel and Corporate Secretary --
1988-present, The Manufacturers
Life Insurance Company
John D. Richardson Chairman and Director Senior Vice President and General
(58) Manager, U.S. Operations
1995-present, The Manufacturers
Life Insurance Company; Senior
Vice President and General
Manager, Canadian Operations
1992-1994, The Manufacturers Life
Insurance Company; Senior Vice
President, Financial Services
1992, The Manufacturers Life
Insurance Company; Executive Vice
Chairman and CFO -- 1989-1991,
Canada Trust
30
Position With
Manufacturers Life
Name of America Principal Occupation
John R. Ostler Vice President, Chief Financial Vice President -- 1992-
(43) Actuary and Treasurer present, The Manufacturers Life
Insurance Company; Vice President,
Insurance Products -- 1990-1992,
The Manufacturers Life Insurance
Company
Douglas H. Myers Vice President, Assistant Vice President and
(42) Finance and Compliance Controller, U.S. Operations --
Controller 1988-present, The Manufacturers
Life Insurance Company
Hugh McHaffie Vice President Vice President & Product Actuary --
(37) June 1990-present, North American
Security Life
UNDER WHAT CIRCUMSTANCES MAY FUND SHARES BE SUBSTITUTED?
Although Manufacturers Life of America believes it to be highly unlikely, it is
possible that in the judgment of its management, one or more of the Portfolios
may become unsuitable for investment by the Account because of a change in
investment policy or a change in the tax laws, because the shares are no longer
available for investment, or for some other reason. In that event Manufacturers
Life of America may seek to substitute the shares of another Portfolio or of an
entirely different mutual fund. Before this can be done, the approval of the
S.E.C. and one or more state insurance departments may be required.
Manufacturers Life of America also reserves the right to combine other separate
accounts with the Account, to establish additional sub-accounts within the
Account, to operate the Account as a management investment company or other
form permitted by law, and to deregister the Account under the 1940 Act. Any
such change would be made only if permissible under applicable federal and
state law.
WHAT REPORTS WILL BE SENT TO POLICYOWNERS?
Once each Policy year (except where the Policy is in force as extended term
insurance or reduced paid-up insurance) Policyowners will be sent statements
showing the amount of the death benefit, the net cash value, and any Policy
debt (and interest charged for the preceding Policy year) as of the Policy
Anniversary. The statement will also show the amount of the cash value derived
from participation in each sub-account.
Each Policyowner will also be sent an annual and a semi-annual report for NASL
Series Trust which will include a list of the securities held in each Portfolio
as required by the 1940 Act.
31
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 Account or
NASL Series 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 at 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 cover of
this prospectus.
LEGAL MATTERS
The legal validity of the Policies has been passed on by James D. Gallagher,
Esq., General Counsel of Manufacturers Life of America. Jones & Blouch L.L.P.,
Washington, D.C., has passed on matters relating to the federal securities
laws.
EXPERTS
The financial statements of The Manufacturers Life Insurance Company of America
and of Separate Account One of The Manufacturers Life Insurance Company of
America appearing in this prospectus for the period ended December 31, 1995,
have been audited by Ernst & Young LLP, independent auditors, to the extent
indicated in their reports thereon appearing elsewhere herein. Such financial
statements have been included herein in reliance upon such report given upon the
authority of such firm as experts in auditing and accounting.
32
APPENDIX A
VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 25
$100,000 FACE AMOUNT
$903.00 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 5% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
- - ---- -------- -- -- --- -- -- ---
1 $ 948 $100,000 $100,001 $100,054 $ 0 $ 0 $ 0
2 1,944 100,000 100,005 100,338 595 652 709
3 2,989 100,000 100,013 100,860 1,225 1,369 1,521
4 4,087 100,000 100,025 101,626 1,846 2,118 2,415
5 5,239 100,000 100,040 102,653 2,481 2,924 3,427
6 6,449 100,000 100,058 103,950 3,106 3,764 4,540
7 7,720 100,000 100,080 105,526 3,721 4,639 5,764
8 9,054 100,000 100,105 107,390 4,326 5,550 7,110
9 10,455 100,000 100,132 109,553 4,921 6,498 8,590
10 11,926 100,000 100,163 112,026 5,506 7,485 10,216
15 20,460 100,000 100,359 129,496 8,220 12,977 20,999
20 31,351 100,000 100,615 156,863 10,467 19,328 37,737
25 45,252 100,000 100,920 196,602 12,192 26,499 63,400
(1) If premiums are paid more frequently than annually, the payments would be
$459.00 semi-annually, $232.50 quarterly, $78.50 monthly, or $77.00
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
33
VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 40
$100,000 FACE AMOUNT
$1,584.00 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 4% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
- - ---- -------- -- -- --- -- -- ---
1 $ 1,663 $100,000 $100,001 $100,092 $ 80 $ 106 $ 132
2 3,410 100,000 100,007 100,460 1,350 1,480 1,614
3 5,243 100,000 100,017 101,106 2,577 2,891 3,224
4 7,169 100,000 100,031 102,037 3,762 4,339 4,973
5 9,190 100,000 100,049 103,268 4,952 5,874 6,928
6 11,313 100,000 100,071 104,805 6,098 7,448 9,050
7 13,542 100,000 100,096 106,657 7,199 9,058 11,354
8 15,882 100,000 100,124 108,833 8,254 10,705 13,854
9 18,339 100,000 100,156 111,342 9,262 12,387 16,564
10 20,920 100,000 100,192 114,195 10,221 14,101 19,501
15 35,889 100,000 100,411 134,059 14,280 23,112 38,228
20 54,995 100,000 100,692 164,746 17,107 32,700 65,787
25 79,380 100,000 101,023 209,007 18,694 42,527 105,702
(1) If premiums are paid more frequently than annually, the payments would be
$804.00 semi-annually, $405.50 quarterly, $136.50 monthly, or $135.00
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
34
VARIABLE LIFE INSURANCE POLICY
MALE ISSUE AGE 55
$100,000 FACE AMOUNT
$3,278.00 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 5% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
- - ---- -------- -- -- --- -- -- ---
1 $ 3,442 $100,000 $100,004 $100,258 $ 668 $ 785 $ 903
2 7,056 100,000 100,013 100,824 2,807 3,179 3,565
3 10,851 100,000 100,026 101,701 4,831 5,591 6,411
4 14,835 100,000 100,044 102,895 6,738 8,017 9,451
5 19,019 100,000 100,066 104,423 8,623 10,554 12,805
6 23,412 100,000 100,091 106,292 10,391 13,102 16,390
7 28,024 100,000 100,121 108,510 12,042 15,659 20,222
8 32,867 100,000 100,154 111,087 13,578 18,219 24,316
9 37,952 100,000 100,191 114,034 14,999 20,779 28,688
10 43,292 100,000 100,231 117,361 16,304 23,334 33,355
15 74,271 100,000 100,478 140,195 21,080 35,768 61,636
20 113,810 100,000 100,786 174,952 23,254 47,305 100,131
25 164,272 100,000 101,142 224,675 23,719 58,135 153,139
(1) If premiums are paid more frequently than annually, the payments would be
$1,660.00 semi-annually, $835.50 quarterly, $280.50 monthly, or $279.00
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
35
APPENDIX B
VARIABLE LIFE INSURANCE POLICY
FEMALE ISSUE AGE 25
$118,727 FACE AMOUNT
$1,000 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 4% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8%
- - ---- -------- -- -- -- -- -- --
1 $ 1,040 $118,727 $118,727 $118,749 $ 0 $ 0 $ 0
2 2,122 118,727 118,727 118,864 706 751 796
3 3,246 118,727 118,727 119,072 1,455 1,568 1,685
4 4,416 118,727 118,727 119,372 2,192 2,403 2,628
5 5,633 118,727 118,727 119,765 2,946 3,288 3,662
6 6,898 118,727 118,727 120,253 3,688 4,194 4,759
7 8,214 118,727 118,727 120,833 4,418 5,119 5,923
8 9,583 118,727 118,727 121,505 5,136 6,065 7,158
9 11,006 118,727 118,727 122,269 5,843 7,031 8,467
10 12,486 118,727 118,727 123,124 6,537 8,018 9,854
15 20,825 118,727 118,727 128,734 9,760 13,191 18,045
20 30,969 118,727 118,727 136,510 12,427 18,574 28,528
25 43,312 118,727 118,727 146,380 14,476 23,991 41,705
(1) If premiums are paid more frequently than annually, the payments would be
$508.34 semi-annually, $257.45 quarterly, $86.42 monthly, or $84.92
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 4% AND 8% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
36
VARIABLE LIFE INSURANCE POLICY
FEMALE ISSUE AGE 25
$118,727 FACE AMOUNT
$1,000 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 5% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
- - ---- -------- -- -- --- -- -- ---
1 $ 1,050 $118,727 $118,728 $118,791 $ 0 $ 0 $ 0
2 2,153 118,727 118,733 119,128 706 774 842
3 3,310 118,727 118,743 119,748 1,455 1,626 1,806
4 4,526 118,727 118,757 120,658 2,192 2,514 2,867
5 5,802 118,727 118,774 121,877 2,946 3,471 4,068
6 7,142 118,727 118,796 123,417 3,688 4,469 5,390
7 8,549 118,727 118,822 125,288 4,418 5,507 6,843
8 10,027 118,727 118,851 127,501 5,136 6,589 8,442
9 11,578 118,727 118,884 130,069 5,843 7,715 10,198
10 13,207 118,727 118,921 133,005 6,537 8,887 12,129
15 22,657 118,727 119,153 153,746 9,760 15,407 24,931
20 34,719 118,727 119,457 186,239 12,427 22,947 44,804
25 50,113 118,727 119,820 233,420 14,476 31,461 75,272
(1) If premiums are paid more frequently than annually, the payments would be
$508.34 semi-annually, $257.45 quarterly, $86.42 monthly, or $84.92
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
37
VARIABLE LIFE INSURANCE POLICY
FEMALE ISSUE AGE 40
$102,654 FACE AMOUNT
$1,500 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 4% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8%
- - ---- -------- -- -- -- -- -- --
1 $ 1,560 $102,654 $102,654 $102,687 $ 82 $ 100 $ 117
2 3,182 102,654 102,654 102,815 1,385 1,474 1,565
3 4,870 102,654 102,654 103,037 2,646 2,858 3,080
4 6,625 102,654 102,654 103,351 3,862 4,250 4,664
5 8,449 102,654 102,654 103,758 5,083 5,700 6,375
6 10,347 102,654 102,654 104,255 6,260 7,157 8,163
7 12,321 102,654 102,654 104,843 7,390 8,617 10,030
8 14,374 102,654 102,654 105,518 8,473 10,079 11,979
9 16,509 102,654 102,654 106,280 9,507 11,541 14,010
10 18,730 102,654 102,654 107,126 10,492 12,998 16,124
15 31,237 102,654 102,654 112,592 14,659 20,152 28,000
20 46,454 102,654 102,654 120,024 17,561 26,872 42,174
25 64,968 102,654 102,654 129,350 19,191 32,814 58,660
(1) If premiums are paid more frequently than annually, the payments would be
$761.21 semi-annually, $384.16 quarterly, $129.74 monthly, or $128.24
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 4% AND 8% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
38
VARIABLE LIFE INSURANCE POLICY
FEMALE ISSUE AGE 40
$102,654 FACE AMOUNT
$1,500 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 5% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
- - ---- -------- -- -- --- -- -- ---
1 $ 1,575 $102,654 $102,656 $102,749 $ 82 $ 109 $ 135
2 3,229 102,654 102,661 103,126 1,385 1,520 1,657
3 4,965 102,654 102,672 103,790 2,646 2,968 3,310
4 6,788 102,654 102,686 104,746 3,862 4,454 5,105
5 8,703 102,654 102,704 106,009 5,083 6,030 7,111
6 10,713 102,654 102,726 107,587 6,260 7,645 9,290
7 12,824 102,654 102,752 109,488 7,390 9,299 11,656
8 15,040 102,654 102,782 111,721 8,473 10,989 14,222
9 17,367 102,654 102,815 114,297 9,507 12,715 17,004
10 19,810 102,654 102,851 117,225 10,492 14,475 20,019
15 33,986 102,654 103,076 137,617 14,659 23,725 39,243
20 52,079 102,654 103,364 169,119 17,561 33,568 67,533
25 75,170 102,654 103,704 214,554 19,191 43,656 108,507
(1) If premiums are paid more frequently than annually, the payments would be
$761.21 semi-annually, $384.16 quarterly, $129.74 monthly, or $128.24
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
39
VARIABLE LIFE INSURANCE POLICY
FEMALE ISSUE AGE 55
$101,227 FACE AMOUNT
$3,000 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 4% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8%
- - ---- -------- -- -- -- -- -- --
1 $ 3,120 $101,227 $101,227 $101,317 $ 676 $ 755 $ 835
2 6,365 101,227 101,227 101,510 2,842 3,091 3,347
3 9,739 101,227 101,227 101,805 4,890 5,397 5,930
4 13,249 101,227 101,227 102,198 6,821 7,667 8,582
5 16,899 101,227 101,227 102,690 8,729 9,998 11,405
6 20,695 101,227 101,227 103,280 10,518 12,288 14,303
7 24,643 101,227 101,227 103,965 12,190 14,534 17,274
8 28,748 101,227 101,227 104,744 13,744 16,731 20,317
9 33,018 101,227 101,227 105,615 15,183 18,876 23,431
10 37,459 101,227 101,227 106,575 16,504 20,962 26,612
15 62,474 101,227 101,227 112,669 21,339 30,298 43,344
20 92,908 101,227 101,227 120,790 23,540 37,603 61,254
25 129,935 101,227 101,227 130,848 24,010 43,243 80,739
(1) If premiums are paid more frequently than annually, the payments would be
$1,519.20 semi-annually, $765.65 quarterly, $256.56 monthly, or $255.06
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 4% AND 8% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
40
VARIABLE LIFE INSURANCE POLICY
FEMALE ISSUE AGE 55
$101,227 FACE AMOUNT
$3,000 ANNUAL PREMIUM FOR NON-SMOKER WITH STANDARD UNDERWRITING RISK(1)
PREMIUMS DEATH BENEFIT(2) CASH VALUE(2)
ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF AT 5% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST --------------------------------- ------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
- - ---- -------- -- -- --- -- -- ---
1 $ 3,150 $101,227 $101,231 $101,488 $ 676 $ 795 $ 914
2 6,458 101,227 101,240 102,061 2,842 3,218 3,609
3 9,930 101,227 101,254 102,949 4,890 5,660 6,489
4 13,577 101,227 101,271 104,158 6,821 8,116 9,567
5 17,406 101,227 101,293 105,704 8,729 10,684 12,962
6 21,426 101,227 101,319 107,596 10,518 13,263 16,591
7 25,647 101,227 101,350 109,841 12,190 15,851 20,470
8 30,080 101,227 101,383 112,450 13,744 18,443 24,614
9 34,734 101,227 101,421 115,433 15,183 21,034 29,040
10 39,620 101,227 101,461 118,801 16,504 23,620 33,765
15 67,972 101,227 101,710 141,916 21,339 36,207 62,392
20 104,158 101,227 102,022 177,098 23,540 47,886 101,360
25 150,340 101,227 102,383 227,432 24,010 58,849 155,018
(1) If premiums are paid more frequently than annually, the payments would be
$1,519.20 semi-annually, $765.65 quarterly, $256.56 monthly, or $255.06
monthly ManuMatic. The death benefits and cash values would be slightly
different for a Policy with more frequent premium payments.
(2) Assumes no Policy loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE
MADE BY MANUFACTURERS LIFE OF AMERICA OR NASL SERIES TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
41
APPENDIX C
ILLUSTRATION OF COMPUTATION OF DEATH BENEFIT
Manufacturers Life of America determines a Policy's death benefit on each
premium due date by calculating the Policy's net return for the period since
the previous premium due date (herein referred to as the "premium period"). The
net return is the difference between the total investment base and assumed base
on the premium due date. The total investment base is the sum of the value of
the assets in the Account relating to the Policy plus the amount of the loan
account. The assumed base is what the total investment base would be on the
premium due date if it increased during the premium period at a net annual
effective rate of 4 1/2%. At the beginning of each premium period, the assumed
base is equal to the total investment base, so that the net return at the end
of the period reflects only the variations from the assumed base for that
period.
In order to determine the change in death benefit, the net return for the
premium period just ended, which may be either positive or negative, is divided
by a factor which is the net single premium for one dollar of paid-up
additions, which factor is based on the life insured's current age and the 1958
Commissioners Standard Ordinary Mortality Table. Such factors at representative
ages as of a Policy Anniversary are shown below:
NET SINGLE PREMIUM
PER DOLLAR OF
ATTAINED AGE PAID-UP ADDITIONS
- - ------------ -----------------
25 .16162
30 .19245
35 .23014
40 .27531
45 .32729
50 .38566
55 .44926
60 .51654
65 .58504
The figure resulting from the division of the net return by the net single
premium factor is the amount of paid-up additions credited to the Policy on the
premium due date. It is added to any paid-up additions previously credited, and
the total paid-up additions are added to the face amount to give the current
death benefit.
Assume, for example, a Policy with a face amount of $100,000 and premiums
payable annually issued to a person at age 40 whose attained age is 45 with no
Policy debt and all net premiums allocated to a single sub-account. Assume also
that on the preceding premium due date there were no additional paid-up
additions. If the total investment base on the premium due date is $6,200.00
and the assumed base is $5,859.00, the difference, $341.00, is the net return,
which is divided by .32729 to give $1,041.89 of paid-up additions. Since there
are no prior paid-up additions, the total death benefit is the face amount,
$100,000, plus the paid-up additions, $1,041.89, or $101,041.89.
Assume further that on the next premium due date the total investment base is
$7,400.00 and the assumed base is $7,777.65. The net return, - $377.65, is
divided by the net single premium factor for age 46, .33847, which results in -
$1,115.76 of paid-up additions. In the absence of the minimum death benefit
guarantee, the new death benefit would be $99,926.13 ($101,041.89 - $1,115.76).
However, the death benefit can never be less than the $100,000 face amount,
provided all premiums are paid when due and there are no Policy loans.
42
APPENDIX D
ILLUSTRATION OF COMPUTATION OF CHANGES
IN TOTAL INVESTMENT BASE AND RELATION
THEREOF TO CASH VALUE
On each premium due date, a Policy's total investment base is the Policy's cash
value on that date plus the current net premium. On Business Days that are not
premium due dates the total investment base will exceed the cash value, because
the cash value reflects the cost of insurance applicable to the premium period,
while the total investment base is adjusted for the cost of insurance only at
the end of a premium period. The total investment base is also credited with a
net premium on a premium due date, while the net cash value will reflect the
fact that a premium has not been paid when due.
The total investment base is calculated on each Business Day. To compute the
total investment base on a Business Day, Manufacturers Life of America first
determines the net investment return for each sub-account in which the Policy
participates and for the loan account for that Business Day. For a Policy with
net premiums invested in one sub-account and no Policy loan, the net investment
return is equal to (i) the income and realized and unrealized capital gains and
losses of the sub-account since the preceding Business Day, less (ii) the
charge for the period since the preceding Business Day for mortality and
expense risks at an annual rate of 0.1% of the average net value of the assets
of the sub-account, less (iii) any charge against the sub-account for taxes or
as a provision for taxes since the preceding Business Day (currently no such
charge is made). A net rate of return for the sub-account is then computed by
dividing the net investment return by an amount equal to (i) the value of the
assets of the sub-account at the end of the current Business Day less (ii) the
net investment return calculated for that day less (iii) the amount of the tax
provision, if any, maintained in the sub-account at the end of the previous
Business Day. Manufacturers Life of America then multiplies the investment base
in that sub-account for the previous Business Day, with adjustments for any
premiums due, or loans, loan repayments or sub-account transfers made, on such
previous day, by a factor which is one plus the net rate of return for the
current Business Day. If the current Business Day is the first Business Day
following a premium due date, the cost of insurance for the premium period just
ended is deducted from the investment base for the previous Business Day before
multiplying the base by the factor to obtain the current investment base. In
addition, if there is any Policy debt, the investment base for the previous
Business Day is adjusted downward to offset an upward adjustment made
concurrently to the investment base in the loan account described below.
Assume, for example, that on the Business Day coinciding with a premium due
date the value of the assets of the sub-account in which the Policy
participates was $5,000,000, that there were no transfers into or out of the
sub-account on that Business Day, that on the first Business Day following the
premium due date ("current Business Day") the sub-account received no dividends
or distributions on the Fund shares held by the sub-account and that no gain or
loss was realized on such shares, that on the current Business Day there was an
unrealized gain on Fund shares of $2,000, and that the charge for mortality and
expense risks for the period ending on the current Business Day was $13.69
($5,000,000 X .001/365). Assume also that the Policy's investment base in that
sub-account for the previous Business Day was $1,000, that the net premium then
due was $400, that no loans, loan repayments or sub-account transfers were made
on that Business Day, and that the cost of insurance for the premium period
then ended was $20. The investment base for the current Business Day is
computed as follows:
(1) The net investment return is the unrealized gain on Fund shares, $2,000,
minus the mortality and expense risks charge, $13.69, or $1,986.31 ($2,000
- $13.69).
(2) The net rate of return is the net investment return, $1,986.31, divided
by an amount equal to (i) the current value of the sub-account's assets,
$5,001,986.31 ($5,000,000 + $1,986.31), minus (ii) the net investment
return, $1,986.31, or 0.000397 ($1,986.31 / $5,000,000).
43
(3) The investment base for the current Business Day is the investment base
for the preceding Business Day, $1,000, adjusted by the addition of the
net premium then due, $400, and the subtraction of the cost of insurance
for the premium period then ended, $20, multiplied by one (1) plus the net
rate of return, 1.000397, or $1,380.55 ($1,380 X 1.000397).
The total investment base is the sum of the investment base held in each
sub-account and in the loan account. The loan account investment base for a
given Business Day is computed on the basis of the net rate of return for the
loan account. The net rate of return is derived from the net investment return,
which, on the assumption that there are no charges or provisions for taxes, is
equal to (i) the loan interest accrued on the Policy debt since the previous
Business Day less (ii) a charge for loan administration expenses for the period
since the preceding Business Day at an annual rate of 0.2% of the average
Policy debt, less (iii) the mortality and expense risks charge for the period
since the preceding Business Day at an annual rate of 0.1% of the average
Policy debt. The net rate of return is the net investment return divided by an
amount equal to the value of the loan account at the end of the current
Business Day less the net investment return calculated for that day. To obtain
the loan account investment base for a given Business Day, Manufacturers Life
of America multiplies the loan account investment base for the previous
Business Day, with adjustments for any loans or loan repayments made on such
previous Business Day, by a factor which is one plus the net rate of return for
the current Business Day. If the current Business Day is the first Business Day
following a premium due date, the loan account investment base for the prior
Business Day is increased so that it will be equal to the amount of the Policy
debt plus interest. The amount by which the loan account investment base is
increased is concurrently deducted from the Policy's investment bases in the
Account, which has the effect of transferring all loan account charges to the
investment base in each sub-account.
Assume, for example, that the amount of the Policy loan on the Business Day
preceding the current Business Day was $1,000, that such preceding day was not
a premium due date, that loan interest since such preceding day at an 8% annual
rate was $.21, that the loan administration and mortality and expense risks
charges for the period ending on the current Business Day were $.01, and that
the Policy's investment base in the loan account for the previous Business Day
was $1,003. The investment base for the current Business Day is computed as
follows:
(1) The net investment return is the loan interest, $.21, minus the loan
administration and mortality and expense risk charges, $.01, or $.20 ($.21
- $.01).
(2) The net rate of return is the net investment return, $.20, divided by an
amount equal to (i) the current value of the loan account, $1,003.20
($1,003 + $.20), minus (ii) the net investment return, $.20 or 0.0001994
($.20 / $1,003).
(3) The investment base for the current Business Day is the investment base
for the preceding Business Day, $1,003, multiplied by one (1) plus the net
rate of return, 1.0001994, or $1,003.20 ($1,003 X 1.0001994).
44
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45
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 December 31, 1996, consisting of___ 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. Opinion and Consent of Counsel - FILED HEREWITH
B. Opinion and Consent of Actuary - INCORPORATED BY REFERENCE
C. Consent of Ernst & Young LLP - FILED HEREWITH
D. Consent of Jones & Blouch L.L.P. - FILED HEREWITH
The following exhibits are filed as part of this Registration Statement:
l. 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) Resolution of Board of Directors of The Manufacturers Life
Insurance Company of America establishing Separate Account One.
Incorporated by reference to Exhibit A(1) to the Registration
Statement on Form S-6 filed by The Manufacturers Life Insurance
Company of America on December 23, 1983 (file no. 2-88607).
A(1)(b) Resolution of Board of Directors of The Manufacturers Life
Insurance Company (U.S.A.) regarding The Manufacturers Life
Insurance Company (U.S.A.) Separate Account L. - FILED HEREWITH
A(3)(a) Distribution Agreement between The Manufacturers Life Insurance
Company of America and ManEquity, Inc. Incorporated by reference
to Exhibit A(3)(a) to the Registration Statement on Form S-6 filed
by The Manufacturers Life Insurance Company of America on May 25,
1984 (file no. 2-88607).
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(5) Form of Variable Life Insurance Policy. Incorporated by reference
to Exhibit A(5) to the Registration Statement on Form S-6 filed by
The Manufacturers Life Insurance Company of America on May 25,
1984 (file no. 2-88607).
A(5)(a) Endorsement to Variable Life Insurance Policy re State of domicile
of The Manufacturers Life Insurance Company of America.
Incorporated by reference to Exhibit A(5)(a) to Post-Effective
Amendment No. 10 to the Registration Statement on Form S-6 filed
by The Manufacturers Life Insurance Company of America on February
26, 1993 (file no. 2-88607).
A(3)(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 A(8)(a) to the Registration
Statement on Form S-6 filed by The Manufacturers Life Insurance
Company of America on May 25, 1984 (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. 10 to the
Registration Statement on Form S-6 filed by The Manufacturers Life
Insurance Company of America on February 26, 1993 (file no.
2-88607).
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 the
Registration Statement on Form S-6 filed by The Manufacturers Life
Insurance Company of America (file no. 2-88607).
A(8)(b) Automatic 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 the
Registration Statement on Form S-6 filed by The Manufacturers Life
Insurance Company of America on May 25, 1984 (file no. 2-88607).
A(8)(c) Form of Assumption Reinsurance Agreement with The Manufacturers
Life Insurance Company (U.S.A.) and The Manufacturers Life
Insurance Company of America - FILED HEREWITH
A(10) Form of Application for Variable Life Insurance Policy.
Incorporated by reference to Exhibit A(10) to the Registration
Statement on Form S-6 filed by The Manufacturers Life Insurance
Company of America on May 25, 1984 (file no. 2-88607).
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. 12 to the Registration Statement on
Form S-6 filed December 30, 1996 (File No. 2 - 88607).
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. 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 for The Manufacturers Life
Insurance Company (U.S.A.) filed July 20, 2000 (File No.
333-41814).
(ii) (John Ostler) 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) 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 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 L
(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) Resolution of Board of Directors of The Manufacturers Life
Insurance Company (U.S.A.)
A(8)(c) 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.