As filed with the Securities and Exchange Commission on May 23, 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 OF NEW YORK
SEPARATE ACCOUNT B
(Exact Name of Registrant)
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
(Name of Depositor)
100 Summit Drive
Valhalla, New York 10595
(Address of Depositor's Principal Executive Offices)
James D. Gallagher Copy To:
President J. Sumner Jones, Esq.
The Manufacturers Life Insurance Company of Jones & Blouch L.L.P.
New York 1025 Thomas Jefferson Street, NW
100 Summit Drive Washington, DC 20007
Valhalla, NY 10595
(Name and Address of Agent for Service)
TITLE OF SECURITIES BEING REGISTERED: VARIABLE LIFE INSURANCE CONTRACTS
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED PUBLIC OFFERING: AS SOON AFTER THE
EFFECTIVE DATE OF THIS REGISTRATION STATEMENT AS IS PRACTICABLE.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
The Manufacturers Life Insurance Company of New York
Registration Statement on Form S-6
Cross-Reference Sheet
FORM
N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
- -------- ---------------------
1 Cover Page; General Information About Manulife of New York, the
Separate Account and the Trust the Separate Account
2 Cover Page; General Information About Manulife of New York, the
Separate Account and the Trust (Manulife of New York)
3 *
4 Other Information (Distribution of the Policy)
5 General Information About Manulife of New York, the Separate Account
and the Trust (The Separate Account)
6 General Information About Manulife of New York, the Separate Account
and the Trust (The Separate Account)
7 *
8 *
9 OTHER INFORMATION (LITIGATION)
10 DEATH BENEFITS; PREMIUM PAYMENTS; CHARGES AND DEDUCTIONS; POLICY VALUE;
POLICY LOANS; POLICY SURRENDER AND PARTIAL WITHDRAWALS; LAPSE AND
REINSTATEMENT; OTHER PROVISIONS OF THE POLICY; OTHER INFORMATION]
11 General Information About Manulife of New York, the Separate Account
and the Trust (The Trust)
12 General Information About Manulife of New York, the Separate Account
and the Trust (The Trust)
13 Charges and Deductions
14 Issuing a Policy; Other Information (Responsibilities Assumed by
Manufacturers Life)
15 Issuing a Policy
16 **
17 Policy Surrender and Partial Withdrawals
18 General Information About Manulife of New York, the Separate Account
and the Trust
19 Other Information (Reports to Policyholders; Responsibilities Assumed
By Manufacturers Life)
20 *
21 Policy Loans
22 *
23 **
24 Other Provisions of the Policy
25 General Information About Manulife of New York, the Separate Account
and the Trust (Manulife of New York)
26 *
27 **
28 Other Information (Officers and Directors)
29 General Information About Manulife of New York, the Separate Account
and the Trust (Manulife of New York)
30 *
31 *
32 *
33 *
34 *
35 **
36 *
37 *
38 Other Information (Distribution of the Policies; Responsibilities of
Manufacturers Life)
39 Other Information (Distribution of the Policies)
40 *
41 **
42 *
43 *
44 Policy Values --Determination of Policy Value; Units and Unit Values
45 *
46 Policy Surrender and Partial Withdrawals; Other Information -- Payment
of Proceeds
47 General Information About Manulife of New York, the Separate Account
and the Trust (The Trust)
48 *
49 *
50 General Information About Manulife of New York, the Separate Account
and the Trust
51 Issuing a Policy; Death Benefits; Premium Payments; Charges and
Deductions; Policy Value; Policy Loans; Policy Surrender and Partial
Withdrawals; Lapse and Reinstatement; Other Policy Provisions
52 Other Information (Substitution of Portfolio Shares)
53 **
54 *
55 *
56 *
57 *
58 *
59 Financial Statements
* Omitted since answer is negative or item is not applicable.
** Omitted.
PART I
INFORMATION REQUIRED IN PROSPECTUS
PROSPECTUS
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
SEPARATE ACCOUNT B
VENTURE VUL PROTECTOR
A FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
This prospectus describes Venture VUL, a flexible premium variable universal
life insurance policy (the "Policy") offered by The Manufacturers Life Insurance
Company of New York (the "Company", "Manulife New York," "we" or "us").
The Policy is designed to provide lifetime insurance protection together with
flexibility as to:
- the timing and amount of premium payments,
- the investments underlying the Policy Value, and
- the amount of insurance coverage.
This flexibility allows you, the policyowner, to pay premiums and adjust
insurance coverage in light of your current financial circumstances and
insurance needs.
Policy Value may be accumulated on a fixed basis or vary with the investment
performance of the sub-accounts of The Manufacturers Life Insurance Company of
New York Separate Account B (the "Separate Account"). The assets of each
sub-account will be used to purchase Series I shares (formerly referred to as
("Class A shares") of a particular investment portfolio (a "Portfolio") of
Manufacturers Investment Trust (the "Trust"). The accompanying prospectus for
the Trust, and the corresponding statement of additional information, describe
the investment objectives of the Portfolios in which you may invest net
premiums. Other sub-accounts and portfolios may be added in the future.
BECAUSE OF THE SUBSTANTIAL NATURE OF SURRENDER CHARGES, THE POLICY IS NOT
SUITABLE FOR SHORT TERM INVESTMENT PURPOSES. ALSO, PROSPECTIVE PURCHASERS SHOULD
NOTE THAT IT MAY NOT BE ADVISABLE TO PURCHASE A POLICY AS A REPLACEMENT FOR
EXISTING INSURANCE.
The Securities and Exchange Commission (the "SEC") maintains a web site
(http://www.sec.gov) that contains material incorporated by reference and other
information regarding registrants that file electronically with the SEC.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT IS
VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE TRUST.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Home Office: Service Office Mailing Address:
The Manufacturers Life Insurance Company of New York The Manufacturers Life Insurance Company of New York
100 Summit Lake Drive P.O. Box 633, Niagara Square Station
Second Floor Buffalo, New York 14201-0633
Valhalla, New York 10595 TELEPHONE: 1-888-267-7784
THE DATE OF THIS PROSPECTUS IS __________, 2002
NYVUL 05/2002
2
TABLE OF CONTENTS
DEFINITIONS............................................................................................... 5
POLICY SUMMARY............................................................................................ 7
General.............................................................................................. 7
Death Benefits....................................................................................... 7
Return of Premium Rider.............................................................................. 7
Premiums............................................................................................. 7
Policy Value......................................................................................... 7
Policy Loans......................................................................................... 7
Surrender and Partial Withdrawals.................................................................... 7
Lapse and Reinstatement.............................................................................. 7
Charges and Deductions............................................................................... 8
Investment Options and Investment Advisers........................................................... 8
Investment Management Fees and Expenses.............................................................. 8
Table of Charges and Deductions...................................................................... 8
Table of Investment Management Fees and Expenses..................................................... 9
Table of Investment Options and Investment Advisers.................................................. 11
GENERAL INFORMATION ABOUT MANULIFE NEW YORK, THE SEPARATE ACCOUNT AND THE TRUST........................... 13
Manulife New York.................................................................................... 13
The Separate Account................................................................................. 13
The Trust............................................................................................ 14
Investment Objectives of the Portfolios.............................................................. 14
ISSUING A POLICY.......................................................................................... 18
Requirements......................................................................................... 18
Temporary Insurance Agreement........................................................................ 19
Right to Examine the Policy.......................................................................... 19
Life Insurance Qualification......................................................................... 20
DEATH BENEFITS............................................................................................ 20
Death Benefit Options................................................................................ 20
Changing the Face Amount............................................................................. 21
PREMIUM PAYMENTS.......................................................................................... 22
Initial Premiums..................................................................................... 22
Subsequent Premiums.................................................................................. 22
Maximum Premium Limitation........................................................................... 22
Premium Allocation................................................................................... 22
CHARGES AND DEDUCTIONS.................................................................................... 23
Premium Charge....................................................................................... 23
Surrender Charges.................................................................................... 23
Monthly Charges...................................................................................... 25
Mortality and Expense Risks Charge................................................................... 26
Charges for Transfers................................................................................ 26
Reduction in Charges................................................................................. 26
SPECIAL PROVISIONS FOR EXCHANGES.......................................................................... 26
COMPANY TAX CONSIDERATIONS................................................................................ 26
POLICY VALUE.............................................................................................. 27
Determination of the Policy Value.................................................................... 27
Units and Unit Values................................................................................ 27
Transfers of Policy Value............................................................................ 28
POLICY LOANS.............................................................................................. 29
Effect of Policy Loan................................................................................ 29
Interest Charged on Policy Loans..................................................................... 29
Loan Account......................................................................................... 29
POLICY SURRENDER AND PARTIAL WITHDRAWALS.................................................................. 30
Policy Surrender..................................................................................... 30
Partial Withdrawals.................................................................................. 30
LAPSE AND REINSTATEMENT................................................................................... 30
Lapse................................................................................................ 30
No-Lapse Guarantee................................................................................... 31
Reinstatement........................................................................................ 31
Termination ......................................................................................... 31
Maturity Advantage .................................................................................. 30
THE GENERAL ACCOUNT....................................................................................... 31
Fixed Account........................................................................................ 31
OTHER PROVISIONS OF THE POLICY............................................................................ 32
Return of Premium Rider.............................................................................. 32
Policyowner Rights................................................................................... 32
Beneficiary.......................................................................................... 32
Incontestability..................................................................................... 32
Misstatement of Age or Sex........................................................................... 32
Suicide Exclusion.................................................................................... 32
Supplementary Benefits............................................................................... 33
TAX TREATMENT OF THE POLICY............................................................................... 33
Life Insurance Qualification......................................................................... 33
Tax Treatment of Policy Benefits..................................................................... 34
Alternate Minimum Tax................................................................................ 37
Income Tax Reporting................................................................................. 37
OTHER INFORMATION......................................................................................... 38
Payment of Proceeds.................................................................................. 38
Reports to Policyowners.............................................................................. 38
Distribution of the Policies......................................................................... 38
Responsibilities Assumed by Manulife New York, Manulife USA and Manulife Financial Securities........ 38
Voting Rights........................................................................................ 39
Substitution of Portfolio Shares..................................................................... 39
Records and Accounts................................................................................. 39
State Regulations.................................................................................... 39
Litigation........................................................................................... 39
Independent Auditors................................................................................. 40
Further Information.................................................................................. 40
Officers and Directors............................................................................... 40
ILLUSTRATIONS............................................................................................. 42
APPENDIX A:-SAMPLE ILLUSTRATIONS OF POLICY VALUES, CASH SURRENDER VALUES AND DEATH BENEFITS............... A-1
APPENDIX B: AUDITED FINANCIAL STATEMENTS................................................................. B-1
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION WHERE IT
WOULD NOT BE LAWFUL. YOU SHOULD RELY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS, THE PROSPECTUS OF THE TRUST, OR THE STATEMENT OF ADDITIONAL
INFORMATION OF THE TRUST. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT.
Examine this prospectus carefully. The Policy Summary will briefly describe the
Policy. More detailed information will be found further in the prospectus.
DEFINITIONS
Additional Rating
is an increase to the Cost of Insurance Rate for insureds who do not meet, at a
minimum, our underwriting requirements for the standard Risk Classification.
Age
on any date is the life insured's age on his or her nearest birthday. If no
specific age is mentioned, age means the life insured's age on the Policy
Anniversary nearest to the birthday.
Attained Age
is the age at issue plus the number of whole years that have elapsed since the
Policy Date.
Business Day
is any day that the New York Stock Exchange is open for business. A Business Day
ends at the close of regularly scheduled day-time trading of the New York Stock
Exchange on that day.
Cash Surrender Value
is the Policy Value less the Surrender Charge and any outstanding Monthly
Deductions due.
Effective Date
is the date the underwriters approve issuance of the Policy. If the Policy is
approved without the initial premium, the Effective Date will be the date we
receive at least the minimum initial premium at our Service Office. In either
case, we will take the first Monthly Deduction on the Effective Date.
Fixed Account
is that part of the Policy Value which reflects the value the policyowner has in
our general account.
Gross Withdrawal
is the amount of partial Net Cash Surrender Value the policyowner requests plus
any Surrender Charge applicable to the withdrawal.
Investment Account
is that part of the Policy Value which reflects the value the policyowner has in
one of the sub-accounts of the Separate Account.
Issue Date
is the date we issued the Policy. The Issue Date is also the date from which the
Suicide and Incontestability provisions of the Policy are measured.
Life Insured
is the person whose life is insured under this Policy.
Loan Account
is that part of the Policy Value which reflects the value transferred from the
Fixed Account or the Investment Accounts as collateral for a policy loan.
Maturity Date
is the Policy Anniversary nearest the life insured's Attained Age 100.
Monthly No-Lapse Guarantee Premium
is one-twelfth of the No-Lapse Guarantee Premium.
Net Cash Surrender Value
is the Cash Surrender Value less the Policy Debt.
Net Policy Value
is the Policy Value less the value in the Loan Account.
5
Net Premium
is the gross premium paid less the Premium Charge. It is the amount of premium
allocated to the Fixed Account and/or Investment Accounts.
No-Lapse Guarantee
when the Policy is in the No-Lapse Guarantee Period, as long as the No-Lapse
Guarantee Cumulative Premium Test is met, the Policy will not lapse, even when
the Net Cash Surrender Value falls to or below zero.
No-Lapse Guarantee Period
is set at issue and will vary by issue age, as set forth in the Policy. The
Policy has two levels of No-Lapse Guarantee Periods determined at issue of the
Policy: (i) a 10 year period and (ii) a 20 year period. Each level has separate
premium amount requirements. The 10 year No Lapse Guarantee terminates at the
beginning of the 11th Policy Year and the 20 year No Lapse Guarantee terminates
at the beginning of the 21st Policy Year. Both the 10 Year and the 20 Year No
Lapse Guarantee are limited to the number of years remaining until the life
insured's age 95, or particular state law requirement.
No-Lapse Guarantee Premium
is the annual premium used to determine the Monthly No-Lapse Guarantee Premium.
The No-Lapse Guarantee Premium is higher for the 20 year guarantee period than
for the 10 year guarantee period. If the sum of premiums paid drops below the
level required for the 20 year guarantee period, the Policy may still be
eligible for the 10 year guarantee period. The premium is set at issue and is
recalculated, prospectively, whenever any of the following changes occur under
the Policy:
- - the face amount of insurance changes.
- - There is a decrease in the Face Amount of insurance due to a partial
withdrawal.
- - a Supplementary Benefit is added, changed or terminated.
- - the risk classification of the life insured changes.
- - a temporary Additional Rating is added (due to a face amount increase) or
terminated.
- - the Death Benefit Option changes.
No-Lapse Guarantee Cumulative Premium
is the minimum amount due to satisfy the No-Lapse Guarantee Cumulative Premium
Test. This amount equals the sum, from issue to the date of the test, of the
Monthly No-Lapse Guarantee Premiums.
No-Lapse Guarantee Cumulative Premium Test
is a test that, if satisfied, during the No-Lapse Guarantee Period will keep the
policy in force when the Net Cash Surrender Value is less than zero. The test is
satisfied if the sum of all premiums paid, less any gross partial withdrawals
and less any Policy Debt, is greater than or equal to the sum of the applicable
monthly No-Lapse Guarantee Premiums due since the Policy Date.
Policy Date
is the date from which charges for the first monthly deduction are calculated
and the date from which Policy Years, Policy Months, and Policy Anniversaries
are determined.
Policy Debt
as of any date equals (a) plus (b) plus (c) minus (d), where:
(a) is the total amount of loans borrowed as of such date;
(b) is the total amount of any unpaid loan interest charges which have been
borrowed against the Policy on a Policy Anniversary;
(c) is any interest charges accrued from the last Policy Anniversary to the
current date; and
(d) is the total amount of loan repayments as of such date.
Policy Value
is the sum of the values in the Loan Account, the Fixed Account, and the
Investment Accounts.
Service Office Mailing Address
is P.O. Box 633, Niagara Square Station, Buffalo, New York 14201-0633.
Surrender Charge Period
is the period following the Issue Date of the Policy or following any increase
in Face Amount during which we will assess surrender charges. Surrender charges
will apply during this period if the policy terminates due to default, if the
policyowner surrenders the policy or makes a partial withdrawal.
6
Written Request
is the policyowner's request to us which must be in a form satisfactory to us,
signed and dated by the policyowner, and received at our Service Office.
POLICY SUMMARY
GENERAL
We have prepared the following summary as a general description of the most
important features of the Policy. It is not comprehensive and you should refer
to the more detailed information contained in this prospectus. Unless otherwise
indicated or required by the context, the discussion throughout this prospectus
assumes that the Policy has not gone into default, there is no outstanding
Policy Debt, and the death benefit is not determined by the minimum death
benefit percentage.
DEATH BENEFITS
There are two death benefit options. Under Option 1 the death benefit is the
FACE AMOUNT OF THE POLICY at the date of death or, if greater, the Minimum Death
Benefit. Under Option 2 the death benefit is the FACE AMOUNT PLUS THE POLICY
VALUE OF THE POLICY at the date of death or, if greater, the Minimum Death
Benefit. You may change the death benefit option and increase or decrease the
Face Amount.
RETURN OF PREMIUM RIDER
The Policy may be issued with an optional Return of Premium Death Benefit rider
if death benefit Option 1 is elected. This rider provides an additional death
benefit payable upon the death of the life insured after the Company receives
due proof of death. The Return of Premium Death benefit is calculated as
follows:
The return of premium rider death benefit is equal to the initial premium. Any
subsequent premiums will increase the death benefit at the time of the premium
payment by the amount of the premium. Any partial withdrawal will reduce the
death benefit at the time of withdrawal by an amount equal to the withdrawal
plus any applicable Surrender Charge (except that the rider death benefit will
not be reduce to less than zero.) The No Lapse Guarantee provisions of the
Policy apply to the Return of Premium Rider Death Benefit for the first two
Policy Years only.
PREMIUMS
You may pay premiums at any time and in any amount, subject to certain
limitations as described under "Premium Payments - Subsequent Premiums." Net
Premiums will be allocated, according to your instructions and at our
discretion, to one or more of our general account and the sub-accounts of the
Separate Account. You may change your allocation instructions at any time. You
may also transfer amounts among the accounts.
POLICY VALUE
The Policy has a Policy Value reflecting premiums paid, certain charges for
expenses and cost of insurance, and the investment performance of the accounts
to which you have allocated premiums.
POLICY LOANS
You may borrow an amount not to exceed 90% of your Policy's Net Cash Surrender
Value. Loan interest at a rate of 5.25% during the first ten Policy Years and 4%
thereafter is due on each Policy Anniversary. We will deduct all outstanding
Policy Debt from proceeds payable at the insured's death, or upon surrender.
SURRENDER AND PARTIAL WITHDRAWALS
You may make a partial withdrawal of your Policy Value. A partial withdrawal may
result in a reduction in the Face Amount of the Policy and an assessment of a
portion of the surrender charges to which the Policy is subject.
You may surrender your Policy for its Net Cash Surrender Value at any time while
the life insured is living. The Net Cash Surrender Value is equal to the Policy
Value less Surrender Charges and outstanding Monthly Deductions due minus the
Policy Debt.
LAPSE AND REINSTATEMENT
Unless the No-Lapse Guarantee Cumulative Premium Test has been met, a Policy
will lapse (and terminate without value) when its Net Cash Surrender Value is
insufficient to pay the next monthly deduction and a grace period of 61 days
expires without your having made an adequate payment.
7
The Policies, therefore, differ in two important respects from conventional life
insurance policies. First, the failure to make planned premium payments will not
itself cause a Policy to lapse. Second, a Policy can lapse even if planned
premiums have been paid.
A policyowner may reinstate a lapsed Policy at any time within the five year
period following lapse provided the Policy was not surrendered for its Net Cash
Surrender Value. We will require evidence of insurability along with a certain
amount of premium as described under "Reinstatement."
CHARGES AND DEDUCTIONS
We assess certain charges and deductions in connection with the Policy. These
include:
- charges assessed monthly for mortality and expense risks, cost of
insurance, administration expenses and supplementary benefits, if
applicable,
- charges deducted from premiums paid, and
- charges assessed on surrender or lapse.
These charges are summarized in the Table of Charges and Deductions. We may
allow you to request that the sum of all charges assessed monthly for mortality
and expense risks, cost of insurance and administration expenses be deducted
from the Fixed Account or one or more of the sub-accounts of the Separate
Account.
In addition, there are charges deducted from each Portfolio of the Trust. These
charges are summarized in the Table of Investment Management Fees and Expenses.
INVESTMENT OPTIONS AND INVESTMENT ADVISERS
You may allocate Net Premiums to the Fixed Account or to one or more of the
sub-accounts of our Separate Account. Each of the sub-accounts invests in the
shares of one of the Portfolios of the Trust.
The Trust receives investment advisory services from Manufacturers Securities
Services, LLC ("MSS"). MSS is a registered investment adviser under the
Investment Advisers Act of 1940, as amended.
The Trust also employs subadvisers. The Table of Investment Options and
Investment Advisers shows the subadvisers that provide investment subadvisory
services to the indicated Portfolios.
Allocating net premiums only to one or a small number of the investment options
(other than the Lifestyle Trusts) should not be considered a balanced investment
strategy. In particular, allocating net premiums to a small number of investment
options that concentrate their investments in a particular business or market
sector will increase the risk that the value of your policy will be more
volatile since these investment options may react similarly to business or
market specific events. Examples of business or market sectors where this risk
historically has been and may continue to be particularly high include: (a)
technology related businesses, including internet related businesses, (b) small
cap securities and (c) foreign securities. We do not provide advice regarding
appropriate investment allocations. Please discuss this matter with your
financial adviser.
INVESTMENT MANAGEMENT FEES AND EXPENSES
Each sub-account of the Separate Account purchases Series I shares (formerly
referred to as "Class A shares") of one of the Portfolios 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 CHARGES AND DEDUCTIONS
Premium Charge: (a) during Policy Year 1, ___% of the premium paid (up to
the amount specified in the Policy) and ___% on any
premium paid in excess of the amount specified, (b)
during Policy Years 2 through ____, __% of the premium
paid and (c) during Policy Years after ___, ___%.
Surrender Charge: A Surrender Charge is applicable for ___ Policy Years
from the Issue Date or an increase in Face Amount. The
Surrender Charge is determined by the following formula:
Surrender Charge = (Surrender Charge Rate) x (Face Amount
Associated with the Surrender Charge/1000) x (Grading
Percentage)
8
The Grading Percentage is based on the Policy Year in
which the transaction causing the assessment of the
charge occurs and is set forth in the table under
"Surrender Charges."
The Surrender Charge Rate is calculated as follows:
Surrender Charge Rate = (___) + ((_____%) x (Surrender
Charge Premium))
The Surrender Charge Premium is the Surrender Charge
Premium Limit specified in the Policy per $1000 Face
Amount.
The maximum Surrender Charge for any Policy per $1000 of
Face Amount is $____________ . A portion of this charge
will be assessed on a partial withdrawal.
Monthly Deductions An administration charge of $___ plus ____ per $1,000 of
current Face Amount per Policy Month will be deducted in
the first Policy Year. In subsequent years, the
administration charge will not exceed $___ plus ___ per
$1,000 of current Face Amount per Policy Month.
The cost of insurance charge.
Any additional charges for supplementary benefits, if
applicable.
A mortality and expense risks charge. This charge is
calculated as a percentage of the value of the Investment
Accounts and is assessed against the Investment Accounts.
This charge varies by ____ as follows:
GUARANTEED MONTHLY GUARANTEED ANNUAL
MORTALITY AND EXPENSE RISKS MORTALITY AND EXPENSE RISKS
------ CHARGE CHARGE
--- ------% ----%
--- ------% ----%
All of the above charges, except the mortality and
expense risks charge, are deducted from the Net Policy
Value.
Loan Charges: A fixed loan interest rate of 5.25% during the first 10
Policy Years and 4% thereafter. Interest credited to
amounts in the Loan Account is guaranteed not to be less
than 4% at all times. The maximum loan amount is 90% of
the Net Cash Surrender Value.
Transfer Charge: A charge of $25 per transfer for each transfer in excess
of 12 in a Policy Year.
TABLE OF INVESTMENT MANAGEMENT FEES AND EXPENSES
TRUST ANNUAL EXPENSES (SERIES I SHARES
(FORMERLY REFERRED TO AS "CLASS A SHARES")
(as a percentage of Trust average net assets
for the fiscal year ended December 31, 2001)
TOTAL TRUST
SERIES I OTHER EXPENSES ANNUAL EXPENSES
MANAGEMENT RULE 12B-1 (AFTER EXPENSE (AFTER EXPENSE
TRUST PORTFOLIO FEES FEES(G) REIMBURSEMENT) REIMBURSEMENT)
- --------------- ---- ------- -------------- --------------
Internet Technologies 1.000% 0.150% 0.110% 1.26%
Pacific Rim Emerging Markets 0.700% 0.150% 0.380% 1.23%
Telecommunications 0.950% 0.150% 0.340% 1.44%(A)
Science & Technology 0.916%(D) 0.150% 0.060% 1.13%
International Small Cap 0.950% 0.150% 0.500% 1.60%
Health Sciences 0.942%(D) 0.150% 0.350% 1.44%(A)
Aggressive Growth 0.850% 0.150% 0.070% 1.07%
Emerging Small Company 0.900% 0.150% 0.070% 1.12%
Small Company Blend 0.900% 0.150% 0.120% 1.17%
Dynamic Growth 0.850% 0.150% 0.080% 1.08%
Mid Cap Growth 0.850% 0.150% 0.390% 1.39%(A)
Mid Cap Opportunities 0.850% 0.150% 0.440% 1.44%(A)
Mid Cap Stock 0.775% 0.150% 0.080% 1.00%
All Cap Growth 0.785% 0.150% 0.060% 0.99%
9
TOTAL TRUST
SERIES I OTHER EXPENSES ANNUAL EXPENSES
MANAGEMENT RULE 12B-1 (AFTER EXPENSE (AFTER EXPENSE
TRUST PORTFOLIO FEES FEES(G) REIMBURSEMENT) REIMBURSEMENT)
- --------------- ---- ------- -------------- --------------
Financial Services 0.800% 0.150% 0.260% 1.21%(A)
Overseas 0.800% 0.150% 0.150% 1.10%
International Stock 0.838%(D) 0.150% 0.170% 1.16%
International Value 0.850% 0.150% 0.150% 1.15%
Capital Appreciation 0.750% 0.150% 0.300% 1.20%
Strategic Opportunities 0.700% 0.150% 0.060% 0.91%
Quantitative Mid Cap 0.650% 0.150% 0.100% 0.90%(A)
Global Equity 0.750% 0.150% 0.110% 1.01%
Strategic Growth 0.750% 0.150% 0.200% 1.10%(A)
Growth 0.697% 0.150% 0.060% 0.91%
Large Cap Growth 0.750% 0.150% 0.080% 0.98%
All Cap Value 0.800% 0.150% 0.470% 1.42%(A)
Capital Opportunities 0.750% 0.150% 0.500%(G) 1.40%(A)(F)
Quantitative Equity 0.599% 0.150% 0.060% 0.81%
Blue Chip Growth 0.702%(D) 0.150% 0.060% 0.91%
Utilities 0.750% 0.150% 0.500%(G) 1.40%(A)(F)
Real Estate Securities 0.645% 0.150% 0.070% 0.87%
Small Company Value 0.891%(D) 0.150% 0.110% 1.15%
Mid Cap Value 0.800% 0.150% 0.200% 1.15%(A)
Value 0.642% 0.150% 0.060% 0.85%
Tactical Allocation 0.750% 0.150% 0.400% 1.30%
Fundamental Value 0.798% 0.150% 0.120% 1.07%(A)
Growth & Income 0.529% 0.150% 0.050% 0.73%
U.S. Large Cap Value 0.725% 0.150% 0.050% 0.93%
Equity-Income 0.711%(D) 0.150% 0.050% 0.91%
Income & Value 0.650% 0.150% 0.070% 0.87%
Balanced 0.563% 0.150% 0.100% 0.81%
High Yield 0.625% 0.150% 0.060% 0.84%
Strategic Bond 0.625% 0.150% 0.080% 0.86%
Global Bond 0.600% 0.150% 0.220% 0.97%
Total Return 0.600% 0.150% 0.060% 0.81%
Investment Quality Bond 0.500% 0.150% 0.090% 0.74%
Diversified Bond 0.600% 0.150% 0.070% 0.82%
U.S. Government Securities 0.550% 0.150% 0.060% 0.76%
Money Market 0.350% 0.150% 0.050% 0.55%
Small Cap Index(E) 0.375% 0.150% 0.075% 0.60%
International Index(E) 0.400% 0.150% 0.050% 0.60%
Mid Cap Index(E) 0.375% 0.150% 0.075% 0.60%
Total Stock Market Index(E) 0.375% 0.150% 0.060% 0.59%
500 Index(E) 0.375% 0.150% 0.050% 0.57%
Lifestyle Aggressive 1000 0.065% 0.000% 0.010% 0.075%(B)(C)
Lifestyle Growth 820 0.054% 0.000% 0.021% 0.075%(B)(C)
Lifestyle Balanced 640 0.054% 0.000% 0.021% 0.075%(B)(C)
Lifestyle Moderate 460 0.062% 0.000% 0.013% 0.075%(B)(C)
Lifestyle Conservative 280 0.069% 0.000% 0.006% 0.075%(B)(C)
(A) Annualized; For the period April 30, 2001 (commencement of operations) to
December 31, 2001.
(B) The investment adviser to the Trust, Manufacturers Securities Services, LLC
("MSS" or the "Adviser") has voluntarily agreed to pay certain expenses of
each Lifestyle Trust as noted below. (For purposes of the expense
reimbursement, total expenses of a Lifestyle Trust includes the advisory
fee but excludes (a) the expenses of the Underlying Portfolios, (b) taxes,
(c) portfolio brokerage, (d) interest, (e) litigation and (f)
indemnification expenses and other extraordinary expenses not incurred in
the ordinary course of the Trust's business.)
If total expenses of a Lifestyle Trust (absent reimbursement) exceed
0.075%, the Adviser will reduce the advisory fee or reimburse expenses of
that Lifestyle Trust by an amount such that total expenses of the Lifestyle
Trust equal 0.075%. If
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the total expenses of the Lifestyle Trust (absent reimbursement) are equal to or
less than 0.075%, then no expenses will be reimbursed by the Adviser.
This voluntary expense reimbursement may be terminated at any time. If such
expense reimbursement was not in effect, Total Trust Annual Expenses would be
higher (based on current advisory fees and the Other Expenses of the Lifestyle
Trusts for the fiscal year ended December 31, 2001) as noted in the chart below:
TOTAL TRUST
MANAGEMENT RULE OTHER ANNUAL
TRUST PORTFOLIO FEES 12B-1 FEES EXPENSES EXPENSES
- --------------- ---- ---------- -------- --------
Lifestyle Aggressive 1000 0.065% 0.000% 1.081% 1.146%
Lifestyle Growth 820 0.054% 0.000% 0.998% 1.052%
Lifestyle Balanced 640 0.054% 0.000% 0.914% 0.968%
Lifestyle Moderate 460 0.062% 0.000% 0.823% 0.885%
Lifestyle Conservative 280 0.069% 0.000% 0.790% 0.859%
(C) Each Lifestyle Trust will invest in shares of the Underlying Portfolios.
Therefore, each Lifestyle Trust will bear its pro rata share of the fees
and expenses incurred by the Underlying Portfolios in which it invests, and
the investment return of each Lifestyle Trust will be net of the Underlying
Portfolio expenses. Each Lifestyle Portfolio must bear its own expenses.
However, the Adviser is currently paying certain of these expenses as
described in footnote (B) above.
(D) Effective June 1, 2000, the Adviser voluntarily agreed to waive a portion
of its advisory fee for the Science & Technology Trust, Health Sciences
Trust, Small Company Value Trust, the Blue Chip Growth Trust, the
Equity-Income Trust and the International Stock Trust. Once the combined
assets exceed specified amounts, the fee reduction is increased. The
percentage fee reduction for each asset level is as follows:
FEE REDUCTION
COMBINED ASSET LEVELS (AS A PERCENTAGE OF THE ADVISORY FEE)
--------------------- -------------------------------------
First $750 million 0.00%
Between $750 million and $1.5 billion 5.00%
Between $1.5 billion and $3.0 billion 7.50%
Over $3.0 billion 10.00%
The fee reductions are applied to the advisory fees of each of the six
portfolios. (However, in the case of the Small Company Value Trust, the fee
reduction will be reduced by 0.05% of the first $500 million in net
assets.) This voluntary fee waiver may be terminated at any time by the
adviser. As of December 31, 2001, the combined asset level for all six
portfolios was approximately $4.097 billion resulting in a fee reduction of
5.00%. There is no guarantee that the combined asset level will remain at
this amount. If the combined asset level were to decrease to a lower
breakpoint, the fee reduction would decrease as well.
(E) MSS has voluntarily agreed to pay expenses of each Index Trust (excluding
the advisory fee) that exceed the following amounts: 0.050% in the case of
the International Index Trust and 500 Index Trust and 0.075% in the case of
the Small Cap Index Trust, the Mid Cap Index Trust and Total Stock Market
Index Trust. For Series I shares, if such expense reimbursement were not in
effect, it is estimated that "Other Expenses" and "Total Trust Annual
Expenses" would be 0.07% and 0.62%, respectively, for the International
Index Trust, 0.075% and 0.60%, respectively, for the Small Cap Index Trust,
and 0.075% and 0.60%, respectively, for the Mid Cap Index Trust and 0.060%
and 0.59%, respectively, for the Total Stock Market Index Trust. It is
estimated that the expense reimbursement will not be effective during the
year end December 31, 2002 for the 500 Index Trust. The expense
reimbursement may be terminated at any time by MSS.
(F) For all portfolios except the Lifestyle Trusts, the Adviser reduces its
advisory fee or reimburses the portfolio if the total of all expenses
(excluding advisory fees, taxes, portfolio brokerage commissions, interest,
litigation and indemnification expenses and other extraordinary expenses
not incurred in the ordinary course of the portfolio's business) exceed
certain annual rates. In the case of the Capital Opportunities and
Utilities Trusts, the Adviser reimbursed the portfolios for certain
expenses for the year ended December 31, 2001. For Series I shares, if such
expense reimbursement were not in effect, it is estimated that "Other
Expenses" and "Total Trust Annual Expenses" would be 0.560% and 1.46%,
respectively, for the Capital Opportunities Trust and 0.610% and 1.51%,
respectively for the Utilities Trust. These voluntary expense
reimbursements may be terminated at any time.
(G) Effective January 1, 2002, the Trust implemented a Series I Rule 12b-1 plan
while simultaneously reducing its advisory fees and implementing advisory
fee breakpoints. The Trust Annual Expense chart reflects these changes.
TABLE OF INVESTMENT OPTIONS AND INVESTMENT ADVISERS
The Trust currently has the following subadvisers who manage the portfolios of
the Trust which are investment options for this contract, one of which is
Manufacturers Adviser Corporation ("MAC"). Both MSS and MAC are affiliates of
ours.
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SUBADVISER PORTFOLIO
A I M Capital Management, Inc. All Cap Growth Trust
Aggressive Growth Trust
Capital Guardian Trust Company Small Company Blend Trust
U.S. Large Cap Value Trust
Income & Value Trust
Diversified Bond Trust
Cohen & Steers Capital Management, Inc. Real Estate Securities Trust
Davis Advisers Financial Services Trust
Fundamental Value Trust
The Dreyfus Corporation All Cap Value Trust
SUBADVISER PORTFOLIO
Fidelity Management & Research Company Strategic Opportunities Trust
Large Cap Growth Trust
Overseas Trust
Founders Asset Management LLC International Small Cap Trust
Franklin Advisers, Inc. Emerging Small Company Trust
INVESCO Funds Group, Inc. Telecommunications Trust
Mid Cap Growth Trust
Janus Capital Corporation Dynamic Growth Trust
Jennison Associates LLC Capital Appreciation Trust
Lord, Abbett & Co. Mid Cap Value Trust
Manufacturers Adviser Corporation Pacific Rim Emerging Markets Trust
Quantitative Equity Trust
Quantitative Mid Cap Trust
Money Market Trust
Index Trusts
Lifestyle Trusts(A)
Balanced Trust
Massachusetts Financial Services Company Strategic Growth Trust
Capital Opportunities Trust
Utilities Trust
Miller Anderson(B) Value Trust
High Yield Trust
Munder Capital Management Internet Technologies Trust
Pacific Investment Management Company Global Bond Trust
Total Return Trust
Putnam Investment Management, L.L.C. Mid Cap Opportunities Trust
Global Equity Trust
Salomon Brothers Asset Management Inc U.S. Government Securities Trust
Strategic Bond Trust
SSgA Funds Management, Inc. Growth Trust
Lifestyle Trusts(A)
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T. Rowe Price Associates, Inc. Science & Technology Trust
Small Company Value Trust
Health Sciences Trust
Blue Chip Growth Trust
Equity-Income Trust
T. Rowe Price International, Inc. International Stock Trust
Templeton Investment Counsel, Inc. International Value Trust
UBS Global Asset Management Tactical Allocation Trust
(formerly, Brinson Advisors, Inc.)
Wellington Management Company, LLP Growth & Income Trust
Investment Quality Bond Trust
Mid Cap Stock Trust
(A) SSgA Funds Management, Inc. provides subadvisory consulting services to
Manufacturers Adviser Corporation regarding management of the Lifestyle
Trusts.
(B) Morgan Stanley Investment Management Inc. ("MSIM") is the sub-adviser to
the Value Trust and the High Yield Trust. MSIM does business in certain
instances (including its role as the sub-adviser to the Value Trust and the
High Yield Trust) using the name "Miller Anderson". Prior to May 1, 2002,
Morgan Stanley Investments LP, an affiliate of MSIM, (formerly, Miller
Anderson & Sherrerd LLP) was the sub-adviser to the Value Trust and High
Yield Trust.
GENERAL INFORMATION ABOUT MANULIFE NEW YORK, THE SEPARATE ACCOUNT AND THE TRUST
MANULIFE NEW YORK
We are a stock life insurance company organized under the laws of New York on
February 10, 1992. Our principal office is located at 100 Summit Lake Drive,
Second Floor, Valhalla, New York 10595. We are a wholly-owned subsidiary of The
Manufacturers Life Insurance Company (U.S.A.) ("MANULIFE USA"), a stock life
insurance company incorporated in Maine on August 20, 1955 by a special act of
the Maine legislature and redomesticated under the laws of Michigan with its
principal office located at 73 Tremont Street, Boston, Massachusetts 02108. Our
ultimate parent is Manulife Financial Corporation ("MFC"), a publicly traded
company, based in Toronto, Canada. MFC is the holding company of The
Manufacturers Life Insurance Company and its subsidiaries, collectively known as
Manulife Financial.
The Manufacturers Life Insurance Company of New York's financial
ratings are as follows:
A++ A.M. Best
Superior companies have a very strong ability to meet their
obligations; 1st category of 16
AAA Fitch
Exceptionally strong capacity to meet policyholder and contract
obligations; 1st category of 24
AA+ Standard & Poor's
Very strong financial security characteristics; 2nd category of 21
These ratings, which are current as of the date of this prospectus and are
subject to change, are assigned as a measure of Manulife New York's ability to
honor the death benefit, fixed account guarantees and no lapse guarantees but
not specifically to its products, the performance (return) of these products,
the value of any investment in these products upon withdrawal or to individual
securities held in any portfolio.
THE SEPARATE ACCOUNT
We established the Separate Account on May 6, 1997, subject to approval by the
Superintendent of Insurance of New York. The Separate Account holds assets that
are segregated from all of our other assets. The Separate Account is currently
used only to support variable life insurance policies.
ASSETS OF THE SEPARATE ACCOUNT
We are the legal owner of the assets in the Separate Account. The income, gains
and losses of the Separate Account, whether or not realized, are, in accordance
with applicable contracts, credited to or charged against the Separate Account
without regard to our other income, gains or losses. We 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
13
be charged with liabilities which arise from any other business we conduct.
However, our obligations under the policies are part of our general corporate
obligations.
REGISTRATION
The Separate Account is registered with the SEC under the Investment Company Act
of 1940, 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 the shares of one or more investment companies,
rather than in a portfolio of unspecified securities. Registration under the
1940 Act does not involve any supervision by the SEC of the management or
investment policies or practices of the Separate Account. For state law purposes
the Separate Account is treated as a part or division of Manulife New York.
THE TRUST
Each sub-account of the Separate Account will only purchase Series I shares of a
particular Portfolio. The Trust is registered under the 1940 Act as an open-end
management investment company. Each of the Trust portfolios, except the
Lifestyle Trusts, are subject to a Rule 12b-1 fee of .15% of a portfolio's
Series I net assets. The Separate Account will purchase and redeem shares of the
Portfolios at net asset value. Shares will be redeemed to the extent necessary
for Manulife New York to provide benefits under the Policies, to transfer assets
from one sub-account to another or to the general account as requested by
policyowners, and for other purposes not inconsistent with the Policies. Any
dividend or capital gain distribution received from a Portfolio with respect to
the Policies will be reinvested immediately at net asset value in shares of that
Portfolio and retained as assets of the corresponding sub-account.
The Trust shares are issued to fund benefits under both variable annuity
contracts and variable life insurance policies issued by us or life insurance
companies affiliated with us. We may also purchase shares through our general
account for certain limited purposes including initial portfolio seed money. For
a description of the procedures for handling potential conflicts of interest
arising from the funding of such benefits see the accompanying Trust prospectus.
INVESTMENT OBJECTIVES OF THE PORTFOLIOS
The investment objectives and certain policies of the Portfolios currently
available to policyowners through corresponding sub-accounts are set forth
below. There is, of course, no assurance that these objectives will be met. A
full description of the Trust, its investment objectives, policies and
restrictions, the risks associated therewith, its expenses, and other aspects of
its operation is contained in the accompanying Trust prospectus, which should be
read together with this prospectus.
ELIGIBLE PORTFOLIOS
The Portfolios of the Trust available under the Policies are as follows:
The INTERNET TECHNOLOGIES TRUST seeks long-term capital appreciation by
investing the portfolio's assets primarily in companies engaged in
Internet-related business (such businesses also include Intranet-related
businesses).
The PACIFIC RIM EMERGING MARKETS TRUST seeks long-term growth of capital by
investing in a diversified portfolio that is comprised primarily of common
stocks and equity-related securities of corporations domiciled in countries in
the Pacific Rim region.
The TELECOMMUNICATIONS TRUST seeks capital appreciation (with earning income as
a secondary objective) by investing, under normal market conditions, primarily
in equity securities of companies engaged in the telecommunications sector, that
is, in the design, development, manufacture, distribution or sale of
communications services and equipment and companies that are involved in
supplying equipment or services to such companies.
The SCIENCE & TECHNOLOGY TRUST seeks long-term growth of capital by investing,
under normal market condition, at least 80% of its net assets (plus any
borrowings for investment purposes) in common stocks of companies expected to
benefit from the development, advancement, and use of science and technology.
Current income is incidental to the portfolio's objective.
The INTERNATIONAL SMALL CAP TRUST seeks capital appreciation by investing
primarily in securities issued by foreign companies which have total market
capitalization or annual revenues of $1.5 billion or less. These securities may
represent companies in both established and emerging economies throughout the
world.
The HEALTH SCIENCES TRUST seeks long-term capital appreciation by investing,
under normal market conditions, at least 80% of its net assets (plus any
borrowings for investment purposes) in common stocks of companies engaged in the
research, development, production, or distribution of products or services
related to health care, medicine, or the life sciences (collectively termed
"health sciences").
14
The AGGRESSIVE GROWTH TRUST seeks long-term capital appreciation by investing
the portfolio's asset principally in common stocks, convertible bonds,
convertible preferred stocks and warrants of companies which in the opinion of
the subadviser are expected to achieve earnings growth over time at a rate in
excess of 15% per year. Many of these companies are in the small and
medium-sized category.
The EMERGING SMALL COMPANY TRUST seeks long-term growth of capital by investing,
under normal market conditions, at least 80% of its net assets (plus any
borrowings for investment purposes) in common stock equity securities of
companies with market capitalizations that approximately match the range of
capitalization of the Russell 2000 Growth Index* ("small cap stocks") at the
time of purchase.
The SMALL COMPANY BLEND TRUST seeks long-term growth of capital and income by
investing the portfolio's assets, under normal market conditions, primarily in
equity and equity-related securities of companies with market capitalizations
that approximately match the range of capitalization of the Russell 2000 Index
at the time of purchase.
The DYNAMIC GROWTH TRUST seeks long-term growth of capital by investing the
portfolio's assets primarily in equity securities selected for their growth
potential. Normally at least 50% of its equity assets are invested in
medium-sized companies.
The MID CAP GROWTH TRUST seeks capital appreciation by investing primarily in
common stocks of mid-sized companies - those with market capitalizations between
$2.5 billion and $15 billion at the time of purchase.
The MID CAP OPPORTUNITIES TRUST seeks capital appreciation by investing, under
normal market conditions, primarily in common stocks and other equity securities
of U.S. mid-size companies.
The MID CAP STOCK TRUST seeks long-term growth of capital by investing primarily
in equity securities of mid-size companies with significant capital appreciation
potential.
The ALL CAP GROWTH TRUST seeks long-term capital appreciation by investing the
portfolio's assets under normal market conditions, principally in common stocks
of companies that are likely to benefit from new or innovative products,
services or processes, as well as those that have experienced above average,
long-term growth in earnings and have excellent prospects for future growth.
The FINANCIAL SERVICES TRUST seeks growth of capital by investing primarily in
common stocks of financial companies. During normal market conditions, at least
65% (80% after July 31, 2002) of the portfolio's net assets (plus any borrowings
for investment purposes) are invested in companies that are principally engaged
in financial services. A company is "principally engaged" in financial services
if it owns financial services-related assets constituting at least 50% of the
value of its total assets, or if at least 50% of its revenues are derived from
its provision of financial services.
The OVERSEAS TRUST seeks growth of capital by investing, under normal market
conditions, at least 80% of its net assets (plus any borrowings for investment
purposes) in foreign securities (including American Depositary Receipts (ADRs)
and European Depositary Receipts (EDRs)). The portfolio expects to invest
primarily in equity securities.
The INTERNATIONAL STOCK TRUST seeks long-term growth of capital by investing
primarily in common stocks of established, non-U.S. companies.
The INTERNATIONAL VALUE TRUST seeks long-term growth of capital by investing,
under normal market conditions, primarily in equity securities of companies
located outside the U.S., including emerging markets.
The CAPITAL APPRECIATION TRUST seeks long-term capital growth by investing at
least 65% of its total assets in equity-related securities of companies that
exceed $1 billion in market capitalization and that the subadviser believes have
above-average growth prospectus. These companies are generally medium-to-large
capitalization companies.
The STRATEGIC OPPORTUNITIES TRUST seeks growth of capital by investing primarily
in common stocks of U.S. issuers and securities convertible into or carrying the
right to buy common stocks.
The QUANTITATIVE MID CAP TRUST seeks long-term growth of capital by investing,
under normal market conditions, at least 80% of its total assets (plus any
borrowings for investment purposes) in U.S. mid-cap stocks, convertible
preferred stocks, convertible bonds and warrants.
The GLOBAL EQUITY TRUST seeks long-term capital appreciation by investing, under
normal market conditions, at least 80% of its net assets (plus any borrowings
for investment purposes) in equity securities of companies in at least three
different countries, including the U.S. The portfolio may invest in companies of
any size but emphasizes mid- and large-capitalization companies that the
subadviser believes are undervalued.
15
The STRATEGIC GROWTH TRUST seeks capital appreciation by investing, under normal
market conditions, at least 65% of the portfolio's total assets in common stocks
and related securities (such as preferred stocks, bonds, warrants or rights
convertible into stock and depositary receipts for these securities) of
companies which the subadviser believes offer superior prospects for growth.
The GROWTH TRUST seeks long-term growth of capital by investing primarily in
large capitalization growth securities (market capitalizations of approximately
$1 billion or greater).
The LARGE CAP GROWTH TRUST seeks long-term growth of capital by investing, under
normal market conditions, at least 80% of its net assets (plus any borrowings
for investment purposes) in equity securities of companies with large market
capitalizations.
The ALL CAP VALUE TRUST seeks capital appreciation by investing, under normal
market conditions, at least 65% of the portfolio's total assets in the stocks of
value companies of any size.
The CAPITAL OPPORTUNITIES TRUST seeks capital appreciation by investing, under
normal market conditions, at least 65% of the portfolio's total assets in common
stocks and related securities, such as preferred stock, convertible securities
and depositary receipts. The portfolio focuses on companies which the subadviser
believes have favorable growth prospects and attractive valuations based on
current and expected earnings or cash flow.
The QUANTITATIVE EQUITY TRUST seeks to achieve intermediate and long-term growth
through capital appreciation and current income by investing in common stocks
and other equity securities of well established companies with promising
prospects for providing an above average rate of return.
The BLUE CHIP GROWTH TRUST seeks to achieve long-term growth of capital (current
income is a secondary objective) by investing, under normal market conditions,
at least 80% of the portfolio's total assets in the common stocks of large and
medium-sized blue chip growth companies. Many of the stocks in the portfolio are
expected to pay dividends.
The UTILITIES TRUST seeks capital growth and current income (income above that
available from a portfolio invested entirely in equity securities) by investing,
under normal market conditions, at least 80% of the portfolio's net assets (plus
any borrowings for investment purposes) in equity and debt securities of
domestic and foreign companies in the utilities industry.
The REAL ESTATE SECURITIES TRUST seeks to achieve a combination of long-term
capital appreciation and current income by investing, under normal market
conditions, at least 80% of its net assets (plus any borrowings for investment
purposes) in securities of real estate companies.
The SMALL COMPANY VALUE TRUST seeks long-term growth of capital by investing,
under normal market conditions, primarily in small companies whose common stocks
are believed to be undervalued. Under normal market conditions, the portfolio
will invest at least 80% of its net assets (plus any borrowings for investment
purposes) in companies with a market capitalization that do not exceed the
maximum market capitalization of any security in the Russell 2000 Index at the
time of purchase.
The MID CAP VALUE TRUST seeks capital appreciation by investing, under normal
market conditions, at least 80% of the portfolio's net assets (plus any
borrowings for investment purposes) will consist of investments in mid-sized
companies, with market capitalizations of roughly $500 million to $10 billion.
The VALUE TRUST seeks to realize an above-average total return over a market
cycle of three to five years, consistent with reasonable risk, by investing
primarily in common and preferred stocks, convertible securities, rights and
warrants to purchase common stocks, ADRs and other equity securities of
companies with equity capitalizations usually greater than $300 million.
The TACTICAL ALLOCATION TRUST seeks total return, consisting of long-term
capital appreciation and current income, by allocating the portfolio's assets
between (i) a stock portion that is designed to track the performance of the S&P
500 Composite Stock Price Index, and (ii) a fixed income portion that consists
of either five-year U.S. Treasury notes or U.S. Treasury bills with remaining
maturities of 30 days.
The FUNDAMENTAL VALUE TRUST seeks growth of capital by investing, under normal
market conditions, primarily in common stocks of U.S. companies with market
capitalizations of at least $5 billion that the subadviser believes are
undervalued. The portfolio may also invest in U.S. companies with smaller
capitalizations.
The GROWTH & INCOME TRUST seeks long-term growth of capital and income,
consistent with prudent investment risk, by investing primarily in a diversified
portfolio of common stocks of U.S. issuers which the subadviser believes are of
high quality.
The U.S. LARGE CAP VALUE TRUST seeks long-term growth of capital and income by
investing the portfolio's assets, under normal market conditions, primarily in
equity and equity-related securities of companies with market capitalization
greater than $500 million.
16
The EQUITY-INCOME TRUST seeks to provide substantial dividend income and also
long-term capital appreciation by investing primarily in dividend-paying common
stocks, particularly of established companies with favorable prospects for both
increasing dividends and capital appreciation.
The INCOME & VALUE TRUST seeks the balanced accomplishment of (a) conservation
of principal and (b) long-term growth of capital and income by investing the
portfolio's assets in both equity and fixed-income securities. The subadviser
has full discretion to determine the allocation between equity and fixed income
securities.
The BALANCED TRUST seeks current income and capital appreciation by investing
the portfolio's assets in a balanced portfolio of (i) equity securities and (ii)
fixed income securities.
The HIGH YIELD TRUST seeks to realize an above-average total return over a
market cycle of three to five years, consistent with reasonable risk, by
investing primarily in high yield debt securities, including corporate bonds and
other fixed-income securities.
The STRATEGIC BOND TRUST seeks a high level of total return consistent with
preservation of capital by giving its subadviser broad discretion to deploy the
portfolio's assets among certain segments of the fixed income market as the
subadviser believes will best contribute to achievement of the portfolio's
investment objective.
The GLOBAL BOND TRUST seeks to realize maximum total return, consistent with
preservation of capital and prudent investment management by investing the
portfolio's asset primarily in fixed income securities denominated in major
foreign currencies, baskets of foreign currencies (such as the ECU), and the
U.S. dollar.
The TOTAL RETURN TRUST seeks to realize maximum total return, consistent with
preservation of capital and prudent investment management by investing, under
normal market conditions, at least 65% of the portfolio's assets in a
diversified portfolio of fixed income securities of varying maturities. The
average portfolio duration will normally vary within a three- to six-year time
frame based on the subadviser's forecast for interest rates.
The INVESTMENT QUALITY BOND TRUST seeks a high level of current income
consistent with the maintenance of principal and liquidity, by investing in a
diversified portfolio of investment grade bonds and tends to focus its
investment on corporate bonds and U.S. Government bonds with intermediate to
longer term maturities. The portfolio may also invest up to 20% of its assets in
non-investment grade fixed income securities.
The DIVERSIFIED BOND TRUST seeks high total return consistent with the
conservation of capital by investing, under normal market conditions, at least
80% of the portfolio's net assets (plus any borrowings for investment purposes)
in fixed income securities.
The U.S. GOVERNMENT SECURITIES TRUST seeks a high level of current income
consistent with preservation of capital and maintenance of liquidity, by
investing in debt obligations and mortgage-backed securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
derivative securities such as collateralized mortgage obligations backed by such
securities.
The MONEY MARKET TRUST seeks maximum current income consistent with preservation
of principal and liquidity by investing in high quality money market instruments
with maturities of 397 days or less issued primarily by U. S. entities.
The SMALL CAP INDEX TRUST seeks to approximate the aggregate total return of a
small cap U.S. domestic equity market index by attempting to track the
performance of the Russell 2000 Index.*
The INTERNATIONAL INDEX TRUST seeks to approximate the aggregate total return of
a foreign equity market index by attempting to track the performance of the
Morgan Stanley European Australian Far East Free Index (the "MSCI EAFE Index").*
The MID CAP INDEX TRUST seeks to approximate the aggregate total return of a mid
cap U.S. domestic equity market index by attempting to track the performance of
the S&P Mid Cap 400 Index.*
The TOTAL STOCK MARKET INDEX seeks to approximate the aggregate total return of
a broad U.S. domestic equity market index by attempting to track the performance
of the Wilshire 5000 Equity Index.*
The 500 INDEX TRUST seeks to approximate the aggregate total return of a broad
U.S. domestic equity market index by attempting to track the performance of the
S&P 500 Composite Stock Price Index.*
17
The LIFESTYLE AGGRESSIVE 1000 TRUST seeks to provide long-term growth of capital
(current income is not a consideration) by investing 100% of the Lifestyle
Trust's assets in other portfolios of the Trust ("Underlying Portfolios") which
invest primarily in equity securities.
The LIFESTYLE GROWTH 820 TRUST seeks to provide long-term growth of capital with
consideration also given to current income by investing approximately 20% of the
Lifestyle Trust's assets in Underlying Portfolios which invest primarily in
fixed income securities and approximately 80% of its assets in Underlying
Portfolios which invest primarily in equity securities.
The LIFESTYLE BALANCED 640 TRUST seeks to provide a balance between a high level
of current income and growth of capital with a greater emphasis given to capital
growth by investing approximately 40% of the Lifestyle Trust's assets in
Underlying Portfolios which invest primarily in fixed income securities and
approximately 60% of its assets in Underlying Portfolios which invest primarily
in equity securities.
The LIFESTYLE MODERATE 460 TRUST seeks to provide a balance between a high level
of current income and growth of capital with a greater emphasis given to current
income by investing approximately 60% of the Lifestyle Trust's assets in
Underlying Portfolios which invest primarily in fixed income securities and
approximately 40% of its assets in Underlying Portfolios which invest primarily
in equity securities.
The LIFESTYLE CONSERVATIVE 280 TRUST seeks to provide a high level of current
income with some consideration also given to growth of capital by investing
approximately 80% of the Lifestyle Trust's assets in Underlying Portfolios which
invest primarily in fixed income securities and approximately 20% of its assets
in Underlying Portfolios which invest primarily in equity securities.
*"Standard & Poor's(R)," "S&P 500(R)," "Standard and Poor's 500(R)" and
"Standard and Poor's 400(R)" are trademarks of The McGraw-Hill Companies, Inc.
"Russell 2000(R)" and "Russell 2000(R) Growth" is a trademark of Frank Russell
Company. "Wilshire 5000(R)" is a trademark of Wilshire Associates. "Morgan
Stanley European Australian Far East Free" and "EAFE(R)" are trademarks of
Morgan Stanley & Co. Incorporated. None of the Index Trusts are sponsored,
endorsed, managed, advised, sold or promoted by any of these companies, and none
of these companies make any representation regarding the advisability of
investing in the Trust.
ISSUING A POLICY
REQUIREMENTS
To purchase a Policy, an applicant must submit a completed application. A Policy
will not be issued until the underwriting process has been completed to our
satisfaction.
Policies may be issued on a basis which does not take into account the insured's
sex, with prior approval from Manulife New York. A Policy will generally be
issued only on the lives of insureds from ages 20 through 90.
Each Policy has a Policy Date, an Effective Date, an Issue Date, and a Maturity
Date (See "Definitions" above).
The Policy Date is the date from which the first monthly deductions are
calculated and from which Policy Years, Policy Months and Policy Anniversaries
are determined. The Effective Date is the date we become obligated under the
Policy and when the first monthly deductions are deducted from the Policy Value.
The Issue Date is the date from which Suicide and Incontestability are measured.
If an application is accompanied by a check for the initial premium and the
application is accepted:
(i) the Policy Date will be the date the application and check were
received at the Service Office (unless a special Policy Date is
requested (See "Backdating a Policy" below));
(ii) the Effective Date will be the date our underwriters approve
issuance of the Policy; and
(iii) the Issue Date will be the date we issue the Policy.
If an application accepted by Manulife New York is not accompanied by a check
for the initial premium and no request to backdate the Policy has been made:
(i) the Policy Date and the Effective Date will be the date we receive
the check at our Service Office; and
(ii) the Issue Date will be the date we issue the Policy.
18
The initial premium must be received within 60 days after the Issue Date and the
policyowner must be in good health on the date the initial premium is received.
If the initial premium is not paid or if the application is rejected, the Policy
will be canceled and any partial premiums paid will be returned to the
applicant.
Regardless of whether or not a policy is backdated, Net Premiums received prior
to the Effective Date of a Policy will be credited with interest from the date
of receipt at the rate of return then being earned on amounts allocated to the
Money Market portfolio.
As of the Effective Date, the premiums paid plus interest credited, net of the
premium charge, will be allocated among the Investment Accounts and/or Fixed
Account in accordance with the policyowner's instructions unless such amount is
first allocated to the Money Market portfolio for the duration of the Right to
Examine period.
MINIMUM INITIAL FACE AMOUNT
Manulife New York will generally issue a Policy only if it has a Face Amount of
at least $100,000.
BACKDATING A POLICY
Under limited circumstances, we may backdate a Policy, upon request, by
assigning a Policy Date earlier than the date the application is signed.
However, in no event will a Policy be backdated earlier than six months before
the date of the application for the Policy. Monthly deductions will be made for
the period the Policy Date is backdated. Regardless of whether or not a Policy
is backdated, Net Premiums received prior to the Effective Date of a Policy will
be credited with interest from the date of receipt at the rate of return then
being earned on amounts allocated to the Money Market portfolio.
TEMPORARY INSURANCE AGREEMENT
In accordance with Manulife New York's underwriting practices, temporary
insurance coverage may be provided under the terms of a Temporary Insurance
Agreement. Generally, temporary life insurance may not exceed $1,000,000 and may
not be in effect for more than 90 days. This temporary insurance coverage will
be issued on a conditional receipt basis, which means that any benefits under
such temporary coverage will only be paid if the life insured meets our usual
and customary underwriting standards for the coverage applied for.
The acceptance of an application is subject to our underwriting rules, and we
reserve the right to request additional information or to reject an application
for any reason.
Persons failing to meet standard underwriting classification may be eligible for
a Policy with an additional risk rating assigned to it.
RIGHT TO EXAMINE THE POLICY
A Policy may be returned for a refund of the premium within 10 days after it is
received. This ten day period is known as the "free look" period. The Policy can
be mailed or delivered to the Manulife New York agent who sold it or to the
Manulife New York 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, Manulife New York will refund any
premium paid. Manulife New York reserves the right to delay the refund of any
premium paid by check until the check has cleared.
If the Policy is purchased in connection with a replacement of an existing
policy (as defined below), the policyowner may also cancel the Policy by
returning it to the Service Office or the Manulife New York agent who sold it at
any time within 60 days after receipt of the Policy. Within 10 days of receipt
of the Policy by Manulife New York, it will pay the policyowner the Policy
Value, computed at the end of the valuation period during which the Policy is
received by Manulife New York. In the case of a replacement of a policy issued
by a New York insurance company, the policyowner may have the right to reinstate
the prior policy. The policyowner should consult with his or her attorney or the
Manulife New York agent regarding this matter prior to purchasing the new
Policy.
Replacement of an existing life insurance policy generally is defined as the
purchase of a new life insurance policy in connection with (a) the lapse,
surrender or change of, or borrowing from, an existing life insurance policy or
(b) the assignment to a new issuer or an existing life insurance policy. This
description, however, does not necessarily cover all situations which could be
considered a replacement of an existing life insurance policy. Therefore, a
policyowner should consult with his or her attorney or Manulife New York agent
regarding whether the purchase of a new life insurance policy is a replacement
of an existing life insurance policy.
If you request an increase in face amount which results in new surrender
charges, you will have the same rights as described above to cancel the
increase. If canceled, the Policy Value and the surrender charges will be
recalculated to the amounts they would have been had the increase not taken
place. You may request a refund of all or any portion of premiums paid during
the free look period, and the Policy Value and the surrender charges will be
recalculated to the amounts they would have been had the premiums not been paid.
19
LIFE INSURANCE QUALIFICATION
A Policy must satisfy either one of two tests to qualify as a life insurance
contract for purposes of Section 7702 of the Internal Revenue Code of 1986, as
amended (the "Code"). At the time of application, the policyowner must choose
either the Cash Value Accumulation Test or the Guideline Premium Test. The test
cannot be changed once the Policy is issued. You should consult your registered
representative for more information so you can select the test that best
accomplishes your goals.
CASH VALUE ACCUMULATION TEST
Under the Cash Value Accumulation Test ("CVAT"), the Policy Value must be less
than the Net Single Premium necessary to fund future Policy benefits, assuming
guaranteed charges and 4% net interest. To ensure that a Policy meets the CVAT,
we will generally increase the death benefit, temporarily, to the required
minimum amount. However, we reserve the right to require evidence of
insurability should a premium payment cause the death benefit to increase by
more than the premium payment amount. Any excess premiums will be refunded.
GUIDELINE PREMIUM TEST
The Guideline Premium Test restricts the maximum premiums that may be paid into
a life insurance policy for a given death benefit. The policy's death benefit
must also be at least equal to the Minimum Death Benefit (described below).
Changes to the Policy may affect the maximum amount of premiums, such as:
- a change in the Policy's Face Amount.
- a change in the death benefit option.
- partial withdrawals.
- addition or deletion of supplementary benefits.
Any of the above changes could cause the total premiums paid to exceed the new
maximum limit. In this situation, we may refund any excess premiums paid. In
addition, these changes could reduce the future premium limitations.
The Guideline Premium Test requires a life insurance policy to meet minimum
ratios of life insurance coverage to policy value. This is achieved by ensuring
that the death benefit is at all times at least equal to the Minimum Death
Benefit. The Minimum Death Benefit on any date is defined as the Policy Value on
that date times the applicable Minimum Death Benefit Percentage for the Attained
Age of the life insured. The Minimum Death Benefit Percentages for this test
appear in the Policy.
DEATH BENEFITS
If the Policy is in force at the time of the death of the life insured, we will
pay an insurance benefit. The amount payable will be the death benefit under the
selected death benefit option, plus any amounts payable under any supplementary
benefits added to the Policy, less the Policy Debt and less any outstanding
monthly deductions due. The insurance benefit will be paid in one lump sum
unless another form of settlement option is agreed to by the beneficiary and
Manulife New York. If the insurance benefit is paid in one sum, we will pay
interest from the date of death to the date of payment. If the life insured
should die after our receipt of a request for surrender, no insurance benefit
will be payable, and we will pay only the Net Cash Surrender Value.
DEATH BENEFIT OPTIONS
There are two death benefit options, described below.
DEATH BENEFIT OPTION 1
Under Option 1 the death benefit is the Face Amount of the Policy at the date of
death or, if greater, the Minimum Death Benefit.
DEATH BENEFIT OPTION 2
Under Option 2 the death benefit is the Face Amount plus the Policy Value of the
Policy at the date of death or, if greater, the Minimum Death Benefit.
20
CHANGING THE DEATH BENEFIT OPTION
The death benefit option may be changed once each Policy Year after the first
Policy Year. The change will occur on the first day of the next Policy Month
after a written request for a change is received at the Service Office. We
reserve the right to limit a request for a change if the change would cause the
Policy to fail to qualify as life insurance for tax purposes. We will not allow
a change in death benefit option if it would cause the Face Amount to decrease
below $100,000.
A change in the death benefit option will result in a change in the Policy's
Face Amount, in order to avoid any change in the amount of the death benefit, as
follows:
CHANGE FROM OPTION 1 TO OPTION 2
The new Face Amount will be equal to the Face Amount prior to the change minus
the Policy Value as of the date of the change.
CHANGE FROM OPTION 2 TO OPTION 1
The new Face Amount will be equal to the Face Amount prior to the change plus
the Policy Value as of the date of the change.
No new Surrender Charges will apply to an increase in Face Amount solely due to
a change in the death benefit option.
CHANGING THE FACE AMOUNT
Subject to the limitations stated in this Prospectus, a policyowner may, upon
written request, increase or decrease the Face Amount of the Policy. We reserve
the right to limit a change in Face Amount so as to prevent the Policy from
failing to qualify as life insurance for tax purposes.
INCREASE IN FACE AMOUNT
Increases in Face Amount may be made once each Policy Year after the first
Policy Year. Any increase in Face Amount must be at least $50,000. An increase
will become effective at the beginning of the policy month following the date we
approve the requested increase. Increases in Face Amount are subject to
satisfactory evidence of insurability. We reserve the right to refuse a
requested increase if the life insured's Attained Age at the effective date of
the increase would be greater than 90.
NEW SURRENDER CHARGES FOR AN INCREASE
An increase in face amount will usually result in the Policy being subject to
new surrender charges. The new surrender charges will be computed as if a new
Policy were being purchased for the increase in Face Amount. The premiums
attributable to the new Face Amount will not exceed the surrender charge premium
limit associated with that increase. There will be no new surrender charges
associated with restoration of a prior decrease in Face Amount. As with the
purchase of a Policy, a policyowner will have a free look right with respect to
any increase resulting in new surrender charges.
An additional premium may be required for a face amount increase, and a new
No-Lapse Guarantee Premium will be determined, if the No-Lapse Guarantee is in
effect at the time of the face amount increase.
INCREASE WITH PRIOR DECREASES
If, at the time of the increase, there have been prior decreases in Face Amount,
these prior decreases will be restored first. The insurance coverage eliminated
by the decrease of the oldest Face Amount will be deemed to be restored first.
CHANGING BOTH THE FACE AMOUNT AND THE DEATH BENEFIT OPTION
If a policyowner requests to change both the Face Amount and the Death Benefit
Option in the same month, the Death Benefit Option change shall be deemed to
occur first.
DECREASE IN FACE AMOUNT
Decreases in Face Amount may be made once each Policy Year after the first
Policy Year. Any decrease in Face Amount must be at least $50,000. A written
request from a policyowner for a decrease in the Face Amount will be effective
at the beginning of the Policy Month following the date Manulife New York
approves the requested decrease. If there have been previous increases in Face
Amount, the decrease will be applied to the most recent increase first and
thereafter to the next most recent increases successively. We will not allow a
decrease in the Face Amount if it is for the reduction or termination of a prior
Face Amount increase which has been in force for less than one year. Under no
circumstances should the sum of all decreases cause the policy to fall below the
minimum Face Amount of $100,000.
21
SURRENDER CHARGE ON DECREASE IN FACE AMOUNT
If the Face Amount of insurance is decreased, a pro-rata Surrender Charge will
be deducted from the Policy Value. A decrease in Face Amount caused by a change
from Death Benefit Option 1 to Option 2 will not incur a pro-rata Surrender
Charge. Each time a pro-rata Surrender Charge is deducted for a Face Amount
decrease, the remaining Surrender Charge will be reduced in the same proportion
that the Surrender Charge deducted bears to the total Surrender Charge
immediately before the Face Amount decrease.
PREMIUM PAYMENTS
INITIAL PREMIUMS
No premiums will be accepted prior to receipt of a completed application by
Manulife New York. All premiums received prior to the Effective Date of the
Policy will be held in the general account and credited with interest from the
date of receipt at the rate of return then being earned on amounts allocated to
the Money Market Trust.
The minimum initial premium is one-twelfth of the No-Lapse Guarantee Premium.
On the later of the Effective Date or the date a premium is received, the Net
Premiums paid plus interest credited will be allocated among the Investment
Accounts or the Fixed Account in accordance with the policyowner's instructions.
SUBSEQUENT PREMIUMS
After the payment of the initial premium, premiums may be paid at any time and
in any amount until the Maturity Date, subject to the limitations on premium
amount described below.
A Policy will be issued with a planned premium, which is based on the amount of
premium the policyowner wishes to pay. Manulife New York will send notices to
the policyowner setting forth the planned premium at the payment interval
selected by the policyowner. However, the policyowner is under no obligation to
make the indicated payment.
We may refuse any premium payment that would cause the Policy to fail to qualify
as life insurance under the Code. We also reserve the right to request evidence
of insurability if a premium payment would result in an increase in the Death
Benefit that is greater than the increase in Policy Value.
Payment of premiums will not guarantee that the Policy will stay in force.
Conversely, failure to pay premiums will not necessarily cause the Policy to
lapse.
All Net Premiums received on or after the Effective Date will be allocated among
Investment Accounts or the Fixed Account as of the Business Day the premiums
were received at the Service Office. Monthly deductions are due on the Policy
Date and at the beginning of each Policy Month thereafter. However, if due prior
to the Effective Date, they will be taken on the Effective Date instead of the
dates they were due.
MAXIMUM PREMIUM LIMITATION
If the Policy is issued under the Guideline Premium Test, in no event may the
total of all premiums paid exceed the then current maximum premium limitations
established by Federal income tax law for a Policy to qualify as life insurance.
If, at any time, a premium is paid which would result in total premiums
exceeding the above maximum premium limitation, we will only accept that portion
of the premium which will make the total premiums equal to the maximum. Any part
of the premium in excess of that amount will be returned and no further premiums
will be accepted until allowed by the then current maximum premium limitation.
PREMIUM ALLOCATION
Premiums may be allocated to the Fixed Account for accumulation at a rate of
interest equal to at least 4% or to one or more of the Investment Accounts for
investment in the Portfolio shares held by the corresponding sub-account of the
Separate Account. Allocations among the Investment Accounts and the Fixed
Account are made as a percentage of the premium. The percentage allocation to
any account may be any number between zero and 100, provided the total
allocation equals 100. A policyowner may change the way in which premiums are
allocated at any time without charge. The change will take effect on the date a
written request for change satisfactory to Manulife New York is received at its
Service Office.
22
CHARGES AND DEDUCTIONS
PREMIUM CHARGE
We deduct a premium charge from each premium payment equal to : (a) during
policy year 1, ___% of the premium paid (up to the amount specified in the
policy) and ___% on any premium paid in excess of the the specified amount, (b)
during policy years 2 through ___, ___% of the premium paid and (c) during
policy years after ___, ___%. The premium charge is designed to cover a portion
of our acquisition and sales expenses and premium taxes.
SURRENDER CHARGES
The Company will deduct a Surrender Charge if during the first 10 years
following the Policy Date, or the effective date of a Face Amount increase:
- the Policy is surrendered for its Net Cash Surrender Value,
- a partial withdrawal is made in excess of the Withdrawal Tier
Amount (see below for a description of this amount) - there is
a decrease in Face Amount or
- the Policy lapses.
The surrender charge, together with a portion of the premium charge, is designed
to compensate us for some of the expenses we incur in selling and distributing
the Policies, including agents' commissions, advertising, agent training and the
printing of prospectuses and sales literature.
SURRENDER CHARGE CALCULATION
The Surrender Charge is determined by the following formula (the calculation is
also described in words below):
Surrender Charge = (Surrender Charge Rate) x (Face Amount associated with the
Surrender Charge x 1000) x (Grading Percentage)
Definitions of the Formula Factors Above
Face Amount Associated with the Surrender Charge
The Face Amount associated with the Surrender Charge equals the Face Amount for
which the Surrender Charge is being applied.
Surrender Charge Rate (the calculation is also described in words below)
Surrender Charge Rate = [(___) + ((_____%)] x (Surrender Charge Premium))
The Surrender Charge Premium is the Surrender Charge Premium Limit specified in
the Policy per $1,000 of Face Amount.
Grading Percentage
The grading percentages during the Surrender Charge Period and set forth in the
table below apply to the initial Face Amount and to all subsequent Face Amount
increases.
The grading percentage is based on the Policy Year in which the transaction
causing the assessment of the charge occurs as set forth in the table below:
Surrender Surrender Charge
Charge Period Grading Percentage
------------- ------------------
1 [%]
23
Within a Policy Year, grading percentages will be interpolated on a monthly
basis. For example, if the policyowner surrenders the Policy during the fourth
month of Policy Year [__], the grading percentage will be [____%].
Formulas Described in Words
Surrender Charge
The Surrender Charge is determined by multiplying the Surrender Charge Rate by
the Face Amount associated with the Surrender Charge divided by 1000. The amount
obtained is then multiplied by the Grading Percentage, a percent which starts at
100% and grades down each policy month to zero over a period not to exceed [___]
years.
Surrender Charge Rate
The Surrender Charge Rate is equal to the sum of (a) plus (b) where (a) equals
[___] and (b) equals [____%] times the Surrender Charge Premium.
Illustration of Maximum Surrender Charge Calculation
Assumptions
- 45 year old male (standard risks and nonsmoker status).
- Policy issued [___] years ago.
- [$________] in premiums has been paid on the Policy in equal
annual installments over the [__] year period.
- Surrender Charge Premium for the Policy is [$____].
- Face Amount of the Policy at issue is [$__________] and no
increases have occurred.
- Policy is surrendered during the first month of the seventh
policy year.
Maximum Surrender Charge
The maximum Surrender Charge to be assessed would be [$_________] determined as
follows:
First, the Surrender Charge Rate is determined by applying the Surrender Charge
Rate formula as set forth below.
Surrender Charge Rate = [(___) + ((_________%)] x (Surrender Charge Premium))
[$________ = (___) + ((_____%) x (____))]
The Surrender Charge Rate is equal to [$____].
Second, the Surrender Charge Rate is entered into the Surrender Charge formula
and the Surrender Charge is determined as set forth below.
Surrender Charge = (Surrender Charge Rate) x (Face Amount Associated with the
Surrender Charge x 1000) x (Grading Percentage)
[$______ = (____) x ($_____ x ____) x (___%)]
The maximum Surrender Charge is equal to [$_____].
Depending upon the Face Amount of the Policy, the age of the insured at issue,
premiums paid under the Policy and the performance of the underlying investment
options, the Policy may have no Cash Surrender Value and therefore, the
policyowner may receive no surrender proceeds upon surrendering the Policy.
24
SURRENDER CHARGES ON A PARTIAL WITHDRAWAL
A partial withdrawal will result in the assessment of a portion of the Surrender
Charges to which the Policy is subject. The portion of the Surrender Charges
assessed will be based on the ratio of the amount of the withdrawal to the Net
Cash Surrender Value of the Policy as at the date of the withdrawal. The
Surrender Charges will be deducted from the Policy Value at the time of the
partial withdrawal on a pro-rata basis from each of the Investment Accounts and
the Fixed Account. If the amount in the accounts is not sufficient to pay the
Surrender Charges assessed, then the amount of the withdrawal will be reduced.
Whenever a portion of the surrender charges is deducted as a result of a partial
withdrawal, the Policy's remaining surrender charges will be reduced in the same
proportion that the surrender charge deducted bears to the total surrender
charge immediately before the partial withdrawal.
SURRENDER CHARGE ON DECREASE IN FACE AMOUNT
[IF] the Face Amount of insurance is decreased, a pro-rata Surrender Charge will
be deducted from the Policy Value. A decrease in Face Amount caused by a change
from Death Benefit Option 1 to Option 2 will not incur a pro-rata Surrender
Charge. Each time a pro-rata Surrender Charge is deducted for a Face Amount
decrease, the remaining Surrender Charge will be reduced in the same proportion
that the Surrender Charge deducted bears to the total Surrender Charge
immediately before the Face Amount decrease.
MONTHLY CHARGES
On the Policy Date and at the beginning of each Policy Month, a deduction is due
from the Net Policy Value to cover certain charges in connection with the Policy
until the Maturity Date. If there is a Policy Debt under the Policy, loan
interest and principal is payable at the beginning of each Policy Month. Monthly
deductions due prior to the Effective Date will be taken on the Effective Date
instead of the dates they were due. These charges consist of:
- an administration charge;
- a charge for the cost of insurance;
- a mortality and expense risks charge;
- if applicable, a charge for any supplementary benefits added
to the Policy.
Unless otherwise allowed by us and specified by the policyowner, the Monthly
Deductions will be allocated among the Investment Accounts and the Fixed Account
in the same proportion as the Policy Value in each bears to the Net Policy
Value.
If the Policy is still in force on the Maturity Date, we will pay the
policyowner the Net Cash Surrender Value as of the Maturity Date of the Policy.
ADMINISTRATION CHARGE
This charge will be equal to [$__] plus [$___] per [$1,000] of [CURRENT] Face
Amount per Policy Month in the first Policy Year. For all subsequent Policy
Years, the administration charge will be [$___] plus [$___] per [$1,000] of
[CURRENT] Face Amount per Policy Month. The charge is designed to cover certain
administrative expenses associated with the Policy, including maintaining policy
records, collecting premiums and processing death claims, surrender and
withdrawal requests and various changes permitted under the Policy.
COST OF INSURANCE CHARGE
The monthly charge for the cost of insurance is determined by multiplying the
applicable cost of insurance rate times the net amount at risk at the beginning
of each Policy Month. The cost of insurance rate and the net amount at risk are
determined separately for the initial Face Amount and for each increase in Face
Amount. In determining the net amount at risk, if there have been increases in
the Face Amount, the Policy Value shall first be considered a part of the
initial Face Amount. If the Policy Value exceeds the initial Face Amount, it
shall then be considered a part of the additional increases in Face Amount
resulting from the increases, in the order the increases occurred.
For Death Benefit Option 1, the net amount at risk is equal to the greater of
zero, or the result of (a) minus (b) where:
(a) is the death benefit as of the first day of the Policy Month,
divided by [___________]; and
(b) is the Policy Value as of the first day of the Policy Month
after the deduction of monthly cost of insurance.
For Death Benefit Option 2, the net amount at risk is equal to the Face Amount
of insurance.
The rates for the cost of insurance are based upon the issue age, duration of
coverage, sex, and Risk Classification of the life insured. These rates may be
higher in early Policy Years due to recovery of initial acquisition costs.
25
Cost of insurance rates will generally increase with the age of the life
insured. The first year cost of insurance rate is guaranteed.
The cost of insurance rates reflect our expectations as to future mortality
experience. The rates may be re-determined from time to time on a basis which
does not unfairly discriminate within the class of life insured. In no event
will the cost of insurance rates exceed the guaranteed rates set forth in the
Policy except to the extent that an extra charge is imposed because of an
additional rating applicable to the life insured. After the first Policy Year,
the cost of insurance will generally increase on each Policy Anniversary. The
guaranteed rates are based on the 1980 Commissioners Smoker Distinct Mortality
tables.
CHARGES FOR SUPPLEMENTARY BENEFITS
If the Policy includes Supplementary Benefits, a charge may apply to such
Supplementary Benefits.
MORTALITY AND EXPENSE RISKS CHARGE
A monthly charge equal to a percentage of the value of the Investment Accounts
is assessed against the Investment Accounts. This charge is to compensate us for
the mortality and expense risks we assume under the Policy. The mortality risk
assumed is that the life insured may live for a shorter period of time than we
estimated. The expense risk assumed is that expenses incurred in issuing and
administering the Policy will be greater than we estimated. We will realize a
gain from this charge to the extent it is not needed to provide benefits and pay
expenses under the Policy.
The charge varies by ______ as follows:
_______ Guaranteed Monthly Mortality and Equivalent Annual Mortality and
Expense Risk Charge Expense Risk Charge
[--- % %
--- % %]
CHARGES FOR TRANSFERS
A charge of $25 will be imposed on each transfer in excess of twelve in a Policy
Year. The charge will be deducted from the Investment Account or the Fixed
Account to which the transfer is being made. All transfer requests received by
us on the same Business Day are treated as a single transfer request.
Transfers under the Dollar Cost Averaging and Asset Allocation Balancer programs
do not count against the number of free transfers permitted per Policy Year.
REDUCTION IN CHARGES
The Policy is available for purchase by corporations and other groups or
sponsoring organizations. Group or sponsored arrangements may include reduction
or elimination of withdrawal charges and deductions for employees, officers,
directors, agents and immediate family members of the foregoing. We reserve the
right to reduce any of the Policy's charges on certain cases where it is
expected that the amount or nature of such cases will result in savings of
sales, underwriting, administrative, commissions or other costs. Eligibility for
these reductions and the amount of reductions will be determined by a number of
factors, including the number of lives to be insured, the total premiums
expected to be paid, total assets under management for the policyowner, the
nature of the relationship among the insured individuals, the purpose for which
the policies are being purchased, expected persistency of the individual
policies, and any other circumstances which we believe to be relevant to the
expected reduction of its expenses. Some of these reductions may be guaranteed
and others may be subject to withdrawal or modification, on a uniform case
basis. Reductions in charges will not be unfairly discriminatory to any
policyowners. We may modify from time to time, on a uniform basis, both the
amounts of reductions and the criteria for qualification.
SPECIAL PROVISIONS FOR EXCHANGES
We will permit owners of certain fixed life insurance policies issued by
Manulife New York to exchange their policies for the Policies described in this
prospectus (and likewise, owners of Policies described in this Prospectus may
also exchange their Policies for certain fixed policies issued by Manulife New
York). Policyowners considering an exchange should consult their tax advisors as
to the tax consequences of an exchange.
COMPANY TAX CONSIDERATIONS
At the present time, we make no specific charge to the Separate Account for any
Federal, state, or local taxes that we incur that may be attributable to the
Separate Account or to the Policies. We, however, reserve the right in the
future to make a charge for any such tax or other economic burden resulting from
the application of the tax laws that it determines to be properly attributable
to the Separate Account or to the Policies.
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POLICY VALUE
DETERMINATION OF THE POLICY VALUE
A Policy has a Policy Value, a portion of which is available to the policyowner
by making a policy loan or partial withdrawal, or upon surrender of the Policy.
The Policy Value may also affect the amount of the death benefit. The Policy
Value at any time is equal to the sum of the values in the Investment Accounts,
the Fixed Account, and the Loan Account.
INVESTMENT ACCOUNTS
An Investment Account is established under each Policy for each sub-account of
the Separate Account to which net premiums or transfer amounts have been
allocated. Each Investment Account under a Policy measures the interest of the
Policy in the corresponding sub-account. The value of the Investment Account
established for a particular sub-account is equal to the number of units of that
sub-account credited to the Policy times the value of such units.
FIXED ACCOUNT
Amounts in the Fixed Account do not vary with the investment performance of any
sub-account. Instead, these amounts are credited with interest at a rate
determined by us. For a detailed description of the Fixed Account, see "The
General Account - Fixed Account."
LOAN ACCOUNT
Amounts borrowed from the Policy are transferred to the Loan Account. Amounts in
the Loan Account do not vary with the investment performance of any sub-account.
Instead, these amounts are credited with interest at a rate which is equal to
the amount charged on the outstanding Policy Debt less the Loan Spread. For a
detailed description of the Loan Account, see "Policy Loans - Loan Account."
UNITS AND UNIT VALUES
CREDITING AND CANCELING UNITS
Units of a particular sub-account are credited to a Policy when net premiums are
allocated to that sub-account or amounts are transferred to that sub-account.
Units of a sub-account are canceled whenever amounts are deducted, transferred
or withdrawn from the sub-account. The number of units credited or canceled for
a specific transaction is based on the dollar amount of the transaction divided
by the value of the unit on the Business Day on which the transaction occurs.
The number of units credited with respect to a premium payment will be based on
the applicable unit values for the Business Day on which the premium is received
at the Service Office, except for any premiums received before the Effective
Date. For premiums received before the Effective Date, the values will be
determined on the Effective Date.
A Business Day is any day that the New York Stock Exchange is open for business.
A Business Day ends at the close of regularly scheduled day-time trading of the
New York Stock Exchange on that day.
Units are valued at the end of each Business Day. When an order involving the
crediting or canceling of units is received after the end of a Business Day, or
on a day which is not a Business Day, the order will be processed on the basis
of unit values determined on the next Business Day. Similarly, any determination
of Policy Value, Investment Account value or death benefit to be made on a day
which is not a Business Day will be made on the next Business Day.
UNIT VALUES
The value of a unit of each sub-account was initially fixed at $10.00 and $12.50
depending on sub-account. For each subsequent Business Day the unit value for
that sub-account is determined by multiplying the unit value for the immediately
preceding Business Day by the net investment factor for the that sub-account on
such subsequent Business Day.
The net investment factor for a sub-account on any Business Day is equal to (a)
divided by (b) where:
(a) is the net asset value of the underlying Portfolio shares held
by that sub-account as of the end of such Business Day before
any policy transactions are made on that day; and
(b) is the net asset value of the underlying Portfolio shares held
by that sub-account as of the end of the immediately preceding
Business Day after all policy transactions were made for that
day.
The value of a unit may increase, decrease, or remain the same, depending on the
investment performance of a sub-account from one Business Day to the next.
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TRANSFERS OF POLICY VALUE
At any time, a policyowner may transfer Policy Value from one sub-account to
another or to the Fixed Account. (Transfers involving the Fixed Account are
subject to certain limitations noted below under "Transfers Involving Fixed
Account.") Transfer requests must be in writing in a format satisfactory to
Manulife New York, or by telephone if a currently valid transfer authorization
form is on file.
We reserve the right to impose limitations on transfers, including the maximum
amount that may be transferred. We also reserve the right to modify or terminate
the transfer privilege at any time in accordance with applicable law. Transfers
may also be delayed when any of the events described under items (i) through
(iii) in "Payment of Proceeds" occur. Transfer privileges are also subject to
any restrictions that may be imposed by the Trust. In addition, we reserve the
right to defer the transfer privilege at any time when we are unable to purchase
or redeem shares of the Trust.
While the Policy is in force, the policyowner may transfer the Policy Value from
any of the Investment Accounts to the Fixed Account without incurring transfer
charges:
(a) within eighteen months after the Issue Date; or
(b) within 60 days of the effective date of a material change in
the investment objectives of any of the sub-accounts or within
60 days of the date of notification of such change, whichever
is later.
Such transfers will not count against the twelve transfers that may be made free
of charge in any Policy Year.
TRANSFER CHARGES
A policyowner may make up to twelve transfers each Policy Year free of charge.
Additional transfers in each Policy Year may be made at a cost of $25 per
transfer. This charge will be deducted from the Investment Account or the Fixed
Account to which the transfer is being made. All transfer requests received by
the Company on the same Business Day are treated as a single transfer request.
Transfers under the Dollar Cost Averaging and Asset Allocation Balancer programs
do not count against the number of free transfers permitted per Policy Year
TRANSFERS INVOLVING FIXED ACCOUNT
The maximum amount that may be transferred from the Fixed Account in any one
Policy Year is the greater of $500 or 15% of the Fixed Account Value at the
previous Policy Anniversary. Any transfer which involves a transfer out of the
Fixed Account may not involve a transfer to the Investment Account for the Money
Market Trust.
TELEPHONE TRANSFERS
Although failure to follow reasonable procedures may result in the Company being
liable for any losses resulting from unauthorized or fraudulent telephone
transfers, We will not be liable for following instructions communicated by
telephone that the Company reasonably believes to be genuine. The Company will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. Such procedures shall consist of confirming that a valid
telephone authorization form is on file, tape recording of all telephone
transactions and providing written confirmation thereof.
DOLLAR COST AVERAGING
The Company will offer policyowners a Dollar Cost Averaging ("DCA") program.
Under DCA program, the policyowner will designate an amount which will be
transferred monthly from one Investment Account into any other Investment
Account(s) or the Fixed Account. Currently, no charge will be made for this
program, although we reserve the right to institute a charge on 90 days' written
notice to the policyholder. If insufficient funds exist to effect a DCA
transfer, the transfer will not be effected and the policyowner will be so
notified.
We reserve the right to cease to offer this program as of 90 days after written
notice is sent to the policyowner.
ASSET ALLOCATION BALANCER TRANSFERS
Under the Asset Allocation Balancer program the policyowner will designate an
allocation of Policy Value among Investment Accounts. At six-month intervals
beginning six months after the Policy Date, we will move amounts among the
Investment Accounts as necessary to maintain the policyowner's chosen
allocation. A change to the policyowner premium allocation instructions will
automatically result in a change in Asset Allocation Balancer instructions so
that the two are identical unless the policyowner either instructs Manulife New
York otherwise or has elected the Dollar Cost Averaging program. Currently,
there is no charge for this program; however, we reserve the right to institute
a charge on 90 days' written notice to the policyowner.
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We reserve the right to cease to offer this program as of 90 days after written
notice is sent to the policyowner.
POLICY LOANS
While this Policy is in force and has an available loan value, a policyowner may
borrow against the Policy Value of the Policy. The Policy serves as the only
security for the loan. Policy loans may have tax consequences, see "Tax
Treatment of Policy Benefits - Interest on Policy Loans After Ten Years" and
"Tax Treatment of Policy Benefits - Policy Loan Interest."
MAXIMUM LOANABLE AMOUNT
The Maximum Loanable Amount is 90% of the Policy's Net Cash Surrender Value.
EFFECT OF POLICY LOAN
A policy loan will have an effect on future Policy Values, since that portion of
the Policy Value in the Loan Account will increase in value at the crediting
interest rate rather than varying with the performance of the underlying
Portfolios or increasing in value at the rate of interest credited for amounts
allocated to the Fixed Account. A policy loan may cause a Policy to be more
susceptible to going into default since a policy loan will be reflected in the
Net Cash Surrender Value. See "Lapse and Reinstatement." In addition, a policy
loan may result in a Policy's failing to satisfy the No-Lapse Guarantee
Cumulative Premium Test since the Policy Debt is subtracted from the sum of the
premiums paid in determining whether this test is satisfied. Finally, a policy
loan will affect the amount payable on the death of the life insured, since the
death benefit is reduced by the Policy Debt at the date of death in arriving at
the insurance benefit.
INTEREST CHARGED ON POLICY LOANS
Interest on the Policy Debt will accrue daily and be payable annually on the
Policy Anniversary. During the first 10 Policy Years, the rate of interest
charged will be an effective annual rate of 5.25%. Thereafter, the rate of
interest charged will be an effective annual rate of 4%, subject to our
reservation of the right to increase the rate as described under the heading
"Tax Treatment of the Policy - Interest on Policy Loans After Year 10." If the
interest due on a Policy Anniversary is not paid by the policyowner, the
interest will be borrowed against the Policy.
The Policy will go into default at any time the Policy Debt exceeds the Cash
Surrender Value. At least 61 days prior to termination, we will send the
policyowner a notice of the pending termination. Payment of interest on the
Policy Debt during the 61 day grace period will bring the policy out of default.
LOAN ACCOUNT
When a loan is made, an amount equal to the loan principal, plus interest to the
next Policy Anniversary, will be deducted from the Investment Accounts or the
Fixed Account and transferred to the Loan Account. Amounts transferred into the
Loan Account cover the loan principal plus loan interest due to the next Policy
Anniversary. The policyowner may designate how the amount to be transferred to
the Loan Account is allocated among the accounts from which the transfer is to
be made. In the absence of instructions, the amount to be transferred will be
allocated to each account in the same proportion as the value in each Investment
Account and the Fixed Account bears to the Net Policy Value. A transfer from an
Investment Account will result in the cancellation of units of the underlying
sub-account equal in value to the amount transferred from the Investment
Account. However, since the Loan Account is part of the Policy Value, transfers
made in connection with a loan will not change the Policy Value.
INTEREST CREDITED TO THE LOAN ACCOUNT
Interest will be credited to amounts in the Loan Account at an effective annual
rate of at least 4.00%. The actual rate credited is equal to the rate of
interest charged on the policy loan less the Loan Interest Credited
Differential, which is currently 1.25% during the first ten policy years and 0%
thereafter, and is guaranteed not to exceed 1.25%. (The Loan Interest Credited
Differential is the difference between the rate of interest charged on a policy
loan and the rate of interest credited to amounts in the Loan Account.) We may
change the Current Loan Interest Credited Differential as of 90 days after
sending you written notice of such change.
For a Policy that is not a MEC, the tax consequences associated with a loan
interest credited differential of 0% are unclear. A tax advisor should be
consulted before effecting a loan to evaluate the tax consequences that may
arise in such a situation. If we determine, in our sole discretion, that there
is a substantial risk that a loan will be treated as a taxable distribution
under Federal tax law as a result of the differential between the credited
interest rate and the loan interest rate, we retain the right to increase the
loan interest rate to an amount that would result in the transaction being
treated as a loan under Federal tax law. If this amount is not prescribed by any
IRS ruling or regulation or any court decision, the amount of increase will be
that which we consider to be most likely to result in the transaction being
treated as a loan under Federal tax law.
LOAN ACCOUNT ADJUSTMENTS
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On the first day of each Policy Anniversary the difference between the Loan
Account and the Policy Debt is transferred to the Loan Account from the
Investment Accounts or the Fixed Account. Amounts transferred to the Loan
Account will be taken from the Investment Accounts and the Fixed Account in the
same proportion as the value in each Investment Account and the Fixed Account
bears to the Net Policy Value.
LOAN REPAYMENTS
Policy Debt may be repaid in whole or in part at any time prior to the death of
the life insured, provided that the Policy is in force. When a repayment is
made, the amount is credited to the Loan Account and transferred to the Fixed
Account or the Investment Accounts. Loan repayments will be allocated first to
the Fixed Account, until the loan amount that was transferred from it is fully
repaid; then to each Investment Account in the same proportion that the loan
amount that was transferred from it bears to the value of the Loan Account.
Amounts paid to Manulife New York not specifically designated in writing as loan
repayments will be treated as premiums. However, when a portion of the Loan
Account amount is allocated to the Fixed Account, we reserve the right to
require that premium payments be applied as loan repayments.
POLICY SURRENDER AND PARTIAL WITHDRAWALS
POLICY SURRENDER
A Policy may be surrendered for its Net Cash Surrender Value at any time while
the life insured is living. The Net Cash Surrender Value is equal to the Policy
Value less any surrender charges and outstanding monthly deductions due (the
"Cash Surrender Value") minus the Policy Debt. If there have been any prior Face
Amount increases, the Surrender Charge will be the sum of the Surrender Charge
for the Initial Face Amount plus the Surrender Charge for each increase. The Net
Cash Surrender Value will be determined as of the end of the Business Day on
which Manulife New York receives the Policy and a written request for surrender
at its Service Office. After a Policy is surrendered, the insurance coverage and
all other benefits under the Policy will terminate.
PARTIAL WITHDRAWALS
A policyowner may make a partial withdrawal of the Net Cash Surrender Value once
each Policy Month after the first Policy Anniversary. The policyowner may
specify the portion of the withdrawal to be taken from each Investment Account
and the Fixed Account. In the absence of instructions, the withdrawal will be
allocated among such accounts in the same proportion as the Policy Value in each
account bears to the Net Policy Value. For information on Surrender Charges on a
Partial Withdrawal see "Charges and Deductions - Surrender Charges."
Withdrawals will be limited if they would otherwise cause the Face Amount to
fall below $100,000.
REDUCTION IN FACE AMOUNT DUE TO A PARTIAL WITHDRAWAL
If Death Benefit Option 1 is in effect when a partial withdrawal is made, the
Face Amount of the Policy will be reduced by the amount of the withdrawal plus
any applicable Surrender Charges.
If the death benefit is based upon the Policy Value times the minimum death
benefit percentage set forth under "Death Benefit - Minimum Death Benefit," the
Face Amount will be reduced only to the extent that the amount of the withdrawal
plus the portion of the Surrender Charge assessed exceeds the difference between
the death benefit and the Face Amount. When the Face Amount of a Policy is based
on one or more increases subsequent to issuance of the Policy, a reduction
resulting from a partial withdrawal will be applied in the same manner as a
requested decrease in Face Amount, i.e., against the Face Amount provided by the
most recent increase, then against the next most recent increases successively
and finally against the initial Face Amount.
Partial withdrawals do not affect the Face Amount of a Policy if Death Benefit
Option 2 is in effect.
LAPSE AND REINSTATEMENT
LAPSE
Unless the No-Lapse Guarantee is in effect, a Policy will go into default if at
the beginning of any Policy Month the Policy's Net Cash Surrender Value would be
zero or below after deducting the monthly deduction then due. Therefore, a
Policy could lapse eventually if increases in Policy Value (prior to deduction
of Policy charges) are not sufficient to cover Policy charges. A lapse could
have adverse tax consequences as described under "Tax Treatment of the Policy -
Tax Treatment of Policy Benefits - Surrender or Lapse." We will notify the
policyowner of the default and will allow a 61 day grace period in which the
policyowner may make a premium payment sufficient to bring the Policy out of
default. The required payment will be equal to the amount necessary to bring the
Net Cash Surrender Value to zero, if it was less than zero on the date of
default, plus the monthly deductions due at the date of default and payable at
the beginning of each of the two Policy Months thereafter, plus any applicable
premium charge. If the required payment is not received by the end of the grace
period, the Policy will terminate with no value.
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NO-LAPSE GUARANTEE
As long as the No-Lapse Guarantee Cumulative Premium Test is satisfied during
the No-Lapse Guarantee Period, as described below, we will guarantee that the
Policy will not go into default, even if adverse investment experience or other
factors should cause the Policy's Net Cash Surrender Value to fall to zero or
below during such period.
The Monthly No-Lapse Guarantee Premium is one-twelfth of the No-Lapse Guarantee
Premium.
The No-Lapse Guarantee Premium is set at issue and reflects any Additional
Rating and Supplementary Benefits, if applicable. It is subject to change if (i)
the Face Amount of the Policy is changed, (ii) there is a Death Benefit Option
change, (iii) there is a decrease in the Face Amount of insurance due to a
partial withdrawal, (iv) a temporary additional rating is added (due to a Face
Amount increase) or terminated or (v) there is any change in the supplementary
benefits added to the Policy or in the risk classification of the life insured.
The No-Lapse Guarantee Period is described under "definitions." There are two
levels of guarantee period each with separate premium requirements.
While the No-Lapse Guarantee is in effect, we will determine at the beginning of
the Policy Month that your policy would otherwise be in default, whether the
No-Lapse Guarantee Cumulative Premium Test, described below, has been met. If
the test has not been satisfied, we will notify the policyowner of that fact and
allow a 61 day grace period in which the policyowner may make a premium payment
sufficient to keep the policy from going into default. This required payment, as
described in the notification to the policyowner, will be equal to the lesser
of:
(a) the outstanding premium requirement to satisfy the No-Lapse
Guarantee Cumulative Premium Test at the date of default, plus
the Monthly No-Lapse Guarantee Premium due for the next two
Policy Months, or
(b) the amount necessary to bring the Net Cash Surrender Value to
zero plus the monthly deductions due, plus the next two
monthly deductions plus the applicable premium charge.
If the required payment is not received by the end of the grace period, the
No-Lapse Guarantee and the Policy will terminate.
NO-LAPSE GUARANTEE CUMULATIVE PREMIUM TEST
The No-Lapse Guarantee Cumulative Premium Test is satisfied if, as of the
beginning of the Policy Month that your policy would otherwise be in default,
the sum of all premiums paid to date less any gross withdrawals taken on or
before the date of the test and less any policy debt is equal to or exceeds the
sum of the Monthly No-Lapse Guarantee Premiums due from the Policy Date to the
date of the test.
DEATH DURING GRACE PERIOD
If the life insured should die during the grace period, the Policy Value used in
the calculation of the death benefit will be the Policy Value as of the date of
default and the insurance benefit will be reduced by any outstanding Monthly
Deductions due at the time of death.
REINSTATEMENT
A policyowner can reinstate a Policy which has terminated after going into
default at any time within 21 days following the date of termination without
furnishing evidence of insurability, subject to the following conditions:
(a) The life insured's risk classification is standard or
preferred, and
(b) The life insured's Attained Age is less than 46.
A policyowner can, by making a written request, reinstate a Policy which has
terminated after going into default at any time within the five-year period
following the date of termination subject to the following conditions:
(a) Evidence of the life insured's insurability, satisfactory to
Manulife New York is provided to Manulife New York; and
(b) A premium equal to the amount that was required during the 61
day grace period following default plus the next two Monthly
Deductions must be paid to Manulife New York.
If the reinstatement is approved, the date of reinstatement will be the later of
the date we approve the policyowner's request or the date the required payment
is received at our Service Office. In addition, any surrender charges will be
reinstated to the amount they were at the date of default. The Policy Value on
the date of reinstatement, prior to the crediting of any Net Premium paid on the
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reinstatement, will be equal to the Policy Value on the date the Policy
terminated.
MATURITY ADVANTAGE
See "maturity advantage" below for information regarding lapse and reinstatement
when this benefit is in effect.
TERMINATION
TERMINATION OF THE POLICY
Your Policy will terminate on the earliest of the following events:
(a) the end of the grace period for which you have not paid the
amount necessary to bring the Policy out of default;
(b) surrender of the Policy for its Net Cash Surrender Value; or
(c) the death of the life insured.
MATURITY ADVANTAGE
If the life insured is alive on the maturity date, the policy will be continue
in force subject to the following unless the policyowner choose to surrender the
policy for its net cash surrender value:
(a) the policy will be continued until the earlier of the death of the life
insured or the date the policyowner surrenders the policy
(b) no additional premium payments will be accepted although loan
repayments will be accepted;
(c) no additional charges or deductions (as described under "charges and
deductions") will be assessed;
(d) interest on any policy debt will continue to accrue;
(e) the policyowner may continue to take partial withdrawals;
(f) the policyowner may continue to transfer portions of the policy value
among the investment accounts and the fixed accounts as described in
this prospectus;
The policy will go into default after the maturity date if the policy debt
equals or exceeds the policy value. The company will notify the policyowner of
the default and will allow a 61 day grace period (from the date the policy goes
into default) in which the policyowner may make a payment of the loan interest
which would then bring the policy out of default. If the required payment is not
received by the end of the grace period, the policy will terminate with no
value.
THE GENERAL ACCOUNT
The general account of Manulife New York consists of all assets owned by it
other than those in the Separate Account and other separate accounts of Manulife
New York. Subject to applicable law, we have sole discretion over the investment
of the assets of the general account.
By virtue of exclusionary provisions, interests in the general account of
Manulife New York have not been registered under the Securities Act of 1933 and
the general account has not been registered as an investment company under the
1940 Act. Accordingly, neither the general account nor any interests therein are
subject to the provisions of these acts, and as a result the staff of the SEC
has not reviewed the disclosures in this prospectus relating to the general
account. Disclosures regarding the general account may, however, be subject to
certain generally applicable provisions of the Federal securities laws relating
to the accuracy and completeness of statements made in a prospectus.
FIXED ACCOUNT
A policyowner may elect to allocate net premiums to the Fixed Account or to
transfer all or a portion of the Policy Value to the Fixed Account from the
Investment Accounts. Manulife New York will hold the reserves required for any
portion of the Policy Value allocated to the Fixed Account in its general
account. Transfers from the Fixed Account to the Investment Accounts are subject
to restrictions.
POLICY VALUE IN THE FIXED ACCOUNT
The Policy Value in the Fixed Account is equal to:
(a) the portion of the net premiums allocated to it; plus
32
(b) any amounts transferred to it; plus
(c) interest credited to it; less
(d) any charges deducted from it; less
(e) any partial withdrawals from it; less
(f) any amounts transferred from it.
INTEREST ON THE FIXED ACCOUNT
An allocation of Policy Value to the Fixed Account does not entitle the
policyowner to share in the investment experience of the general account.
Instead, Manulife New York guarantees that the Policy Value in the Fixed Account
will accrue interest daily at an effective annual rate of at least 4%, without
regard to the actual investment experience of the general account. Consequently,
if a policyowner pays the planned premiums, allocates all net premiums only to
the general account and makes no transfers, partial withdrawals, or policy
loans, the minimum amount and duration of the death benefit of the Policy will
be determinable and guaranteed.
FLEXIBLE FACTORS
When determining the rate of interest to be used in crediting interest to the
portion of the Policy Value in the Fixed Account, and any changes in that rate,
we will consider the following factors: expected mortality and persistency
experience; expected investment earnings; and expected operating expenses. We
will consider the same factors when we determine the actual cost of insurance;
the deductions from premiums for premium load; administrative charges; and
whenever changes are made to any of these charges. We will not try to recover
any losses in earlier years by increasing your charges in later years.
Adjustments to flexible factors will be by class and be determined by us from
time to time based on future expectations for such factors. Any change will be
determined in accordance with procedures and standards on file with the
Superintendent of Insurance of the state of New York.
OTHER PROVISIONS OF THE POLICY
Return of premium rider death benefit
The policy may be issued with an optional return of premium death benefit rider
if death benefit option 1 is elected. This rider provides an additional death
benefit payable upon the death of the insured after the company receives due
proof of death. The return of premium death benefit is calculated as flows:
The return of premium rider death benefit is equal to initial premium. any
subsequent premiums will increase the rider death benefit at the time of the
premium payment by the amount of the premium. Any partial withdrawal will reduce
the death benefit at the time of withdrawal by an amount equal to the withdrawal
plus any applicable surrender charge (except that the rider death benefit will
not be reduce to less than zero).
After increases cease, the company will not take into account any more premiums
paid in determining the amount of the return of premium death benefit.
Decreases in coverage. The return of premium death benefit may be
decreased if requested by the policyowner. The decrease will take effect at the
beginning of the policy month on or next following the date company approves the
request. The return of premium rider death benefit coverage will be reduced by
the amount of the requested decreased. Decreases in the death benefit are not
subject to pro-rata surrender charges.
Partial withdrawals. If the policyowner makes a written request for a
partial withdrawal of net cash surrender value while this rider is in force, the
company will process the withdrawal so that it first reduces the amount of the
return of premium death benefit coverage. Any withdrawals will be subject to a
pro-rata surrender charge as described under "charges and deductions - surrender
charges." In addition, the face amount will be reduced by the amount by which
the withdrawal plus the surrender charge exceeds the amount of the return of
premium rider death benefit.
No lapse guarantee. The no lapse guarantee provisions of the policy
apply to the return of premium rider death benefit for the first two policy
years only.
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POLICYOWNER RIGHTS
Unless otherwise restricted by a separate agreement, the policyowner may, until
the earlier of life insured's death or when life insured reaches Attained Age
100:
- Vary the premiums paid under the Policy.
- Change the death benefit option.
- Change the premium allocation for future premiums.
- Transfer amounts between sub-accounts.
- Take loans and/or partial withdrawals.
- Surrender the contract.
- Transfer ownership to a new owner.
- Name a contingent owner that will automatically become owner
if the policyowner dies before the insured.
- Change or revoke a contingent owner.
- Change or revoke a beneficiary.
ASSIGNMENT OF RIGHTS
Manulife New York will not be bound by an assignment until it receives a copy of
the assignment at its Service Office. Manulife New York assumes no
responsibility for the validity or effects of any assignment.
BENEFICIARY
One or more beneficiaries of the Policy may be appointed by the policyowner by
naming them in the application. Beneficiaries may be appointed in three classes
- - primary, secondary, and final. Beneficiaries may also be revocable or
irrevocable. Unless an irrevocable designation has been elected, the beneficiary
may be changed by the policyowner during the life insured's lifetime by giving
written notice to Manulife New York in a form satisfactory to Manulife New York.
The change will take effect as of the date such notice is signed. If the life
insured dies and there is no surviving beneficiary, the policyowner, or the
policyowner's estate if the policyowner is the life insured, will be the
beneficiary. If a beneficiary dies before the seventh day after the death of the
life insured, we will pay the insurance benefit as if the beneficiary had died
before the life insured.
CONVERSION PRIVILEGE
You may convert your Policy, at any Policy Anniversary, to a fixed paid-up
benefit, without evidence of insurability. The Death Benefit, Policy Value,
other values based on the Policy Value and the Investment Account values will be
determined as of the Business Day on which we receive the written request for
conversion. The basis for determining the Policy Value will be the Commissioners
1980 Standard Ordinary Smoker or Non-Smoker Mortality Table and an interest rate
of 4% per year. The Flexible Premium Variable Life coverage cannot be reinstated
after the date of the conversion. After the date of the conversion, no further
Monthly Deductions will be taken from Policy Value.
INCONTESTABILITY
Manulife New York will not contest the validity of a Policy after it has been in
force during the life insured's lifetime for two years from the Issue Date. It
will not contest the validity of an increase in Face Amount or the addition of a
Supplementary Benefit, after such increase or addition which requires evidence
of insurability has been in force during the lifetime of the life insured for
two years. If a Policy has been reinstated and been in force during the lifetime
of the life insured for less than two years from the reinstatement date, we can
contest any misrepresentation of a fact material to the reinstatement.
MISSTATEMENT OF AGE OR SEX
If the stated age or sex, or both, of the life insured in the Policy are
incorrect, Manulife New York will change the Face Amount so that the death
benefit will be that which the most recent monthly charge for the cost of
insurance would have purchased for the correct age and sex.
SUICIDE EXCLUSION
If the life insured dies by suicide within two years after the Issue Date, the
Policy will terminate and we will pay only the premiums paid less any
partial Net Cash Surrender Value withdrawal and less any Policy Debt.
If the life insured dies by suicide within two years after an applied for
increase in Face Amount takes effect, we will credit the amount of any
Monthly Deductions taken for the increase and reduce the Face Amount to
what it was prior to the increase. If the life insured's death is by
suicide, the Death Benefit for that increase will be limited to the Monthly
Deductions taken for the increase.
We reserve the right to obtain evidence of the manner and cause of death of the
life insured.
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SUPPLEMENTARY BENEFITS
A death benefit guarantee supplementary benefit will be included as part of the
policy when it is issued. Subject to certain requirements, one or more
supplementary benefits may also be added to a Policy, including those providing
accidental death coverage, waiving monthly deductions upon disability, and, in
the case of corporate-owned policies, permitting a change of the life insured( a
taxable event). More detailed information concerning these supplementary
benefits may be obtained from an authorized agent of Manulife New York. The
cost, if any, for supplementary benefits will be deducted as part of the monthly
deduction.
TAX TREATMENT OF THE POLICY
The following summary provides a general description of the Federal income tax
considerations associated with the Policy and does not purport to be complete or
to cover all situations. This discussion is not intended as tax advice. Counsel
or other competent tax advisors should be consulted for more complete
information. This discussion is based upon our understanding of the present
Federal income tax laws as they are currently interpreted by the Internal
Revenue Service (the "IRS"). No representation is made as to the likelihood of
continuation of the present Federal income tax laws nor of the current
interpretations by the IRS. Manulife New York does not make any guarantee
regarding the tax status of any Policy or any transaction regarding the
Policies.
The Policies may be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if the use of such
Policies in any such arrangement, the value of which depends in part on the tax
consequences, is contemplated, a qualified tax advisor should be consulted for
advice on the tax attributes of the particular arrangement.
LIFE INSURANCE QUALIFICATION
There are several requirements that must be met for a Policy to be considered a
Life Insurance Contract under the Code, and thereby to enjoy the tax benefits of
such a contract:
- The Policy must satisfy the definition of life insurance under
Section 7702 of the Code.
- The investments of the Separate Account must be "adequately
diversified" in accordance with Section 817(h) of the Code and
Treasury Regulations.
- The Policy must be a valid life insurance contract under
applicable state law.
- The Policyowner must not possess "incidents of ownership" in
the assets of the Separate Account.
These four items are discussed in detail below.
DEFINITION OF LIFE INSURANCE
Section 7702 of the Code sets forth a definition of a life insurance contract
for Federal tax purposes. For a Policy to be a life insurance contract, it must
satisfy either the Cash Value Accumulation Test or the Guideline Premium Test.
By limiting cash value at any time to the net single premium that would be
required in order to fund future benefits under the Policy, the Cash Value
Accumulation Test in effect requires a minimum death benefit for a given Policy
Value. The Guideline Premium Test also requires a minimum death benefit, but in
addition limits the total premiums that can be paid into a Policy for a given
amount of death benefit.
With respect to a Policy that is issued on the basis of a standard rate class,
we believe (largely in reliance on IRS Notice 88-128 and the proposed mortality
charge regulations under Section 7702, issued on July 5, 1991) that such a
Policy should meet the Section 7702 definition of a life insurance contract.
With respect to a Policy that is issued on a substandard basis (i.e., a rate
class involving higher-than-standard mortality risk), there is less guidance, in
particular as to how mortality and other expense requirements of Section 7702
are to be applied in determining whether such a Policy meets the Section 7702
definition of a life insurance contract. Thus it is not clear whether or not
such a Policy would satisfy Section 7702, particularly if the policyowner pays
the full amount of premiums permitted under the Policy.
The Secretary of the Treasury (the "Treasury") is authorized to prescribe
regulations implementing Section 7702. However, while proposed regulations and
other interim guidance have been issued, final regulations have not been adopted
and guidance as to how Section 7702 is to be applied is limited. If a Policy
were determined not to be a life insurance contract for purposes of Section
7702, such a Policy would not provide the tax advantages normally provided by a
life insurance policy.
If it is subsequently determined that a Policy does not satisfy Section 7702, we
may take whatever steps are appropriate and reasonable to attempt to cause such
a Policy to comply with Section 7702. For these reasons, we reserve the right to
restrict Policy transactions as necessary to attempt to qualify it as a life
insurance contract under Section 7702.
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DIVERSIFICATION
Section 817(h) of the Code requires that the investments of the Separate Account
be "adequately diversified" in accordance with Treasury regulations in order for
the Policy to qualify as a life insurance contract under Section 7702 of the
Code (discussed above). The Separate Account, through the Trust, intends to
comply with the diversification requirements prescribed in Treas. Reg. Sec.
1.817-5, which affect how the Trust's assets are to be invested. We believe that
the Separate Account will thus meet the diversification requirement, and we will
monitor continued compliance with the requirement.
STATE LAW
A policy must qualify as a valid life insurance contract under New York State
laws. State regulations require that the policyowner have appropriate insurable
interest in the life insured. Failure to establish an insurable interest may
result in the Policy not qualifying as a life insurance contract for Federal tax
purposes.
INVESTOR CONTROL
In certain circumstances, owners of variable life insurance policies may be
considered the owners, for Federal income tax purposes, of the assets of the
separate account used to support their policies. In those circumstances, income
and gains from the separate account assets would be includible in the variable
policyowner's gross income. The IRS has stated in published rulings that a
variable policyowner will be considered the owner of separate account assets if
the policyowner possesses incidents of ownership in those assets, such as the
ability to exercise investment control over the assets. The Treasury has also
announced, in connection with the issuance of regulations concerning
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor (i.e., the policyowner), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyowners may direct their
investments to particular sub-accounts without being treated as owners of the
underlying assets." As of the date of this prospectus, no such guidance has been
issued.
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that policyowners were not owners of separate account assets. For example, the
Policy has many more portfolios to which policyowners may allocate premium
payments and policy values than were available in the policies described in the
rulings. These differences could result in an owner being treated as the owner
of a pro-rata portion of the assets of the Separate Account. In addition, we do
not know what standards will be set forth, if any, in the regulations or rulings
which the Treasury has stated it expects to issue. We therefore reserve the
right to modify the Policy as necessary to attempt to prevent an owner from
being considered the owner of a pro rata share of the assets of the Separate
Account.
TAX TREATMENT OF POLICY BENEFITS
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes. We believe that the proceeds
and cash value increases of a Policy should be treated in a manner consistent
with a fixed-benefit life insurance policy for Federal income tax purposes.
Depending on the circumstances, the exchange of a Policy, a change in the
Policy's death benefit option, a Policy loan, partial withdrawal, surrender, or
an assignment of the Policy may have Federal income tax consequences. In
addition, Federal, state and local transfer, and other tax consequences of
ownership or receipt of Policy proceeds depend on the circumstances of each
policyowner or beneficiary.
DEATH BENEFIT
The death benefit under the Policy should be excludable from the gross income of
the beneficiary under Section 101(a)(1) of the Code.
CASH VALUES
Generally, the policyowner will not be deemed to be in constructive receipt of
the Policy Value, including increments thereof, until there is a distribution.
This includes additions attributable to interest, dividends, appreciation or
gains realized on transfers among sub-accounts.
INVESTMENT IN THE POLICY
Investment in the Policy means:
- - the aggregate amount of any premiums or other consideration paid for a
Policy; minus
- - the aggregate amount, other than loan amounts, received under the
Policy which has been excluded from the gross income of the policyowner
(except that the amount of any loan from, or secured by, a Policy that
is a Modified Endowment Contract ("MEC"), to the extent such amount has
been excluded from gross income, will be disregarded); plus
- - the amount of any loan from, or secured by a Policy that is a MEC to
the extent that such amount has been included in the gross income of
the policyowner.
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The repayment of a policy loan, or the payment of interest on a loan, does not
affect the Investment in the Policy.
SURRENDER OR LAPSE
Upon a complete surrender or lapse of a Policy or when benefits are paid at a
Policy's maturity date, if the amount received plus the amount of Policy Debt
exceeds the total investment in the Policy, the excess will generally be treated
as ordinary income subject to tax.
If, at the time of surrender or lapse, a Policy has a loan, the loan is
extinguished and the amount of the loan is a deemed payment to the policyholder.
If the amount of this deemed payment exceeds the investment in the contract, the
excess is taxable income and is subject to IRS reporting requirements.
TREATMENT OF MATURITY BENEFITS AND EXTENSION OF MATURITY DATE
If the maturity date is extended past the year in which the insured attains age
100, the company believes the policy will continue to qualify as a life
insurance policy for federal tax purposes. However, there is some uncertainty
regarding this treatment, and it is possible that the policyowner would be
viewed as constructively receiving the cash value in the year the insured
attains age 100. If this were the case, an amount equal to the excess of the
cash value over the investment in the policy would be includible in the
policyowner's income at that time.
DISTRIBUTIONS
The tax consequences of distributions from, and loans taken from or secured by,
a Policy depend on whether the Policy is classified as a MEC.
DISTRIBUTIONS FROM NON-MEC's
A distribution from a non-MEC is generally treated as a tax-free recovery by the
policyowner of the Investment in the Policy to the extent of such Investment in
the Policy, and as a distribution of taxable income only to the extent the
distribution exceeds the Investment in the Policy. Loans from, or secured by, a
non-MEC are not treated as distributions. Instead, such loans are treated as
indebtedness of the policyowner.
Force Outs
An exception to this general rule occurs in the case of a decrease in the
Policy's death benefit or any other change that reduces benefits under the
Policy in the first 15 years after the Policy is issued and that results in a
cash distribution to the policyowner in order for the Policy to continue to
comply with the Section 7702 definitional limits. Such a cash distribution will
be taxed in whole or in part as ordinary income (to the extent of any gain in
the Policy) under rules prescribed in Section 7702. Changes include partial
withdrawals and death benefit option changes.
DISTRIBUTIONS FROM MEC's
Policies classified as MEC's will be subject to the following tax rules:
- First, all partial withdrawals from such a Policy are treated
as ordinary income subject to tax up to the amount equal to
the excess (if any) of the Policy Value immediately before the
distribution over the Investment in the Policy at such time.
- Second, loans taken from or secured by such a Policy and
assignments or pledges of any part of its value are treated as
partial withdrawals from the Policy and taxed accordingly.
Past-due loan interest that is added to the loan amount is
treated as a loan.
- Third, a 10% additional income tax is imposed on the portion
of any distribution (including distributions on surrender)
from, or loan taken from or secured by, such a policy that is
included in income except where the distribution or loan:
- is made on or after the date on which the policyowner attains
age 59-1/2;
- is attributable to the policyowner becoming disabled; or
- is part of a series of substantially equal periodic payments
for the life (or life expectancy) of the policyowner or the
joint lives (or joint life expectancies) of the policyowner
and the policyowner's beneficiary.
These exceptions are not likely to apply in situations where the Policy is not
owned by an individual.
Definition of Modified Endowment Contracts
Section 7702A establishes a class of life insurance contracts designated as
"Modified Endowment Contracts," or "MEC" which applies to Policies entered into
or materially changed after June 20, 1988.
In general, a Policy will be a MEC if the accumulated premiums paid at any time
during the first seven Policy Years exceed the "seven-pay premium limit." The
seven-pay premium limit on any date is equal to the sum of the net level
premiums that would have
37
been paid on or before such date if the policy provided for paid-up future
benefits after the payment of seven level annual premiums (the "seven-pay
premium").
The rules relating to whether a Policy will be treated as a MEC are extremely
complex and cannot be adequately described in the limited confines of this
summary. Therefore, a current or prospective policyowner should consult with a
competent adviser to determine whether a transaction will cause the Policy to be
treated as a MEC.
Material Changes
A Policy that is not a MEC may become a MEC if it is "materially changed." If
there is a material change to the Policy, the seven year testing period for MEC
status is restarted. The material change rules for determining whether a Policy
is a MEC are complex. In general, however, the determination of whether a Policy
will be a MEC after a material change generally depends upon the relationship
among the death benefit of the Policy at the time of such change, the Policy
Value at the time of the change, and the additional premiums paid into the
Policy during the seven years starting with the date on which the material
change occurs.
Reductions in Face Amount
If there is a reduction in benefits during the first seven Policy Years, the
seven-pay premium limit is recalculated as if the policy had been originally
issued at the reduced benefit level. Failure to comply would result in
classification as a MEC regardless of any efforts by Manulife New York to
provide a payment schedule that will not violate the seven pay test.
Exchanges
A life insurance contract received in exchange for a MEC will also be treated as
a MEC.
Processing of Premiums
If a premium which would cause the Policy to become a MEC is received within 23
days of the next Policy Anniversary, we will not apply the portion of the
premium which would cause MEC status ("excess premium") to the Policy when
received. The excess premium will be placed in a suspense account until the next
anniversary date, at which point the excess premium, along with interest, earned
on the excess premium at a rate of 3.5% from the date the premium was received,
will be applied to the Policy. (Any amount that would still be excess premium on
the next anniversary will be refunded to the policyowner. The policyowner will
be advised of this action and will be offered the opportunity to have the
premium credited as of the original date received or to have the premium
returned. If the policyowner does not respond, the premium and interest will be
applied to the Policy as of the next anniversary.
If a premium which would cause the Policy to become a MEC is received more than
23 days prior to the next Policy Anniversary, we will refund any excess premium
to the policyowner. The portion of the premium which is not excess will be
applied as of the date received. The policyowner will be advised of this action
and will be offered the opportunity to return the premium and have it credited
to the account as of the original date received.
If in connection with the application or issue of the Policy, the policyowner
acknowledges that the policy is or will become a MEC, excess premiums that would
cause MEC status will be credited to the account as of the original date
received.
Multiple Policies
All MEC's that are issued by Manulife New York (or its affiliates) to the same
policyowner during any calendar year are treated as one MEC for purposes of
determining the amount includible in gross income under Section 72(e) of the
Code.
POLICY LOAN INTEREST
Generally, personal interest paid on any loan under a Policy which is owned by
an individual is not deductible. For policies purchased on or after January 1,
1996, interest on any loan under a Policy owned by a taxpayer and covering the
life of any individual who is an officer or employee of or is financially
interested in the business carried on by the taxpayer will not be tax deductible
unless the employee is a key person within the meaning of Section 264 of the
Code. A deduction will not be permitted for interest on a loan under a Policy
held on the life of a key person to the extent the aggregate of such loans with
respect to contracts covering the key person exceed $50,000. The number of
employees who can qualify as key persons depends in part on the size of the
employer but cannot exceed 20 individuals.
Furthermore, if a non-natural person owns a Policy, or is the direct or indirect
beneficiary under a Policy, Section 264(f) of the Code disallows a pro-rata
portion of the taxpayer's interest expense allocable to unborrowed Policy cash
values attributable to insurance held on the lives of individuals who are not
20% (or more) owners of the taxpayer-entity, officers, employees, or former
employees of the taxpayer.
38
The portion of the interest expense that is allocable to unborrowed Policy cash
values is an amount that bears the same ratio to that interest expense as the
taxpayer's average unborrowed Policy cash values under such life insurance
policies bear to the sum of such average unborrowed Policy cash values and the
average adjusted bases for all other assets of the taxpayer.
If the policyowner is an individual, and if the taxpayer is a business and is
not the policyowner, but is the direct or indirect beneficiary under the Policy,
then the amount of unborrowed cash value of the Policy taken into account in
computing the portion of the taxpayer's interest expense allocable to unborrowed
Policy cash values cannot exceed the benefit to which the taxpayer is directly
or indirectly entitled under the Policy.
INTEREST ON POLICY LOANS AFTER YEAR 10
Interest credited to amounts in the Loan Account at an effective annual rate of
at least 4.00%. The actual rate credited is equal to the rate of the interest
charged on the policy loan less than the Loan Interest Credited Differential,
which is currently 1.25% during the first ten policy years and 0% thereafter,
and is guaranteed not to exceed 1.25%. The tax consequences associated with a
loan interest credited differential of 0% are unclear. A tax advisor should be
consulted before effecting a loan to evaluate the tax consequences that may
arise in such a situation. If we determine, in our sole discretion, that there
is a substantial risk that a loan will be treated as a taxable distribution
under Federal tax law as a result of the differential between the credit
interest rate and the loan interest rate, we retain the right to increase the
loan interest rate to an amount that would result in the transaction being
treated as a loan under Federal tax law. If this amount is not prescribed by any
IRS ruling or regulation or any court decision, the amount of increase will be
that which we consider to be most likely to result in the transaction being
treated as a loan under Federal tax law. We will only increase the loan interest
60 days after filing the change with the Superintendent of Insurance of the
State of New York.
POLICY EXCHANGES
A policyowner generally will not recognize gain upon the exchange of a Policy
for another life insurance policy covering the same life insured issued by
Manulife New York or another insurance company, except to the extent that the
policyowner receives cash in the exchange or is relieved of Policy indebtedness
as a result of the exchange. The receipt of cash or forgiveness of indebtedness
is treated as "boot" which is taxable up to the amount of the gain in the
policy. In no event will the gain recognized exceed the amount by which the
Policy Value (including any unpaid loans) exceeds the policyowner's Investment
in the Policy.
OTHER TRANSACTIONS
A transfer of the Policy, a change in the owner, a change in the life insured, a
change in the beneficiary, and certain other changes to the Policy, as well as
particular uses of the Policy (including use in a so called "split-dollar"
arrangement) may have tax consequences depending upon the particular
circumstances and should not be undertaken prior to consulting with a qualified
tax advisor. For instance, if the owner transfers the Policy or designates a new
owner in return for valuable consideration (or, in some cases, if the transferor
is relieved of a liability as a result of the transfer), then the Death Benefit
payable upon the death of the life insured may in certain circumstances be
includible in taxable income to the extent that the Death Benefit exceeds the
prior consideration paid for the transfer and any premiums or other amounts
subsequently paid by the transferee. Further, in such a case, if the
consideration received exceeds the transferor's Investment in the Policy, the
difference will be taxed to the transferor as ordinary income.
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the individual
circumstances of each policyowner and beneficiary.
ALTERNATIVE MINIMUM TAX
Corporate owners may be subject to Alternative Minimum Tax on the annual
increases in Cash Surrender Values and on the Death Benefit proceeds.
INCOME TAX REPORTING
In certain employer-sponsored life insurance arrangements, including equity
split dollar arrangements, participants may be required to report for income tax
purposes, one or more of the following:
- the value each year of the life insurance protection provided;
- an amount equal to imputed interest on a deemed employer loan;
- an amount equal to any employer-paid premiums; or
- some or all of the amount by which the current value exceeds
the employer's interest in the Policy.
Participants should consult with their tax adviser to determine the tax
consequences of these arrangements.
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OTHER INFORMATION
PAYMENT OF PROCEEDS
As long as the Policy is in force, Manulife New York will ordinarily pay any
policy loans, surrenders, partial withdrawals or insurance benefit within seven
days after receipt at its Service Office of all the documents required for such
a payment. We may delay for up to six months the payment from the Fixed Account
of any policy loans, surrenders, partial withdrawals, or insurance benefit. In
the case of any such payments from any Investment Account we may delay payment
during any period during which (i) the New York Stock Exchange is closed for
trading (except for normal weekend and holiday closings), (ii) trading on the
New York Stock Exchange is restricted, and (iii) an emergency exists as a result
of which disposal of securities held in the Separate Account is not reasonably
practicable or it is not reasonably practicable to determine the value of the
Separate Account's net assets or (iv) the SEC, by order, so permits for the
protection of security holders; provided that applicable rules and regulations
of the SEC shall govern as to whether the conditions described in (ii) and (iii)
exist.
REPORTS TO POLICYOWNERS
Within 30 days after each Policy Anniversary, Manulife New York will send the
policyowner a statement showing, among other things:
- the amount of death benefit;
- the Policy Value and its allocation among the Investment
Accounts, the Fixed Account and the Loan Account;
- the value of the units in each Investment Account to which the
Policy Value is allocated;
- the Policy Debt and any loan interest charged since the last
report;
- the premiums paid and other Policy transactions made during
the period since the last report; and
- any other information required by law.
Each policyowner will also be sent an annual and a semi-annual report for the
Trust which will include a list of the securities held in each Portfolio as
required by the 1940 Act.
DISTRIBUTION OF THE POLICIES
Manulife Financial Securities LLC ("Manulife Financial Securities"), whose
principal offices are located at 73 Tremont Street, Boston, Massachusetts 02108,
acts as the principal underwriter of, and continuously offers, the Policies
pursuant to an Underwriting and Distribution Agreement with Manulife New York.
Manulife Financial Securities is an indirect wholly-owned subsidiary of MFC.
Manulife Financial Securities is registered as a broker-dealer under the
Securities Exchange Act of 1934, is a member of the National Association of
Securities Dealers and is duly appointed and licensed as an insurance agent of
Manulife New York. Manulife Financial Securities is a Delaware limited liability
company, the managing member of which is Manulife USA. Manulife USA in its
capacity as managing member is authorized to act on behalf of Manulife Financial
Securities. The Policies will be sold by registered representatives of
broker-dealers having distribution agreements with Manulife Financial Securities
who are also licensed by the New York State Insurance Department and appointed
with Manulife New York.
A registered representative will receive commissions not to exceed [___%] of
premiums in the first year. A registered representative will receive commissions
which are normally [__%] of all premiums paid in the second year and after, and
after the second anniversary [____%] of the Net Policy Value per year.
RESPONSIBILITIES ASSUMED BY MANULIFE NEW YORK, MANULIFE USA AND MANULIFE
FINANCIAL SECURITIES
We have entered into an agreement with Manulife Financial Securities pursuant to
which Manulife Financial Securities will pay selling broker dealers commission
and expense allowance payments subject to limitations imposed by New York
Insurance Law. We will prepare and maintain all books and records required to be
prepared and maintained by Manulife Financial Securities with respect to the
Policies, and send all confirmations required to be sent by Manulife Financial
Securities with respect to the Policies. We will pay Manulife Financial
Securities for expenses incurred and services performed under the terms of the
agreement in such amounts and at such times as agreed to by the parties.
Manulife USA has entered into a Service Agreement with us pursuant to which
Manulife USA or its designee will provide to us all issue, administrative,
general services and recordkeeping functions on our behalf with respect to all
of our insurance policies including the Policies.
Finally, we may, from time to time at our sole discretion, enter into one or
more reinsurance agreements with other life insurance companies, under which
policies issued by us may be automatically reinsured, such that our total amount
at risk under a policy would be limited for the life of the insured.
40
VOTING RIGHTS
As stated previously, all of the assets held in each sub-account of the Separate
Account will be invested in shares of a particular Portfolio of the Trust.
Manulife New York is the legal owner of those shares and as such has the right
to vote upon certain matters that are required by the 1940 Act to be approved or
ratified by the shareholders of a mutual fund and to vote upon any other matters
that may be voted upon at a shareholders' meeting. However, Manulife New York
will vote shares held in the sub-accounts in accordance with instructions
received from policyowners having an interest in such sub-accounts. Shares held
in each sub-account for which no timely instructions from policyowners are
received, including shares not attributable to the Policies, will be voted by
Manulife New York 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 Manulife New York to vote shares held in
the Separate Account in its own right, it may elect to do so.
The number of shares in each sub-account for which instructions may be given by
a policyowner is determined by dividing the portion of the Policy Value derived
from participation in that sub-account, if any, by the value of one share of the
corresponding Portfolio. The number will be determined as of a date chosen by
Manulife New York, but not more than 90 days before the shareholders' meeting.
Fractional votes are counted. Voting instructions will be solicited in writing
at least 14 days prior to the meeting.
Manulife New York may, if required by state officials, disregard voting
instructions if such instructions would require shares to be voted so as to
cause a change in the sub-classification or investment policies of one or more
of the Portfolios, or to approve or disapprove an investment management
contract. In addition, Manulife New York itself may disregard voting
instructions that would require changes in the investment policies or investment
adviser, provided that Manulife New York reasonably disapproves such changes in
accordance with applicable Federal regulations. If Manulife New York does
disregard voting instructions, it will advise policyowners of that action and
its reasons for such action in the next communication to policyowners.
SUBSTITUTION OF PORTFOLIO SHARES
Although we believe it to be unlikely, it is possible that in the judgment of
our management, one or more of the Portfolios may become unsuitable for
investment by the Separate Account because of a change in investment policy or a
change in the applicable laws or regulations, because the shares are no longer
available for investment, or for some other reason. In that event, we may seek
to substitute the shares of another Portfolio or of an entirely different mutual
fund. Before this can be done, the approval of the SEC and the Superintendent of
Insurance of the state of New York may be required.
We also reserve the right to create new separate accounts, combine other
separate accounts with the Separate Account, to establish additional
sub-accounts within the Separate Account, to combine sub-accounts or to transfer
assets in one sub-account to another sub-account, to eliminate existing
sub-accounts and stop accepting new allocations and transfers into the
corresponding fund, to operate the Separate Account as a management investment
company or other form permitted by law, to transfer assets from this Separate
Account to another separate account and from another separate account to this
Separate Account, and to de-register the Separate Account under the 1940 Act. We
would make the change only if permissible under applicable Federal and New York
state law.
RECORDS AND ACCOUNTS
The Service Office will perform administrative functions, such as decreases,
increases, surrenders and partial withdrawals, and fund transfers on behalf of
Manulife New York.
All records and accounts relating to the Separate Account and the Portfolios
will be maintained by us. All financial transactions will be handled by us. All
reports required to be made and information required to be given will be
provided by us.
STATE REGULATIONS
We are subject to the laws of the State of New York governing insurance
companies and to the regulation of the New York Insurance Department. Regulation
by the New York Insurance Department includes periodic examination of our
financial position and operations, including contract liabilities and reserves.
Regulation by supervisory agencies includes licensing to transact business,
overseeing trade practices, licensing agents, approving policy forms,
establishing reserve requirements, fixing maximum interest rates on life
insurance policy loans and minimum rates for accumulation of surrender values,
prescribing the form and content of required financial statements and regulation
of the type and amounts of permitted investments. Our books and accounts are
subject to review by the New York Insurance Department and other supervisory
agencies at all times, and we file annual statements with these agencies.
LITIGATION
No litigation is pending that would have a material effect upon the Separate
Account or the Trust.
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INDEPENDENT AUDITORS
The consolidated financial statements of The Manufacturers Life Insurance
Company of New York at December 31, 2001 and 2000 and for each of the three
years ended December 31, 2001 and the financial statements of Separate Account B
of The Manufacturers Life Insurance Company of New York at December 31, 2001,
and for each of the two years in the period ended December 31, 2001, appearing
in this Prospectus and Registration Statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports thereon appearing
elsewhere herein, and are included in reliance upon such reports given on the
authority of such firm as experts in accounting and auditing.
FURTHER INFORMATION
A registration statement under the Securities Act of 1933 has been filed with
the SEC relating to the offering described in this prospectus. This prospectus
does not include all the information set forth in the registration statement.
The omitted information may be obtained from the SEC's principal office in
Washington D.C. upon payment of the prescribed fee. The SEC also maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC which is
located at http://www.sec.gov.
For further information you may also contact Manulife New York's Home Office,
the address and telephone number of which are on the first page of the
prospectus.
OFFICERS AND DIRECTORS
Our Officers and Directors, together with their principal occupations during the
past five years, are as follows:
NAME, AGE AND PRINCIPAL POSITION WITH
BUSINESS ADDRESS COMPANY PRINCIPAL OCCUPATION
Bruce Avedon Director* Director, Manulife New York, March 1992 to present; Consultant
Age: 73 (self-employed) September 1983 to present.
6601 Hitching Post Lane
Cincinnati, OH 45230
Thomas Borshoff Director* Director, Manulife New York, February 1999 to present; Self-employed,
Age: 55 Real Estate Owner/Manager; Chief Executive Officer and Chairman, First
536 Stone Road Federal Savings and Loan of Rochester, 1983 to 1997.
Pittsford, NY 14534
James R. Boyle Director* Director, Manulife New York, August 1999 to present; Senior Vice
Age: 43 President, U.S. Annuities, Manulife Financial, July 1999 to present;
500 Boylston Street President, Manulife North America, July 1999 December 2001; Vice
Boston, MA 02116 President, Institutional Markets, Manulife Financial, May 1998 to July
1999; Vice President, Administration and Chief Administrative Officer,
Manulife North America, September 1996 to May 1998; Vice President,
Chief Financial Officer and Chief Administrative Officer, Manulife
North America, August 1994 to September 1996.
Robert A. Cook Director* Director, Manulife New York, February 1999 to present; President U.S.
Age: 47 Insurance January 2002 to present; Senior Vice President, U.S.
73 Tremont Street Individual Insurance, Manulife Financial, January 1999 to present; Vice
Boston, MA 02108 President, U.S. Insurance, Manulife Financial, 1995 to December 1998.
42
NAME, AGE AND PRINCIPAL POSITION WITH
BUSINESS ADDRESS COMPANY PRINCIPAL OCCUPATION
John D. DesPrez III Director* and President, Manulife USA, January 1999 to present; Director, Manulife
Age: 45 Chairman of the Wood Logan, October 1996 to present; Director, September 1996 to
73 Tremont Street Board of Directors present and Chairman of the Board, January 1999 to present, of Manulife
Boston, MA 02108 North America; President, Manulife North America, September 1996 to
December 1998; President, MIT September 1996 to present; Senior Vice
President, U.S. Annuities, Manulife USA, September 1996 to December
1998; Vice President, Mutual Funds, Manulife Financial, January 1995 to
September 1996; Director, MWL, December 1995 to present; Director, Wood
Logan Distributors, March 1993 to present; President, North American
Funds, March 1993 to September 1996; Director, Manulife New York, March
1992 to present;
Ruth Ann Fleming Director* Director, Manulife New York, March 1992 to present; Attorney,
Age: 43 consulting services and pro bono activities.
205 Highland Avenue
Short Hills, NJ 07078
James D. Gallagher Director* and President, Manufacturers Investment Trust, February 2001 to Present,
Age: 47 President President, The Manufacturers Life Insurance Company of New York, August
73 Tremont Street 1999 to Present, Executive Vice President, Secretary and Chief Legal
Boston, MA 02108 Counsel, The Manufacturers Life Insurance Company (USA), January 1997
to present; Secretary and General Counsel, Manufacturers Adviser
Corporation, January 1997 to present; Vice President, Chief Legal
Officer and Government Relations-U.S. Operations, The Manufacturers
Life Insurance Company, January 1996 to present; Vice President,
Secretary and General Counsel, The Manufacturers Life Insurance Company
of North America, 1994 to present.
David W. Libbey Treasurer Senior Vice President, Treasurer and Chief Financial Officer, U.S.
Age: 55 Annuities, Manulife USA, December 1997 to present; Treasurer, Manulife
500 Boylston Street New York, November 1997 to present; Vice President, Finance, Manulife
Boston, MA 02116 North America, June 1997 to December 1997; Vice President, Finance,
Annuities, Manulife Financial, June 1997 to present; Vice President &
Actuary, Paul Revere Insurance Group, June 1970 to March 1997.
Neil M. Merkl, Esq. Director* Director, Manulife New York, December 1995 to present; Attorney
Age: 71 (self-employed), April 1994 to present; Attorney, Wilson Elser, 1979 to
35-35 161st Street 1994.
Flushing, NY 11358
James P. O'Malley Director* Senior Vice President, U.S. Pensions, Manulife Financial, January 1999
Age:56 to present; Director, Manulife New York, November 1998 to present;
200 Bloor Street East Director, ManAmerica, November 1998 to present; Vice President, Systems
Toronto, Ontario New Business Pensions, Manulife Financial, 1984 to December 1998.
Canada M4W 1E5
Bradford J. Race Jr. Director* Director, Manulife New York, February 2002 to present; Secretary to the
Age: 57 Governor, Chief of Staff and Senior Policy Advisor to the Governor of
136 East 64th Street the State of New York, George E. Pataki, 1995-February 2002; Partner,
New York, NY 10021 Seward & Kissel - Law Firm, 1981-1994, Attorney, Dewey Ballantine,
1970-1981, 2002-Present.
43
NAME, AGE AND PRINCIPAL POSITION WITH
BUSINESS ADDRESS COMPANY PRINCIPAL OCCUPATION
Kim Ciccarelli Secretary and Secretary and Counsel, Manulife New York, November 2001 to present;
Age: 32 Counsel Assistant Counsel, Manulife U.S.A., November 1999 to present;
73 Tremont Street Paralegal, Manulife U.S.A., March 1995 - October 1999.
Boston, MA 02108
John Ostler Appointed Actuary Appointed Actuary, Manulife New York, November 2000 to present;
Age: 48 Executive Vice President and Chief Financial Officer, Manulife USA,
200 Bloor Street East October 1, 2000 to present; Vice President and Corporate Actuary, The
Toronto, Ontario Manufacturers Life Insurance Company, March 1998 to September 2000;
Canada M4W 1E5 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 , U.S. Insurance, The
Manufacturers Life Insurance Company, 1988-1990.
*Each Director is elected to serve until the next annual meeting of shareholders
or until his or her successor is elected and qualified.
ILLUSTRATIONS
The tables set forth in Appendix A illustrate the way in which a Policy's Death
Benefit, Policy Value, and Cash Surrender Value could vary over an extended
period of time.
FINANCIAL STATEMENTS
Our financial statements included herein should be distinguished from the
financial statements of the Separate Account and should be considered only as
bearing upon our ability to meet our obligations under the Policies.
44
APPENDIX A:-SAMPLE ILLUSTRATIONS OF POLICY VALUES, CASH SURRENDER VALUES AND
DEATH BENEFITS
The following tables have been prepared to help show how values under the Policy
change with investment performance. The tables include both Policy Values and
Cash Surrender Values as well as Death Benefits. The Policy Value is the sum of
the values in the Investment Accounts, as the tables assume no values in the
Fixed Account or Loan Account. The Cash Surrender Value is the Policy Value less
any applicable surrender charges. The tables illustrate how Policy Values and
Cash Surrender Values, which reflect all applicable charges and deductions, and
Death Benefits of the Policy on an insured of given age would vary over time if
the return on the assets of the Portfolios was a uniform, gross, after-tax,
annual rate of 0%, 6% or 12%. The Policy Values, Death Benefits and Cash
Surrender Values would be different from those shown if the returns averaged 0%,
6% or 12%, but fluctuated over and under those averages throughout the years.
The charges reflected in the tables include those for deductions from premiums,
surrender charges, and monthly deductions.
The amounts shown for the Policy Value, Death Benefit and Cash Surrender Value
as of each Policy Year reflect the fact that the net investment return on the
assets held in the sub-accounts is lower than the gross, after-tax return. This
is because the expenses and fees borne by Series I shares of the Manufacturers
Investment Trust are deducted from the gross return. The illustrations reflect a
simple average of those Portfolios' current expenses, which is approximately
_____% per annum. The gross annual rates of return of 0%, 6% and 12% correspond
to approximate net annual rates of return of _____%, ____% and ____%. The
illustrations reflect the current expense reimbursements in effect for the
Lifestyle Trust and Index Trusts. In the absence of such expense reimbursements,
the average of the Portfolio's current expenses would have been 1.019% per annum
and the gross annual rates of return of 0%, 6% and 12% would have corresponded
to approximate net annual rates of return of ____%, _____% and ___%. The expense
reimbursements for certain portfolios of the Trust (which are described in the
"Trust Annual Expense" table) are expected to remain in effect during the fiscal
year ended December 31, 2002. Were the expense reimbursements to terminate, the
average of the Portfolios' current expenses would be higher and the approximate
net annual rates of return would be lower.
The tables assume that no premiums have been allocated to the Fixed Account,
that planned premiums are paid on the Policy Anniversary and that no transfers,
partial withdrawals, Policy loans, changes in death benefit options or changes
in face amount have been made. The tables reflect the fact that no charges for
Federal, state or local taxes are currently made against the Separate Account.
If such a charge is made in the future, it would take a higher gross rate of
return to produce after-tax returns of 0%, 6% and 12% than it does now.
There are four tables shown for each combination of age and death benefit option
for a Policy issued to a male non-smoker:
20 YEAR NO LAPSE GUARANTEE
one based on current cost of insurance charges assessed by Manulife New
York and
the other based on the maximum cost of insurance charges based on the
1980 Commissioners Smoker Distinct Mortality Tables.
10 YEAR NO LAPSE GUARANTEE
one based on current cost of insurance charges assessed by Manulife New
York and
the other based on the maximum cost of insurance charges based on the
1980 Commissioners Smoker Distinct Mortality Tables.
Current cost of insurance charges are not guaranteed and may be changed. Upon
request, Manulife New York will furnish a comparable illustration based on the
proposed life insured's issue age, sex (unless unisex rates are required by law,
or are requested) and risk classes, any additional ratings and the death benefit
option, face amount and planned premium requested. Illustrations for smokers
would show less favorable results than the illustrations shown below.
From time to time, in advertisements or sales literature for the Policies that
quote performance data of one or more of the Portfolios, Manulife New York may
include Cash Surrender Values and Death Benefit figures computed using the same
methodology as that used in the following illustrations, but with the average
annual total return of the Portfolio for which performance data is shown in the
advertisement replacing the hypothetical rates of return shown in the following
tables. This information may be shown in the form of graphs, charts, tables and
examples.
The Policies have been offered to the public only since approximately
____________ 2002. However, total return data may be advertised for as long a
period of time as the underlying Portfolio has been in existence. The results
for any period prior to the
A-1
Policies' being offered would be calculated as if the Policies had been offered
during that period of time, with all charges assumed to be those applicable to
the Policies.
ILLUSTRATIONS TO BE FILED BY AMENDMENT
A-2
APPENDIX B: AUDITED FINANCIAL STATEMENTS
TO BE FILED BY AMENDMENT
B-1
PART II
OTHER INFORMATION
PART II
OTHER INFORMATION
UNDERTAKINGS
Undertaking to File Reports.
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
Representation of Insurer Pursuant to Section 26 of the Investment Company Act
of 1940, as amended.
The Manufacturers Life Insurance Company of New York (the "Company") 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.
Rule 484 Undertaking.
Article 10 of the Charter of the Company provides as follows:
TENTH: No director of the Corporation shall be personally liable to the
Corporation or any of its shareholders for damages for any breach of duty as a
director; provided, however, the foregoing provision shall not eliminate or
limit (i) the liability of a director if a judgment or other final adjudication
adverse to such director established his or her such acts or omissions were in
bad faith or involved intentional misconduct or were acts or omissions (a) which
he or she knew or reasonably should have known violated the New York Insurance
Law or (b) which violated a specific standard of care imposed on directors
directly, and not by reference, by a provision of the New York Insurance Law (or
any regulations promulgated thereunder) or (c) which constituted a knowing
violation of any other law, or establishes that the director personally gained
in fact a financial profit or other advantage to which the director was not
legally entitled or (ii) the liability of a director for any act or omission
prior to the adoption of this Article by the shareholders of the Corporation.
Any repeal or modification of this Article by the shareholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.
Article VII of the By-laws of the Company provides as follows:
Section VII.1. Indemnification of Directors and Officers. The Corporation may
indemnify any person made, or threatened to be made, a party to an action by or
in the right of the corporation to procure a judgment in its favor by reason of
the fact that he or she, his or her testator, testatrix or intestate, is or was
a director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of any other corporation of any type or
kind, domestic or foreign, of any partnership, joint venture, trust, employee
benefit plan or other enterprise, against amounts paid in settlement and
reasonable expenses, including attorneys' fees, actually and necessarily
incurred by him or her in connection with the defense or settlement of such
action, or in connection with an appeal therein, if such director or officer
acted, in good faith, for a purpose which he or she reasonably believed to be
in, or, in the case of service for any other corporation or any partnership,
joint venture, trust, employee benefit plan or other enterprise, not opposed to,
the best interests of the Corporation, except that no indemnification under this
Section shall be made in respect of (1) a threatened action, or a pending action
which is settled or is otherwise disposed of, or (2) any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
Corporation, unless and only to the extent that the court in which the action
was brought, or , if no action was brought, any court of competent jurisdiction,
determines upon application that, in view of all the circumstances of the case,
the person is fairly and reasonably entitled to indemnity for such portion of
the settlement amount and expenses as the court deems proper.
The Corporation may indemnify any person made, or threatened to be made, a party
to an action or proceeding (other than one by or in the right of the Corporation
to procure a judgment in its favor), whether civil or criminal, including an
action by or in the right of any other corporation of any type or kind, domestic
or foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise, which any director or officer of the Corporation served in any
capacity at the request of the Corporation, by reason of the fact that he or
she, his or her testator, testatrix or intestate, was a director or officer of
the Corporation, or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees actually and necessarily incurred as a result of such action or
proceeding, or any appeal therein, if such director or officer acted, in good
faith, for a purpose which he or she reasonably believed to be in, or, in the
case of service for any other corporation or any partnership, joint venture,
trust, employee benefit plan or other enterprise, not opposed to, the best
interests of the Corporation and, in criminal actions or proceedings, in
addition, had no reasonable cause to believe that his or her conduct was
unlawful.
The termination of any such civil or criminal action or proceeding by judgment,
settlement, conviction or upon a plea of nolo contendere, of its equivalent,
shall not in itself create a presumption that any such director or officer did
not act, in good faith, for a purpose which he or she reasonably believed to be
in, or, in the case of service for any other corporation or any partnership,
joint venture, trust, employee benefit plan or other enterprise, not opposed to,
the best interest of the Corporation or that he or she had reasonable cause to
believe that his or her conduct was unlawful.
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, consisting of 80 pages;
Undertaking to file reports;
Representation pursuant to Section 26 of the Investment Company Act of
1940;
Rule 484 Undertaking;
The signatures;
Written consents of the following persons:
- Naveed Irshad, FSA, MAAA, FCIA - To Be Filed by Amendment
- Ernst & Young LLP (Philadelphia, PA) - To Be Filed by Amendment
- Ernst & Young LLP (Boston, MA) - To Be Filed By Amendment
The following exhibits are filed as part of this Registration Statement:
1. Copies of all exhibits required by paragraph A of the instructions as
to exhibits in Form N-8B-2 are set forth below under designations based
on such instructions:
A(1) Resolutions of Board of Directors of First North
American Life Assurance Company establishing FNAL
Variable Life Account I were previously filed in the
Registrant's initial registration statement on Form
S-6 (File No. 333-33351) as filed with the Commission
on August 8, 1997.
A(2) Not applicable.
A(3)(a) Underwriting and Distribution Agreement between The
Manufacturers Life Insurance Company of New York
(Depositor) and Manufacturers Financial Securities
LLC (Underwriter) - Incorporated by reference to
Exhibit A(3)(a) to post-effective amendment No. 3 to
the Registration Statement, file number 333-83023,
filed March 1, 2002 ("Post-Effective Amendment No.
3").
A(3)(b) Selling Agreement between The Manufacturers Life
Insurance Company of New York, Manufactures Financial
Securities LLC (Underwriter), Selling Broker Dealers,
and General Agent - Incorporated by reference to
Exhibit A(3)(b) to Post-Effective Amendment No. 3.
A(3)(c) Not applicable.
A(4) Not applicable.
A(5) Form of Flexible Premium Variable Life Insurance
Policy - To Be Filed By Amendment
A(6)(a)(i) Declaration of Intention and Charter of First North
American Life Assurance Company is incorporated by
reference to Exhibit (b)(6)(i) to post-effective
amendment No. 7 to the Registration Statement on Form
N-4, file number 33-46217, filed February 25, 1998 on
behalf of The Manufacturers Life Insurance Company of
New York Separate Account A.
A(6)(a)(ii) Certificate of amendment of the Declaration of
Intention and Charter of First North American Life
Assurance Company is incorporated by reference to
Exhibit (b)(6)(i) to post-effective amendment No. 7
to the Registration Statement on Form N-4, file
number 33-46217, filed February 25, 1998 on behalf of
The Manufacturers Life Insurance Company of New York
Separate Account A.
A(6)(a)(iii) Certificate of amendment of the Declaration of
Intention and Charter of The Manufacturers Life
Insurance Company of New York is incorporated by
reference to Exhibit (b)(6)(i) to post-effective
amendment No. 7 to the Registration Statement on Form
N-4, file number 33-46217, filed February 25, 1998 on
behalf of The Manufacturers Life Insurance Company of
New York Separate Account A.
(A)(6)(b) By-laws of The Manufacturers Life Insurance Company
of New York are incorporated by reference to Exhibit
(b)(6)(i) to post-effective amendment No. 7 to the
Registration Statement on Form N-4, file number
33-46217, filed February 25, 1998 on behalf of The
Manufacturers Life Insurance Company of New York
Separate Account A.
A(7) Not applicable.
A(8)(a) Form of Reinsurance Agreement between The
Manufacturers Life Insurance Company of New York and
The Manufacturers Life Insurance Company (USA) is
incorporated by reference to Exhibit A(8)(a) to
pre-effective amendment No. 1 to a Registration
Statement on Form S-6, file number 333-33351, filed
on March 16, 1998 on behalf of The Manufacturers Life
Insurance Company of New York Separate Account B.
A(8)(b) Administrative Services Agreement between The
Manufacturers Life Insurance Company (U.S.A.) and The
Manufacturers Life Insurance Company of New York -
Incorporated by reference to Exhibit A(8)(b) to
Post-Effective Amendment No. 3.
A(8)(c) Investment Services Agreement between The
Manufacturers Life Insurance Company of New York and
The Manufacturers Life Insurance Company is
incorporated by reference to Exhibit A(8)(a) to
pre-effective amendment No. 1 to a Registration
Statement on Form S-6, file number 333-33351, filed
on March 16, 1998 on behalf of The Manufacturers Life
Insurance Company of New York Separate Account B.
A(9) Not applicable.
A(10)(a) Form of Application for Flexible Premium Variable
Life Insurance Policy is incorporated by reference to
Exhibit A(8)(a) to pre-effective amendment No. 1 to a
Registration Statement on Form S-6, file number
333-33351, filed on March 16, 1998 on behalf of The
Manufacturers Life Insurance Company of New York
Separate Account B.
2. Consents of the following:
A Opinion and consent of Kim Ciccarelli, Esq., Secretary and
Counsel of The Manufacturers Life Insurance Company of New
York - To Be Filed by Amendment
B Consent of Naveed Irshad, Actuary of The Manufacturers Life
Insurance Company of New York - To Be Filed by Amendment
C Consents of Ernst & Young LLP (Philadelphia, PA) and Ernst &
Young LLP (Boston, MA) - To Be Filed by Amendment
3. No financial statements are omitted from the prospectus pursuant
to instruction 1(b) or (c) of Part I.
4. Not applicable.
5. Not applicable.
6. Memorandum Regarding Purchase, Transfer and Redemption Procedures for
the Policies - To Be Filed by Amendment
7.(i) Powers of Attorney are incorporated by reference to Exhibit A(7) to
pre-effective amendment No. 1 to a Registration Statement on Form S-6,
file number 333-33351, filed on
March 17, 1998 on behalf of The Manufacturers Life Insurance Company
of New York Separate Account B.
7.(ii) Power of Attorney, James O'Malley and Thomas Borshoff - previously
filed as Exhibit (b)(14)(b) to post-effective amendment no. 6 to
Registrant's Registration Statement on Form N-4 File, No. 33-79112,
filed March 2, 1999.
7.(iii) Power of Attorney, James D. Gallagher and James R. Boyle are
incorporated by reference to Exhibit 7(iii) to pre-effective
amendment No. 1 to a Registration Statement on Form S-6, file number
333-83023, filed on November 1, 1999 on behalf of The Manufacturers
Life Insurance Company of New York Separate Account B.
7.(iv) Power of Attorney, Robert Cook - previously filed as
Exhibit (b)(14)(d) to post-effective amendment no. 8 to Registration
Statement on Form N-4, File, No. 33-79112, filed February 25, 2000.
7(v) Power of Attorney, Bradford J. Race Jr. - Incorporated by reference
to Exhibit 7(v) to Post-Effective Amendment No. 3.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant, THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW
YORK SEPARATE ACCOUNT B, has caused this Registration Statement to be signed on
its behalf, in the City of Boston, and Commonwealth of Massachusetts on this
23rd day of May, 2002.
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NEW YORK SEPARATE ACCOUNT B
(Registrant)
By: THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NEW YORK
(Depositor)
By: /s/ JAMES D. GALLAGHER
------------------------
James D. Gallagher
President
Attest
/s/ KIMBERLY CICCARELLI
- ------------------------------------
Kimberly Ciccarelli
Secretary
Pursuant to the requirements of the Securities Act of 1933, the Depositor has
duly caused this Registration Statement to be signed on its behalf by the
undersigned on the 23rd day of May, 2002 in the City of Boston, and Commonwealth
of Massachusetts.
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NEW YORK
(Depositor)
By: /S/ James D. Gallagher
-----------------------------
James D. Gallagher
President
ATTEST
/S/ KIMBERLY CICCARELLI
- ---------------------------
Kimberly Ciccarelli
Secretary
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities with the depositor on
the 23rd day of May, 2002.
NAME TITLE
/s/JAMES D. GALLAGHER Director and President
- ------------------------------- (Principal Executive
James D. Gallagher Officer)
* Director
- -------------------------------
John D. DesPrez, III
* Director
- -------------------------------
Ruth Ann Flemming
* Director
- -------------------------------
Neil M. Merkl
* Director
- -------------------------------
Thomas Borshoff
* Director
- -------------------------------
James R. Boyle
* Director
- -------------------------------
Bruce Avedon
* Director
- -------------------------------
James O'Malley
* Director
- -------------------------------
Robert Cook
* Director
- -------------------------------
Bradford J. Race Jr.
/s/ DAVID W. LIBBEY Treasurer (Principal
- ------------------------------- Financial and Accounting
David W. Libbey Officer)
*By: /s/ DAVID W. LIBBEY
--------------------------
David W. Libbey
Attorney-in-Fact Pursuant
to Powers of Attorney