485BPOS 1 b42568mhe485bpos.txt MANULIFE FINANCIAL SEPARATE ACCOUNT H As filed with the Securities and Exchange Commission on April 29, 2002. Registration No. 333-70864 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective Amendment No. 1 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H (Exact name of Registrant) THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) (Name of Depositor) 38500 Woodward Avenue Bloomfield Hills, Michigan 48304 (Address of Depositor's Principal Executive Offices) (617) 663-3000 (Depositor's Telephone Number Including Area Code) James D. Gallagher, Esq. Vice President, Secretary and General Counsel The Manufacturers Life Insurance Company (U.S.A) 73 Tremont Street Boston, Massachusetts 02108 (Name and Address of Agent for Service) Copy to: J. Sumner Jones, Esq. Jones & Blouch, L.L.P. 1025 Thomas Jefferson Street, N.W. Washington, DC 20007 Title of Securities Being Registered: Variable Annuity Insurance Contracts It is proposed that this filing will become effective: | | Immediately upon filing pursuant to paragraph (b) of Rule 485 |x| on May 1, 2002 pursuant to paragraph (b) of Rule 485 | | 60 days after filing pursuant to paragraph (a)(1) of Rule 485 | | on [date] pursuant to paragraph (a)(1) of Rule 485 If appropriate, check the following box: | | this post-effective amendment designates a new effective date for a previously filed post-effective amendment. THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-4
N-4 Item Part A Caption in Prospectus ------ --------------------- 1................. Cover Page 2................. Appendix A: Special Terms 3................. Summary 4................. Appendix B: Table of Accumulation Values 5................. General Information about Us, The Variable Account, the Trust 6................. Charges and Deductions; Withdrawal Charges; Reduction or Elimination of Withdrawal Charges; Administration Fees; Mortality and Expense Risks Charge; Taxes; Expenses of Distributing the Contract 7................. Accumulation Period Provisions; Company Approval; Purchase Payments; Accumulation Units; Net Investment Factor; Transfers Among Investment Options; Telephone Transactions; Special Transfer Services - Dollar Cost Averaging; Asset Rebalancing Program; Withdrawals; Special Withdrawal Services - the Income Plan; Contract Owner Inquiries; Other Contract Provisions; Ownership; Beneficiary; Modification 8................. Pay Out Period Provisions; General; Annuity Options; Determination of Amount of the First Variable Annuity Benefit Payment; Annuity Units and the Determination of Subsequent Variable Annuity Benefit Payments; Transfers During the Pay Out During the Pay Out Period 9................. Accumulation Period Provisions; Death Benefit During the Accumulation Period; Pay Out Period Provisions; Death Benefit Period 10................ Accumulation Period Provisions; Purchase Payments; Accumulation Units; Value of Accumulation Units; Net Investment Factor; Distribution of Contracts 11................ Withdrawals; Restrictions under the Texas Optional Retirement Program; Accumulation Period Provisions; Purchase Payments; Other Contract Provisions; Ten Day Right to Review 12................ Federal Tax Matters; Introduction; Taxation of Annuities in General; Diversification Requirements; Qualified Retirement Plans; Appendix G: Qualified Plan Types 13................ Legal Proceedings 14................ Statement of Additional Information - Table of Contents
Part B............ Caption in Statement of Additional Information ------ ---------------------------------------------- 15................ Cover Page 16................ Table of Contents 17................ General Information and History. 18................ Services-Independent Auditors, Services-Servicing Agent 19................ Not Applicable 20................ Services - Principal Underwriter 21................ Performance Data 22................ Not Applicable 23................ Financial Statements
PART A INFORMATION REQUIRED IN A PROSPECTUS ANNUITY SERVICE OFFICE MAILING ADDRESS 500 Boylston Street, Suite 400 Post Office Box 9230 Boston, Massachusetts 02116-3739 Boston, Massachusetts 02205-9230 (617) 663-3000 www.manulifeusa.com (800) 344-1029 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H OF THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) FLEXIBLE PAYMENT DEFERRED COMBINATION FIXED AND VARIABLE ANNUITY CONTRACT NON-PARTICIPATING This Prospectus describes an annuity contract issued by The Manufacturers Life Insurance Company (U.S.A.) ("WE" or "US" or "MANULIFE USA"). The "CONTRACT" is a flexible purchase payment, deferred, combination fixed and variable annuity contract, including both an individual contract and a participating interest in a group contract. Both are designed and offered to provide retirement programs for eligible individuals and retirement plans. Participation in a group contract will be separately accounted for by the issuance of a certificate evidencing your interest under the contract. An individual contract will usually be issued only where a group contract may not be used. - Contract values and annuity benefit payments are based upon sixty investment options. Fifty-nine options are variable account options and one is a fixed account option. - Contract values (other than those allocated to the fixed account) and variable annuity benefit payments will vary according to the investment performance of the sub-accounts of one of our separate accounts, The Manufacturers Life Insurance Company (U.S.A.) Separate Account H (the "VARIABLE ACCOUNT"). Contract values may be allocated to, and transferred among, one or more of those sub-accounts. - Each sub-account's assets are invested in Series I shares (formerly referred to as "CLASS A SHARES") of a corresponding portfolio of a mutual fund, Manufacturers Investment Trust (the "TRUST"). We will provide the contract owner ("YOU") a prospectus for the Trust with this Prospectus. - SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. - Special Terms are defined in a glossary in Appendix A. - Except as specifically noted here and under the captions "FIXED ACCOUNT INVESTMENT OPTION" below this Prospectus describes only the variable portion of the contract and prior contracts. PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT CONTAINS INFORMATION ABOUT THE VARIABLE ACCOUNT AND THE VARIABLE PORTION OF THE CONTRACT THAT YOU SHOULD KNOW BEFORE INVESTING. THE CONTRACTS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION ("SEC"). NEITHER THE SEC NOR ANY STATE HAS DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ADDITIONAL INFORMATION about the contract and the Variable Account is contained in a Statement of Additional Information, dated the same date as this Prospectus, which has been filed with the SEC and is incorporated herein by reference. The Statement of Additional Information is available without charge upon request by writing us at the address on the front cover or by telephoning (800) 344-1029. The SEC maintains a Web site (www.sec.gov) that contains the Statement of Additional Information and other information about us, the contracts and the Variable Account. STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS General Information and History....................................... 3 Performance Data...................................................... 3 Services Independent Auditors............................................. 12 Servicing Agent.................................................. 12 Principal Underwriter ........................................... 12 Audited Financial Statements.......................................... 13
The date of this Prospectus is May 1, 2002 STRATEGY.PRO5/62 TABLE OF CONTENTS SUMMARY.................................................................... GENERAL INFORMATION ABOUT US, THE VARIABLE ACCOUNT AND THE TRUST......................................... The Manufacturers Life Insurance Company (U.S.A.)..................... The Variable Account ................................................. The Trust............................................................. DESCRIPTION OF THE CONTRACT ............................................... ELIGIBLE GROUPS AND INDIVIDUALS ........................................ ACCUMULATION PERIOD PROVISIONS ......................................... Purchase Payments .................................................... Accumulation Units ................................................... Value of Accumulation Units .......................................... Net Investment Factor ................................................ Transfers Among Investment Options ................................... Maximum Number of Investment Options.................................. Telephone Transactions ............................................... Special Transfer Services - Dollar Cost Averaging..................... Asset Rebalancing Program............................................. Withdrawals........................................................... Telephone Redemptions.............................................. Special Withdrawal Services - The Income Plan ........................ Death Benefit During Accumulation Period.............................. In General......................................................... Amount of Death Benefit............................................ Payment of Death Benefit........................................... PAY-OUT PERIOD PROVISIONS ................................................. General .............................................................. Annuity Options ...................................................... Determination of Amount of the First Variable Annuity Benefit Payment............................................... Annuity Units and the Determination of Subsequent Variable Annuity Benefit Payments ......................... Transfers During Pay-out Period ...................................... Death Benefit During Pay-out Period................................... OTHER CONTRACT PROVISIONS .............................................. Ten Day Right to Review .............................................. Ownership ............................................................ Annuitant ............................................................ Beneficiary .......................................................... Modification ......................................................... Discontinuance of New Owners ......................................... Misstatement and Proof of Age, Sex or Survival........................ FIXED ACCOUNT INVESTMENT OPTION............................................ Securities Registration .............................................. Guarantee ............................................................ Reinsurance .......................................................... Investment Options ................................................... Investment Accounts .................................................. Renewals ............................................................. Transfers ............................................................ Withdrawals .......................................................... Fixed Annuity Options ................................................ CHARGES AND DEDUCTIONS .................................................... Administration Fees................................................... Reduction or Elimination of Annual Administration Fees ............................................... Mortality and Expense Risks Charge ................................... Taxes ................................................................ Expenses of Distributing the Contract................................. FEDERAL TAX MATTERS ....................................................... INTRODUCTION ........................................................... OUR TAX STATUS ......................................................... TAXATION OF ANNUITIES IN GENERAL ....................................... Tax Deferral During Accumulation Period ............................ Non-Natural Owners ................................................ Diversification Requirements ...................................... Ownership Treatment ............................................... Delayed Pay-out Periods ........................................... Taxation of Partial and Full Withdrawals ............................. Taxation of Annuity Benefit Payments ................................. Taxation of Death Benefit Proceeds ................................... Penalty Tax on Premature Distributions ............................... Aggregation of Contracts.............................................. Loss of Interest Deduction Where Contracts are Held by or for the Benefit of Certain Non- Natural Persons.................................................... QUALIFIED RETIREMENT PLANS ................................................ Direct Rollovers ..................................................... Loans ................................................................ FEDERAL INCOME TAX WITHHOLDING............................................. GENERAL MATTERS............................................................ Performance Data...................................................... Asset Allocation and Timing Services.................................. Restrictions Under The Texas Optional Retirement Program................................................. Distribution of Contracts ............................................ Contract Owner Inquiries.............................................. Confirmation Statements............................................... Legal Proceedings .................................................... Cancellation of Contract.............................................. Voting Interest....................................................... Reinsurance Arrangements.............................................. APPENDIX A: SPECIAL TERMS................................................. APPENDIX B: STATE PREMIUM TAXES........................................... APPENDIX C: PENNSYLVANIA MAXIMUM MATURITY AGE............................................................ APPENDIX D: QUALIFIED PLAN TYPES.......................................... APPENDIX E: PRIOR CONTRACTS .............................................. APPENDIX F: TABLE OF ACCUMULATION UNIT VALUES.............................
SUMMARY OVERVIEW OF THE CONTRACT. The contracts offered by this Prospectus are a group contract, including an owner's participating interest in the group contract, and an individual contract. Usually, a group contract certificate will be issued. An individual contract is intended for use where a group contract is not available. Specific accounts are maintained under a group contract for each member of an eligible group participating in the contract as evidenced by the issuance of a certificate. The contracts provide for the accumulation of contract values prior to the maturity date (the "ACCUMULATION" period) and the payment of annuity benefits on a variable and/or fixed basis (the "PAY-OUT" period). The contracts are designed primarily as funding vehicles for "asset based fee arrangements" offered by brokerage firms which may charge an additional fee for their services. We will treat any such fees assessed against the contract as partial withdrawals from the contract. See "Federal Tax Matters" for further information on the tax implications of assessing such fees against the contract. When you purchase a variable annuity for any tax-qualified retirement plan, the variable annuity does not provide any additional tax deferred treatment of earnings beyond the treatment provided by the plan. Consequently, you should purchase a variable annuity for a tax-qualified plan only on the basis of other benefits offered by the variable annuity. These benefits may include lifetime income payments, protection through the death benefit, and guaranteed fees. PRIOR CONTRACTS. We have a class of variable annuity contract which is no longer being issued but under which purchase payments may continue to be made ("PRIOR CONTRACTS"). Prior contracts were sold during the period from March, 1998 until May, 2000. This Prospectus principally describes the contract offered by this Prospectus but also describes the prior contracts. The principal differences between the contract offered by this Prospectus and the prior contracts relate to the availability of additional fixed investment options available under the prior contracts, the minimum initial purchase payment, and certain charges made by us. For information concerning prior contracts, see Appendix E. PURCHASE PAYMENT LIMITS. The minimum initial purchase payment is $25,000. Subsequent purchase payments must be at least $30. Purchase payments normally may be made at any time. If a purchase payment would cause your contract value to exceed $1,000,000, or your contract value already exceeds $1,000,000, you must obtain our approval in order to make the payment. If permitted by state law, we may cancel your contract if you have made no purchase payments for two years, your contract value is less than $2,000 and your purchase payments over the life of your contract, minus your withdrawals over the life of the contract, is less than $2,000. INVESTMENT OPTIONS. Upon issuance of the contract, purchase payments may be allocated among up to seventeen of the available investment options (including the one fixed account investment option). After the contract is issued, there is no limit on the number of investment options to which you may allocate purchase payments. Currently, fifty-nine Variable Account investment options and one fixed account investment option are available under the contract. Each of the Variable Account investment options is a sub-account of the Variable Account that invests in Series I shares (formerly referred to as "Class A shares") of a corresponding portfolio of the Trust. A full description of each Trust portfolio is in the accompanying Prospectus of the Trust. The portion of your contract value in the Variable Account and monthly variable annuity payments will reflect the investment performance of the sub-accounts selected. Purchase payments may also be allocated to the one-year fixed investment option. Under the fixed account investment option, we guarantee the principal value of purchase payments and the rate of interest credited to the investment account for the term of the guarantee period. Subject to certain regulatory limitations, we may elect to add, subtract or substitute investment options. Allocating assets 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 assets 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 contract will be more volatile since these investment options may react similarly to business or market specific events. Examples of business or market sectors where this risk historically has been and may continue to be particularly high include: (a) technology related businesses, including internet related businesses, (b) small cap securities and (c) foreign securities. The Company does not provide advice regarding appropriate investment allocations, please discuss this matter with your financial adviser. 3 TRANSFERS. During the accumulation period, you may transfer your contract values among any of the investment options. During the pay-out period, you may transfer your allocations among the Variable Account investment options, but transfers from Variable Account options to the fixed account option or from the fixed account option to Variable Account options are not permitted. WITHDRAWALS. During the accumulation period, you may withdraw all or a portion of your contract value. The amount you withdraw from any investment account must be at least $300 or, if less, your entire balance in that investment account. If a partial withdrawal would reduce your contract value to less than $300, we will treat your withdrawal request as a request to withdraw all of your contract value. An administration fee may apply to your withdrawal. A withdrawal may be subject to income tax and a 10% penalty tax. A systematic withdrawal plan service is available under the contract. DEATH BENEFITS. We will pay the death benefit to your BENEFICIARY if you die during the accumulation period. If a contract is owned by more than one person, then the surviving owner will be deemed the beneficiary of the deceased owner. No death benefit is payable on the death of any ANNUITANT (a natural person or persons to whom ANNUITY BENEFIT PAYMENTS are made and whose life is used to determine the duration of annuity benefit payments involving life contingencies), except that if any owner is not a natural person, the death of any annuitant will be treated as the death of an owner. The amount of the death benefit will be calculated as of the date on which our Annuity Service Office receives written notice and proof of death and all required claim forms. If the annuitant dies after the maturity date and annuity payments have been selected based on an annuity option providing for payments for a guaranteed period, we will make the remaining guaranteed payments to the beneficiary. ANNUITY BENEFIT PAYMENTS. We offer a variety of fixed and variable annuity benefit payment options. Periodic annuity benefit payments will begin on the "MATURITY DATE" (the date marking the end of the accumulation period and the beginning of the pay-out period). You select the maturity date, the frequency of payment and the type of annuity benefit payment option. Annuity benefit payments are made to the annuitant. TEN DAY REVIEW. You may cancel your contract by returning it to us within 10 days of receiving it. MODIFICATION. The contract or certificate may not be modified by us without your consent except to make it conform to any law or regulation or ruling issued by a governmental agency. However, on 60 days' notice to the group holder, we may change the administration fees, mortality and expense risk charges, annuity purchase rates and the market value charge as to any certificate issued after the effective date of the modification. TAXATION. Generally all earnings on the underlying investments are tax-deferred until withdrawn or until annuity benefit payments begin. Normally, a portion of each annuity benefit payment is taxable as ordinary income. Partial and total withdrawals generally are taxable as ordinary income to the extent contract value prior to the withdrawal exceeds the purchase payments you have made, minus any prior withdrawals that were not taxable. A 10% penalty tax may apply to withdrawals and annuity benefit payments prior to age 59 1/2. DISCONTINUANCE OF NEW OWNERS. In the case of group contracts, on thirty days' notice to the group holder, we may limit or discontinue acceptance of new applications and the issuance of new certificates. CHARGES AND DEDUCTIONS. The following table and Example are designed to assist you in understanding the various costs and expenses related to the contract. The table reflects expenses of the Variable Account and the underlying portfolios of the Trust. In addition to the items listed in the following table, premium taxes may be applicable to certain contracts. The items listed under "Separate Account Annual Expenses" are more completely described in this Prospectus under "Charges and Deductions.". The items listed under "Trust Annual Expenses" are described in detail in the accompanying Trust Prospectus. See Appendix E for a discussion of different charges and deductions applicable to prior contracts. ANNUAL ADMINISTRATION FEE................................................. $0 TRANSFER FEE ................................................. None
(We reserve the right, however, to impose a charge in the future for transfers in excess of 12 per year. The amount of this fee has not yet been determined.) 4 SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average investment account value) Mortality and expense risks fee.......................................... 0.30% Administration fee....................................................... 0.15% Total Separate Account Annual Expense.................................... 0.45%
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)(A)
TOTAL TRUST SERIES I OTHER EXPENSES ANNUAL EXPENSES MANAGEMENT RULE 12b-1 (AFTER EXPENSE (AFTER EXPENSE TRUST PORTFOLIO FEES FEES 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%(B) Science & Technology 0.916%(E) 0.150% 0.060% 1.13% International Small Cap 0.950% 0.150% 0.500% 1.60% Health Sciences 0.942%(E) 0.150% 0.350% 1.44%(B) 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%(B) Mid Cap Opportunities 0.850% 0.150% 0.440% 1.44%(B) Mid Cap Stock 0.775% 0.150% 0.080% 1.00% All Cap Growth 0.785% 0.150% 0.060% 0.99% Financial Services 0.800% 0.150% 0.260% 1.21%(B) Overseas 0.800% 0.150% 0.150% 1.10% International Stock 0.838%(E) 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%(B) Global Equity 0.750% 0.150% 0.110% 1.01% Strategic Growth 0.750% 0.150% 0.200% 1.10%(B) 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%(B) Capital Opportunities 0.750% 0.150% 0.500%(G) 1.40%(B)(G) Quantitative Equity 0.599% 0.150% 0.060% 0.81% Blue Chip Growth 0.702%(E) 0.150% 0.060% 0.91% Utilities 0.750% 0.150% 0.500%(G) 1.40%(B)(G) Real Estate Securities 0.645% 0.150% 0.070% 0.87% Small Company Value 0.891%(E) 0.150% 0.110% 1.15% Mid Cap Value 0.800% 0.150% 0.200% 1.15%(B) 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%(B) 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%(E) 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%
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TOTAL TRUST SERIES I OTHER EXPENSES ANNUAL EXPENSES MANAGEMENT RULE 12b-1 (AFTER EXPENSE (AFTER EXPENSE TRUST PORTFOLIO FEES FEES REIMBURSEMENT) REIMBURSEMENT) ------------------------------ ---------- ---------- -------------- --------------- 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 0.375% 0.150% 0.075% 0.60% International Index 0.400% 0.150% 0.050% 0.60% Mid Cap Index 0.375% 0.150% 0.075% 0.60% Total Stock Market Index 0.375% 0.150% 0.060% 0.59% 500 Index 0.375% 0.150% 0.050% 0.57% Lifestyle Aggressive 1000 0.065% 0.000% 0.010% 0.075%(C) Lifestyle Growth 820 0.054% 0.000% 0.021% 0.075%(C) Lifestyle Balanced 640 0.054% 0.000% 0.021% 0.075%(C) Lifestyle Moderate 460 0.062% 0.000% 0.013% 0.075%(C) Lifestyle Conservative 280 0.069% 0.000% 0.006% 0.075%(C)
(A) 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. (B) Annualized; For the period April 30, 2001 (commencement of operations) to December 31, 2001. (C) The investment adviser to the Trust, Manufacturers Securities Services, LLC ("MSS" or the "Adviser") has voluntarily agreed to pay certain expenses of each Lifestyle Trust as noted below. (For purposes of the expense reimbursement, total expenses of a Lifestyle Trust includes the advisory fee but excludes (a) the expenses of the Underlying Portfolios, (b) taxes, (c) portfolio brokerage, (d) interest, (e) litigation and (f) indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the Trust's business.) If total expenses of a Lifestyle Trust (absent reimbursement) exceed 0.075%, the Adviser will reduce the advisory fee or reimburse expenses of that Lifestyle Trust by an amount such that total expenses of the Lifestyle Trust equal 0.075%. If the total expenses of the Lifestyle Trust (absent reimbursement) are equal to or less than 0.075%, then no expenses will be reimbursed by the Adviser. This voluntary expense reimbursement may be terminated at any time. If such expense reimbursement was not in effect, Total Trust Annual Expenses would be higher (based on current advisory fees and the Other Expenses of the Lifestyle Trusts for the fiscal year ended December 31, 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%
6 (D) Each Lifestyle Trust will invest in shares of the Underlying Portfolios. Therefore, each Lifestyle Trust will bear its pro rata share of the fees and expenses incurred by the Underlying Portfolios in which it invests, and the investment return of each Lifestyle Trust will be net of the Underlying Portfolio expenses. Each Lifestyle Portfolio must bear its own expenses. However, the Adviser is currently paying certain of these expenses as described in footnote (C) above. (E) 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: 7
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. (F) 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. (G) 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. EXAMPLE(A) You would pay the following expenses on a $1,000 investment, assuming (a) a 5% annual return on assets and (b) all Trust portfolio expense reimbursements remain in effect for the time periods illustrated, regardless of whether you annuitized as provided in the contract, surrendered the contract or did not surrender the contract at the end of the applicable time period: Contracts Investing in Series I Shares (Formerly Referred to as Class A Shares) of the Trust
TRUST PORTFOLIO 1 YEAR 3 YEAR 5 YEAR 10 YEAR --------------- ------ ------ ------ ------- Internet Technologies 17 54 93 202 Pacific Rim Emerging Markets 17 53 91 199 TELECOMMUNICATIONS 19 59 102 221 Science & Technology 16 50 86 188 International Small Cap 21 64 110 238 Health Sciences 19 59 102 221 Aggressive Growth 15 48 83 181 Emerging Small Company 16 50 86 187 Small Company Blend 16 51 88 192 Dynamic Growth 16 48 83 182 Mid Cap Growth 19 58 100 216 Mid Cap Opportunities 19 59 102 221 Mid Cap Stock 15 46 79 174 All Cap Growth 15 46 79 172
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TRUST PORTFOLIO 1 YEAR 3 YEAR 5 YEAR 10 YEAR --------------- ------ ------ ------ ------- FINANCIAL SERVICES 17 52 90 197 OVERSEAS 16 49 84 185 INTERNATIONAL STOCK 16 51 88 191 INTERNATIONAL VALUE 16 50 87 190 CAPITAL APPRECIATION 17 52 90 195 STRATEGIC OPPORTUNITIES 14 43 74 164 QUANTITATIVE MID CAP 14 43 74 162 GLOBAL EQUITY 15 46 80 175 STRATEGIC GROWTH 16 49 84 185 GROWTH 14 43 74 164 LARGE CAP GROWTH 15 45 78 171 ALL CAP VALUE 19 59 101 219 CAPITAL OPPORTUNITIES 19 58 100 217 QUANTITATIVE EQUITY 13 40 69 152 BLUE CHIP GROWTH 14 43 74 164 UTILITIES 19 58 100 217 REAL ESTATE SECURITIES 13 42 72 159 SMALL COMPANY VALUE 16 50 87 190 MID CAP VALUE 16 50 87 190 VALUE 13 41 71 157 TACTICAL ALLOCATION 18 55 95 206 FUNDAMENTAL VALUE 15 48 83 181 Growth & Income 12 37 65 143 U.S. Large Cap Value 14 44 76 166 Equity-Income 14 43 74 164 Income & Value 13 42 72 159 Balanced 13 40 69 152 High Yield 13 41 71 156 Strategic Bond 13 42 72 158 Global Bond 14 45 78 170 Total Return 13 40 69 152 Investment Quality Bond 12 38 65 144 Diversified Bond 13 40 70 153 U.S. Government Securities 12 38 66 147 Money Market 10 32 55 122 Small Cap Index 11 33 58 128 International Index 11 33 58 128 Mid Cap Index 11 33 58 128 Total Stock Market Index 11 33 57 127 500 Index 10 32 56 125 Lifestyle Aggressive 1000 5 17 29 66 Lifestyle Growth 820 5 17 29 66 Lifestyle Balanced 640 5 17 29 66 Lifestyle Moderate 460 5 17 29 66 Lifestyle Conservative 280 5 17 29 66
(A) Does not reflect the $30 administration fee which is applicable to certain contracts described in Appendix E. For purposes of presenting the foregoing Example, we have made certain assumptions. We have assumed that, where applicable, the maximum deferred sales load is deducted, that there are no transfers or other transactions and that the "Other Expenses" line item under "Trust Annual Expenses" will remain the same (including any voluntary expense reimbursement continuing in effect). Those assumptions, (each of which is mandated by the SEC in an attempt to provide prospective investors with standardized data with which to compare various annuity contracts) do not take into account certain features of the contract and prospective changes in the size of the Trust which may operate to change the expenses borne by contract owners. CONSEQUENTLY, THE AMOUNTS LISTED IN THE EXAMPLES ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES BORNE BY 9 CONTRACT OWNERS MAY BE GREATER OR LESSER THAN THOSE SHOWN. LOCATION OF FINANCIAL STATEMENTS OF REGISTRANT AND DEPOSITOR Our financial statements and those of the Variable Account may be found in the Statement of Additional Information. GENERAL INFORMATION ABOUT US, THE VARIABLE ACCOUNT AND THE TRUST THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) We are an indirect subsidiary of MFC. We are a stock life insurance company incorporated in Maine on August 20, 1955 and redomesticated under the laws of Michigan on December 30, 1992. Our annuity service office is located at 500 Boylston Street, Suite 400, Boston, Massachusetts 02116-3739. 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 and The Manufacturers Life Insurance Company (U.S.A.) have received the following ratings from independent rating agencies: 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 Aa2 Moody's Excellent in financial strength; 3rd 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 The Manufacturers Life Insurance Company (U.S.A.)'s ability to honor the death benefit, fixed account guarantees and life annuitization guarantees but not specifically to its products, the performance (return) of these products, the value of any investment in these products upon withdrawal or to individual securities held in any portfolio. THE VARIABLE ACCOUNT The Variable Account is one of our separate accounts that invests the contract values you allocate to it in the Trust portfolio(s) you select. The Variable Account was established on August 24, 1984 as a separate account of The Manufacturers Life Insurance Company of North America ("Manulife North America"), another wholly-owned subsidiary of MFC which on January 1, 2002 merged into Manulife USA As a result of this merger, Manulife USA became the owner of all of Manulife North America's assets, including the assets of the Variable Account and assumed all of Manulife North America's obligations including those under the contracts. The merger had no other effect on the terms and conditions of the contracts or on your allocations among investment options. The income, gains and losses, whether or not realized, from assets of the Variable Account are credited to or charged against the Variable Account without regard to our other income, gains or losses. Nevertheless, all obligations arising under the contracts are our general corporate obligations. Assets of the Variable Account may not be charged with liabilities arising out of any of our other business. The Variable 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. Registration under the 1940 Act does not involve supervision by the SEC of the management or investment policies or practices of the Variable Account. If we determine that it would be in the best interests of persons 10 having voting rights under the contracts, the Variable Account may be operated as a management company under the 1940 Act or it may be deregistered if 1940 Act registration were no longer required. The Variable Account currently has fifty-nine sub-accounts. We reserve the right, subject to compliance with applicable law, to add other sub-accounts, eliminate existing sub-accounts, combine sub-accounts or transfer assets in one sub-account to another sub-account that we, or an affiliated company, may establish. We will not eliminate existing sub-accounts or combine sub-accounts without the prior approval of the appropriate state or federal regulatory authorities. THE TRUST The Trust is a mutual fund in which the Variable Account invests. The assets of each sub-account of the Variable Account are invested in Series I shares of a corresponding investment portfolio of the Trust. The Trust is registered under the 1940 Act as an open-end management investment company. Each of the portfolios is diversified for purposes of the 1940 Act, except for the Dynamic Growth Trust, Global Bond Trust, Utilities, Health Sciences, Real Estate Securities Trust and the five Lifestyle Trusts which are non-diversified. The Trust receives investment advisory services from Manufacturers Securities Services, LLC ("MSS"). "). Each of the Trust portfolios, except the Lifestyle Trusts, are subject to a Rule 12b-1 fee of 0.15% of a portfolio's Series I net assets. 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.
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 Advisors Financial Services Trust Fundamental Value Trust The Dreyfus Corporation All Cap Value Trust 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
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SUBADVISER PORTFOLIO Massachusetts Financial Services Company Strategic Growth Trust Capital Opportunities Trust Utilities Trust Miller Anderson & Sherrerd, LLP Value Trust High Yield Trust Munder Capital Management Internet Technologies Trust Pacific Investment Management Company Global Bond Trust Total Return Trust Putnam Investment Management, 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) 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. 12 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"). 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. 13 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 asset,s under normal market conditions, principally in common stocks of companies that are likely to benefit from new or innovative products, services or processes, as well as those that have experienced above average, long-term growth in earnings and have excellent prospects for future growth. The FINANCIAL SERVICES TRUST seeks growth of capital by investing primarily in common stocks of financial companies. During normal market conditions, at least 65% (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 (formerly, Mid Cap Blend Trust) seeks growth of capital by investing primarily in common stocks of U.S. issuers and securities convertible into or carrying the right to buy common stocks. The QUANTITATIVE MID CAP TRUST seeks long-term growth of capital by investing, under normal market conditions, at least 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. 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. 14 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. 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. 15 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.* 16 The 500 INDEX TRUST seeks to approximate the aggregate total return of a broad U.S. domestic equity market index by attempting to track the performance of the S&P 500 Composite Stock Price Index.* The 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. A full description of the Trust, including the investment objectives, policies and restrictions of, and the risks relating to investment in, each portfolio is contained in the Trust Prospectus for the Trust which we provided you along with this Prospectus. The Trust prospectus should be read carefully before allocating purchase payments to a subaccount. If the shares of a Trust portfolio are no longer available for investment or in our judgment investment in a Trust portfolio becomes inappropriate, we may eliminate the shares of a portfolio and substitute shares of another portfolio of the Trust or another open-end registered investment company. Substitution may be made with respect to both existing investments and the investment of future purchase payments. However, we will make no such substitution without first notifying you and obtaining approval of the SEC (to the extent required by the 1940 Act). You instruct us how to vote Trust shares. We will vote shares of the Trust portfolios held in the Variable Account at the Trust's shareholder meetings according to voting instructions received from the persons having the voting interest under the contracts. We will determine the number of portfolio shares for which voting instructions may be given not more than 90 days prior to the meeting. Trust proxy material will be distributed to each person having the voting interest under the contract together with appropriate forms for giving voting instructions. We will vote all portfolio shares that we hold (including our own shares and those we hold in the Variable Account for contract owners in proportion to the instructions so received. During the accumulation period, the contract owner has the voting interest under a contract. During the pay-out period, the annuitant has the voting interest under a contract. We reserve the right to make any changes in the voting rights described above that may be permitted by the Federal securities laws, regulations or 17 interpretations thereof. For further information on voting interests under the contract see "Voting Interests" in this prospectus. DESCRIPTION OF THE CONTRACT ELIGIBLE GROUPS AND INDIVIDUALS The Contracts are designed primarily as a funding vehicle for "asset based fee arrangements." The contracts are designed primarily as funding vehicles for "asset based fee arrangements" offered by brokerage firms which may charge an additional fee for their services. We will treat any such fees assessed against the contract as partial withdrawals from the contract. See "Federal Tax Matters" for further information on the tax implications of assessing such fees against the contract. Usually, a group certificate will be issued. An individual contract is intended for use where a group contract is not available. Group contracts have been issued to the Venture Trust, a trust established with United Missouri Bank, N.A., Kansas City, Missouri, as group holder for groups comprised of persons who have brokerage accounts with brokers having selling agreements with Manulife Financial Services, LLC, the principal underwriter of the contracts. An eligible member of a group to which a group contract has been issued may become an owner under the contract, or a person may purchase an individual contract, where available, by submitting a completed application and a minimum purchase payment. A certificate summarizing the rights and benefits of the owner under the group contract, or an individual contract, may be issued to an applicant acceptable to us. We reserve the right to decline to issue a certificate or contract to any person in our sole discretion. All rights and privileges under a group contract may be exercised by each owner as to his or her interest unless expressly reserved to the group holder. Provisions of any plan in connection with which the contract was issued may restrict an owner's ability to exercise contractual rights and privileges. ACCUMULATION PERIOD PROVISIONS Initial purchase payments usually must be at least $25,000, subsequent ones at least $30, and total payments no more than $1 million (without our approval). PURCHASE PAYMENTS Your purchase payments are made to us at our Annuity Service Office. The minimum initial purchase payment is $25,000. Subsequent purchase payments must be at least $30. Purchase payments may be made at any time and must be in U.S. dollars. We may provide for purchase payments to be automatically withdrawn from your bank account on a periodic basis. If a purchase payment would cause your contract value to exceed $1,000,000 or your contract value already exceeds $1,000,000, you must obtain our approval in order to make the payment. If permitted by state law, we may cancel a contract at the end of any two consecutive contract years in which no purchase payments have been made, if both: - the total purchase payments made over the life of the contract, less any withdrawals, are less than $2,000; and - the contract value at the end of such two year period is less than $2,000. We may vary the cancellation of contract privileges in certain states in order to comply with state insurance laws and regulations. If we cancel your contract, we will pay you the contract value computed as of the valuation period during which the cancellation occurs, minus the amount of any outstanding loan and minus the annual $30 administration fee. The amount paid will be treated as a withdrawal for federal tax purposes and thus may be subject to income tax and to a 10% penalty tax (see "FEDERAL TAX MATTERS"). Purchase payments are allocated among the investment options in accordance with the percentages you designate. You may change the allocation of subsequent purchase payments at any time by writing us or by telephone. For information relating to the minimum initial purchase payment under prior contracts, see Appendix E. 18 ACCUMULATION UNITS The value of an investment account is measured in "accumulation units," which vary in value with the performance of the underlying Trust portfolio. During the accumulation period, we will establish an "INVESTMENT ACCOUNT" for you for each Variable Account investment option to which you allocate a portion of your contract value. Amounts are credited to those investment accounts in the form of "ACCUMULATION UNITS" (units of measure used to calculate the value of the variable portion of your contract during the accumulation period). The number of accumulation units to be credited to each investment account is determined by dividing the amount allocated to that investment account by the value of an accumulation unit for that investment account next computed after the purchase payment is received at our Annuity Service Office complete with all necessary information or, in the case of the first purchase payment, pursuant to the procedures described below. Initial purchase payments received by mail will usually be credited in the valuation period during which they are received at our Annuity Service Office, and in any event not later than two business days after our receipt of all information necessary for issuing the contract. Subsequent purchase payments will be credited on the business day they are received at our Annuity Service Office. You will be informed of any deficiencies preventing processing if your contract cannot be issued. If the deficiencies are not remedied within five business days after receipt, your purchase payment will be returned promptly, unless you specifically consent to our retaining your purchase payment until all necessary information is received. Initial purchase payments received by wire transfer from broker-dealers will be credited in the valuation period during which the payment was received by us if the broker-dealers have made special arrangements with us. VALUE OF ACCUMULATION UNITS The value of your accumulation units will vary from one business day to the next depending upon the investment results of the investment options you select. The value of an accumulation unit for each sub-account was arbitrarily set at $10 or $12.50 for the first business day under other contracts we have issued. The value of an accumulation unit for any subsequent business day is determined by multiplying the value of an accumulation unit for the immediately preceding business day by the net investment factor for such sub-account (described below) for the business day for which the value is being determined. Accumulation units will be valued as of the end of each business day. NET INVESTMENT FACTOR The net investment factor is an index used to measure the investment performance of a sub-account from one valuation period to the next. The net investment factor may be greater or less than or equal to one; therefore, the value of an accumulation unit may increase, decrease or remain the same. The net investment factor for each sub-account for any valuation period is determined by dividing (a) by (b) and subtracting (c) from the result: Where (a) is: - the net asset value per share of a portfolio share held in the sub-account determined at the end of the current valuation period, plus - The per share amount of any dividend or capital gain distributions made by the portfolio on shares held in the sub-account if the "ex-dividend" date occurs during the current valuation period. Where (b) is the net asset value per share of a portfolio share held in the sub-account determined as of the end of the immediately preceding valuation period. Where (c) is a factor representing the charges deducted from the sub-account on a daily basis for administrative expenses, a portion of the distribution expenses, and mortality and expense risks. That factor is equal on an annual basis to 0.45% (0.15% for administrative expenses and 0.30% for mortality and expense risks). TRANSFERS AMONG INVESTMENT OPTIONS Contract value may be transferred among investment options. During the accumulation period, you may transfer amounts among the variable account investment options and from those investment options to the fixed account investment options at any time upon written notice to us or by telephone if you authorize us in writing to accept your telephone transfer requests. Accumulation units will be canceled from the investment account from which you transfer amounts and credited to the investment account to which you transfer amounts. Your contract value on the date of the 19 transfer will not be affected by a transfer. You must transfer at least $300 or, if less, the entire value of the investment account. If after the transfer the amount remaining in the investment account is less than $100, then we will transfer the entire amount instead of the requested amount. We reserve the right to limit, upon notice, the maximum number of transfers you may make to one per month or six at any time within a contract year. In addition, we reserve the right to defer a transfer at any time we are unable to purchase or redeem shares of the Trust portfolios. We also reserve the right to modify or terminate the transfer privilege at any time (to the extent permitted by applicable law). Currently, we do not impose a charge for transfer requests. The first twelve transfers in a contract year are free of any transfer charge. For each additional transfer in a contract year, we do not currently assess a charge but reserve the right (to the extent permitted by your contract) to assess a reasonable charge to reimburse us for the expenses of processing transfers. Where permitted by law, we may accept your authorization for a third party to make transfers for you subject to our rules. However, the contract is not designed for professional market timing organizations or other entities or persons engaging in programmed, frequent or large exchanges (collectively, "market timers") to speculate on short-term movements in the market since such activity may be disruptive to the Trust portfolios and increase their transaction costs. Therefore, in order to prevent excessive use of the exchange privilege, we reserve the right to (a) reject or restrict any specific purchase and exchange requests and (b) impose specific limitations with respect to market timers, including restricting exchanges by market timers to certain variable investment options (transfers by market timers into or out of fixed investment options is not permitted). MAXIMUM NUMBER OF INVESTMENT OPTIONS Upon issuance of the contract, purchase payments may be allocated among up to seventeen of the available investment options (including the one fixed account investment option). After the contract is issued, there is no limit on the number of investment options to which you may allocate purchase payments. TELEPHONE TRANSACTIONS Telephone transfers and withdrawals are permitted. You are permitted to request transfers and withdrawals by telephone. We will not be liable for following instructions communicated by telephone that we reasonably believe to be genuine. To be permitted to request a withdrawal by telephone, you must elect the option on the Application. (If you do not initially elect an option in the Application form, you may request authorization by executing an appropriate authorization form that we will provide you upon request.) We will employ reasonable procedures to confirm that instructions communicated by telephone are genuine and may only be liable for any losses due to unauthorized or fraudulent instructions where we fail to employ our procedures properly. Such procedures include the following. Upon telephoning a request, you will be asked to provide information that verifies that it is you calling. For both your and our protection, we will tape record all conversations with you. All telephone transactions will be followed by a confirmation statement. SPECIAL TRANSFER SERVICES - DOLLAR COST AVERAGING Dollar Cost Averaging and Asset Rebalancing programs are available. We administer a Dollar Cost Averaging ("DCA") program. If you enter into a DCA agreement, you may instruct us to transfer monthly a predetermined dollar amount from any sub-account or the one year fixed account investment option to other sub-accounts until the amount in the sub-account from which the transfer is made or one year fixed account investment option is exhausted. The DCA program is generally suitable if you are making a substantial deposit and desire to control the risk of investing at the top of a market cycle. The DCA program allows investments to be made in substantially equal installments over time in an effort to reduce that risk. If you are interested in the DCA program, you may elect to participate in the program on the application or by separate application. You may obtain a separate application and full information concerning the program and its restrictions from your securities dealer or our Annuity Service Office. There is no charge for participation in the DCA program. ASSET REBALANCING PROGRAM We administer an Asset Rebalancing Program which enables you to specify the percentage levels you would like to maintain in particular portfolios. Your contract value will be automatically rebalanced pursuant to the schedule described below to maintain the indicated percentages by transfers among the portfolios. The entire value of the variable investment accounts must be included in the Asset Rebalancing Program. Other investment programs, such as the DCA program, or other transfers or withdrawals may not work in concert with 20 the Asset Rebalancing Program. Therefore, you should monitor your use of these other programs and any other transfers or withdrawals while the Asset Rebalancing Program is being used. If you are interested in the Asset Rebalancing Program, you may obtain a separate application and full information concerning the program and its restrictions from your securities dealer or our Annuity Service Office. There is no charge for participation in the Asset Rebalancing Program. Asset rebalancing will only be permitted on the following time schedules: - quarterly on the 25th day of the last month of the quarter (or the next business day if the 25th is not a business day); - semi-annually on June 25th and December 26th (or the next business day if these dates are not business days); or - annually on December 26th (or the next business day if December 26th is not a business day). WITHDRAWALS During the accumulation period, you may withdraw all or a portion of your contract value upon written request (complete with all necessary information) to our Annuity Service Office. You may make withdrawals by telephone if you have authorized telephone withdrawals, as described above under "Telephone Transactions." For certain qualified contracts, exercise of the withdrawal right may require the consent of the qualified plan participant's spouse under the Internal Revenue Code of 1986, as amended (the "CODE"). In the case of a total withdrawal, we will pay the contract value as of the date of receipt of the request at our Annuity Service Office less any unpaid loans, and the contract will be canceled. In the case of a partial withdrawal, we will pay the amount requested and cancel that number of accumulation units credited to each investment account equal in value to the amount withdrawn from that investment account. You may withdraw all or a portion of your contract value, but may incur tax liability as a result. When making a partial withdrawal, you should specify the investment options from which the withdrawal is to be made. The amount requested from an investment option may not exceed the value of that investment option. If you do not specify the investment options from which a partial withdrawal is to be taken, the withdrawal will be taken from the variable account investment options until exhausted and then from the fixed account investment options. If the partial withdrawal is less than the total value in the variable account investment options, the withdrawal will be taken proportionately from all of your variable account investment options. For rules governing the order and manner of withdrawals from the fixed account investment option (see "FIXED ACCOUNT INVESTMENT OPTION"). There is no limit on the frequency of partial withdrawals; however, the amount withdrawn must be at least $300 or, if less, the entire balance in the investment option. If after the withdrawal (and deduction of any withdrawal charge) the amount remaining in the investment option is less than $100, we will treat the partial withdrawal as a withdrawal of the entire amount held in the investment option. If a partial withdrawal plus any applicable withdrawal charge would reduce the contract value to less than $300, we will treat the partial withdrawal as a total withdrawal of the contract value. The amount of any withdrawal from the variable account investment options will be paid promptly, and in any event within seven calendar days of receipt of the request, complete with all necessary information at our Annuity Service Office, except that we reserve the right to defer the right of withdrawal or postpone payments for any period when: - the New York Stock Exchange is closed (other than customary weekend and holiday closings), - trading on the New York Stock Exchange is restricted, - an emergency exists as a result of which disposal of securities held in the Variable Account is not reasonably practicable or it is not reasonably practicable to determine the value of the Variable Account's net assets, or - 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 trading is restricted or an emergency exists. 21 TELEPHONE REDEMPTIONS. You may request the option to withdraw a portion of your contract value by telephone by completing a separate application. We reserve the right to impose maximum withdrawal amounts and procedural requirements regarding this privilege. For additional information on Telephone Redemptions see "Telephone Transactions" above. Withdrawals from the contract may be subject to income tax and a 10% penalty tax (see "FEDERAL TAX MATTERS" below). Withdrawals are permitted from contracts or certificates issued in connection with Section 403(b) qualified plans only under limited circumstances (see "APPENDIX D QUALIFIED PLAN TYPES" below). SPECIAL WITHDRAWAL SERVICES - THE INCOME PLAN Systematic "Income Plan" withdrawals are available. We administer an Income Plan ("IP") which permits you to pre-authorize a periodic exercise of the contractual withdrawal rights described above. After entering into an IP agreement, you may instruct us to withdraw a level dollar amount from specified investment options on a periodic basis. The total of IP withdrawals in a contract year is limited to not more than 20% of the purchase payments made. If an additional withdrawal is made from a contract participating in an IP, the IP will terminate automatically and may be reinstated only on or after the next contract anniversary. The IP is not available to contracts participating in the dollar cost averaging program or for which purchase payments are being automatically deducted from a bank account on a periodic basis. IP withdrawals will be free of withdrawal and market value charges. IP withdrawals, like other withdrawals, may be subject to income tax and a 10% penalty tax (see "FEDERAL TAX MATTERS"). If you are interested in an IP, you may obtain a separate application and full information concerning the program and its restrictions from your securities dealer or our Annuity Service Office. The IP program is free. DEATH BENEFIT DURING ACCUMULATION PERIOD If you die during the accumulation period, your beneficiary will receive a death benefit that might exceed your contract value. See Appendix E for information on the death benefit provisions under prior contracts. IN GENERAL. The following discussion applies principally to contracts that are not issued in connection with qualified plans, i.e., "NON-QUALIFIED CONTRACTS." Tax law requirements applicable to qualified plans, and the tax treatment of amounts held and distributed under such plans, are quite complex. Accordingly, if your contract is to be used in connection with a qualified plan, you should seek competent legal and tax advice regarding the suitability of the contract for the situation involved and the requirements governing the distribution of benefits, including death benefits, from a contract used in the plan. AMOUNT OF DEATH BENEFIT. If an owner dies during the accumulation period, the death benefit will be the greater of the contract value or the minimum death benefit. The minimum death benefit is equal to the sum of all purchase payments made by or on behalf of you minus a reduction for any partial withdrawals made by or on behalf of you. The amount of the reduction is the greater of: - the amount of the partial withdrawal, or - the amount obtained by multiplying the minimum death benefit prior to the withdrawal by the ratio of the partial withdrawal to the contract value prior to the withdrawal. Partial withdrawals include amounts applied under an annuity option under the contract. If you have any debt under the contract, the death benefit otherwise payable is reduced by such debt. The determination of the death benefit will be made on the date written notice and proof of death, as well as all required claims forms, are received at our Annuity Service Office. No person is entitled to the death benefit until this time. 22 PAYMENT OF DEATH BENEFIT. We will pay the death benefit to the beneficiary if any contract owner dies before the maturity date. The death benefit may be taken in the form of a lump sum immediately. If not taken immediately, the contract will continue subject to the following: - The beneficiary will become the owner. - Any excess of the death benefit over the contract value will be allocated to the investment accounts in proportion to their relative values on the date of receipt at our Annuity Service Office of due proof of the owner's death. - No additional purchase payments may be made. - If the deceased owner's spouse is the beneficiary, the spouse continues the contract as the new owner. In such a case, the distribution rules applicable when a contract owner dies will apply when the spouse, as the owner, dies. In addition, a death benefit will be paid upon the death of the spouse. For purposes of calculating the death benefit payable upon the death of the spouse, the death benefit paid upon the first owner's death will be treated as a purchase payment to the contract. - If the beneficiary is not the deceased owner's spouse, distribution of the owner's entire interest in the contract must be made within five years of the owner's death, or alternatively, distribution may be made as an annuity, under one of the annuity options described below under "Annuity Options", which begins within one of the owner's death and is payable over the life of the beneficiary or over a period not extending beyond the life expectancy of the beneficiary. If the distribution is not made as an annuity, upon the death of the beneficiary, the death benefit will equal the contract value and must be distributed immediately in a single sum. - Alternatively, if the contract is not a qualified contract and if the beneficiary is not the deceased owner's spouse, distribution of the owner's entire interest in the contract may be made as a series of withdrawals over the beneficiary's life expectancy. If this form of distribution is selected, the beneficiary may not reduce or stop the withdrawals but may in any year withdraw more than the required amount for that year. If life expectancy withdrawals have been selected and the initial beneficiary dies while value remains in the contract, a successor beneficiary may either take a lump sum distribution of the remaining balance or continue periodic withdrawals according to the original schedule based on the initial beneficiary's life expectancy. If any annuitant is changed and any owner is not a natural person, the entire interest in the contract must be distributed to the owner within five years. The amount distributed will be reduced by charges which would otherwise apply upon withdrawal. A substitution or addition of any owner may result in resetting the death benefit to an amount equal to the contract value as of the date of the change. For purposes of subsequent calculations of the death benefit prior to the maturity date, the contract value on the date of the change will be treated as a payment made on that date. In addition, all payments made and all amounts deducted in connection with partial withdrawals prior to the date of the change will not be considered in the determination of the death benefit. No such change in death benefit will be made if the person whose death will cause the death benefit to be paid is the same after the change in ownership or if ownership is transferred to the owner's spouse. Death benefits will be paid within seven days of the date the amount of the death benefit is determined, as described above, subject to postponement under the same circumstances that payment of withdrawals may be postponed (see "WITHDRAWALS"). In designating beneficiaries you may impose restrictions on the timing and manner of payment of death benefits. The description of death benefits in this prospectus does not reflect any of the restrictions that could be imposed, and it should be understood as describing what will happen if you choose not to restrict death benefits under the contract. If you impose restrictions, those restrictions will govern the payment of the death benefit. PAY-OUT PERIOD PROVISIONS 23 GENERAL Annuity benefits may be paid in several ways. The proceeds of the contract payable on death, withdrawal or the contract maturity date may be applied to the annuity options described below, subject to the distribution of death benefit provisions (see "DEATH BENEFIT DURING ACCUMULATION PERIOD"). Generally, we will begin paying annuity benefits to the annuitant under the contract on the contract's maturity date (the date dividing the accumulation period from the pay-out period). The maturity date is the date specified on the contract or certificate specifications page, unless you change that date. If no date is specified, the maturity date is the maximum maturity date. The maximum maturity date is the first day of the month following the later of the 85th birthday of the oldest annuitant or the tenth contract anniversary. You may specify a different maturity date at any time by written request at least one month before both the previously specified and the new maturity date. The new maturity date may not be later than the maximum maturity date unless we consent. Maturity dates which occur when the annuitant is at an advanced age, e.g., past age 85, may have adverse income tax consequences (see "FEDERAL TAX MATTERS"). Distributions from qualified contracts may be required before the maturity date. You may select the frequency of annuity payments. However, if the contract value at the maturity date is such that a monthly payment would be less than $20, we may pay the contract value, minus any unpaid loans, in one lump sum to the annuitant on the maturity date. ANNUITY OPTIONS Annuity benefit payments are available under the contract on a fixed, variable, or combination fixed and variable basis. Upon purchase of the contract, and at any time during the accumulation period, you may select one or more of the annuity options described below on a fixed and/or variable basis or choose an alternate form of payment acceptable to us. If an annuity option is not selected, we will provide as a default option a life annuity with payments guaranteed for 10 years as described below. Annuity payments will be determined based on the Investment Account Value of each investment option at the maturity date. Internal Revenue Service ("IRS") regulations may preclude the availability of certain annuity options in connection with certain qualified contracts including contracts used in connection with IRAs. Thus, for example, in the case of contracts or certificates issued as IRAs, the co-annuitant referred to in options 2(a) and 2(b) must be your spouse, the life expectancy of the annuitant in option 1(b) and of the joint annuitants in option 2(b) must be at least ten years, and options 3, 4, and 5 are available only with our consent. The following annuity options are guaranteed in the contract. Please read the description of each annuity option carefully. In general, a non-refund life annuity provides the highest level of payments. However, because there is no guarantee that any minimum number of payments will be made, an annuitant may receive only one payment if the annuitant dies prior to the date the second payment is due. Annuities with payments guaranteed for a certain number of years may also be elected but the amount of each payment will be lower than that available under the non-refund life annuity option. OPTION 1(a): NON-REFUND LIFE ANNUITY - An annuity with payments during the lifetime of the annuitant. No payments are due after the death of the annuitant. Because there is no guarantee that any minimum number of payments will be made, an annuitant may receive only one payment if the annuitant dies prior to the date the second payment is due. OPTION 1(b): LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 YEARS - An annuity with payments guaranteed for 10 years and continuing thereafter during the lifetime of the annuitant. Because payments are guaranteed for 10 years, annuity payments will be made to the end of such period if the annuitant dies prior to the end of the tenth year. OPTION 2(a): JOINT & SURVIVOR NON-REFUND LIFE ANNUITY - An annuity with payments during the lifetimes of the annuitant and a designated co-annuitant. No payments are due after the death of the last survivor of the annuitant and co-annuitant. Because there is no guarantee that any minimum number of payments will be made, an annuitant or co-annuitant may receive only one payment if the annuitant and co-annuitant die prior to the date the second payment is due. OPTION 2(b): JOINT & SURVIVOR LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 YEARS - An annuity with payments guaranteed for 10 years and continuing thereafter during the lifetimes of the annuitant and a designated co-annuitant. Because payments are guaranteed for 10 years, annuity 24 payments will be made to the end of such period if both the annuitant and the co-annuitant die prior to the end of the tenth year. In addition to the foregoing annuity options which we are contractually obligated to offer at all times, we currently offer the following annuity options. We may cease offering the following annuity options at any time and may offer other annuity options in the future. OPTION 3: LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 5, 15 OR 20 YEARS - An Annuity with payments guaranteed for 5, 15 or 20 years and continuing thereafter during the lifetime of the annuitant. Because payments are guaranteed for the specific number of years, annuity payments will be made to the end of the last year of the 5, 15 or 20 year period. OPTION 4: JOINT & TWO-THIRDS SURVIVOR NON-REFUND LIFE ANNUITY - An annuity with full payments during the joint lifetime of the annuitant and a designated co-annuitant and two-thirds payments during the lifetime of the survivor. Because there is no guarantee that any minimum number of payments will be made, an annuitant or co-annuitant may receive only one payment if the annuitant and co-annuitant die prior to the date the second payment is due. OPTION 5: PERIOD CERTAIN ONLY ANNUITY FOR 5, 10, 15 OR 20 YEARS - An annuity with payments for a 5, 10, 15 or 20 year period and no payments thereafter. DETERMINATION OF AMOUNT OF THE FIRST VARIABLE ANNUITY BENEFIT PAYMENT The first variable annuity payment is determined by applying that amount of the contract value used to purchase a variable annuity to the annuity tables contained in the contract. The amount of the contract value will be determined as of a date not more than ten business days prior to the maturity date. The amount of the first and all subsequent fixed annuity payments is determined on the same basis using the portion of the contract value used to purchase a fixed annuity. Contract value used to determine annuity payments will be reduced by any applicable premium taxes. The rates contained in the annuity tables vary with the annuitant's sex and age and the annuity option selected. However, for contracts issued in connection with certain employer-sponsored retirement plans sex-distinct tables may not be used. Under such tables, the longer the life expectancy of the annuitant under any life annuity option or the longer the period for which payments are guaranteed under the option, the smaller the amount of the first monthly variable annuity payment will be. ANNUITY UNITS AND THE DETERMINATION OF SUBSEQUENT VARIABLE ANNUITY BENEFIT PAYMENTS Variable annuity benefit payments subsequent to the first will be based on the investment performance of the sub-accounts selected during the pay-out period. The amount of subsequent payments is determined by dividing the amount of the first annuity payment from each sub-account by the annuity unit value of that sub-account (as of the same date the contract value to effect the annuity was determined) to establish the number of annuity units which will thereafter be used to determine payments. This number of annuity units for each sub-account is then multiplied by the appropriate annuity unit value as of a uniformly applied date not more than ten business days before the annuity payment is due, and the resulting amounts for each sub-account are then totaled to arrive at the amount of the payment to be made. The number of annuity units generally remains constant during the annuity benefit payment period. The value of an annuity unit for each sub-account for any valuation period is determined by multiplying the annuity unit value for the immediately preceding valuation period by the net investment factor for that sub-account (see "NET INVESTMENT FACTOR") for the valuation period for which the annuity unit value is being calculated and by a factor to neutralize the assumed interest rate. A 3% assumed interest rate is built into the annuity tables in the contract used to determine the first variable annuity payment. 25 TRANSFERS DURING PAY-OUT PERIOD Some transfers are permitted during the pay-out period, but subject to a few more limitations than during the accumulation period. Once variable annuity benefit payments have begun, you may transfer all or part of the investment upon which those payments are based from one sub-account to another. You must submit your transfer request to our Annuity Service Office at least 30 days before the due date of the first annuity benefit payment to which your transfer will apply. Transfers after the maturity date will be made by converting the number of annuity units being transferred to the number of annuity units of the sub-account to which the transfer is made, so that the next annuity payment if it were made at that time would be the same amount that it would have been without the transfer. Thereafter, annuity benefit payments will reflect changes in the value of the new annuity units. We reserve the right to limit, upon notice, the maximum number of transfers to four per contract year. Once annuity payments have commenced, no transfers may be made from a fixed annuity option to a variable annuity option or from a variable annuity option to a fixed annuity option. In addition, we reserve the right to defer the transfer privilege at any time that we are unable to purchase or redeem shares of the Trust portfolios. We also reserve the right to modify or terminate the transfer privilege at any time in accordance with applicable law. DEATH BENEFIT DURING PAY-OUT PERIOD If an annuity option providing for payments for a guaranteed period has been selected, and the annuitant dies during the pay-out period, we will make the remaining guaranteed payments to the beneficiary. Any remaining payments will be made at least as rapidly as under the method of distribution being used as of the date of the annuitant's death. If no beneficiary is living, we will commute any unpaid guaranteed payments to a single sum (on the basis of the interest rate used in determining the payments) and pay that single sum to the estate of the last to die of the annuitant and the beneficiary. OTHER CONTRACT PROVISIONS TEN DAY RIGHT TO REVIEW You have a ten-day right to cancel your contract. The owner may cancel the contract or certificate by returning it to our Annuity Service Office or agent at any time within ten days after receiving it. Within seven days of receiving a returned contract or certificate, we will pay the owner, the contract value less any debt, computed at the end of the valuation period during which we receive the returned contract. No charge is imposed upon return of the contract within the ten-day right to review period. The ten-day right to review may vary in certain states in order to comply with the requirements of state insurance laws and regulations. When the contract is issued as an individual retirement annuity under the Code Sections 408 and 408A, during the first seven days of the ten-day period, we will return all purchase payments if this is greater than the amount otherwise payable. OWNERSHIP You are entitled to exercise all rights under the contract. In the case of a group contract, you are entitled to exercise all rights under your certificate not reserved to the group holder. The owner is entitled to exercise all rights under the contract. In the case of a group annuity contract, the contract is owned by the group holder; however, all contract rights and privileges not expressly reserved to the group holder may be exercised by each owner as to his or her interest as specified in his or her certificate. During the accumulation period, the owner is the person designated in the contract or certificate specifications page or as subsequently named. During the pay-out period, the annuitant is the owner. If amounts become payable to any beneficiary under the contract, the beneficiary is the owner. In the case of non-qualified contracts, the owner's interest in a contract may be changed, or a certificate or individual contract may be collaterally assigned, at any time prior to the maturity date, subject to the rights of any irrevocable beneficiary. Ownership of a group contract may be assigned at any time by the group holder. Changing the ownership of a contract may be treated as a (potentially taxable) distribution from the contract for federal tax purposes. A collateral assignment will be treated as a distribution from the contract and wll be tax reported as such. (see "FEDERAL TAX MATTERS"). A change of any owner may result in resetting the death benefit to an amount equal to the contract value as of the date of the change and treating such value as a purchase payment made on that date for purposes of computing the amount of the death benefit. Any change of ownership or assignment must be made in writing. We must approve any change. Any assignment and any change, if approved, will be effective as of the date we receive the request at our Annuity Service Office. We assume no liability for any payments made or actions taken before a change is approved or 26 an assignment is accepted or responsibility for the validity or sufficiency of any assignment. An absolute assignment will revoke the interest of any revocable beneficiary. In the case of qualified contracts, ownership of the contract or an owner's interest in the contract generally may not be transferred except by the trustee of an exempt employees' trust which is part of a retirement plan qualified under Section 401 of the Code or as otherwise permitted by applicable IRS regulations. Subject to the foregoing, an owner's interest in a qualified contract may not be sold, assigned, transferred, discounted or pledged as collateral for a loan or as security for the performance of an obligation or for any other purpose to any person other than us. ANNUITANT The "annuitant" is either you or someone you designate. The annuitant is any natural person or persons whose life is used to determine the duration of annuity payments involving life contingencies. The annuitant is entitled to receive all annuity payments under the contract. If the owner names more than one person as an "annuitant," the second person named shall be referred to as "CO-ANNUITANT." The annuitant is as designated on the contract specifications page or in the application, unless changed. On the death of the annuitant prior to the maturity date, the co-annuitant, if living, becomes the annuitant. If there is no living co-annuitant, the owner becomes the annuitant. In the case of certain qualified contracts, there are limitations on the ability to designate and change the annuitant and the co-annuitant. Thus, in the case of an IRA, the owner and annuitant must be the same person and the annuitant cannot be changed. 27 BENEFICIARY The "beneficiary" is the person you designate to receive the death benefit if you die. The beneficiary is the person, persons or entity designated in the contract or certificate specifications page (or as subsequently changed). However, if there is a surviving contract owner, that person will be treated as the beneficiary. The beneficiary may be changed subject to the rights of any irrevocable beneficiary. Any change must be made in writing, approved by us, and (if approved) will be effective as of the date on which written. We assume no liability for any payments made or actions taken before the change is approved. If no beneficiary is living, the contingent beneficiary will be the beneficiary. The interest of any beneficiary is subject to that of any assignee. If no beneficiary or contingent beneficiary is living, the beneficiary is the estate of the deceased contract owner. In the case of certain qualified contracts or certificates, IRS regulations may limit designations of beneficiaries. MODIFICATION We may not modify your contract or certificate without your consent, except to the extent required to make it conform to any law or regulation or ruling issued by a governmental agency. However, in the case of group contracts, on 60 days' notice to the group holder, we may change the administration fees, mortality and expense risks charges, annuity purchase rates and the market value charge as to any certificates issued after the effective date of the modification. The provisions of the contract shall be interpreted so as to comply with the requirements of Section 72(s) of the Code. DISCONTINUANCE OF NEW OWNERS In the case of group contracts, on thirty days' notice to the group holder, we may limit or discontinue acceptance of new applications and the issuance of new certificates. MISSTATEMENT AND PROOF OF AGE, SEX OR SURVIVAL We may require proof of age, sex or survival of any person upon whose age, sex or survival any payment depends. If the age or sex of the annuitant has been misstated, the benefits will be those that would have been provided for the annuitant's correct age and sex. If we have made incorrect annuity payments, the amount of any underpayment will be paid immediately and the amount of any overpayment will be deducted from future annuity payments. FIXED ACCOUNT INVESTMENT OPTION Fixed account investment options are not securities. SECURITIES REGISTRATION. Contract values allocated to the fixed account investment option are held in our general account. Interests in the fixed account investment option are not registered under the Securities Act of 1933, as amended, (the "1933 Act") and our general account is not registered as an investment company under the 1940 Act. Neither interests in the fixed account investment option nor the general account are subject to the provisions or restrictions of the 1933 Act or the 1940 Act. Disclosures relating to interests in the fixed account investment option and the general account nonetheless may be required by the federal securities laws to be accurate. GUARANTEE. Pursuant to a Guarantee Agreement dated March 31, 1996, The Manufacturers Life Insurance Company ("Manulife"), unconditionally guarantees to us, on behalf of and for the benefit of us and owners of fixed annuity contracts we issue, that it will, on demand, make funds available to us for the timely payment of contractual claims under fixed annuity contracts issued after June 27, 1984. This Guarantee covers the fixed portion of the contracts described in this Prospectus. This Guarantee may be terminated by Manulife on notice to us. Termination will not affect Manulife's continuing liability with respect to all fixed annuity contracts issued prior to the termination of the Guarantee except if: - the liability to pay contractual claims under the contracts is assumed by another insurer, or - we are sold and the buyer's guarantee is substituted for the Manulife guarantee. REINSURANCE. Effective June 30, 1995, we entered into a Reinsurance Agreement with Peoples Security Life Insurance Company ("PEOPLES") pursuant to which Peoples reinsures certain amounts with respect to the fixed account portion of the contract described in this Prospectus issued prior to January 1, 1999. Under this Reinsurance Agreement, we remain liable for the contractual obligations of the contracts' fixed accounts and Peoples agrees to reimburse us for certain amounts and obligations in connection with the fixed accounts. Peoples' contractual liability runs solely to us, and no owner shall have any right of action against Peoples. 28 Fixed account investment options guarantee interest of at least 3%. INVESTMENT OPTIONS. Currently, a one-year fixed account investment option is available under the contract. We may offer additional fixed account investment options for any yearly period from two to ten years. Fixed investment accounts provide for the accumulation of interest on purchase payments at guaranteed rates for the duration of the guarantee period. We determine the guaranteed interest rates on new amounts allocated or transferred to a fixed investment account from time-to-time, according to market conditions. In no event will the guaranteed rate of interest be less than 3%. Once an interest rate is guaranteed for a fixed investment account, it is guaranteed for the duration of the guarantee period and we may not change it. INVESTMENT ACCOUNTS. You may allocate purchase payments, or make transfers from the variable investment options, to the one-year fixed account investment option at any time prior to the maturity date. We establish a separate investment account each time you allocate or transfer amounts to the fixed account investment option. Amounts may not be allocated to a fixed account investment option that would extend the guarantee period beyond the maturity date. RENEWALS. At the end of a guarantee period, you may renew the fixed investment account for another one-year guarantee period at the then current interest rate or transfer the amounts to a variable account investment option, all without the imposition of any charge. If you do not specify the renewal option desired, we will renew the one-year guarantee period that has just expired, so long as such period does not extend beyond the maturity date. In the event a renewal would extend beyond the maturity date, we will credit interest up to the maturity date at the then current interest rate for one-year guarantee periods. TRANSFERS. During the accumulation period, you may transfer amounts from the fixed account investment option to the variable account investment options at the end of the guaranteed period; however, amounts may be transferred prior to the end of the guarantee period pursuant to the DCA program. Where there are multiple investment accounts within the one-year fixed account investment option, amounts must be transferred from the one-year fixed account investment option on a first-in-first-out basis. Withdrawals and some transfers from fixed account investment options are permitted during the accumulation period. WITHDRAWALS. You may make total and partial withdrawals of amounts held in the fixed account investment option at any time during the accumulation period. Withdrawals from the fixed account investment option will be made in the same manner and be subject to the same limitations as set forth under "WITHDRAWALS" plus the following provisions also apply to withdrawals from the fixed account investment options: - We reserve the right to defer payment of amounts withdrawn from the fixed account investment option for up to six months from the date we receive the written withdrawal request. If a withdrawal is deferred for more than 30 days pursuant to this right, we will pay interest on the amount deferred at a rate not less than 3% per year (or a higher rate if required by applicable law). - If there are multiple investment accounts under the fixed account investment option, amounts must be withdrawn from those accounts on a first-in-first-out basis. If you do not specify the investment options from which a partial withdrawal is to be taken, the partial withdrawal will be taken from the variable account investment options until exhausted and then from the fixed account investment option. Such withdrawals will be made from the investment options beginning with the shortest guarantee period. Within such a sequence, where there are multiple investment accounts within a fixed account investment option, withdrawals will be made on a first-in-first-out basis. Withdrawals from the contract may be subject to income tax and a 10% penalty tax (see "FEDERAL TAX MATTERS" below). Withdrawals are permitted from contracts or certificates issued in connection with Section 403(b) qualified plans only under limited circumstances (see "APPENDIX D QUALIFIED PLAN TYPES" below). 29 FIXED ANNUITY OPTIONS. Subject to the distribution of death benefits provisions (see "DEATH BENEFIT DURING ACCUMULATION PERIOD" above), on death, withdrawal or the maturity date of the contract, the proceeds may be applied to a fixed annuity option (see "ANNUITY OPTIONS" above). The amount of each fixed annuity payment is determined by applying the portion of the proceeds (minus any applicable premium taxes) applied to purchase the fixed annuity to the appropriate annuity table in the contract. If the annuity table we are then using is more favorable to you, we will substitute that annuity table. We guarantee the dollar amount of fixed annuity payments. CHARGES AND DEDUCTIONS Charges and deductions under the contracts are assessed against purchase payments, contract values or annuity payments. Currently, there are no deductions made from purchase payments, except for premium taxes in certain states. In addition, there are deductions from and expenses paid out of the assets of the Trust portfolios that are described in the accompanying prospectus of the Trust. For information on certain charges and deductions under prior contracts, see Appendix E. ADMINISTRATION FEES We deduct asset-based charges totaling 0.45% on an annual basis for administration, and mortality and expense risks. Fees may be deducted under a contract to compensate us for our costs of providing all administrative services attributable to the contracts and the operations of the Variable Account: A daily charge in an amount equal to 0.15% of the value of each variable investment account on an annual basis is deducted from each sub-account as an administration fee. This asset-based administration fee will not be deducted from the fixed account investment option. The charge will be reflected in the contract value as a proportionate reduction in the value of each variable investment account. Because this portion of the administrative fee is a percentage of assets rather than a flat amount, larger contract values will in effect pay a higher proportion of this portion of the administrative expense than smaller contract values. Even though administrative expenses may increase, we guarantee that we will not increase the amount of the administration fees as to any outstanding individual contracts or any certificates under group contracts issued prior to the effective date of the modification of those fees. REDUCTION OR ELIMINATION OF ANNUAL ADMINISTRATION FEES The amount of the annual administration fee on a contract or certificate may be reduced or eliminated when sales of the contracts or certificates are made to a group of individuals in such a manner that results in savings of administration expenses. We will determine entitlement to such a reduction or elimination of the administration charges in the following manner: - The size and type of group to which administrative services are provided will be considered. - The total amount of purchase payments to be received will be considered. - There may be other circumstances of which we are not presently aware, which could result in reduced administrative expense. If, after consideration of the foregoing factors, we determine that there will be a reduction in administration expenses, we will provide a reduction in the annual administration fee. The administration fee may be waived when a contract is issued to officers, directors or employees (or a relative thereof), of us or of Manulife, the Trust or any of their affiliates. In no event will reduction or elimination of the administration fees be permitted where that reduction or elimination will be unfairly discriminatory to any person. FOR FURTHER INFORMATION, CONTACT YOUR REGISTERED REPRESENTATIVE. MORTALITY AND EXPENSE RISKS CHARGE The mortality risk we assume is the risk that annuitants may live for a longer period of time than we estimate. We assume this mortality risk by virtue of annuity rates incorporated into the contract which cannot be changed in the case of individual contracts or with respect to existing certificates in the case of group contracts. This assures each annuitant that his or her longevity will not have an adverse effect on the amount of annuity payments. We also assume mortality risks in connection with our guarantee that, if the contract owner dies during the accumulation period, we will pay a death benefit. (See "DEATH BENEFIT BEFORE 30 MATURITY DATE") The expense risk we assume is the risk that the administration charges may be insufficient to cover actual expenses. To compensate us for assuming these risks, we deduct from each of the sub-accounts a daily charge in an amount equal to 0.30% of the value of the variable investment accounts on an annual basis. The charge will be reflected in your contract value as a proportionate reduction in the value of each variable investment account. The rate of the mortality and expense risks charge cannot be increased under an individual contract. The rate can be increased under a group contract, but only as to certificates issued after the effective date of the increase and upon 60 days' prior written notice to the group holder. We may issue contracts and certificates with a mortality or expense risks charge at rates less than those set out above, if we conclude that the mortality or expense risks of the groups involved are less than the risks we have determined for persons for whom the contracts have been generally designed. If the charge is insufficient to cover the actual cost of the mortality and expense risks assumed, we will bear the loss. Conversely, if the charge proves more than sufficient, the excess will be profit to us and will be available for any proper corporate purpose including, among other things, payment of distribution expenses. On the Period Certain Only Annuity Option, if you elect benefits payable on a variable basis, the mortality and expense risks charge is assessed although we bear only the expense risk and not any mortality risk. The mortality and expense risks charge is not assessed against the fixed account investment option. TAXES We reserve the right to charge, or provide for, certain taxes against purchase payments, contract values or annuity payments. Such taxes may include premium taxes or other taxes levied by any government entity which we determine to have resulted from our: - establishment or maintenance of the Variable Account, - receipt of purchase payments, - issuance of the contacts, or - commencement or continuance of annuity payments under the contracts or certificates. In addition, we will withhold taxes to the extent required by applicable law. Except for residents of those states which apply premium taxes upon receipt of purchase payments, premium taxes will be deducted from the contract value used to provide for fixed or variable annuity payments. For residents of those states which apply premium taxes upon receipt of purchase payments, premium taxes will be deducted upon payment of any withdrawal benefits, upon any annuitization, or payment of death benefits. The amount deducted will depend on the premium tax assessed in the applicable state. State premium taxes currently range from 0% to 3.5% depending on the jurisdiction and the tax status of the contract and are subject to change by the legislature or other authority. See Appendix B for a table of State Premium Taxes. EXPENSES OF DISTRIBUTING THE CONTRACT Since the contracts are designed primarily as funding vehicles for "asset based fee arrangements" offered by brokerage firms which may charge an additional fee for their services, no compensation is paid to selling brokers for sales of the contract. FEDERAL TAX MATTERS INTRODUCTION The following discussion of the federal income tax treatment of the contract is not exhaustive, does not purport to cover all situations, and is not intended as tax advice. The Federal income tax treatment of an annuity contract is unclear in certain circumstances. You should consult a qualified tax advisor with regard to the application of the law to your circumstances. This discussion is based on the Code, IRS regulations, and interpretations existing on the date of this Prospectus. These authorities, however, are subject to change by Congress, the IRS, and judicial decisions. References below to the contract generally include the certificate in the case of group contracts. 31 This discussion does not address state or local tax consequences associated with the purchase of a contract. IN ADDITION, WE MAKE NO GUARANTEE REGARDING ANY TAX TREATMENT -- FEDERAL, STATE, OR LOCAL -- OF ANY CONTRACT OR OF ANY TRANSACTION INVOLVING A CONTRACT. OUR TAX STATUS We are taxed as a life insurance company. Because the operations of the Variable Account are a part of, and are taxed with, our operations, the Variable Account is not separately taxed as a "regulated investment company" under the Code. Under existing Federal income tax laws, we are not taxed on the investment income and capital gains of the Variable Account, but the operations of the Variable Account may reduce our Federal income taxes. For example, we may be eligible for certain tax credits or deductions relating to foreign taxes paid and dividends received by Trust portfolios. Our use of these tax credits and deductions will not adversely affect or benefit the Variable Account. We do not anticipate that we will be taxed on the income and gains of the Variable Account in the future, but if we are, we may impose a corresponding charge against the Variable Account. TAXATION OF ANNUITIES IN GENERAL TAX DEFERRAL DURING ACCUMULATION PERIOD Gains inside the contract are usually tax-deferred until you make a withdrawal, the annuitant starts receiving annuity benefit payments, or the beneficiary receives a death benefit payment. Under existing provisions of the Code, except as described below, any increase in the contract value is generally not taxable to the owner or annuitant until received, either in the form of annuity payments, or in some other form of distribution. Certain requirements must be satisfied in order for this general rule to apply, including: - the contract must be owned by an individual (or treated as owned by an individual), - the investments of the Variable Account must be "adequately diversified" in accordance with IRS regulations, - we, rather than the owner, must be considered the owner of the assets of the Variable Account for federal tax purposes, and - the contract must provide for appropriate amortization, through annuity payments, of the contract's purchase payments and earnings, e.g., the pay-out period must not begin near the end of the annuitant's life expectancy. NON-NATURAL OWNERS. As a general rule, deferred annuity contracts held by "non-natural persons" (such as a corporation, trust or other similar entity) are not treated as annuity contracts for Federal income tax purposes. The investment income on such contracts is taxed as ordinary income that is received or accrued by the owner of the contract during the taxable year. There are several exceptions to this general rule for non-natural contract owners. First, contracts will generally be treated as held by a natural person if the nominal owner is a trust or other entity which holds the contract as an agent for a natural person. This special exception will not apply, however, in the case of any employer who is the nominal owner of an annuity contract under a non-qualified deferred compensation arrangement for its employees. Exceptions to the general rule for non-natural contract owners will also apply with respect to: - contracts acquired by an estate of a decedent by reason of the death of the decedent, - certain qualified contracts, - certain annuities purchased by employers upon the termination of certain qualified plans, - certain annuities used in connection with structured settlement agreements, and - annuities purchased with a single premium when the annuity starting date (as defined in the tax law) is no later than a year from purchase of the annuity and substantially equal periodic payments are made, not less frequently than annually, during the annuity period. 32 DIVERSIFICATION REQUIREMENTS. For a contract to be treated as an annuity for Federal income tax purposes, the investments of the Variable Account must be "adequately diversified" in accordance with IRS Regulations. The IRS has issued regulations which prescribe standards for determining whether the investments of the Variable Account are "adequately diversified." If the Variable Account failed to comply with these diversification standards, a contract would not be treated as an annuity contract for federal income tax purposes and the owner would generally be taxable currently on the excess of the contract value over the premiums paid for the contract. Although we do not control the investments of the Trust, we expect that the Trust will comply with such regulations so that the Variable Account will be considered "adequately diversified." OWNERSHIP TREATMENT. In certain circumstances, a variable annuity contract owner may be considered the owner, for Federal income tax purposes, of the assets of the insurance company separate account used to support his or her contract. In those circumstances, income and gains from such separate account assets would be includible in the owner's gross income. The IRS has stated in published rulings that a variable contract owner will be considered the owner of separate account assets if the owner possesses "incidents of ownership" in those assets, such as the ability to exercise investment control over the assets. In addition, the IRS announced, in connection with the issuance of regulations concerning investment 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, 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 in the form of regulations or rulings on the "extent to which Policyholders may direct their investments to particular sub-accounts of a separate account 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 contract are similar to, but different in certain respects from, those described by the IRS in rulings in which it was determined that policyholders were not owners of separate account assets. For example, an owner under this contract has the choice of many more investment options to which to allocate premiums and contract values, and may be able to transfer among investment options more frequently than in such rulings. THESE DIFFERENCES COULD RESULT IN THE OWNER BEING TREATED AS THE OWNER OF THE ASSETS OF THE VARIABLE ACCOUNT AND THUS SUBJECT TO CURRENT TAXATION ON THE INCOME AND GAINS FROM THOSE ASSETS. In addition, we do not know what standards will be set forth in the regulations or rulings which the IRS has stated it expects to issue. We therefore reserve the right to modify the contract as necessary to attempt to prevent the contract owners from being considered the owners of the assets of the Variable Account. DELAYED PAY-OUT PERIODS. If the contract's pay-out period commences (or is scheduled to commence) at a time when the annuitant has reached an advanced age, e.g., past age 85, it is possible that the contract would not be treated as an annuity for Federal income tax purposes. In that event, the income and gains under the contract could be currently includible in the owner's income. The remainder of this discussion assumes that the contract will be treated as an annuity contract for Federal income tax purposes and that we will be treated as the owner of the Variable Account assets. TAXATION OF PARTIAL AND FULL WITHDRAWALS In the case of a partial withdrawal, amounts received are taxable as ordinary income to the extent the owner's contract value before the withdrawal exceeds the "INVESTMENT IN THE CONTRACT." In the case of a full withdrawal, amounts received are includible in income to the extent they exceed the investment in the contract. For these purposes the investment in the contract at any time equals the total of the purchase payments made under the contract to that time (to the extent such payments were neither deductible when made nor excludible from income as, for example, in the case of certain employer contributions to qualified contracts) less any amounts previously received from the contract which were not included in income. Other than in the case of certain qualified contracts, any amount received as a loan under a contract, and any assignment or pledge (or agreement to assign or pledge) any portion of the contract value, is treated as a withdrawal of such amount or portion. (Loans, assignments and pledges are permitted only in limited circumstances under qualified contracts.) The investment in the contract is increased by the amount includible in income with respect to such assignment or pledge, though it is not affected by any other aspect of the assignment or pledge (including its release). If an individual transfers his or her interest in an annuity contract without adequate consideration to a person other than the owner's spouse (or to a former spouse incident to divorce), the owner will be taxed on the difference between the contract value and his or her investment in the contract at the time of transfer. In such a case, the transferee's investment in the 33 contract will be increased to reflect the increase in the transferor's income. The contract may be used in connection with a asset based fee arrangement. Under such arrangements, a fee, typically equal to a specified percentage of the assets included in the arrangement is imposed. We will treat any such fees assessed against the contract as partial withdrawals from the contract. There may be special income tax issues present in situations where the owner and the annuitant are not the same person and are not married to one another. A tax advisor should be consulted in those situations. TAXATION OF ANNUITY BENEFIT PAYMENTS A portion of each annuity payment is usually taxable as ordinary income. Normally, a portion of each annuity benefit payment is taxable as ordinary income. The taxable portion of an annuity benefit payment is equal to the excess of the payment over the "exclusion amount." In the case of variable annuity payments, the exclusion amount is the investment in the contract (defined above) allocated to the variable annuity option, adjusted for any period certain or refund feature, when payments begin to be made divided by the number of payments expected to be made (determined by IRS regulations which take into account the annuitant's life expectancy and the form of annuity benefit selected). In the case of fixed annuity payments, the exclusion amount is the amount determined by multiplying the payment by the ratio of (a) to (b), where: (a) is the investment in the contract allocated to the fixed annuity option (adjusted for any period certain or refund feature) and (b) is the total expected value of fixed annuity payments for the term of the contract (determined under IRS regulations). A simplified method of determining the taxable portion of annuity payments applies to contracts issued in connection with certain qualified plans other than IRAs. Once the total amount of the investment in the contract is excluded using these ratios, annuity payments will be fully taxable. If annuity payments cease because of the death of the annuitant and before the total amount of the investment in the contract is recovered, the unrecovered amount generally will be allowed as a deduction to the annuitant in his or her last taxable year. TAXATION OF DEATH BENEFIT PROCEEDS Amounts may be distributed from a contract because of the death of an owner or the annuitant. During the accumulation period, death benefit proceeds are includible in income as follows: - if distributed in a lump sum, they are taxed in the same manner as a full withdrawal, as described above, - if distributed under an annuity option, they are taxed in the same manner as annuity payments, as described above, or - If distributed as a series of withdrawals over the beneficiary's life expectancy, they are taxable to the extent the contract value exceeds the "investment in the contract." During the pay-out period, where a guaranteed period exists under an annuity option and the annuitant dies before the end of that period, payments made to the beneficiary for the remainder of that period are includible in income as follows: - if received in a lump sum, they are includible in income to the extent that they exceed the unrecovered investment in the contract at that time, or - if distributed in accordance with the existing annuity option selected, they are fully excludable from income until the remaining investment in the contract is deemed to be recovered, and all annuity payments thereafter are fully includible in income. 34 PENALTY TAX ON PREMATURE DISTRIBUTIONS Withdrawals and annuity benefit payments prior to age 59 1/2 may incur a 10% penalty tax. There is a 10% penalty tax on the taxable amount of any distribution from a non-qualified contract, including partial withdrawals, full withdrawals and annuity benefit payments. Exceptions to this penalty tax include distributions: - received on or after the owner reaches age 59 1/2; - attributable to the owner's becoming disabled (as defined in the tax law); - made to a beneficiary on or after the death of the owner or, if the owner is not an individual, on or after the death of the primary annuitant (as defined in the tax law); - made as a series of substantially equal periodic payments (not less frequently than annually) for the life (or life expectancy) of the owner or for the joint lives (or joint life expectancies) of the owner and designated beneficiary (as defined in the tax law); - made under an annuity contract purchased with a single premium when the annuity starting date (as defined in the tax law) is no later than a year from purchase of the annuity and substantially equal periodic payments are made, not less frequently than annually, during the annuity period; or - made with respect to certain annuities issued in connection with structured settlement agreements. A similar penalty tax, applicable to distributions from certain qualified contracts, is discussed below. AGGREGATION OF CONTRACTS In certain circumstances, the amount of an annuity payment or a withdrawal from a contract that is includible in income may be determined by combining some or all of the non-qualified contracts owned by an individual. For example, if a person purchases a contract offered by this Prospectus and also purchases at approximately the same time an immediate annuity, the IRS may treat the two contracts as one contract. Similarly, if a person transfers part of his or her interest in one annuity contract to purchase another annuity contract, the IRS might treat the two contracts as one contract. In addition, if a person purchases two or more deferred annuity contracts from the same insurance company (or its affiliates) during any calendar year, all such contracts will be treated as one contract. The effects of such aggregation are not always clear; however, it could affect the amount of a withdrawal or an annuity payment that is taxable and the amount which might be subject to the penalty tax described above. LOSS OF INTEREST DEDUCTION WHERE CONTRACTS ARE HELD BY OR FOR THE BENEFIT OF CERTAIN NON-NATURAL PERSONS. In the case of contracts issued after June 8, 1997 to a non-natural taxpayer (such as a corporation or a trust), or held for the benefit of such an entity, a portion of otherwise deductible interest may not be deductible by the entity, regardless of whether the interest relates to debt used to purchase or carry the contract. However, this interest deduction disallowance does not affect contracts where the income on such contracts is treated as ordinary income that is received or accrued by the owner during the taxable year. Entities that are considering purchasing the contract, or entities that will be beneficiaries under a contract, should consult a tax advisor. QUALIFIED RETIREMENT PLANS Special tax provisions apply to qualified plans. Consult your tax advisor prior to using the contract with a qualified plan. The contracts are also available for use in connection with certain types of retirement plans, including IRAs, which receive favorable treatment under the Code ("QUALIFIED PLANS"). Numerous special tax rules apply to the participants in qualified plans and to the contracts used in connection with qualified plans. Therefore, no attempt is made in this Prospectus to provide more than general information about use of the contract with the various types of qualified plans. Persons intending to use the contract in connection with a qualified plan should consult a tax advisor. Brief descriptions of various types of qualified plans in connection with which we may issue a contract are contained in Appendix D of this Prospectus. Appendix D also discusses certain potential tax consequences associated with the use of the contract with qualified plans, including IRAs, which should be considered by a purchaser. 35 The tax rules applicable to qualified plans vary according to the type of plan and the terms and conditions of the plan itself. For example, for both withdrawals and annuity payments under certain qualified contracts, there may be no "investment in the contract" and the total amount received may be taxable. Also, loans from qualified contracts, where allowed, are subject to a variety of limitations, including restrictions as to the amount that may be borrowed, the duration of the loan, and the manner in which the loan must be repaid. (You should always consult your tax advisor and retirement plan fiduciary prior to exercising your loan privileges.) Both the amount of the contribution that may be made, and the tax deduction or exclusion that you may claim for that contribution, are limited under qualified plans. If you are considering the purchase of a contract in connection with a qualified plan, you should consider, in evaluating the suitability of the contract, that the contract requires a minimum initial purchase payment of $25,000. If this contract is used in connection with a qualified plan, the owner and annuitant must be the same individual. If a co-annuitant is named, all distributions made while the annuitant is alive must be made to the annuitant. Also, if a co-annuitant is named who is not the annuitant's spouse, the annuity options which are available may be limited, depending on the difference in ages between the annuitant and co-annuitant. Furthermore, the length of any guarantee period may be limited in some circumstances. Additionally, for contracts issued in connection with qualified plans subject to the Employee Retirement Income Security Act, the spouse or ex-spouse of the owner will have rights in the contract. In such a case, the owner may need the consent of the spouse or ex-spouse to change annuity options or make a withdrawal from the contract. In addition, special rules apply to the time at which distributions to the owner and beneficiaries must commence and the form in which the distributions must be paid. These special rules may also require the length of any guarantee period to be limited. They also affect the restrictions that may be imposed by the owner on the timing and manner of payment of death benefits to the owner's designated beneficiaries or the period of time over which a designated beneficiary may extend payment of the death benefits under the contract. Failure to comply with minimum distribution requirements applicable to qualified plans will result in the imposition of an excise tax. This excise tax generally equals 50% of the amount by which a minimum required distribution exceeds the actual distribution from the qualified plan. In the case of IRAs (other than Roth IRAs), lifetime distributions of minimum amounts (as specified in the tax law) to the owner must generally commence by April 1 of the calendar year following the calendar year in which the owner attains age 70 1/2. In the case of certain other qualified plans, such distributions must generally commence by the later of this date or April 1 of the calendar year following the calendar year in which the employee retires. Distributions made under certain qualified plans, including IRAs, after the owner's death must also comply with the minimum distribution requirements, and different rules governing the timing and the manner of payments apply, depending on whether the designated beneficiary is an individual, and, if so, the owner's spouse, or an individual other than the owner's spouse. If you wish to impose restrictions on the timing and manner of payment of death benefits to your designated beneficiaries or if your beneficiary wishes to extend over a period of time the payment of the death benefits under your contract, please consult a tax advisor. There is also a 10% penalty tax on the taxable amount of any distribution from certain qualified contracts (but not Section 457 plans). (The amount of the penalty tax is 25% of the taxable amount of any distribution received from a "SIMPLE retirement account" during the 2-year period beginning on the date the individual first participated in any qualified salary reduction arrangement - as defined in the tax law - maintained by the individual's employer.) There are exceptions to this penalty tax which vary depending on the type of qualified plan. In the case of an "Individual Retirement Annuity" or an "IRA," including a "SIMPLE IRA," exceptions provide that the penalty tax does not apply to a distribution: - received on or after the owner reaches age 59 1/2, - received on or after the owner's death or because of the owner's disability (as defined in the tax law), or - made as a series of substantially equal periodic payments (not less frequently than annually) for the life (or life expectancy) of the owner or for the joint lives (or joint life expectancies) of the owner and designated beneficiary (as defined in the tax law). These exceptions, as well as certain others not described herein, generally apply to taxable distributions from other qualified plans (although, in the case of plans qualified under Sections 401 and 403, the exception for substantially equal periodic payments applies only if the owner has separated from service). In addition, the 36 penalty tax does not apply to certain distributions from IRAs which are used for qualified first time home purchases or for higher education expenses. Special conditions must be met to qualify for these two exceptions to the penalty tax. If you wish to take a distribution from an IRA for these purposes, you should consult your tax advisor. Certain special tax considerations may apply if the contract is used in connection with a asset based fee arrangement. For example, if the contract is qualified under section 403(b) of the Code, distribution restrictions applicable to such contacts may prohibit the use of contract value to pay asset based fees. When issued in connection with a qualified plan, a contract will be amended as generally necessary to conform to the requirements of the plan. However, the rights of any person to any benefits under qualified plans may be subject to the terms and conditions of the plans themselves, regardless of the terms and conditions of the contract. In addition, we will not be bound by terms and conditions of qualified plans to the extent those terms and conditions contradict the contract, unless we consent. DIRECT ROLLOVERS If the contract is used in connection with a retirement plan that is qualified under Sections 401(a), 403(a), or 403(b) of the Code, any "ELIGIBLE ROLLOVER DISTRIBUTION" from the contract will be subject to "direct rollover" and mandatory withholding requirements. An eligible rollover distribution generally is any taxable distribution from such qualified plans, excluding certain amounts such as (i) minimum distributions required under Section 401(a)(9) of the Code, (ii) certain distributions for life, life expectancy, or for 10 years or more which are part of a "series of substantially equal periodic payments," and (iii) certain hardship withdrawals. Under these requirements, Federal income tax equal to 20% of the eligible rollover distribution will be withheld from the amount of the distribution. Unlike withholding on certain other amounts distributed from the contract, discussed below, the owner cannot elect out of withholding with respect to an eligible rollover distribution. However, this 20% withholding will not apply if, instead of receiving the eligible rollover distribution, the person entitled to the distribution elects to have it directly transferred to certain qualified plans. Prior to receiving an eligible rollover distribution, a notice will be provided explaining generally the direct rollover and mandatory withholding requirements and how to avoid the 20% withholding by electing a direct rollover. LOANS Some qualified contracts have a loan feature. A loan privilege is available only to owners of contracts issued in connection with Section 403(b) retirement arrangements that are not subject to Title 1 of ERISA. The requirements and limitations governing the availability of loans, including the maximum amount that a participant may take as a loan, are subject to the rules in the Code, IRS regulations, and our procedures in effect at the time a loan is made. Because the rules governing loans under section 403(b) contracts are complicated, you should consult your tax advisor before exercising the loan privilege. Failure to meet the requirements for loans may result in adverse income tax consequences to you. The loan agreement you sign will describe the restrictions and limitations applicable to the loan at the time you apply. Federal tax law also requires loans to be repaid in a certain manner and over a certain period of time. For example, loans generally are required to be repaid within 5 years (except in cases where the loan was used to acquire the principal residence of the plan participant), with repayments made at least quarterly and in substantially level amortized payments over the term of the loan. Interest will be charged on your loan amount. Failure to make a loan repayment when due will result in adverse income tax consequences to you. When you request a loan, we will reduce your investment in the investment accounts and transfer the amount of the loan to the "loan account," a part of our general account. You may designate the investment accounts from which the loan is to be withdrawn. Absent such a designation, the amount of the loan will be withdrawn from the investment accounts in accordance with the rules for making partial withdrawals (see "WITHDRAWALS"). When a loan is repaid, the appropriate amount of the repayment will be transferred from the loan account to the investment accounts. You may designate the investment accounts to which a repayment is to be allocated. Otherwise, the repayment will be allocated in the same manner as your purchase payments are currently being allocated. The amount of any unpaid loans will be deducted from the death benefit otherwise payable under the contract. In addition, loans, whether or not repaid, will have a permanent effect on the contract value because the investment results of the investment accounts will apply only to the unborrowed portion of the contract 37 value. The longer a loan is unpaid, the greater the effect is likely to be. The effect could be favorable or unfavorable. If investment results are greater than the rate being credited on amounts held in your loan account while your loan is unpaid, your contract value will not increase as rapidly as it would have if no loan were unpaid. If investment results are below that rate, your contract value will be greater than it would have been had no loan been outstanding. FEDERAL INCOME TAX WITHHOLDING We may be required to withhold amounts from some distributions for federal income taxes. We will withhold and remit to the U.S. Government a part of the taxable portion of each distribution made under a contract unless the person receiving the distribution notifies us at or before the time of the distribution that he or she elects not to have any amounts withheld. In certain circumstances, we may be required to withhold tax. The withholding rates applicable to the taxable portion of periodic annuity payments are the same as the withholding rates generally applicable to payments of wages. In addition, the withholding rate applicable to the taxable portion of non-periodic payments (including withdrawals prior to the maturity date and rollovers from non-Roth IRAs to Roth IRAs) is 10%. As discussed above, the withholding rate applicable to eligible rollover distributions is 20%. GENERAL MATTERS PERFORMANCE DATA Each of the sub-accounts may quote total return figures in its advertising and sales materials. PAST PERFORMANCE FIGURES ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE OF ANY SUB-ACCOUNT. The sub-accounts may advertise both "standardized" and "non-standardized" total return figures. Standardized figures will include average annual total return figures for one, five and ten years, or from the inception date of the relevant sub-account of the Variable Account (if that period since inception is shorter than one of those periods). Non-standardized total return figures may be quoted including figures that do not assume redemption at the end of the time period. Non-standardized figures also include total return numbers from the inception date of the portfolio or ten years, whichever period is shorter. Where the period since inception is less than one year, the total return quoted will be the aggregate return for the period. Average annual total return is the average annual compounded rate of return that equates a purchase payment to the market value of that purchase payment on the last day of the period for which such return is calculated. The aggregate total return is the percentage change (not annualized) that equates a purchase payment to the market value of such purchase payment on the last day of the period for which such return is calculated. For purposes of the calculations it is assumed that an initial purchase payment of $1,000 is made on the first day of the period for which the return is calculated. For total return figures quoted for periods prior to the commencement of the offering of the contract, standardized performance data will be the historical performance of the Trust portfolio from the date the applicable sub-account of the Variable Account first became available for investment under other contracts that we offer, adjusted to reflect current contract charges. In the case of non-standardized performance, performance figures will be the historical performance of the Trust portfolio from the inception date of the portfolio (or in the case of the Trust portfolios created in connection with the merger of Manulife Series Fund, Inc. into the Trust, the inception date of the applicable predecessor Manulife Series Fund portfolio), adjusted to reflect current contract charges. ASSET ALLOCATION AND TIMING SERVICES We are aware that certain third parties are offering asset allocation and timing services in connection with the contracts. In certain cases we have agreed to honor transfer instructions from such asset allocation and timing services where we have received powers of attorney, in a form acceptable to us, from the contract owners participating in the service. The contract is not designed for professional market timing organizations or other entities or persons engaging in programmed, frequent or large exchanges (collectively, "market timers") to speculate on short-term movements in the market since such activity may be disruptive to the Trust portfolios and increase their transaction costs. Therefore, in order to prevent excessive use of the exchange privilege, we reserve the right to (a) reject or restrict any specific purchase and exchange requests and (b) impose specific limitations with respect to market timers, including restricting exchanges by market timers to certain variable investment options (transfers by market timers into or out of fixed investment options is not permitted).WE DO NOT ENDORSE, APPROVE OR RECOMMEND SUCH SERVICES IN ANY WAY AND YOU SHOULD BE AWARE THAT FEES PAID FOR SUCH SERVICES ARE SEPARATE AND IN ADDITION TO FEES PAID UNDER THE CONTRACTS. See "Transfers Among Investment Options" for further information on asset allocation and timing services. RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM 38 Section 830.105 of the Texas Government Code permits participants in the Texas Optional Retirement Program ("ORP") to withdraw their interest in a variable annuity contract issued under the ORP only upon: - termination of employment in the Texas public institutions of higher education, - retirement, - death, or - the participant's attainment of age 70 1/2. Accordingly, before any amounts may be distributed from the contract, proof must be furnished to us that one of these four events has occurred. The foregoing restrictions on withdrawal do not apply in the event a participant in the ORP transfers the contract value to another contract or another qualified custodian during the period of participation in the ORP. Loans are not available under contracts subject to the ORP. DISTRIBUTION OF CONTRACTS We pay broker/dealers to sell the Contracts. Manulife Financial Securities LLC ("Manulife Financial Securities"), a Delaware limited liability company that we control, is the principal underwriter of the contracts. Manulife Financial Securities, located at 73 Tremont Street, Boston, Massachusetts 02108, is a broker-dealer registered under the Securities Exchange Act of 1934 (the "1934 Act") and a member of the National Association of Securities Dealers, Inc. (the "NASD"). Sales of the contracts will be made by registered representatives of broker-dealers authorized by Manulife Financial Securities to sell the contracts. Those registered representatives will also be our licensed insurance agents. CONTRACT OWNER INQUIRIES Your inquiries should be directed to our Annuity Service Office at P.O. Box 9230, Boston, Massachusetts 02205-9230. CONFIRMATION STATEMENTS You will be sent confirmation statements for certain transactions in your account. You should carefully review these statements to verify their accuracy. Any mistakes should immediately be reported to our Company's Annuity Service Office. If you fail to notify our Annuity Service Office of any mistake within 60 days of the mailing of the confirmation statement, you will be deemed to have ratified the transaction. LEGAL PROCEEDINGS There are no legal proceedings to which the Variable Account is a party or to which the assets of the Variable Account are subject. Neither we nor Manulife Financial Securities are involved in any litigation that is of material importance to either, or that relates to the Variable Account. CANCELLATION OF CONTRACT We may, at our option, cancel a contract at the end of any two consecutive contract years in which no purchase payments by or on behalf of you, have been made, if both: - the total purchase payments made for the contract, less any withdrawals, are less than $2,000; and - the contract value at the end of such two year period is less than $2,000. We, as a matter of administrative practice, will attempt to notify you prior to such cancellation in order to allow you to make the necessary purchase payment to keep the contract in force. The cancellation of contract provisions may vary in certain states in order to comply with the requirements of insurance laws and regulations in such states. VOTING INTEREST As stated above under "The Trust," we will vote shares of the Trust portfolios held in the Variable Account at the Trust's shareholder meetings according to voting instructions received from the persons having the voting interest under the contracts. 39 Accumulation Period. During the accumulation period, the owner has the voting interest under a contract. The number of votes for each portfolio for which voting instructions may be given is determined by dividing the value of the investment account corresponding to the sub-account in which such portfolio shares are held by the net asset value per share of that portfolio. Pay-out Period. During the pay-out period, the annuitant has the voting interest under a contract. The number of votes as to each portfolio for which voting instructions may be given is determined by dividing the reserve for the contract allocated to the sub-account in which such portfolio shares are held by the net asset value per share of that portfolio. Generally, the number of votes tends to decrease as annuity payments progress since the amount of reserves attributable to a contract will usually decrease after commencement of annuity payments. We will determine the number of portfolio shares for which voting instructions may be given not more than 90 days prior to the meeting. REINSURANCE ARRANGEMENTS We utilize reinsurance as part of our risk management program. Under any reinsurance agreement, we remain liable for the contractual obligations of the contracts' guaranteed benefits and the reinsurer(s) agree to reimburse us for certain amounts and obligations in connection with the risks covered in the reinsurance agreements. The reinsurer's contractual liability runs solely to us, and no contract owner shall have any right of action against any reinsurer. In evaluating reinsurers, we consider the financial and claims paying ability ratings of the reinsurer. Our philosophy is to minimize incidental credit risk. We do so by engaging in secure types of reinsurance transactions with high quality reinsurers and diversifying reinsurance counterparties to limit concentrations. Some of the benefits that are currently reinsured include guaranteed death benefits and fixed account guarantees. 40 APPENDIX A SPECIAL TERMS The following terms as used in this Prospectus have the indicated meanings: ACCUMULATION UNIT - A unit of measure that is used to calculate the value of the variable portion of the contract before the maturity date. ACCUMULATION PERIOD - The accumulation period is the period between the issue date of the contract and the maturity date of the contract. During this period, purchase payment(s) are typically made to the contract by the owner. ANNUITANT - Any natural person or persons to whom annuity payments are made and whose life is used to determine the duration of annuity payments involving life contingencies. If the contract owner names more than one person as an "annuitant," the second person named shall be referred to as "co-annuitant." The "annuitant" and "co-annuitant" will be referred to collectively as "annuitant." The "annuitant" is as designated on the specification page of the contract or certificate, unless changed. ANNUITY OPTION - The method you select. At the maturity date, we will provide an annuity with payments guaranteed for 10 years and for the lifetime of the annuitant, if the annuitant lives more than 10 years. This will be the annuity option unless changed. ANNUITY SERVICE OFFICE - The address of our Annuity Service Office is: P.O. Box 9230, Boston, Massachusetts 02205-9230. ANNUITY UNIT - A unit of measure that is used after the maturity date to calculate variable annuity payments. APPLICATION - The document signed by you that serves as your application for an individual contract or participation under a group contract. BENEFICIARY - The person, persons or entity entitled to the death benefit under the contract upon the death of a contract owner or, in certain circumstances, an annuitant. The beneficiary is as specified in the contract or certificate specifications page, unless changed. If there is a surviving contract owner, that person will be deemed the beneficiary. CERTIFICATE - The document which is issued to you which summarizes your rights and benefits as owner of a participating interest in a group contract. CONTRACT ANNIVERSARY - For an individual contract, the anniversary of the contract date. For a group contract, the anniversary of the date of issue of a certificate under the contract. CONTRACT APPLICATION - The document signed by you, as Group Holder, that evidences your application for a Contract or, where context requires, the document signed by you, as a prospective owner applying for an individual contract or a certificate evidencing participation in a group contract. CONTRACT DATE - The date of issue of the contract. CONTRACT VALUE - The total of the investment account values and, if applicable, any amount in the loan account attributable to the contract. CONTRACT YEAR - The period of twelve consecutive months beginning on the contract date or any anniversary thereof. DEBT - Any amounts in an owner's loan account plus any accrued loan interest. The loan provision is available only under contracts or certificates issued in connection with Section 403(b) qualified plans that are not subject to Title I of ERISA. DUE PROOF OF DEATH - Due Proof of Death is required upon the death of the contract owner or annuitant, as applicable. One of the following must be received at our Annuity Service Office within one year of the date of death: (a) A certified copy of a death certificate; (b) A certified copy of a decree of a court of competent jurisdiction as to the finding of death; or (c) Any other proof satisfactory to us. Death Benefits will be paid within 7 days of receipt of due proof of death and all required claim forms by our Annuity Service Office. FIXED ANNUITY - An annuity option with payments which are predetermined and guaranteed as to dollar amount. GENERAL ACCOUNT - All our assets other than assets in separate accounts. GROUP HOLDER - The person, persons or entity to whom a group contract is issued. INVESTMENT ACCOUNT - An account we establish which represents your interest in an investment option during the Accumulation Period. INVESTMENT ACCOUNT VALUE - The value of your allocation to an investment account. INVESTMENT OPTIONS - The investment choices available to contract owners. LOAN ACCOUNT - The portion of the general account that is used for collateral when a loan is taken. MATURITY DATE - The date on which annuity benefits commence. The maturity date is the date specified on the contract or certificate specifications page and is generally the first day of the month following the later of the annuitant's 85th birthday or the tenth contract anniversary, unless changed. NET PURCHASE PAYMENT - The purchase payment less the amount of premium tax, if any. NON-QUALIFIED CONTRACTS - Contracts which are not issued under qualified plans. OWNER - In the case of a group contract, the person, persons or entity named in a certificate and entitled to all of the ownership rights under the contract not expressly reserved to the group holder. In the case of an individual contract, the person, persons or entity named in the contract and entitled to all of the ownership rights under the contract. The owner is as specified on the contract or certificate specifications page, unless changed. PAY-OUT PERIOD - The pay-out period is the time (beginning on the maturity date) when we make payments to you. PORTFOLIO OR TRUST PORTFOLIO - A separate investment portfolio of the Trust, a mutual fund in which the Variable Account invests, or of any successor mutual fund. PURCHASE PAYMENT - An amount you pay to us as consideration for the benefits provided by the contract. QUALIFIED CONTRACTS - Contracts issued under qualified plans. QUALIFIED PLANS - Retirement plans which receive favorable tax treatment under Section 401, 403, 408, 408A or 457 of the Internal Revenue Code of 1986, as amended. SEPARATE ACCOUNT - A segregated account that we establish that is not commingled with our general assets and obligations. SUB-ACCOUNT(S) - One or more of the sub-accounts of the Variable Account. Each sub-account is invested in shares of a different Trust portfolio. VALUATION DATE - Any date on which the New York Stock Exchange is open for business and the net asset value of a Trust portfolio is determined. VALUATION PERIOD - Any period from one valuation date to the next, measured from the time on each such date that the net asset value of each portfolio is determined. VARIABLE ACCOUNT - One of our separate accounts that is used to fund the contracts. VARIABLE ANNUITY - An annuity option with payments which: (1) are not predetermined or guaranteed as to dollar amount, and (2) vary in relation to the investment experience of one or more specified sub-accounts. APPENDIX B STATE PREMIUM TAXES Premium taxes vary according to the state and are subject to change. In many jurisdictions there is no tax at all. For current information, a tax adviser should be consulted.
TAX RATE QUALIFIED NON-QUALIFIED STATE CONTRACTS CONTRACTS CALIFORNIA 0.50% 2.35% MAINE 0.00% 2.00% NEVADA 0.00% 3.50% PUERTO RICO 1.00% 1.00% SOUTH DAKOTA 0.00% 1.25% WEST VIRGINIA 1.00% 1.00% WYOMING 0.00% 1.00%
APPENDIX C PENNSYLVANIA MAXIMUM MATURITY AGE For all contracts issued in Pennsylvania the maximum maturity age based upon the issue age of the annuitant is as follows:
ISSUE AGE MAXIMUM MATURITY AGE 70 or less 85 71-75 86 76-80 88 81-85 90 86-90 93 91-93 96 94-95 98 96-97 99 98-99 101 100-101 102 102 103 103 104 104 105 105 106
The annuitant must exercise a settlement annuity option no later than the maximum maturity age stated above. For example, an annuitant who is age 60 at issue must exercise a settlement option prior to age 86. We will use the issue age of the youngest annuitant in the determination of the required settlement option date. APPENDIX D QUALIFIED PLAN TYPES Set forth below are brief descriptions of the types of qualified plans in connection with which we will issue contracts. Persons intending to use the contract in connection with qualified plans should consult their tax advisor. Individual Retirement Annuities Section 408 of the Code permits eligible individuals to contribute to an individual retirement program known as an "Individual Retirement Annuity" or "IRA." IRAs are subject to limits on the amounts that may be contributed and deducted, the persons who may be eligible and on the time when distributions may commence. Also, distributions from certain other types of qualified retirement plans may be "rolled over" on a tax-deferred basis into an IRA. The contract may not, however be used in connection with an "Education IRA" under Section 530 of the Code. SIMPLIFIED EMPLOYEE PENSIONS (SEP-IRAS) Section 408(k) of the Code allows employers to establish simplified employee pension plans for their employees, using the employees' IRAs for such purposes, if certain criteria are met. Under these plans the employer may, within specified limits, make deductible contributions on behalf of the employees to IRAs. SIMPLE IRAS Section 408(p) of the Code permits certain small employers to establish "SIMPLE retirement accounts," including SIMPLE IRAs, for their employees. Under SIMPLE IRAs, certain deductible contributions are made by both employees and employers. SIMPLE IRAs are subject to various requirements, including limits on the amounts that may be contributed, the persons who may be eligible, and the time when distributions may commence. ROTH IRAS Section 408A of the Code permits eligible individuals to contribute to a type of IRA known as a "Roth IRA." Roth IRAs are generally subject to the same rules as non-Roth IRAs, but differ in certain respects. Among the differences are that contributions to a Roth IRA are not deductible and "qualified distributions" from a Roth IRA are excluded from income. A qualified distribution is a distribution that satisfies two requirements. First, the distribution must be made in a taxable year that is at least five years after the first taxable year for which a contribution to any Roth IRA established for the owner was made. Second, the distribution must be: made after the owner attains age 59 1/2; made after the owner's death; attributable to the owner being disabled; or a qualified first-time homebuyer distribution within the meaning of Section 72(t)(2)(F) of the Code. In addition, distributions from Roth IRAs need not commence when the owner attains age 70 1/2. A Roth IRA may accept a "qualified rollover contribution" from a non-Roth IRA, but a Roth IRA may not accept rollover contributions from other qualified plans. CORPORATE AND SELF-EMPLOYED ("H.R. 10" AND "KEOGH") PENSION AND PROFIT-SHARING PLANS Sections 401(a) and 403(a) of the Code permit corporate employers to establish various types of tax-favored retirement plans for employees. The Self-Employed Individuals' Tax Retirement Act of 1962, as amended, commonly referred to as "H.R. 10" or "Keogh," permits self-employed individuals also to establish such tax-favored retirement plans for themselves and their employees. Such retirement plans may permit the purchase of the contracts in order to provide benefits under the plans. TAX-SHELTERED ANNUITIES Section 403(b) of the Code permits public school employees and employees of certain types of charitable, educational and scientific organizations specified in Section 501(c)(3) of the Code to have their employers purchase annuity contracts for them and, subject to certain limitations, to exclude the amount of purchase payments from gross income for tax purposes. These annuity contracts are commonly referred to as "tax-sheltered annuities". Purchasers of the contracts for such purposes should seek competent advice as to eligibility, limitations on permissible amounts of purchase payments and other tax consequences associated with the contracts. Tax-sheltered annuity contracts must contain restrictions on withdrawals of: contributions made pursuant to a salary reduction agreement in years beginning after December 31, 1988, earnings on those contributions, and earnings after 1988 on amounts attributable to salary reduction contributions (and earnings on those contributions) held as of the last day of the year beginning before January 1, 1989. These amounts can be paid only if the employee has reached age 59 1/2, separated from service, died, or become disabled (within the meaning of the tax law), or in the case of hardship (within the meaning of the tax law). Amounts permitted to be distributed in the event of hardship are limited to actual contributions; earnings thereon cannot be distributed on account of hardship. Amounts subject to the withdrawal restrictions applicable to Section 403(b)(7) custodial accounts may be subject to more stringent restrictions. (These limitations on withdrawals do not apply to the extent we are directed to transfer some or all of the contract value to the issuer of another tax-sheltered annuity or into a Section 403(b)(7) custodial account.) These restrictions on withdrawals may prohibit the payment of asset based fees from the contract. DEFERRED COMPENSATION PLANS OF STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS Section 457 of the Code permits employees of state and local governments and tax-exempt organizations to defer a portion of their compensation without paying current taxes. The employees must be participants in an eligible deferred compensation plan. Generally, a contract purchased by a state or local government or a tax-exempt organization will not be treated as an annuity contract for federal income tax purposes. APPENDIX E PRIOR CONTRACTS We have a class of variable annuity contract which is no longer being issued but under which purchase payments may continue to be made ("PRIOR CONTACTS"). Prior contracts were sold from March, 1998 until May, 2000. The prior contracts were designed as funding vehicles for amounts that are "rolled over" from employee benefit plans. The contracts serve primarily as Individual Retirement Annuities under Section 408 of the Internal Revenue Code ("IRAs") although they were also used to fund other plans qualifying for special income tax treatment under the Code or plans not entitled to such special income tax treatment under the Code. The principal differences between the contract offered by this Prospectus and the prior contracts relate to: - the availability of additional fixed account investment options under prior contracts, - the minimum initial purchase payment, and - certain charges made by us. These differences are described below. A separate expense summary for these prior contracts is also set forth below. EXPENSE SUMMARY The following table and Example are designed to assist you in understanding the various costs and expenses related to the prior contracts. The table reflects expenses of the Variable Account and the underlying portfolios of the Trust. In addition to the items listed in the following table, premium taxes may be applicable to certain contracts. The items listed under "Separate Account Annual Expenses" are more completely described in this Prospectus. The items listed under "Trust Annual Expenses" are described in detail in the accompanying Trust Prospectus. ANNUAL ADMINISTRATION FEE..................................... $ 30* SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average account value) Mortality and expense risks fee**............................. 0.30% Administration fee............................................ 0.15% ----- Total Separate Account Annual Expense*** ..................... 0.45%
*The $30 annual administration fee will not be assessed prior to the maturity date if at the time of its assessment the sum of all investment accounts is greater than or equal to $100,000. **0.85% of average account value prior to May 1, 2000 ***1.00% of average account value prior to May 1, 2000 TRUST ANNUAL EXPENSES See "Summary - Trust Annual Expenses" in the Prospectus. EXAMPLE See "Summary - Example" in the Prospectus. A TABLE OF ACCUMULATION UNIT VALUES RELATING TO THE CONTRACT IS SET FORTH BELOW IN APPENDIX F. FIXED ACCOUNT INVESTMENT OPTIONS FIXED INVESTMENT OPTIONS. Under the contract described in the prospectus there is only a one year fixed account investment option. Under the prior contracts there are five fixed account investment options: one, three, five and seven year investment accounts and a fixed investment account which may be established under the Dollar Cost Averaging ("DCA") program ("DCA fixed investment account") to make automatic monthly transfers from a fixed account to one or more variable investment options. (See "Dollar Cost Averaging" below.) We may offer additional fixed account investment options for any yearly period from two to ten years. Fixed investment accounts provide for the accumulation of interest on purchase payments at guaranteed rates for the duration of the guarantee period. We determine the guaranteed interest rates on new amounts allocated or transferred to a fixed investment account from time-to-time, according to market conditions. In no event will the guaranteed rate of interest be less than 3%. Once an interest rate is guaranteed for a fixed investment account, it is guaranteed for the duration of the guarantee period and we may not change it. RENEWALS. Under the prior contracts, at the end of a guarantee period, you may establish a new investment account with the same guarantee period at the then current interest rate, select a different fixed account investment option or transfer the amounts to a variable account investment option, all without the imposition of any charge. You may not select a guarantee period that would extend beyond the maturity date. In the case of renewals within one year of the maturity date, the only fixed account investment option available is to have interest accrued up to the maturity date at the then current interest rate for one year guarantee periods. If you do not specify the renewal option desired, we will select the same guarantee period as has just expired, so long as such period does not extend beyond the maturity date. In the event a renewal would extend beyond the maturity date, we will select the longest period that will not extend beyond such date, except in the case of a renewal within one year of the maturity date in which case we will credit interest up to the maturity date at the then current interest rate for one year guarantee periods. MARKET VALUE CHARGE. Under the prior contracts, any amount withdrawn, transferred or borrowed from a fixed investment account prior to the end of the guarantee period may be subject to a market value charge. A market value charge is assessed only when current interest rates are higher than the guaranteed interest rate on the account. The purpose of the charge is to compensate us for our investment losses on amounts withdrawn, transferred or borrowed prior to the maturity date. The formula for calculating this charge is set forth below. A market value charge will be calculated separately for each investment account affected by a transaction to which a market value charge may apply. The market value charge for an investment account will be calculated by multiplying the amount withdrawn or transferred from the investment account by the adjustment factor described below. In the case of group contracts we reserve the right to modify the market value charge as to any certificates issued after the effective date of a change specified in written notice to the group holder. The adjustment factor is determined by the following formula: 0.75x(B-A)xC/12 where: A- The guaranteed interest rate on the investment account. B- The guaranteed interest rate available, on the date the request is processed, for amounts allocated to a new investment account with the same length of guarantee period as the investment account from which the amounts are being withdrawn. C- The number of complete months remaining to the end of the guarantee period. For purposes of applying this calculation, the maximum difference between "B" and "A" will be 3%. The adjustment factor may never be less than zero. The total market value charge will be the sum of the market value charges for each investment account being withdrawn. Where the guaranteed rate available on the date of the request is less than the rate guaranteed on the investment account from which the amounts are being withdrawn (B-A in the adjustment factor is negative), there is no market value charge. There is only a market value charge when interest rates have increased (B-A in the adjustment factor is positive). We make no market value charge on withdrawals from the fixed account investment options in the following situations: death of the owner; amounts withdrawn to pay fees or charges; amounts applied at the maturity date to purchase an annuity at the guaranteed rates provided in the contract; - amounts withdrawn from investment accounts within one month prior to the end of the guarantee period; - amounts withdrawn from a one-year fixed investment account; - amounts withdrawn in any contract year that do not exceed 10% of (i) total purchase payments less (ii) any prior partial withdrawals in that contract year. Notwithstanding application of the foregoing formula, in no event will the market value charge - be greater than the amount by which the earnings attributable to the amount withdrawn or transferred from an investment account exceed an annual rate of 3%, - be greater than 10% of the amount transferred or withdrawn, or - reduce the amount payable on withdrawal or transfer below the amount required under the non forfeiture laws of the state with jurisdiction over the contract. DOLLAR COST AVERAGING ("DCA"). If you enter into a DCA agreement, you may instruct us to transfer monthly a predetermined dollar amount from any sub-account or the one year fixed account investment option to other sub-accounts until the amount in the sub-account from which the transfer is made or DCA fixed account investment option is exhausted. Under the prior contracts, in states where approved by the state insurance department, a special one year fixed account investment option may be established under the DCA program to make automatic transfers. Only purchase payments (and not existing contract values) may be allocated to the DCA fixed account investment option. The DCA fixed account investment option is not available under the contract described in the prospectus. WITHDRAWALS. Under the prior contracts, the market value charge described above may apply to withdrawals from any fixed investment option except for a one year fixed investment option. In the event a market value charge applies to a withdrawal from a fixed investment account, it will be calculated with respect to the full amount in the investment account and deducted from the amount payable in the case of a total withdrawal. In the case of a partial withdrawal, the market value charge will be calculated on the amount requested and deducted, if applicable, from the remaining investment account value. If you request a partial withdrawal in excess of your amount in the variable account investment options and do not specify the fixed account investment options from which the withdrawal is to be made, such withdrawal will be made from your investment options beginning with the shortest guarantee period. Within such sequence, where there are multiple investment accounts within a fixed account investment option, withdrawals will be made on a first-in-first-out basis. LOANS. We offer a loan privilege only to owners of contracts or certificates issued in connection with Section 403(b) qualified plans that are not subject to Title I of ERISA. If you own such a contract, you may borrow from us, using your contract as the only security for the loan, in the same manner and subject to the same limitations as set forth under "LOANS." The market value charge described above may apply to amounts transferred from the fixed investment accounts to the loan account in connection with such loans and, if applicable, will be deducted from the amount so transferred. INITIAL PURCHASE PAYMENT The minimum initial purchase payment is $25,000 under the contract described in the prospectus and was $3,500 under the prior contracts. CERTAIN CHARGES AND DEDUCTIONS Certain charges and deductions under prior contracts differ from the charges and deductions under the contract described in the prospectus. ANNUAL ADMINISTRATION FEE Under the contract described in the prospectus, we will normally deduct no annual administration. For prior contracts, the annual administration fee is $30, and we will waive this fee if, during the accumulation period, the contract value is equal to or greater than $100,000 at the time of assessment of the fee. A daily charge in an amount equal to 0.15% of the value of each variable investment account on an annual basis is deducted from each sub-account as an administration fee under both the contract described in this prospectus and the prior contracts. MORTALITY AND EXPENSE RISKS CHARGE Under the contract described in the prospectus, the mortality and expense risks charge which we assess is 0.30%. Under the prior contracts, this charge was 0.85% until May 1, 2000, at which time it was lowered to 0.30%. APPENDIX F TABLE OF ACCUMULATION UNIT VALUES
UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS AT SUB-ACCOUNT START OF YEAR* END OF YEAR END OF YEAR ----------- -------------- ------------- ------------------ Internet Technologies 2000 $12.500000 $7.009252 0.000 2001 7.009252 3.761654 4,632.916 Pacific Rim Emerging Market 1998 $12.500000 $11.267395 0.000 1999 11.267395 18.168886 224.463 2000 18.168886 13.655344 99.192 2001 13.655344 11.069002 0.000 Telecommunications 2001 $12.500000 $7.905970 0.000 Science & Technology 1998 $12.500000 $15.503436 4,015.626 1999 15.503436 30.621118 15,088.635 2000 30.621118 20.064987 8,506.879 2001 20.064987 11.734960 7,859.545 International Small Cap 1998 $12.500000 $12.202690 334.680 1999 12.202690 22.341682 6,651.249 2000 22.341682 15.728111 6,807.681 2001 15.728111 10.787968 6,082.611 Health Sciences 2001 $12.500000 $13.449140 1,741.515 Aggressive Growth 1998 $12.500000 $12.027610 216.003 1999 12.027610 15.834780 325.123 2000 15.834780 16.207424 17,002.959 2001 16.207424 11.942407 11,256.145 Emerging Small Company 1998 $12.500000 $11.312902 6,458.290 1999 11.312902 19.436616 1,702.501 2000 19.436616 18.484616 5,716.424 2001 18.484616 14.308293 5,431.349 Small Company Blend 2000 $12.500000 $9.554061 5,324.912 2001 9.554061 9.291556 1,110.360 Dynamic Growth 2000 $12.500000 $7.956456 1,259.303 2001 7.956456 4.733016 1,275.148 Mid Cap Growth 2001 $12.500000 $10.438314 929.785 Mid Cap Opportunities 2001 $12.500000 $10.557954 1,499.809 Mid Cap Stock 1999 $12.500000 $13.057764 0.00 2000 13.057764 12.483407 9,744.177 2001 12.483407 11.060968 3,037.351 All Cap Growth 1998 $12.500000 $13.903872 3,648.192 1999 13.903872 19.917321 3,240.142 2000 19.917321 17.657078 3,032.44 2001 17.657078 13.398914 5,532.934
UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS AT SUB-ACCOUNT START OF YEAR* END OF YEAR END OF YEAR ----------- -------------- ------------- ------------------ Financial Services 2001 $12.50000 $11.598060 0.000 Overseas 1998 $12.500000 $11.720466 330.533 1999 11.720466 16.319479 215.524 2000 16.319479 13.181065 7.666 2001 13.181065 9.602535 7.551 International Stock 1998 $12.500000 $12.656070 0.000 1999 12.656070 16.253406 389.992 2000 16.253406 13.475212 240.000 2001 13.475212 10.525001 263.632 International Value 1999 $12.500000 $13.372512 0.000 2000 13.372512 12.452499 0.000 2001 12.452499 11.160168 0.000 All Cap Value 2001 $12.500000 $11.349968 0.000 Capital Appreciation 2000 $12.500000 $10.962135 0.000 2001 10.962135 8.90310 0.000 Strategic Opportunities 1998 $12.500000 $12.103394 4,814.848 1999 12.103394 15.307946 876.769 2000 15.307946 14.242740 1,569.263 2001 14.242740 12.015572 1,852.752 Quantitative Mid Cap 2001 $12.500000 $10.169149 0.000 Global Equity 1998 $12.500000 $12.195410 672.794 1999 12.195410 12.516028 553.040 2000 12.516028 13.953918 298.751 2001 13.953918 11.655792 748.884 Strategic Growth 2001 $12.500000 $10.986679 747.516 Growth 1998 $12.500000 $13.655376 521.187 1999 13.655376 18.549262 6,215.486 2000 18.549262 13.403429 5,743.327 2001 13.403429 10.492183 5,774.409 Large Cap Growth 1998 $12.500000 $13.271688 309.757 1999 13.271688 16.461980 329.341 2000 16.461980 14.028600 2,050.187 2001 14.028600 11.477445 161.372 Capital Opportunities 2001 $12.500000 $10.667641 0.000 Quantitative Equity 1998 $12.500000 $14.006399 2,087.403 1999 14.006399 16.959503 5,575.181 2000 16.959503 17.915408 5,442.736 2001 17.915408 13.741313 4,631.635 Blue Chip Growth 1998 $12.500000 $14.123586 8,341.366 1999 14.123586 16.700133 10,828.723 2000 16.700133 16.137290 13,246.945 2001 16.137290 13.717702 9,557.503
UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS AT SUB-ACCOUNT START OF YEAR* END OF YEAR END OF YEAR ----------- -------------- ------------- ------------------ Utilities 2001 $12.500000 $9.318742 0.000 Real Estate Securities 1998 $12.500000 $10.417728 1,081.138 1999 10.417728 9.488883 1,068.493 2000 9.488883 11.853453 746.705 2001 11.853453 12.171588 802.823 Small Company Value 1998 $12.500000 $10.897925 0.000 1999 10.897925 11.652144 0.000 2000 11.652144 12.266242 1,232.576 2001 12.266242 13.009205 1,232.576 Mid Cap Value 2001 $12.500000 $13.049955 210.511 Value 1998 $12.500000 $11.207507 405.978 1999 11.207507 10.786297 290.973 2000 10.786297 13.351990 1,554.076 2001 13.351990 13.746382 1,631.842 Tactical Allocation 2000 $12.500000 $12.064740 927.758 2001 12.064740 10.402759 845.900 Fundamental Value 2001 $12.500000 $11.694569 2180.959 Growth & Income 1998 $12.500000 $13.924321 6,874.303 1999 13.924321 16.387611 12,931.753 2000 16.387611 15.124927 14,168.941 2001 15.124927 13.358356 13,505.629 U.S. Large Cap Value 1999 $12.500000 11.969517 0.000 2000 11.969517 12.247584 0.000 2001 12.247584 11.881980 6,597.764 Equity-Income 1998 $12.500000 $12.464044 27,051.493 1999 12.464044 12.759601 27,275.103 2000 12.759601 14.327119 25,292.587 2001 14.327119 14.446503 25,366.373 Income & Value 1998 $12.500000 $13.179250 1,854.886 1999 13.179250 14.181040 1,701.854 2000 14.181040 14.788189 1,431.801 2001 14.788189 14.865986 1,248.895 Balanced 1998 $12.500000 $13.203432 914.156 1999 13.203432 12.856009 1,912.865 2000 12.856009 11.583489 2,014.739 2001 11.583489 10.355674 1,953.835 High Yield 1998 $12.500000 $12.279967 2,098.051 1999 12.279967 13.130722 2,176.489 2000 13.130722 11.878374 1,643.248 2001 11.878374 11.176956 968.165 Strategic Bond 1998 $12.500000 $12.280627 147.794 1999 12.280627 12.428556 315.740 2000 12.428556 13.262545 6.667 2001 13.262545 14.026945 6.568
UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS AT SUB-ACCOUNT START OF YEAR* END OF YEAR END OF YEAR ----------- -------------- ------------- ------------------ Global Bond 1998 $12.500000 $13.080198 0.000 1999 13.080198 12.085889 0.000 2000 12.085889 12.212091 0.000 2001 12.212091 12.220839 420.441 Total Return 1999 $12.500000 12.349038 0.000 2000 12.349038 13.634669 0.000 2001 13.634669 14.697020 1,321.379 Investment Quality Bond 1998 $12.500000 $13.269922 87.491 1999 13.269922 12.902584 1,629.528 2000 12.902584 13.634669 693.426 2001 13.634669 14.987723 754.781 Diversified Bond 1998 $12.500000 $13.161158 139.729 1999 13.161158 13.123588 543.569 2000 13.123588 14.387750 6.302 2001 14.387750 15.337803 729.221 U.S. Government Securities 1998 $12.500000 $13.159699 4,840.536 1999 13.159699 12.999097 4,333.170 2000 12.999097 14.321813 603.299 2001 14.321813 15.259551 539.289 Money Market 1998 $12.500000 $12.872909 4,306.330 1999 12.872909 13.331106 78,626.678 2000 13.331106 14.026504 54,560.354 2001 14.026504 14.463814 54,928.129 Small Cap Index 2000 $12.500000 $11.668507 0.000 2001 11.668507 12.500000 0.000 International Index 2000 $12.500000 $11.236763 0.000 2001 11.236763 13.063516 0.000 Mid Cap Index 2000 $12.500000 $13.354538 0.000 2001 13.354538 11.110924 0.000 Total Stock Market Index 2000 $12.500000 $11.211599 0.000 2001 11.211599 9.887504 0.000 500 Index 2000 $12.500000 $11.270447 2001 11.270447 9.8311721 1,752.470 Lifestyle Aggressive 1000 1998 $12.500000 $11.895710 363.913 1999 11.895710 13.497935 1,565669 2000 13.497935 12.728218 1,966.490 2001 12.728218 10.938337 762.170 Lifestyle Growth 820 1998 $12.500000 $12.159849 5,302.697 1999 12.159849 14.033145 5,144.277 2000 14.033145 13.529644 5,139.431 2001 13.529644 12.251081 5,434.568
UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS AT SUB-ACCOUNT START OF YEAR* END OF YEAR END OF YEAR ----------- -------------- ------------- ------------------ Lifestyle Balanced 640 1998 $12.500000 $12.282889 6,978.000 1999 12.282889 13.671696 11,201.806 2000 13.671696 13.929909 16,881.644 2001 13.929909 13.204737 16,390.727 Lifestyle Moderate 460 1998 $12.500000 $12.868825 5,852.516 1999 12.868825 13.746687 11,142.295 2000 13.746687 14.242240 10,111.608 2001 14.242240 14.022897 9,321.967 Lifestyle Conservative 280 1998 $12.500000 $13.175636 2240.611 1999 13.175636 13.593172 2,571.768 2000 13.593172 14.547877 2,195.532 2001 14.547877 14.949047 1,909.73
* Units under this series of contracts were first credited under the sub-accounts on March 30, 1998 except in the following instances: - Small Company Blend, Mid Cap Stock, International Value, U.S. Large Cap Value and Total Return Trusts where units were first credited on May 1, 1999. - Internet Technologies, Dynamic Growth, Tactical Allocation, Small Cap Index, International Index, Mid Cap Index, Total Stock Market Index and 500 Index where units were first credited on May 1, 2000. - Capital Appreciation Trust where units were first credited on November 1, 2000. - Telecommunications, Health Sciences, Mid Cap Growth, Mid Cap Opportunities, Financial Services, All Cap Value, Quantitative Mid Cap, Strategic Growth, Capital Opportunities, Utilities, Mid Cap Value, Fundamental Value where units were first credited on May 1, 2001. PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION STATEMENT OF ADDITIONAL INFORMATION THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT H OF THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) FLEXIBLE PAYMENT DEFERRED COMBINATION FIXED AND VARIABLE ANNUITY CONTRACTS NON-PARTICIPATING This Statement of Additional Information is not a Prospectus. It contains information in addition to that described in the Prospectus and should be read in conjunction with the Prospectus dated the same date as this Statement of Additional Information. The Prospectus may be obtained by writing The Manufacturers Life Insurance Company (U.S.A.) at the mailing address of the Annuity Service Office, P.O. Box 9230, Boston, Massachusetts 02205-9230 or telephoning (800) 344-1029. The date of this Statement of Additional Information is May 1, 2002. The Manufacturers Life Insurance Company (U.S.A.) 38500 Woodward Avenue Bloomfield Hills, Michigan 48304 (617) 663-3000 (800) 344-1029 MRPG.SAI5/02 2 STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
General Information and History........................................... Performance Data.......................................................... Services Independent Auditors............................................... Servicing Agent.................................................... Principal Underwriter.............................................. Audited Financial Statements..............................................
3 GENERAL INFORMATION AND HISTORY The Manufacturers Life Insurance Company (U.S.A.) Separate Account H ("VARIABLE ACCOUNT") is a separate investment account of The Manufacturers Life Insurance Company (U.S.A.) ("WE" or "US" or "MANULIFE USA"). We are a stock life insurance company incorporated in Maine on August 20, 1955 by a special act of the Maine legislature and redomesticated under the laws of Michigan. Our principal office is located at 38500 Woodward Avenue, Bloomfield Hills, Michigan 48304. Our ultimate parent is Manulife Financial Corporation ("MFC"), a publicly traded company based in Toronto, Canada. MFC is the holding company of The Manufacturers Life Insurance Company and its subsidiaries, collectively known as Manulife Financial. The Variable Account was established on August 24, 1984 as a separate account of The Manufacturers Life Insurance Company of North America ("Manulife North America"), another wholly-owned subsidiary of MFC which on January 1, 2002 merged into Manulife USA As a result of this merger, Manulife USA became the owner of all of Manulife North America's assets, including the assets of the Variable Account and assumed all of Manulife North America's obligations including those under the contracts. The merger had no other effect on the terms and conditions of the contracts or on your allocations among investment options. Our financial statements which are included in this Statement of Additional Information should be considered only as bearing on our ability to meet our obligations under the contracts. They should not be considered as bearing on the investment performance of the assets held in the Variable Account. PERFORMANCE DATA Each of the sub-accounts may in its advertising and sales materials quote total return figures. The sub-accounts may advertise both "standardized" and "non-standardized" total return figures, although standardized figures will always accompany non-standardized figures. Non-standardized total return figures may be quoted assuming both : - redemption at the end of the time period, and - no redemption at the end of the time period. Standardized figures include total return figures from: - the inception date of the sub-account of the Variable Account which invests in the portfolio, or - ten years, whichever period is shorter. Non-standardized figures include total return figures from: - inception date of the portfolio, or - ten years, whichever period is shorter. Such figures will always include the average annual total return for recent one year and, when applicable, five and ten year periods, and where less than ten years, the inception date of the sub-account, in the case of standardized returns, and the inception date of the portfolio, in the case of non-standardized returns. Where the period since inception is less than one year, the total return quoted will be the aggregate total return for the period. The average annual total return is the average annual compounded rate of return that equates a purchase payment to the market value of such purchase payment on the last day of the period for which such return is calculated. The aggregate total return is the percentage change (not annualized) that equates a purchase payment to the market value of such purchase payment on the last day of the period for which such return is calculated. For purposes of the calculations it is assumed that an initial payment of $1,000 is made on the first day of the period for which the return is calculated. In calculating standardized return figures, all recurring charges (all asset charges - mortality and expense risk fees, administrative fees, and distribution fees) are reflected, and the asset charges are reflected in changes in unit values. Standardized total return figures will be quoted assuming redemption at the end of the period. Non-standardized total return figures reflecting redemption at the end of the time period are calculated on the same basis as the standardized returns. Non-standardized total return figures not reflecting redemption at the end of the time period are calculated on the same basis as the standardized returns except that the calculations assume no redemption at the end of the period and do not reflect deduction of the annual contract fee. We believe such non-standardized figures not reflecting redemptions at the end of the time period are useful to owners who wish to assess the performance of an ongoing contract of the size that is meaningful to the individual owner. 4 For total return figures quoted for periods prior to the commencement of the offering of the contract, standardized performance data will be the historical performance of the Trust portfolio from the date the applicable sub-account of the Variable Account first became available for investment under other contracts offered by us or by Manulife North America, adjusted to reflect current contract charges. In the case of non-standardized performance, performance figures will be the historical performance of the Trust portfolio from the inception date of the portfolio (or in the case of the Trust portfolios created in connection with the merger of Manulife Series Fund, Inc. into the Trust). PRIOR CONTRACT STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES FOR CONTRACTS THAT INVEST IN SERIES I SHARES OF THE TRUST CALCULATED AS OF DECEMBER 31, 2001
SINCE INCEPTION OR 10 YEARS, INCEPTION PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE(A) --------- ------ ------ -------------------- --------- Internet Technologies - 46.47% N/A - 51.54% 05/01/00 Pacific Rim Emerging Markets - 19.08% N/A - 9.60% 01/01/97 Telecommunications N/A N/A - 36.89% 04/30/01 Science & Technology - 41.65% N/A 3.23% 01/01/97 International Small Cap - 31.55% -0.58% 0.86% 03/04/96 Health Sciences N/A N/A 7.86% 04/30/01 Aggressive Growth - 26.45% N/A 0.18% 01/01/97 Emerging Small Company - 22.73% N/A 7.66% 01/01/97 Small Company Blend - 2.88% N/A - 0.29% 05/03/99 Dynamic Growth - 40.65% N/A - 44.33% 05/01/00 Mid Cap Growth N/A N/A - 16.63% 04/30/01 Mid Cap Opportunities N/A N/A - 15.67% 04/30/01 Mid Cap Stock - 11.53% N/A - 6.03% 05/03/99 All Cap Growth - 24.25% 6.82% 6.88% 03/04/96 Financial Services N/A N/A - 7.35% 04/30/01 Overseas - 21.59% -1.48% 1.30% 01/09/95 International Stock - 22.03% N/A - 1.15% 01/01/97 International Value - 10.51% N/A - 5.49% 05/03/99 Capital Appreciation -18.92% N/A - 25.54% 11/01/00 Strategic Opportunities - 15.77% 4.78% 9.89% 06/18/85 Quantitative Mid Cap N/A N/A - 18.78% 04/30/01 Global Equity - 16.61% 4.79% 6.90% 03/18/88
5 Strategic Growth N/A N/A - 12.24% 04/30/01 Growth - 21.86% 3.10% 4.63% 07/15/96 Large Cap Growth - 18.32% 3.66% 6.43% 08/03/89 All Cap Value N/A N/A 0.46% 04/30/01 Capital Opportunities N/A N/A - 14.80% 04/30/01 Quantitative Equity - 23.44% N/A 9.60% 01/01/97 Blue Chip Growth - 15.13% 9.11% 8.76% 12/11/92 Utilities N/A N/A - 25.59% 04/30/01 Real Estate Securities 2.55% N/A 2.89% 01/01/97 Small Company Value 5.92% N/A 1.49% 10/01/97 Mid Cap Value N/A N/A 4.26% 04/30/01 Value 2.82% N/A 7.50% 01/01/97 Tactical Allocation - 13.91% N/A - 10.59% 05/01/00 Fundamental Value N/A N/A - 6.58% 04/30/01 Growth & Income - 11.82% 9.49% 11.40% 04/23/91 U.S. Large Cap Value - 3.12% N/A 0.47% 05/03/99 Equity-Income 0.70% 9.88% 11.37% 02/19/93 Income & Value 0.39% 7.97% 8.02% 08/03/89 Balanced - 10.74% N/A 0.57% 01/01/97 High Yield - 6.04% N/A 0.53% 01/01/97 Strategic Bond 5.63% 4.59% 6.01% 02/19/93 Global Bond -0.06% 0.16% 4.31% 03/18/88 Total Return 7.66% N/A 6.06% 05/03/99 Investment Quality Bond 6.71% 5.61% 5.54% 06/18/85 Diversified Bond 6.47% 6.98% 6.78% 08/03/89 U.S. Government Securities 6.41% 5.67% 5.34% 03/18/88 Money Market 2.98% 3.88% 3.42% 06/18/85 Small Cap Index 0.91% N/A - 3.61% 05/01/00 International Index - 22.89% N/A - 19.81% 05/01/00 Mid Cap Index - 2.32% N/A 2.52% 05/01/00 Total Stock Market Index - 11.95% N/A - 13.28% 05/01/00 500 Index - 12.90% N/A - 13.58% 05/01/00
6 Lifestyle Aggressive 1000 - 14.20% N/A 0.83% 01/07/97 Lifestyle Growth 820 - 9.59% N/A 3.51% 01/07/97 Lifestyle Balanced 640 - 5.34% N/A 4.82% 01/07/97 Lifestyle Moderate 460 - 1.68% N/A 5.83% 01/07/97 Lifestyle Conservative 280 2.62% N/A 6.48% 01/07/97
(A) Inception date of the sub-account of the Variable Account which invests in the portfolio. (B) 10 year average annual return. 7 PRIOR CONTRACT NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES(C) FOR CONTRACTS THAT INVEST IN SERIES I SHARES OF THE TRUST CALCULATED AS OF DECEMBER 31, 2001
SINCE INCEPTION OR 10 YEARS, INCEPTION PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE(A) --------- ------ ------ -------------------- --------- Internet Technologies - 46.33% N/A - 51.31% 05/01/00 Pacific Rim Emerging Markets - 18.94% -9.56% -5.08% 01/01/97 Telecommunications N/A N/A - 36.75% 04/30/01 Science & Technology - 41.52% N/A 3.32% 01/01/97 International Small Cap - 31.41% -0.47% 0.97% 03/04/96 Health Sciences N/A N/A 7.99% 04/30/01 Aggressive Growth - 26.32% N/A 0.31% 01/01/97 Emerging Small Company - 22.59% N/A 7.76% 01/01/97 Small Company Blend - 2.75% N/A - 0.15% 05/03/99 Dynamic Growth - 40.51% N/A - 44.13% 05/01/00 Mid Cap Growth N/A N/A - 16.49% 04/30/01 Mid Cap Opportunities N/A N/A - 15.54% 04/30/01 Mid Cap Stock - 11.39% N/A - 5.86% 05/03/99 All Cap Growth - 24.12% 6.91% 6.98% 03/04/96 Financial Services N/A N/A - 7.22% 04/30/01 Overseas - 21.45% -1.36% 1.42% 01/09/95 International Stock - 21.89% N/A - 1.03% 01/01/97 International Value - 10.38% N/A - 5.33% 05/03/99 Capital Appreciation -18.78% N/A - 25.28% 11/01/00 Strategic Opportunities - 15.64% 4.89% 9.97% 06/18/85 Quantitative Mid Cap N/A N/A - 18.65% 04/30/01 Global Equity - 16.47% 4.90% 7.00% 03/18/88 Strategic Growth N/A N/A - 12.11% 04/30/01 Growth - 21.72% 3.19% 4.73% 07/15/96 Large Cap Growth - 18.19% 3.76% 6.52% 08/03/89 All Cap Value N/A N/A 0.59% 04/30/01 Capital Opportunities N/A N/A - 14.66% 04/30/01
8 Quantitative Equity - 23.30% 9.55% 10.11% 01/01/97 Blue Chip Growth - 14.99% 9.20% 8.87% 12/11/92 Utilities N/A N/A - 25.45% 04/30/01 Real Estate Securities 2.68% 2.53% 9.16% 01/01/97 Small Company Value 6.06% N/A 1.67% 10/01/97 Mid Cap Value N/A N/A 4.40% 04/30/01 Value 2.95% N/A 7.61% 01/01/97 Tactical Allocation - 13.78% N/A - 10.42% 05/01/00 Fundamental Value N/A N/A - 6.44% 04/30/01 Growth & Income - 11.68% 9.59% 11.48% 04/23/91 U.S. Large Cap Value - 2.99% N/A 0.62% 05/03/99 Equity-Income 0.83% 9.98% 11.46% 02/19/93 Income & Value 0.53% 8.08% 8.12% 08/03/89 Balanced - 10.60% N/A 0.68% 01/01/97 High Yield - 5.91% N/A 0.66% 01/01/97 Strategic Bond 5.76% 4.71% 6.12% 02/19/93 Global Bond 0.07% 0.29% 4.42% 03/18/88 Total Return 7.79% N/A 6.21% 05/03/99 Investment Quality Bond 6.85% 5.73% 5.65% 06/18/85 Diversified Bond 6.60% 7.10% 6.88% 08/03/89 U.S. Government Securities 6.55% 5.79% 5.45% 03/18/88 Money Market 3.12% 4.01% 3.54% 06/18/85 Small Cap Index 1.04% N/A - 3.44% 05/01/00 International Index - 22.76% N/A - 19.64% 05/01/00 Mid Cap Index - 2.18% N/A 2.68% 05/01/00 Total Stock Market Index - 11.81% N/A - 13.11% 05/01/00 500 Index - 12.77% N/A - 13.40% 05/01/00 Lifestyle Aggressive 1000 - 14.06% N/A 0.95% 01/07/97 Lifestyle Growth 820 - 9.45% N/A 3.63% 01/07/97 Lifestyle Balanced 640 - 5.21% N/A 4.94% 01/07/97 Lifestyle Moderate 460 - 1.54% N/A 5.94% 01/07/97 Lifestyle Conservative 280 2.76% N/A 6.60% 01/07/97
9 (A) Performance for each of these sub-accounts is based upon the historical performance of the portfolio, adjusted to reflect current contract charges. On December 31, 1996, Manulife Series Fund, Inc. merged with the Trust. Performance for each of these sub-accounts is based on the historical performance of the respective predecessor Manulife Series Fund, Inc. portfolio for periods prior to December 31, 1996. (B) 10 year average annual return. (C) Performance is the same regardless of whether redemption occurs at the end of the time period. 10 NEW CONTRACT STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES FOR CONTRACTS THAT INVEST IN SERIES I SHARES OF THE TRUST CALCULATED AS OF DECEMBER 31, 2001
SINCE INCEPTION OR 10 YEARS, INCEPTION PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE(A) --------- ------ ------ -------------------- --------- Internet Technologies - 46.33% N/A - 51.31% 05/01/00 Pacific Rim Emerging Markets - 18.94% N/A - 9.09% 01/01/97 Telecommunications N/A N/A - 36.75% 04/30/01 Science & Technology - 41.52% N/A 3.70% 01/01/97 International Small Cap - 31.41% -0.10% 1.37% 03/04/96 Health Sciences N/A N/A 7.99% 04/30/01 Aggressive Growth - 26.32% N/A 0.67% 01/01/97 Emerging Small Company - 22.59% N/A 8.16% 01/01/97 Small Company Blend - 2.75% N/A - 0.15% 05/03/99 Dynamic Growth - 40.51% N/A - 44.13% 05/01/00 Mid Cap Growth N/A N/A - 16.49% 04/30/01 Mid Cap Opportunities N/A N/A - 15.54% 04/30/01 Mid Cap Stock - 11.39% N/A - 5.86% 05/03/99 All Cap Growth - 24.12% 7.30% 7.40% 03/04/96 Financial Services N/A N/A - 7.22% 04/30/01 Overseas - 21.45% -1.00% 1.84% 01/09/95 International Stock - 21.89% N/A - 0.66% 01/01/97 International Value - 10.38% N/A - 5.33% 05/03/99 Capital Appreciation -18.78% N/A - 25.28% 11/01/00 Strategic Opportunities - 15.64% 5.27% 10.47% 06/18/85 Quantitative Mid Cap N/A N/A - 18.65% 04/30/01 Global Equity - 16.47% 5.29% 7.49% 03/18/88 Strategic Growth N/A N/A - 12.11% 04/30/01 Growth - 21.72% 3.57% 5.13% 07/15/96 Large Cap Growth - 18.19% 4.14% 7.01% 08/03/89 All Cap Value N/A N/A 0.59% 04/30/01 Capital Opportunities N/A N/A - 14.66% 04/30/01
11 Quantitative Equity - 23.30% N/A 10.09% 01/01/97 Blue Chip Growth - 14.99% 9.60% 9.36% 12/11/92 Utilities N/A N/A - 25.45% 04/30/01 Real Estate Securities 2.68% N/A 3.40% 01/01/97 Small Company Value 6.06% N/A 2.01% 10/01/97 Mid Cap Value N/A N/A 4.40% 04/30/01 Value 2.95% N/A 8.01% 01/01/97 Tactical Allocation - 13.78% N/A - 10.42% 05/01/00 Fundamental Value N/A N/A - 6.44% 04/30/01 Growth & Income - 11.68% 9.99% 11.99% 04/23/91 U.S. Large Cap Value - 2.99% N/A 0.62% 05/03/99 Equity-Income 0.83% 10.39% 11.95% 02/19/93 Income & Value 0.53% 8.47% 8.61% 08/03/89 Balanced - 10.60% N/A 1.05% 01/01/97 High Yield - 5.91% N/A 1.03% 01/01/97 Strategic Bond 5.76% 5.09% 6.60% 02/19/93 Global Bond 0.07% 0.66% 4.90% 03/18/88 Total Return 7.79% N/A 6.21% 05/03/99 Investment Quality Bond 6.85% 6.11% 6.13% 06/18/85 Diversified Bond 6.60% 7.49% 7.37% 08/03/89 U.S. Government Securities 6.55% 6.18% 5.93% 03/18/88 Money Market 3.12% 4.39% 4.01% 06/18/85 Small Cap Index 1.04% N/A - 3.44% 05/01/00 International Index - 22.76% N/A - 19.64% 05/01/00 Mid Cap Index - 2.18% N/A 2.68% 05/01/00 Total Stock Market Index - 11.81% N/A - 13.11% 05/01/00 500 Index - 12.77% N/A - 13.40% 05/01/00 Lifestyle Aggressive 1000 - 14.06% N/A 1.32% 01/07/97 Lifestyle Growth 820 - 9.45% N/A 4.00% 01/07/97 Lifestyle Balanced 640 - 5.21% N/A 5.32% 01/07/97 Lifestyle Moderate 460 - 1.54% N/A 6.33% 01/07/97 Lifestyle Conservative 280 2.76% N/A 6.99% 01/07/97
12 (A) Inception date of the sub-account of the Variable Account which invests in the portfolio. (B) 10 year average annual return. (C) 10 year average annual return. 13 NEW CONTRACT NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES (C) FOR CONTRACTS THAT INVEST IN SERIES I SHARES OF THE TRUST CALCULATED AS OF DECEMBER 31, 2001
SINCE INCEPTION OR 10 YEARS, INCEPTION PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE(A) --------- ------ ------ -------------------- --------- Internet Technologies - 46.33% N/A - 51.31% 05/01/00 Pacific Rim Emerging Markets - 18.94% -9.56% -4.92% 10/04/94 Telecommunications N/A N/A - 36.75% 04/30/01 Science & Technology - 41.52% N/A 3.70% 01/01/97 International Small Cap - 31.41% -0.10% 1.37% 03/04/96 Health Sciences N/A N/A 7.99% 04/30/01 Aggressive Growth - 26.32% N/A 0.67% 01/01/97 Emerging Small Company - 22.59% N/A 8.16% 01/01/97 Small Company Blend - 2.75% N/A - 0.15% 05/03/99 Dynamic Growth - 40.51% N/A - 44.13% 05/01/00 Mid Cap Growth N/A N/A - 16.49% 04/30/01 Mid Cap Opportunities N/A N/A - 15.54% 04/30/01 Mid Cap Stock - 11.39% N/A - 5.86% 05/03/99 All Cap Growth - 24.12% 7.30% 7.40% 03/04/96 Financial Services N/A N/A - 7.22% 04/30/01 Overseas - 21.45% -1.00% 1.84% 01/09/95 International Stock - 21.89% N/A - 0.66% 01/01/97 International Value - 10.38% N/A - 5.33% 05/03/99 Capital Appreciation -18.78% N/A - 25.28% 11/01/00 Strategic Opportunities - 15.64% 5.27% 10.47% 06/18/85 Quantitative Mid Cap N/A N/A - 18.65% 04/30/01 Global Equity - 16.47% 5.29% 7.49% 03/18/88 Strategic Growth N/A N/A - 12.11% 04/30/01 Growth - 21.72% 3.57% 5.13% 07/15/96 Large Cap Growth - 18.19% 4.14% 7.01% 08/03/89 All Cap Value N/A N/A 0.59% 04/30/01 Capital Opportunities N/A N/A - 14.66% 04/30/01
14 Quantitative Equity - 23.30% 9.54% 10.41% 04/30/87 Blue Chip Growth - 14.99% 9.60% 9.36% 12/11/92 Utilities N/A N/A - 25.45% 04/30/01 Real Estate Securities 2.68% 2.53% 9.46% 04/30/87 Small Company Value 6.06% N/A 2.01% 10/01/97 Mid Cap Value N/A N/A 4.40% 04/30/01 Value 2.95% N/A 8.01% 01/01/97 Tactical Allocation - 13.78% N/A - 10.42% 05/01/00 Fundamental Value N/A N/A - 6.44% 04/30/01 Growth & Income - 11.68% 9.99% 11.99% 04/23/91 U.S. Large Cap Value - 2.99% N/A 0.62% 05/03/99 Equity-Income 0.83% 10.39% 11.95% 02/19/93 Income & Value 0.53% 8.47% 8.61% 08/03/89 Balanced - 10.60% N/A 1.05% 01/01/97 High Yield - 5.91% N/A 1.03% 01/01/97 Strategic Bond 5.76% 5.09% 6.60% 02/19/93 Global Bond 0.07% 0.66% 4.90% 03/18/88 Total Return 7.79% N/A 6.21% 05/03/99 Investment Quality Bond 6.85% 6.11% 6.13% 06/18/85 Diversified Bond 6.60% 7.49% 7.37% 08/03/89 U.S. Government Securities 6.55% 6.18% 5.93% 03/18/88 Money Market 3.12% 4.39% 4.01% 06/18/85 Small Cap Index 1.04% N/A - 3.44% 05/01/00 International Index - 22.76% N/A - 19.64% 05/01/00 Mid Cap Index - 2.18% N/A 2.68% 05/01/00 Total Stock Market Index - 11.81% N/A - 13.11% 05/01/00 500 Index - 12.77% N/A - 13.40% 05/01/00 Lifestyle Aggressive 1000 - 14.06% N/A 1.32% 01/07/97 Lifestyle Growth 820 - 9.45% N/A 4.00% 01/07/97 Lifestyle Balanced 640 - 5.21% N/A 5.32% 01/07/97 Lifestyle Moderate 460 - 1.54% N/A 6.33% 01/07/97 Lifestyle Conservative 280 2.76% N/A 6.99% 01/07/97
15 (A) Performance for each of these sub-accounts is based upon the historical performance of the portfolio, adjusted to reflect current contract charges. On December 31, 1996, Manulife Series Fund, Inc. merged with the Trust. Performance for each of these sub-accounts is based on the historical performance of the respective predecessor Manulife Series Fund, Inc. portfolio for periods prior to December 31, 1996. (B) 10 year average annual return. (C) Performance is the same regardless of whether redemption occurs at the end of the time period. In addition to the non-standardized returns quoted above, each of the sub-accounts may from time to time quote aggregate non-standardized total returns calculated in the same manner as set forth above for other time periods. From time to time the Trust may include in its advertising and sales literature general discussions of economic theories, including but not limited to, discussions on how demographic and political trends can affect the financial markets. Further, the Trust may also include in its advertising and sales literature specific information on each of the Trust's subadvisers, including but not limited to, research capabilities of a subadviser, assets under management, information relating to other clients of a subadviser, and other generalized information. SERVICES INDEPENDENT AUDITORS The consolidated financial statements of The Manufacturers Life Insurance Company (U.S.A.) at December 31, 2001 and 2000 and for each of the three years in the period ended December 31, 2001 and the financial statements of The Manufacturers Life Insurance Company of North America Separate Account A at December 31, 2001, and for each of the two years in the period ended December 31, 2001, appearing in this Statement of Additional Information 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. SERVICING AGENT Computer Sciences Corporation Financial Services Group ("CSC FSG") provides to us a computerized data processing record keeping system for variable annuity administration. CSC FSG provides various daily, semimonthly, monthly, semiannual and annual reports including: - daily updates on: - accumulation unit values - variable annuity participants and transaction - agent production and commissions; - semimonthly commission statements; - monthly summaries of agent production and daily transaction reports; - semiannual statements for contract owners; and - annual contract owner tax reports. We pay CSC FSG approximately $7.80 per policy per year, plus certain other fees for the services provided. PRINCIPAL UNDERWRITER Manulife Financial Securities LLC an indirect wholly owned subsidiary of MFC, serves as principal underwriter t the contracts. Prior to January 1, 2002, Manufacturers Securities Services, LLC ("MSS") a Delaware limited liability company controlled by us, served as principal underwriter of the contracts. Contracts are offered on a continuous basis. The aggregate dollar amount of underwriting commissions paid to MSS in 2001, 2000 and 1999 were $202,486,965, $251,409,183 $183,494,116 , respectively. MSS did not retain any of these amounts during such periods. 16 AUDITED FINANCIAL STATEMENTS 17 AUDITED FINANCIAL STATEMENTS The Manufacturers Life Insurance Company of North America Separate Account A Years ended December 31, 2001 and 2000 The Manufacturers Life Insurance Company of North America Separate Account A Audited Financial Statements Years ended December 31, 2001 and 2000 CONTENTS Report of Independent Auditors.............................................. 1 Audited Financial Statements Statement of Assets and Contract Owners' Equity............................. 3 Statements of Operations and Changes in Contract Owners' Equity............. 5 Notes to Financial Statements............................................... 26
Report of Independent Auditors To the Contract Owners of The Manufacturers Life Insurance Company of North America Separate Account A We have audited the accompanying statement of assets and contract owners' equity of The Manufacturers Life Insurance Company of North America Separate Account A (comprising, respectively, the Strategic Opportunities, Investment Quality Bond, Growth & Income, Blue Chip Growth, Money Market, Global Equity, Global Bond, U.S. Government Securities, Diversified Bond, Income & Value, Large Cap Growth, Equity-Income, Strategic Bond, Overseas, Growth, All Cap Growth, International Small Cap, Pacific Rim Emerging Markets, Science & Technology, Emerging Small Company, Aggressive Growth, International Stock, Quantitative Equity, Value, Real Estate Securities, Balanced, High Yield, Lifestyle Aggressive 1000, Lifestyle Growth 820, Lifestyle Balanced 640, Lifestyle Moderate 460, Lifestyle Conservative 280, Small Company Value, International Value, Small Company Blend, Total Return, U.S. Large Cap Value, Mid Cap Stock, Tactical Allocation, Dynamic Growth, Internet Technologies, International Index, Total Stock Market Index, 500 Index, Mid Cap Index, Small Cap Index, Capital Appreciation, Telecommunications, Health Sciences, Mid Cap Growth, Mid Cap Opportunities, Financial Services, Quantitative Mid Cap, Strategic Growth, All Cap Value, Capital Opportunities, Utilities, Mid Cap Value, Fundamental Value, Basic Value Focus, Special Value Focus and Developing Capital Markets Focus Sub-Accounts) of The Manufacturers Life Insurance Company of North America as of December 31, 2001, and the related statements of operations and changes in contract owners' equity for each of the two years in the period then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. 1 In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Manufacturers Life Insurance Company of North America Separate Account A at December 31, 2001, and the results of its operations and the changes in its contract owners' equity for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States. ERNST & YOUNG LLP Boston, Massachusetts March 15, 2002 2 The Manufacturers Life Insurance Company of North America Separate Account A Statement of Assets and Contract Owners' Equity December 31, 2001 ASSETS Investments at market value: Sub-accounts held by Manufacturers Investment Trust: Strategic Opportunities Portfolio-- 71,306,314 shares (cost $1,221,207,424) $ 901,311,814 Investment Quality Bond Portfolio-- 23,721,856 shares (cost $277,049,109) 281,103,989 Growth & Income Portfolio-- 82,807,400 shares (cost $2,255,761,475) 1,979,924,926 Blue Chip Growth Portfolio-- 76,881,840 shares (cost $1,461,872,664) 1,217,039,531 Money Market Portfolio-- 100,132,617 shares (cost $1,001,326,165) 1,001,326,165 Global Equity Portfolio -- 34,002,731 shares (cost $561,861,656) 442,035,499 Global Bond Portfolio-- 7,513,212 shares (cost $89,154,352) 86,251,669 U.S. Government Securities Portfolio-- 22,057,812 shares (cost $297,635,843) 302,633,183 Diversified Bond Portfolio-- 19,920,991 shares (cost $209,067,667) 210,963,290 Income & Value Portfolio-- 49,042,095 shares (cost $538,643,371) 496,796,420 Large Cap Growth Portfolio-- 41,558,648 shares (cost $535,320,904) 411,015,028 Equity-Income Portfolio-- 57,017,812 shares (cost $909,863,673) 862,679,499 Strategic Bond Portfolio-- 18,836,951 shares (cost $203,500,783) 202,308,855 Overseas Portfolio-- 28,971,679 shares (cost $309,681,678) 247,997,570 Growth Portfolio-- 23,757,035 shares (cost $518,690,375) 331,410,642 All Cap Growth Portfolio-- 36,139,231 shares (cost $734,209,508) 533,053,663 International Small Cap Portfolio-- 10,751,817 shares (cost $198,991,438) 121,495,530 Pacific Rim Emerging Markets Portfolio-- 5,605,514 shares (cost $42,859,970) 37,276,665 Science & Technology Portfolio-- 42,987,932 shares (cost $1,175,965,783) 551,535,168 Emerging Small Company Portfolio -- 7,441,394 shares (cost $259,157,427) 193,922,733 Aggressive Growth Portfolio-- 18,804,662 shares (cost $342,889,869) 248,597,637 International Stock Portfolio-- 11,396,704 shares (cost $138,229,175) 109,294,393 Quantitative Equity Portfolio-- 14,366,088 shares (cost $333,758,481) 247,096,715 Value Portfolio-- 16,236,695 shares (cost $260,822,931) 267,418,360 Real Estate Securities Portfolio-- 4,759,225 shares (cost $71,735,846) 73,863,177 Balanced Portfolio-- 5,511,279 shares (cost $92,776,362) 74,843,169 High Yield Portfolio-- 13,537,250 shares (cost $150,798,398) 133,748,028 Lifestyle Aggressive 1000 Portfolio -- 9,191,217 shares (cost $114,213,246) 95,037,182 Lifestyle Growth 820 Portfolio-- 38,864,531 shares (cost $501,870,399) 437,225,977 Lifestyle Balanced 640 Portfolio-- 38,290,545 shares (cost $489,847,831) 452,594,244 Lifestyle Moderate 460 Portfolio-- 13,916,750 shares (cost $180,006,697) 168,531,837 Lifestyle Conservative 280 Portfolio-- 8,171,466 shares (cost $105,821,690) 105,738,771 Small Company Value Portfolio -- 9,373,648 shares (cost $121,788,549) 129,356,338 International Value Portfolio-- 7,170,430 shares (cost $80,824,934) 75,576,337 Small Company Blend Portfolio-- 9,808,706 shares (cost $122,287,358) 107,699,594 Total Return Portfolio -- 27,174,648 shares (cost $363,566,230) 377,184,115 U.S. Large Cap Value Portfolio--24,186,873 shares (cost $304,985,250) 304,996,468 Mid Cap Stock Portfolio-- 10,181,917 shares (cost $114,389,919) 109,659,241
3 The Manufacturers Life Insurance Company of North America Separate Account A Statement of Assets and Contract Owners' Equity (continued) December 31, 2001 ASSETS (CONTINUED) Tactical Allocation Portfolio -- 6,814,567 shares (cost $75,236,021) $68,418,252 Dynamic Growth Portfolio -- 18,972,973 shares (cost $145,778,338) 90,311,350 Internet Technologies Portfolio-- 9,546,088 shares (cost $67,897,163) 36,179,674 International Index Portfolio -- 1,489,073 shares (cost $14,428,645) 12,686,905 Total Stock Market Index Portfolio-- 2,583,358 shares (cost $27,034,675) 25,291,072 500 Index Portfolio-- 15,713,287 shares (cost $164,659,009) 154,147,342 Mid Cap Index Portfolio-- 2,932,942 shares (cost $37,104,764) 37,600,321 Small Cap Index Portfolio-- 2,258,392 shares (cost $24,886,955) 25,474,661 Capital Appreciation Portfolio -- 3,017,659 shares (cost $27,369,631) 27,008,052 Telecommunications Portfolio -- 1,011,829 shares (cost $8,302,695) 8,023,806 Health Sciences Portfolio -- 3,289,373 shares (cost $42,395,354) 44,538,109 Mid Cap Growth Portfolio -- 2,299,209 shares (cost $23,516,759) 24,072,717 Mid Cap Opportunities Portfolio -- 1,229,323 shares (cost $12,495,398) 13,018,527 Financial Services Portfolio -- 1,831,499 shares (cost $21,098,434) 21,300,332 Quantitative Mid Cap Portfolio -- 424,611 shares (cost $4,458,888) 4,331,032 Strategic Growth Portfolio -- 4,063,155 shares (cost $43,926,460) 44,775,968 All Cap Value Portfolio -- 1,475,995 shares (cost $17,570,739) 18,612,296 Capital Opportunities Portfolio -- 2,659,354 shares (cost $28,193,711) 28,455,090 Utilities Portfolio -- 1,660,632 shares (cost $16,824,533) 15,443,876 Mid Cap Value Portfolio -- 5,430,356 shares (cost $67,672,757) 70,920,450 Fundamental Value Portfolio -- 7,688,596 shares (cost $88,889,419) 90,187,236 Sub-accounts held by Merrill Lynch Variable Series Funds, Inc.: Basic Value Focus Portfolio-- 3,426,444 shares (cost $47,082,489) 46,017,149 Special Value Focus Portfolio-- 1,026,720 shares (cost $23,295,722) 25,709,074 Developing Capital Markets Focus Portfolio-- 227,521 shares (cost $2,062,905) 1,672,277 --------------- Total assets $14,864,738,990 =============== CONTRACT OWNERS' EQUITY Variable annuity contracts $14,848,662,429 Annuity reserves 16,076,561 --------------- Total contract owners' equity $14,864,738,990 ===============
See accompanying notes. 4 The Manufacturers Life Insurance Company of North America Separate Account A Statements of Operations and Changes in Contract Owners' Equity
SUB-ACCOUNT ------------------------------------------------------------------------------------------ STRATEGIC OPPORTUNITIES(1) INVESTMENT QUALITY BOND GROWTH & INCOME ------------------------------ -------------------------- ------------------------------ YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 ------------------------------ -------------------------- ------------------------------ 2001 2000 2001 2000 2001 2000 -------------- -------------- ------------ ------------ -------------- -------------- Income: Dividends $ 158,636,799 $207,385,361 $14,907,454 $16,068,154 $119,515,267 $172,497,819 Expenses: Mortality and expense risk and administrative charges 15,181,277 19,140,237 3,720,093 3,037,122 31,449,972 39,106,144 -------------- -------------- ------------ ------------ -------------- -------------- Net investment income (loss) 143,455,522 188,245,124 11,187,361 13,031,032 88,065,295 133,391,675 Net realized gain (loss) (143,160,911) 1,518,215 (2,276,030) (4,860,035) 72,972,314 205,723,802 Unrealized appreciation (depreciation) during the period (198,199,647) (293,755,736) 3,611,691 7,652,144 (472,607,901) (573,777,887) -------------- -------------- ------------ ------------ -------------- -------------- Net increase (decrease) in contract owners' equity from operations (197,905,036) (103,992,397) 12,523,022 15,823,141 (311,570,292) (234,662,410) Changes from principal transactions: Purchase payments 56,606,793 101,596,423 26,390,246 16,914,727 124,307,682 266,944,260 Transfers between sub-accounts and the Company (34,343,112) (17,644,852) 59,617,897 (10,162,552) (91,406,127) 43,977,681 Withdrawals (131,318,186) (209,796,618) (30,744,594) (27,879,309) (238,811,128) (339,279,830) Annual contract fee (749,801) (609,450) (147,661) (82,707) (1,475,340) (1,102,606) -------------- -------------- ------------ ------------ -------------- -------------- Net increase (decrease) in contract owners' equity from principal transactions (109,804,306) (126,454,497) 55,115,888 (21,209,841) (207,384,913) (29,460,495) -------------- -------------- ------------ ------------ -------------- -------------- Total increase (decrease) in contract owners' equity (307,709,342) (230,446,894) 67,638,910 (5,386,700) (518,955,205) (264,122,905) Contract owners' equity at beginning of period 1,209,021,156 1,439,468,050 213,465,079 218,851,779 2,498,880,131 2,763,003,036 -------------- -------------- ------------ ------------ -------------- -------------- Contract owners' equity at end of period $ 901,311,814 $1,209,021,156 $281,103,989 $213,465,079 $1,979,924,926 $2,498,880,131 ============== ============== ============ ============ ============== ==============
(1) On April 30, 2001, Mid Cap Blend Sub-Account was renamed to Strategic Opportunities through a vote of the Board of Directors. See accompanying notes. 5 The Manufacturers Life Insurance Company of North America Separate Account A Statements of Operations and Changes in Contract Owners' Equity (continued)
SUB-ACCOUNT --------------------------------------------------------------------------------------------- BLUE CHIP GROWTH MONEY MARKET GLOBAL EQUITY YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 ------------------------------- ----------------------------- --------------------------- 2001 2000 2001 2000 2001 2000 -------------- -------------- -------------- ------------ ------------ ------------ Income: Dividends $ 99,905,894 $68,456,785 $28,211,049 $36,972,986 $88,125,057 $82,383,211 Expenses: Mortality and expense risk and administrative charges 19,141,635 22,602,760 12,487,746 9,520,861 7,387,678 9,106,124 -------------- -------------- -------------- ------------ ------------ ------------ Net investment income (loss) 80,764,259 45,854,025 15,723,303 27,452,125 80,737,379 73,277,087 Net realized gain (loss) (12,231,924) 105,083,092 (2,597,294) (279,759) (42,801,830) (4,808,176) Unrealized appreciation (depreciation) during the period (322,520,628) (223,839,731) 0 0 (139,257,810) (8,909,999) -------------- -------------- -------------- ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from operations (253,988,293) (72,902,614) 13,126,009 27,172,366 (101,322,261) 59,558,912 Changes from principal transactions: Purchase payments 112,606,890 259,700,042 431,610,422 456,112,648 23,023,468 25,181,486 Transfers between sub-accounts and the Company (60,999,936) 103,228,451 216,102,162 (441,973,830) (31,014,046) (85,629,338) Withdrawals (130,474,421) (170,380,105) (292,643,160) (279,553,607) (70,393,478) (110,490,713) Annual contract fee (1,102,157) (685,340) (418,355) (203,690) (299,939) (283,267) -------------- -------------- -------------- ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from principal transactions (79,969,624) 191,863,048 354,651,069 (265,618,479) (78,683,995) (171,221,832) -------------- -------------- -------------- ------------ ------------ ------------ Total increase (decrease) in contract owners' equity (333,957,917) 118,960,434 367,777,078 (238,446,113) (180,006,256) (111,662,920) Contract owners' equity at beginning of period 1,550,997,448 1,432,037,014 633,549,087 871,995,200 622,041,755 733,704,675 -------------- -------------- -------------- ------------ ------------ ------------ Contract owners' equity at end of period $1,217,039,531 $1,550,997,448 $1,001,326,165 $633,549,087 $442,035,499 $622,041,755 ============== ============== ============== ============ ============ ============
See accompanying notes. 6 The Manufacturers Life Insurance Company of North America Separate Account A Statements of Operations and Changes in Contract Owners' Equity (continued)
SUB-ACCOUNT -------------------------------------------------------------------------------------------------- GLOBAL BOND U.S. GOVERNMENT SECURITIES DIVERSIFIED BOND YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 ------------------------------ ------------------------------ ------------------------------ 2001 2000 2001 2000 2001 2000 ------------- ------------- ------------- ------------- ------------- ------------- Income: Dividends $ 0 $ 3,796,523 $ 13,400,175 $ 14,725,566 $ 9,638,263 $ 18,151,051 Expenses: Mortality and expense risk and administrative charges 1,387,312 1,597,181 3,672,169 2,842,672 2,648,970 2,125,400 ------------- ------------- ------------- ------------- ------------- ------------- Net investment income (loss) (1,387,312) 2,199,342 9,728,006 11,882,894 6,989,293 16,025,651 Net realized gain (loss) (2,851,981) (11,963,988) 2,449,653 (3,191,977) (792,261) (5,295,132) Unrealized appreciation (depreciation) during the period 3,632,952 9,154,777 (599,224) 8,615,164 2,994,425 1,528,892 ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in contract owners' equity from operations (606,341) (609,869) 11,578,435 17,306,081 9,191,457 12,259,411 Changes from principal transactions: Purchase payments 5,332,898 5,361,206 39,333,317 13,155,701 25,091,797 12,157,844 Transfers between sub-accounts and the Company (12,844,346) (7,856,997) 73,820,301 (18,953,949) 44,297,965 1,918,182 Withdrawals (13,732,325) (25,959,005) (30,120,170) (33,547,249) (23,385,648) (28,053,888) Annual contract fee (48,542) (45,150) (124,080) (73,284) (102,997) (71,435) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in contract owners' equity from principal transactions (21,292,315) (28,499,946) 82,909,368 (39,418,781) 45,901,117 (14,049,297) ------------- ------------- ------------- ------------- ------------- ------------- Total increase (decrease) in contract owners' equity (21,898,656) (29,109,815) 94,487,803 (22,112,700) 55,092,574 (1,789,886) Contract owners' equity at beginning of period 108,150,325 137,260,140 208,145,380 230,258,080 155,870,716 157,660,602 ------------- ------------- ------------- ------------- ------------- ------------- Contract owners' equity at end of period $ 86,251,669 $ 108,150,325 $ 302,633,183 $ 208,145,380 $ 210,963,290 $ 155,870,716 ============= ============= ============= ============= ============= =============
See accompanying notes. 7 The Manufacturers Life Insurance Company of North America Separate Account A Statements of Operations and Changes in Contract Owners' Equity (continued)
SUB-ACCOUNT -------------------------------------------------------------------------------------------- INCOME & VALUE LARGE CAP GROWTH EQUITY-INCOME YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 ----------------------------- --------------------------- --------------------------- 2001 2000 2001 2000 2001 2000 ------------ ------------ ------------ ------------ ------------ ------------ Income: Dividends $23,585,482 $128,856,471 $17,705,628 $65,696,039 $85,764,180 $95,309,005 Expenses: Mortality and expense risk and administrative charges 7,011,496 7,694,963 6,206,333 6,562,245 11,834,272 10,430,531 ------------ ------------ ------------ ------------ ------------ ------------ Net investment income (loss) 16,573,986 121,161,508 11,499,295 59,133,794 73,929,908 84,878,474 Net realized gain (loss) (18,593,563) (15,429,958) (65,339,356) 6,932,994 (12,819,349) 4,603,997 Unrealized appreciation (depreciation) during the period (634,738) (87,992,790) (37,845,761) (147,796,443) (64,467,673) (17,064,655) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from operations (2,654,315) 17,738,760 (91,685,822) (81,729,655) (3,357,114) 72,417,816 Changes from principal transactions: Purchase payments 31,551,107 26,083,194 63,425,417 135,377,279 79,405,985 47,439,755 Transfers between sub-accounts and the Company 36,535,472 (43,139,054) 10,516,257 111,395,736 134,126,211 ( 82,856,050) Withdrawals (66,463,920) (98,995,592) (40,705,922) (52,222,116) (98,443,168) (101,021,875) Annual contract fee (325,416) (292,999) (463,395) (234,621) (467,542) (300,000) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from principal transactions 1,297,243 (116,344,451) 32,772,357 194,316,278 114,621,486 (136,738,170) ------------ ------------ ------------ ------------ ------------ ------------ Total increase (decrease) in contract owners' equity (1,357,072) (98,605,691) (58,913,465) 112,586,623 111,264,372 (64,320,354) Contract owners' equity at beginning of period 498,153,492 596,759,183 469,928,493 357,341,870 751,415,127 815,735,481 ------------ ------------ ------------ ------------ ------------ ------------ Contract owners' equity at end of period $496,796,420 $498,153,492 $411,015,028 $469,928,493 $862,679,499 $751,415,127 ============ ============ ============ ============ ============ ============
See accompanying notes. 8 The Manufacturers Life Insurance Company of North America Separate Account A Statements of Operations and Changes in Contract Owners' Equity (continued)
SUB-ACCOUNT ------------------------------------------------------------------------------------------- STRATEGIC BOND OVERSEAS GROWTH ----------------------------- ----------------------------- --------------------------- YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 ----------------------------- --------------------------- --------------------------- 2001 2000 2001 2000 2001 2000 ------------ ------------ ------------ ------------ ------------ ------------ Income: Dividends $16,040,950 $20,125,562 $27,986,915 $29,237,688 $0 $60,698,434 Expenses: Mortality and expense risk and administrative charges 3,072,703 3,267,126 4,357,094 5,312,275 5,858,783 9,107,473 ------------ ------------ ------------ ------------ ------------ ------------ Net investment income (loss) 12,968,247 16,858,436 23,629,821 23,925,413 (5,858,783) 51,590,961 Net realized gain (loss) (12,391,153) (8,786,838) (88,794,763) 22,246,460 (96,442,776) 23,324,830 Unrealized appreciation (depreciation) during the period 6,922,851 4,526,864 (10,069,902) (120,214,661) (16,918,973) (282,682,889) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from operations 7,499,945 12,598,462 (75,234,844) (74,042,788) (119,220,532) (207,767,098) Changes from principal transactions: Purchase payments 14,486,231 14,224,706 24,798,315 81,033,196 26,039,994 143,799,101 Transfers between sub-accounts and the Company (7,309,273) (23,800,359) (28,143,569) 71,221,845 (74,191,581) 146,926,128 Withdrawals (28,783,854) (36,563,833) (32,049,798) (36,864,648) (36,638,753) (55,952,151) Annual contract fee (95,459) (73,839) (250,246) (126,801) (434,157) (267,709) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from principal transactions (21,702,355) (46,213,325) (35,645,298) 115,263,592 (85,224,497) 234,505,369 ------------ ------------ ------------ ------------ ------------ ------------ Total increase (decrease) in contract owners' equity (14,202,410) (33,614,863) (110,880,142) 41,220,804 (204,445,029) 26,738,271 Contract owners' equity at beginning of period 216,511,265 250,126,128 358,877,712 317,656,908 535,855,671 509,117,400 ------------ ------------ ------------ ------------ ------------ ------------ Contract owners' equity at end of period $202,308,855 $216,511,265 $247,997,570 $358,877,712 $331,410,642 $535,855,671 ============ ============ ============ ============ ============ ============
See accompanying notes. 9 The Manufacturers Life Insurance Company of North America Separate Account A Statements of Operations and Changes in Contract Owners' Equity (continued)
SUB-ACCOUNT ------------------------------------------------------------------------------------------- ALL CAP GROWTH(2) INTERNATIONAL SMALL CAP PACIFIC RIM EMERGING MARKETS ----------------------------- --------------------------- -------------------------- YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 ----------------------------- --------------------------- -------------------------- 2001 2000 2001 2000 2001 2000 ------------ ------------ ------------ ------------ ----------- ----------- Income: Dividends $36,338,213 $50,593,333 $ 0 $49,840,813 $189,533 $250,797 Expenses: Mortality and expense risk and administrative charges 8,779,604 11,195,251 2,268,952 3,686,749 673,054 1,023,867 ------------ ------------ ------------ ------------ ----------- ----------- Net investment income (loss) 27,558,609 39,398,082 (2,268,952) 46,154,064 (483,521) (773,070) Net realized gain (loss) (52,498,441) 44,666,187 (75,086,334) 11,637,764 (11,109,334) 1,067,099 Unrealized appreciation (depreciation) during the period (164,637,059) (205,068,014) 11,898,270 (160,394,277) 2,933,651 (18,274,248) ------------ ------------ ------------ ------------ ----------- ----------- Net increase (decrease) in contract owners' equity from operations (189,576,891) (121,003,745) (65,457,016) (102,602,449) (8,659,204) (17,980,219) Changes from principal transactions: Purchase payments 59,975,314 197,502,417 12,973,521 88,505,705 2,885,796 22,426,542 Transfers between sub-accounts and the Company (38,003,469) 168,562,170 (30,276,745) 71,390,906 (12,909,667) (7,310,646) Withdrawals (48,430,034) (70,464,668) (13,420,646) (22,334,423) (3,411,960) (5,352,849) Annual contract fee (555,856) (282,698) (204,479) (94,638) (62,569) (30,253) ------------ ------------ ------------ ------------ ----------- ----------- Net increase (decrease) in contract owners' equity from principal transactions (27,014,045) 295,317,221 (30,928,349) 137,467,550 (13,498,400) 9,732,794 ------------ ------------ ------------ ------------ ----------- ----------- Total increase (decrease) in contract owners' equity (216,590,936) 174,313,476 (96,385,365) 34,865,101 (22,157,604) (8,247,425) Contract owners' equity at beginning of period 749,644,599 575,331,123 217,880,895 183,015,794 59,434,269 67,681,694 ------------ ------------ ------------ ------------ ----------- ----------- Contract owners' equity at end of period $533,053,663 $749,644,599 $121,495,530 $217,880,895 $37,276,665 $59,434,269 ============ ============ ============ ============ =========== ===========
(2) On May 1, 2000, the Mid Cap Growth Sub-Account was renamed All Cap Growth through a vote of the Board of Directors. See accompanying notes. 10 The Manufacturers Life Insurance Company of North America Separate Account A Statements of Operations and Changes in Contract Owners' Equity (continued)
SUB-ACCOUNT ------------------------------------------------------------------------------------------- SCIENCE & TECHNOLOGY EMERGING SMALL COMPANY AGGRESSIVE GROWTH ----------------------------- --------------------------- --------------------------- YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 ----------------------------- --------------------------- --------------------------- 2001 2000 2001 2000 2001 2000 ------------ -------------- ------------ ------------ ------------ ------------ Income: Dividends $ 38,026,075 $ 30,984,269 $ 7,806,044 $ 18,181,415 $ 0 $ 0 Expenses: Mortality and expense risk and administrative charges 10,141,645 17,606,870 2,929,835 3,158,927 3,954,802 3,700,752 ------------ -------------- ------------ ------------ ------------ ------------ Net investment income (loss) 27,884,430 13,377,399 4,876,209 15,022,488 (3,954,802) (3,700,752) Net realized gain (loss) (180,117,412) 73,111,691 (33,916,723) 24,781,412 (19,318,842) 22,160,342 Unrealized appreciation (depreciation) during the period (272,045,635) (609,701,574) (31,168,072) (71,226,705) (69,208,391) (50,553,904) ------------ -------------- ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from operations (424,278,617) (523,212,484) (60,208,586) (31,422,805) (92,482,035) (32,094,314) Changes from principal transactions: Purchase payments 74,905,484 375,238,009 29,781,989 88,275,621 46,793,941 139,587,411 Transfers between sub-accounts and the Company (43,566,540) 328,600,573 (8,839,605) 93,870,947 (18,932,333) 131,983,782 Withdrawals (54,798,116) (85,011,925) (13,373,730) (17,506,692) (18,504,165) (19,504,041) Annual contract fee (918,586) (567,673) (227,334) (72,800) (345,065) (101,186) ------------ -------------- ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from principal transactions (24,377,758) 618,258,984 7,341,320 164,567,076 9,012,378 251,965,966 ------------ -------------- ------------ ------------ ------------ ------------ Total increase (decrease) in contract owners' equity (448,656,375) 95,046,500 (52,867,266) 133,144,271 (83,469,657) 219,871,652 Contract owners' equity at beginning of period 1,000,191,543 905,145,043 246,789,999 113,645,728 332,067,294 112,195,642 ------------- -------------- ------------ ------------ ------------ ------------ Contract owners' equity at end of period $ 551,535,168 $1,000,191,543 $193,922,733 $246,789,999 $248,597,637 $332,067,294 ============= ============== ============ ============ ============ ============
See accompanying notes. 11 The Manufacturers Life Insurance Company of North America Separate Account A Statements of Operations and Changes in Contract Owners' Equity (continued)
SUB-ACCOUNT --------------------------------------------------------------------------------------------- INTERNATIONAL STOCK QUANTITATIVE EQUITY VALUE ----------------------------- ----------------------------- ----------------------------- YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 ----------------------------- ----------------------------- ----------------------------- 2001 2000 2001 2000 2001 2000 ------------- ------------- ------------- ------------- ------------- ------------- Income: Dividends $ 5,474,463 $ 587,742 $ 44,139,549 $ 29,985,988 $ 6,520,750 $ 0 Expenses: Mortality and expense risk and administrative charges 1,738,417 1,848,550 4,237,735 4,118,616 3,400,043 1,807,351 ------------- ------------- ------------- ------------- ------------- ------------- Net investment income (loss) 3,736,046 (1,260,808) 39,901,814 25,867,372 3,120,707 (1,807,351) Net realized gain (loss) (17,050,390) (34,568) (45,685,915) 9,348,288 8,719,270 (6,402,959) Unrealized appreciation (depreciation) during the period (17,063,153) (21,530,458) (77,823,593) (31,278,573) (12,616,845) 34,265,188 ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in contract owners' equity from operations (30,377,497) (22,825,834) (83,607,694) 3,937,087 (776,868) 26,054,878 Changes from principal transactions: Purchase payments 16,765,577 41,030,648 39,889,290 65,879,887 43,358,003 13,981,057 Transfers between sub- accounts and the Company (4,958,900) 31,041,113 (30,380,517) 107,902,641 89,667,963 2,554,059 Withdrawals (9,523,302) (9,853,897) (27,248,506) (25,638,236) (19,880,416) (10,944,275) Annual contract fee (123,486) (50,493) (235,128) (108,277) (152,336) (49,911) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in contract owners' equity from principal transactions 2,159,889 62,167,371 (17,974,861) 148,036,015 112,993,214 5,540,930 ------------- ------------- ------------- ------------- ------------- ------------- Total increase (decrease) in contract owners' equity (28,217,608) 39,341,537 (101,582,555) 151,973,102 112,216,346 31,595,808 Contract owners' equity at beginning of period 137,512,001 98,170,464 348,679,270 196,706,168 155,202,014 123,606,206 ------------- ------------- ------------- ------------- ------------- ------------- Contract owners' equity at end of period $ 109,294,393 $ 137,512,001 $ 247,096,715 $ 348,679,270 $ 267,418,360 $ 155,202,014 ============= ============= ============= ============= ============= =============
See accompanying notes. 12 The Manufacturers Life Insurance Company of North America Separate Account A Statements of Operations and Changes in Contract Owners' Equity (continued)
SUB-ACCOUNT ---------------------------------------------------------------------------------------------- REAL ESTATE SECURITIES BALANCED HIGH YIELD ----------------------------- ----------------------------- ------------------------------ YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 ----------------------------- ----------------------------- ------------------------------ 2001 2000 2001 2000 2001 2000 ------------- ------------- ------------- ------------- ------------- ------------- Income: Dividends $ 1,566,408 $ 1,158,716 $ 1,661,487 $ 3,964,386 $ 14,082,998 $ 453,242 Expenses: Mortality and expense risk and administrative charges 847,773 507,898 1,154,917 1,321,982 2,020,610 1,940,401 ------------- ------------- ------------- ------------- ------------- ------------- Net investment income (loss) 718,635 650,818 506,570 2,642,404 12,062,388 (1,487,159) Net realized gain (loss) 2,892,235 (3,041,066) (6,279,463) (2,487,625) (18,227,513) (5,426,552) Unrealized appreciation (depreciation) during the period (3,374,764) 10,418,414 (4,084,207) (9,650,745) (3,977,805) (6,804,957) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in contract owners' equity from operations 236,106 8,028,166 (9,857,100) (9,495,966) (10,142,930) (13,718,668) Changes from principal transactions: Purchase payments 12,061,247 5,177,299 8,881,103 10,941,134 17,548,109 19,691,165 Transfers between sub-accounts and the Company 17,830,845 10,027,572 1,739,124 (10,419,139) 19,867,888 (13,667,551) Withdrawals (6,096,963) (3,300,384) (7,104,749) (8,097,238) (15,005,911) (14,495,377) Annual contract fee (44,288) (15,181) (50,307) (36,965) (78,772) (42,218) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in contract owners' equity from principal transactions 23,750,841 11,889,306 3,465,171 (7,612,208) 22,331,314 (8,513,981) ------------- ------------- ------------- ------------- ------------- ------------- Total increase (decrease) in contract owners' equity 23,986,947 19,917,472 (6,391,929) (17,108,174) 12,188,384 (22,232,649) Contract owners' equity at beginning of period 49,876,230 29,958,758 81,235,098 98,343,272 121,559,644 143,792,293 ------------- ------------- ------------- ------------- ------------- ------------- Contract owners' equity at end of period $ 73,863,177 $ 49,876,230 $ 74,843,169 $ 81,235,098 $ 133,748,028 $ 121,559,644 ============= ============= ============= ============= ============= =============
See accompanying notes. 13 The Manufacturers Life Insurance Company of North America Separate Account A Statements of Operations and Changes in Contract Owners' Equity (continued)
SUB-ACCOUNT ---------------------------------------------------------------------------------------------- LIFESTYLE AGGRESSIVE 1000 LIFESTYLE GROWTH 820 LIFESTYLE BALANCED 640 ----------------------------- ----------------------------- ------------------------------ YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 ----------------------------- ----------------------------- ------------------------------ 2001 2000 2001 2000 2001 2000 ------------- ------------- ------------- ------------- ------------- ------------- Income: Dividends $ 6,677,725 $ 3,260,744 $ 31,273,338 $ 24,070,437 $ 28,360,750 $ 22,590,170 Expenses: Mortality and expense risk and administrative charges 1,265,443 992,146 5,572,022 4,681,050 5,669,714 4,654,347 ------------- ------------- ------------- ------------- ------------- ------------- Net investment income (loss) 5,412,282 2,268,598 25,701,316 19,389,387 22,691,036 17,935,823 Net realized gain (loss) (2,722,360) 862,638 (7,734,403) 671,806 (4,474,066) 100,333 Unrealized appreciation (depreciation) during the period (16,434,732) (8,171,974) (56,710,602) (34,792,440) (40,120,126) (14,989,131) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in contract owners' equity from operations (13,744,810) (5,040,738) (38,743,689) (14,731,247) (21,903,156) 3,047,025 Changes from principal transactions: Purchase payments 27,626,431 29,969,701 114,644,548 86,800,102 110,222,350 58,548,994 Transfers between sub-accounts and the Company 4,919,247 3,930,470 31,577,676 11,936,876 45,658,871 16,571,536 Withdrawals (4,233,194) (3,202,336) (20,376,071) (19,986,744) (27,460,181) (25,752,333) Annual contract fee (106,829) (50,842) (361,830) (205,193) (248,953) (158,662) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in contract owners' equity from principal transactions 28,205,655 30,646,993 125,484,323 78,545,041 128,172,087 49,209,535 ------------- ------------- ------------- ------------- ------------- ------------- Total increase (decrease) in contract owners' equity 14,460,845 25,606,255 86,740,634 63,813,794 106,268,931 52,256,560 Contract owners' equity at beginning of period 80,576,337 54,970,082 350,485,343 286,671,549 346,325,313 294,068,753 ------------- ------------- ------------- ------------- ------------- ------------- Contract owners' equity at end of period $ 95,037,182 $ 80,576,337 $ 437,225,977 $ 350,485,343 $ 452,594,244 $ 346,325,313 ============= ============= ============= ============= ============= =============
See accompanying notes. 14 The Manufacturers Life Insurance Company of North America Separate Account A Statements of Operations and Changes in Contract Owners' Equity (continued)
SUB-ACCOUNT --------------------------------------------------------------------------------------------- LIFESTYLE MODERATE 460 LIFESTYLE CONSERVATIVE 280 SMALL COMPANY VALUE ----------------------------- ----------------------------- ----------------------------- YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 ----------------------------- ----------------------------- ----------------------------- 2001 2000 2001 2000 2001 2000 ------------- ------------- ------------- ------------- ------------- ------------- Income: Dividends $ 7,902,314 $ 15,925,334 $ 4,151,737 $ 5,172,781 $ 124,685 $ 74,799 Expenses: Mortality and expense risk and administrative charges 2,169,905 1,974,137 1,321,714 1,104,615 1,277,039 807,207 ------------- ------------- ------------- ------------- ------------- ------------- Net investment income (loss) 5,732,409 13,951,197 2,830,023 4,068,166 (1,152,354) (732,408) Net realized gain (loss) (2,134,418) (437,059) (642,485) (248,679) 4,152,131 3,776,487 Unrealized appreciation (depreciation) during the period (6,850,716) (9,869,828) (688,992) 507,418 1,760,796 (476,014) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in contract owners' equity from operations (3,252,725) 3,644,310 1,498,546 4,326,905 4,760,573 2,568,065 Changes from principal transactions: Purchase payments 32,428,718 15,178,282 17,950,612 7,805,142 24,028,645 9,375,506 Transfers between sub-accounts and the Company 16,990,967 (5,758,954) 17,811,230 (12,552,216) 47,694,013 (6,069,006) Withdrawals (13,343,533) (11,393,647) (7,914,526) (6,546,677) (6,840,042) (4,551,929) Annual contract fee (81,963) (61,523) (39,395) (28,796) (70,716) (22,792) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in contract owners' equity from principal transactions 35,994,189 (2,035,842) 27,807,921 (11,322,547) 64,811,900 (1,268,221) ------------- ------------- ------------- ------------- ------------- ------------- Total increase (decrease) in contract owners' equity 32,741,464 1,608,468 29,306,467 (6,995,642) 69,572,473 1,299,844 Contract owners' equity at beginning of period 135,790,373 134,181,905 76,432,304 83,427,946 59,783,865 58,484,021 ------------- ------------- ------------- ------------- ------------- ------------- Contract owners' equity at end of period $ 168,531,837 $ 135,790,373 $ 105,738,771 $ 76,432,304 $ 129,356,338 $ 59,783,865 ============= ============= ============= ============= ============= =============
See accompanying notes. 15 The Manufacturers Life Insurance Company of North America Separate Account A Statements of Operations and Changes in Contract Owners' Equity (continued)
SUB-ACCOUNT --------------------------------------------------------------------------------------------- INTERNATIONAL VALUE SMALL COMPANY BLEND TOTAL RETURN --------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 ----------------------------- ----------------------------- ----------------------------- 2001 2000 2001 2000 2001 2000 ------------- ------------- ------------- ------------- ------------- ------------- Income: Dividends $ 1,675,032 $ 251,800 $ 464,556 $ 8,493,432 $ 8,514,836 $ 2,094,744 Expenses: Mortality and expense risk and administrative charges 949,485 651,186 1,342,521 1,107,578 3,767,832 1,478,185 ------------- ------------- ------------- ------------- ------------- ------------- Net investment income (loss) 725,547 (399,386) (877,965) 7,385,854 4,747,004 616,559 Net realized gain (loss) (3,055,770) 128,872 (14,964,306) 1,701,789 6,224,570 707,686 Unrealized appreciation (depreciation) during the period (4,586,703) (2,465,795) 13,065,358 (32,868,881) 4,611,990 9,055,202 ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in contract owners' equity from operations (6,916,926) (2,736,309) (2,776,913) (23,781,238) 15,583,564 10,379,447 Changes from principal transactions: Purchase payments 18,633,675 18,246,107 18,351,095 30,645,376 97,411,836 41,477,118 Transfers between sub-accounts and the Company 10,903,759 16,299,253 14,512,595 41,747,695 137,200,949 37,567,468 Withdrawals (4,607,196) (2,393,767) (5,239,976) (3,473,151) (20,961,429) (6,731,118) Annual contract fee (65,593) (22,698) (107,144) (35,746) (190,783) (48,508) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in contract owners' equity from principal transactions 24,864,645 32,128,895 27,516,570 68,884,174 213,460,573 72,264,960 ------------- ------------- ------------- ------------- ------------- ------------- Total increase (decrease) in contract owners' equity 17,947,719 29,392,586 24,739,657 45,102,936 229,044,137 82,644,407 Contract owners' equity at beginning of period 57,628,618 28,236,032 82,959,937 37,857,001 148,139,978 65,495,571 ------------- ------------- ------------- ------------- ------------- ------------- Contract owners' equity at end of period $ 75,576,337 $ 57,628,618 $ 107,699,594 $ 82,959,937 $ 377,184,115 $ 148,139,978 ============= ============= ============= ============= ============= =============
See accompanying notes. 16 The Manufacturers Life Insurance Company of North America Separate Account A Statements of Operations and Changes in Contract Owners' Equity (continued)
SUB-ACCOUNT --------------------------------------------------------------------------------------------- U.S. LARGE CAP VALUE MID CAP STOCK TACTICAL ALLOCATION(3) ----------------------------- ----------------------------- ----------------------------- YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 ----------------------------- ----------------------------- ----------------------------- 2001 2000 2001 2000 2001 2000 ------------- ------------- ------------- ------------- ------------- ------------- Income: Dividends $ 2,639,997 $ 1,231,221 $ 0 $ 0 $ 450,672 $ 1,332,431 Expenses: Mortality and expense risk and administrative charges 3,858,633 2,551,561 1,267,950 715,767 836,567 262,422 ------------- ------------- ------------- ------------- ------------- ------------- Net investment income (loss) (1,218,636) (1,320,340) (1,267,950) (715,767) (385,895) 1,070,009 Net realized gain (loss) (265,347) 1,307,778 (4,391,627) (234,783) (4,405,640) (57,540) Unrealized appreciation (depreciation) during the period (6,818,955) 2,039,607 (3,051,082) (2,588,424) (4,357,593) (2,460,176) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in contract owners' equity from operations (8,302,938) 2,027,045 (8,710,659) (3,538,974) (9,149,128) (1,447,707) Changes from principal transactions: Purchase payments 56,577,305 69,676,361 28,854,943 30,988,778 25,416,000 23,857,486 Transfers between sub-accounts and the Company 42,830,870 49,204,822 19,287,542 23,181,327 16,655,246 16,534,697 Withdrawals (15,483,321) (9,136,666) (5,066,965) (2,460,315) (2,297,814) (1,037,549) Annual contract fee (262,632) (88,438) (90,144) (25,979) (97,010) (15,969) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in contract owners' equity from principal transactions 83,662,222 109,656,079 42,985,376 51,683,811 39,676,422 39,338,665 ------------- ------------- ------------- ------------- ------------- ------------- Total increase (decrease) in contract owners' equity 75,359,284 111,683,124 34,274,717 48,144,837 30,527,294 37,890,958 Contract owners' equity at beginning of period 229,637,184 117,954,060 75,384,524 27,239,687 37,890,958 0 ------------- ------------- ------------- ------------- ------------- ------------- Contract owners' equity at end of period $ 304,996,468 $ 229,637,184 $ 109,659,241 $ 75,384,524 $ 68,418,252 $ 37,890,958 ============= ============= ============= ============= ============= =============
(3) Commencement of Operations, May 1, 2000, through a vote of the Board of Directors. See accompanying notes. 17 The Manufacturers Life Insurance Company of North America Separate Account A Statements of Operations and Changes in Contract Owners' Equity (continued)
SUB-ACCOUNT --------------------------------------------------------------------------------------------- DYNAMIC GROWTH(3) INTERNET TECHNOLOGIES(3) INTERNATIONAL INDEX(3) ----------------------------- ----------------------------- ----------------------------- YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 ----------------------------- ----------------------------- ----------------------------- 2001 2000 2001 2000 2001 2000 ------------- ------------- ------------- ------------- ------------- ------------- Income: Dividends $ 176,321 $ 0 $ 0 $ 0 $ 150,074 $ 104,347 Expenses: Mortality and expense risk and administrative charges 1,467,410 731,507 575,031 390,381 147,669 37,399 ------------- ------------- ------------- ------------- ------------- ------------- Net investment income (loss) (1,291,089) (731,507) (575,031) (390,381) 2,405 66,948 Net realized gain (loss) (40,230,842) (4,564,786) (25,510,772) (3,855,629) (1,092,680) (193,990) Unrealized appreciation (depreciation) during the period (15,232,811) (40,234,177) (624,106) (31,093,383) (1,350,445) (391,295) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in contract owners' equity from operations (56,754,742) (45,530,470) (26,709,909) (35,339,393) (2,440,720) (518,337) Changes from principal transactions: Purchase payments 33,352,059 77,760,872 10,377,810 43,329,348 5,975,523 5,222,617 Transfers between sub-accounts and the Company 10,035,539 78,616,628 4,331,792 43,429,491 1,811,325 3,391,636 Withdrawals (4,725,862) (2,298,272) (1,875,200) (1,288,888) (652,186) (92,000) Annual contract fee (133,172) (11,230) (69,029) (6,348) (10,675) (278) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in contract owners' equity from principal transactions 38,528,564 154,067,998 12,765,373 85,463,603 7,123,987 8,521,975 ------------- ------------- ------------- ------------- ------------- ------------- Total increase (decrease) in contract owners' equity (18,226,178) 108,537,528 (13,944,536) 50,124,210 4,683,267 8,003,638 Contract owners' equity at beginning of period 108,537,528 0 50,124,210 0 8,003,638 0 ------------- ------------- ------------- ------------- ------------- ------------- Contract owners' equity at end of period $ 90,311,350 $ 108,537,528 $ 36,179,674 $ 50,124,210 $ 12,686,905 $ 8,003,638 ============= ============= ============= ============= ============= =============
(3) Commencement of Operations, May 1, 2000, through a vote of the Board of Directors. See accompanying notes. 18 The Manufacturers Life Insurance Company of North America Separate Account A Statements of Operations and Changes in Contract Owners' Equity (continued)
SUB-ACCOUNT --------------------------------------------------------------------------------------------- TOTAL STOCK MARKET INDEX(3) 500 INDEX(3) MID CAP INDEX(3) ----------------------------- ----------------------------- ----------------------------- YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 ----------------------------- ----------------------------- ----------------------------- 2001 2000 2001 2000 2001 2000 ------------- ------------- ------------- ------------- ------------- ------------- Income: Dividends $ 201,791 $ 116,012 $ 1,169,265 $ 132,092 $ 234,678 $ 262,152 Expenses: Mortality and expense risk and administrative charges 270,413 54,891 1,564,727 300,294 391,981 69,776 ------------- ------------- ------------- ------------- ------------- ------------- Net investment income (loss) (68,622) 61,121 (395,462) (168,202) (157,303) 192,376 Net realized gain (loss) (1,438,676) (41,794) (7,725,632) (190,043) (1,645,809) (209,438) Unrealized appreciation (depreciation) during the period (651,864) (1,091,739) (5,248,394) (5,263,273) 672,275 (176,718) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in contract owners' equity from operations (2,159,162) (1,072,412) (13,369,488) (5,621,518) (1,130,837) (193,780) Changes from principal transactions: Purchase payments 6,128,531 4,102,618 50,888,607 33,971,178 11,259,601 5,797,626 Transfers between sub-accounts and the Company 9,430,012 9,553,681 59,546,373 35,860,190 15,499,075 8,264,638 Withdrawals (601,438) (78,976) (6,010,446) (998,846) (1,678,453) (199,986) Annual contract fee (10,893) (889) (114,413) (4,295) (16,817) (746) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in contract owners' equity from principal transactions 14,946,212 13,576,434 104,310,121 68,828,227 25,063,406 13,861,532 ------------- ------------- ------------- ------------- ------------- ------------- Total increase (decrease) in contract owners' equity 12,787,050 12,504,022 90,940,633 63,206,709 23,932,569 13,667,752 Contract owners' equity at beginning of period 12,504,022 0 63,206,709 0 13,667,752 0 ------------- ------------- ------------- ------------- ------------- ------------- Contract owners' equity at end of period $ 25,291,072 $ 12,504,022 $ 154,147,342 $ 63,206,709 $ 37,600,321 $ 13,667,752 ============= ============= ============= ============= ============= =============
(3) Commencement of Operations, May 1, 2000, through a vote of the Board of Directors. See accompanying notes. 19 The Manufacturers Life Insurance Company of North America Separate Account A Statements of Operations and Changes in Contract Owners' Equity (continued)
SUB-ACCOUNT --------------------------------------------------------------------------------- SMALL CAP INDEX(3) CAPITAL APPRECIATION(4) TELECOMMUNICATIONS(5) --------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 DECEMBER 31 ---------------------------- ---------------------------- ------------ 2001 2000 2001 2000 2001 ------------ ------------ ------------ ------------ ------------ Income: Dividends $ 379,293 $ 189,839 $ 0 $ 0 $ 0 Expenses: Mortality and expense risk and administrative charges 220,964 30,485 205,687 1,555 36,061 ------------ ------------ ------------ ------------ ------------ Net investment income (loss) 158,329 159,354 (205,687) (1,555) (36,061) Net realized gain (loss) (1,335,416) (30,281) (1,423,346) 23,692 (781,106) Unrealized appreciation (depreciation) during the period 1,018,358 (430,652) (338,212) (23,367) (278,889) ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from operations (158,729) (301,579) (1,967,245) (1,230) (1,096,056) Changes from principal transactions: Purchase payments 7,663,722 3,383,862 11,880,721 478,603 3,680,658 Transfers between sub-accounts and the Company 13,169,926 2,615,737 16,855,747 385,039 5,509,990 Withdrawals (807,211) (79,135) (608,434) (4,391) (68,733) Annual contract fee (11,374) (558) (10,738) (20) (2,053) ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from principal transactions 20,015,063 5,919,906 28,117,296 859,231 9,119,862 ------------ ------------ ------------ ------------ ------------ Total increase (decrease) in contract owners' equity 19,856,334 5,618,327 26,150,051 858,001 8,023,806 Contract owners' equity at beginning of period 5,618,327 0 858,001 0 0 ------------ ------------ ------------ ------------ ------------ Contract owners' equity at end of period $ 25,474,661 $ 5,618,327 $ 27,008,052 $ 858,001 $ 8,023,806 ============ ============ ============ ============ ============
(3) Commencement of Operations, May 1, 2000, through a vote of the Board of Directors. (4) Commencement of Operations, November 1, 2000, through a vote of the Board of Directors. (5) Commencement of Operations, April 30, 2001, through a vote of the Board of Directors. See accompanying notes. 20 The Manufacturers Life Insurance Company of North America Separate Account A Statements of Operations and Changes in Contract Owners' Equity (continued)
SUB-ACCOUNT -------------------------------------------------------------------------------- HEALTH SCIENCES(5) MID CAP GROWTH(5) MID CAP OPPORTUNITIES(5) ---------------------- ---------------------- ------------------------ YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 2001 2001 2001 ---------------------- ---------------------- ------------------------ Income: Dividends $ 0 $ 0 $ 0 Expenses: Mortality and expense risk and administrative charges 200,609 98,603 53,233 ------------ ------------ ------------ Net investment income (loss) (200,609) (98,603) (53,233) Net realized gain (loss) (138,860) (630,156) (254,283) Unrealized appreciation (depreciation) during the period 2,142,755 555,958 523,129 ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from operations 1,803,286 (172,801) 215,613 Changes from principal transactions: Purchase payments 17,463,800 7,685,785 5,904,385 Transfers between sub-accounts and the Company 26,030,010 16,885,836 7,055,377 Withdrawals (748,338) (322,252) (151,770) Annual contract fee (10,649) (3,851) (5,078) ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from principal transactions 42,734,823 24,245,518 12,802,914 ------------ ------------ ------------ Total increase (decrease) in contract owners' equity 44,538,109 24,072,717 13,018,527 Contract owners' equity at beginning of period 0 0 0 ------------ ------------ ------------ Contract owners' equity at end of period $ 44,538,109 $ 24,072,717 $ 13,018,527 ============ ============ ============
(5) Commencement of Operations, April 30, 2001, through a vote of the Board of Directors. See accompanying notes. 21 The Manufacturers Life Insurance Company of North America Separate Account A Statements of Operations and Changes in Contract Owners' Equity (continued)
SUB-ACCOUNT ------------------------------------------------------------------------------ FINANCIAL SERVICES(5) QUANTITATIVE MID CAP(5) STRATEGIC GROWTH(5) ---------------------- ----------------------- ---------------------- YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 2001 2001 2001 ---------------------- ---------------------- ------------------------ Income: Dividends $ 5,716 $ 0 $ 0 Expenses: Mortality and expense risk and administrative charges 105,756 19,893 205,377 ------------ ------------ ------------ Net investment income (loss) (100,040) (19,893) (205,377) Net realized gain (loss) (460,013) (122,156) (1,054,394) Unrealized appreciation (depreciation) during the period 201,898 (127,856) 849,508 ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from operations (358,155) (269,905) (410,263) Changes from principal transactions: Purchase payments 9,549,130 2,006,503 16,643,888 Transfers between sub-accounts and the Company 12,449,084 2,660,137 29,309,482 Withdrawals (334,311) (65,163) (759,887) Annual contract fee (5,416) (540) (7,252) ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from principal transactions 21,658,487 4,600,937 45,186,231 ------------ ------------ ------------ Total increase (decrease) in contract owners' equity 21,300,332 4,331,032 44,775,968 Contract owners' equity at beginning of period 0 0 0 ------------ ------------ ------------ Contract owners' equity at end of period $ 21,300,332 $ 4,331,032 $ 44,775,968 ============ ============ ============
(5) Commencement of Operations, April 30, 2001, through a vote of the Board of Directors. See accompanying notes. 22 The Manufacturers Life Insurance Company of North America Separate Account A Statements of Operations and Changes in Contract Owners' Equity (continued)
SUB-ACCOUNT ------------------------------------------------------------------------------ ALL CAP VALUE(5) CAPITAL OPPORTUNITIES(5) UTILITIES(5) ---------------------- ----------------------- ---------------------- YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 2001 2001 2001 ---------------------- ----------------------- ---------------------- Income: Dividends $3,235 $0 $74,285 Expenses: Mortality and expense risk and administrative charges 77,460 126,332 78,439 ----------- ----------- ----------- Net investment income (loss) (74,225) (126,332) (4,154) Net realized gain (loss) (376,923) (326,683) (408,611) Unrealized appreciation (depreciation) during the period 1,041,557 261,379 (1,380,657) ----------- ----------- ----------- Net increase (decrease) in contract owners' equity from operations 590,409 (191,636) (1,793,422) Changes from principal transactions: Purchase payments 7,315,671 10,158,527 7,387,415 Transfers between sub-accounts and the Company 11,168,995 19,088,625 10,155,443 Withdrawals (458,504) (596,013) (301,483) Annual contract fee (4,275) (4,413) (4,077) ----------- ----------- ----------- Net increase (decrease) in contract owners' equity from principal transactions 18,021,887 28,646,726 17,237,298 ----------- ----------- ----------- Total increase (decrease) in contract owners' equity 18,612,296 28,455,090 15,443,876 Contract owners' equity at beginning of period 0 0 0 ----------- ----------- ----------- Contract owners' equity at end of period $18,612,296 $28,455,090 $15,443,876 =========== =========== ===========
(5) Commencement of Operations, April 30, 2001, through a vote of the Board of Directors. See accompanying notes. 23 The Manufacturers Life Insurance Company of North America Separate Account A Statements of Operations and Changes in Contract Owners' Equity (continued)
SUB-ACCOUNT ------------------------------------------------------------------------------------- MID CAP VALUE(5) FUNDAMENTAL VALUE(5) BASIC VALUE FOCUS ------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 ---------------------------- 2001 2001 2001 2000 ---------------------- ---------------------- ------------ ------------ Income: Dividends $ 156,761 $ 0 $ 2,451,975 $ 3,311,277 Expenses: Mortality and expense risk and administrative charges 318,910 408,375 595,855 387,775 ------------ ------------ ------------ ------------ Net investment income (loss) (162,149) (408,375) 1,856,120 2,923,502 Net realized gain (loss) (213,679) (387,131) (290,683) (14,850) Unrealized appreciation (depreciation) during the period 3,247,693 1,297,817 (555,137) 253,246 ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from operations 2,871,865 502,311 1,010,300 3,161,898 Changes from principal transactions: Purchase payments 24,827,064 40,188,351 8,119,499 9,599,125 Transfers between sub-accounts and the Company 44,288,396 50,801,526 3,706,847 3,757,553 Withdrawals (1,049,511) (1,288,526) (1,336,871) (963,661) Annual contract fee (17,364) (16,426) (60,190) (28,229) ------------ ------------ ------------ ------------ Net increase (decrease) in contract owners' equity from principal transactions 68,048,585 89,684,925 10,429,285 12,364,788 ------------ ------------ ------------ ------------ Total increase (decrease) in contract owners' equity 70,920,450 90,187,236 11,439,585 15,526,686 Contract owners' equity at beginning of period 0 0 34,577,564 19,050,878 ------------ ------------ ------------ ------------ Contract owners' equity at end of period $ 70,920,450 $ 90,187,236 $ 46,017,149 $ 34,577,564 ============ ============ ============ ============
(5) Commencement of Operations, April 30, 2001, through a vote of the Board of Directors. See accompanying notes. 24 The Manufacturers Life Insurance Company of North America Separate Account A Statements of Operations and Changes in Contract Owners' Equity (continued)
SUB-ACCOUNT ------------------------------------------------------------------------------------------------- DEVELOPING CAPITAL SPECIAL VALUE FOCUS MARKETS FOCUS TOTAL ------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 --------------------------- -------------------------- ------------------------------------ 2001 2000 2001 2000 2001 2000 ------------ ----------- ----------- ----------- ---------------- ---------------- Income: Dividends $ 1,398,925 $ 2,059,524 $ 13,551 $ 11,561 $ 957,880,145 $ 1,297,046,053 Expenses: Mortality and expense risk and administrative charges 256,257 105,688 26,769 29,824 214,315,556 226,490,104 ------------ ----------- ----------- ----------- ---------------- ---------------- Net investment income (loss) 1,142,668 1,953,836 (13,218) (18,263) 743,564,589 1,070,555,949 Net realized gain (loss) 450,958 145,791 (200,078) 66,317 (993,360,778) 483,611,857 Unrealized appreciation (depreciation) during the period 3,149,620 (1,385,469) 195,328 (844,765) (2,017,940,394) (3,042,118,831) ------------ ----------- ----------- ----------- ---------------- ---------------- Net increase (decrease) in contract owners' equity from operations 4,743,246 714,158 (17,968) (796,711) (2,267,736,583) (1,487,951,025) Changes from principal transactions: Purchase payments 6,516,475 3,345,046 142,273 1,087,706 2,327,092,092 3,283,966,017 Transfers between sub-accounts and the Company 5,680,230 1,162,990 (579,039) 603,692 956,936,012 1,041,422,712 Withdrawals (812,933) (230,200) (24,766) (49,698) (1,660,609,562) (2,002,014,829) Annual contract fee (21,558) (6,170) (4,155) (1,599) (11,770,693) (6,730,699) ------------ ----------- ----------- ----------- ---------------- ---------------- Net increase (decrease) in contract owners' equity from principal transactions 11,362,214 4,271,666 (465,687) 1,640,101 1,611,647,849 2,316,643,201 ------------ ----------- ----------- ----------- ---------------- ---------------- Total increase (decrease) in contract owners' equity 16,105,460 4,985,824 (483,655) 843,390 (656,088,734) 828,692,176 Contract owners' equity at beginning of period 9,603,614 4,617,790 2,155,932 1,312,542 15,520,827,724 14,692,135,548 ------------ ----------- ----------- ----------- ---------------- ---------------- Contract owners' equity at end of period $ 25,709,074 $ 9,603,614 $ 1,672,277 $ 2,155,932 $ 14,864,738,990 $ 15,520,827,724 ============ =========== =========== =========== ================ ================
See accompanying notes. 25 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements December 31, 2001 1. ORGANIZATION The Manufacturers Life Insurance Company of North America Separate Account A (the Account) is a separate account established by The Manufacturers Life Insurance Company of North America (the Company). The Company established the Account on August 24, 1984 as a separate account under Delaware law. The Account operates as a Unit Investment Trust under the Investment Company Act of 1940, as amended, and invests in forty-seven sub-accounts of Manufacturers Investment Trust (the Trust) and three sub-accounts of Merrill Lynch Variable Series Funds, Inc. The Account is a funding vehicle for variable annuity contracts (the Contracts) issued by the Company. The Account includes fifty-two contracts, distinguished principally by the level of expenses and surrender charges. These fifty-two contracts are as follows: Venture Variable Annuity 1, 3, 7, 8, 17, 18, 20, 21, 22, 23, 25, 26, 27, 30, 31 and 34 (VEN 1, 3, 7, 8, 17, 18, 20, 21, 22, 23, 25, 26, 27, 30, 31 and 34), Venture Vantage Annuity 20, 21, 22, 23, 25, 50, 51, 52, 53, 55, 56, 60, 61, 62, 63, 64, 65, 66, 70, 71, 72, 73, 74, 75, 76, 80, 81, 82, 83, 84, 85 and 86 (VTG20, 21, 22, 23, 25, 50, 51, 52, 53, 55, 56, 60, 61, 62, 63, 64, 65, 66, 70, 71, 72, 73, 74, 75, 76, 80, 81, 82, 83, 84, 85 and 86), Venture Vision Variable Annuity 5, 6, 25 and 26 (VIS 5, 6, 25 and 26) and Venture No-load Rollover Annuity (MRP). The Company is a wholly-owned subsidiary of Manulife Wood Logan Holding Company, Inc. (MWLH). MWLH is an indirect wholly-owned subsidiary of the Manufacturers Life Insurance Company (MLI). MLI is a wholly-owned subsidiary of Manulife Financial Corporation. Manulife Financial Corporation and its subsidiaries are known collectively as Manulife Financial. On April 30, 2001, twelve new sub-accounts, All Cap Value Trust, Capital Opportunities Trust, Financial Services Trust, Fundamental Value Trust, Health Sciences Trust, Mid Cap Growth Trust, Mid Cap Opportunities Trust, Mid Cap Value Trust, Quantitative Mid Cap Trust, Strategic Growth Trust, Telecommunications Trust and Utilities Trust commenced operations. On May 1, 2000, eight new sub-accounts, Tactical Allocation, Dynamic Growth Trust, Internet Technologies Trust, International Index Trust, Total Stock Market Index Trust, 500 Index Trust, Mid Cap Index Trust and Small Cap Index Trust commenced operations. On November 1, 2000, 1 new sub-account, Capital Appreciation commenced operations. On April 30, 2001, the Mid Cap Blend sub-account was renamed Strategic Opportunities Trust through a vote of the Board of Directors. On May 1, 2000, the Mid Cap Growth sub-account was renamed All Cap Growth through a vote of the Board of Directors. 26 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 2. SIGNIFICANT ACCOUNTING POLICIES Investments are made in the portfolios of the Trust and are valued at the reported net asset values of such portfolios. Transactions are recorded on the trade date. Income from dividends is recorded on the ex-dividend date. Realized gains and losses on the sales of investments are computed on the basis of the identified cost of the investment sold. In addition to the Account, a contract holder may also allocate funds to the Fixed Account, which is part of the Company's general account. Because of exemptive and exclusionary provisions, interests in the Fixed Account have not been registered under the Securities Act of 1933, and the Company's general account has not been registered as an investment company under the Investment Company Act of 1940. Annuity reserves are computed for contracts under which periodic benefit payments are being made according to the 1983a Individual Annuitant Mortality Table. The assumed investment return is 4%, as regulated by the laws of the respective states. The mortality risk is fully borne by the Company and may result in additional amounts being transferred into the Account by the Company. The operations of the Account are included in the federal income tax return of the Company, which is taxed as a life insurance company under the provisions of the Internal Revenue Code (the Code). Under the current provisions of the Code, the Company does not expect to incur federal income taxes on the earnings of the Account to the extent the earnings are credited under the contracts. Based on this, no charge is being made currently to the Account for federal income taxes. The Company will periodically review the status of this decision based on changes in the tax law. Such a charge may be made in future years for any federal income taxes that would be attributable to the contract. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from reported results using those estimates. 27 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 3. AFFILIATED COMPANY TRANSACTIONS The Company has an Administrative Services Agreement with Manulife Financial, whereby Manulife Financial or its designee, with the consent of the Company, performs certain services on behalf of the Company necessary for the operation of the separate account. The Company has an underwriting and distribution agreements with its affiliate, Manufacturers Securities Services LLC (MSS). MSS is 90% owned by the Company and 10% owned by The Manufacturers Life Insurance Company of New York (MNY). MNY is a wholly owned subsidiary of the Company. 4. CONTRACT CHARGES There are no deductions made from purchase payments for sales charges at the time of purchase. In the event of a surrender, a contingent deferred sales charge may be charged by the Company to cover sales expenses. An annual administrative fee of $30 is deducted from each contract owners' account on the contract anniversary date to cover contract administration costs. This charge is waived on certain contracts. Deductions from each sub-account are made daily for administrative fees and for the assumption of mortality and expense risk charges as follows: (i) Prior Contract Series (VEN 1): deductions from each sub-account are made daily for the assumption of mortality and expense risks equal to an effective annual rate of 1.30% of the contract value. (ii) Current Contract Series (VEN 3, 7, 8, 17, 18, 20, 21, 22, 23, 25, 26, 27, 30, 31, 34, VENR 21, 23, 31, 41): deductions from each sub-account are made daily for administration and for the assumption of mortality and expense risks equal to an effective annual rate of 0.15% and 1.25% of the contract value, respectively. (iii) Current Contract Series (VEN 25, 26, 27): offered in Merrill Lynch Series Funds only (Basic Value Focus, Developing Capital Markets Focus and Special Value Focus portfolios): deductions from each sub-account are made daily for administration and for the assumption of mortality and expense risks equal to an effective annual rate of 0.15% and 1.25% of the contract value, respectively. 28 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 4. CONTRACT CHARGES (CONTINUED) (iv) Current Contract Series (VIS 5, 6, 25, 26): deductions from each sub-account are made daily for distribution fees, administration and for the assumption of mortality and expense risks equal to an effective annual rate of 0.15%, 0.25% and 1.25% of the contract value, respectively. (v) Current Contract Series (VTG20, 21, 22, 23, 25, 26): deductions from each sub-account are made daily for administration and for the assumption of mortality and expense risks equal to an effective annual rate of 0.30% and 1.25% of the contract value, respectively. (vi) Current Contract Series (VTG50, 51, 52, 53, 55, 56): deductions from each sub-account are made daily for administration and for the assumption of mortality and expense risks equal to an effective annual rate of 0.30% and 1.45% of the contract value, respectively. (vii) Current Contract Series (VTG10, 11, 12, 13, 15, 16): deductions from each sub-account are made daily for administration and for the assumption of mortality and expense risks equal to an effective annual rate of 0.30% and 1.25% of the contract value, respectively. (viii) Current Contract Series (VTG60, 61, 62, 63, 65, 66): deductions from each sub-account are made daily for administration and for the assumption of mortality and expense risks equal to an effective annual rate of 0.30% and 1.30% of the contract value, respectively. (ix) Current Contract Series (VTG70, 71, 72, 73, 75, 76): deductions from each sub-account are made daily for administration and for the assumption of mortality and expense risks equal to an effective annual rate of 0.30% and 1.45% of the contract value, respectively. (x) Current Contract Series (VTG80, 81, 82, 83, 85, 86): deductions from each sub-account are made daily for administration and for the assumption of mortality and expense risks equal to an effective annual rate of 0.30% and 1.50% of the contract value, respectively. (xi) Current Contract Series (MRP): deductions from each sub-account are made daily for administration and for the assumption of mortality and expense risks equal to an effective annual rate of 0.15% and .85% of the contract value, respectively. On June 1, 2000, deductions were reduced to an effective annual rate of 0.15% and 0.30% respectively. 29 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 4. CONTRACT CHARGES (CONTINUED) (xii) Current Contract Series (VEN50, 51, 52, 53, 55, 56, 58, 80, 81, 82, 83, 84, 90, 91, 92, 93): deductions from each sub-account are made daily for administration, the assumption of mortality and expense risks and a guaranteed earnings multiplier rider equal to an effective annual rate of 0.15%, 1.25% and 0.20%, respectively. (xiii) Current Contract Series (TYP10, 11, 13, 14, 15, 16, 17, 18): deductions from each sub-account are made daily for administration and the assumption of mortality and expense risks equal to an effective annual rate of 0.40% and 1.25%, respectively. (xiv) Current Contract Series (TYP60, 61, 63, 64, 65, 66, 67, 68): deductions from each sub-account are made daily for administration, the assumption of mortality and expense risks, and an annual death benefit step rider, equal to an effective annual rate of 0.40%, 1.25% and 0.05%, respectively. (xv) Current Contract Series (TYP70, 71, 73, 74, 75, 76, 77, 78): deductions from each sub-account are made daily for administration, the assumption of mortality and expense risks, and a guaranteed earnings multiplier, equal to an effective annual rate of 0.40%, 1.25% and 0.20%, respectively. (xvi) Current Contract Series (TYP80, 81, 83, 84, 85, 86, 87, 88): deductions from each sub-account are made daily for administration, the assumption of mortality and expense risks, a guaranteed earnings multiplier and an annual death benefit rider, equal to an effective annual rate of 0.40%, 1.25%, 0.20% and 0.05%, respectively. (xvii) Current Contract Series (VSTG01, VSTI01): deductions from each sub-account are made daily for administration and for the assumption of mortality and expense risks equal to an effective annual rate of 0.15% and 0.30% of the contract value, respectively. 30 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 5. PURCHASES AND SALES OF INVESTMENTS The following table shows aggregate cost of shares purchased and proceeds from sales of each subaccount for the year ended December 31, 2001:
PURCHASES SALES -------------- -------------- Strategic Opportunities Portfolio $ 412,240,310 $ 378,589,094 Investment Quality Bond Portfolio 160,356,316 94,053,067 Growth & Income Portfolio 300,995,699 420,315,317 Blue Chip Growth Portfolio 318,595,246 317,800,611 Money Market Portfolio 2,864,084,937 2,493,710,565 Global Equity Portfolio 274,419,967 272,366,583 Global Bond Portfolio 47,097,431 69,777,058 U.S. Government Securities Portfolio 226,673,086 134,035,712 Diversified Bond Allocation Portfolio 139,127,754 86,237,344 Income & Value Portfolio 164,771,784 146,900,555 Large Cap Growth Portfolio 245,976,846 201,705,194 Equity-Income Portfolio 394,875,532 206,324,138 Strategic Bond Portfolio 107,185,279 115,919,387 Overseas Portfolio 412,805,158 424,820,635 Growth Portfolio 106,682,788 197,766,068 All Cap Growth Portfolio 267,869,722 267,325,158 International Small Cap Portfolio 193,333,118 226,530,419 Pacific Rim Emerging Markets Portfolio 183,921,548 197,903,469 Science & Technology Portfolio 247,605,556 244,098,884 Emerging Small Company Portfolio 120,534,654 108,317,125 Aggressive Growth Portfolio 111,874,579 106,817,003 International Stock Portfolio 171,042,620 165,146,685 Quantitative Equity Portfolio 168,730,917 146,803,964 Value Portfolio 219,161,009 103,047,088 Real Estate Securities Portfolio 71,363,063 46,893,587 Balanced Portfolio 23,356,232 19,384,491 High Yield Portfolio 147,263,856 112,870,154 Lifestyle Aggressive 1000 Portfolio 44,976,638 11,358,701
31 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 5. PURCHASES AND SALES OF INVESTMENTS (CONTINUED)
PURCHASES SALES --------------- -------------- Lifestyle Growth 820 Portfolio $ 192,448,966 $ 41,263,327 Lifestyle Balanced 640 Portfolio 199,138,035 48,274,912 Lifestyle Moderate 460 Portfolio 66,073,342 24,346,744 Lifestyle Conservative 280 Portfolio 53,302,049 22,664,105 Small Company Value Portfolio 161,908,298 98,248,752 International Value Portfolio 76,607,539 51,017,347 Small Company Blend Portfolio 71,340,492 44,701,887 Total Return Portfolio 301,619,200 83,411,623 U.S. Large Cap Value Portfolio 142,509,161 60,065,575 Mid Cap Stock Portfolio 68,864,570 27,147,144 Tactical Allocation Portfolio 65,741,525 26,450,998 Dynamic Growth Portfolio 84,328,982 47,091,507 Internet Technologies Portfolio 27,585,827 15,395,485 International Index Portfolio 27,900,148 20,773,756 Total Stock Market Index Portfolio 20,515,099 5,637,509 500 Index Portfolio 138,025,501 34,110,842 Mid Cap Index Portfolio 44,358,025 19,451,922 Small Cap Index Portfolio 36,803,439 16,630,047 Capital Appreciation Portfolio 42,387,980 14,476,371 Telecommunications Portfolio 12,293,772 3,209,971 Health Sciences Portfolio 54,893,028 12,358,814 Mid Cap Growth Portfolio 30,408,161 6,261,246 Mid Cap Opportunities Portfolio 15,962,069 3,212,388 Financial Services Portfolio 30,537,656 8,979,209 Quantitative Mid Cap Portfolio 5,563,848 982,804 Strategic Growth Portfolio 51,194,755 6,213,901 All Cap Value Portfolio 24,476,913 6,529,251 Capital Opportunities Portfolio 30,301,854 1,781,460 Utilities Portfolio 19,067,749 1,834,605 Mid Cap Value Portfolio 74,706,017 6,819,581 Fundamental Value Portfolio 94,208,110 4,931,560 Basic Value Focus Portfolio 17,263,051 4,977,646 Special Value Focus Portfolio 15,933,516 3,428,634 Developing Capital Markets Focus Portfolio 335,931 814,836 --------------- -------------- Total $10,445,526,253 $8,090,313,815 =============== ==============
32 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION A summary of the accumulation unit values at December 31, 2001 and December 31, 2000 and the accumulation units and dollar values outstanding at December 31, 2001 are as follows:
2000 2001 ---------- -------------------------------------------------------------------------------- INVESTMENT TOTAL UNIT UNIT EXPENSE INCOME RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- ---------- ---------- ------------ -------------- ---------- -------- Strategic Opportunities Sub-Account: 0.45% to 1.90% 15.08% Venture 1.30% Fee Contracts $60.037547 $50.221375 9,683 $ 486,316 (0.16%) Venture 1.40% Fee Contracts 36.392717 30.409247 24,237,416 737,041,574 (0.16%) Venture Vision Contracts 26.586905 22.159728 2,192,082 48,575,930 (0.17%) Venture Vantage 1.55% Fee Contracts 15.588834 13.006127 6,742,185 87,689,715 (0.17%) Venture Vantage 1.75% Fee Contracts 11.972462 9.968780 1,164,679 11,610,427 (0.17%) Venture Vantage 1.60% Fee Contracts(1) 9.885051 907,414 8,969,826 (0.21%) Venture Vantage 1.80% Fee Contracts(1) 9.866815 529,537 5,224,845 (0.21%) Venture III 1.70% Fee Contracts(2) 10.894550 50,797 553,411 (0.13%) Venture III 1.85% Fee Contracts(2) 10.887723 5,079 55,304 (0.13%) Venture III 1.90% Fee Contracts(2) 10.885446 22,580 245,794 (0.13%) Venture Strategy & Rollover Contracts 14.242740 12.015572 1,853 22,262 (0.16%) 35,863,305 900,475,404 Investment Quality Bond Sub-Account: 0.45% to 1.90% 5.88% Venture 1.30% Fee Contracts 23.817687 25.233827 1,399 35,295 5.95% Venture 1.40% Fee Contracts 20.541376 21.739025 8,339,346 181,289,246 5.83% Venture Vision Contracts 13.826642 14.596065 1,559,789 22,766,786 5.56% Venture Vantage 1.55% Fee Contracts 14.422789 15.240703 3,597,494 54,828,342 5.67% Venture Vantage 1.75% Fee Contracts 13.054821 13.767444 422,241 5,813,184 5.46% Venture Vantage 1.60% Fee Contracts(1) 13.097442 572,837 7,502,697 4.78% Venture Vantage 1.80% Fee Contracts(1) 13.073356 480,845 6,286,246 4.59% Venture III 1.70% Fee Contracts(2) 12.549501 80,574 1,011,163 0.40% Venture III 1.85% Fee Contracts(2) 12.541663 11,755 147,424 0.33% Venture III 1.90% Fee Contracts(2) 12.539051 70,365 882,306 0.31% Venture Strategy & Rollover Contracts 14.027435 14.987723 755 11,312 6.85% 15,137,400 280,574,001
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 33 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- -------------------------------------------------------------------------------- INVESTMENT TOTAL UNIT UNIT EXPENSE INCOME RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- ---------- ---------- ------------ -------------- ---------- -------- Growth & Income Sub-Account: 0.45% to 1.90% 5.54% Venture 1.40% Fee Contracts $35.404552 $30.971701 46,744,749 $1,447,764,393 (12.52%) Venture Vision Contracts 27.835602 24.289203 5,914,200 143,651,197 (12.74%) Venture Vantage 1.55% Fee Contracts 16.924924 14.783474 20,778,497 307,178,367 (12.65%) Venture Vantage 1.75% Fee Contracts 11.658205 10.162651 3,494,883 35,517,272 (12.83%) Venture Vantage 1.60% Fee Contracts(1) 10.702774 2,317,557 24,804,298 (14.38%) Venture Vantage 1.80% Fee Contracts(1) 10.683054 1,258,235 13,441,797 (14.54%) Venture III 1.70% Fee Contracts(2) 11.913393 203,825 2,428,244 (4.69%) Venture III 1.85% Fee Contracts(2) 11.905935 18,024 214,598 (4.75%) Venture III 1.90% Fee Contracts(2) 11.903453 130,404 1,552,261 (4.77%) Venture Strategy & Rollover Contracts 15.124927 13.358356 13,506 180,413 (11.68%) -------------------------- 80,873,880 1,976,732,840 Blue Chip Growth Sub-Account: 0.45% to 1.90% 7.66% Venture 1.40% Fee Contracts 24.518135 20.643428 40,432,968 834,675,066 (15.80%) Venture Vision Contracts 25.365287 21.302974 3,932,537 83,774,725 (16.02%) Venture Vantage 1.55% Fee Contracts 18.27937 15.367363 15,320,446 235,434,858 (15.93%) Venture Vantage 1.75% Fee Contracts 11.549188 9.689796 2,890,053 28,004,033 (16.10%) Venture Vantage 1.60% Fee Contracts(1) 10.343004 2,037,110 21,069,836 (17.26%) Venture Vantage 1.80% Fee Contracts(1) 10.323946 979,633 10,113,670 (17.41%) Venture III 1.70% Fee Contracts(2) 12.143192 111,401 1,352,767 (2.85%) Venture III 1.85% Fee Contracts(2) 12.135598 12,861 156,077 (2.92%) Venture III 1.90% Fee Contracts(2) 12.133063 69,505 843,310 (2.94%) Venture Strategy & Rollover Contracts 16.13729 13.717702 9,558 131,107 (14.99%) -------------------------- 65,796,072 1,215,555,449
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 34 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- -------------------------------------------------------------------------------- INVESTMENT TOTAL UNIT UNIT EXPENSE INCOME RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- ---------- ---------- ------------ -------------- ---------- -------- Money Market Sub-Account: 0.45% to 1.90% 3.37% Venture 1.30% Fee Contracts $18.654229 $19.073731 4,054 $ 77,329 2.25% Venture 1.40% Fee Contracts 17.010114 17.373703 30,646,500 532,443,186 2.14% Venture Vision Contracts 12.657686 12.895798 9,296,391 119,884,385 1.88% Venture Vantage 1.55% Fee Contracts 14.090782 14.370287 15,483,886 222,507,896 1.98% Venture Vantage 1.75% Fee Contracts 12.724933 12.951278 2,303,283 29,830,460 1.78% Venture Vantage 1.60% Fee Contracts(1) 12.703000 3,878,691 49,271,015 1.62% Venture Vantage 1.80% Fee Contracts(1) 12.679643 2,126,685 26,965,612 1.44% Venture III 1.70% Fee Contracts(2) 12.533918 964,734 12,091,892 0.27% Venture III 1.85% Fee Contracts(2) 12.526094 27,939 349,968 0.21% Venture III 1.90% Fee Contracts(2) 12.523480 551,853 6,911,122 0.19% Venture Strategy & Rollover Contracts 14.026504 14.463814 54,928 794,470 3.12% -------------------------- 65,338,944 1,001,127,335 Global Equity Sub-Account: 0.45% to 1.90% 17.22% Venture 1.40% Fee Contracts 27.253960 22.548612 16,146,846 364,088,967 (17.26%) Venture Vision Contracts 21.049744 17.371743 1,956,124 33,981,275 (17.47%) Venture Vantage 1.55% Fee Contracts 15.723185 12.988963 2,616,203 33,981,758 (17.39%) Venture Vantage 1.75% Fee Contracts 13.554144 11.174588 250,776 2,802,313 (17.56%) Venture Vantage 1.60% Fee Contracts(1) 10.523033 348,120 3,663,283 (15.82%) Venture Vantage 1.80% Fee Contracts(1) 10.503647 250,397 2,630,081 (15.97%) Venture III 1.70% Fee Contracts(2) 11.362716 20,969 238,262 (9.10%) Venture III 1.85% Fee Contracts(2) 11.355598 6,918 78,561 (9.16%) Venture III 1.90% Fee Contracts(2) 11.353229 14,279 162,118 (9.17%) Venture Strategy & Rollover Contracts 13.953918 11.655792 749 8,729 (16.47%) -------------------------- 21,611,381 441,635,347
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 35 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- -------------------------------------------------------------------------------- INVESTMENT TOTAL UNIT UNIT EXPENSE INCOME RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- ---------- ---------- ------------ -------------- ---------- -------- Global Bond Sub-Account: 0.45% to 1.90% 0.00% Venture 1.40% Fee Contracts $19.685989 $19.512793 3,519,891 $68,682,913 (0.88%) Venture Vision Contracts 13.602454 13.448939 509,331 6,849,956 (1.13%) Venture Vantage 1.55% Fee Contracts 12.526713 12.397792 618,249 7,664,920 (1.03%) Venture Vantage 1.75% Fee Contracts 12.871966 12.713906 69,624 885,192 (1.23%) Venture Vantage 1.60% Fee Contracts(1) 12.469302 88,571 1,104,414 (0.25%) Venture Vantage 1.80% Fee Contracts(1) 12.446362 59,230 737,201 (0.43%) Venture III 1.70% Fee Contracts(2) 12.665620 10,130 128,306 1.32% Venture III 1.90% Fee Contracts(2) 12.655085 4,688 59,326 1.24% Venture Strategy & Rollover Contracts 12.212091 12.220839 420 5,138 0.07% ------------------------- 4,880,134 86,117,366 U.S. Government Securities 0.45% to 1.90% 5.35% Sub-Account: Venture 1.40% Fee Contracts 19.993612 21.100300 8,993,854 189,773,022 5.54% Venture Vision Contracts 13.913787 14.647092 1,754,264 25,694,863 5.27% Venture Vantage 1.55% Fee Contracts 14.641155 15.428294 3,929,959 60,632,563 5.38% Venture Vantage 1.75% Fee Contracts 13.197644 13.879256 444,322 6,166,860 5.16% Venture Vantage 1.60% Fee Contracts(1) 13.106028 717,662 9,405,699 4.85% Venture Vantage 1.80% Fee Contracts(1) 13.081938 573,571 7,503,420 4.66% Venture III 1.70% Fee Contracts(2) 12.689331 170,252 2,160,383 1.51% Venture III 1.85% Fee Contracts(2) 12.681412 10,938 138,711 1.45% Venture III 1.90% Fee Contracts(2) 12.678773 78,307 992,835 1.43% Venture Strategy & Rollover Contracts 14.321813 15.259551 539 8,229 6.55% -------------------------- 16,673,668 302,476,585
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 36 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- -------------------------------------------------------------------------------- INVESTMENT TOTAL UNIT UNIT EXPENSE INCOME RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- ---------- ---------- ------------ -------------- ---------- -------- Diversified Bond Sub-Account: 0.45% to 1.90% 5.31% Venture 1.40% Fee $19.585192 $20.680033 6,910,278 $142,904,771 5.59% Contracts Venture Vision Contracts 15.765628 16.605167 913,817 15,174,086 5.33% Venture Vantage 1.55% Fee Contracts 14.989755 15.803857 2,281,337 36,053,916 5.43% Venture Vantage 1.75% Fee Contracts 13.190998 13.879479 244,136 3,388,478 5.22% Venture Vantage 1.60% Fee Contracts(1) 13.053022 511,480 6,676,367 4.42% Venture Vantage 1.80% Fee Contracts(1) 13.029001 407,305 5,306,776 4.23% Venture III 1.70% Fee Contracts(2) 12.675169 62,586 793,288 1.40% Venture III 1.85% Fee Contracts(2) 12.667251 4,622 58,543 1.34% Venture III 1.90% Fee Contracts(2) 12.664622 34,146 432,445 1.32% Venture Strategy & Rollover Contracts 14.387750 15.337803 729 11,185 6.60% -------------------------- 11,370,436 210,799,855 Income & Value Sub-Account: 0.45% to 1.90% 4.85% Venture 1.40% Fee Contracts 23.004542 22.905535 17,542,582 401,822,226 (0.43)% Venture Vision Contracts 18.566934 18.440571 1,711,883 31,568,105 (0.68)% Venture Vantage 1.55% Fee Contracts 15.921242 15.828793 2,843,771 45,013,469 (0.58)% Venture Vantage 1.75% Fee Contracts 12.710793 12.611582 486,760 6,138,809 (0.78)% Venture Vantage 1.60% Fee Contracts(1) 12.039038 576,573 6,941,383 (3.69)% Venture Vantage 1.80% Fee Contracts(1) 12.016868 264,001 3,172,473 (3.87)% Venture III 1.70% Fee Contracts(2) 12.290367 88,027 1,081,885 (1.68)% Venture III 1.85% Fee Contracts(2) 12.282680 2,267 27,842 (1.74)% Venture III 1.90% Fee Contracts(2) 12.280120 47,904 588,263 (1.76)% Venture Strategy & Rollover Contracts 14.788189 14.865986 1,249 18,566 0.53% -------------------------- 23,565,017 496,373,021
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 37 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- -------------------------------------------------------------------------------- INVESTMENT TOTAL UNIT UNIT EXPENSE INCOME RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- ---------- ---------- ------------ -------------- ---------- -------- Large Cap Growth Sub-Account: 0.45% to 1.90% 4.19% Venture 1.40% Fee Contracts $24.071737 $19.506566 14,153,827 $276,092,557 (18.96%) Venture Vision Contracts 19.733542 15.950869 1,281,707 20,444,339 (19.17%) Venture Vantage 1.55% Fee Contracts 15.400808 12.461213 6,592,900 82,155,526 (19.09%) Venture Vantage 1.75% Fee Contracts 10.924721 8.821694 1,545,756 13,636,186 (19.25%) Venture Vantage 1.60% Fee Contracts(1) 9.925531 1,109,881 11,016,158 (20.60%) Venture Vantage 1.80% Fee Contracts(1) 9.907230 579,502 5,741,261 (20.74%) Venture III 1.70% Fee Contracts(2) 11.439961 96,237 1,100,952 (8.48%) Venture III 1.85% Fee Contracts(2) 11.432796 10,330 118,100 (8.54%) Venture III 1.90% Fee Contracts(2) 11.430412 40,103 458,395 (8.56%) Venture Strategy & Rollover Contracts 14.028600 11.477445 163 1,852 (18.19%) -------------------------- 25,410,406 410,765,326 Equity-Income Sub-Account: 0.45% to 1.90% 10.57% Venture 1.40% Fee Contracts 25.057453 25.025958 24,570,458 614,899,243 (0.13%) Venture Vision Contracts 23.507739 23.419227 2,933,697 68,704,905 (0.38%) Venture Vantage 1.55% Fee Contracts 16.140990 16.096393 7,855,731 126,448,941 (0.28%) Venture Vantage 1.75% Fee Contracts 14.266438 14.198434 1,146,437 16,277,613 (0.48%) Venture Vantage 1.60% Fee Contracts(1) 12.453924 1,588,991 19,789,168 (0.37%) Venture Vantage 1.80% Fee Contracts(1) 12.431003 887,859 11,036,983 (0.55%) Venture III 1.70% Fee Contracts(2) 12.146730 195,153 2,370,476 (2.83%) Venture III 1.85% Fee Contracts(2) 12.139130 30,635 371,885 (2.89%) Venture III 1.90% Fee Contracts(2) 12.136595 72,763 883,093 (2.91%) Venture Strategy & Rollover Contracts 14.327119 14.446503 25,366 366,456 0.83% -------------------------- 39,307,090 861,148,763
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 38 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- -------------------------------------------------------------------------------- INVESTMENT TOTAL UNIT UNIT EXPENSE INCOME RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- ---------- ---------- ------------ -------------- ---------- -------- Strategic Bond Sub-Account: 0.45% to 1.90% 7.64% Venture 1.40% Fee Contracts $15.463354 $16.199150 8,825,115 $142,959,361 4.76% Venture Vision Contracts 15.128283 15.808358 1,166,466 18,439,908 4.50% Venture Vantage 1.55% Fee Contracts 13.581019 14.205813 2,143,934 30,456,322 4.60% Venture Vantage 1.75% Fee Contracts 12.905776 13.472399 274,594 3,699,445 4.39% Venture Vantage 1.60% Fee Contracts(1) 12.991163 215,649 2,801,534 3.93% Venture Vantage 1.80% Fee Contracts(1) 12.967269 246,561 3,197,222 3.74% Venture III 1.70% Fee Contracts(2) 12.647340 34,820 440,380 1.18% Venture III 1.85% Fee Contracts(2) 12.639442 2,341 29,589 1.12% Venture III 1.90% Fee Contracts(2) 12.636812 7,332 92,653 1.09% Venture Strategy & Rollover Contracts 13.262545 14.026945 7 92 5.76% -------------------------- 12,916,819 202,116,506 Overseas Sub-Account: 0.45% to 1.90% 9.39% Venture 1.40% Fee Contracts 13.661286 10.628366 16,528,653 175,672,569 (22.20%) Venture Vision Contracts 13.458771 10.444462 1,731,799 18,087,705 (22.40%) Venture Vantage 1.55% Fee Contracts 13.768330 10.695465 4,020,779 43,004,106 (22.32%) Venture Vantage 1.75% Fee Contracts 11.222510 8.700270 638,558 5,555,624 (22.47%) Venture Vantage 1.60% Fee Contracts(1) 9.694096 354,115 3,432,823 (22.45%) Venture Vantage 1.80% Fee Contracts(1) 9.676220 168,275 1,628,260 (22.59%) Venture III 1.70% Fee Contracts(2) 11.387239 25,684 292,474 (8.90%) Venture III 1.90% Fee Contracts(2) 11.377732 6,459 73,486 (8.98%) Venture Strategy & Rollover Contracts 13.181065 10.353401 8 78 (21.45%) -------------------------- 23,474,330 247,747,125
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 39 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- -------------------------------------------------------------------------------- INVESTMENT TOTAL UNIT UNIT EXPENSE INCOME RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- ---------- ---------- ------------ -------------- ---------- -------- Growth Sub-Account: 0.45% to 1.90% 0.00% Venture 1.40% Fee Contracts $20.120816 $15.600316 14,698,196 $229,296,507 (22.47%) Venture Vision Contracts 19.897782 15.388542 1,313,052 20,205,950 (22.66%) Venture Vantage 1.55% Fee Contracts 14.469646 11.201832 6,084,755 68,160,402 (22.58%) Venture Vantage 1.75% Fee Contracts 9.089389 7.022468 988,489 6,941,635 (22.74%) Venture Vantage 1.60% Fee Contracts(1) 9.163627 380,246 3,484,435 (26.69%) Venture Vantage 1.80% Fee Contracts(1) 9.146718 328,103 3,001,065 (26.83%) Venture III 1.70% Fee Contracts(2) 11.706670 8,825 103,316 (6.35%) Venture III 1.90% Fee Contracts(2) 11.696894 3,148 36,820 (6.42%) Venture Strategy & Rollover Contracts 13.403429 10.492183 5,774 60,585 (21.72%) -------------------------- 23,810,588 331,290,715 All Cap Growth Sub-Account: 0.45% to 1.90% 6.09% Venture 1.40% Fee Contracts 23.852189 17.927398 20,256,874 363,153,049 (24.84%) Venture Vision Contracts 23.566248 17.667879 1,893,240 33,449,529 (25.03%) Venture Vantage 1.55% 19.211930 14.417921 7,133,799 102,854,549 (24.95%) Fee Contracts Venture Vantage 1.75% Fee Contracts 10.349704 7.751463 2,084,763 16,159,963 (25.10%) Venture Vantage 1.60% Fee Contracts(1) 8.857071 1,006,732 8,916,704 (29.14%) Venture Vantage 1.80% Fee Contracts(1) 8.840730 782,842 6,920,892 (29.27%) Venture III 1.70% Fee Contracts(2) 11.653136 33,482 390,165 (6.77%) Venture III 1.85% Fee Contracts(2) 11.645841 8,255 96,140 (6.83%) Venture III 1.90% Fee Contracts(2) 11.643403 27,423 319,297 (6.85%) Venture Strategy & Rollover Contracts 17.657078 13.398914 5,533 74,135 (24.12%) -------------------------- 33,232,943 532,334,423
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 40 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- -------------------------------------------------------------------------------- INVESTMENT TOTAL UNIT UNIT EXPENSE INCOME RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- ---------- ---------- ------------ -------------- ---------- -------- International Small Cap Sub-Account: 0.45% to 1.90% 0.00% Venture 1.40% Fee Contracts $18.844170 $12.802022 6,932,712 $88,752,727 (32.06%) Venture Vision Contracts 18.618300 12.616712 553,997 6,989,615 (32.23%) Venture Vantage 1.55% Fee Contracts 16.566096 11.237365 1,890,669 21,246,141 (32.17%) Venture Vantage 1.75% Fee Contracts 10.030446 6.790288 319,523 2,169,650 (32.30%) Venture Vantage 1.60% Fee Contracts(1) 8.693187 105,148 914,070 (30.45%) Venture Vantage 1.80% Fee Contracts(1) 8.677144 129,049 1,119,778 (30.58%) Venture III 1.70% Fee Contracts(2) 11.687448 3,155 36,870 (6.50%) Venture III 1.85% Fee Contracts(2) 11.680121 1,921 22,434 (6.56%) Venture III 1.90% Fee Contracts(2) 11.677685 11,321 132,202 (6.58%) Venture Strategy & Rollover Contracts 15.728111 10.787968 6,083 65,620 (31.41%) -------------------------- 9,953,578 121,449,107 Pacific Rim Emerging Markets Sub-Account: 1.40% to 1.90% 0.41% Venture 1.40% Fee Contracts 9.217819 7.400679 3,357,589 24,848,441 (19.71%) Venture Vision Contracts 9.126236 7.308701 385,545 2,817,833 (19.92%) Venture Vantage 1.55% Fee Contracts 8.924717 7.154529 1,204,952 8,620,867 (19.83%) Venture Vantage 1.75% Fee Contracts 10.941915 8.753934 77,788 680,955 (20.00%) Venture Vantage 1.60% Fee Contracts(1) 9.980535 21,132 210,915 (20.16%) Venture Vantage 1.80% Fee Contracts(1) 9.962106 5,232 52,129 (20.30%) Venture III 1.70% Fee Contracts(2) 11.824607 1,035 12,240 (5.40%) Venture III 1.90% Fee Contracts(2) 11.814713 912 10,771 (5.48%) -------------------------- 5,054,185 37,254,151
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 41 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- -------------------------------------------------------------------------------- INVESTMENT TOTAL UNIT UNIT EXPENSE INCOME RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- ---------- ---------- ------------ -------------- ---------- -------- Science & Technology Sub-Account: 0.45% to 1.90% 5.53% Venture 1.40% Fee Contracts $24.672266 $14.291433 25,291,584 $361,452,980 (42.07%) Venture Vision Contracts 24.427405 14.113845 2,359,252 33,298,116 (42.22%) Venture Vantage 1.55% Fee Contracts 19.767418 11.432929 10,971,012 125,430,796 (42.16%) Venture Vantage 1.75% Fee Contracts 8.857329 5.112469 2,841,498 14,527,068 (42.28%) Venture Vantage 1.60% Fee Contracts(1) 6.396444 1,494,462 9,559,238 (48.83%) Venture Vantage 1.80% Fee Contracts(1) 6.384603 856,271 5,466,952 (48.92%) Venture III 1.70% Fee Contracts(2) 10.313402 86,179 888,799 (17.49%) Venture III 1.85% Fee Contracts(2) 10.306931 1,628 16,776 (17.54%) Venture III 1.90% Fee Contracts(2) 10.304778 55,036 567,136 (17.56%) Venture Strategy & Rollover Contracts 20.064987 11.734960 7,859 92,226 (41.52%) -------------------------- 43,964,781 551,300,087 Emerging Small Company Sub-Account: 0.45% t o1.90% 3.94% Venture 1.40% Fee Contracts 23.225958 17.806889 6,990,942 124,486,930 (23.33%) Venture Vision Contracts 22.995348 17.585667 630,775 11,092,607 (23.53%) Venture Vantage 1.55% Fee Contracts 20.764734 15.895834 2,777,117 44,144,589 (23.45%) Venture Vantage 1.75% Fee Contracts 10.932942 8.352524 741,901 6,196,748 (23.60%) Venture Vantage 1.60% Fee Contracts(1) 9.086879 512,535 4,657,337 (27.30%) Venture Vantage 1.80% Fee Contracts(1) 9.070108 262,188 2,378,068 (27.44%) Venture III 1.70% Fee Contracts(2) 12.118671 35,417 429,210 (3.05%) Venture III 1.85% Fee Contracts(2) 12.111098 4,641 56,208 (3.11%) Venture III 1.90% Fee Contracts(2) 12.108565 25,841 312,900 (3.13%) Venture Strategy & Rollover Contracts 18.484616 14.308293 5,431 77,713 (22.59%) -------------------------- 11,986,788 193,832,310
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 42 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- -------------------------------------------------------------------------------- INVESTMENT TOTAL UNIT UNIT EXPENSE INCOME RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- ---------- ---------- ------------ -------------- ---------- -------- Aggressive Growth Sub-Account: 0.45% to 1.90% 0.00% Venture 1.40% Fee Contracts $16.889157 $12.326027 12,455,239 $153,523,614 (27.02%) Venture Vision Contracts 16.721411 12.172856 1,005,806 12,243,526 (27.20%) Venture Vantage 1.55% Fee Contracts 15.815609 11.525066 5,299,733 61,079,768 (27.13%) Venture Vantage 1.75% Fee Contracts 11.182499 8.132426 1,223,781 9,952,311 (27.28%) Venture Vantage 1.60% Fee Contracts(1) 9.020870 798,748 7,205,401 (27.83%) Venture Vantage 1.80% Fee Contracts(1) 9.004226 383,970 3,457,347 (27.97%) Venture III 1.70% Fee Contracts(2) 11.131670 49,959 556,122 (10.95%) Venture III 1.85% Fee Contracts(2) 11.124693 4,291 47,735 (11.00%) Venture III 1.90% Fee Contracts(2) 11.122368 29,592 329,130 (11.02%) Venture Strategy & Rollover Contracts 16.207424 11.942407 11,256 134,425 (26.32%) -------------------------- 21,262,375 248,529,379 International Stock Sub-Account: 0.45% to 1.90% 4.65% Venture 1.40% Fee Contracts 15.087850 11.672280 5,957,226 69,534,415 (22.64%) Venture Vision Contracts 14.938063 11.527320 719,284 8,291,413 (22.83%) Venture Vantage 1.55% Fee Contracts 13.470191 10.405088 2,312,028 24,056,851 (22.75%) Venture Vantage 1.75% Fee Contracts 11.202883 8.636273 236,635 2,043,652 (22.91%) Venture Vantage 1.60% Fee Contracts(1) 9.671494 249,765 2,415,597 (22.63%) Venture Vantage 1.80% Fee Contracts(1) 9.653655 213,338 2,059,497 (22.77%) Venture III 1.70% Fee Contracts(2) 11.635074 31,891 371,052 (6.92%) Venture III 1.85% Fee Contracts(2) 11.627790 6,137 71,360 (6.98%) Venture III 1.90% Fee Contracts(2) 11.625360 27,818 323,389 (7.00%) Venture Strategy & Rollover Contracts 13.475212 10.525001 264 2,775 (21.89%) -------------------------- 9,754,386 109,170,001
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 43 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- -------------------------------------------------------------------------------- INVESTMENT TOTAL UNIT UNIT EXPENSE INCOME RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- ---------- ---------- ------------ -------------- ---------- -------- Quantitative Equity 0.45% to 1.90% 15.40% Sub-Account: Venture 1.40% Fee Contracts $25.371611 $19.274831 8,261,590 $159,240,759 (24.03%) Venture Vision Contracts 25.119884 19.035553 1,149,891 21,888,814 (24.22%) Venture Vantage 1.55% Fee Contracts 19.714449 14.954450 3,290,549 49,208,353 (24.14%) Venture Vantage 1.75% Fee Contracts 12.092105 9.154017 720,103 6,591,834 (24.30%) Venture Vantage 1.60% Fee Contracts(1) 9.257381 659,075 6,101,309 (25.94%) Venture Vantage 1.80% Fee Contracts(1) 9.240305 350,722 3,240,779 (26.08%) Venture III 1.70% Fee Contracts(2) 11.206237 29,209 327,326 (10.35%) Venture III 1.85% Fee Contracts(2) 11.199216 3,427 38,383 (10.41%) Venture III 1.90% Fee Contracts(2) 11.196875 34,080 381,588 (10.42%) Venture Strategy & Rollover Contracts 17.915408 13.741313 4,632 63,645 (23.30%) -------------------------- 14,503,278 247,082,790 Value Sub-Account: 0.45% to 1.90% 2.83% Venture 1.40% Fee Contracts 17.1823400 17.521564 9,378,964 164,334,111 1.97% Venture Vision Contracts 17.0118280 17.304087 1,159,966 20,072,152 1.72% Venture Vantage 1.55% Fee Contracts 14.1275020 14.384678 4,020,484 57,833,366 1.82% Venture Vantage 1.75% Fee Contracts 15.5527530 15.804033 543,780 8,593,911 1.62% Venture Vantage 1.60% Fee Contracts(1) 12.262228 808,086 9,908,942 (1.90%) Venture Vantage 1.80% Fee Contracts(1) 12.239648 365,986 4,479,540 (2.08%) Venture III 1.70% Fee Contracts(2) 11.954290 58,639 700,987 (4.37%) Venture III 1.85% Fee Contracts(2) 11.946808 10,102 120,685 (4.43%) Venture III 1.90% Fee Contracts(2) 11.944310 90,953 1,086,370 (4.45%) Venture Strategy & Rollover Contracts 13.3519900 13.746382 1,632 22,432 2.95% -------------------------- 16,438,592 267,152,496
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 44 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- ------------------------------------------------------------------------------------ INVESTMENT TOTAL UNIT UNIT EXPENSE INCOME RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- ---------- --------- ----------- -------------- ---------- -------- Real Estate Securities Sub-Account: 0.45% to 1.90% 2.74% Venture 1.40% Fee Contracts $13.852028 $14.088482 3,120,893 $43,968,646 1.71% Venture Vision Contracts 13.714476 13.913544 451,753 6,285,481 1.45% Venture Vantage 1.55% Fee Contracts 12.511528 12.705913 1,226,429 15,582,898 1.55% Venture Vantage 1.75% Fee Contracts 13.588062 13.771429 138,375 1,905,628 1.35% Venture Vantage 1.60% Fee Contracts(1) 12.837004 256,275 3,289,800 2.70% Venture Vantage 1.80% Fee Contracts(1) 12.813379 142,337 1,823,816 2.51% Venture III 1.70% Fee Contracts(2) 12.403674 49,154 609,691 (0.77%) Venture III 1.85% Fee Contracts(2) 12.395916 2,736 33,916 (0.83%) Venture III 1.90% Fee Contracts(2) 12.393335 25,944 321,539 (0.85%) Venture Strategy & Rollover Contracts 11.853453 12.171588 803 9,772 2.68% -------------------------- 5,414,699 73,831,187 Balanced Sub-Account: 0.45% to 1.90% 2.14% Venture 1.40% Fee Contracts 14.272291 12.637994 3,249,577 41,068,134 (11.45%) Venture Vision Contracts 14.130567 12.481031 504,035 6,290,876 (11.67%) Venture Vantage 1.55% Fee Contracts 12.446809 11.004909 2,097,046 23,077,804 (11.58%) Venture Vantage 1.75% Fee Contracts 11.252446 9.928886 161,268 1,601,215 (11.76%) Venture Vantage 1.60% Fee Contracts(1) 10.562682 148,406 1,567,563 (15.50%) Venture Vantage 1.80% Fee Contracts(1) 10.543217 89,878 947,609 (15.65%) Venture III 1.70% Fee Contracts(2) 11.861420 6,822 80,920 (5.11%) Venture III 1.90% Fee Contracts(2) 11.851529 8,766 103,888 (5.19%) Venture Strategy & Rollover Contracts 11.583489 10.355674 1,954 20,234 (10.60%) -------------------------- 6,267,752 74,758,243
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 45 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- ------------------------------------------------------------------------------------ INVESTMENT TOTAL UNIT UNIT EXPENSE INCOME RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- ---------- --------- ----------- -------------- ---------- -------- High Yield Sub-Account: 0.45% to 1.90% 10.38% Venture 1.40% Fee Contracts $13.459828 $12.544550 5,952,678 $74,673,671 (6.80%) Venture Vision Contracts 13.326181 12.388789 1,453,526 18,007,421 (7.03%) Venture Vantage 1.55% Fee Contracts 12.409523 11.548229 2,809,577 32,445,633 (6.94%) Venture Vantage 1.75% Fee Contracts 11.519841 10.698741 235,980 2,524,685 (7.13%) Venture Vantage 1.60% Fee Contracts(1) 10.920556 314,206 3,431,303 (12.64%) Venture Vantage 1.80% Fee Contracts(1) 10.900449 168,652 1,838,387 (12.80%) Venture III 1.70% Fee Contracts(2) 11.987059 38,548 462,074 (4.10%) Venture III 1.85% Fee Contracts(2) 11.979562 2,291 27,450 (4.16%) Venture III 1.90% Fee Contracts(2) 11.977070 23,587 282,507 (4.18%) Venture Strategy & Rollover Contracts 11.878374 11.176956 968 10,824 (5.91%) --------------------------- 11,000,013 133,703,955 Lifestyle Aggressive 1000 0.45% to 1.90% 7.78% Sub-Account: Venture 1.40% Fee Contracts 14.948006 12.723595 4,535,529 57,708,229 (14.88%) Venture Vision Contracts 14.799593 12.565579 329,417 4,139,320 (15.10%) Venture Vantage 1.55% Fee Contracts 13.263783 11.272948 2,043,538 23,036,689 (15.01%) Venture Vantage 1.75% Fee Contracts 11.872645 10.070301 281,664 2,836,445 (15.18%) Venture Vantage 1.60% Fee Contracts(1) 10.363738 429,012 4,446,172 (17.09%) Venture Vantage 1.80% Fee Contracts(1) 10.344632 191,040 1,976,235 (17.24%) Venture III 1.70% Fee Contracts(2) 11.850047 52,572 622,976 (5.20%) Venture III 1.85% Fee Contracts(2) 11.842624 3,019 35,752 (5.26%) Venture III 1.90% Fee Contracts(2) 11.840156 19,005 225,023 (5.28%) Venture Strategy & Rollover Contracts 12.728218 10.938337 762 8,337 (14.06%) --------------------------- 7,885,558 95,035,178
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 46 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- ----------------------------------------------------------------------------- INVESTMENT UNIT UNIT EXPENSE INCOME TOTAL RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- -------------------------------------- -------------------------------------- Lifestyle Growth 820 Sub-Account: 0.45% to 1.90% 8.31% Venture 1.40% Fee Contracts $16.162371 $14.495682 17,321,581 $251,088,130 (10.31%) Venture Vision Contracts 16.001947 14.315720 2,041,720 29,228,686 (10.54%) Venture Vantage 1.55% Fee Contracts 14.237879 12.750370 8,372,926 106,757,902 (10.45%) Venture Vantage 1.75% Fee Contracts 12.089786 10.804923 1,230,634 13,296,907 (10.63%) Venture Vantage 1.60% Fee Contracts(1) 10.938240 1,782,794 19,500,631 (12.49%) Venture Vantage 1.80% Fee Contracts(1) 10.918093 957,298 10,451,868 (12.66%) Venture III 1.70% Fee Contracts(2) 12.068379 384,805 4,643,967 (3.45%) Venture III 1.85% Fee Contracts(2) 12.060834 23,486 283,263 (3.51%) Venture III 1.90% Fee Contracts(2) 12.058318 148,069 1,785,458 (3.53%) Venture Strategy & Rollover Contracts 13.529644 12.251081 5,435 66,579 (9.45%) ------------------------ 32,268,748 437,103,391 Lifestyle Balanced 640 Sub-Account: 0.45% to 1.90% 7.47% Venture 1.40% Fee Contracts 16.437657 15.433664 14,592,433 225,214,704 (6.11%) Venture Vision Contracts 16.274494 15.242085 2,696,849 41,105,609 (6.34%) Venture Vantage 1.55% Fee Contracts 14.594658 13.682573 9,274,040 126,892,731 (6.25%) Venture Vantage 1.75% Fee Contracts 12.355297 11.559863 1,152,081 13,317,897 (6.44%) Venture Vantage 1.60% Fee Contracts(1) 11.514709 1,904,121 21,925,395 (7.88%) Venture Vantage 1.80% Fee Contracts(1) 11.493504 1,321,349 15,186,928 (8.05%) Venture III 1.70% Fee Contracts(2) 12.205200 375,232 4,579,783 (2.36%) Venture III 1.85% Fee Contracts(2) 12.197559 51,647 629,964 (2.42%) Venture III 1.90% Fee Contracts(2) 12.195023 245,748 2,996,899 (2.44%) Venture Strategy & Rollover Contracts 13.929909 13.204737 16,391 216,435 (5.21%) ------------------------ 31,629,891 452,066,345
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 47 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- ----------------------------------------------------------------------------- INVESTMENT UNIT UNIT EXPENSE INCOME TOTAL RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- -------------------------------------- -------------------------------------- Lifestyle Moderate 460 Sub-Account: 0.45% to 1.90% 5.45% Venture 1.40% Fee Contracts $16.596254 $16.185243 5,123,480 $82,924,771 (2.48%) Venture Vision Contracts 16.431521 15.984331 1,247,429 19,939,317 (2.72%) Venture Vantage 1.55% Fee Contracts 14.954083 14.561752 2,943,459 42,861,920 (2.62%) Venture Vantage 1.75% Fee Contracts 12.579492 12.224839 335,394 4,100,142 (2.82%) Venture Vantage 1.60% Fee Contracts(1) 12.028658 616,270 7,412,901 (3.77%) Venture Vantage 1.80% Fee Contracts(1) 12.006535 284,408 3,414,747 (3.95%) Venture III 1.70% Fee Contracts(2) 12.322172 209,118 2,576,785 (1.42%) Venture III 1.85% Fee Contracts(2) 12.314464 26,438 325,570 (1.48%) Venture III 1.90% Fee Contracts(2) 12.311897 159,770 1,967,070 (1.50%) Venture Strategy & Rollover Contracts 14.242240 14.022897 9,322 130,721 (1.54%) ------------------------ 10,955,088 165,653,944 Lifestyle Conservative 280 Sub-Account: 0.45% to 1.90% 4.72% Venture 1.40% Fee Contracts 16.397834 16.689833 2,866,820 47,846,739 1.78% Venture Vision Contracts 16.235059 16.482670 1,017,207 16,766,284 1.53% Venture Vantage 1.55% Fee Contracts 15.160940 15.407658 2,000,113 30,817,048 1.63% Venture Vantage 1.75% Fee Contracts 12.913124 13.096907 180,020 2,357,709 1.42% Venture Vantage 1.60% Fee Contracts(1) 12.607483 356,485 4,494,372 0.86% Venture Vantage 1.80% Fee Contracts(1) 12.584297 158,202 1,990,862 0.67% Venture III 1.70% Fee Contracts(2) 12.513503 42,106 526,891 0.11% Venture III 1.85% Fee Contracts(2) 12.505683 1,490 18,630 0.05% Venture III 1.90% Fee Contracts(2) 12.503081 71,318 891,697 0.02% Venture Strategy & Rollover Contracts 14.547877 14.949047 1,909 28,539 2.76% ------------------------ 6,695,670 105,738,771
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 48 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- ----------------------------------------------------------------------------- INVESTMENT UNIT UNIT EXPENSE INCOME TOTAL RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- -------------------------------------- -------------------------------------- Small Company Value Sub-Account: 0.45% to 1.90% 0.14% Venture 1.40% Fee Contracts $12.436171 $13.063929 5,828,339 $ 76,141,001 5.05% Venture Vision Contracts 12.335633 12.925755 825,196 10,666,280 4.78% Venture Vantage 1.55% Fee Contracts 12.375754 12.980850 1,949,877 25,311,063 4.89% Venture Vantage 1.75% Fee Contracts 13.356548 13.981425 270,322 3,779,487 4.68% Venture Vantage 1.60% Fee Contracts(1) 12.933102 480,845 6,218,809 3.46% Venture Vantage 1.80% Fee Contracts(1) 12.909289 382,033 4,931,786 3.27% Venture III 1.70% Fee Contracts(2) 12.612748 105,547 1,331,238 0.90% Venture III 1.85% Fee Contracts(2) 12.604862 5,929 74,741 0.84% Venture III 1.90% Fee Contracts(2) 12.602235 63,197 796,425 0.82% Venture Strategy & Rollover Contracts 12.266242 13.009205 1,233 16,035 6.06% ------------------------ 9,912,518 129,266,865 International Value Sub-Account: 1.40% to 1.90% 2.62% Venture 1.40% Fee Contracts 11.862293 10.529997 4,056,960 42,719,778 (11.23%) Venture Vision Contracts 11.813131 10.459987 447,013 4,675,755 (11.45%) Venture Vantage 1.55% Fee Contracts 11.832776 10.487935 1,904,559 19,974,889 (11.37%) Venture Vantage 1.75% Fee Contracts 11.868508 10.498425 216,641 2,274,386 (11.54%) Venture Vantage 1.60% Fee Contracts(1) 11.125714 252,964 2,814,400 (10.99%) Venture Vantage 1.80% Fee Contracts(1) 11.105217 223,671 2,483,917 (11.16%) Venture III 1.70% Fee Contracts(2) 11.968682 36,123 432,345 (4.25%) Venture III 1.85% Fee Contracts(2) 11.961174 2,396 28,660 (4.31%) Venture III 1.90% Fee Contracts(2) 11.958679 12,424 148,571 (4.33%) ------------------------ 7,152,751 75,552,701
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 49 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- ----------------------------------------------------------------------------- INVESTMENT UNIT UNIT EXPENSE INCOME TOTAL RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- -------------------------------------- -------------------------------------- Small Company Blend Sub-Account: 0.45% to 1.90% 0.51% Venture 1.40% Fee Contracts $12.601917 $12.138851 5,261,455 $ 63,868,019 (3.67%) Venture Vision Contracts 12.549695 12.058116 641,339 7,733,338 (3.92%) Venture Vantage 1.55% Fee Contracts 12.570556 12.090352 2,118,013 25,607,517 (3.82%) Venture Vantage 1.75% Fee Contracts 9.630818 9.244249 373,446 3,452,228 (4.01%) Venture Vantage 1.60% Fee Contracts(1) 10.682160 362,207 3,869,153 (14.54%) Venture Vantage 1.80% Fee Contracts(1) 10.662451 188,907 2,014,212 (14.70%) Venture III 1.70% Fee Contracts(2) 12.178671 67,344 820,159 (2.57%) Venture III 1.85% Fee Contracts(2) 12.171046 2,248 27,363 (2.63%) Venture III 1.90% Fee Contracts(2) 12.168505 22,152 269,553 (2.65%) Venture Strategy & Rollover Contracts 9.554061 9.291556 1,110 10,317 (2.75%) ------------------------ 9,038,221 107,671,859 Total Return Sub-Account: 0.45% to 1.90% 3.38% Venture 1.40% Fee Contracts 13.404017 14.311130 13,222,441 189,228,072 6.77% Venture Vision Contracts 13.348487 14.216074 2,143,055 30,465,834 6.50% Venture Vantage 1.55% Fee Contracts 13.370675 14.254028 6,436,963 91,752,651 6.61% Venture Vantage 1.75% Fee Contracts 13.220054 14.065149 1,010,389 14,211,263 6.39% Venture Vantage 1.60% Fee Contracts(1) 13.327266 2,073,199 27,630,072 6.62% Venture Vantage 1.80% Fee Contracts(1) 13.302764 1,198,006 15,936,788 6.42% Venture III 1.70% Fee Contracts(2) 12.789672 386,875 4,948,010 2.32% Venture III 1.85% Fee Contracts(2) 12.781691 39,111 499,899 2.25% Venture III 1.90% Fee Contracts(2) 12.779035 194,521 2,485,790 2.23% Venture Strategy & Rollover Contracts 14.697020 1,321 19,420 7.79% ------------------------ 26,705,881 377,177,799
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 50 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- ----------------------------------------------------------------------------- INVESTMENT UNIT UNIT EXPENSE INCOME TOTAL RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- -------------------------------------- -------------------------------------- U.S. Large Cap Value Sub-Account: 0.45% to 1.90% 1.02% Venture 1.40% Fee Contracts $12.894130 $12.390130 13,530,303 $167,642,208 (3.91%) Venture Vision Contracts 12.840714 12.307781 1,670,512 20,560,298 (4.15%) Venture Vantage 1.55% Fee Contracts 12.862059 12.340662 6,796,370 83,871,703 (4.05%) Venture Vantage 1.75% Fee Contracts 12.467016 11.937561 943,818 11,266,894 (4.25%) Venture Vantage 1.60% Fee Contracts(1) 11.511103 821,376 9,454,942 (7.91%) Venture Vantage 1.80% Fee Contracts(1) 11.489880 839,169 9,641,945 (8.08%) Venture III 1.70% Fee Contracts(2) 12.076441 137,784 1,663,935 (3.39%) Venture III 1.85% Fee Contracts(2) 12.068885 705 8,510 (3.45%) Venture III 1.90% Fee Contracts(2) 12.066364 43,256 521,938 (3.47%) Venture Strategy & Rollover Contracts 11.881980 6,598 78,395 (2.99%) ------------------------ 24,789,891 304,710,768 Mid Cap Stock Sub-Account: 0.45% to 1.90% 0.00% Venture 1.40% Fee Contracts 11.821790 10.374890 5,974,628 61,986,111 (12.24%) Venture Vision Contracts 11.772795 10.305876 585,476 6,033,839 (12.46%) Venture Vantage 1.55% Fee Contracts 11.792364 10.333419 2,559,861 26,452,114 (12.37%) Venture Vantage 1.75% Fee Contracts 12.208008 10.676087 368,860 3,937,977 (12.55%) Venture Vantage 1.60% Fee Contracts(1) 10.646203 538,184 5,729,617 (14.83%) Venture Vantage 1.80% Fee Contracts(1) 10.626573 377,123 4,007,526 (14.99%) Venture III 1.70% Fee Contracts(2) 12.492798 58,462 730,354 (0.06%) Venture III 1.85% Fee Contracts(2) 12.484975 5,518 68,887 (0.12%) Venture III 1.90% Fee Contracts(2) 12.482364 53,822 671,822 (0.14%) Venture Strategy & Rollover Contracts 12.483407 11.060968 3,037 33,596 (11.39%) ------------------------ 10,524,971 109,651,843
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 51 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- ----------------------------------------------------------------------------- INVESTMENT UNIT UNIT EXPENSE INCOME TOTAL RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- -------------------------------------- -------------------------------------- Tactical Allocation Sub-Account: 0.45% to 1.90% 0.81% Venture 1.40% Fee Contracts $11.989936 $10.239810 3,637,816 $37,250,542 (14.60%) Venture Vision Contracts 11.970334 10.197351 230,096 2,346,367 (14.81%) Venture Vantage 1.55% Fee Contracts 11.978173 10.214321 1,240,440 12,670,247 (14.73%) Venture Vantage 1.75% Fee Contracts 12.188577 10.372818 416,414 4,319,385 (14.90%) Venture Vantage 1.60% Fee Contracts(1) 10.340578 585,114 6,050,420 (17.28%) Venture Vantage 1.80% Fee Contracts(1) 10.321521 505,460 5,217,123 (17.43%) Venture III 1.70% Fee Contracts(2) 11.719158 32,057 375,686 (6.25%) Venture III 1.85% Fee Contracts(2) 11.711820 3,448 40,381 (6.31%) Venture III 1.90% Fee Contracts(2) 11.709378 11,123 130,243 (6.32%) Venture Strategy & Rollover Contracts 12.064740 10.402759 846 8,800 (13.78%) ------------------------ 6,662,814 68,409,194 Dynamic Growth Sub-Account: 0.45% to 1.90% 0.18% Venture 1.40% Fee Contracts 7.906976 4.658653 11,671,811 54,374,918 (41.08%) Venture Vision Contracts 7.894008 4.639280 804,566 3,732,607 (41.23%) Venture Vantage 1.55% Fee Contracts 7.899193 4.647016 4,546,306 21,126,755 (41.17%) Venture Vantage 1.75% Fee Contracts 8.771239 5.149629 904,271 4,656,658 (41.29%) Venture Vantage 1.60% Fee Contracts(1) 6.281540 549,781 3,453,470 (49.75%) Venture Vantage 1.80% Fee Contracts(1) 6.269929 363,236 2,277,465 (49.84%) Venture III 1.70% Fee Contracts(2) 10.761173 35,428 381,248 (13.91%) Venture III 1.85% Fee Contracts(2) 10.754429 320 3,442 (13.96%) Venture III 1.90% Fee Contracts(2) 10.752178 24,817 266,837 (13.98%) Venture Strategy & Rollover Contracts 7.956456 4.733016 1,275 6,035 (40.51%) ------------------------ 18,901,811 90,279,435
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 52 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- ----------------------------------------------------------------------------- INVESTMENT UNIT UNIT EXPENSE INCOME TOTAL RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- -------------------------------------- -------------------------------------- Internet Technologies Sub-Account 0.45% to 1.90% 0.00% Venture 1.40% Fee Contracts $6.965644 $3.702481 6,246,364 $23,127,043 (46.85%) Venture Vision Contracts 6.954217 3.687062 365,553 1,347,816 (46.98%) Venture Vantage 1.55% Fee Contracts 6.958782 3.693226 2,239,993 8,272,799 (46.93%) Venture Vantage 1.75% Fee Contracts 7.012603 3.714267 446,650 1,658,978 (47.03%) Venture Vantage 1.60% Fee Contracts(1) 5.777008 185,158 1,069,661 (53.78%) Venture Vantage 1.80% Fee Contracts(1) 5.766322 113,932 656,965 (53.87%) Venture III 1.70% Fee Contracts(2) 10.476489 238 2,494 (16.19%) Venture III 1.90% Fee Contracts(2) 10.467736 2,518 26,360 (16.26%) Venture Strategy & Rollover Contracts 3.761654 4,633 17,427 (46.33%) ------------------------ 9,605,039 36,179,543 International Index Sub-Account: 1.40% to 1.90% 1.50% Venture 1.40% Fee Contracts 11.167069 8.543617 908,679 7,763,404 (23.49%) Venture Vision Contracts 11.148798 8.508168 46,720 397,501 (23.69%) Venture Vantage 1.55% Fee Contracts 11.156110 8.522331 288,345 2,457,368 (23.61%) Venture Vantage 1.75% Fee Contracts 11.529885 8.790137 60,409 531,006 (23.76%) Venture Vantage 1.60% Fee Contracts(1) 9.687956 98,643 955,650 (22.50%) Venture Vantage 1.80% Fee Contracts(1) 9.670086 18,745 181,268 (22.64%) Venture III 1.70% Fee Contracts(2) 11.430305 25,783 294,709 (8.56%) Venture III 1.85% Fee Contracts(2) 11.423141 182 2,079 (8.61%) Venture III 1.90% Fee Contracts(2) 11.420756 5,675 64,816 (8.63%) ------------------------ 1,453,181 12,647,801
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 53 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- ----------------------------------------------------------------------------- INVESTMENT UNIT UNIT EXPENSE INCOME TOTAL RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- -------------------------------------- -------------------------------------- Total Stock Market Index Sub-Account: 1.40% to 1.90% 1.12% Venture 1.40% Fee Contracts $11.142088 $ 9.732630 1,234,347 $12,013,441 (12.65%) Venture Vision Contracts 11.123861 9.692272 253,819 2,460,084 (12.87%) Venture Vantage 1.55% Fee Contracts 11.131148 9.708403 768,989 7,465,657 (12.78%) Venture Vantage 1.75% Fee Contracts 11.456807 9.972325 87,254 870,123 (12.96%) Venture Vantage 1.60% Fee Contracts(1) 10.524299 138,933 1,462,174 (15.81%) Venture Vantage 1.80% Fee Contracts(1) 10.504899 59,445 624,461 (15.96%) Venture III 1.70% Fee Contracts(2) 11.846265 21,575 255,587 (5.23%) Venture III 1.85% Fee Contracts(2) 11.838850 1,002 11,859 (5.29%) Venture III 1.90% Fee Contracts(2) 11.836381 4,897 57,968 (5.31%) ------------------------- 2,570,261 25,221,354 500 Index Sub-Account: 0.45% to 1.90% 1.10% Venture 1.40% Fee Contracts 11.200577 9.677729 8,953,455 86,649,107 (13.60%) Venture Vision Contracts 11.182275 9.637624 847,220 8,165,189 (13.81%) Venture Vantage 1.55% Fee Contracts 11.189592 9.653637 3,091,061 29,839,979 (13.73%) Venture Vantage 1.75% Fee Contracts 11.516966 9.916084 555,438 5,507,771 (13.90%) Venture Vantage 1.60% Fee Contracts(1) 10.450629 1,477,184 15,437,495 (16.39%) Venture Vantage 1.80% Fee Contracts(1) 10.431377 514,816 5,370,243 (16.55%) Venture III 1.70% Fee Contracts(2) 11.773758 160,515 1,889,861 (5.81%) Venture III 1.85% Fee Contracts(2) 11.766387 15,044 177,011 (5.87%) Venture III 1.90% Fee Contracts(2) 11.763930 75,325 886,122 (5.89%) Venture Strategy & Rollover Contracts 9.831721 1,752 17,230 (12.77%) ------------------------- 15,691,810 153,940,008
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 54 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- ----------------------------------------------------------------------------- INVESTMENT UNIT UNIT EXPENSE INCOME TOTAL RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- -------------------------------------- -------------------------------------- Mid Cap Index Sub-Account: 1.40% to 1.90% 0.89% Venture 1.40% Fee Contracts $13.271787 $12.858949 1,619,104 $20,819,979 (3.11%) Venture Vision Contracts 13.250096 12.805647 323,252 4,139,446 (3.35%) Venture Vantage 1.55% Fee Contracts 13.258777 12.826946 577,686 7,409,950 (3.26%) Venture Vantage 1.75% Fee Contracts 13.223282 12.766859 77,151 984,972 (3.45%) Venture Vantage 1.60% Fee Contracts(1) 11.903823 215,048 2,559,891 (4.77%) Venture Vantage 1.80% Fee Contracts(1) 11.881892 80,113 951,892 (4.94%) Venture III 1.70% Fee Contracts(2) 12.317115 36,586 450,633 (1.46%) Venture III 1.85% Fee Contracts(2) 12.309409 880 10,830 (1.52%) Venture III 1.90% Fee Contracts(2) 12.306843 16,546 203,627 (1.55%) ------------------------ 2,946,366 37,531,220 Small Cap Index Sub-Account: 1.40% to 1.90% 2.53% Venture 1.40% Fee Contracts 11.596178 11.605417 1,252,055 14,530,618 0.08% Venture Vision Contracts 11.577217 11.557294 214,463 2,478,607 (0.17%) Venture Vantage 1.55% Fee Contracts 11.584805 11.576533 396,804 4,593,618 (0.07%) Venture Vantage 1.75% Fee Contracts 11.943325 11.910780 47,386 564,402 (0.27%) Venture Vantage 1.60% Fee Contracts(1) 11.910953 178,168 2,122,147 (4.71%) Venture Vantage 1.80% Fee Contracts(1) 11.889003 45,674 543,013 (4.89%) Venture III 1.70% Fee Contracts(2) 12.432687 38,374 477,090 (0.54%) Venture III 1.85% Fee Contracts(2) 12.424901 336 4,171 (0.60%) Venture III 1.90% Fee Contracts(2) 12.422319 7,324 90,986 (0.62%) ------------------------ 2,180,584 25,404,652
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 55 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- ----------------------------------------------------------------------------- INVESTMENT UNIT UNIT EXPENSE INCOME TOTAL RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- -------------------------------------- -------------------------------------- Capital Appreciation Sub-Account: 1.40% to 1.90% 0.00% Venture 1.40% Fee Contracts $10.945558 $8.804929 1,758,403 $15,482,610 (19.56%) Venture Vision Contracts 10.941194 8.779269 182,076 1,598,492 (19.76%) Venture Vantage 1.55% Fee Contracts 10.942940 8.789532 410,618 3,609,139 (19.68%) Venture Vantage 1.75% Fee Contracts 10.939455 8.769024 101,033 885,962 (19.84%) Venture Vantage 1.60% Fee Contracts(1) 9.437943 266,792 2,517,967 (24.50%) Venture Vantage 1.80% Fee Contracts(1) 9.420540 206,667 1,946,909 (24.64%) Venture III 1.70% Fee Contracts(2) 11.867934 53,583 635,919 (5.06%) Venture III 1.85% Fee Contracts(2) 11.860509 7,787 92,358 (5.12%) Venture III 1.90% Fee Contracts(2) 11.858037 20,129 238,696 (5.14%) ------------------------ 3,007,088 27,008,052 Telecommunications Sub-Account: 1.40% to 1.90% 0.00% Venture 1.40% Fee Contracts 7.855476 467,251 3,670,476 (37.16%) Venture Vision Contracts 7.842239 95,241 746,899 (37.26%) Venture Vantage 1.55% Fee Contracts 7.847530 218,991 1,718,535 (37.22%) Venture Vantage 1.75% Fee Contracts 7.836946 18,360 143,888 (37.30%) Venture Vantage 1.60% Fee Contracts(1) 7.844884 109,489 858,930 (37.24%) Venture Vantage 1.80% Fee Contracts(1) 7.834309 89,110 698,119 (37.33%) Venture III 1.70% Fee Contracts(2) 10.382237 9,281 96,359 (16.94%) Venture III 1.90% Fee Contracts(2) 10.373561 8,734 90,600 (17.01%) ------------------------ 1,016,457 8,023,806
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 56 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- ----------------------------------------------------------------------------- INVESTMENT UNIT UNIT EXPENSE INCOME TOTAL RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- -------------------------------------- -------------------------------------- Health Sciences Sub-Account: 0.45% to 1.90% 0.00% Venture 1.40% Fee Contracts $13.413253 1,671,262 $22,417,060 7.31% Venture Vision Contracts 13.390760 292,739 3,919,995 7.13% Venture Vantage 1.55% Fee Contracts 13.399749 629,384 8,433,583 7.20% Venture Vantage 1.75% Fee Contracts 13.381761 65,587 877,664 7.05% Venture Vantage 1.60% Fee Contracts(1) 13.395250 351,366 4,706,630 7.16% Venture Vantage 1.80% Fee Contracts(1) 13.377271 201,379 2,693,897 7.02% Venture III 1.70% Fee Contracts(2) 13.191182 61,133 806,412 5.53% Venture III 1.85% Fee Contracts(2) 13.182940 3,329 43,883 5.46% Venture III 1.90% Fee Contracts(2) 13.180193 46,697 615,476 5.44% Venture Strategy & Rollover Contracts 13.499140 1,742 23,509 7.99% ------------------------ 3,324,618 44,538,109 Mid Cap Growth Sub-Account: 0.45% to 1.90% 0.00% Venture 1.40% Fee Contracts 10.371739 1,263,887 13,108,709 (17.03%) Venture Vision Contracts 10.354292 135,587 1,403,906 (17.17%) Venture Vantage 1.55% Fee Contracts 10.361265 390,251 4,043,489 (17.11%) Venture Vantage 1.75% Fee Contracts 10.347320 65,698 679,802 (17.22%) Venture Vantage 1.60% Fee Contracts(1) 10.357777 264,652 2,741,207 (17.14%) Venture Vantage 1.80% Fee Contracts(1) 10.343827 132,999 1,375,715 (17.25%) Venture III 1.70% Fee Contracts(2) 11.309753 45,053 509,537 (9.52%) Venture III 1.85% Fee Contracts(2) 11.302659 2,268 25,637 (9.58%) Venture III 1.90% Fee Contracts(2) 11.300304 15,487 175,010 (9.60%) Venture Strategy & Rollover Contracts 10.438314 930 9,705 (16.49%) ------------------------ 2,316,812 24,072,717
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 57 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- ----------------------------------------------------------------------------- INVESTMENT UNIT UNIT EXPENSE INCOME TOTAL RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- -------------------------------------- -------------------------------------- Mid Cap Opportunities Sub-Account: 0.45% to 1.90% 0.00% Venture 1.40% Fee Contracts $10.490622 617,741 $ 6,480,484 (16.08%) Venture Vision Contracts 10.472982 99,556 1,042,650 (16.22%) Venture Vantage 1.55% Fee Contracts 10.480032 142,849 1,497,059 (16.16%) Venture Vantage 1.75% Fee Contracts 10.465924 67,113 702,396 (16.27%) Venture Vantage 1.60% Fee Contracts(1) 10.476500 192,110 2,012,644 (16.19%) Venture Vantage 1.80% Fee Contracts(1) 10.462406 84,846 887,692 (16.30%) Venture III 1.70% Fee Contracts(2) 11.662694 21,043 245,420 (6.70%) Venture III 1.90% Fee Contracts(2) 11.652957 11,529 134,347 (6.78%) Venture Strategy & Rollover Contracts 10.557954 1,500 15,835 (15.54%) ------------------------ 1,238,287 13,018,527 Financial Services Sub-Account: 1.40% to 1.90% 0.08% Venture 1.40% Fee Contracts 11.524203 854,345 9,845,646 (7.81%) Venture Vision Contracts 11.504833 120,454 1,385,806 (7.96%) Venture Vantage 1.55% Fee Contracts 11.512580 309,851 3,567,188 (7.90%) Venture Vantage 1.75% Fee Contracts 11.497105 48,080 552,781 (8.02%) Venture Vantage 1.60% Fee Contracts(1) 11.508706 306,662 3,529,283 (7.93%) Venture Vantage 1.80% Fee Contracts(1) 11.493242 150,907 1,734,407 (8.05%) Venture III 1.70% Fee Contracts(2) 11.815615 26,301 310,757 (5.48%) Venture III 1.85% Fee Contracts(2) 11.808217 819 9,673 (5.53%) Venture III 1.90% Fee Contracts(2) 11.805755 30,899 364,791 (5.55%) ------------------------ 1,848,318 21,300,332
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 58 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- ----------------------------------------------------------------------------- INVESTMENT UNIT UNIT EXPENSE INCOME TOTAL RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- -------------------------------------- -------------------------------------- Quantitative Mid Cap Sub-Account: 1.40% to 1.90% 0.00% Venture 1.40% Fee Contracts $10.104317 237,982 $ 2,404,650 (19.17%) Venture Vision Contracts 10.087326 29,914 301,754 (19.30%) Venture Vantage 1.55% Fee Contracts 10.094110 46,230 466,648 (19.25%) Venture Vantage 1.75% Fee Contracts 10.080533 12,529 126,300 (19.36%) Venture Vantage 1.60% Fee Contracts(1) 10.090711 66,229 668,296 (19.27%) Venture Vantage 1.80% Fee Contracts(1) 10.077137 22,952 231,292 (19.38%) Venture III 1.70% Fee Contracts(2) 11.056543 11,309 125,037 (11.55%) Venture III 1.90% Fee Contracts(2) 11.047303 639 7,055 (11.62%) ------------------------ 427,784 4,331,032 Strategic Growth Sub-Account: 0.45% to 1.90% 0.00% Venture 1.40% Fee Contracts 10.916683 2,277,621 24,864,068 (12.67%) Venture Vision Contracts 10.898344 199,058 2,169,407 (12.81%) Venture Vantage 1.55% Fee Contracts 10.905675 534,088 5,824,588 (12.75%) Venture Vantage 1.75% Fee Contracts 10.891002 148,689 1,619,370 (12.87%) Venture Vantage 1.60% Fee Contracts(1) 10.901999 444,255 4,843,273 (12.78%) Venture Vantage 1.80% Fee Contracts(1) 10.887341 323,912 3,526,542 (12.90%) Venture III 1.70% Fee Contracts(2) 11.791031 90,855 1,071,279 (5.67%) Venture III 1.85% Fee Contracts(2) 11.783648 4,415 52,031 (5.73%) Venture III 1.90% Fee Contracts(2) 11.781186 67,667 797,197 (5.75%) Venture Strategy & Rollover Contracts 10.986679 748 8,213 (12.11%) ------------------------ 4,091,308 44,775,968
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 59 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- ----------------------------------------------------------------------------- INVESTMENT UNIT UNIT EXPENSE INCOME TOTAL RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- -------------------------------------- -------------------------------------- All Cap Value Sub-Account: 1.40% to 1.90% 0.06% Venture 1.40% Fee Contracts $12.494117 642,029 $ 8,021,590 (0.05%) Venture Vision Contracts 12.473142 197,505 2,463,504 (0.21%) Venture Vantage 1.55% Fee Contracts 12.481529 234,580 2,927,915 (0.15%) Venture Vantage 1.75% Fee Contracts 12.464762 36,486 454,787 (0.28%) Venture Vantage 1.60% Fee Contracts(1) 12.477337 257,359 3,211,151 (0.18%) Venture Vantage 1.80% Fee Contracts(1) 12.460579 91,709 1,142,751 (0.32%) Venture III 1.70% Fee Contracts(2) 12.553231 16,169 202,978 0.43% Venture III 1.85% Fee Contracts(2) 12.545380 2,897 36,343 0.36% Venture III 1.90% Fee Contracts(2) 12.542764 12,061 151,277 0.34% ------------------------ 1,490,795 18,612,296 Capital Opportunities Sub-Account: 1.40% to 1.90% 0.00% Venture 1.40% Fee Contracts 10.599650 1,404,266 14,884,726 (15.20%) Venture Vision Contracts 10.581831 178,983 1,893,972 (15.35%) Venture Vantage 1.55% Fee Contracts 10.588948 515,545 5,459,074 (15.29%) Venture Vantage 1.75% Fee Contracts 10.574706 47,817 505,653 (15.40%) Venture Vantage 1.60% Fee Contracts(1) 10.585386 305,288 3,231,596 (15.32%) Venture Vantage 1.80% Fee Contracts(1) 10.571147 170,803 1,805,587 (15.43%) Venture III 1.70% Fee Contracts(2) 11.568273 35,681 412,772 (7.45%) Venture III 1.85% Fee Contracts(2) 11.561026 283 3,270 (7.51%) Venture III 1.90% Fee Contracts(2) 11.558615 22,359 258,440 (7.53%) ------------------------ 2,681,025 28,455,090
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 60 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- ----------------------------------------------------------------------------- INVESTMENT UNIT UNIT EXPENSE INCOME TOTAL RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- -------------------------------------- -------------------------------------- Utilities Sub-Account: 1.40% to 1.90% 1.42% Venture 1.40% Fee Contracts $ 9.259344 853,854 $ 7,906,132 (25.93%) Venture Vision Contracts 9.243770 141,292 1,306,075 (26.05%) Venture Vantage 1.55% Fee Contracts 9.250000 244,504 2,261,667 (26.00%) Venture Vantage 1.75% Fee Contracts 9.237560 40,041 369,882 (26.10%) Venture Vantage 1.60% Fee Contracts(1) 9.246883 195,733 1,809,924 (26.02%) Venture Vantage 1.80% Fee Contracts(1) 9.234447 138,460 1,278,604 (26.12%) Venture III 1.70% Fee Contracts(2) 10.614010 28,877 306,504 (15.09%) Venture III 1.85% Fee Contracts(2) 10.607363 3,482 36,932 (15.14%) Venture III 1.90% Fee Contracts(2) 10.605146 15,856 168,156 (15.16%) ------------------------ 1,662,099 15,443,876 Mid Cap Value Sub-Account: 0.45% to 1.90% 0.74% Venture 1.40% Fee Contracts 12.966914 2,797,905 36,280,195 3.74% Venture Vision Contracts 12.945151 356,695 4,617,469 3.56% Venture Vantage 1.55% Fee Contracts 12.953850 816,530 10,577,205 3.63% Venture Vantage 1.75% Fee Contracts 12.936460 118,370 1,531,284 3.49% Venture Vantage 1.60% Fee Contracts(1) 12.949506 717,914 9,296,637 3.60% Venture Vantage 1.80% Fee Contracts(1) 12.932106 462,766 5,984,540 3.46% Venture III 1.70% Fee Contracts(2) 12.986625 132,969 1,726,820 3.89% Venture III 1.85% Fee Contracts(2) 12.978503 5,927 76,919 3.83% Venture III 1.90% Fee Contracts(2) 12.975798 63,706 826,634 3.81% Venture Strategy & Rollover Contracts 13.049955 211 2,747 4.40% ------------------------ 5,472,993 70,920,450
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 61 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- ----------------------------------------------------------------------------- INVESTMENT UNIT UNIT EXPENSE INCOME TOTAL RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- -------------------------------------- -------------------------------------- Fundamental Value Sub-Account: 0.45% to 1.90% 0.00% Venture 1.40% Fee Contracts $11.620125 3,512,835 $40,819,580 (7.04%) Venture Vision Contracts 11.600607 892,026 10,348,040 (7.20%) Venture Vantage 1.55% Fee Contracts 11.608415 1,333,345 15,478,025 (7.13%) Venture Vantage 1.75% Fee Contracts 11.592814 167,664 1,943,701 (7.26%) Venture Vantage 1.60% Fee Contracts(1) 11.604513 950,717 11,032,610 (7.16%) Venture Vantage 1.80% Fee Contracts(1) 11.588922 536,341 6,215,616 (7.29%) Venture III 1.70% Fee Contracts(2) 12.072032 231,144 2,790,383 (3.42%) Venture III 1.85% Fee Contracts(2) 12.064485 11,114 134,083 (3.48%) Venture III 1.90% Fee Contracts(2) 12.061966 116,042 1,399,693 (3.50%) Venture Strategy & Rollover Contracts 11.694569 2,181 25,505 (6.44%) ------------------------ 7,753,409 90,187,236 Basic Value Focus Sub-Account: 1.40% to 1.80% 6.07% Venture 1.40% Fee Contracts 22.514992 23.100090 1,247,105 28,808,249 2.60% Venture Vision Contracts 12.186911 27,712 337,724 (2.50%) Venture Vantage 1.55% Fee Contracts 15.864568 16.252289 712,421 11,578,476 2.44% Venture Vantage 1.75% Fee Contracts 13.588646 13.892756 158,085 2,196,230 2.24% Venture Vantage 1.60% Fee Contracts(1) 12.192528 185,627 2,263,262 (2.46%) Venture Vantage 1.80% Fee Contracts(1) 12.170082 57,367 698,152 (2.64%) Venture III 1.70% Fee Contracts(2) 12.398032 10,893 135,056 (0.82%) ------------------------ 2,399,210 46,017,149
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. 62 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
2000 2001 ---------- ------------------------------------------------------------------------------ INVESTMENT UNIT UNIT EXPENSE INCOME TOTAL RETURN VALUE VALUE UNITS DOLLARS RATIO* RATIO** RATIO*** ---------- ------------------------------------- -------------------------------------- Developing Capital Market Focus Sub-Account: 1.40% to 1.80% 0.74% Venture 1.40% Fee Contracts $ 7.313442 $ 7.305149 176,552 $ 1,289,740 (0.11%) Venture Vantage 1.55% Fee Contracts 11.064248 11.035006 24,137 266,351 (0.26%) Venture Vantage 1.75% Fee Contracts 9.694543 9.649444 6,958 67,138 (0.47%) Venture Vantage 1.60% Fee Contracts(1) 11.316501 1,135 12,841 (9.47%) Venture Vantage 1.80% Fee Contracts(1) 11.295632 3,205 36,207 (9.63%) ------------------------ 211,987 1,672,277 Special Value Focus Sub-Account: 1.40% to 1.80% 8.12% Venture 1.40% Fee Contracts 38.059573 48.661734 298,224 14,512,114 27.86% Venture Vision Contracts 14.756455 18,549 273,715 18.05% Venture Vantage 1.55% Fee Contracts 15.730490 20.082156 318,521 6,396,592 27.66% Venture Vantage 1.75% Fee Contracts 12.606854 16.062025 120,240 1,931,300 27.41% Venture Vantage 1.60% Fee Contracts(1) 14.763263 118,267 1,746,004 18.11% Venture Vantage 1.80% Fee Contracts(1) 14.736065 55,506 817,933 17.89% Venture III 1.70% Fee Contracts(2) 13.273185 2,367 31,416 6.19% ------------------------ 931,674 25,709,074 TOTAL $14,848,662,429 ===============
(1) Reflects less than one full year of performance activity. Funds were first received in this option during January 2001. (2) Reflects less than one full year of performance activity. Funds were first received in this option during August 2001. *The Expense Ratio represents the annualized contract expenses of the separate account, consisting primarily of mortality and expense charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of underlying fund are excluded. **The Investment Income Ratio represents the dividends, excluding the distributions of capital gains, received by the subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying fund in which the subaccount invests. ***The Total Return Ratio represents the total return for the periods indicated, including changes in the value of the underlying fund, and reflect deductions for all items included in the expense ratio. This does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. 63 The Manufacturers Life Insurance Company of North America Separate Account A Notes to Financial Statements (continued) 7. DIVERSIFICATION REQUIREMENTS Under the provisions of Section 817(h) of the Internal Revenue Code, a variable annuity contract, other than a contract issued in connection with certain types of employee benefits plans, will not be treated as an annuity contract for federal tax purposes for any period for which the investments of the segregated asset account on which the contract is based are not adequately diversified. The Code provides that the "adequately diversified" requirement may be met if the underlying investments satisfy either a statutory safe harbor test or diversification requirements set forth in regulations issued by the Secretary of Treasury. The Internal Revenue Service has issued regulations under Section 817(h) of the Code. The Company believes that the Account satisfies the current requirements of the regulations, and it intends that the Account will continue to meet such requirements. 8. SUBSEQUENT EVENT Effective January 1, 2002, the Company transferred all of the Company's in-force operations to The Manufacturers Life Insurance Company (U.S.A.) via an assumption reinsurance agreement. As a result, products currently sold and administered under the name of the Company will be offered and administered under the name of The Manufacturers Life Insurance Company (U.S.A.). As such, and effective January 1, 2002, the account will be known as The Manufacturers Life Insurance Company (U.S.A.) Separate Account H. 64 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) AUDITED CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 [MANULIFE FINANCIAL LOGO] THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) AUDITED CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 CONTENTS REPORT OF INDEPENDENT AUDITORS...............................................1 AUDITED CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS.............................................2 CONSOLIDATED STATEMENTS OF INCOME.......................................3 CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS...............4 CONSOLIDATED STATEMENTS OF CASH FLOWS...................................5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..............................6 REPORT OF INDEPENDENT AUDITORS THE BOARD OF DIRECTORS THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) We have audited the accompanying consolidated balance sheets of The Manufacturers Life Insurance Company (U.S.A.) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of income, changes in capital and surplus, and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Manufacturers Life Insurance Company (U.S.A.) and subsidiaries at December 31, 2001 and 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States. As discussed in Note 2 to the financial statements, in 2001, the Company changed its accounting for certain investments. /s/ ERNST & YOUNG LLP Philadelphia, Pennsylvania March 22, 2002 1 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) CONSOLIDATED BALANCE SHEETS
As at December 31 ($ millions) ASSETS 2001 2000 ---------------------------------------------------------------------------------------------------------------------- INVESTMENTS: Securities available-for-sale, at fair value: Fixed-maturity (amortized cost: 2001 $9,656 ; 2000 $9,580) $ 10,108 $ 9,797 Equity (cost: 2001 $889 ; 2000 $707) 845 852 Mortgage loans 1,675 1,539 Real estate 969 986 Policy loans 2,226 1,998 Short-term investments 539 715 ---------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS $ 16,362 $ 15,887 ---------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents $ 109 $ 98 Deferred acquisition costs 2,302 2,066 Deferred income taxes 79 125 Due from affiliates 508 511 Amounts recoverable from reinsurers 767 572 Other assets 641 757 Separate account assets 30,217 29,681 ---------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS $ 50,985 $ 49,697 ====================================================================================================================== LIABILITIES, CAPITAL AND SURPLUS ---------------------------------------------------------------------------------------------------------------------- LIABILITIES: Policyholder liabilities and accruals $ 17,415 $ 16,240 Note payable 200 200 Due to affiliate 250 250 Other liabilities 601 778 Separate account liabilities 30,217 29,681 ---------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES $ 48,683 $ 47,149 ====================================================================================================================== CAPITAL AND SURPLUS: Capital stock $ 5 $ 5 Retained earnings 2,176 2,260 Accumulated other comprehensive income 121 283 ---------------------------------------------------------------------------------------------------------------------- TOTAL CAPITAL AND SURPLUS $ 2,302 $ 2,548 ---------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES, CAPITAL AND SURPLUS $ 50,985 $ 49,697 ======================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 2 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31 ($ millions) 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------------ REVENUE: Premiums $ 794 $ 814 $ 881 Fee income 903 958 746 Net investment income 1,115 1,135 1,121 Realized investment gains 35 137 27 Other 12 -- 5 ------------------------------------------------------------------------------------------------------------------------ TOTAL REVENUE $2,859 $ 3,044 $ 2,780 ------------------------------------------------------------------------------------------------------------------------ BENEFITS AND EXPENSES: Policyholder benefits and claims $1,567 $ 1,535 $ 1,429 Operating expenses and commissions 600 617 494 Amortization of deferred acquisition costs 277 180 40 Interest expense 30 19 8 Policyholder dividends 348 339 323 Minority interest expense -- 16 16 ------------------------------------------------------------------------------------------------------------------------ TOTAL BENEFITS AND EXPENSES $2,822 $ 2,706 $ 2,310 ------------------------------------------------------------------------------------------------------------------------ INCOME BEFORE INCOME TAXES 37 338 470 ------------------------------------------------------------------------------------------------------------------------ INCOME TAX (BENEFIT) EXPENSE (4) 90 177 ------------------------------------------------------------------------------------------------------------------------ NET INCOME $ 41 $ 248 $ 293 ========================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 3 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
ACCUMULATED OTHER TOTAL FOR THE YEARS ENDED DECEMBER 31 CAPITAL RETAINED COMPREHENSIVE CAPITAL AND ($ millions) STOCK EARNINGS INCOME (LOSS) SURPLUS ----------------------------------------------------------------------------------------------------------------- BALANCE AT JANUARY 1, 1999 $ 5 $1,697 $ 149 $ 1,851 Comprehensive income -- 293 (21) 272 ----------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 1999 $ 5 $1,990 $ 128 $ 2,123 ----------------------------------------------------------------------------------------------------------------- Comprehensive income -- 248 155 403 Contributed surplus -- 22 -- 22 ----------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 2000 $ 5 $2,260 $ 283 $ 2,548 Comprehensive income -- 41 (162) (121) Dividend to shareholder -- (125) -- (125) ----------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 2001 $ 5 $2,176 $ 121 $ 2,302 =================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 4 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31 ($ millions) 2001 2000 1999 ----------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES: Net Income $ 41 $ 248 $ 293 Adjustments to reconcile net income to net cash provided by operating activities: Additions to policyholder liabilities and accruals 442 330 404 Deferred acquisition costs (538) (590) (463) Amortization of deferred acquisition costs 277 180 40 Amounts recoverable from reinsurers (91) 23 334 Realized investment gains (35) (137) (27) Decreases to deferred income taxes 60 34 194 Amounts due from affiliates 3 259 22 Other assets and liabilities, net (38) (244) 258 Other, net 3 (62) 58 ----------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities $ 124 $ 41 $ 1,113 ----------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES: Fixed-maturity securities sold, matured or repaid $ 9,976 $ 6,584 $ 4,302 Fixed-maturity securities purchased (10,031) (6,792) (4,763) Equity securities sold 412 1,185 303 Equity securities purchased (587) (1,012) (349) Mortgage loans advanced (334) (187) (148) Mortgage loans repaid 200 274 314 Real estate sold 42 101 54 Real estate purchased (29) (58) (219) Policy loans advanced, net (228) (155) (133) Short-term investments 176 (431) (251) Separate account seed money -- -- 32 Other investments, net (26) 196 (355) ----------------------------------------------------------------------------------------------------------------- Net cash used in investing activities $ (429) $ (295) $ (1,213) ----------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES: Deposits and interest credited to policyholder account balances $ 1,934 $ 1,336 $ 1,263 Withdrawals from policyholder account balances (1,532) (1,579) (987) Amounts due to affiliates 150 250 -- Principal repayment of amounts due to affiliates (150) -- -- Net reinsurance recoverable (payable) 39 87 (158) Dividend to shareholder (125) -- -- Borrowed funds -- 107 50 ----------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities $ 316 $ 201 $ 168 ----------------------------------------------------------------------------------------------------------------- CASH: Increase (decrease) during the year 11 (53) 68 Balance, beginning of year 98 151 83 ----------------------------------------------------------------------------------------------------------------- BALANCE, END OF YEAR $ 109 $ 98 $ 151 =================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 5 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 (IN MILLIONS OF DOLLARS) 1. ORGANIZATION The Manufacturers Life Insurance Company (U.S.A.) ("ManUSA") is an indirectly wholly-owned subsidiary of Manulife Financial Corporation, a Canadian-based publicly traded company. Manulife Financial Corporation ("MFC") and its subsidiaries are collectively known as "Manulife Financial". ManUSA and its subsidiaries, collectively known as the "Company", operate in the life insurance industry, offering a broad range of insurance and wealth management related products. These products are offered both on an individual and group basis and are marketed primarily in the United States. In December of 2000 through an issuance of shares, the Company acquired the remaining 21.6% minority interest in Manulife-Wood Logan Holding Co. Inc ("MWLH"), a subsidiary of the Company, from MRL Holding, LLC ("MRL-LLC"), an affiliated company. As this was a related party transaction, the purchase was accounted for at MRL-LLC's carrying value and no goodwill was generated. 2. SIGNIFICANT ACCOUNTING POLICIES a) BASIS OF PRESENTATION The accompanying consolidated financial statements of ManUSA have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and include accounts and operations, after intercompany eliminations, of ManUSA and its subsidiaries. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates. b) RECENT ACCOUNTING STANDARDS In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires the purchase method of accounting to be used for all future business combinations. SFAS No. 142 eliminates the practice of amortizing goodwill through periodic charges to earnings and establishes a new methodology for recognizing and measuring goodwill and other intangible assets. Under this new accounting standard, the Company will cease goodwill amortization effective January 1, 2002. The Company is currently considering the other provisions of the new standard. The impact of adopting these two standards on the Company's financial statements is not expected to be material. 6 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) EITF Issue No. 99-20 ("EITF 99-20"), "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets", applies to all securities, purchased or retained, which represent beneficial interests in securitized assets, unless they meet certain exception criteria. Such securities include many collateralized mortgage, bond, debt and loan obligations, mortgage-backed securities, and asset-backed securities. EITF 99-20 significantly changes the method of assessing "other than temporary impairments" and for recognizing interest income. A decline in fair value below the "amortized cost" basis is considered to be an other than temporary impairment whenever there is an adverse change in the amount or timing of cash flows to be received, regardless of the resulting yield, unless the decrease is solely a result of changes in market interest rates. Interest income is based on prospective estimates of future cash flows. EITF 99-20 was effective for fiscal quarters beginning after March 15, 2001. We reviewed all applicable securities held by the Company since April 1, 2001 and deemed the impact of this new accounting clarification as immaterial. c) INVESTMENTS The Company classifies all of its fixed-maturity and equity securities as available-for-sale and records these securities at fair value. The cost of fixed-maturity securities is adjusted for the amortization of premiums and accretion of discounts, which are calculated using the effective interest method. For the mortgage-backed bond portion of the fixed-maturity securities portfolio, the Company recognizes amortization using a constant effective yield based on anticipated prepayments and the estimated economic life of the securities. When actual prepayments differ significantly from anticipated prepayments, the effective yield is recalculated to reflect actual payments to date and anticipated future payments. The net investment in the security is adjusted to the amount that would have existed had the new effective yield been applied since the acquisition of the security. That adjustment is included in net investment income. Realized gains and losses on sales of securities classified as available-for-sale are recognized in net income using the specific-identification method. Temporary changes in the fair value of securities available-for-sale are reflected directly in accumulated other comprehensive income after adjustments for deferred taxes, deferred acquisition costs, policyholder liabilities and unearned revenue liability. Mortgage loans are reported at unpaid principal balances, net of a provision for losses. The provision for losses is established for mortgage loans both on a specific as well as on an aggregate basis. Mortgage loans are considered to be impaired when the Company has determined that it is probable that all amounts due under contractual terms will not be collected. Impaired loans are reported at the lower of unpaid principal or fair value of the underlying collateral. Real estate held for investment is carried at cost, less accumulated depreciation and provisions for impairment and write-downs, if applicable. Real estate held for sale is carried at the lower of cost or market value where changes in estimates of market value are recognized as realized gains or losses in the income statement. Policy loans are reported at aggregate unpaid balances, which approximates fair value. 7 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Short-term investments, which include investments with maturities of less than one year and greater than ninety days as at the date of acquisition, are reported at amortized cost which approximates fair value. d) CASH EQUIVALENTS The Company considers all highly liquid debt instruments purchased with an original maturity date of three months or less to be cash equivalents. Cash equivalents are stated at cost plus accrued interest, which approximates fair value. e) DEFERRED ACQUISITION COSTS ("DAC") Commissions and other expenses, which vary with and are primarily related to the production of new business, are deferred to the extent recoverable from future gross profits and included as an asset. The portion of DAC associated with variable annuity and variable life insurance contracts, universal life insurance contracts, investment contracts, and participating life insurance contracts is charged to expense in relation to the estimated gross profits of those contracts. This amortization is adjusted retrospectively when current gross profits or estimates of future gross profits are revised. Certain changes in assumptions regarding the variable annuity product line were made which refined the amortization pattern. DAC associated with all other insurance contracts is amortized over the premium-paying period of the related policies. Assuming the unrealized gains or losses on securities had been realized at year-end, DAC is adjusted for the impact on current and estimated future gross profits. The impact of any such adjustments is included in net unrealized gains (losses) in accumulated other comprehensive income. DAC is reviewed annually to determine recoverability from future income and if not recoverable, is immediately expensed. f) POLICYHOLDER LIABILITIES AND ACCRUALS Policyholder liabilities for traditional non-participating life insurance policies and for accident and health policies are computed using the net level premium method. The calculations are based upon estimates as to future mortality, morbidity, persistency, maintenance expenses, and interest rate yields that were applicable in the year of issue. The assumptions include a provision for the risk of adverse deviation. For payout annuities in loss recognition, policyholder liabilities are computed using estimates of expected mortality, expenses, and investment yields as determined at the time these contracts first moved into loss recognition. Payout annuity reserves are adjusted for the impact of net unrealized gains associated with the underlying assets. For variable annuity and variable life contracts, universal life insurance contracts, and investment contracts with no substantial mortality or morbidity risk, policyholder liabilities equal the policyholder account values. Account values are increased for deposits received and interest credited and are reduced by withdrawals, mortality charges, and administrative expenses charged to the policyholders. 8 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) For traditional participating life insurance policies, policyholder liabilities are computed using the net level premium reserve for death and endowment policy benefits. Mortality and interest assumptions are the same as the non-forfeiture benefit assumptions at the time the policy was issued. Interest rate assumptions used in the calculation of the liabilities for traditional participating life insurance policies range from 2.5% to 7.0%. As of December 31, 2001, participating insurance expressed as a percentage of insurance in force is 69.1%. For participating policies inforce as of September 23, 1999, the demutualization of The Manufacturers Life Insurance Company ("MLT"), an indirect parent, separate sub-accounts were established within the participating accounts of the Company. These sub-accounts permit this participating business to be operated as separate "closed block" of business. As at December 31, 2001, $7,441 (2000 - $7,048) of both assets and actuarial liabilities related to the participating policyholders' account are included in the closed block. ManUSA's Board of Directors approves the amount of policyholder dividends to be paid annually. The aggregate amount of policyholder dividends is calculated based on actual interest, mortality, morbidity and expense experience for the year, and on management's judgment as to the appropriate level of equity to be retained by the Company. The carrying value of this liability approximates the earned amount and fair value as at December 31, 2001. g) SEPARATE ACCOUNTS Separate account assets and liabilities represent funds that are separately administered, principally for investment contracts related to group pension business as well as for variable annuity and variable life contracts, and for which the contract holder, rather than the Company, bears the investment risk. Separate account contract holders have no claim against the assets of the general account of the Company. Separate account assets are recorded at market value. Operations of the separate accounts are not included in the accompanying financial statements. However, fees charged on separate account policyholder funds are included in revenue of the Company. h) REVENUE RECOGNITION Premiums on long-duration life insurance contracts are recognized as revenue when due. Premiums on short-duration contracts are earned over the related contract period. Net premiums on limited-payment contracts are recognized as revenue and the difference between the gross premium received and the net premium is deferred and recognized in income based on either a constant relationship to insurance in force or the present value of annuity benefits, depending on the product type. Fee income from annuity contracts, pension contracts, and insurance contracts consist of charges for mortality, expense, surrender and administration that have been assessed against the policyholder account balances. To the extent such charges compensate the Company for future services, they are deferred and recognized in income over the period earned using the same assumptions as those associated with the amortization of DAC. Interest on fixed-maturity securities and performing mortgage loans is recorded as income when earned and is adjusted for any amortization of premiums or discounts. Interest on restructured mortgage loans is recorded as income based on the rate to be paid; interest on delinquent mortgage loans is recorded as income on a cash basis. Dividends are recorded as income on ex-dividend dates. 9 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) i) POLICYHOLDER BENEFITS AND CLAIMS Benefits for variable annuity and variable life contracts, for universal life insurance contracts, and for investment pension contracts include interest credited to policyholder account values and benefit claims incurred during the period in excess of policyholder account values. j) REINSURANCE The Company routinely utilizes reinsurance transactions to minimize exposure to large risks. Life reinsurance is accomplished through various plans including yearly renewable term, co-insurance, and modified co-insurance. Reinsurance premiums, policy charges for cost of insurance, and claims are accounted for on a basis consistent with that used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums, fees, and claims are reported net of reinsured amounts. The amount recoverable from reinsures and pertaining to policyholder liabilities is presented as a separate asset on the balance sheet. For those claims paid and covered by a reinsurance treaty, a reinsurance receivable has been included as part of other assets. k) INCOME TAX Income taxes have been provided for in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that likely will be in effect when the differences are expected to reverse. The measurement of deferred tax assets is reduced by a valuation allowance if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. ManUSA joins its direct parent, Manulife Reinsurance Corporation (U.S.A.) ("MRC"), its indirect parent, The Manufacturers Investment Corporation ("MIC"), and its subsidiary, The Manufacturers Life Insurance Company of America ("MLA"), in filing a U.S. consolidated income tax return as a life insurance group under the provisions of the Internal Revenue Service. A separate life insurance group for certain of ManUSA's subsidiaries is also in place. In accordance with the income tax-sharing agreements, the Company's income tax provision (or benefit) is computed as if ManUSA and the companies within the two groups filed separate income tax returns. Tax benefits from operating losses are provided at the U.S. statutory rate plus any tax credits attributable, provided the consolidated group utilizes such benefits currently. l) FOREIGN EXCHANGE The balance sheet and statement of income of the Company's foreign operations as well as non-U.S. dollar investments are translated into U.S. dollars using exchange rates in effect at the balance sheet date and average exchange rates prevailing during the respective periods. Translation adjustments are included in accumulated other comprehensive income. 10 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) m) DERIVATIVES The Company adopted the Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by Statement of Financial Accounting Standards No. 138, on January 1, 2001. As a result, all derivative instruments are reported on the Consolidated Balance Sheet at their fair value, with changes in fair value recorded in income or equity, depending on the nature of the derivative instrument. Changes in the fair value of derivatives not designated as hedges are recognized in current period earnings. There was no cumulative transition adjustment at the time of adoption. For fair value hedges, the Company is hedging changes in the fair value of assets, liabilities or firm commitments with changes in fair values of the derivative instruments. Both sets of changes are recorded through income. For cash flow hedges, the Company is hedging the variability of cash flows related to forecasted transactions. The effective portion of changes in the fair value of cash flow hedges is recorded in other comprehensive income and reclassified into income in the same period or periods during which the hedged transaction affects earnings. The Company estimates that deferred net losses of $4 after tax, included in other comprehensive income as at December 31, 2001, will be reclassified into earnings within the next twelve months. Cash flow hedges include hedges of certain forecasted transactions of varying periods up to a maximum of 40 years. n) RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform to the current year presentation. 3. INVESTMENTS AND INVESTMENT INCOME a) FIXED-MATURITY AND EQUITY SECURITIES At December 31, 2001, all fixed-maturity and equity securities have been classified as available-for-sale and reported at fair value. The amortized cost and fair value is summarized as follows:
GROSS GROSS AMORTIZED COST UNREALIZED UNREALIZED FAIR VALUE AS AT DECEMBER 31 GAINS LOSSES ($ millions) 2001 2000 2001 2000 2001 2000 2001 2000 ---------------------------------------------------------------------------------------------------------- FIXED-MATURITY SECURITIES: U.S. government $1,963 $1,240 $65 $103 $ (9) $ -- $ 2,019 $1,343 Foreign governments 1,290 1,730 169 204 (2) -- 1,457 1,934 Corporate 5,728 5,561 297 111 (98) (215) 5,927 5,457 Asset - backed 675 1,049 32 21 (2) (7) 705 1,063 ---------------------------------------------------------------------------------------------------------- TOTAL FIXED-MATURITY SECURITIES 9,656 9,580 563 439 (111) (222) 10,108 9,797 ---------------------------------------------------------------------------------------------------------- EQUITY SECURITIES $ 889 $ 707 $ 93 $210 $ (137) $(65) $ 845 $ 852 ----------------------------------------------------------------------------------------------------------
Proceeds from sales of fixed-maturity securities during 2001 were $10,063 (2000 - $6,584 and 1999 - $4,302). Gross gains and losses of $225 and $98 respectively, were realized on those sales (2000 - $71 and $242 respectively, 1999 - $49 and $167 respectively). 11 3. INVESTMENTS AND INVESTMENT INCOME (CONTINUED) Proceeds from the sale of equity securities during 2001 were $412 (2000 - $1,185 and 1999 - $303). Gross gains and losses of $20 and $31 respectively, were realized on those sales (2000 - $319 and $60 respectively, 1999 - $84 and $39 respectively). The contractual maturities of fixed-maturity securities at December 31, 2001 are shown below.
AS AT DECEMBER 31, 2001 ($ millions) AMORTIZED COST FAIR VALUE ---------------------------------------------------------------------------------------------------- Fixed-maturity securities, excluding mortgage-backed securities: One year or less $ 230 $ 242 Greater than 1; up to 5 years 1,310 1,342 Greater than 5; up to 10 years 2,930 3,022 Due after 10 years 4,511 4,797 Asset - backed securities 675 705 ---------------------------------------------------------------------------------------------------- TOTAL FIXED-MATURITY SECURITIES $ 9,656 $ 10,108 ----------------------------------------------------------------------------------------------------
Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without prepayment penalties. Corporate requirements and investment strategies may result in the sale of investments before maturity. b) MORTGAGE LOANS Mortgage loans are reported at amortized cost, net of a provision for losses. The impaired mortgage loans and the related allowance for mortgage loan losses were as follows:
AS AT DECEMBER 31 ($ millions) 2001 2000 ----------------------------------------------------------------------- IMPAIRED LOANS $ 79 $ 80 ----------------------------------------------------------------------- Allowance, January 1 $ 51 $ 57 Deductions (1) (6) ----------------------------------------------------------------------- ALLOWANCE, DECEMBER 31 $ 50 $ 51 -----------------------------------------------------------------------
c) INVESTMENT INCOME Income by type of investment was as follows:
FOR THE YEARS ENDED DECEMBER 31 ($ millions) 2001 2000 1999 ----------------------------------------------------------------------- Fixed-maturity securities $ 698 $ 727 $ 726 Equity securities 42 60 18 Mortgage loans 128 126 149 Investment real estate 81 95 71 Other investments 200 184 195 ----------------------------------------------------------------------- Gross investment income 1,149 1,192 1,159 Investment expenses (34) (57) (38) ----------------------------------------------------------------------- NET INVESTMENT INCOME $ 1,115 $ 1,135 $ 1,121 -----------------------------------------------------------------------
12 3. INVESTMENTS AND INVESTMENT INCOME (CONTINUED) d) SIGNIFICANT EQUITY INTERESTS ManUSA holds a 27.7% (2000 - 22.4%) indirect interest in Flex Leasing I, LLC and a 19.6% direct interest in Flex Leasing II, LLC. These investments are accounted for using the equity method whereby ManUSA would recognize its proportionate share of the respective investee's net income or loss. As at December 31, 2001, the sum of total assets for both these investees was $396 (2000 - $392), with total liabilities amounting to $295 (2000 - $288). For the year ended December 31, 2001, total net loss for both these investees amounted to $4 (2000 - net income of $1). 4. COMPREHENSIVE INCOME a) Total comprehensive income was as follows:
FOR THE YEARS ENDED DECEMBER 31 ($ millions) 2001 2000 1999 ----------------------------------------------------------------------------------------- NET INCOME $ 41 $ 248 $ 293 ----------------------------------------------------------------------------------------- OTHER COMPREHENSIVE (LOSS) INCOME, NET OF INCOME TAX: Unrealized holding (losses) gains arising during the year (146) 69 (4) Foreign currency translation (13) (3) 1 Less: Reclassification adjustment for realized gains and losses included in net income 3 (89) 18 ----------------------------------------------------------------------------------------- Other comprehensive (loss) income (162) 155 (21) ----------------------------------------------------------------------------------------- COMPREHENSIVE (LOSS) INCOME $(121) $ 403 $ 272 =========================================================================================
Other comprehensive (loss) income is reported net of tax (benefit) expense of ($81), $87, and $30 for 2001, 2000 and 1999, respectively. 13 4. COMPREHENSIVE INCOME (CONTINUED) Accumulated other comprehensive income is comprised of the following:
AS AT DECEMBER 31 ($ millions) 2001 2000 ------------------------------------------------------------- UNREALIZED GAINS : Beginning balance $ 290 $ 132 Current period change (149) 158 ------------------------------------------------------------- Ending balance $ 141 $ 290 ------------------------------------------------------------- FOREIGN CURRENCY: Beginning balance $ (7) $ (4) Current period change (13) (3) ------------------------------------------------------------- Ending balance $ (20) $ (7) ------------------------------------------------------------- ACCUMULATED OTHER COMPREHENSIVE INCOME $ 121 $ 283 =============================================================
b) UNREALIZED GAINS (LOSSES) ON SECURITIES AVAILABLE-FOR-SALE Net unrealized gains (losses) on fixed-maturity and equity securities included in other comprehensive income were as follows:
AS AT DECEMBER 31 ($ millions) 2001 2000 ------------------------------------------------------------------------------ Gross unrealized gains $ 656 $ 648 Gross unrealized losses (248) (286) DAC and other amounts required to satisfy policyholder liabilities (191) 39 Deferred income taxes (76) (111) ------------------------------------------------------------------------------ NET UNREALIZED GAINS ON SECURITIES AVAILABLE-FOR-SALE $ 141 $ 290 ==============================================================================
5. DEFERRED ACQUISITION COSTS The components of the change in DAC were as follows:
FOR THE YEARS ENDED DECEMBER 31 ($ millions) 2001 2000 ----------------------------------------------------------------------- Balance, January 1 $ 2,066 $ 1,631 Capitalization 538 590 Amortization (277) (180) Effect of net unrealized gains on securities available-for-sale (25) 25 ======================================================================= BALANCE, DECEMBER 31 $ 2,302 $ 2,066 =======================================================================
14 6. INCOME TAXES The components of income tax (benefit) expense were as follows:
FOR THE YEARS ENDED DECEMBER 31 ($ millions) 2001 2000 1999 ----------------------------------------------------------------- Current (benefit) expense $ (64) $ 56 $ (17) Deferred expense 60 34 194 ----------------------------------------------------------------- TOTAL (BENEFIT) EXPENSE $ (4) $ 90 $ 177 =================================================================
Income before federal income taxes differs from taxable income principally due to tax-exempt investment income; dividends received tax deductions, differences in the treatment of policy acquisition costs, and differences in reserves for policy and contract liabilities for tax and financial reporting purposes. The Company's deferred income tax asset (liability), which results from tax affecting the differences between financial statement values and tax values of assets and liabilities at each balance sheet date, relates to the following:
FOR THE YEARS ENDED DECEMBER 31 ($ millions) 2001 2000 1999 ------------------------------------------------------------------------------------ DEFERRED TAX ASSETS: Differences in computing policy reserves $682 $630 $635 Investments 1 -- -- Policyholder dividends payable 13 11 9 Net capital loss -- 6 -- Net operating loss 87 41 -- Other deferred tax assets 37 19 -- ------------------------------------------------------------------------------------ Deferred tax assets $820 $707 $644 ------------------------------------------------------------------------------------ DEFERRED TAX LIABILITIES: Deferred acquisition costs $412 $340 $244 Unrealized gains on securities available-for-sale 163 140 189 Premiums receivable 16 13 14 Investments 112 47 14 Other deferred tax liabilities 38 42 32 ------------------------------------------------------------------------------------ Deferred tax liabilities $741 $582 $493 ------------------------------------------------------------------------------------ NET DEFERRED TAX ASSETS $ 79 $125 $151 ====================================================================================
15 6. INCOME TAXES (CONTINUED) The Company files a consolidated federal income tax return for all its subsidiaries except for The Manufacturers Life Insurance Company of North America ("MNA") and The Manufacturers Life Insurance Company of New York ("MNY"). MNA and MNY file a separate consolidated federal income tax return. ManUSA and its subsidiaries file separate state income tax returns. The method of allocation among the companies is subject to a written tax sharing agreement under which the tax liability is allocated to each member on a pro rata basis based on the relationship that the member's tax liability (computed on a separate return basis) bears to the tax liability of the consolidated group. The tax charge to each of the respective companies will not be more than that which each company would have paid on a separate return basis. Settlements of taxes are made through an increase or reduction to the payable to parent, subsidiaries or affiliates. Such settlements occur on a periodic basis. At December 31, 2001, the Company has operating loss carry forwards of $249 that will begin to expire in 2011. 7. NOTE PAYABLE On December 29, 1997, the Company issued a surplus debenture for $200 plus interest at 7.93% per annum to MIC. The surplus debenture matures on February 1, 2022. Except in the event of insolvency or wind-up of the Company, the instrument may not be redeemed by the Company during the period of five years from date of issue without the approval of the Office of the Superintendent of Financial Institutions of Canada. Interest accrued and expensed was $16 for each of 2001, 2000, and 1999. Interest paid was $16, $9, and $16 for 2001, 2000, and 1999, respectively. 8. CAPITAL AND SURPLUS Capital Stock is comprised of the following:
AS AT DECEMBER 31 ($ millions) 2001 2000 --------------------------------------------------------------------- AUTHORIZED: 50,000,000 Preferred shares, Par value $1.00 -- -- 50,000,000 Common shares, Par value $1.00 --------------------------------------------------------------------- ISSUED AND OUTSTANDING: 100,000 Preferred shares 4,728,934 Common shares (2000 - 4,711,772 ) 5 5 =====================================================================
Pursuant to an agreement dated December 31, 2000, ManUSA purchased from MRL-LLC all of MRL-LLC's 21.6% interest in MWLH. In exchange, ManUSA transferred 167,268 of its common shares to MRL-LLC and forgave a promissory note owed by MRL-LLC amounting to $52 plus accrued interest. The result was a $22 addition to the Company's contributed surplus. As well, the agreement permitted the use of estimates in determining the value of shares exchanged until a final valuation of the respective companies was performed. This valuation was completed in 2001 resulting in an additional 17,162 shares transferred from ManUSA to MRL-LLC. There was no addition to the Company's contributed surplus. ManUSA and its life insurance subsidiaries are subject to statutory limitations on the payment of dividends. Dividend payments in excess of prescribed limits cannot be paid without the prior approval of U.S. insurance regulatory authorities. 16 8. CAPITAL AND SURPLUS (CONTINUED) Net income (loss) and capital and surplus, as determined in accordance with statutory accounting principles for ManUSA and its life insurance subsidiaries were as follows:
FOR THE YEARS ENDED DECEMBER 31 ($ millions) 2001 2000 1999 --------------------------------------------------------------------------------------------------- THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.): Net income $ 55 $ 200 $ 132 Net capital and surplus 1,280 1,384 1,560 THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA: Net loss $ (117) $ (59) $ (3) Net capital and surplus 212 152 171 THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA: Net (loss) income $ (20) $ (19) $ 6 Net capital and surplus 100 120 137 THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK: Net (loss) income $ (26) $ (3) $ 1 Net capital and surplus 34 61 64 ===================================================================================================
In March 1998, the National Association of Insurance Commissioners adopted codified statutory accounting principles ("Codification") effective January 1, 2001. Codification changes prescribed statutory accounting practices and results in changes to the accounting practices that the Company's life insurance subsidiaries use to prepare their statutory-basis financial statements. The states of domicile of these subsidiaries adopted Codification as the prescribed basis of accounting on which insurers must report their statutory-basis results. The cumulative effect of changes in accounting principles adopted to conform to the requirements of Codification was reported as an increase to surplus in the statutory-basis financial statement of the respective life insurance subsidiaries. In total, statutory-basis surplus of the life insurance entities within the Company increased by $175. As a result of demutualization of MLI, an indirect parent, there are regulatory restrictions on the amounts of profit that can be transferred to shareholders. These restrictions generally take the form of a fixed percentage of the policyholder dividends. The transfers are governed by the terms of MLI's Plan of Demutualization. 9. EMPLOYEE BENEFITS a) EMPLOYEE RETIREMENT PLAN The Company sponsors a non-contributory pension plan entitled "The Manulife Financial U.S. Cash Balance Plan" ("the Plan"). Pension benefits are provided to participants of the Plan after three years of vesting service with the Company and are a function of the length of service together with final average earnings. The normal form of payment under the Plan is a life annuity, payable at the normal retirement age of 65, and is actuarially equivalent to the cash balance account. Various optional forms of payment are available including a lump sum. Early retirement benefits are actuarially equivalent to the cash balance account, but are subsidized for participants who were age 45 with 5 or more years vesting service with the Company as at July 1, 1998 and who terminate employment after attaining age 50 and have completed 10 years of service. 17 9. EMPLOYEE BENEFITS (CONTINUED) Cash balance accounts are credited annually with contribution credits and semi-annually with interest credits. Future contribution credits under the Plan vary based on service. Interest credits are a function of the 1-year U.S. Treasury Bond rate plus 0.50%, but no less than 5.25% per year. Actuarial valuation of accumulated plan benefits are based on projected salaries, an assumed discount rate, and best estimates of investment yields on plan assets, mortality of participants, employee termination, and ages at retirement. Pension costs that relate to current service are funded as they accrue and are charged to earnings of the Company in the current period. Vested benefits are fully funded. Experience gains and losses are amortized into income of the Company over the estimated average remaining service lives of the participants. No contributions were made during the current or prior year because the Plan was subject to the full funding limitation under the Internal Revenue Code. The Company also sponsors an unfunded supplemental cash balance plan entitled "The Manulife Financial U.S. Supplemental Cash Balance Plan" ("the Supplemental Plan"). This non-qualified plan provides defined pension benefits in excess of limits imposed by law. The Internal Revenue Code does not restrict compensation nor does it limit benefits. Benefits under the Supplemental Plan are provided to participants who terminate after three years of service. The default form of payment under this plan is a lump sum, although participants may elect to receive payment in the form of an annuity provided that such an election is made within the time period prescribed in the Supplemental Plan. If an annuity form of payment is elected, the amount payable is equal to the actuarial equivalent of the participant's balance under the Supplemental Plan, using the factors and assumptions for determining immediate annuity amounts applicable to the participant under the Plan. Cash balance contribution credits vary by service, and interest credits are a function of the 1-year U.S. Treasury Bond rate plus 0.50%, but no less than 5.25% per year. The annual contribution credits are made in respect of the participant's compensation that is in excess of the limit in the Internal Revenue Code. Together, these contributions serve to restore to the participant the benefit that he / she would have been entitled to under the Plan's benefit formula but for the limitation in Internal Revenue Code. At December 31, 2001, the projected benefit obligation to the participants of both the Plan and the Supplemental Plan was $78, which was based on an assumed interest rate of 7.25%. The fair value of the Plan assets totaled $72. b) 401(k) PLAN The Company sponsors a defined contribution 401(k) Savings Plan which is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The Company contributed $1 for each of 2001, 2000, and 1999, respectively. 18 9. EMPLOYEE BENEFITS (CONTINUED) c) DEFERRED COMPENSATION PLAN The Company has deferred compensation incentive plans open to all branch managers and qualified agents. There are no stock option plans involving stock of ManUSA. d) POSTRETIREMENT BENEFIT PLAN In addition to the retirement plans, the Company sponsors a postretirement benefit plan that provides retiree medical and life insurance benefits to those who have attained age 50 and have 10 or more years of service with the Company. This plan provides medical coverage for retirees and spouses under age 65. When the retirees or the covered spouses reach age 65, Medicare provides primary coverage and this plan provides secondary coverage. This plan is contributory with the amount of contribution based on the service of the employees as at the time of retirement. This plan provides the retiree with a life insurance benefit of 100% of the salary just prior to retirement. The amount is reduced to 65% on the first of January following retirement, and is further reduced to 30% at age 70. The Company accounts for its retiree benefit plan using the accrual method. At December 31, 2001, the benefit obligation of the postretirement benefit plan was $21, which was based on an assumed interest rate of 7.25%. This plan is unfunded. 19 9. EMPLOYEE BENEFITS (CONTINUED) e) FINANCIAL INFORMATION REGARDING THE EMPLOYEE RETIREMENT PLAN AND THE POSTRETIREMENT BENEFIT PLAN Information applicable to the Employee Retirement Plan and the Postretirement Benefit Plan as estimated by a consulting actuary for the December 31 year-end is as follows:
EMPLOYEE POSTRETIREMENT RETIREMENT BENEFIT AS OF DECEMBER 31 PLAN PLAN ------------------------------------- (in millions) 2001 2000 2001 2000 ------------------------------------------------------------------------------------------------------------ CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year $(74) $(68) $(18) $(17) Service cost (3) (2) (1) (1) Interest cost (5) (5) (1) (1) Amendments -- (1) -- -- Actuarial gain (loss) (1) (3) (1) -- Benefits paid 5 5 1 1 ------------------------------------------------------------------------------------------------------------ Benefits obligation at end of year $(78) $(74) $(20) $(18) ------------------------------------------------------------------------------------------------------------ CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year $ 81 $ 87 $ -- $ -- Actual return on plan assets (6) (2) -- -- Employer contribution 2 1 1 1 Benefits paid (5) (5) (1) (1) ------------------------------------------------------------------------------------------------------------ Fair value of plan assets at end of year $ 72 $ 81 $ -- $ -- ------------------------------------------------------------------------------------------------------------ Funded status $ (6) $ 7 $(21) $(18) Unrecognized transition asset (6) (9) -- -- Unrecognized actuarial loss (gain) 30 16 (12) (15) Unrecognized prior service cost (recovery) 3 3 -- -- ------------------------------------------------------------------------------------------------------------ Net amount recognized $ 21 $ 17 $(33) $(33) ------------------------------------------------------------------------------------------------------------ Amounts recognized in statement of financial position consist of: Prepaid benefit cost $ 38 $ 34 $ -- $ -- Accrued benefit liability (22) (21) (33) (33) Intangible asset 1 1 -- -- Accumulated other comprehensive income 4 4 -- -- ------------------------------------------------------------------------------------------------------------ Net amount recognized $ 21 $ 18 $(33) $(33) ------------------------------------------------------------------------------------------------------------
EMPLOYEE POSTRETIREMENT RETIREMENT BENEFIT PLAN PLAN ---------------------------------------------- AS OF DECEMBER 31 2001 2000 2001 2000 ------------------------------------------------------------------------------------- WEIGHTED AVERAGE ASSUMPTIONS Discount rate 7.25% 7.25% 7.25% 7.25% Expected return on plan assets 9.00% 8.50% n/a n/a Rate of compensation increase 5.00% 5.00% 5.00% 5.00%
20 9. EMPLOYEE BENEFITS (CONTINUED) On December 31, 2001, the accrued postretirement benefit cost was $21. The postretirement benefit obligation for eligible active employees was $3. The amount of the postretirement benefit obligation for ineligible active employees was $6. For measurement purposes as of December 31, 2001, a 7.5% and 9.5% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2002 for pre-65 and post-65 coverages, respectively. These rates were assumed to decrease gradually to 5.0% in 2007 and 2011, respectively, and remain at that level thereafter.
EMPLOYEE POSTRETIREMENT RETIREMENT BENEFIT PLAN PLAN AS OF DECEMBER 31 ---------------------------------- (in millions) 2001 2000 2001 2000 ------------------------------------------------------------------------------------ COMPONENTS OF NET PERIODIC (BENEFIT) COST FOR PLAN SPONSOR Service cost $ 3 $ 2 $ 1 $ 1 Interest cost 5 5 1 1 Expected return on plan assets (7) (7) -- -- Amortization of net transition obligation (2) (2) -- -- Recognized actuarial loss (gain) -- -- (1) (1) ------------------------------------------------------------------------------------ NET PERIODIC (BENEFIT) COST $(1) $(2) $ 1 $ 1 ====================================================================================
The projected benefit obligation in excess of plan assets, the accumulated benefit obligation in excess of plan assets, and the fair value of plan assets for the Supplemental Plan were $23, $22, and $0 respectively as of December 31, 2001 and $22, $21, and $0 respectively as of December 31, 2000. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one-percentage-point change in assumed health care cost trend rates would have the following effects on 2001 values:
1-PERCENTAGE-POINT 1-PERCENTAGE-POINT (in millions) INCREASE DECREASE ------------------------------------------------------------------------------------------- Effect on total of service and interest cost components $ -- $ -- Effect on postretirement benefit obligation $ 3 $ (2) -------------------------------------------------------------------------------------------
21 10. DERIVATIVE FINANCIAL INSTRUMENTS The Company uses a variety of off-balance sheet derivative financial instruments as part of its efforts to manage exposures to foreign currency, interest rate, and other market risks arising from its on-balance sheet financial instruments. These instruments include interest rate exchange agreements, cross currency swaps, and foreign currency forward contracts. The Company enters into interest rate exchange agreements to reduce and manage interest rate risk associated with outstanding non-U.S. dollar denominated debt. These instruments are regarded as fair value hedges. The Company uses cross currency swaps to reduce both foreign exchange and interest rate risk and to alter exposures arising from mismatches between assets and liabilities. Since the interest payments are in different currencies, there are no netting arrangements between counter-parties. These instruments are regarded as fair value hedges. The Company uses foreign currency forward contracts to hedge some of the foreign exchange risk, as it generates revenue and holds assets in U.S. dollars, but incurs a significant portion of its maintenance and acquisition expenses in Canadian dollars. A foreign currency forward contract obligates the Company to deliver a specified amount of currency on a future date at a specified exchange rate. The value of the foreign exchange forward contracts at any given point fluctuates according to the underlying level of exchange rate and interest rate differentials. These instruments are regarded as cash flow hedges. These instruments are designated and effective as hedges, as there is a high correlation between changes in market value of the derivative and the underlying hedged item at inception and over the life of the hedge. The Company's exposure to credit risk is the risk of loss from a counterparty failing to perform according to the terms of the contract. That exposure includes settlement risk (i.e., the risk that the counterparty defaults after the Company has delivered funds or securities under terms of the contract) that would result in a loss and replacement cost risk (i.e. the cost to replace the contract at current market rates should the counterparty default prior to the settlement date). To limit exposure associated with counterparty nonperformance on interest rate exchange agreements, the Company enters into master netting agreements with its counterparties. Outstanding derivative instruments with off-balance sheet risks are as follows:
NOTIONAL OR CONTRACT AMOUNTS CARRYING VALUE FAIR VALUE AS AT DECEMBER 31 ------- -------------- ---------- ($ millions) 2001 2000 2001 2000 2001 2000 ----------------------------------------------------------------------------------------------------------- Interest rate & currency swaps & floors $1,098 $1,008 $ 2 $ 5 $ 2 $ 5 Interest rate option written 22 22 (1) -- (1) -- Equity Contracts 37 68 -- (1) -- (1) Currency forwards 851 1,125 (10) 5 (10) 5 ----------------------------------------------------------------------------------------------------------- TOTAL DERIVATIVES $2,008 $2,223 $ (9) $ 9 $ (9) $ 9 ===========================================================================================================
22 10. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED) Fair value of off-balance sheet derivative financial instruments reflect the estimated amounts that the Company would receive or pay to terminate the contract at the balance sheet date, including the current unrealized gains (losses) on the instruments. Fair values of the agreements were based on estimates obtained from the individual counter parties. 11. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying values and the estimated fair values of the Company's financial instruments at December 31, 2001 were as follows:
($ millions) CARRYING VALUE FAIR VALUE -------------------------------------------------------------------------- ASSETS: Fixed-maturity and equity securities $10,953 $10,953 Mortgage loans 1,675 1,783 Policy loans 2,226 2,226 Separate account assets 30,217 30,217 LIABILITIES: Insurance investment contracts $ 1,699 $ 1,698 Derivative financial instruments 9 9 Separate account liabilities 30,217 30,217 --------------------------------------------------------------------------
The following methods and assumptions were used to estimate the fair values of the above financial instruments: FIXED-MATURITY AND EQUITY SECURITIES: Fair values of fixed-maturity and equity securities were based on quoted market prices where available. Where no quoted market price was available, fair values were estimated using values obtained from independent pricing services or, in the case of private placements, by discounting expected future cash flows using a current market rate applicable to yield, credit quality, and average life of the investments. MORTGAGE LOANS: Fair value of mortgage loans was estimated using discounted cash flows and took into account the contractual maturities and discount rates, which were based on current market rates for similar maturity ranges and adjusted for risk due to the property type. POLICY LOANS: Carrying values approximate fair values. DERIVATIVE FINANCIAL INSTRUMENTS: Fair values of derivative financial instruments were based on estimates obtained from the individual counterparties. INSURANCE INVESTMENT CONTRACTS: Fair value of insurance investment contracts, which do not subject the Company to significant mortality or morbidity risks, was estimated using cash flows discounted at market rates. SEPARATE ACCOUNT ASSETS AND LIABILITIES: The carrying amounts in the balance sheet for separate account assets and liabilities approximate their fair value. Fair value was determined by applying the above outlined methodology to the relevant assets underlying the respective separate accounts. 23 12. RELATED PARTY TRANSACTIONS The Company has formal service agreements with MFC, which can be terminated by either party upon two months notice. Under the various agreements, the Company will pay direct operating expenses incurred by MFC on behalf of the Company. Services provided under the agreements include legal, actuarial, investment, data processing, accounting and certain other administrative services. Costs incurred under the agreements were $216 in 2001. Prior to 2001, the agreements were with MLI. Costs incurred under these agreements were $243 and $194 for 2000 and 1999, respectively. MFC also provides a claims paying guarantee to certain U.S. policyholders. On September 23, 1997, the Company entered into a reinsurance agreement with Manulife Reinsurance Limited ("MRL"), an affiliated life insurance company domiciled in Bermuda, to reinsure a closed block of participating life insurance business. As there was limited transfer of mortality risk between the Company and MRL, the agreement was classified as financial reinsurance and given deposit-type accounting treatment. Title to the assets supporting this block of business was transferred to MRL under the terms of the agreement. Included in amounts due from affiliates is $506 (2000 - $568) representing the receivable from MRL for the transferred assets. The Company loaned $20 to MRL pursuant to a promissory note dated September 29, 2000. The loan is due on September 29, 2005 with interest calculated at 7.30% per annum, payable quarterly starting December 15, 2000. Pursuant to a promissory note dated June 12, 2000, the Company loaned $7 to MRL. Principal and accrued interest are payable on June 12, 2003. Interest on the loan calculated at 7.65% is payable semi-annually starting August 1, 2000. Pursuant to a grid promissory note and a credit agreement dated December 19, 2000, the Company received a loan of $250 ($375 Canadian) from an affiliate, Manulife Hungary Holdings KFT ("MHH"). The maturity date with respect to any advances is set at 365 days after the date of the advancement. Interest on the loan is calculated at the fluctuating rate to be equivalent to LIBOR plus 25 basis points and is payable quarterly starting March 28, 2001. The loan has been renewed until December 19, 2002. On August 7, 2001, the Company repaid $100 ($150 Canadian) of this loan. Pursuant to a grid promissory note and a credit agreement dated August 7, 2001, MNA received a loan of $100 ($150 Canadian) from MHH. The maturity date with respect to any advances is set at 365 days after the date of the advancement. Interest on the loan is calculated at the fluctuating rate to be equivalent to LIBOR plus 32.5 basis points and is payable quarterly starting December 28, 2001. Pursuant to a grid promissory note dated May 11, 2001, the Company loaned $20 to MRL. Principal and accrued interest are payable on May 11, 2006. Interest on the load is calculated at an annual rate of interest equal to LIBOR plus 60 basis points annually starting June 15, 2001. 24 13. REINSURANCE In the normal course of business, the Company assumes and cedes reinsurance as a party to several reinsurance treaties with major unrelated insurance companies. The Company remains liable for amounts ceded in the event that reinsurers do not meet their obligations. The effects of reinsurance on premiums with unrelated insurance companies were as follows:
FOR THE YEARS ENDED DECEMBER 31 ($ millions) 2001 2000 1999 ------------------------------------------------------------------ Direct premiums $ 969 $ 963 $ 976 Reinsurance assumed 14 14 12 Reinsurance ceded (189) (163) (107) ------------------------------------------------------------------ TOTAL PREMIUMS $ 794 $ 814 $ 881 ------------------------------------------------------------------
Reinsurance recoveries on ceded reinsurance contracts were $204, $187, and $33 during 2001, 2000 and 1999, respectively. 14. CONTINGENCIES & COMMITMENTS The Company and its subsidiaries are subject to legal actions arising in the ordinary course of business. These legal actions are not expected to have a material adverse effect on the consolidated financial position of the Company. During the year, the Company entered into an office ground lease agreement, which expires on September 20, 2096. The terms of the lease provide for adjustments in future periods with the minimum aggregate rental commitments for the next five years as follows: $0 for 2002 and 2003, and $2 for 2004 and thereafter. There was no other material operating leases in existence as at the end of 2001. 15. SUBSEQUENT EVENT Effective on January 1, 2002, all of the operations of MRC and all of the operations of MNA were merged with and into the operations of ManUSA. On the same day, all of the inforce operations of MLA were transferred to the Company by way of an assumption reinsurance agreement and dividend declarations. As a result of this reorganization, products previously sold and administered under the name of MRC, MNA, and MLA are now offered and administered under the name of ManUSA. Under the new organizational structure, surplus of the Company would increase by approximately $369. Also on January 1, 2002, the operations of Manulife-Wood Logan Holding Co., Inc., Manulife Wood Logan, Inc., and Manulife Holding Corporation, all subsidiaries of ManUSA, were liquidated into the Company. 25 PART C OTHER INFORMATION Guide to Name Changes and Successions: The following name changes took place November 1, 1997: Old Name New Name NAWL Holding Co., Inc. Manulife-Wood Logan Holding Co., Inc. The following name changes took place September 24, 1999: Old Name New Name Wood Logan Associates, Inc. Manulife Wood Logan, Inc. On September 30, 1997, Manufacturers Securities Services, LLC succeeded to the business of NASL Financial Services, Inc. The following changes became effective January 1, 2002: The Manufacturers Life Insurance Company of North America ("Manulife North America") merged into The Manufacturers Life Insurance Company (U.S.A.) with the latter becoming the owner of all of Manulife North America's assets including the assets of Separate Account A. Item 24. Financial Statements and Exhibits (a) Financial Statements (1) Financial Statements of the Registrant, The Manufacturers Life Insurance Company (U.S.A.) Separate Account H (Part B of the registration statement). - FILED HEREWITH (2) Financial Statements of the Depositor, The Manufacturers Life Insurance Company (U.S.A.) (Part B of the registration statement). - FILED HEREWITH (b) Exhibits (1) (i) Form of Resolution of the Board of Directors of The Manufacturers Life Insurance Company (U.S.A.) establishing The Manufacturers Life Insurance Company Separate Account H - Incorporated by reference to Exhibit (1)(i) to pre-effective amendment No. 1 to this registration statement filed January 2, 2002 (the "Pre-Effective Amendment"). (2) Agreements for custody of securities and similar investments - Not Applicable. (3) (i) Form of Underwriting Agreement - Incorporated by reference to Exhibit 3 (i) to post-amendment No. 6 on Form N-4, file number 33-76162, filed March 1, 1999 on behalf of The Manufacturers Life Insurance Company of North America. (ii) Form of broker-dealer agreement - Incorporated by reference to Exhibit 3(ii) to initial registration statement on Form N-4 (333-70864) filed October 3, 2001 (the "Initial Registration Statement") (iii) Form of Promotional Agent Agreement. Incorporated by reference to Exhibit 3 (iii) to pre-effective amendment no. 1 to registration statement filed on Form N-4, file number 333-38081 filed on March 17, 1998 on behalf of The Manufacturers Life Insurance Company of North America. (4) (i) Form of Flexible Payment Deferred Combination Fixed and Variable Group Annuity Contract, Non-Participating -- Incorporated by reference to Exhibit 4 (i) to registration statement filed on Form N-4, file number 333-38081 filed on October 16, 1997 on behalf of The Manufacturers Life Insurance Company of North America. (ii) Specimen Certificate Under Flexible Payment Deferred Combination Fixed and Variable Group Annuity Contract, Non-Participating --Incorporated by reference to Exhibit 3 (ii) to registration statement filed on Form N-4, file number 333-38081 filed on October 16, 1997 on behalf of The Manufacturers Life Insurance Company of North America. (iii) Specimen Endorsements to Contract: (i) Individual Retirement Annuity Endorsement; (ii) ERISA Tax-sheltered Annuity Endorsement; (iii) Tax-sheltered Annuity Endorsement; (iv) Section 401 Plans Endorsement; (v) Texas Optional Retirement Program Endorsement; (vi) Qualified Contract Provisions; (vii) Fixed Account Endorsement; (viii) Death Benefit Endorsement - Incorporated by reference to Exhibit (b)(4)(iii) to registration statement filed on Form N-4, file number 333-38081 filed February 26, 1998 on behalf of The Manufacturers Life Insurance Company of North America. (iv) Individual Retirement Annuity Endorsement -- Incorporated by reference to Exhibit 3 (iv) to registration statement filed on Form N-4, file number 333-38081 filed on October 16, 1997 on behalf of The Manufacturers Life Insurance Company of North America. (v) Roth Individual Retirement Annuity Endorsement - Incorporated by reference to Exhibit (b)(4)(ii)(F) to registration statement filed on Form N-4, file number 33-76162, filed March 1, 1999 on behalf of The Manufacturers Life Insurance Company of North America. (vi) 457 Plan Endorsements - Incorporated by reference to Exhibit (b)(4)(vi) to post-effective amendment no. 4 to registration statement filed on Form N-4, file number 333-38081, filed on April 25, 2001 on behalf of The Manufacturers Life Insurance Company of North America. (5) (i) Specimen Application for Flexible Payment Deferred Combination fixed and Variable Group Annuity Contract, Non-Participating. - Incorporated by reference to Exhibit 3 (iv) to pre-effective amendment No. 1 registration statement on Form N-4, file number 333-38081, filed on March 17, 1998 on behalf of The Manufacturers Life Insurance Company of North America. (ii) Specimen Certificate Application - Incorporated by reference to Exhibit (b)(5)(ii) to post effective amendment no. 4 to Form N-4, file number 33-76684, filed February 26, 1998 on behalf of Separate Account A of The Manufacturers Life Insurance Company of North America. (6) (i) Restated Articles of Redomestication of The Manufacturers Life Insurance Company (U.S.A.) -- Incorporated by reference to Exhibit A(6) to the registration statement on Form S-6 filed July 20, 2000 (File No. 333-41814). (vi) By-laws of The Manufacturers Life Insurance Company (U.S.A.) -- Incorporated by reference to Exhibit A(6)(b) to the registration statement on Form S-6 filed July 20, 2000 (File No. 333-41814). (7) (i) Form of contract of reinsurance in connection with the variable annuity contracts being offered - Variable Annuity Guaranteed Death Benefit Reinsurance Contract with Connecticut General Life Insurance Company, effective July 1, 1995 -- Incorporated by reference to Exhibit (b)(7)(ii) to post-effective amendment no. 2 to Form N-4,file number 33-76684, filed March 1, 1996 on behalf of the NASL Variable Account of North American Security Life Insurance Company. (ii) Form of contract of reinsurance in connection with the variable annuity contracts being offered - Variable Annuity Guaranteed Death Benefit Reinsurance Contract with Connecticut General Life Insurance Company, effective July 1, 1995 -- Incorporated by reference to Exhibit (b)(7)(iii) to post-effective amendment no. 2 to Form N-4, file number 33-76684, filed March 1, 1996 on behalf of the NASL Variable Account of North American Security Life Insurance Company. (iii) Form of contract of reinsurance in connection with the variable annuity contracts being offered - Automatic Reinsurance Agreement with Swiss Re America, effective August 1, 1995 -- Incorporated by reference to Exhibit (b)(7)(iv) to post-effective amendment no. 3 to Form N-4, file number 33-76684, filed February 28, 1997 on behalf of the NASL Variable Account of North American Security Life Insurance Company. (iv) Form of contract of reinsurance in connection with the variable annuity contracts being offered - Reinsurance Agreement with PaineWebber Life Insurance Company, effective December 31, 1994 -- Previously filed as Exhibit (b)(7)(v) to post-effective amendment no. 3 to Form N-4, file no. 33-76684, filed February 28, 1997. (v) Form of coinsurance Agreement with Peoples Security Life Insurance Company, effective June 30, 1995 - Incorporated by reference to Exhibit 10(iv) to pre-effective amendment No. 1 to Form S-1, file number 333-6011 filed January 29, 1997 (vi) Form of Automatic Reinsurance Agreement with AXA Re Life Insurance Company, effective May 1, 2000. Incorporated by reference to Exhibit (7)(v) to pre-effective amendment No. 1, to Form N-4, file number 333-70728, filed January 2, 2002. i. Form of Amendment No. 1 to Automatic Reinsurance Agreement (Agreement 2000-14) dated May 1, 2000 with AXA Re Life Insurance Company. Incorporated by reference to Exhibit 7(v)(i) to post-effective amendment No. 1 to Form N-4 file number 333-70728, filed April 29, 2002 ii. Form of Amendment No. 2 to Automatic Reinsurance Agreement (Agreement 2000-14) dated May 1, 2000 with AXA Re Life Insurance Company. Incorporated by reference to Exhibit 7(v)(ii) to post-effective amendment No. 1 to Form N-4 file number 333-70728, filed April 29, 2002 iii. Form of Amendment No. 3 to Automatic Reinsurance Agreement (Agreement 2000-14) dated May 1, 2000 with AXA Re Life Insurance Company. Incorporated by reference to Exhibit 7(v)(iii) to post-effective amendment No. 1 to Form N-4 file number 333-70728, filed April 29, 2002 (vii) Form of Automatic Reinsurance Agreement (Agreement 2000-21) with AXA Re Life Insurance Company now known as AXA Corporate Solutions Life Reinsurance Company, effective August 15, 2000. Incorporated by reference to Exhibit 7(vi) to post-effective amendment No. 1 to Form N-4 file number 333-70728, filed April 29, 2002. (viii) Form of Automatic Reinsurance Agreement (Agreement 2001-41) with AXA Corporate Solutions Life Reinsurance Company, effective January 29, 2001. Incorporated by reference to Exhibit 7(vii) to post-effective amendment No. 1 to Form N-4 file number 333-70728, filed April 29, 2002. (ix) Form of Automatic Reinsurance Agreement (Agreement 2001-47) with AXA Corporate Solutions Life Reinsurance Company, effective July 1, 2001. Incorporated by reference to Exhibit 7(viii) to post-effective amendment No. 1 to Form N-4 file number 333-70728, filed April 29, 2002. (i) Form of Amendment No. 1 to Automatic Reinsurance Agreement (Agreement 2001-47) dated July 1, 2001 with AXA Corporate Solutions Life Reinsurance Company. Incorporated by reference to Exhibit 7(viii)(i) to post-effective amendment No. 1 to Form N-4 file number 333-70728, filed April 29, 2002 (x) Form of Automatic Reinsurance Agreement (Agreement 2001-48) with AXA Corporate Solutions Life Reinsurance Company, effective July 1, 2001. Incorporated by reference to Exhibit 7(ix) to post-effective amendment No. 1 to Form N-4 file number 333-70728, filed April 29, 2002 (8) Other material contracts not made in the ordinary course of business which are to be performed in whole or in part on or after the date the registration statement is filed: (i) Form of Remote Service Agreement dated November 1, 1996 with CSC Continuum, Inc.-- Incorporated by reference to Exhibit (b)(8)(i) to post-effective amendment no. 3 to Form N-4, file number 33-76684 , filed February 28, 1997 on behalf of the NASL Variable Account of North American Security Life Insurance Company. (ii) Amendment to Remote Service Agreement dated April 1, 1998 with CSC Continuum Inc. -- Incorporated by reference to Exhibit (b)(8)(ii) to post effective amendment no. 9 to Form N-4, file number 33-77878, filed April 27, 2000. (iii) Amendment to Remote Service Agreement dated March 1999 with CSC Continuum Inc. - Incorporated by reference to Exhibit (b)(8)(ii) to post-effective amendment no. 9 to Form N-4, file number 33-76162 filed April 27, 2000. (iv) Form of Merger Agreement with The Manufacturers Life Insurance Company (U.S.A.) and The Manufacturers Life Insurance Company of North America -Incorporated by reference to Exhibit (8)(iv) to the Initial Registration Statement. (9) Opinion of James D. Gallagher, Esq. as to the legality of the securities being registered and consent to use of opinion - Incorporated by reference to Exhibit 9 to the Pre-Effective Amendment. (10) Written consent of Ernst & Young LLP independent certified public accountants. - Filed Herewith (11) All financial statements omitted from Item 23, Financial Statements -- Not Applicable. (12) Agreements in consideration for providing initial capital between or among Registrant, Depositor Underwriter or initial contract owners -- Not Applicable. (13) Schedule for computation of performance quotations provided in the Registration Statement in response to Item 21--Incorporated by reference to Exhibit (b)(13) to post-effective amendment no. 2 to Form N-4, file number 33-76684, filed March 1, 1996 on behalf of the NASL Variable Account of North American Security Life Insurance Company. (14) Financial Data Schedule --Not Applicable (15). Powers of Attorney (i) (Robert A. Cook, John DesPrez III, Geoffrey Guy, James O'Malley, Joseph J. Pietroski, Rex Schlaybaugh) incorporated by reference to exhibit 7 to initial registration statement on Form S-6, file number 333-41814 filed July 20, 2000 on behalf of The Manufacturers Life Insurance Company (U.S.A.) (ii) Powers of Attorney (John Ostler) - Incorporated by reference to Exhibit (15) (ii) to the Initial Registration Statement (iii) Powers of Attorney (Jim Boyle, John Lyon) - Incorporated by reference to Exhibit (15) (iii) to the Initial Registration Statement (iv) Power of Attorney (Steven Mannik) - Filed Herewith Item 25. Directors and Officers of the Depositor. OFFICERS AND DIRECTORS OF THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
Name and Principal Business Address Position with Depositor ---------------- ----------------------- John D. DesPrez III** Director and Chairman of the Board of Directors, President James Boyle*** Director Robert A. Cook** Senior Vice President, U.S. Insurance; Director Peter Copestake* Vice President, Finance James D. Gallagher** Vice President, Secretary and General Counsel Donald Guloien* Executive Vice President and Chief Financial Officer Geoffrey Guy* Director John Lyon* Vice President and Chief Financial Officer, Investments;Director Steven Mannik Director James O'Malley* Senior Vice President, U.S. Group Pension; Director Rex Schaybaugh, Jr.* Director John Ostler* Vice President and Chief Financial Officer Warren Thomson Senior Vice President, Investments Denis Turner* Vice President and Treasurer
* Principal business address is Manulife Financial, 200 Bloor Street, Toronto, Ontario Canada M4W 1E5. ** Principal business address is Manulife Financial, 73 Tremont Street, Boston, MA 02116. *** Principal business address is Manulife Financial, 500 Boylston Street, Boston, MA 02116 Item 26. Persons Controlled by or Under Common Control with Depositor or Registrant. MANULIFE FINANCIAL CORPORATION CORPORATE ORGANIZATION CHART AS OF JANUARY 1, 2002
% of Jurisdiction of Affiliate Legal ID Equity Incorporation ----------------------------------------------------------------------------------------------------- Manulife Financial Corporation 2 100 Canada The Manufacturers Life Insurance Company 1 100 Canada Manulife Bank of Canada 58 100 Canada Manulife Financial Services Inc. 190 100 Canada Manulife Securities International Ltd. 79 100 Canada Enterprise Capital Management Inc. 20 Ontario Cantay Holdings Inc. 51 100 Ontario 994744 Ontario Inc. 122 100 Ontario DomLife Realty Limited 108 100 Canada Innova LifeSciences Corporation 16.01 Ontario 1293319 Ontario Inc. 170 100 Ontario Manulife International Capital Corporation Limited 135 100 Ontario Golf Town Canada Inc. 145 63.96 Canada Regional Power Inc. 136 80 Ontario Addalam Power Corporation(1) 50 Philippines VFC Inc. 25 Canada Luxell Technologies Inc. 12.57 Ontario MDR Switchview Global Networks Inc. 10.45 Canada NAL Resources Management Limited 120 100 Canada Seamark Asset Management Ltd. 118 35.01 Canada First North American Insurance Company 111 100 Canada MLI Resources Inc. 194 100 Alberta 3426505 Canada Inc. 161 100 Canada NAL Resources Limited 117 100 Alberta FNA Financial Inc. 115 100 Canada Elliot & Page Limited 116 100 Ontario 3550435 Canada Inc. 107 100 Canada MFC Insurance Company Limited 106 100 Canada The Manufacturers Investment Corporation 87 100 Michigan Manulife Reinsurance Limited 67 100 Bermuda The Manufacturers Life Insurance Company (U.S.A.) 19 100 Michigan Manufacturers Securities Services, LLC 97 90(2) Delaware The Manufacturers Life Insurance Company of New York 94 100 New York Manulife Financial Securities, LLC 5 100 Delaware Thornhill Leasing Investments, LLC 90 Delaware ESLS Investment Limited, LLC 167 25 Ohio Ironside Venture Partners II LLC 197 100 Delaware Ironside Venture Partners I LLC 196 100 Delaware NewRiver Investor Communications Inc. 14.67 Delaware The Manufacturers Life Insurance Company of America 17 100 Michigan ManuLife Service Corporation 7 100 Colorado Manulife Property Management of Washington, D.C., Inc. 100 Wash., D.C.
% of Jurisdiction of Affiliate Legal ID Equity Incorporation ----------------------------------------------------------------------------------------------------- Manulife Capital Corporation 144 100 Delaware MF Private Capital Securities, Inc. 119 100 Delaware MCC Asset Management, Inc. 186 100 Delaware Manufacturers Adviser Corporation 6 100 Colorado Manulife Leasing Co., LLC 80 Delaware Cavalier Cable Inc. 100 Delaware Ennal, Inc. 124 100 Ohio Dover Leasing Investments, LLC 99 Delaware Flex Holding, LLC 27.7 Delaware Flex Leasing I, LLC 99.99 Delaware Flex Leasing II, LLC 19.6 Delaware Manulife International Investment Management Limited 64 100 U.K. Manulife International Fund Management Limited 100 U.K. WT (SW) Properties Ltd. 82 100 U.K. Manulife Europe Ruckversicherungs-Aktiengesellschaft 138 100 Germany Manulife International Holdings Limited 152 100 Bermuda Manulife Provident Funds Trust Company Limited 163 100 Hong Kong Manulife Funds Direct (Barbados) Limited 78 100 Barbados P.T. Manulife Aset Manajemen Indonesia 55 Indonesia Manulife Funds Direct (Hong Kong) Limited 100 Hong Kong Manulife (International) Limited 28 100 Bermuda The Manufacturers (Pacific Asia) Insurance Company Limited 61 100 Hong Kong Manulife Consultants Limited 100 Hong Kong Manulife Financial Shareholdings Limited 100 Hong Kong Manulife Financial Management Limited 100 Hong Kong Manulife Financial Group Limited 100 Hong Kong Manulife Financial Investment Limited 100 Hong Kong Manulife-Sinochem Life Insurance Co. Ltd. 43 51 China Manulife (Vietnam) Limited 188 100 Vietnam The Manufacturers Life Insurance Co. (Phils.), Inc. 164 100 Philippines Manulife Financial Plans, Inc. 187 100 Philippines P.T. Asuransi Jiwa Manulife Indonesia 42 71 Indonesia P.T. Buanadaya Sarana Informatika 100 Indonesia P.T. Asuransi Jiwa Arta Mandiri Prima 100 Indonesia OUB Manulife Pte. Ltd. 14 50 Singapore MIL Holdings (Bermuda) Limited 147 100 Bermuda ManuLife (International) Reinsurance Limited 34 100 Bermuda Manufacturers Life Reinsurance Limited 49 100 Barbados Manulife Management Services Ltd. 191 100 Barbados Manufacturers P&C Limited 36 100 Barbados Manulife European Holdings (Alberta) Limited 146 100 Alberta Manulife Hungary Holdings KFT 149 99(3) Hungary
% of Jurisdiction of Affiliate Legal ID Equity Incorporation ----------------------------------------------------------------------------------------------------- Manulife Century Investments (Alberta) Inc. 171 100 Alberta Manulife Life Insurance Company 180 35(4) Japan Manulife Century Investments (Bermuda) Limited 172 100 Bermuda Manulife Century Investments (Luxembourg) S.A. 173 100 Luxembourg Manulife Century Investments (Netherlands) B.V. 174 100 Netherlands Daihyaku Manulife Holdings (Bermuda) Limited 175 100 Bermuda Manulife Century Holdings (Netherlands) B.V. 195 100 Netherlands Kyoritsu Confirm Co., Ltd. 179 90.9(5) Japan Manulife Premium Collection Co., Ltd. 178 57(6) Japan Manulife Holdings (Hong Kong) Limited 15 100 Hong Kong Manulife (Malaysia) SDN.BHD. 74 100 Malaysia Manulife Financial Systems (Hong Kong) Limited 53 100 Hong Kong Chinfon-Manulife Insurance Company Limited 59 60 Bermuda MF Leasing (Canada) Inc. 169 100 Ontario Manulife Data Services Inc. 81 100 Barbados Manucab Ltd. 30 100 Canada
---------- (1) Inactive subsidiaries are noted in italics. (2) 10% of Manufacturers Securities Services, LLC is owned by The Manufacturers Life Insurance Company of New York. (3) 1% of Manulife Hungary Holdings KFT is owned by Manulife Century Investments (Alberta) Inc. (4) 32.6% of Manulife Life Insurance Company is owned by Manulife Century Investments (Netherlands) B.V. and 32.4% is owned by Manulife Century Holdings (Netherlands) B.V. (5) 9.1% of Kyoritsu Confirm Co., Ltd. is owned by Manulife Life Insurance Company. (6) 10% of Manulife Premium Collection Co., Ltd. is owned by Manulife Life Insurance Company. Item 27. Number of Contract owners. As of April 3, 2002, there were 95 qualified contracts and 5 nonqualified contracts outstanding. Item 28. Indemnification. Article XII of the Restated Articles of Redomestication of the Company provides as follows: No director of this Corporation shall be personally liable to the Corporation or its shareholders or policyholders for monetary damages for breach of the director's fiduciary duty, provided that the foregoing shall not eliminate or limit the liability of a director for any of the following: i) a breach of the director's duty or loyalty to the Corporation or its shareholders or policyholders; ii) acts or omissions not in good faith or that involve intentional misconduct or knowing violation of law; iii) a violation of Sections 5036, 5276 or 5280 of the Michigan Insurance Code, being MCLA 500.5036, 500.5276 and 500.5280; iv) a transaction from which the director derived an improper personal benefit; or v) an act or omission occurring on or before the date of filing of these Articles of Incorporation. If the Michigan Insurance Code is hereafter amended to authorize the further elimination or limitation of the liability of directors. then the liability of a director of the Corporation, in addition to the limitation on personal liability contained herein, shall be eliminated or limited to the fullest extent permitted by the Michigan Insurance Code as so amended. No amendment or repeal of this Article XII shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to the effective date of any such amendment or repeal. Notwithstanding the foregoing, Registrant hereby makes the following undertaking pursuant to Rule 484 under the Securities Act of 1933: Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Item 29. Principal Underwriters. a. Set forth below is information concerning other investment companies for which Manulife Financial Securities, LLC, the principal underwriter of the contracts, acts as investment adviser or principal underwriter.
Name of Investment Company Capacity in which acting -------------------------- ------------------------ The Manufacturers Life Insurance Principal Underwriter Company (U.S.A.) Separate Account H The Manufacturers Life Insurance Principal Underwriter Company (U.S.A.) Separate Account I The Manufacturers Life Insurance Principal Underwriter Company (U.S.A.) Separate Account J The Manufacturers Life Insurance Principal Underwriter Company (U.S.A.) Separate Account K
Name of Investment Company Capacity in which acting -------------------------- ------------------------ The Manufacturers Life Insurance Principal Underwriter Company (U.S.A.) Separate Account M The Manufacturers Life Insurance Principal Underwriter Company of New York Separate Account A The Manufacturers Life Insurance Principal Underwriter Company of New York Separate Account B
b. The Manufacturers Life Insurance Company (U.S.A.) is the sole member of Manulife Financial Securities LLC (MFS LLC) and the following officers of The Manufacturers Life Insurance Company (U.S.A.) have power to act on behalf of Manulife Financial Securities, LLC: John DesPrez* (Chairman and President), John Ostler** (Vice President and Chief Financial Officer) and Jim Gallagher* (Vice President , Secretary and General Counsel) The board of managers of MFS LLC (consisting of Gary Buchanan**, Robert Cook* and John Vrysen***) may also act on behalf of MFS LLC. * Principal business office is 73 Tremont Street, Boston, MA 02108 ** Principal business office is 200 Bloor Street, Toronto, Canada M4W 1E5 *** Principal business office is 680 Washington Blvd, Stamford, CT 06901 c. None. Item 30. Location of Accounts and Records. All books and records are maintained at 500 Boylston Street, Suite 400, Boston, MA 02116-3739 and at 73 Tremont Street, Boston, MA 02108. Item 31. Management Services. None. Item 32. Undertakings. Representation of Insurer Pursuant to Section 26 of the Investment Company Act of 1940 The Manufacturers Life Insurance Company (U.S.A.) (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. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it meets all the requirements for effectiveness of this amendment to the Registration Statement pursuant to Securities Act of 1933 Rule 485(b) and have caused this post-effective amendment to the Registration Statement to be signed on its behalf in the City of Boston, Massachusetts, on this 25th day of April, 2002. SEPARATE ACCOUNT H OF THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) (Registrant) By: THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) (Depositor) By: /s/John D. DesPrez III ---------------------- John D. DesPrez III President Pursuant to the requirements of the Securities Act of 1933, the Depositor has duly caused this post-effective amendment to the Registration Statement to be signed by the undersigned on the 25th day of April, 2002 in the City of Boston, Massachusetts. THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) By: /s/John D. DesPrez III ---------------------- John D. DesPrez III President SIGNATURES Pursuant to the requirements of the Securities Act of 1933, this post-effective amendment to the Registration Statement has been signed by the following persons in the capacities indicated on this 25th day of April, 2002.
Signature Title --------- ----- /s/John D. DesPrez III Chairman and President ---------------------- (Principal Executive Officer) John D. DesPrez III * Executive Vice President and ---------------------- (Chief Financial Officer) John Ostler * Director ---------------------- James Boyle * Director ---------------------- Robert A. Cook * Director ---------------------- Geoffrey Guy * Director ---------------------- Steve Mannik * Director ---------------------- James O'Malley * Director ---------------------- John Lyon * Director ---------------------- Rex Schlaybaugh, Jr. */s/James D. Gallagher ---------------------- JAMES D. GALLAGHER Pursuant to Power of Attorney
EXHIBIT INDEX
Exhibit No. Description ----------- ----------- 10) Consent of Ernst & Young LLP 15) Power of Attorney - Steven Mannik