<PAGE> 1
As filed with the Securities and Exchange Commission on April 28, 2000
Registration No. 33-77878
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 10
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT A,
formerly, NASL Variable Account
(Exact name of Registrant)
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
formerly, North American Security Life Insurance Company
(Name of Depositor)
500 Boylston Street
Boston, Massachusetts 02116-3739
(Address of Depositor's Principal Executive Offices)
(617) 663-3000
(Depositor's Telephone Number Including Area Code)
James D. Gallagher Copy to:
Vice President, Secretary and J. Sumner Jones, Esq.
General Counsel Jones & Blouch, L.L.P.
The Manufacturers Life Insurance Company 1025 Thomas Jefferson Street, N.W.
of North America Washington, DC 20007
73 Tremont Street
Boston, Massachusetts 02108
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
----
X on May 1, 2000 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 Prospectus contained in this registration statement also relates to variable
annuity contracts covered by earlier registration statements under file no.
33-55712
<PAGE> 2
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT A
CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 Item
Part A Caption in Prospectus
- ------ ---------------------
<S> <C>
1.......................... Cover Page
2.......................... Appendix A: Special Terms
3.......................... Summary
4.......................... Performance Data
5.......................... General Information about Us, The Variable Account, and The Trust
6.......................... Charges and Deductions; Withdrawal Charges; Reduction or Elimination of
Withdrawal Charges; Administration Fees; Distribution Fee; Mortality and Expense
Risks Charge; Taxes; Appendix C: Examples of Calculation of Withdrawal Charges;
Expenses of Distributing Contracts
7.......................... Accumulation Period Provisions; Our 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 Period
9.......................... Accumulation Period Provisions; Death Benefit During the Accumulation Period; Pay-out Period
Provisions; Death Benefit During the Pay-out 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; Our Tax Status; Taxation of Annuities in General; Diversification
Requirements; Qualified Retirement Plans
13......................... Legal Proceedings
14......................... Statement of Additional Information - Table of Contents
</TABLE>
<TABLE>
<CAPTION>
N-4 Item
Part B Caption in Statement of Additional Information
- ------ -----------------------------------------------
<S> <C>
15......................... Cover Page
16......................... Table of Contents
17......................... General History and Information
18......................... Services-Independent Auditors; Services-Servicing Agent
19......................... Not Applicable
20......................... Services - Principal Underwriter
21......................... Performance Data
22......................... Not Applicable
23......................... Audited Financial Statements
</TABLE>
<PAGE> 3
PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 4
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
(800) 344-1029
THE MANUFACTURERS LIFE INSURANCE COMPANY
OF NORTH AMERICA SEPARATE ACCOUNT A
OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
FLEXIBLE PURCHASE PAYMENT INDIVIDUAL DEFERRED
COMBINATION FIXED AND VARIABLE ANNUITY CONTRACT
NON-PARTICIPATING
This Prospectus describes an annuity contract (the "CONTRACT") issued
by The Manufacturers Life Insurance Company of North America ("WE" or "US"). The
contract is a flexible purchase payment, individual, deferred,
non-participating, combination fixed and variable annuity contract. Parts of
this Prospectus also describe other variable annuity contracts that we no longer
offer and ones that we offer only in the state of Washington.
- Contract values and annuity benefit payments are based upon
forty-eight investment options. Forty-six options are variable
and two are fixed account options.
- Contract values (other than those allocated to one of the
fixed accounts) 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 of North America Separate
Account A (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 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.
- Except as specifically noted here and under the caption "FIXED
ACCOUNT INVESTMENT OPTIONS" below, this Prospectus describes
only the variable portion of the contract.
- Special terms are defined in a glossary in Appendix A.
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.
<PAGE> 5
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.
<PAGE> 6
- - 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 (http://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
Service
Independent Auditors.......................... 15
Servicing Agent............................... 15
Principal Underwriter......................... 16
Audited Financial Statements........................... 17
The date of this Prospectus is May 1, 2000
VISION.PRO 5/2000
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SUMMARY................................................... 4
GENERAL INFORMATION ABOUT US, THE
VARIABLE ACCOUNT AND THE TRUST............................ 9
The Manufacturers Life Insurance Company of North
America ............................................. 9
The Variable Account ................................ 10
The Trust............................................ 10
DESCRIPTION OF THE CONTRACT .............................. 14
ACCUMULATION PERIOD PROVISIONS ........................ 14
Purchase Payments ................................... 14
Accumulation Units .................................. 15
Value of Accumulation Units ......................... 15
Net Investment Factor ............................... 15
Transfers Among Investment Options .................. 16
Maximum Number of Investment Options................. 16
Telephone Transactions .............................. 16
Special Transfer Services - Dollar Cost Averaging.... 16
Asset Rebalancing Program............................ 17
Withdrawals.......................................... 17
Special Withdrawal Services - the Income Plan ....... 18
Death Benefit During the Accumulation Period......... 19
PAY-OUT PERIOD PROVISIONS ............................. 22
General ............................................. 22
Annuity Options ..................................... 22
Determination of Amount of the First Variable
Annuity Payment...................................... 23
Annuity Units and the Determination of
Subsequent Variable Annuity Payments ................ 23
Transfers During Pay-out Period ..................... 24
Death Benefit During Pay-out Period.................. 24
OTHER CONTRACT PROVISIONS ............................. 24
Ten Day Right to Review ............................. 24
Ownership ........................................... 24
Annuitant ........................................... 25
Beneficiary ......................................... 25
Modification ........................................ 25
Our Approval ........................................ 25
Misstatement and Proof of Age, Sex or Survival....... 26
FIXED ACCOUNT INVESTMENT OPTIONS....................... 26
CHARGES AND DEDUCTIONS ................................... 28
Withdrawal Charges .................................. 28
Reduction or Elimination of Withdrawal Charges ...... 29
Administration Fees.................................. 29
Distribution Fee..................................... 29
Mortality and Expense Risks Charge .................. 30
Taxes ............................................... 30
Expenses of Distributing Contracts................... 30
FEDERAL TAX MATTERS ...................................... 30
INTRODUCTION .......................................... 30
OUR TAX STATUS ........................................ 31
TAXATION OF ANNUITIES IN GENERAL ...................... 31
Tax Deferral During Accumulation Period ............. 31
Taxation of Partial and Full Withdrawals ............ 32
Taxation of Annuity Benefit Payments ................ 33
Taxation of Death Benefit Proceeds .................. 33
Penalty Tax on Premature Distributions .............. 34
Aggregation of Contracts ............................ 34
QUALIFIED RETIREMENT PLANS ............................ 34
Direct Rollovers .................................... 35
Loans................................................ 18
FEDERAL INCOME TAX WITHHOLDING......................... 36
GENERAL MATTERS........................................... 36
Performance Data..................................... 36
Asset Allocation and Timing Services................. 36
Restrictions under the Texas Optional
Retirement Program................................. 37
Distribution of Contracts ........................... 37
Contract Owner Inquiries............................. 37
Confirmation Statements.............................. 37
Legal Proceedings ................................... 37
Year 2000 Issues..................................... 38
Cancellation of the Contract......................... 39
Voting Interest...................................... 39
APPENDIX A: SPECIAL TERMS................................ A-1
APPENDIX B: TABLE OF ACCUMULATION UNIT VALUES
RELATING TO THE CONTRACT............................. B-1
APPENDIX C: EXAMPLES OF CALCULATION OF
WITHDRAWAL CHARGE.................................... C-1
APPENDIX D: STATE PREMIUM TAXES........................... D-1
APPENDIX E: PENNSYLVANIA MAXIMUM MATURITY
AGE.................................................. E-1
APPENDIX F: PRIOR CONTRACTS (VV CONTRACTS)................ F-1
APPENDIX G: QUALIFIED PLAN TYPES.......................... G-1
</TABLE>
<PAGE> 8
SUMMARY
OVERVIEW OF THE CONTRACT. Under the contract, you make one or more payments to
us for a period of time (the "ACCUMULATION PERIOD") and then later, beginning on
the "MATURITY DATE" we make one or more annuity benefit payments to you (the
"PAY-OUT PERIOD"). Contract values during the accumulation period and the
amounts of annuity benefit payments during the pay-out period may either be
variable or fixed, depending upon the investment option(s) you select. You may
use the contract to fund either a non-qualified or tax-qualified retirement
plan.
PURCHASE PAYMENT LIMITS. The minimum initial purchase payment is $25,000.
Subsequent purchase payments must be at least $1,000 (except for qualified plans
where the minimum is $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, however, 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 payments for two years, your contract value is
less than $2,000 and your payments over the life of your contract, minus your
withdrawals over the life of the contract is less than $2,000.
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, family protection through the death benefit, and guaranteed
fees.
INVESTMENT OPTIONS. Upon issuance of the contract, purchase payments may be
allocated among up to seventeen of the available investment options (including
all fixed account investment options) After the contract is issued, there is no
limit on the number of investment options to which you may allocate purchase
payments. Currently, forty-six Variable Account investment options and two fixed
account investment options are available under the contract. Each of the
forty-six Variable Account investment options is a sub-account of the Variable
Account that invests in a corresponding portfolio of the Trust. A full
description of each Trust portfolio is in the accompanying Prospectus of the
Trust. Your contract value during the accumulation period and the amounts of
annuity benefit payments will depend upon the investment performance of the
Trust portfolio underlying each sub-account of the Variable Account you select
and/or upon the interest we credit on each fixed account option you select.
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.
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 fixed account options or from fixed account
options 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 plus any applicable withdrawal charge 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. A withdrawal charge and 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.
CONFIRMATION STATEMENTS. We will send you confirmation statements for certain
transactions in your account. You should carefully review these statements to
verify their accuracy. You should immediately
4
<PAGE> 9
report any mistakes to our Annuity Service Office (at the address or phone
number shown on the cover of this Prospectus). 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.
DEATH BENEFITS. We will pay the death benefit described below to your
BENEFICIARY if you die during the accumulation period. If a contract is owned by
more than one person, then the surviving contract owner will be deemed the
beneficiary of the deceased contract owner. No death benefit is payable on the
death of any ANNUITANT (a natural person or persons whose life is used to
determine the duration of ANNUITY BENEFIT PAYMENTS involving life
contingencies), except that if any contract 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.
The formula used to calculate the death benefit may vary according to the age(s)
of the contract owner(s) at the time the contract is issued and the age of the
contract own who dies. If there are any unpaid loans (including unpaid interest)
under the contract, the death benefit equals the death benefit calculated
according to the applicable formula, minus the amount of the unpaid loans. If
the annuitant dies during the pay-out period and annuity payment method selected
called for payments for a guaranteed period, we will make the remaining
guaranteed payments to the beneficiary. See Appendix F for information on death
benefit provisions applicable to certain contracts no longer being issued and
contracts issued in the state of Washington.
ANNUITY BENEFIT PAYMENTS. We offer a variety of fixed and variable annuity
payment options. Periodic annuity benefit payments will begin on the "maturity
date" (the first day of the pay-out period). You select the maturity date, the
frequency of payment and the type of annuity benefit payment option.
TEN DAY REVIEW. You may cancel your contract by returning it to us within 10
days of receiving it.
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 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 penalty tax may apply to withdrawals prior
to age 59-1/2.
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 and we reserve the right to impose an
annual $30 per contract administration fee on contracts where the contract value
is less than $10,000 as a result of a partial withdrawal. The items listed under
"Contract Owner Transaction Expenses" and "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.
CONTRACT OWNER TRANSACTION EXPENSES
For contracts issued on or after November 1, 1996 -
Deferred sales load (withdrawal charge as percentage of purchase
payments) -- NONE
For contracts issued prior to November 1, 1996 -
Deferred sales load (withdrawal charge as percentage of purchase
payments):
<TABLE>
<CAPTION>
For Contracts Issued
Number of Complete Years Prior to November 1, 1996
Purchase Payment in Contract Withdrawal Charge Percentage
<S> <C>
0 3%
1 3%
2 3%
3+ 0%
</TABLE>
5
<PAGE> 10
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
<TABLE>
<S> <C>
Mortality and expense risks fee......................................................... 1.25%
Administration fee ..................................................................... 0.25%
Distribution fee........................................................................ 0.15%
Total Separate Account Annual Expenses.................................................. 1.65%
</TABLE>
TRUST ANNUAL EXPENSES
(as a percentage of Trust average net assets for the fiscal year ended December
31, 1999)
<TABLE>
<CAPTION>
OTHER EXPENSES
MANAGEMENT (AFTER EXPENSE TOTAL TRUST
TRUST PORTFOLIO FEES REIMBURSEMENT) ANNUAL EXPENSES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Rim Emerging Markets........ 0.850% 0.260% 1.110%
Internet Technologies............... 1.150% 0.136%(A) 1.286%
Science & Technology................ 1.100% 0.060% 1.160%
International Small Cap............. 1.100% 0.270% 1.370%
Aggressive Growth................... 1.000%(F) 0.130% 1.130%
Emerging Small Company.............. 1.050% 0.070% 1.120%
Small Company Blend................. 1.050% 0.250%(A) 1.300%(E)
Dynamic Growth...................... 1.000%(F) 0.132%(A) 1.132%
Mid Cap Stock....................... 0.925% 0.100%(A) 1.025%(E)
All Cap Growth(H)................... 0.950%(F) 0.070% 1.020%
Overseas............................ 0.950% 0.260% 1.210%
International Stock................. 1.050% 0.200% 1.250%
International Value................. 1.000% 0.230%(A) 1.230%(E)
Mid Cap Blend....................... 0.850%(F) 0.060% 0.910%
Small Company Value................. 1.050% 0.170% 1.220%
Global Equity....................... 0.900% 0.160% 1.060%
Growth.............................. 0.850% 0.050% 0.900%
Large Cap Growth.................... 0.875%(F) 0.100% 0.975%
Quantitative Equity................. 0.700% 0.060% 0.760%
Blue Chip Growth.................... 0.875%(F) 0.050% 0.925%
Real Estate Securities.............. 0.700% 0.070% 0.770%
Value............................... 0.800% 0.070% 0.870%
Tactical Allocation................. 0.900% 0.127%(A) 1.027%
Growth & Income..................... 0.750% 0.050% 0.800%
U.S. Large Cap Value................ 0.875% 0.070%(A) 0.945%(E)
Equity-Income....................... 0.875%(F) 0.060% 0.935%
Income & Value...................... 0.800%(F) 0.080% 0.880%
Balanced............................ 0.800% 0.070% 0.870%
High Yield.......................... 0.775% 0.065% 0.840%
Strategic Bond...................... 0.775% 0.095% 0.870%
Global Bond......................... 0.800% 0.180% 0.980%
Total Return........................ 0.775% 0.060%(A) 0.835%(E)
Investment Quality Bond............. 0.650% 0.120% 0.770%
Diversified Bond.................... 0.750% 0.090% 0.840%
U.S. Government Securities.......... 0.650% 0.070% 0.720%
Money Market........................ 0.500% 0.050% 0.550%
Small Cap Index..................... 0.525% 0.075%(AG) 0.600%
International Index................. 0.550% 0.050%(AG) 0.600%
Mid Cap Index....................... 0.525% 0.075%(AG) 0.600%
Total Stock Market Index............ 0.525% 0.075%(AG) 0.600%
500 Index........................... 0.525% 0.039%(AG) 0.564%
Lifestyle Aggressive 1000(D)........ 0.075% 1.060%(B) 1.135%(C)
Lifestyle Growth 820(D)............. 0.057% 1.008%(B) 1.065%(C)
</TABLE>
6
<PAGE> 11
<TABLE>
<S> <C> <C> <C>
Lifestyle Balanced 640(D)........... 0.057% 0.928%(B) 0.985%(C)
Lifestyle Moderate 460(D)........... 0.066% 0.869%(B) 0.935%(C)
Lifestyle Conservative 280(D)....... 0.075% 0.780%(B) 0.855%(C)
</TABLE>
- -----------------
(A) Based on estimates to be made during the current fiscal year.
(B) Reflects expenses of the Underlying Portfolios.
(C) The investment adviser to the Trust, Manufacturers Securities Services,
LLC ("MSS" or the "Adviser") has voluntarily agreed to pay certain
expenses of each Lifestyle Trust (excluding the expenses of the
Underlying Portfolios) as follows:
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 a Lifestyle Trust (absent
reimbursement) are equal to or less than 0.075%, then no expenses will be
reimbursed by the Adviser. (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.)
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, 1999) as noted in the
chart below:
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL TRUST
TRUST PORTFOLIO FEES EXPENSES ANNUAL EXPENSES
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lifestyle Aggressive 1000...... 0.075% 1.090% 1.165%
Lifestyle Growth 820........... 0.057% 1.030% 1.087%
Lifestyle Balanced 640......... 0.057% 0.940% 0.997%
Lifestyle Moderate 460......... 0.066% 0.900% 0.966%
Lifestyle Conservative 280..... 0.075% 0.810% 0.885%
</TABLE>
(D) Each Lifestyle Trust will invest in shares of the Underlying
Portfolios. Therefore, each Lifestyle Trust will bear its pro rata
share of the fees and expenses incurred by the Underlying Portfolios in
which it invests, and the investment return of each Lifestyle Trust
will be net of the Underlying Portfolio expenses. Each Lifestyle
Portfolio must bear its own expenses. However, the Adviser is currently
paying certain of these expenses as described in footnote (C) above.
(E) Annualized - For the period May 1, 1999 (commencement of operations) to
December 31, 1999.
(F) Management Fees changed effective May 1, 1999. Fees shown are the
current management fees.
(G) MSS has voluntarily agreed to pay expenses of each Index Trust
(excluding the advisory fee) that exceed the following amounts: 0.050%
in the case of the International Index Trust and 500 Index Trust and
0.075% in the case of the Small Cap Index Trust, the Mid Cap Index
Trust and Total Stock Market Index Trust. If such expense reimbursement
were not in effect, it is estimated that "Other Expenses" and "Total
Trust Annual Expenses" would be 0.022% higher for the International
Index Trust, 0.014% higher for the Small Cap Index Trust, 0.060% higher
for the Mid Cap Index Trust and 0.005% higher for the Total Stock
Market Index Trust. It is estimated that the expense reimbursement will
not be effective during the year end December 31, 2000 for the 500
Index Trust. The expense reimbursement may be terminated at any time by
MSS.
(H) Formerly, the Mid Cap Growth Trust.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets, if you surrendered your contract at the end of the applicable
time period: (For contracts issued on or after November 1, 1996, no withdrawal
charges will be imposed upon surrender, therefore, for such contracts please
refer to the second table for expenses if you selected an annuity benefit
payment option or did not surrender at the end of the applicable time period.)
7
<PAGE> 12
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets........ $56 $115 $146 $309
Internet Technologies............... 57 120 155 326
Science & Technology................ 56 116 148 314
International Small Cap............. 58 122 159 334
Aggressive Growth................... 56 115 147 311
Emerging Small Company.............. 56 115 146 310
Small Company Blend................. 57 120 155 327
Dynamic Growth...................... 56 115 147 311
Mid Cap Stock....................... 55 112 142 301
All Cap Growth(A)................... 55 112 141 300
Overseas............................ 57 118 151 319
International Stock................. 57 119 153 322
International Value................. 57 118 152 320
Mid Cap Blend....................... 54 109 136 290
Small Company Value................. 57 118 151 319
Global Equity....................... 55 113 143 304
Growth.............................. 54 109 136 289
Large Cap Growth.................... 54 111 139 296
Quantitative Equity................. 52 105 129 275
Blue Chip Growth.................... 54 109 137 291
Real Estate Securities.............. 52 105 129 276
Value............................... 53 108 134 286
Tactical Allocation ................ 55 112 142 301
Growth & Income..................... 53 106 131 279
U.S. Large Cap Value................ 54 110 138 293
Equity-Income....................... 54 110 137 292
Income & Value...................... 53 108 135 287
Balanced............................ 53 108 134 286
High Yield.......................... 53 107 133 283
Strategic Bond...................... 53 108 134 286
Global Bond......................... 54 111 140 296
Total Return........................ 53 107 132 282
Investment Quality Bond............. 52 105 129 276
Diversified Bond.................... 53 107 133 283
U.S. Government Securities.......... 52 103 127 271
Money Market........................ 50 98 118 253
Small Cap Index..................... 51 100 120 258
International Index................. 51 100 120 258
Mid Cap Index....................... 51 100 120 258
Total Stock Market Index............ 51 100 120 258
500 Index........................... 50 99 119 255
Lifestyle Aggressive 1000........... 56 115 147 311
Lifestyle Growth 820................ 55 113 144 305
Lifestyle Balanced 640.............. 54 111 140 297
Lifestyle Moderate 460.............. 54 110 137 292
Lifestyle Conservative 280.......... 53 107 133 284
</TABLE>
(A) Formerly, the Mid Cap Growth Trust
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets, if you selected an annuity benefit payment option as provided
in the contract or did not surrender the contract at the end of the applicable
time period:
<TABLE>
<CAPTION>
TRUST PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets........ $28 $86 $146 $309
Internet Technologies............... 30 91 155 326
Science & Technology................ 28 87 148 314
International Small Cap............. 30 93 159 334
Aggressive Growth................... 28 86 147 311
</TABLE>
8
<PAGE> 13
<TABLE>
<S> <C> <C> <C> <C>
Emerging Small Company.............. 28 86 146 310
Small Company Blend................. 30 91 155 327
Dynamic Growth...................... 28 86 147 311
Mid Cap Stock....................... 27 83 142 301
All Cap Growth(A)................... 27 83 141 300
Overseas............................ 29 89 151 319
International Stock................. 29 90 153 322
International Value................. 29 89 152 320
Mid Cap Blend....................... 26 80 136 290
Small Company Value................. 29 89 151 319
Global Equity....................... 27 84 143 304
Growth.............................. 26 79 136 289
Large Cap Growth.................... 27 82 139 296
Quantitative Equity................. 24 75 129 275
Blue Chip Growth.................... 26 80 137 291
Real Estate Securities.............. 25 75 129 276
Value............................... 26 78 134 286
Tactical Allocation................. 27 83 142 301
Growth & Income..................... 25 76 131 279
U.S. Large Cap Value................ 26 81 138 293
Equity-Income....................... 26 80 137 292
Income & Value...................... 26 79 135 287
Balanced............................ 26 78 134 286
High Yield.......................... 25 78 133 283
Strategic Bond...................... 26 78 134 286
Global Bond......................... 27 82 140 296
Total Return........................ 25 77 132 282
Investment Quality Bond............. 25 75 129 276
Diversified Bond.................... 25 78 133 283
U.S. Government Securities.......... 24 74 127 271
Money Market........................ 22 69 118 253
Small Cap Index..................... 23 70 120 258
International Index................. 23 70 120 258
Mid Cap Index....................... 23 70 120 258
Total Stock Market Index............ 23 70 120 258
500 Index........................... 22 69 119 255
Lifestyle Aggressive 1000........... 28 86 147 311
Lifestyle Growth 820................ 27 84 144 305
Lifestyle Balanced 640.............. 27 82 140 297
Lifestyle Moderate 460.............. 26 80 137 292
Lifestyle Conservative 280.......... 25 78 133 284
</TABLE>
(A) Formerly, the Mid Cap Growth Trust
For purposes of presenting the foregoing Examples, we have made certain
assumptions. We have assumed that, where applicable, the maximum 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 CONTRACT OWNERS MAY BE GREATER OR LESSER
THAN THOSE SHOWN.
A TABLE OF ACCUMULATION UNIT VALUES RELATING TO THE CONTRACT IS INCLUDED IN
APPENDIX B TO THIS PROSPECTUS.
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
9
<PAGE> 14
Information.
GENERAL INFORMATION ABOUT US, THE VARIABLE ACCOUNT AND THE TRUST
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
We are an indirect subsidiary of MFC.
We are a stock life insurance company organized under the laws of
Delaware in 1979. Our principal office is located at 500 Boylston St, 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 of North America's financial
ratings are as follows:
A++ A.M. Best
Superior in financial strength; 1st category of 15
AAA Duff & Phelps
Highest in claims paying ability; 1st category of 18
AA+ Standard & Poor's
Very strong in financial strength; 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 of North America's ability to honor the death benefit and life
annuitization guarantees but not specifically to its products, the performance
(return) of these products, the value of any investment in these products upon
withdrawal or to individual securities held in any portfolio.
THE 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.
We established the Variable Account on August 24,1984. 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 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 forty-six 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
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
10
<PAGE> 15
Global Bond Trust, and the five Lifestyle Trusts which are non-diversified. The
Trust receives investment advisory services from Manufacturers Securities
Services, LLC ("MSS").
The Trust currently has nineteen subadvisers who manage all of the portfolios,
one of which subadvisers is Manufacturers Adviser Corporation ("MAC"). Both MSS
and MAC are affiliates of Manufacturers Life of ours.
<TABLE>
<CAPTION>
SUBADVISER PORTFOLIO
<S> <C>
A I M Capital Management, Inc. Aggressive Growth Trust
All Cap Growth Trust(B)
AXA Rosenberg Investment Management LLC Small Company Value Trust
Capital Guardian Trust Company Small Company Blend Trust
U.S. Large Cap Value Trust
Income & Value Trust
Diversified Bond Trust
Fidelity Management Trust Company Mid Cap Blend Trust
Large Cap Growth Trust
Overseas Trust
Founders Asset Management LLC International Small Cap Trust
Balanced Trust
Franklin Advisers, Inc. Emerging Small Company Trust
Janus Capital Corporation Dynamic Growth Trust
Manufacturers Adviser Corporation Pacific Rim Emerging Markets Trust
Quantitative Equity Trust
Real Estate Securities Trust
Money Market Trust
Index Trusts
Lifestyle Trusts(A)
Miller Anderson & Sherrerd, LLP Value Trust
High Yield Trust
Mitchell Hutchins Asset Management Inc. Tactical Allocation Trust
Morgan Stanley Asset Management Inc. Global Equity Trust
Munder Capital Management Internet Technologies Trust
Pacific Investment Management Company Global Bond Trust
Total Return Trust
Rowe Price-Fleming International, Inc. International Stock Trust
Salomon Brothers Asset Management Inc U.S. Government Securities Trust
Strategic Bond Trust
State Street Global Advisors Growth Trust
Lifestyle Trusts(A)
T. Rowe Price Associates, Inc. Science & Technology Trust
Blue Chip Growth Trust
Equity-Income Trust
Templeton Investment Counsel, Inc. International Value Trust
Wellington Management Company, LLP Growth & Income Trust
Investment Quality Bond Trust
Mid Cap Stock Trust
</TABLE>
11
<PAGE> 16
(A) State Street Global Advisors provides subadvisory consulting services to
Manufacturers Adviser Corporation regarding management of the Lifestyle Trusts.
(B) Formerly, the Mid Cap Growth Trust
The following is a brief description of each portfolio:
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 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 SCIENCE & TECHNOLOGY TRUST seeks long-term growth of capital by investing at
least 65% of the portfolio's total assets in common stocks of companies expected
to benefit from the development, advancement, and use of science and technology.
Current income is incidental to the portfolio's objective.
The INTERNATIONAL SMALL CAP TRUST seeks capital appreciation by investing
primarily in securities issued by foreign companies which have total market
capitalization or annual revenues of $1 billion or less. These securities may
represent companies in both established and emerging economies throughout the
world.
The AGGRESSIVE GROWTH TRUST seeks long-term capital appreciation by investing
the portfolio's asset principally in common stocks, convertible bonds,
convertible preferred stocks and warrants of companies which in the opinion of
the subadviser are expected to achieve earnings growth over time at a rate in
excess of 15% per year. Many of these companies are in the small and
medium-sized category.
The EMERGING SMALL COMPANY TRUST seeks long-term growth of capital by investing,
under normal market conditions, at least 65% of the portfolio's total assets in
common stock equity securities of companies with market capitalizations that
approximately match the range of capitalization of the Russell 2000 Index
("small cap stocks") at the time of purchase.
The SMALL COMPANY BLEND TRUST seeks long-term growth of capital and income by
investing the portfolio's assets, under normal market conditions, primarily in
equity and equity-related securities of companies with market capitalizations
that approximately match the range of capitalization of the Russell 2000 Index
at the time of purchase.
The DYNAMIC GROWTH TRUST seeks long-term growth of capital by investing the
portfolio's assets primarily in equity securities selected for their growth
potential. Normally at least 50% of its equity assets are invested in
medium-sized companies.
The MID CAP STOCK TRUST seeks long-term growth of capital by investing primarily
in equity securities with significant capital appreciation potential with
emphasis on medium-sized companies.
The ALL CAP GROWTH TRUST (formerly, Mid Cap Growth Trust) seeks long-term
capital appreciation by investing the portfolio's assets, under normal market
conditions, principally in common stocks of companies that are likely to benefit
from new or innovative products, services or processes, as well as those that
have experienced above-average, long-term growth in earnings and have excellent
prospects for future growth.
The OVERSEAS TRUST seeks growth of capital by investing, under normal market
conditions, at least 65% of the portfolio's assets in foreign securities
(including American Depositary Receipts (ADRs) and European Depositary Receipts
(EDRs)). The portfolio expects to invest primarily in equity securities.
The INTERNATIONAL STOCK TRUST seeks long-term growth of capital by investing
primarily in
12
<PAGE> 17
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 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 SMALL COMPANY VALUE TRUST seeks long-term growth of capital by investing,
under normal circumstances, at least 65% of the portfolio's assets in common
stocks of companies with total market capitalization that approximately match
the range of capitalization of the Russell 2000 Index and are traded principally
in the markets of the United States.
The GLOBAL EQUITY TRUST seeks long-term capital appreciation by investing
primarily in equity securities throughout the world, including U.S. issuers and
emerging markets.
The GROWTH TRUST seeks long-term growth of capital by investing primarily in
large capitalization growth securities (market capitalizations of approximately
$1 billion or greater).
The LARGE CAP GROWTH TRUST seeks long-term growth of capital by investing, under
normal market conditions, at least 65% of the portfolio's assets in equity
securities of companies with large market capitalizations.
The QUANTITATIVE EQUITY TRUST seeks to achieve intermediate and long-term growth
through capital appreciation and current income by investing in common stocks
and other equity securities of well established companies with promising
prospects for providing an above average rate of return.
The BLUE CHIP GROWTH TRUST seeks to achieve long-term growth of capital (current
income is a secondary objective) by investing at least 65% of the portfolio's
total assets in the common stocks of large and medium-sized blue chip companies.
Many of the stocks in the portfolio are expected to pay dividends.
The REAL ESTATE SECURITIES TRUST seeks to achieve a combination of long-term
capital appreciation and satisfactory current income by investing in real estate
related equity and debt securities.
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 GROWTH & INCOME TRUST seeks long-term growth of capital and income,
consistent with prudent investment risk, by investing primarily in a diversified
portfolio of common stocks of U.S. issuers which the subadviser believes are of
high quality.
The U.S. LARGE CAP VALUE TRUST seeks long-term growth of capital and income by
investing the portfolio's assets, under normal market conditions, primarily in
equity and equity-related securities of companies with market capitalization
greater than $500 million.
The EQUITY-INCOME TRUST seeks to provide substantial dividend income and also
long-term capital appreciation by investing primarily in dividend-paying common
stocks, particularly of established companies with favorable prospects for both
increasing dividends and capital appreciation.
The INCOME & VALUE TRUST seeks the balanced accomplishment of (a) conservation
of principal
13
<PAGE> 18
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 in
a balanced portfolio of common stocks, U.S. and foreign government obligations
and a variety of corporate fixed income securities.
The HIGH YIELD TRUST seeks to realize an above-average total return over a
market cycle of three to five years, consistent with reasonable risk, by
investing primarily in high yield debt securities, including corporate bonds and
other fixed-income securities.
The STRATEGIC BOND TRUST seeks a high level of total return consistent with
preservation of capital by giving its subadviser broad discretion to deploy the
portfolio's assets among certain segments of the fixed income market as the
subadviser believes will best contribute to achievement of the portfolio's
investment objective.
The GLOBAL BOND TRUST seeks to realize maximum total return, consistent with
preservation of capital and prudent investment management by investing the
portfolio's asset primarily in fixed income securities denominated in major
foreign currencies, baskets of foreign currencies (such as the ECU), and the
U.S. dollar.
The TOTAL RETURN TRUST seeks to realize maximum total return, consistent with
preservation of capital and prudent investment management by investing, under
normal market conditions, at least 65% of the portfolio's assets in a
diversified portfolio of fixed income securities of varying maturities. The
average portfolio duration will normally vary within a three- to six-year time
frame based on the subadviser's forecast for interest rates.
The INVESTMENT QUALITY BOND TRUST seeks a high level of current income
consistent with the maintenance of principal and liquidity, by investing
primarily in a diversified portfolio of investment grade corporate bonds and
U.S. Government bonds with intermediate to longer term maturities. The portfolio
may also invest up to 20% of its assets in non-investment grade fixed income
securities.
The DIVERSIFIED BOND TRUST seeks high total return consistent with the
conservation of capital by investing at least 75% of the portfolio's assets in
fixed income securities.
The U.S. GOVERNMENT SECURITIES TRUST seeks a high level of current income
consistent with preservation of capital and maintenance of liquidity, by
investing in debt obligations and mortgage-backed securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
derivative securities such as collateralized mortgage obligations backed by such
securities.
The MONEY MARKET TRUST seeks maximum current income consistent with preservation
of principal and liquidity by investing in high quality money market instruments
with maturities of 397 days or less issued primarily by U. S. entities.
The SMALL CAP INDEX TRUST seeks to approximate the aggregate total return of a
small cap U.S. domestic equity market index by attempting to track the
performance of the Russell 2000 Index.*
The INTERNATIONAL INDEX TRUST seeks to approximate the aggregate total return of
a foreign equity market index by attempting to track the performance of the
Morgan Stanley European Australian Far East Free Index (the "MSCI EAFE Index").*
The MID CAP INDEX TRUST seeks to approximate the aggregate total return of a mid
cap U.S. domestic equity market index by attempting to track the performance of
the S&P Mid Cap 400 Index.*
The TOTAL STOCK MARKET INDEX seeks to approximate the aggregate total return of
a broad U.S. domestic equity market index by attempting to track the performance
of the Wilshire 5000 Equity Index.*
14
<PAGE> 19
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)" 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's Prospectus which we provided you along
with this Prospectus. The Trust prospectus should be read carefully before
allocating purchase payments to a sub-account.
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 in 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 in 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.
15
<PAGE> 20
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 interpretations thereof. For further information
on voting interest under the contract see "Voting Interest" in this prospectus.
DESCRIPTION OF THE CONTRACT
ACCUMULATION PERIOD PROVISIONS
PURCHASE PAYMENTS
Initial purchase payments usually must be at least $25,000, subsequent ones at
least $1,000, and total payments no more than $1 million (without our approval).
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 $1,000 (except for qualified plans where the minimum is $30).
Purchase payments may be made at any time. 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").
You designate how your purchase payments are to be allocated among the
investment options. You may change the allocation of subsequent purchase
payments at any time by notifying us in writing (or by telephone if you comply
with our telephone transfer procedures described below).
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 on
the business day (any date on which the New York Stock Exchange is open and the
net asset value of a Trust portfolio is determined) on 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. 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 on the business day received by us if the
broker-dealers have made special arrangements with us.
16
<PAGE> 21
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 that sub-account
(described below) for the business day for which the value is being determined.
Accumulation units will be valued at the end of each business day. A business
day is deemed to end at the time of the determination of the net asset value of
the Trust shares.
NET INVESTMENT FACTOR
The net investment factor is an index used to measure the investment
performance of a sub-account from one business day to the next (the "VALUATION
PERIOD"). 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
1.65% (0.25% for administrative expenses, 0.15% for
distribution expenses and 1.25% for mortality and expense
risks).
TRANSFERS AMONG INVESTMENT OPTIONS
Amounts invested may be transferred among investment options.
During the accumulation period, you may transfer amounts among the
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 transferred and credited to the investment account to which you transfer
amounts. Your contract value on the date of the 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 the Company imposes no 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, the Company does not currently assess a
charge but reserves the right (to the extent permitted by your contract) to
assess a reasonable charge to reimburse it 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
17
<PAGE> 22
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 all fixed account
investment options). 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 transfer or
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 of the transaction. We reserve the right to impose
maximum withdrawal amounts and other new procedural requirements regarding
transfer privileges.
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. In
states where approved by the state insurance department, a DCA 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 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 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 Fixed Account Investment Options are not eligible for
participation in the Asset Rebalancing Program.) 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 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.
18
<PAGE> 23
For rebalancing programs begun on or after October 1, 1996, 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 or 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).
Rebalancing will continue to take place on the last business day of every
calendar quarter for rebalancing programs begun prior to October 1, 1996.
WITHDRAWALS
You may withdraw all or a portion of your contract value, but may incur tax
liability as a result.
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") and
related Treasury Department regulations. 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, minus the annual $30 administration fee (if applicable),
any unpaid loans and any applicable withdrawal charge. The contract then will be
canceled. In the case of a partial withdrawal, we will pay the amount requested
and cancel accumulation units credited to each investment account equal in value
to the amount withdrawn from that investment account plus any applicable
withdrawal charge deducted from that investment account.
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 minus any
applicable withdrawal charge. 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
options, see "FIXED ACCOUNT INVESTMENT OPTIONS".
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 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
19
<PAGE> 24
- 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.
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 issued in connection with Section 403(b) qualified plans only under
limited circumstances (see Appendix G "Qualified Plan Types").
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 10% of the purchase
payments made (to ensure that no withdrawal charge will ever apply to an IP
withdrawal). 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 pursuant to a new application. 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 charges. IP
withdrawals, like other withdrawals, may be subject to income tax and a 10%
penalty tax. 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.
20
<PAGE> 25
DEATH BENEFIT DURING THE ACCUMULATION PERIOD
If you die during the accumulation period, your beneficiary will receive a death
benefit that might exceed your contract value.
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. In particular, if you intend to use the contract in connection with a
qualified plan, you should consider that the contract provides a death benefit
(described below) that could be characterized as an "incidental death benefit."
There are limits on the amount of incidental benefits that may be provided under
certain qualified plans and the provision of such benefits may result in
currently taxable income to plan participants (see "FEDERAL TAX MATTERS"). See
Appendix F for information on different death benefit provisions applicable to
certain prior contracts and to contracts sold in the state of Washington.
AMOUNT OF DEATH BENEFIT. If any contract owner dies on or prior to his
or her 85th birthday and the oldest owner had an attained age of less than 81
years on the date as of which the contract was issued, the death benefit will be
the greater of:
- the contract value or
- the excess of (i) over (ii), where
- (i) equals the sum of purchase payments made,
accumulated daily at the equivalent of 5% per year
starting on the date each purchase payment is
allocated to the contract; provided, however, that
the accumulated value of each purchase payment will
not exceed two times such payment, and
- (ii) equals the sum of any amounts deducted in
connection with partial withdrawals, accumulated
daily at the equivalent of 5% per year starting on
the date each such deduction occurs; provided,
however, that the accumulated value of each amount so
deducted will not exceed two times such deducted
amount.
If any contract owner dies after his or her 85th birthday and the
oldest owner had an attained age of less than 81 years on the date as of which
the contract was issued, the death benefit will be the greater of:
- the contract value or
- the excess of the sum of all purchase payments over the sum
of:
- any amounts deducted in connection with partial
withdrawals (including amounts deducted in connection
with partial withdrawals other than annual
administration fees and amounts applied under an
annuity option under the contract) and
- any amounts applied under an annuity benefit option.
If any contract owner dies and the oldest owner had an attained age
greater than 80 on the date as of which the contract was issued, the death
benefit will be the contract value less any applicable withdrawal charges at the
time of payment of benefits.
The determination of the death benefit will be made on the date we
receive written notice and "proof of death" as well as all required claims
forms, at our Annuity Service Office. No one is entitled to the death benefit
until this time. Death benefits will be paid within 7 days of that
determination. Proof of death occurs when we receive one of the following at our
Annuity Service Office within one year of the date of death:
- a certified copy of a death certificate;
21
<PAGE> 26
- a certified copy of a decree of a court of competent
jurisdiction as to the finding of death; or
- any other proof satisfactory to us.
If there are any unpaid loans, the death benefit equals the death benefit, as
described above, minus the amount of unpaid loans (including unpaid interest).
PAYMENT OF DEATH BENEFIT. We will pay the death benefit to the
beneficiary if any contract owner dies before the maturity date. If there is a
surviving contract owner, that contract owner will be deemed to be the
beneficiary. No death benefit is payable on the death of any annuitant, except
that if any contract owner is not a natural person, the death of any annuitant
will be treated as the death of an owner. On the death of the last surviving
annuitant, the contract owner, if a natural person, will become the annuitant
unless the contract owner designates another person as the annuitant.
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 contract owner.
- Any excess of the death benefit over the contract value will
be allocated to the owner's 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 beneficiary is not the deceased owner's spouse,
distribution of the contract 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, which begins
within one year 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. Upon the death of the
beneficiary, the death benefit will equal the contract value
and must be distributed immediately in a single sum.
- If the 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. In addition, all payments made and all amounts
deducted in connection with partial withdrawals prior to the
date of the first owner's death will not be considered in the
determination of the spouse's death benefit.
- If any contract owner dies and the oldest owner had an
attained age of less than 81 on the date as of which the
contract is issued, withdrawal charges are not applied on
payment of the death benefit (whether taken through a partial
or total withdrawal or applied under an annuity option). If
any contract owner dies and the oldest owner had an attained
age greater than 80 on the date as of which the contract was
issued, any applicable withdrawal charges will be assessed
only upon payment of the death benefit (so that if the death
benefit is paid in a subsequent year, a lower withdrawal
charge will be applicable).
If any annuitant is changed and any contract owner is not a natural
person, the entire interest in the contract must be distributed to the contract
owner within five years.
A substitution or addition of any contract 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.
22
<PAGE> 27
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").
PAY-OUT PERIOD PROVISIONS
GENERAL
You have a choice of several different ways of receiving annuity benefit
payments from us.
You or your beneficiary may elect to have any amounts that we are
obligated to pay you or your beneficiary on withdrawal or death, or as of the
maturity date, paid by means of periodic annuity benefit payments rather than in
one lump sum (subject to the distribution of death benefit provisions described
above).
Generally, we will begin paying annuity benefits under the contract on
the contract's maturity date (the first day of the pay-out period). The maturity
date is the date specified on your contract's specifications page, unless you
change that date. If no date is specified, the maturity date is the maximum
maturity date described below. The maximum maturity date is the first day of the
month following the later of the 85th birthday of the annuitant or the tenth
contract anniversary. (See Appendix E for contracts issued in Pennsylvania.) 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 at advanced ages, e.g., past age 85, may in
some circumstances 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
(except Option 5 which is available on a fixed basis only) 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 ten years as described below. Annuity payments will be determined
based on the Investment Account Value of each investment option at the maturity
date. Treasury Department regulations may preclude the availability of certain
annuity options in connection with certain qualified contracts.
Please read the description of each annuity option carefully. In
general, a nonrefund 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 nonrefund life annuity option.
The following annuity options are guaranteed in the contract.
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.
23
<PAGE> 28
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 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 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. See Appendix F for information on
assumed interest rates applicable to certain contracts no longer being issued
and contracts issued in the state of Washington.
ANNUITY UNITS AND THE DETERMINATION OF SUBSEQUENT VARIABLE ANNUITY PAYMENTS
Variable annuity payments after the first one will be based on the
investment performance of the sub-accounts selected during the pay-out period.
The amount of a subsequent payment 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 annuity benefit payment to be made. The number of annuity units generally
remains constant throughout the pay-out period (assuming no transfer is made).
24
<PAGE> 29
The value of an annuity unit for each sub-account for any business day
is determined by multiplying the annuity unit value for the immediately
preceding business day 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.
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 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 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 payments will reflect
changes in the value of the annuity units for the new sub-account selected. We
reserve the right to limit, upon notice, the maximum number of transfers a
contract owner may make per contract year to four. 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 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.
You may cancel the contract by returning it to our Annuity Service
Office or agent at any time within 10 days after receiving it. Within 7 days of
receiving a returned contract, we will pay you the contract value (minus any
unpaid loans), computed at the end of the business day on which we receive your
returned contract.
No withdrawal charge is imposed upon return of a 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 Sections 408 or 408A of the Code, during the first 7 days of the 10 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 your contract.
The contract owner is the person entitled to exercise all rights under
the contract. Prior to the maturity date, the contract owner is the person
designated in the contract specifications page or as subsequently named. On and
after the maturity date, the annuitant is the contract owner. If amounts become
payable to any beneficiary under the contract, the beneficiary is the contract
owner.
In the case of non-qualified contracts, ownership of the contract may
be changed or the contract may be collaterally assigned at any time prior to the
maturity date, subject to the rights of any irrevocable beneficiary. Assigning a
contract, or changing the ownership of a contract, may be treated as a
(potentially taxable) distribution of the contract value for federal tax
purposes. A change of any contract owner may result in resetting the death
benefit to an amount equal to the contract value as of the date of the change
and
25
<PAGE> 30
treating that 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 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 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 Internal Revenue Service ("IRS") regulations.
Subject to the foregoing, 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. 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 is as designated on
the contract specifications page or in the application, unless changed.
On the death of the annuitant, 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.
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 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, Treasury Department
regulations may limit designations of beneficiaries.
MODIFICATION
We may not modify your contract without your consent, except to the
extent required to make it conform to any law or regulation or ruling issued by
a governmental agency. The provisions of the contract shall be interpreted so as
to comply with the requirements of Section 72(s) of the Code.
OUR APPROVAL
We reserve the right to accept or reject any contract application at
our sole discretion.
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 OPTIONS
26
<PAGE> 31
The fixed account investment options are not securities.
SECURITIES REGISTRATION. Interests in the fixed account investment
options 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 options
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 options 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 certain of our fixed annuity contracts. This
guarantee covers the fixed portion of the contracts described in this
Prospectus. The 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 which were issued prior to
January 1, 1999. Under this Reinsurance Agreement, we remain liable for the
contractual obligations of the contracts' fixed account and Peoples agrees to
reimburse us for certain amounts and obligations in connection with the fixed
account. Peoples contractual liability runs solely to us, and no contract owner
shall have any right of action against Peoples. The Manufacturers Life Insurance
Company (U.S.A.) reinsures certain amounts with respect to the fixed account
portion of the contract for contracts issued after January 1, 1999 under a
reinsurance agreement with substantially similar terms to the Peoples
reinsurance agreement.
Fixed account investment options guarantee interest of at least 3%.
INVESTMENT OPTIONS. A one-year fixed account investment option is
available under the contract. In addition, in states where approved by the state
insurance department, a DCA fixed investment account may be established under
the DCA program to make automatic transfers to one or more variable investment
options. Under the fixed account investment options, 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. The portion of the contract value
in a fixed account investment option and any fixed annuity benefit payments will
reflect those interest and principal guarantees. 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%. See Appendix F for information on
guaranteed rate of interest applicable to certain prior contracts and to
contracts sold in the state of Washington. 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
one-year 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 establish a new
investment account with a 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. In the case of renewals in the last year
of the accumulation period, the only fixed account investment option available
is to have interest accrued for the remainder of the accumulation period at the
then current interest rate for one-year guarantee periods. If you do not specify
a renewal option, we will select the one-year fixed account investment option.
In the case of a renewal in the last year of the accumulation period, we will
credit interest for the remainder of the accumulation period at the then current
interest rate for one-year guarantee periods.
27
<PAGE> 32
Withdrawals and some transfers from fixed account investment options are
permitted during the accumulation period.
TRANSFERS. During the accumulation period, you normally may transfer
amounts from the fixed account investment option to the variable account
investment options only at the end of a guaranteed period. You may, however,
transfer amounts from fixed to variable account investment options 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. You may make total and partial withdrawals of amounts held
in the fixed account investment options at any time during the accumulation
period. Withdrawals from the fixed account investment options 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 options 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 options, 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 options. 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. For this
purpose, the DCA fixed account investment option is considered to have a shorter
guarantee period than the one-year fixed account investment option.
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 issued in connection with Section 403(b) qualified plans only under
limited circumstances (see Appendix G "Qualified Plan Types").
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 table in the contract. If the table we are then using is more
favorable to you, we will substitute that table. We guarantee the dollar amount
of fixed annuity payments.
CHARGES. No administrative, distribution, or mortality and expense risk
charges are deducted from fixed account investment options.
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.
Some old contracts have withdrawal charges; new ones do not.
WITHDRAWAL CHARGES
If you make a withdrawal from your contract during the accumulation
period, a withdrawal charge (contingent deferred sales charge) may be assessed
against amounts withdrawn attributable to purchase payments that have been in
the contract less than three complete contract years. NO WITHDRAWAL CHARGE WILL
BE IMPOSED ON WITHDRAWALS FROM CONTRACTS ISSUED ON OR AFTER NOVEMBER 1, 1996.
There is never a
28
<PAGE> 33
withdrawal charge with respect to earnings accumulated in the contract, certain
other free withdrawal amounts described below or purchase payments that have
been in the contract more than three complete contract years. In no event may
the total withdrawal charges exceed 3% of the amount invested. The amount of the
withdrawal charge and when it is assessed are discussed below.
Each withdrawal from the contract is allocated first to the "FREE
WITHDRAWAL AMOUNT" and second to "UNLIQUIDATED PURCHASE PAYMENTS." In any
contract year, the free withdrawal amount for that year is the greater of:
- 10% of total purchase payments (less all prior partial
withdrawals in that contract year), and
- the accumulated earnings of the contract (i.e., the excess of
the contract value on the date of withdrawal over the
unliquidated purchase payments).
Withdrawals allocated to the free withdrawal amount may be withdrawn
without the imposition of a withdrawal charge. The free withdrawal amount will
be applied to a requested withdrawal, first, to withdrawals from variable
account investment options and then to withdrawals from the one-year fixed
account investment option.
If the amount of a withdrawal exceeds the free withdrawal amount, the
excess will be allocated to purchase payments which will be liquidated on a
first-in first-out basis. On any withdrawal request, we will liquidate purchase
payments equal to the amount of the withdrawal request which exceeds the free
withdrawal amount in the order the purchase payments were made: the oldest
unliquidated purchase payment first, the next purchase payment second, etc.,
until all purchase payments have been liquidated.
Each purchase payment or portion thereof liquidated in connection with
a withdrawal request that has been in the contract for less than three years is
subject to a withdrawal charge of 3%.
The withdrawal charge is deducted from the contract value remaining
after the contract owner is paid the amount requested, except in the case of a
complete withdrawal when it is deducted from the amount otherwise payable. In
the case of a partial withdrawal, the amount requested from an investment
account may not exceed the value of that investment account minus any applicable
withdrawal charge.
There is generally no withdrawal charge on distributions made as a
result of the death of the contract owner or, if applicable, the annuitant. In
addition, no withdrawal charges are imposed on annuity benefit payments.
The amount collected from the withdrawal charge will be used to
reimburse us for the compensation we pay to broker-dealers for selling the
contracts, preparation of sales literature and other sales-related expenses.
For examples of calculation of the withdrawal charge, see Appendix C.
REDUCTION OR ELIMINATION OF WITHDRAWAL CHARGES
The amount of the withdrawal charge on a contract may be reduced or
eliminated when sales of the contracts are made to individuals or to a group of
individuals in such a manner that results in savings of sales expenses. We will
determine entitlement to such a reduction in the withdrawal charge in the
following manner:
- The size and type of group to which sales are to be made will
be considered. Generally, sales expenses for a larger group
are smaller than for a smaller group because of the ability to
implement large numbers of contracts with fewer sales
contacts.
- The total amount of purchase payments to be received will be
considered. Per-dollar sales expenses are likely to be less on
larger purchase payments than on smaller ones.
29
<PAGE> 34
- Any prior or existing relationship with us will be considered.
Per-contract sales expenses are likely to be less when there
is a prior or existing relationship because of the likelihood
of implementing the contract with fewer sales contacts.
- The level of commissions paid to selling broker-dealers will
be considered. Certain broker-dealers may offer the contract
in connection with financial planning programs offered on a
fee-for-service basis. In view of the financial planning fees,
such broker-dealers may elect to receive lower commissions for
sales of the contracts, thereby reducing our sales expenses.
- There may be other circumstances of which we are not presently
aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, we determine that
there will be a reduction in sales expenses, we will provide a reduction in the
withdrawal charge. The withdrawal charge will be eliminated 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 withdrawal charge be permitted where that reduction or
elimination will be unfairly discriminatory to any person. For further
information, contact your registered representative.
We deduct asset-based charges totaling 1.65% on an annual basis for
administration, distribution and mortality and expense risks.
ADMINISTRATION FEES
A daily fee in an amount equal to 0.25% of the value of each variable
investment account on an annual basis is deducted from each sub-account as an
administration fee. The fee is designed to compensate us for administering the
contracts and operating the Variable Account. Even though administrative
expenses may increase, we guarantee that we will not increase the amount of the
administration fees.
If your contract value falls below $10,000 as a result of a partial
withdrawal, we may deduct an annual administration fee of $30 as partial
compensation for administrative expenses. The fee will be deducted on the last
day of each contract year. It will be withdrawn from each investment option in
the same proportion that the value of such investment option bears to the
contract value. If the entire contract value is withdrawn on other than the last
day of any contract year, the fee will be deducted from the amount paid.
DISTRIBUTION FEE
A daily fee 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 a
distribution fee. The fee is designed to compensate us for a portion of the
expenses we incur in selling the contracts.
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 benefit payment rates incorporated into the contract which cannot be
changed. This assures each annuitant that his or her longevity will not have an
adverse effect on the amount of annuity benefit 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. The expense
risk we assume is the risk that the administration charges, distribution charge,
or withdrawal charge 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 1.25% of the value of the
variable investment accounts on an annual basis. The rate of the mortality and
expense risks charge cannot be increased. 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. Under the Period Certain
Only Annuity Options, 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 options
30
<PAGE> 35
We will charge you for state premium taxes to the extent we incur them and
reserve the right to charge you for new taxes we may incur.
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 the we
determine to have resulted from our:
- establishment or maintenance of the Variable Account,
- receipt of purchase payments,
- issuance of the contracts, or
- commencement or continuance of annuity payments under the
contracts.
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 D for a table of State Premium Taxes.
EXPENSES OF DISTRIBUTING CONTRACTS
MSS, the principal underwriter for the contracts, pays compensation to
selling broker-dealers in varying amounts which under normal circumstances are
not expected to exceed 1.25% of purchase payments plus 1% of the contract value
per year commencing one year after each purchase payment. These expenses are not
assessed against the contracts but are instead paid by MSS. See "Distribution of
Contracts" for further information.
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. 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, Treasury Department regulations, and interpretations existing on the
date of this Prospectus. These authorities, however, are subject to change by
Congress, the Treasury Department, and judicial decisions.
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. We do not anticipate that we
will be taxed on the income and gains of the Variable Account, but if we are,
then we may impose a corresponding charge against the Variable Account.
TAXATION OF ANNUITIES IN GENERAL
31
<PAGE> 36
Gains inside the contract are usually tax-deferred until you make a withdrawal,
start receiving annuity benefit payments, or receive a death benefit payment
TAX DEFERRAL DURING ACCUMULATION PERIOD
Under existing provisions of the Code, except as described below, any
increase in the contract value is generally not taxable to the contract 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 Treasury Department
regulations,
- we, rather than the contract 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 benefit payments, of the contract's purchase
payments and earnings, e.g., the pay-out period must not occur
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 contracts purchased by employers upon the termination
of certain qualified plans,
- certain contracts used in connection with structured
settlement agreements, and
- contracts 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.
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, 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 a contract if the income on the contract 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.
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 Treasury Department
Regulations. The Secretary of the Treasury 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 contract 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."
32
<PAGE> 37
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 contract 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 Treasury Department 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 this contract are similar to, but different
in certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the owner of 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 CONTRACT 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 Treasury Department
has stated it expects to issue. We therefore reserve the right to modify the
contract as necessary to attempt to prevent 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 includible in
income to the extent the 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 plans) 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 the investment in the contract at the time of transfer. In
such a case, the transferee's investment in the contract will be increased to
reflect the increase in the transferor's income.
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.
33
<PAGE> 38
A portion of each annuity payment is usually taxable as ordinary income.
TAXATION OF ANNUITY BENEFIT PAYMENTS
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 Treasury Department
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 Treasury Department
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, or
- if distributed under an annuity option, they are taxed in the
same manner as annuity payments, as described above.
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.
Withdrawals prior to age 59-1/2 may incur a 10% penalty tax.
PENALTY TAX ON PREMATURE DISTRIBUTIONS
There is a 10% penalty tax on the taxable amount of any payment from a
non-qualified contract unless the payment is:
- received on or after the contract owner reaches age 59-1/2;
- attributable to the contract owner becoming disabled (as
defined in the tax law);
- made to a beneficiary on or after the death of the contract
owner or, if the contract owner is not an individual, on or
after the death of the primary annuitant (as defined in the
tax law);
34
<PAGE> 39
- made as a series of substantially equal periodic payments (not
less frequently than annually) for the life (or life
expectancy) of the annuitant or for the joint lives (or joint
life expectancies) of the annuitant 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 this
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 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.
Special tax provisions apply to qualified plans. Consult your tax advisor prior
to using the contract with a qualified plan.
QUALIFIED RETIREMENT PLANS
The contracts are also designed for use in connection with certain
types of retirement plans 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.
Brief descriptions of various types of qualified plans in connection with which
we may issue a contract are contained in Appendix G to this Prospectus. Appendix
G also discusses certain potential tax consequences associated with the use of
the contract with certain qualified plans which should be considered by a
purchaser.
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 to satisfy certain minimum distribution requirements under
federal tax laws.
In addition, special rules apply to the time at which distributions
must commence and the form in which the distributions must be paid. For example,
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
35
<PAGE> 40
distribution from the qualified plan. In the case of IRAs (other than Roth
IRAs), distributions of minimum amounts (as specified in the tax law) 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, distributions of such minimum amounts 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.
There is also a 10% penalty tax on the taxable amount of any payment
from certain qualified contracts (but not Section 457 plans). (The amount of the
penalty tax is 25% of the taxable amount of any payment 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
payment:
- received on or after the contract 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 here, 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 penalty tax does not apply to certain distributions from IRAs
taken after December 31, 1997 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.
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, and (ii) certain distributions for life, life expectancy,
or for 10 years or more which are part of a "series of substantially equal
periodic payments."
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 receiving 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
We offer a loan privilege only to owners of contracts issued in
connection with Section 403(b) qualified plans that are not subject to Title I
of ERISA. If you are not an owner of such a contract, none of this discussion
about loans applies to your contract. If you are an owner of such a contract,
you may borrow from us, using your contract as the only security for the loan.
Loans are subject to certain tax law restrictions and to applicable retirement
program rules (collectively, "LOAN RULES"). You should consult
36
<PAGE> 41
your tax advisor and retirement plan fiduciary prior to taking a loan under the
contract.
The maximum loan value of a contract is normally 80% of the contract
value, although loan rules may serve to reduce that maximum in some cases. The
amount available for a loan at any given time is the loan value less any unpaid
prior loans. Unpaid prior loans equal the amount of any prior loans plus
interest accrued on those loans. Loans will be made only upon written request
from the owner. We will make loans within seven days of receiving a properly
completed loan application (applications are available from our Annuity Service
Office), subject to postponement under the same circumstances that payment of
withdrawals may be postponed (see "WITHDRAWALS").
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"). The contract provides that
you may repay unpaid loans at any time. Under applicable loan rules, loans
generally must be repaid within five years, repayments must be made at least
quarterly and repayments must be made in substantially equal amounts. When a
loan is repaid, the 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 most recent purchase payment. On each anniversary of
the date your contract was issued, we will transfer from the investment accounts
to the loan account the excess of the balance of your loan over the balance in
your loan account.
We charge interest of 6% per year on contract loans. Loan interest is
payable in arrears and, unless paid in cash, the accrued loan interest is added
to the amount of the debt and bears interest at 6% as well. We credit interest
with respect to amounts held in the loan account at a rate of 4% per year.
Consequently, the net cost of loans under the contract is 2%. If on any date
unpaid loans under your contract exceed your contract value, your contract will
be in default. In such case you will receive a notice indicating the payment
needed to bring your contract out of default and will have a thirty-one day
grace period within which to pay the default amount. If the required payment is
not made within the grace period, your contract may be terminated without value.
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 contract value because the investment results of
the investment accounts will apply only to the unborrowed portion of the
contract value. The longer a loan is unpaid, the greater the effect is likely to
be. The effect could be favorable or unfavorable. If the 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,
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 payments for Federal income tax
payments.
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
We may advertise our investment performance.
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
37
<PAGE> 42
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 also may be quoted, including figures that do not assume redemption at
the end of the time period. Non-standardized figures may 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 the 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 the 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. 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,
Inc. 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.
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM
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.
Manufacturers Securities Services, LLC ('MSS"), a Delaware limited
liability company that we control, is the principal underwriter of the
contracts. MSS, located at 73 Tremont Street, Boston,
38
<PAGE> 43
Massachusetts 02108, also is the investment adviser to the Trust. MSS 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"). MSS has entered into a non-exclusive promotional agent agreement with
Manulife Wood Logan, Inc. ("MANULIFE WOOD LOGAN"). Manulife Wood Logan is a
broker-dealer registered under the 1934 Act and a member of the NASD. Manulife
Wood Logan is an indirect wholly owned subsidiary of MFC. Sales of the contracts
will be made by registered representatives of broker-dealers authorized by MSS
to sell the contracts. Those registered representatives will also be our
licensed insurance agents. Under the promotional agent agreement, Manulife Wood
Logan will recruit and provide sales training and licensing assistance to those
registered representatives. In addition, Manulife Wood Logan will prepare sales
and promotional materials for our approval.
CONTRACT OWNER INQUIRIES
Your inquiries should be directed to our Annuity Service Office mailing
address 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 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 MSS
are involved in any litigation that is of material importance to either, or that
relates to the Variable Account.
YEAR 2000 ISSUES
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when information
using year 2000 dates is processed. In addition, similar problems may arise in
some systems which use certain dates in 1999 to represent something other than a
date. Although the change in date has occurred, it is not possible to conclude
that all aspects of the Year 2000 Issue that may affect us, including those
related to customers, suppliers, or other third parties, have been fully
resolved.
CANCELLATION OF THE 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
<PAGE> 44
Accumulation Period. During the accumulation period, the contract 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.
40
<PAGE> 45
APPENDIX A
SPECIAL TERMS
The following terms as used in this Prospectus have the indicated meanings:
ACCUMULATION PERIOD - 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.
ACCUMULATION UNIT - A unit of measure that is used to calculate the value of the
variable portion of the contract before the maturity date.
ANNUITANT - Any natural person or persons 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
contract specification page, unless changed.
ANNUITY UNIT - A unit of measure that is used after the maturity date to
calculate variable annuity payments.
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 on the contract specifications page,
unless changed. If there is a surviving contract owner, that person will be the
beneficiary.
BUSINESS DAY - Any day on which the New York Stock Exchange is open for business
and the net asset value of a Trust portfolio is determined.
THE CODE - The Internal Revenue Code of 1986, as amended.
CONTINGENT BENEFICIARY - The person, persons or entity to become the beneficiary
if the beneficiary is not alive. The contingent beneficiary is as specified in
the application, unless changed.
CONTRACT YEAR - The period of twelve consecutive months beginning on the date as
of which the contract is issued, or any anniversary of that date.
FIXED ANNUITY - An annuity option with payments the amount of which we
guarantee.
GENERAL ACCOUNT - All of our assets other than assets in separate accounts such
as the Variable Account.
INVESTMENT ACCOUNT - An account we establish for you which represents your
interest in an investment option during the accumulation period.
INVESTMENT OPTIONS - The investment choices available to contract owners.
Currently, there are thirty-eight variable and two fixed investment options
under the contract.
LOAN ACCOUNT - The portion of our general account that is used for collateral
for a loan.
MATURITY DATE - The date on which the pay-out period commences and we begin to
make annuity benefit payments to the annuitant. The maturity date is the date
specified on the contract 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.
NON-QUALIFIED CONTRACTS - Contracts which are not issued under qualified plans.
OWNER OR CONTRACT OWNER - The person, persons (co-owner) or entity entitled to
all of the ownership rights under the contract. References in this Prospectus to
contract owners are typically by use of "you." The owner has the legal right to
make all changes in contractual designations where specifically permitted by the
contract. The owner is as specified on the contract specifications page, unless
changed.
PAY-OUT PERIOD - The pay-out period is the period when we make annuity benefit
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.
<PAGE> 46
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 Code.
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.
UNPAID LOANS - The unpaid amounts (including any accrued interest) of loans some
contract owners may have taken from us, using certain qualified contracts as
collateral.
VALUATION PERIOD - Any period from one business day to the next, measured from
the time on each business day that the net asset value of each portfolio is
determined.
<PAGE> 47
APPENDIX B
TABLE OF ACCUMULATION UNIT VALUES RELATING TO THE CONTRACT
<TABLE>
<CAPTION>
SUB-ACCOUNT UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS AT END
START OF YEAR(A) END OF YEAR OF YEAR
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Rim Emerging Markets
1997 $12.500000 $ 8.160547 92,489.680
1998 8.160547 7.656925 146,258.768
1999 7.656925 12.267100 322,514.472
- --------------------------------------------------------------------------------------------------------------
Science & Technology
1997 $12.500000 $13.613317 355,255.526
1998 13.613317 19.191525 674,168.571
1999 19.191525 37.660683 1,436,589.022
- --------------------------------------------------------------------------------------------------------------
International Small Cap
1996 $12.500000 $13.465203 224,018.261
1997 13.465203 13.348864 193,834.190
1998 13.348864 14.687879 258,056.613
1999 14.687879 26.718058 379,904.401
- --------------------------------------------------------------------------------------------------------------
Aggressive Growth
1997 $12.500000 $12.296448 270,398.951
1998 12.296448 12.617679 465,435.110
1999 12.617679 16.504105 552,060.070
- --------------------------------------------------------------------------------------------------------------
Emerging Small Company
1997 $12.500000 $14.537900 161,450.115
1998 14.537900 14.310172 310,758.065
1999 14.310172 24.427201 286,641.557
- --------------------------------------------------------------------------------------------------------------
Small Company Blend
1999 $12.500000 $15.895877 104,107.273
- --------------------------------------------------------------------------------------------------------------
All Cap Growth(B)
1996 $12.500000 $13.188627 587,704.824
1997 13.188627 14.952186 550,309.278
1998 14.952186 18.869029 909,754.925
1999 18.869029 26.855000 1,112,356.278
- --------------------------------------------------------------------------------------------------------------
Mid Cap Stock
1999 $12.500000 $12.462837 129,674.417
- --------------------------------------------------------------------------------------------------------------
Overseas
1995 $10.000000 $10.528678 178,852.062
1996 10.528678 11.660474 351,591.394
1997 11.660474 11.460078 374,473.198
1998 11.460078 12.168562 617,029.124
1999 12.168562 16.833813 885,837.752
- --------------------------------------------------------------------------------------------------------------
International Stock
1997 $12.500000 $12.620816 240,538.835
1998 12.620816 14.265882 430,101.363
1999 14.265882 18.202233 589,229,.912
- --------------------------------------------------------------------------------------------------------------
International Value
1999 $12.500000 $12.83881 85,805.983
- --------------------------------------------------------------------------------------------------------------
Mid Cap Blend
1994 $10.675585 $10.965867 36,324.491
1995 10.965867 15.402974 663,652.478
1996 15.402974 18.199588 1,024,727.992
1997 18.199588 21.347335 710,225.513
1998 21.347335 22.973151 1,192,385.855
1999 22.973151 28.867552 1,071,824.967
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 48
<TABLE>
<CAPTION>
SUB-ACCOUNT UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS AT END
START OF YEAR(A) END OF YEAR OF YEAR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Small Company Value
1997 $12.500000 $11.890948 121,356.238
1998 11.890948 11.143828 753,524.163
1999 11.143828 11.837890 547,174.367
- --------------------------------------------------------------------------------------------------------------
Global Equity
1994 $13.117996 $12.153179 49,050.593
1995 12.153179 12.872711 361,285.266
1996 12.872711 14.257610 622,699.384
1997 14.257610 16.941296 452,078.125
1998 16.941296 18.706100 900,761.542
1999 18.706100 19.073534 1,126,476.045
- --------------------------------------------------------------------------------------------------------------
Growth
1996 $12.500000 $13.711434 136,813.299
1997 13.711434 16.906185 432,054.497
1998 16.906185 20.612746 789,132.498
1999 20.612746 26.855000 1,112,356.278
- --------------------------------------------------------------------------------------------------------------
Large Cap Growth
1994 $10.444531 $10.303433 7,523.248
1995 10.303433 12.443644 67,382.620
1996 12.443644 13.829135 119,961.606
1997 13.829135 16.200363 57,970.102
1998 16.200363 18.982681 130,457.346
1999 18.982681 23.393391 380,091.954
- -------------------------------------------------------------------------------------------------------------
Quantitative Equity
1997 $12.500000 $16.067235 192,717.960
1998 16.067235 19.968902 468,687.291
1999 19.968902 24.022598 901,180.009
- -------------------------------------------------------------------------------------------------------------
Blue Chip Growth
1994 $ 9.145044 $ 9.280989 18,796.455
1995 9.280989 11.551552 274,368.201
1996 11.551552 14.303631 673,370.337
1997 14.303631 17.859518 1,129,154.033
1998 17.859518 22.573222 2,444,541.966
1999 22.573222 26.518360 3,079,280.538
- -------------------------------------------------------------------------------------------------------------
Real Estate Securities
1997 $12.500000 $14.912035 194,806.572
1998 14.912035 12.255908 297,723.946
1999 12.255908 11.090818 226,692.229
- -------------------------------------------------------------------------------------------------------------
Value
1997 $12.500000 $15.019763 532,115.531
1998 15.019763 14.519332 1,143,817.237
1999 14.519332 13.883152 1,022,887.843
- -------------------------------------------------------------------------------------------------------------
Growth & Income
1994 $10.576574 $10.436393 24,644.881
1995 10.436393 13.263871 448,739.926
1996 13.263871 16.024067 1,043,469.657
1997 16.024067 20.936844 1,453,214.116
1998 20.936844 26.056725 3,147,982.577
1999 26.056725 30.467742 4,219,095.207
- -------------------------------------------------------------------------------------------------------------
U.S. Large Cap Value
1999 $12.500000 $12.700198 662,117.758
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 49
<TABLE>
<CAPTION>
SUB-ACCOUNT UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS AT END
START OF YEAR(A) END OF YEAR OF YEAR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity-Income
1994 $10.844086 $10.578121 31,102.019
1995 10.578121 12.870851 375,815.524
1996 12.870851 15.172018 833,362.583
1997 15.172018 19.357272 973,290.243
1998 19.357272 20.794388 1,719,624.978
1999 20.794388 21.149570 1,586,409.600
- -------------------------------------------------------------------------------------------------------------
Income & Value
1994 $10.269505 $10.156264 19,952.394
1995 10.156264 12.056663 205,665.149
1996 12.056663 13.039212 340,400.940
1997 13.039212 14.861563 176,904.939
1998 14.861563 16.824988 449,891.382
1999 16.824988 17.986686 771,920.090
- -------------------------------------------------------------------------------------------------------------
Balanced
1997 $12.500000 $14.573591 209,560.113
1998 14.573591 16.377624 683,342.735
1999 16.377624 15.843343 782,138.303
- -------------------------------------------------------------------------------------------------------------
High Yield
1997 $12.500000 $13.856003 531,676.796
1998 13.856003 14.008370 1,741,127.736
1999 14.008370 14.881850 1,380,131.201
- -------------------------------------------------------------------------------------------------------------
Strategic Bond
1994 $10.132498 $ 9.897404 9,621.542
1995 9.897404 11.607403 146,877.133
1996 11.607403 13.093621 470,296.507
1997 13.093621 14.293477 681,451.817
1998 14.293477 14.243718 1,092,910.900
1999 14.243718 14.321908 945,776.422
- -------------------------------------------------------------------------------------------------------------
Global Bond
1994 $10.345362 $10.262238 6,324.370
1995 10.262238 12.434811 108,887.995
1996 12.434811 13.821405 236,432.653
1997 13.821405 13.995892 542,434.525
1998 13.995892 14.814388 196,058.554
1999 14.814388 13.599529 206,366.445
- -------------------------------------------------------------------------------------------------------------
Investment Quality Bond
1994 $ 9.785855 $ 9.713969 5,980.272
1995 9.713969 11.417606 143,843.254
1996 11.417606 11.519237 359,256.707
1997 11.519237 12.435620 262,883.942
1998 12.435620 13.299876 855,003.631
1999 13.299876 12.847911 1,129,566.354
- -------------------------------------------------------------------------------------------------------------
Diversified Bond
1994 $10.124972 $10.050011 2,989.757
1995 10.050011 11.672867 123,692.494
1996 11.672867 12.287873 193,254.830
1997 12.287873 13.469181 98,739.766
1998 13.469181 14.663990 261,092.778
1999 14.663990 14.527388 292,613.312
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 50
<TABLE>
<CAPTION>
SUB-ACCOUNT UNIT VALUE AT UNIT VALUE AT NUMBER OF UNITS AT END
START OF YEAR(A) END OF YEAR OF YEAR
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Government Securities
1994 $10.033365 $ 9.968713 17,964.448
1995 9.968713 11.333420 218,996.714
1996 11.333420 11.522857 283,607.608
1997 11.522857 12.294922 291,264.608
1998 12.294922 12.999698 909,940.877
1999 12.999698 12.757839 986,798.366
- -------------------------------------------------------------------------------------------------------------
Money Market
1994 $10.172129 $10.290731 46,595.747
1995 10.290731 10.692803 282,116.623
1996 10.692803 11.048244 516,160.781
1997 11.048244 11.427217 1,222,689.467
1998 11.427217 11.811952 3,637,922.565
1999 11.811952 12.153141 6,264,766.906
- -------------------------------------------------------------------------------------------------------------
Lifestyle Aggressive 1000
1997 $12.500000 $13.635694 206,171.846
1998 13.635694 14.064128 276,086.785
1999 14.064128 15.855076 169,802.704
- -------------------------------------------------------------------------------------------------------------
Lifestyle Growth 820
1997 $12.500000 $13.998474 223,792.942
1998 13.998474 14.623605 1,903,948.071
1999 14.623605 16.767184 1,241,961.810
- -------------------------------------------------------------------------------------------------------------
Lifestyle Balanced 640
1997 $12.500000 $14.031517 1,456,423.208
1998 14.031517 14.591457 2,558,525.534
1999 14.591457 16.136115 1,808,450.426
- -------------------------------------------------------------------------------------------------------------
Lifestyle Moderate 460
1997 $12.500000 $13.981923 486,907.289
1998 13.981923 15.096548 1,304,937.192
1999 15.096548 16.021927 1,092,440.188
- -------------------------------------------------------------------------------------------------------------
Lifestyle Conservative 280
1997 $12.500000 $13.790807 202,270.252
1998 13.790807 14.950846 766,504.994
1999 14.950846 15.324704 776,422.562
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Units under this series of contracts were first credited under the
sub-accounts on August 9, 1994, except in the case of:
- - Overseas Trust where units were first credited on January 9, 1995;
- - Mid Cap Growth and International Small Cap Trusts where units were
first credited on March 4, 1996;
- - Growth Trust where units were first credited on July 15, 1996;
- - Pacific Rim Emerging Markets, Science & Technology, Aggressive Growth,
Emerging Small Company, - International Stock, Quantitative Equity,
Real Estate Securities, Value, Balanced, and High Yield Trusts where
units were first credited on January 1, 1997;
- - Lifestyle Aggressive 1000, Lifestyle Growth 820, Lifestyle Balanced
640, Lifestyle Moderate 460, and Lifestyle Conservative 280 Trusts
where units were first credited on January 7, 1997;
- - Small Company Value Trust where units were first credited on October 1,
1997; and
- - 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.
(B) Formerly, the Mid Cap Growth Trust
<PAGE> 51
APPENDIX C
EXAMPLES OF CALCULATION OF WITHDRAWAL CHARGE(A)
(A) Effective November 1, 1996, no withdrawal charge will be imposed on
withdrawals from contracts issued on or after November 1, 1996.
Example 1 - Assume a single payment of $50,000 is made into the contract, no
transfers are made, no additional payments are made and there are no partial
withdrawals. The table below illustrates four examples of the withdrawal charges
that would be imposed if the contract is completely withdrawn, based on
hypothetical contract values.
<TABLE>
<CAPTION>
HYPOTHETICAL FREE PURCHASE
CONTRACT CONTRACT WITHDRAWAL PAYMENTS WITHDRAWAL
YEAR VALUE AMOUNT LIQUIDATED CHARGE
- ----------------------------------------------------------------------------------------------------------
PERCENT AMOUNT
------- ------
<S> <C> <C> <C> <C> <C>
1 55,000 5,000(a) 50,000 3% 1,500
2 50,500 5,000(b) 45,500 3% 1,365
3 60,000 10,000(c) 50,000 3% 1,500
4 70,000 20,000(d) 50,000 0% 0
</TABLE>
(a) During any contract year the free withdrawal amount is the greater of
accumulated earnings, or 10% of the total purchase payments made under
the contract less any prior partial withdrawals in that contract year.
In the first contract year the earnings under the contract and 10% of
purchase payments both equal $5,000. Consequently, on total withdrawal
$5,000 is withdrawn free of the withdrawal charge, the entire $50,000
purchase payment is liquidated and the withdrawal charge is assessed
against such liquidated purchase payment (contract value less free
withdrawal amount).
(b) In the example for the second contract year, the accumulated earnings
of $500 is less than 10% of purchase payments, therefore the free
withdrawal amount is equal to 10% of purchase payments ($50,000 X 10% =
$5,000) and the withdrawal charge is only applied to purchase payments
liquidated (contract value less free withdrawal amount).
(c) In the example for the third contract year, the accumulated earnings of
$10,000 is greater than 10% of purchase payments ($5,000), therefore
the free withdrawal amount is equal to the accumulated earnings of
$10,000 and the withdrawal charge is applied to the purchase payments
liquidated (contract value less free withdrawal amount).
(d) There is no withdrawal charge on any purchase payments liquidated that
have been in the contract for at least 3 years.
<PAGE> 52
Example 2 - Assume a single payment of $50,000 is made into the contract, no
transfers are made, no additional payments are made and there are a series of
four partial withdrawals made during the third contract year of $2,000, $5,000,
$7,000, and $8,000.
<TABLE>
<CAPTION>
HYPOTHETICAL PARTIAL WITHDRAWAL FREE PURCHASE
CONTRACT REQUESTED WITHDRAWAL PAYMENTS WITHDRAWAL
VALUE AMOUNT LIQUIDATED CHARGE
- ----------------------------------------------------------------------------------------------------------------
PERCENT AMOUNT
------- ------
<S> <C> <C> <C> <C> <C>
65,000 2,000 15,000(a) 0 3% 0
49,000 5,000 3,000(b) 2,000 3% 60
52,000 7,000 4,000(c) 3,000 3% 90
44,000 8,000 0(d) 8,000 3% 240
</TABLE>
(a) The free withdrawal amount during any contract year is the greater of
the contract value less the unliquidated purchase payments (accumulated
earnings), or 10% of purchase payments less 100% of all prior
withdrawals in that contract year. For the first example, accumulated
earnings of $15,000 is the free withdrawal amount since it is greater
than 10% of purchase payments less prior withdrawals ($5,000-0). The
amount requested ($2,000) is less than the free withdrawal amount so no
purchase payments are liquidated and no withdrawal charge applies.
(b) The contract has negative accumulated earnings ($49,000-$50,000), so
the free withdrawal amount is limited to 10% of purchase payments less
all prior withdrawals. Since $2,000 has already been withdrawn earlier
in the current contract year, the remaining free withdrawal amount
during the third contract year is $3,000. The $5,000 partial withdrawal
will consist of $3,000 free of withdrawal charge, and the remaining
$2,000 will be subject to a withdrawal charge and result in purchase
payments being liquidated. The remaining unliquidated purchase payments
are $48,000.
(c) The contract has increased in value to $52,000. The unliquidated
purchase payments are $48,000 so the accumulated earnings are $4,000,
which is greater than 10% of purchase payments less prior withdrawals
($5,000-$2,000-$5,000 < 0). Hence the free withdrawal amount is
$4,000. Therefore, $3,000 of the $7,000 partial withdrawal will be
subject to a withdrawal charge and result in purchase payments being
liquidated. The remaining unliquidated purchase payments are $45,000.
(d) The free withdrawal amount is zero since the contract has negative
accumulated earnings ($44,000-$45,000) and the full 10% of purchase
payments ($5,000) has already been utilized. The full amount of $8,000
will result in purchase payments being liquidated subject to a
withdrawal charge. At the beginning of the next contract year the full
10% of purchase payments would be available again for withdrawal
requests during that year.
<PAGE> 53
APPENDIX D
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.
<TABLE>
<CAPTION>
TAX RATE
QUALIFIED NON-QUALIFIED
STATE CONTRACTS CONTRACTS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
CALIFORNIA........................................... .50% 2.35%
MAINE................................................ .00% 2.00%
NEVADA............................................... .00% 3.50%
PUERTO RICO.......................................... 1.00% 1.00%
SOUTH DAKOTA*........................................ .00% 1.25%
WEST VIRGINIA........................................ 1.00% 1.00%
WYOMING.............................................. .00% 1.00%
</TABLE>
*Premium tax paid upon receipt of premium (no tax at annuitization if tax paid
on premium at issue).
<PAGE> 54
APPENDIX E
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:
<TABLE>
<CAPTION>
ISSUE AGE MAXIMUM MATURITY AGE
- --------------------------------------------------------------
<S> <C>
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
</TABLE>
It is required that the annuitant exercise a settlement annuity
option no later than the maximum maturity age stated above. For example an
annuitant age 60 at issue must exercise a settlement option prior to the
attainment of age 86. We will use the issue age of the youngest named annuitant
in the determination of the required settlement option date.
If contracts are issued with annuitants over age 96, a withdrawal
charge could be imposed if they terminate the contract rather than elect a
settlement option upon attainment of the maximum maturity age. This is a result
of the restrictions by Pennsylvania in combination with the 3-year withdrawal
charge schedule of the contract.
<PAGE> 55
APPENDIX F
PRIOR CONTRACTS (VV CONTRACTS)
PRIOR CONTRACTS
This Appendix sets forth the principal differences between the contract
offered by this Prospectus and a class of variable annuity contract that we
offer in the state of Washington ("PRIOR CONTRACTS" or "VV CONTRACTS") and which
were previously sold in other states during the period April, 1993 to March,
1998. The principal differences between the contract offered by this Prospectus
and the VV contract relate to the death benefit provisions.
DEATH BENEFIT PROVISIONS UNDER PRIOR CONTRACTS
Death of Last Surviving Annuitant (Where the Annuitant Was Not an Owner)
We will pay the minimum death benefit (minus any unpaid loans) to the
beneficiary if :
- the annuitant dies before the maturity date,
- the annuitant is not an owner,
- there is no surviving co-annuitant, and
- no owner of the contract is a non-natural person.
If any owner of the contract is a non-natural person, the death or change of any
annuitant is treated as the death of an owner. The beneficiary may elect to:
- receive payment (either as a lump sum or in accordance with
any annuity option described in the contract) or
- continue the contract, as its owner, with the contract value
on the date due proof of death and all required claim forms
are received, equal to the minimum death benefit.
An election to receive the minimum death benefit under an annuity option must be
made within 60 days after the date on which the death benefit first becomes
payable. In general, a beneficiary who continues the contract will nonetheless
be treated for Federal income tax purposes as if he or she had received the
minimum death benefit.
Death of Owner
Deceased Owner (Who was the Last-Surviving Annuitant): We will pay the
minimum death benefit, less any unpaid loans, to the beneficiary if:
- an owner dies before the maturity date,
- the deceased owner is an annuitant, and
- there is no surviving co-annuitant.
If the contract is a non-qualified contract, after the owner's death, the
beneficiary's entire interest must be distributed within five years unless:
- the beneficiary elects to receive his or her interest as an
annuity which begins within one year of the owner's death and
is paid over the beneficiary's life or over a period not
extending beyond the beneficiary's life expectancy or
- the beneficiary is the deceased owner's surviving spouse and
elects to continue the contract, as its owner, with the
contract value on the date due proof of death and all
required claim forms are received, equal to the minimum death
benefit.
An election to receive the minimum death benefit as an annuity must be made
within 60 days after the date on which the death benefit first becomes payable
If the spouse continues the contract, the distribution rules applicable when a
contract owner dies generally will apply when that spouse, as the owner, dies.
For purposes of this paragraph, in determining the minimum death benefit,
withdrawal charges (applicable when an annuitant either dies after the first of
the month following his or her 85th birthday or when the annuitant had attained
age 81 or greater on the contract date -- see "Minimum Death Benefit") will be
taken into account, but only when the minimum death benefit is paid and only if
such charges would have applied if the payment had been made to the deceased
owner at that time.
<PAGE> 56
Deceased Owner (Who was Not the Last-Surviving Annuitant and There Are
No Surviving Owners):
If:
- an owner dies before the maturity date,
- any annuitant survives, and
- there are no surviving owners,
we will transfer the interest in the contract to the successor owner (the
person, persons, or entity to become the contract owner if the contract owner
dies prior to the maturity date). If the contract is a non-qualified contract,
after the owner's death, the successor owner's entire interest in the contract
must be distributed within five years unless:
- the successor owner elects to receive payment of the interest in
the contract as an annuity which begins within one year of the
owner's death and is paid over the successor owner's life or over
a period not extending beyond the successor owner's life
expectancy or
- the successor owner is the deceased owner's surviving spouse and
elects to continue the contract, as its owner, with the contract
value on the date due proof of death and all required claim forms
are received, equal to the interest in the contract.
An election to receive the interest in the contract as an annuity must be made
within 60 days after the date on which the death benefit first becomes payable.
If the spouse continues the contract, the distribution rules applicable when a
contract owner dies generally will apply when that spouse, as the owner, dies.
If the deceased contract owner had not attained age 81 on the contract date, the
interest in the contract equals the contract value. If the deceased contract
owner had attained age 81 on the contract date, the interest in the contract
also equals the contract value, but such interest may be subject to applicable
withdrawal charges when any amounts are actually paid. The successor owner's
right to the interest in the contract does not affect the annuitant designations
in the contract, although the successor owner may change such designations after
acquiring the interest in the contract.
Deceased Owner (Who was Not the Last-Surviving Annuitant and There Are
Surviving Owners):
If :
- an owner dies before the maturity date,
- any annuitant survives, and
- there is a surviving owner,
we will transfer the interest in the contract to the surviving owner. The amount
of this interest and the rights and restrictions attendant to this transfer are
the same as those described in the immediately preceding paragraph, except that
"surviving owner" should be substituted for "successor owner," wherever these
terms appear.
Non-Natural Owners: If any owner of a non-qualified contract is not an
individual, the death or change of any annuitant will be treated as the death of
an owner (who was not the last-surviving annuitant), unless the last-surviving
annuitant has actually died in which case the death will be treated as the death
of an owner (who is the last-surviving annuitant).
Application of Distributed Amounts Towards the Purchase of a New
Contract: A beneficiary, successor owner, or surviving owner, as the case may
be, may apply amounts required to be distributed towards the purchase of a new
contract. In general, if such distributed amounts are so applied, the
beneficiary, successor owner, or surviving owner will be treated for Federal
income tax purposes as if he or she had received these distributed amounts.
Minimum Death Benefit
If the last surviving annuitant dies on or before the first of the
month following his or her 85th birthday and had an attained age of less than 81
years on the contract date, the minimum death benefit will be equal to the
greater of:
- the contract value on the date due proof of death and all
required claim forms are received at our Annuity Service
Office, or
<PAGE> 57
- the excess of
- the sum of each purchase payment accumulated daily, at the
equivalent of 5% per year, starting on the date each purchase
payment is allocated to the contract, with a maximum
accumulation of two times each purchase payment, over
- the sum of each withdrawal or annuitized amount, including any
applicable withdrawal charges, accumulated daily at a rate
equivalent to 5% per year, starting as of the date of each
such withdrawal or annuitization, with a maximum accumulation
of two times each such withdrawal or annuitization amount.
If the last surviving annuitant dies after the -first of the month
following his or her 85th birthday and had an attained age of less than 81 years
on the contract date, the minimum death benefit will be equal to the greater of:
- the contract value on the date due proof of death and all required
claim forms are received at our Annuity Service Office, or
- the excess of:
- the sum of all purchase payments over
- the sum of any amounts deducted in connection with partial
withdrawals.
If the last surviving annuitant dies and the Annuitant had an attained
age of 81 or greater on the contract date, the minimum death benefit payable on
due proof of death and receipt of all required claim forms will equal the amount
payable on total withdrawal.
OTHER CONTRACT PROVISIONS
Annuity Tables Assumed Interest Rate
A 4% assumed interest rate is built into the annuity tables in the
prior contract used to determine the first variable annuity payment to be made
under that contract.
Fixed accounts are not available in Washington state.
FIXED ACCOUNT MINIMUM INTEREST GUARANTEE
The minimum interest rate to be credited for any guarantee period under
the fixed portion of the prior contracts is 4%. If a withdrawal is deferred for
more than 30 days, we will pay interest on the amount deferred at a rate not
less than 4% per year (or a higher rate if required by applicable law).
The fixed account is not available to contracts issued in the state of
Washington.
<PAGE> 58
TABLE OF ACCUMULATION UNIT VALUES RELATING TO PRIOR CONTRACTS
<TABLE>
<CAPTION>
SUB-ACCOUNT UNIT VALUE AT START UNIT VALUE AT NUMBER OF UNITS AT END
OF YEAR(A) END OF YEAR OF YEAR
- -------------------------------------- --------------------- ------------------------------ --------------------------
<S> <C> <C> <C>
Pacific Rim Emerging Markets
1997 $12.500000 $8.160547 34,627.016
1998 8.160547 7.656925 41,134.511
1999 7.656925 12.267100 59,652.978
- -------------------------------------- --------------------- ------------------------------ --------------------------
Science & Technology
1997 $12.500000 $13.613317 135,733.204
1998 13.613317 19.191525 213,834.441
1999 19.191525 37.660683 439,623.047
- -------------------------------------- --------------------- ------------------------------ --------------------------
International Small Cap
1996 $12.500000 $13.465203 233,342.969
1997 13.465203 13.348864 450,429.209
1998 13.348864 14.687879 346,668.259
1999 14.687879 26.718058 297,099.270
- -------------------------------------- --------------------- ------------------------------ --------------------------
Aggressive Growth
1997 $12.500000 $12.296448 90,240.319
1998 12.296448 12.617679 148,710.766
1999 12.617679 16.504105 160,483.979
- -------------------------------------- --------------------- ------------------------------ --------------------------
Emerging Small Company
1997 $12.500000 $14.537900 102,965.388
1998 14.537900 14.310172 102,715.794
1999 14.310172 24.427201 122,829.358
- -------------------------------------- --------------------- ------------------------------ --------------------------
Small Company Blend
1999 $12.500000 $15.895877 26,632.075
- -------------------------------------- --------------------- ------------------------------ --------------------------
Mid Cap Growth
1996 $12.500000 $13.188627 283,880.941
1997 13.188627 14.952186 958,265.084
1998 14.952186 18.869029 803,736.602
1999 18.869029 26.855000 771,866.732
- -------------------------------------- --------------------- ------------------------------ --------------------------
Mid Cap Stock
1999 $12.500000 $12.462837 12,667.874
- -------------------------------------- --------------------- ------------------------------ --------------------------
Overseas
1995 $10.000000 $10.528678 178,852.062
1996 10.528678 11.660474 687,006.606
1997 11.660474 11.460078 955,856.892
1998 11.460078 12.168562 832,545.108
1999 12.168562 16.833813 707,261.234
- -------------------------------------- --------------------- ------------------------------ --------------------------
International Stock
1997 $12.500000 $12.620816 152,757.810
1998 12.620816 14.265882 164,021.287
1999 14.265882 18.202233 171,066.912
- -------------------------------------- --------------------- ------------------------------ --------------------------
International Value
1999 $12.500000 $12.83881 52,564.605
- -------------------------------------- --------------------- ------------------------------ --------------------------
Mid Cap Blend
1994 $10.675585 $10.965867 36,324.491
1995 10.965867 15.402974 663,652.478
1996 15.402974 18.199588 2,871,862.671
1997 18.199588 21.347335 3,250,746.116
1998 21.347335 22.973151 2,667,318.668
1999 22.973151 28.867552 1,969,128.617
- -------------------------------------- --------------------- ------------------------------ --------------------------
</TABLE>
<PAGE> 59
<TABLE>
<CAPTION>
SUB-ACCOUNT UNIT VALUE AT START UNIT VALUE AT NUMBER OF UNITS AT END
OF YEAR(A) END OF YEAR OF YEAR
- -------------------------------------- --------------------- ------------------------------ --------------------------
<S> <C> <C> <C>
Small Company Value
1997 $12.500000 $ 11.890948 64,896.994
1998 11.890948 11.143828 136,031.616
1999 11.143828 11.837890 110,833.955
- -------------------------------------- --------------------- ------------------------------ --------------------------
Global Equity
1994 $13.117996 $ 12.153179 49,050.593
1995 12.153179 12.872711 361,285.266
1996 12.872711 14.257610 2,854,082.412
1997 14.257610 16.941296 3,095,669.746
1998 16.941296 18.706100 2,651,804.343
1999 18.706100 19.073534 2,058,275.152
- -------------------------------------- --------------------- ------------------------------ --------------------------
Growth
1996 $12.500000 $ 13.711434 59,459.482
1997 13.711434 16.906185 241,081.231
1998 16.906185 20.612746 237,044.423
1999 20.612746 27.818889 392,471.271
- -------------------------------------- --------------------- ------------------------------ --------------------------
Large Cap Growth
1994 $10.444531 $ 10.303433 7,523.248
1995 10.303433 12.443644 67,382.620
1996 12.443644 13.829135 407,378.669
1997 13.829135 16.200363 420,740.164
1998 16.200363 18.982681 407,475.288
1999 18.982681 23.393391 417,856.885
- -------------------------------------- --------------------- ------------------------------ --------------------------
Quantitative Equity
1997 $12.500000 $ 16.067235 37,093.601
1998 16.067235 19.968902 79,660.211
1999 19.968902 24.022598 119,064.802
- -------------------------------------- --------------------- ------------------------------ --------------------------
Blue Chip Growth
1994 $ 9.145044 $ 9.280989 18,796.455
1995 9.280989 11.551552 274,368.201
1996 11.551552 14.303631 1,496,909.237
1997 14.303631 17.859518 2,019,046.153
1998 17.859518 22.573222 1,961,275.725
1999 22.573222 26.518360 1,756,878.003
- -------------------------------------- --------------------- ------------------------------ --------------------------
Real Estate Securities
1997 $12.500000 $ 14.912035 136,253.215
1998 14.912035 12.255908 187,493.937
1999 12.255908 11.090818 133,707.917
- -------------------------------------- --------------------- ------------------------------ --------------------------
Value
1997 $12.500000 $ 15.019763 189,688.364
1998 15.019763 14.519332 291,736.295
1999 14.519332 13.883152 230,494.539
- -------------------------------------- --------------------- ------------------------------ --------------------------
Growth & Income
1994 $10.576574 $ 10.436393 24,644.881
1995 10.436393 13.263871 448,739.926
1996 13.263871 16.024067 2,888,470.321
1997 16.024067 20.936844 3,683,351.338
1998 20.936844 26.056725 3,517,115.549
1999 26.056725 30.467742 3,324,063.963
- -------------------------------------- --------------------- ------------------------------ --------------------------
U.S. Large Cap Value
1999 $12.500000 $ 12.700198 144,388.409
</TABLE>
<PAGE> 60
<TABLE>
<CAPTION>
SUB-ACCOUNT UNIT VALUE AT START UNIT VALUE AT NUMBER OF UNITS AT END
OF YEAR(A) END OF YEAR OF YEAR
- -------------------------------------- --------------------- ------------------------------ --------------------------
<S> <C> <C> <C>
Equity-Income
1994 $10.844086 $ 10.578121 31,102.019
1995 10.578121 12.870851 375,815.524
1996 12.870851 15.172018 2,075,876.729
1997 15.172018 19.357272 2,755,727.059
1998 19.357272 20.794388 2,465,922.102
1999 20.794388 21.149570 1,965,890.905
- -------------------------------------- --------------------- ------------------------------ --------------------------
Income & Value
1994 $10.269505 $ 10.156264 19,952.394
1995 10.156264 12.056663 205,665.149
1996 12.056663 13.039212 1,358,995.894
1997 13.039212 14.861563 1,405,589.059
1998 14.861563 16.824988 1,219,676.937
1999 16.824988 17.986686 1,125,825.714
- -------------------------------------- --------------------- ------------------------------ --------------------------
Balanced
1997 $12.500000 $ 14.573591 43,507.584
1998 14.573591 16.377624 106,132.643
1999 16.377624 15.843343 84,860.215
- -------------------------------------- --------------------- ------------------------------ --------------------------
High Yield
1997 $12.500000 $13.856003 159,593.993
1998 13.856003 14.008370 235,174.727
1999 14.008370 14.881850 210,283.790
- -------------------------------------- --------------------- ------------------------------ --------------------------
Strategic Bond
1994 $10.132498 $ 9.897404 9,621.542
1995 9.897404 11.607403 146,877.133
1996 11.607403 13.093621 687,006.604
1997 13.093621 14.293477 1,309,575.793
1998 14.293477 14.243718 1,158,904.476
1999 14.243718 14.321908 1,054,279.029
- -------------------------------------- --------------------- ------------------------------ --------------------------
Global Bond
1994 $10.345362 $ 10.262238 6,324.370
1995 10.262238 12.434811 108,887.995
1996 12.434811 13.821405 1,152,443.822
1997 13.821405 13.995892 1,043,390.432
1998 13.995892 14.814388 832,754.874
1999 14.814388 13.599529 604,727.661
- -------------------------------------- --------------------- ------------------------------ --------------------------
Investment Quality Bond
1994 $ 9.785855 $ 9.713969 5,980.272
1995 9.713969 11.417606 143,843.254
1996 11.417606 11.519237 727,979.095
1997 11.519237 12.435620 880,259.981
1998 12.435620 13.299876 792,835.875
1999 13.299876 12.847911 638,266.213
- -------------------------------------- --------------------- ------------------------------ --------------------------
Diversified Bond
1994 $10.124972 $ 10.050011 2,989.757
1995 10.050011 11.672867 123,692.494
1996 11.672867 12.287873 661,002.839
1997 12.287873 13.469181 759,271.964
1998 13.469181 14.663990 604,747.668
1999 14.663990 14.527388 490,754.770
</TABLE>
<PAGE> 61
<TABLE>
<CAPTION>
SUB-ACCOUNT UNIT VALUE AT START UNIT VALUE AT NUMBER OF UNITS AT END
OF YEAR(A) END OF YEAR OF YEAR
- -------------------------------------- --------------------- ------------------------------ --------------------------
<S> <C> <C> <C>
U.S. Government Securities
1994 $10.033365 $ 9.968713 17,964.448
1995 9.968713 11.333420 218,996.714
1996 11.333420 11.522857 909,658.556
1997 11.522857 12.294922 963,718.317
1998 12.294922 12.999698 941,111.101
1999 12.999698 12.757839 725,036.390
- -------------------------------------- --------------------- ------------------------------ --------------------------
Money Market
1994 $10.172129 $10.290731 46,595.747
1995 10.290731 10.692803 282,116.623
1996 10.692803 11.048244 1,414,861.094
1997 11.048244 11.427217 1,688,484.012
1998 11.427217 11.811952 1,585,641.987
1999 11.811952 12.153141 3,130,591.073
- -------------------------------------- --------------------- ------------------------------ --------------------------
Lifestyle Aggressive 1000
1997 $12.500000 $13.635694 16,912.665
1998 13.635694 14.064128 35,287.822
1999 14.064128 15.855076 20,252.890
- -------------------------------------- --------------------- ------------------------------ --------------------------
Lifestyle Growth 820
1997 $12.500000 $13.998474 296,965.327
1998 13.998474 14.623605 482,081.492
1999 14.623605 16.767184 336,530.505
- -------------------------------------- --------------------- ------------------------------ --------------------------
Lifestyle Balanced 640
1997 $12.500000 $14.031517 217,585.010
1998 14.031517 14.591457 271,046.864
1999 14.591457 16.136115 129,605.695
- -------------------------------------- --------------------- ------------------------------ --------------------------
Lifestyle Moderate 460
1997 $12.500000 $13.981923 143,237.634
1998 13.981923 15.096548 197,638.622
1999 15.096548 16.021927 179,659.697
- -------------------------------------- --------------------- ------------------------------ --------------------------
Lifestyle Conservative 280
1997 $12.500000 $13.790807 17,023.204
1998 13.790807 14.950846 74,057.315
1999 14.950846 15.324704 70,653.704
- -------------------------------------- --------------------- ------------------------------ --------------------------
</TABLE>
(A) Units under this series of contracts were first credited under the
sub-accounts on April 1, 1993, except in the case of:
- Overseas Trust where units were first credited on January 9, 1995;
- Mid Cap Growth and International Small Cap Trusts where units were
first credited on March 4, 1996;
- Growth Trust where units were first credited on July 15, 1996;
- Pacific Rim Emerging Markets, Science & Technology, Aggressive Growth,
Emerging Small Company, International Stock, Quantitative Equity, Real
Estate Securities, Value, Balanced, and High Yield Trusts where units
were first credited on January 1, 1997;
- Lifestyle Aggressive 1000, Lifestyle Growth 820, Lifestyle Balanced
640, Lifestyle Moderate 460, and Lifestyle Conservative 280 Trusts
where units were first credited on January 7, 1997;
- Small Company Value Trust where units were first credited on October 1,
1997; and
- 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.
<PAGE> 62
APPENDIX G
QUALIFIED PLAN TYPES
Set forth below are brief descriptions of the types of qualified plans
in connection with which we will issue contracts. Certain potential tax
consequences associated with use of the contract in connection with qualified
plans are also described. 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, 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.
IRAs generally may not provide life insurance coverage, but they may
provide a death benefit that equals the greater of the premiums paid and the
contract value. The contract provides a death benefit that in certain
circumstances may exceed the greater of the purchase payments and the contract
value. It is possible that the contract's death benefit could be viewed as
providing life insurance coverage with the result that the contract would not be
viewed as satisfying the requirements of an IRA.
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. As discussed above
(see Individual Retirement Annuities), there is some uncertainty regarding the
treatment of the contract's death benefit for purposes of the tax rules
governing IRAs (which would include SEP-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. As discussed above (see
"Individual Retirement Annuities"), there is some uncertainty regarding the
proper characterization of the contract's death benefit for purposes of the tax
rules governing IRAs (which would include SIMPLE IRAs).
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 is 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.
As described above (see "Individual Retirement Annuities"), there is
some uncertainty regarding the proper characterization of the contract's death
benefit for purposes of the tax rules governing IRAs (which include Roth IRAs).
Also, the state tax treatment of a Roth IRA may differ from the Federal income
tax treatment of a Roth IRA.
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. The contract provides a
death benefit that in certain circumstances may exceed the greater of the
purchase payments and the contract value. It is possible that the IRS could
characterize
<PAGE> 63
the death benefit as an "incidental death benefit." There are limitations on the
amount of incidental benefits that may be provided under pension and profit
sharing plans. In addition, the provision of such benefits may result in current
taxable income to participants.
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. In
particular, purchasers should consider that the contract provides a death
benefit that in certain circumstances may exceed the greater of the purchase
payments and the contract value. It is possible that the IRS could characterize
the death benefit as an "incidental death benefit." If so, the contract owner
could be deemed to receive currently taxable income. In addition, there are
limitations on the amount of incidental benefits that may be provided under a
tax-sheltered annuity. Even if the IRS characterized the benefit under the
contract as an incidental death benefit, the death benefit is unlikely to
violate those limits unless the purchaser also purchases a life insurance
contract as part of his or her tax-sheltered annuity plan.
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.)
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. The contract will be issued in
connection with a Section 457 deferred compensation plan sponsored by a state or
local government only if the plan has established a trust to hold plan assets,
including the contract.
<PAGE> 64
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 65
STATEMENT OF ADDITIONAL INFORMATION
THE MANUFACTURERS LIFE INSURANCE COMPANY OF
NORTH AMERICA SEPARATE ACCOUNT A
OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
FLEXIBLE PURCHASE PAYMENT INDIVIDUAL DEFERRED
COMBINATION FIXED AND VARIABLE ANNUITY CONTRACT
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 of North America 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, 2000.
The Manufacturers Life Insurance Company of North America
500 Boylston Street
Boston, Massachusetts 02116-3739
(617) 663-3000
(800) 344-1029
2
<PAGE> 66
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
General Information and History............................................... 4
Performance Data.............................................................. 4
Services
Independent Auditors...................................................16
Servicing Agent........................................................17
Principal Underwriter..................................................17
Audited Financial Statements..................................................18
3
<PAGE> 67
GENERAL INFORMATION AND HISTORY
The Manufacturers Life Insurance Company of North America Separate
Account A (the "VARIABLE ACCOUNT") is a separate investment account of The
Manufacturers Life Insurance Company of North America ("WE" or "US"). We are a
stock life insurance company organized under the laws of Delaware in 1979. Our
principal 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 it subsidiaries,
collectively known as Manulife Financial.
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
- not assuming 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 numbers 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 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 contract owners who wish
to assess the performance of an ongoing contract of the size that is meaningful
to the individual contract owner.
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
4
<PAGE> 68
Variable Account first became available for investment under other contracts
offered by us, 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, Inc. portfolio), adjusted to reflect current
contract charges.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
CALCULATED AS OF DECEMBER 31, 1999
FOR CONTACTS ISSUED PRIOR TO NOVEMBER 1, 1996
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE(A)
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets 57.21% N/A -1.53% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Science & Technology 93.24% N/A 44.00% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
International Small Cap 78.91% N/A 21.95% 03/04/96
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Aggressive Growth 27.80% N/A 8.88% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Emerging Small Company 67.70% N/A 24.40% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Small Company Blend N/A N/A 24.17% 05/01/99
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Mid Cap Stock N/A N/A -2.99% 05/01/99
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
All Cap Growth (C) 39.32% N/A 22.12% 03/04/96
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Overseas 35.34% N/A 11.03% 01/09/95
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
International Stock 24.59% N/A 12.57% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
International Value N/A N/A -0.07% 05/01/99
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Mid Cap Blend 22.66% 21.36% 12.15% (B) 06/18/85
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Small Company Value 3.34% N/A -3.56% 10/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Global Equity -0.79% 9.43% 6.96% (B) 03/18/88
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Growth 31.96% N/A 25.99% 07/15/96
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Large Cap Growth 20.24% 17.82% 10.95% (B) 08/03/89
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Quantitative Equity 17.30% N/A 23.70% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Blue Chip Growth 14.48% 23.36% 13.94% 12/11/92
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Real Estate Securities -11.92% N/A -4.77% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Value -6.95% N/A 2.62% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Growth & Income 13.93% 23.90% 16.53% 04/23/91
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
U.S. Large Cap Value N/A% N/A -1.15% 05/01/99
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Equity-Income -1.04% 14.86% 12.25% 02/19/93
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Income & Value 4.00% 12.11% 8.07% (B) 08/03/89
</TABLE>
5
<PAGE> 69
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Balanced -5.86% N/A 7.37% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
High Yield 3.35% N/A 5.09% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Strategic Bond -2.17% 7.67% 5.37% 02/19/93
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Global Bond -10.65% 5.79% 6.29% (B) 03/18/88
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Total Return N/A N/A -4.75% 05/01/99
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Investment Quality Bond -6.00% 5.75% 4.45% (B) 06/18/85
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Diversified Bond -3.60% 7.65% 5.73% (B) 08/03/89
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
U.S. Government Securities -4.50% 5.06% 5.12% (B) 03/18/88
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Money Market 0.10% 3.38% 3.17% (B) 06/18/85
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Aggressive 1000 9.73% N/A 7.45% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Growth 820 11.66% N/A 9.53% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Balanced 640 7.59% N/A 8.10% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Moderate 460 3.25% N/A 7.83% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Conservative 280 -0.27% N/A 6.20% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
</TABLE>
(A) Inception date of the sub-account of the Variable Account which invests in
the portfolio.
(B) 10 year average annual return.
(C) Formerly, the Mid Cap Growth Trust
6
<PAGE> 70
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
(ASSUMING REDEMPTION AT THE END OF THE TIME PERIOD)
CALCULATED AS OF DECEMBER 31, 1999
FOR CONTACTS ISSUED PRIOR TO NOVEMBER 1, 1996
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE(A)
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets (A) 57.21% 2.87% 1.61% 10/04/94
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Science & Technology 93.24% N/A 44.00% 01/01/97
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
International Small Cap 78.91% N/A 21.95% 03/04/96
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Aggressive Growth 27.80% N/A 8.88% 01/01/97
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Emerging Small Company 67.70% N/A 24.40% 01/01/97
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Small Company Blend N/A N/A 24.17% 05/01/99
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Mid Cap Stock N/A N/A -2.99% 05/01/99
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
All Cap Growth (C) 39.32% N/A 22.12% 03/04/96
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Overseas 35.34% N/A 11.03% 01/09/95
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
International Stock 24.59% N/A 12.57% 01/01/97
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
International Value N/A N/A -0.07% 05/01/99
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Mid Cap Blend 22.66% 21.36% 12.15% (B) 06/18/85
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Small Company Value 3.34% N/A -3.56% 10/01/97
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Global Equity -0.79% 9.43% 6.96% (B) 03/18/88
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Growth 31.96% N/A 25.99% 07/15/96
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Large Cap Growth 20.24% 17.82% 10.95% (B) 08/03/89
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Quantitative Equity (A) 17.30% 23.00% 14.07% (B) 04/30/87
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Blue Chip Growth (A) 14.48% 23.36% 13.94% 12/11/92
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Real Estate Securities -11.92% 5.38% 8.83% (B) 04/30/87
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Value -6.95% N/A 2.62% 01/01/97
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Growth & Income 13.93% 23.90% 16.53% 04/23/91
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
U.S. Large Cap Value N/A N/A -1.15% 05/01/99
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Equity-Income -1.04% 14.86% 12.25% 02/19/93
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Income & Value 4.00% 12.11% 8.07% (B) 08/03/89
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Balanced -5.86% N/A 7.37% 01/01/97
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
High Yield 3.35% N/A 5.09% 01/01/97
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Strategic Bond -2.17% 7.67% 5.37% 02/19/93
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
</TABLE>
7
<PAGE> 71
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE(A)
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
<S> <C> <C> <C> <C>
Global Bond -10.65% 5.79% 6.29% (B) 03/18/88
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Total Return N/A N/A -4.75% 05/01/99
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Investment Quality Bond -6.00% 5.75% 4.45% (B) 06/18/85
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Diversified Bond -3.60% 7.65% 5.73% (B) 08/03/89
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
U.S. Government Securities -4.50% 5.06% 5.12% (B) 03/18/88
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Money Market 0.10% 3.38% 3.17% (B) 06/18/85
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Lifestyle Aggressive 1000 9.73% N/A 7.45% 01/07/97
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Lifestyle Growth 820 11.66% N/A 9.53% 01/07/97
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Lifestyle Balanced 640 7.59% N/A 8.10% 01/07/97
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Lifestyle Moderate 460 3.25% N/A 7.83% 01/07/97
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
Lifestyle Conservative 280 -0.27% N/A 6.20% 01/07/97
- ------------------------------------- ------------------ ------------------- ----------------------- ---------------
</TABLE>
(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) Formerly, the Mid Cap Growth Trust
8
<PAGE> 72
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
(ASSUMING NO REDEMPTION AT THE END OF THE TIME PERIOD)
CALCULATED AS OF DECEMBER 31, 1999
FOR CONTACTS ISSUED PRIOR TO NOVEMBER 1, 1996
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE(A)
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets (A) 60.21% 2.87% 1.61% 10/04/94
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
Science & Technology 96.24% N/A 44.48% 01/01/97
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
International Small Cap 81.91% N/A 21.95% 03/04/96
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
Aggressive Growth 30.80% N/A 9.71% 01/01/97
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
Emerging Small Company 70.70% N/A 25.05% 01/01/97
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
Small Company Blend N/A N/A 27.17% 05/01/99
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
Mid Cap Stock N/A N/A -0.30% 05/01/99
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
All Cap Growth (C) 42.32% N/A 22.12% 03/04/96
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
Overseas 38.34% N/A 11.03% 01/09/95
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
International Stock 27.59% N/A 13.36% 01/01/97
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
International Value N/A N/A 2.71% 05/01/99
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
Mid Cap Blend 25.66% 21.36% 12.15% (B) 06/18/85
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
Small Company Value 6.23% N/A -2.39% 10/01/97
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
Global Equity 1.96% 9.43% 6.96% (B) 03/18/88
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
Growth 34.96% N/A 25.99% 07/15/96
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
Large Cap Growth 23.24% 17.82% 10.95% (B) 08/03/89
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
Quantitative Equity (A) 20.30% 23.00% 14.07% (B) 04/30/87
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
Blue Chip Growth 17.48% 23.36% 13.94% 12/11/92
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
Real Estate Securities (A) -9.51% 5.38% 8.83% (B) 04/30/87
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
Value -4.38% N/A 3.56% 01/01/97
- ------------------------------------ ------------------ ------------------ ------------------------ ----------------
Growth & Income 16.93% 23.90% 16.53% 04/23/91
- ------------------------------------ ------------------ ------------------ ------------------------ ----------------
U.S. Large Cap Value N/A N/A 1.60% 05/01/99
- ------------------------------------ ------------------ ------------------ ------------------------ ----------------
Equity-Income 1.71% 14.86% 12.25% 02/19/93
- ------------------------------------ ------------------ ------------------ ------------------------ ----------------
Income & Value 6.90% 12.11% 8.07% (B) 08/03/89
- ------------------------------------ ------------------ ------------------ ------------------------ ----------------
Balanced -3.26% N/A 8.23% 01/01/97
- ------------------------------------ ------------------ ------------------ ------------------------ ----------------
High Yield 6.24% N/A 5.99% 01/01/97
- ------------------------------------ ------------------ ------------------ ------------------------ ----------------
Strategic Bond 0.55% 7.67% 5.37% 02/19/93
- ------------------------------------ ------------------ ------------------ ------------------------ ----------------
</TABLE>
9
<PAGE> 73
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE*
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
<S> <C> <C> <C> <C>
Global Bond -8.20% 5.79% 6.29% (B) 03/18/88
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
Total Return N/A N/A -2.12% 05/01/99
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
Investment Quality Bond -3.40% 5.75% 4.45% (B) 06/18/85
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
Diversified Bond -0.93% 7.65% 5.73% (B) 08/03/89
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
U.S. Government Securities -1.86% 5.06% 5.12% (B) 03/18/88
- ------------------------------------ ------------------ ------------------ ------------------------- ---------------
Money Market 2.89% 3.38% 3.17% 06/18/85
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Aggressive 1000 12.73% N/A 8.31% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Growth 820 14.66% N/A 10.36% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Balanced 640 10.59% N/A 8.95% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Moderate 460 6.13% N/A 8.69% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Conservative 280 2.50% N/A 7.08% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
</TABLE>
(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) Formerly, the Mid Cap Stock Trust
10
<PAGE> 74
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
CALCULATED AS OF DECEMBER 31, 1999
FOR CONTACTS ISSUED ON OR AFTER NOVEMBER 1, 1996
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE(A)
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets 60.21% N/A -0.63% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Science & Technology 96.24% N/A 44.48% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
International Small Cap 81.91% N/A 21.95% 03/04/96
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Aggressive Growth 30.80% N/A 9.71% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Emerging Small Company 70.70% N/A 25.05% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Small Company Blend N/A N/A 27.17% 05/01/99
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Mid Cap Stock N/A N/A -0.30% 05/01/99
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
All Cap Growth (C) 42.32% N/A 22.12% 03/04/96
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Overseas 38.34% N/A 11.03% 01/09/95
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
International Stock 27.59% N/A 13.36% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
International Value N/A N/A 2.71% 05/01/99
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Mid Cap Blend 25.66% 21.36% 12.15% (B) 06/18/85
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Small Company Value 6.23% N/A -2.39% 10/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Global Equity 1.96% 9.43% 6.96% (B) 03/18/88
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Growth 34.96% N/A 25.99% 07/15/96
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Large Cap Growth 23.24% 17.82% 10.95% (B) 08/03/89
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Quantitative Equity 20.30% N/A 24.35% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Blue Chip Growth 17.48% 23.36% 13.94% 12/11/92
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Real Estate Securities -9.51% N/A -3.91% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Value -4.38% N/A 3.56% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Growth & Income 16.93% 23.90% 16.53% 04/23/91
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
U.S. Large Cap Value N/A N/A 1.60% 05/01/99
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Equity-Income 1.71% 14.86% 12.25% 02/19/93
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Income & Value 6.90% 12.11% 8.07% (B) 08/03/89
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Balanced -3.26% N/A 8.23% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
High Yield 6.24% N/A 5.99% 01/01/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Strategic Bond 0.55% 7.67% 5.37% 02/19/93
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Global Bond -8.20% 5.79% 6.29% (B) 03/18/88
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
</TABLE>
11
<PAGE> 75
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE(A)
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
<S> <C> <C> <C> <C>
Total Return N/A N/A -2.12% 05/01/99
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Investment Quality Bond -3.40% 5.75% 4.45% (B) 06/18/85
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Diversified Bond -0.93% 7.65% 5.73% (B) 08/03/89
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
U.S. Government Securities -1.86% 5.06% 5.12% (B) 03/18/88
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Money Market 2.89% 3.38% 3.17% (B) 06/18/85
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Aggressive 1000 12.73% N/A 8.31% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Growth 820 14.66% N/A 10.36% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Balanced 640 10.59% N/A 8.95% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Moderate 460 6.13% N/A 8.69% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
Lifestyle Conservative 280 2.50% N/A 7.08% 01/07/97
- ----------------------------------- ------------------- ------------------ ------------------------- ---------------
</TABLE>
(A) Inception date of the sub-account of the Variable Account which invests in
the portfolio
(B) 10 year average annual return.
(C) Formerly, the Mid Cap Growth Trust
12
<PAGE> 76
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
(ASSUMING REDEMPTION AT THE END OF THE TIME PERIOD)
CALCULATED AS OF DECEMBER 31, 1999
FOR CONTACTS ISSUED ON OR AFTER NOVEMBER 1, 1996
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE(A)
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets (A) 60.21% 2.87% 1.61% 10/04/94
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Science & Technology 96.24% N/A 44.48% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
International Small Cap 81.91% N/A 21.95% 03/04/96
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Aggressive Growth 30.80% N/A 9.71% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Emerging Small Company 70.70% N/A 25.05% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Small Company Blend N/A N/A 27.17% 05/01/99
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Mid Cap Stock N/A N/A -0.30% 05/01/99
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
All Cap Growth (C) 42.32% N/A 22.12% 03/04/96
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Overseas 38.34% N/A 11.03% 01/09/95
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
International Stock 27.59% N/A 13.36% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
International Value N/A N/A 2.71% 05/01/99
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Mid Cap Blend 25.66% 21.36% 12.15% (B) 06/18/85
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Small Company Value 6.23% N/A -2.39% 10/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Global Equity 1.96% 9.43% 6.96% (B) 03/18/88
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Growth 34.96% N/A 25.99% 07/15/96
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Large Cap Growth 23.24% 17.82% 10.95% (B) 08/03/89
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Quantitative Equity (A) 20.30% 23.00% 14.07% (B) 04/30/87
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Blue Chip Growth 17.48% 23.36% 13.94% 12/11/92
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Real Estate Securities (A) -9.51% 5.38% 8.83% (B) 04/30/87
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Value -4.38% N/A 3.56% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Growth & Income 16.93% 23.90% 16.53% 04/23/91
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
U.S. Large Cap Value N/A N/A 1.60% 05/01/99
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Equity-Income 1.71% 14.86% 12.25% 02/19/93
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Income & Value 6.90% 12.11% 8.07% (B) 08/03/89
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Balanced -3.26% N/A 8.23% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
High Yield 6.24% N/A 5.99% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Strategic Bond 0.55% 7.67% 5.37% 02/19/93
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
</TABLE>
13
<PAGE> 77
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE(A)
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
<S> <C> <C> <C> <C>
Global Bond -8.20% 5.79% 6.29% (B) 03/18/88
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Total Return N/A N/A -2.12% 05/01/99
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Investment Quality Bond -3.40% 5.75% 4.45% (B) 06/18/85
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Diversified Bond -0.93% 7.65% 5.73% (B) 08/03/89
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
U.S. Government Securities -1.86% 5.06% 5.12% (B) 03/18/88
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Money Market 2.89% 3.38% 3.17% (B) 06/18/85
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Lifestyle Aggressive 1000 12.73% N/A 8.31% 01/07/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Lifestyle Growth 820 14.66% N/A 10.36% 01/07/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Lifestyle Balanced 640 10.59% N/A 8.95% 01/07/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Lifestyle Moderate 460 6.13% N/A 8.69% 01/07/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Lifestyle Conservative 280 2.50% N/A 7.08% 01/07/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
</TABLE>
(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) Formerly, the Mid Cap Growth Trust.
14
<PAGE> 78
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
(ASSUMING NO REDEMPTION AT THE END OF THE TIME PERIOD)
CALCULATED AS OF DECEMBER 31, 1999
FOR CONTACTS ISSUED ON OR AFTER NOVEMBER 1, 1996
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE(A)
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
<S> <C> <C> <C> <C>
Pacific Rim Emerging Markets(A) 60.21% 2.87% 1.61% 10/04/94
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Science & Technology 96.24% N/A 44.48% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
International Small Cap 81.91% N/A 21.95% 03/04/96
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Aggressive Growth 30.80% N/A 9.71% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Emerging Small Company 70.70% N/A 25.05% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Small Company Blend N/A N/A 27.17% 05/01/99
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Mid Cap Stock N/A N/A -0.30% 05/01/99
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
All Cap Growth(C) 42.32% N/A 22.12% 03/04/96
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Overseas 38.34% N/A 11.03% 01/09/95
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
International Stock 27.59% N/A 13.36% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
International Value N/A% N/A 2.71% 05/01/99
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Mid Cap Blend 25.66% 21.36% 12.15%(B) 06/18/85
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Small Company Value 6.23% N/A -2.39% 10/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Global Equity 1.96% 9.43% 6.96%(B) 03/18/88
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Growth 34.96% N/A 25.99% 07/15/96
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Large Cap Growth 23.24% 17.82% 10.95%(B) 08/03/89
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Quantitative Equity(A) 20.30% 23.00% 14.07%(B) 04/30/87
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Blue Chip Growth 17.48% 23.36% 13.94% 12/11/92
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Real Estate Securities(A) -9.51% 5.38% 8.83%(B) 04/30/87
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Value -4.38% N/A 3.56% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Growth & Income 16.93% 23.90% 16.53% 04/23/91
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
U.S. Large Cap Value N/A N/A 1.60% 05/01/99
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Equity-Income 1.71% 14.86% 12.25% 02/19/93
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Income & Value 6.90% 12.11% 8.07%(B) 08/03/89
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Balanced -3.26% N/A 8.23% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
High Yield 6.24% N/A 5.99% 01/01/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Strategic Bond 0.55% 7.67% 5.37% 02/19/93
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
</TABLE>
15
<PAGE> 79
<TABLE>
<CAPTION>
SINCE INCEPTION
OR 10 YEARS, INCEPTION
TRUST PORTFOLIO 1 YEAR 5 YEAR WHICHEVER IS SHORTER DATE(A)
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
<S> <C> <C> <C> <C>
Global Bond -8.20% 5.79% 6.29%(B) 03/18/88
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Total Return N/A N/A -2.12% 05/01/99
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Investment Quality Bond -3.40% 5.75% 4.45%(B) 06/18/85
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Diversified Bond -0.93% 7.65% 5.73%(B) 08/03/89
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
U.S. Government Securities -1.86% 5.06% 5.12%(B) 03/18/88
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Money Market 2.89% 3.38% 3.17%(B) 06/18/85
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Lifestyle Aggressive 1000 12.73% N/A 8.31% 01/07/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Lifestyle Growth 820 14.66% N/A 10.36% 01/07/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Lifestyle Balanced 640 10.59% N/A 8.95% 01/07/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Lifestyle Moderate 460 6.13% N/A 8.69% 01/07/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
Lifestyle Conservative 280 2.50% N/A 7.08% 01/07/97
- ------------------------------------- ----------------- ------------------ ------------------------- ---------------
</TABLE>
(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) Formerly, the Mid Cap Growth Trust
* * * * *
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 Company at December 31,
1999 and 1998 and for each of the three years in the period ended December 31,
1999 and of the Variable Account at December 31, 1999 and for the each of the
two years in the period ended December 31, 1999 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.
16
<PAGE> 80
SERVICING AGENT
Computer Sciences Corporation Financial Services Group ("CSC FSG")
provides to us a computerized data processing recordkeeping 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
Manufacturers Securities Services, LLC ("MSS"), the successor to NASL
Financial Services, Inc., is a Delaware limited liability company controlled by
us. It serves as principal underwriter of the contracts. Contracts are offered
on a continuous basis. The aggregate dollar amount of underwriting commissions
paid to MSS in 1999, 1998 and 1997 were $183,494,116, $122,828,714 and
$29,615,342 respectively. MSS did not retain any of these amounts during such
periods.
17
<PAGE> 81
AUDITED FINANCIAL STATEMENTS
18
<PAGE> 82
AUDITED CONSOLIDATED
FINANCIAL STATEMENTS
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
Years ended December 31, 1999, 1998 and 1997
<PAGE> 83
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
WITH REPORT OF INDEPENDENT AUDITORS
CONTENTS
Report of Independent Auditors.............................................1
Audited Consolidated Financial Statements
Consolidated Balance Sheets...........................................2
Consolidated Statements of Income.....................................3
Consolidated Statements of Changes in Shareholder's Equity............4
Consolidated Statements of Cash Flows.................................5
Notes to Consolidated Financial Statements.................................6
<PAGE> 84
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholder
The Manufacturers Life Insurance Company of North America
We have audited the accompanying consolidated balance sheets of The
Manufacturers Life Insurance Company of North America (the Company) as of
December 31, 1999 and 1998, and the related consolidated statements of income,
changes in shareholder's equity, and cash flows for each of the three years in
the period ended December 31, 1999. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated 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 consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
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 of North America at December 31, 1999 and
1998, and the consolidated results of its operations and its cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
Boston, Massachusetts
February 28, 2000 /s/ Ernst & Young LLP
1
<PAGE> 85
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As at December 31
ASSETS ($ thousands) 1999 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENTS:
Fixed-maturity securities available-for-sale, at fair value (note 3) $ 152,922 $ 157,743
(amortized cost: 1999 $156,382; 1998 $152,969)
Short-term investments 41,311 34,074
Policy loans 7,049 5,175
- --------------------------------------------------------------------------------------------------------------------
Total investments $ 201,282 $ 196,992
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 27,790 $ 10,320
Accrued investment income 2,630 3,132
Deferred acquisition costs (note 5) 655,294 449,332
Other assets 19,341 6,360
Due from reinsurers 797,746 641,858
Separate account assets 16,022,215 12,188,420
- --------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 17,726,298 $ 13,496,414
- --------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDER'S EQUITY ($ thousands)
- --------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Policyholder liabilities and accruals $ 139,764 $ 102,252
Payable to affiliates 10,267 4,388
Notes payable to affiliates (note 10) 311,100 241,000
Deferred income taxes (note 6) 46,533 23,777
Other liabilities 50,577 26,655
Due to reinsurers 808,599 655,892
Separate account liabilities 16,022,215 12,188,420
- --------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES $ 17,389,055 $ 13,242,384
- --------------------------------------------------------------------------------------------------------------------
SHAREHOLDER'S EQUITY:
Common stock (note 8) $ 2,600 $ 2,600
Additional paid-in capital (note 8) 207,102 179,053
Retained earnings 130,145 70,293
Accumulated other comprehensive (loss) income (2,604) 2,084
- --------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDER'S EQUITY $ 337,243 $ 254,030
- --------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 17,726,298 $ 13,496,414
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
2
<PAGE> 86
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
- --------------------------------------------------------------- ----------------- ------------------- ----------------
<S> <C> <C> <C>
REVENUES:
Fees from separate accounts and policyholder funds $ 218,231 $ 166,498 $ 126,636
Advisory fees and other distribution revenues 122,662 94,821 67,678
Premiums 175 - -
Net investment income (note 3) 12,721 12,178 7,906
Net realized investment (losses) gains (note 3) (266) 719 531
- --------------------------------------------------------------- ----------------- ------------------- ----------------
TOTAL REVENUE $ 353,523 $ 274,216 $ 202,751
- --------------------------------------------------------------- ----------------- ------------------- ----------------
BENEFITS AND EXPENSES:
Policyholder benefits and claims $ 6,735 $ 4,885 $ 4,986
Amortization of deferred acquisition costs (note 5) 44,554 53,499 40,649
Other insurance expenses (note 11) 192,834 135,624 100,385
Financing costs 16,842 12,497 14,268
- --------------------------------------------------------------- ----------------- ------------------- ----------------
TOTAL BENEFITS AND EXPENSES $ 260,965 $ 206,505 $ 160,288
- --------------------------------------------------------------- ----------------- ------------------- ----------------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES $ 92,558 $ 67,711 $ 42,463
- --------------------------------------------------------------- ----------------- ------------------- ----------------
- --------------------------------------------------------------- ----------------- ------------------- ----------------
INCOME TAX EXPENSE (NOTE 6) $ 32,706 $ 23,873 $ 15,044
- --------------------------------------------------------------- ----------------- ------------------- ----------------
- --------------------------------------------------------------- ----------------- ------------------- ----------------
NET INCOME FROM CONTINUING OPERATIONS $ 59,852 $ 43,838 $ 27,419
- --------------------------------------------------------------- ----------------- ------------------- ----------------
Discontinued operations (note 15):
Loss from operations, net of tax $ - $ - $ (141)
Gain on disposal, net of tax $ - $ 582 $ 5,955
- --------------------------------------------------------------- ----------------- ------------------- ----------------
NET INCOME $ 59,852 $ 44,420 $ 33,233
- --------------------------------------------------------------- ----------------- ------------------- ----------------
</TABLE>
See accompanying notes.
3
<PAGE> 87
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
RETAINED OTHER TOTAL
COMMON ADDITIONAL EARNINGS COMPREHENSIVE SHAREHOLDER'S
($thousands) STOCK PAID-IN CAPITAL (DEFICIT) (LOSS) INCOME EQUITY
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $2,600 $131,322 $(7,360) $ 509 $ 127,071
Capital contribution (note 8) - 47,731 - - 47,731
Comprehensive income (note 4) - - 33,233 691 33,924
-------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 $2,600 $179,053 $25,873 $ 1,200 $ 208,726
Comprehensive income (note 4) - - 44,420 884 45,304
-------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 $2,600 $179,053 $70,293 $ 2,084 $ 254,030
Capital contribution (note 8) - 28,049 - - 28,049
Comprehensive income (loss) (note 4) - - 59,852 (4,688) 55,164
-------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 $2,600 $207,102 $130,145 $ (2,604) $ 337,243
-------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
4
<PAGE> 88
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
- ---------------------------------------------------------------------------- -------------- ---------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 59,852 $ 44,420 $ 33,233
Adjustments to reconcile net income to net cash used in operating
activities:
Amortization of bond discount and premium 747 685 401
Benefits to policyholders 6,735 4,885 4,986
Provision for deferred income tax 24,269 6,872 15,767
Net realized investment losses (gains) 266 (719) (531)
Amortization of deferred acquisition costs 44,554 53,499 40,649
Amortization of deferred acquisition costs included in discontinued - - 1,707
operations
Policy acquisition costs deferred (248,483) (138,527) (123,965)
Gain on disposal of discontinued operations - - (9,394)
Changes in assets and liabilities:
Accrued investment income 502 (491) (835)
Other assets (12,981) 3,266 (1,396)
Receivable from affiliates - 4,605 (4,605)
Payable to affiliates 5,879 4,644 (1,462)
Other liabilities 23,922 (1,882) 6,642
- ---------------------------------------------------------------------------- -------------- ---------- -----------
Net cash used in operating activities $ (94,738) $(18,743) $(38,803)
- ---------------------------------------------------------------------------- -------------- ---------- -----------
INVESTING ACTIVITIES:
Fixed-maturity securities sold, matured or repaid $ 95,139 $ 37,694 $ 74,626
Fixed-maturity securities purchased (99,565) (50,056) (118,765)
Equity securities sold - - 1
Equity securities purchased - - (250)
Foreclosed real estate sold - - 2,268
Disposal of discontinued operations - - 16,338
Net change in short-term investments (7,237) (19,082) (10,697)
Policy loans advanced, net (1,874) (1,899) (2,639)
- ---------------------------------------------------------------------------- -------------- ---------- -----------
Cash used in investing activities $ (13,537) $(33,343) $ (39,118)
- ---------------------------------------------------------------------------- -------------- ---------- -----------
FINANCING ACTIVITIES:
Net reinsurance consideration $ (3,181) $ (7,014) $ (5,443)
Deposits to policyholder funds 50,351 15,551 20,607
Return of policyholder funds (19,574) (10,934) (15,462)
Increase in notes payable to affiliates 70,100 57,464 25,754
Capital contribution by Parent 28,049 - 47,731
- ---------------------------------------------------------------------------- -------------- ---------- -----------
Cash provided by financing activities $ 125,745 $ 55,067 $ 73,187
- ---------------------------------------------------------------------------- -------------- ---------- -----------
CASH AND CASH EQUIVALENTS:
Increase (decrease) during the year 17,470 2,981 (4,734)
Balance, beginning of year 10,320 7,339 12,073
- ---------------------------------------------------------------------------- -------------- ---------- -----------
BALANCE, END OF YEAR $ 27,790 $ 10,320 $ 7,339
- ---------------------------------------------------------------------------- -------------- ---------- -----------
</TABLE>
See accompanying notes.
5
<PAGE> 89
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(IN THOUSANDS OF DOLLARS)
1. ORGANIZATION
The Manufacturers Life Insurance Company of North America (hereinafter
referred to as "MNA"), is a wholly-owned subsidiary of Manulife-Wood
Logan Holding Co., Inc. (hereinafter referred to as "MWLH"). MWLH is an
indirect wholly-owned subsidiary of The Manufacturers Life Insurance
Company ("MLI"); prior to June 1, 1999, MLI indirectly owned 85% of
MWLH, and minority shareholders associated with MWLH owned the
remaining 15%. MLI is a wholly-owned subsidiary of Manulife Financial
Corporation, a publicly traded company. Manulife Financial Corporation
and its subsidiaries are known collectively as "Manulife Financial."
MNA owns 100% of The Manufacturers Life Insurance Company of New York
(hereinafter referred to as "MNY") and is the managing member with a
90% interest in Manufacturers Securities Services, LLC ("MSS"). MNY
owns a 10% interest in MSS. MNA, MNY and MSS are hereinafter referred
to collectively as "the Company."
MNA issues individual and group annuity contracts in forty-eight
states, excluding New York and New Hampshire. Prior to July 1, 1998,
MNA also issued individual variable life insurance contracts. MNY
issues individual and group annuity contracts and individual life
insurance contracts in New York. Amounts invested in the fixed portion
of the contracts are allocated to the general accounts of the Company
or noninsulated separate accounts of the Company. Amounts invested in
the variable portion of the contracts are allocated to the separate
accounts of the Company. Each of these separate accounts invests in
shares of the various portfolios of the Manufacturers Investment Trust
(hereinafter referred to as "MIT"), a no-load, open-end investment
management company organized as a Massachusetts business trust, or in
open-end investment management companies offered and managed by
unaffiliated third parties.
Prior to October 1, 1997, NASL Financial Services Inc. ("NASL
Financial"), a subsidiary of MNA, acted as investment adviser to MIT
and as principal underwriter of the variable contracts issued by the
Company. Effective October 1, 1997, MSS, the successor to NASL
Financial, replaced NASL Financial as the investment adviser to MIT and
as the principal underwriter of all variable contracts issued by MNA.
MSS also acts as the principal underwriter for the variable contracts
and is the exclusive distributor for all contracts issued by MNY.
On October 31, 1998, MNA transferred a 10% interest in the members'
equity of MSS to MNY as a contribution of capital valued at $175.
6
<PAGE> 90
2. SIGNIFICANT ACCOUNTING POLICIES
A) BASIS OF PRESENTATION
The accompanying consolidated financial statements of the Company have
been prepared in conformity with generally accepted accounting
principles ("GAAP") in the United States and include the accounts and
operations, after intercompany eliminations, of the Company and its
majority and wholly-owned subsidiaries, MSS and MNY.
The preparation of financial statements in conformity with GAAP
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.
B) RECENT ACCOUNTING STANDARDS
i) In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS No. 133). SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging
activities. Contracts that contain embedded derivatives, such as
certain insurance contracts, are also addressed by the Statement. SFAS
No. 133 requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and
measure those instruments at fair value. In July 1999, the FASB issued
Statement 137, which delayed the effective date of SFAS No. 133 to
fiscal years beginning after June 15, 2000. The Company is evaluating
the accounting implications of SFAS No. 133 and has not determined its
potential impact on the Company's results of operations or its
financial condition.
ii) In December 1997, the American Institute of Certified Public
Accountant's Accounting Standards Executive Committee (AcSEC) issued
Statement of Position (SOP) 97-3, "Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments." SOP 97-3 provides
guidance on the recognition and measurement of liabilities for various
assessments related to insurance activities, including those by state
guaranty funds. The Company adopted SOP 97-3 during 1999. Prior to the
adoption of SOP 97-3, the Company expensed and recognized liabilities
for such assessments on a "pay-as-you-go" basis. The effect of adopting
SOP 97-3 did not have a material impact on the results of operations
and financial condition of the Company for the year ended December 31,
1999.
iii) In March 1998, AcSEC issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1
requires the capitalization of certain costs incurred in connection
with developing or obtaining internal-use software. The Company adopted
SOP 98-1 during 1999. Prior to the adoption of SOP 98-1, the Company
expensed internal-use software-related costs as incurred. The effect of
adopting the SOP 98-1 was to increase net income by $1,039 for the year
ended December 31, 1999.
7
<PAGE> 91
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C) INVESTMENTS
The Company classifies all of its fixed-maturity securities as
available-for-sale and records these securities at fair value. Realized
gains and losses on sales of securities classified as
available-for-sale are recognized in net income using the
specific-identification method. Changes in the fair value of securities
available-for-sale are reflected directly in accumulated other
comprehensive income after adjustments for deferred taxes and deferred
acquisition costs. Discounts and premiums on investments are amortized
using the effective-interest method.
The cost of fixed-maturity securities is adjusted for the amortization
of premiums and accretion of discounts using the interest method. This
amortization or accretion is included in net investment income.
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.
Policy loans are reported at aggregate unpaid balances, which
approximate fair value.
Short-term investments, which include investments with maturities of
less than one year and greater than 90 days at the date of acquisition,
are reported at amortized cost, which approximates fair value.
D) CASH EQUIVALENTS
The Company considers all liquid debt instruments purchased with a
maturity date of three months or less at acquisition to be cash
equivalents. Cash equivalents are stated at cost plus accrued interest,
which approximates fair value.
8
<PAGE> 92
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E) DEFERRED ACQUISITION COSTS (DAC)
Commissions, net of commission allowances for reinsurance ceded, and
other expenses which vary with, and are primarily related to the
production of new business are deferred to the extent recoverable and
included as an asset. Acquisition costs associated with annuity
contracts and investment pension contracts are being amortized
generally in proportion to the present value of expected gross profits
from surrender charges and investment, mortality and expense margins.
The amortization is adjusted retrospectively when estimates of current
or future gross profits are revised. DAC associated with traditional
nonparticipating individual insurance policies is charged to expense
over the premium-paying period of the related policies. DAC is adjusted
for the impact on estimated future gross profits, assuming the
unrealized gains or losses on securities had been realized at year end.
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, it is immediately expensed.
F) POLICYHOLDER LIABILITIES
Policyholder liabilities equal the policyholder account value for the
fixed portions of annuity, variable life and investment pension
contracts with no substantial mortality or morbidity risk. Account
values are increased for deposits received and interest credited, and
are reduced by withdrawals. For traditional nonparticipating life
insurance policies, policyholder liabilities are computed using the net
level premium method and are based upon estimates as to future
mortality, persistency, maintenance expenses and interest rate yields
that are applicable in the year of issue. The assumptions include a
provision for adverse deviation.
G) SEPARATE ACCOUNTS
Separate account assets and liabilities that are reported in the
accompanying balance sheets represent investments in MIT, which are
mutual funds that are separately administered for the exclusive benefit
of the policyholders of the Company and its affiliates, or open-end
investment management companies offered and managed by unaffiliated
third parties, which are mutual funds that are separately administered
for the benefit of the Company's policyholders and other contract
owners. These assets and liabilities are reported at fair value. The
policyholders, rather than the Company, bear the investment risk. The
operations of the separate accounts are not included in the
accompanying financial statements. Fees charged on separate account
policyholder funds are included in revenues.
9
<PAGE> 93
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
H) REVENUE RECOGNITION
Fee income from separate accounts, annuity contracts and investment
pension contracts consists of charges for mortality, expenses, and
surrender and administration charges that have been assessed against
the policyholder account balances. Premiums on traditional
nonparticipating life insurance policies are recognized as revenue when
due. Investment income is recorded as revenue when due.
MSS and formerly NASL Financial (collectively the Adviser) are
responsible for managing the corporate and business affairs of MIT and
act as investment adviser to MIT. As compensation for its investment
advisory services, the Adviser receives advisory fees based on the
daily average net assets of the portfolios. The Adviser, as part of its
advisory services, is responsible for selecting and compensating
subadvisers to manage the investment and reinvestment of the assets of
each portfolio, subject to the supervision of the Board of Trustees of
MIT. The Company's discontinued operations include the compensation of
NASL Financial for investment advisory fees and subadviser compensation
from the North American Funds ("NAF") through October 1, 1997, the date
the Company sold NAF. Subadviser compensation for MIT is included in
other insurance expenses.
I) POLICYHOLDER BENEFITS AND CLAIMS
Benefits for annuity contracts and investment pension contracts include
interest credited to policyholder account balances and benefit claims
incurred during the period in excess of policyholder account balances.
J) FINANCING AGREEMENTS
MNA has entered into various financing agreements with reinsurers and
an affiliated company. All assets and liabilities related to these
contracts are reported on a gross basis. Due to the nature of MNA's
products, these agreements are accounted for under the deposit method
whereby the net premiums paid to the reinsurers are recorded as
deposits.
K) INCOME TAXES
Income taxes have been provided using the liability method 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.
10
<PAGE> 94
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
L) RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the
current year presentation.
3. INVESTMENTS AND INVESTMENT INCOME
A) FIXED-MATURITY SECURITIES
At December 31, 1999, the amortized cost and fair value of
fixed-maturity securities available for sale are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED COST UNREALIZED UNREALIZED LOSSES FAIR VALUE
AS AT DECEMBER 31, GAINS
($ thousands) 1999 1998 1999 1998 1999 1998 1999 1998
------------------------------ ---------- ---------- -------- ------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. government $ 28,634 $ 18,266 $ 94 $1,144 $ (740) $ (28) $ 27,988 $ 19,382
Corporate 92,532 100,705 122 3,376 (2,486) (35) 90,168 104,046
Mortgage-backed 28,234 16,812 27 131 (406) (68) 27,855 16,875
Foreign governments 5,924 16,129 23 151 - (8) 5,947 16,272
States/political subdivisions 1,058 1,057 - 111 94) - 964 1,168
------------------------------ ---------- ---------- -------- ------- --------- -------- --------- ---------
TOTAL FIXED-MATURITY $ 156,382 $152,969 $ 266 $4,913 $(3,726) $(139) $152,922 $157,743
SECURITIES
------------------------------ ---------- ---------- -------- ------- --------- ------- --------- ---------
</TABLE>
Proceeds from sales of fixed-maturity securities during 1999 were
$81,874 (1998, $23,780; 1997, $53,325).
The contractual maturities of fixed-maturity securities at December 31,
1999 are shown below. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or prepay
obligations with or without prepayment penalties. Corporate
requirements and investment strategies may result in the sale of
investments before maturity.
<TABLE>
<CAPTION>
($ thousands) AMORTIZED COST FAIR VALUE
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
FIXED-MATURITY SECURITIES
One year or less $ 42,477 $ 42,567
Greater than 1; up to 5 years 49,172 48,582
Greater than 5; up to 10 years 18,299 17,505
Due after 10 years 18,200 16,413
Mortgage-backed securities 28,234 27,855
-----------------------------------------------------------------------------------------------------------
TOTAL FIXED-MATURITY SECURITIES $156,382 $152,922
-----------------------------------------------------------------------------------------------------------
</TABLE>
Fixed-maturity securities with a fair value of $6,108 and $6,105 at
December 31, 1999 and 1998, respectively, were on deposit with, or in
custody accounts on behalf of, state insurance departments to satisfy
regulatory requirements.
11
<PAGE> 95
3. INVESTMENTS AND INVESTMENT INCOME (CONTINUED)
B) INVESTMENT INCOME AND NET REALIZED INVESTMENT GAINS
Income by type of investment was as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed-maturity securities $9,945 $ 9,904 $7,250
Short-term investments 2,960 2,503 1,126
Other invested assets - 19 -
-----------------------------------------------------------------------------------------------------------
Gross investment income 12,905 12,426 8,376
-----------------------------------------------------------------------------------------------------------
Investment expenses (184) (248) (470)
-----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME $12,721 $ 12,178 $7,906
-----------------------------------------------------------------------------------------------------------
</TABLE>
The gross realized gains and losses on the sales of investments were as
follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed-maturity securities:
Gross realized gains $311 $724 $788
Gross realized losses (577) (5) (7)
Equity securities
Gross realized losses - - (250)
-----------------------------------------------------------------------------------------------------------
NET REALIZED (LOSS) GAIN ($266) $719 $531
-----------------------------------------------------------------------------------------------------------
</TABLE>
4. COMPREHENSIVE INCOME
Total comprehensive income was as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
---------------------------------------------------------------- -------------- ------------ -------------
<S> <C> <C> <C>
NET INCOME $ 59,852 $ 44,420 $ 33,233
---------------------------------------------------------------- -------------- ------------ -------------
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX:
Unrealized holding (losses) gains arising during the period (4,861) 1,351 1,036
Less:
Reclassification adjustment for realized (losses) gains
included In net income (173) 467 345
---------------------------------------------------------------- -------------- ------------ -------------
Other comprehensive (loss) income (4,688) 884 691
---------------------------------------------------------------- -------------- ------------ -------------
COMPREHENSIVE INCOME $ 55,164 $ 45,304 $ 33,924
---------------------------------------------------------------- -------------- ------------ -------------
</TABLE>
Other comprehensive (loss) income is reported net of income taxes
(benefit) of $(1,513), $476, and $372 for 1999, 1998, and 1997,
respectively.
12
<PAGE> 96
5. DEFERRED ACQUISITION COSTS
The components of the change in DAC were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
----------------------------------------------- -------------------- ------------------- ------------------
<S> <C> <C> <C>
Balance at January 1 $ 449,332 $ 364,983 $ 290,610
Capitalization 248,483 138,527 123,965
Amortization (44,554) (53,499) (40,649)
Amortization included in discontinued - - (1,707)
operations
Amortization included in gain on disposal of - - (6,943)
discontinued operations
Effect of net unrealized losses (gains) on 2,033 (679) (293)
securities available-for-sale
----------------------------------------------- -------------------- ------------------- ------------------
BALANCE AT DECEMBER 31 $ 655,294 $ 449,332 $ 364,983
----------------------------------------------- -------------------- ------------------- ------------------
</TABLE>
6. INCOME TAXES
The components of income tax expense from continuing operations were as
follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
----------------------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Current expense (benefit) $ 8,437 $ 17,001 $ (723)
Deferred expense 24,269 6,872 15,767
----------------------------------------------------- ----------------- ----------------- -----------------
TOTAL EXPENSE $ 32,706 $ 23,873 $15,044
----------------------------------------------------- ----------------- ----------------- -----------------
</TABLE>
Significant components of the Company's net deferred tax liability are
as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
AS AT DECEMBER 31
($ thousands) 1999 1998
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX ASSETS:
Financing arrangements $ 136 $ 1,289
Unrealized losses on securities available for sale 1,048 -
-----------------------------------------------------------------------------------------------------------
Gross deferred tax assets 1,184 1,289
Valuation allowance (657) -
-----------------------------------------------------------------------------------------------------------
Net deferred tax assets 527 1,289
-----------------------------------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES:
Deferred policy acquisition costs (43,559) (22,017)
Unrealized gains on securities available-for-sale - (1,122)
Other (3,501) (1,927)
-----------------------------------------------------------------------------------------------------------
Total deferred tax liabilities (47,060) (25,066)
-----------------------------------------------------------------------------------------------------------
NET DEFERRED TAX LIABILITY $ (46,533) $ (23,777)
-----------------------------------------------------------------------------------------------------------
</TABLE>
As of December 31, 1999, the Company had $3,460 of unrealized capital
losses in its available-for-sale portfolio. Under federal tax law,
utilization of these capital losses, when realized, is limited to use
as an offset against capital gains. The Company believes that it is
more likely than not that it will be unable to realize the benefit of
the full deferred tax asset related to the net unrealized capital
losses. The Company has therefore, established a valuation allowance
for the amount in excess of the available capital gains. The Company
believes that it will realize the full benefit of its remaining
deferred tax assets.
13
<PAGE> 97
6. INCOME TAXES (CONTINUED)
The Company is a member of the MWLH-affiliated group, filing a
consolidated federal income tax return. MNA and MNY file separate state
income tax returns. The method of allocation between the companies is
subject to a written tax-sharing agreement under which the tax
liability is allocated to each member of the group 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 MNA or MNY will not be more than either
company would have paid on a separate-return basis. Settlements of
taxes are made through an increase or reduction to the payable to
parent, subsidiaries and affiliates, which are settled periodically.
The Company made estimated tax payments of $11,077, $12,516 and $531 in
1999, 1998 and 1997, respectively.
7. FINANCING AND REINSURANCE AGREEMENTS
The financing agreements entered into with reinsurance companies relate
primarily to the products sold by MNA. Most of MNA's reinsured products
are considered investment products under generally accepted accounting
principles and, as such, the reinsurance agreements are considered
financing arrangements and are accounted for under the deposit method.
Under this method, net premiums received by the reinsurer are recorded
as deposits. Financing transactions have been entered into primarily to
improve cash flow and statutory capital.
The Company has entered into two indemnity coinsurance agreements to
reinsure 100% of all contractual liabilities arising from the fixed
portion of both in-force and new variable annuity business written by
the Company. Under these agreements, each reinsurer, one unaffiliated
and one affiliated, receives the fixed portion of all premiums and
transfers received by the Company. Each reinsurer reimburses the
Company for all claims and provides expense allowances to cover
commissions and other costs associated with the reinsured business.
The Company has modified coinsurance agreements with two unaffiliated
life insurance companies. The treaties cover the quota share of all
elements of risk under the variable portion of certain variable annuity
policy forms. Another treaty, recaptured in 1999, with an unaffiliated
life insurance company covered the variable portion of certain annuity
contracts written prior to December 31, 1996.
The Company has treaties with three reinsurers, two unaffiliated and
one affiliated, to reinsure its Minimum Death Benefit Guarantee risk.
In addition, the Company reinsures a portion of its risk related to
waiving surrender charges at death. The Company is paying the
reinsurers an asset- based premium, the level of which varies with both
the amount of exposure to this risk and the realized experience.
14
<PAGE> 98
7. FINANCING AND REINSURANCE AGREEMENTS (CONTINUED)
The Company has a treaty with an unaffiliated reinsurer to reinsure a
quota share of the variable portion of the Company's variable life
insurance contracts. In addition, the reinsurer assumes the product's
net amount at risk in excess of the Company's retention limit on a
yearly renewable term basis.
During 1998, MNY entered into reinsurance agreements with various
reinsurers to reinsure face amounts in excess of $100 for its
traditional nonparticipating insurance product. To date, there have
been no reinsurance recoveries under these agreements.
In the event of insolvency of a reinsurer, the Company remains
primarily liable to its policyholders. Failure of reinsurers to honor
their obligations could result in losses to the Company and,
accordingly, the Company periodically monitors the financial condition
of its reinsurers.
The Company has not entered into any reinsurance agreements in which
the reinsurer may unilaterally cancel any reinsurance for reasons other
than nonpayment of premiums or other similar credits or a significant
change in the ownership of the Company. The Company does not have any
reinsurance agreements in effect under which the amount of losses paid
or accrued through December 31, 1999 would result in a payment to the
reinsurer of amounts which, in the aggregate and allowing for offset of
mutual credits from other reinsurance agreements with the same
reinsurer, exceed the total direct premiums collected under the
reinsured policies.
8. SHAREHOLDER'S EQUITY
The Company has one class of capital stock:
<TABLE>
<CAPTION>
AS AT DECEMBER 31:
($ thousands) 1999 1998
---------------------------------------------------------------- -------------------------- ----------------
<S> <C> <C>
AUTHORIZED:
3,000 Common shares, par value $1,000
ISSUED AND OUTSTANDING:
2,600 Common shares $ 2,600 $2,600
---------------------------------------------------------------- -------------------------- ----------------
</TABLE>
15
<PAGE> 99
8. SHAREHOLDER'S EQUITY (CONTINUED)
In December 1999, the Company received a capital contribution of
$28,049 from MWLH.
In October 1997, the Company received a capital contribution of $47,731
from MWLH to support expansion of its New York operations.
The net assets of MNA and MNY available to MWLH as dividends are
generally limited to, and cannot be made except from, earned statutory
basis profits. The maximum amount of dividends that may be paid by life
insurance companies without prior approval of the Insurance
Commissioners of the States of Delaware and New York is subject to
restrictions relating to statutory surplus and net gain from operations
on a statutory basis.
Net (loss) income and capital and surplus, as determined in accordance
with statutory accounting principles for MNA and MNY were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MNA:
Net (loss) income $ (2,524) $ 28,067 $ 22,259
Net capital and surplus 171,094 157,940 139,171
MNY:
Net income (loss) 932 (5,678) (1,562)
Net capital and surplus 63,470 62,881 68,336
-----------------------------------------------------------------------------------------------------------
</TABLE>
State regulatory authorities prescribe statutory accounting practices
that differ in certain respects from accounting principles generally
accepted in the United States followed by stock life insurance
companies. The significant differences relate to investments, deferred
acquisition costs, deferred income taxes, nonadmitted asset balances
and reserve calculation assumptions.
MNA's broker dealer subsidiary, MSS, is subject to the Securities and
Exchange Commission's (SEC) "Net Capital Rule" as defined under rule
15c3-1. At December 31, 1999 and 1998, the net capital of the broker
dealer exceeded the SEC's minimum capital requirements.
9. RELATED-PARTY TRANSACTIONS
The Company utilized various services provided by MLI in 1999, 1998 and
1997, such as legal, personnel, investment accounting and other
corporate services. The charges for these services were approximately
$11,751, $12,752 and $8,229 in 1999, 1998 and 1997, respectively. At
December 31, 1999 and 1998, the Company had a net liability to MLI for
these services and interest accrued on notes payable of $8,341 and
$180, respectively. At December 31, 1999 and 1998, the payable is
offset by a receivable from MIT and MLI for expenses paid on their
behalf of $434 and $792, respectively. In addition, the Company has an
intercompany payable to MWLH relating to federal income taxes of $2,360
and $5,000 reflected in the intercompany payable at December 31, 1999
and 1998, respectively.
16
<PAGE> 100
9. RELATED-PARTY TRANSACTIONS (CONTINUED)
The financial statements have been prepared from the records maintained
by the Company and may not necessarily be indicative of the financial
conditions or results of operations that would have occurred if the
Company had been operated as an unaffiliated corporation (see also
Notes 1, 6, 7, 8, 10, 12, 13 and 14 for additional related-party
transactions).
10. NOTES PAYABLE TO AFFILIATES AND LINES OF CREDIT
MNA has promissory notes from The Manufacturers Life Insurance Company
(U.S.A.) ("ManUSA") for $291,100 including an additional borrowing of
$70,100 during 1999. Interest on the loan is calculated at a
fluctuating rate equal to LIBOR plus 32.5 basis points and is payable
in quarterly installments. Principal and accrued interest are payable
within 45 days of demand. Accrued interest payable at December 31, 1999
and 1998 is $834 and $419, respectively.
MNA has a surplus note of $20,000 with interest at 8% due to ManUSA.
The note and accrued interest are subordinated to payments due to
policyholders and other claimants. Principal and interest payments and
interest accruals can be made only upon prior approval of the Insurance
Department of the State of Delaware.
MNA and MNY have unsecured lines of credit with State Street Bank and
Trust Company totaling $15,000, bearing interest at the bank's money
market rate plus 50 basis points. There were no outstanding advances
under the lines of credit at December 31, 1999 and 1998.
Interest expense and interest paid in 1999 were $15,546 and $15,250,
respectively (1998 $13,506 and $16,861; 1997 $10,887 and $9,354).
11. OTHER INSURANCE EXPENSES
Other insurance expenses were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1999 1998 1997
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Selling and administrative expenses $69,757 $49,732 $42,581
Subadvisory fees 53,118 38,701 26,364
General operating expenses 69,959 47,191 31,440
-----------------------------------------------------------------------------------------------------------
TOTAL
$192,834 $135,624 $100,385
-----------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 101
12. EMPLOYEE BENEFITS
A) EMPLOYEE RETIREMENT PLAN
Prior to July 1, 1998, MNA and MNY, participated in a noncontributory
defined benefit pension plan (the Nalaco Plan) sponsored by MLI,
covering its employees. A similar plan (the Manulife Plan) also existed
for ManUSA. Both plans provided pension benefits based on length of
service and final average earnings. Vested benefits were fully funded;
current pension costs were funded as they accrue.
Effective July 1, 1998, the Nalaco Plan was merged into the Manulife
Plan as approved by the Board of Directors of MLI. The merged plan was
then restated as a cash balance pension plan entitled "The Manulife
Financial U.S. Cash Balance Pension Plan" (Cash Balance Plan).
Participants in the two prior plans ceased accruing benefits under the
old plan effective June 30, 1998, and became participants in the Cash
Balance Plan on July 1, 1998. Also effective July 1, ManUSA became the
sponsor of the Cash Balance Plan. Each participant who was a
participant in one of the prior plans received an opening account
balance equal to the present value of their June 30, 1998 accrued
benefit under the prior plan, using Pension Benefit Guaranty
Corporation rates (PBCG). Future contribution credits under the Cash
Balance Plan vary by service, and interest credits are a function of
the interest rate levels. Pension benefits are provided to those
participants after three years of vesting service, and the normal
retirement benefit is actuarially equivalent to the cash balance
account at normal retirement date. The normal form of payment under the
Cash Balance Plan is a life annuity, with various optional forms
available.
Actuarial valuation of accumulated plan benefits are based on projected
salaries and best estimates of investment yields on plan assets,
mortality of participants, employee termination and ages at retirement.
Pension costs relating to current service and amortization of
experience gains and losses are amortized to income over the estimated
average remaining service lives of the participants. No pension expense
was recognized by the sponsor in 1999, 1998 or 1997 because the plan
was subject to the full funding limitation under the Internal Revenue
Code.
At December 31, 1999, the projected benefit obligation based on an
assumed interest rate of 7.5% was $68,410. The fair value of plan
assets invested in ManUSA's general fund deposit administration
insurance contracts was $86,777.
Prior to July 1, 1998, MNA also participated in an unfunded
Supplemental Executive Retirement Plan (Manulife SERP) sponsored by MLI
for executives. This was a non-qualified plan that provides defined
pension benefits in excess of limits imposed by the law to those
retiring after age 50 with 10 or more years of vesting service, and the
pension benefit is a final average benefit based on the executive's
highest 5-year average earnings. Compensation was not limited by, and
benefits were not restricted by the Internal Revenue Code Section 415.
18
<PAGE> 102
12. EMPLOYEE BENEFITS (CONTINUED)
A) EMPLOYEE RETIREMENT PLAN (CONTINUED)
Effective July 1, 1998, the Manulife SERP was restated to become a
supplemental cash balance plan, and each participant in the SERP who
became a participant in the restated plan was provided with an opening
account balance equal to the present value of their June 30, 1998
accrued benefit under the SERP, using PBGC rates. Future contribution
credits vary by service, and interest credits are a function of
interest rate levels. These annual contribution credits are made in
respect of the participant's compensation that is in excess of the
limit in Internal Revenue Code Section 401(a)(17). In addition, a one
time contribution may be made for a participant if it is determined at
the time of their termination of employment that the participant's
pension benefit under the Cash Balance Plan is limited by Internal
Revenue Code Section 415. Together, these contributions serve to
restore to the participant the benefit that they would have been
entitled to under the Cash Balance Plan's benefit formula but for the
limitation in Internal Revenue Code Sections 401(a)(17) and 415.
Benefits are provided to participants after three years. The default
form of payment under the plan is a lump sum although participants may
elect to receive payment in the form of an annuity provided that such
election is made within the time period prescribed in the plan. If an
annuity form of payment is elected, the amount payable is equal the
actuarial equivalent of the participant's balance under the
supplemental Cash Balance Plan, using the factors and assumptions for
determining immediate annuity amounts applicable to the participant
under the qualified Cash Balance Plan.
B) 401(K) PLAN
Prior to July 1, 1998, the Company also sponsored a defined
contribution plan, the North American Security Life 401(k) Savings
Plan, which was subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA). A similar plan, the Manulife
Financial 401K Savings Plan, also existed for employees of ManUSA.
These two plans were merged on July 1, 1998 into one defined
contribution plan sponsored by ManUSA, as approved by the Board of
Directors on March 26, 1998. The Company contributed $300, $285 and
$353 in 1999, 1998 and 1997, respectively.
C) OTHER POSTRETIREMENT BENEFIT PLAN
In addition to the retirement plan, the Company participates in the
other postretirement benefit plan of ManUSA which provides retiree
medical and life insurance benefits to those who have attained age 55
with ten or more years of service. The plan provides the medical
coverage for retirees and spouses under age 65. When the retirees or
the covered dependents reach age 65, Medicare provides primary coverage
and the plan provides secondary coverage. There is no contribution for
post-age 65, coverage and no contributions are required for retirees
for life insurance coverage. The plan is unfunded.
The other postretirement benefit cost of the Company, which includes
the expected cost of postretirement benefits for newly eligible
employees and for vested employees, interest cost, and gains and losses
arising from differences between actuarial assumptions and actual
experience is accounted for by the plan sponsor, ManUSA.
19
<PAGE> 103
13. LEASES
In January 1999, ManUSA entered into a new sublease agreement on behalf
of the Company. In September 1999, the Company surrendered its old
office space and was released from its lease commitment. The Company
moved into the new office space in September 1999 with payments to the
landlord commencing January 1, 2000. The free rent from September to
December 1999 is being amortized over the term of the lease. For the
years ended December 31, 1999, 1998 and 1997, the Company incurred rent
expenses of $3,105, $1,617 and, $1,316, respectively. The Company also
leases various office equipment under operating lease agreements.
The minimum lease payments associated with the office space and various
office equipment under operating lease agreements are as follows:
<TABLE>
<CAPTION>
YEAR ENDED: MINIMUM LEASE PAYMENTS
------------------------------------------------------
<S> <C>
2000 4,028
2001 4,012
2002 4,008
2003 3,994
2004 and after 19,234
------------------------------------------------------
Total $35,276
------------------------------------------------------
</TABLE>
14. GUARANTEE AGREEMENT
Pursuant to a guarantee agreement, MLI unconditionally guarantees that
it will, on demand, make funds available to the Company for the timely
payment of contractual claims made under the fixed portion of the
variable annuity contracts issued by MNA. The guarantee covers the
outstanding fixed portion of variable annuity contracts, including
those issued prior to the date of the guarantee agreement.
15. DISCONTINUED OPERATIONS
On May 6, 1997, MNA signed a letter of intent to sell its mutual fund
operations. This disposal has been accounted for as discontinued
operations in accordance with Accounting Principles Board Opinion No.
30, which, among other provisions, required the plan of disposal to be
carried out within one year. On October 1, 1997, the Company sold its
advisory operations for NAF and the pre-existing deferred commission
assets related to the mutual fund operations. In 1998, related to the
sale, the Company received a contingent payment of $1,000, before
income taxes, less an adjustment of $105 to the final settlement of the
purchase price. For 1998 and 1997, the Company realized a gain of $895
and $9,161, before applicable taxes of $313 and $3,206, respectively.
Included in the gain for 1997 is a provision of $10, before applicable
taxes of $3, for the loss from continuing operations during the
phase-out period. Expenses of $223 in 1997 were incurred on the sale
and netted against the realized gain.
20
<PAGE> 104
15. DISCONTINUED OPERATIONS (CONTINUED)
The operating results related to discontinued operations are summarized
as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
($ thousands) 1997
------------------------------------------ -------------------
<S> <C>
Advisory fees, commissions
and distribution revenues $ 4,605
------------------------------------------ -------------------
Loss from operations before income tax $ (217)
benefit
Income tax benefit 76
------------------------------------------ -------------------
Loss from operations, net of tax $ (141)
------------------------------------------ -------------------
</TABLE>
16. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values and estimated fair values of the Company's
financial instruments are as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------------------------- ----------------------------- -------------------------------
($ thousands) CARRYING VALUE FAIR VALUE CARRYING VALUE FAIR VALUE
---------------------------------------- ---------------- ------------ ----------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Fixed-maturity securities 152,922 152,922 157,743 157,743
Short-term investments 41,311 41,311 34,074 34,074
Policy loans 7,049 7,049 5,175 5,175
Cash and cash equivalents 27,790 27,790 10,320 10,320
Due from reinsurers 797,746 797,746 641,858 641,858
Separate account assets 16,022,215 16,022,215 12,188,420 12,188,420
LIABILITIES:
Policyholder liabilities and 139,764 137,717 102,252 98,312
accruals
Due to reinsurers 808,599 808,599 655,892 655,892
Notes payable to affiliates 311,100 311,100 241,000 241,000
Separate account liabilities 16,022,215 16,022,215 12,188,420 12,188,420
---------------------------------------- ----------- ----------- ----------- ------------
</TABLE>
The following methods and assumptions were used by the Company in
estimating the fair value disclosures for financial instruments:
Fixed-Maturity Securities: Fair values for fixed-maturity securities
are obtained from an independent pricing service.
Short-Term Investments and Cash and Cash Equivalents: Carrying values
approximate fair values.
Policy Loans: Carrying values approximate fair values.
21
<PAGE> 105
16. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Due from Reinsurers: Fair value is equal to deposits made under the
contract and approximates the carrying value.
Separate Account Assets and Liabilities: The carrying amounts in the
balance sheet for separate account assets and liabilities approximate
their fair value.
Policyholder Liabilities and Accruals: Fair values of the Company's
liabilities under contracts not involving significant mortality risk
(deferred annuities) are estimated to be the cash surrender value, or
the cost the Company would incur to extinguish the liability.
Due to Reinsurers: Amounts on deposit from and payable to reinsurers
reflects the net reinsured cash flow related to financing agreements
which is primarily a current liability. As such, fair value
approximates carrying value.
Notes Payable to Affiliates: Fair value is considered to approximate
carrying value as the majority of notes payable are at variable
interest rates that fluctuate with market interest rate levels.
17. CONTINGENCIES
The Company is subject to various lawsuits that have arisen in the
course of its business. Contingent liabilities arising from litigation,
income taxes and other matters are not considered material in relation
to the financial position of the Company.
22
<PAGE> 106
AUDITED FINANCIAL STATEMENTS
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT A
Years ended December 31, 1999 and 1998
<PAGE> 107
The Manufacturers Life Insurance Company of North America
Separate Account A
Audited Financial Statements
Years ended December 31, 1999 and 1998
CONTENTS
Report of Independent Auditors................................................1
Audited Financial Statements
Statement of Assets and Contract Owners' Equity...............................2
Statements of Operations and Changes in Contract Owners' Equity...............4
Notes to Financial Statements................................................19
<PAGE> 108
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, liabilities and contract
owners' equity of The Manufacturers Life Insurance Company of North America
Separate Account A of The Manufacturers Life Insurance Company of North America
as of December 31, 1999, 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.
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, 1999, 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.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 15, 2000
1
<PAGE> 109
The Manufacturers Life Insurance Company of North America
Separate Account A
Statement of Assets and Contract Owners' Equity
December 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments at market value:
Sub-accounts held by Manufacturers Investment Trust:
Mid Cap Blend Portfolio--65,729,135 shares (cost $1,267,408,277) $1,439,468,050
Investment Quality Bond Portfolio--18,866,533 shares (cost $226,060,734) 218,851,779
Growth and Income Portfolio--84,573,096 shares (cost $1,992,453,797) 2,763,003,036
Blue Chip Growth Portfolio--66,175,463 shares (cost $1,130,509,788) 1,432,037,014
Money Market Portfolio--87,199,520 shares (cost $871,995,200) 871,995,200
Global Equity Portfolio--39,047,614 shares (cost $705,363,023) 733,704,675
Global Bond Portfolio--11,832,771 shares (cost $152,950,552) 137,260,140
U.S. Government Securities Portfolio--17,391,094 shares (cost $233,276,680) 230,258,080
Diversified Bond Portfolio--14,571,220 shares (cost $160,288,296) 157,660,602
Income & Value Portfolio--46,224,569 shares (cost $549,978,606) 596,759,183
Large Cap Growth Portfolio--20,739,517 shares (cost $296,005,542) 357,341,870
Equity-Income Portfolio--47,843,723 shares (cost $781,387,327) 815,735,481
Strategic Bond Portfolio--22,452,974 shares (cost $262,767,771) 250,126,128
Overseas Portfolio--19,953,323 shares (cost $249,056,453) 317,656,908
Growth Portfolio--18,940,379 shares (cost $396,795,271) 509,117,400
Mid Cap Growth Portfolio--23,114,951 shares (cost $406,781,895) 575,331,123
International Small Cap Portfolio--6,499,140 shares (cost $112,015,695) 183,015,794
Pacific Rim Emerging Markets Portfolio--6,220,744 shares (cost $57,924,402) 67,681,694
Science & Technology Portfolio--25,024,745 shares (cost $647,828,449) 905,145,043
Emerging Small Company Portfolio--2,789,537 shares (cost $76,485,645) 113,645,728
Aggressive Growth Portfolio--6,470,337 shares (cost $86,725,579) 112,195,642
International Stock Portfolio--6,362,311 shares (cost $88,511,635) 98,170,464
Quantitative Equity Portfolio--6,985,304 shares (cost $174,265,768) 196,706,168
Value Trust Portfolio--9,342,873 shares (cost $138,659,120) 123,606,206
Real Estate Securities Portfolio--2,324,186 shares (cost $34,875,077) 29,958,758
Balanced Portfolio--5,518,702 shares (cost $102,541,513) 98,343,272
High Yield Portfolio--11,198,777 shares (cost $150,059,901) 143,792,293
Lifestyle Aggressive 1000 Portfolio--3,780,611 shares (cost $49,539,440) 54,970,082
Lifestyle Growth 820 Portfolio--18,884,819 shares (cost $259,812,929) 286,671,549
Lifestyle Balanced 640 Portfolio--20,650,896 shares (cost $276,213,083) 294,068,753
Lifestyle Moderate 460 Portfolio--9,496,242 shares (cost $128,936,221) 134,181,905
Lifestyle Conservative 280 Portfolio--6,344,330 shares (cost $83,329,291) 83,427,946
Small Company Value Portfolio--4,766,424 shares (cost $52,201,014) 58,484,021
US Large Cap Value Portfolio--9,186,453 shares (cost $113,163,494) 117,954,060
Mid Cap Stock Portfolio--2,161,880 shares (cost $26,330,859) 27,239,687
Small Company Blend Portfolio--2,402,094 shares (cost $32,641,242) 37,857,001
International Value Trust Portfolio--2,175,349 shares (cost $26,432,131) 28,236,032
Total Return Portfolio--5,294,711 shares (cost $65,544,878) 65,495,571
</TABLE>
2
<PAGE> 110
The Manufacturers Life Insurance Company of North America
Separate Account A
Statement of Assets, Liabilities and Contract Owners' Equity (continued)
December 31, 1999
<TABLE>
<S> <C>
ASSETS (CONTINUED)
Investments at market value (continued):
Sub-accounts held by Merrill Lynch Variable Series Funds, Inc.:
Basic Value Focus Portfolio--1,402,863 shares (cost $19,814,327) $ 19,050,878
Developing Capital Markets Focus Portfolio--127,061 shares (cost $1,053,733) 1,312,542
Special Value Focus Portfolio--197,764 shares (cost $3,968,589) 4,617,790
----------------
Total assets $ 14,692,135,548
================
CONTRACT OWNERS' EQUITY
Variable annuity contracts $ 14,670,567,844
Annuity reserves 21,567,704
----------------
Total contract owners' equity $ 14,692,135,548
================
</TABLE>
See accompanying notes.
3
<PAGE> 111
The Manufacturers Life Insurance Company of North America
Separate Account A
Statements of Operations and Changes in
Contract Owners' Equity
<TABLE>
<CAPTION>
SUB-ACCOUNT
--------------------------------------------------------------------------------------------------
MID CAP BLEND (1) INVESTMENT QUALITY BOND GROWTH AND INCOME
--------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998 1999 1998
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 153,929,397 $ 262,896,468 $ 11,715,866 $ 9,380,173 $ 80,203,495 $ 104,185,784
Expenses:
Mortality and expense risk
and administrative charges 18,761,395 19,254,747 3,235,250 2,619,222 34,879,668 24,518,612
--------------------------------------------------------------------------------------------------
Net investment income (loss) 135,168,002 243,641,721 8,480,616 6,760,951 45,323,827 79,667,172
Net realized gain (loss) (26,061,804) 31,286,927 855,077 3,524,700 192,498,787 120,361,648
Unrealized appreciation
(depreciation) during the
period 199,725,097 (174,185,950) (16,830,922) 2,142,373 149,108,797 182,367,957
--------------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
operations 308,831,295 100,742,698 (7,495,229) 12,428,024 386,931,411 382,396,777
Changes from principal
transactions:
Purchase payments 93,411,927 94,757,279 40,597,928 34,025,800 379,342,825 248,202,994
Transfers between sub-
accounts and the
Company (148,189,886) (73,281,664) (152,399) 27,481,604 201,840,782 109,065,836
Withdrawals (180,603,372) (127,824,175) (29,033,342) (18,664,400) (262,999,113) (142,936,147)
Annual contract fee (578,783) (627,094) (67,743) (56,911) (798,850) (612,633)
--------------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
principal transactions (235,960,114) (106,975,654) 11,344,444 42,786,093 317,385,644 213,720,050
--------------------------------------------------------------------------------------------------
Total increase (decrease) in
contract owners' equity 72,871,181 (6,232,956) 3,849,215 55,214,117 704,317,055 596,116,827
Contract owners' equity at
beginning of period 1,366,596,869 1,372,829,825 215,002,564 159,788,447 2,058,685,981 1,462,569,154
--------------------------------------------------------------------------------------------------
Contract owners' equity at end
of period $1,439,468,050 $1,366,596,869 $218,851,779 $215,002,564 $2,763,003,036 $2,058,685,981
==================================================================================================
</TABLE>
(1) On May 3, 1999, the Equity Sub-Account was renamed Mid Cap Blend through a
vote of the Board of Directors.
See accompanying notes.
4
<PAGE> 112
The Manufacturers Life Insurance Company of North America
Separate Account A
Statements of Operations and Changes in Contract
Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
----------------------------------------------------------------------------------------------
BLUE CHIP GROWTH MONEY MARKET GLOBAL EQUITY
----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998 1999 1998
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 48,024,156 $ 13,929,066 $ 29,316,220 $ 21,461,471 $ 84,963,853 $ 59,603,230
Expenses:
Mortality and expense risk
and administrative charges 17,072,171 10,658,625 9,381,472 6,194,641 11,225,268 12,014,172
----------------------------------------------------------------------------------------------
Net investment income (loss) 30,951,985 3,270,441 19,934,748 15,266,830 73,738,585 47,589,058
Net realized gain (loss) 92,356,233 61,124,930 (37,631) 192,043 34,261,905 27,283,864
Unrealized appreciation
(depreciation) during the
period 80,600,837 123,565,136 0 0 (93,110,046) 6,192,769
----------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
operations 203,909,055 187,960,507 19,897,117 15,458,873 14,890,444 81,065,691
Changes from principal transactions:
Purchase payments 267,993,066 142,511,048 374,293,200 280,358,533 51,092,502 61,937,777
Transfers between sub-
accounts and the
Company 99,970,099 70,636,247 302,685,947 (41,216,927) (84,444,789) (27,166,058)
Withdrawals (122,015,658) (50,972,213) (291,230,505) (115,055,612) (98,792,707) (71,777,066)
Annual contract fee (388,548) (266,440) (159,194) (111,391) (331,275) (372,022)
----------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
principal transactions 245,558,959 161,908,642 385,589,448 123,974,603 (132,476,269) (37,377,369)
----------------------------------------------------------------------------------------------
Total increase (decrease) in
contract owners' equity 449,468,014 349,869,149 405,486,565 139,433,476 (117,585,825) 43,688,322
Contract owners' equity at
beginning of period 982,569,000 632,699,851 466,508,635 327,075,159 851,290,500 807,602,178
----------------------------------------------------------------------------------------------
Contract owners' equity at end
of period $1,432,037,014 $ 982,569,000 $ 871,995,200 $ 466,508,635 $ 733,704,675 $851,290,500
==============================================================================================
</TABLE>
See accompanying notes.
5
<PAGE> 113
The Manufacturers Life Insurance Company of North America
Separate Account A
Statements of Operations and Changes in Contract
Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
-----------------------------------------------------------------------------------------------
GLOBAL BOND (2) U.S. GOVERNMENT SECURITIES DIVERSIFIED BOND (3)
-----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998 1999 1998
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 15,950,596 $ 18,973,842 $ 10,287,189 $ 9,103,890 $ 16,986,531 $ 17,570,424
Expenses:
Mortality and expense risk
and administrative charges 2,249,622 2,750,057 3,564,976 2,945,305 2,451,082 2,625,650
-----------------------------------------------------------------------------------------------
Net investment income (loss) 13,700,974 16,223,785 6,722,213 6,158,585 14,535,449 14,944,774
Net realized gain (loss) (7,723,870) 898,854 1,192,111 4,428,098 541,478 3,497,458
Unrealized appreciation
(depreciation) during the
period (20,175,181) (5,780,204) (12,050,024) 1,035,564 (16,277,262) (1,878,860)
-----------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
operations (14,198,077) 11,342,435 (4,135,700) 11,622,247 (1,200,335) 16,563,372
Changes from principal
transactions:
Purchase payments 8,221,045 9,584,824 37,846,882 40,913,770 14,089,233 7,937,011
Transfers between sub-
accounts and the
Company (17,128,037) (21,994,571) (4,058,550) 19,072,298 (9,493,700) (6,943,504)
Withdrawals (26,084,516) (18,770,928) (36,511,642) (23,285,802) (31,237,206) (26,555,234)
Annual contract fee (60,363) (77,219) (72,992) (66,701) (81,266) (92,857)
-----------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
principal transactions (35,051,871) (31,257,894) (2,796,302) 36,633,565 (26,722,939) (25,654,584)
-----------------------------------------------------------------------------------------------
Total increase (decrease) in
contract owners' equity (49,249,948) (19,915,459) (6,932,002) 48,255,812 (27,923,274) (9,091,212)
Contract owners' equity at
beginning of period 186,510,088 206,425,547 237,190,082 188,934,270 185,583,876 194,675,088
-----------------------------------------------------------------------------------------------
Contract owners' equity at end
of period $ 137,260,140 $ 186,510,088 $ 230,258,080 $ 237,190,082 $ 157,660,602 $ 185,583,876
===============================================================================================
</TABLE>
(2) On May 3, 1999, the Global Government Bond Sub-Account was renamed Global
Bond through a vote of the Board of Directors.
(3) On May 3, 1999, the Conservative Asset Allocation Sub-Account was renamed
Diversified Bond through a vote of the Board of Directors.
See accompanying notes.
6
<PAGE> 114
The Manufacturers Life Insurance Company of North America
Separate Account A
Statements of Operations and Changes in Contract
Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
-----------------------------------------------------------------------------------------------
INCOME & VALUE (4) LARGE CAP GROWTH (5) EQUITY INCOME
-----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998 1999 1998
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 64,728,819 $ 64,146,035 $ 25,595,630 $ 26,290,872 $ 61,583,673 $ 50,288,949
Expenses:
Mortality and expense risk
and administrative charges 8,356,583 8,092,103 3,917,259 3,191,540 12,388,373 12,044,210
-----------------------------------------------------------------------------------------------
Net investment income (loss) 56,372,236 56,053,932 21,678,371 23,099,332 49,195,300 38,244,739
Net realized gain (loss) 14,156,297 14,458,530 23,897,802 9,700,147 60,838,721 45,466,323
Unrealized appreciation
(depreciation) during the
period (30,559,573) 2,472,822 19,560,682 3,631,032 (93,256,752) (23,107,903)
-----------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
operations 39,968,960 72,985,284 65,136,855 36,430,511 16,777,269 60,603,159
Changes from principal
transactions:
Purchase payments 37,755,830 18,958,426 58,029,084 10,964,443 89,380,630 103,523,597
Transfers between sub-
accounts and the
Company 29,853,674 (17,040,289) 32,067,415 (5,795,331) (80,590,017) (18,384,431)
Withdrawals (89,782,808) (71,094,567) (36,367,472) (24,226,715) (100,634,351) (60,748,536)
Annual contract fee (304,235) (329,687) (154,449) (156,682) (292,444) (292,490)
-----------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
principal transactions (22,477,539) (69,506,117) 53,574,578 (19,214,285) (92,136,182) 24,098,140
-----------------------------------------------------------------------------------------------
Total increase (decrease) in
contract owners' equity 17,491,421 3,479,167 118,711,433 17,216,226 (75,358,913) 84,701,299
Contract owners' equity at
beginning of period 579,267,762 575,788,595 238,630,437 221,414,211 891,094,394 806,393,095
-----------------------------------------------------------------------------------------------
Contract owners' equity at end
of period $ 596,759,183 $ 579,267,762 $ 357,341,870 $ 238,630,437 $ 815,735,481 $ 891,094,394
===============================================================================================
</TABLE>
(4) On May 3, 1999, the Moderate Asset Allocation Sub-Account was renamed Income
& Value through a vote of the Board of Directors.
(5) On May 3, 1999, the Aggressive Asset Allocation Sub-Account was renamed
Large Cap Growth through a vote of the Board of Directors.
See accompanying notes.
7
<PAGE> 115
The Manufacturers Life Insurance Company of North America
Separate Account A
Statements of Operations and Changes in Contract
Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
-----------------------------------------------------------------------------------------------
STRATEGIC BOND OVERSEAS (6) GROWTH
-----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998 1999 1998
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 20,390,856 $ 19,762,976 $ 0 $ 10,783,616 $ 14,178,869 $ 6,498,283
Expenses:
Mortality and expense risk
and administrative charges 3,938,500 4,220,177 3,241,956 2,772,206 4,962,443 2,460,324
-----------------------------------------------------------------------------------------------
Net investment income (loss) 16,452,356 15,542,799 (3,241,956) 8,011,410 9,216,426 4,037,959
Net realized gain (loss) (3,762,853) 5,827,370 23,772,499 (4,242,482) 31,512,124 7,868,700
Unrealized appreciation
(depreciation) during the
period (11,027,718) (22,293,148) 64,760,081 6,890,254 74,478,633 23,267,491
-----------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
operations 1,661,785 (922,979) 85,290,624 10,659,182 115,207,183 35,174,150
Changes from principal
transactions:
Purchase payments 22,725,716 59,587,164 28,374,515 22,213,738 89,248,445 46,724,068
Transfers between sub-
accounts and the
Company (40,829,510) (16,016,161) 34,421,895 (9,290,437) 107,317,349 20,642,796
Withdrawals (34,305,856) (21,651,946) (23,065,572) (13,365,800) (27,547,360) (9,558,754)
Annual contract fee (83,834) (81,880) (76,048) (72,465) (102,141) (54,268)
-----------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
principal transactions (52,493,484) 21,837,177 39,654,790 (514,964) 168,916,293 57,753,842
-----------------------------------------------------------------------------------------------
Total increase (decrease) in
contract owners' equity (50,831,699) 20,914,198 124,945,414 10,144,218 284,123,476 92,927,992
Contract owners' equity at
beginning of period 300,957,827 280,043,629 192,711,494 182,567,276 224,993,924 132,065,932
-----------------------------------------------------------------------------------------------
Contract owners' equity at end
of period $ 250,126,128 $ 300,957,827 $ 317,656,908 $ 192,711,494 $ 509,117,400 $ 224,993,924
===============================================================================================
</TABLE>
(6) On May 3, 1999, the International Growth & Income Sub-Account was renamed
Overseas through a vote of the Board of Directors.
See accompanying notes.
8
<PAGE> 116
The Manufacturers Life Insurance Company of North America
Separate Account A
Statements of Operations and Changes in Contract
Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
----------------------------------------------------------------------------------------------
MID CAP GROWTH (7) INTERNATIONAL SMALL CAP PACIFIC RIM EMERGING MARKETS
----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998 1999 1998
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 48,276,292 $ 0 $ 358,697 $ 336,534 $ 1,026,291 $ 0
Expenses:
Mortality and expense risk
and administrative charges 5,718,870 3,976,254 1,573,338 1,517,775 446,217 137,686
----------------------------------------------------------------------------------------------
Net investment income (loss) 42,557,422 (3,976,254) (1,214,641) (1,181,241) 580,074 (137,686)
Net realized gain (loss) 28,008,220 20,349,494 15,671,103 6,105,663 7,368,690 (2,090,591)
Unrealized appreciation
(depreciation) during the
period 94,166,019 51,762,373 65,010,127 5,595,158 9,147,024 1,949,020
----------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
operations 164,731,661 68,135,613 79,466,589 10,519,580 17,095,788 (279,257)
Changes from principal
transactions:
Purchase payments 73,220,832 46,950,104 12,518,161 11,129,043 17,899,189 3,553,787
Transfers between sub-
accounts and the
Company 23,827,468 8,700,217 (3,519,893) (11,727,965) 23,572,852 1,253,352
Withdrawals (33,080,407) (17,277,732) (10,366,665) (6,285,382) (2,407,322) (497,351)
Annual contract fee (133,217) (102,955) (40,229) (42,473) (9,223) (3,324)
----------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
principal transactions 63,834,676 38,269,634 (1,408,626) (6,926,777) 39,055,496 4,306,464
----------------------------------------------------------------------------------------------
Total increase (decrease) in
contract owners' equity 228,566,337 106,405,247 78,057,963 3,592,803 56,151,284 4,027,207
Contract owners' equity at
beginning of period 346,764,786 240,359,539 104,957,831 101,365,028 11,530,410 7,503,203
----------------------------------------------------------------------------------------------
Contract owners' equity at end
of period $ 575,331,123 $ 346,764,786 $ 183,015,794 $ 104,957,831 $ 67,681,694 $ 11,530,410
==============================================================================================
</TABLE>
(7) On May 3, 1999, the Small Mid Cap Sub-Account was renamed Mid Cap Growth
through a vote of the Board of Directors.
See accompanying notes.
9
<PAGE> 117
The Manufacturers Life Insurance Company of North America
Separate Account A
Statements of Operations and Changes in Contract
Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
----------------------------------------------------------------------------------------------
SCIENCE & TECHNOLOGY EMERGING SMALL COMPANY AGGRESSIVE GROWTH (8)
----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998 1999 1998
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 61,919,386 $ 0 $ 759,177 $ 606,644 $ 0 $ 0
Expenses:
Mortality and expense risk
and administrative charges 5,761,991 1,202,138 873,992 644,336 924,547 725,112
----------------------------------------------------------------------------------------------
Net investment income (loss) 56,157,395 (1,202,138) (114,815) (37,692) (924,547) (725,112)
Net realized gain (loss) 55,024,474 2,838,592 7,884,062 (840,697) 4,579,079 302,011
Unrealized appreciation
(depreciation) during the
period 227,736,042 32,860,184 35,160,887 754,323 21,518,364 2,526,128
----------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
operations 338,917,911 34,496,638 42,930,134 (124,066) 25,172,896 2,103,027
Changes from principal
transactions:
Purchase payments 207,053,560 34,212,705 15,034,166 16,370,893 26,876,986 12,805,688
Transfers between sub-
accounts and the
Company 249,768,296 16,789,653 5,408,633 532,221 5,696,610 514,103
Withdrawals (27,264,960) (4,130,388) (4,232,298) (2,520,170) (4,347,279) (2,807,192)
Annual contract fee (118,939) (26,696) (20,646) (12,785) (20,633) (17,850)
----------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
principal transactions 429,437,957 46,845,274 16,189,855 14,370,159 28,205,684 10,494,749
----------------------------------------------------------------------------------------------
Total increase (decrease) in
contract owners' equity 768,355,868 81,341,912 59,119,989 14,246,093 53,378,580 12,597,776
Contract owners' equity at
beginning of period 136,789,175 55,447,263 54,525,739 40,279,646 58,817,062 46,219,286
----------------------------------------------------------------------------------------------
Contract owners' equity at end
of period $ 905,145,043 $ 136,789,175 $ 113,645,728 $ 54,525,739 $ 112,195,642 $ 58,817,062
==============================================================================================
</TABLE>
(8) On May 3, 1999, the Pilgrim Baxter Growth Sub-Account was renamed Aggressive
Growth through a vote of the Board of Directors.
See accompanying notes.
10
<PAGE> 118
The Manufacturers Life Insurance Company of North America
Separate Account A
Statements of Operations and Changes in Contract
Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
-----------------------------------------------------------------------------------------
INTERNATIONAL STOCK WORLDWIDE GROWTH (9) QUANTITATIVE EQUITY
-----------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998 1999 1998
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 8,108,456 $ 862,935 $ 319,615 $ 172,999 $ 10,516,654 $ 4,541,776
Expenses:
Mortality and expense risk
and administrative charges 1,061,361 674,016 177,079 395,448 2,042,760 640,582
-----------------------------------------------------------------------------------------
Net investment income (loss) 7,047,095 188,919 142,536 (222,449) 8,473,894 3,901,194
Net realized gain (loss) 8,135,854 2,364,955 3,255,622 525,371 4,998,960 449,434
Unrealized appreciation
(depreciation) during the
period 7,613,413 3,503,979 (1,523,409) 1,343,334 14,982,816 6,170,135
-----------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
operations 22,796,362 6,057,853 1,874,749 1,646,256 28,455,670 10,520,763
Changes from principal
transactions:
Purchase payments 23,670,823 13,225,216 2,628,319 11,495,901 48,763,678 20,771,816
Transfers between sub-
accounts and the
Company 1,405,970 2,851,294 (37,474,479) 2,347,570 63,401,411 12,619,124
Withdrawals (5,184,070) (2,491,971) (1,108,247) (1,286,241) (11,480,477) (2,437,925)
Annual contract fee (20,859) (13,680) (3,338) (7,427) (35,712) (11,798)
-----------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
principal transactions 19,871,864 13,570,859 (35,957,745) 12,549,803 100,648,900 30,941,217
-----------------------------------------------------------------------------------------
Total increase (decrease) in
contract owners' equity 42,668,226 19,628,712 (34,082,996) 14,196,059 129,104,570 41,461,980
Contract owners' equity at
beginning of period 55,502,238 35,873,526 34,082,996 19,886,937 67,601,598 26,139,618
-----------------------------------------------------------------------------------------
Contract owners' equity at end
of period $ 98,170,464 $ 55,502,238 $ 0 $ 34,082,996 $ 196,706,168 $ 67,601,598
=========================================================================================
</TABLE>
(9) On April 30, 1999, the Worldwide Growth Sub-Account ceased operations and
was merged with the Global Equity Sub-Account through a vote of the Board of
Directors.
See accompanying notes.
11
<PAGE> 119
The Manufacturers Life Insurance Company of North America
Separate Account A
Statements of Operations and Changes in Contract
Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
--------------------------------------------------------------------------------------------
VALUE TRUST REAL ESTATE SECURITIES BALANCED
--------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998 1999 1998
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 3,906,842 $ 4,638,914 $ 1,606,291 $ 4,863,628 $ 7,083,393 $ 4,362,693
Expenses:
Mortality and expense risk
and administrative charges 1,922,443 1,782,489 467,023 550,805 1,443,252 638,257
--------------------------------------------------------------------------------------------
Net investment income (loss) 1,984,399 2,856,425 1,139,268 4,312,823 5,640,141 3,724,436
Net realized gain (loss) (2,588,397) 1,138,053 (6,927,167) (902,342) (1,412,831) 247,184
Unrealized appreciation
(depreciation) during the
period (5,159,090) (10,157,046) 2,714,591 (10,990,491) (6,552,341) 1,131,212
--------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
operations (5,763,088) (6,162,568) (3,073,308) (7,580,010) (2,325,031) 5,102,832
Changes from principal
transactions:
Purchase payments 18,406,894 49,908,355 4,080,168 11,906,485 29,779,086 26,732,376
Transfers between sub-
accounts and the
Company (18,344,695) 14,640,406 (5,881,514) 2,566,730 5,388,722 22,894,698
Withdrawals (11,460,776) (5,344,005) (3,461,863) (2,469,360) (9,245,498) (2,463,299)
Annual contract fee (41,689) (29,966) (11,688) (10,774) (27,011) (9,365)
--------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
principal transactions (11,440,266) 59,174,790 (5,274,897) 11,993,081 25,895,299 47,154,410
--------------------------------------------------------------------------------------------
Total increase (decrease) in
contract owners' equity (17,203,354) 53,012,222 (8,348,205) 4,413,071 23,570,268 52,257,242
Contract owners' equity at
beginning of period 140,809,560 87,797,338 38,306,963 33,893,892 74,773,004 22,515,762
--------------------------------------------------------------------------------------------
Contract owners' equity at end
of period $ 123,606,206 $ 140,809,560 $ 29,958,758 $ 38,306,963 $ 98,343,272 $ 74,773,004
============================================================================================
</TABLE>
See accompanying notes.
12
<PAGE> 120
The Manufacturers Life Insurance Company of North America
Separate Account A
Statements of Operations and Changes in Contract
Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
--------------------------------------------------------------------------------------------
HIGH YIELD CAPITAL GROWTH BOND (10) LIFESTYLE AGGRESSIVE 1000
--------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998 1999 1998
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 11,545,406 $ 8,887,481 $ 864,902 $ 264,547 $ 2,722,018 $ 2,636,383
Expenses:
Mortality and expense risk
and administrative charges 1,997,783 1,432,205 55,062 95,375 708,426 723,027
--------------------------------------------------------------------------------------------
Net investment income (loss) 9,547,623 7,455,276 809,840 169,172 2,013,592 1,913,356
Net realized gain (loss) (2,257,195) 308,573 (660,734) 135,919 (1,222,067) 809,716
Unrealized appreciation
(depreciation) during the
period 1,227,151 (7,507,180) (267,578) 156,238 5,251,865 (1,147,651)
--------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
operations 8,517,579 256,669 (118,472) 461,329 6,043,390 1,575,421
Changes from principal transactions:
Purchase payments 29,744,338 57,459,954 1,787,667 3,886,790 15,435,696 21,969,123
Transfers between sub-
accounts and the
Company (6,333,119) 15,683,299 (12,288,805) 3,612,080 (21,418,342) (1,521,360)
Withdrawals (12,946,674) (5,903,448) (285,298) (227,645) (3,918,302) (3,165,862)
Annual contract fee (31,743) (17,792) (620) (891) (35,402) (25,491)
--------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
principal transactions 10,432,802 67,222,013 (10,787,056) 7,270,334 (9,936,350) 17,256,410
--------------------------------------------------------------------------------------------
Total increase (decrease) in
contract owners' equity 18,950,381 67,478,682 (10,905,528) 7,731,663 (3,892,960) 18,831,831
Contract owners' equity at
beginning of period 124,841,912 57,363,230 10,905,528 3,173,865 58,863,042 40,031,211
--------------------------------------------------------------------------------------------
Contract owners' equity at end
of period $ 143,792,293 $ 124,841,912 $ 0 $ 10,905,528 $ 54,970,082 $ 58,863,042
============================================================================================
</TABLE>
(10) On April 30, 1999, the Capital Growth Bond Sub-Account ceased operations
and was merged with the Investment Quality Bond Sub-Account through a vote
of the Board of Directors.
See accompanying notes.
13
<PAGE> 121
The Manufacturers Life Insurance Company of North America
Separate Account A
Statements of Operations and Changes in Contract
Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
-----------------------------------------------------------------------------------------------
LIFESTYLE GROWTH 820 LIFESTYLE BALANCED 640 LIFESTYLE MODERATE 460
-----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998 1999 1998
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 14,858,795 $ 14,111,619 $ 17,810,957 $ 13,670,797 $ 7,506,470 $ 3,839,085
Expenses:
Mortality and expense risk
and administrative charges 3,749,541 3,455,069 4,121,828 3,423,557 1,849,094 1,151,712
-----------------------------------------------------------------------------------------------
Net investment income (loss) 11,109,254 10,656,550 13,689,129 10,247,240 5,657,376 2,687,373
Net realized gain (loss) 1,685,669 2,139,936 (859,793) 1,544,172 1,153,420 878,683
Unrealized appreciation
(depreciation) during the
period 23,446,478 (2,785,080) 16,069,672 (3,124,500) 1,095,396 2,974,288
-----------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
operations 36,241,401 10,011,406 28,899,008 8,666,912 7,906,192 6,540,344
Changes from principal
transactions:
Purchase payments 70,193,502 110,072,582 61,122,566 136,038,997 28,704,487 54,357,743
Transfers between sub-
accounts and the
Company (94,123,645) 5,245,489 (82,208,600) 14,223,902 (8,341,574) 14,002,683
Withdrawals (19,561,667) (10,385,720) (20,076,098) (12,460,337) (9,811,239) (3,921,846)
Annual contract fee (123,215) (72,269) (106,632) (51,951) (41,995) (13,485)
-----------------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
principal transactions (43,615,025) 104,860,082 (41,268,764) 137,750,611 10,509,679 64,425,095
-----------------------------------------------------------------------------------------------
Total increase (decrease) in
contract owners' equity (7,373,624) 114,871,488 (12,369,756) 146,417,523 18,415,871 70,965,439
Contract owners' equity at
beginning of period 294,045,173 179,173,685 306,438,509 160,020,986 115,766,034 44,800,595
-----------------------------------------------------------------------------------------------
Contract owners' equity at end
of period $ 286,671,549 $ 294,045,173 $ 294,068,753 $ 306,438,509 $ 134,181,905 $ 115,766,034
===============================================================================================
</TABLE>
See accompanying notes.
14
<PAGE> 122
The Manufacturers Life Insurance Company of North America
Separate Account A
Statements of Operations and Changes in Contract
Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
-----------------------------------------------------------------------------------
US LARGE CAP
LIFESTYLE CONSERVATIVE 280 SMALL COMPANY VALUE VALUE (11)
-----------------------------------------------------------------------------------
YEAR ENDED
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, DECEMBER 31
-----------------------------------------------------------------------------------
1999 1998 1999 1998 1999
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income:
Dividends $ 5,216,443 $ 1,713,067 $ 38,016 $ 19,377 $ 0
Expenses:
Mortality and expense risk
and administrative charges 1,128,310 556,830 809,959 606,307 626,565
-----------------------------------------------------------------------------------
Net investment income (loss) 4,088,133 1,156,237 (771,943) (586,930) (626,565)
Net realized gain (loss) 544,159 271,648 (5,255,135) (582,960) (193,257)
Unrealized appreciation
(depreciation) during the
period (2,519,013) 2,119,282 9,035,272 (2,538,730) 4,790,566
-----------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
operations 2,113,279 3,547,167 3,008,194 (3,708,620) 3,970,744
Changes from principal transactions:
Purchase payments 23,265,220 33,166,004 8,866,509 28,591,491 57,292,554
Transfers between sub-
accounts and the
Company (1,927,268) 14,381,167 (13,624,996) 25,105,906 58,617,615
Withdrawals (6,127,892) (2,280,020) (4,843,069) (1,762,784) (1,920,575)
Annual contract fee (18,295) (4,485) (18,019) (8,494) (6,278)
-----------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
principal transactions 15,191,765 45,262,666 (9,619,575) 51,926,119 113,983,316
-----------------------------------------------------------------------------------
Total increase (decrease) in
contract owners' equity 17,305,044 48,809,833 (6,611,381) 48,217,499 117,954,060
Contract owners' equity at
beginning of period 66,122,902 17,313,069 65,095,402 16,877,903 0
-----------------------------------------------------------------------------------
Contract owners' equity at end
of period $ 83,427,946 $ 66,122,902 $ 58,484,021 $ 65,095,402 $ 117,954,060
===================================================================================
</TABLE>
See accompanying notes.
15
<PAGE> 123
The Manufacturers Life Insurance Company of North America
Separate Account A
Statements of Operations and Changes in Contract
Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
-----------------------------------------------------------------
MID CAP STOCK (11) SMALL COMPANY INTERNATIONAL
BLEND (11) VALUE (11)
-----------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1999 1999
-----------------------------------------------------------------
<S> <C> <C> <C>
Income:
Dividends $ 0 $ 720,294 $ 0
Expenses:
Mortality and expense risk
and administrative charges 122,937 164,934 136,693
-----------------------------------------------------------------
Net investment income (loss) (122,937) 555,360 (136,693)
Net realized gain (loss) (173,237) 257,693 33,013
Unrealized appreciation
(depreciation) during the
period 908,828 5,215,759 1,803,901
-----------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
operations 612,654 6,028,812 1,700,221
Changes from principal
transactions:
Purchase payments 15,399,144 15,336,609 11,603,890
Transfers between sub-
accounts and the
Company 11,691,592 16,834,296 15,682,172
Withdrawals (461,893) (340,818) (748,816)
Annual contract fee (1,810) (1,898) (1,435)
-----------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
principal transactions 26,627,033 31,828,189 26,535,811
-----------------------------------------------------------------
Total increase (decrease) in
contract owners' equity 27,239,687 37,857,001 28,236,032
Contract owners' equity at
beginning of period 0 0 0
-----------------------------------------------------------------
Contract owners' equity at end
of period $ 27,239,687 $ 37,857,001 $ 28,236,032
=================================================================
</TABLE>
(11) From commencement of operations, May 3, 1999.
See accompanying notes.
16
<PAGE> 124
The Manufacturers Life Insurance Company of North America
Separate Account A
Statements of Operations and Changes in Contract
Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
-------------------------------------------------------------------------------------
DEVELOPING CAPITAL MARKETS
TOTAL RETURN (11) BASIC VALUE FOCUS FOCUS
-------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1999 1998 1999 1998
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income:
Dividends $ 0 $ 2,014,871 $ 53,970 $ 11,709 $ 388
Expenses:
Mortality and expense risk
and administrative charges 322,526 133,444 21,001 7,049 1,933
-------------------------------------------------------------------------------------
Net investment income (loss) (322,526) 1,881,427 32,969 4,660 (1,545)
Net realized gain (loss) (54,031) (18,709) (18,194) 19,139 (7,758)
Unrealized appreciation
(depreciation) during the
period (49,306) (842,689) 80,592 295,033 (46,006)
-------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
operations (425,863) 1,020,029 95,367 318,832 (55,309)
Changes from principal
transactions:
Purchase payments 28,361,631 10,559,719 2,636,532 597,141 279,236
Transfers between sub-
accounts and the
Company 39,133,059 4,408,752 331,091 281,489 (12,556)
Withdrawals (1,570,783) (317,296) (27,056) (125,800) (2,025)
Annual contract fee (2,473) (4,087) (92) (248) (6)
-------------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
principal transactions 65,921,434 14,647,088 2,940,475 752,582 264,649
-------------------------------------------------------------------------------------
Total increase (decrease) in
contract owners' equity 65,495,571 15,667,117 3,035,842 1,071,414 209,340
Contract owners' equity at
beginning of period 0 3,383,761 347,919 241,128 31,788
-------------------------------------------------------------------------------------
Contract owners' equity at end
of period $ 65,495,571 $ 19,050,878 $ 3,383,761 $ 1,312,542 $ 241,128
=====================================================================================
</TABLE>
(11) From commencement of operations, May 3, 1999.
See accompanying notes.
17
<PAGE> 125
The Manufacturers Life Insurance Company of North America
Separate Account A
Statements of Operations and Changes in Contract
Owners' Equity (continued)
<TABLE>
<CAPTION>
SUB-ACCOUNT
--------------------------------------------------------------------------------
SPECIAL VALUE FOCUS TOTAL
--------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income:
Dividends $ 250,560 $ 57,259 $ 845,296,685 $ 760,515,175
Expenses:
Mortality and expense risk
and administrative charges 31,506 10,495 178,004,548 140,724,000
--------------------------------------------------------------------------------
Net investment income (loss) 219,054 46,764 667,292,137 619,791,175
Net realized gain (loss) (63,717) (77,295) 555,229,763 367,566,677
Unrealized appreciation
(depreciation) during the
period 704,186 (50,244) 825,926,613 198,898,651
--------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
operations 859,523 (80,775) 2,048,448,513 1,186,256,503
Changes from principal transactions:
Purchase payments 2,095,665 1,000,154 2,452,701,028 1,890,721,447
Transfers between sub-
accounts and the
Company 665,403 117,665 643,567,683 174,920,177
Withdrawals (275,556) (10,841) (1,597,183,118) (886,646,495)
Annual contract fee (1,270) (76) (4,430,769) (3,754,865)
--------------------------------------------------------------------------------
Net increase (decrease) in
contract owners' equity from
principal transactions 2,484,242 1,106,902 1,494,654,824 1,175,240,264
--------------------------------------------------------------------------------
Total increase (decrease) in
contract owners' equity 3,343,765 1,026,127 3,543,103,337 2,361,496,767
Contract owners' equity at
beginning of period 1,274,025 247,898 11,149,032,211 8,787,535,444
--------------------------------------------------------------------------------
Contract owners' equity at end
of period $ 4,617,790 $ 1,274,025 $ 14,692,135,548 $ 11,149,032,211
================================================================================
</TABLE>
See accompanying notes.
18
<PAGE> 126
The Manufacturers Life Insurance Company of North America
Separate Account A
Notes to Financial Statements
December 31, 1999
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 thirty-eight 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 twenty-six contracts,
distinguished principally by the level of expenses and surrender charges. These
twenty-six 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
(VTG20, 21, 22, 23, 25), 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 78.4% owned by The Manufacturers Life Insurance Company
(USA), (ManUSA) and 21.6% by MRL Holding LLC, (MRL). ManUSA and MRL are indirect
wholly-owned subsidiaries of the Manufacturers Life Insurance Company (MLI),
which in turn is a wholly-owned subsidiary of Manulife Financial Corporation.
Manulife Financial Corporation and its subsidiaries are known collectively as
Manulife Financial.
On May 3, 1999, five new sub-accounts, Small Company Blend, Total Return,
International Value, US Large Cap Value and Mid Cap Stock commenced operations.
On April 30, 1999, two sub-accounts, Capital Growth Bond and Worldwide Growth,
ceased operations and were merged into the Investment Quality Bond and Global
Equity sub-accounts, respectively.
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.
19
<PAGE> 127
The Manufacturers Life Insurance Company of North America
Separate Account A
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In addition to the Account, a contract holder may also allocate funds to the
Fixed Account, which is part of the Company's general account. Because of
exemptive and exclusionary provisions, interests in the Fixed Account have not
been registered under the Securities Act of 1933, and the Company's general
account has not been registered as an investment company under the Investment
Company Act of 1940.
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 review, periodically, the status of such decision based on
changes in the tax law. Such a charge may be made in future years for any
federal income taxes that would be attributable to the contract.
The preparation of financial statements in conformity with generally accepted
accounting principles 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.
20
<PAGE> 128
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 owned 90% by the Company and 10% 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): 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.
21
<PAGE> 129
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.
(i) Current Contract Series (VTG20, 21, 22, 23, 25): 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 1.15% of the contract value, respectively.
(vi) 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.
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, 1999:
<TABLE>
<CAPTION>
PURCHASES SALES
------------------------------------
<S> <C> <C>
Mid Cap Blend $ 326,353,442 $ 427,145,554
Investment Quality Bond Portfolio 103,324,875 83,499,815
Growth and Income Portfolio 748,865,292 386,155,821
Blue Chip Growth Portfolio 591,383,750 314,872,806
Money Market Portfolio 2,549,392,949 2,143,868,753
Global Equity Portfolio 588,186,069 646,923,753
Global Bond Portfolio 50,588,524 71,939,421
U.S. Government Securities Portfolio 133,569,431 129,643,520
Diversified Bond Allocation Portfolio 51,328,952 63,516,442
Income & Value Portfolio 170,745,338 136,850,641
Large Cap Growth Portfolio 231,014,038 155,761,089
Equity-Income Portfolio 247,368,634 290,309,516
Strategic Bond Portfolio 69,523,298 105,564,426
Overseas Portfolio 380,837,141 344,424,307
Growth Portfolio 281,014,445 102,881,726
Mid Cap Growth Portfolio 233,388,727 126,996,629
</TABLE>
22
<PAGE> 130
The Manufacturers Life Insurance Company of North America
Separate Account A
Notes to Financial Statements (continued)
5. PURCHASES AND SALES OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PURCHASES SALES
---------------------------------
<S> <C> <C>
International Small Cap Portfolio $ 123,004,361 $ 125,627,627
Pacific Rim Emerging Markets Portfolio 179,053,815 139,418,246
Science & Technology Portfolio 634,748,848 149,153,496
Emerging Small Company Portfolio 113,235,700 97,160,660
Aggressive Growth Portfolio 115,965,778 88,684,641
International Stock Portfolio 373,033,926 346,114,967
Worldwide Growth Portfolio 14,975,888 50,791,097
Quantitative Equity Portfolio 156,567,797 47,445,003
Value Trust Portfolio 55,041,981 64,497,848
Real Estate Securities Portfolio 19,050,260 23,185,889
Balanced Portfolio 76,804,994 45,269,554
High Yield Portfolio 102,362,334 82,381,909
Capital Growth Bond Portfolio 4,586,526 14,563,742
Lifestyle Aggressive 1000 Portfolio 24,724,045 32,646,803
Lifestyle Growth 820 Portfolio 90,261,683 122,767,454
Lifestyle Balanced 640 Portfolio 92,501,212 120,080,847
Lifestyle Moderate 460 Portfolio 54,442,620 38,275,565
Lifestyle Conservative 280 Portfolio 50,735,991 31,456,093
Small Company Value Portfolio 33,013,909 43,405,427
Total Return Portfolio 75,358,181 9,759,272
US Large Cap Value Portfolio 126,164,709 12,807,958
International Value Trust Portfolio 48,638,006 22,238,888
Mid Cap Stock Portfolio 31,573,764 5,069,668
Small Company Blend Portfolio 35,802,685 3,419,136
Basic Value Focus Portfolio 17,696,840 1,168,325
Developing Capital Markets Focus Portfolio 3,471,451 768,155
Special Value Focus Portfolio 947,250 190,008
---------------------------------
Total $9,410,649,459 $7,248,702,497
=================================
</TABLE>
23
<PAGE> 131
The Manufacturers Life Insurance Company of North America
Separate Account A
Notes to Financial Statements (continued)
6. UNIT VALUES
A summary of the accumulation unit values at December 31, 1999 and 1998 and the
accumulation units and dollar values outstanding at December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
1998 1999
--------------- ---------------------------------------------------
UNIT UNIT
VALUE VALUE UNITS DOLLARS
--------------- ---------------------------------------------------
<S> <C> <C> <C> <C>
Mid Cap Blend Sub-Account:
VEN 1 Contracts 51.507214 64.95498 12,707 $ 825,409
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 31.289551 39.416089 32,325,962 1,274,163,008
VIS 5,6,25 and 26 Contracts 22.973151 28.867552 3,038,413 87,711,548
VTG20 Contracts 13.443090 16.909177 4,464,769 75,495,561
MRP Contracts 12.103394 15.307946 877 13,422
--------------------------------------
39,842,728 1,438,208,948
Investment Quality Bond Sub-Account:
VEN 1 Contracts 22.746879 22.052785 4,129 91,059
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 19.660365 19.039807 8,787,934 167,320,569
VIS 5,6,25 and 26 Contracts 13.299876 12.847911 1,766,908 22,701,077
VTG20 Contracts 13.845626 13.388502 2,078,881 27,833,097
MRP Contracts 13.269922 12.902584 1,630 21,025
--------------------------------------
12,639,482 217,966,827
Growth and Income Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 32.976967 38.655938 57,740,268 2,232,004,220
VIS 5,6,25 and 26 Contracts 26.056725 30.467742 7,534,499 229,559,163
VTG20 Contracts 15.811724 18.506889 16,079,923 297,589,355
MRP Contracts 13.924321 16.387611 12,932 211,921
-----------------------------------------------------
81,367,622 2,759,364,659
Blue Chip Growth Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 21.710674 25.568866 42,817,809 1,094,802,822
VIS 5,6,25 and 26 Contracts 22.573222 26.51836 4,836,159 128,246,994
VTG20 Contracts 16.234822 19.091275 10,790,218 205,999,017
MRP Contracts 14.123586 16.700133 10,829 180,841
--------------------------------------
58,455,015 1,429,229,674
</TABLE>
24
<PAGE> 132
The Manufacturers Life Insurance Company of North America
Separate Account A
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
<TABLE>
<CAPTION>
1998 1999
------------- ---------------------------------------------------
UNIT UNIT
VALUE VALUE UNITS DOLLARS
------------- ---------------------------------------------------
<S> <C> <C> <C> <C>
Money Market Sub-Account:
VEN 1 Contracts 17.283692 17.846774 4,228 $ 75,456
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 15.794513 16.291417 38,239,225 622,971,156
VIS 5,6,25 and 26 Contracts 11.811952 12.153141 9,394,304 114,170,305
VTG20 Contracts 13.123053 13.515626 9,661,872 130,586,252
MRP Contracts 12.872909 13.331106 78,627 1,048,181
--------------------------------------
57,378,256 868,851,350
Global Equity Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 24.098970 24.633827 25,688,362 632,802,659
VIS 5,6,25 and 26 Contracts 18.706100 19.073534 3,181,382 60,680,189
VTG20 Contracts 13.944724 14.232856 2,766,110 39,369,646
MRP Contracts 12.195410 12.516028 553 6,922
--------------------------------------
31,636,407 732,859,416
Global Bond Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 21.333144 19.632749 6,071,768 119,205,498
VIS 5,6,25 and 26 Contracts 14.814388 13.599529 810,534 11,022,877
VTG20 Contracts 13.615563 12.511533 539,336 6,747,926
--------------------------------------
7,421,638 136,976,301
U.S. Government Securities Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 18.587049 18.286918 10,165,983 185,904,501
VIS 5,6,25 and 26 Contracts 12.999698 12.757839 1,711,219 21,831,460
VTG20 Contracts 13.651980 13.411398 1,654,589 22,190,357
MRP Contracts 13.159699 12.999097 4,333 56,327
--------------------------------------
13,536,124 229,982,645
</TABLE>
25
<PAGE> 133
The Manufacturers Life Insurance Company of North America
Separate Account A
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
<TABLE>
<CAPTION>
1998 1999
--------------- -----------------------------------------------------
UNIT UNIT
VALUE VALUE UNITS DOLLARS
--------------- -----------------------------------------------------
<S> <C> <C> <C> <C>
Diversified Bond Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 18.125951 18.002047 7,516,672 $135,315,483
VIS 5,6,25 and 26 Contracts 14.663990 14.527388 783,368 11,380,292
VTG20 Contracts 13.914540 13.7987 782,445 10,796,730
MRP Contracts 13.161158 13.123588 544 7,134
--------------------------------------
9,083,029 157,499,639
Income & Value Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 20.742457 22.230152 24,075,423 535,200,302
VIS 5,6,25 and 26 Contracts 16.824988 17.986686 1,897,189 34,124,143
VTG20 Contracts 14.398732 15.408317 1,751,346 26,985,288
MRP Contracts 13.179250 14.181104 1,702 24,134
--------------------------------------
27,725,660 596,333,867
Large Cap Growth Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 23.040505 28.465074 10,369,256 295,161,628
VIS 5,6,25 and 26 Contracts 18.982681 23.393391 797,949 18,666,730
VTG20 Contracts 14.785253 18.238886 2,373,175 43,284,060
MRP Contracts 13.271688 16.46198 329 5,422
--------------------------------------
13,540,709 357,117,840
Equity-Income Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 22.054902 22.487758 29,513,793 663,699,024
VIS 5,6,25 and 26 Contracts 20.794388 21.14957 3,549,615 75,072,828
VTG20 Contracts 14.249466 14.507362 5,116,706 74,229,906
MRP Contracts 12.464044 12.759601 27,275 348,019
--------------------------------------
38,207,389 813,349,777
</TABLE>
26
<PAGE> 134
The Manufacturers Life Insurance Company of North America
Separate Account A
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
<TABLE>
1998 1999
--------------- -----------------------------------------------------
UNIT UNIT
VALUE VALUE UNITS DOLLARS
--------------- -----------------------------------------------------
<S> <C> <C> <C> <C>
Strategic Bond Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 14.486687 14.602672 13,422,186 $195,999,784
VIS 5,6,25 and 26 Contracts 14.243718 14.321908 2,000,055 28,644,610
VTG20 Contracts 12.761400 12.8443 1,950,430 25,051,911
MRP Contracts 12.280627 12.428556 316 3,924
--------------------------------------
17,372,987 249,700,229
Overseas Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 12.290162 17.044524 15,431,151 263,016,625
VIS 5,6,25 and 26 Contracts 12.168562 16.833813 1,593,099 26,817,931
VTG20 Contracts 12.423604 17.203799 1,571,610 27,037,669
MRP Contracts 11.720466 16.319479 216 3,517
--------------------------------------
18,596,076 316,875,742
Growth Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 20.739989 28.060585 13,675,398 383,739,682
VIS 5,6,25 and 26 Contracts 20.612746 27.818889 1,531,097 42,593,413
VTG20 Contracts 14.959659 20.209678 4,080,687 82,469,376
MRP Contracts 13.655376 18.549262 6,215 115,293
--------------------------------------
19,293,397 508,917,764
Mid-Cap Growth Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 19.002856 27.113084 16,588,508 449,765,600
VIS 5,6,25 and 26 Contracts 18.869029 26.855 1,884,223 50,600,809
VTG20 Contracts 15.351927 21.871173 3,358,970 73,464,619
MRP Contract 13.903872 19.917321 3,240 64,535
--------------------------------------
21,834,941 573,895,563
</TABLE>
27
<PAGE> 135
The Manufacturers Life Insurance Company of North America
Separate Account A
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
<TABLE>
<CAPTION>
1998 1999
--------------- -----------------------------------------------------
UNIT UNIT
VALUE VALUE UNITS DOLLARS
--------------- -----------------------------------------------------
<S> <C> <C> <C> <C>
International Small Cap Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 14.792077 26.974754 5,445,119 $146,880,743
VIS 5,6,25 and 26 Contracts 14.687879 26.718058 677,004 18,088,222
VTG20 Contracts 13.042850 23.749328 744,863 17,689,992
MRP Contracts 12.202690 22.341682 6,651 148,600
--------------------------------------
6,873,637 182,807,557
Pacific Rim Emerging Markets Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 7.695249 12.359297 3,719,990 45,976,459
VIS 5,6,25 and 26 Contracts 7.656925 12.2671 382,168 4,688,087
VTG20 Contracts 7.472906 11.984246 1,419,030 17,006,003
MRP 18.168886 224 4,078
--------------------------------------
5,521,412 67,674,627
Science & Technology Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 19.287390 37.943261 16,967,094 643,786,890
VIS 5,6,25 and 26 Contracts 19.191525 37.660683 1,876,212 70,659,428
VTG20 Contracts 15.499402 30.445751 6,240,095 189,984,367
MRP Contracts 15.503436 30.621118 15,089 462,031
--------------------------------------
25,098,490 904,892,716
Emerging Small Company Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 14.381705 24.610648 3,384,328 83,290,514
VIS 5,6,25 and 26 Contracts 14.310172 24.427201 409,471 10,002,229
VTG20 Contracts 12.896270 22.035674 918,233 20,233,873
MRP Contracts 11.312902 19.436616 1,703 33,091
--------------------------------------
4,713,735 113,559,707
</TABLE>
28
<PAGE> 136
The Manufacturers Life Insurance Company of North America
Separate Account A
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
<TABLE>
<CAPTION>
1998 1999
--------------- ---------------------------------------------------
UNIT UNIT
VALUE VALUE UNITS DOLLARS
--------------- ---------------------------------------------------
<S> <C> <C> <C> <C>
Aggressive Growth Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 12.680777 16.628126 4,630,976 $ 77,004,445
VIS 5,6,25 and 26 Contracts 12.617679 16.504105 712,544 11,759,901
VTG20 Contracts 11.910371 15.594503 1,500,020 23,392,064
MRP Contracts 12.027610 15.83478 325 5,148
--------------------------------------
6,843,865 112,161,558
International Stock Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 14.337171 18.338932 3,652,874 66,989,812
VIS 5,6,25 and 26 Contracts 14.265882 18.202233 760,297 13,839,100
VTG20 Contracts 12.838403 16.397239 1,046,587 17,161,143
16.253406 390 6,339
--------------------------------------
5,460,148 97,996,394
Quantitative Equity Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 20.068624 24.202942 5,781,734 139,934,976
VIS 5,6,25 and 26 Contracts 19.968902 24.022598 1,020,245 24,508,931
VTG20 Contracts 15.640646 18.834509 1,707,382 32,157,705
MRP Contracts 14.006399 16.959503 5,575 94,552
--------------------------------------
8,514,936 196,696,164
Value Trust Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 14.591878 13.987433 5,992,312 83,817,066
VIS 5,6,25 and 26 Contracts 14.519332 13.883152 1,253,382 17,400,899
VTG20 Contracts 12.033566 11.517818 1,927,798 22,204,025
MRP Contracts 11.207507 10.786297 291 3,139
--------------------------------------
9,173,783 123,425,129
</TABLE>
29
<PAGE> 137
The Manufacturers Life Insurance Company of North America
Separate Account A
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
<TABLE>
<CAPTION>
1998 1999
--------------- ---------------------------------------------------
UNIT UNIT
VALUE VALUE UNITS DOLLARS
--------------- ---------------------------------------------------
<S> <C> <C> <C> <C>
Real Estate Securities Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 12.317190 11.174188 1,920,244 $21,457,172
VIS 5,6,25 and 26 Contracts 12.255908 11.090818 360,400 3,997,132
VTG20 Contracts 11.158599 10.10793 441,160 4,459,217
MRP Contracts 10.417728 9.488883 1,069 10,139
--------------------------------------
2,722,873 29,923,660
Balanced Sub-Account;
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 16.459454 15.96237 3,662,011 58,454,381
VIS 5,6,25 and 26 Contracts 16.377624 15.843343 866,999 13,736,155
VTG20 Contracts 14.397307 13.941569 1,863,512 25,980,277
MRP Contracts 13.203432 12.856009 1,913 24,592
--------------------------------------
6,394,435 98,195,405
High Yield Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 14.078376 14.993652 6,044,506 90,629,226
VIS 5,6,25 and 26 Contracts 14.008370 14.88185 1,590,415 23,668,318
VTG20 Contracts 13.018749 13.844359 2,121,022 29,364,184
MRP Contracts 12.279967 13.130722 2,176 28,579
--------------------------------------
9,758,119 143,690,307
Lifestyle Aggressive 1000 Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 14.134419 15.974195 2,511,100 40,112,804
VIS 5,6,25 and 26 Contracts 14.064128 15.855076 190,056 3,013,346
VTG20 Contracts 12.579492 14.195565 832,852 11,822,799
MRP Contracts 11.895710 13.497935 1,566 21,133
--------------------------------------
3,535,574 54,970,082
</TABLE>
30
<PAGE> 138
The Manufacturers Life Insurance Company of North America
Separate Account A
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
<TABLE>
<CAPTION>
1998 1999
--------------- ---------------------------------------------------
UNIT UNIT
VALUE VALUE UNITS DOLLARS
--------------- ---------------------------------------------------
<S> <C> <C> <C> <C>
Lifestyle Growth 820 Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 14.696667 16.893101 11,564,148 $195,354,327
VIS 5,6,25 and 26 Contracts 14.623605 16.767184 1,577,729 26,454,079
VTG20 Contracts 12.985550 14.903883 4,346,395 64,778,160
MRP Contracts 12.159849 14.033145 5,144 72,190
--------------------------------------
17,493,416 286,658,756
Lifestyle Balanced 640 Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 14.664362 16.257312 11,049,450 179,634,356
VIS 5,6,25 and 26 Contracts 14.591457 16.136115 1,938,056 31,272,696
VTG20 Contracts 13.059244 14.456141 5,693,341 82,303,734
MRP Contracts 12.282889 13.671696 11,202 153,148
--------------------------------------
18,692,049 293,363,934
Lifestyle Moderate 460 Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 15.171965 16.142259 4,878,939 78,757,090
VIS 5,6,25 and 26 Contracts 15.096548 16.021927 1,272,100 20,381,491
VTG20 Contracts 13.711730 14.566774 2,395,187 34,890,154
MRP Contracts 12.868825 13.746687 11,142 153,170
--------------------------------------
8,557,368 134,181,905
Lifestyle Conservative 280 Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 15.025549 15.439823 3,085,032 47,632,353
VIS 5,6,25 and 26 Contracts 14.950846 15.324704 847,076 12,981,193
VTG20 Contracts 13.933826 14.296546 1,593,353 22,779,442
MRP Contracts 13.175636 13.593172 2,572 34,958
--------------------------------------
5,528,033 83,427,946
</TABLE>
31
<PAGE> 139
The Manufacturers Life Insurance Company of North America
Separate Account A
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
<TABLE>
<CAPTION>
1998 1999
--------------- -----------------------------------------------------
UNIT UNIT
VALUE VALUE UNITS DOLLARS
--------------- -----------------------------------------------------
<S> <C> <C> <C> <C>
Total Return Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 12.255674 3,467,956 $42,502,137
VIS 5,6,25 and 26 Contracts 12.235367 395,881 4,843,748
VTG20 Contracts 12.243486 1,482,395 18,149,686
--------------------------------------
5,346,232 65,495,571
Small Company Value Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 11.178700 11.904646 3,361,623 40,018,928
VIS 5,6,25 and 26 Contracts 11.143828 11.83789 658,008 7,789,430
VTG20 Contracts 11.157770 11.864553 887,824 10,533,632
--------------------------------------
4,907,455 58,341,990
U.S. Large Cap Value Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 12.721279 5,189,158 66,012,721
VIS 5,6,25 and 26 Contracts 12.700198 806,506 10,242,789
VTG20 Contracts 12.70863 3,259,258 41,420,698
--------------------------------------
MRP 9,254,922 117,676,208
Mid Cap Stock Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 12.48352 1,289,051 16,091,892
VIS 5,6,25 and 26 Contracts 12.462837 142,342 1,773,989
VTG20 Contracts 12.471106 751,642 9,373,806
--------------------------------------
2,183,035 27,239,687
Small Company Blend Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 15.922213 1,517,759 24,166,076
VIS 5,6,25 and 26 Contracts 15.895877 130,739 2,078,216
VTG20 Contracts 15.906411 729,934 11,610,624
--------------------------------------
2,378,432 37,854,916
</TABLE>
32
<PAGE> 140
The Manufacturers Life Insurance Company of North America
Separate Account A
Notes to Financial Statements (continued)
6. UNIT VALUES (CONTINUED)
<TABLE>
<CAPTION>
1998 1999
--------------- ---------------------------------------------------
UNIT UNIT
VALUE VALUE UNITS DOLLARS
--------------- ---------------------------------------------------
<S> <C> <C> <C> <C>
International Value Sub-Account:
VEN 3,7,8,17,18,20,21,22,23,25,26 and
27 Contracts 12.86011 1,412,579 $ 18,165,918
VIS 5,6,25 and 26 Contracts 12.83881 138,371 1,776,514
VTG20 Contracts 12.847324 644,472 8,279,742
--------------------------------------
2,195,422 28,222,174
Basic Value Focus Sub-Account:
VEN 25,26 and 27 Contracts 17.018200 20.300779 650,610 13,207,896
Venture/Vantage 12.027400 14.325771 407,865 5,842,982
--------------------------------------
1,058,475 19,050,878
Developing Capital Market Focus Sub-Account:
VEN 25,26 and 27 Contracts 6.389100 10.419795 89,279 930,266
Venture/Vantage 9.694900 15.787402 24,214 382,276
--------------------------------------
113,493 1,312,542
Special Value Focus Sub-Account:
VEN 25,26 and 27 Contracts 25.494200 33.685273 81,985 2,761,701
Venture/Vantage 10.568700 13.943374 133,116 1,856,089
--------------------------------------
215,101 4,617,790
-------------------
TOTAL $14,670,567,844
===================
</TABLE>
33
<PAGE> 141
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.
34
<PAGE> 142
PART C
OTHER INFORMATION
<PAGE> 143
Guide to Name Changes and Successions:
The following name changes took place October 1, 1997:
<TABLE>
<CAPTION>
Old Name New Name
<S> <C>
NASL Variable Account The Manufacturers Life Insurance Company of North
America Separate Account A
North American Security Life Insurance Company The Manufacturers Life Insurance Company of North America
</TABLE>
The following name changes took place November 1, 1997:
<TABLE>
<CAPTION>
Old Name New Name
<S> <C>
NAWL Holding Co., Inc. Manulife-Wood Logan Holding Co., Inc.
</TABLE>
The following name changes took place September 24, 1999:
<TABLE>
Old Name New Name
<S> <C>
Wood Logan Associates, Inc. Manulife Wood Logan, Inc.
</TABLE>
On September 30, 1997, Manufacturers Securities Services, LLC succeeded to the
business of NASL Financial Services, Inc.
*****
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Statements of the Registrant, The
Manufacturers Life Insurance Company of North America
Separate Account A (formerly NASL Variable Account)
(Part B of the registration statement). FILED HEREIN
(2) Financial Statements of the Depositor, The
Manufacturers Life Insurance Company of North America
(formerly North American Security Life Insurance
Company) (Part B of the registration statement).
FILED HEREIN
(b) Exhibits
(1) (i) Resolution of the Board of Directors of North
American Security Life Insurance Company establishing
the NASL Variable Account - Incorporated by reference
to Exhibit (b)(1)(i) to Form N-4, file number
33-76162, filed February 25, 1998.
(ii) Resolution of the Board of Directors of North
American Security Life Insurance Company
redesignating existing sub-accounts and dividing the
NASL Variable Account to create additional
sub-accounts, dated May 30, 1995 - Previously filed
as Exhibit (b)(1)(ii) to post-effective amendment no.
2 to Form N-4 filed March 1, 1996.
(iii) Resolution of the Board of Directors of North
American Security Life Insurance Company
redesignating existing sub-accounts and dividing the
NASL Variable Account to create additional
sub-accounts, dated September 30, 1996 -- Previously
filed as Exhibit (b)(i)(iii) to post-effective
amendment no. 3 to Form N-4 filed February 28, 1997.
(iv) Resolution of the Board of Directors of North
American Security Life Insurance Company
redesignating existing sub-accounts and dividing the
NASL Variable Account to create additional
sub-accounts, dated September 30, 1996 -- Previously
filed as Exhibit (b)(1)(iv) to post-effective
amendment no. 3 to Form N-4 filed February 28, 1997.
<PAGE> 144
(v) Resolution of the Board of Directors of North
American Security Life Insurance Company
redesignating existing sub-accounts and dividing the
NASL Variable Account to create four additional
sub-accounts, dated September 26, 1997 --
Incorporated by reference to Exhibit (b)(1)(v) to
Form N-4, file number 33-76162, February 25, 1998.
(2) Agreements for custody of securities and similar investments -
Not Applicable.
(3) (i) Underwriting Agreement between North American
Security Life Insurance Company (Depositor) and NASL
Financial Services, Inc. (Underwriter) --
Incorporated by reference to Exhibit (b)(3)(i) to
Form N-4, file number 33-76162, March 1, 1999.
(ii) Promotional Agent Agreement between NASL Financial
Services, Inc. (Underwriter), North American Security
Life Insurance Company (Depositor), Wood Logan
Associates, Inc. (Promotional Agent) and NAWL Holding
Company, Inc.-- Previously filed as Exhibit
(b)(3)(ii) to post-effective amendment no. 3 to Form
N-4 filed February 28, 1997.
(iii) Amendment to Promotional Agent Agreement -
Incorporated by reference to Exhibit (b)(3)(iii) to
Form N-4, file number 33-76162, February 25, 1998.
(iv) Form of Selling Agreement between The Manufacturers
Life Insurance Company of North America,
Manufacturers Securities Services, LLC, Selling
Broker-Dealer and General Agent -- Incorporated by
reference to Exhibit (b)(3)(iv) to Form N-4, file
number 33-76162, filed February 25, 1998.
(4) (i)(A) Specimen Flexible Purchase Payment Individual
Deferred Variable Annuity Contract, Non-Participating
(VIS25) - Previously filed as Exhibit (b)(4)(i)(A) to
post-effective amendment no. 4 to Form N-4 filed
February 26, 1998.
(i)(B) Specimen Flexible Purchase Payment Individual
Deferred Variable Annuity Contract, Non-Participating
(VV) - Previously filed as Exhibit (b)(4)(i)(B) to
post-effective amendment no. 4 to Form N-4 filed
February 26, 1998.
(ii) Specimen Fixed Account Endorsement to Flexible
Purchase Payment Individual Deferred Variable Annuity
Contract, Non-Participating (END.007.98) - Previously
filed as Exhibit (b)(4)(ii) to post-effective
amendment no. 4 to Form N-4 filed February 26, 1998.
(iii) Specimen Individual Retirement Annuity Endorsement to
Flexible Purchase Payment Individual Deferred
Variable Annuity Contract, Non-Participating
(ENDORSEMENT.001) - Previously filed as Exhibit
(b)(4)(iii) to post-effective amendment no. 4 to Form
N-4 filed February 26, 1998.
(iv) Specimen ERISA Tax-Sheltered Annuity Endorsement to
Flexible Purchase Payment Individual Deferred
Variable Annuity Contract, Non-Participating
(END.002.97) - Previously filed as Exhibit (b)(4)(iv)
to post-effective amendment no. 4 to Form N-4 filed
February 26, 1998.
(v) Specimen Tax-Sheltered Annuity Endorsement to
Flexible Purchase Payment Individual Deferred
Variable Annuity Contract, Non-Participating
(END.003.97) - Previously filed as Exhibit (b)(4)(v)
to post-effective amendment no. 4 to Form N-4 filed
February 26, 1998.
(vi) Specimen Qualified Plan Endorsement Section 401 Plans
to Flexible Purchase Payment Individual Deferred
Variable Annuity Contract, Non-Participating
(END.004.97) - Previously filed as Exhibit (b)(4)(vi)
to post-effective amendment no. 4 to Form N-4 filed
February 26, 1998.
<PAGE> 145
(vii) Roth Individual Retirement Annuity Endorsement -
Incorporated by reference to Exhibit (b)(4)(ii)(F) to
Form N-4, file number 33-76162, filed March 1, 1999.
(5) (i)(A) Specimen Application for Flexible Purchase Payment
Individual Deferred Combination Fixed and Variable
Annuity Contract, Non-Participating (VIS25) -
Previously filed as Exhibit (b)(5)(i) to
post-effective amendment no. 4 to Form N-4 filed
February 26, 1998.
(i)(B) Specimen Application for Flexible Payment Deferred
Combination Fixed and Variable Annuity Contract -
Incorporated by reference to Exhibit (b)(5)(i)(B) to
post effective amendment no. 9 filed February 28,
2000.
(ii) Specimen Application for Flexible Purchase Payment
Individual Deferred Variable Annuity Contract,
Non-Participating (VV) - Previously filed as Exhibit
(b)(5)(ii) to post-effective amendment no. 4 to Form
N-4 filed February 26, 1998.
(6) (i) Certificate of Incorporation of North American
Security Life Insurance Company -- Incorporated by
reference to Exhibit (3)(i) to Form 10Q of The
Manufacturers Life Insurance Company of North
America, filed November 14, 1997.
(ii) Certificate of Amendment of Certificate of
Incorporation of the Company, Name Change July 1984
-- Incorporated by reference to Exhibit (3)(i)(a) to
Form 10Q of The Manufacturers Life Insurance Company
of North America, filed November 14, 1997.
(iii) Certificate of Amendment of Certificate of
Incorporation of the Company, Authorization of
Capital December 1994 -- Incorporated by reference to
Exhibit (3)(i)(b) to Form 10Q of The Manufacturers
Life Insurance Company of North America, filed
November 14, 1997.
(iv) Certificate of Amendment of Certificate of
Incorporation, Name change March 1997 --Incorporated
by reference to Exhibit (3)(i)(a) to post effective
amendment no. 1 to Form S-1 on behalf of The
Manufacturers Life Insurance Company of North
America, file number 333-6011, filed October 9, 1997.
(v) Certificate of Amendment of Certificate of
Incorporation of the Company, Registered Agent July
1997 -- Incorporated by reference to Exhibit
(3)(i)(c) to Form 10Q of The Manufacturers Life
Insurance Company of North America filed November 14,
1997.
(vi) Amended and Restated By-laws of The Manufacturers
Life Insurance Company of North America
--Incorporated by reference to Exhibit (3)(ii) to
Form 10Q of The Manufacturers Life Insurance Company
of North America filed November 14, 1997.
(7) (i) Contract of reinsurance in connection with the
variable annuity contracts being offered -Reinsurance
and Accounts Receivable Agreements between North
American Security Life Insurance Company and ITT
Lyndon Life, effective December 31, 1993, and
Amendments thereto effective January 1, 1994 and
December 31, 1994 -- Incorporated by reference to
Exhibit (b)(7)(i) to Form N-4, file number 33-76162,
filed February 25, 1998.
<PAGE> 146
(ii)(A) Contract of reinsurance in connection with the
variable annuity contracts being offered Variable
Annuity Guaranteed Death Benefit Reinsurance Contract
between North American Security Life Insurance
Company and Connecticut General Life Insurance
Company, effective July 1, 1995 (VIS25) - Previously
filed as Exhibit (b)(7)(ii) to post-effective
amendment no. 2 to Form N-4 filed March 1, 1996.
(ii)(B) Contract of reinsurance in connection with the
variable annuity contracts being offered Variable
Annuity Guaranteed Death Benefit Reinsurance Contract
between North American Security Life Insurance
Company and Connecticut General Life Insurance
Company, effective July 1, 1995 (VV) - Previously
filed as Exhibit (b)(7)(ii) to post-effective
amendment no. 2 to Form N-4 filed March 1, 1996.
(iii) Contract of reinsurance in connection with the
variable annuity contracts being offered Contract
between North American Security Life Insurance
Company and Swiss Re America, effective August 1,
1995 - Previously filed as Exhibit (b)(7)(iii) to
post-effective amendment no. 2 to Form N-4 filed
March 1, 1996.
(iv) Contract of reinsurance in connection with the
variable annuity contracts being offered - Contract
between The Manufacturers Life Insurance Company of
North America and Manulife Reinsurance Corporation
(USA), effective July 1, 1998 - Previously filed as
Exhibit (b)(7)(iv) to post-effective amendment no. 6
to Form N-4 filed December 16, 1998.
(v) Coinsurance Agreement between The Manufacturers Life
Insurance Company of North America and The
Manufacturers Life Insurance Company (USA) -
Incorporated by reference to Exhibit 10(ix) to Form
10K, file number 333-6011, filed March 30, 1999 on
behalf of The Manufacturers Life Insurance Company of
North America.
(vi) Coinsurance Agreement between North American Security
Life Insurance Company and 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.
(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 between North American Security Life Insurance
Company and CSC Continuum Inc. -- Previously filed as
Exhibit (b)(8)(i) to post-effective amendment no. 3
to Form N-4 filed February 28, 1997.
(ii) Amendment to Remote Service Agreement dated April 1,
1998 between Manufacturers Life Insurance Company of
North America and 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.
(9) (i) Opinion of Counsel and consent to its use as to the
legality of the securities being registered (VIS25)
-- Previously filed as Exhibit (b)(9)(i) to
post-effective amendment no. 4 to Form N-4 filed
February 26, 1998.
(ii) Opinion of Counsel and consent to its use as to the
legality of the securities being registered (VV) -
Previously filed as Exhibit (b)(9)(ii) to
post-effective amendment no. 4 to Form N-4 filed
February 26, 1998.
(10) Written consent of Ernst & Young LLP, independent auditors -
FILED HEREIN
(11) All financial statements omitted from Item 23, Financial
Statements - Not Applicable
(12) Agreements in consideration for providing initial capital
between or among Registrant,
<PAGE> 147
Depositor, Underwriter or initial contract owners -- Not
Applicable.
(13) Schedule for computation of each performance quotation
provided in the Registration Statement in response to Item 21
-- Incorporated by reference to Exhibit (b)(13) to Form N-4,
33-76162 filed March 1, 1996.
(14) Financial Data Schedule -- Not Applicable.
(15) (i) Power of Attorney - John D. Richardson (Director,
North American Security Life Insurance Company) --
Incorporated by reference to Exhibit (b)(15)(ii) to
Form N-4, file number 33-76162, filed April 29, 1997.
(ii) Power of Attorney - David W. Libbey (Principal
Financial Officer of North American Security Life
Insurance Company) -- Incorporated by reference to
Exhibit (24)(ii) to Form 10Q of The Manufacturers
Life Insurance Company of North America filed
November 14, 1997.
(iii) Power of Attorney - John D. DesPrez III (Director,
The Manufacturers Life Insurance Company of North
America) - Incorporated by reference to Exhibit
(14)(iv) to post-effective amendment no. 1 to Form
N-4, file number 333-38081 filed April 19, 1999.
Item 25. Directors and Officers of the Depositor.
OFFICERS AND DIRECTORS OF THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA
<TABLE>
<CAPTION>
Name and Principal
Business Address Position with Manulife North America
- ---------------- ------------------------------------
<S> <C>
John D. DesPrez III Director and Chairman of the Board of
73 Tremont Street Directors
Boston, MA 02108
James R. Boyle Director and President
500 Boylston Street
Boston, MA 02116
John D. Richardson Director
200 Bloor Street East
Toronto, Ontario
Canada M4W-1E5
Robert Boyda Vice President, Investment Management Services
73 Tremont Street
Boston, MA 02108
James D. Gallagher Vice President, Secretary and General Counsel
73 Tremont Street
Boston, MA 02108
Kevin S. Hill Vice President, Business Implementation
500 Boylston Street
Boston, MA 02116
Brian A. Kroll Vice President, Product Development
500 Boylston Street
Boston, MA 02116
</TABLE>
<PAGE> 148
<TABLE>
<S> <C>
David W. Libbey Vice President, Treasurer & Chief Financial Officer
500 Boylston Street
Boston, MA 02116
Jonnie Smith Vice President, Customer Service and Administration
500 Boylston Street
Boston, MA 02116
Janet Sweeney Vice President, Human Resources
73 Tremont Street
Boston, MA 02108
John G. Vrysen Vice President & Chief Actuary
73 Tremont Street
Boston, MA 02108
</TABLE>
Item 26. Persons Controlled by or Under Common Control with Depositor or
Registrant.
MANULIFE FINANCIAL CORPORATION
Corporate Organization as at December 31, 1999
Manulife Financial Corporation (Canada)
The Manufacturers Life Insurance Company (Canada)
<TABLE>
<S> <C>
1. Manulife Data Services Inc. - Barbados (100%)
2. MF Leasing (Canada) Inc. - Ontario (100%)
2.1 1332953 Ontario Inc. - Ontario (100%)
3. Enterprise Capital Management Inc. - Ontario (20%)
4. Cantay Holdings Inc. - Canada (100%)
5. 994744 Ontario Inc. - Ontario (100%)
6. 3426505 Canada Inc. - Canada (100%)
7. Family Realty First Corp. - Ontario (100%)
8. Manulife Bank of Canada - Canada (100%)
9. Manulife Securities International Ltd. - Canada (100%)
10. NAL Resources Limited - Alberta (100%)
11. Manulife International Capital Corporation Limited - Ontario (100%)
11.1. Golf Town Canada Inc. - Canada (100%)
11.2. Regional Power Inc. - Ontario (100%)
11.2.1. Addalam Power Corporation - Philippines
11.2.2. La Regionale Power Angliers Inc. - Canada (100%)
11.2.3. La Regionale Power Port-Cartier Inc. - Canada (100%)
11.3. VFC Inc. - Canada (100%)
11.4. 1198184 Ontario Limited - Ontario (100%)
12. 1293319 Ontario Inc. - Ontario (100%)
13. FNA Financial Inc. - Canada (100%)
13.1.Elliott & Page Limited - Ontario (100%)
</TABLE>
<PAGE> 149
<TABLE>
<S> <C>
13.2. Seamark Asset Management Ltd. - Canada (67.86%)
13.3. NAL Resources Management Limited - Canada (100%)
13.3.1. Caravan Oil & Gas Ltd. - Alberta (12.2%)
13.3.2. Carrack Energy Inc. - Alberta (16%)
13.4. First North American Insurance Company - Canada (100%)
14. MLI Resources Inc. - Alberta (100%)
15. Stylus Exploration Inc. - Alberta (100%)
16. Manucab Ltd. - Canada (100%)
16.1. Plazcab Service Limited - Newfoundland (100%)
17. The Manufacturers Investment Corporation - Michigan (100%)
17.1. Manulife Reinsurance Corporation (U.S.A.) - Michigan (100%)
17.1.1. Manulife Reinsurance Limited - Bermuda (100%)
17.1.1.1. MRL Holding, LLC - Delaware (99%)
17.1.2. MRL Holding, LLC - Delaware (1%)
17.1.2.1. Manulife-Wood Logan Holding Co. Inc. - Delaware (22.4%)
17.1.3. The Manufacturers Life Insurance Company (U.S.A.) - Michigan (100%)
17.1.3.1. Manulife-Wood Logan Holding Co. Inc. - Delaware (77.6%)
17.1.3.1.1. Manulife Wood Logan, Inc. - Connecticut (100%)
17.1.3.1.2. The Manufacturers Life Insurance Company of North America - Delaware (100%)
17.1.3.1.2.1. Manufacturers Securities Services, LLC - Delaware (90%)
17.1.3.1.2.2. The Manufacturers Life Insurance Company of New York - New York (100%)
17.1.3.1.2.2.1 Manufacturers Securities Services, LLC - Delaware (10%)
17.1.3.2. Flex Leasing 1, LLC - Delaware (50%)
17.1.3.3. Ennal, Inc. - Ohio (100%)
17.1.3.4. ESLS Investment Limited, LLC - Ohio (100%)
17.1.3.5. Thornhill Leasing Investments, LLC - Delaware (90%)
17.1.3.6. The Manufacturers Life Insurance Company of America - Michigan (100%)
17.1.3.6.1. Manulife Holding Corporation - Delaware (100%)
17.1.3.6.1.1. ManEquity, Inc. - Colorado (100%)
17.1.3.6.1.2. Manufacturers Adviser Corporation - Colorado (100%)
17.1.3.6.1.3. Manulife Capital Corporation - Delaware (100%)
17.1.3.6.1.3.1. MF Private Capital, Inc. - Delaware (80.4%)
17.1.3.6.1.3.1.1. MF Private Capital Securities, Inc. -
Delaware (100%)
17.1.3.6.1.3.1.2. MFPC Ventures, Inc. - Delaware (100%)
17.1.3.6.1.3.1.3. MFPC Insurance Advisors, Inc. -
Delaware (100%)
17.1.3.6.1.4. Manulife Property Management of Washington, D.C.
Inc. -Washington, D.C. (100%)
17.1.3.4.1.5. ManuLife Service Corporation - Colorado (100%)
17.1.3.4.1.6. Manulife Leasing Co., LLC. - Delaware (80%)
18. Manulife International Investment Management Limited - U.K. (100%)
18.1. Manulife International Fund Management Limited - U.K. (100%)
19. WT(SW) Properties Ltd. - U.K. (100%)
20. Manulife Europe Ruckversicherungs-Aktiengesellschaft - Germany (100%)
21. Manulife International Holdings Limited - Bermuda (100%)
21.1. Manulife Provident Funds Trust Company Limited - Hongkong (100%)
21.2. Manulife (International) Limited - Bermuda (100%)
21.2.1. Zhong Hong Life Insurance Co. Ltd. - China (51%)
21.3. Manulife Funds Direct (Barbados) Limited - Barbados (100%)
21.3.1. Manulife Funds Direct (Hong Kong) Limited - Hongkong (100%)
21.3.2. Pt. Manulife Aset Manajemen Indonesia - Indonesia (55%)
</TABLE>
<PAGE> 150
<TABLE>
<S> <C>
22. ManuLife (International) Reinsurance Limited - Bermuda (100%)
22.1. Manufacturers Life Reinsurance Limited - Barbados (100%)
22.2. Manufacturers P&C Limited - Barbados (100%)
22.3. Manulife Management Services Ltd. - Barbados (100%)
23. Chinfon-Manulife Insurance Company Limited - Bermuda (60%)
24. Manulife Century Investments (Bermuda) Limited - Bermuda (13%)
25. Manulife Century Investments (Alberta) Inc. - Alberta (100%)
25.1 Manulife Century Investments (Bermuda) Limited - Bermuda (87%)
25.1.1 Daihyaku System Service Co. Ltd. - Japan (90%)
25.2 Manulife Century Investments (Luxembourg) S.A. - Luxembourg (100%)
25.2.1 Manulife Century Investments (Netherlands) B.V. - Netherlands (100%)
25.2.1.1 Daihyaku Manulife Holdings (Bermuda) Limited - Bermuda (100%)
25.2.1.1.1 Manulife Century Life Insurance Company - Japan (8.8%)
25.2.1.2 Manulife Century Life Insurance Company - Japan (74.6%)
25.2.1.2.1 Daihyaku System Service Co. Ltd. - Japan (10%)
25.2.1.2.2 Manulife Century Business Company - Japan (100%)
25.2.1.2.3 Kyoritsu Confirm Co., Ltd. - Japan (9.1%)
25.2.1.2.4 Daihyaku Premium Collection Co., Ltd. - Japan (10%)
25.2.1.3 Kyoritsu Confirm Co., Ltd. - Japan (90.9%)
25.2.1.4 Daihyaku Premium Collection Co., Ltd. - Japan (57%)
26. P.T. Asuransi Jiwa Dharmala ManuLife - Indonesia (51%)
26.1. P.T. Buanadays Sarana Informatika - Indonesia (100%)
26.2. P.T. Asuransi Jiwa Arta Mandiri Prime - Indonesia (100%)
27. OUB Manulife Pte. Ltd. - Singapore (50%)
28. The Manufacturers Life Insurance Company (Phils.) Inc. - Philippines (100%)
</TABLE>
Item 27. Number of Contract Owners.
As of March 31, 2000, there were 2,401 qualified and 6,581 non-qualified
contracts for VIS25 and 650 qualified and 2,070 non-qualified contracts for VV
of the series offered hereby outstanding.
Item 28. Indemnification.
Article 9 of the Articles of Incorporation of the Company provides as follows:
NINTH: A director of this corporation shall not be liable to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a director
except to the extent such exemption from liability or limitation thereof is not
permitted under the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended. Any repeal or modification of the foregoing
sentence shall not adversely affect any right or protection of a director of the
corporation existing hereunder with respect to any act or omission occurring
prior to such repeal or modification.
Article XIV of the By-laws of the Company provides as follows:
Each Director or officer, whether or not then in office, shall be
indemnified by the Company against all costs and expenses reasonably incurred by
or imposed upon him or her, including legal fees, in connection with or
resulting from any claim, action, suit or proceeding, whether civil, criminal or
administrative, in which he or she may become involved as a party or otherwise,
by reason of his or her being or having been a Director or officer of the
Company.
(1) Indemnity will not be granted to any Director or officer with
respect to any claim, action, suit or proceeding which shall be brought against
such Director or officer by or in the right of the Company, and
<PAGE> 151
(2) Indemnification for amounts paid and expenses incurred in settling
such action, claim, suit or proceeding, will not be granted, until it shall be
determined by a disinterested majority of the Board of Directors or by a
majority of any disinterested committee or group of persons to whom the question
may be referred by the Board, that said Director or officer did indeed act in
good faith and in a manner he or she reasonably believed to be in, or not
adverse, to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonably cause to believe that his or her
conduct was legal, and that the payment of such costs, expenses, penalties or
fines is in the interest of the Company, and not contrary to public policy or
other provisions of law.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendre or its equivalent, shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which he or she reasonably believed to be in, or not adverse, to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
Indemnification shall be made by the corporation upon determination by a
disinterested majority of the Board of Directors or of a majority of any
disinterested committee or group or persons to whom the question may be referred
to by said Board, that the person did indeed act in good faith and in a manner
he or she reasonably believed to be in, or not adverse, to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had
reasonably cause to believe that his or her conduct was legal.
The foregoing right to indemnity shall not be exclusive of any other
rights to which such Director or officer may be entitled as a matter of law.
The foregoing right to indemnity shall also extend to the estate of any
deceased Director or officer with respect to any such claim, action, suit or
proceeding in which such Director or officer or his or her estate may become
involved by reason of his or her having been a Director or officer of the
Company, and subject to the same conditions outlined above.
Section IX, paragraph D of the Promotional Agent Agreement among the Company
(referred to therein as "Security Life"), NASL Financial and Wood Logan
(referred to therein as "Promotional Agent") provides as follows:
a. NASL Financial and Security Life agree to indemnify and hold harmless
Promotional Agent, its officers, directors and employees against any
and all losses, claims, damages or liabilities to which they may become
subject under the Securities Act of 1933 ("1933 Act"), the 1934 Act or
other federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact or any
omission or alleged omission to state a material fact required to be
stated or necessary to make the statements made not misleading in any
registration statement for the Contracts filed pursuant to the 1933 Act
or any prospectus included as a part thereof, as from time to time
amended and supplemented, or any advertisement or sales literature
approved in writing by NASL Financial or Security Life pursuant to
Section VI, paragraph B of this Agreement.
b. Promotional Agent agrees to indemnify and hold harmless NASL Financial
and Security Life, their officers, directors and employees against any
and all losses, claims, damages or liabilities to which they may become
subject under the 1933 Act, the 1934 Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon: (i) any oral or written
misrepresentation by Promotional Agent or its officers, directors,
employees or agents unless such misrepresentation is contained in any
registration statement for the Contracts or Fund shares, any prospectus
included as a part thereof, as from time to time amended and
supplemented, or any advertisement or sales literature approved in
writing by NASL Financial pursuant to Section VI, paragraph B of this
Agreement or, (ii) the failure of Promotional Agent or its officers,
directors, employees or agents to comply with any applicable provisions
of this Agreement.
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
<PAGE> 152
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.
<TABLE>
<CAPTION>
a. Name of Investment Company Capacity in which acting
-------------------------- ------------------------
<S> <C>
Manufacturers Investment Trust Investment Adviser
The Manufacturers Life Insurance Principal Underwriter
Company of North America Separate
Account A
The Manufacturers Life Insurance Principal Underwriter
Company of North America Separate
Account B
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
</TABLE>
b. The Manufacturers Life Insurance Company of North America is the managing
member of Manufacturers Securities Services, LLC and has sole power to act on
behalf of Manufacturers Securities Services, LLC. The officers and directors of
The Manufacturers Life Insurance Company of North America are set forth under
Item 25.
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 of North America (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.
<PAGE> 153
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant, The Manufacturers Life Insurance Company of North
America Separate Account A, 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 has caused this Amendment to the
Registration Statement to be signed on its behalf, in the City of Boston, and
Commonwealth of Massachusetts on this 28th day of April, 2000.
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA SEPARATE
ACCOUNT A
------------------------------------
(Registrant)
By: THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA
------------------------------------
(Depositor)
By: /s/ JAMES R. BOYLE
------------------------------
James R. Boyle, President
Attest:
/s/ JAMES D. GALLAGHER
- -------------------------------
James D. Gallagher, Secretary
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Depositor has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned on the
28th day of April, 2000 in the City of Boston, and Commonwealth of
Massachusetts.
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA
------------------------------------
(Depositor)
By: /s/ JAMES R. BOYLE
-------------------------------
James R. Boyle, President
Attest:
/s/ JAMES D. GALLAGHER
- --------------------------------
James D. Gallagher, Secretary
<PAGE> 154
As required by the Securities Act of 1933, this amended Registration
Statement has been signed by the following persons in the capacities with the
Depositor as indicated on this 28th day of April, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
* Director and Chairman
------------------------------------------- of the Board
John D. DesPrez III
/s/ JAMES R. BOYLE Director and President
------------------------------------------- (Principal Executive Officer)
James R. Boyle
* Director
-------------------------------------------
John D. Richardson
* Vice President, Treasurer
------------------------------------------- and Chief Financial Officer
David W. Libbey (Principal Financial Officer)
*By: /s/ JAMES D. GALLAGHER
----------------------------------
James D. Gallagher
Attorney-in-Fact
Pursuant to Powers
of Attorney
</TABLE>
<PAGE> 155
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
(b)(10) Written consent of Ernst & Young LLP, independent auditors
</TABLE>
<PAGE> 1
EXHIBIT 99(b)10
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our reports dated February 28, 2000, with respect to the
consolidated financial statements of The Manufacturers Life Insurance Company of
North America and February 15, 2000, with respect to the financial statements of
The Manufacturers Life Insurance Company of North America Separate Account A,
both of which are contained in the Statement of Additional Information, in
Post-Effective Amendment No. 10 to the Registration Statement (Form N-4 File No.
33-77878).
/s/ Ernst & Young LLP
Boston, Massachusetts
April 24, 2000
