<PAGE> 1
ART WORK
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
Who Sells The Policies? . . . . . . . . . . . . . . . . . . . . . . . . . 2
What Responsibilities Has Manufacturers Life Assumed? . . . . . . . . . . 2
Who Are The Directors And Officers Of Manufacturers Life of America? . . 2
What State Regulations Apply? . . . . . . . . . . . . . . . . . . . . . . 3
Is There Any Litigation Pending? . . . . . . . . . . . . . . . . . . . . 3
Where Can Further Information Be Found? . . . . . . . . . . . . . . . . . 3
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 5
<PAGE> 3
WHO SELLS THE POLICIES?
ManEquity, Inc., an indirect wholly-owned subsidiary of Manufacturers Life,
will act as the principal underwriter of, and continuously offer, the Policies
pursuant to an Underwriting Agreement with Manufacturers Life of America.
ManEquity, Inc. is registered as a broker-dealer under the Securities Exchange
Act of 1934 and is a member of the National Association of Securities Dealers.
The Policies will be sold by registered representatives of either ManEquity,
Inc. or other broker-dealers having distribution agreements with ManEquity,
Inc. who are also authorized by state insurance departments to do so.
For the years ended December 31, 1992, December 31, 1993 and December 31, 1994,
ManEquity, Inc. received $572,654, $2,053,988, and $2,389,494, respectively, as
compensation for sales of the Policies by its registered representatives. Of
these amounts, $512,243, $1,897,235, and $2,283,353, respectively, were
remitted to Manufacturers Life to reimburse it for commissions paid to such
registered representatives pursuant to the agreement described below.
WHAT RESPONSIBILITIES HAS MANUFACTURERS LIFE ASSUMED?
Manufacturers Life has entered into an agreement with ManEquity, Inc. pursuant
to which Manufacturers Life, on behalf of ManEquity, Inc., will pay the sales
commissions in respect of the Policies and certain other policies issued by
Manufacturers Life of America, prepare and maintain all books and records
required to be prepared and maintained by ManEquity, Inc. with respect to the
Policies and such other policies, and send all confirmations required to be
sent by ManEquity, Inc. with respect to the Policies and such other policies.
ManEquity, Inc. will promptly reimburse Manufacturers Life for all sales
commissions paid by Manufacturers Life and will pay Manufacturers Life for its
other services under the agreement in such amounts and at such times as agreed
to by the parties.
Manufacturers Life has also entered into a Service Agreement with Manufacturers
Life of America pursuant to which Manufacturers Life will provide to
Manufacturers Life of America in Toronto, Ontario, Canada all issue,
administrative, general services and record keeping functions on behalf of
Manufacturers Life of America with respect to all of its insurance policies
including the Policies. Under this agreement Manufacturers Life of America is
obligated to reimburse operating expenses and costs incurred by Manufacturers
Life on behalf of Manufacturers Life of America. For 1992, 1993, and 1994,
Manufacturers Life of America paid $4,919,667, $17,831,031, and $21,326,446,
respectively, to Manufacturers Life pursuant to the agreement.
WHO ARE THE DIRECTORS AND OFFICERS OF MANUFACTURERS LIFE OF AMERICA?
The directors and executive officers of Manufacturers Life of America, together
with their principal occupations during the past five years, are as follows:
<TABLE>
<CAPTION>
Position with
Name Manufacturers Life of America Principal Occupation
---- ----------------------------- --------------------
<S> <C> <C>
Sandra M. Cotter Director Attorney -- 1989-present, Dykema Gossett
Leonard V. Day, Jr. Director General Manager, Philadelphia Branch -- 1970-
present, The Manufacturers Life Insurance
Company
Donald A. Guloien President and Director Senior Vice President, Business Development --
1994-present, The Manufacturers Life Insurance
Company; Vice President, U.S. Individual
Business -- 1990-1994, The Manufacturers Life
Insurance Company
Stephen C. Nesbitt Secretary, General Counsel and Legal Vice President -- 1990-present, The
Director Manufacturers Life Insurance Company
Joseph J. Pietroski Director Senior Vice President, General Counsel and
Corporate Secretary -- 1988-present, The
Manufacturers Life Insurance Company
</TABLE>
2
<PAGE> 4
<TABLE>
<CAPTION>
Position with
Name Manufacturers Life of America Principal Occupation
---- ----------------------------- --------------------
<S> <C> <C>
John D. Richardson Chairman and Director Senior Vice President and General
Manager, U.S. Operations -- 1995-
present, The Manufacturers Life
Insurance Company; Senior Vice
President and General Manager,
Canadian Operations -- 1992-1994,
The Manufacturers Life Insurance
Company; Senior Vice President,
Financial Services -- 1992, The
Manufacturers Life Insurance
Company; Executive Vice Chairman
and CFO --1989-1991, Canada Trust
Diane M. Schwartz Director Senior Vice President,
International Operations -- 1992-
present, The Manufacturers Life
Insurance Company; Senior Vice
President and General Manager,
U.S. Operations -- 1988-1992, The
Manufacturers Life Insurance
Company
Robin Bolton Vice President, Marketing Assistant Vice President,
Variable and Annuity Products --
1992-present, The Manufacturers
Life Insurance Company; Assistant
Vice President, Variable
Universal Life Products --
1991-1992, The Manufacturers Life
Insurance Company; Director,
Agencies -- 1990-1991, The
Manufacturers Life Insurance
Company; Assistant Vice
President, Finance & Planning --
1987-1991, The Manufacturers Life
Insurance Company
John R. Ostler Vice President, Chief Financial Vice President -- 1992-
Actuary and Treasurer present, The Manufacturers Life
Insurance Company; Vice
President, Insurance Products --
1990-1992, The Manufacturers Life
Insurance Company
Douglas H. Myers Vice President, Finance Assistant Vice President and
and Compliance, Controller, U.S. Operations --
Controller 1988-present, The Manufacturers
Life Insurance Company
</TABLE>
WHAT STATE REGULATIONS APPLY?
Manufacturers Life of America is subject to regulation and supervision by the
Michigan Department of Insurance, which periodically examines its financial
condition and operations. It is also subject to the insurance laws and
regulations of all jurisdictions in which it is authorized to do business. The
Policy has been filed with insurance officials and meets all standards set by
law in each jurisdiction where it is sold.
Manufacturers Life of America is required to submit annual statements of its
operations, including financial statements, to the insurance departments of the
various jurisdictions in which it does business for the purposes of determining
solvency and compliance with local insurance laws and regulations.
IS THERE ANY LITIGATION PENDING?
No litigation is pending that would have a material effect upon the Account or
the Series Fund.
WHERE CAN FURTHER INFORMATION BE FOUND?
A registration statement under the Securities Act of 1933 has been filed with
the S.E.C. relating to the offering described in the prospectus and the
Statement of Additional Information. The prospectus and the Statement of
Additional Information do not include all the information set forth in the
registration statement. The omitted information may be obtained from the
S.E.C.'s principal office in Washington, D.C. upon payment of the prescribed
fee.
3
<PAGE> 5
For further information you may also contact Manufacturers Life of America's
Service Office, the address and telephone number of which are on the first page
of the prospectus.
LEGAL MATTERS
The legal validity of the Policies has been passed on by Stephen C. Nesbitt,
Esq., Secretary and General Counsel of Manufacturers Life of America. Jones &
Blouch, Washington, D.C. has passed on certain matters relating to the federal
securities laws.
EXPERTS
The financial statements of The Manufacturers Life Insurance Company of America
and of The Manufacturers Life Insurance Company of America Separate Account Two
appearing in this Statement of Additional Information have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports
appearing elsewhere herein and are included herein in reliance upon such
reports given upon the authority of such firm as experts in auditing and
accounting.
4
<PAGE> 6
FINANCIAL STATEMENTS
The financial statements of Manufacturers Life of America included herein
should be distinguished from the financial statements of the Account and should
be considered only as bearing upon the ability of Manufacturers Life of America
to meet its obligations under the Policies.
5
<PAGE> 7
Report of Independent Auditors
To the Board of Directors
The Manufacturers Life Insurance
Company of America
We have audited the statement of assets and liabilities as of December 31, 1994
and the statement of operations and the statements of changes in net assets for
each of the periods presented herein of Separate Account Two of The
Manufacturers Life Insurance Company of America (comprising, respectively,
Emerging Growth Equity Sub-Account, Common Stock Sub-Account, Real Estate
Securities Sub-Account, Balanced Assets Sub-Account, Capital Growth Bond
Sub-Account, Money Market Sub-Account, International Sub-Account and Pacific
Rim Emerging Markets Sub-Account). These financial statements are the
responsibility of the management of The Manufacturers Life Insurance Company of
America. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 each of the respective
sub-accounts constituting Separate Account Two of The Manufacturers Life
Insurance Company of America at December 31, 1994, and the results of their
operations and changes in their net assets for each of the periods presented
herein, in conformity with generally accepted accounting principles.
Philadelphia, Pennsylvania ERNST & YOUNG LLP
February 6, 1995
6
<PAGE> 8
Separate Account Two of
The Manufacturers Life Insurance Company of America
Statement of Assets and Liabilities
December 31, 1994
<TABLE>
<CAPTION>
EMERGING COMMON REAL ESTATE
GROWTH EQUITY STOCK SECURITIES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investment in Manulife Series
Fund, Inc.--at market value:
Emerging Growth Equity Fund,
2,788,822 shares (cost $52,281,085) $51,734,732
Common Stock Fund,
1,208,447 shares (cost $17,275,512) $16,148,694
Real Estate Securities Fund,
2,002,653 shares (cost $28,461,405) $26,724,581
Balanced Assets Fund,
2,577,528 shares (cost $38,572,524)
Capital Growth Bond Fund,
1,066,365 shares (cost $11,999,272)
Money Market Fund,
1,236,781 shares (cost $12,788,176)
International Fund,
86,308 shares (cost $853,025)
Pacific Rim Emerging Markets Fund,
66,905 shares (cost $643,471) ---------------------------------------------------------
$51,734,732 $16,148,694 $26,724,581
Receivable (payable) for policy-related transactions $30,649 $ 3,027 $ (2,279)
---------------------------------------------------------
Net assets $51,765,381 $16,151,721 $26,722,302
=========================================================
Units outstanding $ 1,454,901 $ 803,568 $ 1,205,880
=========================================================
Net asset value per unit $ 36.58 $ 20.10 $ 22.16
=========================================================
</TABLE>
See accompanying notes.
7
<PAGE> 9
<TABLE>
<CAPTION>
PACIFIC RIM
BALANCED CAPITAL EMERGING
ASSETS GROWTH BOND MONEY MARKET INTERNATIONAL MARKETS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT TOTAL
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
51,734,732
16,148,694
26,724,581
$35,504,879 35,504,879
$10,769,201 10,769,201
$12,692,039 12,692,039
$847,379 847,379
$629,371 629,371
-------------------------------------------------------------------------------------------------------------
35,504,879 10,769,201 12,692,039 847,379 629,371 155,050,876
29,336 2,089 (57,588) 19,446 3,660 28,340
-------------------------------------------------------------------------------------------------------------
$35,534,215 $10,771,290 $12,634,451 $866,825 $633,031 $155,079,216
=============================================================================================================
2,001,928 672,365 918,869 89,180 67,272
=============================================================================================================
$ 17.75 $ 16.02 $ 13.75 $ 9.72 $ 9.41
=============================================================================================================
</TABLE>
8
<PAGE> 10
Separate Account Two of
The Manufacturers Life Insurance Company of America
Statement of Operations
Year ended December 31, 1994
<TABLE>
<CAPTION>
EMERGING COMMON REAL ESTATE
GROWTH EQUITY STOCK SECURITIES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividend income $ 196,396 $ 800,888 $ 615,224
Expenses:
Mortality and expense risks charge 431,634 139,014 231,870
-----------------------------------------------------
Net investment (loss) income 235,238 661,874 383,354
-----------------------------------------------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) from security transactions:
Proceeds from sales 3,338,038 608,055 1,091,602
Cost of securities sold 3,056,187 493,059 924,949
------------------------------------------------------
Net realized gain (loss) 281,851 114,996 166,653
------------------------------------------------------
Unrealized appreciation (depreciation)
of investments:
Beginning of year 1,464,566 395,888 127,600
End of year (546,353) (1,126,818) (1,736,824)
-------------------------------------------------------
Net unrealized appreciation (depreciation)
during the year (2,010,919) (1,522,706) (1,864,424)
-------------------------------------------------------
Net realized and unrealized loss on
investments (1,729,068) (1,407,710) (1,697,771)
--------------------------------------------------------
Net (decrease) increase in net assets derived
from operations $(1,964,306) $ (745,836) $ (1,314,417)
=========================================================
</TABLE>
*Reflects the period from commencement of operations
October 4, 1994 through December 31, 1994.
See accompanying notes.
9
<PAGE> 11
<TABLE>
<CAPTION>
*PACIFIC RIM
BALANCED CAPITAL EMERGING
ASSETS GROWTH BOND MONEY MARKET *INTERNATIONAL MARKETS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT TOTAL
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1,876,137 $ 709,840 $ 371,695 $ 2,198 $ 2,242 $ 4,574,620
318,087 98,973 81,503 872 689 1,302,642
-------------------------------------------------------------------------------------------------------------
1,558,050 610,867 290,192 1,326 1,553 3,271,978
-------------------------------------------------------------------------------------------------------------
2,049,830 2,204,010 5,915,298 4,898 31,794 15,243,525
1,923,618 2,330,475 5,881,619 4,987 32,667 14,647,561
--------------------------------------------------------------------------------------------------------------
126,212 (126,465) 33,679 (89) (873) 595,964
--------------------------------------------------------------------------------------------------------------
276,074 (226,829) (19,735) - - 2,017,564
(3,067,645) (1,230,071) (96,137) (5,646) (14,100) (7,823,594)
---------------------------------------------------------------------------------------------------------------
(3,343,719) (1,003,242) (76,402) (5,646) (14,100) (9,841,158)
---------------------------------------------------------------------------------------------------------------
(3,217,507) (1,129,707) (42,723) (5,735) (14,973) (9,245,194)
--------------------------------------------------------------------------------------------------------------
$ (1,659,457) $ (518,840) $ 247,469 $ (4,409) $ (13,420) $ (5,973,216)
==============================================================================================================
</TABLE>
10
<PAGE> 12
Separate Account Two of
The Manufacturers Life Insurance Company of America
Statements of Changes in Net Assets
Years ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
EMERGING GROWTH COMMON STOCK REAL ESTATE SECURITIES
EQUITY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/94 DEC. 31/93 DEC. 31/94 DEC. 31/93 DEC. 31/94 DEC. 31/93
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment (loss) income $ (235,238) $ 3,200,433 $ 661,874 $ 479,778 $ 383,354 $ 1,293,019
Net realized gain (loss) 281,851 177,287 114,996 81,896 166,653 32,526
Unrealized (depreciation)
appreciation of investments
during the year (2,010,919) 957,940 (1,522,706) 106,332 (1,864,424) (101,193)
----------------------------------------------------------------------------------------------
(Decrease) increase in net assets
derived from operations (1,964,306) 4,335,660 (745,836) 668,006 (1,314,417) 1,224,352
----------------------------------------------------------------------------------------------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 20,192,208 18,977,034 6,307,192 5,646,020 11,495,742 11,475,542
Transfer on death
Transfer on terminations (1,175,021) (316,957) (211,937) (103,519) (365,263) (72,275)
Transfer on maturity
Net interfund transfer 2,047,524 982,678 619,575 407,492 616,085 1,193,272
------------------------------------------------------------------------------------------------
20,944,544 19,642,755 6,616,284 5,949,993 11,662,109 12,596,539
Net increase in net
assets 18,980,238 23,978,415 5,870,448 6,617,999 10,347,692 13,820,891
NET ASSETS
Beginning of year 32,785,143 8,806,728 10,281,273 3,663,274 16,374,610 2,553,719
-----------------------------------------------------------------------------------------------
End of year $51,765,381 $32,785,143 $16,151,721 $10,281,273 $26,722,302 $16,374,610
===============================================================================================
</TABLE>
See accompanying notes.
11
<PAGE> 13
<TABLE>
<CAPTION>
BALANCED ASSETS CAPITAL GROWTH MONEY MARKET
SUB-ACCOUNT BOND SUB-ACCOUNT SUB-ACCOUNT
--------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31/94 DEC. 31/93 DEC. 31/94 DEC. 31/93 DEC. 31/94 DEC. 31/93
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1,558,050 $ 1,281,368 $ 610,867 $ 492,684 $ 290,192 $ 60,671
126,212 93,851 (126,465) 34,959 33,679 (500)
(3,343,719) 10,732 (1,003,242) (184,106) (76,402) (5,837)
--------------------------------------------------------------------------------------------------------
(1,659,457) 1,385,951 (518,840) 343,537 247,469 54,334
--------------------------------------------------------------------------------------------------------
14,684,868 13,478,551 4,091,955 5,672,487 9,297,572 4,906,844
(51,630) - (2,484) - - -
(715,314) (187,823) (530,903) (131,876) (504,302) (342,175)
(59,741) (27,287) (49,450) - (2,334) (51,966)
(860,845) 846,067 (686,906) (27,415) (801,647) (2,485,536)
--------------------------------------------------------------------------------------------------------
12,997,338 14,109,508 2,822,212 5,513,196 7,989,289 2,027,167
--------------------------------------------------------------------------------------------------------
11,337,881 15,495,459 2,303,372 5,856,733 8,236,758 2,081,501
24,196,334 8,700,875 8,467,918 2,611,185 4,397,693 2,316,192
---------------------------------------------------------------------------------------------------------
$35,534,215 $24,196,334 $10,771,290 $8,467,918 $12,634,451 $4,397,693
=========================================================================================================
</TABLE>
12
<PAGE> 14
Separate Account Two of
The Manufacturers Life Insurance Company of America
Statements of Changes in Net Assets (continued)
Years ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
PACIFIC RIM
INTERNATIONAL EMERGING MARKETS
SUB-ACCOUNT SUB-ACCOUNT TOTAL
----------------------------------------------------------------------------
*PERIOD ENDED *PERIOD ENDED YEAR ENDED YEAR ENDED
DEC. 31/94 DEC. 31/94 DEC. 31/94 DEC. 31/93
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 1,326 $ 1,553 $ 3,271,978 $ 6,807,953
Net realized (loss) gain (89) (873) 595,964 420,019
Unrealized (depreciation)
appreciation of investments
during the year (5,646) (14,100) (9,841,158) 783,868
----------------------------------------------------------------------------
(Decrease) increase in net
assets derived from operations (4,409) (13,420) (5,973,216) 8,011,840
----------------------------------------------------------------------------
FROM CAPITAL TRANSACTIONS
Additions (deductions) from:
Transfer of net premiums 266,607 162,380 66,498,524 60,156,478
Transfer on death - - (131,091) -
Transfer on terminations (69) (40) (3,502,849) (1,154,625)
Transfer of maturity - - (337,716) (79,253)
Net interfund transfers 604,696 484,111 2,022,593 916,558
----------------------------------------------------------------------------
871,234 646,451 64,549,461 59,839,158
----------------------------------------------------------------------------
Net increase in net
assets 866,825 633,031 58,576,245 67,850,998
NET ASSETS
Beginning of year - - 96,502,971 28,651,973
----------------------------------------------------------------------------
End of year $866,825 $633,031 $155,079,216 $96,502,971
============================================================================
</TABLE>
*Reflects the period from commencement of operations October 4, 1994 through
December 31, 1994.
13
<PAGE> 15
Separate Account Two of
The Manufacturers Life Insurance Company of America
Notes to Financial Statements
December 31, 1994
1. ORGANIZATION
Separate Account Two of The Manufacturers Life Insurance Company of America
(the "Separate Account") is a unit investment trust registered under the
Investment Company Act of 1940, as amended. The Separate Account is currently
comprised of eight investment sub-accounts, one for each series of shares of
Manulife Series Fund, Inc., available for allocation of net premiums under
variable annuity policies (the "Policies") issued by The Manufacturers Life
Insurance Company of America ("Manufacturers Life of America").
The Separate Account was established by Manufacturers Life of America, a
wholly-owned subsidiary of The Manufacturers Life Insurance Company of Michigan
("MLIM"), as a separate investment account on November 3, 1987. MLIM is a life
insurance holding company organized in 1983 under Michigan law and a
wholly-owned subsidiary of The Manufacturers Life Insurance Company ("Manulife
Financial"), a mutual life insurance company based in Toronto, Canada.
The assets of the Separate Account are the property of Manufacturers Life of
America. The portion of the Separate Account's assets applicable to the
Policies will not be chargeable with liabilities arising out of any other
business Manufacturers Life of America may conduct.
In May 1994, Manufacturers Life of America began to market a new variable
annuity, Lifestyle, through Separate Account Two.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Separate Account in preparation of its financial statements:
a. Valuation of Investments - Investments are made among the eight Funds of
Manulife Series Fund, Inc. and are valued at the reported net asset values
of these Funds. Transactions are recorded on the trade date.
b. Realized gains and losses on the sale of investments are computed on the
first-in, first-out basis.
c. Dividend income is recorded on the ex-dividend date.
d. Federal Income Taxes - Manufacturers Life of America, the Separate
Account's sponsor, is taxed as a "life insurance company" under the
Internal Revenue Code. Under these provisions of the Code, the operations
of the Separate Account form part of the sponsor's total operations and are
not taxed separately.
14
<PAGE> 16
Separate Account Two of
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The current year's operations of the Separate Account are not expected to
affect the sponsor's tax liabilities and, accordingly, no charges were made
against the Separate Account for federal, state and local taxes. However, in
the future, should the sponsor incur significant tax liabilities related to
Separate Account operations, it intends to make a charge or establish a
provision within the Separate Account for such taxes.
3. MORTALITY AND EXPENSE RISKS CHARGE
Manufacturers Life of America deducts from the assets of the Separate Account a
daily charge equivalent to an annual rate of 1.0% of the average net value of
the Separate Account's assets for mortality and expense risks.
4. PURCHASES AND SALES OF MANULIFE SERIES FUND, INC. SHARES
Purchases and sales of the shares of common stock of Manulife Series Fund, Inc.
for the year ended December 31, 1994 were $83,423,197 and $15,243,525,
respectively and for the year ended December 31, 1993 were $72,116,950 and
$5,871,626, respectively.
5. RELATED PARTY TRANSACTIONS
ManEquity, Inc., a registered broker-dealer and indirect wholly-owned
subsidiary of Manulife Financial, acts as the principal underwriter of the
Policies pursuant to a Distribution Agreement with Manufacturers Life of
America. Registered representatives of either ManEquity, Inc. or other
broker-dealers having distribution agreements with ManEquity, Inc. who are also
authorized as variable life insurance agents under applicable state insurance
laws, sell the Policies. Registered representatives are compensated on a
commission basis.
Manufacturers Life of America has a formal service agreement with its
affiliate, Manulife Financial, which can be terminated by either party upon two
months' notice. Under this Agreement, Manufacturers Life of America pays for
legal, actuarial, investment and certain other administrative services.
15
<PAGE> 17
Report of Independent Auditors
The Board of Directors
The Manufacturers Life Insurance
Company of America
We have audited the accompanying balance sheets of The Manufacturers Life
Insurance Company of America as of December 31, 1994 and 1993, and the related
statements of operations, changes in capital and surplus, and cash flows for
each of the three years in the period ended December 31, 1994. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Manufacturers Life
Insurance Company of America at December 31, 1994 and 1993, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles and with reporting practices prescribed or permitted by the
Insurance Department of the State of Michigan.
Philadelphia, Pennsylvania ERNST & YOUNG LLP
February 20, 1995
16
<PAGE> 18
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993
---------------------------------------
<S> <C> <C>
ASSETS
Bonds, at amortized cost (market $51,082,395--1994
and $24,120,198--1993) $ 52,149,080 $ 23,375,773
Stocks (note 9) 25,629,580 40,549,278
Short-term investments 10,914,561 797,875
Policy loans 4,494,390 3,023,275
---------------------------------------
Total investments 93,187,611 67,746,201
Cash 5,069,197 8,260,261
Life insurance premiums deferred and uncollected 13,646 31,574
Accrued investment income 796,333 468,968
Separate account assets 302,736,198 174,182,746
Funds receivable on reinsurance assumed 880,284 2,240,200
Receivable for undelivered securities 69,003 353,576
Other assets 333,651 108,260
---------------------------------------
Total assets $403,085,923 $253,391,786
=======================================
LIABILITIES, CAPITAL AND SURPLUS
Aggregate policy reserves $ 29,761,174 $ 13,019,605
Other contract deposits 3,938,425 3,284,211
Interest maintenance and asset valuation reserves 111,566 431,400
Policy and contract claims 94,346 153,709
Provision for policyholder dividends payable 1,385,409 1,016,502
Amounts due to affiliates 7,377,108 7,953,242
Payable for undelivered securities 3,512,459 -
Accrued liabilities 4,773,565 2,694,433
Separate account liabilities 302,736,198 174,182,746
---------------------------------------
Total liabilities 353,690,250 202,735,848
Capital and surplus:
Common shares, par value $1.00; authorized,
5,000,000 shares; issued and outstanding
4,501,855 shares (1,501,854 shares in 1993) 4,501,855 1,501,854
Preferred shares, par value $100; authorized
5,000,000 shares; issued and outstanding
105,000 shares (335,000 shares in 1993) 10,500,000 33,500,000
Surplus (deficit) (15,456,180) 5,804,085
---------------------------------------
Capital paid in excess of par value 49,849,998 9,849,999
Total capital and surplus 49,395,673 50,655,938
---------------------------------------
Total liabilities, capital and surplus $403,085,923 $253,391,786
=======================================
</TABLE>
See accompanying notes.
17
<PAGE> 19
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1994 1993 1992
---------------------------------------------------
<S> <C> <C> <C>
Revenues:
Life and annuity premiums, principally $(000,000,000) $(000,000,000) $(00,000,000)
reinsurance assumed $ 25,385,628 $ 12,745,981 $ 6,579,233
Other life and annuity considerations 168,075,003 113,332,974 33,268,869
Investment income, net of investment
expenses ($106,908 in 1994,
$89,186 in 1993, $58,423 in 1992) 3,588,629 3,323,962 1,430,454
Amortization of interest maintenance reserve 19,527 32,866 7,707
Commission and expense allowance
on reinsurance ceded 187,694 - -
Foreign exchange gain (loss) 114,728 (197,971) 24,657
Other revenue 54,763 33,935 4,903
---------------------------------------------------
Total revenues 197,425,972 129,271,747 41,315,823
Benefits paid or provided:
Increase in aggregate policy reserves 16,741,569 5,168,484 3,625,964
Increase in liability for deposit funds 654,214 2,820,520 422,369
Transfers to separate accounts, net 136,896,150 98,601,141 26,789,260
Death benefits 640,875 582,534 286,278
Maturity benefits 580,615 79,253 -
Surrender benefits 3,701,591 2,319,926 1,596,434
---------------------------------------------------
159,215,014 109,571,858 32,720,305
Insurance expenses:
Management fee 21,222,310 12,378,288 4,861,244
Commissions 23,416,110 14,742,130 5,192,462
General expenses 8,260,467 5,108,104 2,744,475
Commissions and expense allowances
on reinsurance assumed 810,252 329,634 269,141
---------------------------------------------------
53,709,139 32,558,156 13,067,322
---------------------------------------------------
Loss before policyholders' dividends
and federal income tax (15,498,181) (12,858,267) (4,471,804)
Dividends to policyholders 1,149,719 837,454 634,652
---------------------------------------------------
Loss before federal income tax (16,647,900) (13,695,721) (5,106,456)
Federal income tax provision (benefit) - (324,643) 339,539
---------------------------------------------------
Net loss from operations after policyholders'
dividends and federal income tax (16,647,900) (13,371,078) (5,445,995)
Net realized capital gains (net of capital
gains tax of $0 in 1994, $236,415 in 1993,
and $0 in 1992 and $(554,000) in 1994,
$347,292 in 1993, and $68,401 in 1992
transferred to (from) the interest
maintenance reserve) (3,012,485) 93,618 139,261
---------------------------------------------------
Net loss from operations $ (19,660,385) $ (13,277,460) $ (5,306,734)
===================================================
</TABLE>
See accompanying notes.
18
<PAGE> 20
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
<TABLE>
<CAPTION>
CAPITAL
PAID IN
EXCESS OF SURPLUS
CAPITAL PAR VALUE (DEFICIT) TOTAL
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1991 $ 29,001,853 $ 4,000,000 $ 19,650,265 $ 52,652,118
Net loss from operations (5,306,734) (5,306,734)
Issuance of preferred shares 6,000,000 6,000,000
Increase in asset valuation reserve (8,813) (8,813)
Increase in nonadmitted assets (1,025,556) (1,025,556)
Change in liability for reinsurance
in unauthorized companies (7,166) (7,166)
Company's share of increase
in separate account assets 3,240,199 3,240,199
----------------------------------------------------------------------
Balance, December 31, 1992 35,001,853 4,000,000 16,542,195 55,544,048
Net loss from operations (13,277,460) (13,277,460)
Issuance of common stocks 1 5,849,999 5,850,000
Increase in asset valuation reserve (13,076) (13,076)
Increase in nonadmitted assets (133,575) (133,575)
Change in net unrealized capital
losses (1,592,242) (1,592,242)
Change in liability for reinsurance
in unauthorized companies (29,905) (29,905)
Company's share of increase in
separate account assets 4,308,148 4,308,148
----------------------------------------------------------------------
Balance, December 31, 1993 35,001,854 9,849,999 5,804,085 50,655,938
Net loss from operations (19,660,385) (19,660,385)
Issuance of common shares 1 19,999,999 20,000,000
Capital restructuring of preference
shares (20,000,000) 20,000,000 -
Increase in asset valuation reserve (55,286) (55,286)
Increase in nonadmitted assets (1,021,357) (1,021,357)
Change in net unrealized capital
losses (425,082) (425,082)
Change in liability for reinsurance
in unauthorized companies (98,155) (98,155)
----------------------------------------------------------------------
Balance, December 31, 1994 $ 15,001,855 $ 49,849,998 $ (15,456,180) $ 49,395,673
======================================================================
</TABLE>
See accompanying notes.
19
<PAGE> 21
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1994 1993 1992
---------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums collected, net $ 193,478,637 $ 126,075,035 $ 39,842,600
Policy benefits paid, net (4,982,444) (2,829,812) (1,932,712)
Commissions and other expenses paid (48,141,400) (35,203,997) (9,431,344)
Net investment income 3,343,515 3,197,892 1,356,553
Other income and expenses (1,946,063) (1,592,957) (1,849,180)
Transfers to separate accounts, net (136,950,482) (98,220,292) (26,266,436)
---------------------------------------------------------
Net cash provided by (used in)
operating activities 4,801,763 (8,574,131) 1,719,481
INVESTING ACTIVITIES
Sale, maturity, or repayment of investments 73,187,733 28,248,633 11,975,475
Purchase of investments (91,063,874) (73,688,735) (24,400,135)
---------------------------------------------------------
Net cash used in investing activities (17,876,141) (45,440,102) (12,424,660)
FINANCING ACTIVITIES
Issuance of shares 20,000,000 5,850,000 6,000,000
Surplus withdrawn from separate account - 48,701,076 6,000,000
---------------------------------------------------------
Net cash provided by financing activities 20,000,000 54,551,076 12,000,000
---------------------------------------------------------
Net increase in cash and short-term
investments 6,925,622 536,843 1,294,821
Cash and short-term investments
at beginning of year 9,058,136 8,521,293 7,226,472
---------------------------------------------------------
Cash and short-term investments
at end of year $ 15,983,758 $ 9,058,136 $ 8,521,293
=========================================================
</TABLE>
See accompanying notes.
20
<PAGE> 22
The Manufacturers Life Insurance Company of America
Notes to Financial Statements
December 31, 1994
1. ORGANIZATION
The Manufacturers Life Insurance Company of America (Manufacturers Life of
America or the Company) is a wholly-owned subsidiary of The Manufacturers Life
Insurance Company of Michigan (the Parent), which is in turn a wholly-owned
subsidiary of The Manufacturers Life Insurance Company (Manulife Financial), a
Canadian-based mutual life insurance company.
During 1994, the Company's parent contributed $20,000,000 capital in return for
1 share of the Company's common stock par value $1 with the remaining
$19,999,999 being recorded as contributed surplus. During 1994 the Company
restructured its capital by exchanging 230,000 shares of preferred stock with a
par value of $23,000,000 for 3,000,000 shares of common stock par value
$3,000,000 with the remaining $20,000,000 being recorded as contributed
surplus.
The Parent contributed $5,850,000 in capital in return for 1 share of common
stock during 1993, $6,000,000 in capital in return for 60,000 shares of
preferred stock during 1992.
During 1991, the Company invested $1,800,000 to fund initial branch operations
in Taiwan. This investment in Taiwan was increased by $6,000,000 in 1992 and a
further investment of $5,200,000 in 1993. There was no new funding in 1994 for
the Taiwan branch.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements of Manufacturers Life of America have
been prepared in accordance with accounting practices prescribed or permitted
by the Insurance Department of Michigan, which are considered generally
accepted accounting principles for mutual life insurance companies and their
wholly-owned direct and indirect subsidiaries. Such practices differ in
certain respects from generally accepted accounting principles followed by
stock life insurance companies in determining financial position and results of
operations. In general, the differences are: (1) commissions and other costs
of acquiring and writing policies are charged to expense in the year incurred
rather than being amortized over the related policy term; (2) certain
non-admitted assets are excluded from the balance sheet; (3) deferred income
taxes are not provided for timing differences in recording certain items for
financial statement and tax purposes; (4) certain transactions are reflected
directly to surplus rather than reflected in net income from operations (for
example, certain transactions related to the separate accounts); and (5) debt
securities are carried at amortized cost.
21
<PAGE> 23
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION (CONTINUED)
In April 1993, the Financial Accounting Standards Board issued Interpretation
40, Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises. The interpretation, which has been amended to
be effective for 1996 annual financial statements and thereafter, will no
longer allow statutory financial statements to be described as being prepared
in conformity with generally accepted accounting principles (GAAP). This will
require life insurance companies to adopt all applicable standards promulgated
by the FASB in any general purpose financial statements such companies may
issue. While GAAP standards have recently been developed for mutual life
insurance companies, the Company has not yet completed the complex and
extensive historical calculations and thus is unable to quantify the effects of
the Interpretation on its financial statements.
All amounts presented are expressed in U.S. Dollars. Certain amounts from
prior periods have been reclassified to conform with current period
presentation.
STOCKS
Stocks are carried at market value.
BONDS
Bonds are carried at amortized cost. Discounts and premiums on investments are
amortized using the effective interest method. Gains and losses on sales of
bonds are calculated on the specific identification method and recognized into
income based on NAIC prescribed formulas. Short-term investments include
investments with maturities of less than one year at the date of acquisition.
Market values disclosed are based on NAIC quoted values.
ASSET VALUATION RESERVE AND INTEREST MAINTENANCE RESERVE
The Asset Valuation Reserve and Interest Maintenance Reserve were determined by
NAIC prescribed formulas and are reported as liabilities rather than as
valuation allowances or appropriations of surplus.
POLICY AND CONTRACT CLAIMS
Policy and contract claims are determined on an individual case basis for
reported losses. Estimates of incurred but not reported losses are developed
on the basis of past experience.
22
<PAGE> 24
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Separate Accounts
Separate account assets and liabilities reported in the accompanying financial
statements represent funds that are separately administered, principally for
variable annuity and variable life contracts. For the majority of these
contracts the contractholder, rather than the Company, bears the investment
risk. Separate account assets are recorded at market value. Operations of the
separate accounts are not included in the accompanying financial statements.
REVENUE RECOGNITION
Both premium and investment income are recorded when due.
REINSURANCE
Reinsurance premiums and claims are accounted for on a basis consistent with
that used in accounting for the original policies issued and the terms of the
reinsurance contracts. Premiums and claims are reported net of reinsured
amounts.
POLICY RESERVES
Certain policy reserves are calculated based on statutorily required interest
and mortality assumptions.
3. INVESTMENTS AND INVESTMENT INCOME
The amortized cost and market value of investments in fixed maturities (bonds)
as of December 31, 1994 are summarized as follows:
<TABLE>
<CAPTION>
QUOTED OR
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government securities $ 34,265,152 $ 243,971 $ (441,592) $ 34,067,531
Foreign government securities 7,388,458 - (294,385) 7,094,073
Corporate securities 10,495,470 2,457 (577,136) 9,920,791
------------------------------------------------------------------------
$ 52,149,080 $ 246,428 $ (1,313,113) $ 51,082,395
========================================================================
</TABLE>
Proceeds from sales of investments in debt securities during 1994 were
$43,175,845. Gross gains of $167,738 and gross losses of $1,006,702 were
realized on those sales.
23
<PAGE> 25
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
3. INVESTMENTS AND INVESTMENT INCOME (CONTINUED)
The amortized cost and market value of investments in fixed maturities (bonds)
as of December 31, 1993 are summarized as follows:
<TABLE>
<CAPTION>
QUOTED OR
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government securities $ 15,473,821 $ 725,851 $ (19,830) $ 16,179,842
Foreign government securities 3,277,886 39,710 (5,316) 3,312,280
Corporate securities 4,624,066 47,402 (43,392) 4,628,076
-----------------------------------------------------------------------
$ 23,375,773 $ 812,963 $ (68,538) $ 24,120,198
=======================================================================
</TABLE>
Proceeds from sales of investments in debt securities during 1993 were
$28,248,633. Gross gains of $694,800 and gross losses of $17,715 were realized
on those sales.
The amortized cost and market value of fixed maturities at December 31, 1994 by
contractual maturities, 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.
<TABLE>
<CAPTION>
YEARS TO MATURITY AMORTIZED COST MARKET VALUE
----------------- ----------------------------------------
<S> <C> <C>
One year or less $ 107,413 $ 108,160
Greater than 1; up to 5 years 5,213,296 5,217,002
Greater than 5; up to 10 years 24,217,449 23,599,525
Due after 10 years 22,610,922 22,157,708
----------------------------------------
$ 52,149,080 $ 51,082,395
========================================
</TABLE>
At December 31, 1994, $4,447,934 of bonds at amortized cost were on deposit
with government insurance departments to satisfy regulatory regulations.
24
<PAGE> 26
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
3. INVESTMENTS AND INVESTMENT INCOME (CONTINUED)
Major categories of net investment income for each year were as follows:
<TABLE>
<CAPTION>
NET INVESTMENT INCOME
1994 1993 1992
--------------------------------------------------
<S> <C> <C> <C>
Gross investment income:
Dividends; Manulife Series Fund, Inc. $ 1,244,794 $ 1,440,392 $ -
Bond income 1,712,294 1,422,064 1,043,273
Policy loans 236,972 166,514 131,606
Short-term investments 501,477 384,178 313,998
--------------------------------------------------
3,695,537 3,413,148 1,488,877
Investment expenses (106,908) (89,786) (58,423)
--------------------------------------------------
Net investment income $ 3,588,629 $ 3,323,962 $ 1,430,454
==================================================
</TABLE>
4. RELATED PARTY TRANSACTIONS
The Company has a formal service agreement with Manulife Financial which can be
terminated by either party upon two months' notice. Under the Agreement, the
Company will pay direct operating expenses incurred each year by Manulife
Financial on behalf of the Company. Services provided under the Agreement
include legal, actuarial, investment, data processing and certain other
administrative services. Costs incurred under this Agreement were $21,326,446
in 1994, $12,467,474 in 1993, and $4,919,667 in 1992. In addition, there were
$7,795,184 agents' bonuses in 1994, $5,363,558 in 1993, and $1,871,799 in 1992
which were allocated to the Company and are included in commissions.
The Company has reinsurance agreements with Manulife Financial which may be
terminated upon the specified notice by either party. These agreements are
summarized as follows:
(a) The Company assumes two blocks of insurance from Manulife Financial under
coinsurance treaties. The Company's risk is limited to $100,000 of
initial face amount per claim plus a pro-rata share of any increase in
face amount.
(b) The Company cedes the risk in excess of $25,000 per life to Manulife
Financial under the terms of an automatic reinsurance agreement.
(c) The Company cedes a substantial portion of its risk on its Flexible
Premium Variable Life policies to Manulife Financial under the terms of a
stop loss reinsurance agreement.
d) Under the terms of an automatic coinsurance agreement, the Company cedes
its risk on structured settlements to Manulife Financial.
25
<PAGE> 27
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
4. RELATED PARTY TRANSACTIONS (CONTINUED)
Selected amounts relating to the above treaties reflected in the financial
statements are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------------------------------------------------------
<S> <C> <C> <C>
Life and annuity premiums assumed $ 25,385,628 $ 12,745,981 $ 6,579,233
Other life and annuity
considerations ceded (437,650) (201,685) (114,505)
Commissions and expense allowances
on reinsurance assumed (810,252) (329,634) (269,141)
Policy reserves assumed 47,672,591 23,070,952 10,799,350
Policy reserves ceded 3,786,647 3,782,156 3,662,930
</TABLE>
During 1992 and 1993 the Company assumed the first $50,000 of initial face
amount on two blocks of business. This resulted in transfers of $5,031,000 and
$10,837,000, respectively, to establish the initial reserves. In 1994 the
treaties were amended to assume the first $100,000 of initial face amount for
the same blocks of business. This resulted in a transfer of $21,477,000 to
establish the additional reserve. Commissions equal to 17% are charged for all
renewed premiums related to these contracts.
During 1994, the Company terminated another treaty resulting in a premium to
Manulife Financial to transfer the reserve of $799,874.
5. FEDERAL INCOME TAX
The Company joins the Parent, The Manufacturers Life Insurance Co. (U.S.A.) and
Manufacturers Reinsurance Limited in filing a U.S. consolidated income tax
return as a life insurance group under provisions of the Internal Revenue Code.
In accordance with an income tax-sharing agreement dated December 29, 1983, the
Company's income tax provision (or benefit) is computed as if the Company filed
a separate income tax return. The Company receives no surtax exemption. Tax
benefits from operating losses are provided at the U.S. statutory rate plus any
tax credits attributable to the Company, provided the consolidated group
utilizes such benefits currently.
The Company, Parent and The Manufacturers Life Insurance Co. (U.S.A.) have
available consolidated net operating losses of approximately $92,600,000 which
will expire in the years 2007 to 2009, and capital loss carryforwards of
$129,600,000 which will expire in 1999. The losses of the Company, Parent and
The Manufacturers Life Insurance Co. (U.S.A.) may be used to offset the
ordinary and capital gain income of Manufacturers Reinsurance Limited.
However, losses of Manufacturers Reinsurance Limited may not be used to offset
the income of the other members of the consolidated group.
26
<PAGE> 28
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
6. STATUTORY RESTRICTIONS ON DIVIDENDS
The Company is subject to statutory limitations on the payment of dividends to
its Parent. The Company cannot pay dividends during 1995 without the prior
approval of insurance regulatory authorities.
7. REINSURANCE
The Company cedes reinsurance as a party to several reinsurance treaties with
major unrelated insurance companies.
Summary financial information related to these reinsurance activities is as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
------------------------------------------------------
<S> <C> <C> <C>
Life insurance premiums assumed $ - $ - $28,887,669
Life insurance premiums ceded (218,767) (130,913) (28,809,307)
</TABLE>
During 1992, the Company assumed and ceded a significant block of business on a
yearly renewable term basis. This contract was not renewed in 1993.
8. AGGREGATE POLICY RESERVES
Aggregate policy reserves for life policies including variable life are based
on statutory mortality tables and interest assumptions using either the net
level or commissioners' reserve valuation method. The composition of the
aggregate policy reserves at December 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
MORTALITY INTEREST
AGGREGATE RESERVES TABLE RATES
---------------------------------- --------- -------
1994 1993
----------------------------------
<S> <C> <C> <C>
$ - $ 758,158 1958 CSO 4%
28,553,885 11,792,874 1980 CSO 4%
(189,080) (62,228) Reinsurance ceded
1,396,369 530,801 Miscellaneous
----------------------------------
$29,761,174 $13,019,605
==================================
</TABLE>
27
<PAGE> 29
The Manufacturers Life Insurance Company of America
Notes to Financial Statements (continued)
9. INVESTMENT IN SEPARATE ACCOUNTS
During 1984, the Company initiated plans to market variable life insurance
products through Separate Account One of The Manufacturers Life Insurance
Company of America ("Separate Account One") using Manulife Series Fund, Inc. as
its investment vehicle. Initial capitalization was $15,000,000. Through 1988,
the Company provided an additional capitalization of $6,000,000.
In December 1993, the Company transferred all of its shares, related to seed
money, in Manulife Series Fund, Inc. out of Separate Account One to the General
Account. At December 31, 1994, the $25,629,580 common stock represents the
Company's seed money investment in Manulife Series Fund, Inc.
During 1994, 1993, and 1992, the following dividends were received from
Manulife Series Fund, Inc.:
<TABLE>
<CAPTION>
1994 1993 1992
------------------------------------------------------
<S> <C> <C> <C>
Separate Account One $ 38,732 $ 1,610,693 $ 3,166,712
Separate Account Two 4,574,620 7,377,861 1,706,218
Separate Account Three 1,490,374 666,141 277,830
Separate Account Four 3,072,376 4,966,559 1,578,932
General Account 1,244,794 1,440,392 -
</TABLE>
Dividends have been reinvested by the Company in Manulife Series Fund, Inc.
During 1993, the Company withdrew $8,000,000 of its seed money and accumulated
earnings from Separate Account One and the Manulife Series Fund, Inc. and
utilized these funds to pay down its intercompany debt.
During 1994, the Company withdrew $13,011,137 of its seed money and accumulated
earnings from the Manulife Series Fund, Inc. and utilized these funds to pay
down its intercompany debt.
28
