<PAGE> 1
As filed with the Securities and Exchange Commission on February 27, 1998.
Registration No. 33-57018
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________
FORM N-4
Post-Effective Amendment No. 9
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF l933
AND AMENDMENT NO. 19 TO REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
__________________________________
SEPARATE ACCOUNT TWO
OF THE MANUFACTURERS LIFE
INSURANCE COMPANY OF AMERICA
(Exact name of registrant)
THE MANUFACTURERS LIFE
INSURANCE COMPANY OF AMERICA
(Name of depositor)
__________________________________
500 N. Woodward Avenue
Bloomfield Hills, Michigan, 48304
(Address of depositor's principal executive offices)
__________________________________
(416) 926-6700
JAMES D. GALLAGHER, ESQ.
Secretary and General Counsel Notice to:
The Manufacturers Life Insurance W. Randolph Thompson, Esq. Of Counsel
Company of America Jones & Blouch L.L.P., Suite 405W
500 N. Woodward Avenue 1025 Thomas Jefferson Street, N.W.
Bloomfield Hills, Michigan 48304 Washington, D.C. 20007-0805
(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
_____ on May 1, 1997 pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
__X__ on May 1, 1998 pursuant to paragraph (a) of Rule 485
_____ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
<PAGE> 2
SEPARATE ACCOUNT TWO
OF
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
Registration Statement on Form N-4
Cross-Reference Sheet Required by Rule 495(a)
<TABLE>
<S> <C>
Form N-4
Item of Part A
Item No. Caption in Prospectus
- -------------- --------------------------------------------------------
1 ----- Cover Page
2 ----- Definitions
3 ----- Summary of Policies
4 ----- Condensed Financial Information
5 ----- General Information About Manufacturers Life Of America;
General Information About Manufacturers Life Insurance Company
of America's Separate Accounts, General Information about
Manufacturers Investment Trust
6 ----- Description of the Policies ("Policy Charges")
7 ----- Description of the Policies
8 ----- Description of the Policies ("Commencement of Annuity
Payments"); Appendix A ("Annuity Options")
9 ----- Description of the Policies ("Provisions On Death")
10 ----- Description of the Policies ("Purchasing A Policy", "Variable
Policy Value and Determination of Variable Policy Value")
11 ----- Description of the Policies ("Surrender or Withdrawal Rights")
12 ----- Federal Tax Matters
13 ----- Manufacturers Life of America (Legal Proceedings)
14 ----- Not applicable
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Form N-4
Item of Part B
Item No. Caption in Prospectus
- -------------- --------------------------------------------------------
15 ----- Not Applicable
16 ----- Not applicable
17 ----- General Information About Manufacturers Life Of America; The
Separate Accounts, Manufacturers Investment Trust, and The General Account
18 ----- General Information About Manufacturers Life of America
("Responsibilities Assumed By Manufacturers Life")
19 ----- Description of the Policies ("Policy Charges"; "Purchasing A
Policy")
20 ----- Other Matters ("Sale of the Policies")
21 ----- Other Matters ("Performance and Other Comparative
Information")
22 ----- Not applicable
23 ----- Financial Statements
</TABLE>
<PAGE> 4
PART A.
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 5
[LIFESTYLE LOGO]
LIFESTYLE FROM MANULIFE FINANCIAL
PROSPECTUS FOR
MULTI-ACCOUNT FLEXIBLE
PAYMENT VARIABLE ANNUITY
ISSUED BY
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
PRINTED MAY, 1998
[MANULIFE FINANCIAL LOGO]
<PAGE> 6
LIFESTYLE FROM MANULIFE FINANCIAL
MULTI-ACCOUNT FLEXIBLE PAYMENT
VARIABLE ANNUITY
This prospectus describes Multi-Account Flexible Payment Variable Annuity
Policies ("Policies" or "Policy") issued by The Manufacturers Life Insurance
Company of America ("Manufacturers Life of America"). The Policies are designed
for use in connection with retirement plans that may or may not be entitled to
special income tax treatment. The Policies will be offered on both an individual
basis and in connection with group or sponsored arrangements.
During the Accumulation Period, the Policies provide for the accumulation of
value on a fixed, variable, or fixed and variable basis. Annuity payments are
available on a fixed basis only.
Policy Value accumulated on a variable basis will be held in one or more of the
sub-accounts of Manufacturers Life of America's Separate Account Two. The assets
of each sub-account will be used to purchase shares of a particular investment
portfolio ("Portfolio") of Manufacturers Investment Trust. The accompanying
prospectus for Manufacturers Investment Trust describes the investment
objectives of the Portfolios in which purchase payments may be invested. These
Portfolios are: the Emerging Growth Trust, the Balanced Trust, the Capital
Growth Bond Trust, the Money Market Trust, the Quantitative Equity Trust
(formerly Common Stock Fund), the Real Estate Securities Trust, the
International Stock Trust, and the Pacific Rim Emerging Markets Trust. Other
sub-accounts and Portfolios may be added in the future.
In some jurisdictions the Policyowner may allocate Policy Value to various Fixed
Accounts during the Accumulation Period. Policy Value so allocated will earn a
fixed rate of interest for a specified period of time (the "Guarantee Period");
however, the Policy Value so allocated and the interest earned thereon is
guaranteed only if the allocation is maintained to the Maturity Date. If the
allocation is not maintained to the Maturity Date, the value thereof may be
increased or decreased by the Market Value Adjustment. Fixed Account Value may
be held either in Manufacturers Life of America's Separate Account A or, if
applicable state law permits, in Manufacturers Life of America's General
Account.
The Policyowner may also allocate Policy Value to the Guaranteed Interest
Account during the Accumulation Period. Policy Value so allocated will earn a
rate of interest guaranteed not to be less than 3% per annum and may, at
Manufacturers Life of America's discretion, exceed that rate.
Prior to the Annuity Commencement Date, Manufacturers Life of America will
furnish to each Policyowner at least annually a report showing certain account
information including unit values, current rates, current purchase payment
allocations and cash surrender value. In addition, reports that include
financial statements of Manufacturers Investment Trust and information about the
investment holdings of the various Portfolios will be sent to the Policyowner
semi-annually.
This prospectus contains a detailed discussion of the information a prospective
purchaser ought to know before making a purchase. Please read this prospectus
carefully and keep it for future reference. It is valid only when accompanied by
a current prospectus for Manufacturers Investment Trust.
The Securities and Exchange Commission maintains a Web site (http://www.sec.gov)
that contains material incorporated by reference and other information regarding
registrants that file electronically with the Commission.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 7
The Manufacturers Life Insurance
Company of America
500 N. Woodward Avenue
Bloomfield Hills, Michigan 48304
Service Office:
200 Bloor Street East
Toronto, Ontario, Canada M4W 1E5
Telephone: 1-800-827-4546 (1-800-VARILIN[E])
THE DATE OF THIS PROSPECTUS IS MAY 1, 1998.
<PAGE> 8
PROSPECTUS CONTENTS
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
DEFINITIONS................................... 1
SUMMARY OF POLICIES........................... 3
POLICYOWNER INQUIRIES......................... 4
EXPENSE TABLE................................. 5
CONDENSED FINANCIAL INFORMATION............... 8
GENERAL INFORMATION ABOUT MANUFACTURERS LIFE
OF AMERICA.................................. 10
Manufacturers Life of America and
Manufacturers Life...................... 10
General Information about Manufacturers
Life of America's Separate Accounts..... 10
Manufacturers Life of America's Separate
Account Two: The Variable Accounts...... 10
General Information About Manufacturers
Investment Trust........................ 10
INVESTMENT OBJECTIVES AND CERTAIN POLICIES
OF THE PORTFOLIOS........................... 11
DESCRIPTION OF THE POLICIES................... 13
Purchasing A Policy....................... 13
"Free Look" Right......................... 13
Restrictions Applicable To Purchase
Payments................................ 13
Policy Value.............................. 14
The Fixed Accounts................... 14
The Guaranteed Interest Account...... 15
The Variable Accounts................ 15
Annuity Value Guarantee................... 16
Transfers of Policy Value................. 16
Dollar Cost Averaging................ 17
Asset Allocation Balancer............ 17
Surrender Or Withdrawal Rights............ 18
Special Policy Access..................... 18
Provisions on Death....................... 19
Survivor Benefit Amount.............. 19
Joint Ownership...................... 19
Death of the Policyowner............. 19
Death of the Annuitant............... 20
Commencement of Annuity Payments.......... 21
Substitution of Portfolio Shares.......... 21
Policy Charges............................ 21
Withdrawal Charge.................... 21
Record-Keeping Charge................ 23
Dollar Cost Averaging Charge......... 23
Special Policy Access Charge......... 23
Premium Tax Deduction................ 23
Mortality And Expense Risks
Charges............................ 23
Administration Charge................ 24
Market Value Adjustment................... 24
OTHER GENERAL POLICY PROVISIONS............... 25
Deferral of Payments................. 25
Annual Statements.................... 25
Rights of Ownership.................. 25
<CAPTION>
PAGE
-------
<S> <C>
Beneficiary.......................... 26
Modification......................... 26
FEDERAL TAX MATTERS........................... 27
Taxation of Manufacturers Life of
America................................. 27
Tax Treatment Of The Policies............. 27
Purchase of Policies by Qualified Plans... 29
ADDITIONAL INFORMATION ABOUT MANUFACTURERS
LIFE OF AMERICA............................. 29
Description of Business................... 29
Responsibilities Assumed By Manufacturers
Life.................................... 30
Selected Financial Data................... 31
Management Discussion and Analysis of
Financial Condition and Results
of Operations........................... 31
Executive Officers and Directors.......... 35
Executive Compensation.................... 36
Legal Proceedings......................... 37
State Regulations......................... 37
OTHER MATTERS................................. 37
Special Provisions For Group Or Sponsored
Arrangements............................ 37
Sale of the Policies...................... 38
Voting Rights............................. 38
Further Information....................... 39
Legal Matters............................. 39
Experts................................... 39
Performance and Other Comparative
Information............................. 39
Advertising Performance of Variable
Accounts................................ 39
FINANCIAL STATEMENTS.......................... 43
APPENDIX B.................................... 44
Sample Calculations Of Market Value
Adjustments And Withdrawal Charges...... 44
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN
ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS.
</TABLE>
<PAGE> 9
DEFINITIONS
"ACCUMULATION PERIOD" is the period from the date Manufacturers Life of America
receives the first purchase payment to the Elected Annuity Date.
"ANNUITANT" means a person upon whose life annuity payments are based. An
Annuitant has no rights under the Policy.
"ANNUITY COMMENCEMENT DATE" means the date on which the first annuity payment is
made.
"BUSINESS DAY" is any day that the New York Stock Exchange is open for trading
and trading is not restricted. The net asset value of the underlying shares of a
Variable Account will be determined on each Business Day.
"CHARITABLE REMAINDER TRUST" means a trust established pursuant to Section 664
of the Internal Revenue Code of 1986, as amended.
"CUMULATIVE NET EARNINGS" means the greater of (i) zero and (ii) the Policy
Value less the sum of Net Premiums remaining after adjustments for any prior
withdrawals.
"ELECTED ANNUITY DATE" means the date selected by the Policyowner on which the
first annuity payment is due.
"FIXED ACCOUNT" or "FIXED ACCOUNTS" are the various accounts in which
allocations are credited with a Guaranteed Rate for a set period of time if the
allocations are maintained until the Maturity Date.
"FIXED ACCOUNT VALUE" is the sum of the values of a Policy's interest in the
Fixed Accounts prior to application of any Market Value Adjustment calculated as
set forth in Description of the Policies -- "Policy Value" (the Fixed Accounts).
"GENERAL ACCOUNT" is all assets of Manufacturers Life of America except those
allocated to Separate Account Two, Separate Account A, or other separate
accounts of Manufacturers Life of America.
"GROSS WITHDRAWAL AMOUNT" is the amount of any full surrender or partial
withdrawal prior to (i) the deduction of any applicable charges or withholding
taxes and (ii) any adjustment for applicable Market Value Adjustments.
"GUARANTEE PERIOD" is a period during which a Guaranteed Rate will be paid on an
allocation to a Fixed Account.
"GUARANTEED INTEREST ACCOUNT" is the account in which allocations earn interest
at a rate guaranteed not to fall below 3% per annum and which can be reset
daily.
"GUARANTEED INTEREST ACCOUNT VALUE" is the value of a Policy's interest in the
Guaranteed Interest Account.
"GUARANTEED RATE" is the rate of interest credited by Manufacturers Life of
America on a Fixed Account for a given Guarantee Period.
"MARKET VALUE ADJUSTMENT" is an adjustment to any portion of the Fixed Account
Value which is surrendered, withdrawn, annuitized or transferred prior to the
Maturity Date.
"MATURITY DATE" is the last day of a Guarantee Period.
"NET PREMIUMS" are gross premiums less deductions for applicable premium taxes.
"PAYEE" is a person designated by the Policyowner to receive the annuity
payments due and payable on and after the Annuity Commencement Date.
"POLICY VALUE" means the value during the Accumulation Period of amounts
accumulated under the Policy. The Policy Value is the sum of the Variable Policy
Value, the Guaranteed Interest Account Value and the Fixed Account Value.
"POLICY YEARS", "POLICY ANNIVERSARIES" and "POLICY MONTHS" are determined from
the date the initial purchase payment is allocated. The first Policy Anniversary
will be on the same date of the same month one year later.
"PURCHASE PAYMENT" is an amount paid under the Policy.
"QUALIFIED POLICY" means a Policy used in connection with a retirement plan
which receives favorable federal income tax treatment under sections 401 or 408
of the Internal Revenue Code of 1986, as amended ("Code").
"SERVICE OFFICE" is the office designated by Manufacturers Life of America to
service the Policy.
"SURVIVOR BENEFIT AMOUNT" is the amount to which the Policy Value may be set on
the death of the original Policyowner.
1
<PAGE> 10
"UNIT" is an index used to measure the value of a Policy's interest in a
Variable Account.
"VARIABLE ACCOUNT" or "VARIABLE ACCOUNTS" are any one or more of the various
sub-accounts of Separate Account Two.
"VARIABLE POLICY VALUE" is the sum of the value of a Policy's interest in each
of the Variable Accounts calculated as set forth in Description of the Policies
- -- "Policy Value" (The Variable Accounts).
2
<PAGE> 11
SUMMARY OF POLICIES
ELIGIBLE PURCHASERS. The Policies described in this prospectus are designed to
provide a flexible investment program for the accumulation of amounts for
retirement purposes under plans which receive favorable federal income tax
treatment pursuant to sections 401 or 408 of the Code ("Qualified Policies"), or
under plans and trusts not entitled to any special tax treatment ("Nonqualified
Policies"). The Policies, which will generally be issued to persons up to age
75, will be offered both on an individual basis and in connection with group or
sponsored arrangements. (See Description of the Policies -- "Purchasing A
Policy".)
FUNDING ARRANGEMENTS. The Policies are designed to provide flexibility as to
the timing and amount of purchase payments and the available funding media.
Purchase payments may be allocated among three types of accounts -- the Variable
Accounts, the Guaranteed Interest Account and, in some jurisdictions, the Fixed
Accounts. The Variable Accounts are sub-accounts of Separate Account Two, each
sub-account investing in a corresponding Portfolio of Manufacturers Investment
Trust. The Guaranteed Interest Account is an account in which allocated purchase
payments earn interest at a rate which can be reset daily but is guaranteed not
to be less than 3% per annum. The Fixed Accounts are accounts which earn a fixed
rate of interest only if held to maturity.
PURCHASE PAYMENTS. The minimum initial purchase payment is $5,000 ($2,000 for
Qualified Plans). Subsequent purchase payments must be at least $500.
Manufacturers Life of America reserves the right to alter these minimum payment
amounts on 90 days written notice to the Policyowner and it further reserves the
right to institute a pre-authorized payment plan which provides for automatic
monthly deductions and which may permit smaller payments. Purchase payments may
be allocated among the Variable Accounts, Fixed Accounts and Guaranteed Interest
Account in any manner the Policyowner wishes. A Policyowner should specify how
each purchase payment is to be allocated. Allocations among the Variable
Accounts, Fixed Accounts and Guaranteed Interest Account are made as a
percentage of Net Premiums. The percentage allocation to any account may be any
whole number between 0 and 100, provided the total percentage allocations equal
100. A Policyowner may change the way in which Net Premiums are allocated at any
time without charge. If no allocation is specified, a purchase payment will be
allocated as set forth in the Policyowner's previous allocation request. (See
Description of the Policies -- "Restrictions Applicable To Purchase Payments".)
CHARGES AND DEDUCTIONS. There is no deduction from purchase payments for sales
expenses. However, full surrender of a Policy or a partial withdrawal thereunder
may be subject to a withdrawal charge (contingent deferred sales charge), which
is a percentage of the Gross Withdrawal Amount subject to the withdrawal charge.
The applicable percentage will depend upon when the purchase payment to which
such amount is deemed attributable was made. The maximum withdrawal charge is 8%
of the Gross Withdrawal Amount, decreasing over time until, beginning in the
seventh year after the purchase payment was made, it is 0%. However, in no event
may the charge exceed 8% of the total purchase payments made. The Gross
Withdrawal Amount will also be adjusted by any applicable Market Value
Adjustment and reduced by any applicable record-keeping charges or withholding
taxes.
When amounts allocated to a Fixed Account are not maintained until the
applicable Maturity Date, whether as a result of a surrender, partial
withdrawal, transfer or the Annuity Commencement Date, the Market Value
Adjustment may cause a deduction from, or an addition to, the amounts
surrendered, withdrawn, transferred or annuitized. In an investment environment
of rapidly increasing interest rates, the Market Value Adjustment could cause
the amount available from a Fixed Account prior to the Maturity Date of that
Fixed Account upon surrender, withdrawal, transfer or on the Annuity
Commencement Date to be substantially less than the amount allocated to that
Fixed Account.
A record-keeping charge equal to 2% of the Policy Value up to a maximum of $30
will be deducted on the last day of each Policy Year or on the date of a full
surrender made prior to the end of a Policy Year.
Deductions are made for (i) mortality and expense risks charges, and (ii) an
administration charge. Mortality and expense risks charges are deducted daily at
an annual rate of .80% of assets of Separate Account Two, and monthly, at the
beginning of each Policy Month, at an annual rate of .45% of the Variable Policy
Value and Fixed Account Value. The administration charge is deducted daily at an
annual rate of .20% of the assets of Separate Account Two.
A deduction may be made for any applicable premium taxes attributable to the
Policies (currently such taxes range from 0% to 3.5%).
3
<PAGE> 12
There is no charge for Dollar Cost Averaging transfers if Policy Value exceeds
$15,000; otherwise there is a charge of $5 per transfer. (See Description of the
Policies --"Policy Charges".)
ANNUITY PAYMENTS. Annuity payments will begin on the Elected Annuity Date and
will be on a fixed basis only. The Policyowner may change the Elected Annuity
Date to any date so long as payments will commence by the end of the year in
which the Annuitant reaches age 85. The date the first annuity payment is made
is the Annuity Commencement Date. Under some Qualified Policies, annuity
payments must commence no later than April 1 following the year the Annuitant
attains the age of 70. If application of the Policy Value would result in
annuity payments of less than $20 monthly, $60 quarterly, $100 semi-annually or
$200 annually, the Policy Value will be paid to the Policyowner in a single sum.
(See Description of the Policies --"Commencement of Annuity Payments".)
SURRENDERS OR WITHDRAWALS. At any time prior to the Annuity Commencement Date,
a Policyowner may fully surrender the Policy for, or make a cash withdrawal in
an amount not exceeding, its Policy Value, reduced by any applicable withdrawal
charge and record-keeping charge, and adjusted for any Market Value Adjustment.
A full surrender or cash withdrawal may be subject to a tax penalty. (See "Tax
Treatment Of The Policies".) The minimum cash withdrawal that may be requested
at any one time is $500. Some Qualified Policies must contain restrictions on
withdrawal rights. (See Description of the Policies -- "Surrender Or Withdrawal
Rights".)
TRANSFERS. Subject to certain limitations, transfers may be made at any time
among the Guaranteed Interest Account, the Variable Accounts and the Fixed
Accounts (subject, in the case of transfers from Fixed Accounts, to any
applicable Market Value Adjustment). Transfers into the accounts may be made in
any amount. Transfers from any account of less than the entire account value
must be at least $500, including transfers under the Dollar Cost Averaging
program, except transfers made pursuant to the Asset Allocation Balancer program
or transfers designed to change percentage allocations of assets among accounts.
Transfers from the Guaranteed Interest Account are limited in any one Policy
Year to the greater of $500 or 15% of the Guaranteed Interest Account Value at
the previous Policy Anniversary. (See Description of the Policies -- "Transfers
of Policy Value".)
FREE LOOK RIGHT. Within ten days after receiving a Policy, the Policyowner may
return it for cancellation by mailing it to the Service Office. Within seven
days after receipt, except where state insurance law requires return of any
purchase payments, Manufacturers Life of America will refund the Policy Value
plus or minus any applicable Market Value Adjustment.
* * *
The above summary is qualified in its entirety by the detailed information
appearing elsewhere in this prospectus and the accompanying prospectus of
Manufacturers Investment Trust to which reference should be made.
POLICYOWNER INQUIRIES
All communications or inquiries relating to a Policy should be addressed to the
Manufacturers Life of America Service Office at 200 Bloor Street East, Toronto,
Ontario, Canada, M4W 1E5. All notices and elections under a Policy must be
received at that Service Office to be effective.
4
<PAGE> 13
EXPENSE TABLE
<TABLE>
<CAPTION>
NUMBER OF
COMPLETE POLICY
YEARS SINCE
PURCHASE
PAYMENT WITHDRAWAL
WAS MADE CHARGE
--------------- -----------
<S> <C> <C>
1. POLICY AND TRANSACTION CHARGES:
(a) Withdrawal Charge (contingent deferred sales charge) 0-2.99 8.00%
(as a percentage of the lesser of amount surrendered or 3 6.00%
purchase payments)1: 4 4.00%
5 2.00%
6 or more None
(b) Record-Keeping Charge $302
(c) Dollar Cost Averaging Charge (if selected and applicable)3 $ 5
</TABLE>
<TABLE>
<CAPTION>
ANNUAL RATE
-----------------------------
<S> <C> <C>
2. MORTALITY AND EXPENSE RISKS CHARGE
(a) Variable (Separate) Accounts
- Charged daily as a percentage of average Variable Account
Values4 0.80%
- Charged monthly as a percentage of the policy month-start
Variable Account Value and Fixed Account Value 0.45%
-----
1.25%
(b) Fixed Accounts
- Charged monthly as a percentage of the policy month-start
Fixed Account Assets 0.45%
(c) Guaranteed Interest Account 0.00%
3. OTHER SEPARATE ACCOUNT EXPENSES
Charge for administration charged daily as a percentage of average
Variable
Account Values 0.20%
-----
TOTAL SEPARATE ACCOUNT AND OTHER ASSET BASED CHARGES 1.45%
</TABLE>
1 The withdrawal charge decreases over time depending on the number of complete
Policy Years elapsed since the purchase to which the withdrawal is deemed
attributable was made. A withdrawal other than one made pursuant to the free
withdrawal provision is deemed to be a liquidation of a purchase payment. The
free withdrawal provision allows the Policyowner to withdraw in any Policy
Year after the first up to 10% of the Policy Value as of the most recent
Policy Anniversary free of the withdrawal charge. In addition, a Market Value
Adjustment may cause a deduction from or addition to amounts withdrawn from
the Fixed Accounts.
2 A record-keeping charge of 2% of the Policy Value up to a maximum of $30 is
deducted during the Accumulation Period on the last day of a Policy Year. The
charge is also deducted upon full surrender of a Policy on a date other than
the last day of a Policy Year.
3 Transfers pursuant to the optional Dollar Cost Averaging program are free if
Policy Value exceeds $15,000 at the time of the transfer, but otherwise incur
a $5 charge.
4 A mortality and expense risks charge of .80% per annum is deducted daily from
Separate Account Two assets, and a mortality and expense risks charge of .45%
per annum is deducted monthly from Variable Policy Values and Fixed Account
Values.
5
<PAGE> 14
4. MANUFACTURERS INVESTMENT TRUST ANNUAL EXPENSES (AFTER APPLICABLE FEE
WAIVERS AND EXPENSE REIMBURSEMENTS):
As a percentage of underlying Trust's average net assets
<TABLE>
<CAPTION>
INVESTMENT TOTAL
MANAGEMENT OTHER TRUST
PORTFOLIO FEES EXPENSES* EXPENSES
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Rim Emerging Markets Trust 0.85% 0.57% 1.42%
Emerging Growth Trust 1.05% 0.06% 1.11%
International Stock Trust 1.05% 0.33% 1.38%
Quantitative Equity Trust (formerly Common Stock Fund) 0.70% 0.07% 0.77%
Real Estate Securities Trust 0.70% 0.07% 0.77%
Balanced Trust 0.80% 0.08% 0.88%
Capital Growth Bond Trust 0.65% 0.08% 0.73%
Money Market Trust 0.50% 0.04% 0.54%
</TABLE>
* Other Expenses include custody fees, registration fees, legal fees, audit
fees, trustees' fees, insurance fees and other miscellaneous expenses.
Manufacturers Securities Services, LLC ("MSS") has agreed pursuant to its
advisory agreement with Manufacturers Investment Trust to reduce its
advisory fee or reimburse Manufacturers Investment Trust to the extent that
such other expenses (excluding taxes, portfolio brokerage commissions,
interest, litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of business) exceed .75% in the
case of the International Stock Trust and Pacific Rim Emerging Markets Trust
and, in the case of each of the other Manufacturers Investment Trusts listed
above, .50% of the average annual net assets of such Manufacturers
Investment Trust Portfolio. Such expense limitations with respect to the
Manufacturers Investment Trust will continue in effect from year to year
unless otherwise terminated at any year end by MSS on 30 days' notice to
Manufacturers Investment Trust.
Example 5
If you surrender your Policy at the end of the applicable time period:
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------
<S> <C> <C> <C> <C>
MANUFACTURERS INVESTMENT TRUST
PACIFIC RIM EMERGING MARKETS TRUST $103 $ 168 $ 195 $327
EMERGING GROWTH TRUST $100 $ 159 $ 180 $297
INTERNATIONAL STOCK TRUST $103 $ 167 $ 193 $323
QUANTITATIVE EQUITY TRUST (FORMERLY COMMON STOCK FUND) $ 97 $ 150 $ 164 $263
REAL ESTATE SECURITIES TRUST $ 97 $ 150 $ 164 $263
BALANCED TRUST $ 98 $ 153 $ 169 $274
CAPITAL GROWTH BOND TRUST $ 97 $ 149 $ 162 $259
MONEY MARKET TRUST $ 95 $ 143 $ 153 $239
If you do NOT surrender your Policy or if you annuitize at the end of
the applicable time period:
You would pay the following expenses on a $1,000 investment, assuming
a 5% annual return on assets:
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------
<S> <C> <C> <C> <C>
MANUFACTURERS INVESTMENT TRUST
PACIFIC RIM EMERGING MARKETS TRUST $ 30 $ 91 $ 155 $327
EMERGING GROWTH TRUST $ 27 $ 82 $ 140 $297
INTERNATIONAL STOCK TRUST $ 29 $ 90 $ 153 $323
QUANTITATIVE EQUITY TRUST (FORMERLY COMMON STOCK FUND) $ 23 $ 72 $ 123 $263
REAL ESTATE SECURITIES TRUST $ 23 $ 72 $ 123 $263
BALANCED TRUST $ 24 $ 75 $ 128 $274
CAPITAL GROWTH BOND TRUST $ 23 $ 70 $ 121 $259
MONEY MARKET TRUST $ 21 $ 65 $ 111 $239
</TABLE>
5 In the examples above, the $30 annual record-keeping charge has been reflected
in the calculation of annual expenses by converting it to a percentage charge.
In converting the charge to a percentage an average account size of $40,000
was used. The 10% free withdrawal has been incorporated where applicable.
The purpose of the above table is to assist a Policyowner in understanding
the various costs and expenses that he or she will bear directly or indirectly.
The table reflects expenses of Separate Account Two, the Fixed Accounts and
Manufacturers Investment Trust, but it does not reflect any deduction made to
cover any premium taxes
6
<PAGE> 15
attributable to a Policy. Such taxes may be as much as 3.50% depending on the
law of the applicable state or local jurisdiction. In addition, although the
table does not reflect any charge for the Special Policy Access feature,
Manufacturers Life of America reserves the right to charge an administrative fee
not to exceed $150 for withdrawal under this provision. However, currently no
charge is imposed. The example included in the above table should not be
considered a representation of past or future expenses, and actual expenses may
be greater or less than those shown.
Information concerning charges assessed under the Policies is set forth
below. See Description of the Policies -- "Policy Charges". Information
concerning the management fees paid by Manufacturers Investment Trust is
provided under the caption "Management of the Trust" in the accompanying
Manufacturers Investment Trust prospectus.
7
<PAGE> 16
CONDENSED FINANCIAL INFORMATION
SCHEDULE OF ACCUMULATION UNIT VALUES AND
ACCUMULATION UNITS OUTSTANDING
The accumulation unit values set forth in the following table are accounting
data that do not reflect the impact of the following charges (which are not
deducted as part of the calculation of accumulation unit values): withdrawal
charges, record-keeping charges, the portion of the mortality and expense risk
charges deducted monthly, deductions for premium taxes (if any), Dollar Cost
Averaging, or Special Policy Access transactions. Accordingly, the change in
accumulation unit values over time should not be viewed as an accurate measure
of the investment performance of Separate Account Two.
FOR THE PERIOD NOVEMBER 3, 1987 THROUGH DECEMBER 31, 1997
SUB-ACCOUNTS
<TABLE>
<CAPTION>
EMERGING GROWTH TRUST
(FORMERLY EMERGING GROWTH EQUITY FUND)
------------------------------------------------------------------------------------
1987 1988 1989 1990 1991 1992 1993 1994 1995
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
November 3 (Commencement) $10.00
January 1 value $10.87 $12.58 $17.72 $14.93 $25.33 $30.55 $37.47 $35.58
December 31 value $10.87 $12.58 $17.72 $14.93 $25.33 $30.55 $37.47 $35.58 $45.01
December 31 units 329 11,285 22,539 41,687 76,705 288,277 874,970 1,454,901 1,670,956
<CAPTION>
1996 1997
<S> <C> <C>
November 3 (Commencement)
January 1 value $45.01
December 31 value $46.79
December 31 units 1,681,075
</TABLE>
<TABLE>
<CAPTION>
BALANCED TRUST
(FORMERLY BALANCED ASSETS FUND)
------------------------------------------------------------------------------------
1987 1988 1989 1990 1991 1992 1993 1994 1995
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
November 3 (Commencement) $10.00
January 1 value $10.20 $10.87 $13.06 $13.13 $16.04 $16.87 $18.70 $17.75
December 31 value $10.20 $10.87 $13.06 $13.13 $16.04 $16.87 $18.70 $17.75 $21.91
December 31 units 1,645 21,509 47,074 118,664 201,901 515,812 1,293,922 2,001,928 2,189,632
<CAPTION>
1996 1997
<S> <C> <C>
November 3 (Commencement)
January 1 value $21.91
December 31 value $23.98
December 31 units 2,312,513
</TABLE>
<TABLE>
<CAPTION>
CAPITAL GROWTH BOND TRUST
(FORMERLY CAPITAL GROWTH BOND FUND)
------------------------------------------------------------------------------------
1987 1988 1989 1990 1991 1992 1993 1994 1995
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
November 3 (Commencement) $10.00
January 1 value $10.15 $10.77 $12.14 $12.81 $14.76 $15.47 $16.94 $16.02
December 31 value $10.15 $10.77 $12.14 $12.81 $14.76 $15.47 $16.94 $16.02 $19.07
December 31 units 1,039 17,737 36,191 51,268 69,024 168,747 499,877 672,365 789,655
<CAPTION>
1996 1997
<S> <C> <C>
November 3 (Commencement)
January 1 value $19.07
December 31 value $19.35
December 31 units 851,595
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET TRUST
(FORMERLY MONEY-MARKET FUND)
------------------------------------------------------------------------------------
1987 1988 1989 1990 1991 1992 1993 1994 1995
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
November 3 (Commencement) $10.00
January 1 value $10.07 $10.68 $11.51 $12.28 $12.84 $13.15 $13.37 $13.75
December 31 value $10.07 $10.68 $11.51 $12.28 $12.84 $13.15 $13.37 $13.75 $14.38
December 31 units 7,161 23,091 32,907 160,484 122,681 176,160 328,922 918,869 1,290,129
<CAPTION>
1996 1997
<S> <C> <C>
November 3 (Commencement)
January 1 value $14.38
December 31 value $14.95
December 31 units 1,375,204
</TABLE>
<TABLE>
<CAPTION>
QUANTITATIVE EQUITY TRUST
(FORMERLY COMMON STOCK FUND)
------------------------------------------------------------------------------------
1987 1988 1989 1990 1991 1992 1993 1994 1995
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
November 3 (Commencement) $10.00
January 1 value $10.43 $11.35 $14.68 $13.94 $17.97 $18.88 $21.19 $20.10
December 31 value $10.43 $11.35 $14.68 $13.94 $17.97 $18.88 $21.19 $20.10 $25.72
December 31 units 709 7,257 20,202 43,044 78,327 194,079 485,195 803,568 977,871
<CAPTION>
1996 1997
<S> <C> <C>
November 3 (Commencement)
January 1 value $25.72
December 31 value $30.03
December 31 units 1,274,256
</TABLE>
8
<PAGE> 17
<TABLE>
<CAPTION>
REAL ESTATE SECURITIES TRUST
(FORMERLY REAL ESTATE SECURITIES FUND)
----------------------------------------------------------------------------------------
1987 1988 1989 1990 1991 1992 1993 1994
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
November 3 (Commencement) $10.00
January 1 value $ 9.99 $11.05 $11.95 $11.30 $15.78 $18.96 $23.01
December 31 value $ 9.99 $11.05 $11.95 $11.30 $15.78 $18.96 $23.01 $22.16
December 31 units 1,642 12,733 17,676 17,834 24,956 134,707 711,630 1,205,880
<CAPTION>
1995 1996 1997
<S> <C> <C> <C> <C>
November 3 (Commencement)
January 1 value $22.16 $25.26
December 31 value $25.26 $33.68
December 31 units 1,149,409 1,190,829
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL STOCK TRUST
(FORMERLY INTERNATIONAL FUND)
------------------------------------------------------------
1994 1995 1996 1997
------------------------------------------------------------
<S> <C> <C> <C> <C>
October 4 (Commencement) $10.00
January 1 value $ 9.72 $10.71
December 31 value $ 9.72 $10.71 11.71
December 31 units 89,180 354,776 652,940
</TABLE>
<TABLE>
<CAPTION>
PACIFIC RIM EMERGING MARKETS TRUST
(FORMERLY PACIFIC RIM
EMERGING MARKETS FUND)
------------------------------------------------------------
1994 1995 1996 1997
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
October 4 (Commencement) $10.00
January 1 value $ 9.41 $10.38
December 31 value $ 9.41 $10.38 11.29
December 31 units 67,272 261,208 502,325
</TABLE>
9
<PAGE> 18
GENERAL INFORMATION ABOUT MANUFACTURERS LIFE OF AMERICA
MANUFACTURERS LIFE OF AMERICA AND MANUFACTURERS LIFE
Manufacturers Life of America, a wholly-owned subsidiary of The Manufacturers
Life Insurance Company (U.S.A.) ("Manufacturers USA"), is a stock life insurance
company organized under the laws of Pennsylvania on April 11, 1977 and
redomesticated under the laws of Michigan on December 9, 1992. It is a licensed
life insurance company in the District of Columbia and all states of the United
States except New York. Manufacturers USA, a life insurance company organized in
1955 under the laws of Maine and redomesticated under the laws of Michigan on
December 30, 1992, is a wholly-owned subsidiary of Manulife Reinsurance
Corporation (U.S.A.), a life insurance company organized in 1983 under the laws
of Michigan which in turn is a wholly-owned subsidiary of The Manufacturers Life
Insurance Company ("Manufacturers Life"), a mutual life insurance company based
in Toronto, Canada. Manufacturers Life and its subsidiaries, together,
constitute one of the largest life insurance companies in North America and rank
among the 60 largest life insurers in the world as measured by assets.
Manufacturers Life and Manufacturers Life of America have received the following
ratings from independent rating agencies: Standard and Poor's Insurance Rating
Service -- AA+ (for claims paying ability), A.M. Best Company -- A++ (for
financial strength), Duff & Phelps Credit Rating Co. -- AAA (for claims paying
ability), and Moody's Investors Service, Inc. -- Aa3 (for financial strength).
However, neither Manufacturers Life of America nor Manufacturers Life guarantees
the investment performance of the Separate Account. On January 19, 1998, the
Board of Directors of Manufacturers Life asked the management of Manufacturers
Life to prepare a plan for conversion of Manufacturers Life from a mutual life
insurance company to an investor-owned, publicly-traded stock company. Any
demutualization plan for Manufacturers Life is subject to the approval of the
Manufacturers Life Board of Directors and policyholders as well as regulatory
approval
GENERAL INFORMATION ABOUT MANUFACTURERS LIFE OF AMERICA'S SEPARATE ACCOUNTS
Manufacturers Life of America is the legal owner of the assets in its separate
accounts. The income, gains and losses of the separate accounts, whether or not
realized, are, in accordance with applicable contracts, credited to or charged
against the accounts without regard to the other income, gains or losses of
Manufacturers Life of America. Manufacturers Life of America will at all times
maintain assets in the accounts with a total market value at least equal to the
reserves and other liabilities relating to Variable Account or Fixed Account
benefits under all Policies participating in the accounts. While the assets of
Separate Account Two may not be charged with liabilities which arise from any
other business Manufacturers Life of America conducts, the assets of Separate
Account A may be so charged. However, all obligations under the Policies are
general corporate obligations of Manufacturers Life of America.
The investments made by the separate accounts are subject to the requirements of
applicable state laws. These investment requirements may differ between those
for separate accounts supporting variable obligations and those for separate
accounts supporting fixed obligations.
MANUFACTURERS LIFE OF AMERICA'S SEPARATE ACCOUNT TWO: THE VARIABLE ACCOUNTS
Manufacturers Life of America established its Separate Account Two on May 25,
1983 as a separate account under Pennsylvania law. Since December 9, 1992 the
Separate Account has been operated under Michigan law. This account holds assets
that are segregated from all of Manufacturers Life of America's other assets.
Separate Account Two is currently used only to support the Variable Account
obligations under variable annuity contracts.
Separate Account Two is registered with the Securities and Exchange Commission
("S.E.C.") under the Investment Company Act of 1940 ("1940 Act") as a unit
investment trust. A unit investment trust is a type of investment company which
invests its assets in specified securities, such as the shares of one or more
investment companies, rather than in a portfolio of unspecified securities.
Registration under the 1940 Act does not involve any supervision by the S.E.C.
of the management or investment policies or practices of Separate Account Two.
For state law purposes Separate Account Two is treated as a part or division of
Manufacturers Life of America.
GENERAL INFORMATION ABOUT MANUFACTURERS INVESTMENT TRUST
Each sub-account of Separate Account Two will purchase shares only of a
particular portfolio of Manufacturers Investment Trust. Manufacturers Investment
Trust is registered under the 1940 Act as an open-end management
10
<PAGE> 19
investment company. Separate Account Two will purchase and redeem shares of
Manufacturers Investment Trust at net asset value. Shares will be redeemed to
the extent necessary for Manufacturers Life of America to provide benefits under
the Policies, to transfer assets from one sub-account to another or to the
General Account or Separate Account A as requested by Policyowners, and for
other purposes consistent with the Policies. Any dividend or capital gain
distribution received from a portfolio will be reinvested immediately at net
asset value in shares of that portfolio and retained as assets of the
corresponding sub-account. Manufacturers Investment Trust shares are issued to
fund benefits under both variable annuity contracts and variable life insurance
policies issued by Manufacturers Life of America, or other insurance companies
affiliated with the Company. Shares of Manufacturers Investment Trust will also
be issued to Manufacturers Life of America's general account for certain limited
investment purposes including initial portfolio seed money. For a description of
the procedures for handling potential conflicts of interest arising from the
funding of such benefits, see the accompanying Manufacturers Investment Trust
prospectus.
Manufacturers Investment Trust receives investment advisory services from MSS.
MSS is a registered investment adviser under the Investment Advisers Act of
1940. Manufacturers Investment Trust also employs subadvisers. The following
subadvisers provide investment subadvisory services to the indicated portfolios:
<TABLE>
<CAPTION>
PORTFOLIO SUBADVISER
- ----------------------------------------------- -----------------------------------------------
<S> <C>
Aggressive Growth Portfolios
Pacific Rim Emerging Markets Trust Manufacturers Adviser Corporation*
Emerging Growth Trust Warburg Pincus Asset Management, Inc.
International Stock Trust Rowe Price-Fleming International, Inc.
Equity Portfolios
Quantitative Equity Trust
(formerly Common Stock Fund) Manufacturers Adviser Corporation*
Real Estate Securities Trust Manufacturers Adviser Corporation*
Balanced Portfolio
Balanced Trust Founders Asset Management LLC
Bond Portfolio
Capital Growth Bond Trust Manufacturers Adviser Corporation*
Money Market Portfolio
Money Market Trust Manufacturers Adviser Corporation*
</TABLE>
- ---------------
* Manufacturers Adviser Corporation is an indirect wholly-owned subsidiary of
Manufacturers Life.
INVESTMENT OBJECTIVES AND CERTAIN POLICIES OF THE PORTFOLIOS
The investment objectives and certain policies of the Portfolios currently
available to policyowners through corresponding sub-accounts are set forth
below. There is, of course, no assurance that these objectives will be met.
EMERGING GROWTH TRUST. The investment objective of the Emerging Growth Trust is
maximum capital appreciation. Warburg Pincus Asset Management, Inc. manages the
Emerging Growth Trust and will pursue this objective by investing primarily in a
portfolio of equity securities of domestic companies. The Emerging Growth Trust
ordinarily will invest at least 65% of its total assets in common stocks or
warrants of emerging growth companies that represent attractive opportunities
for maximum capital appreciation.
BALANCED TRUST. The investment objective of the Balanced Trust is current
income and capital appreciation. Founders Asset Management, Inc. is the manager
of the Balanced Trust and seeks to attain this objective by investing in a
balanced portfolio of common stocks, U.S. and foreign government obligations and
a variety of corporate fixed-income securities.
CAPITAL GROWTH BOND TRUST. The investment objective of the Capital Growth Bond
Trust is to achieve growth of capital by investing in medium-grade or better
debt securities, with income as a secondary consideration. Manufacturers Adviser
Corporation manages the Capital Growth Bond Trust. The Capital Growth Bond Trust
differs from most "bond" funds in that its primary objective is capital
appreciation, not income.
11
<PAGE> 20
MONEY MARKET TRUST. The investment objective of the Money Market Trust is to
obtain maximum current income consistent with preservation of principal and
liquidity. Manufacturers Adviser Corporation manages the Money Market Trust and
seeks to achieve this objective by investing in high quality, U.S. dollar
denominated money market instruments.
QUANTITATIVE EQUITY TRUST (FORMERLY COMMON STOCK FUND). The investment
objective of the Quantitative Equity Trust is to achieve intermediate and
long-term growth through capital appreciation and current income by investing in
common stocks and other equity securities of well established companies with
promising prospects for providing an above-average rate of return. Manufacturers
Adviser Corporation manages the Quantitative Equity Trust.
REAL ESTATE SECURITIES TRUST. The investment objective of the Real Estate
Securities Trust is to achieve a combination of long-term capital appreciation
and satisfactory current income by investing in real estate related equity and
debt securities. Manufacturers Adviser Corporation manages the Real Estate
Securities Trust.
INTERNATIONAL STOCK TRUST. The investment objective of the International Stock
Trust is to achieve long-term growth of capital. Rowe Price-Fleming
International, Inc. manages the International Stock Trust and seeks to obtain
this objective by investing primarily in common stocks of established, non-U.S.
companies.
PACIFIC RIM EMERGING MARKETS TRUST. The investment objective of the Pacific Rim
Emerging Markets Trust is to achieve long-term growth of capital. Manufacturers
Adviser Corporation manages the Pacific Rim Emerging Markets Trust and seeks to
achieve this investment objective by investing in a diversified portfolio that
is comprised primarily of common stocks and equity-related securities of
corporations domiciled in countries of the Pacific Rim region.
A full description of the Manufacturers Investment Trust, its investment
objectives, policies and restrictions, the risks associated therewith, its
expenses, and other aspects of its operation is contained in the accompanying
Manufacturers Investment Trust prospectus, which should be read together with
this prospectus.
12
<PAGE> 21
DESCRIPTION OF THE POLICIES
PURCHASING A POLICY
The Policies are designed for use in connection with retirement plans entitled
to special tax treatment under Sections 401 or 408 of the Code and retirement
plans and trusts not entitled to any special tax treatment. The Policies are
appropriate for group or sponsored plans with individual accounts or for
purchase directly by individuals. (See Other Matters -- "Special Provisions for
Group or Sponsored Arrangements".) A Policy will generally be issued to persons
up to age 75. In certain circumstances Manufacturers Life of America may, in its
sole discretion, issue a Policy to persons above age 75.
Except where application information and the initial purchase payment are
supplied by electronic transmission, persons seeking to purchase Policies must
submit an application and a check for the initial purchase payment. The
application, whether written, or via electronic transmission, is subject to
underwriting standards adopted by Manufacturers Life of America and
Manufacturers Life of America reserves the right to reject any application. A
properly completed application that is accompanied by the initial purchase
payment and all information necessary for the processing of the application will
normally be accepted within two business days. An incomplete application which
is subsequently made complete will normally be accepted within two business days
of completion; however, if an application is not completed properly or necessary
information is not obtained within 5 working days, Manufacturers Life of America
will offer to return the purchase payment.
Special provisions for electronic transmission of application information and
purchase payments. In jurisdictions where it is not prohibited, Manufacturers
Life of America will accept transmittal of initial and subsequent purchase
payments by electronic transfer to the Service Office provided the transmission
is (i) initiated by a broker-dealer from whom Manufacturers Life of America has
agreed to accept such transfers and (ii) accompanied by the information
necessary to issue a Policy and/or allocate the premium payments.
Initial purchase payments made via electronic transfer and accompanied by the
information necessary to issue a Policy will normally be accepted within two
business days. If the accompanying information is incomplete but is subsequently
made complete, it will normally be accepted within two business days; however,
if the requested information cannot be obtained within five business days,
Manufacturers Life of America will inform the broker-dealer, on the applicant's
behalf, of the reasons for the delay and offer to return the purchase payment.
Based on the information provided by the electronic transmission, Manufacturers
Life of America will generate an application and Policy to be forwarded to the
applicant for signature.
"FREE LOOK" RIGHT
Within ten days after receiving a Policy, the Policyowner may return it for
cancellation by mailing it to the Service Office. Within seven days after
receipt, except where state insurance law requires return of any purchase
payments made, Manufacturers Life of America will refund the Policy Value plus
or minus any applicable Market Value Adjustment.
RESTRICTIONS APPLICABLE TO PURCHASE PAYMENTS
Purchase payments are made directly by the Policyowner. They may be made at any
time until the Annuity Commencement Date or until the Policy is fully
surrendered. If the Policyowner is an individual, purchase payments will not be
permitted after the Policyowner's death unless the beneficiary is the
Policyowner's spouse. If the Policyowner is not an individual, purchase payments
will not be permitted after the Annuitant's death, unless the Policyowner is the
trustee of a trust which is part of a qualified retirement plan described in
section 401(a) of the Code. See Description of the Policies -- "Provisions on
Death" (Death of the Policyowner and Death of the Annuitant). Purchase payments
must be made to the Manufacturers Life of America Service Office.
The minimum initial purchase payment is $5,000 ($2,000 for Qualified Plans).
This can be allocated to the Variable Accounts, the Guaranteed Interest Account
or the Fixed Accounts. Subsequent purchase payments must be at least $500. If an
additional purchase payment would cause the Policy Value to exceed $1,000,000,
or if the Policy Value should already exceed $1,000,000, the prior approval of
Manufacturers Life of America will be required for an additional purchase
payment. If, for any reason, the Policy Value should fall to zero, the Policy
and all rights of the Policyowner and any other person under the Policy, will
terminate and no further purchase payments may be made.
13
<PAGE> 22
Manufacturers Life of America reserves the right to alter the minimum payment
amounts on 90 days written notice to the Policyowner and it further reserves the
right to institute a pre-authorized payment plan which will provide for
automatic monthly deductions and which may permit smaller payments.
A Policyowner should specify how each purchase payment is to be allocated. The
percentage allocation to any account may be any whole number between 0 and 100,
provided the total percentage allocations equal 100. A Policyowner may change
the way in which Net Premiums are allocated at any time without charge. The
change will take effect on the date a written or telephonic request for change
satisfactory to Manufacturers Life of America is received at its Service Office.
If no allocation is specified, a purchase payment will be allocated using the
same percentages as specified in the last allocation request received from the
Policyowner. Such allocation will be made at the end of the Business Day in
which the purchase payment is received at the Manufacturers Life of America
Service Office. Manufacturers Life of America will send a confirmation of its
receipt of each purchase payment.
POLICY VALUE
The Policy Value at any time is equal to the sum of the Variable Policy Value,
the Fixed Account Value and the Guaranteed Interest Account Value. The Policy
Value is available to the Policyowner through a partial withdrawal or a full
surrender. See "Surrender or Withdrawal Rights" below. The portion of the Policy
Value based on the Variable Policy Value is not guaranteed and will vary each
Business Day with the investment performance of the underlying Portfolios.
Reserves for Policy Values allocated to the Guaranteed Interest Account will be
held in the General Account of Manufacturers Life of America. Reserves for
Policy Values allocated to the Fixed Accounts will either be held in Separate
Account A or in the General Account of Manufacturers Life of America, depending
upon the requirements of the jurisdiction in which a Policy is purchased.
THE FIXED ACCOUNTS
Manufacturers Life of America established its Separate Account A on December 1,
1992 as a separate account under Michigan law. It is not a registered investment
company. This account holds assets that are segregated from all of Manufacturers
Life of America's other assets. Separate Account A is currently used only to
support the Fixed Account obligations under variable annuity contracts. These
Fixed Account obligations are based on interest rates credited to Fixed Accounts
and do not depend on the investment performance of Separate Account A. Any gain
or loss in Separate Account A accrues solely to Manufacturers Life of America
and Manufacturers Life of America assumes any risk associated with the
possibility that the value of the assets in Separate Account A might fall below
the reserves and other liabilities that must be maintained. Should the value of
the assets in Separate Account A fall below such reserves and other liabilities,
Manufacturers Life of America will transfer assets from its General Account to
Separate Account A to make up the shortfall. Manufacturers Life of America
reserves the right to transfer to its General Account any assets of Separate
Account A in excess of such reserves and other liabilities and to maintain
assets in Separate Account A which support any number of annuities which
Manufacturers Life of America offers or may offer. The assets of Separate
Account A are not insulated from the claims of Manufacturers Life of America's
creditors and may be charged with liabilities which arise from other business
conducted by Manufacturers Life of America. Thus Manufacturers Life of America
may, at its discretion if permitted by applicable state law, transfer existing
Fixed Account assets to, or place future Fixed Account allocations in, its
General Account for purposes of administration.
The assets of Separate Account A will be invested in those assets chosen by
Manufacturers Life of America and permitted by applicable state laws for
separate account investments.
The Policyowner may allocate Net Premiums directly to the Fixed Accounts or
transfer Policy Values to the Fixed Accounts provided such allocations are
permitted by the Policyowner's jurisdiction. Each allocation to a Fixed Account
is accounted for separately and earns a fixed rate of interest for a set period
of time called a "Guarantee Period".
Currently, Guarantee Periods ranging from 1 to 10 years are offered under the
Policies.
To the extent permitted by law, Manufacturers Life of America reserves the right
at any time to offer Guarantee Periods with durations that differ from those
available at the date of this prospectus. Manufacturers Life of
14
<PAGE> 23
America also reserves the right at any time to stop accepting new allocations,
transfers or renewals for a particular Guarantee Period. These actions may be
taken upon 60 days written notice to the Policyowner.
If the Policyowner surrenders, withdraws or transfers any Policy Value
attributable to the Fixed Accounts prior to the end of the applicable Guarantee
Period, a Market Value Adjustment will apply. (See Description of the Policies
- -- "Policy Charges" -- Market Value Adjustment).
If Manufacturers Life of America does not receive written notice at least 7 days
prior to the end of the Guarantee Period of a Fixed Account indicating what
action to take with respect to funds in the Fixed Account upon maturity thereof,
the funds will be allocated to a new Fixed Account for the same Guarantee Period
as the matured Fixed Account. If the same Guarantee Period is no longer
available, we will use the next shortest available Guarantee Period; provided
that Manufacturers Life of America will not allocate funds to a Guarantee period
that extends beyond the Elected Annuity Date. If the required Guarantee Period
is not available, funds will be transferred to the Guaranteed Interest Account.
FIXED ACCOUNT VALUE. The value of a Policyowner's interest in a Fixed Account
reflects all interest credited to or accrued to date on the Fixed Account, all
purchase payments or transfers allocated to the Fixed Account, any withdrawals
or transfers from the Fixed Account, any applicable withdrawal or other charges
deducted from the account, and any applicable Market Value Adjustments
previously made.
THE GUARANTEED INTEREST ACCOUNT
As noted above, Policyowners may accumulate value on a variable basis, by
allocating purchase payments to one or more sub-accounts of Separate Account
Two, or on a fixed basis by allocating purchase payments either to one or more
of the Fixed Accounts, or, if permitted by the Policyowner's jurisdiction, to
the Guaranteed Interest Account. Amounts allocated to the Guaranteed Interest
Account will earn a minimum interest rate of 3% per annum. Manufacturers Life of
America may credit interest at a rate in excess of 3% per annum; however, it is
not obligated to do so. The rate of interest credited is subject to change
daily. No specific formula governs the determination of the rate to be credited
in excess of 3% per annum.
GUARANTEED INTEREST ACCOUNT VALUE. The value of a Policyowner's interest in the
Guaranteed Interest Account reflects all interest credited to or accrued to date
on the account, all purchase payments or transfers allocated to the Guaranteed
Interest Account, any withdrawals or transfers from the Guaranteed Interest
Account and any applicable withdrawal and other charges deducted from the
Guaranteed Interest Account.
THE VARIABLE ACCOUNTS
VARIABLE POLICY VALUE. Upon receipt of a purchase payment at its Service
Office, Manufacturers Life of America credits the Policy with a number of units
for each Variable Account based upon the portion of the purchase payment
allocated to the Variable Account. Units are also credited to reflect any
transfers to a Variable Account. Units are cancelled whenever amounts are
deducted, transferred or withdrawn from a Variable Account, any charge or
deduction is assessed against a Variable Account, on the Annuity Commencement
Date, or on payment of proceeds payable on death.
The number of units credited or cancelled for a specific transaction is based on
the dollar amount of the transaction divided by the value of the unit on the
Business Day on which the transaction occurs. The number of units credited with
respect to an initial payment submitted with a completed purchase application
will be based on the applicable unit values for either the Business Day on which
the payment is received at the Manufacturers Life of America's Service Office or
other office or entity so designated by Manufacturers Life of America or the
following Business Day, depending on when the application is accepted. Units
will be credited with respect to any subsequent purchase payments allocated to,
or transfers into, a Variable Account based on the applicable unit values of the
Business Day on which the payment or transfer request is so received. The number
of units cancelled in connection with partial withdrawals, transfers out of a
Variable Account or deduction of charges from a Variable Account will also be
based on the applicable unit values of the Business Day on which the requests
for a partial withdrawal or transfer are so received, or on which deductions are
made.
Units are 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.
When an order involving the crediting or cancelling of units is received after
the end of a Business Day or on a day which is not a Business Day, the order
will be processed on the basis of
15
<PAGE> 24
unit values determined on the next Business Day. Similarly, any determination of
Policy Value or Variable Account Value to be made on a day which is not a
Business Day will be made on the next Business Day.
The value of a unit of each Variable Account was initially fixed at $10.00. For
each subsequent Business Day the unit value of a particular Variable Account is
the value of the adjusted net assets of that account at the end of the Business
Day divided by the total number of units.
The value of a unit may increase, decrease or remain the same, depending on the
investment performance of a Variable Account from one Business Day to the next.
The unit value for any Variable Account for any Business Day is the result of
(a) minus (b) divided by (c), where:
(a) is the net assets of the Variable Account as of the end of such Business
Day;
(b) is a charge not exceeding .000027397 for each calendar day since the
preceding Business Day, multiplied by the net assets of the Variable
Account as of the end of such Business Day, corresponding to a charge of
0.80% per annum for mortality and expense risks, and 0.20% per annum for
the administration charge; and
(c) is the total number of units of the Variable Account.
Manufacturers Life of America reserves the right to adjust the above formula to
provide for any taxes determined by it to be attributable to the operations of
Separate Account Two.
ANNUITY VALUE GUARANTEE
The Annuity Value Guarantee guarantees that, in those jurisdictions where
permitted, under certain conditions the Policy Value available at the Annuity
Commencement Date will be the greater of the Policy Value or an amount
reflecting the purchase payments and withdrawals made by the Policyowner.
Such amount is calculated as follows: (1) when the Policy is issued, the amount
is set equal to the initial purchase payment; (2) each time a purchase payment
is made the amount is increased by the amount of the purchase payment; and (3)
each time a withdrawal is made, the amount is reduced by the same percentage as
the Gross Withdrawal Amount bears to the Policy Value.
This Guarantee will be effective only for Policies owned individually or jointly
with another individual, unless otherwise required by state law, and only if the
Annuity Commencement Date is a date within 30 days of the later of the tenth
Policy Anniversary or the first Policy Anniversary after the original
policyowner (or the older of two original joint Policyowners) is age 65. If the
Annuity Commencement Date does not fall within this time frame, the Policy may
still be eligible for this Guarantee. Thereafter eligibility will re-occur every
fifth anniversary, provided the Annuity Commencement Date is within 30 days
thereof.
The Policyowner will cease to be eligible for the Annuity Value Guarantee if, at
any time, (i) the Policyowner makes a withdrawal or transfers money out of a
Fixed Account prior to that account's Maturity Date or (ii) the Annuity
Commencement Date is prior to the Maturity Date of any Fixed Account to which
the Policyowner has allocated values.
TRANSFERS OF POLICY VALUE
Subject to the restrictions described below, transfers may be made among any of
the accounts at any time during the Policy Year free of charge. Manufacturers
Life of America does, however, reserve the right to limit, upon notice, the
maximum number of transfers a Policyowner may make to one per month or six at
any time within a Policy Year. In addition, Manufacturers Life of America also
reserves the right to modify or terminate the transfer privilege at any time in
accordance with applicable law.
The minimum dollar amount of all transfers pursuant to a single transfer
request, except for transfers pursuant to the Asset Allocation Balancer program
or transfers designed to change percentage allocations of assets, is $500. The
maximum amount that may be transferred from the Guaranteed Interest Account in
any one Policy Year is the greater of $500 or 15% of the Guaranteed Interest
Account Value at the previous Policy anniversary. Any transfer which involves a
transfer out of the Guaranteed Interest Account may not involve a transfer to
the Variable Accounts' Money Market Trust.
Transfer requests must be satisfactory to Manufacturers Life of America and in
writing, or by telephone if a currently valid telephone transfer authorization
form is on file. Although failure to follow reasonable procedures may result in
Manufacturers Life of America's liability for any losses due to unauthorized or
fraudulent telephone
16
<PAGE> 25
transfers, Manufacturers Life of America will not be liable for following
instructions communicated by telephone that it reasonably believes to be
genuine. Manufacturers Life of America will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. Such procedures
shall consist of confirming a valid telephone authorization form is on file,
tape recording all telephone transactions and providing written confirmation
thereof.
LIMITATIONS. To the extent that surrenders, partial withdrawals and transfers
out of a Variable Account exceed net premium allocations and transfers into that
Variable Account, portfolio securities of the underlying Fund may have to be
sold. Excessive sales of the Fund's portfolio securities in such a situation
could be detrimental to that Fund and to Policyowners with Policy Values
allocated to Variable Accounts investing in that Fund. To protect the interests
of all Policyowners, the Policy's transfer privilege is limited as described
below.
So long as effecting all requested transfers out of the Equity Index Trust
Sub-account in a particular Business Day would not reduce the number of shares
of the underlying Equity Index Trust outstanding at the close of the prior
Business Day by more than 5%, all such requests will be effected. However, net
transfers out of that sub-account greater than 5% would be permitted only if,
and to the extent that, in the judgment of Manufacturers Adviser Corporation,
they would not result in detriment to the underlying Equity Index Trust or to
the interests of Policyowners or others with assets allocated to that Portfolio.
If and when transfers must be limited to avoid such detriment, some requests
will not be effected. In determining which requests will be effected, transfers
pursuant to the Dollar Cost Averaging program will be effected first, followed
by Asset Allocation Balancer transfers, written requests next and telephone
requests last. Within each such group, requests will be processed in the order
received, to the extent possible. Policyowners whose transfer requests are not
effected will be so notified. Current S.E.C. rules preclude Manufacturers Life
of America from processing at a later date those requests that were not
effected. Accordingly, a new transfer request would have to be submitted in
order to effect a transfer that was not effected because of the limitations
described in this paragraph. Manufacturers Life of America may be permitted to
limit transfers in certain other circumstances. (See Description of the Policies
- -- "Other General Policy Provisions" -- Deferral of Payments).
DOLLAR COST AVERAGING
Manufacturers Life of America will offer Policyowners a Dollar Cost Averaging
program. Under this program amounts will be automatically transferred at
predetermined intervals from one Variable Account to any other Variable
Account(s), or a Fixed Account or the Guaranteed Interest Account.
Under the Dollar Cost Averaging program the Policyowner will designate a dollar
amount of available assets to be transferred at predetermined intervals from one
Variable Account into any other Variable Account(s) or a Fixed Account or the
Guaranteed Interest Account.
Each transfer under the Dollar Cost Averaging program must be at least $500 and
Manufacturers Life of America reserves the right to change this minimum at any
time upon notice to the Policyowner. Currently, there is no charge for this
program if Policy Value exceeds $15,000; otherwise a charge of $5 per transfer
or series of transfers occurring on the same transfer date will apply. If
insufficient funds exist to effect a Dollar Cost Averaging transfer, including
the charge, if applicable, the transfer will not be effected and the Policyowner
will be so notified. Manufacturers Life of America reserves the right to cease
to offer the Dollar Cost Averaging program on 90 days' written notice to the
Policyowner.
ASSET ALLOCATION BALANCER
Manufacturers Life of America will also offer Policyowners the ability to have
amounts automatically transferred among stipulated accounts to maintain an
allocated percentage in each stipulated account.
Under the Asset Allocation Balancer program the Policyowner will designate an
allocation of Policy Value among the Variable Accounts. Every six Policy Months,
Manufacturers Life of America will move amounts out of Variable Accounts and
into other Variable Accounts as necessary to maintain the Policyowner's chosen
allocation. Currently, there is no charge for this program. A change to the
policyowner's premium allocation instructions will automatically result in a
change in Asset Allocation Balancer instructions so that the two are identical
unless the Policyowner instructs Manufacturers Life of America otherwise or has
a Dollar Cost Averaging request in effect. Manufacturers Life of America
reserves the right to institute a charge for this program or to cease to offer
the Asset Allocation Balancer Program on 90 days' written notice to the
Policyowner.
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<PAGE> 26
SURRENDER OR WITHDRAWAL RIGHTS
At any time prior to the Elected Annuity Date, a Policyowner may fully surrender
the Policy for, or make a partial withdrawal in an amount not exceeding, its
Policy Value, reduced by any applicable withdrawal or record-keeping charge and
any applicable withholding taxes and reduced or augmented by any applicable
Market Value Adjustment. (See Description of the Policies -- "Policy Charges".)
For certain Qualified Policies, exercise of the right to surrender may require
the consent of the Policyowner's spouse under regulations promulgated by the
Treasury or Labor Department.
In any Policy Year after the first and before the Elected Annuity Date, up to
10% of the Policy Value as of the most recent Policy Anniversary may be
surrendered or withdrawn free of the withdrawal charge. In states where
permitted, if the Policyowner is a Charitable Remainder Trust, in any Policy
Year after the first and before the Elected Annuity Date, the Policyowner may
withdraw, free of the withdrawal charge, the greater of (i) 10% of the Policy
Value as of the most recent Policy Anniversary or (ii) Cumulative Net Earnings
under the Policy. During the first Policy Year, if the Policyowner is a
Charitable Remainder Trust, the Policyowner may withdraw, free of the withdrawal
charge, up to 10% of the cumulative Net Premiums as reduced by prior
withdrawals. The amount received on withdrawal will be adjusted for any
applicable Market Value Adjustment. Amounts surrendered or withdrawn during a
Policy Year which exceed the foregoing sums will be subject to a withdrawal
charge.
In the case of a full surrender of a Policy, Manufacturers Life of America will
pay the Policy Value reduced by any applicable withdrawal or record-keeping
charges and any applicable withholding taxes, and adjusted by any applicable
Market Value Adjustment as of the Business Day on which the request for
surrender is received at its Service Office, and the Policy will be cancelled.
In the case of a partial withdrawal from the Variable Accounts, Manufacturers
Life of America will pay the amount requested and cancel that number of units
credited to each Variable Account necessary to equal the amount of the partial
withdrawal plus any applicable withdrawal charges and withholding taxes. In the
case of a partial withdrawal from the Fixed Account or the Guaranteed Interest
Account, Manufacturers Life of America will pay the amount requested. The Fixed
Account Value and/or the Guaranteed Interest Account Value will be reduced by
the amount withdrawn and any applicable withdrawal charges and withholding
taxes, and adjusted by any applicable Market Value Adjustment. In any event,
should there not be sufficient funds available in the designated account or
accounts equal to the Gross Withdrawal Amount, Manufacturers Life of America
will notify the Policyowner and await further instruction before effecting any
withdrawal. (For a discussion of withholding taxes see Federal Tax Matters --
"Tax Treatment of the Policies".)
For a partial withdrawal, the Policyowner should specify the account(s) from
which the withdrawal should be made. If no specification is indicated, the
withdrawal will not be made and the Policyowner will be so notified.
There is no limit on the frequency of partial withdrawals; however, the
requested withdrawal must be at least $500. Any request for a partial withdrawal
or a full surrender of a Policy must be in writing and delivered to the
Manufacturers Life of America Service Office. If the amount to be withdrawn
exceeds $10,000, it must be accompanied by a guarantee of the Policyowner's
signature by a commercial bank, trust company, member of the National
Association of Securities Dealers, Inc., a notary public, or any other
individual or association designated by Manufacturers Life of America.
SPECIAL POLICY ACCESS
In those states where permitted, if the Policyowner should become terminally
ill, he or she will be permitted to make one full surrender or partial
withdrawal without imposition of withdrawal charges. If partial withdrawal is
chosen, the Survivor Benefit Amount and Annuity Value Guarantee, if applicable,
will be reduced accordingly. To be eligible, Manufacturers Life of America must
receive written evidence acceptable to Manufacturers Life of America, including
a written statement from a licensed medical doctor, that the Policyowner is
terminally ill and has a life expectancy of one year or less and the consent of
any irrevocable beneficiary and any assignee.
There is currently no charge associated with this feature. However,
Manufacturers Life of America reserves the right to impose an administrative
charge not to exceed $150 for a partial withdrawal or full surrender pursuant to
this provision.
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<PAGE> 27
PROVISIONS ON DEATH
In the discussions that follow, references to the age, death, life expectancy,
or marital status of a Policy owner do not apply to a Policyowner who owns a
Policy other than individually or jointly with another person, except the
Survivor Benefit amount which will apply upon death of the annuitant if the
Policyowner is a charitable remainder trust. In addition, references to the
death of the original Policyowner include the first to die of two joint
Policyowners.
SURVIVOR BENEFIT AMOUNT
Upon occurrence of the death of the original Policyowner, Manufacturers Life of
America will compare the Policy Value to the Survivor Benefit Amount and, if the
Policy Value is lower, Manufacturers Life of America will deposit sufficient
funds into the Money-Market Variable Account to make the Policy Value equal the
Survivor Benefit Amount. Any funds which Manufacturers Life of America deposits
into the Money-Market Variable Account will not be deemed a purchase payment for
purposes of calculating withdrawal charges.
The Survivor Benefit Amount is calculated as follows: (1) when the Policy is
issued, the Survivor Benefit Amount is set equal to the initial purchase
payment; (2) each time a purchase payment is made, the Survivor Benefit Amount
is increased by the amount of the purchase payment; (3) each time a withdrawal
is made, the Survivor Benefit Amount is reduced by the same percentage as the
Gross Withdrawal Amount bears to the Policy Value; (4) in jurisdictions where it
is allowed, on every sixth Policy Anniversary Manufacturers Life of America will
set the Survivor Benefit Amount to the greater of its current value or the
Policy Value on that Policy Anniversary, provided the original Policyowner is
still alive and is not older than age 85.
Subsequent to the death of the original Policyowner, the Variable Policy Value
will continue to reflect the investment performance of the selected Variable
Accounts.
JOINT OWNERSHIP
If the Policy is owned jointly, the proceeds of the Survivor Benefit Amount will
be payable on the first death of a Policyowner. However, if the surviving
Policyowner is the spouse of the deceased and elects to continue the Policy,
payment of the Survivor Benefit Amount will be deferred. The Survivor Benefit
Amount will continue to be calculated as described above if payment is deferred.
If the surviving Policyowner is not the spouse of the deceased Policyowner, the
proceeds of the Survivor Benefit Amount will be payable as set out in the
non-spousal ownership provisions of the section entitled Provisions on Death --
"Death of the Policyowner".
DEATH OF THE POLICYOWNER
DEATH PRIOR TO ANNUITY COMMENCEMENT DATE. If any Policyowner dies before the
Elected Annuity Date, all amounts will remain as allocated by that Policyowner
until Manufacturers Life of America receives further instructions from the new
Policyowner, or the surviving Policyowner if the Policy was owned jointly. The
new or surviving Policyowner can make withdrawals, transfer amounts, assign the
policy and name a payee, prior to payment of the Policy Value as described
below.
If the new or surviving Policyowner is the spouse, he or she can:
(a) continue the Policy and may make further purchase payments; or
(b) make a full surrender or partial withdrawal of the Policy Value within 60
days after the death without imposition of a Market Value Adjustment or
withdrawal charge except with respect to withdrawal of purchase payments
received after the death of the Policyowner; or
(c) elect to receive payment under a guaranteed annuity option. If the payment
is made as an annuity, the Policy Value used to provide the annuity will be
determined as of the date Manufacturers Life of America receives written
notification of the election at its Service Office.
However, if a partial withdrawal or a full surrender of the Policy Value occurs
more than 60 days after the death of the Policyowner, the payment will be based
on the Policy Value determined as of the date of payment, adjusted for any
applicable Market Value Adjustment and withdrawal charge. (See Description of
the Policies -- "Market Value Adjustment" and "Policy Charges".)
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<PAGE> 28
The Policy will continue under option (a) in the absence of a written
notification from the surviving spouse to do otherwise.
If the new or surviving Policyowner is not the spouse, he or she can:
(a) continue the Policy. If this option is selected, no further purchase
payments can be made, and the Policy must be surrendered within 5 years of
the death. Applicable Market Value Adjustments and withdrawal charges will
be imposed. (See Description of the Policies -- "Market Value Adjustment"
and "Policy Charges".); or
(b) make a full surrender or partial withdrawal of the Policy Value within 60
days after the death without imposition of a Market Value Adjustment or
withdrawal charge; or
(c) elect to receive payment under a guaranteed annuity option. If the payment
is made as an annuity, (i) the Policy Value used to provide the annuity
will be determined as of the date Manufacturers Life of America receives
written notification of the election at its Service Office, (ii) the only
Annuity Options available are options 1, 2(b), or 2(c) of the Annuity
Options described in Appendix A, (iii) the period selected for payment must
not extend beyond the new or surviving Policyowner's life expectancy, and
(iv) payments under the Annuity Option selected must begin no later than
December 31 of the year following death of the Policyowner.
The Policy will continue under option (a) in the absence of written notification
to do otherwise.
DEATH AFTER ANNUITY COMMENCEMENT DATE. If the Policyowner dies after the
Annuity Commencement Date, payments will continue under the annuity option
selected if the terms of the annuity so provide.
DEATH OF THE ANNUITANT
DEATH PRIOR TO ANNUITY COMMENCEMENT DATE. If the Policyowner is an individual
who is not the Annuitant, and the Annuitant dies before the Annuity Commencement
Date, the Policy will continue and the Policyowner may continue to make purchase
payments. If the Policyowner has appointed a contingent Annuitant, he or she
will become the new Annuitant. If no such appointment has been made, the Policy
owner must appoint a new Annuitant within 60 days of the death of the original
Annuitant; otherwise the Policyowner will be deemed to be the new Annuitant.
If the Policyowner is not an individual, the Policy is not a Qualified Policy
owned by the trustee of a plan described in Section 401 of the Code, and the
Annuitant dies before the Annuity Commencement Date, the Policyowner can:
(a) continue the Policy. If this option is selected, no further purchase
payments can be made, and the Policy must be surrendered for a lump sum
within 5 years of the Annuitant's death. Market Value Adjustments and all
applicable charges will continue to be imposed. (See Description of the
Policies -- "Market Value Adjustment" and "Policy Charges".); or
(b) make a full surrender or partial withdrawal of the Policy Value within 60
days after the Annuitant's death without imposition of a Market Value
Adjustment or withdrawal charge.
The Policy will continue under option (a) in the absence of written notification
to do otherwise.
If the Policyowner is not an individual, the Policy is a Qualified Policy owned
by a trustee of a plan described in Section 401 of the Code, and the Annuitant
dies before the Annuity Commencement Date, the Policyowner can:
(a) continue the Policy. If this option is selected, a new Annuitant must be
appointed and no further purchase payments can be made. Market Value
Adjustments and all applicable charges will continue to be imposed. (See
Description of the Policies -- "Market Value Adjustment" and "Policy
Charges".); or
(b) make a full surrender or partial withdrawal of the Policy Value within 60
days after the Annuitant's death without imposition of a Market Value
Adjustment or withdrawal charge.
The Policy will continue under option (a) in the absence of written notification
to do otherwise.
DEATH AFTER ANNUITY COMMENCEMENT DATE. If the Policyowner is an individual who
is not the Annuitant and the Annuitant dies after the Elected Annuity Date,
payments will continue under the annuity option selected if the terms of the
annuity so provide.
20
<PAGE> 29
COMMENCEMENT OF ANNUITY PAYMENTS
The Policyowner elects an annuity date in the application (the "Elected Annuity
Date"). The Policyowner may change the Elected Annuity Date to any date prior to
the end of the Policy Year in which the Annuitant reaches age 85 except in the
case of Qualified Policies and Policies where the owner is a Charitable
Remainder Trust. If the Policyowner is a Charitable Remainder Trust there is no
required annuitization age. Written request for change of the Elected Annuity
Date must be received by the Manufacturers Life of America Service Office at
least thirty days prior to the new Elected Annuity Date.
Annuity payments will be made by application of the Policy Value to provide an
annuity. Annuity payments will be made on a fixed basis only; the Policy Value
will no longer reflect the investment performance of the Variable Accounts, the
Fixed Accounts or the Guaranteed Interest Account. The annuity options available
are described in Appendix A under "Annuity Options". The date on which the first
annuity payment is made is the Annuity Commencement Date.
There are legal restrictions on the Elected Annuity Date selected for Qualified
Policies. In general, the Annuity Commencement Date for Qualified Policies owned
by an individual cannot be later than April 1 following the calendar year in
which the Policyowner attains age 70 1/2. There are some exceptions to this
requirement. If the Policy is owned by the trustee of a trust established
pursuant to an employer retirement plan, the Elected Annuity Date is determined
by the terms of the trust and plan.
Annuity payments may be made monthly, quarterly, semi-annually or annually. If
application of the Policy Value would result in annuity payments of less than
$20 monthly, $60 quarterly, $100 semi-annually or $200 annually, Manufacturers
Life of America will pay the Policy Value to the Policyowner in a single sum in
lieu of annuity payments.
SUBSTITUTION OF PORTFOLIO SHARES
Although Manufacturers Life of America believes it to be highly unlikely, it is
possible that in the judgment of its management, one or more of the Portfolios
may become unsuitable for investment by Separate Account Two because of a change
in investment policy or a change in the tax laws, because the shares are no
longer available for investment, or for some other reason. In that event,
Manufacturers Life of America may seek to substitute the shares of another
Portfolio or of an entirely different mutual fund. Before this can be done, the
approval of the S.E.C. and one or more state insurance departments may be
required.
Manufacturers Life of America also reserves the right to combine other
registered separate accounts with Separate Account Two investing in additional
Portfolios of the Manufacturers Investment Trust or another investment company,
to establish additional sub-accounts within Separate Account Two, to operate
Separate Account Two as a management investment company or other form permitted
by law, to transfer assets from Separate Account Two to another registered
separate account and from another registered separate account to Separate
Account Two, and to deregister Separate Account Two under the 1940 Act. Any such
change would be made only if permissible under applicable federal and state law.
POLICY CHARGES
The various charges and deductions applicable to the Policy and the separate
accounts are set forth below.
WITHDRAWAL CHARGE
A withdrawal charge (contingent deferred sales charge) may be imposed on partial
withdrawals from, and the full surrender of, a Policy. In any Policy Year after
the first and before the Elected Annuity Date, up to 10% of the Policy Value as
of the most recent Policy Anniversary may be surrendered or withdrawn free of
the withdrawal charge. In states where permitted, if the Policyowner is a
Charitable Remainder Trust, in any Policy Year after the first and before the
Elected Annuity Date, the Policyowner may withdraw, free of the withdrawal
charge, the greater of (i) 10% of the Policy Value as of the most recent Policy
Anniversary, or (ii) the Cumulative Net Earnings under the Policy. During the
first Policy Year, if the Policyowner is a Charitable Remainder Trust, the
Policyowner may withdraw, free of the withdrawal charge, up to 10% of the
cumulative Net Premiums as reduced by prior withdrawals. The amount received on
withdrawal will be adjusted for any applicable Market Value Adjustment. The
withdrawal charge is deducted as a percentage of amounts withdrawn in a Policy
Year in excess of
21
<PAGE> 30
the foregoing sums minus any applicable record-keeping charge (imposed on Policy
Anniversaries and on full surrenders made on other than a Policy Anniversary)
and plus or minus any applicable Market Value Adjustment.
The withdrawal charge is designed to partially compensate Manufacturers Life of
America for the cost of selling and distributing the Policies. The cost includes
agents' commissions, advertising, agent training and the printing of
prospectuses and sales literature.
The withdrawal charge is determined by applying a percentage to the Gross
Withdrawal Amount subject to the withdrawal charge. The applicable percentage
depends upon when the purchase payments to which the withdrawal or surrender is
deemed attributable were made, as indicated in the following schedule:
<TABLE>
<CAPTION>
NUMBER OF COMPLETE POLICY YEARS ELAPSED THE WITHDRAWAL
SINCE PURCHASE PAYMENT WAS MADE: CHARGE IS
--------------------------------------- --------------
<S> <C>
0-2.99 8%
3 6%
4 4%
5 2%
6 or more None
</TABLE>
Where the Gross Withdrawal Amount is deemed attributable to purchase payments
made in different Policy Years, different percentages will be applied to the
portions of the Gross Withdrawal Amount attributable to such payments.
For purposes of determining the withdrawal charge applicable to a full surrender
or partial withdrawal, any Gross Withdrawal Amount, other than an amount not
subject to a withdrawal charge by reason of the free withdrawal provisions
described above, will be deemed to be a liquidation of a purchase payment. The
oldest previously unliquidated purchase payment will be deemed to have been
liquidated first, then the next oldest and so forth. In addition, all purchase
payments made during a Policy Year will be deemed to have been made on the first
day of that year. Once all purchase payments have been liquidated, additional
amounts surrendered or withdrawn will not be subject to a withdrawal charge.
Thus, in no event may aggregate withdrawal charges exceed 8% of the total
purchase payments made.
No withdrawal charge will be applied: (1) if the Policy Value is applied to an
annuity, (2) when a full surrender or partial withdrawal is made within 60 days
of the death of the original Policyowner (except that a withdrawal charge will
be applied to a Gross Withdrawal Amount consisting of purchase payments made
after the date of death of the original Policyowner), (3) when the Policyowner
is not an individual and a full surrender or partial withdrawal is made within
60 days of the death of the Annuitant, or (4) upon a full surrender or the first
partial withdrawal made after the Policyowner becomes terminally ill. (See
Description of the Policies -- "Provisions on Death" and "Special Policy
Access".)
On a full surrender of the Policy, the Gross Withdrawal Amount is the Policy
Value. Upon full surrender, the Policyowner will receive the Gross Withdrawal
Amount adjusted by any applicable Market Value Adjustment, less applicable
withdrawal charges and withholding taxes, and less the record-keeping charge.
On a partial withdrawal, the Policyowner will receive the amount he or she
requests. Manufacturers Life of America will calculate the Gross Withdrawal
Amount such that after all applicable withdrawal charges, withholding taxes and
Market Value Adjustments have been applied, the Policyowner will receive the
amount requested. See Appendix B for examples of the application of withdrawal
charges.
Withdrawal charges on a partial withdrawal will be deducted from the accounts
proportionately to the Gross Withdrawal Amount, adjusted by any applicable
Market Value Adjustments attributable to the respective accounts. Should there
not be sufficient funds available in the designated account or accounts equal to
the Gross Withdrawal Amount, Manufacturers Life of America will notify the
Policyowner and await further instruction before effecting any withdrawal.
Manufacturers Life of America does not expect to recover its total sales
expenses through the withdrawal charge. To the extent that the withdrawal charge
is insufficient to recover sales expenses, Manufacturers Life of America will
pay sales expenses from its other assets or surplus. These assets may include
proceeds from the mortality and expense risks charges described below.
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<PAGE> 31
RECORD-KEEPING CHARGE
A record-keeping charge equal to 2% of the Policy Value up to a maximum of $30
will be deducted from Policy Value on the last day of each Policy Year during
the Accumulation Period. This charge will also be deducted upon full surrender
of a Policy on a date other than the last day of a Policy Year. The charge will
be taken before any withdrawal charge is applied and before any applicable
Market Value Adjustment. It will be deducted from the Variable Policy Value, the
Fixed Account Value and the Guaranteed Interest Account Value in the same
proportion that the value in each account bears to the Policy Value.
The record-keeping charge is paid to Manufacturers Life of America to compensate
it for certain costs associated with the Policies and the operations of the
separate accounts, including the establishing and maintaining of account and tax
records for each Policyowner; communicating with Policyowners by mailing
confirmations of transactions, Policy Anniversary statements, annual reports of
Manufacturers Investment Trust and annually updated prospectuses for
Manufacturers Investment Trust and the Policy and by responding to Policyowner
requests to change information contained in his or her records such as names,
addresses, allocation percentages, beneficiary or Annuitant designation,
participation in the Dollar Cost Averaging or Asset Allocation Balancer
programs, certain Fixed Account transactions such as calculations of Market
Value Adjustments and transfers solely between Fixed Accounts, and responding to
written or oral inquiries by Policyowners regarding the operations of the
Policy, the separate accounts or Manufacturers Investment Trust. Although these
expenses may rise in the future, Manufacturers Life of America guarantees that
it will not increase the amount of the record-keeping charge applicable to
outstanding Policies.
DOLLAR COST AVERAGING CHARGE
Currently, there is no charge for Dollar Cost Averaging transfers if Policy
Value exceeds $15,000, otherwise there is a charge of $5.00 per transfer or
series of transfers taking place on the same transfer date. This charge will be
deducted from the account from which funds are transferred. If insufficient
funds exist to effect a Dollar Cost Averaging transfer, including the charge, if
applicable, the transfer will not be effected.
SPECIAL POLICY ACCESS CHARGE
There is currently no charge associated with this feature. However,
Manufacturers Life of America reserves the right to impose an administrative
charge not to exceed $150 for a partial withdrawal or full surrender pursuant to
the provision.
PREMIUM TAX DEDUCTION
Manufacturers Life of America will deduct any premium or similar state or local
tax attributable to a Policy. Currently, such taxes, if any, range up to 3.5%
depending on applicable law. Although the deduction can be made from purchase
payments or from Policy Value, it is anticipated that premium taxes will be
deducted from the Policy Value at the time it is applied to provide an annuity
unless required otherwise by applicable law. When deducted at the Annuity
Commencement Date, the premium tax deduction will be taken from the Variable
Policy Value, the Fixed Account Value and the Guaranteed Interest Account Value
in the same proportion that the value in each account bears to the Policy Value.
Other than the premium taxes above, Manufacturers Life of America makes no
charge for federal, state or local taxes that may be attributable to the
separate accounts or to the operations of Manufacturers Life of America with
respect to the Policies. However, if Manufacturers Life of America incurs any
such such taxes, it may make a charge therefor, in addition to the foregoing.
MORTALITY AND EXPENSE RISKS CHARGES
A charge at an annual rate of .45% is made for mortality and expense risks that
Manufacturers Life of America assumes. This charge is deducted monthly at .0375%
of assets at the beginning of each Policy Month from the Variable Account Value
and the Fixed Account Value.
A charge at an annual rate of .80% is also made for mortality and expense risks
that Manufacturers Life of America assumes. This charge is deducted daily from
the assets of Separate Account Two.
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<PAGE> 32
The mortality risks assumed are (i) the risk that Annuitants may live for longer
periods of time than the periods indicated in the mortality tables on which
Manufacturers Life of America calculated the annuity tables in the Policies,
(ii) the risk that mortality will cause a Policy to terminate before the assumed
Annuity Commencement Date and (iii) the risk that mortality will cause
Manufacturers Life of America to incur higher costs than anticipated for the
Survivor Benefit Amount. The expense risks assumed are that the expenses of
administration of and recordkeeping for the Policies will be greater than
Manufacturers Life of America estimated. Manufacturers Life of America will
realize a gain from these charges to the extent they are not needed to pay
expenses under the Policies.
Although it is difficult to specify precisely the breakdown between expense and
mortality risk elements of the mortality and expense risks charge, Manufacturers
Life of America estimates that approximately .85% is for mortality risks and
.40% for expense risks. A little more than half of the mortality risk element is
estimated to be attributable to risks taken in connection with the Survivor
Benefit Amount (a death benefit guarantee). As both the daily and monthly
charges are imposed in connection with the same risks, each charge could be
estimated to be divided into mortality risk and expense risk components at the
same ratio as for the overall estimate.
ADMINISTRATION CHARGE
A charge at an annual rate of 0.20% of the Variable Account Value is made for
the administration of the Policy. This charge is deducted daily by assessing a
charge against the assets of Separate Account Two.
The administration charge is paid to Manufacturers Life of America to compensate
it for costs associated with administration of the Policies and the separate
accounts including those related to allocation of initial and subsequent
purchase payments, processing purchase applications, withdrawals, surrenders,
unit value calculations, transfers, calculation of proceeds payable on death,
payment of proceeds payable on death, cash management prior to Policy issue, and
establishing and maintaining computer system support for those or other
administrative functions. Manufacturers Life of America reserves the right to
increase the amount of the administration charge applicable to outstanding
Policies in the future if costs associated with the Policies and the operations
of the separate accounts should rise above current levels.
MARKET VALUE ADJUSTMENT
A Market Value Adjustment ("MVA") will apply when money is removed from a Fixed
Account prior to the Maturity Date for any of the following reasons: full
surrender, partial withdrawal, transfer to another account (including another
Fixed Account), or to purchase an annuity. However, the MVA will be waived if
the amount is removed within the one month period prior to the Maturity Date.
The MVA will be applied after any transfer or contract charge is deducted, but
before the application of any withdrawal charges.
The MVA reflects the difference between the Guaranteed Rate for the applicable
Fixed Account, and the current Guaranteed Rate for the time period equal to the
remaining Guarantee Period ("Current Rate"). Generally, if the Guaranteed Rate
is higher than the Current Rate, the MVA will be positive. If the Guaranteed
Rate is lower than the Current Rate, the MVA will be negative.
On a full surrender, a positive MVA will increase the amount received by the
Policyowner, while a negative MVA will decrease the amount received by the
Policyowner.
On a transfer, the amount of the requested transfer from a Fixed Account will
not reflect any adjustment by the MVA. Any such adjustment will be reflected in
the amount transferred to the new account(s). A positive MVA will increase the
amount transferred into the new account(s), while a negative MVA will decrease
the amount so transferred.
On the Annuity Commencement Date, a positive MVA will increase the amount
applied to provide an annuity, while a negative MVA will decrease the amount
applied to provide an annuity.
On a partial withdrawal, a positive MVA will decrease the Gross Withdrawal
Amount required to provide the requested amount. A negative MVA will increase
the Gross Withdrawal Amount so required.
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<PAGE> 33
The actual MVA is a proportion of the Gross Withdrawal Amount, determined by the
following formula:
(1+G) exp N - 1
(1+C)
where:
G is the Guaranteed Rate for the money being subjected to the MVA.
C is the Guaranteed Rate offered by Manufacturers Life of America for deposits
for a time period equal to the number of years remaining in the Guarantee
Period, rounded up to the next full year (the "Current Rate"). If at the time of
the MVA calculation, Manufacturers Life of America does not offer a Guarantee
Period with the required number of years, then the rate C will be found by
linear interpolation of the current rates for available Guarantee Periods.
N is the number of full months remaining in the Guarantee Period divided by 12.
See Appendix B for examples of MVA calculations.
OTHER GENERAL POLICY PROVISIONS
DEFERRAL OF PAYMENTS
Manufacturers Life of America reserves the right to postpone the transfer or
payment of any value or benefit available under a Policy based upon the assets
allocated to Separate Account Two for any period during which:
(1) the New York Stock Exchange ("Exchange") is closed for trading (other than
customary weekend and holiday closings) or trading on the Exchange is
otherwise restricted; or
(2) an emergency exists as defined by the S.E.C. or the S.E.C. requires that
trading be restricted; or
(3) the S.E.C., by order, so permits a delay for the protection of security
holders.
Manufacturers Life of America also reserves the right to delay transfer or
payment of assets from the Fixed Accounts or the Guaranteed Interest Account for
up to six months and will pay interest at a rate determined by it if there is a
delay in payment for more than 30 days. In addition, transfers may be denied
under the circumstances previously set forth. (See Description of the Policies
- -- "Provisions on Transfers".)
ANNUAL STATEMENTS
Within 30 days after each Policy Anniversary, Manufacturers Life of America will
send the Policyowner a statement showing:
(1) the summary of each active account up to the most recent Policy Anniversary
including the Policy Value up to the Policy Anniversary date; and
(2) a description of the transactions affecting each active account during the
Policy Year including total units cancelled, amounts deducted from each
account for fees, and total units and amounts credited to each account as
allocations or interest.
RIGHTS OF OWNERSHIP
The Policyowner is the person entitled to exercise all rights under a Policy. As
such, any Policy rights or privileges may be exercised without the consent of
the Annuitant, beneficiary or any other individual, except as provided by the
Policyowner.
Except as discussed below, ownership of the Policy may be changed or the Policy
collaterally assigned at any time prior to the Annuity Commencement Date,
subject to the rights of any irrevocable beneficiary or other person. Any change
of ownership or assignment must be made in writing and will not take effect
until received at the Manufacturers Life of America Service Office.
Manufacturers Life of America assumes no responsibility for the validity of any
assignment.
In the case of a Qualified Policy, there may be restrictions on the privileges
of ownership. Some plans do not permit the exercise of certain of the
Policyowner's rights without the written consent of the Policyowner's spouse.
Among
25
<PAGE> 34
the rights limited are the right to choose an optional form of payment; to make
withdrawals; or to surrender the Policy.
A Qualified Policy which is not owned by a trustee of a trust which qualifies
under section 401(a) of the Code, 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
to Manufacturers Life of America except as may be provided by applicable state
or federal law. Ownership of a Qualified Policy which is owned by a trustee of a
Qualified Plan may not be transferred to a participant prior to the Annuity
Commencement Date. The transfer of a Qualified Policy to a participant prior to
the Annuity Commencement Date would jeopardize the plan's qualified status as
the Policy does not contain the restrictions on a participant's rights on
withdrawal or on and after the Annuity Commencement Date required for plans
under the Employee Retirement Income Security Act.
Change of Annuitant. The Policyowner may change the Annuitant prior to the
Annuity Commencement Date. Eligible Annuitants are: (i) the Policyowner, (ii)
Policyowner's spouse, or (iii) the Policyowner's parent(s), brother(s),
sister(s), or child(ren).
If the Policyowner is not an individual, the Annuitant(s) may not be changed
except with respect to certain Qualified Plans. In any event, the Annuitant(s)
may not be changed after the Annuity Commencement Date.
Change of Elected Annuity Date. The Elected Annuity Date may be changed from
that stated in the application to an earlier or later date. The new date cannot
be later than the end of the Policy Year in which the Annuitant reaches age 85.
A written request to change the Elected Annuity Date must be received by the
Manufacturers Life of America Service Office at least 30 days prior to the new
Elected Annuity Date. (See Description of the Policies --"Annuity Value
Guarantee").
Selection of Payee. The Policyowner must select a Payee to receive any payments
due under the Policy. If the Payee is the Policyowner, any payments remaining on
the Policyowner's death will be paid to the beneficiary. If a Payee other than
the Policyowner has been selected, any payments remaining on the Policyowner's
death will continue to be made to the Payee until Manufacturers Life of America
receives written notice from the beneficiary to change the Payee.
The Payee for annuity payments should be chosen from the following:
(a) The Annuitant;
(b) The Annuitant's spouse, parent(s), brother(s), sister(s), child(ren); or
(c) The Policyowner, if the Policyowner is an individual.
Any other choice of Payee will require the consent of Manufacturers Life of
America:
Change of Payee. The Policyowner may change the Payee at any time upon 30 days'
written notice to Manufacturers Life of America. Such notice must specify the
date on which payments to the new Payee should begin. A change in the Payee will
not require the Payee's consent.
BENEFICIARY
Ownership of the Policy will pass to the designated beneficiary on the death of
the Policyowner. The beneficiary is the person designated in the application or
as subsequently designated. The beneficiary may be changed at any time by
written notice to Manufacturers Life of America. Any change will be effective on
the date written notice is received at the Manufacturers Life of America Service
Office. If no beneficiary survives the Policyowner, ownership will pass to the
Policyowner's estate. In the case of Qualified Policies, regulations promulgated
by the Departments of Labor and Treasury prescribe certain limitations on the
designation of a beneficiary.
MODIFICATION
A Policy may not be modified by Manufacturers Life of America without the
consent of the Policyowner, except where required to conform to any applicable
law or regulation or any ruling issued by a government agency.
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<PAGE> 35
FEDERAL TAX MATTERS
TAXATION OF MANUFACTURERS LIFE OF AMERICA
Manufacturers Life of America is taxed as a life insurance company under
Subchapter L of the Code. Since the operations of Separate Account Two are part
of, and are taxed with, the operations of Manufacturers Life of America,
Separate Account Two is not separately taxed as a "regulated investment company"
under Subchapter M of the Code. Under existing federal income tax laws,
investment income and capital gains of Separate Account Two are not taxed to the
extent they are applied to increase reserves under the Policies. Since, under
the Policies, investment income and realized capital gains of Separate Account
Two are automatically applied to increase reserves, Manufacturers Life of
America does not anticipate that it will incur any federal income tax liability
attributable to Separate Account Two, other than a federal income tax based on
premiums received which is currently absorbed by Manufacturers Life of America,
and therefore Manufacturers Life of America does not intend to make provision
for any such taxes. However, if changes in the federal tax laws or
interpretations thereof result in Manufacturers Life of America being taxed on
such income or gains, or taxes currently absorbed are increased, then
Manufacturers Life of America may impose a charge against Separate Account Two
in order to make provision for such taxes.
TAX TREATMENT OF THE POLICIES
The Policies are designed for use in connection with retirement savings plans
that may or may not qualify for special income tax treatment under the
provisions of the Code. The following discussion of federal income tax aspects
of amounts received under a variable annuity contract is not exhaustive, does
not purport to cover all situations, and is not intended as tax advice. A
qualified tax adviser should always be consulted with regard to the application
of law to individual circumstances.
The United States Congress has, in the past, considered legislation that, if
enacted, would have taxed the inside build-up in certain annuities. While this
proposal was not enacted, Congress remains interested in the taxation of the
inside build-up of annuity contracts. Policyholders should consult their tax
advisor regarding the status of new, similar provisions before purchasing the
Policy.
Section 72 of the Code governs taxation of annuities in general. Under existing
provisions of the Code, except as described below, any increase in the value of
a Policy is not taxable to the Policyowner or Annuitant until received, either
in the form of annuity payments, as contemplated by the Policy, or in some other
form of distribution. However, as a general rule, deferred Policies held by a
corporation, trust or other similar entity, as opposed to a natural person, are
not treated as annuity contracts for federal tax purposes. The investment income
on such Policies is taxed as ordinary income that is received or accrued by the
Policyowner during the taxable year.
In certain circumstances policies will be treated as held by a natural person if
the nominal owner is a non-natural person and the beneficial owner is a natural
person, but this special exception will not apply in the case of any employer
who is the nominal owner of a Policy providing non-qualified deferred
compensation for its employees. Exceptions to the general rule (of immediate
taxation) for Policies held by a corporation, trust or similar entity may apply
with respect to (1) annuities held by an estate of a decedent, (2) Policies
issued in connection with qualified retirement plans, or IRAs, (3) certain
annuities purchased by employers upon the termination of a qualified retirement
plan, (4) certain annuities used in connection with structured settlement
agreements, and (5) annuities purchased with a single premium when the annuity
starting date is no later than a year from purchase of the annuity.
When annuity payments commence, each payment is taxable under Section 72 of the
Code as ordinary income in the year of receipt if the Policyowner has not
previously been taxed on any portion of the purchase payments. If any portion of
the purchase payments has been included in the taxable income of the
Policyowner, this aggregate amount will be considered the "investment in the
contract." For fixed annuity payments, there is no tax on the portion of each
payment which represents the same ratio that the "investment in the contract"
bears to the total expected value of the annuity payments for the term of the
annuity; the remainder of each payment is taxable. However, once the total
amount of the taxpayer's "investment in the contract" is excluded using this
ratio, annuity payments will be fully taxable. If annuity payments cease before
the total amount of the taxpayer's "investment in the contract" is recovered,
the unrecovered amount will be allowed as a deduction to the Policyowner in his
or her last taxable year.
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<PAGE> 36
In the case of a withdrawal, amounts received are taxable as ordinary income to
the extent that the Policy Value (determined without regard to any withdrawal
charges) before the withdrawal exceeds the "investment in the contract." Amounts
loaned under an annuity or amounts received pursuant to an assignment or pledge
of an annuity are treated as withdrawals. There are special rules for loans to
participants from annuities held in connection with qualified retirement plans
or IRA's. With respect to contracts issued after April 22, 1987, if an
individual transfers an annuity without adequate consideration to a person other
than his or her spouse (or to his or her former spouse incident to divorce), he
or she will be taxed on the difference between the value of the annuity minus
any withdrawal charges and the "investment in the contract" at the time of
transfer. In such case, the transferee's "investment in the contract" will be
increased to reflect the increase in the transferor's income.
In addition, there is a 10% penalty tax on the taxable amount of any payment
unless the payment is: (a) received on or after the date that the Policyowner
reaches age 59 1/2; (b) attributable to the Policyowner's becoming disabled as
defined in the Code; (c) made to a beneficiary on the death of the Policyowner;
(d) made to a beneficiary on the death of the primary annuitant if the
Policyowner is not a natural person; (e) made as a series of substantially equal
periodic payments for the life of the taxpayer (or the joint lives of the
taxpayer and beneficiary), subject to certain recapture rules; (f) made under an
annuity that is purchased with a single premium whose annuity starting date is
no later than a year from purchase of the annuity; (g) attributable to
"investment in the contract" before August 14, 1982; or (h) made with respect to
certain annuities issued in connection with structured settlement agreements.
Special rules may apply to annuities issued in connection with qualified
retirement plans.
For both withdrawals and annuity payments under some types of plans qualifying
for special federal income tax treatment ("qualified plans"), there may be no
"investment in the contract" and the total amount received may be taxable.
Where the Policy is owned by an individual, Manufacturers Life of America will
withhold and remit to the U.S. Government a part of the taxable portion of each
distribution made under a Policy unless the distributee notifies Manufacturers
Life of America at or before the time of the distribution that he or she elects
not to have any amounts withheld. 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. The withholding rate applicable
to the taxable portion of nonperiodic payments (including withdrawals prior to
the annuity commencement date) is 10%. Where the Policy is not owned by an
individual or it is owned in connection with a qualified plan, or when the owner
is a non-resident alien, special withholding rules may apply.
In certain circumstances, owners of variable annuity policies may be considered
the owners, for federal income tax purposes, of the assets of the separate
account used to support their policies. In those circumstances, income and gains
from the separate account assets would be includible in the variable
policyowner's gross income. The IRS has stated in published rulings that a
variable policyowner will be considered the owner of separate account assets if
the policyowner possesses incidents of ownership in those assets, such as the
ability to exercise investment control over the assets. The Treasury Department
has also announced, in connection with the issuance of regulations concerning
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor (i.e., the policyowner), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyowners may direct their
investments to particular sub-accounts without being treated as owners of the
underlying assets."
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that policyowners were not owners of separate account assets. For example, the
Policy has many more Portfolios to which Policyowners may allocate premium
payments and Policy Values than were available in the policies described in the
rulings. These differences could result in a policyowner being treated as the
owner of a pro rata portion of the assets of the Separate Account. In addition,
the Company does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. Manufacturers Life of America therefore reserves the right to modify the
Policy as necessary to attempt to prevent a Policyowner from being considered
the policyowner of a pro rata share of the assets of the Separate Account.
For purposes of determining a Policyowner's gross income from distributions
which are not in the form of an annuity, the Code provides that all deferred
annuities issued by the same company to the same Policyowner during any calendar
year shall be treated as one annuity. Additional rules may be promulgated under
this provision to
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<PAGE> 37
prevent avoidance of its effect. For further information on current aggregation
rules under this and other Code provisions, the Policyowner should consult his
or her tax adviser.
PURCHASE OF POLICIES BY QUALIFIED PLANS
The Policies are available for use with several types of qualified plans. The
tax rules applicable to participants in such qualified plans vary according to
the type of plan and the terms and conditions of the plan itself. Therefore, no
attempt is made to provide more than general information about the use of the
Policies with the various types of qualified plans. Policyowners, Annuitants and
beneficiaries are cautioned that the rights of any person to any benefits under
such qualified plans may be subject to the terms and conditions of the Policy.
Following are brief descriptions of the various types of qualified plans in
connection with which Manufacturers Life of America will issue a Policy.
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". These IRAs are subject to limits on
the amount that may be contributed, the persons who may be eligible and on the
time when distributions may commence. Distributions from certain other types of
qualified plans may be "rolled over" on a tax-deferred basis into an IRA. Sales
of the Policies for use with IRAs may be subject to special requirements of the
Internal Revenue Service. Distributions from these qualified plans are subject
to special withholding rules. Consult your plan administrator before taking a
distribution which you wish to roll over. A direct rollover from a qualified
plan is permitted and is exempt from the special withholding rules. When issued
in connection with an IRA, a Policy will be amended as necessary to conform to
the requirements of federal laws governing such plans.
Corporate and Self-Employed (H.R. 10 and Keogh) Pension and Profit Sharing
Plans. Section 401(a) of the Code permits corporate employers to establish
various types of tax-favored retirement plans for employees. Self-employed
individuals may establish plans for themselves and their employees. Such
retirement plans may permit the purchase of the Policies in order to provide
benefits under the plans. Employers intending to use Policies in connection with
such plans should seek competent advice.
PURCHASE OF POLICIES BY CHARITABLE REMAINDER TRUSTS
The Policies may be purchased by Charitable Remainder Trusts. If a Charitable
Remainder Trust is the Policyowner, the character of amounts received by the
income beneficiary of the Charitable Remainder Trust depends on the character of
the income in the trust. To the extent the trust has any undistributed ordinary
income, amounts received by the income beneficiary from the trust are taxed as
ordinary income. The Internal Revenue Service has held in at least one private
letter ruling that any increase in the value of a Policy will be treated as
income to the trust in the year it accrues regardless whether it is actually
received by the trust. However, a private letter ruling cannot be relied on as
precedent by anyone other than the taxpayer who requests it.
STATE AND LOCAL GOVERNMENT DEFERRED COMPENSATION PLANS
Section 457 of the Code permits employees of state and local governments, rural
electric cooperatives 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. To the extent Policies are used in
connection with an eligible plan, employees are considered general creditors of
the employer and the employer as owner of the Policy has the sole right to the
proceeds of the Policy. Those who intend to use Policies in connection with such
plans should seek qualified advice as to the tax and legal consequences of such
an investment.
ADDITIONAL INFORMATION ABOUT MANUFACTURERS LIFE OF AMERICA
DESCRIPTION OF BUSINESS
Manufacturers Life of America's primary purpose is to issue and sell variable
universal life and variable annuity products in the United States. However,
Manufacturers Life of America also commenced establishment of branch operations
in Taiwan to develop and market traditional insurance for the Taiwanese market.
Manufacturers Life of America began capitalizing this operation in 1993 and
commenced full operations in 1995.
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<PAGE> 38
RESPONSIBILITIES ASSUMED BY MANUFACTURERS LIFE
Manufacturers Life and Manufacturers USA have entered into an agreement with
ManEquity, Inc. pursuant to which Manufacturers Life or Manufacturers USA, 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 or Manufacturers USA 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 and Manufacturers USA have also entered into a Service
Agreement with Manufacturers Life of America pursuant to which Manufacturers
Life and Manufacturers USA will provide to Manufacturers Life of America all
issue, administrative, general services and 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 or Manufacturers USA on behalf of Manufacturers Life of America. For 1995,
1996 and 1997, Manufacturers Life of America paid $23,211,484, $26,982,466 and $
, respectively, to Manufacturers Life pursuant to the agreement.
Finally, Manufacturers USA has entered into an excess reinsurance arrangement
with Manufacturers Life of America for certain obligations arising under the
Survivor Benefit Amount. Except for its obligations to Manufacturers Life of
America under this reinsurance agreement, Manufacturers USA has no financial
obligation for any variable Policy benefits.
Manufacturers Life of America's ultimate parent company, Manufacturers Life, is
a Canadian-based mutual life insurance company with worldwide operations and
assets of $ Billion (Canadian Dollars) and surplus of $ Billion (Canadian
Dollars) as of December 31, 1997. As in the past, Manufacturers Life of America
may look to its ultimate parent company to provide the necessary capital to
finance its operations.
The vast majority of Manufacturers Life's business in the United States will be
sold directly through Manufacturers USA after December 31, 1996. However,
subsidiary companies are used for certain special purposes. The primary purpose
of this subsidiary, Manufacturers Life of America, is to issue and sell variable
universal life and variable annuity products. Manufacturers Life of America has
no direct employees.
Manufacturers Life of America owns no property.
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<PAGE> 39
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
----------------------------------------------------------------------
1997 1996 1995 1994 1993* 1992*
----------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
UNDER GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES:
Total Revenues $ 73,532 $ 62,174 $ 60,322
Net loss (8,407) (6,846) (6,726)
Total Assets 1,062,603 854,814 654,968
Long Term Obligations 8,500 167,390 159,019
Capital and Surplus 116,630 110,520 101,839
</TABLE>
* selected financial data under generally accepted accounting principles is not
available for the 1993 and 1992 fiscal years. See Management's Discussion and
Analysis and Notes to the Consolidated Financial Statements for additional
information.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
----------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ON STATUTORY BASIS**:
Total Revenues $ 202,666 $165,756 $197,426 $129,272 $ 41,316
Net loss (15,961) (13,705) (19,661) (13,277) (5,307)
Total Assets 795,083 588,742 403,086 253,392 136,065
Long Term Obligations 8,500 8,500 -- -- --
Capital and Surplus 76,202 56,298 49,396 50,656 55,544
</TABLE>
** Statutory accounting practices differ in certain respects from generally
accepted accounting principles. The significant differences relate to
consolidation accounting, investments, deferred acquisition costs, deferred
income taxes, non-admitted asset balances and reserve calculation
assumptions. All information presented elsewhere in this document is
presented under generally accepted accounting principles.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
The following analysis of the consolidated results of operations and financial
condition of The Manufacturers Life Insurance Company of America, (hereafter
referred to as the Company) should be read in conjunction with the Consolidated
Financial Statements and the related Notes to Consolidated Financial Statements.
CORPORATE STRUCTURE
The Company is a U.S. direct wholly-owned subsidiary of The Manufacturers Life
Insurance Company (U.S.A.), which in turn is a direct wholly-owned subsidiary of
the Manulife Reinsurance Corporation (U.S.A.) ("MRC"). MRC is an indirectly
wholly-owned subsidiary of The Manufacturers Life Insurance Company
("Manufacturers Life"), a Canadian mutual insurance company. Manufacturers Life,
with consolidated assets of $ billion ($Can), actively operates in fourteen
countries worldwide. Manufacturers Life has been doing business in the United
States since 1903.
Manufacturers Life and its subsidiaries have consistently received excellent
ratings from Standard & Poor's Insurance Rating Service, A. M. Best Company,
Moody's Investors Service Inc. and Duff & Phelps Credit Rating Co.
RECENT DEVELOPMENTS
REORGANIZATION
In 1996, the ownership of the Company was transferred from MRC, to The
Manufacturers Life Insurance Company (U.S.A.) ("ManUSA"). This was part of a
more general corporate reorganization of Manufacturers Life's U.S. operations.
This transfer of ownership had no material effect on the operations or
consolidated financial statements of the Company.
Also in 1996, the ownership of Manulife Holding Corporation was transferred from
MRC to the Company. Manulife Holding Corporation is a holding company for a
number of U.S. non-insurance subsidiaries primarily
31
<PAGE> 40
supporting variable products, as well as for Manufacturers Life Mortgage
Securities Corporation (hereafter referred to as MLMSC), which is an issuer of
$159 million of mortgage backed U.S. dollar bonds. See note 2 to the
consolidated financial statements for additional information.
ADOPTION OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
During 1996, the Company adopted generally accepted accounting principles
("GAAP") in conformity with the requirements of the Financial Accounting
Standards Board. Prior to 1996, the Company prepared its financial statements in
conformity with statutory accounting practices prescribed or permitted by the
Insurance Department of the State of Michigan which were considered GAAP for
mutual life insurance companies and their wholly-owned direct and indirect
subsidiaries. As discussed in note 2 to the consolidated financial statements,
the effect of the adoption of GAAP has been reflected retroactively and the
previously issued 1995 and 1994 financial statements have been restated for the
change. A description of the accounting policies can be found in note 3 to the
consolidated financial statements. Selected financial data has been presented on
a GAAP basis and also on a statutory basis for the most recent five years. GAAP
information was not available prior to 1994, and is not comparable to statutory
basis information presented for 1993.
MARKETING AND PRODUCT DISTRIBUTION
The Company focuses on two major businesses:
VARIABLE PRODUCTS IN THE U.S.: Products sold include both Variable Universal
Life and Variable Annuities. In recent years the Company has experienced
significant growth in the sale of its variable products due to increasing estate
planning needs from aging baby-boomers as estates are passed from generation to
generation.
TAIWAN: In 1993 the Company entered the Taiwan market as a startup venture to
sell traditional insurance products. The Company anticipates a large potential
for this market. The Company operates in Taiwan using a branch of the Company.
During 1995 the Company commenced full operations which have resulted in
significant recruitment and training expenditures. These expenditures are
expected to positively impact future operations as market share increases. The
business written in Taiwan consists of traditional individual life insurance,
such as whole life and endowment contracts, and is marketed by the Company's own
agency force.
In addition, the Company has assumed reinsurance from its parent company,
ManUSA. The Company reinsures an in force individual participating life
insurance block of business which does not include any new business.
32
<PAGE> 41
REVIEW OF CONSOLIDATED OPERATING RESULTS
FINANCIAL SUMMARY
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------
(IN '000'S)
<S> <C> <C> <C>
Premiums $ 12,898 $ 15,293
Fee Income 40,434 24,986
Net Investment Income 19,651 18,729
Other Revenues 668 82
Realized Capital Gains (Losses) (119) 3,084
----------------------------------
Total Revenues 73,532 62,174
Policyholder Benefits 14,473 16,905
Policyholder Dividends 872 1,886
----------------------------------
Loss Before Taxes (12,316) (10,806)
Income Tax Benefit 3,909 3,960
Net Loss $ (8,407) $ (6,846)
----------------------------------
General Account Assets 394,509 374,409
Separate Account Assets 668,094 480,405
----------------------------------
Total Assets $1,062,603 $854,814
General Account Liabilities $ 277,879 $263,889
Separate Account Liabilities 668,094 480,405
----------------------------------
Capital and Surplus 116,630 110,520
----------------------------------
</TABLE>
[REMAINDER OF MANAGEMENT DISCUSSION & ANALYSIS TO BE FILED BY AMENDMENT]
CAPITAL REQUIREMENTS AND SOLVENCY PROTECTION
In order to enhance the regulation of insurer solvency, the NAIC enforces
minimum Risk Based Capital (RBC) requirements. The requirements are designed to
monitor capital adequacy and to raise the level of protection that statutory
surplus provides for policyholders. The RBC model law required that life
insurance companies report on a formula-based RBC standard which is calculated
by applying factors to various assets, premium and reserve items. The formula
takes into account risk characteristics of the life insurer, including asset
risk, insurance risk, interest risk and business risk. If an insurer's ratio
falls below certain thresholds, regulators will be authorized, and in some
circumstance required, to take regulatory action.
The Company's policy is to maintain capital and surplus balances well in excess
of the minimums required under government regulations in all jurisdictions in
which the Company does business.
RISK MANAGEMENT PRACTICES AND PROCEDURES
Risk management is a fundamental element of the Company's financial strength and
profitability, and is essential to its continuing success. The Company is
committed to comprehensive risk management policies and procedures which measure
and control risk in all of its business activities and allow for periodic by
internal and external auditors and regulators.
The key risk faced by the Company are credit, claims, pricing and business risk.
The nature of these risks and how they are managed is explained in the following
sections.
CREDIT RISK
Credit risk is the risk that a party to a financial instrument will fail to
fully honor its financial obligations to the Company. Senior management within
the Investments operations establishes policies and procedures for the
management of credit risk which limits concentration by issuer, connections,
rating sector and geographic region. Limits are placed on all personnel in terms
of ability to commit the Company to credit instruments. Credit and commitment
exposures are monitored using a rigorous reporting process and are subject to a
formal quarterly review.
33
<PAGE> 42
CLAIMS RISK
The Company is always subject to the risk of change in the life expectancy of
the population. Claims trends are therefore monitored on an ongoing basis. The
Company uses both its own and industry experience to develop estimates of future
claims.
The management of ongoing claims risk for an insurer includes establishing
appropriate criteria to determine the insurability of applicants as well as
managing the exposure to large dollar claims. Underwriting standards have been
established to manage the insurability of applicants. Renewal underwriting
standards are also in place for business that renews on a periodic basis
(primarily group life and health insurance). Management performs periodic
reviews to ensure compliance with standards.
Exposure to large claims is managed by establishing policy retention limits.
Policies in excess of the limits are reinsured with MRC. Underwriting standards
and policy retention limits are reviewed on a periodic basis.
PRICING RISK
The process of pricing products includes the estimation of many factors
including future investment yields, mortality and morbidity experience,
expenses, rates of policy surrender, and taxes. Pricing risk is the risk that
actual experience in the future will not develop as estimated in pricing. Some
products are designed such that adjustments to premiums or benefits can be made
for experience variations, while for other products no such changes are
possible.
The Company manages pricing risks by setting standards and guidelines for
pricing. These standards and guidelines cover pricing methods and assumption
setting, profit margin objectives, required scenario analysis, and
documentation. They also address the areas of pricing software, approved pricing
personnel, and pricing approvals. These standards and guidelines ensure that an
appropriate level of risk is borne by the Company and that an appropriate return
is provided to the policyholders.
BUSINESS RISK
Business risk comprises operating risk as well as other risks. Operating risk is
the exposure to inadequate internal controls, including inadequate control of
risk management. Other risks include legal, political, competitive and
environmental risks. Business risks expose the Company to potential loss of
earnings.
The Company manages operating risks by establishing appropriate internal control
policies and procedures. The Company centrally manages business risk using risk
identification and compliance monitoring processes. Diversification of
businesses is an integral part of the Company's business risk management
strategy.
A controllership function has been established in each operation and is
responsible for day-to-day management of operating risk including compliance
with Company control policies.
Internal and external auditors review the adequacy of internal controls and
report to senior management and the Board of Directors on a quarterly and an
annual basis, respectively.
The Company has coordinated its operational compliance departments under the
supervision of its corporate legal function. This structure ensures compliance
with all legal and regulatory requirements in all jurisdictions in which the
Company does business. All customer-related communications, product brochures
and selling tools, and procedures for compliance therewith, are subject to
review by the compliance function. Compliance is monitored on an ongoing basis.
34
<PAGE> 43
EXECUTIVE OFFICERS AND DIRECTORS
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
MANUFACTURERS LIFE OF
NAME AMERICA PRINCIPAL OCCUPATION
- ---------------------------- ----------------------- ----------------------------------------
<S> <C> <C>
Sandra M. Cotter (35) Director Attorney -- 1989-present, Dykema,
(since December 1992) Gossett
James D. Gallagher (42) Director, Secretary and Vice President, Secretary and General
General Counsel Counsel -- January 1997-present, ManUSA;
Vice President, Legal Services U.S.
Operations -- January 1996-present, The
Manufacturers Life Insurance Company;
Vice President, Secretary and General
Counsel -- 1994-present, The
Manufacturers Life Insurance Company of
North America; Vice President and
Associate General Counsel -- 1991-1994,
The Prudential Insurance Company of
America
Bruce Gordon* (54) Director Vice President, U.S. Operations --
(Since May 1996) Pensions -- 1990-present, The
Manufacturers Life Insurance Company
Donald A. Guloien (41) President and Director Senior Vice President, Business
(since September 1990) Development -- 1994-present, The
Manufacturers Life Insurance Company,
Vice President, U.S. Individual Business
-- 1990-1994, The Manufacturers Life
Insurance Company
Theodore Kilkuskie (42) Director Vice President, U.S. Individual
Insurance -- January 1997-present, Man
USA; Vice President, U.S. Individual
Insurance -- June 1995-present, The
Manufacturers Life Insurance Company;
Executive Vice President, Mutual Funds
-- January 1995-May 1995, State Street
Research; Vice President, Mutual Funds
-- 1987-1994, Metropolitan Life
Insurance Company
Joseph J. Pietroski (59) Director (since July Senior Vice President, General Counsel
1982) and Corporate Secretary -- 1988-present,
The Manufacturers Life Insurance Company
John D. Richardson (60) Chairman and Director Senior Vice President and General
(since January 1995) Manager, U.S. Operations --
1995-present, The Manufacturers Life
Insurance Company; Senior Vice President
and General Manager, Canadian Operations
1992-1994
John R. Ostler (45) Vice President, Chief Financial Vice President -- 1992-present
Actuary and Treasurer
Douglas H. Myers** (43) Vice President, Finance Assistant Vice President and Controller,
and Compliance U.S. Operations -- 1988-present, The
Controller Manufacturers Life Insurance Company
</TABLE>
35
<PAGE> 44
<TABLE>
<CAPTION>
POSITION WITH
MANUFACTURERS LIFE OF
NAME AMERICA PRINCIPAL OCCUPATION
- ---------------------------- ----------------------- ----------------------------------------
<S> <C> <C>
Victor Apps (49) Senior Vice President Senior Vice President and General
and General Manager Manager, Greater China Division --
1995-present, The Manufacturers Life
Insurance Company; Vice President and
General Manager, Greater China Division
-- 1993-1995, The Manufacturers Life
Insurance Company; International Vice
President, Asia Pacific Division --
1988-1993, The Manufacturers Life
Insurance Company
Robert A. Cook (43) Vice President, Vice President, Product Management --
Marketing 1996-present, The Manufacturers Life
Insurance Company; Sales and Marketing
Director, U.S. Division -- 1994-1995 The
Manufacturers Life Insurance Company;
Vice President, Corporation Strategic
Review -- 1992-1993, The Manufacturers
Life Insurance Company
</TABLE>
- ------------------
* Bruce Gordon is also a director of ManEquity, Inc.
** Douglas Myers is also a director and president of ManEquity, Inc.
EXECUTIVE COMPENSATION
All of the executive officers of the Company also serve as officers of
Manufacturers Life and receive no compensation directly from the Company.
Allocations have been made as to such officers' time devoted to duties as
executive officers of the Company and its subsidiaries. The aggregate allocated
cash compensation of the president of the Company for services rendered in all
capacities to the Company and its subsidiaries during 1997 was $ . This
consisted of salary ($ ), profit-sharing ($ ), flexible spending
benefits ($ ) and incentive plans (not eligible). No executive officer had
allocated cash compensation in excess of $100,000. These figures include salary,
applicable profit-sharing and incentive plans and flexible spending benefits.
In addition to cash compensation, all officers are entitled to a standard
benefit package including medical, health and pension. There are no other
benefit packages which currently enhance overall compensation by more than 10%.
Directors of the Company who are also officers or employees of Manufacturers
Life or its affiliates receive no compensation in addition to their compensation
as officers or employees of Manufacturers Life or its affiliates. Directors who
are not also officers or employees will receive compensation as set by the
Board. No shares of the Company are owned by any executive officer or director.
Executive officers participate in certain plans sponsored by Manufacturers Life.
A short-term profit sharing plan is in place for all employees of Manufacturers
Life and its subsidiaries at "director" level and above. Pay-outs under the
short-term profit sharing plan are based on a percentage of salary and the
employee's level in the organization. Manufacturers Life also maintains a Long
Term Incentive Plan for officers of Manufacturers Life who have attained the
title of Vice-President. Benefits are directly linked to long-term growth as
measured by changes in Manufacturers Life's surplus.
Manufacturers Life maintains a defined benefit pension plan for the benefit of
all Canadian Staff which vests at two years of service. Benefit pay-out is a
function of years of service and salary including all contractual incentive
compensation.
Pay-outs under this program are regulated by the various provincial benefit acts
and Section 248 of the Income Tax Act (Canada).
The maximum yearly pension benefit as permitted by Section 248 of the Income Tax
Act (Canada) is $1,266 per year of service. There are no years of service
restrictions limiting overall pay-outs under this section. The maximum yearly
benefit is currently earned at a salary of $ . The yearly allowable benefit
will be indexed commencing 1999 based on increases in average industrial wages.
36
<PAGE> 45
All executive officers of the Company currently accrue maximum yearly benefits
under this plan.
In addition there is a supplemental pension arrangement available to officers of
Manufacturers Life who have attained the title of Vice President. This is an
unfunded, non-qualified arrangement intended to provide additional pension
income consistent with the executive's pre-retirement income.
Combined pension benefits at age 65 under these arrangements is as follows:
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------------------------------
REMUNERATION* 15 20 25 30 35
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 125,000 24,879 33,172 41,465 49,758 58,052
150,000 30,394 40,525 50,657 60,788 70,919
200,000 41,423 55,231 69,039 82,847 96,655
250,000 52,453 69,937 87,422 104,906 122,390
300,000 63,482 84,643 105,804 126,965 148,126
400,000 85,541 114,055 142,569 171,083 199,597
500,000 107,600 143,467 179,334 215,201 251,068
600,000 129,659 172,879 216,099 259,319 302,539
700,000 151,718 202,291 252,864 303,437 354,010
800,000 173,777 231,703 289,629 347,555 405,481
900,000 195,836 261,115 326,394 391,673 456,952
1,000,000 217,895 290,527 363,159 435,791 508,423
</TABLE>
* Remuneration table is based on a 100% time allocation to Manufacturers Life of
America.
Normal retirement age is 65. Pay-out is annuity based with either single life
with a ten year guarantee or joint life with a five year guarantee.
Donald Guloien, President and Chief Operating Officer, has 16 years and 9 months
of credited service.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting Separate Account Two or
Manufacturers Life of America.
STATE REGULATIONS
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.
OTHER MATTERS
SPECIAL PROVISIONS FOR GROUP OR SPONSORED ARRANGEMENTS
Where permitted by state insurance laws, Policies may be purchased under group
or sponsored arrangements, as well as on an individual basis. A "group
arrangement" includes a program under which a trustee, employer or similar
entity purchases Policies covering a group of individuals on a group basis. A
"sponsored arrangement" includes a program under which an employer permits group
solicitation of its employees or an association permits group solicitation of
its members for the purchase of Policies on an individual basis.
Charges and deductions described above (see Description of the Policies --
"Policy Charges") may be reduced for Policies issued in connection with group or
sponsored arrangements. Such arrangements may also include sales without
withdrawal charges and certain other charges to employees, officers, directors,
agents, immediate family members of the foregoing and employees of agents of
Manufacturers Life and its subsidiaries. Manufacturers Life of America will
reduce the charges and deductions in accordance with its rules in effect as of
the date an application for a Policy is approved. To qualify for such a
reduction, a group or sponsored arrangement must satisfy certain criteria as to,
for example, size of the group, expected number of participants and anticipated
premium
37
<PAGE> 46
payments from the group. Generally, the sales contacts and effort,
administrative costs and mortality risks and expense risks costs per Policy vary
based on such factors as the size of the group or sponsored arrangements, the
purposes for which Policies are purchased and certain characteristics of its
members.
The amount of reduction and the criteria for qualification will reflect the
reduced sales effort and administrative, mortality and expense risks costs
resulting from sales to qualifying groups and sponsored arrangements.
Manufacturers Life of America may modify from time to time on a uniform basis,
both the amounts of reductions and the criteria for qualification. Reductions in
these charges will not be unfairly discriminatory against any person, including
the affected Policyowners and all other owners of the Policies.
SALE OF 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 a Distribution 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, 1995, December 31, 1996 and December 31, 1997,
ManEquity, Inc. received, $3,355,185, $3,045,326 and $ , respectively, as
compensation for sales of other variable annuity policies issued by Separate
Account Two by its registered representatives. Of these amounts, $3,262,711,
$2,957,985 and $ , respectively, were remitted to Manufacturers Life to
reimburse it for commissions paid to such registered representatives. The total
of all compensation received by ManEquity, Inc. for sales of variable products,
including products issued by Separate Account Two, for the year ended December
31, 1997 was $ .
Agents will receive commissions on purchase payments not to exceed 4% thereof
and, each year beginning with the seventh Policy Anniversary, 0.50% of the
Policy Value at the respective Policy Anniversary. Under certain circumstances
agents may be eligible for a bonus payment of not exceeding 1% of purchase
payments. In addition, agents who meet certain productivity and persistency
standards will be eligible for additional compensation.
VOTING RIGHTS
As stated above, all of the assets held in the Variable Accounts will be
invested in shares of a particular Portfolio of Manufacturers Investment Trust.
Manufacturers Life of America is the legal owner of those shares and as such has
the right to vote upon certain matters that are required by the 1940 Act to be
approved or ratified by the shareholders of a mutual fund and to vote upon any
other matters that may be voted upon at a shareholders' meeting. However,
Manufacturers Life of America will vote shares held in the Variable Accounts in
accordance with instructions received from Policyowners having an interest in
such Accounts. Shares held in each Variable Account for which no timely
instructions from Policyowners are received, including shares not attributable
to Policies, will be voted by Manufacturers Life of America in the same
proportion as those shares in that Variable Account for which instructions are
received. Should the applicable federal securities laws or regulations change so
as to permit Manufacturers Life of America to vote shares held in the Variable
Accounts in its own right, it may elect to do so.
The number of shares in each Variable Account for which instructions may be
given by a Policyowner is determined by dividing the portion of that Policy's
Variable Policy Value derived from participation in that Variable Account, if
any, by the value of one share of the corresponding Trust. The number will be
determined as of a date chosen by Manufacturers Life of America, but not more
than 90 days before the shareholders' meeting. Fractional votes are counted.
Voting instructions will be solicited in writing at least 14 days prior to the
shareholders' meeting.
FURTHER INFORMATION
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. The prospectus
does not include all the information set forth in the registration statement.
The omitted information may be obtained at the S.E.C.'s principal office in
Washington, D.C. upon payment of the prescribed fee.
38
<PAGE> 47
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 this prospectus.
EXPERTS
The financial statements of The Manufacturers Life Insurance Company of America
and the financial statements of Separate Account Two of The Manufacturers Life
Insurance Company of America appearing in this prospectus for the year ended
December 31, 199_ have been audited by Ernst & Young LLP, independent auditors,
to the extent indicated in their reports thereon also appearing elsewhere
herein. Such financial statements have been included herein in reliance upon
such reports given upon the authority of such firm as experts in auditing and
accounting.
PERFORMANCE AND OTHER COMPARATIVE INFORMATION
From time to time, in advertisements or in reports to Policyowners,
Manufacturers Life of America may quote various independent quotation services
for the purpose of comparing Manufacturers Life of America's Policies'
performance and other rankings with other companies' variable annuity policies
and for the purpose of comparing any of the Portfolios of Manufacturers
Investment Trust with other mutual funds with similar investment objectives.
Performance rankings are not to be considered indicative of the future
performance of the Portfolios. The quotation services which are currently
followed by Manufacturers Life of America include Lipper Analytical Services,
Inc.("Lipper"), Morningstar, Inc., Variable Annuity Research and Data Service,
and Money Magazine; however, other nationally recognized rating services may be
quoted in the future. The performance of certain indices may also be quoted in
advertisements or in reports to Policyowners. These indices include Standard &
Poor's 500 Index, National Association of Real Estate A11 REIT's Index, Salomon
Brothers (broad corporate index), Dow Jones Industrial Average, Donoghue Prime
Money Fund Index, 3 month Treasury Bills, the National Association of Securities
Dealers Automated Quotation System, the Financial Times Actuaries World Index,
and the following Lipper Indices: Money-Market Funds, Corporate Bond Funds,
Balanced Funds, Growth Funds, Small-Company Growth Funds, Real Estate Funds,
International Funds and Pacific Region Funds. These comparisons may include
graphs, charts, tables or examples.
ADVERTISING PERFORMANCE OF VARIABLE ACCOUNTS
Manufactures Life of America may publish advertisements or distribute sales
literature that contain performance data relating to the sub-accounts of
Separate Account Two. 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 (i) redemption
at the end of the time period and (ii) not assuming redemption at the end of the
time period. Standardized figures include total return figures from: (i) the
inception date of the sub-account of the Separate Account Two which invests in
the portfolio or (ii) ten years, whichever period is shorter. Non-standardized
figures include total return numbers from: (i) inception date of the portfolio
or (i) 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
subaccount, 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. Non-standardized figures may also include total return
numbers for one and three year periods where applicable. 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, mortality and expense risk fees
are reflected in changes in unit values. The annual administration charge is
estimated by dividing the total administration charges collected during a given
year by the average total assets attributable to the Policies during that year
(including amounts allocated to both Separate Account Two and the Guaranteed
Interest Account), multiplying that percentage by the average of the beginning
and ending values of the hypothetical investment and substracting the result
from the year end account value. Standardized total return figures will be
quoted assuming redemption at the end of the period. Non-
39
<PAGE> 48
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 return.
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
does not reflect deduction of the annual contract fee. The Company believes 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 tot he individual contract
owner.
For total return figures quoted for periods prior to the commencement of
the offering of this contract, May 4, 1994, standardized performance data will
be the historical performance of the Manufacturers Investment Trust portfolio
from the date the applicable sub-account of the Separate Account Two first
became available for investment under other contracts offered by Manufacturers
Life of America; adjusted to reflect current contract charges. In the case of
non-standardized performance, performance figures will be the historical
performance of the Manufacturers Investment Trust portfolio from the inception
date of the portfolio, adjusted to reflect current contract charges.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
Total returns if surrendered for the period ending December 31, 1997 were as
follows:
<TABLE>
<CAPTION>
AVG. ANNUAL
TOTAL RETURN
SINCE INCEPTION
OF SUB-ACCOUNT
AVG. ANNUAL AVG. ANNUAL OR TEN YEARS,
MANUFACTURERS INVESTMENT TOTAL RETURN TOTAL RETURN WHICH EVER
TRUST PORTFOLIOS ONE YEARS FIVE YEARS# IS SHORTER#
- ----------------------------------------------------------
-----------------------------------------------
<S> <C> <C> <C>
Emerging Growth n/a n/a 7.15%*
Balanced n/a n/a 7.40*
Capital Growth Bond** -1.49% 4.81% 6.92+
Quantitative Equity** 17.67 13.96% 13.42+
(formerly Common Stock)
Real Estate Securities** 7.30 14.39% 14.17+
Money Market -4.73 n/a -4.73*
International Stock n/a n/a -7.00*
Pacific Rim Emerging Markets** -40.34 n/a -11.59*
</TABLE>
* Average Annual Return since Inception of Sub-Account (October 4, 1994 for
the Pacific Rim Emerging Markets Trust; and December 31, 1996 for the
Emerging Growth, Balanced, Money Market Trust and International Stock
Trust).
** On December 31, 1996 Manulife Series Fund, Inc. merged with Manufacturers
Investment Trust. Performance presented for these sub-accounts is based upon
the performance of the respective predecessor Manulife Series Fund
portfolios for periods to December 31, 1996.
# Policies have only been offered since May 4, 1994. Performance data for
earlier periods are hypothetical figures based on the performance of the
Sub-Account in which policy assets may be invested.
+ 10 year average annual total return.
40
<PAGE> 49
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
(ASSUMING REDEMPTION AT THE END OF THE TIME PERIOD)
Total returns if surrendered are as follows:
<TABLE>
<CAPTION>
AVG. ANNUAL
TOTAL RETURN
AVG. ANNUAL AVG. ANNUAL TEN YEARS#
MANUFACTURERS INVESTMENT TOTAL RETURN TOTAL RETURN OR
TRUST PORTFOLIOS ONE YEAR FIVE YEARS# SINCE INCEPTION
- -------------------------------------------------------------
----------------------------------------------
<S> <C> <C> <C>
Emerging Growth n/a n/a 7.15%*
Balanced n/a n/a 7.40**
Capital Growth Bond** -1.49% 4.81% 6.92+
Quantitative Equity**
(formerly Common Stock) 17.67 13.96 13.42+
Real Estate Securities** 7.30 14.39 14.17+
Money Market -4.73 2.14 3.87*
International Stock n/a n/a -7.00*
Pacific Rim Emerging Markets** -40.34 n/a -11.59*
</TABLE>
* Average Annual Return since Inception (June 18, 1985 for the Money Market
Trust; October 4, 1994 for the Pacific Rim Emerging Markets Trust; and
December 31, 1996 for the Emerging Growth, Balanced and International Stock
Trust).
** On December 31, 1996 Manulife Series Fund, Inc. merged with Manufacturers
Investment Trust (formerly, NASL Series Trust). Performance presented for
these sub-accounts is based upon the performance of the respective
predecessor Manulife Series Fund portfolios for periods to December 31,
1996.
# Policies have only been offered since May 4, 1994. Performance data for
earlier periods are hypothetical figures based on the performance of the
Portfolio in which policy assets may be invested.
+ 10 year average annual total return.
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FIGURES
(ASSUMING NO REDEMPTION AT THE END OF THE TIME PERIOD)
Total returns if not surrendered are as follows:
<TABLE>
<CAPTION>
AVG. ANNUAL
TOTAL RETURN
AVG. ANNUAL AVG. ANNUAL TEN YEARS#
MANUFACTURERS INVESTMENT TOTAL RETURN TOTAL RETURN OR
TRUST PORTFOLIOS ONE YEAR FIVE YEARS# SINCE INCEPTION
- -------------------------------------------------------------
----------------------------------------------
<S> <C> <C> <C>
Emerging Growth n/a n/a 16.46%
Balanced n/a n/a 16.74+
Capital Growth Bond** 7.08% 5.58 6.92+
Quantitative Equity**
(formerly Common Stock) 27.90 14.80 13.42+
Real Estate Securities** 16.64 15.23 14.17+
Money Market 3.56 2.89 3.87*
International Stock n/a n/a 1.09*
Pacific Rim Emerging Markets** -35.16 n/a -9.52*
</TABLE>
* Average Annual Return since Inception (June 18, 1985 for the Money Market
Trust; October 4, 1994 for the Pacific Rim Emerging Markets Trust; and
December 31, 1996 for the Emerging Growth, Balanced and International Stock
Trust).
# Policies have only been offered since May 4, 1994. Performance data for
earlier periods are hypothetical figures based on the performance of the
Portfolio in which policy assets may be invested.
** On December 31, 1996 Manulife Series Fund, Inc. merged with Manufacturers
Investment Trust. Performance presented for these sub-accounts is based upon
the performance of the respective predecessor Manulife Series Fund
portfolios for periods to December 31, 1996.
+ 10 year average annual total return.
41
<PAGE> 50
NON-STANDARDIZED AGGREGATE TOTAL RETURN
(ASSUMING REDEMPTION AT THE END OF THE TIME PERIOD
Aggregate total returns if surrendered as of the end of each year since
inception are as follows:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Emerging Growth N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Balanced N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Capital Growth
Bond*** -1.49% -7.14% 10.42% -13.46% 0.89% -3.72% 6.62% -3.04% 4.16% -2.49% -10.92% 12.51% 16.22% 4.86%
Quantitative
Equity***
(formerly
Common Stock) 17.67% 6.86% 19.27% -13.19% 3.67% -3.53% 20.20% -13.08% 20.68% 0.20% -22.58% N/A N/A N/A
Real Estate
Securities*** 7.30% 22.08% 5.39% -11.90% 12.75% 11.46% 30.95% -13.50% -0.42% 2.03% -16.61% N/A N/A N/A
Money Market -4.73% -4.81% -3.88% -5.64% -6.78% -6.12% -3.79% -1.77% -0.96% -2.74% -3.38% -3.76% -5.17% N/A
International
Stock N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Pacific Rim
Emerging
Markets*** -40.34% -0.50% 1.78% -13.50 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
*** On December 31, 1996 Manulife Series Fund, Inc. merged with Manufacturers
Investment Trust. Performance presented for these sub-accounts is based upon
the performance of the respective predecessor Manulife Series Fund
portfolios for periods to December 31, 1996.
NON-STANDARDIZED AGGREGATE TOTAL RETURN
(ASSUMING NO REDEMPTION AT THE END OF THE TIME PERIOD
Aggregate total returns as of the end of each year since inception, if not
surrendered are as follows:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Emerging Growth N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Balanced N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Capital Growth
Bond*** 7.08% 0.94% 18.42% -5.93% 8.89% 4.28% 14.62% 4.96% 12.16% 5.51% -3.17% 20.51% 24.22% 12.86%
Quantitative
Equity***
(formerly
Common Stock) 27.90% 16.15% 27.27% -5.64% 11.67% 4.47% 28.20% -5.52% 28.68% 8.20% -15.85% N/A N/A N/A
Real Estate
Securities*** 16.64% 32.69% 13.99% -4.24% 20.75% 19.46% 38.95% -5.98% 7.58% 10.03% -9.35% N/A N/A N/A
Money Market 3.56% 3.46% 4.12% 2.36% 1.22% 1.88% 4.21% 6.23% 7.04% 5.26% 4.62% 4.24% 2.03% N/A
International
Stock N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Pacific Rim
Emerging
Markets*** -35.16% 8.15% 9.60% -1.90% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
*** On December 31, 1996 Manulife Series Fund, Inc. merged with Manufacturers
Investment Trust. Performance presented for these sub-accounts is based upon
the performance of the respective predecessor Manulife Series Fund
portfolios for periods to December 31, 1996.
All of the above performance data are based on the actual historical performance
of the Portfolios or sub-accounts for specified periods, and the figures are not
intended to indicate future performance.
42
<PAGE> 51
FINANCIAL STATEMENTS
The financial statements of Manufacturers Life of America included herein should
be distinguished from the financial statements of Separate Account Two and
should be considered only as bearing upon the ability of Manufacturers Life of
America to meet its obligations under the Policies.
[FINANCIAL STATEMENTS TO BE FILED BY AMENDMENT]
43
<PAGE> 52
APPENDIX A
ANNUITY OPTIONS
The Policyowner may elect one of the following annuity options described
below. If no option is specified, annuity payments will be made as a life
annuity with a ten year certain period. Treasury or Labor Department regulations
may require a different annuity option if no option is specified and may
preclude the availability of certain options in connection with Qualified
Policies. There may also be state insurance law requirements that limit the
availability of certain options. The amounts payable under each option will be
no less than amounts determined on the basis of tables contained in each Policy.
Such tables are based on the 1983 Individual Annuity Mortality Tables and an
assumed interest rate of 3% per year.
<TABLE>
<S> <C>
OPTION 1: ANNUITY CERTAIN -- payments in equal installments for a period of not less
than five years and not more than twenty years.
OPTION 2(A): LIFE ANNUITY WITHOUT REFUND -- payments in equal installments during the
lifetime of an Annuitant. Upon the death of the Annuitant, payments will be
cease. Since there is no guarantee that any minimum number of payments will
be made, the payee may receive only one payment if he or she dies before
the date the second payment is due.
OPTION 2(B): LIFE ANNUITY WITH CERTAIN PERIOD -- payments in equal installments during
the lifetime of an Annuitant and if the Annuitant dies before installments
have been paid for a designated period, either five, ten or twenty years,
payments will continue for the remainder of the period selected.
OPTION 2(C): LIFE ANNUITY WITH INSTALLMENT REFUND -- payments in equal installments
during the lifetime of an Annuitant and if the Annuitant dies before the
total installments paid equal the Policy Value applied to provide the
annuity, payments will continued until the Policy Value had been paid.
OPTION 3(A): JOINT AND SURVIVOR ANNUITY WITHOUT REFUND -- payments in equal installments
during the lifetime of two Annuitants with payments continuing in full
amount to the survivor upon death of either. Since there is no guarantee
that any minimum number of payments will be made, the payees may receive
only one payment if they both die before the date the second payment is
due.
OPTION 3(B): JOINT AND SURVIVOR ANNUITY WITH CERTAIN PERIOD -- payments in equal
installments during the lifetime of two Annuitants and if both die before
installments have been paid for a ten year period, payments will continue
for the remainder of the period.
</TABLE>
Under Options 2(b), 2(c) and 3(b), upon the death of the Annuitant or
second to die of joint Annuitants, the beneficiary may elect to receive the
commuted value of any remaining payments. Any such commutation will be at the
interest rate used to determine the amount of the annuity payments plus 1/2%.
44
<PAGE> 53
APPENDIX B
SAMPLE CALCULATIONS OF MARKET VALUE ADJUSTMENTS AND
WITHDRAWAL CHARGES 1
MVA FORMULA
The MVA factor is equal to:
<TABLE>
<S> <C> <C>
(1+G) exp N
------- -1
(1+C)
</TABLE>
EXAMPLE ONE: NEGATIVE MVA AND NO WITHDRAWAL CHARGE
Assume the following:
<TABLE>
<S> <C>
Type of Account: Fixed
Type of Transaction: Transfer
Time remaining in the Guarantee Period: 30 months, 5 days
Guaranteed Rate: 6%
Current Rate for new 3-year deposits: 8%
Transfer Requested: $10,000
Withdrawal Charge: 0%
Other Charges: $35 transfer charge
</TABLE>
In this example,
N = 30/12 = 2.5
G = .06
C = .08
The MVA factor equals:
1.06 exp 2.5 - 1 = -0.0457
1.08
Manufacturers Life of America will deduct a Gross Withdrawal Amount of
$10,000.00.
From this, Manufacturers Life of America will deduct the transfer charge of $35.
This will leave $9,965.00.
The amount of the MVA adjustment would be $9,965.00 X -0.0457, or -$455.40.
The cash transferred to another account(s) would be $9,965.00 -$455.40, or
$9,509.60.
1 The assumed fixed interest rates used in the examples in this Appendix
illustrate the operation of the Market Value Adjustment and are not intended
to reflect the levels of interest rates currently offered on the Fixed
Accounts.
EXAMPLE TWO: POSITIVE MVA AND NO WITHDRAWAL CHARGE
Assume the following:
<TABLE>
<S> <C>
Type of Account: Fixed
Type of Transaction: Partial Withdrawal
Time remaining in the Guarantee Period: 47 months
Guaranteed Rate: 6%
Current Rate for new 3-year deposits: 4%
Current Rate for new 4-year deposits: Not Offered
Current Rate for new 5-year deposits: 6%
Cash Withdrawal Requested: $10,000
Withdrawal Charge: 0%
Other Charges: None
</TABLE>
45
<PAGE> 54
In this example,
N = 47/12 = 3.91677
G = .06
C = .05
The time remaining in the Guarantee Period, rounded to the next full year, is 4
years. Since the 4-year deposit is not available, interpolate between the 3-year
rate and the 5-year rate, to get a rate of 5%.
The MVA factor equals:
1.06 exp. 3.91677 - 1
1.05
= 0.0378
We will take out a Gross Withdrawal Amount of $9,635.77
The amount of the MVA adjustment would be $9,635.77 X 0.0378, or $364.23.
The cash received by the Policyowner would be $9,635.77 + $364.23, or $10,000.
EXAMPLE THREE: WITHDRAWAL CHARGE AND NO MVA
Assume the following:
<TABLE>
<S> <C>
Type of Account: Variable
Type of Transaction: Partial Withdrawal
Cash Withdrawal Requested: $10,000
Withdrawal Charge: 6%*
Other Charges: None
</TABLE>
The Gross Withdrawal Amount will be $10,638.30.
The withdrawal charge will be $10,638.30 X 6%, or $638.30.
The cash received by the Policyowner would be $10,638.30 - $638.30, or $10,000.
* In this example, Manufacturers Life of America assumes that a 10% free
withdrawal has already been taken earlier in the year, and that the withdrawal
charge percentage applies to the total Policy Value. In other situations the
withdrawal charge may not apply to the total Policy Value.
EXAMPLE FOUR: NEGATIVE MVA AND WITHDRAWAL CHARGE
Assume the following:
<TABLE>
<S> <C>
Type of Account: Fixed
Type of Transaction: Surrender
Time remaining in the Guarantee Period: 30 months, 5 days
Guaranteed Rate: 6%
Current Rate for new 3-year deposits: 8%
Policy Value: $10,000
Withdrawal Charge: 6%*
Other Charges: $30 record-keeping charge
</TABLE>
In this example,
N = 30/12 = 2.5
G = .06
C = .08
The MVA factor equals:
1.06 exp. 2.5 - 1
1.08
= -0.0457
46
<PAGE> 55
On a surrender, the Gross Withdrawal Amount is the Policy Value, or $10,000 in
this example.
Manufacturers Life of America will deduct the record-keeping charge of $30,
leaving $9,970.
The amount of the MVA adjustment would be $9,970 X -0.0457, or $455.63.
This leaves an amount of $9,970.00 - $455.63, or $9,514.37.
The withdrawal charge will be $9,514.37 X 6%, or $570.86.
The cash received by the Policyowner would be $9,514.37 - $570.86, or $8,943.51.
*In this example, Manufacturers Life of America assumes that a 10% free
withdrawal has already been taken earlier in the year, and that the withdrawal
charge percentage applies to the total Policy Value. In other situations the
withdrawal charge may not apply to the total Policy Value.
47
<PAGE> 56
Manulife Financial and the block design are registered
service marks of The Manufacturers Life Insurance
Company and are used by it and its subsidiaries, including The
Manufacturers Life Insurance Company (U.S.A.), The
Manufacturers Life Insurance Company of America,
and ManEquity, Inc.
IM5036 05/97 Printed in Canada [Manulife Financial LOGO]
<PAGE> 57
PART B
STATEMENT OF ADDITIONAL INFORMATION
47
<PAGE> 58
Information permitted to be in the Statement of Additional Information is
contained in the Prospectus.
48
<PAGE> 59
PART C
OTHER INFORMATION
49
<PAGE> 60
Item 24. Financial Statements and Exhibits
(a) Financial Statements.
Included in the Prospectus:
Reports of Independent Auditors for Registrant and Depositor for
Financial statements of The Manufacturers Life Insurance Company
of America Separate Account Two for the year ended December 31,
1997 and financial statements of The Manufacturers Life
Insurance Company of America for the year ended December 31,
1997. (Part A of Registration Statement.)-- To be Filed
by Amendment.
(b) Exhibits, including those previously filed and incorporated herein by
reference.
(1) Copy of resolution establishing Separate Account Two. Previously
filed as Exhibit (1) to the Registration Statement on Form N-4 filed
by The Manufacturers Life Insurance Company of America on January 13,
1993 (File No. 33-57018).
(3)(a)(i) Distribution Agreement between The Manufacturers Life Insurance
Company of America and ManEquity, Inc. Previously filed as Exhibit
(3)(a)(i) to the Registration Statement on Form N-4 filed by The
Manufacturers Life Insurance Company of America on January 13, 1993
(File No. 33-57018).
(3)(a)(ii) Supplemental Agreement to Distribution Agreement. Previously filed
as Exhibit (3)(a)(ii) to the Registration Statement on Form N-4 filed
by The Manufacturers Life Insurance Company of America on January 13,
1993 (File No. 33-57018).
(3)(b)(i) Specimen Agreement between ManEquity, Inc. and registered
representatives. Previously filed as Exhibit (1) to the Registration
Statement on Form N-4 filed by The Manufacturers Life Insurance
Company of America on January 13, 1993 (File No. 33-57018).
(3)(b)(ii) Specimen Agreement between ManEquity, Inc. and dealers. Previously
filed as Exhibit (3)(b)(ii) to the Registration Statement on Form N-4
filed by The Manufacturers Life Insurance Company of America on
January 13, 1993 (File No. 33-57018).
50
<PAGE> 61
(ii)
(4)(a) Form of Multi-Account Flexible Variable Annuity Policy, previously
filed as Exhibit (4)(a) to Pre-Effective Amendment No. 1 on Form N-4
filed by The Manufacturers Life Insurance Company of America on
February 10, 1994 (File No. 33-57018).
(4)(b)(i) Individual Retirement Annuity Rider, previously filed as Exhibit
(4)(b)(i) to Pre-Effective Amendment No. 1 on Form N-4 filed by The
Manufacturers Life Insurance Company of America on February 10, 1994
(File No. 33-57018).
(4)(b)(i)(a) Trustee-Owned Policies Rider, previously filed as Exhibit
(4)(b)(i)(a) to Pre-Effective Amendment No. 1 on Form N-4 filed by
The Manufacturers Life Insurance Company of America on February 10,
1994 (File No. 33-57018).
(4)(b)(ii) Unisex Endorsement. Previously filed as Exhibit (4)(b)(iv) to the
Registration Statement on Form N-4 filed by The Manufacturers Life
Insurance Company of America on January 13, 1993 (File No. 33-57018).
(5) Form of Application for the Policy, previously filed as Exhibit (5)
to Pre-Effective Amendment No. 1 on Form N-4 filed by The
Manufacturers Life Insurance Company of America on February 10, 1994
(File No. 33-57018).
(5)(a) Form of Application Supplement for the Policy. Previously filed as
exhibit (5)(a) to Post-Effective Amendment No.7 on form N-4 filed
by the Manufacturers Life Insurance Company of America on
December 18, 1996 (File No. 33-57018)**
(6)(a)(i) Restated Articles of Redomestication of The Manufacturers Life
Insurance Company of America. Incorporated by reference to Exhibit
3(a)(i) to Post Effective Amendment No. 6 to the Registration
Statement on Form S-1 filed by the Manufacturers Life Insurance
Company of America on December 9, 1996 (File No. 33-57020)**
(6)(b)(i) By-Laws of The Manufacturers Life Insurance Company of America.
Incorporated by reference to Exhibit 3(b)(i) to Post Effective
Amendment No. 6 to the Registration Statement on Form S-1 filed by
the Manufacturers Life Insurance Company of America on December 9,
1996 (File No. 33-57020)**
** Filed electronically.
51
<PAGE> 62
(iii)
(7) Reinsurance Agreement between The Manufacturers Life Insurance
Company and The Manufacturers Life Insurance Company of America.
Previously filed as Exhibit 7 to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-4 filed by The Manufacturers Life
Insurance Company of America on February 10, 1994.
(8)(a) Service Agreement between The Manufacturers Life Insurance Company of
America and The Manufacturers Life Insurance Company. Previously
filed as Exhibit (8)(a) to the Registration Statement on Form N-4
filed by The Manufacturers Life Insurance Company of America on
January 13, 1993 (File No. 33-57018).
(8)(b) First Amendment to Service Agreement. Previously filed as Exhibit
(8)(b) to the Registration Statement on Form N-4 filed by The
Manufacturers Life Insurance Company of America on January 13, 1993
(File No. 33-57018).
(8)(c) Second Amendment to Service Agreement, previously filed as Exhibit
(8)(c) to Pre-Effective Amendment No. 1 on Form N-4 filed by The
Manufacturers Life Insurance Company of America on February 10, 1994
(File No. 33-57018).
(8)(d) Service Agreement between The Manufacturers Life Insurance Company
and ManEquity, Inc. dated January 2, 1991 as amended March 1, 1994.
Previously filed as Exhibit 8(d) to Post-Effective Amendment No. 1 to
the Registration Statement on Form N-4 filed by The Manufacturers
Life Insurance Company of America on May 2, 1994.
52
<PAGE> 63
(iv)
(9)(a) Opinion and consent of James D. Gallagher, Esq., General Counsel of
The Manufacturers Life Insurance Company of America. Previously filed
as Exhibit (9)(a) to Post-Effective Amendment No. 7 on Form N-4 filed
by The Manufacturers Life Insurance Company of America on December
18, 1996 (File No. 33-57018).
(9)(b) Consent of Ernst & Young LLP. [To be filed by Amendment]
(16) Performance Computation Schedule. Previously filed as Exhibit 16 to
the Post-Effective Amendment No. 3 to the Registration Statement
on Form N-4 filed by The Manufacturers Life Insurance Company of
America on April 26, 1996 (File No. 33-57018).**
(24) Power of Attorney. Previously filed as Exhibit (12) to Post-Effective
Amendment No. 10 on Form S-6 filed by The Manufacturers Life
Insurance Company of America on February 28, 1997 (file No.
33-52310).**
(27) Financial Data Schedule Not-Applicable.
** Filed electronically
53
<PAGE> 64
Item 25. Directors and Officers of the Depositor.
The names and positions of each of the officers and directors of The
Manufacturers Life Insurance Company of America are set forth in Part A of this
registration statement under the caption Additional Information about
Manufacturers Life of America -- "Executive Officers and Directors". The
business address of John Richardson, Donald Guloien, Joseph Pietroski, Bruce
Gordon, John Ostler, Victor Apps, Robert Cook and Douglas Myers is 200 Bloor
Street, East, Toronto, Ontario, Canada M4W 1E5. The business address of Sandra
M. Cotter is 800 Michigan National Tower, Lansing, Michigan 48933. The business
address of James Gallagher and Theodore Kilkuskie is 73 Tremont Street, Boston,
MA 02108-3915.
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant.
THE MANUFACTURERS LIFE INSURANCE COMPANY
Manulife Corporation Organization as at December 31, 1997
The Manufacturers Life Insurance Company (Canada)
1. 1198150 Ontario Limited - Ontario (100%)
1.1 Manulife Investment Management Corporation - Canada (100%)
1.1.1 159139 Canada Inc. - Canada (50%)
A. Altamira Management Ltd. - Ontario (60.96%)
i. Altamira Financial Services Inc. - Ontario (100%)
a. AIS Securities (Partnership) - Ontario (100%) [5% by
Altamira Financial Services, Inc. and 95% by
Altamira Investment Services Inc.]
b. Altamira Investment Services Inc. - Ontario (100%)
(i) AIS Securities (Partnership) - Ontario (100%) [95%
by Altamira Investment Services Inc. and 5% by
Altamira Financial Services Inc.]
(ii) Altamira (Alberta) Ltd. - Alberta (100%)
(iii) Capital Growth Financial Services Inc. - Ontario
(100%)
B. ACI Limited - Cayman (100%)
1.2 1198183 Ontario Limited - Ontario (100%)
1.3 1198184 Ontario Limited - (100%)
2. ManuLife Holdings (Hong Kong) Limited - L.K. (100%)
3. ManuLife Financial Systems (Hong Kong) Limited - H.K. (100%)
4. P.T. Asuransi Jiwa Dharmala Manulife - Indonesia (51%)
5. WT (SW) Properties Ltd. - U.K. (100%)
6. OUB Manulife Pte. Ltd. - Singapore (50%)
7. Manulife (Malaysia) SDN.BHD. - Malaysia (100%)
8. Manulife (Thailand) Ltd. - Thailand (100%)
9. Young Poong Manulife Insurance Company - Korea (50%)
10. NAL Resources Limited - Alberta (100%)
11. Dhinfon-Manulife Insurance Company Limited - Bermuda (60%)
12. Manulife International Capital Corporation Limited - Ontario
12.1 Regional Power Inc. - Ontario (98.5%)
13. 484551 Ontario Limited - Ontario (100%)
13.1 484551 Ontario Limited - Ontario (100%)
14. Peel-de Maisonneuve Investments Ltd. - Canada (50%)
14.1 2932121 Canada Inc. - Canada (100%)
15. Balmoral Developments Inc. - Canada (100%)
54
<PAGE> 65
16. Townvest Inc. - Ontario (100%)
17. Cantay Holdings Inc. - Ontario (100%)
18. Manufacturers Life Capital Corporation Inc. - Canada (100%)
19. 495603 Ontario Limited - Ontario (100%)
20. 944744 Ontario Inc. - Ontario (100%)
21. The North American Group Inc. - Ontario (100%)
22. 742166 Ontario Inc. - Ontario (100%)
23. Manulife International Investment Management Limited - U.K. (100%)
23.1 Manulife International Fund Management Limited - U.K. (100%)
24. Manulife (International) Limited - Bermuda (100%)
24.1 The Manufacturers (Pacific Asia) Insurance Company Limited
- Hong Kong (100%)
24.2 Newtime Consultants Limited - Hong Kong (100%)
24.3 Zhong Hong Life Insurance Co. Ltd. - China (51%)
25. Manulife Data Services Inc. - Barbados (100%)
(a) Manulife Funds Direct (Barbados) Limited - Barbados - (100%)
(i) Manulife Funds Direct (Hong Kong) Limited - Hong Kong (100%)
26. FNA Financial Inc. - Canada (100%)
26.1 Elliott & Page Limited - Ontario (100%)
26.2 Seamark Asset Management Ltd. - Canada (69.175%)
26.3 NAL Resources management Limited - Canada (100%)
(i) NAL Energy Inc. - Alberta (100%)
27. ManuCab Ltd. - Canada (100%)
27.1 Plazcab Service Limited - Canada (100%)
28. The Manufacturers Investment Corporation - Michigan (100%)
A. Manulife Reinsurance Corporation (U.S.A.) - Michigan (100%)
A.I The Manufacturers Life Insurance Company (U.S.A.) - Michigan (100%)
a) The Manufacturers Life Insurance Company of America
- Michigan (100%)
(i) Manulife Holding Corporation - Delaware (100%)
ia. ManEquity, Inc. - Colorado (100%)
ib. Manulife Service Corporation - Colorado (100%)
ic. Manufacturers Adviser Corporation - Colorado (100%)
id. Succession Planning International Inc. - Wisconsin
(80.11%)
ie. Manufacturers Life Mortgage Securities Corporation
- Delaware (100%)
if. Manulife Property Management of Washington, D.C., Inc.
- Washington, D.C. - 100%
b) Capitol Bankers Life Insurance Company - Michigan (100%)
c) Ennal, Inc. - Ohio (100%)
d) First North America Realty, Inc. - Minnesota (100%)
e) NAWL Holding Company, Inc. - Delaware (65%) [20% by The
Manufacturers Life Insurance Company]
(i) Wood Logan Associates Inc. - Connecticut (100%)
i.a. Wood Logan Distributors - Connecticut (100%0
(ii) North American Security Life Insurance Company - Delaware
(100%)
ii.a NASL Financial Services, Inc. - Massachusetts (100%)
11.b First North American Life Assurance Company -
New York (100%)
A.II. Manulife Reinsurance Limited - Bermuda (100%)
55
<PAGE> 66
29. NAWL Holding Company Inc. - Delaware (20%)
29.1 Wood Logan Associates Inc. - Connecticut (100%)
29.1.1 Wood Logan Distributors - Connecticut (100%)
29.2 North American Security Life Insurance Company - Delaware (100%)
29.2.1 NASL Financial Services, Inc. - Massachusetts (100%)
29.2.2 First North American Life Assurance Company - New York (100%)
30. Manulife (International) Reinsurance Limited - Bermuda (100%)
30.1 Manulife (International) P&C Limited - Bermuda (100%)
30.2 Manufacturers P&C Limited - Barbados (100%)
30.2.1 Manufacturers Life Reinsurance Limited - Barbados (100%)
31. Thos. N. Shea Investment Corporation Limited - Ontario (100%)
32. Family Realty First Corp. Limited - Ontario (100%)
33. Manulife Bank of Canada - Canada (100%)
33.1 Manulife Securities International Ltd. - Canada (100%)
Item 27. Number of Policyowners
There were 1,284 Policies participating in the contract offered by this
prospectus, at December 31, 1997, (date within 90 days of filing).
56
<PAGE> 67
Item 28. Indemnification of Directors and Officers
Article XV of the By-Laws of The Manufacturers Life Insurance Company of
America provides for indemnification of directors and officers as follows:
"Article XV."
1. The Company may indemnify any person who is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal or administrative (other than by or in
the right of the Company), by reason of the fact that he;
(a) is or was a director, officer or employee of the Company,
or
(b) is or was serving at the request of the Company as a
director, officer, employee, or trustee of another
corporation, partnership, joint venture, trust or other
enterprise,
against all expenses (including solicitors' and attorneys' fees),
judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him in connection with such action, suit or proceeding, if he
acted honestly and in good faith and with a view to the best interests of
the Company, and, in the case of any criminal or administrative action or
proceeding, he had reasonable grounds for believing that his conduct was
lawful. The termination of any action, suit or proceeding by judgment,
order, settlement or conviction shall not of itself create a presumption
that the person did not act honestly and in good faith with a view to the
best interest of the Company and, with respect to any criminal action or
proceeding, that he did not have reasonable grounds for believing that his
conduct was lawful.
2. The Company shall in any event indemnify a person referred to in
paragraph 1 hereof who has been substantially successful in the defence of
any such action, suit or proceeding against all expenses (including
solicitors' and attorneys' fees) reasonably incurred by him in connection
with the action, suit or proceeding.
3. The indemnification provided by this By-Law shall be continuing and enure
to the benefit of the heirs, executors, and administrators of any person
referred to in paragraph 1 hereof.
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4. Expenses (including solicitors' and attorneys' fees) incurred in
defending a civil or criminal action, suit or proceeding may be paid by
the Company in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of any person
referred to in paragraph 1 hereof to repay the amount if it shall be
ultimately determined that he is not entitled to indemnified by the
Company as authorized by this By-Law.
5. The indemnification provided by this By-Law shall not be deemed exclusive
of any other rights to which those entitled to be indemnified hereunder
may be entitled as a matter of law or under any by-law, agreement, vote of
members, or otherwise.
Administrative Resolution Number 600.01 of The Manufacturers Life Insurance
Company provides for indemnification of certain directors and officers of
subsidiary companies as follows:
"Resolution 600.01"
1.1 [The Manufacturers Life Insurance Company (the "Company")] shall
indemnify any person who is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether
civil, criminal or administrative (other than by or in the right of the
Company except as provided in 1.2 of this Article) by reason of the fact
that the person
(a) is or was a Director, officer or employee of the Company,
or
(b) is or was serving at the specific request of the Company,
as a Director, officer, employee or trustee of another
corporation, partnership, joint venture, trust or other
enterprise, or
(c) is or was engaged at the same time as an agent in the
sale of the Company's products while at the same time
employed by the Company in the United States in a branch
management capacity,
against all expenses (including but not limited to solicitors' and
attorneys' fees) judgments, fines and amounts in settlement, actually and
reasonably incurred by the person in connection with such action, suit or
proceeding, (other than those specifically excluded below) if the person
acted honestly, in good faith, with a view to the best interests of the
Company or the enterprise the person is serving at the request of the
Company, and within the scope of his or her authority and normal
activities, and, in the case of any criminal or administrative action or
proceeding, the person had reasonable grounds for believing that his or her
conduct was lawful.
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<PAGE> 69
The termination of any action, suit or proceeding by judgment, order,
settlement or conviction shall not of itself create a presumption that the
person did not act honestly and in good faith with a view to the best
interests of the Company and, with respect to any criminal action or
proceeding, that the person did not have reasonable grounds for believing
that his or her conduct was lawful.
1.2 The Company shall also, with the approval of the Board, indemnify a person
referred to in Section 1.1 of this Article in respect of any action by any
person by or on behalf of the Company to procure a judgment in its favour
to which the person is made a party by reason of being or having been a
Director, officer or employee of the Company, against all costs, charges
and expenses reasonably incurred by him or her in connection with such
action if he or she fulfills the conditions set out in Section 1.1 of this
Article.
1.3 The Company shall have no obligation to indemnify any person for:
(a) any act, error, or omission committed with actual
dishonest, fraudulent, criminal or malicious purpose or
intent, or
(b) any act of gross negligence or willful neglect, or
(c) any liability of others assumed by any person otherwise
entitled to indemnification hereunder, or
(d) any claims by or against any enterprise which is owned,
operated, managed, or controlled by any person otherwise
entitled to indemnification hereunder or any claims by such
person against an enterprise, or
(e) any claim arising out of, or based on, any pension plan
sponsored by any person otherwise entitled to indemnification
hereunder as employer, or
(f) bodily injury, sickness, disease or death of any person, or
injury to or destruction of any tangible property including
loss of use thereof, or
(g) any amount covered by any other indemnification provision or by
any valid and collectible insurance which the person entitled
to indemnity hereunder may have, or
(h) any liability in respect of which the person would otherwise be
entitled to indemnification if in the course of that
person's actions, he or she is found by the Board of
Directors to have been in breach of compliance with the
Company's Code of Business Conduct or Conflict of
Interest guidelines, or
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<PAGE> 70
(i) any liability incurred by that person for any sales activities
unless the person qualifies under Section 1.1(c) of this
Article.
1.4 In the event of any indemnity payment by the Company and as a condition of
it, the Company shall be subrogated to all the rights of recovery of the
person indemnified, and such person shall execute and deliver instruments
and papers and do whatever else is necessary to secure such rights.
1.5 As a condition of indemnification, the person to be indemnified shall not
demand or agree to arbitration of any claim, make any payment, admit any
liability, settle any claims, assume any obligation or incur any expense
without the written consent of the Company.
1.6 Any claim to indemnification shall not be assignable. In the event of
death or incompetency, the legal representative of a person eligible for
indemnification shall be entitled to indemnification for those acts and
omissions of the indemnified person incurred prior to his death or
incompetency.
1.7 The Company shall have the right as a condition of pending
indemnification to appoint counsel satisfactory to the person to be
indemnified to defend the person for any claim against him or her which
may be covered by this indemnity.
1.8 The indemnification shall be continuing and enure to the benefit of the
heirs, executors and administrators of any person referred to in Section
1.1. of this Article.
1.9 Expenses (including but not limited to solicitors' and attorneys' fees),
incurred in defending a civil, criminal, or administrative action, suit or
proceeding shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of any person referred to in Section 1.1 of
this Article to repay the amount if it shall be ultimately determined that
the person is not eligible to be indemnified by the Company.
1.10 The Indemnification provided hereunder shall not be deemed exclusive of
any other rights to which those eligible to be indemnified hereunder may
be entitled as a matter of law under any By-Law, Resolution, agreement,
vote of members or otherwise.
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<PAGE> 71
Liability Insurance
At a meeting of the Executive Committee of the Board of
Directors of The Manufacturers Life Insurance Company held October 21,
1993, the purchase of Directors and Officers (D&O) liability insurance
was approved. It became effective December 1, 1993. It provides
global coverage for all Directors and Officers of The Manufacturers
Life Insurance Company and its subsidiaries.
The coverage provided:
1. Insures Directors and Officers against loss arising from claims
against them for certain acts in cases where they are not
indemnified by The Manufacturers Life Insurance Company or a
subsidiary.
2. Insures The Manufacturers Life Insurance Company against loss
arising from claims against Directors and Officers for certain
wrongful acts, but only where the corporation indemnifies the
Directors or Officers as required or permitted under applicable
statutory or by-law provisions.
In general, the D&O coverage encompasses:
- past, present and future Directors and Officers of The
Manufacturers Life Insurance Company and subsidiaries
- defense costs and settlements (if legally obligated to be
paid) resulting from third party claims in connection with
'wrongful acts' committed by a Director or Officer within
the scope of their duties
- claims made basis (i.e. policy responds to claims
filed/reported during the policy term, including claims
arising from events transpiring before the policy was in
force as long as no Director/Officer was aware of the events
prior to coverage placement).
Item 29. Principal Underwriters.
(a) In addition to the Policies, ManEquity, Inc. acts as principal
underwriter of policies participating in Separate Accounts One, Three and
Four as well as other Policies issued by Separate Account Two of The
Manufacturers Life Insurance Company of America.
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<PAGE> 72
<TABLE>
<CAPTION>
(b) Name and Principal Positions and Offices
Business Address with Underwriter
------------------- ------------------------
<S> <C>
- Thomas G. Reive Treasurer
200 Bloor Street East
Toronto, Ontario
- Gary Buchanan V.P., Compliance
200 Bloor Street East
Toronto, Ontario
- Brian Buckley Secretary and General
73 Tremont Street Counsel
Boston, Massachusetts 02108
- Douglas Myers Director, President
200 Bloor Street East
Toronto, Ontario
- Bruce Gordon Director
200 Bloor Street East
Toronto, Ontario
- John Richardson Director
200 Bloor Street East
Toronto, Ontario
- Gary Buchanan Director
200 Bloor Street East
Toronto, Ontario
- Ray Bubbs Director
73 Tremont St.
Boston, MA 02108
</TABLE>
<TABLE>
<CAPTION>
(c) (1) (2) (3) (4) (5)
Name of Net Underwriting Other
Principal Discounts and Compensation Brokerage Compen-
Underwriter Commissions on Redemption Commissions sation
- ----------- ---------------- ------------- ----------- --------
<S> <C> <C> <C> <C>
ManEquity, Inc. $ * - 0 - - 0 - - 0 -
</TABLE>
* To be supplied by Amendment.
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<PAGE> 73
Item 30. Location of Accounts and Records.
Pursuant to a Service Agreement, The Manufacturers Life Insurance Company
maintains physical possession of the books and records of Separate Account Two
required by Section 31(a) of the 1940 Act and the rules thereunder.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
Representation of Insurer Pursuant to Section 26 of the Investment
Company Act of 1940
The Manufacturers Life Insurance Company of America 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.
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<PAGE> 74
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant and the Depositor have caused
this amendment to the Registration Statement to be signed on their behalf in the
City of Toronto, Province of Ontario, Canada, on this 27th day of
February, 1998.
SEPARATE ACCOUNT TWO OF
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
(Registrant)
By: THE MANUFACTURERS LIFE INSURANCE
COMPANY OF AMERICA
(Depositor)
By: /s/ Donald A. Guloien
-----------------------------
DONALD A. GULOIEN
President
THE MANUFACTURERS LIFE
INSURANCE COMPANY OF AMERICA
By: /s/ Donald A. Guloien
------------------------------
DONALD A. GULOIEN
President
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<PAGE> 75
SIGNATURES
Pursuant to the requirements of the Securities Act of l933, this amended
Registration Statement has been signed by the following persons in the
capacities on this 27th day of February, 1998.
<TABLE>
<CAPTION>
Signature Title
- -------------- -------------
<S> <C>
*
- ---------------------------- Chairman and Director
JOHN D. RICHARDSON
*
- ---------------------------- President and Director
DONALD A. GULOIEN (Principal Executive Officer)
*
- ---------------------------- Director
SANDRA M. COTTER
/s/ James D. Gallagher
- ---------------------------- Director
JAMES D. GALLAGHER
*
- ---------------------------- Director
BRUCE GORDON
*
- ---------------------------- Director
JOSEPH J. PIETROSKI
*
- ---------------------------- Director
THEODORE KILKUSKIE, JR.
* Vice President, Finance
- ---------------------------- (Principal Financial and
DOUGLAS H. MYERS Accounting Officer)
*/s/ James D. Gallagher
- -----------------------------
JAMES D. GALLAGHER
Pursuant to Power of Attorney
</TABLE>
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EXHIBIT INDEX
No Exhibits Filed
66
