0001193125-05-200355.txt : 20151006 0001193125-05-200355.hdr.sgml : 20151006 20051012165154 ACCESSION NUMBER: 0001193125-05-200355 CONFORMED SUBMISSION TYPE: N-6/A PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 20051012 DATE AS OF CHANGE: 20070130 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JOHN HANCOCK LIFE INSURANCE CO (USA) SEPARATE ACCOUNT N CENTRAL INDEX KEY: 0000813572 IRS NUMBER: 232030787 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-6/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-126668 FILM NUMBER: 051135450 BUSINESS ADDRESS: STREET 1: 200 BLOOR STREET EAST ST 10 STREET 2: TORONTO M4W 1EF CITY: ONTARIO CANADA STATE: A6 ZIP: 48304 BUSINESS PHONE: 4169266302 MAIL ADDRESS: STREET 1: P O BOX 600 CITY: BUFFALO STATE: NY ZIP: 14201-0600 FORMER COMPANY: FORMER CONFORMED NAME: MANUFACTURERS LIFE INS CO USA SEPARATE ACCOUNT N DATE OF NAME CHANGE: 20020411 FORMER COMPANY: FORMER CONFORMED NAME: SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INS CO OF AM DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JOHN HANCOCK LIFE INSURANCE CO (USA) SEPARATE ACCOUNT N CENTRAL INDEX KEY: 0000813572 IRS NUMBER: 232030787 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-6/A SEC ACT: 1940 Act SEC FILE NUMBER: 811-05130 FILM NUMBER: 051135451 BUSINESS ADDRESS: STREET 1: 200 BLOOR STREET EAST ST 10 STREET 2: TORONTO M4W 1EF CITY: ONTARIO CANADA STATE: A6 ZIP: 48304 BUSINESS PHONE: 4169266302 MAIL ADDRESS: STREET 1: P O BOX 600 CITY: BUFFALO STATE: NY ZIP: 14201-0600 FORMER COMPANY: FORMER CONFORMED NAME: MANUFACTURERS LIFE INS CO USA SEPARATE ACCOUNT N DATE OF NAME CHANGE: 20020411 FORMER COMPANY: FORMER CONFORMED NAME: SEPARATE ACCOUNT FOUR OF THE MANUFACTURERS LIFE INS CO OF AM DATE OF NAME CHANGE: 19920703 N-6/A 1 dn6a.txt JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N CVUL 05 As filed with the U.S. Securities and Exchange Commission on October 12, 2005 Registration No. 333-126668 ---------------------------------------------- U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------ FORM N-6 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 PRE-EFFECTIVE AMENDMENT NO.1 [X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 AMENDMENT NO. 6 [X] JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N (formerly, The Manufacturers Life Insurance Company (U.S.A.)Separate Account N) (Exact Name of Registrant) JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) (formerly, The Manufacturers Life Insurance Company (U.S.A.) ) (Name of Depositor) 38500 Woodward Avenue Bloomfield Hills, Michigan 48304 (Complete address of depositor's principal executive offices) Depositor's Telephone Number: 1-800-521-1234 ------------------ JAMES C. HOODLET, ESQ. JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) U.S. Protection - LAW JOHN HANCOCK PLACE BOSTON, MA 02117 (Name and complete address of agent for service) ------------------ Copy to: THOMAS C. LAUERMAN, ESQ. Foley & Lardner 3000 K Street, N.W. Washington, D.C. 20007 ------------------ It is proposed that this filing will become effective as soon as practicable after the effective date of the Registration Statement. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Prospectus dated October 12, 2005 for interests in Separate Account N Interests are made available under CORPORATE VUL a flexible premium variable universal life insurance policy issued by JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) ("John Hancock USA") The policy provides a fixed account with fixed rates of return declared by John Hancock USA and the following investment accounts: Science & Technology Pacific Rim Health Sciences Emerging Growth Small Cap Growth Emerging Small Company Small Cap Index Dynamic Growth Mid Cap Stock Natural Resources All Cap Growth Strategic Opportunities Financial Services International Opportunities International Stock International Small Cap International Equity Index B Overseas Equity American International International Value Quantitative Mid Cap Mid Cap Index Mid Cap Core Global Capital Appreciation American Growth U.S. Global Leaders Growth Quantitative All Cap All Cap Core Large Cap Growth Total Stock Market Index Blue Chip Growth U.S. Large Cap Core Equity Strategic Value Large Cap Value Classic Value Utilities Real Estate Securities Small Cap Opportunities Small Cap Value Small Company Value Special Value Mid Value Mid Cap Value Value All Cap Value Growth & Income II 500 Index B Fundamental Value Growth & Income Large Cap Quantitative Value American Growth-Income Equity-Income American Blue Chip Income and Growth Income & Value Managed PIMCO VIT All Asset Global Allocation High Yield U.S. High Yield Bond Strategic Bond Strategic Income Global Bond Investment Quality Bond Total Return American Bond Real Return Bond Bond Index B Core Bond Active Bond U.S. Government Securities Short-Term Bond Money Market B Lifestyle Aggressive 1000 Lifestyle Growth 820 Lifestyle Balanced 640 Lifestyle Moderate 460 Lifestyle Conservative 280 * * * * * * * * * * * * Please note that the SEC has not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. GUIDE TO THIS PROSPECTUS This prospectus is arranged in the following way: . Starting on the next page is a Table of Contents for this prospectus. . The section after the Table of Contents is called "Summary of Benefits and Risks". It contains a summary of the benefits available under the policy and of the principal risks of purchasing the policy. You should read this section before reading any other section of this prospectus. . Behind the Summary of Benefits and Risks section is a section called "Fee Tables" that describes the fees and expenses you will pay when buying, owning and surrendering the policy. . Behind the Fee Tables section is a section called "Detailed Information". This section gives more details about the policy. It may repeat certain information contained in the Summary of Benefits and Risks section in order to put the more detailed information in proper context. . Finally, on the back cover of this prospectus is information concerning the Statement of Additional Information (the "SAI") and how the SAI, personalized illustrations and other information can be obtained. After this prospectus ends, you will find all applicable state-specific supplements. After the supplements, if any, the prospectuses for the underlying portfolios begin. See the section of this prospectus entitled "The Investment Accounts" for a brief description of the portfolios. 2 TABLE OF CONTENTS
Page No. -------- SUMMARY OF BENEFITS AND RISKS ........................... 4 The Nature of the Policy ................................ 4 Summary of Policy Benefits .............................. 4 Death Benefit ........................................ 4 Surrender of the Policy .............................. 4 Withdrawals .......................................... 4 Policy Loans ......................................... 4 Optional Supplementary Benefit Riders ................ 5 Investment Options ................................... 5 Summary of Policy Risks ................................. 5 Lapse Risk ........................................... 5 Investment Risk ...................................... 5 Transfer Risk ........................................ 5 Early Surrender Risk ................................. 5 Market Timing Risk ................................... 5 Tax Risks ............................................ 6 FEE TABLES .............................................. 7 DETAILED INFORMATION .................................... 14 Your Investment Options ................................. 14 Description of John Hancock USA ......................... 23 Description of Separate Account N ....................... 24 The Fixed Account ....................................... 24 The Death Benefit ....................................... 25 Limitations on payment of death benefit .............. 25 Base Face Amount vs. Supplemental Face Amount ........ 25 The minimum death benefit ............................ 25 When the insured person reaches 100 .................. 26 Requesting an increase in coverage ................... 26 Requesting a decrease in coverage .................... 26 Change of death benefit option ....................... 27 Tax consequences of coverage changes ................. 27 Your beneficiary ..................................... 27 Ways in which we pay out policy proceeds ............. 27 Changing a payment option ............................ 27 Tax impact of payment option chosen .................. 27 Premiums ................................................ 27 Planned Premiums ..................................... 27 Minimum initial premium .............................. 28 Maximum premium payments ............................. 28 Processing premium payments .......................... 28 Ways to pay premiums ................................. 28 Lapse and reinstatement ................................. 29 Lapse ................................................ 29 Death during grace period ............................ 29 Reinstatement ........................................ 29 The Policy Value ........................................ 29 Allocation of future premium payments ................ 30 Transfers of existing policy value ................... 30 Surrender and Withdrawals ............................... 31
Page No. -------- Surrender ............................................ 31 Withdrawals .......................................... 31 Policy loans ............................................ 31 Repayment of policy loans ............................ 31 Effects of policy loans .............................. 32 Description of Charges at the Policy Level .............. 32 Deduction from premium payments ...................... 32 Deductions from policy value ......................... 32 Additional information about how certain policy charges work ...................................... 33 Sales expenses and related charges ................... 33 Method of deduction .................................. 33 Reduced charges for eligible classes ................. 33 Other charges we could impose in the future .......... 33 Description of Charges at the Portfolio Level ........... 34 Other Policy Benefits, Rights and Limitations ........... 34 Optional supplementary benefit riders you can add ............................................... 34 Variations in policy terms ........................... 34 Procedures for issuance of a policy .................. 34 Commencement of insurance coverage ................... 34 Backdating ........................................... 35 Temporary coverage prior to policy delivery .......... 35 Monthly deduction dates .............................. 35 Changes that we can make as to your policy ........... 35 The owner of the policy .............................. 35 Policy cancellation right ............................ 36 Reports that you will receive ........................ 36 Assigning your policy ................................ 36 When we pay policy proceeds .......................... 36 General .............................................. 36 Delay to challenge coverage .......................... 37 Delay for check clearance ............................ 37 Delay of separate account proceeds ................... 37 Delay of general account surrender proceeds .......... 37 How you communicate with us .......................... 37 General Rules ........................................ 37 Telephone, Facsimile and Internet Transactions ....... 38 Distribution of Policies ............................. 38 Tax considerations ...................................... 39 General .............................................. 39 Policy proceeds ...................................... 39 Other policy distributions ........................... 40 Diversification rules and ownership of the Account ........................................... 40 7-pay premium limit .................................. 40 Corporate and H.R. 10 plans .......................... 41 Financial statements reference .......................... 41 Registration statement filed with the SEC ............... 41 Independent Registered Public Accounting Firm ........... 41
3 SUMMARY OF BENEFITS AND RISKS The Nature of the Policy The policy's primary purpose is to provide lifetime protection against economic loss due to the death of the insured person. The policy is unsuitable as a short-term savings vehicle because of the substantial policy-level charges. We are obligated to pay all amounts promised under the policy. The value of the amount you have invested under the policy may increase or decrease daily based upon the investment results of the investment accounts that you choose. The amount we pay to the policy's beneficiary upon the death of the insured person (we call this the "death benefit") may be similarly affected. That's why the policy is referred to as a "variable" life insurance policy. We call the investments you make in the policy "premiums" or "premium payments". The amount we require as your first premium depends upon the specifics of your policy and the insured person. Except as noted in the "Detailed Information" section of this prospectus, you can make any other premium payments you wish at any time. That's why the policy is called a "flexible premium" policy. Summary of Policy Benefits Death Benefit When the insured person dies, we will pay the death benefit minus any outstanding loans. There are two ways of calculating the death benefit (Option 1 and Option 2). You choose which one you want in the application. The two death benefit options are: . Option 1 - The death benefit will equal the greater of (1) the Total Face Amount, or (2) the minimum death benefit (as described under "The minimum death benefit" provision in the "Detailed Information" section of this prospectus). . Option 2 - The death benefit will equal the greater of (1) the Total Face Amout plus the policy value on the date of death, or (2) the minimum death benefit. Surrender of the Policy You may surrender the policy in full at any time. If you do, we will pay you the policy value less any outstanding policy debt. This is called your "net cash surrender value". You must return your policy when you request a surrender. If you have not taken a loan on your policy, the "policy value" of your policy will, on any given date, be equal to: . the amount you invested, . plus or minus the investment experience of the investment options you've chosen, . minus all charges we deduct, and . minus all withdrawals you have made. If you take a loan on your policy, your policy value will be computed somewhat differently. See "Effects of policy loans". Withdrawals After the first policy year, you may make a withdrawal of part of your surrender value. Generally, each withdrawal must be at least $500. There is a fee (usually $25) for each withdrawal. Your policy value is automatically reduced by the amount of the withdrawal and the charge. We reserve the right to refuse a withdrawal if it would reduce the net cash surrender value or the Total Face Amount below certain minimum amounts. Policy Loans You may borrow from your policy at any time by completing the appropriate form. Generally, the minimum amount of each loan is $500. The maximum amount you can borrow is determined by a formula (see the section entitled "Policy Loans" for the formula). Interest is charged on each loan. You can pay the interest or allow it to become part of the outstanding loan balance. You can repay all or part of a loan at any time. If there is an outstanding loan when the insured person dies, it will be deducted from the death benefit. Outstanding loans also permanently affect the calculation of your policy value. 4 Optional Supplementary Benefit Riders When you apply for the policy, you can request any of the optional supplementary benefit riders that we make available. Availability of riders varies from state to state. Charges for most riders will be deducted monthly from the policy value. Investment Options The policy offers a number of investment options, as listed on the cover of this prospectus. There is an option that provides a fixed rate of return. Such an option is referred to in this prospectus as a "fixed account". The rest of the options have returns that vary depending upon the investment results of underlying portfolios. These options are referred to in this prospectus as "investment accounts". The fixed account and the investment accounts are sometimes collectively referred to in this prospectus as the "accounts". The investment accounts cover a broad spectrum of investment styles and strategies. Although the portfolios of the Series Funds that underly those investment accounts operate like publicly traded mutual funds, there are important differences between the investment accounts and publicly-traded mutual funds. On the plus side, you can transfer money from one investment account to another without tax liability. Moreover, any dividends and capital gains distributed by each underlying portfolio are automatically reinvested and reflected in the portfolio's value and create no taxable event for you. On the negative side, if and when policy earnings are distributed (generally as a result of a surrender or withdrawal), they will be treated as ordinary income instead of as capital gains. Also, you must keep in mind that you are purchasing an insurance policy and you will be assessed charges at the policy level as well as at the fund level. Such policy level charges, in aggregate, are significant and will reduce the investment performance of your investment accounts. Summary of Policy Risks Lapse Risk If the net cash surrender value is insufficient to pay the charges when due, your policy can terminate (i.e. "lapse"). This can happen because you haven`t paid enough premiums or because the investment performance of the investment accounts you've chosen has been poor or because of a combination of both factors. You'll be given a "grace period" within which to make additional premium payments to keep the policy in effect. If lapse occurs, you'll be given the opportunity to reinstate the policy by making the required premium payments and satisfying certain other conditions. Since withdrawals reduce your policy value, withdrawals increase the risk of lapse. Policy loans also increase the risk of lapse. Investment Risk As mentioned above, the investment performance of any investment account may be good or bad. Your policy value will rise or fall based on the investment performance of the investment accounts you've chosen. Some investment accounts are riskier than others. These risks (and potential rewards) are discussed in detail in the attached prospectuses of the underlying portfolios. Transfer Risk There is a risk that you will not be able to transfer your policy value from one investment account to another because of limitations on the dollar amount or frequency of transfers you can make. The limitation on transfers out of the fixed account are more restrictive than those that apply to transfers out of investment accounts. Early Surrender Risk Depending on the amount of premium paid and the policy value at the time you are considering surrender, there may be little or no surrender value payable to you if the policy is surrendered. Market Timing Risk Investment accounts in variable life insurance products can be a prime target for abusive transfer activity because these products value their investment accounts on a daily basis and allow transfers among investment accounts without immediate tax consequences. As a result, some investors may seek to frequently transfer into and out of investment accounts in reaction to market news or to exploit a perceived pricing inefficiency. Whatever the reason, long-term investors in an investment account can be harmed by frequent transfer activity since such activity may expose the investment account's underlying 5 portfolio to increased portfolio transaction costs and/or disrupt the portfolio manager's ability to effectively manage the portfolio's investments in accordance with the portfolio's investment objectives and policies, both of which may result in dilution with respect to interests held for long-term investment. To discourage disruptive frequent trading activity, we impose restrictions on transfers (see "Transfers of existing policy value") and reserve the right to change, suspend or terminate telephone, facsimile and internet transaction privileges (see "How you communicate with us"). In addition, we reserve the right to take other actions at any time to restrict trading, including, but not limited to: (i) restricting the number of transfers made during a defined period, (ii) restricting the dollar amount of transfers, and (iii) restricting transfers into and out of certain investment accounts. We also reserve the right to defer a transfer at any time we are unable to purchase or redeem shares of the underlying portfolio. While we seek to identify and prevent disruptive frequent trading activity, it may not always be possible to do so. Therefore, no assurance can be given that the restrictions we impose will be successful in preventing all disruptive frequent trading and avoiding harm to long-term investors. Tax Risks In order for you to receive the tax benefits accorded life insurance under the Internal Revenue Code, your policy must comply with certain requirements of the Code. We will monitor your policy for compliance with these requirements, but a policy might fail to qualify as life insurance in spite of our monitoring. If this were to occur, you would be subject to income tax on the income credited to your policy for the period of disqualification and all subsequent periods. The tax laws also contain a so-called "7 pay limit" that limits the amount of premium that can be paid in relation to the policy's death benefit. If the limit is violated, the policy will be treated as a "modified endowment", which can have adverse tax consequences. There are also certain Treasury Department rules referred to as the "investor control rules" that determine whether you would be treated as the "owner" of the assets underlying your policy. If that were determined to be the case, you would be taxed on any income or gains those assets generate. In other words, you would lose the value of the so-called "inside build-up" that is a major benefit of life insurance. In general, you will be taxed on the amount of distributions that exceed the premiums paid under the policy. Any taxable distribution will be treated as ordinary income (rather than as capital gains) for tax purposes. There is also a tax risk associated with policy loans. Although no part of a loan is treated as income to you when the loan is made, surrender or lapse of the policy would result in the loan being treated as a distribution at the time of lapse or surrender. This could result in a considerable tax bill. Under certain circumstances involving large amounts of outstanding loans and an insured person of advanced age, you might find yourself having to choose between high premium requirements to keep your policy from lapsing and a significant tax burden if you allow the lapse to occur. Tax consequences of ownership or receipt of policy proceeds under federal, state and local estate, inheritance, gift and other tax laws can vary greatly depending upon the circumstances of each owner or beneficiary. There can also be unfavorable tax consequences on such things as the change of policy ownership or assignment of ownership interests. For these and all the other reasons mentioned above, we recommend you consult with a qualified tax adviser before buying the policy and before exercising certain rights under the policy. 6 FEE TABLES This section contains five tables that describe all of the fees and expenses that you will pay when buying and owning the policy. In the first three tables, certain entries show the minimum charge, the maximum charge and the charge for a representative insured person. Other entries show only the maximum charge we can assess and are labeled as such. Except where necessary to show a rate greater than zero, all rates shown in the tables have been rounded to two decimal places as required by prospectus disclosure rules. Consequently, the actual rates charged may be slightly higher or lower than those shown in the tables. The first table below describes the fees and expenses that you will pay at the time that you pay a premium, withdraw policy value, surrender the policy, lapse the policy or transfer policy value between investment accounts.
Transaction Fees Charge When Charge is Deducted Amount Deducted Maximum premium charge Upon payment of premium 7% of each premium paid Maximum withdrawal fee Upon making a withdrawal The lesser of 2% of the withdrawal amount or $25 Maximum transfer fee Upon each transfer into or out of an $25 (currently $0)(1) investment account beyond an annual limit of not less than 12
(1) This charge is not currently imposed, but we reserve the right to do so in the policy. 7 The next two tables describe the charges and expenses that you will pay periodically during the time you own the policy. These tables do not include fees and expenses paid at the portfolio level. Except for the policy loan interest rate, all of the charges shown in the tables are deducted from your policy value. The second table is devoted only to optional supplementary rider benefits.
Periodic Charges Other Than Fund Operating Expenses When Charge is Charge Deducted Cost of insurance charge:(1) Monthly Minimum charge Maximum charge Charge for representative insured person Face Amount charge:(2) Monthly for 10 policy years from the Policy Date Minimum charge Maximum charge Charge for representative insured person Administrative charge Monthly Asset-based risk charge(3) Monthly Maximum policy loan interest Accrues daily rate(4) Payable annually Amount Deducted Charge Guaranteed Rate Current Rate Cost of insurance charge:(1) Minimum charge $0.07 per $1,000 of NAR $0.05 per $1,000 of NAR Maximum charge $83.33 per $1,000 of NAR $83.33 per $1,000 of NAR Charge for representative $0.38 per $1,000 of NAR $0.13 per $1,000 of NAR insured person Face Amount charge:(2) Minimum charge $0.09 per $1,000 of Base Face $0.09 per $1,000 of Base Face Amount in policy years 1-10 Amount in policy years 1-3 $0.06 per $1,000 of Base Face Amount in policy years 4-6 $0.03 per $1,000 of Base Face Amount in policy years 7-10 Maximum charge $1.08 per $1,000 of Base Face $1.08 per $1,000 of Base Face Amount in policy years 1-10 Amount in policy years 1-3 $0.72 per $1,000 of Base Face Amount in policy years 4-6 $0.36 per $1,000 of Base Face Amount in policy years 7-10 Charge for representative $0.28 per $1,000 of Base Face $0.28 per $1,000 of Base Face insured person Amount Amount in policy years 1-3 $0.19 per $1,000 of Base Face Amount in policy years 4-6 $0.09 per $1,000 of Base Fase Amount in policy years 7-10 Administrative charge $ 12 $ 9 Asset-based risk charge(3) 0.08% of policy value in policy 0.03% of policy value in policy years 1-10 years 1-10 0.03% of policy value in policy 0.004% of policy value in policy year 11 and thereafter year 11 and thereafter Maximum policy loan interest 3.75% 3.75% rate(4)
(1) The insurance charge is determined by multiplying the amount of insurance for which we are at risk (the net amount at risk or "NAR") by the applicable cost of insurance rate. The rates vary widely depending upon the length of time the policy has been in effect, the insurance risk characteristics of the insured person and (generally) the gender of the insured person. The "minimum" rate shown in the table is the rate in the first policy year for a policy issued to cover a 15 year old female preferred underwriting risk. The "maximum" rate shown in the table at both guaranteed and current rates is the rate in the first policy year for a policy issued to cover a 90 year old male substandard smoker underwriting risk. This includes the so-called "extra mortality charge". The "representative insured person" referred to in the table is a 45 year old male standard non-smoker underwriting risk with a policy in the first policy year. The charges shown in the table may not be particularly relevant to your current situation. For more information about cost of insurance rates, talk to your John Hancock USA representative. (2) This charge is determined by multiplying the Base Face Amount at issue by the applicable rate. The rates vary by the sex and issue age of the insured person. The "minimum" rate shown in the table is for a 15 year old female. The "maximum" rate shown in the table is for a 90 year old male. The "representative insured person" referred to in the table is a 45 year old male. (3) This charge only applies to that portion of policy value held in the investment accounts. The charge determined does not apply to any fixed account. 8 (4) 3.75% is the maximum effective annual interest rate we can charge and applies only during policy years 1-10. The effective annual interest rate is 3.0% thereafter (although we reserve the right to increase the rate after the tenth policy year to as much as 3.25%). The amount of any loan is transferred from the accounts to a special loan account which earns interest at an effective annual rate of 3.0%. Therefore, the cost of a loan is the difference between the loan interest we charge and the interest we credit to the special loan account.
Rider Charges When Charge is Charge Deducted Amount Deducted Enhanced Cash Value Rider Upon payment 0.5% of premium paid in the first 7 policy years, up to the Limiting of premium Premium (1)for each policy stated in the Policy Specifications page of the policy.
(1) The "Limiting Premium" is an amount determined by multiplying the Base Face Amount at issue by an applicable rate which varies by the sex and issue age of the insured person. The "minimum" rate is for a 15-year old female and is $17.90 per $1000 of Base Face Amount. The "maximum" rate is for a 90-year old male and is $216.26 per $1000 of Base Face Amount. The rate for a "representative insured person" is for a 45 year old male and is $56.49 per $1000 of Base Face Amount. Thus, for the representative 45 year old male with $100,000 of Base Face Amount, the Limiting Premium for the policy year would be $5649.00. The next table describes the minimum and maximum portfolio level fees and expenses charged by any of the portfolios underlying a variable investment option offered through this prospectus, expressed as a percentage of average net assets (rounded to two decimal places). These expenses are deducted from portfolio assets.
Total Annual Portfolio Operating Expenses Minimum Maximum Range of expenses, including management fees, distribution and/ 0.50% 1.53% or service (12b-1) fees, and other expenses
The next table describes the fees and expenses for each class of shares of each portfolio underlying a variable investment option offered through this prospectus. None of the portfolios charge a sales load or surrender fee. The fees and expenses do not reflect the fees and expenses of any variable insurance contract or qualified plan which may use the portfolio as its underlying investment medium. Except for the American International, American Growth, American Growth-Income, American Blue Chip Income and Growth, American Bond and PIMCO VIT All Asset portfolios, all of the portfolios shown in the table are NAV class shares that are not subject to Rule 12b-1 fees. These NAV class shares commenced operations on April 29, 2005. The expense ratios shown in the table for the NAV class shares of a portfolio are estimates for the current fiscal year. In those cases where a portfolio had a Series I class of shares in operation during 2004, the NAV class estimates are based upon the expense ratios of the portfolio's Series I shares for the year ended December 31, 2004 (adjusted to reflect the absence of a Rule 12b-1 fee applicable to the NAV shares). In the case of the American International, American Growth, American Growth-Income, American Blue Chip Income and Growth, American Bond, and PIMCO VIT All Asset portfolios, the expense ratios are based upon the portfolio's actual expenses for the year ended December 31, 2004. Portfolio Annual Expenses (as a percentage of portfolio average net assets, rounded to two decimal places)
Management Other Total Portfolio Fees 12b-1 Fees Expenses Annual Expenses ---------------------------------- ------------ ------------ ---------- ---------------- Science & Technology ............ 1.04%A N/A 0.07% 1.11% Pacific Rim ..................... 0.80% N/A 0.28% 1.08% Health Sciences ................. 1.05%A N/A 0.11% 1.16% Emerging Growth ................. 0.80% N/A 0.07% 0.87% Small Cap Growth ................ 1.08% N/A 0.07% 1.15% Emerging Small Company .......... 1.00% N/A 0.06% 1.06% Small Cap ....................... 0.85% N/A 0.07% 0.92% Small Cap Index ................. 0.49% N/A 0.03% 0.52% Dynamic Growth .................. 0.95% N/A 0.07% 1.02% Mid Cap Stock ................... 0.86% N/A 0.05% 0.91% Natural Resources ............... 1.01% N/A 0.07% 1.08% All Cap Growth .................. 0.89% N/A 0.06% 0.95% Strategic Opportunities ......... 0.80% N/A 0.07% 0.87%
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Management Other Total Portfolio Fees 12b-1 Fees Expenses Annual Expenses ------------------------------------------------- ----------- ------------ ---------- ---------------- Financial ServicesF ............................ 0.88%F N/A 0.08% 0.96% International Opportunities .................... 0.90% N/A 0.20% 1.06% International Stock ............................ 0.90% N/A 0.16% 1.06% International Small Cap ........................ 1.00% N/A 0.19% 1.19% International Equity Index B G ................. 0.55% N/A 0.04% 0.59% Overseas Equity ................................ 1.05% N/A 0.09% 1.14% American International E ....................... 0.54% 0.60% 0.08% 1.22% International Value ............................ 0.87%D N/A 0.15% 1.02% Quantitative Mid Cap ........................... 0.75% N/A 0.09% 0.84% Mid Cap Index .................................. 0.49% N/A 0.03% 0.52% Mid Cap Core ................................... 0.90% N/A 0.16% 1.06% Global ......................................... 0.85%D N/A 0.15% 1.00% Capital Appreciation ........................... 0.85% N/A 0.07% 0.92% American Growth E .............................. 0.35% 0.60% 0.03% 0.98% U.S. Global Leaders Growth ..................... 0.71% N/A 0.73% 1.44%C Quantitative All Cap ........................... 0.71% N/A 0.05% 0.76% All Cap Core ................................... 0.80% N/A 0.07% 0.87% Large Cap Growth ............................... 0.85% N/A 0.06% 0.91% Total Stock Market Index ....................... 0.49% N/A 0.03% 0.52% Blue Chip Growth ............................... 0.82%A N/A 0.04% 0.86% U.S. Large Cap ................................. 0.82% N/A 0.06% 0.88% Core Equity .................................... 0.85% N/A 0.06% 0.91% Strategic Value ................................ 0.85% N/A 0.09% 0.94% Large Cap Value ................................ 0.85% N/A 0.13% 0.98% Classic Value .................................. 0.80% N/A 0.56% 1.36%C Utilities ...................................... 0.85% N/A 0.25% 1.10% Real Estate Securities ......................... 0.70% N/A 0.05% 0.75% Small Cap Opportunities ........................ 1.00% N/A 0.08% 1.08% Small Cap Value ................................ 1.08% N/A 0.08% 1.16% Small Company Value ............................ 1.04%A N/A 0.01% 1.05% Special Value .................................. 1.00% N/A 0.28% 1.28% Mid Value ...................................... 1.01%A N/A 0.07% 1.08% Mid Cap Value .................................. 0.87% N/A 0.05% 0.92% Value .......................................... 0.74% N/A 0.06% 0.80% All Cap Value .................................. 0.84% N/A 0.06% 0.90% Growth & Income II ............................. 0.68% N/A 0.03% 0.71% 500 Index B G .................................. 0.47% N/A 0.03% 0.50% Fundamental ValueF ............................. 0.84%F N/A 0.05% 0.89% Growth & Income I .............................. 0.76% 0.05% 0.04% 0.85% Large Cap ...................................... 0.85% N/A 0.15% 1.00% Quantitative Value ............................. 0.70% N/A 0.08% 0.78% American Growth-Income E ....................... 0.29% 0.60% 0.03% 0.92% Equity-Income .................................. 0.81%A N/A 0.05% 0.86% American Blue Chip Income and Growth E ......... 0.45% 0.60% 0.05% 1.10% Income & Value ................................. 0.79% N/A 0.04% 0.83% Managed ........................................ 0.69% N/A 0.04% 0.73% PIMCO VIT All Asset Portfolio .................. 0.20% 0.25% 1.08% 1.53%H Global Allocation .............................. 0.85% N/A 0.20% 1.05% High Yield ..................................... 0.68% N/A 0.07% 0.75%
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Management Other Total Portfolio Fees 12b-1 Fees Expenses Annual Expenses -------------------------------------- ----------- ------------ ---------- ---------------- U.S. High Yield Bond ................ 0.75% N/A 0.21% 0.96% Strategic Bond ...................... 0.70% N/A 0.08% 0.78% Strategic Income .................... 0.73% N/A 0.46% 1.19% Global Bond ......................... 0.70% N/A 0.10% 0.80% Investment Quality Bond ............. 0.60% N/A 0.09% 0.69% Total Return ........................ 0.70% N/A 0.05% 0.75% American Bond ....................... 0.44% 0.60% 0.04% 1.08% Real Return Bond .................... 0.70% N/A 0.07% 0.77% Bond Index B G ...................... 0.47% N/A 0.03% 0.50% Core Bond ........................... 0.69% N/A 0.21% 0.90% Active Bond ......................... 0.61% N/A 0.04% 0.65% U.S. Government Securities .......... 0.62% N/A 0.07% 0.69% Short-Term Bond ..................... 0.58% N/A 0.05% 0.63% Money Market B G .................... 0.49% N/A 0.04% 0.53% Lifestyle Aggressive 1000B .......... 0.05% N/A 1.02% 1.07% Lifestyle Growth 820B ............... 0.05% N/A 0.95% 1.00% Lifestyle Balanced 640B ............. 0.05% N/A 0.90% 0.95% Lifestyle Moderate 460B ............. 0.05% N/A 0.87% 0.92% Lifestyle Conservative 280B ......... 0.05% N/A 0.79% 0.84%
A The Adviser has voluntarily agreed to waive a portion of its advisory fee for the Science & Technology, Health Sciences, the Blue Chip Growth and the Equity-Income portfolios. The waiver is based on the combined assets of these portfolios and the Small Company Value portfolio. Once these combined assets exceed specified amounts, the fee reduction is increased. The fee reductions are applied to the advisory fees of each of the four portfolios. This voluntary fee waiver may be terminated at any time by the Adviser. If such advisory fee waiver were reflected, it is estimated that the advisory fees for these portfolios would have been as follows: Science & Technology ......... 1.01% Health Sciences .............. 1.02% Blue Chip Growth ............. 0.79% Equity-Income ................ 0.78% Mid Value .................... 0.98% Small Company Value .......... 1.01%
B Each of the Lifestyle Trusts may invest in all the other Trust portfolios except the American Growth Trust, the American International Trust, the American Blue Chip Income and Growth Trust, the American Growth-Income Trust and the American Bond Trust. "Other Expenses" reflects the expenses of the underlying portfolios as well as the expenses of the Lifestyle Trust. The Adviser is currently paying a portion of the expenses of each Lifestyle Trust. The expenses above do not reflect this expense reimbursement. If such expense reimbursement were reflected, it is estimated that "Other Expenses" and "Total Annual Expenses" would be:
Other Total Expenses Annual Expenses ---------- ---------------- Lifestyle Aggressive 1000 ....... 1.01% 1.06% Lifestyle Growth 820 ............ 0.94% 0.99% Lifestyle Balanced 640 .......... 0.89% 0.94% Lifestyle Moderate 460 .......... 0.86% 0.91% Lifestyle Conservative 280 ...... 0.78% 0.83%
This voluntary expense reimbursement may be terminated at any time. 11 C For certain portfolios, the Adviser reduces its advisory fee or reimburses the portfolio if the total of all expenses (excluding advisory fees, Rule 12b-1 fees, transfer agency fees, blue sky fees, taxes, portfolio brokerage commissions, interest, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the portfolio's business) exceed certain annual rates. In the case of the U.S. Global Leaders Growth and Classic Value portfolios, the Adviser reimbursed the portfolio for certain expenses for the year ended December 31, 2004. If such expense reimbursement were reflected, it is estimated that "Other Expenses" and "Total Trust Annual Expenses" would be:
Total Other Expenses Annual Expenses ---------------- ---------------- U.S. Global Leaders Growth ...... 0.50% 1.21% Classic Value ................... 0.50% 1.30%
These voluntary expense reimbursements may be terminated at any time. D Effective December 9, 2003, due to a decrease in the subadvisory fees for the Global and International Value portfolios, the Adviser voluntarily agreed to waive its advisory fees so that the amount retained by the Adviser after payment of the subadvisory fees for each such portfolio does not exceed 0.35% of the portfolio's average net assets. For the year ended December 31, 2004, the effective annual advisory fee for the Global and International Value portfolios was 0.80% and 0.80%, respectively. These advisory fee waivers may be rescinded at any time. E Reflects the aggregate annual operating expenses of Series I of each portfolio and its corresponding master fund of the American Fund Insurance Series. In the case of the American Growth, American International, American Blue Income and Growth, and American Growth-Income portfolio, during the year ended December 31, 2004, Capital Research Management Company (the adviser to the American Growth, American International, American Blue Income and Growth, and American Growth-Income portfolios) voluntarily reduced investment advisory fees to rate provided by amended agreement effective April 1, 2004. If such fee waiver had been reflected, the advisory fee would be 0.34%, 0.53%, 0.44%, 0.28% and Total Trust Annual Expenses would be 0.97%, 1.21%, 1.09%, and 0.91%. F The Adviser has voluntarily agreed to reduce its advisory fee for the Financial Services and Fundamental Value portfolios to the amounts shown below. These advisory fee waivers may be terminated at any time.
Between $50 million Excess Over Portfolio First $50 million* and $500 million* $500 million* ------------------------------ -------------------- --------------------- -------------- Financial Services ......... 0.85% 0.80% 0.75% Fundamental Value .......... 0.85% 0.80% 0.75%
* as a percentage of average annual net assets. If such advisory fee waiver were reflected, it is estimated that the advisory fees for these portfolios would have been as follows: Financial Services ......... 0.83% Fundamental Value .......... 0.79%
G The Trust sells these portfolios only to certain variable life insurance and variable annuity separate accounts of John Hancock Life Insurance Company and its affiliates. Each portfolio is subject to an expense cap pursuant to an agreement between the Trust and the Adviser. The fees in the table reflect such expense cap. The expense cap is as follows: the Adviser has agreed to waive its advisory fee (or, if necessary, reimburse expenses of the portfolio) in an amount so that the rate of the portfolio's "Annual Operating Expenses" does not exceed the rate noted in the table under "Total Annual Expenses." The rates noted in the table for each portfolio reflect a fee waiver (or expense reimbursement) equal to 0.25% of the portfolio's average net assets. A portfolio's "Annual Operating Expenses" includes all of its operating expenses including advisory fees and Rule 12b-1 fees, but excludes taxes, brokerage commissions, interest, litigation and indemnification expenses and extraordinary expenses of the portfolio not incurred in the ordinary course of the portfolio`s business. Under the Agreement, the Adviser's obligation to provide the expense cap with respect to a particular portfolio terminates only if the Trust, without the prior written consent of the Adviser, sells shares of the portfolio to (or has shares of the portfolio held by) any person other than the variable life insurance or variable annuity insurance separate accounts of John Hancock Life Insurance Company or any of its affiliates that are specified in the agreement. H The PIMCO VIT All Asset Portfolio may invest in any of a number of underlying funds offered by the PIMCO Funds (the "PIMS Funds"). Underlying PIMS Fund expenses for the portfolio are estimated based upon an allocation of the portfolio's assets among the underlying PIMS Funds and upon the total annual operating expenses of the Institutional Class shares of these underlying PIMS Funds. Underlying PIMS Fund expenses will vary with changes in the expenses of the underlying PIMS Funds, as well as allocation of the portfolio's assets, and may be higher or lower than those shown above. The underlying PIMS Fund net operating expenses for the most recent fiscal year range from 0.32% to 0.85%. PIMCO has contractually agreed, for the portfolio's current fiscal year, to reduce its Advisory Fee to the extent that the underlying PIMS Fund Expenses attributable to Advisory and Administrative Fees exceed 0.60%. PIMCO may recoup these waivers in future periods, not exceeding three years, provided total expenses, including each recoupment, do not exceed the annual expense limit. 12 I The percentages shown have been restated to reflect the expected affirmative shareholder vote on October 17, 2005 to increase the management fee. The percentages shown for the portfolio restate the 2004 numbers as if the management fee increase had been in effect for all of 2004. 13 DETAILED INFORMATION This section of the prospectus provides additional detailed information that is not contained in the Summary of Benefits and Risks section. Your Investment Options The assets of each sub-account of the Account (except those invested in the American Growth, American International, American Blue Chip Income and Growth, American Growth-Income American Bond and PIMCO All Asset portfolios) are invested in the NAV shares of a corresponding investment portfolio of the John Hancock Trust (the "Trust"). The Trust is registered under the 1940 Act as an open-end management investment company. John Hancock Investment Management Services, LLC("JHIMS LLC") (formerly, Manufacturers Securities Services, LLC) provides investment advisory services to the Trust and receives investment managementfees for doing so. JHIMS LLC pays a portion of its investment management fees to sub-investment advisors that actually manage the portfolio assets. These sub-investment managers are the entities identified in the table below as "Portfolio Managers". Our affiliates own JHIMS LLC and, therefore, we indirectly benefit from any investment management fees JHIMS LLC retains. Each of the American Growth, American International, American Growth-Income American Blue Chip Income and Growth and American Bond subaccounts invests in Series I shares of the corresponding investment portfolio of the Trust and are subject to a 0.60% Rule 12b-1 fee. The PIMCO VIT All Asset portfolio is a series of the PIMCO Variable Insurance Trust (the "PIMCO Trust") which is registered under the 1940 Act as an open-end management investment company. The assets of the PIMCO VIT All Asset subaccount are invested in Class M shares of the PIMCO VIT All Asset portfolio which is subject to a 0.25% Rule 12b-1 fee. The PIMCO Trust receives investment advisory services from Pacific Investment Management Company LLC ("PIMCO") and pays investment management fees to PIMCO. In this prospectus, the Trust and the PIMCO Trust are each referred to as a "Series Fund" and are collectively referred to as the "Series Funds". In this prospectus the various series of the Series Funds are referred to as "funds" or "portfolios". In the prospectuses for the Series Funds, the series may be referred to by other terms such as "trusts" or "series". The portfolios pay us or certain of our affiliates compensation for some of the distribution, administrative, shareholder support, marketing and other services we or our affiliates provide to the portfolios. The amount of this compensation is based on a percentage of the assets of the portfolios attributable to the variable insurance products that we and our affiliates issue. These percentages may differ from portfolio to portfolio and among classes of shares within a portfolio. In a few cases, the compensation is derived from the Rule 12b-1 fees which are deducted from a portfolio's assets for the services we or our affiliates provide to that portfolio. In addition, compensation payments of up to 0.45% of assets may be made by a portfolio's investment advisors or its affiliates. We pay American Funds Distributors, Inc., the principal underwriter for the American Fund Insurance Series, a percentage of some or all of the amounts allocated to the "American" portfolios of the Trust for the marketing support services it provides (see "Distribution of Policies"). None of these compensation payments, however, result in any charge to you in addition to what is shown in the Fee Tables. The following table contains a general description of the portfolios that underlie the investment accounts we make available under the policy. You can find a full description of each portfolio, including the investment objectives, policies and restrictions of, and the risks relating to investment in the portfolio, in the prospectus for that portfolio. You should read the portfolio's prospectus carefully before investing in the corresponding investment account.
Portfolio Portfolio Manager ======================= ================================ Science & Technology T. Rowe Price Associates, Inc. Portfolio Investment Description ======================= ============================================================== Science & Technology Seeks long-term growth of capital by investing, under normal market condition, at least 80% of its net assets (plus any borrowings for investment purposes) in common stocks of companies expected to benefit from the development, advancement, and use of science and technology. Current income is incidental to the portfolio's objective.
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Portfolio Portfolio Manager ========================== ================================= Pacific Rim MFC Global Investment Management (U.S.A.) Limited Health Sciences T. Rowe Price Associates, Inc. Emerging Growth MFC Global Investment Management (U.S.A.) Limited Small Cap Growth Wellington Management Company, LLP Emerging Small Company Franklin Advisers, Inc. Small Cap Independence Investment LLC Small Cap Index MFC Global Investment Management (U.S.A.) Limited Dynamic Growth Deutsche Asset Management Inc. Mid Cap Stock Wellington Management Company, LLP Natural Resources Wellington Management Company, LLP All Cap Growth AIM Capital Management, Inc. Strategic Opportunities Fidelity Management & Research Company Portfolio Investment Description ========================== =============================================================== Pacific Rim Seeks long-term growth of capital by investing in a diversified portfolio that is comprised primarily of common stocks and equity-related securities of corporations domiciled in countries in the Pacific Rim region. Health Sciences Seeks long-term capital appreciation by investing, under normal market conditions, at least 80% of its net assets (plus any borrowings for investment purposes) in common stocks of companies engaged in the research, development, production, or distribution of products or services related to health care, medicine, or the life sciences (collectively termed "health sciences"). Emerging Growth Seeks superior long-term rates of return through capital appreciation by investing, under normal circumstances, primarily in high quality securities and convertible instruments of small-cap U.S. companies. Small Cap Growth Seeks long-term capital appreciation by investing, under normal market conditions, primarily in small-cap companies that are believed to offer above average potential for growth in revenues and earnings. Emerging Small Company Seeks long-term growth of capital by investing, under normal market conditions, at least 80% of its net assets (plus any borrowings for investment purposes) in common stock equity securities of companies with market capitalizations that approximately match the range of capitalization of the Russell 2000 Growth Index* ("small cap stocks") at the time of purchase. Small Cap Seeks maximum capital appreciation consistent with reasonable risk to principal by investing, under normal market conditions, at least 80% of its net assets in equity securities of companies whose market capitalization is under $2 billion. Small Cap Index Seeks to approximate the aggregate total return of a small cap U.S. domestic equity market index by attempting to track the performance of the Russell 2000 Index. Dynamic Growth Seeks long-term growth of capital by investing in stocks and other equity securities of medium-sized U.S. companies with strong growth potential. Mid Cap Stock Seeks long-term growth of capital by investing primarily in equity securities of mid-size companies with significant capital appreciation potential. Natural Resources Seeks long-term total return by investing, under normal market conditions, primarily in equity and equity-related securities of natural resource-related companies worldwide. All Cap Growth Seeks long-term capital appreciation by investing the portfolio's assets under normal market conditions, principally in common stocks of companies that are likely to benefit from new or innovative products, services or processes, as well as those that have experienced above average, long-term growth in earnings and have excellent prospects for future growth. Strategic Opportunities Seeks growth of capital by investing primarily in common stocks. Investments may include securities of domestic and foreign issuers, and growth or value stocks or a combination of both.
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Portfolio Portfolio Manager =============================== ===================================== Financial Services Davis Advisors International Opportunities Marisco Capital Management, LLC International Stock Grantham, Mayo, VanOtterloo & Co. LLC International Small Cap Templeton Investment Counsel, Inc. International Equity Index B SSgA Funds Management, Inc. Overseas Equity Capital Guardian Trust Company American International Capital Research Management Company International Value Templeton Investment Counsel, Inc. Quantitative Mid Cap MFC Global Investment Management (U.S.A.) Limited Portfolio Investment Description =============================== ================================================================== Financial Services Seeks growth of capital by investing primarily in common stocks of financial companies. During normal market conditions, at least 80% of the portfolio's net assets (plus any borrowings for investment purposes) are invested in companies that are principally engaged in financial services. A company is "principally engaged" in financial services if it owns financial services-related assets constituting at least 50% of the value of its total assets, or if at least 50% of its revenues are derived from its provision of financial services. International Opportunities Seeks long-term growth of capital by investing, under normal market conditions, at least 65% of its assets in common stocks of foreign companies that are selected for their long-term growth potential. The portfolio may invest in companies of any size throughout the world. The portfolio normally invests in issuers from at least three different countries not including the U.S. The portfolio may invest in common stocks of companies operating in emerging markets. International Stock Seeks to outperform the MSCI EAFE Index by investing typically in a diversified portfolio of equity investments from developed markets other than the U.S. International Small Cap Seeks capital appreciation by investing primarily in the common stock of companies located outside the U.S. which have total stock market capitalization or annual revenues of $1.5 billion or less ("small company securities"). International Equity Index B Seeks to track the performance of a broad-based equity index of foreign companies primarily in developed countries and, to a lesser extent, in emerging market countries by investing, under normal market conditions, at least 80% of its assets in securities listed in the Morgan Stanley Capital International All Country World Excluding U.S. Index. Overseas Equity Seeks long-term capital appreciation by investing, under normal market conditions, at least 80% of its assets in equity securities of companies outside the U.S. in a diversified mix of large established and medium-sized foreign companies located primarily in developed countries and, to a lesser extent, in emerging markets. American International Invests all of its assets in Class 2 shares of the International Fund, a series of American Fund Insurance Series. The International Fund invests primarily in common stocks of companies located outside the United States. International Value Seeks long-term growth of capital by investing, under normal market conditions, primarily in equity securities of companies located outside the U.S., including emerging markets. Quantitative Mid Cap Seeks long-term growth of capital by investing, under normal market conditions, at least 80% of its total assets (plus any borrowings for investment purposes) in U.S. mid- cap stocks, convertible preferred stocks, convertible bonds and warrants.
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Portfolio Portfolio Manager ============================= ==================================== Mid Cap Index MFC Global Investment Management (U.S.A.) Limited Mid Cap Core AIM Capital Management, Inc. Global Templeton Global Advisors Limited Capital Appreciation Jennison Associates LLC American Growth Capital Research Management Company U.S. Global Leaders Growth Sustainable Growth Advisers, L.P. Quantitative All Cap MFC Global Investment Management (U.S.A.) Limited All Cap Core Deutsche Asset Management Inc. Large Cap Growth Fidelity Management & Research Company Total Stock Market Index MFC Global Investment Management (U.S.A.) Limited Blue Chip Growth T. Rowe Price Associates, Inc. U.S. Large Cap Capital Guardian Trust Company Portfolio Investment Description ============================= ================================================================ Mid Cap Index Seeks to approximate the aggregate total return of a mid cap U.S. domestic equity market index by attempting to track the performance of the S&P Mid Cap 400 Index*. Mid Cap Core Seeks long-term growth of capital by investing, normally, at least 80% of its assets in equity securities, including convertible securities, of mid-capitalization companies. Global Seeks long-term capital appreciation by investing, under normal market conditions, at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of companies located anywhere in the world, including emerging markets. Capital Appreciation Seeks long-term capital growth by investing at least 65% of its total assets in equity-related securities of companies that exceed $1 billion in market capitalization and that the subadviser believes have above-average growth prospects. These companies are generally medium-to-large capitalization companies. American Growth Invests all of its assets in Class 2 shares of the Growth Fund, a series of American Fund Insurance Series. The Growth Fund invests primarily in common stocks of companies that appear to offer superior opportunities for growth of capital. U.S. Global Leaders Growth Seeks long-term growth of capital by investing, under normal market conditions, primarily in common stocks of "U.S. Global Leaders." Quantitative All Cap Seeks long-term growth of capital by investing, under normal circumstances, primarily in equity securities of U.S. companies. The portfolio will generally focus on equity securities of U.S. companies across the three market capitalization ranges of large, mid and small. All Cap Core Seeks long-term growth of capital by investing primarily in common stocks and other equity securities within all asset classes (small, mid and large cap) primarily those within the Russell 3000 Index. Large Cap Growth Seeks long-term growth of capital by investing, under normal market conditions, at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of companies with large market capitalizations. Total Stock Market Index Seeks to approximate the aggregate total return of a broad U.S. domestic equity market index by attempting to track the performance of the Wilshire 5000 Equity Index*. Blue Chip Growth Seeks to achieve long-term growth of capital (current income is a secondary objective) by investing, under normal market conditions, at least 80% of the portfolio's total assets in the common stocks of large and medium- sized blue chip growth companies. Many of the stocks in the portfolio are expected to pay dividends. U.S. Large Cap Seeks long-term growth of capital and income by investing the portfolio's assets, under normal market conditions, primarily in equity and equity-related securities of companies with market capitalization greater than $500 million.
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Portfolio Portfolio Manager ========================== =================================== Core Equity Legg Mason Funds Management, Inc. Strategic Value Massachusetts Financial Services Company Large Cap Value Mercury Advisors Classic Value Pzena Investment Management, LLC Utilities Massachusetts Financial Services Company Real Estate Securities Deutsche Asset Management Inc. Small Cap Opportunities Munder Capital Management Small Cap Value Wellington Management Company, LLP Small Company Value T. Rowe Price Associates, Inc. Special Value Salomon Brothers Asset Management Inc. Portfolio Investment Description ========================== =============================================================== Core Equity Seeks long-term capital growth by investing, under normal market conditions, primarily in equity securities that, in the subadviser's opinion, offer the potential for capital growth. The subadviser Seeks to purchase securities at large discounts to the subadviser's assessment of their intrinsic value. Strategic Value Seeks capital appreciation by investing, under normal market conditions, at least 65% of its net assets in common stocks and related securities of companies which the subadviser believes are undervalued in the market relative to their long term potential. Large Cap Value Seeks long-term growth of capital by investing, under normal market conditions, primarily in a diversified portfolio of equity securities of large cap companies located in the U.S. Classic Value Seeks long-term growth of capital by investing, under normal market conditions, at least 80% of its net assets in domestic equity securities. Utilities Seeks capital growth and current income (income above that available from a portfolio invested entirely in equity securities) by investing, under normal market conditions, at least 80% of the portfolio's net assets (plus any borrowings for investment purposes) in equity and debt securities of domestic and foreign companies in the utilities industry. Real Estate Securities Seeks to achieve a combination of long-term capital appreciation and current income by investing, under normal market conditions, at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of real estate investment trusts ("REITS") and real estate companies. Small Cap Opportunities Seeks long-term capital appreciation by investing, under normal circumstances, at least 80% of its assets in equity securities of companies with market capitalizations within the range of the companies in the Russell 2000 Index. Small Cap Value Seeks long-term capital appreciation by investing, under normal market conditions, at least 80% of its assets in small-cap companies that are believed to be undervalued by various measures and offer good prospects for capital appreciation. Small Company Value Seeks long-term growth of capital by investing, under normal market conditions, primarily in small companies whose common stocks are believed to be undervalued. Under normal market conditions, the portfolio will invest at least 80% of its net assets (plus any borrowings for investment purposes) in companies with a market capitalization that do not exceed the maximum market capitalization of any security in the Russell 2000 Index* at the time of purchase. Special Value Seeks long-term capital growth by investing, under normal circumstances, at least 80% of its net assets in common stocks and other equity securities of companies whose market capitalization at the time of investment is no greater than the market capitalization of companies in the Russell 2000 Value Index.
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Portfolio Portfolio Manager ========================== ================================ Mid Value T. Rowe Price Associates, Inc. Mid Cap Value Lord, Abbett & Co Value Van Kampen All Cap Value Lord, Abbett & Co Growth & Income II Independence Investment LLC 500 Index B MFC Global Investment Management (U.S.A.) Limited Fundamental Value Davis Advisors Growth & Income Grantham, Mayo, VanOtterloo & Co. LLC Large Cap UBS Global Asset Management Quantitative Value MFC Global Investment Management (U.S.A.) Limited American Growth -Income Capital Research Management Company Portfolio Investment Description ========================== =============================================================== Mid Value Seeks long-term capital appreciation by investing, under normal market conditions, primarily in a diversified mix of common stocks of mid size U.S. companies that are believed to be undervalued by various measures and offer good prospects for capital appreciation. Mid Cap Value Seeks capital appreciation by investing, under normal market conditions, at least 80% of the portfolio's net assets (plus any borrowings for investment purposes) in mid-sized companies, with market capitalization of roughly $500 million to $10 billion. Value Seeks to realize an above-average total return over a market cycle of three to five years, consistent with reasonable risk, by investing primarily in equity securities of companies with capitalizations similar to the market capitalization of companies in the Russell Midcap Value Index. All Cap Value Seeks capital appreciation by investing in equity securities of U.S. and multinational companies in all capitalization ranges that the subadviser believes are undervalued. Growth & Income II Seeks income and long-term capital appreciation by investing, under normal market conditions, primarily in a diversified mix of common stocks of large U.S. companies. 500 Index B Seeks to approximate the aggregate total return of a broad U.S. domestic equity market index investing, under normal market conditions, at least 80% of its net assets (plus any borrowings for investment purposes) in (a) the common stocks that are included in the S & P 500 Index and (b) securities (which may or may not be included in the S & P 500 Index) that MFC Global (U.S.A.) believes as a group will behave in a manner similar to the index. Fundamental Value Seeks growth of capital by investing, under normal market conditions, primarily in common stocks of U.S. companies with market capitalizations of at least $5 billion that the subadviser believes are undervalued. The portfolio may also invest in U.S. companies with smaller capitalizations. Growth & Income Seeks long-term growth of capital and income, consistent with prudent investment risk, by investing primarily in a diversified portfolio of common stocks of U.S. issuers which the subadviser believes are of high quality. Large Cap Seeks to maximize total return, consisting of capital appreciation and current income by investing, under normal circumstances, at least 80% of its net assets (plus borrowings for investment purposes, if any) in equity securities of U.S. large capitalization companies. Quantitative Value Seeks long-term capital appreciation by investing primarily in large-cap U.S. securities with the potential for long-term growth of capital. American Growth -Income Invests all of its assets in Class 2 shares of the Growth- Income Fund, a series of American Fund Insurance Series. The Growth-Income Fund invests primarily in common stocks or other securities which demonstrate the potential for appreciation and/or dividends.
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Portfolio Portfolio Manager ================================= ================================= Equity-Income T. Rowe Price Associates, Inc. American Blue Chip Income Capital Research Management and Growth Company Income & Value Capital Guardian Trust Company Managed Grantham, Mayo, VanOtterloo & Co. LLC, Declaration Management & Research LLC PIMCO VIT All Asset (only Pacific Investment Management Class M is available for sale) Company Global Allocation UBS Global Asset Management High Yield Salomon Brothers Asset Management Inc. U.S. High Yield Bond Wells Fargo Fund Management, LLC Strategic Bond Salomon Brothers Asset Management Inc. Strategic Income John Hancock Advisers, LLC Portfolio Investment Description ================================= =============================================================== Equity-Income Seeks to provide substantial dividend income and also long- term capital appreciation by investing primarily in dividend-paying common stocks, particularly of established companies with favorable prospects for both increasing dividends and capital appreciation. American Blue Chip Income Invests all of its assets in Class 2 shares of the Blue Chip and Growth Income and Growth Fund, a series of American Fund Insurance Series. The Blue Chip Income and Growth Fund invests primarily in common stocks of larger, more established companies based in the U.S. with market capitalizations of $4 billion and above. Income & Value Seeks the balanced accomplishment of (a) conservation of principal and (b) long-term growth of capital and income by investing the portfolio's assets in both equity and fixed- income securities. The subadviser has full discretion to determine the allocation between equity and fixed income securities. Managed A balanced stock and bond portfolio investing primarily in a diversified mix of: (a) common stocks of large and mid sized U.S. companies, and (b) bonds with an overall intermediate term average maturity. PIMCO VIT All Asset (only Invests primarily in a diversified mix of: (a) common Class M is available for sale) stocks of large and mid sized U.S. companies, and (b) bonds with an overall intermediate term average maturity. Global Allocation Seeks total return, consisting of long-term capital appreciation and current income, by investing in equity and fixed income securities of issuers located within and outside the U.S. High Yield Seeks to realize an above-average total return over a market cycle of three to five years, consistent with reasonable risk, by investing primarily in high yield debt securities, including corporate bonds and other fixed-income securities. U.S. High Yield Bond Seeks total return with a high level of current income by investing, under normal market conditions, primarily in below investment-grade debt securities (sometimes referred to as "junk bonds" or high yield securities). The portfolio also invests in corporate debt securities and may buy preferred and other convertible securities and bank loans. Strategic Bond Seeks a high level of total return consistent with preservation of capital by giving its subadviser broad discretion to deploy the portfolio's assets among certain segments of the fixed income market as the subadviser believes will best contribute to achievement of the portfolio's investment objective. Strategic Income Seeks a high level of current income by investing, under normal market conditions, primarily in foreign government and corporate debt securities from developed and emerging markets; U.S. Government and agency securities; and U.S. high yield bonds.
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Portfolio Portfolio Manager ========================== ================================= Global Bond Pacific Investment Management Company Investment Quality Bond Wellington Management Company, LLP Total Return Pacific Investment Management Company American Bond Capital Research Management Company Real Return Bond Pacific Investment Management Company Bond Index B Declaration Management & Research Core Bond Wells Fargo Fund Management, LLC Active Bond Declaration Management & Research LLC John Hancock Advisers, LLC Portfolio Investment Description ========================== =============================================================== Global Bond Seeks to realize maximum total return, consistent with preservation of capital and prudent investment management by investing the portfolio's assets primarily in fixed income securities denominated in major foreign currencies, baskets of foreign currencies (such as the ECU), and the U.S. dollar. Investment Quality Bond Seeks a high level of current income consistent with the maintenance of principal and liquidity, by investing in a diversified portfolio of investment grade bonds and tends to focus its investment on corporate bonds and U.S. Government bonds with intermediate to longer term maturities. The portfolio may also invest up to 20% of its assets in non-investment grade fixed income securities. Total Return Seeks to realize maximum total return, consistent with preservation of capital and prudent investment management by investing, under normal market conditions, at least 65% of the portfolio's assets in a diversified portfolio of fixed income securities of varying maturities. The average portfolio duration will normally vary within a three- to six- year time frame based on the subadviser's forecast for interest rates. American Bond Seeks to maximize current income and preserve capital. Real Return Bond Seeks maximum return, consistent with preservation of capital and prudent investment management by investing, under normal market conditions, at least 80% of its net assets in inflation-indexed bonds of varying maturities issued by the U.S. and non-U.S. governments and by corporations. Bond Index B Seeks to track the performance of the Lehman Brothers Aggregate Index (which represents the U.S. investment grade bond market) by investing, under normal market conditions, at least 80% of its assets in securities listed in the Lehman Index. Core Bond Seeks total return consisting of income and capital appreciation by investing, under normal market conditions, in a broad range of investment-grade debt securities. The subadviser invests in debt securities that the subadviser believes offer attractive yields and are undervalued relative to issues of similar credit quality and interest rate sensitivity. From time to time, the portfolio may also invest in unrated bonds that the subadviser believes are comparable to investment-grade debt securities. Under normal circumstances, the subadviser expects to maintain an overall effective duration range between 4 and 5 1/2 years. Active Bond Seeks income and capital appreciation by investing at least 80% of its assets in a diversified mix of debt securities and instruments.
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Portfolio Portfolio Manager ============================= ================================ U.S. Government Securities Salomon Brothers Asset Management Inc. Short-Term Bond Declaration Management & Research LLC Money Market B MFC Global Investment Management (U.S.A.) Limited Lifestyle Aggressive 1000 MFC Global Investment Management (U.S.A.) Limited Deutsche Asset Management Inc. Lifestyle Growth 820 MFC Global Investment Management (U.S.A.) Limited Deutsche Asset Management Inc. Lifestyle Balanced 640 MFC Global Investment Management (U.S.A.) Limited Deutsche Asset Management Inc. Lifestyle Moderate 460 MFC Global Investment Management (U.S.A.) Limited Deutsche Asset Management Inc. Lifestyle Conservative 280 MFC Global Investment Management (U.S.A.) Limited Deutsche Asset Management Inc. Portfolio Investment Description ============================= ============================================================== U.S. Government Securities Seeks a high level of current income consistent with preservation of capital and maintenance of liquidity, by investing in debt obligations and mortgage-backed securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities and derivative securities such as collateralized mortgage obligations backed by such securities. Short-Term Bond Seeks income and capital appreciation by investing at least 80% of its assets in a diversified mix of debt securities and instruments. Money Market B Seeks to obtain maximum current income consistent with preservation of principal and liquidity by investing in high quality, U.S. Dollar denominated money market instruments. Lifestyle Aggressive 1000 Seeks to provide long-term growth of capital (current income is not a consideration) by investing 100% of the Lifestyle Trust's assets in other portfolios of the Trust ("Underlying Portfolios") which invest primarily in equity securities. Lifestyle Growth 820 Seeks to provide long-term growth of capital with consideration also given to current income by investing approximately 20% of the Lifestyle Trust's assets in Underlying Portfolios which invest primarily in fixed income securities and approximately 80% of its assets in Underlying Portfolios which invest primarily in equity securities. Lifestyle Balanced 640 Seeks to provide a balance between a high level of current income and growth of capital with a greater emphasis given to capital growth by investing approximately 40% of the Lifestyle Trust's assets in Underlying Portfolios which invest primarily in fixed income securities and approximately 60% of its assets in Underlying Portfolios which invest primarily in equity securities. Lifestyle Moderate 460 Seeks to provide a balance between a high level of current income and growth of capital with a greater emphasis given to current income by investing approximately 60% of the Lifestyle Trust's assets in Underlying Portfolios which invest primarily in fixed income securities and approximately 40% of its assets in Underlying Portfolios which invest primarily in equity securities. Lifestyle Conservative 280 Seeks to provide a high level of current income with some consideration also given to growth of capital by investing approximately 80% of the Lifestyle Trust's assets in Underlying Portfolios which invest primarily in fixed income securities and approximately 20% of its assets in Underlying Portfolios which invest primarily in equity securities.
*"Standard & Poor's (Reg. TM)," "S&P 500 (Reg. TM)," "Standard and Poor's 500 (Reg. TM)" and "S&P Mid Cap 400 (Reg. TM)" are trademarks of The McGraw-Hill Companies, Inc. "Russell 2000 (Reg. TM)," "Russell 2000 (Reg. TM) Growth" and "Russell 3000 (Reg. TM)" are trademarks of Frank Russell Company. "Wilshire 5000 (Reg. TM)" is a trademark of Wilshire Associates. "MSCI All Country World ex US Index" and "EAFE (Reg. TM)" are trademarks of Morgan Stanley & Co. Incorporated. None of the Index Trusts are sponsored, endorsed, managed, advised, sold or promoted by any of these companies, and none of these companies make any representation regarding the advisability of investing in the Trust. You bear the investment risk of any portfolio you choose as an investment account for your contract. A full description of each portfolio, including the investment objectives, policies and restrictions of, and the risks relating to investments in, each 22 portfolio is contained in the portfolio prospectuses. The portfolio prospectuses should be read carefully before allocating purchase payments to a subaccount. If the shares of a portfolio are no longer available for investment or in our judgment investment in a portfolio becomes inappropriate, we may eliminate the shares of a portfolio and substitute shares of another portfolio of the Trust or another open-end registered investment company. Substitution may be made with respect to both existing investments and the investment of future purchase payments. However, we will make no such substitution without first notifying you and obtaining approval of state regulators and the SEC (to the extent required by applicable law). We will purchase and redeem Series Fund shares for the Account at their net asset value without any sales or redemption charges. Shares of a Series Fund represent an interest in one of the funds of the Series Fund which corresponds to a subaccount of the Account. Any dividend or capital gains distributions received by the Account will be reinvested in shares of that same fund at their net asset value as of the dates paid. On each business day, shares of each fund are purchased or redeemed by us for each subaccount based on, among other things, the amount of net premiums allocated to the subaccount, distributions reinvested, and transfers to, from and among subaccounts, all to be effected as of that date. Such purchases and redemptions are effected at each fund's net asset value per share determined for that same date. A "business day" is any date on which the New York Stock Exchange is open for trading. We compute policy values for each business day as of the close of that day (usually 4:00 p.m. Eastern Time). We will vote shares of the portfolios held in the Account at the shareholder meetings according to voting instructions received from persons having the voting interest under the contracts. We will determine the number of portfolio shares for which voting instructions may be given not more than 90 days prior to the meeting. Proxy material will be distributed to each person having the voting interest under the contract together with appropriate forms for giving voting instructions. We will vote all portfolio shares that we hold (including our own shares and those we hold in the Account for contract owners) in proportion to the instructions so received. We determine the number of a portfolio's shares held in a subaccount attributable to each owner by dividing the amount of a policy's account value held in the subaccount by the net asset value of one share in the portfolio. Fractional votes will be counted. We determine the number of shares as to which the owner may give instructions as of the record date for a Series Fund's meeting. Owners of policies may give instructions regarding the election of the Board of Trustees or Board of Directors of a Series Fund, ratification of the selection of independent auditors, approval of Series Fund investment advisory agreements and other matters requiring a shareholder vote. We will furnish owners with information and forms to enable owners to give voting instructions. However, we may, as permitted by the SEC's rules, disregard voting instructions in certain limited circumstances where compliance with such instructions could cause us to violate requirements of insurance regulatory authorities. You will receive a summary of such action and the reasons for it in the next semi-annual report to owners. The voting privileges described above reflect our understanding of applicable Federal securities law requirements. To the extent that applicable law, regulations or interpretations change to eliminate or restrict the need for such voting privileges, we reserve the right to proceed in accordance with any such revised requirements. We also reserve the right, subject to compliance with applicable law, including approval of owners if so required, (1) to transfer assets determined by John Hancock USA to be associated with the class of policies to which your policy belongs from the Account to another separate account or subaccount, (2) to operate the Account as a "management-type investment company" under the 1940 Act, or in any other form permitted by law, the investment adviser of which would be John Hancock USA, (3) to deregister the Account under the 1940 Act, (4) to substitute for the fund shares held by a subaccount any other investment permitted by law, and (5) to take any action necessary to comply with or obtain any exemptions from the 1940 Act. Any such change will be made only if, in our judgement, the change would best serve the interests of owners of policies in your policy class or would be appropriate in carrying out the purposes of such policies. We would notify owners of any of the foregoing changes and, to the extent legally required, obtain approval of affected owners and any regulatory body prior thereto. Such notice and approval, however, may not be legally required in all cases. Description of John Hancock USA We are a stock life insurance company incorporated in Maine on August 20, 1955 by a special act of the Maine legislature and redomesticated under the laws of Michigan. We are a licensed life insurance company in the District of Columbia and all states of the United States except New York. Our ultimate parent is Manulife Financial Corporation ("MFC"), a publicly traded company, based in Toronto, Canada. MFC is the holding company of John Hancock USA and its 23 subsidiaries. John Hancock USA is one of the largest life insurance companies in North America and ranks among the 60 largest life insurers in the world as measured by assets. However, neither John Hancock USA nor any of its affiliated companies guarantees the investment performance of the Account. We have received the following ratings from independent rating agencies: A++ A.M. Best Superior companies have a very strong ability to meet their obligations; 1st category of 16 AA+ Fitch Very strong capacity to meet policyholder and contract obligations; 2nd category of 24 AA+ Standard & Poor's Very strong financial security characteristics; 2nd category of 21 Aa2 Moody's Excellent in financial strength; 3rd category of 21 These ratings, which are current as of the date of this prospectus and are subject to change, are assigned as a measure of our ability to honor any guarantees provided by the policy and any applicable optional riders, but do not specifically relate to its products, the performance (return) of these products, the value of any investment in these products upon withdrawal or to individual securities held in any portfolio. Description of Separate Account N The investment accounts shown on page 1 are in fact subaccounts of Separate Account N (the "Account"), a separate account established under Pennsylvania law and operated by us under Michigan law. The Account meets the definition of "separate account" under the Federal securities laws and is registered as a unit investment trust under the Investment Company Act of 1940 ("1940 Act"). Such registration does not involve supervision by the Securities and Exchange Commission ("SEC") of the management of the Account or of us. The Account's assets are our property. Each policy provides that amounts we hold in the Account pursuant to the policies cannot be reached by any other persons who may have claims against us and can't be used to pay any indebtedness of John Hancock USA other than those arising out of policies that use the Account. New subaccounts may be added and made available to policy owners from time to time. Existing subaccounts may be modified or deleted at any time. The Fixed Account Our obligations under any fixed account are backed by our general account assets. Our general account consists of assets owned by us other than those in the Account and in other separate accounts that we may establish. Subject to applicable law, we have sole discretion over the investment of assets of the general account and policy owners do not share in the investment experience of, or have any preferential claim on, those assets. Instead, we guarantee that the policy value allocated to any fixed account will accrue interest daily at an effective annual rate that we determine without regard to the actual investment experience of the general account. We currently offer only one fixed account - the standard fixed account. The effective annual rate we declare for the standard fixed account will never be less than 3%. We reserve the right to offer one or more additional fixed accounts with characteristics that differ from those of the current fixed account, but we are under no obligation to do so. Because of exemptive and exclusionary provisions, interests in our fixed account have not been and will not be registered under the Securities Act of 1933 and our general account has not been registered as an investment company under the 1940 Act. Accordingly, neither the general account nor any interests therein are subject to the provisions of these acts, and we have been advised that the staff of the SEC has not reviewed the disclosure in this prospectus relating to any fixed account. Disclosure regarding fixed accounts may, however, be subject to certain generally-applicable provisions of the Federal securities laws relating to accuracy and completeness of statements made in prospectuses. 24 The Death Benefit In your application for the policy, you will tell us how much life insurance coverage you want on the life of the insured person. This is called the "Total Face Amount". Total Face Amount is composed of the Base Face Amount and any Supplemental Face Amount you elect. The amount of Supplemental Face Amount you can have generally cannot exceed 900% of the Base Face Amount. There are a number of factors you should consider in determining whether to elect coverage in the form of Base Face Amount or in the form of Supplemental Face Amount. These factors are discussed under "Base Face Amount vs. Supplemental Face Amount" below. When the insured person dies, we will pay the death benefit minus any outstanding loans. There are two ways of calculating the death benefit. You must choose which one you want in the application. The two death benefit options are: . Option 1 - The death benefit will equal the greater of (1) the Total Face Amount, or (2) the minimum death benefit (as described below). . Option 2 - The death benefit will equal the greater of (1) the Total Face Amount plus the policy value on the date of death, or (2) the minimum death benefit. For the same premium payments, the death benefit under Option 2 will tend to be higher than the death benefit under Option 1. On the other hand, the monthly insurance charge will be higher under Option 2 to compensate us for the additional insurance risk. Because of that, the policy value will tend to be higher under Option 1 than under Option 2 for the same premium payments. Limitations on payment of death benefit If the insured person commits suicide within certain time periods, the amount of death benefit we pay will be limited as described in the policy. Also, if an application misstated the age or gender of the insured person, we will adjust the amount of any death benefit as described in the policy. Base Face Amount vs. Supplemental Face Amount As noted above, you should consider a number of factors in determining whether to elect coverage in the form of Base Face Amount or in the form of Supplemental Face Amount. For the same amount of premiums paid, the amount of the face amount charge deducted from policy value and the amount of compensation paid to the selling insurance agent will generally be less if coverage is included as Supplemental Face Amount, rather than as Base Face Amount. On the other hand, the amount of any Supplemental Face Amount included in the calculation of the death benefit at and after the policy anniversary nearest the insured person's 100th birthday will be limited to the lesser of the current Supplemental Face Amount or the policy value. If your priority is to reduce your face amount charges, you may wish to maximize the proportion of the Supplemental Face Amount. However, if your priority is to maximize the death benefit when the insured person reaches 100, then you may wish to maximize the proportion of the Base Face Amount. Any decision you make to modify the amount of Total Face Amount coverage after issue can have significant tax consequences (see "Tax considerations"). The minimum death benefit In order for a policy to qualify as life insurance under Federal tax law, there has to be a minimum amount of insurance in relation to policy value. There are two tests that can be applied under Federal tax law - the "guideline premium test" and the "cash value accumulation test". When you elect the death benefit option, you must also elect which test you wish to have applied. Once elected, the test cannot be changed without our approval. Under the guideline premium test, we compute the minimum death benefit each business day by multiplying the policy value and any enhanced cash value, if applicable, on that date by the death benefit factor applicable on that date. In this case, the factors are derived by applying the guideline premium test. Factors for some ages are shown in the table below: 25
Attained Age Applicable Factor ------------------------ ------------------ 40 and under ......... 250% 45 ................... 215% 50 ................... 185% 55 ................... 150% 60 ................... 130% 65 ................... 120% 70 ................... 115% 75 ................... 105% 90 ................... 105% 95 and above ......... 100%
A table showing the factor for each age will appear in the policy. Under the cash value accumulation test, we compute the minimum death benefit each business day by multiplying the policy value (and any benefit under the enhanced cash value rider, if applicable) on that date by the death benefit factor applicable on that date. In this case, the factors are derived by applying the cash value accumulation test. The factor decreases as attained age increases. A table showing the factor for each age will appear in the policy. As noted above, you have to elect which test will be applied when you elect the death benefit option. The cash value accumulation test may be preferable if you want an increasing death benefit in later policy years and/or want to fund the policy at the "7 pay" limit for the full 7 years (see "Tax considerations"). The guideline premium test may be preferable if you want the policy value under the policy to increase without increasing the death benefit as quickly as might otherwise be required. To the extent that the calculation of the minimum death benefit under the selected life insurance qualification test causes the death benefit to exceed our limits, we reserve the right to return premiums or distribute a portion of the policy value so that the resulting amount of insurance is maintained within our limits. Our limits on the amount to which we will permit the minimum death benefit to grow under the policy are generally established by reference to our risk guidelines, and may be further limited by the amount of retention and reinsurance available to us on the policy. These limits vary with age, sex and risk class of the life insured, and may change from time to time in response to business and market conditions. Alternatively, if we should decide to accept the additional amount of insurance, we may require additional evidence of insurability. When the insured person reaches 100 At and after the policy anniversary nearest the insured person's 100th birthday, the following will occur: . Any Supplemental Face Amount will be limited (see "Base Face Amount vs. Supplemental Face Amount"). . We will stop deducting any monthly deductions. . We will stop accepting any premium payments. Requesting an increase in coverage After the first policy year, we may request an unscheduled increase in the Supplemental Face Amount at any time, subject to the maximum limit stated in the policy. Generally, each such increase must be at least $50,000. However, you will have to provide us with evidence that the insured person still meets our requirements for issuing insurance coverage. An approved increase will take effect on the policy anniversary on or next following the date we approve the request. Requesting a decrease in coverage After the first policy year, we may approve a reduction in the Base Face Amount or the Supplemental Face Amount, but only if: . the remaining Total Face Amount will be at least $100,000, . the remaining Base Face Amount will be at least $50,000, and . the remaining Total Face Amount will at least equal the minimum required by the tax laws to maintain the policy's life insurance status. 26 An approved decrease will take effect on the monthly deduction date on or next following the date we approve the request. We reserve the right to require that the Supplemental Face Amount be fully depleted before the Base Face Amount can be reduced. Change of death benefit option The death benefit option may be changed from Option 2 to Option 1 after the first policy year. We reserve the right to limit a request for a change if the change would cause the policy to fail to qualify as life insurance for tax purposes. We will not allow a change in death benefit option if it would cause the Total Face Amount to decrease below $100,000. A change in the death benefit option from Option 2 to Option 1 will result in a change in the policy's Total Face Amount, in order to avoid any change in the amount of the death benefit. The new Total Face Amount will be equal to the Total Face Amount prior to the change plus the policy value as of the date of the change. The change will take effect on the monthly deduction date on or next following the date the written request for the change is received at our Service Office. If you change the death benefit option, the Federal tax law test ("guideline premium test" or "cash value accumulation test") that you elected at issue will continue to apply. Please read "The minimum death benefit" for more information about these Federal tax laws tests. Tax consequences of coverage changes A change in the death benefit option or Total Face Amount will often change the policy's limits under the life insurance qualification test that you elected. To avoid having the policy cease to qualify as life insurance for tax purposes, we reserve the right to (i) refuse or limit a change in the death benefit option or Total Face Amount and (ii) change the Guideline Single Premium or Guideline Level Premium, as applicable. Please read "Tax considerations" to learn about possible tax consequences of changing your insurance coverage under the policy. Your beneficiary You name your beneficiary when you apply for the policy. The beneficiary is entitled to the proceeds we pay following the insured person's death. You may change the beneficiary during the insured person's lifetime. Such a change requires the consent of any named irrevocable beneficiary. A new beneficiary designation is effective as of the date you sign it, but will not affect any payments we make before we receive it. If no beneficiary is living when the insured person dies, we will pay the insurance proceeds to the owner or the owner's estate. Ways in which we pay out policy proceeds You may choose to receive proceeds from the policy as a single sum. This includes proceeds that become payable because of death or surrender. Alternatively, you can elect to have proceeds of $1,000 or more applied to any of the other payment options we may offer at the time. You cannot choose an option if the monthly payments under the option would be less than $50. We will issue a supplementary agreement when the proceeds are applied to any alternative payment option. That agreement will spell out the terms of the option in full. If no alternative payment option has been chosen, proceeds will be paid as a single sum. Changing a payment option You can change the payment option at any time before the proceeds are payable. If you haven't made a choice, the payee of the proceeds has a prescribed period in which he or she can make that choice. Tax impact of payment option chosen There may be tax consequences to you or your beneficiary depending upon which payment option is chosen. You should consult with a qualified tax adviser before making that choice. Premiums Planned Premiums The Policy Specifications page of your policy will show the "Planned Premium" for the policy. You choose this amount in the policy application. You will also choose how often to pay premiums - annually, semi-annually, quarterly or monthly. 27 The premium reminder notice we send you is based on the amount and period you choose. However, payment of Planned Premiums is not necessarily required. You need only invest enough to keep the policy in force (see "Lapse and reinstatement"). Minimum initial premium The minimum initial premium is set forth in the Policy Specifications page of your policy. After the payment of the initial premium, premiums may be paid at any time and in any amount until the insured person's attained age 100, subject to the limitations on premium amount described below. Maximum premium payments Federal tax law limits the amount of premium payments you can make relative to the amount of your policy's insurance coverage. We will not knowingly accept any amount by which a premium payment exceeds this limit. If you exceed certain other limits, the law may impose a penalty on amounts you take out of your policy. More discussion of these tax law requirements is provided under "Tax considerations". Large premium payments may expose us to unanticipated investment risk, and we will generally refuse to accept premiums in excess of the Maximum Annual Premium limit set forth in the Policy Specifications. In addition, in order to limit our investment risk exposure under certain market conditions, we may refuse to accept additional premium payments that are not in excess of the Maximum Annual Premium limit. This may be the case, for example, in an environment of decreasing interest rates, where we may not be able to acquire investments for our general account that will sufficiently match the liabilities we are incurring under our fixed account guarantees. Excessive allocations may also interfere with the effective management of our variable investment account portfolios, if we are unable to make an orderly investment of the additional premium into the portfolios. Also, we may refuse to accept an amount of additional premium if the amount of the additional premium would increase our insurance risk exposure, and the insured person doesn't provide us with adequate evidence that he or she continues to meet our requirements for issuing insurance. We will notify you in writing of our refusal to accept additional premium under these provisions within three days following the date that it is received by us, and will promptly thereafter take the necessary steps to return the premium to you. Notwithstanding the foregoing limits on the additional premium that we will accept, we will not refuse to accept any premium necessary to prevent the policy from terminating. Processing premium payments No premiums will be accepted prior to our receipt of a completed application at our Service Office. All premiums received on or after the Issue Date, but prior to the Allocation Date, will be held in the Money Market B investment account. The "Allocation Date" of the policy is the 10th day after the Issue Date. The Issue Date is shown on the Policy Specifications page of the policy. On the Allocation Date, the Net Premiums paid plus interest credited, if any, will be allocated among the investment accounts or the fixed account in accordance with the policy owner's instructions. The "Net Premium" is the premium paid less the premium charge we deduct from it. Any Net Premium received on or after the Allocation Date will be allocated among investment accounts or the fixed account as of the business day on or next following the date the premium is received at the Service Office. Monthly deductions are normally due on the Policy Date and at the beginning of each policy month thereafter. However, if the monthly deductions are due prior to the Contract Completion Date, they will be deducted from policy value on the Contract Completion Date instead of the dates they were due (see "Procedures for issuance of a policy" for the definition of "Contract Completion Date"). Payment of premiums will not guarantee that the policy will stay in force. Conversely, failure to pay premiums will not necessarily cause the policy to lapse. Ways to pay premiums If you pay premiums by check or money order, they must be drawn on a U.S. bank in U.S. dollars and made payable to "John Hancock". We will not accept credit card checks. We will not accept starter or third party checks if they fail to satisfy our administrative requirements. Premiums after the first must be sent to the John Hancock USA Service Office at the appropriate address shown on the back cover of this prospectus. We will also accept premiums by wire or by exchange from another insurance company. 28 Lapse and reinstatement Lapse A policy will go into default if at the beginning of any policy month the policy's net cash surrender value would be zero or below after deducting the monthly deductions then due. Therefore, a policy could lapse eventually if increases in policy value (prior to deduction of policy charges) are not sufficient to cover policy charges. A lapse could have adverse tax consequences as described under "Tax considerations". We will notify you of the default and will allow a 61 day grace period in which you may make a premium payment sufficient to bring the policy out of default. The required payment will be equal to the amount necessary to bring the net cash surrender value to zero, if it was less than zero on the date of default, plus the monthly deductions due at the date of default and payable at the beginning of each of the two policy months thereafter, plus any applicable premium charge. If the required payment is not received by the end of the grace period, the policy will terminate (i.e., "lapse") with no value. Death during grace period If the insured person should die during the grace period, the policy value used in the calculation of the death benefit will be the policy value as of the date of default and the insurance benefit will be reduced by any outstanding monthly deductions due at the time of death. Reinstatement You can reinstate a policy that has gone into default and terminated at any time within 21 days following the date of termination without furnishing evidence of insurability, subject to the following conditions: (a) The insured person's risk classification is standard or preferred, and (b) The insured person's attained age is less than 46. By making a written request, you can reinstate a policy that has gone into default and terminated at any time within the three-year period following the date of termination subject to the following conditions: (a) You must provide to us evidence of the insured person's insurability that is satisfactory to us; and (b) You must pay a premium equal to the amount that was required to bring the policy out of default immediately prior to termination, plus the amount needed to keep the policy in force to the next scheduled date for payment of the Planned Premium. If the reinstatement is approved, the date of reinstatement will be the later of the date we approve your request or the date the required payment is received at our Service Office. The policy value on the date of reinstatement, prior to the crediting of any Net Premium paid in connection with the reinstatement, will be equal to the policy value on the date the policy terminated. Any policy debt not paid upon termination of a policy will be reinstated if the policy is reinstated. The Policy Value From each premium payment you make, we deduct the premium charge described under "Deduction from premium payments". We invest the rest (known as the "Net Premium") in the accounts (fixed or investment) you've elected. Special investment rules apply to premiums processed prior to the Allocation Date. (See "Processing premium payments"). Over time, the amount you've invested in any investment account will increase or decrease the same as if you had invested the same amount directly in the corresponding underlying portfolio and had reinvested all portfolios' dividends and distributions in additional portfolio shares; except that we will deduct certain additional charges which will reduce your policy value. We describe these charges under "Description of Charges at the Policy Level". The amount you've invested in the fixed account will earn interest at the rates we declare from time to time. For the fixed account, we guarantee that this rate will be at least 3%. If you want to know what the current declared rate is for the fixed account, just call or write to us. Amounts you invest in the fixed account will not be subject to the asset-based risk charge described under "Deductions from policy value". Otherwise, the policy level charges applicable to the fixed account are the same as those applicable to the investment accounts. We reserve the right to offer one or more additional fixed accounts with characteristics that differ from those of the current fixed account, but we are under no obligation to do so. 29 Allocation of future premium payments At any time, you may change the accounts (fixed or investment) in which future premium payments will be invested. You make the original allocation in the application for the policy. The percentages you select must be in whole numbers and must total 100%. Transfers of existing policy value You may also transfer your existing policy value from one account (fixed or investment) to another. To do so, you must tell us how much to transfer, either as a whole number percentage or as a specific dollar amount. A confirmation of each transfer will be sent to you. Without our approval, the maximum amount you may transfer to or from any account in any policy year is $1,000,000. The policies are not designed for professional market timing organizations or other persons or entities that use programmed or frequent transfers among investment accounts. As a consequence, we have reserved the right to impose limits on the number and frequency of transfers into and out of investment accounts and to impose a fee of up to $25 for any transfer beyond an annual limit (which will not be less than 12). No transfer fee will be imposed on any transfer from an investment account into a fixed account if the transfer occurs during the following periods: . within 18 months after the policy's Issue Date, or . within 60 days after the later of the effective date of a material change in the investment objectives of any investment account or the date you are notified of the change. Subject to the restrictions set forth below, you may transfer existing policy value into or out of investment accounts. Transfers out of a fixed account are subject to additional limitations noted below. Our current practice is to restrict transfers into or out of investment accounts to two per calendar month (except with respect to those policies described in the following paragraph). For purposes of this restriction, transfers made during the period from the opening of a business day (usually 9:00 a.m. Eastern Time) to the close of that business day (usually 4:00 p.m. Eastern Time) are considered one transfer. You may, however, transfer to the Money Market B investment account even if the two transfer per month limit has been reached, but only if 100% of the account value in all investment accounts is transferred to the Money Market B investment account. If such a transfer to the Money Market B investment account is made, then, for the 30 calendar day period after such transfer, no transfers from the Money Market B investment account to any other investment accounts (variable or fixed) may be made. If your policy offers a dollar cost averaging or automatic asset allocation rebalancing program, any transfers pursuant to such program are not considered transfers subject to these restrictions on frequent trading. The restrictions described in this paragraph will be applied uniformly to all policy owners subject to the restrictions. Policies such as yours may be purchased by a corporation or other entity as a means to informally finance the liabilities created by an employee benefit plan, and to this end the entity may aggregately manage the policies purchased to match its liabilities under the plan. Policies sold under these circumstances are subject to special transfer restrictions. In lieu of the two transfers per month restriction, we will allow the policy owner under these circumstances to rebalance the investment options in its policies within the following limits: (i) during the 10 calendar day period after any policy values are transferred from one investment account into a second investment account, the values can only be transferred out of the second investment account if they are transferred into the Money Market B investment account; and (ii) any policy values that would otherwise not be transferable by application of the 10 day limit described above and that are transferred into the Money Market B investment account may not be transferred out of the Money Market B investment account into any other accounts (fixed or investment) for 30 calendar days. The restrictions described in this paragraph will be applied uniformly to all policy owners subject to the restrictions. The most you can transfer at any one time out of the fixed account is the greater of (i) the fixed account maximum transfer amount of $2,000, or (ii) the fixed account maximum transfer percentage of 25% multiplied by the amount of the fixed account on the immediately preceding policy anniversary. Any transfer which involves a transfer out of the fixed account may not involve a transfer to the Money Market B investment account. We reserve the right to impose a minimum amount limit on transfers out of the fixed account. We also reserve the right to impose different restrictions on any additional fixed account that we may offer in the future. 30 Surrender and Withdrawals Surrender You may surrender your policy in full at any time. If you do, we will pay you the policy value less any policy debt. This is called your "net cash surrender value." You must return your policy when you request a surrender. We will process surrenders on the day we receive the surrender request (unless such day is not a business day, in which case we will process surrenders as of the business day next following the date of the receipt). Withdrawals After the first policy year, you may make a withdrawal of part of your net cash surrender value once in each policy month. Generally, each withdrawal must be at least $500. There is a withdrawal fee for each withdrawal of $25 (or 2% of the withdrawal, if less). We will automatically reduce the policy value of your policy by the amount of the withdrawal fee. Unless otherwise specified by you, each account (fixed and investment) will be reduced in the same proportion as the policy value is then allocated among them. We will not permit a withdrawal if it would cause your net cash surrender value to fall below 3 months' worth of monthly deductions (see "Deductions from policy value"). We also reserve the right to refuse any withdrawal that would cause the policy's Total Face Amount to fall below $100,000 or the Base Face Amount to fall below $50,000. Because it reduces the policy value, any withdrawal will reduce your death benefit under either Option 1 or Option 2 (see "The Death Benefit"). Under Option 1, such a withdrawal may also reduce the Total Face Amount. This will happen only if the minimum death benefit under Option 1 is equal to or less than the Total Face Amount. Any such reduction in the Total Face Amount will be implemented by first reducing any Supplemental Face Amount then in effect. The Base Face Amount will be reduced only after the Supplemental Face Amount has been reduced to zero. If such a reduction in Total Face Amount would cause the policy to fail the Internal Revenue Code's definition of life insurance, we will not permit the withdrawal. Policy loans You may borrow from your policy at any time by completing a form satisfactory to us or, if the telephone/internet transaction authorization form has been completed, by telephone or e-mail. The maximum amount you can borrow is the amount determined as follows: . We first determine the net cash surrender value of your policy. . We then subtract an amount equal to 12 times the monthly deductions then being deducted from policy value. . We then multiply the resulting amount by 0.75% in policy years 1 through 10 and 0% thereafter (although we reserve the right to increase the percentage after the tenth policy year to as much as .25%). . We then subtract the third item above from the second item above. The minimum amount of each loan is $500. The interest charged on any loan is an effective annual rate of 3.75% in the first 10 policy years and 3.0% thereafter. However, we reserve the right to increase the percentage after the tenth policy year to as much as 3.25%. Accrued interest will be added to the loan daily and will bear interest at the same rate as the original loan amount. Unless otherwise specified by you, the amount of the loan is deducted from the accounts (fixed and investment) in the same proportion as the policy value is then allocated among them. The amount of the loan is then placed in a special loan account. This special loan account will earn interest at an effective annual rate of 3.0%. However, if we determine that a loan will be treated as a taxable distribution because of the differential between the loan interest rate and the rate being credited on the special loan account, we reserve the right to increase the rate charge on the loan to a rate that would, in our reasonable judgement, result in the transaction being treated as a loan under Federal tax law. We process policy loans as of the business day on or next following the day we receive the loan request. Repayment of policy loans You can repay all or part of a loan at any time. Each repayment will be allocated among the accounts as follows: . The same proportionate part of the loan as was borrowed from any fixed account will be repaid to that fixed account. . The remainder of the repayment will be allocated among the accounts in the same way a new premium payment would be allocated (unless otherwise specified by you). 31 If you want a payment to be used as a loan repayment, you must include instructions to that effect. Otherwise, all payments will be assumed to be premium payments. We process loan repayments as of the day we receive the repayment. Effects of policy loans The policy value, the net cash surrender value, and any death benefit are permanently affected by any loan, whether or not it is repaid in whole or in part. This is because the amount of the loan is deducted from the accounts and placed in a special loan account. The accounts and the special loan account will generally have different rates of investment return. The amount of the outstanding loan (which includes accrued and unpaid interest) is subtracted from the amount otherwise payable when the policy proceeds become payable. Taking out a loan on the policy increases the risk that the policy may lapse because of the difference between the interest rate charged on the loan and the interest rate credited to the special loan account. Also, whenever the outstanding loan equals or exceeds your policy value after the insured person reaches age 100, the policy will terminate 31 days after we have mailed notice of termination to you (and to any assignee of record at such assignee's last known address) specifying the amount that must be paid to avoid termination, unless a repayment of at least the amount specified is made within that period. Policy loans may also result in adverse tax consequences under certain circumstances (see "Tax considerations"). Description of Charges at the Policy Level Deduction from premium payments . Premium charge - A charge to (i) help cover our sales costs, (ii) cover state premium taxes we currently expect to pay, on average, and (iii) cover the increased Federal income tax burden that we currently expect will result from receipt of premiums. The current charge is 1.5% of each premium paid, although we reserve the right to increase the percentage to as high as 7%. Deductions from policy value . Administrative charge - A monthly charge to help cover our administrative costs. This is a flat dollar charge of up to $12. . Face Amount charge - A monthly charge for the first ten policy years to primarily help cover sales costs. To determine the charge we multiply the amount of Base Face Amount by a rate which varies by the insured person's sex, age and risk classification at issue. . Cost of insurance charge - A monthly charge for the cost of insurance. To determine the charge, we multiply the net amount of insurance for which we are then at risk by a cost of insurance rate. The rate is derived from an actuarial table. The table in your policy will show the maximum cost of insurance rates. The cost of insurance rates that we currently apply are generally less than the maximum rates. The current rates will never be more than the maximum rates shown in the policy. The table of rates we use will depend on the insurance risk characteristics and (usually) gender of the insured person, the Total Face Amount and the length of time the policy has been in effect. Regardless of the table used, cost of insurance rates generally increase each year that you own your policy, as the insured person`s attained age increases. (The insured person's "attained age" on any date is his or her age on the birthday nearest that date.) For Death Benefit Option 1, the net amount at risk is equal to the greater of zero, or the result of (a) minus (b) where: (a) is the death benefit as of the first day of the policy month, divided by 1.0024663; and (b) is the policy value as of the first day of the policy month after the deduction of all other monthly deductions. Since the net amount at risk for Death Benefit Option 1 is based on a formula that includes as factors the death benefit and the policy value, the net amount at risk is affected by the investment performance of the investment accounts chosen, payment of premiums and charges assessed. The cost of insurance rate and net amount at risk will be determined separately for the initial Total Face Amount and for each increase in Total Face Amount. In determining the net amount at risk, if there have been increases in Total Face Amount, the policy value shall first reduce the initial Total Face Amount. If the policy value exceeds the initial Total Face Amount, then such excess shall reduce the additional increases in Total Face Amount resulting from the increases, in the order the increases occurred. 32 For Death Benefit Option 2, the net amount at risk is equal to the Total Face Amount of insurance. . Additional mortality charge - A monthly charge specified in your policy for additional mortality risk if the insured person is subject to certain types of special insurance risk. . Asset-based risk charge - A monthly charge to help cover sales, administrative and other costs. The charge is a percentage of that portion of your policy value allocated to investment accounts. This charge does not apply to the current fixed account. . Supplementary benefits charges - Monthly charges for any supplementary insurance benefits added to the policy by means of a rider. . Withdrawal fee - A fee for each withdrawal of policy value to compensate us for the administrative expenses of processing the withdrawal. The charge is equal to the lesser of $25 or 2% of the withdrawal amount. Additional information about how certain policy charges work Sales expenses and related charges The premium charges help to compensate us for the cost of selling our policies. (See "Description of Charges at the Policy Level"). The amount of the charges in any policy year does not specifically correspond to sales expenses for that year. We expect to recover our total sales expenses over the life of the policies. To the extent that the premium charges do not cover total sales expenses, the sales expenses may be recovered from other sources, including gains from the asset-based risk charge and other gains with respect to the policies, or from our general assets. Similarly, administrative expenses not fully recovered by the administrative charge may also be recovered from such other sources. Method of deduction We deduct the monthly deductions described in the Fee Tables section from your policy's accounts (fixed and investment) in proportion to the amount of policy value you have in each, unless otherwise specified by you. Reduced charges for eligible classes The charges otherwise applicable may be reduced with respect to policies issued to a class of associated individuals or to a trustee, employer or similar entity where we anticipate that the sales to the members of the class will result in lower than normal sales or administrative expenses, lower taxes or lower risks to us. We will make these reductions in accordance with our rules in effect at the time of the application for a policy. The factors we consider in determining the eligibility of a particular group for reduced charges, and the level of the reduction, are as follows: the nature of the association and its organizational framework; the method by which sales will be made to the members of the class; the facility with which premiums will be collected from the associated individuals and the association's capabilities with respect to administrative tasks; the anticipated lapse and surrender rates of the policies; the size of the class of associated individuals and the number of years it has been in existence; the aggregate amount of premiums paid; and any other such circumstances which result in a reduction in sales or administrative expenses, lower taxes or lower risks. Any reduction in charges will be reasonable and will apply uniformly to all prospective policy purchasers in the class and will not unfairly discriminate against any owner. Other charges we could impose in the future Except for a portion of the premium charge, we currently make no charge for our Federal income taxes. However, if we incur, or expect to incur, income taxes attributable to any subaccount of the Account or this class of policies in future years, we reserve the right to make a charge for such taxes. Any such charge would reduce what you earn on any affected investment accounts. However, we expect that no such charge will be necessary. We also reserve the right to increase the premium charge in order to correspond with changes in the state premium tax levels or in the Federal income tax treatment of the deferred acquisition costs for this type of policy. Under current laws, we may incur state and local taxes (in addition to premium taxes) in several states. At present, these taxes are not significant. If there is a material change in applicable state or local tax laws, we may make charges for such taxes. 33 Description of Charges at the Portfolio Level The portfolios must pay investment management fees and other operating expenses. These fees and expenses (shown in the tables of portfolio annual expenses under "Fee Tables") are different for each portfolio and reduce the investment return of each portfolio. Therefore, they also indirectly reduce the return you will earn on any investment accounts you select. We may also receive payments from a Series Fund or its affiliates at an annual rate of up to approximately 0.45% of the average net assets that holders of our variable life insurance policies and other products have invested in that portfolio. Any such payments do not, however, result in any charge to you in addition to what is shown in the tables. Expenses of the portfolios are not fixed or specified under the terms of the policy, and those expenses may vary from year to year. Other Policy Benefits, Rights and Limitations Optional supplementary benefit riders you can add When you apply for a policy, you can request any of the optional supplementary benefit riders that we then make available. Availability of any rider, the benefits it provides and the charges for it may vary by state. Our rules and procedures will govern eligibility for any rider and, in some cases, the configuration of the actual rider benefits. Each rider contains specific details that you should review before you decide to choose the rider. Charges for most riders will be deducted from the policy value. We may change these charges (or the rates that determine them), but not above any applicable maximum amount stated in the Policy Specifications page of your policy. We may add to, delete from or modify the list of optional supplementary benefit riders. . Enhanced Cash Value Rider - This rider provides for payment of an additional benefit to the policy owner upon surrender of the policy in the first seven policy years. The enhanced cash value rider benefit is calculated as a percentage of the lesser of cumulative premiums paid to date or the "Limiting Premium" shown in the Policy Specifications page of your policy, minus any withdrawals and policy debt. The percentage starts at 11% and reduces to 0% in the eighth policy year. The enhanced cash value rider is only available if: (i) notice of surrender is received at our Service Office prior to the death of the insured person, (ii) such surrender is not the result of an exchange under Section 1035 of the Internal Revenue Code, and (iii) the rider has not terminated pursuant to its premiums. This rider does not increase the available loan value of the policy. Variations in policy terms Insurance laws and regulations apply to us in every state in which our policies are sold. As a result, various terms and conditions of your insurance coverage may vary from the terms and conditions described in this prospectus, depending upon where you reside. These variations will be reflected in your policy or in endorsements attached to your policy. We may vary the charges and other terms of our policies where special circumstances result in sales or administrative expenses, mortality risks or other risks that are different from those normally associated with the policies. These include the type of variations discussed under "Reduced charges for eligible classes". No variation in any charge will exceed any maximum stated in this prospectus with respect to that charge. Any variation discussed above will be made only in accordance with uniform rules that we adopt and that we apply fairly to our customers. Procedures for issuance of a policy Generally, the policy is available with a minimum Total Face Amount at issue of $100,000 and a minimum Base Face Amount at issue of $50,000. At the time of issue, the insured person must have an attained age of no more than 90. All insured persons must meet certain health and other insurance risk criteria called "underwriting standards". Policies issued in Montana or in connection with certain employee plans will not directly reflect the sex of the insured person in either the premium rates or the charges or values under the policy. Commencement of insurance coverage After you apply for a policy, it can sometimes take up to several weeks for us to gather and evaluate all the information we need to decide whether to issue a policy to you and, if so, what the insured person's rate classification should be. After we approve an application for a policy and assign an appropriate insurance rate classification, we will prepare the policy for 34 delivery. We will not pay a death benefit under a policy unless the policy is in effect when the insured person dies (except for the circumstances described under "Temporary coverage prior to policy delivery" below). The policy will take effect only if all of the following conditions are satisfied: . The policy is delivered to and received by the applicant. . The minimum initial premium is received by us. . The insured person is living and there has been no deterioration in the insurability of the insured person since the date of the application. The date all of the above conditions are satisfied is referred to in this prospectus as the "Contract Completion Date". If all of the above conditions are satisfied, the policy will take effect on the date shown in the policy as the "Policy Date". That is the date on which we begin to deduct monthly charges. Policy months, policy years and policy anniversaries are all measured from the Policy Date. Backdating Under limited circumstances, we may backdate a policy, upon request, by assigning a Policy Date earlier than the date the application is signed. However, in no event will a policy be backdated earlier than the earliest date allowed by state law, which is generally three months to one year prior to the date of application for the policy. The most common reasons for backdating are to preserve a younger age at issue for the insured person or to retain a common monthly deduction date in certain corporate-owned life insurance cases involving multiple policies issued over time. If used to preserve age, backdating will result in lower insurance charges. However, monthly deductions will begin earlier than would otherwise be the case. Monthly deductions for the period the Policy Date is backdated will actually be deducted from policy value on the Contract Completion Date. Temporary coverage prior to policy delivery If a specified amount of premium is paid with the application for a policy and other conditions are met, we will provide temporary term life insurance coverage on the insured person for a period prior to the time coverage under the policy takes effect. Such temporary term coverage will be subject to the terms and conditions described in the Temporary Life Insurance Agreement and Receipt attached to the application for the policy, including conditions to coverage and limits on amount and duration of coverage. Monthly deduction dates Each charge that we deduct monthly is assessed against your policy value at the close of business on the Policy Date and at the close of the first day in each subsequent policy month. Changes that we can make as to your policy We reserve the right to make any changes in the policy necessary to ensure the policy is within the definition of life insurance under the Federal tax laws and is in compliance with any changes in Federal or state tax laws. In our policies, we reserve the right to make certain changes if they would serve the best interests of policy owners or would be appropriate in carrying out the purposes of the policies. Such changes include the following: . Changes necessary to comply with or obtain or continue exemptions under the Federal securities laws . Combining or removing fixed accounts or investment accounts . Changes in the form of organization of any separate account Any such changes will be made only to the extent permitted by applicable laws and only in the manner permitted by such laws. When required by law, we will obtain your approval of the changes and the approval of any appropriate regulatory authority. The owner of the policy Who owns the policy? That's up to the person who applies for the policy. The owner of the policy is the person who can exercise most of the rights under the policy, such as the right to choose the accounts in which to invest or the right to surrender the policy. In many cases, the person buying the policy is also the person who will be the owner. However, the 35 application for a policy can name another person or entity (such as a trust) as owner. Whenever we`ve used the term "you" in this prospectus, we've assumed that the reader is the person who has whatever right or privilege is being discussed. There may be tax consequences if the owner and the insured person are different, so you should discuss this issue with your tax adviser. While the insured person is alive, you will have a number of options under the policy. Here are some major ones: . Determine when and how much you invest in the various acounts in which to invest . Borrow or withdraw amounts you have in the accounts . Change the beneficiary who will receive the death benefit . Change the amount of insurance . Turn in (i.e., "surrender") the policy for the full amount of its net cash surrender value . Choose the form in which we will pay out the death benefit or other proceeds It is possible to name so-called "joint owners" of the policy. If more than one person owns a policy, all owners must join in most requests to exercise rights under the policy. Policy cancellation right You have the right to cancel your policy within 10 days after you receive it (the period may be longer in some states). This is often referred to as the "free look" period. To cancel your policy, simply deliver or mail the policy to: . John Hancock USA at one of the addresses shown on the back cover of this prospectus, or . the John Hancock USA representative who delivered the policy to you. The date of cancellation will be the date of such mailing or delivery. In most states, you will receive a refund of any premiums you've paid. In some states, the refund will be your policy value on the date of cancellation. Reports that you will receive At least annually, we will send you a statement setting forth at least the following information as of the end of the most recent reporting period: the amount of the death benefit, the portion of the policy value in the fixed account and in each investment account, premiums received and charges deducted from premiums since the last report, any outstanding policy loan (and interest charged for the preceding policy year), and any further information required by law. Moreover, you also will receive confirmations of premium payments, transfers among accounts, policy loans, partial withdrawals and certain other policy transactions. Semiannually we will send you a report containing the financial statements of the portfolios, including a list of securities held in each portfolio. Assigning your policy You may assign your rights in the policy to someone else as collateral for a loan or for some other reason. Assignments do not require the consent of any revocable beneficiary. A copy of the assignment must be forwarded to us. We are not responsible for any payment we make or any action we take before we receive a copy of the assignment at our Service Office. Nor are we responsible for the validity of the assignment or its efficacy in meeting your objectives. An absolute assignment is a change of ownership. All collateral assignees of record must usually consent to any surrender, withdrawal or loan from the policy. When we pay policy proceeds General We will ordinarily pay any death benefit, withdrawal, surrender value or loan within 7 days after we receive the last required form or request (and, with respect to the death benefit, any other documentation that may be required). If we don't have information about the desired manner of payment within 7 days after the date we receive documentation of the insured person's death, we will pay the proceeds as a single sum. 36 Delay to challenge coverage We may challenge the validity of your insurance policy based on any material misstatements made to us in the application for the policy. We cannot make such a challenge, however, beyond certain time limits that are specified in the policy. Delay for check clearance We reserve the right to defer payment of that portion of your policy value that is attributable to a premium payment made by check for a reasonable period of time (not to exceed 15 days) to allow the check to clear the banking system. Delay of separate account proceeds We reserve the right to defer payment of any death benefit, loan or other distribution that is derived from an investment account if (1) the New York Stock Exchange is closed (other than customary weekend and holiday closings) or trading on the New York Stock Exchange is restricted; (2) an emergency exists, as a result of which disposal of securities is not reasonably practicable or it is not reasonably practicable to fairly determine the policy value; or (3) the SEC by order permits the delay for the protection of owners. Transfers and allocations of policy value among the investment accounts may also be postponed under these circumstances. If we need to defer calculation of separate account values for any of the foregoing reasons, all delayed transactions will be processed at the next values that we do compute. Delay of general account surrender proceeds State laws allow us to defer payment of any portion of the net cash surrender value derived from any fixed account for up to 6 months. These laws were enacted many years ago to help insurance companies in the event of a liquidity crisis. How you communicate with us General Rules You should mail or express all checks and money orders for premium payments and loan repayments to the John Hancock USA Service Office at the appropriate address shown on the back cover. Under our current rules, certain requests must be made in writing and be signed and dated by you. They include the following: . loans . surrenders or withdrawals . change of death benefit option . increase or decrease in Face Amount . change of beneficiary . election of payment option for policy proceeds . tax withholding elections . election of telephone/internet transaction privilege. The following requests may be made either in writing (signed and dated by you) or by telephone or fax or through the Company's secured website, if a special form is completed (see "Telephone, Facsimile and Internet Transactions" below): . transfers of policy value among accounts . change of allocation among accounts for new premium payments You should mail or express all written requests to our Service Office at the appropriate address shown on the back cover. You should also send notice of the insured person's death and related documentation to our Service Office. We do not consider that we've "received" any communication until such time as it has arrived at the proper place and in the proper and complete form. We have special forms that should be used for a number of the requests mentioned above. You can obtain these forms from our Service Office or your John Hancock USA representative. Each communication to us must include your name, your policy number and the name of the insured person. We cannot process any request that doesn't include this required 37 information. Any communication that arrives after the close of our business day, or on a day that is not a business day, will be considered "received" by us on the next following business day. Our business day currently closes at 4:00 p.m. Eastern Time, but special circumstances (such as suspension of trading on a major exchange) may dictate an earlier closing time. Telephone, Facsimile and Internet Transactions If you complete a special authorization form, you can request transfers among accounts and changes of allocation among accounts simply by telephoning us at 1-800-521-1234 or by faxing us at 1-617-572-7008 or through the Company's secured website. Any fax or internet request should include your name, daytime telephone number, policy number and, in the case of transfers and changes of allocation, the names of the accounts involved. We will honor telephone and internet instructions from anyone who provides the correct identifying information, so there is a risk of loss to you if this service is used by an unauthorized person. However, you will receive written confirmation of all telephone/internet transactions. There is also a risk that you will be unable to place your request due to equipment malfunction or heavy phone line or internet usage. If this occurs, you should submit your request in writing. If you authorize telephone or internet transactions, you will be liable for any loss, expense or cost arising out of any unauthorized or fraudulent telephone or internet instructions which we reasonably believe to be genuine, unless such loss, expense or cost is the result of our mistake or negligence. We employ procedures which provide safeguards against the execution of unauthorized transactions which are reasonably designed to confirm that instructions received by telephone or internet are genuine. These procedures include requiring personal identification, the use of a unique password for internet authorization, recording of telephone calls, and providing written confirmation to the owner. If we do not employ reasonable procedures to confirm that instructions communicated by telephone or internet are genuine, we may be liable for any loss due to unauthorized or fraudulent instructions. As stated earlier in this prospectus, the policies are not designed for professional market timing organizations or other persons or entities that use programmed or frequent transfers among investment options. To discourage disruptive frequent trading, we have imposed certain transfer restrictions (see "Transfers of existing policy value"). In addition, we also reserve the right to change our telephone, facsimile and internet transaction privileges outlined in this section at any time, and to suspend or terminate any or all of those privileges with respect to any owners who we feel are abusing the privileges to the detriment of other owners. Distribution of Policies John Hancock Distributors LLC ("JH Distributors"), a Delaware limited liability company that we control, is the principal distributor of the policies and the principal underwriter of the securities offered through this prospectus and of other annuity and life insurance products we and our affiliates offer. JH Distributors also acts as the principal underwriter of the John Hancock Trust, whose securities are used to fund certain investment accounts under the policies and under other annuity and life insurance products we offer. JH Distributors' principal address is 200 Bloor Street East, Toronto, Canada M4W 1E5 and it also maintains offices with us at 601 Congress Street, Boston, Massachusetts 02210. JH Distributors is a broker-dealer registered under the Securities Exchange Act of 1934 (the "1934 Act") and is a member of the National Association of Securities Dealers, Inc. (the "NASD"). We offer the policies for sale through individuals who are licensed as insurance agents and who are registered representatives of broker-dealers that have entered into selling agreements with JH Distributors. These broker-dealers may include our affiliates Essex National Securities, Inc. and Signator Investors, Inc. Through JH Distributors, John Hancock USA pays compensation to broker-dealers for the promotion and sale of the policies. The registered representative through whom your policy is sold will be compensated pursuant to the registered representative's own arrangement with his or her broker-dealer. Compensation to broker-dealers for the promotion and sale of the policies is not paid directly by policyowners but will be recouped through the fees and charges imposed under the policy. (See "Description of Charges at the Policy Level".) A limited number of broker-dealers may also be paid commissions or overrides to "wholesale" the policies; that is, to provide marketing support and training services to the broker-dealer firms that do the actual selling. We may also provide compensation to a limited number of broker-dealers for providing ongoing service in relation to policies that have already been purchased. 38 Standard Compensation. The compensation JH Distributors may pay to broker-dealers may vary depending on the selling agreement, but compensation (inclusive of wholesaler overrides and expense allowances) paid to broker-dealers for sale of the policies (not including riders) is not expected to exceed 32% of target commissionable premium, and 4% of premium in excess of target, paid in the first policy year, 9% of commissionable premium paid in years 2-5, and 6% of commissionable premium paid in years 6-10. Additional Compensation and Revenue Sharing. To the extent permitted by SEC and NASD rules and other applicable laws and regulations, selling broker-dealers may receive, directly or indirectly, additional payments in the form of cash, other compensation or reimbursement. These additional compensation or reimbursement arrangements may include, for example, payments in connection with the firm's "due diligence" examination of the policies, payments for providing conferences or seminars, sales or training programs for invited registered representatives and other employees, payment for travel expenses, including lodging, incurred by registered representatives and other employees for such seminars or training programs, seminars for public, advertising and sales campaigns regarding the policies, payments to assist a firm in connection with its systems, operations and marketing expenses and/or other events or activities sponsored by the firms. Subject to applicable NASD rules and other applicable laws and regulations, JH Distributors and its affiliates may contribute to, as well as sponsor, various educational programs, sales contests, and/or other promotions in which participating firms and their sales persons may receive prizes such as merchandise, cash or other rewards. These arrangements will not be offered to all firms, and the terms of such arrangements may differ between firms. We provide additional information on special compensation or reimbursement arrangements involving selling firms and other financial institutions in the Statement of Additional Information, which is available upon request. Any such compensation, which may be significant at times, will not result in any additional direct charge to you by us. Differential Compensation. Compensation negotiated and paid by JH Distributors pursuant to a selling agreement with a broker-dealer may differ from compensation levels that the broker-dealer receives for selling other variable policies or contracts. These compensation arrangements may give us benefits such as greater access to registered representatives. In addition, under their own arrangements, broker-dealer firms may pay a portion of any amounts received under standard or additional compensation or revenue sharing arrangements to their registered representatives. As a result, registered representatives may be motivated to sell the policies of one issuer over another issuer, or one product over another product. You should contact your registered representative for more information on compensation arrangements in connection with your purchase of a policy. Tax considerations This description of federal income tax consequences is only a brief summary and is not intended as tax advice. Tax consequences will vary based on your own particular circumstances, and for further information you should consult a qualified tax advisor. Federal, state and local tax laws, regulations and interpretations can change from time to time. As a result, the tax consequences to you and the beneficiary may be altered, in some cases retroactively. General Generally, death benefits paid under policies such as yours are not subject to income tax. Earnings on your policy value are not subject to income tax as long as we don't pay them out to you. If we do pay out any amount of your policy value upon surrender or withdrawal, all or part of that distribution should generally be treated as a return of the premiums you've paid and should not be subject to income tax. Amounts you borrow are generally not taxable to you. However, some of the tax rules change if your policy is found to be a "modified endowment contract". This can happen if you've paid more than a certain amount of premiums that is prescribed by the tax laws. Additional taxes and penalties may be payable for policy distributions of any kind under a modified endowment contract. Policy proceeds We believe the policy will receive the same Federal income and estate tax treatment as fixed benefit life insurance policies. Section 7702 of the Internal Revenue Code (the "Code") defines a life insurance contract for federal tax purposes. If certain standards are met at issue and over the life of the policy, the policy will satisfy that definition. We will monitor compliance with these standards. If the policy complies with Section 7702, we believe the death benefit proceeds under the policy will be excludable from the beneficiary's gross income under Section 101 of the Code. 39 Other policy distributions Increases in policy value as a result of interest or investment experience will not be subject to federal income tax unless and until values are actually received through distributions. In general, the owner will be taxed on the amount of distributions that exceed the premiums paid under the policy. But under certain circumstances within the first 15 policy years, the owner may be taxed on a distribution even if total withdrawals do not exceed total premiums paid. Any taxable distribution will be ordinary income to the owner (rather than capital gains). Distributions for tax purposes can include amounts received upon surrender or withdrawals. You may also be deemed to have received a distribution for tax purposes if you assign all or part of your policy rights or change your policy's ownership. We also believe that, except as noted below, loans received under the policy will be treated as indebtedness of an owner and that no part of any loan will constitute income to the owner. However, if the policy terminates for any reason, the amount of any outstanding loan that was not previously considered income will be treated as if it had been distributed to the owner upon such termination. This could result in a considerable tax bill. Under certain circumstances involving large amounts of outstanding loans and an insured person of advanced age, you might find yourself having to choose between high premium requirements to keep your policy from lapsing and a significant tax burden if you allow the lapse to occur. It is possible that, despite our monitoring, a policy might fail to qualify as a life insurance contract under Section 7702 of the Code. This could happen, for example, if we inadvertently failed to return to you any premium payments that were in excess of permitted amounts, or if any of the portfolios failed to meet certain investment diversification or other requirements of the Code. If this were to occur, you would be subject to income tax on the income credited to the policy for the period of the disqualification and for subsequent periods. Tax consequences of ownership or receipt of policy proceeds under Federal, state and local estate, inheritance, gift and other tax laws depend on the circumstances of each owner or beneficiary. Because there may be unfavorable tax consequences (including recognition of taxable income and the loss of income tax-free treatment for any death benefit payable to the beneficiary), you should consult a qualified tax adviser prior to changing the policy's ownership or making any assignment of ownership interests. Diversification rules and ownership of the Account Your policy will not qualify for the tax benefit of a life insurance contract unless the Account follows certain rules requiring diversification of investments underlying the policy. In addition, the rules require that the policy owner not have "investment control" over the underlying assets. The Treasury Department explained in its temporary regulations regarding diversification that such regulations "do not provide guidance concerning the circumstances in which investor control of the investments of a segregated asset account may cause the investor, rather than the insurance company, to be treated as the owner of the assets in the account". As the variable policy owner, you will be treated as the owner of Account assets if you have the ability to exercise investment control over them. If you are found to have such ability, you will be taxed on any income or gains the assets generate. Although the Treasury Department announced several years ago that it would provide further guidance on this issue, it had not yet done so as of the date of this prospectus. The ownership rights under your policy are similar to, but different in certain respects from, those described in Internal Revenue Service rulings in which it was determined that policyholders were not owners of separate account assets. Since you have greater flexibility in allocating premiums and policy values than was the case in those rulings, it is possible that you would be treated as the owner of your policy's proportionate share of the assets of the Account. We do not know what will be in future Treasury Department regulations or other guidance. We cannot guarantee that the portfolios will be able to operate as currently described in the Series Funds' prospectuses, or that a Series Fund will not have to change any portfolio's investment objectives or policies. We have reserved the right to modify your policy if we believe it will prevent you from being considered the owner of your policy's proportionate share of the assets of the Account, but we are under no obligation to do so. 7-pay premium limit At the time of policy issuance, we will determine whether the Planned Premium schedule will exceed the 7-pay limit discussed below. If so, our standard procedures prohibit issuance of the policy unless you sign a form acknowledging that fact. 40 The 7-pay limit is the total of net level premiums that would have been payable at any time for a comparable fixed policy to be fully "paid-up" after the payment of 7 equal annual premiums. "Paid-up" means that no further premiums would be required to continue the coverage in force until maturity, based on certain prescribed assumptions. If the total premiums paid at any time during the first 7 policy years exceed the 7-pay limit, the policy will be treated as a "modified endowment contract", which can have adverse tax consequences. The owner will be taxed on distributions and loans from a "modified endowment contract" to the extent of any income (gain) to the owner (on an income-first basis). The distributions and loans affected will be those made on or after, and within the two year period prior to, the time the policy becomes a modified endowment contract. Additionally, a 10% penalty tax may be imposed on taxable portions of such distributions or loans that are made before the owner attains age 591/2. Furthermore, any time there is a "material change" in a policy (generally the result of such things as an increase in the Total Face Amount, the addition of certain other policy benefits after issue, a change in death benefit option, or reinstatement of a lapsed policy), the policy will have a new 7-pay limit as if it were a newly-issued policy. If a prescribed portion of the policy's then policy value, plus all other premiums paid within 7 years after the material change, at any time exceed the new 7-pay limit, the policy will become a modified endowment contract. Moreover, if benefits under a policy are reduced (such as a reduction in the Total Face Amount or death benefit or the reduction or cancellation of certain rider benefits) during the 7 years in which a 7-pay test is being applied, the 7-pay limit will generally be recalculated based on the reduced benefits. If the premiums paid to date are greater than the recalculated 7-pay limit, the policy will become a modified endowment contract. All modified endowment contracts issued by the same insurer (or its affiliates) to the owner during any calendar year generally are required to be treated as one contract for the purpose of applying the modified endowment contract rules. A policy received in exchange for a modified endowment contract will itself also be a modified endowment. You should consult your tax advisor if you have questions regarding the possible impact of the 7-pay limit on your policy. Corporate and H.R. 10 plans The policy may be acquired in connection with the funding of retirement plans satisfying the qualification requirements of Section 401 of the Code. If so, the Code provisions relating to such plans and life insurance benefits thereunder should be carefully scrutinized. We are not responsible for compliance with the terms of any such plan or with the requirements of applicable provisions of the Code. Financial statements reference The financial statements of John Hancock USA and the Account can be found in the Statement of Additional Information. The financial statements of John Hancock USA should be distinguished from the financial statements of the Account and should be considered only as bearing upon the ability of John Hancock USA to meet its obligations under the policies. Registration statement filed with the SEC This prospectus omits certain information contained in the Registration Statement which has been filed with the SEC. More details may be obtained from the SEC upon payment of the prescribed fee. Independent Registered Public Accounting Firm The consolidated financial statements of John Hancock Life Insurance Company (U.S.A.) at December 31, 2004 and 2003, and for each of the three years in the period ended December 31, 2004, and the financial statements of Separate Account N of John Hancock Life Insurance Company (U.S.A.) at December 31, 2004, and for each of the two years in the periods ended December 31, 2004 and 2003, appearing in this Statement of Additional Information of the Registration Statement have been audited by Ernst & Young LLP, Independent Registered Public Accounting Firm, as set forth in their reports thereon appearing elsewhere herein, and are included in reliance upon such reports given on the authority of such firm as experts in accounting and auditing. 41 In addition to this prospectus, John Hancock USA has filed with the Securities and Exchange Commission (the "SEC") a Statement of Additional Information (the "SAI") which contains additional information about John Hancock USA and the Account. The SAI and personalized illustrations of death benefits, policy values and surrender values are available, without charge, upon request. You may obtain the personalized illustrations from your John Hancock USA representative. The SAI may be obtained by contacting the John Hancock USA Service Office. You should also contact the John Hancock USA Service Office to request any other information about your policy or to make any inquiries about its operation.
SERVICE OFFICE Express Delivery Mail Delivery Life Operations P.O. Box 192 197 Clarendon Street Boston, MA 02117 Boston, MA 02117 Phone: Fax: 1-800-521-1234 1-617-572-7008
Information about the Account (including the SAI) can be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 202-942-8090. Reports and other information about the Account are available on the SEC's Internet website at http://www.sec.gov. Copies of such information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC at 450 Fifth Street, NW, Washington, DC 20549-0102. Investment Company Act File No. 811-5130 Statement of Additional Information dated October 12, 2005 for interests in John Hancock Life Insurance Company (U.S.A.) Separate Account N ("Registrant") Interests are made available under CORPORATE VUL a flexible premium variable universal life insurance policy issued by JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) ("JOHN HANCOCK USA" or "DEPOSITOR") This is a Statement of Additional Information ("SAI"). It is not the prospectus. The prospectus, dated the same date as this SAI, may be obtained from a John Hancock USA representative or by contacting the John Hancock USA Servicing Office at Life Operations, 197 Clarendon Street, Boston, MA 02117 or telephoning 1-800-521-1234. TABLE OF CONTENTS Contents of this SAI Page No. -------------------- -------- Description of the Depositor ........................... 2 Description of the Registrant .......................... 2 Services ............................................... 2 Independent Registered Public Accounting Firm .......... 2 Principal Underwriter/Distributor ...................... 2 Additional Information About Charges ................... 3 Financial Statements of Registrant and Depositor ....... F-1 Description of the Depositor Under the federal securities laws, the entity responsible for organization of the registered separate account underlying the variable life insurance policy is known as the "Depositor". The Depositor is John Hancock USA, a stock life insurance company organized under the laws of Maine on August 20, 1955 by a special act of the Maine legislature and redomesticated under the laws of Michigan. We are a licensed life insurance company in the District of Columbia and all states of the United States except New York. Until 2004, John Hancock USA had been known as The Manufacturers Life Insurance Company (U.S.A.). Our ultimate parent is Manulife Financial Corporation ("MFC"), a publicly traded company based in Toronto, Canada. MFC is the holding company of The Manufacturers Life Insurance Company and its subsidiaries, collectively known as Manulife Financial. Description of the Registrant Under the federal securities laws, the registered separate account underlying the variable life insurance policy is known as the "Registrant". In this case, the Registrant is John Hancock Life Insurance Company (U.S.A.) Separate Account N (the "Account"), a separate account established by John Hancock USA under Michigan law. The variable investment options shown on page 1 of the prospectus are subaccounts of the Account. The Account meets the definition of "separate account" under the federal securities laws and is registered as a unit investment trust under the Investment Company Act of 1940 ("1940 Act"). Such registration does not involve supervision by the SEC of the management of the Account or of John Hancock USA. New subaccounts may be added and made available to policy owners from time to time. Existing subaccounts may be modified or deleted at any time. Services Administration of policies issued by John Hancock USA and of registered separate accounts organized by John Hancock USA may be provided by John Hancock Life Insurance Company, John Hancock Life Insurance Company (U.S.A.) or other affiliates. Neither John Hancock USA nor the separate accounts are assessed any charges for such services. Custodianship and depository services for the Registrant are provided by State Street Bank. State Street Bank's address is 225 Franklin Street, Boston, Massachusetts, 02110. Independent Registered Public Accounting Firm The consolidated financial statements of John Hancock Life Insurance Company (U.S.A.) at December 31, 2004 and 2003, and for each of the three years in the period ended December 31, 2004, and the financial statements of Separate Account N of John Hancock Life Insurance Company (U.S.A.) at December 31, 2004, and for each of the two years in the periods ended December 31, 2004 and 2003, appearing in this Statement of Additional Information of the Registration Statement have been audited by Ernst & Young LLP, Independent Registered Public Accounting Firm, as set forth in their reports thereon appearing elsewhere herein, and are included in reliance upon such reports given on the authority of such firm as experts in accounting and auditing. Principal Underwriter/Distributor John Hancock Distributors LLC ("JH Distributors"), a Delaware limited liability company that we control, is the principal distributor of the policies and the principal underwriter of the securities offered through this prospectus. JH Distributors acts as the principal distributor of a number of other annuity and life insurance products we and our affiliates offer. JH Distributors also acts as the principal underwriter of the John Hancock Trust, whose securities are used to fund certain variable investment options under the policies and under other annuity and life insurance products we offer. JH Distributors' principal address is 200 Bloor Street East, Toronto, Canada M4W 1E5 and it also maintains offices with us at 601 Congress Street, Boston, Massachusetts 02210. JH Distributors is a broker-dealer registered under the Securities Act of 1934 (the "1934 Act") and is a member of the National Association of Securities Dealers, Inc. (the "NASD"). 2 We offer the policies for sale through individuals who are licensed as insurance agents and who are registered representatives of broker-dealers that have entered into selling agreements with JH Distributors. These broker-dealers may include our affiliates Essex National Securities, Inc. and Signator Investors, Inc. The aggregate dollar amount of underwriting commissions paid to JH Distributors in 2004, 2003 and 2002 was $403,619,081, $293,120,491, and $275,138,774, respectively. JH Distributors did not retain any of these amounts during such periods. Through JH Distributors, John Hancock USA pays compensation to broker-dealers for the promotion and sale of the policies. The compensation JH Distributors may pay to broker-dealers may vary depending on the selling agreement, but compensation (inclusive of wholesaler overrides and expense allowances) paid to broker-dealers for sale of the policies (not including riders) is not expected to exceed 32% of target commissionable premium, and 4% of premium in excess of target, paid in the first policy year, 9% of commissionable premium paid in years 2-5, and 6% of commissionable premium paid in years 6-10. The registered representative through whom your policy is sold will be compensated pursuant to the registered representative's own arrangement with his or her broker-dealer. Compensation to broker-dealers for the promotion and sale of the policies is not paid directly by policyowners but will be recouped through the fees and charges imposed under the policy. Additional compensation and revenue sharing arrangements may be offered to certain broker-dealer firms. The terms of such arrangements may differ among broker-dealer firms we select based on various factors. In general, the arrangements involve three types of payments or any combination thereof: . Fixed dollar payments: The amount of these payments varies widely. JH Distributors may, for example, make one or more payments in connection with a firm's conferences, seminars or training programs, seminars for the public, advertising and sales campaigns regarding the policies, to assist a firm in connection with its systems, operations and marketing expenses, or for other activities of a selling firm or wholesaler. JH Distributors may make these payments upon the initiation of a relationship with a firm, and at any time thereafter. . Payments based upon sales: These payments are based upon a percentage of the total amount of money received, or anticipated to be received, for sales through a firm of some or all of the insurance products that we and/or our affiliates offer. JH Distributors makes these payments on a periodic basis. . Payments based upon "assets under management": These payments are based upon a percentage of the policy value of some or all of our (and/or our affiliates') insurance products that were sold through the firm. JH Distributors makes these payments on a periodic basis. Signator Investors, Inc. and Essex National Securities, Inc. may pay their respective registered representatives additional cash incentives in the form of bonus payments, expense payments, employment benefits or the waiver of overhead costs or expenses in connection with the sale of the policies that they would not receive in connection with the sale of policies issued by unaffiliated companies. Certain unaffiliated financial institutions such as banks may also receive compensation in connection with the sale of our policies sold by registered representatives of Essex National Securities, Inc. on bank premises. Additional Information About Charges A Policy will not be issued until the underwriting process has been completed to the Company's satisfaction. The underwriting process generally includes the obtaining of information concerning your age, medical history, occupation and other personal information. This information is then used to determine the cost of insurance charge. Reduction In Charges The Policy is available for purchase by corporations and other groups or sponsoring organizations. Group or sponsored arrangements may include reduction or elimination of withdrawal charges and deductions for employees, officers, directors, agents and immediate family members of the foregoing. John Hancock USA reserves the right to reduce any of the Policy's charges on certain cases where it is expected that the amount or nature of such cases will result in savings of sales, underwriting, administrative, commissions or other costs. Eligibility for these reductions and the amount of reductions will be determined by a number of factors, including the number of lives to be insured, the total premiums expected to be paid, total assets under management for the policyowner, the nature of the relationship among the insured individuals, the purpose for which the policies are being purchased, expected persistency of the individual policies, and any other circumstances which John Hancock USA believes to be relevant to the expected reduction of its expenses. Some of these reductions may be quaranteed and others may be subject to withdrawal or modifications, on a uniform case basis. Reductions in charges will not be unfairly discriminatory to any policyowners. John Hancock USA may modify from time to time, on a uniform basis, both the amounts of reductions and the criteria for qualification. 3 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors The Manufacturers Life Insurance Company (U.S.A.) We have audited the accompanying consolidated balance sheets of The Manufacturers Life Insurance Company (U.S.A.) and subsidiaries ("the Company") as of December 31, 2004 and 2003, and the related consolidated statements of income, changes in capital and surplus, and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we do not express such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Manufacturers Life Insurance Company (U.S.A.) and subsidiaries at December 31, 2004 and 2003, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2004 in conformity with U.S. generally accepted accounting principles. As discussed in Note 2 to the financial statements, in 2004 the Company changed its method of accounting for certain nontraditional long duration contracts and for separate accounts. Boston, Massachusetts March 25, 2005 F-1 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31 ----------------- 2004 2003 ------- ------- ($US MILLIONS) ASSETS Investments (Note 3): Securities available-for-sale, at fair value: Fixed-maturity (amortized cost: 2004 $10,396; 2003 $9,827) $11,188 $10,653 Equity (cost: 2004 $382; 2003 $401)....................... 466 475 Mortgage loans............................................ 2,367 2,187 Real estate................................................ 1,450 1,259 Policy loans............................................... 2,681 2,532 Short-term investments..................................... 436 564 ------- ------- Total Investments......................................... 18,588 17,670 Cash and cash equivalents.................................. 1,482 972 Deferred acquisition costs (Note 5)........................ 3,448 2,939 Deferred sales inducements (Note 5)........................ 228 215 Due from affiliates........................................ 2,350 2,330 Amounts recoverable from reinsurers........................ 968 1,140 Other assets (Goodwill: 2004 -- $62; 2003 -- $62).......... 1,101 717 Separate account assets.................................... 57,103 43,694 ------- ------- Total Assets.............................................. $85,268 $69,677 ======= =======
The accompanying notes are an integral part of these consolidated financial statements. F-2 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
AS AT DECEMBER 31 ----------------- 2004 2003 ------- ------- ($US MILLIONS) LIABILITIES, CAPITAL AND SURPLUS Liabilities: Policyholder liabilities and accruals.......... $21,427 $20,428 Net deferred tax liabilities (Note 6).......... 569 426 Due to affiliate............................... 420 289 Other liabilities.............................. 1,830 1,265 Separate account liabilities................... 57,103 43,694 ------- ------- Total Liabilities............................. 81,349 66,102 Capital and Surplus: Capital stock (Note 8)......................... 5 5 Retained earnings.............................. 3,086 2,777 Accumulated other comprehensive income (Note 4) 828 793 Total Capital and Surplus..................... 3,919 3,575 ------- ------- Total Liabilities, Capital and Surplus........ $85,268 $69,677 ======= =======
The accompanying notes are an integral part of these consolidated financial statements. F-3 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31 ------------------------------ 2004 2003 2002 ------ ------ ------ ($US MILLIONS) REVENUE: Premiums............................................................... $ 943 $ 955 $1,002 Fee income............................................................. 1,369 1,107 930 Net investment income.................................................. 1,148 1,174 1,157 Net realized investment gains (losses) (Note 13)....................... 285 160 (222) Other (Note 13)........................................................ 5 5 4 ------ ------ ------ Total revenue......................................................... 3,750 3,401 2,871 BENEFITS AND EXPENSES: Policyholder benefits and claims....................................... 1,687 1,829 1,606 Operating expenses and commissions..................................... 715 654 575 Amortization of deferred acquisition costs............................. 358 227 92 Interest expense....................................................... 22 46 42 Policyholder dividends................................................. 389 377 370 ------ ------ ------ Total benefits and expenses........................................... 3,171 3,133 2,685 ------ ------ ------ Operating income before income taxes and change in accounting principle 579 268 186 ------ ------ ------ Income tax expense..................................................... 168 77 31 ------ ------ ------ Income after income taxes and before change in accounting principle.... 411 191 155 ------ ------ ------ Change in accounting principle......................................... 48 -- -- ------ ------ ------ Net income............................................................. $ 459 $ 191 $ 155 ====== ====== ======
The accompanying notes are an integral part of these consolidated financial statements. F-4 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
FOR THE YEARS ENDED DECEMBER 31 ----------------------------------------- ACCUMULATED OTHER TOTAL CAPITAL RETAINED COMPREHENSIVE CAPITAL AND STOCK EARNINGS INCOME SURPLUS - ------- -------- ------------- ----------- ($US MILLIONS) Balance, December 31, 2001 $ 5 $2,511 $153 $2,669 Comprehensive income...... -- 155 358 513 --- ------ ---- ------ Balance, December 31, 2002 $ 5 $2,666 $511 $3,182 === ====== ==== ====== Comprehensive income...... -- 191 282 473 Dividend to shareholder... -- (80) -- (80) --- ------ ---- ------ Balance, December 31, 2003 $ 5 $2,777 $793 $3,575 === ====== ==== ====== Comprehensive income...... -- 459 35 494 Dividend to shareholder... -- (150) -- (150) --- ------ ---- ------ Balance, December 31, 2004 $ 5 $3,086 $828 $3,919 === ====== ==== ======
The accompanying notes are an integral part of these consolidated financial statements. F-5 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31 - ------------------------------ 2004 2003 2002 - ------- ------- ------- ($US MILLIONS) Operating activities: Operating cash inflows: Premiums....................................................... $ 940 $ 972 $ 1,018 Fee income..................................................... 1,369 1,168 981 Net investment income.......................................... 1,154 1,229 1,153 Other.......................................................... 5 11 4 ------- ------- ------- Total operating cash inflows................................. 3,468 3,380 3,156 Operating cash outflows: Benefit payments............................................... 1,166 1,495 1,480 Insurance expenses and taxes................................... 1,656 1,237 1,180 Dividends paid to policyholders................................ 389 373 358 Change in other assets and other liabilities................... (130) (288) (422) ------- ------- ------- Total operating cash outflows................................ 3,081 2,817 2,596 ------- ------- ------- Net cash provided by operating activities.................... 387 563 560 Investing activities: Fixed-maturity securities sold, matured or repaid.............. 9,218 11,223 8,634 Fixed-maturity securities purchased............................ (9,277) (9,715) (9,082) Equity securities sold......................................... 209 530 34 Equity securities purchased.................................... (159) (166) (214) Mortgage loans advanced........................................ (481) (564) (432) Mortgage loans repaid.......................................... 335 307 186 Real estate sold............................................... 3 -- 1 Real estate purchased.......................................... (212) (197) (60) Policy loans advanced, net..................................... (149) (163) (143) Short-term investments, net.................................... (170) (262) (41) Other investments, net......................................... -- 10 (4) ------- ------- ------- Net cash (used in) provided by investing activities.......... (683) 1,003 (1,121) Financing activities: Deposits and interest credited to policyholder account balances 1,836 1,877 1,778 Withdrawals from policyholder account balances................. (1,327) (1,392) (1,342) Unearned revenue............................................... 120 85 168 Amounts due (from) to affiliates, net.......................... 155 (1,516) 101 Principal repayment of amounts due to affiliates and parent.... -- (416) (211) Net reinsurance recoverable.................................... 172 132 243 Dividend paid to shareholder................................... (150) (80) -- Repaid funds................................................... -- (2) (2) ------- ------- ------- Net cash provided by (used in) financing activities............ 806 (1,312) 735 Increase in cash and cash equivalents during the year.......... 510 254 174 ------- ------- ------- Cash and cash equivalents at beginning of year................. 972 718 544 ------- ------- ------- Balance, end of year........................................... $ 1,482 $ 972 $ 718 ======= ======= =======
The accompanying notes are an integral part of these consolidated financial statements. F-6 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31 ------------------------------ 2004 2003 2002 - ----- ----- ----- ($US MILLIONS) Reconciliation of net income to net cash provided by operating activities: Net income........................................................................ $ 459 $ 191 $ 155 Adjustments to reconcile net income to net cash provided by operating activities Net realized (gains) losses..................................................... (285) (160) 222 Net depreciation, amortization of bond premium or discount and other investment related items................................................................. 3 55 (5) Addition to policyholder liabilities and accruals............................... 517 417 104 Deferral of acquisition costs................................................... (901) (648) (567) Amortization of deferred acquisition costs...................................... 358 227 92 Increase in deferred tax liability, net......................................... 128 143 83 Interest expense................................................................ 22 46 42 Policyholder dividends.......................................................... 4 4 12 Change in accounting principle.................................................. (48) -- -- Change in other assets and other liabilities.................................... 130 288 422 ----- ----- ----- Net cash provided by operating activities......................................... $ 387 $ 563 $ 560 ===== ===== =====
The accompanying notes are an integral part of these consolidated financial statements. F-7 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 1. ORGANIZATION AND BASIS OF PRESENTATION The Manufacturers Life Insurance Company (U.S.A.) ("ManUSA") is an indirect, wholly-owned subsidiary of Manulife Financial Corporation ("MFC"), a Canadian-based publicly traded company. MFC and its subsidiaries are collectively known as "Manulife Financial". As a result of the merger between MFC and John Hancock Financial Services Inc., ManUSA changed its name to John Hancock Life Insurance Company (U.S.A.) effective January 1, 2005. ManUSA and its subsidiaries, collectively known as the "Company", operate in the life insurance industry, offering a broad range of individual insurance, reinsurance, individual wealth management and group wealth management related products. These products are marketed primarily in the United States. 2. SIGNIFICANT ACCOUNTING POLICIES a) Recent Accounting Standards Financial Accounting Standards Board (FASB) Derivative Implementation Group Statement of Financial Accounting Standards (SFAS) 133 Implementation Issue No. 36 -- "Embedded Derivatives: Bifurcation of a Debt Instrument that Incorporates Both Interest Rate Risk and Credit Rate Risk Exposures that are Unrelated or only Partially Related to the Creditworthiness of the Issuer of that Instrument" ("DIG B36") In April 2003, the FASB's Derivative Implementation Group released DIG B36, which addresses whether SFAS No. 133 requires bifurcation of a debt instrument into a debt host contract and an embedded derivative if the debt instrument incorporates both interest rate risk and credit risk exposures that are unrelated or only partially related to the creditworthiness of the issuer of that instrument. Under DIG B36, modified coinsurance and coinsurance with funds withheld reinsurance agreements as well as other types of receivables and payables where interest is determined by reference to a pool of fixed maturity assets or a total return debt index are examples of arrangements containing embedded derivatives requiring bifurcation. The Company's adoption of this guidance effective January 1, 2004 did not have a material impact on the consolidated financial position, results of operations, or cash flows. Statement of Position 03-1 -- "Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts" ("SOP 03-1") In July 2003, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued SOP 03-1. SOP 03-1 provides guidance on a number of topics including separate account presentation, interests in separate accounts, gains and losses on the transfer of assets from the general account to a separate account, liability valuation, returns based on a contractually referenced pool of assets or index, accounting for contracts that contain death or other insurance benefit features, accounting for reinsurance and other similar contracts, accounting for annuitization guarantees, and sales inducements to contract holders. SOP 03-1 was effective for the Company's consolidated financial statements on January 1, 2004. These consolidated financial statements reflect the adoption of SOP 03-1 and resulted in the following adjustments:
AS AT JANUARY 1, 2004 --------------------- ASSETS Increase in deferred acquisition costs...................... $ 14 LIABILITIES Decrease in policyholder liabilities and accruals........... (62) Increase in unearned revenue liability...................... 2 Increase in deferred income tax liabilities................. 26 TWELVE MONTHS ENDED DECEMBER 31, 2004 --------------------- CUMULATIVE EFFECT OF ACCOUNTING CHANGE RECORDED IN NET INCOME $ 48
F-8 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) SFAS No. 123 (revised 2004) -- Share Based Payment In December 2004, FASB issued SFAS No. 123 (revised 2004), "Share Based Payment" (SFAS 123(R)), which is a revision of SFAS No. 123, "Accounting for Stock-Based Compensation". SFAS No. 123(R) supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees", and amends SFAS No. 95, "Statement of Cash Flows". Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statements of income based on their fair values. Pro forma disclosure is no longer an alternative. The Company adopted the fair-value based method of accounting for share-based payments effective January 1, 2003 using the prospective method described in SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure". The Company uses the Black-Scholes option-pricing model to estimate the value of stock options of its parent granted to its employees and expects to continue to use this model upon anticipated adoption of SFAS No. 123(R), on July 1, 2005. Because SFAS No. 123(R) must be applied not only to new awards but to previously granted awards that are not fully vested on the effective date, and because the Company adopted SFAS No. 123 using the prospective transition method (which applied only to awards granted, modified or settled after the adoption date), compensation cost for some previously granted awards that were not recognized under SFAS No. 123 will be recognized under SFAS No. 123(R). However, had the Company adopted SFAS No. 123(R) in prior periods, the impact of that standard would have been immaterial to the financial statements. FASB Staff Position 106-2-- Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 In May 2004, the FASB issued FASB Staff Position 106-2-- "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug Improvement and Modernization Act of 2003" (FSP 106-2). In accordance with FSP 106-2, the Company recorded a $1 decrease in net periodic post-retirement benefit costs for the period January to December, 2004. On December 8, 2003, President George W. Bush signed into law the bill referenced above, which expands Medicare, primarily by adding a prescription drug benefit for Medicare-eligible retirees starting in 2006. The Medicare Prescription Drug Improvement and Modernization Act of 2003 (the Act) provides for special tax-free subsidies to employers that offer plans with qualifying drug coverages beginning in 2006. There are two broad groups of retirees receiving employer-subsidized prescription drug benefits at the Company. The first group, those who retired prior to January 1, 1992, receives a subsidy of between 90% and 100% of total cost. Since this subsidy level will clearly meet the criteria for qualifying drug coverage, the Company anticipates that the benefits it pays after 2005 for pre-1992 retirees will be lower as a result of the new Medicare provisions and has reflected that reduction in the other post-retirement benefit plan liability. With respect to the second group, those who retired on or after January 1, 1992, the employer subsidy on prescription drug benefits is capped and currently provides as low as 25% of the total cost. Since final authoritative accounting guidance has not yet been issued on determining whether a benefit meets the actuarial criteria for qualifying drug coverage, the Company has deferred recognition as permitted by FSP 106-2 for this group. The final accounting guidance could require changes to previously reported information. FASB Interpretation 46 (revised December 2003)-- Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51 In December, 2003, the FASB re-issued Interpretation 46, "Consolidation of Variable Interest Entities, an Interpretation of ARB No.51", ("FIN 46R") which clarifies the consolidation accounting guidance of Accounting Research Bulletin No.51, "Consolidated Financial Statements," ("ARB 51") to certain entities for which controlling financial interest are not measurable by reference to ownership of the equity of the entity. Such entities are known as variable interest entities ("VIEs"). F-9 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) Controlling financial interests of a VIE are defined as exposure of a party to the VIE to a majority of either the expected variable losses or expected variable returns of the VIE, or both. Such party is the primary beneficiary of the VIE and FIN 46R requires the primary beneficiary of a VIE to consolidate the VIE. FIN46R also requires certain disclosures for significant relationships with VIEs, whether or not consolidation accounting is either used or anticipated. In the event additional liabilities are recognized as a result of consolidating any VIEs with which the Company is involved, these additional liabilities would not represent additional claims on the general assets of the Company; rather, they would represent claims against additional assets recognized as a result of consolidating VIEs. Conversely, in the event additional assets recognized as a result of consolidating VIEs, these additional assets would not represent additional funds which the Company could use to satisfy claims against its general assets, rather they would be used only to settle additional liabilities recognized as a result of consolidating the VIEs. This interpretation was effective in 2003 for VIEs created after January 31, 2003 and on January 1, 2004 for all other VIEs. The Company has determined that no VIEs are required to be consolidated under the new guidance. b) Investments The Company classifies all of its fixed-maturity and equity securities as available-for-sale and records these securities at fair value. The cost of fixed-maturity securities is adjusted for the amortization of premiums and accretion of discounts, which are calculated using the effective interest method. For the mortgage-backed bond portion of the fixed-maturity securities portfolio, the Company recognizes amortization using a constant effective yield based on anticipated prepayments and the estimated economic life of the securities. When actual prepayments differ significantly from anticipated prepayments, the effective yield is recalculated to reflect actual payments to date and anticipated future payments. Realized gains and losses on sales of securities classified as available-for-sale are recognized in income using the specific-identification method. A decline in the value of a specific security that is considered other-than-temporary results in a write-down of the cost basis of the security and a charge to income in the period of recognition. Unrealized gains and losses, other than unrealized losses that are considered to be other-than-temporary, are reflected directly in accumulated other comprehensive income after adjustments for deferred income taxes, deferred acquisition costs, policyholder liabilities and unearned revenue liability. In evaluating whether a decline in fair value is other than temporary, the Company considers various factors, including the time and extent to which the fair value has been less than cost, the financial condition and near term prospects of the issuer and whether the debtor is current on contractually obligated interest and principal payments. Mortgage loans are reported at unpaid principal balances, net of a provision for losses. The provision for losses is established for mortgage loans both on a specific as well as on an aggregate basis. Mortgage loans are considered to be impaired when the Company has determined that it is probable that all amounts due under contractual terms will not be collected. Impaired loans are reported at the lower of unpaid principal or fair value of the underlying collateral. Real estate held for investment is carried at cost, less accumulated depreciation and provisions for impairment and write-downs, if applicable. Real estate held for sale is carried at the lower of cost or market value where changes in estimates of market value are recognized as realized gains or losses in the consolidated statements of income. Policy loans are reported at aggregate unpaid balances, which approximates fair value. Short-term investments, which include investments with maturities of less than one year and greater than ninety days at the date of acquisition, are reported at amortized cost which approximates fair value. F-10 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) c) Derivatives All derivative instruments are reported on the Consolidated Balance Sheets at their fair value, with changes in fair value recorded in income or equity, depending on the nature of the derivative instrument. Changes in the fair value of derivatives not designated as hedges are recognized in current period earnings. For fair value hedges, the Company is hedging changes in the fair value of assets, liabilities or firm commitments with changes in fair values of the derivative instruments. Changes in the fair value of derivatives are recorded in income, and changes in the fair value of hedged items are recorded in income to the extent the hedge is effective. For cash flow hedges, the Company is hedging the variability of cash flows related to forecasted transactions. The effective portion of changes in the fair value of cash flow hedges is initially recorded in other comprehensive income and is subsequently reflected into income in the same period or periods during which the hedged transaction affects earnings. The Company estimates that deferred net gains of $17 after tax, included in other comprehensive income as at December 31, 2004, will be reclassified into earnings within the next twelve months. Cash flow hedges include hedges of certain forecasted transactions of varying periods up to a maximum of 40 years. d) Cash Equivalents The Company considers all highly liquid debt instruments purchased with an original maturity date of three months or less to be cash equivalents. Cash equivalents are stated at cost plus accrued interest, which approximates fair value. e) Deferred Acquisition Costs ("DAC") Commissions and other expenses, which vary with and are primarily related to the production of new business, are deferred to the extent recoverable from future gross profits and included as an asset. The portion of DAC associated with variable annuity and variable life insurance contracts, universal life insurance contracts, investment contracts, and participating life insurance contracts is charged to expense in relation to the estimated gross profits of those contracts. This amortization is adjusted retrospectively when current gross profits or estimates of future gross profits are revised. DAC associated with all other insurance and reinsurance contracts is amortized over the premium-paying period of the related policies. Assuming the unrealized gains or losses on securities had been realized at year-end, DAC is adjusted for the impact on current and estimated future gross profits. The impact of any such adjustments is included in net unrealized gains (losses) in accumulated other comprehensive income. DAC is reviewed annually to determine recoverability from future gross profits and any unrecoverable portion is immediately expensed. f) Policyholder Liabilities and Accruals Policyholder liabilities for traditional non-participating life insurance policies, reinsurance policies, and for accident and health policies are computed using the net level premium method. The calculations are based upon estimates as to future mortality, morbidity, persistency, maintenance expenses, and interest rate yields that were applicable in the year of issue. The assumptions include a provision for the risk of adverse deviation. For payout annuities in loss recognition, policyholder liabilities are computed using estimates of expected mortality, expenses, and investment yields as determined at the time these contracts first moved into loss recognition. Payout annuity reserves are adjusted for the impact of net realized gains associated with the underlying assets. F-11 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) For variable annuity and variable life contracts, universal life insurance contracts, and investment contracts with no substantial mortality or morbidity risk, policyholder liabilities equal the policyholder account values. Account values are increased for deposits received and interest credited and are reduced by withdrawals, mortality charges, and administrative expenses charged to the policyholders. For traditional participating life insurance policies, policyholder liabilities are computed using the net level premium reserve for death and endowment policy benefits. Mortality and interest assumptions are the same as the non-forfeiture benefit assumptions at the time the policy was issued. Interest rate assumptions used in the calculation of the liabilities for traditional participating life insurance policies range from 2.5% to 7.8%. As of December 31, 2004, participating insurance expressed as a percentage of gross actuarial reserves and account value was 46.5%. For those participating policies in force as of September 23, 1999 and as a result of the demutualization of The Manufacturers Life Insurance Company ("MLI"), an indirect parent, separate sub-accounts were established within the participating accounts of the Company. These sub-accounts permit this participating business to be operated as a separate "closed block" of business. As of December 31, 2004, $9,527 (2003 - $9,315) of policyholder liabilities and accruals related to the participating policyholders' account were included in the closed block. ManUSA's Board of Directors approves the amount of policyholder dividends to be paid annually. The aggregate amount of policyholder dividends is calculated based on actual interest, mortality, morbidity and expense experience for the year, and on management's judgment as to the appropriate level of equity to be retained by the Company. The carrying value of this liability approximates the earned amount and fair value as of December 31, 2004. g) Separate Accounts Separate account assets and liabilities represent funds that are separately administered, principally for investment contracts related to group pension business as well as for variable annuity and variable life contracts, and for which the contract holder, rather than the Company, bears the investment risk. Separate account contract holders have no claim against the assets of the general account of the Company. Separate account assets are recorded at market value. Operations of the separate accounts are not included in the accompanying consolidated financial statements. However, fees charged on separate account policyholder funds are included in revenue of the Company. h) Revenue Recognition Premiums on long-duration life insurance and reinsurance contracts are recognized as revenue when due. Premiums on short-duration contracts are earned over the related contract period. Net premiums on limited-payment contracts are recognized as revenue and the difference between the gross premium received and the net premium is deferred and recognized in income based on either a constant relationship to insurance in force or the present value of annuity benefits, depending on the product type. Fee income from annuity contracts, pension contracts, and insurance contracts consists of charges for mortality, expense, surrender and administration that have been assessed against the policyholder account balances. To the extent such charges compensate the Company for future services, they are deferred and recognized in income over the period earned using the same assumptions as those associated with the amortization of DAC. Interest on fixed-maturity securities and performing mortgage loans is recorded as income when earned and is adjusted for any amortization of premiums or discounts. Interest on restructured mortgage loans is recorded as income based on the rate to be paid; interest on delinquent mortgage loans is recorded as income on a cash basis. Dividends are recorded as income on the ex-dividend date. F-12 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) i) Policyholder Benefits and Claims Benefits for variable annuity and variable life contracts, for universal life insurance contracts, and for investment pension contracts include interest credited to policyholder account values and benefit claims incurred during the period in excess of policyholder account values. j) Reinsurance The Company routinely utilizes reinsurance transactions to minimize exposure to large risks. Life reinsurance is accomplished through various plans including yearly renewable term, co-insurance, and modified co-insurance. Reinsurance premiums, policy charges for cost of insurance, and claims are accounted for on a basis consistent with that used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums, fees, and claims are reported net of reinsured amounts. The amount recoverable from reinsurers and pertaining to policyholder liabilities is presented as a separate asset on the consolidated balance sheets. For those claims paid and covered by a reinsurance treaty, a reinsurance receivable has been included as part of other assets. k) Stock-Based Compensation Certain of ManUSA's employees are provided compensation in the form of stock options, deferred share units and restricted share units in MFC, the indirect parent of the Company. Effective January 1, 2003, MFC prospectively changed its accounting policy for employee stock options from the intrinsic value method to the fair value method for awards granted on or after January 1, 2002. As a result, the fair value of the stock options granted by MFC to the Company's employees is recorded by the Company over the vesting periods. The fair value of the deferred share units granted by MFC to ManUSA employees is recognized in the accounts of ManUSA over the vesting periods of the units. The intrinsic fair value of the restricted share units granted by MFC to ManUSA employees is recognized in the accounts of ManUSA over the vesting periods of the units. The stock-based compensation is a legal obligation of MFC, but in accordance with U.S. generally accepted accounting principles, is recorded in the accounts of ManUSA. l) Income Taxes Income taxes have been provided for in accordance with SFAS No. 109, "Accounting for Income Taxes". Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that likely will be in effect when the differences are expected to reverse. The measurement of deferred tax assets is reduced by a valuation allowance if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. ManUSA joins its indirect parent, Manulife Holdings (Delaware) LLC. and its subsidiaries, with the exception of The Manufacturers Life Insurance Company of New York ("MNY"), in filing a U.S. consolidated income tax return. MNY files a separate federal income tax return. In accordance with the income tax-sharing agreements in effect for the applicable tax years, the Company's income tax provision (or benefit) is computed as if ManUSA and the companies filed separate income tax returns. The tax charge to each of the respective companies will not be more than that which each company would have paid on a separate return basis. Settlements of taxes are made through an increase or reduction to other liabilities. Such settlements occur on a periodic basis in accordance with the tax sharing agreement. Tax benefits from operating losses are provided at the U.S. statutory rate plus any tax credits attributable, provided the consolidated group utilizes such benefits currently. F-13 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) m) Foreign Exchange Translation The consolidated balance sheets of the Company's foreign operations and the Company's non-U.S. dollar investments are translated into U.S. dollars using exchange rates in effect at the consolidated balance sheet date. The consolidated statements of income of the Company's foreign operations are translated into U.S. dollars using average exchange rates prevailing during the respective periods. Translation adjustments are included in accumulated other comprehensive income. n) Comparative Figures Certain of the prior year's figures have been reclassified to conform to the current year's presentation. o) Use of Estimates The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") which require management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates. The Company made adjustments to the amortized costs of its fixed-maturities and equity securities by recognizing $8 (2003 --$53; 2002 -- $177) in other than temporary impairments in the investment portfolio, net of the related DAC and unearned revenue liability unlocking. In 2002, three items led to a combined net positive income effect from DAC and unearned revenue liability unlocking of $139. The latter changes included positive impacts from an extension of the DAC amortization period on its participating line of business, and improved mortality assumptions on its participating and universal life businesses, and a negative impact from equity market performance below historical assumptions on its variable annuity business. 3. INVESTMENTS AND INVESTMENT INCOME a) Fixed-Maturity and Equity Securities At December 31, 2004, all fixed-maturity and equity securities have been classified as available-for-sale and reported at fair value. The amortized cost and fair value is summarized as follows:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE -------------- --------- ---------- --------------- AS OF DECEMBER 31 2004 2003 2004 2003 2004 2003 2004 2003 ----------------- ------- ------ ---- ---- ---- ---- ------- ------- FIXED-MATURITY SECURITIES: U.S. government................ $ 3,308 $2,536 $111 $ 64 $ (8) $(18) $ 3,411 $ 2,582 Foreign governments............ 1,063 1,108 203 202 -- (3) 1,266 1,307 Corporate...................... 5,882 5,933 494 589 (14) (23) 6,362 6,499 Asset-backed................... 143 250 7 18 (1) (3) 149 265 ------- ------ ---- ---- ---- ---- ------- ------- Total fixed-maturity securities $10,396 $9,827 $815 $873 $(23) $(47) $11,188 $10,653 ======= ====== ==== ==== ==== ==== ======= ======= Equity securities.............. $ 382 $ 401 $ 91 $ 83 $ (7) $ (9) $ 466 $ 475 ======= ====== ==== ==== ==== ==== ======= =======
Proceeds from sales of fixed-maturity securities during 2004 were $8,860 (2003 -- $10,986; 2002 -- $8,481). Gross gains and losses of $252 and $123 respectively, were realized on those sales (2003 -- $251 and $122 respectively; 2002 -- $218 and $154 respectively). In addition during 2004, other-than-temporary impairments of nil (2003 -- $10; 2002 -- $109) were recognized in income. F-14 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 3. INVESTMENTS AND INVESTMENT INCOME -- (CONTINUED) Proceeds from the sale of equity securities during 2004 were $209 (2003 -- $530; 2002 -- $34). Gross gains and losses of $35 and $28 respectively, were realized on those sales (2003 -- $181 and $147 respectively; 2002 -- $48 and $84 respectively). In addition during 2004, other-than-temporary impairments of $10 (2003 -- $51; 2002 -- $135) were recognized in income. The cost amounts for both fixed-maturity securities and equity securities are net of the other-than-temporary impairment charges. At December 31, 2004, there were 114 (2003 -- 323) fixed-income securities that have a gross unrealized loss of $23 (2003 -- $47) of which the single largest unrealized loss was $2 (2003 -- $7). The Company anticipates that these fixed income securities will perform in accordance with their contractual terms and currently has the ability and intent to hold these fixed-income securities until they recover or mature. At December 31, 2004, there were 69 (2003 -- 78) equity securities that have a gross unrealized loss of $7 (2003 -- $9) of which the single largest unrealized loss was $2 (2003 -- $2). The Company anticipates that these equity securities will recover in value. The contractual maturities of fixed-maturity securities at December 31, 2004 are shown below:
AMORTIZED FAIR AS OF DECEMBER 31, 2004 COST VALUE ----------------------- --------- ------- FIXED-MATURITY SECURITIES, EXCLUDING MORTGAGE-BACKED SECURITIES: One year or less................................................ $ 335 $ 347 Greater than 1; up to 5 years................................... 1,639 1,686 Greater than 5; up to 10 years.................................. 2,868 3,023 Due after 10 years.............................................. 5,411 5,983 Asset - backed securities....................................... 143 149 ------- ------- Total fixed-maturity securities.............................. $10,396 $11,188 ======= =======
Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without prepayment penalties. Corporate requirements and investment strategies may result in the sale of investments before maturity. b) Mortgage Loans Mortgage loans are reported at amortized cost, net of a provision for losses. The impaired mortgage loans and the related allowances for mortgage loan losses were as follows:
AS OF DECEMBER 31 2004 2003 ----------------- ---- ---- Impaired loans........ $ 83 $90 ==== === Allowance, January 1.. $ 31 $36 Deductions............ (23) (5) ---- --- Allowance, December 31 $ 8 $31 ==== ===
All impaired mortgage loans have been provided for and no interest is accrued on impaired loans. F-15 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 3. INVESTMENTS AND INVESTMENT INCOME -- (CONTINUED) c) Investment Income Income by type of investment was as follows:
FOR THE YEARS ENDED DECEMBER 31 ------------------------------ 2004 2003 2002 ------ ------ ------ Fixed-maturity securities $ 692 $ 737 $ 729 Equity securities........ 16 12 11 Mortgage loans........... 155 149 139 Investment real estate... 86 86 88 Other investments........ 230 228 228 ------ ------ ------ Gross investment income.. 1,179 1,212 1,195 Investment expenses...... (31) (38) (38) ------ ------ ------ Net investment income.... $1,148 $1,174 $1,157 ====== ====== ======
d) Significant Equity Interests ManUSA holds a 27.7% indirect interest in Flex Leasing I, LLC ("Flex I") which is accounted for using the equity method whereby ManUSA recognizes its proportionate share of the investee's net income or loss. In 2003, ManUSA sold its 19.6% direct interest in Flex II, LLC, which also had been accounted for using the equity method, for a realized gain of $1. As of December 31, 2004, the total assets for Flex I were $290 (2003 -- $296 for Flex I; 2002 -- $306 for Flex I and $87 for Flex II), with total liabilities amounting to $230 (2003 -- $237 for Flex I; 2002 -- $248 for Flex I and $77 for Flex II). For the year ended December 31, 2004, total net loss amounted to $3 (2003 -- $5 for Flex I; 2002 -- $3 for Flex I and $4 for Flex II). e) Securities Lending The Company engages in securities lending to generate additional income. Certain securities from its portfolio are loaned to other institutions for certain periods of time. Collateral, which exceeds the market value of the loaned securities, is lodged by the borrower with the Company and retained by the Company until the underlying security has been returned to the Company. The collateral is reported in cash and other liabilities. The market value of the loaned securities is monitored on a daily basis with additional collateral obtained or refunded as the market value fluctuates. As of December 31, 2004, the Company has loaned securities (which are included in invested assets) with a carrying value and market value of approximately $2,579 and $2,645 respectively (2003 -- $667 and $642 respectively). F-16 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 4. COMPREHENSIVE INCOME a) Total comprehensive income was as follows:
FOR THE YEARS ENDED DECEMBER 31 ------------------------------- 2004 2003 2002 ---- ---- ---- NET INCOME..................................................................... $459 $191 $155 OTHER COMPREHENSIVE INCOME, NET OF DAC, DEFERRED INCOME TAXES AND OTHER AMOUNTS REQUIRED TO SATISFY POLICYHOLDER LIABILITIES: Unrealized holding gains arising during the year.............................. 118 209 269 Minimum pension asset (liability)............................................. (1) 24 (25) Foreign currency translation.................................................. 57 131 44 Less: Reclassification adjustment for realized gains (losses) included in net income 139 82 (70) ---- ---- ---- Other comprehensive income..................................................... 35 282 358 ---- ---- ---- Comprehensive income........................................................... $494 $473 $513 ==== ==== ====
Other comprehensive income is reported net of tax (benefit) expense of $(11), $81, and $169 for 2004, 2003 and 2002, respectively. b) Accumulated other comprehensive income is comprised of the following:
AS OF DECEMBER 31 2004 2003 ----------------- ---- ---- UNREALIZED GAINS : Beginning balance.................... $640 $512 Current period change................ (21) 128 ---- ---- Ending balance....................... $619 $640 ---- ---- MINIMUM PENSION LIABILITY: Beginning balance.................... $ (3) $(28) Current period change................ (1) 25 ---- ---- Ending balance....................... $ (4) $ (3) ---- ---- FOREIGN CURRENCY: Beginning balance.................... $156 $ 27 Current period change................ 57 129 ---- ---- Ending balance....................... $213 $156 ---- ---- Accumulated other comprehensive income $828 $793 ==== ====
F-17 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 4. COMPREHENSIVE INCOME -- (CONTINUED) c) Unrealized Gains on Securities Available-for-Sale Net unrealized gains on fixed-maturity and equity securities included in other comprehensive income were as follows:
AS AT DECEMBER 31 2004 2003 ----------------- ------ ------ Gross unrealized gains............................................ $1,355 $1,385 Gross unrealized losses........................................... (56) (56) DAC and other amounts required to satisfy policyholder liabilities (349) (345) Deferred income taxes............................................. (331) (344) ------ ------ Net unrealized gains on securities available-for-sale............. $ 619 $ 640 ====== ======
5. DEFERRED ACQUISITION COSTS ("DAC") AND DEFERRED SALES INDUCEMENTS ("DSI") The components of the change in DAC/DSI were as follows:
FOR THE YEARS ENDED DECEMBER 31 ------------------ 2004 2003 ------ ------ Balance, January 1............................................. $3,154 $2,731 Capitalization................................................. 847 651 Amortization................................................... (358) (227) Change in accounting principle (Note 2 a)...................... 14 -- Effect of net unrealized gains on securities available-for-sale 19 (1) ------ ------ Balance, December 31........................................... $3,676 $3,154 ====== ======
6. INCOME TAXES The components of income tax expense were as follows:
FOR THE YEARS ENDED DECEMBER 31 ------------------ 2004 2003 2002 ---- ---- ---- Current expense (benefit) $ 40 $(66) $(52) Deferred expense......... 128 143 83 ---- ---- ---- Total expense............ $168 $ 77 $ 31 ==== ==== ====
Income before federal income taxes differs from taxable income principally due to tax-exempt investment income; dividends received tax deductions, differences in the treatment of deferred acquisition costs, and differences in reserves for policy and contract liabilities for tax and financial reporting purposes. F-18 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 6. INCOME TAXES -- (CONTINUED) Deferred income tax assets (liabilities), result from tax affecting the differences between financial statement values and tax values of assets and liabilities at each consolidated balance sheet date. The Company's deferred income tax assets (liabilities) were as follows:
FOR THE YEARS ENDED DECEMBER 31 ------------------ 2004 2003 ------ ------ DEFERRED TAX ASSETS: Differences in computing policy reserves......... $ 704 $ 598 Investments...................................... -- 1 Policyholder dividends payable................... -- 11 Net operating loss............................... 69 178 Other deferred tax assets........................ 113 34 ------ ------ Deferred tax assets............................. 886 822 ------ ------ DEFERRED TAX LIABILITIES: Deferred acquisition costs....................... 735 672 Unrealized gains on securities available-for-sale 465 472 Premiums receivable.............................. 23 25 Investments...................................... 229 58 Other deferred tax liabilities................... 3 21 ------ ------ Deferred tax liabilities........................ 1,455 1,248 ------ ------ Net deferred tax liabilities.................... $ (569) $ (426) ====== ======
At December 31, 2004, the Company has operating loss carry forwards of $198 that will begin to expire in 2016, and $4 of tax credits with no expiry limitation. At December 31, 2003 and December 31, 2002, the Company had operating loss carry forwards of $508 and $612, respectively, and $3.4 and $1.4, respectively, of tax credits. 7. NOTES PAYABLE TO PARENT On December 29, 1997, the Company issued two surplus debentures for $240 bearing interest at 7.93% per annum to Manufacturers Investment Corporation ("MIC"). On April 1, 1998, the Company issued two additional surplus debentures for $150 bearing interest at 8.10% per annum to MIC. During 2002, a partial principal repayment of $20 on one of the debentures was made. On December 31, 2003, with the approval of the Michigan Division of Insurance by letter dated December 23, 2003, the Company repaid the total remaining principal of $370 to MIC plus accrued interest of $12. Total interest paid was $31 and $32 for 2003 and 2002, respectively. No amount was owed to MIC as of December 31, 2004. F-19 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 8. CAPITAL AND SURPLUS Capital stock is comprised of the following:
2004 2003 ---- ---- AUTHORIZED: 50,000,000 Preferred shares, Par value $1.00 -- -- 50,000,000 Common shares, Par value $1.00... -- -- ISSUED AND OUTSTANDING: 100,000 Preferred shares.................... -- -- 4,728,934 Common shares..................... $ 5 $ 5
ManUSA and its life insurance subsidiaries are subject to statutory limitations on the payment of dividends. Dividend payments in excess of prescribed limits cannot be paid without the prior approval of U.S. insurance regulatory authorities. Net income (loss) and net capital and surplus, as determined in accordance with statutory accounting principles for ManUSA and its life insurance subsidiaries were as follows:
US STATUTORY BASIS ------------------ FOR THE YEARS ENDED DECEMBER 31 2004 2003 2002 ------------------------------- ------ ---- ------ THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.): Net income (loss)................................... $ 304 $289 $ (396) Net capital and surplus............................. 1,165 954 1,078 THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK: Net income (loss)................................... $ 21 $ 2 $ (26) Net capital and surplus............................. 51 52 52
As a result of the demutualization of MLI there are regulatory restrictions on the amounts of participating profit that can be transferred to shareholders. These restrictions generally take the form of a fixed percentage of the policyholder dividends. The transfers are governed by the terms of MLI's Plan of Demutualization. As at December 31, 2004, assets in the amount of $6.7 (2003 -- $6.7) were on deposit with government authorities or trustees as required by law. 9. PENSION AND OTHER POST-EMPLOYMENT BENEFITS a) Employee Retirement Plans The Company sponsors a non-contributory pension plan entitled "The Manulife Financial U.S. Cash Balance Plan" (the "Plan"). Pension benefits are provided to participants of the Plan after three years of vesting service with the Company and are a function of the length of service together with final average earnings. The normal form of payment under the Plan is a life annuity, payable at the normal retirement age of 65, and is actuarially equivalent to the cash balance account. Various optional forms of payment are available including a lump sum. Early retirement benefits are actuarially equivalent to the cash balance account, but are subsidized for participants who were age 45 with five or more years vesting service with the Company as of July 1, 1998 and who terminate employment after attaining age 50 and have completed 10 years of service. F-20 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 9. PENSION AND OTHER POST-EMPLOYMENT BENEFITS -- (CONTINUED) Cash balance accounts under the Plan are credited annually with contribution credits and semi-annually with interest credits. Future contribution credits will vary based on service. Interest credits are based on the greater of one-year U.S. Treasury Constant Maturity Bond yields or 5.25% per annum. Actuarial valuation of accumulated plan benefits are based on projected salaries, an assumed discount rate, and best estimates of investment yields on plan assets, mortality of participants, employee termination, and ages at retirement. Pension costs that relate to current service are funded as they accrue and are charged to earnings of the Company in the current period. Vested benefits are fully funded. Experience gains and losses are amortized to income of the Company over the estimated average remaining service lives of the plan participants. No contributions were made during the current or prior year because the Plan was subject to the full funding limitation under the Internal Revenue Code. At December 31, 2004, the projected benefit obligation to the participants of the Plan was $78 (2003 -- $76), which was based on an assumed interest rate of 5.75% (2003 -- 6.0%). The fair value of the Plan assets totaled $74 (2003 -- $71). The Company also sponsors an unfunded supplemental cash balance plan entitled "The Manulife Financial U.S. Supplemental Cash Balance Plan" (the "Supplemental Plan"). This non-qualified plan provides defined pension benefits in excess of limits imposed by law. Compensation is not limited and benefits are not restricted by the Internal Revenue Code. Benefits under the Supplemental Plan are provided to participants who terminate after three years of service. The default form of payment under this plan is a lump sum, although participants may elect to receive payment in the form of an annuity provided that such an election is made within the time period prescribed in the Supplemental Plan. If an annuity form of payment is elected, the amount payable is equal to the actuarial equivalent of the participant's balance under the Supplemental Plan, using the factors and assumptions for determining immediate annuity amounts applicable to the participant under the Plan. Cash balance contribution credits for the Supplemental Plan vary with service, and interest credits are based on the greater of one-year U.S. Treasury Constant Maturity Bond yields or 5.25% per annum. The annual contribution credits are made in respect of the participant's compensation that is in excess of the limit set by the Internal Revenue Code. Together, these contributions serve to restore to the participant the benefit that he/she would have been entitled to under the Plan's benefit formula except for the pay and benefit limitations in the Internal Revenue Code. At December 31, 2004, the projected benefit obligation to the participants of the Supplemental Plan was $28 (2003 -- $26), which was based on an assumed interest rate of 5.75% (2003 -- 6.0%). b) 401(k) Plan The Company sponsors a defined contribution 401(k) savings plan, which is subject to the provisions of the Employee Retirement Income Security Act of 1974. The Company contributed $2 in 2004 (2003 -- $2). c) Post-retirement Benefit Plan In addition to the retirement plans, the Company sponsors a post-retirement benefit plan that provides retiree medical and life insurance benefits to those who have attained age 50 and have 10 or more years of service with the Company. This plan provides primary medical coverage for retirees and spouses under age 65. When the retirees or the covered spouses reach age 65, Medicare provides primary coverage and this plan provides secondary coverage. This plan is contributory with the amount of contribution based on the service of the employees as at the time of retirement. It also provides the employee with a life insurance benefit of 100% of the salary just prior to retirement up to a maximum of $150,000. This life insurance benefit is reduced to 65% on the first of January following retirement, and is further reduced to 30% at age 70. F-21 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 9. PENSION AND OTHER POST-EMPLOYMENT BENEFITS -- (CONTINUED) The Company accounts for its retiree benefit plan using the accrual method. At December 31, 2004, the benefit obligation of the postretirement benefit plan was $30 (2003 -- $29), which was based on an assumed interest rate of 5.75% (2003 -- 6.0%). This plan is unfunded. Post-retirement benefit plan expenses for 2004 were $3 (2003 -- $2). d) Financial Information regarding the Employee Retirement Plans and the Post-retirement Benefit Plan Pension plans based in the United States require annual valuations, with the most recent valuations performed as at January 1, 2004. Information applicable to the Employee Retirement Plans and the Post-retirement Benefit Plan as estimated by a consulting actuary for the December 31 year-ends is as follows:
POST- EMPLOYEE RETIREMENT RETIREMENT BENEFIT PLANS PLAN ------------ ---------- AS OF DECEMBER 31 2004 2003 2004 2003 ----------------- ----- ----- ---- ---- CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year...................... $(102) $ (90) $(29) $(23) Service cost................................................. (5) (5) (1) (1) Interest cost................................................ (6) (6) (2) (2) Actuarial loss............................................... -- (8) (1) (4) Impact of Medicare........................................... N/A N/A 1 -- Benefits paid................................................ 7 7 2 1 ----- ----- ---- ---- Benefit obligation at end of year............................ $(106) $(102) $(30) $(29) ----- ----- ---- ---- CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year............... $ 71 $ 60 $ -- $ -- Actual return on plan assets................................. 9 16 -- -- Employer contribution........................................ 1 2 1 1 Benefits paid................................................ (7) (7) (1) (1) ----- ----- ---- ---- Fair value of plan assets at end of year..................... $ 74 $ 71 $ -- $ -- ----- ----- ---- ---- Funded status................................................ $ (32) $ (31) $(30) $(29) Unrecognized transition asset................................ -- (1) -- -- Unrecognized actuarial loss (gain)........................... 45 50 (6) (6) Unrecognized prior service cost.............................. 3 3 -- -- ----- ----- ---- ---- Net amount recognized........................................ $ 16 $ 21 $(36) $(35) ----- ----- ---- ---- Amounts recognized in consolidated balance sheets consist of: Prepaid benefit cost........................................ $ 36 $ 39 $ -- $ -- Accrued benefit liability................................... (26) (24) (37) (35) Intangible asset............................................ 1 1 -- -- Accumulated other comprehensive income...................... 6 5 -- -- ----- ----- ---- ---- Net amount recognized........................................ $ 17 $ 21 $(37) $(35) ===== ===== ==== ====
F-22 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 9. PENSION AND OTHER POST-EMPLOYMENT BENEFITS -- (CONTINUED)
EMPLOYEE POST-RETIREMENT RETIREMENT BENEFIT PLANS PLAN ---------- -------------- AS OF DECEMBER 31 2004 2003 2004 2003 ----------------- ---- ---- ---- ---- WEIGHTED AVERAGE ASSUMPTIONS Discount rate................. 5.75% 6.00% 5.75% 6.00% Expected return on plan assets 8.25% 8.25% N/A N/A Rate of compensation increase. 4.00% 5.00% 4.00% 5.00% Cost-of-living increase....... 3.00% 3.00% N/A N/A
On December 31, 2004, the accrued post-retirement benefit plan obligation was $30. The post-retirement benefit obligation for eligible active employees was $5. The amount of the post-retirement benefit obligation for ineligible active employees was $11. For measurement purposes as of December 31, 2004, a 10.5% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2004 for both pre-65 and post-65 coverages. This rate was assumed to decrease gradually to 5% in 2016 and will remain at that level thereafter.
EMPLOYEE POST-RETIREMENT RETIREMENT BENEFIT PLANS PLAN -------- -------------- AS OF DECEMBER 31 2004 2003 2004 2003 ----------------- ---- ---- ---- ---- COMPONENTS OF NET PERIODIC BENEFIT COST FOR PLAN SPONSOR Service cost............................................ $ 5 $ 5 $ 1 $ 1 Interest cost........................................... 6 6 2 2 Expected return on plan assets.......................... (6) (7) -- -- Amortization of net transition obligation............... (1) (3) -- -- Recognized actuarial loss (gain)........................ 3 2 -- (1) --- --- --- --- NET PERIODIC BENEFIT COST............................... $ 7 $ 3 $ 3 $ 2 === === === ===
For the pension plans with accumulated benefit obligations in excess of plan assets, the projected benefit obligation, the accumulated benefit obligation, and the fair value of plan assets were $28, $26, and nil respectively as of December 31, 2004 and $26, $24, and nil respectively as of December 31, 2003. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one-percentage-point change in assumed health care cost trend rates would have the following effects on 2004 reported expenses:
ONE-PERCENTAGE- ONE-PERCENTAGE-POINT POINT INCREASE DECREASE --------------- -------------------- Effect on total of service and interest cost components $1 $(1) Effect on post-retirement benefit obligation........... $5 $(4)
F-23 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 9. PENSION AND OTHER POST-EMPLOYMENT BENEFITS -- (CONTINUED) No contributions are anticipated during the next 5 years and the expected benefit payments for the next 5 years are as follows:
EXPECTED PENSION & OTHER BENEFIT PAYMENTS ---------------------- 2005 $8 2006 $8 2007 $8 2008 $9 2009 $9
e) Plan Assets The weighted average assets for the Company's U.S. Cash Balance Plan at December 31, 2004, and December 31, 2003, by asset category are as follows:
PLAN ASSETS ---------- AS OF DECEMBER 31 2004 2003 ----------------- ---- ---- Equity securities 63% 66% Debt securities.. 33% 29% Real estate...... 4% 5% Other............ 0% 0% --- --- Total............ 100% 100% === ===
The primary objective is to maximize the long-term investment return while maintaining an acceptable variability of pension expense without undue risk of loss or impairment. The range of target allocation percentages include a 40% to 80% range for equity securities with a target allocation of 67% and a range of 20% to 60% for debt securities with a target allocation of 33%. In addition, while there is no set target allocation, real estate is also included as an investment vehicle. To the extent an asset class exceeds its maximum allocation, the Company shall determine appropriate steps, as it deems necessary, to rebalance the asset class. To the extent that any portion of the assets is managed by one or more fund managers, each manager will employ security selection and asset mix strategies to try to add value to the returns that would otherwise be earned by the alternative of passively managing the fund assets. OVERALL GUIDELINES . No more than 5% of the market value of the total assets can be invested in any one company's securities. . No more than 5% of a corporation's outstanding issues in a given security class may be purchased. . No more than 25% of the market value of the portfolio can be invested in one industry sector unless authorized by the U.S. Retirement Committee (managers may employ any acceptable industry classification approach). This restriction does not apply to investments made in U.S. Government securities. . Futures, covered options or any other derivative investments may be used for hedging or defensive purposes only. Use of these investments to leverage the portfolio is prohibited. . Investments in securities of the investment manager, custodian or any other security which would be considered a non-exempt prohibited transaction or a self-dealing transaction under the employee Retirement Income Security Act are prohibited. F-24 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 9. PENSION AND OTHER POST-EMPLOYMENT BENEFITS -- (CONTINUED) . Each fund manager will maintain a fully invested (5% or less in cash equivalents) portfolio according to the mandate mutually agreed to by the fund manager and the U.S. Retirement Committee. Any exceptions to this must be agreed to in writing by the U.S. Retirement Committee. 10. STOCK BASED COMPENSATION There are no stock based compensation plans involving stock of ManUSA. However, employees of ManUSA participate in the Executive Stock Option Plan of MFC (the "ESOP"). Under this plan, stock options are periodically granted to selected individuals. The stock options provide the holder with the right to purchase common shares at an exchange price equal to the closing market price of MFC's common shares on the Toronto Stock Exchange on the business day immediately preceding the date the options were granted. The options vest over a period not exceeding four years and expire not more than 10 years from the grant date. A total of 36,800,000 MFC common shares have been reserved for issuances under the ESOP. Details of outstanding options relating to the employees of ManUSA are as follows:
FOR THE YEARS ENDED DECEMBER 31 ----------------------------------------- 2004 2003 -------------------- -------------------- WEIGHTED WEIGHTED AVERAGE AVERAGE NUMBER OF EXERCISE NUMBER OF EXERCISE OPTIONS PRICE OPTIONS PRICE (THOUSANDS) (CDN.) (THOUSANDS) (CDN.) ----------- -------- ----------- -------- Outstanding, January 1........ 2,235 $38.82 2,110 $40.37 Granted....................... 378 48.53 275 36.38 Exercised..................... (95) 38.79 (7) 39.02 Forfeited/Cancelled........... (13) 43.13 (143) 41.27 ----- ------ ----- ------ Outstanding, December 31...... 2,505 $40.26 2,235 $38.82 ----- ------ ----- ------ Exercisable, as of December 31 1,595 $40.04 1,264 $38.86 ===== ====== ===== ======
The exercise price of stock options outstanding range from Cdn. $14.17 to Cdn. $55.4 and have a weighted average contractual remaining life of 5.1 years. The weighted average fair value of each option granted by MFC in 2004 has been estimated at Cdn. $11.33 (2003 -- Cdn. $10.75) using the Black-Scholes option-pricing model. The pricing model uses the following weighted average assumptions: risk-free interest rate of 3.7% (2003 -- 4.8%), dividend yield of 1.8% (2003 -- 1.8%), expected volatility of 22.5% (2003 --25%) and expected life of six years (2003 -- seven years). Effective January 1, 2003, MFC changed its accounting policy on a prospective basis for stock options granted to employees on or after January 1, 2002, from the intrinsic value method to the fair value method. As a result, the Company recorded in its accounts an additional compensation expense of $1 for the year ended December 31, 2003. In 2000, MFC also granted deferred share units (the "DSUs") to certain employees in the ESOP. The DSUs vest over a four-year period and each unit entitles the holder to receive one common share of MFC on retirement or termination of employment. The DSUs attract dividends in the form of additional DSUs at the same rate as dividends on the common shares of MFC. No DSUs were granted during 2004 and 2003. The number of DSUs outstanding was 173,237 as at December 31, 2004 (2003 -- 170,209). ManUSA recorded compensation expense of $2 related to DSUs granted by MFC to its employees (2003 -- $1; 2002 -- $1). F-25 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 10. STOCK BASED COMPENSATION -- (CONTINUED) Effective January 1, 2001, MFC established the Global Share Ownership Plan (the "GSOP") in which ManUSA employees can participate. Under this plan, qualifying employees of ManUSA can choose to have up to 5% of their annual base earnings applied toward the purchase of common shares of MFC. Subject to certain conditions, MFC will match 50% of the employee's eligible contributions. The MFC contributions vest immediately. All contributions will be used by the plan's trustee to purchase common shares in the open market. Amounts matched by MFC in respect of ManUSA employees are charged and expensed to ManUSA via the service agreement between ManUSA and MFC. The Company also has deferred compensation incentive plans open to all branch managers and qualified agents. During the first quarter of 2003, MFC established a new Restricted Share Unit ("RSU") plan. RSUs represent phantom common shares of MFC that entitle a participant to receive payment equal to the market value of the same number of common shares at the time the RSUs vest. RSUs vest and are paid out in 34 months and the related compensation expense is recognized over the period based on changes in the fair value of MFC's stock. At December 31, 2004 there were 252,149 RSU's outstanding for eligible employees (2003 -- 222,269). The Company recorded a compensation expense related to RSUs of $3 for the year ended December 31, 2004 (2003 -- $1). 11. DERIVATIVE FINANCIAL INSTRUMENTS The Company uses a variety of derivative financial instruments as part of its efforts to manage exposures to foreign currency, interest rate, and other market risks arising from its on-balance sheet financial instruments and future commitments. These instruments include interest rate exchange agreements, cross currency swaps, and foreign currency forward contracts. The Company enters into interest rate exchange agreements to reduce and manage interest rate risk associated with individual assets and liabilities. These interest rate exchange agreements consist primarily of interest rate swap agreements and interest rate floors and are regarded as fair value hedges. The Company uses cross currency swaps to reduce both foreign exchange and interest rate risk associated with outstanding non-U.S. dollar denominated debt. These instruments are regarded as fair value hedges. These instruments are designated and effective as hedges, as there is a high correlation between changes in market value or cash flow of the derivative and the underlying hedged item at inception and over the life of the hedge. The Company uses foreign currency forward contracts to hedge some of the foreign exchange risk, as it generates revenue and holds assets in U.S. dollars, but incurs a significant portion of its maintenance and acquisition expenses in Canadian dollars. A foreign currency forward contract obliges the Company to deliver a specified amount of currency on a future date at a specified exchange rate. The value of the foreign exchange forward contracts at any given point fluctuates according to the underlying level of exchange rate and interest rate differentials. These instruments are regarded as cash flow hedges. The Company's exposure to credit risk is the risk of loss from a counterparty failing to perform according to the terms of the contract. That exposure includes settlement risk (i.e. the risk that the counterparty defaults after the Company has delivered funds or securities under terms of the contract) and replacement cost risk (i.e. the cost to replace the contract at current market rates should the counterparty default prior to the settlement date). To limit exposure associated with counterparty nonperformance on interest rate exchange agreements, the Company enters into master netting agreements with its counterparties. F-26 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 11. DERIVATIVE FINANCIAL INSTRUMENTS -- (CONTINUED) Outstanding derivative instruments were as follows:
NOTIONAL OR CONTRACT AMOUNTS CARRYING VALUE FAIR VALUE -------------------- ------------- ---------- AS OF DECEMBER 31 2004 2003 2004 2003 2004 2003 ----------------- ------ ------ ---- ---- ---- ---- Interest rate and currency swaps and floors $1,491 $ 830 $(41) $(34) $(41) $(34) Interest rate option written............... 12 12 (1) (1) (1) (1) Equity contracts........................... 3 9 -- -- -- -- Currency forwards.......................... 356 276 25 25 25 25 ------ ------ ---- ---- ---- ---- Total derivatives.......................... $1,862 $1,127 $(17) $(10) $(17) $(10) ====== ====== ==== ==== ==== ====
Fair value of derivative financial instruments reflect the estimated amounts that the Company would receive or pay to terminate the contract at the consolidated balance sheet date, including the current unrealized gains (losses) on the instruments. Fair values of the agreements were based on estimates obtained from the individual counter parties. 12. FAIR VALUE OF FINANCIAL INSTRUMENTS Thecarrying values and the estimated fair values of the Company's financial instruments at December 31 were as follows:
CARRYING VALUE FAIR VALUE --------------- --------------- AS OF DECEMBER 31 2004 2003 2004 2003 ----------------- ------- ------- ------- ------- ASSETS: Fixed-maturity and equity securities $11,654 $11,128 $11,654 $11,128 Mortgage loans...................... 2,367 2,187 2,516 2,419 Policy loans........................ 2,681 2,532 2,681 2,532 Short-term investments.............. 436 564 436 564 LIABILITIES: Insurance investment contracts...... 2,337 2,365 2,309 2,333 Derivative financial instruments.... 17 10 17 10
The following methods and assumptions were used to estimate the fair values of the above financial instruments: Fixed-maturity and equity securities: Fair values of fixed-maturity and equity securities were based on quoted market prices where available. Where no quoted market price was available, fair values were estimated using values obtained from independent pricing services or, in the case of fixed-maturity private placements, by discounting expected future cash flows using a current market rate applicable to yield, credit quality, and average life of the investments. Mortgage loans: Fair value of mortgage loans was estimated using discounted cash flows and took into account the contractual maturities and discount rates, which were based on current market rates for similar maturity ranges and adjusted for risk due to the property type. Policy loans: Carrying values approximate fair values. Insurance investment contracts: Fair value of insurance investment contracts, which do not subject the Company to significant mortality or morbidity risks, were estimated using cash flows discounted at market rates. F-27 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 12. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED) Derivative financial instruments: Fair values of derivative financial instruments were based on estimates obtained from the individual counterparties. Separate account assets and liabilities: The carrying values in the consolidated balance sheets for separate account assets and liabilities approximate their fair value. Fair value was determined by applying the above outlined methodology to the relevant assets underlying the respective separate accounts. 13. RELATED PARTY TRANSACTIONS The Company has formal service agreements with MFC, which can be terminated by either party upon two months notice. Under the various agreements, the Company will pay direct operating expenses incurred by MFC on behalf of the Company. Services provided under the agreements include legal, actuarial, investment, data processing, accounting and certain other administrative services. Costs incurred under the agreements were $281 in 2004 (2003 -- $254; 2002 -- $277). MFC also provides a claims paying guarantee to certain U.S. policyholders. On December 20, 2002, the Company entered into a reinsurance agreement with Manulife Reinsurance Limited (Bermuda) (MRL), a sister company to reinsure a block of variable annuity business. The contract reinsures all risks, however, the primary risk reinsured is investment and lapse risk with only limited coverage of mortality risk. Accordingly, the contract was classified as financial reinsurance and given deposit-type accounting treatment. Under the terms of the agreement, the Company received a ceding commission of $169 in 2004 (2003 -- $123; 2002 -- $168), which is classified as unearned revenue and reported in other liabilities. The amount is being amortized to income as payments are made to MRL. The balance of this unearned revenue as of December 31, 2004 was $374. On September 23, 1997, the Company entered into a reinsurance agreement with MRL to reinsure a closed block of participating life insurance business. On December 31, 2003, the Company recaptured the reinsurance agreement. As there was limited transfer of mortality risk between the Company and MRL, the agreement was classified as financial reinsurance and given deposit-type accounting treatment. As a result of the early termination of the treaty, the company paid MRL a termination fee of $21, which was reported as a reduction of other revenue in 2003. On December 31, 2003, the Company entered into a reinsurance agreement with an affiliate, Manulife Reinsurers Bermuda Limited (MRBL), to reinsure 90% of the non-reinsured risk of the closed block of participating life insurance business. As approximately 90% of the mortality risk is covered under previously existing contracts with third party reinsurers and the resulting limited mortality risk inherent in the new contract with MRBL, it was classified as financial reinsurance and given deposit-type accounting treatment. Title to the assets supporting this block of business was transferred to MRBL under the terms of the agreement. Included in amounts due from affiliates is $2,371 (2003 -- $2,223) representing the receivable from MRBL for the transferred assets, which are accounted for in a similar manner as invested assets available-for-sale. Pursuant to a promissory note, issued pursuant to a Credit Agreement of the same date, the Company received a loan of $250 (Cdn. $375) from an affiliate, Manulife Hungary Holdings KFT ("MHHL"). The principal outstanding is $74 (Cdn. $96) both on December 31, 2004 and 2003. The maturity date with respect to any borrowing is 365 days following the date of the advance of a loan, however, the loan is normally renegotiated at each year-end. Interest is calculated at a fluctuating rate equivalent to a 3-month LIBOR plus 39 basis points in 2003 (32 basis points in 2002) and is payable quarterly. On December 30, 2002, the Company repaid $177 (Cdn. $279) of the principal balance outstanding. By an agreement dated August 9, 2004 effected on September 2, 2004, the Cdn $96 of the principal outstanding was converted to U.S. $74. F-28 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 13. RELATED PARTY TRANSACTIONS -- (CONTINUED) On December 29, 2001, ManUSA entered into a one-year agreement with MLI to swap Cdn. $375 at a three-month Banker's Acceptance note plus 31.34 basis points for U.S. $240 at 3-month LIBOR plus 32.5 basis points. There was no gain or loss on the maturity of the swap. On December 29, 2002, ManUSA entered into a one-year agreement with MLI to swap Cdn. $96 at a three-month Banker's Acceptance note plus 32 basis points for U.S. $61 at a three-month LIBOR plus 25 basis points. There was no gain or loss on the maturity of the swap. Effective December 28, 2003, the Company entered into a one-year agreement with MLI to swap Cdn. $96 at a three-month Banker's Acceptance note plus 39 basis points for U.S. $71 at a three-month LIBOR plus 25 basis points. The Company terminated this swap agreement on the same day the loan with MHHL was converted to U.S. dollars. Pursuant to a promissory note issued by the Company, the Company borrowed $4 from MHHL. The maturity date with respect to any borrowing is 365 days after the date of the advance of a loan. Interest on the loan is calculated at a fluctuating rate equal to a 3-month LIBOR plus 25 basis points and is payable quarterly starting March 28, 2001. The rate was 2.8% at December 31, 2004. Pursuant to a promissory note dated May 7, 1999, ENNAL Inc., a wholly owned non-life subsidiary of the Company, loaned $83 (Cdn. $125) to MLI. Interest is calculated at a rate of 5.6% per annum and is payable annually on December 15. The principal balance was collected on December 15, 2003, resulting in a foreign exchange gain of $10, which was recorded as a realized investment gain. As at December 31, 2004, the Company had one (2003 -- two) inter-company loan to MRL with a carrying value of $18 (2003 -- $19). The loan matures on May 11, 2006 and bears interest at a 3-month LIBOR plus 60 basis points. The rate at December 31, 2004 was 3.09%. The Company has a liquidity pool in which affiliates can invest their excess cash. Terms of operation and participation in the liquidity pool are set out in the Liquidity Pool and Loan Facility Agreement effective May 28, 2004. The maximum aggregate amount that the Company can accept in the liquidity pool is $600. By acting as the group's banker the Company can earn a spread over the amount it pays its affiliates and this aggregation and resulting economies of scale allows the affiliates to improve the investment return on their excess cash. Interest payable on the funds will be reset daily to the one-month U.S. Dollar London Inter-Bank Bid ("LIBID"). The following table exhibits the affiliates and their participation in the Company's liquidity pool:
AFFILIATE 2004 2003 --------- ---- ---- Manulife Investment Corporation ("MIC").... $ 51 $ 34 Manulife Reinsurance Ltd ("MRL")........... 65 71 Manulife Reinsurance (Bermuda) Ltd ("MRBL") 67 50 MRBL Reinsurance Trust..................... 155 58 Manulife Hungary Holdings KFT ("MHHL")..... 4 -- ---- ---- Total...................................... $342 $213 ==== ====
The amounts are included in due to affiliates. 14. REINSURANCE In the normal course of business, the Company assumes and cedes reinsurance as a party to several reinsurance treaties with major unrelated insurance companies. The Company remains liable for amounts ceded in the event that reinsurers do not meet their obligations. F-29 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 14. REINSURANCE -- (CONTINUED) Reinsurance premiums were included in premium revenue as follows:
FOR THE YEARS ENDED DECEMBER 31 2004 2003 2002 ------------------------------- ----- ------ ------ Direct premiums.......... $ 900 $1,011 $1,011 Reinsurance assumed...... 335 309 323 Reinsurance ceded........ (292) (365) (332) ----- ------ ------ Total premiums........... $ 943 $ 955 $1,002 ===== ====== ======
Reinsurance recoveries on ceded reinsurance contracts were $281, $309 and $311 during 2004, 2003 and 2002, respectively. 15. CERTAIN SEPARATE ACCOUNTS The Company issues variable annuity contracts through its separate accounts for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contract holder. All contracts contain certain guarantees, which are discussed more fully below. The company also has an immaterial amount of variable life insurance contracts in force, which will not be discussed further. During 2004 and 2003, there were losses on transfers of assets from the general account to the separate accounts of $1. The assets supporting the variable portion of the variable annuity contracts are carried at fair value and reported as summary total separate account assets with an equivalent summary total reported for liabilities. Amounts assessed against the contractholders for mortality, administrative, and other services are included in revenue and changes in liabilities for minimum guarantees are included in policyholder benefits in the Company's Consolidated Statements of Income. Separate account net investment income, net investment gains and losses, and the related liability changes are offset within the same line items in the Company's Consolidated Statements of Income. The deposits related to the variable life insurance contracts are invested in separate accounts and the Company guarantees a specified death benefit if certain specified premiums are paid by the policyholder, regardless of separate account performance. The variable annuity contracts are issued through separate accounts and the Company contractually guarantees to the contract holder either (a) a return of no less than total deposits made to the contract less any partial withdrawals, (b) total deposits made to the contract less any partial withdrawals plus a minimum return, or (c) the highest contract value on a specified anniversary date minus any withdrawals following the contract anniversary. Business issued after December 31, 2002 has a proportional partial withdrawal benefit instead of a dollar-for-dollar relationship. Variable annuity policyholders can also elect guarantees that provide either a minimum benefit payable in the event of death or annuitization or a minimum partial withdrawal amount during the accumulation period. Reinsurance has been utilized to mitigate risk related to guaranteed minimum death benefits and guaranteed minimum income benefits. F-30 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 15. CERTAIN SEPARATE ACCOUNTS -- (CONTINUED) At December 31, 2004 and December 31, 2003, the Company had the following variable contracts with guarantees:
AS AT DECEMBER 31 2004 2003 ----------------- ------- ------- RETURN OF NET DEPOSITS Account value................................. $ 4,093 $ 2,004 Net amount at risk -- gross................... $ 11 $ 15 Net amount at risk -- net..................... $ 2 $ 10 RETURN OF NET DEPOSITS PLUS A MINIMUM RETURN Account value................................. $ 896 $ 838 Net amount at risk -- gross................... $ 178 $ 201 Net amount at risk -- net..................... $ 1 $ 1 Guaranteed minimum return rate................ 5% 5% HIGHEST ANNIVERSARY ACCOUNT VALUE MINUS WITHDRAWALS POST-ANNIVERSARY Account value.................................. $22,637 $18,690 Net amount at risk -- gross.................... $ 2,275 $ 3,039 Net amount at risk -- net...................... $ 90 $ 262 GUARANTEED MINIMUM INCOME BENEFIT Account value.................................. $11,420 $ 9,252 Net amount at risk -- gross.................... $ 1,277 $ 1,348 Net amount at risk -- net...................... $ 21 $ 18 GUARANTEED MINIMUM WITHDRAWAL BENEFIT Account value.................................. $ 3,187 $ 9 Net amount at risk -- gross.................... -- -- Net amount at risk -- net...................... -- --
(Note that the Company's variable annuity contracts with guarantees may offer more than one type of guarantee in each contract; therefore, the amounts listed are not mutually exclusive.) For guarantees of amounts in the event of death, the net amount at risk is defined as the current guaranteed minimum death benefit in excess of the current account balance at the consolidated balance sheet date. For guarantees of amounts at annuitization, the net amount at risk is defined as the excess of the current annuitization income base over the current account value. For guarantees of partial withdrawal amounts, the net amount at risk is defined as the current guaranteed withdrawal amount minus the current account value. The table above shows the net amount at risk both gross and net of reinsurance. For purposes of modeling risk, account balances of variable contracts with guarantees have been allocated to Separate Account mutual funds with the following characteristics (in units of $1 billion), as of December 31, 2004 and December 31, 2003, respectively:
DECEMBER 31, DECEMBER 31, ASSET CLASS INDEX 2004 2003 ----------- ----- ------------ ------------ Large Cap Equity S&P 500 9.65 7.22 High Quality Bond Ibbottson US Intermediate Term Gov't Bond 1.93 4.62 High Yield Bond Ibbottson Domestic High Yield Bond 0.72 0.66 Balanced 60% Large Cap Equity, 40% High Quality Bond 8.58 4.44 Small Cap Equity Ibbottson US Small Cap Stock 4.02 3.50 International Equity MSCI EAFE 1.18 0.85 Global Equity MSCI World 0.38 0.35 Real Estate NAREIT 0.35 0.24
F-31 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 AND 2003 ($US MILLIONS) 15. CERTAIN SEPARATE ACCOUNTS -- (CONTINUED) The reserves roll forward for the separate accounts as at December 31, 2004 is shown below (in units of millions):
GUARANTEED GUARANTEED GUARANTEED MINIMUM MINIMUM MINIMUM WITHDRAWAL DEATH BENEFIT INCOME BENEFIT BENEFIT (GMDB) (GMIB) (GMWB) TOTALS ------------- -------------- ---------- ------ Balance at January 1, 2004...... $ 66 $136 -- $202 Incurred Guarantee Benefits..... (42) -- -- (42) Other Reserve Changes........... 48 (15) $(24) 9 ---- ---- ---- ---- Balance at December 31, 2004.... 72 121 (24) 169 Reinsurance Recoverable......... 32 194 -- 226 ---- ---- ---- ---- Net Balance at December 31, 2004 $ 40 $(73) $(24) $(57) ==== ==== ==== ====
The gross reserve for both GMDB and GMIB are determined using SOP 03-1 whereas the gross reserve for GMWB is determined according to SFAS 133. The Company regularly evaluates estimates used and adjusts the additional liability balance, with a related charge or credit to benefit expense, if actual experience or other evidence suggests that earlier assumptions should be revised. The following assumptions and methodology were used to determine the above amounts: . Data used included 1,000 stochastically generated investment performance scenarios. For SFAS 133 purposes, risk neutral scenarios have been used. . Mean return and volatility assumptions have been determined for each of the asset classes noted above. . Annuity mortality was assumed to be 90% of the Annuity 2000 table. . Annuity lapse rates vary by contract type and duration and range from 1 percent to 45 percent. . Partial withdrawal rates are approximately 4% per year. . The discount rate is 7.0% in the SOP 03-1 calculations and 4.8% for SFAS 133 calculations. 16. CONTINGENCIES AND COMMITMENTS The Company and its subsidiaries are subject to legal actions arising in the ordinary course of business. These legal actions are not expected to have a material adverse effect on the consolidated financial position of the Company. On December 31, 2004, the Company had outstanding commitments involving three mortgage applications in the United States for a total $28 to be disbursed in 2005. During 2001, the Company entered into an office ground lease agreement, which expires on September 20, 2096. The terms of the lease agreement provide for adjustments in future periods. The minimum aggregate rental commitments on the ground lease together with other rental office space commitments for the next five years are as follows: $11 for 2005, and $11 for 2006 and thereafter. There were no other material operating leases in existence at the end of 2004. 17. SUBSEQUENT EVENTS On September 14, 2004, the Board of Directors of the Company resolved to discontinue its branch operations in Taiwan and proceed with negotiations to sell the in-force business of its Taiwan branch to an affiliate, Manulife (International) Limited, a life insurance company incorporated in Bermuda. The sale was completed on January 1, 2005 and resulted in assets of $234 and liabilities of $185 being transferred to MLI for a cash consideration of $24. F-32 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contract Owners of The Manufacturers Life Insurance Company (U.S.A.) Separate Account N We have audited the accompanying statement of assets and contract owners' equity of The Manufacturers Life Insurance Company (U.S.A.) Separate Account N (comprising of the 500 Index Trust, Aggressive Growth Trust, All Asset Portfolio, All Cap Core Trust, All Cap Growth Trust, All Cap Value Trust, American Blue Chip Income & Growth Trust, American Growth Trust, American Growth-Income Trust, American International Trust, Balanced Trust, Blue Chip Growth Trust, Capital Appreciation Trust, Diversified Bond Trust, Dynamic Growth Trust, Emerging Growth Trust, Emerging Small Company Trust, Equity-Income Trust, Equity Index Trust, Financial Services Trust, Fundamental Value Trust, Global Trust, Global Allocation Trust, Global Bond Trust, Growth & Income Trust, Health Sciences Trust, High Yield Trust, Income & Value Trust, International Equity Index Fund, International Index Trust, International Small Cap Trust, International Stock Trust, International Value Trust, Investment Quality Bond Trust, Large Cap Growth Trust, Large Cap Value Trust, Lifestyle Aggressive 1000 Trust, Lifestyle Balanced 640 Trust, Lifestyle Conservative 280 Trust, Lifestyle Growth 820 Trust, Lifestyle Moderate 460 Trust, Mid Cap Core Trust, Mid Cap Index Trust, Mid Cap Stock Trust, Mid Cap Value Trust, Money Market Trust, Natural Resources Trust, Overseas Trust, Pacific Rim Trust, Quantitative All Cap Trust, Quantitative Equity Trust, Quantitative Mid Cap Trust, Real Estate Securities Trust, Real Return Bond Trust, Science & Technology Trust, Small Cap Index Trust, Small Cap Opportunities Trust, Small Company Trust, Small Company Blend Trust, Small Company Value Trust, Special Value Trust, Strategic Bond Trust, Strategic Growth Trust, Strategic Income Trust, Strategic Opportunities Trust, Strategic Value Trust, Total Return Trust, Total Stock Market Index Trust, U.S. Government Securities Trust, U.S. Large Cap Trust, Utilities Trust, and Value Trust sub-accounts) of The Manufacturers Life Insurance Company (U.S.A.) as of December 31, 2004, and the related statements of operations and changes in contract owners' equity for each of the two years in the period then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Account's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion of the effectiveness of the Account's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the sub-accounts of The Manufacturers Life Insurance Company (U.S.A.) Separate Account N at December 31, 2004, and the results of their operations and the changes in their contract owners' equity for each of the two years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ ERNST & YOUNG LLP March 18, 2005 F-33 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N STATEMENT OF ASSETS AND CONTRACT OWNERS' EQUITY DECEMBER 31, 2004 ASSETS Investments at fair value: Sub-accounts invested in Manufacturers Investment Trust Portfolios: 500 Index Trust -- 699,263 shares (cost $6,751,733)....................... $ 7,356,251 Aggressive Growth Trust -- 398,728 shares (cost $5,277,336)............... 5,785,540 All Cap Core Trust -- 189,233 shares (cost $2,527,335).................... 3,006,912 All Cap Growth Trust -- 510,575 shares (cost $6,986,673).................. 7,837,329 All Cap Value Trust -- 109,827 shares (cost $1,392,732)................... 1,596,891 American Blue Chip Income & Growth Trust -- 21,470 shares (cost $326,367). 362,839 American Growth Trust -- 478,116 shares (cost $7,358,028)................. 8,261,844 American Growth-Income Trust -- 104,460 shares (cost $1,651,593).......... 1,775,824 American International Trust -- 87,912 shares (cost $1,520,713)........... 1,702,860 Balanced Trust............................................................ -- Blue Chip Growth Trust -- 1,920,123 shares (cost $28,010,854)............. 32,373,276 Capital Appreciation Trust -- 111,804 shares (cost $861,577).............. 982,755 Diversified Bond Trust -- 713,867 shares (cost $7,611,162)................ 7,709,761 Dynamic Growth Trust -- 534,167 shares (cost $2,329,024).................. 2,585,369 Emerging Growth Trust -- 3,730 shares (cost $56,612)...................... 61,397 Emerging Small Company Trust -- 1,760,254 shares (cost $47,338,560)....... 50,607,293 Equity-Income Trust -- 2,157,328 shares (cost $31,774,504)................ 36,760,871 Equity Index Trust -- 1,830,520 shares (cost $23,083,833)................. 27,164,917 Financial Services Trust -- 23,002 shares (cost $268,966)................. 322,026 Fundamental Value Trust -- 166,623 shares (cost $2,104,863)............... 2,356,047 Global Trust -- 276,454 shares (cost $3,614,842).......................... 4,088,754 Global Allocation Trust -- 18,278 shares (cost $184,312).................. 197,769 Global Bond Trust -- 265,874 shares (cost $3,933,329)..................... 4,323,117 Growth & Income Trust -- 701,844 shares (cost $14,344,904)................ 16,191,548 Health Sciences Trust -- 225,422 shares (cost $3,175,016)................. 3,480,512 High Yield Trust -- 1,128,682 shares (cost $11,062,428)................... 11,862,447 Income & Value Trust -- 2,713,976 shares (cost $28,055,742)............... 29,826,597 International Index Trust................................................. -- International Small Cap Trust -- 269,123 shares (cost $4,038,811)......... 4,744,645 International Stock Trust -- 1,203,310 shares (cost $10,622,084).......... 13,368,772 International Value Trust -- 553,931 shares (cost $7,070,369)............. 8,198,182 Investment Quality Bond Trust -- 1,824,805 shares (cost $22,541,555)...... 22,645,826 Large Cap Growth Trust -- 727,040 shares (cost $6,738,430)................ 7,321,297 Large Cap Value Trust -- 76,418 shares (cost $1,366,735).................. 1,435,901 Lifestyle Aggressive 1000 Trust -- 404,549 shares (cost $4,483,215)....... 5,093,275 Lifestyle Balanced 640 Trust -- 1,308,132 shares (cost $15,743,939)....... 18,039,138 Lifestyle Conservative 280 Trust -- 387,631 shares (cost $5,295,311)...... 5,504,364 Lifestyle Growth 820 Trust -- 576,247 shares (cost $6,723,798)............ 7,721,710 Lifestyle Moderate 460 Trust -- 249,837 shares (cost $3,185,678).......... 3,447,752 Mid Cap Core Trust -- 33,838 shares (cost $538,740)....................... 587,434 Mid Cap Index Trust -- 416,238 shares (cost $6,230,101)................... 6,984,470 Mid Cap Stock Trust -- 1,157,971 shares (cost $15,369,164)................ 16,362,126 Mid Cap Value Trust -- 748,929 shares (cost $11,438,007).................. 13,585,575 Money Market Trust -- 4,036,184 shares (cost $40,361,843)................. 40,361,843 Natural Resources Trust -- 89,428 shares (cost $1,753,404)................ 1,963,833
See accompanying notes. F-34 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N STATEMENT OF ASSETS AND CONTRACT OWNERS' EQUITY -- (CONTINUED) DECEMBER 31, 2004 ASSETS Investments at fair value: Sub-accounts invested in Manufacturers Investment Trust Portfolios: Overseas Trust -- 564,355 shares (cost $5,372,760)......................... $ 6,016,023 Pacific Rim Trust -- 614,350 shares (cost $4,955,052)...................... 5,836,323 Quantitative All Cap Trust -- 175 shares (cost $2,788)..................... 2,916 Quantitative Equity Trust.................................................. -- Quantitative Mid Cap Trust -- 30,525 shares (cost $335,671)................ 394,385 Real Estate Securities Trust -- 1,433,712 shares (cost $27,666,242)........ 38,437,806 Real Return Bond Trust -- 113,202 shares (cost $1,515,122)................. 1,584,831 Science & Technology Trust -- 2,621,258 shares (cost $28,733,484).......... 30,223,103 Small Cap Index Trust -- 472,081 shares (cost $6,301,799).................. 7,067,046 Small Cap Opportunities Trust -- 75,188 shares (cost $1,462,907)........... 1,625,557 Small Company Trust........................................................ -- Small Company Blend Trust -- 132,945 shares (cost $1,396,657).............. 1,624,586 Small Company Value Trust -- 1,152,974 shares (cost $20,226,956)........... 24,396,927 Special Value Trust -- 12,067 shares (cost $190,180)....................... 225,420 Strategic Bond Trust -- 400,134 shares (cost $4,635,583)................... 4,821,612 Strategic Growth Trust -- 96,966 shares (cost $928,153..................... 1,039,479 Strategic Income Trust -- 2,250 shares (cost $29,848)...................... 30,167 Strategic Opportunities Trust -- 432,959 shares (cost $4,110,923).......... 4,732,242 Strategic Value Trust -- 70,644 shares (cost $737,194)..................... 832,892 Total Return Trust -- 3,485,820 shares (cost $48,938,618).................. 49,394,073 Total Stock Market Index Trust -- 232,561 shares (cost $2,331,365)......... 2,572,128 U.S. Government Securities Trust -- 591,944 shares (cost $8,173,830)....... 8,245,778 U.S. Large Cap Trust -- 1,631,197 shares (cost $20,926,239)................ 22,836,763 Utilities Trust -- 40,518 shares (cost $423,193)........................... 489,462 Value Trust -- 1,161,005 shares (cost $21,130,568)......................... 22,720,877 Sub-account invested in John Hancock Variable Series I Trust (VST) Portfolio: International Equity Index Fund -- 46,061 shares (cost $663,505)........... 752,181 Sub-account invested in PIMCO Variable Investment Trust (VIT) Portfolio: All Asset Portfolio -- 6,680 shares (cost $78,299)......................... 77,490 ------------ Total assets.................................................................. $681,926,956 ============ CONTRACT OWNERS' EQUITY Variable universal life insurance contracts................................... $681,926,956 ============
See accompanying notes. F-35 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
SUB-ACCOUNT ------------------------------------------------------------ ALL ASSET 500 INDEX TRUST AGGRESSIVE GROWTH TRUST PORTFOLIO ---------------------- ----------------------- ------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03 DEC. 31/04## ---------- ---------- ----------- ---------- ------------ Income: Dividends.............................................. $ 52,648 $ 29,256 $ -- $ -- $ 1,982 Expenses: Mortality and expense risks, and administrative charges 21,044 13,256 31,136 25,747 44 ---------- ---------- ----------- ---------- ------- Net investment income (loss) during the year............ 31,604 16,000 (31,136) (25,747) 1,938 Net realized gain (loss) during the year................ 768,477 106,471 773,190 (526,951) 76 Unrealized appreciation (depreciation) during the year.. (82,506) 846,742 (329,750) 1,839,047 (809) ---------- ---------- ----------- ---------- ------- Net increase (decrease) in assets from operations....... 717,575 969,213 412,304 1,286,349 1,205 ---------- ---------- ----------- ---------- ------- Changes from principal transactions: Transfer of net premiums............................... 2,838,073 1,151,910 1,437,207 557,429 133 Transfer on terminations............................... (784,921) (242,686) (1,333,689) (965,558) (885) Transfer on policy loans............................... (244) (16,417) (669) (1,649) -- Net interfund transfers................................ (987,143) 861,391 296,229 34,722 77,037 ---------- ---------- ----------- ---------- ------- Net increase (decrease) in assets from principal transactions................................ 1,065,765 1,754,198 399,078 (375,056) 76,285 ---------- ---------- ----------- ---------- ------- Total increase (decrease) in assets..................... 1,783,340 2,723,411 811,382 911,293 77,490 Assets beginning of year................................ 5,572,911 2,849,500 4,974,158 4,062,865 -- ---------- ---------- ----------- ---------- ------- Assets end of year...................................... $7,356,251 $5,572,911 $ 5,785,540 $4,974,158 $77,490 ========== ========== =========== ========== =======
SUB-ACCOUNT -------------------------------------------------- ALL CAP CORE TRUST ALL CAP GROWTH TRUST ------------------------ ------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03 ----------- ----------- ----------- ----------- Income: Dividends.............................................. $ 16,936 $ -- $ -- $ -- Expenses: Mortality and expense risks, and administrative charges 19,777 28,834 45,204 48,145 ----------- ----------- ----------- ----------- Net investment income (loss) during the year............ (2,841) (28,834) (45,204) (48,145) Net realized gain (loss) during the year................ 636,601 (93,111) 809,620 (437,237) Unrealized appreciation (depreciation) during the year.. (176,408) 1,436,253 (292,493) 2,518,315 ----------- ----------- ----------- ----------- Net increase (decrease) in assets from operations....... 457,352 1,314,308 471,923 2,032,933 ----------- ----------- ----------- ----------- Changes from principal transactions: Transfer of net premiums............................... 579,317 876,646 1,392,163 1,985,180 Transfer on terminations............................... (799,360) (1,891,000) (796,257) (2,983,291) Transfer on policy loans............................... 398 28,365 (15,642) (9,110) Net interfund transfers................................ (1,881,123) (1,573,393) (1,419,052) (607,373) ----------- ----------- ----------- ----------- Net increase (decrease) in assets from principal transactions................................ (2,100,768) (2,559,382) (838,788) (1,614,594) ----------- ----------- ----------- ----------- Total increase (decrease) in assets..................... (1,643,416) (1,245,074) (366,865) 418,339 Assets beginning of year................................ 4,650,328 5,895,402 8,204,194 7,785,855 ----------- ----------- ----------- ----------- Assets end of year...................................... $ 3,006,912 $ 4,650,328 $ 7,837,329 $ 8,204,194 =========== =========== =========== ===========
## Reflects the period from commencement of operations on May 3, 2004 through December 31, 2004. See accompanying notes. F-36 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY -- (CONTINUED)
SUB-ACCOUNT --------------------------------------------- AMERICAN BLUE CHIP ALL CAP VALUE TRUST INCOME & GROWTH TRUST --------------------- ---------------------- YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03+ ---------- ---------- ---------- ------------ Income: Dividends.............................................. $ 3,931 $ 95 $ -- $ -- Expenses: Mortality and expense risks, and administrative charges 6,352 1,489 1,742 348 ---------- -------- -------- -------- Net investment income (loss) during the year............ (2,421) (1,394) (1,742) (348) Net realized gain (loss) during the year................ 33,935 2,247 11,500 296 Unrealized appreciation (depreciation) during the year.. 147,520 69,288 18,709 17,763 ---------- -------- -------- -------- Net increase (decrease) in assets from operations....... 179,034 70,141 28,467 17,711 ---------- -------- -------- -------- Changes from principal transactions: Transfer of net premiums............................... 319,423 55,795 128,999 1,770 Transfer on terminations............................... (84,084) (15,953) (61,777) (2,842) Transfer on policy loans............................... -- -- -- -- Net interfund transfers................................ 661,583 233,043 61,782 188,729 ---------- -------- -------- -------- Net increase (decrease) in assets from principal transactions................................ 896,922 272,885 129,004 187,657 ---------- -------- -------- -------- Total increase (decrease) in assets..................... 1,075,956 343,026 157,471 205,368 Assets beginning of year................................ 520,935 177,909 205,368 -- ---------- -------- -------- -------- Assets end of year...................................... $1,596,891 $520,935 $362,839 $205,368 ========== ======== ======== ========
SUB-ACCOUNT ---------------------------------------------------- AMERICAN GROWTH TRUST AMERICAN GROWTH-INCOME TRUST ----------------------- --------------------------- YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03+ DEC. 31/04 DEC. 31/03+ ---------- ------------ ---------- ------------ Income: Dividends.............................................. $ 824 $ -- $ 5,197 $ -- Expenses: Mortality and expense risks, and administrative charges 21,522 1,636 6,748 88 ---------- ---------- ---------- ------- Net investment income (loss) during the year............ (20,698) (1,636) (1,551) (88) Net realized gain (loss) during the year................ 75,532 508 8,690 90 Unrealized appreciation (depreciation) during the year.. 828,549 75,267 119,999 4,232 ---------- ---------- ---------- ------- Net increase (decrease) in assets from operations....... 883,383 74,139 127,138 4,234 ---------- ---------- ---------- ------- Changes from principal transactions: Transfer of net premiums............................... 1,111,161 3,565 603,377 2,153 Transfer on terminations............................... (293,984) (12,488) (128,761) (1,298) Transfer on policy loans............................... (2,122) -- (1,392) -- Net interfund transfers................................ 5,092,730 1,405,460 1,126,472 43,901 ---------- ---------- ---------- ------- Net increase (decrease) in assets from principal transactions................................ 5,907,785 1,396,537 1,599,696 44,756 ---------- ---------- ---------- ------- Total increase (decrease) in assets..................... 6,791,168 1,470,676 1,726,834 48,990 Assets beginning of year................................ 1,470,676 -- 48,990 -- ---------- ---------- ---------- ------- Assets end of year...................................... $8,261,844 $1,470,676 $1,775,824 $48,990 ========== ========== ========== =======
+ Reflects the period from commencement of operations on July 9, 2003 through December 31, 2003. See accompanying notes. F-37 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY -- (CONTINUED)
SUB-ACCOUNT -------------------------------------------------- AMERICAN INTERNATIONAL TRUST BALANCED TRUST ----------------------- ------------------------- YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03+ DEC. 31/04X DEC. 31/03 ---------- ------------ ------------ ----------- Income: Dividends.............................................. $ 11,168 $ -- $ 521,928 $ 581,430 Expenses: Mortality and expense risks, and administrative charges 3,669 243 47,490 148,268 ---------- -------- ------------ ----------- Net investment income (loss) during the year............ 7,499 (243) 474,438 433,162 Net realized gain (loss) during the year................ 7,949 772 (8,069,837) (1,679,793) Unrealized appreciation (depreciation) during the year.. 165,634 16,512 7,482,627 4,153,530 ---------- -------- ------------ ----------- Net increase (decrease) in assets from operations....... 181,082 17,041 (112,772) 2,906,899 ---------- -------- ------------ ----------- Changes from principal transactions: Transfer of net premiums............................... 303,456 1,908 496,880 1,927,224 Transfer on terminations............................... (51,291) (2,216) (1,264,303) (4,389,247) Transfer on policy loans............................... -- -- 31,175 79,372 Net interfund transfers................................ 1,150,634 102,246 (21,681,958) (1,881,128) ---------- -------- ------------ ----------- Net increase (decrease) in assets from principal transactions................................ 1,402,799 101,938 (22,418,206) (4,263,779) ---------- -------- ------------ ----------- Total increase (decrease) in assets..................... 1,583,881 118,979 (22,530,978) (1,356,880) Assets beginning of year................................ 118,979 -- 22,530,978 23,887,858 ---------- -------- ------------ ----------- Assets end of year...................................... $1,702,860 $118,979 $ -- $22,530,978 ========== ======== ============ ===========
SUB-ACCOUNT --------------------------------------------------- BLUE CHIP GROWTH TRUST CAPITAL APPRECIATION TRUST ------------------------ ------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03 ----------- ----------- ---------- ---------- Income: Dividends.............................................. $ 35,790 $ 12,366 $ -- $ -- Expenses: Mortality and expense risks, and administrative charges 161,502 151,369 4,962 3,538 ----------- ----------- ---------- ---------- Net investment income (loss) during the year............ (125,712) (139,003) (4,962) (3,538) Net realized gain (loss) during the year................ 2,932,130 (2,760,298) 133,071 3,419 Unrealized appreciation (depreciation) during the year.. (258,615) 9,996,426 (30,875) 169,019 ----------- ----------- ---------- ---------- Net increase (decrease) in assets from operations....... 2,547,803 7,097,125 97,234 168,900 ----------- ----------- ---------- ---------- Changes from principal transactions: Transfer of net premiums............................... 5,344,335 3,739,819 258,563 121,616 Transfer on terminations............................... (7,195,400) (7,571,724) (129,212) (29,055) Transfer on policy loans............................... (43,386) 9,348 -- -- Net interfund transfers................................ (3,098,715) 5,173,107 (484,737) 787,108 ----------- ----------- ---------- ---------- Net increase (decrease) in assets from principal transactions................................ (4,993,166) 1,350,550 (355,386) 879,669 ----------- ----------- ---------- ---------- Total increase (decrease) in assets..................... (2,445,363) 8,447,675 (258,152) 1,048,569 Assets beginning of year................................ 34,818,639 26,370,964 1,240,907 192,338 ----------- ----------- ---------- ---------- Assets end of year...................................... $32,373,276 $34,818,639 $ 982,755 $1,240,907 =========== =========== ========== ==========
+ Reflects the period from commencement of operations on July 9, 2003 through December 31, 2003. x Terminated as an investment option and funds transferred to Income & Value Trust on May 3, 2004. See accompanying notes. F-38 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY -- (CONTINUED)
SUB-ACCOUNT ----------------------------------------------- DIVERSIFIED BOND TRUST DYNAMIC GROWTH TRUST ----------------------- ---------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03 ---------- ----------- ---------- ---------- Income: Dividends.............................................. $ 323,733 $ 435,668 $ -- $ -- Expenses: Mortality and expense risks, and administrative charges 43,498 49,468 12,196 8,596 ---------- ----------- ---------- ---------- Net investment income (loss) during the year............ 280,235 386,200 (12,196) (8,596) Net realized gain (loss) during the year................ (26,615) 80,327 311,045 (197) Unrealized appreciation (depreciation) during the year.. (14,499) (129,077) (81,740) 469,750 ---------- ----------- ---------- ---------- Net increase (decrease) in assets from operations....... 239,121 337,450 217,109 460,957 ---------- ----------- ---------- ---------- Changes from principal transactions: Transfer of net premiums............................... 730,276 1,329,104 927,165 371,454 Transfer on terminations............................... (786,184) (2,075,985) (345,255) (174,319) Transfer on policy loans............................... (659) (7,653) (789) (1,041) Net interfund transfers................................ (320,949) 487,589 (706,652) 1,105,918 ---------- ----------- ---------- ---------- Net increase (decrease) in assets from principal transactions................................ (377,516) (266,945) (125,531) 1,302,012 ---------- ----------- ---------- ---------- Total increase (decrease) in assets..................... (138,395) 70,505 91,578 1,762,969 Assets beginning of year................................ 7,848,156 7,777,651 2,493,791 730,822 ---------- ----------- ---------- ---------- Assets end of year...................................... $7,709,761 $ 7,848,156 $2,585,369 $2,493,791 ========== =========== ========== ==========
SUB-ACCOUNT --------------------------------------------------- EMERGING GROWTH TRUST EMERGING SMALL COMPANY TRUST ----------------------- --------------------------- YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03^ DEC. 31/04 DEC. 31/03 ---------- ------------ ----------- ----------- Income: Dividends.............................................. $ 7,018 $ 8,360 $ -- $ -- Expenses: Mortality and expense risks, and administrative charges 1,147 291 289,281 273,350 --------- -------- ----------- ----------- Net investment income (loss) during the year............ 5,871 8,069 (289,281) (273,350) Net realized gain (loss) during the year................ (8,126) 1,219 3,849,168 802,928 Unrealized appreciation (depreciation) during the year.. 3,645 1,140 1,520,033 14,562,578 --------- -------- ----------- ----------- Net increase (decrease) in assets from operations....... 1,390 10,428 5,079,920 15,092,156 --------- -------- ----------- ----------- Changes from principal transactions: Transfer of net premiums............................... 69,543 4,752 6,059,223 4,191,176 Transfer on terminations............................... (8,760) 5,351 (8,505,902) (9,511,719) Transfer on policy loans............................... -- -- 4,168 111,566 Net interfund transfers................................ (224,156) 202,849 (3,032,745) (622,011) --------- -------- ----------- ----------- Net increase (decrease) in assets from principal transactions................................ (163,373) 212,952 (5,475,256) (5,830,988) --------- -------- ----------- ----------- Total increase (decrease) in assets..................... (161,983) 223,380 (395,336) 9,261,168 Assets beginning of year................................ 223,380 -- 51,002,629 41,741,461 --------- -------- ----------- ----------- Assets end of year...................................... $ 61,397 $223,380 $50,607,293 $51,002,629 ========= ======== =========== ===========
^ Reflects the period from commencement of operations on May 5, 2003 through December 31, 2003. See accompanying notes. F-39 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY -- (CONTINUED)
SUB-ACCOUNT -------------------------------------------------- EQUITY-INCOME TRUST EQUITY INDEX TRUST ------------------------ ------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03 ----------- ----------- ----------- ----------- Income: Dividends.............................................. $ 736,725 $ 779,423 $ 325,047 $ 336,279 Expenses: Mortality and expense risks, and administrative charges 158,262 120,550 134,580 121,262 ----------- ----------- ----------- ----------- Net investment income (loss) during the year............ 578,463 658,873 190,467 215,017 Net realized gain (loss) during the year................ 2,624,166 (625,000) 655,691 (1,465,131) Unrealized appreciation (depreciation) during the year.. 1,200,893 5,411,380 1,401,575 6,639,431 ----------- ----------- ----------- ----------- Net increase (decrease) in assets from operations....... 4,403,522 5,445,253 2,247,733 5,389,317 ----------- ----------- ----------- ----------- Changes from principal transactions: Transfer of net premiums............................... 6,036,727 4,308,031 3,123,608 2,875,947 Transfer on terminations............................... (3,547,654) (6,435,587) (3,493,461) (6,980,588) Transfer on policy loans............................... (34,327) (30,575) 29,596 60,198 Net interfund transfers................................ 2,601,373 3,087,048 (364,568) 824,166 ----------- ----------- ----------- ----------- Net increase (decrease) in assets from principal transactions................................ 5,056,119 928,917 (704,825) (3,220,277) ----------- ----------- ----------- ----------- Total increase (decrease) in assets..................... 9,459,641 6,374,170 1,542,908 2,169,040 Assets beginning of year................................ 27,301,230 20,927,060 25,622,009 23,452,969 ----------- ----------- ----------- ----------- Assets end of year...................................... $36,760,871 $27,301,230 $27,164,917 $25,622,009 =========== =========== =========== ===========
SUB-ACCOUNT ----------------------------------------------- FINANCIAL SERVICES TRUST FUNDAMENTAL VALUE TRUST ----------------------- ---------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03 ---------- ---------- ---------- ---------- Income: Dividends.............................................. $ 1,238 $ 572 $ 8,830 $ 1,327 Expenses: Mortality and expense risks, and administrative charges 1,852 1,762 9,976 4,461 --------- -------- ---------- ---------- Net investment income (loss) during the year............ (614) (1,190) (1,146) (3,134) Net realized gain (loss) during the year................ 46,998 (16,607) 131,285 49,568 Unrealized appreciation (depreciation) during the year.. (23,386) 114,156 91,066 192,135 --------- -------- ---------- ---------- Net increase (decrease) in assets from operations....... 22,998 96,359 221,205 238,569 --------- -------- ---------- ---------- Changes from principal transactions: Transfer of net premiums............................... 183,685 79,561 203,165 120,955 Transfer on terminations............................... (28,176) (30,566) (575,511) (59,219) Transfer on policy loans............................... (20,973) -- (1,906) -- Net interfund transfers................................ (237,493) (56,477) 1,329,837 556,446 --------- -------- ---------- ---------- Net increase (decrease) in assets from principal transactions................................ (102,957) (7,482) 955,585 618,182 --------- -------- ---------- ---------- Total increase (decrease) in assets..................... (79,959) 88,877 1,176,790 856,751 Assets beginning of year................................ 401,985 313,108 1,179,257 322,506 --------- -------- ---------- ---------- Assets end of year...................................... $ 322,026 $401,985 $2,356,047 $1,179,257 ========= ======== ========== ==========
See accompanying notes. F-40 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY -- (CONTINUED)
SUB-ACCOUNT ----------------------------------------------- GLOBAL TRUST GLOBAL ALLOCATION TRUST ----------------------- ---------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03 ---------- ----------- ---------- ---------- Income: Dividends.............................................. $ 58,733 $ 38,256 $ 477 $ 149 Expenses: Mortality and expense risks, and administrative charges 18,758 19,136 762 202 ---------- ----------- -------- ------- Net investment income (loss) during the year............ 39,975 19,120 (285) (53) Net realized gain (loss) during the year................ 315,391 (71,996) 11,680 (713) Unrealized appreciation (depreciation) during the year.. 72,560 799,499 7,525 8,658 ---------- ----------- -------- ------- Net increase (decrease) in assets from operations....... 427,926 746,623 18,920 7,892 ---------- ----------- -------- ------- Changes from principal transactions: Transfer of net premiums............................... 836,068 401,570 6,785 2,138 Transfer on terminations............................... (566,348) (1,328,917) (9,619) (1,015) Transfer on policy loans............................... 35,604 (215) -- -- Net interfund transfers................................ 235,568 134,153 145,783 1,607 ---------- ----------- -------- ------- Net increase (decrease) in assets from principal transactions................................ 540,892 (793,409) 142,949 2,730 ---------- ----------- -------- ------- Total increase (decrease) in assets..................... 968,818 (46,786) 161,869 10,622 Assets beginning of year................................ 3,119,936 3,166,722 35,900 25,278 ---------- ----------- -------- ------- Assets end of year...................................... $4,088,754 $ 3,119,936 $197,769 $35,900 ========== =========== ======== =======
SUB-ACCOUNT ------------------------------------------------- GLOBAL BOND TRUST GROWTH & INCOME TRUST ----------------------- ------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03 ---------- ----------- ----------- ----------- Income: Dividends.............................................. $ 118,864 $ 189,031 $ 148,138 $ 193,949 Expenses: Mortality and expense risks, and administrative charges 18,347 25,555 94,342 107,660 ---------- ----------- ----------- ----------- Net investment income (loss) during the year............ 100,517 163,476 53,796 86,289 Net realized gain (loss) during the year................ 151,288 399,426 527,508 (2,026,989) Unrealized appreciation (depreciation) during the year.. 124,591 (7,054) 391,770 6,243,806 ---------- ----------- ----------- ----------- Net increase (decrease) in assets from operations....... 376,396 555,848 973,074 4,303,106 ---------- ----------- ----------- ----------- Changes from principal transactions: Transfer of net premiums............................... 746,551 1,084,114 2,146,875 2,633,281 Transfer on terminations............................... (320,418) (1,279,409) (2,402,594) (4,336,102) Transfer on policy loans............................... (4,866) (6,830) (17,384) 41,199 Net interfund transfers................................ 62,251 (1,487,323) (2,818,709) (3,490,042) ---------- ----------- ----------- ----------- Net increase (decrease) in assets from principal transactions................................ 483,518 (1,689,448) (3,091,812) (5,151,664) ---------- ----------- ----------- ----------- Total increase (decrease) in assets..................... 859,914 (1,133,600) (2,118,738) (848,558) Assets beginning of year................................ 3,463,203 4,596,803 18,310,286 19,158,844 ---------- ----------- ----------- ----------- Assets end of year...................................... $4,323,117 $ 3,463,203 $16,191,548 $18,310,286 ========== =========== =========== ===========
See accompanying notes. F-41 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY -- (CONTINUED)
SUB-ACCOUNT ------------------------------------------------ HEALTH SCIENCES TRUST HIGH YIELD TRUST ---------------------- ------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03 ---------- ---------- ----------- ----------- Income: Dividends.............................................. $ -- $ -- $ 562,418 $ 398,871 Expenses: Mortality and expense risks, and administrative charges 17,169 11,505 61,547 46,685 ---------- ---------- ----------- ----------- Net investment income (loss) during the year............ (17,169) (11,505) 500,871 352,186 Net realized gain (loss) during the year................ 362,830 207,104 771,889 48,670 Unrealized appreciation (depreciation) during the year.. (19,432) 447,695 (140,135) 1,283,048 ---------- ---------- ----------- ----------- Net increase (decrease) in assets from operations....... 326,229 643,294 1,132,625 1,683,904 ---------- ---------- ----------- ----------- Changes from principal transactions: Transfer of net premiums............................... 980,132 528,036 2,234,125 1,773,559 Transfer on terminations............................... (564,535) (622,518) (1,525,900) (1,323,960) Transfer on policy loans............................... (206) (982) (36,157) (7,894) Net interfund transfers................................ 148,708 231,362 68,235 1,652,035 ---------- ---------- ----------- ----------- Net increase (decrease) in assets from principal transactions................................ 564,099 135,898 740,303 2,093,740 ---------- ---------- ----------- ----------- Total increase (decrease) in assets..................... 890,328 779,192 1,872,928 3,777,644 Assets beginning of year................................ 2,590,184 1,810,992 9,989,519 6,211,875 ---------- ---------- ----------- ----------- Assets end of year...................................... $3,480,512 $2,590,184 $11,862,447 $ 9,989,519 ========== ========== =========== ===========
SUB-ACCOUNT --------------------------------------------------------------- INTERNATIONAL EQUITY INDEX INCOME & VALUE TRUST FUND INTERNATIONAL INDEX TRUST ------------------------ ------------- ----------------------- YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04## DEC. 31/04XX DEC. 31/03 ----------- ----------- ------------- ------------ ---------- Income: Dividends.............................................. $ 109,406 $ 138,418 $ 3,519 $ 9,400 $ 16,517 Expenses: Mortality and expense risks, and administrative charges 122,036 39,969 2,513 2,737 3,874 ----------- ----------- -------- ----------- ---------- Net investment income (loss) during the year............ (12,630) 98,449 1,006 6,663 12,643 Net realized gain (loss) during the year................ 1,003,727 226,936 12,075 173,749 33,575 Unrealized appreciation (depreciation) during the year.. 962,213 1,318,770 88,675 (138,303) 179,741 ----------- ----------- -------- ----------- ---------- Net increase (decrease) in assets from operations....... 1,953,310 1,644,155 101,756 42,109 225,959 ----------- ----------- -------- ----------- ---------- Changes from principal transactions: Transfer of net premiums............................... 4,231,922 1,057,600 87,138 91,593 144,241 Transfer on terminations............................... (6,483,566) (2,109,506) 45,385 (43,555) (23,061) Transfer on policy loans............................... 45,331 44,380 -- (189) (12,972) Net interfund transfers................................ 22,681,696 (736,594) 517,902 (1,365,388) 620,260 ----------- ----------- -------- ----------- ---------- Net increase (decrease) in assets from principal transactions................................ 20,475,383 (1,744,120) 650,425 (1,317,539) 728,468 ----------- ----------- -------- ----------- ---------- Total increase (decrease) in assets..................... 22,428,693 (99,965) 752,181 (1,275,430) 954,427 Assets beginning of year................................ 7,397,904 7,497,869 -- 1,275,430 321,003 ----------- ----------- -------- ----------- ---------- Assets end of year...................................... $29,826,597 $ 7,397,904 $752,181 $ -- $1,275,430 =========== =========== ======== =========== ==========
## Reflects the period from commencement of operations on May 3, 2004 through December 31, 2004. xx Terminated as an investment option and funds transferred to International Equity Index Fund on June 18, 2004. See accompanying notes. F-42 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY -- (CONTINUED)
SUB-ACCOUNT ------------------------------------------------------ INTERNATIONAL SMALL CAP TRUST INTERNATIONAL STOCK TRUST ---------------------------- ------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03 ----------- ---------- ----------- ----------- Income: Dividends.............................................. $ 5,349 $ -- $ 104,174 $ 53,315 Expenses: Mortality and expense risks, and administrative charges 24,521 16,757 61,516 56,500 ----------- ---------- ----------- ----------- Net investment income (loss) during the year............ (19,172) (16,757) 42,658 (3,185) Net realized gain (loss) during the year................ 849,587 (45,297) 597,300 (1,563,858) Unrealized appreciation (depreciation) during the year.. (88,192) 1,284,540 1,163,890 4,523,874 ----------- ---------- ----------- ----------- Net increase (decrease) in assets from operations....... 742,223 1,222,486 1,803,848 2,956,831 ----------- ---------- ----------- ----------- Changes from principal transactions: Transfer of net premiums............................... 703,685 239,758 1,212,570 1,231,742 Transfer on terminations............................... (1,232,239) (911,199) (2,209,945) (1,761,081) Transfer on policy loans............................... (3,762) (2,578) 54,950 25,019 Net interfund transfers................................ 1,125,617 (32,392) (41,676) (1,223,310) ----------- ---------- ----------- ----------- Net increase (decrease) in assets from principal transactions................................ 593,301 (706,411) (984,101) (1,727,630) ----------- ---------- ----------- ----------- Total increase (decrease) in assets..................... 1,335,524 516,075 819,747 1,229,201 Assets beginning of year................................ 3,409,121 2,893,046 12,549,025 11,319,824 ----------- ---------- ----------- ----------- Assets end of year...................................... $ 4,744,645 $3,409,121 $13,368,772 $12,549,025 =========== ========== =========== ===========
SUB-ACCOUNT ------------------------------------------- INTERNET INTERNATIONAL VALUE TRUST TECHNOLOGIES TRUST ------------------------ ------------------ YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/03^^ ---------- ---------- ------------------ Income: Dividends.............................................. $ 82,963 $ 20,561 $ -- Expenses: Mortality and expense risks, and administrative charges 33,467 16,662 128 ---------- ---------- --------- Net investment income (loss) during the year............ 49,496 3,899 (128) Net realized gain (loss) during the year................ 1,009,272 17,750 5,519 Unrealized appreciation (depreciation) during the year.. 188,729 1,138,503 3,653 ---------- ---------- --------- Net increase (decrease) in assets from operations....... 1,247,497 1,160,152 9,044 ---------- ---------- --------- Changes from principal transactions: Transfer of net premiums............................... 2,116,710 718,723 107,810 Transfer on terminations............................... (366,105) (855,609) (1,028) Transfer on policy loans............................... (36,098) (765) -- Net interfund transfers................................ (544,139) 2,779,470 (192,829) ---------- ---------- --------- Net increase (decrease) in assets from principal transactions................................ 1,170,368 2,641,819 (86,047) ---------- ---------- --------- Total increase (decrease) in assets..................... 2,417,865 3,801,971 (77,003) Assets beginning of year................................ 5,780,317 1,978,346 77,003 ---------- ---------- --------- Assets end of year...................................... $8,198,182 $5,780,317 $ -- ========== ========== =========
^^ Terminated as an investment option and funds transferred to Science & Technology Trust on May 2, 2003. See accompanying notes. F-43 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY -- (CONTINUED)
SUB-ACCOUNT ------------------------------------------------------ INVESTMENT QUALITY BOND TRUST LARGE CAP GROWTH TRUST ---------------------------- ------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03 ----------- ----------- ----------- ----------- Income: Dividends.............................................. $ 1,366,393 $ 1,391,377 $ 23,846 $ 18,064 Expenses: Mortality and expense risks, and administrative charges 146,253 162,838 43,751 37,618 ----------- ----------- ----------- ----------- Net investment income (loss) during the year............ 1,220,140 1,228,539 (19,905) (19,554) Net realized gain (loss) during the year................ 596,722 838,741 671,749 (1,139,465) Unrealized appreciation (depreciation) during the year.. (893,139) (290,689) (345,841) 2,498,052 ----------- ----------- ----------- ----------- Net increase (decrease) in assets from operations....... 923,723 1,776,591 306,003 1,339,033 ----------- ----------- ----------- ----------- Changes from principal transactions: Transfer of net premiums............................... 3,188,093 6,198,183 2,069,195 1,449,084 Transfer on terminations............................... (2,616,123) (8,156,887) (1,224,513) (3,534,941) Transfer on policy loans............................... 41,763 15,717 (4,664) 27,272 Net interfund transfers................................ (1,052,994) (4,115,386) (966,924) 220,780 ----------- ----------- ----------- ----------- Net increase (decrease) in assets from principal transactions................................ (439,261) (6,058,373) (126,906) (1,837,805) ----------- ----------- ----------- ----------- Total increase (decrease) in assets..................... 484,462 (4,281,782) 179,097 (498,772) Assets beginning of year................................ 22,161,364 26,443,146 7,142,200 7,640,972 ----------- ----------- ----------- ----------- Assets end of year...................................... $22,645,826 $22,161,364 $ 7,321,297 $ 7,142,200 =========== =========== =========== ===========
SUB-ACCOUNT ------------------------------------------------------- LARGE CAP VALUE TRUST LIFESTYLE AGGRESSIVE 1000 TRUST ----------------------- ------------------------------ YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03^ DEC. 31/04 DEC. 31/03 ---------- ------------ ---------- ---------- Income: Dividends.............................................. $ 14,149 $ 24,547 $ 35,968 $ 1,995 Expenses: Mortality and expense risks, and administrative charges 3,267 1,405 29,388 3,580 ---------- ---------- ---------- ---------- Net investment income (loss) during the year............ 10,882 23,142 6,580 (1,585) Net realized gain (loss) during the year................ 80,283 395 47,473 (34,549) Unrealized appreciation (depreciation) during the year.. 21,022 48,144 566,211 221,495 ---------- ---------- ---------- ---------- Net increase (decrease) in assets from operations....... 112,187 71,681 620,264 185,361 ---------- ---------- ---------- ---------- Changes from principal transactions: Transfer of net premiums............................... 113,792 390 497,754 128,629 Transfer on terminations............................... (146,556) (10,124) (55,157) (46,619) Transfer on policy loans............................... -- -- 594 2,445 Net interfund transfers................................ 33,531 1,261,000 2,991,538 356,308 ---------- ---------- ---------- ---------- Net increase (decrease) in assets from principal transactions................................ 767 1,251,266 3,434,729 440,763 ---------- ---------- ---------- ---------- Total increase (decrease) in assets..................... 112,954 1,322,947 4,054,993 626,124 Assets beginning of year................................ 1,322,947 -- 1,038,282 412,158 ---------- ---------- ---------- ---------- Assets end of year...................................... $1,435,901 $1,322,947 $5,093,275 $1,038,282 ========== ========== ========== ==========
^ Reflects the period from commencement of operations on May 5, 2003 through December 31, 2003. See accompanying notes. F-44 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY -- (CONTINUED)
SUB-ACCOUNT ------------------------------------------------------------ LIFESTYLE BALANCED 640 TRUST LIFESTYLE CONSERVATIVE 280 TRUST --------------------------- ------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03 ----------- ----------- ---------- ---------- Income: Dividends.............................................. $ 328,587 $ 242,423 $ 243,215 $ 158,079 Expenses: Mortality and expense risks, and administrative charges 96,243 63,840 35,051 27,789 ----------- ----------- ---------- ---------- Net investment income (loss) during the year............ 232,344 178,583 208,164 130,290 Net realized gain (loss) during the year................ 1,185,242 (14,109) 334,023 27,293 Unrealized appreciation (depreciation) during the year.. 672,696 2,159,197 (119,281) 307,943 ----------- ----------- ---------- ---------- Net increase (decrease) in assets from operations....... 2,090,282 2,323,671 422,906 465,526 ----------- ----------- ---------- ---------- Changes from principal transactions: Transfer of net premiums............................... 3,100,911 2,186,718 983,092 954,051 Transfer on terminations............................... (1,116,611) (678,814) (451,598) (265,373) Transfer on policy loans............................... 590 2,666 (54) -- Net interfund transfers................................ 165,265 2,161,820 (475,564) 472,902 ----------- ----------- ---------- ---------- Net increase (decrease) in assets from principal transactions................................ 2,150,155 3,672,390 55,876 1,161,580 ----------- ----------- ---------- ---------- Total increase (decrease) in assets..................... 4,240,437 5,996,061 478,782 1,627,106 Assets beginning of year................................ 13,798,701 7,802,640 5,025,582 3,398,476 ----------- ----------- ---------- ---------- Assets end of year...................................... $18,039,138 $13,798,701 $5,504,364 $5,025,582 =========== =========== ========== ==========
SUB-ACCOUNT ------------------------------------------------------ LIFESTYLE GROWTH 820 TRUST LIFESTYLE MODERATE 460 TRUST ------------------------- --------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03 ---------- ---------- ---------- ---------- Income: Dividends.............................................. $ 97,192 $ 20,359 $ 74,117 $ 35,860 Expenses: Mortality and expense risks, and administrative charges 42,944 11,977 15,603 7,817 ---------- ---------- ---------- ---------- Net investment income (loss) during the year............ 54,248 8,382 58,514 28,043 Net realized gain (loss) during the year................ 236,171 (96,705) 145,304 1,738 Unrealized appreciation (depreciation) during the year.. 596,713 622,363 104,246 189,081 ---------- ---------- ---------- ---------- Net increase (decrease) in assets from operations....... 887,132 534,040 308,064 218,862 ---------- ---------- ---------- ---------- Changes from principal transactions: Transfer of net premiums............................... 792,513 452,200 914,609 589,804 Transfer on terminations............................... (404,024) (113,989) (218,578) (115,931) Transfer on policy loans............................... (3,582) 40,089 14 (1,521) Net interfund transfers................................ 3,574,472 789,189 624,400 223,584 ---------- ---------- ---------- ---------- Net increase (decrease) in assets from principal transactions................................ 3,959,379 1,167,489 1,320,445 695,936 ---------- ---------- ---------- ---------- Total increase (decrease) in assets..................... 4,846,511 1,701,529 1,628,509 914,798 Assets beginning of year................................ 2,875,199 1,173,670 1,819,243 904,445 ---------- ---------- ---------- ---------- Assets end of year...................................... $7,721,710 $2,875,199 $3,447,752 $1,819,243 ========== ========== ========== ==========
See accompanying notes. F-45 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY -- (CONTINUED)
SUB-ACCOUNT ----------------------------------- MID CAP MID CAP CORE TRUST GROWTH TRUST ---------------------- ------------ YEAR ENDED PERIOD ENDED YEAR ENDED DEC. 31/04 DEC. 31/03^ DEC. 31/03# ---------- ------------ ------------ Income: Dividends.............................................. $ 2,449 $ -- $ -- Expenses: Mortality and expense risks, and administrative charges 2,811 170 888 --------- ------- --------- Net investment income (loss) during the year............ (362) (170) (888) Net realized gain (loss) during the year................ 29,124 2,138 16,629 Unrealized appreciation (depreciation) during the year.. 44,290 4,404 30,881 --------- ------- --------- Net increase (decrease) in assets from operations....... 73,052 6,372 46,622 --------- ------- --------- Changes from principal transactions: Transfer of net premiums............................... 241,312 1,648 87,818 Transfer on terminations............................... (153,727) (2,022) (9,500) Transfer on policy loans............................... 1 -- -- Net interfund transfers................................ 380,453 40,345 (469,770) --------- ------- --------- Net increase (decrease) in assets from principal transactions................................ 468,039 39,971 (391,452) --------- ------- --------- Total increase (decrease) in assets..................... 541,091 46,343 (344,830) Assets beginning of year................................ 46,343 -- 344,830 --------- ------- --------- Assets end of year...................................... $ 587,434 $46,343 $ -- ========= ======= =========
SUB-ACCOUNT ------------------------------------------ MID CAP MID CAP INDEX TRUST OPPORTUNITIES TRUST ---------------------- ------------------- YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/03# ---------- ---------- ------------------- Income: Dividends.............................................. $ 20,885 $ -- $ -- Expenses: Mortality and expense risks, and administrative charges 23,879 12,594 131 ---------- ---------- -------- Net investment income (loss) during the year............ (2,994) (12,594) (131) Net realized gain (loss) during the year................ 572,157 31,790 2,820 Unrealized appreciation (depreciation) during the year.. 255,962 654,807 2,954 ---------- ---------- -------- Net increase (decrease) in assets from operations....... 825,125 674,003 5,643 ---------- ---------- -------- Changes from principal transactions: Transfer of net premiums............................... 883,375 497,096 19,401 Transfer on terminations............................... (560,507) (734,782) (936) Transfer on policy loans............................... (130) (10,100) -- Net interfund transfers................................ 2,106,730 1,643,681 (96,089) ---------- ---------- -------- Net increase (decrease) in assets from principal transactions................................ 2,429,468 1,395,895 (77,624) ---------- ---------- -------- Total increase (decrease) in assets..................... 3,254,593 2,069,898 (71,981) Assets beginning of year................................ 3,729,877 1,659,979 71,981 ---------- ---------- -------- Assets end of year...................................... $6,984,470 $3,729,877 $ -- ========== ========== ========
# Terminated as an investment option and funds transferred to Dynamic Growth Trust on May 2, 2003. ^ Reflects the period from commencement of operations on May 5, 2003 through December 31, 2003. See accompanying notes. F-46 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY -- (CONTINUED)
SUB-ACCOUNT ------------------------------------------------ MID CAP STOCK TRUST MID CAP VALUE TRUST ----------------------- ----------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03 ----------- ---------- ----------- ---------- Income: Dividends.............................................. $ -- $ -- $ 50,792 $ 17,250 Expenses: Mortality and expense risks, and administrative charges 44,528 14,068 52,309 25,353 ----------- ---------- ----------- ---------- Net investment income (loss) during the year............ (44,528) (14,068) (1,517) (8,103) Net realized gain (loss) during the year................ 1,502,857 116,139 1,262,145 75,045 Unrealized appreciation (depreciation) during the year.. 401,043 754,718 1,027,584 1,106,386 ----------- ---------- ----------- ---------- Net increase (decrease) in assets from operations....... 1,859,372 856,789 2,288,212 1,173,328 ----------- ---------- ----------- ---------- Changes from principal transactions: Transfer of net premiums............................... 4,622,286 389,218 4,154,000 1,102,546 Transfer on terminations............................... (1,117,415) (765,037) (1,401,796) (851,098) Transfer on policy loans............................... (729) (37) 24,834 (29,157) Net interfund transfers................................ 5,828,863 3,402,231 2,046,385 685,344 ----------- ---------- ----------- ---------- Net increase (decrease) in assets from principal transactions................................ 9,333,005 3,026,375 4,823,423 907,635 ----------- ---------- ----------- ---------- Total increase (decrease) in assets..................... 11,192,377 3,883,164 7,111,635 2,080,963 Assets beginning of year................................ 5,169,749 1,286,585 6,473,940 4,392,977 ----------- ---------- ----------- ---------- Assets end of year...................................... $16,362,126 $5,169,749 $13,585,575 $6,473,940 =========== ========== =========== ==========
SUB-ACCOUNT --------------------------------------------------- MONEY MARKET TRUST NATURAL RESOURCES TRUST -------------------------- ----------------------- YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03^ ------------ ------------ ---------- ------------ Income: Dividends.............................................. $ 341,955 $ 240,857 $ 15,891 $ -- Expenses: Mortality and expense risks, and administrative charges 215,875 228,002 5,348 1,513 ------------ ------------ ---------- ---------- Net investment income (loss) during the year............ 126,080 12,855 10,543 (1,513) Net realized gain (loss) during the year................ -- -- 259,989 10,994 Unrealized appreciation (depreciation) during the year.. -- -- 13,369 197,060 ------------ ------------ ---------- ---------- Net increase (decrease) in assets from operations....... 126,080 12,855 283,901 206,541 ------------ ------------ ---------- ---------- Changes from principal transactions: Transfer of net premiums............................... 28,529,902 20,256,826 275,431 16,460 Transfer on terminations............................... (7,713,967) (11,945,035) (50,167) (4,618) Transfer on policy loans............................... (78,061) 14,487 -- -- Net interfund transfers................................ (19,391,094) (10,912,070) 337,104 899,181 ------------ ------------ ---------- ---------- Net increase (decrease) in assets from principal transactions................................ 1,346,780 (2,585,792) 562,368 911,023 ------------ ------------ ---------- ---------- Total increase (decrease) in assets..................... 1,472,860 (2,572,937) 846,269 1,117,564 Assets beginning of year................................ 38,888,983 41,461,920 1,117,564 -- ------------ ------------ ---------- ---------- Assets end of year...................................... $ 40,361,843 $ 38,888,983 $1,963,833 $1,117,564 ============ ============ ========== ==========
^ Reflects the period from commencement of operations on May 5, 2003 through December 31, 2003. See accompanying notes. F-47 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY -- (CONTINUED)
SUB-ACCOUNT ----------------------------------------------- OVERSEAS TRUST PACIFIC RIM TRUST ----------------------- ---------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03 ----------- ---------- ---------- ---------- Income: Dividends.............................................. $ 21,159 $ 17,518 $ 20,768 $ 6,609 Expenses: Mortality and expense risks, and administrative charges 33,125 22,247 29,895 21,704 ----------- ---------- ---------- ---------- Net investment income (loss) during the year............ (11,966) (4,729) (9,127) (15,095) Net realized gain (loss) during the year................ 1,033,768 (456,686) 536,710 (285,724) Unrealized appreciation (depreciation) during the year.. (445,818) 1,925,765 257,716 1,533,102 ----------- ---------- ---------- ---------- Net increase (decrease) in assets from operations....... 575,984 1,464,350 785,299 1,232,283 ----------- ---------- ---------- ---------- Changes from principal transactions: Transfer of net premiums............................... 1,245,662 553,899 617,822 430,123 Transfer on terminations............................... (1,498,451) (824,866) (905,314) (898,326) Transfer on policy loans............................... (779) (7,849) 51,175 (18,354) Net interfund transfers................................ 676,903 137,349 1,037,019 403,612 ----------- ---------- ---------- ---------- Net increase (decrease) in assets from principal transactions................................ 423,335 (141,467) 800,702 (82,945) ----------- ---------- ---------- ---------- Total increase (decrease) in assets..................... 999,319 1,322,883 1,586,001 1,149,338 Assets beginning of year................................ 5,016,704 3,693,821 4,250,322 3,100,984 ----------- ---------- ---------- ---------- Assets end of year...................................... $ 6,016,023 $5,016,704 $5,836,323 $4,250,322 =========== ========== ========== ==========
SUB-ACCOUNT ------------------------------------------------------------------ QUANTITATIVE ALL CAP TRUST QUANTITATIVE EQUITY TRUST QUANTITATIVE MID CAP TRUST ------------- ------------------------- ------------------------- PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04## DEC. 31/04XX DEC. 31/03 DEC. 31/04 DEC. 31/03 ------------- ------------ ----------- ---------- ---------- Income: Dividends.............................................. $ 35 $ 198,602 $ 138,084 $ -- $ -- Expenses: Mortality and expense risks, and administrative charges 7 43,130 129,789 2,073 325 -------- ------------ ----------- -------- -------- Net investment income (loss) during the year............ 28 155,472 8,295 (2,073) (325) Net realized gain (loss) during the year................ 229 (7,943,133) (3,570,094) 12,163 68 Unrealized appreciation (depreciation) during the year.. 128 7,725,161 7,685,455 42,800 16,509 -------- ------------ ----------- -------- -------- Net increase (decrease) in assets from operations....... 385 (62,500) 4,123,656 52,890 16,252 -------- ------------ ----------- -------- -------- Changes from principal transactions: Transfer of net premiums............................... 28,497 543,057 1,475,657 52,296 14,374 Transfer on terminations............................... (137) (1,119,875) (4,819,925) (41,619) (1,168) Transfer on policy loans............................... -- (16,546) 172,419 -- -- Net interfund transfers................................ (25,829) (20,123,033) (1,362,746) 175,614 117,607 -------- ------------ ----------- -------- -------- Net increase (decrease) in assets from principal transactions................................ 2,531 (20,716,397) (4,534,595) 186,291 130,813 -------- ------------ ----------- -------- -------- Total increase (decrease) in assets..................... 2,916 (20,778,897) (410,939) 239,181 147,065 Assets beginning of year................................ -- 20,778,897 21,189,836 155,204 8,139 -------- ------------ ----------- -------- -------- Assets end of year...................................... $ 2,916 $ -- $20,778,897 $394,385 $155,204 ======== ============ =========== ======== ========
## Reflects the period from commencement of operations on May 3, 2004 through December 31, 2004. xx Terminated as an investment option and funds transferred to U.S. Large Cap Trust on May 3, 2004. See accompanying notes. F-48 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY -- (CONTINUED)
SUB-ACCOUNT ---------------------------------------------------- REAL RETURN REAL ESTATE SECURITIES TRUST BOND TRUST --------------------------- ----------------------- YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03^ ----------- ----------- ---------- ------------ Income: Dividends.............................................. $ 685,716 $ 661,957 $ 22,216 $ -- Expenses: Mortality and expense risks, and administrative charges 165,197 131,925 5,297 997 ----------- ----------- ---------- -------- Net investment income (loss) during the year............ 520,519 530,032 16,919 (997) Net realized gain (loss) during the year................ 2,771,624 449,817 (20,665) (74,490) Unrealized appreciation (depreciation) during the year.. 5,105,174 6,210,400 67,108 2,601 ----------- ----------- ---------- -------- Net increase (decrease) in assets from operations....... 8,397,317 7,190,249 63,362 (72,886) ----------- ----------- ---------- -------- Changes from principal transactions: Transfer of net premiums............................... 4,537,256 2,228,246 212,754 54,956 Transfer on terminations............................... (2,562,745) (6,199,060) (202,894) (4,703) Transfer on policy loans............................... 13,292 52,040 -- -- Net interfund transfers................................ 3,708,238 (1,275,479) 1,434,946 99,296 ----------- ----------- ---------- -------- Net increase (decrease) in assets from principal transactions................................ 5,696,041 (5,194,253) 1,444,806 149,549 ----------- ----------- ---------- -------- Total increase (decrease) in assets..................... 14,093,358 1,995,996 1,508,168 76,663 Assets beginning of year................................ 24,344,448 22,348,452 76,663 -- ----------- ----------- ---------- -------- Assets end of year...................................... $38,437,806 $24,344,448 $1,584,831 $ 76,663 =========== =========== ========== ========
SUB-ACCOUNT ------------------------------------------------ SCIENCE & TECHNOLOGY TRUST SMALL CAP INDEX TRUST ------------------------ ---------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03 ----------- ----------- ---------- ---------- Income: Dividends.............................................. $ -- $ -- $ 15,158 $ -- Expenses: Mortality and expense risks, and administrative charges 126,572 113,576 23,199 11,128 ----------- ----------- ---------- ---------- Net investment income (loss) during the year............ (126,572) (113,576) (8,041) (11,128) Net realized gain (loss) during the year................ 3,685,252 (4,679,165) 211,250 262,856 Unrealized appreciation (depreciation) during the year.. (3,490,949) 13,048,189 540,967 530,917 ----------- ----------- ---------- ---------- Net increase (decrease) in assets from operations....... 67,731 8,255,448 744,176 782,645 ----------- ----------- ---------- ---------- Changes from principal transactions: Transfer of net premiums............................... 7,760,063 3,182,954 1,169,609 280,924 Transfer on terminations............................... (4,236,763) (6,903,537) (166,933) (807,915) Transfer on policy loans............................... (41,439) 16,197 (50,614) (10,257) Net interfund transfers................................ 518,941 2,750,132 3,211,715 (171,607) ----------- ----------- ---------- ---------- Net increase (decrease) in assets from principal transactions................................ 4,000,802 (954,254) 4,163,777 (708,855) ----------- ----------- ---------- ---------- Total increase (decrease) in assets..................... 4,068,533 7,301,194 4,907,953 73,790 Assets beginning of year................................ 26,154,570 18,853,376 2,159,093 2,085,303 ----------- ----------- ---------- ---------- Assets end of year...................................... $30,223,103 $26,154,570 $7,067,046 $2,159,093 =========== =========== ========== ==========
^ Reflects the period from commencement of operations on May 5, 2003 through December 31, 2003. See accompanying notes. F-49 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY -- (CONTINUED)
SUB-ACCOUNT -------------------------------------------------------------- SMALL CAP OPPORTUNITIES SMALL COMPANY TRUST TRUST SMALL COMPANY BLEND TRUST ----------------------- ------------- ----------------------- YEAR ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03^ DEC.31/04## DEC. 31/04 DEC. 31/03 ---------- ------------ ------------- ----------- ---------- Income: Dividends.............................................. $ 3,327 $ -- $-- $ -- $ -- Expenses: Mortality and expense risks, and administrative charges 3,140 562 -- 14,623 16,798 ---------- -------- --- ----------- ---------- Net investment income (loss) during the year............ 187 (562) -- (14,623) (16,798) Net realized gain (loss) during the year................ 113,023 2,490 6 476,929 93,382 Unrealized appreciation (depreciation) during the year.. 108,537 54,113 -- (381,573) 864,915 ---------- -------- --- ----------- ---------- Net increase (decrease) in assets from operations....... 221,747 56,041 6 80,733 941,499 ---------- -------- --- ----------- ---------- Changes from principal transactions: Transfer of net premiums............................... 127,192 38 -- 352,634 324,985 Transfer on terminations............................... (133,464) (2,168) (1) (676,647) (910,483) Transfer on policy loans............................... -- -- -- (50,127) (4,508) Net interfund transfers................................ 919,045 437,126 (5) (1,414,305) 627,411 ---------- -------- --- ----------- ---------- Net increase (decrease) in assets from principal transactions................................ 912,773 434,996 (6) (1,788,445) 37,405 ---------- -------- --- ----------- ---------- Total increase (decrease) in assets..................... 1,134,520 491,037 -- (1,707,712) 978,904 Assets beginning of year................................ 491,037 -- -- 3,332,298 2,353,394 ---------- -------- --- ----------- ---------- Assets end of year...................................... $1,625,557 $491,037 $-- $ 1,624,586 $3,332,298 ========== ======== === =========== ==========
SUB-ACCOUNT ------------------------------------------------ SMALL COMPANY VALUE TRUST SPECIAL VALUE TRUST ------------------------ ---------------------- YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03^ ----------- ----------- ---------- ------------ Income: Dividends.............................................. $ 232,040 $ 69,143 $ 3,020 $ -- Expenses: Mortality and expense risks, and administrative charges 94,855 65,205 839 120 ----------- ----------- -------- -------- Net investment income (loss) during the year............ 137,185 3,938 2,181 (120) Net realized gain (loss) during the year................ 2,282,749 1,063,081 2,877 4,496 Unrealized appreciation (depreciation) during the year.. 1,936,155 2,377,283 30,299 4,941 ----------- ----------- -------- -------- Net increase (decrease) in assets from operations....... 4,356,089 3,444,302 35,357 9,317 ----------- ----------- -------- -------- Changes from principal transactions: Transfer of net premiums............................... 4,890,637 2,089,466 35,513 3,834 Transfer on terminations............................... (1,900,460) (3,631,767) (4,252) (307) Transfer on policy loans............................... 11,035 (24,754) -- -- Net interfund transfers................................ 1,934,834 1,620,153 (7,234) 153,192 ----------- ----------- -------- -------- Net increase (decrease) in assets from principal transactions................................ 4,936,046 53,098 24,027 156,719 ----------- ----------- -------- -------- Total increase (decrease) in assets..................... 9,292,135 3,497,400 59,384 166,036 Assets beginning of year................................ 15,104,792 11,607,392 166,036 -- ----------- ----------- -------- -------- Assets end of year...................................... $24,396,927 $15,104,792 $225,420 $166,036 =========== =========== ======== ========
^ Reflects the period from commencement of operations on May 5, 2003 through December 31, 2003. ## Reflects the period from commencement of operations on May 3, 2004 through December 31, 2004. See accompanying notes. F-50 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY -- (CONTINUED)
SUB-ACCOUNT ---------------------------------------------------------------- STRATEGIC INCOME STRATEGIC BOND TRUST STRATEGIC GROWTH TRUST TRUST ----------------------- ---------------------- ---------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03 DEC.31/04## ---------- ----------- ---------- ---------- ---------------- Income: Dividends.............................................. $ 166,811 $ 241,276 $ -- $ -- $ 456 Expenses: Mortality and expense risks, and administrative charges 24,149 21,353 7,897 6,379 30 ---------- ----------- ---------- ---------- ------- Net investment income (loss) during the year............ 142,662 219,923 (7,897) (6,379) 426 Net realized gain (loss) during the year................ 60,033 240,936 219,720 71,825 6 Unrealized appreciation (depreciation) during the year.. 49,512 (3,352) (109,627) 229,165 320 ---------- ----------- ---------- ---------- ------- Net increase (decrease) in assets from operations....... 252,207 457,507 102,196 294,611 752 ---------- ----------- ---------- ---------- ------- Changes from principal transactions: Transfer of net premiums............................... 1,203,396 598,512 236,481 361,182 -- Transfer on terminations............................... (280,031) (2,396,508) (933,642) (119,311) (284) Transfer on policy loans............................... (3,858) (3,128) 100 (1,286) -- Net interfund transfers................................ 469,939 821,989 111,460 15,171 29,699 ---------- ----------- ---------- ---------- ------- Net increase (decrease) in assets from principal transactions................................ 1,389,446 (979,135) (585,601) 255,756 29,415 ---------- ----------- ---------- ---------- ------- Total increase (decrease) in assets..................... 1,641,653 (521,628) (483,405) 550,367 30,167 Assets beginning of year................................ 3,179,959 3,701,587 1,522,884 972,517 -- ---------- ----------- ---------- ---------- ------- Assets end of year...................................... $4,821,612 $ 3,179,959 $1,039,479 $1,522,884 $30,167 ========== =========== ========== ========== =======
SUB-ACCOUNT ----------------------------------------------------- STRATEGIC OPPORTUNITIES TRUST STRATEGIC VALUE TRUST ---------------------------- ----------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03 ----------- ----------- ----------- ---------- Income: Dividends.............................................. $ 4,691 $ -- $ 2,224 $ 54 Expenses: Mortality and expense risks, and administrative charges 31,607 40,333 4,362 3,453 ----------- ----------- ----------- ---------- Net investment income (loss) during the year............ (26,916) (40,333) (2,138) (3,399) Net realized gain (loss) during the year................ 54,973 (1,585,789) 268,135 (11,796) Unrealized appreciation (depreciation) during the year.. 540,794 3,153,829 (95,497) 222,087 ----------- ----------- ----------- ---------- Net increase (decrease) in assets from operations....... 568,851 1,527,707 170,500 206,892 ----------- ----------- ----------- ---------- Changes from principal transactions: Transfer of net premiums............................... 813,794 838,526 195,688 164,886 Transfer on terminations............................... (779,773) (2,337,833) (38,725) (31,000) Transfer on policy loans............................... 25,888 18,630 7,539 949 Net interfund transfers................................ (1,859,398) (1,292,218) (1,832,767) 1,722,162 ----------- ----------- ----------- ---------- Net increase (decrease) in assets from principal transactions................................ (1,799,489) (2,772,895) (1,668,265) 1,856,997 ----------- ----------- ----------- ---------- Total increase (decrease) in assets..................... (1,230,638) (1,245,188) (1,497,765) 2,063,889 Assets beginning of year................................ 5,962,880 7,208,068 2,330,657 266,768 ----------- ----------- ----------- ---------- Assets end of year...................................... $ 4,732,242 $ 5,962,880 $ 832,892 $2,330,657 =========== =========== =========== ==========
## Reflects the period from commencement of operations on May 3, 2004 through December 31, 2004. See accompanying notes. F-51 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY -- (CONTINUED)
SUB-ACCOUNT ------------------------------------------- TELECOMMUNICATIONS TRUST TOTAL RETURN TRUST ------------------ ------------------------ YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/03^^ DEC. 31/04 DEC. 31/03 ------------------ ----------- ----------- Income: Dividends.............................................. $ -- $ 1,747,512 $ 2,532,370 Expenses: Mortality and expense risks, and administrative charges 62 173,817 201,806 --------- ----------- ----------- Net investment income (loss) during the year............ (62) 1,573,695 2,330,564 Net realized gain (loss) during the year................ (3,358) (53,376) 311,416 Unrealized appreciation (depreciation) during the year.. 9,013 36,499 (855,374) --------- ----------- ----------- Net increase (decrease) in assets from operations....... 5,593 1,556,818 1,786,606 --------- ----------- ----------- Changes from principal transactions: Transfer of net premiums............................... 1,087 13,333,338 11,370,011 Transfer on terminations............................... (1,412) (3,157,466) (4,666,022) Transfer on policy loans............................... -- (1,095) (23,990) Net interfund transfers................................ (101,430) (980,814) (6,740,228) --------- ----------- ----------- Net increase (decrease) in assets from principal transactions................................ (101,755) 9,193,963 (60,229) --------- ----------- ----------- Total increase (decrease) in assets..................... (96,162) 10,750,781 1,726,377 Assets beginning of year................................ 96,162 38,643,292 36,916,915 --------- ----------- ----------- Assets end of year...................................... $ -- $49,394,073 $38,643,292 ========= =========== ===========
SUB-ACCOUNT ------------------------------------------------- TOTAL STOCK MARKET U.S. GOVERNMENT INDEX TRUST SECURITIES TRUST ----------------------- ------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03 ----------- ---------- ----------- ----------- Income: Dividends.............................................. $ 26,321 $ -- $ 235,364 $ 592,721 Expenses: Mortality and expense risks, and administrative charges 21,037 14,950 37,676 82,229 ----------- ---------- ----------- ----------- Net investment income (loss) during the year............ 5,284 (14,950) 197,688 510,492 Net realized gain (loss) during the year................ 441,641 157,008 (62,499) 32,960 Unrealized appreciation (depreciation) during the year.. (163,829) 529,222 29,793 (428,860) ----------- ---------- ----------- ----------- Net increase (decrease) in assets from operations....... 283,096 671,280 164,982 114,592 ----------- ---------- ----------- ----------- Changes from principal transactions: Transfer of net premiums............................... 739,392 996,099 2,316,495 5,091,881 Transfer on terminations............................... (618,492) (611,627) (1,509,148) (3,643,704) Transfer on policy loans............................... (313) (108) (1,876) (19,060) Net interfund transfers................................ (1,551,114) 1,266,868 (1,612,537) (8,718,791) ----------- ---------- ----------- ----------- Net increase (decrease) in assets from principal transactions................................ (1,430,527) 1,651,232 (807,066) (7,289,674) ----------- ---------- ----------- ----------- Total increase (decrease) in assets..................... (1,147,431) 2,322,512 (642,084) (7,175,082) Assets beginning of year................................ 3,719,559 1,397,047 8,887,862 16,062,944 ----------- ---------- ----------- ----------- Assets end of year...................................... $ 2,572,128 $3,719,559 $ 8,245,778 $ 8,887,862 =========== ========== =========== ===========
^^ Terminated as an investment option and funds transferred to Science & Technology Trust on May 2, 2003. See accompanying notes. F-52 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY -- (CONTINUED)
SUB-ACCOUNT --------------------------------------------- U.S. LARGE CAP TRUST UTILITIES TRUST ----------------------- -------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03 ----------- ---------- ---------- ---------- Income: Dividends.............................................. $ 14,756 $ 11,255 $ 1,176 $ 517 Expenses: Mortality and expense risks, and administrative charges 102,018 16,490 1,321 549 ----------- ---------- -------- -------- Net investment income (loss) during the year............ (87,262) (5,235) (145) (32) Net realized gain (loss) during the year................ 680,254 147 20,291 16,180 Unrealized appreciation (depreciation) during the year.. 1,272,633 909,318 54,611 10,622 ----------- ---------- -------- -------- Net increase (decrease) in assets from operations....... 1,865,625 904,230 74,757 26,770 ----------- ---------- -------- -------- Changes from principal transactions: Transfer of net premiums............................... 1,686,794 508,108 16,995 16,960 Transfer on terminations............................... (2,845,810) (741,038) (11,554) (10,969) Transfer on policy loans............................... 36,588 (10,980) (21,107) -- Net interfund transfers................................ 18,447,265 464,452 308,920 60,075 ----------- ---------- -------- -------- Net increase (decrease) in assets from principal transactions................................ 17,324,837 220,542 293,254 66,066 ----------- ---------- -------- -------- Total increase (decrease) in assets..................... 19,190,462 1,124,772 368,011 92,836 Assets beginning of year................................ 3,646,301 2,521,529 121,451 28,615 ----------- ---------- -------- -------- Assets end of year...................................... $22,836,763 $3,646,301 $489,462 $121,451 =========== ========== ======== ========
SUB-ACCOUNT ------------------------ VALUE TRUST TOTAL ------------------------ --------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/04 DEC. 31/03 ----------- ----------- ------------ ------------- Income: Dividends.............................................. $ 70,205 $ 102,883 $ 9,343,432 $ 9,759,041 Expenses: Mortality and expense risks, and administrative charges 73,832 51,322 3,256,647 2,900,219 ----------- ----------- ------------ ------------- Net investment income (loss) during the year............ (3,627) 51,561 6,086,785 6,858,822 Net realized gain (loss) during the year................ 2,389,598 (970,386) 25,595,639 (18,418,285) Unrealized appreciation (depreciation) during the year.. (156,787) 3,645,093 29,602,062 115,810,369 ----------- ----------- ------------ ------------- Net increase (decrease) in assets from operations....... 2,229,184 2,726,268 61,284,486 104,250,906 ----------- ----------- ------------ ------------- Changes from principal transactions: Transfer of net premiums............................... 6,364,526 1,158,162 146,386,789 99,703,509 Transfer on terminations............................... (1,959,091) (3,217,433) (88,708,576) (127,940,183) Transfer on policy loans............................... 4,581 (2,852) (76,529) 495,736 Net interfund transfers................................ 3,381,928 2,658,046 1,335,829 (1,135,070) ----------- ----------- ------------ ------------- Net increase (decrease) in assets from principal transactions................................ 7,791,944 595,923 58,937,513 (28,876,008) ----------- ----------- ------------ ------------- Total increase (decrease) in assets..................... 10,021,128 3,322,191 120,221,999 75,374,898 Assets beginning of year................................ 12,699,749 9,377,558 561,704,957 486,330,059 ----------- ----------- ------------ ------------- Assets end of year...................................... $22,720,877 $12,699,749 $681,926,956 $ 561,704,957 =========== =========== ============ =============
See accompanying notes. F-53 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 1. ORGANIZATION The Manufacturers Life Insurance Company (U.S.A.) Separate Account N (the "Account") is a separate account administered and sponsored by The Manufacturers Life Insurance Company (U.S.A.) ("ManUSA" or the "Company"). The Account operates as a Unit Investment Trust registered under the Investment Company Act of 1940, as amended (the "Act") and has sixty-six active investment sub-accounts that invest in shares of a particular Manufacturers Investment Trust portfolio, one sub-account that invests in shares of a particular John Hancock Variable Series 1 Trust portfolio and one sub-account that invests in shares of a particular PIMCO Variable Investment Trust portfolio. Manufacturers Investment Trust, John Hancock Variable Series I Trust and PIMCO Variable Investment Trust (collectively the "Trusts") are registered under the Act as open-end management investment companies, commonly known as mutual funds, which do not transact with the general public. Instead, the Trusts deal primarily with insurance companies by providing the investment medium for variable contracts. The Account is a funding vehicle for the allocation of net premiums under variable universal life insurance contracts (the "Contracts") issued by the Company. The Company is a stock life insurance company incorporated under the laws of Michigan in 1979. The Company is a wholly owned subsidiary of Manulife Financial Corporation ("MFC"), a Canadian based publicly traded life insurance company. The Company is required to maintain assets in the Account with a total fair value at least equal to the reserves and other liabilities relating to the variable benefits under all Contracts participating in the Account. These assets may not be charged with liabilities which arise from any other business the Company conducts. However, all obligations under the Contracts are general corporate obligations of the Company. Additional assets are held in the Company's general account to cover the contingency that the guaranteed minimum death benefit might exceed the death benefit which would have been payable in the absence of such guarantee. As the result of portfolio changes, the following sub-accounts of the Account were renamed as follows: PREVIOUS NAME NEW NAME EFFECTIVE DATE ------------- -------- -------------- Capital Opportunities Trust Strategic Value Trust May 1, 2003 Global Equity Trust Global Trust May 3, 2004 Pacific Rim Emerging Markets Trust Pacific Rim Trust May 3, 2004 Tactical Allocation Trust Global Allocation Trust May 1, 2003 U.S. Large Cap Value Trust U.S. Large Cap Trust May 1, 2003 Effective May 3, 2004 the following sub-accounts of the Account were terminated as investment options and the funds were transferred to existing sub-account funds as follows: TERMINATED FUNDS TRANSFERRED TO ---------- -------------------- Balanced Trust Income & Value Trust Quantitative Equity Trust U.S. Large Cap Trust Effective June 18, 2004 the following sub-account of the Account was terminated as an investment option and the funds were transferred to an existing sub-account fund as follows: TERMINATED FUNDS TRANSFERRED TO ---------- -------------------- International Index Trust International Equity Index Fund F-54 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 1. ORGANIZATION -- (CONTINUED) Effective May 2, 2003 the following sub-accounts of the Account were terminated as investment options and the funds were transferred to existing sub-account funds as follows: TERMINATED FUNDS TRANSFERRED TO ---------- -------------------- Internet Technologies Science & Technology Trust Trust Mid Cap Growth Trust Dynamic Growth Trust Mid Cap Opportunities Trust Dynamic Growth Trust Telecommunications Trust Science & Technology Trust The following sub-accounts of the Account were added as investment options for variable universal life insurance contract holders of the Company:
COMMENCEMENT OF OPERATIONS OF THE SUB-ACCOUNTS ----------------- All Asset Portfolio........................ May 3, 2004 American Blue Chip Income & Growth Trust... July 9, 2003 American Growth Trust...................... July 9, 2003 American Growth-Income Trust............... July 9, 2003 American International Trust............... July 9, 2003 Classic Value Trust(less than)............. May 3, 2004 Core Equity Trust(less than)............... May 3, 2004 Emerging Growth Trust...................... May 5, 2003 International Equity Index Fund............ May 3, 2004 Large Cap Value Trust...................... May 5, 2003 Mid Cap Core Trust......................... May 5, 2003 Natural Resources Trust.................... May 5, 2003 Quantitative All Cap Trust................. May 5, 2003 Quantitative Value Trust(less than)........ May 3, 2004 Real Return Bond Trust..................... May 5, 2003 Small Cap Opportunities Trust.............. May 5, 2003 Small Company Trust........................ May 3, 2004 Special Value Trust........................ May 5, 2003 Strategic Income Trust..................... May 3, 2004 U.S. Global Leaders Growth Trust(less than) May 3, 2004
(less than) Fund available in current year but no activity. 2. SIGNIFICANT ACCOUNTING POLICIES Investments of each sub-account consist of shares in the respective portfolios of the Trust. These shares are carried at fair value which is calculated using the fair value of the investment securities underlying each Trust portfolio. Transactions are recorded on the trade date. Income from dividends is recorded on the ex-dividend date. Realized gains and losses on the sale of investments are computed on the basis of the specifically identified cost of the investment sold. In addition to the Account, a contract holder may also allocate funds to the fixed account contained within the Company's general account. Because of exemptive and exclusionary provisions, interests in the fixed account have not been registered under the Securities Act of 1933 and the Company's general account has not been registered as an investment company under the Act. Net interfund transfers include interfund transfers between separate and general accounts. F-55 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) The operations of the Account are included in the federal income tax return of the Company, which is taxed as a life insurance company under the provisions of the Internal Revenue Code (the "Code"). Under the current provisions of the Code, the Company does not expect to incur federal income taxes on the earnings of the Account to the extent the earnings are credited under the Contracts. Based on this, no charge is being made currently to the Account for federal income taxes. The Company will periodically reassess this position taking into account changes in the tax law. Such a charge may be made in future years for any federal income taxes that would be attributable to the Contracts. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported herein. Actual results could differ from those estimates. 3. MORTALITY AND EXPENSE RISKS CHARGE The Company deducts from the assets of the Account a daily charge equivalent to annual rates between 0.40% and 0.65% of the average net value of the Account's assets for the assumption of mortality and expense risks. 4. CONTRACT CHARGES The Company deducts certain charges from gross premiums before placing the remaining net premiums in the sub-account. In the event of a surrender by the contract holder, surrender charges may be levied by the Company against the contract value at the time of termination to cover sales and administrative expenses associated with underwriting and issuing the Contract. Additionally, each month a deduction consisting of an administration charge, a charge for cost of insurance and charges for supplementary benefits is deducted from the contract value. Contract charges are paid through the redemption of sub-account units and are reflected as terminations. 5. PURCHASES AND SALES The cost of purchases and proceeds from sales of investments for the year ended December 31, 2004 were as follows:
SUB-ACCOUNTS: PURCHASES SALES ------------- ----------- ----------- 500 Index Trust......................... $ 7,707,113 $ 6,609,744 Aggressive Growth Trust................. 5,172,959 4,805,015 All Asset Portfolio..................... 79,153 930 All Cap Core Trust...................... 2,303,494 4,407,102 All Cap Growth Trust.................... 4,767,345 5,651,337 All Cap Value Trust..................... 1,921,255 1,026,753 American Blue Chip Income & Growth Trust 349,471 222,209 American Growth Trust................... 8,544,244 2,657,156 American Growth-Income Trust............ 3,319,455 1,721,310 American International Trust............ 1,591,940 181,642 Balanced Trust.......................... 1,902,076 23,845,844 Blue Chip Growth Trust.................. 17,401,340 22,520,218 Capital Appreciation Trust.............. 642,443 1,002,790 Diversified Bond Trust.................. 4,764,045 4,861,327
F-56 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 5. PURCHASES AND SALES -- (CONTINUED)
SUB-ACCOUNTS: PURCHASES SALES ------------- ----------- ----------- Dynamic Growth Trust............ $ 2,880,157 $ 3,017,883 Emerging Growth Trust........... 468,334 625,836 Emerging Small Company Trust.... 13,650,177 19,414,714 Equity-Income Trust............. 23,601,953 17,967,371 Equity Index Trust.............. 11,284,801 11,799,159 Financial Services Trust........ 511,929 615,499 Fundamental Value Trust......... 2,676,262 1,721,822 Global Trust.................... 3,000,110 2,419,242 Global Allocation Trust......... 681,567 538,904 Global Bond Trust............... 4,327,218 3,743,184 Growth & Income Trust........... 8,406,962 11,444,978 Health Sciences Trust........... 4,418,881 3,871,951 High Yield Trust................ 9,641,643 8,400,469 Income & Value Trust............ 33,576,039 13,113,287 International Equity Index Fund. 1,339,642 688,211 International Index Trust....... 342,572 1,653,447 International Small Cap Trust... 4,672,116 4,097,987 International Stock Trust....... 4,011,839 4,953,282 International Value Trust....... 6,964,602 5,744,737 Investment Quality Bond Trust... 13,885,537 13,104,659 Large Cap Growth Trust.......... 7,179,883 7,326,695 Large Cap Value Trust........... 2,762,565 2,750,915 Lifestyle Aggressive 1000 Trust. 5,202,536 1,761,228 Lifestyle Balanced 640 Trust.... 11,634,510 9,252,010 Lifestyle Conservative 280 Trust 5,648,370 5,384,331 Lifestyle Growth 820 Trust...... 6,184,631 2,171,004 Lifestyle Moderate 460 Trust.... 3,246,059 1,867,098 Mid Cap Core Trust.............. 974,892 507,216 Mid Cap Index Trust............. 6,996,415 4,569,942 Mid Cap Stock Trust............. 21,908,916 12,620,439 Mid Cap Value Trust............. 10,693,410 5,871,504 Money Market Trust.............. 42,734,704 41,261,845 Natural Resources Trust......... 2,138,962 1,566,052 Overseas Trust.................. 5,054,697 4,643,327 Pacific Rim Trust............... 4,486,560 3,694,987 Quantitative All Cap Trust...... 28,544 25,985 Quantitative Equity Trust....... 2,948,416 23,509,340 Quantitative Mid Cap Trust...... 461,966 277,749 Real Estate Securities Trust.... 20,019,941 13,803,380 Real Return Bond Trust.......... 3,569,454 2,107,730 Science & Technology Trust...... 27,645,445 23,771,216 Small Cap Index Trust........... 8,174,202 4,018,466 Small Cap Opportunities Trust... 1,909,681 996,721
F-57 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 5. PURCHASES AND SALES -- (CONTINUED)
SUB-ACCOUNTS: PURCHASES SALES ------------- ------------ ------------ Small Company Trust............. $ 245 $ 251 Small Company Blend Trust....... 1,214,358 3,017,426 Small Company Value Trust....... 16,377,723 11,304,491 Special Value Trust............. 56,917 30,709 Strategic Bond Trust............ 5,716,082 4,183,975 Strategic Growth Trust.......... 1,152,319 1,745,816 Strategic Income Trust.......... 30,155 313 Strategic Opportunities Trust... 3,295,029 5,121,432 Strategic Value Trust........... 829,865 2,500,268 Total Return Trust.............. 47,478,149 36,710,491 Total Stock Market Index Trust.. 4,167,831 5,593,074 U.S. Government Securities Trust 9,621,505 10,230,881 U.S. Large Cap Trust............ 24,790,674 7,553,099 Utilities Trust................. 598,566 305,457 Value Trust..................... 25,135,528 17,347,211 ------------ ------------ $552,878,379 $487,854,073 ============ ============
6. FINANCIAL HIGHLIGHTS The Account is a funding vehicle for a number of variable universal life insurance products which have unique combinations of features and fees that are charged against the contract owner's account balance. Differences in the fee structures result in a variety of unit values, expense ratios and total returns. The following table was developed by determining which products offered by the Company have the lowest and highest total return. Only product designs within each sub-account that had units outstanding during the period were considered when determining the lowest and highest total return. The summary may not reflect the minimum and maximum mortality and expense risk charge offered by the Company as contract owners may not have selected all available and applicable contract options as discussed in note 3.
SUB-ACCOUNT -------------------------------------------------------------------------- 500 INDEX TRUST -------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 --------------- ---------------- -------------------- -------------------- Units, beginning of year............. 575,198 375,317 94,218 22,035 Units issued......................... 773,654 501,063 688,915 86,705 Units redeemed....................... (659,394) (301,182) (407,816) (14,522) --------------- ---------------- -------------------- -------------------- Units, end of year................... 689,458 575,198 375,317 94,218 =============== ================ ==================== ==================== Unit value, end of year.............. $10.51 - $10.72 $9.59 - $9.72 $7.54 - $7.61 $9.80 - $9.85 Assets, end of year.................. $7,356,251 $5,572,911 $2,849,500 $925,055 Investment income ratio/(1)/......... 0.81% 0.79% 0.00% 1.51% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 9.54% to 10.05% 27.19% to 27.69% (23.02%) to (22.71%) (12.93%) to (12.71%)
F-58 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT -------------------------------------------------------------------------- AGGRESSIVE GROWTH TRUST -------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 --------------- ---------------- -------------------- -------------------- Units, beginning of year............. 387,460 417,367 388,103 290,154 Units issued......................... 399,144 321,514 416,070 253,473 Units redeemed....................... (363,344) (351,421) (386,806) (155,524) --------------- ---------------- -------------------- -------------------- Units, end of year................... 423,260 387,460 417,367 388,103 =============== ================ ==================== ==================== Unit value, end of year.............. $16.05 - $16.24 $10.75 - $14.90 $8.07 - $11.16 $10.82 - $14.91 Assets, end of year.................. $5,785,540 $4,974,158 $4,062,865 $5,113,597 Investment income ratio/(1)/......... 0.00% 0.00% 0.00% 0.00% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.45% to 0.65% 0.55% to 0.65% Total return, lowest to highest/(3)/. 8.55% to 8.88% 33.00% to 33.34% (25.45%) to (25.30%) (26.46%) to (26.39%)
SUB-ACCOUNT ------------------- ALL ASSET PORTFOLIO ------------------- PERIOD ENDED DEC. 31/04## ------------------- Units, beginning of year............. -- Units issued......................... 5,623 Units redeemed....................... (65) ------- Units, end of year................... 5,558 ======= Unit value, end of year.............. $ 13.94 Assets, end of year.................. $77,490 Investment income ratio/(1)/......... 17.85% Expense ratio, lowest to highest/(2)/ 0.65% Total return, lowest to highest/(3)/. 11.53%
## Reflects the period from commencement of operations on May 3, 2004 through December 31, 2004. F-59 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT --------------------------------------------------------------------------- ALL CAP CORE TRUST --------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- -------------------- Units, beginning of year............ 384,083 632,910 955,887 901,341 Units issued........................ 162,081 396,838 744,586 586,549 Units redeemed...................... (353,320) (645,665) (1,067,563) (532,003) ---------------- ---------------- -------------------- -------------------- Units, end of year.................. 192,844 384,083 632,910 955,887 ================ ================ ==================== ==================== Unit value, end of year............. $8.72 - $16.04 $7.54 - $13.81 $5.76 - $10.54 $7.75 - $14.12 Assets, end of year................. $3,006,912 $4,650,328 $5,895,402 $12,500,179 Investment income ratio/(1)/........ 0.50% 0.00% 0.00% 0.00% Expense ratio, lowest to highest/(2)/...................... 0.35% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.55% to 0.65% Total return, lowest to highest/(3)/ 15.57% to 15.92% 30.71% to 31.02% (25.72%) to (25.57%) (21.88%) to (21.80%)
SUB-ACCOUNT ------------------------------------------------------------------------- ALL CAP GROWTH TRUST ------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 -------------- ---------------- -------------------- -------------------- Units, beginning of year............. 507,091 602,095 604,579 371,985 Units issued......................... 266,106 472,429 510,835 493,095 Units redeemed....................... (360,129) (567,433) (513,319) (260,501) -------------- ---------------- -------------------- -------------------- Units, end of year................... 413,068 507,091 602,095 604,579 ============== ================ ==================== ==================== Unit value, end of year.............. $9.94 - $19.31 $9.38 - $18.16 $7.30 - $14.11 $9.71 - $18.73 Assets, end of year.................. $7,837,329 $8,204,194 $7,785,855 $10,184,673 Investment income ratio/(1)/......... 0.00% 0.00% 0.00% 0.00% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.45% to 0.65% 0.45% to 0.65% Total return, lowest to highest/(3)/. 5.83% to 6.14% 28.40% to 28.72% (24.90%) to (24.75%) (24.27%) to (24.11%)
F-60 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT ------------------------------------------------------------------- ALL CAP VALUE TRUST ------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01* ---------------- ---------------- -------------------- ------------ Units, beginning of year............. 42,078 19,759 1,194 -- Units issued......................... 149,430 48,939 83,130 1,531 Units redeemed....................... (80,131) (26,620) (64,565) (337) ---------------- ---------------- -------------------- ------- Units, end of year................... 111,377 42,078 19,759 1,194 ================ ================ ==================== ======= Unit value, end of year.............. $14.26 - $14.42 $12.38 - $12.44 $9.00 - $9.03 $12.56 Assets, end of year.................. $1,596,891 $520,935 $177,909 $14,993 Investment income ratio/(1)/......... 0.33% 0.04% 0.01% 0.03% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.45% to 0.65% 0.45% to 0.65% 0.65% Total return, lowest to highest/(3)/. 15.20% to 15.55% 37.47% to 37.75% (28.30%) to (28.16%) 0.46%
* Reflects the period from commencement of operations on May 1, 2001 through December 31, 2001.
SUB-ACCOUNT -------------------------------- AMERICAN BLUE CHIP INCOME & GROWTH TRUST -------------------------------- YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03+ --------------- ---------------- Units, beginning of year............. 14,497 -- Units issued......................... 24,431 14,889 Units redeemed....................... (15,363) (392) --------------- ---------------- Units, end of year................... 23,565 14,497 =============== ================ Unit value, end of year.............. $15.38 - $15.44 $14.17 - $14.18 Assets, end of year.................. $362,839 $205,368 Investment income ratio/(1)/......... 0.00% 0.00% Expense ratio, lowest to highest/(2)/ 0.40% to 0.65% 0.45% to 0.65% Total return, lowest to highest/(3)/. 8.61% to 8.87% 13.32% to 13.43%
+ Reflects the period from commencement of operations on July 9, 2003 through December 31, 2003. F-61 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT --------------------------------- AMERICAN GROWTH TRUST --------------------------------- YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03+ ---------------- ---------------- Units, beginning of year............. 106,170 -- Units issued......................... 615,014 107,375 Units redeemed....................... (186,720) (1,205) ---------------- ---------------- Units, end of year................... 534,464 106,170 ================ ================ Unit value, end of year.............. $15.42 - $15.49 $13.84 - $13.86 Assets, end of year.................. $8,261,844 $1,470,676 Investment income ratio/(1)/......... 0.00% 0.00% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 11.38% to 11.71% 10.75% to 10.88%
+ Reflects the period from commencement of operations on July 9, 2003 through December 31, 2003.
SUB-ACCOUNT ---------------------------- AMERICAN GROWTH-INCOME TRUST ---------------------------- YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03+ --------------- ------------ Units, beginning of year............. 3,474 -- Units issued......................... 230,255 3,561 Units redeemed....................... (118,758) (87) --------------- ------- Units, end of year................... 114,971 3,474 =============== ======= Unit value, end of year.............. $15.41 - $15.47 $14.10 Assets, end of year.................. $1,775,824 $48,990 Investment income ratio/(1)/......... 0.30% 0.00% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.65% Total return, lowest to highest/(3)/. 9.24% to 9.57% 12.82%
+ Reflects the period from commencement of operations on July 9, 2003 through December 31, 2003. F-62 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT ---------------------------------- AMERICAN INTERNATIONAL TRUST ---------------------------------- YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03+ ---------------- ---------------- Units, beginning of year............. 7,859 -- Units issued......................... 98,310 8,484 Units redeemed....................... (11,181) (625) ---------------- ---------------- Units, end of year................... 94,988 7,859 ================ ================ Unit value, end of year.............. $17.88 - $17.96 $15.14 - $15.15 Assets, end of year.................. $1,702,860 $118,979 Investment income ratio/(1)/......... 0.43% 0.00% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.45% to 0.65% Total return, lowest to highest/(3)/. 18.11% to 18.47% 21.11% to 21.22%
+ Reflects the period from commencement of operations on July 9, 2003 through December 31, 2003.
SUB-ACCOUNT ----------------------------------------------------------------------------- BALANCED TRUST ----------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04X DEC. 31/03 DEC. 31/02 DEC. 31/01 ------------------ ---------------- -------------------- -------------------- Units, beginning of year............. 888,396 1,065,668 1,197,589 1,380,133 Units issued......................... 53,657 102,294 172,364 171,891 Units redeemed....................... (942,053) (279,566) (304,285) (354,435) ------------------ ---------------- -------------------- -------------------- Units, end of year................... -- 888,396 1,065,668 1,197,589 ================== ================ ==================== ==================== Unit value, end of year.............. $9.48 - $25.58 $9.54 - $25.73 $8.39 - $22.60 $9.85 - $26.49 Assets, end of year.................. $-- $22,530,978 $23,887,858 $31,589,231 Investment income ratio/(1)/......... 2.40% 2.51% 2.55% 2.30% Expense ratio, lowest to highest/(2)/ 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. (0.64%) to (0.55%) 13.56% to 13.84% (14.92%) to (14.70%) (10.78%) to (10.55%)
x Terminated as an investment option and funds transferred to Income & Value Trust on May 3, 2004. F-63 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT -------------------------------------------------------------------------- BLUE CHIP GROWTH TRUST -------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 --------------- ---------------- -------------------- -------------------- Units, beginning of year............. 2,092,515 1,902,374 1,996,442 1,789,836 Units issued......................... 958,632 1,470,531 2,117,890 1,329,733 Units redeemed....................... (1,383,294) (1,280,390) (2,211,958) (1,123,127) --------------- ---------------- -------------------- -------------------- Units, end of year................... 1,667,853 2,092,515 1,902,374 1,996,442 =============== ================ ==================== ==================== Unit value, end of year.............. $11.12 - $20.96 $10.25 - $19.26 $7.98 - $14.97 $10.60 - $19.85 Assets, end of year.................. $32,373,276 $34,818,639 $26,370,964 $36,203,915 Investment income ratio/(1)/......... 0.11% 0.04% 0.00% 0.00% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 8.33% to 8.65% 28.33% to 28.65% (24.75%) to (24.56%) (15.16%) to (14.95%) SUB-ACCOUNT -------------------------------------------------------------------------- CAPITAL APPRECIATION TRUST -------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01* --------------- ---------------- -------------------- -------------------- Units, beginning of year............. 126,280 25,173 3,341 -- Units issued......................... 65,459 111,005 67,713 3,401 Units redeemed....................... (99,894) (9,898) (45,881) (60) --------------- ---------------- -------------------- -------------------- Units, end of year................... 91,845 126,280 25,173 3,341 =============== ================ ==================== ==================== Unit value, end of year.............. $10.64 - $10.75 $9.80 - $9.85 $7.62 - $7.64 $11.05 Assets, end of year.................. $982,755 $1,240,907 $192,338 $36,920 Investment income ratio/(1)/......... 0.00% 0.00% 0.00% 0.00% Expense ratio, lowest to highest/(2)/ 0.40% to 0.65% 0.45% to 0.65% 0.45% to 0.65% 0.65% Total return, lowest to highest/(3)/. 8.61% to 8.88% 28.62% to 28.88% (31.07%) to (30.93%) (11.60%)
* Reflects the period from commencement of operations on May 1, 2001 through December 31, 2001. F-64 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT -------------------------------------------------------------------------- DIVERSIFIED BOND TRUST -------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 --------------- ---------------- -------------------- -------------------- Units, beginning of year............. 475,744 489,585 507,459 264,580 Units issued......................... 265,904 449,319 1,003,740 513,683 Units redeemed....................... (291,024) (463,160) (1,021,614) (270,804) --------------- ---------------- -------------------- -------------------- Units, end of year................... 450,624 475,744 489,585 507,459 =============== ================ ==================== ==================== Unit value, end of year.............. $16.66 - $17.25 $16.13 - $16.64 $15.51 - $15.95 $14.49 - $14.89 Assets, end of year.................. $7,709,761 $7,848,156 $7,777,651 $7,354,939 Investment income ratio/(1)/......... 4.27% 5.26% 3.61% 3.26% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.45% to 0.65% 0.45% to 0.65% Total return, lowest to highest/(3)/. 3.18% to 3.48% 3.93% to 4.19% 6.90% to 7.12% 6.38% to 6.61% SUB-ACCOUNT -------------------------------------------------------------------------- DYNAMIC GROWTH TRUST -------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 --------------- ---------------- -------------------- -------------------- Units, beginning of year............. 577,167 217,363 102,477 34,003 Units issued......................... 670,334 707,581 235,862 352,426 Units redeemed....................... (702,537) (347,777) (120,976) (283,952) --------------- ---------------- -------------------- -------------------- Units, end of year................... 544,964 577,167 217,363 102,477 =============== ================ ==================== ==================== Unit value, end of year.............. $4.70 - $4.77 $4.30 - $4.34 $3.36 - $3.37 $4.72 - $4.73 Assets, end of year.................. $2,585,369 $2,493,791 $730,822 $483,613 Investment income ratio/(1)/......... 0.00% 0.00% 0.00% 0.28% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.45% to 0.65% 0.55% to 0.65% Total return, lowest to highest/(3)/. 9.29% to 9.62 28.17% to 28.60% (28.83%) to (28.63%) (40.63%) to (40.57%)
F-65 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT -------------------------------- EMERGING GROWTH TRUST -------------------------------- YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03^ --------------- ---------------- Units, beginning of year............. 13,715 -- Units issued......................... 27,399 15,745 Units redeemed....................... (37,573) (2,030) --------------- ---------------- Units, end of year................... 3,541 13,715 =============== ================ Unit value, end of year.............. $17.29 - $17.35 $16.29 - $16.31 Assets, end of year.................. $61,397 $223,380 Investment income ratio/(1)/......... 0.00% 0.00% Expense ratio, lowest to highest/(2)/ 0.45% to 0.65% 0.45% to 0.65% Total return, lowest to highest/(3)/. 6.20% to 6.41% 30.28% to 30.45%
^ Reflects the period from commencement of operations on May 5, 2003 through December 31, 2003.
SUB-ACCOUNT --------------------------------------------------------------------------- EMERGING SMALL COMPANY TRUST --------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- -------------------- Units, beginning of year............. 911,363 1,056,757 1,065,694 840,091 Units issued......................... 273,287 380,894 544,611 525,737 Units redeemed....................... (497,248) (526,288) (553,548) (300,134) ---------------- ---------------- -------------------- -------------------- Units, end of year................... 687,402 911,363 1,056,757 1,065,694 ================ ================ ==================== ==================== Unit value, end of year.............. $12.69 - $86.85 $11.44 - $78.03 $8.23 - $56.84 $11.69 - $79.51 Net assets, end of year.............. $50,607,293 $51,002,629 $41,741,461 $63,138,723 Investment income ratio/(1)/......... 0.00% 0.00% 0.00% 0.00% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 10.80% to 11.13% 38.83% to 39.17% (29.66%) to (29.49%) (22.75%) to (22.55%)
F-66 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT --------------------------------------------------------------------------- EQUITY-INCOME TRUST --------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- -------------------- Units, beginning of year............. 1,460,643 1,339,589 840,766 431,687 Units issued......................... 1,139,513 1,036,965 1,689,347 687,162 Units redeemed....................... (953,918) (915,911) (1,190,524) (278,083) ---------------- ---------------- -------------------- -------------------- Units, end of year................... 1,646,238 1,460,643 1,339,589 840,766 ================ ================ ==================== ==================== Unit value, end of year.............. $16.60 - $22.75 $14.54 - $19.85 $11.64 - $15.87 $13.50 - $18.38 Assets, end of year.................. $36,760,871 $27,301,230 $20,927,060 $15,189,718 Investment income ratio/(1)/......... 1.22% 1.44% 1.22% 1.42% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 14.06% to 14.41% 24.76% to 25.07% (13.84%) to (13.63%) 0.63% to 0.89% SUB-ACCOUNT --------------------------------------------------------------------------- EQUITY INDEX TRUST --------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- -------------------- Units, beginning of year............. 1,545,993 1,769,922 2,189,228 1,984,054 Units issued......................... 673,240 954,968 2,193,979 1,366,361 Units redeemed....................... (684,864) (1,178,897) (2,613,285) (1,161,187) ---------------- ---------------- -------------------- -------------------- Units, end of year................... 1,534,369 1,545,993 1,769,922 2,189,228 ================ ================ ==================== ==================== Unit value, end of year.............. $11.03 - $19.67 $10.04 - $18.06 $7.87 - $14.13 $10.18 - $18.26 Assets, end of year.................. $27,164,917 $25,622,009 $23,452,969 $38,066,462 Investment income ratio/(1)/......... 1.28% 1.52% 1.16% 1.00% Expense ratio, lowest to highest/(2)/ 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 9.76% to 10.03% 27.46% to 27.78% (22.81%) to (22.61%) (12.83%) to (12.61%)
F-67 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT ------------------------------------------------------------------ FINANCIAL SERVICES TRUST ------------------------------------------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01* --------------- ---------------- -------------------- ------------ Units, beginning of year............. 31,948 33,067 8,377 -- Units issued......................... 39,967 13,233 42,607 8,668 Units redeemed....................... (48,578) (14,352) (17,917) (291) --------------- ---------------- -------------------- ------- Units, end of year................... 23,337 31,948 33,067 8,377 =============== ================ ==================== ======= Unit value, end of year.............. $13.75 - $13.85 $12.54 - $12.61 $9.45 - $9.48 $11.58 Assets, end of year.................. $322,026 $401,985 $313,108 $97,034 Investment income ratio/(1)/......... 0.37% 0.17% 0.00% 0.05% Expense ratio, lowest to highest/(2)/ 0.45% to 0.65% 0.45% to 0.65% 0.45% to 0.65% 0.65% Total return, lowest to highest/(3)/. 9.66% to 9.87% 32.71% to 32.98% (18.41%) to (18.25%) (7.34%)
* Reflects the period from commencement of operations on May 1, 2001 through December 31, 2001.
SUB-ACCOUNT ------------------------------------------------------------------- FUNDAMENTAL VALUE TRUST ------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01* ---------------- ---------------- -------------------- ------------ Units, beginning of year............. 93,865 33,158 21,338 -- Units issued......................... 205,077 173,788 35,752 22,014 Units redeemed....................... (130,546) (113,081) (23,932) (676) ---------------- ---------------- -------------------- -------- Units, end of year................... 168,396 93,865 33,158 21,338 ================ ================ ==================== ======== Unit value, end of year.............. $13.93 - $14.08 $12.54 - $12.61 $9.72 - $9.75 $11.68 Assets, end of year.................. $2,356,047 $1,179,257 $322,506 $249,216 Investment income ratio/(1)/......... 0.48% 0.18% 0.09% 0.00% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.45% to 0.65% 0.45% to 0.65% 0.65% Total return, lowest to highest/(3)/. 11.08% to 11.42% 28.99% to 29.25% (16.75%) to (16.58%) (6.57%)
* Reflects the period from commencement of operations on May 1, 2001 through December 31, 2001. F-68 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT --------------------------------------------------------------------------- GLOBAL TRUST --------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- -------------------- Units, beginning of year............. 220,709 272,877 206,811 192,970 Units issued......................... 178,596 315,226 360,226 133,113 Units redeemed....................... (172,542) (367,394) (294,160) (119,272) ---------------- ---------------- -------------------- -------------------- Units, end of year................... 226,763 220,709 272,877 206,811 ================ ================ ==================== ==================== Unit value, end of year.............. $13.72 - $18.20 $12.02 - $15.89 $9.48 - $12.52 $11.79 - $15.50 Assets, end of year.................. $4,088,754 $3,119,936 $3,166,722 $3,140,867 Investment income ratio/(1)/......... 1.76% 1.19% 1.15% 2.22% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.45% to 0.65% 0.55% to 0.65% Total return, lowest to highest/(3)/. 14.01% to 14.35% 26.63% to 26.95% (19.63%) to (19.47%) (16.63%) to (16.55%) SUB-ACCOUNT --------------------------------------------------------------------------- GLOBAL ALLOCATION TRUST --------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- -------------------- Units, beginning of year............. 3,613 3,195 7,967 -- Units issued......................... 66,928 844 23,360 18,137 Units redeemed....................... (52,774) (426) (28,132) (10,170) ---------------- ---------------- -------------------- -------------------- Units, end of year................... 17,767 3,613 3,195 7,967 ================ ================ ==================== ==================== Unit value, end of year.............. $11.13 - $11.22 $9.94 $7.91 - $7.94 $10.37 Net assets, end of year.............. $197,769 $35,900 $25,278 $82,609 Investment income ratio/(1)/......... 0.40% 0.48% 0.00% 0.26% Expense ratio, lowest to highest/(2)/ 0.45% to 0.65% 0.65% 0.45% to 0.65% 0.65% Total return, lowest to highest/(3)/. 11.99% to 12.25% 25.61% (23.70%) to (23.55%) (13.95%)
F-69 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT -------------------------------------------------------------------------- GLOBAL BOND TRUST -------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 --------------- ---------------- -------------------- -------------------- Units, beginning of year............. 196,659 297,639 118,128 30,310 Units issued......................... 233,486 389,164 348,049 113,867 Units redeemed....................... (212,013) (490,144) (168,538) (26,049) --------------- ---------------- -------------------- -------------------- Units, end of year................... 218,132 196,659 297,639 118,128 =============== ================ ==================== ==================== Unit value, end of year.............. $18.71 - $19.96 $17.06 - $18.14 $14.87 - $15.77 $12.45 - $13.16 Assets, end of year.................. $4,323,117 $3,463,203 $4,596,803 $1,549,796 Investment income ratio/(1)/......... 3.41% 4.35% 0.00% 0.00% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.45% to 0.65% 0.55% to 0.65% Total return, lowest to highest/(3)/. 9.53% to 9.85% 14.65% to 14.94% 19.35% to 19.59% (0.12%) to (0.03%) SUB-ACCOUNT -------------------------------------------------------------------------- GROWTH & INCOME TRUST -------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 --------------- ---------------- -------------------- -------------------- Units, beginning of year............. 1,151,229 1,592,866 1,605,126 1,309,646 Units issued......................... 471,319 695,451 1,400,088 974,279 Units redeemed....................... (722,747) (1,137,088) (1,412,348) (678,799) --------------- ---------------- -------------------- -------------------- Units, end of year................... 899,801 1,151,229 1,592,866 1,605,126 =============== ================ ==================== ==================== Unit value, end of year.............. $10.50 - $18.89 $9.89 - $17.73 $7.86 - $14.06 $10.44 - $18.66 Assets, end of year.................. $16,191,548 $18,310,286 $19,158,844 $26,826,511 Investment income ratio/(1)/......... 0.85% 1.02% 0.63% 0.41% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 6.08% to 6.39% 25.77% to 26.09% (24.82%) to (24.63%) (11.85%) to (11.63%)
F-70 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT ------------------------------------------------------------------- HEALTH SCIENCES TRUST ------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01* ---------------- ---------------- -------------------- ------------ Units, beginning of year............. 195,742 185,557 11,197 -- Units issued......................... 312,678 257,208 260,559 15,145 Units redeemed....................... (279,604) (247,023) (86,199) (3,948) ---------------- ---------------- -------------------- -------- Units, end of year................... 228,816 195,742 185,557 11,197 ================ ================ ==================== ======== Unit value, end of year.............. $15.11 - $15.28 $13.19 - $13.28 $9.75 - $9.78 $13.48 Assets, end of year.................. $3,480,512 $2,590,184 $1,810,992 $150,957 Investment income ratio/(1)/......... 0.00% 0.00% 0.00% 0.00% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.45% to 0.65% 0.65% Total return, lowest to highest/(3)/. 14.57% to 14.91% 35.33% to 35.68% (27.71%) to (27.57%) (7.85%)
* Reflects the period from commencement of operations on May 1, 2001 through December 31, 2001.
SUB-ACCOUNT ----------------------------------------------------------------------- HIGH YIELD TRUST ----------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- ------------------ ------------------ Units, beginning of year............. 699,961 536,644 395,816 298,325 Units issued......................... 615,089 565,735 687,272 403,067 Units redeemed....................... (567,692) (402,418) (546,444) (305,576) ---------------- ---------------- ------------------ ------------------ Units, end of year................... 747,358 699,961 536,644 395,816 ================ ================ ================== ================== Unit value, end of year.............. $13.69 - $16.40 $12.40 - $14.80 $10.02 - $11.94 $10.82 - $12.87 Assets, end of year.................. $11,862,447 $9,989,519 $6,211,875 $4,979,952 Investment income ratio/(1)/......... 4.99% 4.84% 7.65% 8.80% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 10.34% to 10.68% 23.65% to 23.94% (7.48%) to (7.23%) (6.09%) to (5.85%)
F-71 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT --------------------------------------------------------------------- INCOME & VALUE TRUST --------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 --------------- ---------------- -------------------- --------------- Units, beginning of year............. 465,991 605,848 649,395 399,769 Units issued......................... 2,010,940 357,985 747,671 426,269 Units redeemed....................... (797,206) (497,842) (791,218) (176,643) --------------- ---------------- -------------------- --------------- Units, end of year................... 1,679,725 465,991 605,848 649,395 =============== ================ ==================== =============== Unit value, end of year.............. $14.94 - $18.01 $13.95 - $16.73 $11.09 - $13.28 $13.27 - $15.86 Assets, end of year.................. $29,826,597 $7,397,904 $7,497,869 $9,857,366 Investment income ratio/(1)/......... 0.53% 1.90% 2.11% 2.36% Expense ratio, lowest to highest/(2)/ 0.30% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 6.94% to 7.33% 25.66% to 25.98% (16.48%) to (16.27%) 0.33% to 0.58%
SUB-ACCOUNT -------------------- INTERNATIONAL EQUITY INDEX FUND -------------------- PERIOD ENDED DEC. 31/04## -------------------- Units, beginning of year............. -- Units issued......................... 103,970 Units redeemed....................... (52,958) ---------------- Units, end of year................... 51,012 ================ Unit value, end of year.............. $14.74 - $14.77 Assets, end of year.................. $752,181 Investment income ratio/(1)/......... 0.58% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% Total return, lowest to highest/(3)/. 17.94% to 18.17%
## Reflects the period from commencement of operations on May 3, 2004 through December 31, 2004. F-72 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT ------------------------------------------------------------------------- INTERNATIONAL INDEX TRUST ------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04(GREATER THAN) DEC. 31/03 DEC. 31/02 DEC. 31/01 ------------------------ ---------------- -------------------- ---------- Units, beginning of year............. 136,084 45,074 22,786 3,964 Units issued......................... 34,759 180,935 40,213 74,324 Units redeemed....................... (170,843) (89,925) (17,925) (55,502) -------------- ---------------- -------------------- -------- Units, end of year................... -- 136,084 45,074 22,786 ============== ================ ==================== ======== Unit value, end of year.............. $9.65 - $9.73 $9.35 - $9.42 $7.12 - $7.15 $8.65 Assets, end of year.................. $0 $1,275,430 $321,003 $197,118 Investment income ratio/(1)/......... 1.00% 2.67% 1.93% 1.22% Expense ratio, lowest to highest/(2)/ 0.40% to 0.65% 0.40% to 0.65% 0.45% to 0.65% 0.65% Total return, lowest to highest/(3)/. 3.14% to 3.26% 31.34% to 31.68% (17.69%) to (17.51%) (22.91%)
(greater than) Terminated as an investment option and funds transferred to John Hancock VST International Equity Index Fund on June 18, 2004.
SUB-ACCOUNT --------------------------------------------------------------------------- INTERNATIONAL SMALL CAP TRUST --------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- -------------------- Units, beginning of year............. 261,096 345,552 215,989 241,469 Units issued......................... 297,698 143,552 344,659 183,007 Units redeemed....................... (304,434) (228,008) (215,096) (208,487) ---------------- ---------------- -------------------- -------------------- Units, end of year................... 254,360 261,096 345,552 215,989 ================ ================ ==================== ==================== Unit value, end of year.............. $11.88 - $19.17 $9.86 - $15.86 $6.40 - $10.28 $7.73 - $12.36 Assets, end of year.................. $4,744,645 $3,409,121 $2,893,046 $2,355,865 Investment income ratio/(1)/......... 0.12% 0.00% 0.00% 0.00% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.45% to 0.65% 0.55% to 0.65% Total return, lowest to highest/(3)/. 20.28% to 20.64% 53.94% to 54.34% (17.27%) to (17.10%) (31.55%) to (31.48%)
F-73 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT --------------------------------------------------------------------------- INTERNATIONAL STOCK TRUST --------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- -------------------- Units, beginning of year............. 1,106,364 1,306,287 1,135,448 1,217,912 Units issued......................... 334,186 431,223 1,749,658 987,073 Units redeemed....................... (423,854) (631,146) (1,578,819) (1,069,537) ---------------- ---------------- -------------------- -------------------- Units, end of year................... 1,016,696 1,106,364 1,306,287 1,135,448 ================ ================ ==================== ==================== Unit value, end of year.............. $10.69 - $13.23 $9.30 - $11.47 $7.18 - $8.84 $9.22 - $11.33 Assets, end of year.................. $13,368,772 $12,549,025 $11,319,824 $12,791,612 Investment income ratio/(1)/......... 0.84% 0.49% 0.45% 0.21% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 14.84% to 15.19% 29.43% to 29.75% (22.19%) to (22.00%) (22.05%) to (21.85%) SUB-ACCOUNT --------------------------------------------------------------------------- INTERNATIONAL VALUE TRUST --------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- -------------------- Units, beginning of year............. 451,530 225,236 200,221 153,410 Units issued......................... 510,926 488,195 349,940 124,451 Units redeemed....................... (427,964) (261,901) (324,925) (77,640) ---------------- ---------------- -------------------- -------------------- Units, end of year................... 534,492 451,530 225,236 200,221 ================ ================ ==================== ==================== Unit value, end of year.............. $15.24 - $15.83 $12.62 - $13.09 $8.77 - $9.09 $10.74 - $11.12 Assets, end of year.................. $8,198,182 $5,780,317 $1,978,346 $2,154,783 Investment income ratio/(1)/......... 1.28% 0.67% 0.71% 1.05% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 20.75% to 21.12% 43.91% to 44.28% (18.38%) to (18.16%) (10.56%) to (10.33%)
F-74 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED) SUB-ACCOUNT -------------------------------------------------------------------------- INVESTMENT QUALITY BOND TRUST -------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 --------------- ---------------- -------------------- -------------------- Units, beginning of year............. 1,159,780 1,475,664 1,255,012 1,052,039 Units issued......................... 645,968 984,315 631,277 706,642 Units redeemed....................... (673,703) (1,300,199) (410,625) (503,669) --------------- ---------------- -------------------- -------------------- Units, end of year................... 1,132,045 1,159,780 1,475,664 1,255,012 =============== ================ ==================== ==================== Unit value, end of year.............. $17.50 - $20.28 $16.79 - $19.39 $15.73 - $18.14 $14.38 - $16.56 Assets, end of year.................. $22,645,826 $22,161,364 $26,443,146 $20,633,935 Investment income ratio/(1)/......... 5.96% 5.40% 5.06% 5.69% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 4.13% to 4.45% 6.63% to 6.89% 9.22% to 9.50% 6.63% to 6.90% SUB-ACCOUNT -------------------------------------------------------------------------- LARGE CAP GROWTH TRUST -------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 --------------- ---------------- -------------------- -------------------- Units, beginning of year............. 621,936 797,344 583,261 457,838 Units issued......................... 613,074 486,197 655,691 435,680 Units redeemed....................... (673,398) (661,605) (441,608) (310,257) --------------- ---------------- -------------------- -------------------- Units, end of year................... 561,612 621,936 797,344 583,261 =============== ================ ==================== ==================== Unit value, end of year.............. $9.49 - $13.42 $8.99 - $12.67 $7.21 - $10.15 $9.39 - $13.17 Assets, end of year.................. $7,321,297 $7,142,200 $7,640,972 $7,423,884 Investment income ratio/(1)/......... 0.29% 0.28% 0.32% 0.00% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 5.49% to 5.80% 24.51% to 24.82% (23.33%) to (23.14%) (18.35%) to (18.14%)
F-75 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT --------------------------------- LARGE CAP VALUE TRUST --------------------------------- YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03^ ---------------- ---------------- Units, beginning of year............. 83,191 -- Units issued......................... 156,448 83,839 Units redeemed....................... (165,209) (648) ---------------- ---------------- Units, end of year................... 74,430 83,191 ================ ================ Unit value, end of year.............. $19.23 - $19.32 $15.89 - $15.91 Assets, end of year.................. $1,435,901 $1,322,947 Investment income ratio/(1)/......... 1.43% 0.00% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 21.02% to 21.38% 27.11% to 27.32%
^ Reflects the period from commencement of operations on May 5, 2003 through December 31, 2003.
SUB-ACCOUNT ----------------------------------------------------------------- LIFESTYLE AGGRESSIVE 1000 TRUST ----------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- ---------- Units, beginning of year............. 73,758 38,262 47,093 42,247 Units issued......................... 350,315 46,257 10,408 30,690 Units redeemed....................... (118,458) (10,761) (19,239) (25,844) ---------------- ---------------- -------------------- -------- Units, end of year................... 305,615 73,758 38,262 47,093 ================ ================ ==================== ======== Unit value, end of year.............. $13.31 - $16.86 $11.53 - $14.53 $8.60 - $10.82 $13.68 Assets, end of year.................. $5,093,275 $1,038,282 $412,158 $644,205 Investment income ratio/(1)/......... 0.78% 0.35% 0.81% 4.05% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.45% to 0.65% 0.45% to 0.65% 0.65% Total return, lowest to highest/(3)/. 15.30% to 15.66% 34.04% to 34.31% (21.23%) to (21.06%) (14.23%)
F-76 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT ------------------------------------------------------------------------- LIFESTYLE BALANCED 640 TRUST ------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- ------------------ Units, beginning of year............. 805,068 549,847 385,225 231,860 Units issued......................... 639,365 354,757 502,066 269,321 Units redeemed....................... (530,313) (99,536) (337,444) (115,956) ---------------- ---------------- -------------------- ------------------ Units, end of year................... 914,120 805,068 549,847 385,225 ================ ================ ==================== ================== Unit value, end of year.............. $15.62 - $19.96 $13.84 - $17.62 $11.22 - $14.27 $12.53 - $15.90 Assets, end of year.................. $18,039,138 $13,798,701 $7,802,640 $6,058,824 Investment income ratio/(1)/......... 2.05% 2.30% 3.49% 4.97% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.45% to 0.65% Total return, lowest to highest/(3)/. 12.75% to 13.09% 23.17% to 23.48% (10.53%) to (10.32%) (5.40%) to (5.21%) SUB-ACCOUNT ------------------------------------------------------------------------- LIFESTYLE CONSERVATIVE 280 TRUST ------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- ------------------ Units, beginning of year............. 268,987 198,190 220,989 17,741 Units issued......................... 280,449 176,092 177,049 223,911 Units redeemed....................... (280,489) (105,295) (199,848) (20,663) ---------------- ---------------- -------------------- ------------------ Units, end of year................... 268,947 268,987 198,190 220,989 ================ ================ ==================== ================== Unit value, end of year.............. $16.74 - $20.76 $15.50 - $19.16 $13.97 - $17.22 $13.81 - $16.98 Assets, end of year.................. $5,504,364 $5,025,582 $3,398,476 $3,748,192 Investment income ratio/(1)/......... 3.76% 3.54% 3.26% 1.32% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.45% to 0.65% 0.55% to 0.65% Total return, lowest to highest/(3)/. 7.88% to 8.21% 10.83% to 11.10% 1.06% to 1.26% 2.56% to 2.66%
F-77 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT ------------------------------------------------------------------------- LIFESTYLE GROWTH 820 TRUST ------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- ------------------ Units, beginning of year............. 178,824 93,184 87,349 91,321 Units issued......................... 368,911 120,911 76,636 52,084 Units redeemed....................... (130,127) (35,271) (70,801) (56,056) ---------------- ---------------- -------------------- ------------------ Units, end of year................... 417,608 178,824 93,184 87,349 ================ ================ ==================== ================== Unit value, end of year.............. $14.28 - $18.71 $12.53 - $16.33 $9.73 - $12.66 $11.62 - $15.11 Assets, end of year.................. $7,721,710 $2,875,199 $1,173,670 $1,316,120 Investment income ratio/(1)/......... 1.39% 1.02% 2.04% 5.20% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.45% to 0.65% 0.45% to 0.65% 0.45% to 0.65% Total return, lowest to highest/(3)/. 13.85% to 14.19% 28.70% to 28.97% (16.39%) to (16.22%) (9.63%) to (9.44%) SUB-ACCOUNT ------------------------------------------------------------------------- LIFESTYLE MODERATE 460 TRUST ------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- ------------------ Units, beginning of year............. 105,262 58,209 53,694 19,785 Units issued......................... 170,447 136,503 41,924 90,551 Units redeemed....................... (104,939) (89,450) (37,409) (56,642) ---------------- ---------------- -------------------- ------------------ Units, end of year................... 170,770 105,262 58,209 53,694 ================ ================ ==================== ================== Unit value, end of year.............. $16.03 - $20.45 $14.51 - $18.45 $12.39 - $15.71 $12.98 - $16.41 Assets, end of year.................. $3,447,752 $1,819,243 $904,445 $817,107 Investment income ratio/(1)/......... 2.62% 2.75% 2.98% 6.33% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.45% to 0.65% 0.55% to 0.65% Total return, lowest to highest/(3)/. 10.32% to 10.65% 17.06% to 17.35% (4.66%) to (4.47%) (1.74%) to (1.63%)
F-78 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT --------------------------------- MID CAP CORE TRUST --------------------------------- YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03^ ---------------- ---------------- Units, beginning of year............. 3,038 -- Units issued......................... 61,571 5,520 Units redeemed....................... (30,766) (2,482) ---------------- ---------------- Units, end of year................... 33,843 3,038 ================ ================ Unit value, end of year.............. $17.33 - $17.40 $15.26 - $15.27 Assets, end of year.................. $587,434 $46,343 Investment income ratio/(1)/......... 0.00% 0.00% Expense ratio, lowest to highest/(2)/ 0.40% to 0.65% 0.45% to 0.65% Total return, lowest to highest/(3)/. 13.57% to 13.85% 22.04% to 22.19%
^ Reflects the period from commencement of operations on May 5, 2003 through December 31, 2003.
SUB-ACCOUNT ------------------------------------------------------------------------- MID CAP INDEX TRUST ------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- ------------------ Units, beginning of year............. 253,416 151,140 80,845 18,407 Units issued......................... 459,051 275,299 140,757 94,158 Units redeemed....................... (301,447) (173,023) (70,462) (31,720) ---------------- ---------------- -------------------- ------------------ Units, end of year................... 411,020 253,416 151,140 80,845 ================ ================ ==================== ================== Unit value, end of year.............. $16.88 - $17.09 $14.67 - $14.78 $10.97 - $11.02 $13.02 - $13.04 Assets, end of year.................. $6,984,470 $3,729,877 $1,659,979 $1,052,814 Investment income ratio/(1)/......... 0.34% 0.00% 0.67% 1.68% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.45% to 0.65% 0.55% to 0.65% Total return, lowest to highest/(3)/. 15.08% to 15.43% 33.70% to 34.03% (15.71%) to (15.54%) (2.38%) to (2.27%)
F-79 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT --------------------------------------------------------------------------- MID CAP STOCK TRUST --------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- -------------------- Units, beginning of year............. 439,064 157,865 72,047 31,783 Units issued......................... 1,709,693 463,180 226,721 68,876 Units redeemed....................... (957,543) (181,981) (140,903) (28,612) ---------------- ---------------- -------------------- -------------------- Units, end of year................... 1,191,214 439,064 157,865 72,047 ================ ================ ==================== ==================== Unit value, end of year.............. $13.62 - $14.44 $11.52 - $12.20 $8.14 - $8.62 $10.59 - $11.19 Assets, end of year.................. $16,362,126 $5,169,749 $1,286,585 $762,884 Investment income ratio/(1)/......... 0.00% 0.00% 0.00% 0.00% Expense ratio, lowest to highest/(2)/ 0.30% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.55% to 0.65% Total return, lowest to highest/(3)/. 18.26% to 18.68% 41.41% to 41.76% (23.07%) to (22.87%) (11.57%) to (11.48%) SUB-ACCOUNT --------------------------------------------------------------------------- MID CAP VALUE TRUST --------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01* ---------------- ---------------- -------------------- -------------------- Units, beginning of year............. 445,032 376,737 10,285 -- Units issued......................... 675,227 383,482 701,062 10,527 Units redeemed....................... (366,758) (315,187) (334,610) (242) ---------------- ---------------- -------------------- -------------------- Units, end of year................... 753,501 445,032 376,737 10,285 ================ ================ ==================== ==================== Unit value, end of year.............. $17.93 - $18.12 $14.50 - $14.59 $11.64 - $11.68 $13.03 Assets, end of year.................. $13,585,575 $6,473,940 $4,392,977 $134,052 Investment income ratio/(1)/......... 0.49% 0.36% 0.00% 0.37% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.45% to 0.65% 0.65% Total return, lowest to highest/(3)/. 23.65% to 24.03% 24.54% to 24.86% (10.68%) to (10.51%) 4.27%
* Reflects the period from commencement of operations on May 1, 2001 through December 31, 2001. F-80 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT ---------------------------------------------------------------- MONEY MARKET TRUST ---------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 --------------- ---------------- --------------- --------------- Units, beginning of year............. 2,120,159 2,245,118 2,216,771 2,375,556 Units issued......................... 2,342,246 2,995,349 3,641,306 2,060,563 Units redeemed....................... (2,288,200) (3,120,308) (3,612,959) (2,219,348) --------------- ---------------- --------------- --------------- Units, end of year................... 2,174,205 2,120,159 2,245,118 2,216,771 =============== ================ =============== =============== Unit value, end of year.............. $13.75 - $19.21 $13.71 - $19.09 $13.71 - $19.06 $13.63 - $18.91 Assets, end of year.................. $40,361,843 $38,888,983 $41,461,920 $40,817,893 Investment income ratio/(1)/......... 0.81% 0.58% 1.18% 3.59% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 0.15% to 0.46% (0.07%) to 0.17% 0.53% to 0.77% 2.91% to 3.17%
SUB-ACCOUNT --------------------------------- NATURAL RESOURCES TRUST --------------------------------- YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03^ ---------------- ---------------- Units, beginning of year............. 62,308 -- Units issued......................... 108,859 66,429 Units redeemed....................... (82,809) (4,121) ---------------- ---------------- Units, end of year................... 88,358 62,308 ================ ================ Unit value, end of year.............. $22.14 - $22.24 $17.92 - $17.95 Assets, end of year.................. $1,963,833 $1,117,564 Investment income ratio/(1)/......... 0.07% 0.00% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 23.51% to 23.88% 43.39% to 43.63%
^ Reflects the period from commencement of operations on May 5, 2003 through December 31, 2003. F-81 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT --------------------------------------------------------------------------- OVERSEAS TRUST --------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- -------------------- Units, beginning of year............. 434,997 460,570 296,994 223,097 Units issued......................... 401,096 344,726 324,701 249,901 Units redeemed....................... (391,902) (370,299) (161,125) (176,004) ---------------- ---------------- -------------------- -------------------- Units, end of year................... 444,191 434,997 460,570 296,994 ================ ================ ==================== ==================== Unit value, end of year.............. $11.33 - $14.79 $10.19 - $13.26 $7.13 - $9.24 $9.12 - $11.80 Assets, end of year.................. $6,016,023 $5,016,704 $3,693,821 $3,057,649 Investment income ratio/(1)/......... 0.37% 0.46% 0.52% 0.27% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.45% to 0.65% 0.55% to 0.65% Total return, lowest to highest/(3)/. 11.07% to 11.40% 42.90% to 43.25% (21.95%) to (21.79%) (21.61%) to (21.53%) SUB-ACCOUNT --------------------------------------------------------------------------- PACIFIC RIM TRUST --------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- -------------------- Units, beginning of year............. 487,239 500,442 569,972 595,097 Units issued......................... 502,648 494,143 429,620 343,573 Units redeemed....................... (397,342) (507,346) (499,150) (368,698) ---------------- ---------------- -------------------- -------------------- Units, end of year................... 592,545 487,239 500,442 569,972 ================ ================ ==================== ==================== Unit value, end of year.............. $9.79 - $9.91 $8.43 - $10.32 $6.03 - $7.38 $6.94 - $8.48 Assets, end of year.................. $5,836,323 $4,250,322 $3,100,984 $3,999,341 Investment income ratio/(1)/......... 0.65% 0.19% 0.12% 0.41% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.45% to 0.65% 0.55% to 0.65% Total return, lowest to highest/(3)/. 16.14% to 16.50% 39.81% to 40.16% (13.09%) to (12.92%) (19.10%) to (19.03%)
F-82 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT ---------------- QUANTITATIVE ALL CAP TRUST ---------------- PERIOD ENDED DEC. 31/04## ---------------- Units, beginning of year.......... -- Units issued...................... 1,784 Units redeemed.................... (1,620) ---------------- Units, end of year................ 164 ================ Unit value, end of year........... $17.69 - $17.75 Assets, end of year............... $2,916 Investment income ratio*.......... 1.30% Expense ratio, lowest to highest** 0.45% to 0.65% Total return, lowest to highest*** 14.16% to 14.39%
## Reflects the period from commencement of operations on May 3, 2004 through December 31, 2004.
SUB-ACCOUNT -------------------------------------------------------------------------------- QUANTITATIVE EQUITY TRUST -------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04(LESS THAN) DEC. 31/03 DEC. 31/02 DEC. 31/01 --------------------- ---------------- -------------------- -------------------- Units, beginning of year............. 538,573 704,257 707,953 718,538 Units issued......................... 61,041 184,033 243,025 126,527 Units redeemed....................... (599,614) (349,717) (246,721) (137,112) ------------------ ---------------- -------------------- -------------------- Units, end of year................... -- 538,573 704,257 707,953 ================== ================ ==================== ==================== Unit value, end of year.............. $9.30 - $45.01 $9.34 - $45.17 $7.60 - $36.67 $10.59 - $51.01 Assets, end of year.................. $-- $20,778,897 $21,189,836 $33,132,109 Investment income ratio/(1)/......... 0.99% 0.68% 0.30% 0.29% Expense ratio, lowest to highest/(2)/ 0.40% to 0.65% 0.40% to 0.65% 0.45% to 0.65% 0.45% to 0.65% Total return, lowest to highest/(3)/. (0.45%) to (0.37%) 22.75% to 23.06% (28.25%) to (28.11%) (23.45%) to (23.30%)
(less than) Terminated as an investment option and funds transferred to U.S. Large Cap Trust on May 3, 2004. F-83 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT ------------------------------------------------------ QUANTITATIVE MID CAP TRUST ------------------------------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02++ ---------------- ---------------- -------------------- Units, beginning of year............. 14,437 1,039 -- Units issued......................... 41,021 27,939 6,248 Units redeemed....................... (24,255) (14,541) (5,209) ---------------- ---------------- -------------------- Units, end of year................... 31,203 14,437 1,039 ================ ================ ==================== Unit value, end of year.............. $12.62 - $12.71 $10.74 - $10.80 $7.80 - $7.83 Assets, end of year.................. $394,385 $155,204 $8,139 Investment income ratio/(1)/......... 0.00% 0.00% 0.00% Expense ratio, lowest to highest/(2)/ 0.45% to 0.65% 0.45% to 0.65% 0.45% to 0.65% Total return, lowest to highest/(3)/. 17.44% to 17.67% 37.65% to 37.92% (23.15%) to (22.99%)
++ Fund available in prior year but no activity.
SUB-ACCOUNT ----------------------------------------------------------------- REAL ESTATE SECURITIES TRUST ----------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- --------------- --------------- Units, beginning of year............. 445,289 572,990 495,247 433,589 Units issued......................... 359,425 190,483 458,746 197,124 Units redeemed....................... (293,205) (318,184) (381,003) (135,466) ---------------- ---------------- --------------- --------------- Units, end of year................... 511,509 445,289 572,990 495,247 ================ ================ =============== =============== Unit value, end of year.............. $29.65 - $76.43 $22.58 - $57.88 $16.32 - $41.77 $15.99 - $40.88 Assets, end of year.................. $38,437,806 $24,344,448 $22,348,452 $19,809,218 Investment income ratio/(1)/......... 2.36% 2.98% 3.12% 3.12% Expense ratio, lowest to highest/(2)/ 0.30% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 31.18% to 31.64% 38.24% to 38.59% 1.92% to 2.17% 2.48% to 2.74%
F-84 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT ------------------------------- REAL RETURN BOND TRUST ------------------------------- YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03^ --------------- --------------- Units, beginning of year............. 5,873 -- Units issued......................... 262,524 133,583 Units redeemed....................... (156,668) (127,710) --------------- --------------- Units, end of year................... 111,729 5,873 =============== =============== Unit value, end of year.............. $14.14 - $14.22 $13.05 - $13.07 Assets, end of year.................. $1,584,831 $76,663 Investment income ratio/(1)/......... 0.49% 0.00% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.45% to 0.65% Total return, lowest to highest/(3)/. 8.35% to 8.69% 4.43% to 4.57%
^ Reflects the period from commencement of operations on May 5, 2003 through December 31, 2003.
SUB-ACCOUNT ------------------------------------------------------------------------- SCIENCE & TECHNOLOGY TRUST ------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 -------------- ---------------- -------------------- -------------------- Units, beginning of year............. 2,816,080 2,889,535 2,589,114 1,857,203 Units issued......................... 2,720,294 2,001,149 2,806,957 2,876,612 Units redeemed....................... (3,022,949) (2,074,604) (2,506,536) (2,144,701) -------------- ---------------- -------------------- -------------------- Units, end of year................... 2,513,425 2,816,080 2,889,535 2,589,114 ============== ================ ==================== ==================== Unit value, end of year.............. $5.08 - $13.50 $5.06 - $13.38 $3.39 - $8.94 $5.75 - $15.15 Assets, end of year.................. $30,223,103 $26,154,570 $18,853,376 $29,690,730 Investment income ratio/(1)/......... 0.00% 0.00% 0.00% 0.00% Expense ratio, lowest to highest/(2)/ 0.30% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 0.22% to 0.58% 49.43% to 49.79% (41.15%) to (41.00%) (41.63%) to (41.49%)
F-85 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT ---------------------------------------------------------------------- SMALL CAP INDEX TRUST ---------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- --------------- Units, beginning of year............. 162,048 226,973 58,468 3,750 Units issued......................... 586,135 280,118 325,076 104,968 Units redeemed....................... (294,215) (345,043) (156,571) (50,250) ---------------- ---------------- -------------------- --------------- Units, end of year................... 453,968 162,048 226,973 58,468 ================ ================ ==================== =============== Unit value, end of year.............. $15.48 - $15.66 $13.28 - $13.38 $9.17 - $9.21 $11.75 - $11.77 Assets, end of year.................. $7,067,046 $2,159,093 $2,085,303 $687,114 Investment income ratio/(1)/......... 0.34% 0.00% 1.05% 5.76% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.55% to 0.65% Total return, lowest to highest/(3)/. 16.56% to 16.92% 44.85% to 45.20% (21.98%) to (21.79%) 0.85% to 0.94%
SUB-ACCOUNT --------------------------------- SMALL CAP OPPORTUNITIES TRUST --------------------------------- YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03^ ---------------- ---------------- Units, beginning of year............. 28,153 -- Units issued......................... 98,813 32,131 Units redeemed....................... (52,634) (3,978) ---------------- ---------------- Units, end of year................... 74,332 28,153 ================ ================ Unit value, end of year.............. $21.77 - $21.88 $17.43 - $17.45 Assets, end of year.................. $1,625,557 $491,037 Investment income ratio/(1)/......... 0.03% 0.00% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 24.96% to 25.34% 39.40% to 39.64%
^ Reflects the period from commencement of operations on May 5, 2003 through December 31, 2003. F-86 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT ------------------------------------------------------------------------ SMALL COMPANY BLEND TRUST ------------------------------------------------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 --------------- ---------------- -------------------- ------------------ Units, beginning of year............. 269,799 262,861 259,656 105,856 Units issued......................... 97,890 216,346 475,065 237,942 Units redeemed....................... (247,385) (209,408) (471,860) (84,142) --------------- ---------------- -------------------- ------------------ Units, end of year................... 120,304 269,799 262,861 259,656 =============== ================ ==================== ================== Unit value, end of year.............. $11.95 - $13.65 $11.21 - $12.79 $8.07 - $9.20 $10.89 - $12.39 Assets, end of year.................. $1,624,586 $3,332,298 $2,353,394 $3,178,735 Investment income ratio/(1)/......... 0.00% 0.00% 0.20% 0.00% Expense ratio, lowest to highest/(2)/ 0.45% to 0.65% 0.45% to 0.65% 0.45% to 0.65% 0.55% to 0.65% Total return, lowest to highest/(3)/. 6.51% to 6.71% 38.79% to 39.08% (26.04%) to (25.89%) (2.94%) to (2.84%)
SUB-ACCOUNT -------------------------------------------------------------------- SMALL COMPANY VALUE TRUST -------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- ------------------ --------------- Units, beginning of year............. 1,151,115 1,194,763 521,854 255,050 Units issued......................... 1,166,644 1,030,795 1,822,893 529,457 Units redeemed....................... (791,942) (1,074,443) (1,149,984) (262,653) ---------------- ---------------- ------------------ --------------- Units, end of year................... 1,525,817 1,151,115 1,194,763 521,854 ================ ================ ================== =============== Unit value, end of year.............. $15.67 - $23.28 $12.60 - $18.70 $9.49 - $14.07 $10.15 - $15.03 Assets, end of year.................. $24,396,927 $15,104,792 $11,607,392 $5,349,826 Investment income ratio/(1)/......... 0.15% 0.44% 0.25% 0.18% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 24.38% to 24.76% 32.81% to 33.12% (6.53%) to (6.30%) 5.85% to 6.11%
F-87 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT ----------------------------- SPECIAL VALUE TRUST ----------------------------- YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03^ ---------------- ------------ Units, beginning of year............. 10,527 -- Units issued......................... 3,178 20,755 Units redeemed....................... (1,756) (10,228) ---------------- -------- Units, end of year................... 11,949 10,527 ================ ======== Unit value, end of year.............. $18.81 - $18.87 $15.77 Assets, end of year.................. $225,420 $166,036 Investment income ratio/(1)/......... 0.00% 0.00% Expense ratio, lowest to highest/(2)/ 0.45% to 0.65% 0.45% Total return, lowest to highest/(3)/. 19.40% to 19.65% 26.18%
^ Reflects the period from commencement of operations on May 5, 2003 through December 31, 2003.
SUB-ACCOUNT ---------------------------------------------------------------- STRATEGIC BOND TRUST ---------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 --------------- ---------------- --------------- --------------- Units, beginning of year............. 169,132 221,458 183,559 69,600 Units issued......................... 290,490 397,326 428,880 204,490 Units redeemed....................... (220,847) (449,652) (390,981) (90,531) --------------- ---------------- --------------- --------------- Units, end of year................... 238,775 169,132 221,458 183,559 =============== ================ =============== =============== Unit value, end of year.............. $18.32 - $20.38 $17.27 - $19.15 $15.36 - $16.98 $14.17 - $15.62 Assets, end of year.................. $4,821,612 $3,179,959 $3,701,587 $2,855,362 Investment income ratio/(1)/......... 3.88% 6.69% 5.15% 4.49% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.45% to 0.65% 0.55% to 0.65% Total return, lowest to highest/(3)/. 5.98% to 6.29% 12.38% to 12.66% 8.25% to 8.47% 5.55% to 5.66%
F-88 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT ------------------------------------------------------------------ STRATEGIC GROWTH TRUST ------------------------------------------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01* --------------- ---------------- -------------------- ------------ Units, beginning of year............. 153,437 123,666 68,964 -- Units issued......................... 117,728 109,988 335,268 69,524 Units redeemed....................... (172,448) (80,217) (280,566) (560) --------------- ---------------- -------------------- -------- Units, end of year................... 98,717 153,437 123,666 68,964 =============== ================ ==================== ======== Unit value, end of year.............. $10.47 - $10.56 $9.89 - $9.95 $7.85 - $7.88 $10.97 Assets, end of year.................. $1,039,479 $1,522,884 $972,517 $756,713 Investment income ratio/(1)/......... 0.00% 0.00% 0.00% 0.00% Expense ratio, lowest to highest/(2)/ 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.65% Total return, lowest to highest/(3)/. 5.87% to 6.14% 26.04% to 26.35% (28.50%) to (28.33%) (12.22%)
* Reflects the period from commencement of operations on May 1, 2001 through December 31, 2001.
SUB-ACCOUNT ---------------------- STRATEGIC INCOME TRUST ---------------------- PERIOD ENDED DEC. 31/04## ---------------------- Units, beginning of year............. -- Units issued......................... 2,246 Units redeemed....................... (21) --------------- Units, end of year................... 2,225 =============== Unit value, end of year.............. $13.56 - $13.57 Assets, end of year.................. $30,167 Investment income ratio/(1)/......... 6.19% Expense ratio, lowest to highest/(2)/ 0.45% to 0.65% Total return, lowest to highest/(3)/. 8.46% to 8.60%
## Reflects the period from commencement of operations on May 3, 2004 through December 31, 2004. F-89 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT --------------------------------------------------------------------------- STRATEGIC OPPORTUNITIES TRUST --------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- -------------------- Units, beginning of year............. 588,318 895,938 706,044 863,681 Units issued......................... 299,516 493,480 804,779 529,543 Units redeemed....................... (491,171) (801,100) (614,885) (687,180) ---------------- ---------------- -------------------- -------------------- Units, end of year................... 396,663 588,318 895,938 706,044 ================ ================ ==================== ==================== Unit value, end of year.............. $9.17 - $12.43 $8.21 - $11.09 $6.56 - $8.84 $10.77 - $14.47 Assets, end of year.................. $4,732,242 $5,962,880 $7,208,068 $9,806,062 Investment income ratio/(1)/......... 0.09% 0.00% 0.00% 0.51% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.45% to 0.65% 0.55% to 0.65% Total return, lowest to highest/(3)/. 11.58% to 11.93% 25.03% to 25.34% (39.16%) to (39.04%) (15.81%) to (15.72%) SUB-ACCOUNT --------------------------------------------------------------------------- STRATEGIC VALUE TRUST --------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01* ---------------- ---------------- -------------------- -------------------- Units, beginning of year............. 235,464 34,516 9,069 -- Units issued......................... 79,793 211,670 29,192 9,089 Units redeemed....................... (243,643) (10,722) (3,745) (20) ---------------- ---------------- -------------------- -------------------- Units, end of year................... 71,614 235,464 34,516 9,069 ================ ================ ==================== ==================== Unit value, end of year.............. $11.56 - $11.66 $9.86 - $9.93 $7.71 - $7.73 $10.65 - $10.67 Assets, end of year.................. $832,892 $2,330,657 $266,768 $96,738 Investment income ratio/(1)/......... 0.25% 0.01% 0.00% 0.00% Expense ratio, lowest to highest/(2)/ 0.40% to 0.65% 0.40% to 0.65% 0.45% to 0.65% 0.45% to 0.65% Total return, lowest to highest/(3)/. 17.23% to 17.52% 27.94% to 28.27% (27.66%) to (27.52%) (14.77%) to (14.67%)
* Reflects the period from commencement of operations on May 1, 2001 through December 31, 2001. F-90 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT --------------------------------------------------------------- TOTAL RETURN TRUST --------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 --------------- --------------- --------------- --------------- Units, beginning of year............. 2,319,152 2,315,832 1,419,177 340,762 Units issued......................... 2,668,560 1,537,006 3,545,219 1,361,346 Units redeemed....................... (2,153,777) (1,533,686) (2,648,564) (282,931) --------------- --------------- --------------- --------------- Units, end of year................... 2,833,935 2,319,152 2,315,832 1,419,177 =============== =============== =============== =============== Unit value, end of year.............. $17.28 - $17.53 $16.57 - $16.70 $15.89 - $15.97 $14.60 - $14.65 Assets, end of year.................. $49,394,073 $38,643,292 $36,916,915 $20,755,404 Investment income ratio/(1)/......... 3.71% 2.77% 2.58% 2.22% Expense ratio, lowest to highest/(2)/ 0.30% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 4.28% to 4.65% 4.32% to 4.60% 8.80% to 9.08% 7.58% to 7.85%
SUB-ACCOUNT --------------------------------------------------------------------------- TOTAL STOCK MARKET INDEX TRUST --------------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- -------------------- Units, beginning of year............. 371,604 181,207 309,502 118,184 Units issued......................... 405,051 467,766 327,720 302,834 Units redeemed....................... (545,752) (277,369) (456,015) (111,516) ---------------- ---------------- -------------------- -------------------- Units, end of year................... 230,903 371,604 181,207 309,502 ================ ================ ==================== ==================== Unit value, end of year.............. $11.10 - $11.23 $9.99 - $10.07 $7.71 - $7.74 $9.85 - $9.87 Assets, end of year.................. $2,572,128 $3,719,559 $1,397,047 $3,050,162 Investment income ratio/(1)/......... 0.73% 0.00% 0.42% 1.20% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.45% to 0.65% 0.55% to 0.65% Total return, lowest to highest/(3)/. 11.02% to 11.35% 29.69% to 30.02% (21.80%) to (21.65%) (11.99%) to (11.90%)
F-91 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT ------------------------------------------------------------------------ U.S. GOVERNMENT SECURITIES TRUST ------------------------------------------------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 --------------- ---------------- -------------------- ------------------ Units, beginning of year............. 595,722 1,081,467 719,661 199,345 Units issued......................... 625,354 950,497 1,334,914 694,784 Units redeemed....................... (679,384) (1,436,242) (973,108) (174,468) --------------- ---------------- -------------------- ------------------ Units, end of year................... 541,692 595,722 1,081,467 719,661 =============== ================ ==================== ================== Unit value, end of year.............. $15.08 - $16.15 $14.76 - $15.78 $14.60 - $15.59 $13.61 - $14.52 Assets, end of year.................. $8,245,778 $8,887,862 $16,062,944 $9,992,662 Investment income ratio/(1)/......... 1.95% 4.00% 3.29% 4.63% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.45% to 0.65% Total return, lowest to highest/(3)/. 2.21% to 2.54% 1.07% to 1.32% 7.30% to 7.56% 6.33% to 6.55% SUB-ACCOUNT ------------------------------------------------------------------------ U.S. LARGE CAP TRUST ------------------------------------------------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 --------------- ---------------- -------------------- ------------------ Units, beginning of year............. 284,605 268,376 277,574 157,692 Units issued......................... 1,930,714 230,093 443,269 379,250 Units redeemed....................... (575,288) (213,864) (452,467) (259,368) --------------- ---------------- -------------------- ------------------ Units, end of year................... 1,640,031 284,605 268,376 277,574 =============== ================ ==================== ================== Unit value, end of year.............. $13.91 - $14.07 $12.79 - $12.89 $9.38 - $9.44 $12.61 - $12.66 Assets, end of year.................. $22,836,763 $3,646,301 $2,521,529 $3,505,205 Investment income ratio/(1)/......... 0.09% 0.39% 0.36% 0.27% Expense ratio, lowest to highest/(2)/ 0.35% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.45% to 0.65% Total return, lowest to highest/(3)/. 8.68% to 9.01% 36.17% to 36.52% (25.67%) to (25.49%) (3.18%) to (2.98%)
F-92 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
SUB-ACCOUNT ------------------------------------------------------------------- UTILITIES TRUST ------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01* ---------------- ---------------- -------------------- ------------ Units, beginning of year............. 12,829 4,043 5,383 -- Units issued......................... 57,841 34,544 12,660 5,433 Units redeemed....................... (30,453) (25,758) (14,000) (50) ---------------- ---------------- -------------------- -------- Units, end of year................... 40,217 12,829 4,043 5,383 ================ ================ ==================== ======== Unit value, end of year.............. $12.15 - $12.26 $9.45 - $9.50 $7.07 - $7.09 $9.31 Assets, end of year.................. $489,462 $121,451 $28,615 $50,102 Investment income ratio/(1)/......... 0.54% 0.56% 0.01% 0.73% Expense ratio, lowest to highest/(2)/ 0.40% to 0.65% 0.45% to 0.65% 0.45% to 0.65% 0.65% Total return, lowest to highest/(3)/. 28.57% to 28.91% 33.64% to 33.93% (24.04%) to (23.89%) (25.55%)
* Reflects the period from commencement of operations on May 1, 2001 through December 31, 2001.
SUB-ACCOUNT ---------------------------------------------------------------------- VALUE TRUST ---------------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DEC. 31/04 DEC. 31/03 DEC. 31/02 DEC. 31/01 ---------------- ---------------- -------------------- --------------- Units, beginning of year............. 720,769 715,767 700,592 281,401 Units issued......................... 1,280,008 639,080 622,576 639,311 Units redeemed....................... (920,018) (634,078) (607,401) (220,120) ---------------- ---------------- -------------------- --------------- Units, end of year................... 1,080,759 720,769 715,767 700,592 ================ ================ ==================== =============== Unit value, end of year.............. $18.71 - $21.18 $16.33 - $18.39 $11.84 - $13.31 $15.42 - $17.26 Assets, end of year.................. $22,720,877 $12,699,749 $9,377,558 $11,984,303 Investment income ratio/(1)/......... 0.53% 1.23% 0.85% 0.53% Expense ratio, lowest to highest/(2)/ 0.30% to 0.65% 0.40% to 0.65% 0.40% to 0.65% 0.40% to 0.65% Total return, lowest to highest/(3)/. 14.43% to 14.83% 37.86% to 38.20% (23.31%) to (23.11%) 2.75% to 3.00%
/(1)/ These ratios represent the dividends, excluding distributions of capital gains, received by the sub-account from the underlying Trust portfolio, net of management fees assessed by the Trust portfolio adviser, divided by the average net assets of the sub-account. These ratios exclude those expenses, such as mortality and expense risk charges, that result in direct reductions in unit values. The recognition of investment income by the sub-account is affected by the timing of the declarations of dividends by the underlying Trust portfolio in which the sub-accounts invest. It is the practice of the Trusts, for income tax reasons, to declare dividends in April for investment income received in the previous calendar year for all sub-accounts of the Trusts except for the Money Market Trust which declares and reinvests dividends on a daily basis. Any dividend distribution received from a sub-account of the Trusts is reinvested immediately, at the net asset value, in shares of that sub-account and retained as assets of the corresponding sub-account so that the unit value of the sub-account is not affected by the declaration and reinvestment of dividends. /(2)/ These ratios represent the annualized contract expenses of the separate account, consisting primarily of mortality and expense risk charges, for the period indicated. The ratios include only those expenses that result in a direct reduction in unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying Trust portfolio are excluded. F-93 THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 2004 6. FINANCIAL HIGHLIGHTS -- (CONTINUED) /(3)/ These ratios represent the total return for the period indicated, including changes in the value of the underlying Trust portfolio, and reflect deductions for all items included in the expense ratio. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. 7. RELATED PARTY TRANSACTIONS Manulife Financial Securities LLC, a registered broker-dealer and wholly owned subsidiary of ManUSA, acts as the principal underwriter of the Contracts pursuant to a distribution agreement with the Company. Contracts are sold by registered representatives of either Manulife Financial Securities LLC or other broker-dealers having distribution agreements with Manulife Financial Securities LLC who are also authorized as variable life insurance agents under applicable state insurance laws. Registered representatives are compensated on a commission basis. The Company has a formal service agreement with its ultimate parent company, MFC, which can be terminated by either party upon two months' notice. Under this agreement, the Company pays for legal, actuarial, investment and certain other administrative services. 8. SUBSEQUENT EVENT Effective January 1, 2005, the following name changes occurred: PREVIOUS NAME NEW NAME ------------- -------- The Manufacturers Life Insurance John Hancock Life Insurance Company (U.S.A.) Company (U.S.A.) Manulife Financial Securities LLC John Hancock Distributors LLC Manufacturers Investment Trust John Hancock Trust The Manufacturers Life Insurance Company John Hancock Life Insurance Company F-94 PART C OTHER INFORMATION Item 27. Exhibits The following exhibits are filed as part of this Registration Statement: (a) Resolutions of Board of Directors of the John Hancock Life Insurance Company (U.S.A.) (formerly, The Manufacturers Life Insurance Company (U.S.A.)) establishing Separate Account N. Incorporated by reference to exhibit A (1) to the pre-effective amendment no. 1 file number 333-71312 filed with the Commission on January 2, 2002. (b) Not applicable. (c) (1) Form of Distribution Agreement. Incorporated by reference to Exhibit A(3)(a)(i), (ii) and (iii) file number 333-66303 filed with the Commission on October 29, 1998. (2) Form of broker-dealer agreement. Incorporated by reference to Exhibit A(3)(b)(i) file number 333-70950 filed with the Commission on October 4, 2001. (3) Form of General Agent and Broker Dealer Servicing Agreement by and among John Hancock Life Insurance Company (U.S.A.) and John Hancock Distributors LLC, filed herewith. (4) Form of General Agent and Broker-Dealer Selling Agreement by and among John Hancock Life Insurance Company (U.S.A.) and John Hancock Distributors LLC, filed herewith. (d) (1)Form of Specimen Flexible Premium Variable Life Insurance Policy, filed herewith. (2) Form of Specimen Enhanced Cash Value Rider, filed herewith. (e) Form of Specimen Application for a Master COLI Insurance Policy, filed herewith. (f) (1) Restated Articles of Redomestication of the John Hancock Life Insurance Company (U.S.A.) (formerly, The Manufacturers Life Insurance Company (U.S.A.)). Incorporated by reference to Exhibit A(6) file number 333-41814 filed with the Commission on July 20, 2000. (a) Amendment to the Articles of Redomestication of the John Hancock Life Insurance Company (U.S.A.) dated July 16, 2004, filed herewith (2) By-laws of the John Hancock Life Insurance Company (U.S.A.) (formerly, The Manufacturers Life Insurance Company (U.S.A.)) dated December 2, 1992, filed herewith. (a) Amendment to the By-laws of the John Hancock Life Insurance Company (U.S.A.) (formerly, The Manufacturers Life Insurance Company (U.S.A.)) dated June 7, 2000, filed herewith. (b) Amendment to the By-laws of the John Hancock Life Insurance Company (U.S.A.) (formerly, The Manufacturers Life Insurance Company (U.S.A.)) dated March 12, 1999, filed herewith. (g) (1) Form of Assumption Reinsurance or Merger Agreement with the John Hancock Life Insurance Company (U.S.A.) (formerly, The Manufacturers Life Insurance Company(U.S.A.)) and The Manufacturers Life Insurance Company of America. Incorporated by reference to Exhibit A(9)(a) file number 333-70950 filed with the Commission on October 4, 2001. (h) (1)Form of Participation Agreement among The Manufacturers Insurance Company (U.S.A.), The Manufacturers Insurance Company of New York, PIMCO Variable Insurance Trust and PIMCO Advisors Distributors LLC dated April 30, 2004, filed herewith. (h) (2) Participation Agreement among John Hancock Life Insurance Company (U.S.A), John Hancock Life Insurance Company of New York, John Hancock Life Insurance Company, John Hancock Variable Life Insurance Company and John Hancock Trust, filed herewith. (i) (1) Form of Service Agreement between The Manufacturers Life Insurance Company and the John Hancock Life Insurance Company (U.S.A.) (formerly,The Manufacturers Life Insurance Company (U.S.A.)). Incorporated by reference to Exhibit A(8)(a) (i), (ii), (iii), (iv), (v)and (vi) to pre-effective amendment No. 1 file number 333-51293 filed with the Commission on August 28, 1998. (2) Form of Amendment to Service Agreement between The Manufacturers Life Insurance Company and the John Hancock Life Insurance Company (U.S.A.) (formerly, The Manufacturers Life Insurance Company (U.S.A.)). Incorporated by reference to Exhibit A(8)(a)(vii) to post-effective amendment No. 11 file number 33-57018 filed with the Commission March 1, 1999. (3)Form of Service Agreement. Incorporated byreference to Exhibit A(8)(c)(i) to pre-effective amendment no. 1 file number 333-51293 filed with the Commission on August 28, 1998. (4)Form of Amendment to Service Agreement. Incorporated by reference to Exhibit A(8)(c)(ii) to pre-effective amendment no. 1 file number 333-51293 filed with the Commission on August 28, 1998. (j) Memorandum Regarding Issuance, Face Amount Increase, Redemption and Transfer Procedures for the Policies. Incorporated by reference to Exhibit A(6) to pre-effective amendment no. 1 file number 333-100597 filed with the Commission on December 16, 2002. (k)Opinion and consent of counsel for John Hancock Life Insurance Company (U.S.A.). Incorporated by reference to Exhibit 2 (a) to pre-effective amendment no. 1 file number 333-100597 filed with the Commission on December 16, 2002. (l) Not Applicable. (m) Not Applicable. (n) Consent of Independent Registered Public Accounting Firm, filed herewith. (o) Not Applicable. (p) Not Applicable. (q) Not Applicable. Powers of Attorney (i) Powers of Attorney (Robert A. Cook, John DesPrez III, Geoffrey Guy, James O'Malley, Joseph J. Pietroski, Rex Schlaybaugh) incorporated by reference to exhibit 7 file number 333-41814 filed with the Commission on July 20, 2000. (ii) Powers of Attorney (John Ostler) incorporated by reference to exhibit 7(ii) file number 333-70950 filed with the Commission on October 4, 2001. (iii) Powers of Attorney (Jim Boyle, John Lyon) incorporated by reference to exhibit 7(iii) file number 333-70950 filed with the Commission on October 4, 2001. (iv) Power of Attorney (Steven Mannik) incorporated by reference to exhibit 7(iv) file number 333-71312 filed with the Commission on April 29, 2002. (v) Powers of Attorney (John D. DesPrez, Alison Alden, James R. Boyle, Marc Costantini, James P. O'Malley, John R. Ostler, Rex Schlaybaugh, Jr., Diana Scott, Warren A. Thomson) incorporated by reference to exhibit 7(v) file number 333-100567 filed with the Commission on April 28, 2005. (vi) Powers of Attorney (Alison Alden, James R. Boyle, Robert A. Cook, John DesPrezIII, James P. O'Malley, John R. Ostler, Rex Schlaybaugh, Diana Scott, Warren Thomson), filed herewith. Item 28. Directors and Officers of the Depositor OFFICERS AND DIRECTORS OF JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) as of September 2005 Name and Principal Business Address Position with Depositor Directors .......................... Alison Alden* ...................... Director James R. Boyle* .................... Director Robert Cook* ....................... Director John D. DesPrez III* ............... Director James P. O'Malley** ................ Director John R. Ostler** ................... Director Rex Schlaybaugh Jr.** .............. Director Diana Scott* ....................... Director Warren Thomson** ................... Director Officers ........................... John D. DesPrez III* ............... Chairman James P. O'Malley** ................ President James Boyle* ....................... Executive Vice President, Annuities Robert A Cook* ..................... Executive Vice President, Life Insurance Steven Mannik** .................... Executive Vice President & General Manager, Reinsurance Marc Costantini* ................... Senior Vice President & Chief Financial Officer Alison Alden* ...................... Senior Vice President, Human Resources Emanuel Alves* ..................... Vice President and Secretary Jonathan Chiel* .................... Executive Vice President & General Counsel Joseph Scott* ...................... Vice President & Chief Administrative Officer
Mitchell A. Karman* ....... Vice President, Chief Compliance Officer & Counsel Donald A. Guloien**........ Senior Executive Vice President and Chief Investments Officer Steven Finch** ............ Senior Vice President, Finance Protection Warren Thomson** .......... Executive Vice President, Investments Patrick Gill* ............. Senior Vice President and Controller Peter Copestake** ......... Senior Vice President and Treasurer Peter Mitsopoulos* ........ Vice President, Treasury Ian Cook** ................ Senior Vice President and CFO, Investments Philip Clarkson* .......... Vice President, Taxation Brian Collins** ........... Vice President, Taxation John H. Durfey** .......... Assistant Secretary Kwong Yiu** ............... Assistant Secretary Grace O'Connell* .......... Assistant Secretary Elizabeth Clark* .......... Assistant Secretary
* Principal business office is 601 Congress Street, Boston, MA 02210 ** Principal business office is 200 Bloor Street, Toronto, Canada M4W 1E5 Item 29. Persons Controlled by or Under Common Control with the Depositor or the Registrant John Hancock Life Insurance Company (U.S.A.) Manulife Reinsurance Limited Cavalier Cable, Inc. The Manufacturers Life Insurance Company of America John Hancock Investment Management Services, LLC Manulife Reinsurance (Bermuda) Limited Manulife Service Corporation John Hancock Life Insurance Company of New York Polymerix Corporation Ennal, Inc. John Hancock Distributors, LLC Ironside Venture Partners I LLC Ironside Venture Partners II LLC Avon Long Term Care Leaders LLC Flex Holding, LLC Manulife Leasing Co., LLC Aegis Analytical Corporation NewRiver Investor Communications Inc. Manulife Property Management of Washington, D.C., Inc. ESLS Investment Limited, LLC Flex Leasing I, LLC Dover Leasing Investments, LLC Item 30. Indemnification Article XII of the Restated Articles of Redomestication of The Manufacturers Life Insurance Company (U.S.A.) provides as follows: No director of this Corporation shall be personally liable to the Corporation orits shareholders or policyholders for monetarydamages for breach of the director's fiduciary duty, provided,that the foregoingshall not eliminate or limit the liability of a director for any of the following: (i) a breach of the director's duty or loyalty to the Corporation or its shareholders or policyholders; (ii) acts or omissions not in good faith or that involve intentional misconduct or knowing violation of law; (iii) a violation of Sections 5036, 5276 or 5280 of the Michigan Insurance Code, being MCLA 500.5036, 500.5276 and 500.5280; (iv) a transaction from which the director derived an improper personal benefit; or (v) an act or omission occurring on or before the date of filing of these Articles of Incorporation. If the Michigan Insurance Code is hereafter amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability contained herein, shall be eliminated or limited to the fullest extent permitted by the Michigan Insurance Code as so amended. No amendment or repeal of this Article XII shall apply to or have any effect on the liability or alleged liability or any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to the effective date of any such amendment or repeal. Notwithstanding the foregoing, Registrant hereby makes the following undertaking pursuant to Rule 484 under the Securities Act of 1933: Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Item 31. Principal Underwriter a. Set forth below is information concerning other investment companies for which John Hancock Distributors, LLC ("JHD LLC"), the principal underwriter of the contracts, acts as investment adviser or principal underwriter. Name of Investment Company ............. Capacity in Which Acting John Hancock Life Insurance Company (U.S.A.) Separate Account ...... Principal Underwriter John Hancock Life Insurance Company (U.S.A.) Separate Account H .... Principal Underwriter John Hancock Life Insurance Company (U.S.A.) Separate Account L .... Principal Underwriter John Hancock Life Insurance Company (U.S.A.) Separate Account M .... Principal Underwriter John Hancock Life Insurance Company (U.S.A.) Separate Account N .... Principal Underwriter John Hancock Life Insurance Company of New York Separate Account A . Principal Underwriter John Hancock Life Insurance Company of New York Separate Account B . Principal Underwriter
b. John Hancock Life Insurance Company (U.S.A.) is the sole member of JHD LLC and the following officers of John Hancock Life Insurance Company (U.S.A.)have power to act on behalf of JHD LLC: John DesPrez* (Chairman and President), Marc Costantini* (Vice President and Chief Financial Officer) and Jim Gallagher* (Vice President, Secretary and General Counsel). The board of managers of JHD LLC (consisting of Gary Buchanan**, Robert Cook* and John Vrysen***) may also act on behalf of JHD LLC. *Principal business office is 601 Congress Street, Boston, MA 02210 **Principal business office is 200 Bloor Street, Toronto, Canada M4W1E5 ***Principal business office is 680 Washington Blvd, Stamford, CT 06901 c. None. Item 32. Location of Accounts and Records All books and records are maintained at 601 Congress Street, Boston, MA 02210 and 200 Bloor Street East, Toronto, Ontario, Canada M4W 1E5. Item 33. Management Services None Item 34. Fee Representation Representation of Insurer Pursuant to Section 26 of the Investment Company Act of 1940 The Manufacturers Life Insurance Company (U.S.A.) hereby represents that the fees and charges deducted under the contracts issued pursuant to this registration statement, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the Company. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has caused this pre-effective amendment to the Registration Statement to be signed on their behalf in the City of Boston, Massachusetts, on this 12th day of October, 2005. JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) SEPARATE ACCOUNT N (Registrant) JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) (Depositor) By: /s/ John D. DesPrez III ----------------------- John D. DesPrez III President JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) By: /s/ John D. DesPrez III ----------------------- John D. DesPrez III President SIGNATURES Pursuant to the requirements of the Securities Act of 1933, this pre-effective amendment to the Registration Statement has been signed by the following persons in the capacities indicated on this 12th day of October, 2005.
Signatures Title /s/ PATRICK GILL Senior Vice President and Controller ------------------------------ Patrick Gill /s/John D. DesPrez III Chairman and President ------------------------------ (Principal Executive Officer) John D. DesPrez III * Senior Vice President and Chief Financial Officer ------------------------------ Marc Constantini * Director ------------------------------ James Boyle * Director ------------------------------ Warren Thomson * Director ------------------------------ John Ostler * Director ------------------------------ JamesO'Malley * Director ------------------------------ Robert A. Cook * Director ------------------------------ Rex Schlaybaugh * Director ------------------------------ Allison Alden * Director ------------------------------ Diana Scott /s/James C. Hoodlet ------------------------------ JAMES C. Hoodlet
Pursuant to Power of Attorney EX-99.27(C)(3) 2 dex9927c3.txt FORM OF GENERAL AGENT AND BROKER DEALER SERVICING AGREEMENT [LOGO OF JOHN HANCOCK COMPANY] General Agent and Broker-Dealer Servicing Agreement -------------------------------------------------------------------------------- AG2006US (01/2005) [LOGO OF JOHN HANCOCK General Agent and Broker-Dealer Servicing Agreement COMPANY] -------------------------------------------------------------------------------- AGREEMENT, dated as of the effective date as provided below, by and among John Hancock Life Insurance Company (U.S.A.) ("John Hancock USA"), John Hancock Distributors LLC, the undersigned general agent ("General Agent") and the undersigned broker-dealer ("Broker-Dealer"). WHEREAS, John Hancock USA issues life insurance and annuity contracts, some of which are exempted securities pursuant to Section 3 of the Securities Act of 1933 (the "1933 Act") and therefore not subject to registration under the 1933 Act ("Insurance Contracts"), and some of which are not exempted securities pursuant to Section 3 of the 1933 Act and therefore subject to registration under the 1933 Act unless sold in exempt transactions ("Securities Contracts"); and WHEREAS, John Hancock USA has appointed John Hancock Distributors LLC as the principal underwriter for the Securities Contracts; and WHEREAS, General Agent and Broker-Dealer desire to service certain previously sold Securities Contracts and Insurance Contracts (collectively, the "Contracts") in accordance with the provisions set forth in the Contracts, Commissions and Fees Schedule (the "Contracts Schedule") which is Exhibit A to this Agreement; WHEREAS, General Agent desires to have its sub-agents who are not also registered representatives of Broker-Dealer appointed as agents of John Hancock USA for the purpose of servicing some or all of the Insurance Contracts ("Insurance Agents"), and General Agent and Broker-Dealer desire to have General Agent's sub-agents who are also registered representatives of Broker-Dealer appointed as agents of John Hancock USA for the purpose of servicing some or all of the Contracts ("Securities Agents")(lnsurance Agents and Securities Agents are hereinafter collectively referred to as "Agents"); and WHEREAS, if General Agent and Broker-Dealer are the same person, the term "General Agent" in this Agreement shall refer to Broker-Dealer, which shall undertake all the duties, responsibilities and privileges of General Agent under this Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: 1. APPOINTMENT AND AUTHORIZATION a. John Hancock USA and John Hancock Distributors LLC appoint and authorize, on a non-exclusive basis, General Agent and Broker-Dealer to service the Contracts in those jurisdictions in which John Hancock USA is admitted to do business, the Contracts have been approved for sale by the appropriate regulatory authorities and General Agent and Broker-Dealer are properly licensed to conduct business. General Agent and Broker-Dealer accept such appointment and authorization, and each agrees to use its best efforts to provide ongoing services to those purchasers with respect to the Contracts. b. Each of General Agent and Broker-Dealer is performing the acts covered by this Agreement in the capacity of an independent contractor and not as an employee or partner of or a joint venturer with John Hancock USA or John Hancock Distributors LLC and is authorized to represent John Hancock USA and John Hancock Distributors LLC only to the extent expressly authorized by this Agreement. No further authority is granted or implied. 2. LICENSING AND APPOINTMENT OF AGENTS a. General Agent is authorized to designate persons for appointment by John Hancock USA as Agents to provide service to the Contracts and to collect the premium (as used herein, the term "premium" shall refer to any premium payment, deposit or contribution, as applicable, paid or payable in connection with a Contract) thereon in conformance with applicable state laws and John Hancock USA's rules and procedures. General Agent shall not propose an Agent for appointment unless such Agent is duly licensed as an insurance agent in the state(s) in which it is proposed that such Agent solicit applications for the Contracts and, if the Agent is to sell Securities Contracts, unless the Agent is a registered representative of Broker-Dealer. General Agent shall be responsible for such Agents' continuing compliance with applicable licensing requirements under state insurance laws, and Broker-Dealer shall be responsible for such Agents' continuing compliance with applicable registration requirements under federal and state securities laws. b. General Agent shall assist John Hancock USA in the appointment of Agents under applicable insurance laws and, in that connection, shall prepare and transmit to John Hancock USA appropriate licensing and appointment forms, shall fulfill all requirements set forth in the General Letter of Recommendation attached as Exhibit B to this Agreement and shall comply with such other related policies and procedures as John Hancock USA from time to time may establish or amend in its sole discretion. AG2006US (01/2005) 1 of 11 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- c. John Hancock USA shall pay the initial appointment fees and renewal fees required under state insurance laws to appoint each previously licensed person as an agent of John Hancock USA for the sale of Contracts. General Agent shall be responsible for all other state insurance appointment and licensing fees with respect to the Agents, including license issue, transfer and termination fees. Broker-Dealer shall be responsible for all fees, including registration and examination fees, necessary to maintain Securities Agents' continuing compliance with applicable registration requirements under federal and state securities laws and the rule of self-regulatory organizations. d. John Hancock USA, in its discretion, may refuse to appoint any Agent designated by General Agent or, after it has appointed an Agent, may terminate or refuse to renew such Agent's appointment or may withdraw the Agent's right to service some or all of the Contracts, in which case General Agent shall cause such Agent to cease providing service under this Agreement. e. With the frequency reasonably requested by John Hancock USA, General Agent shall provide John Hancock USA with a list of all Agents, indicating which of them are Securities Agents, and the jurisdictions where such Agents are licensed to solicit sales of the Contracts. With the frequency reasonably requested by General Agent, John Hancock USA shall provide General Agent with a list which shows the jurisdictions in which John Hancock USA is admitted to do business and the Contracts that have been approved for sale in each of those jurisdictions. 3. SUPERVISION OF AGENTS a. Except to the extent that Broker-Dealer is responsible therefor, General Agent shall supervise all Agents and be responsible for their training and compliance with applicable insurance laws and regulations, and if any act or omission of an Agent or employee of General Agent is the proximate cause of any loss, claim, damage, liability or expense (including reasonable attorneys' fees) to John Hancock USA or John Hancock Distributors LLC, General Agent shall be liable therefor. Broker-Dealer shall supervise Securities Agents and be responsible for their training and compliance with applicable federal and state securities laws and regulations and the rules of the National Association of Securities Dealers, Inc. ("NASD"), and if any act or omission of a Securities Agent or employee of Broker-Dealer is the proximate cause of any loss, claim, damage, liability or expense (including reasonable attorneys' fees) to John Hancock USA or John Hancock Distributors LLC, Broker-Dealer shall be liable therefor. General Agent and Broker-Dealer shall insure that only Securities Agents service Securities Contracts. John Hancock USA and John Hancock Distributors LLC shall not have any responsibility for the supervision, training or compliance with any law or regulation of any Agent or any employee of General Agent or Broker-Dealer, and nothing in this Agreement shall be deemed to make such an Agent or employee an agent or employee of John Hancock USA or John Hancock Distributors LLC. b. General Agent shall (i) supervise Agents' compliance with all applicable suitability requirements under state insurance laws and regulations and (ii) provide adequate training to insure that Agents have thorough knowledge of each Insurance Contract and the ability to make appropriate product presentations and suitability determinations in compliance with applicable law. Broker-Dealer shall (i) supervise Securities Agents' compliance with all applicable suitability requirements under federal and state securities laws and regulations and NASD rules and (ii) provide adequate training to insure that Securities Agents have thorough knowledge of each Securities Contract and the ability to make appropriate product presentations and suitability determinations in compliance with applicable law. Each of General Agent and Broker-Dealer shall not, and shall cause the Agents not to, recommend the purchase of a Contract to a prospective purchaser unless it has reasonable grounds to believe that such purchase is suitable for the prospective purchaser and is in accordance with applicable rules and regulations of any regulatory authority, including, in the case of Securities Contracts, the Securities and Exchange Commission ("SEC") and the NASD. General Agent, in submitting an application for an Insurance Contract, and Broker-Dealer, in submitting an application for a Securities Contract, will be deemed to have warranted to John Hancock USA, and to John Hancock Distributors LLC in the case of a Securities Contract, that it has made a determination of suitability based on information concerning the prospective purchaser's insurance and investment objectives, risk tolerance, need for liquidity, and financial and insurance situation and needs, or on such other factors that General Agent or Broker-Dealer deems to be appropriate under the circumstances and in compliance with applicable law. c. If an Agent performs any unauthorized transaction with respect to a Contract, fails to submit to the supervision of or otherwise meet the rules and standards of General Agent or Broker-Dealer, or fails to hold any required license, appointment, registration or association with Broker-Dealer, General Agent and Broker-Dealer immediately shall notify John Hancock USA in writing and act to terminate the sales activities of such Agent relating to the Contracts. d. Upon request by John Hancock USA or John Hancock Distributors LLC, General Agent and Broker-Dealer shall furnish appropriate records or other documentation to evidence the diligent supervision of Agents by General Agent and Broker-Dealer. 4. OBLIGATIONS OF GENERAL AGENT AND BROKER-DEALER a. General Agent and Broker-Dealer shall permit Agents to provide service for Contracts only if they (i) are duly licensed insurance Agents and appointed by John Hancock USA and (ii) in the case of Securities Contracts, are also registered representatives of Broker-Dealer. b. Checks or money orders for the payment of premiums shall be drawn to the order of "John Hancock Life Insurance Company (U.S.A.)", or such other name as John Hancock USA shall authorize from time to time. General Agent and Broker-Dealer do not have authority to deposit or endorse checks payable to John Hancock USA without the prior written approval of John Hancock USA. John Hancock USA has the right in its sole discretion to reject any application for a Contract and return any premium payment made in connection with the sale of the Contract. AG2006US (01/2005) 2 of 11 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- c. Contracts issued on accepted applications shall be delivered to the contract owners according to administrative procedures established by John Hancock USA. d. General Agent and Broker-Dealer shall not, directly or indirectly, expend or contract for the expenditure of any funds of John Hancock USA or John Hancock Distributors LLC. John Hancock USA and John Hancock Distributors LLC shall not be obligated to pay any expense incurred by General Agent or Broker-Dealer in the performance of this Agreement, unless otherwise specifically provided for in this Agreement or agreed to in advance in writing by John Hancock USA or John Hancock Distributors LLC. e. General Agent and Broker-Dealer are not authorized: to incur indebtedness or make contracts on behalf of John Hancock USA or John Hancock Distributors LLC; to alter or amend any of the provisions of the Contracts or the forms prescribed by John Hancock USA or John Hancock Distributors LLC; to discharge, waive any forfeitures under or extend the time for making payments under the Contracts; to pay any premium or other payment on behalf of a Contract applicant; to enter into any court or regulatory proceeding in the name of or on behalf of John Hancock USA or John Hancock Distributors LLC; or to bind John Hancock USA or John Hancock Distributors LLC in any way not specifically authorized in writing by the party to be bound. f. General Agent and Broker-Dealer shall not induce any employee or agent of John Hancock USA to terminate that relationship, persuade owners of insurance or annuity contracts issued by John Hancock USA to discontinue their contracts or otherwise do anything prejudicial to the interests of John Hancock USA or the owners of contracts issued by it. g. General Agent and Broker-Dealer agree to comply with, and to cause the Agents to comply with, the administrative procedures of John Hancock USA relating to the Contracts and the policies and procedures adopted by John Hancock USA relating to privacy, agent conduct and similar matters and identified in the Policies and Procedures Schedule which is Exhibit C to this Agreement, to the extent such policies and procedures are applicable to the offer, sale and servicing of the Contracts, as those administrative procedures and other policies and procedures are now in effect or may be amended or established in the future by John Hancock USA in its sole discretion and communicated to General Agent and Broker-Dealer, as appropriate. General Agent and Broker-Dealer acknowledge receipt of those policies of John Hancock USA set forth in the Policies and Procedures Schedule. h. Each of General Agent and Broker-Dealer agrees to carry out its activities and obligations under this Agreement, and to cause each Agent for which it has primary supervisory responsibility to carry out the Agent's activities and obligations in connection with the offer, sale and servicing of the Contracts, in continuous compliance with applicable laws, rules and regulations of applicable federal and state regulatory authorities (including the rules of the NASD), including those governing securities and insurance-related activities or transactions, and to notify John Hancock USA and John Hancock Distributors LLC immediately in writing if it or any such Agent fails to comply with any of those laws and regulations. i. Broker-Dealer shall execute any electronic or telephone orders only in accordance with the current prospectus applicable to the Securities Contracts and agrees that, in consideration for electronic and telephone transfer privileges, John Hancock USA will not be liable for any loss incurred as a result of acting upon electronic or telephone instructions containing unauthorized, incorrect or incomplete information received from Broker-Dealer or its representatives. 5. COMPENSATION a. John Hancock USA shall pay General Agent compensation for the servicing of Insurance Contracts and, on behalf of John Hancock Distributors LLC, shall pay Broker-Dealer for the servicing of Securities Contracts as set forth in the Contracts Schedule. Unless otherwise provided in the Contracts Schedule, John Hancock USA will make these payments within 15 days after the end of the calendar month in which it accepts the premiums and purchase payments on which the payments are based. Notwithstanding any other provision of this Agreement, Broker-Dealer shall return to John Hancock USA all compensation paid to it with respect to a Securities Contract if the Securities Contract is tendered for redemption within seven business days after John Hancock USA's acceptance of the application for the Securities Contract. b. Except as otherwise set forth in this Agreement including the Contracts Schedule, General Agent shall be exclusively responsible for setting the compensation of and promptly paying Agents for Insurance Contracts, and Broker-Dealer shall be exclusively responsible for setting the compensation of and promptly paying Agents for Securities Contracts. 6. ASSOCIATED INSURANCE AGENCY a. If they are not the same person, General Agent and Broker-Dealer represent and warrant that they are in compliance with the terms and conditions of no-action letters issued by the staff of the SEC with respect to non-registration as a broker-dealer of an insurance agency associated with a registered broker-dealer. If Broker-Dealer has entered into an agreement with one or more insurance agencies other than General Agent (each, an "Associated Agency") for purposes of selling Securities Contracts in those states in which neither Broker-Dealer nor General Agent can obtain an insurance license necessary to sell the Contracts, Broker-Dealer represents and warrants that it and each such Associated Agency are in compliance with the terms and conditions of no-action letters issued by the staff of the SEC with respect to non-registration as a broker-dealer of an insurance agency associated with a registered broker-dealer. The Broker-Dealer will supervise agents of an Associated Agency in the same manner as it is required to supervise Agents under this Agreement, as applicable. General Agent and Broker-Dealer shall notify John Hancock USA and John Hancock Distributors LLC immediately in writing if General Agent, Broker-Dealer or any Associated Agency fails to comply with any such terms and conditions and shall take such measures as may be necessary to comply with any such terms and conditions. AG2006US (01/2005) 3 of 11 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- b. In reliance on such representations and warranties, John Hancock USA, on behalf of John Hancock Distributors LLC, agrees to pay any compensation otherwise due to Broker-Dealer for sales of Securities Contracts to General Agent or Associated Agencies as authorized in writing by Broker-Dealer. c. Broker-Dealer shall have the same obligations under this Agreement with respect to sales of Securities Contracts for which compensation is paid to General Agent or an Associated Agency as it has for sales of Securities Contracts for which it receives compensation directly from John Hancock Distributors LLC or John Hancock USA. In addition, Broker-Dealer shall insure that compensation paid to General Agent or an Associated Agency is distributed only to duly licensed Securities Agents. 7. REPRESENTATIONS AND WARRANTIES a. Each of John Hancock USA, John Hancock Distributors LLC, Broker-Dealer and General Agent represents to the others that it and its officers signing below have full power and authority to enter into this Agreement, that this Agreement has been duly and validly executed by it and that this Agreement, assuming due and valid execution by the other parties, constitutes a legal, valid and binding agreement. b. General Agent represents and warrants to John Hancock USA and John Hancock Distributors LLC that General Agent is, and at all times when performing its functions and fulfilling its obligations under this Agreement will be, a properly licensed insurance agency in each jurisdiction in which such licensing is required for the sale of the Contracts. c. Broker-Dealer represents and warrants to John Hancock USA and John Hancock Distributors LLC that Broker-Dealer is, and at all times when performing its functions and fulfilling its obligations under this Agreement will be, registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934 (the "1934 Act") and under the securities laws of each state in which such registration is required for the sale of the Securities Contracts and a member of the NASD. Broker-Dealer will notify John Hancock Distributors LLC promptly in writing if any such registration or membership is terminated or suspended. d. John Hancock Distributors LLC represents and warrants to Broker-Dealer that John Hancock Distributors LLC is, and at all times when performing its functions and fulfilling its obligations under this Agreement will be, registered as a broker-dealer with the SEC under the 1934 Act and under the securities laws of each state in which such registration is required for underwriting the Securities Contracts and a member of the NASD. e. John Hancock USA represents and warrants to General Agent and Broker-Dealer that the Securities Contracts, including any variable account(s) supporting the Securities Contracts, shall comply in all material respects with applicable registration and other requirements of the 1933 Act and the Investment Company Act of 1940 (the "1940 Act"), and the rules and regulations thereunder, including the terms of any order of the SEC with respect thereto. f. John Hancock USA represents and warrants to General Agent and Broker-Dealer that the prospectuses included in John Hancock USA's registration statements for the Contracts, and in post-effective amendments thereto, and any supplements thereto, as filed or to be filed with the SEC, as of their respective effective dates, contain or will contain in all material respects all statements and information which are required to be contained therein by the 1933 Act. 8. SALES LITERATURE, ADVERTISEMENTS AND OTHER PROMOTION MATERIAL a. General Agent and Broker-Dealer shall not use, and shall cause the Agents not to use, any sales literature, advertisements or other promotional material ("Sales Material") in connection with the offer and sale of the Contracts unless the Sales Material has been approved in writing prior to use by John Hancock USA, in the case of Insurance Contracts, or John Hancock Distributors LLC, in the case of Securities Contracts. For purposes of this Agreement, Sales Material shall include but not be limited to: i. material published, or designed for use in, a newspaper, magazine or other periodical, radio, television, telephone or tape recording, video-tape display, signs or billboards, motion pictures, telephone directories (other than routine listings), electronic or other public media, or direct mail; ii. descriptive literature and sales aids of all kinds, including, but not limited to, circulars, leaflets, booklets, marketing guides, seminar material, audiovisual material, computer print-outs, depictions, illustrations and form letters; iii. material used for training and education which is designed to be used or is used to induce the public to purchase or retain a Contract; and iv. prepared sales talks and other presentations and material prepared for use with prospective purchasers of the Contracts or with the public generally. b. John Hancock USA or John Hancock Distributors LLC will provide Broker-Dealer, without charge, with as many copies of the prospectuses and statements of additional information for the Securities Contracts and the underlying investment funds as may be reasonably requested ("Registration Material"). Upon receipt of updated Registration Material, Broker-Dealer will promptly discard or destroy all copies of Registration Material previously provided to it, except as needed to maintain proper records. AG2006US (01/2005) 4 of 11 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- c. Upon notice to General Agent or Broker-Dealer, John Hancock USA or John Hancock Distributors LLC may terminate at any time and for any reason the use of any Sales Material previously approved by it or of any Registration Material, and General Agent and Broker-Dealer shall promptly comply with any such request and shall not use, or permit an Agent to use, such material thereafter. d. General Agent and Broker-Dealer are not authorized, and may not authorize anyone else, to give any information or to make any representation concerning John Hancock USA, the Contracts, the separate accounts of John Hancock USA or the underlying investment funds for the Contracts other than those contained in the current Registration Material and Sales Material authorized for use by John Hancock USA or John Hancock Distributors LLC. Broker-Dealer, General Agent and Agents may not modify or represent that they are authorized to modify any such material. e. General Agent shall be responsible for all communications by Agents with prospective purchasers of, and with the public generally in connection with, Insurance Contracts. Broker-Dealer shall be responsible for all communications by Securities Agents with prospective purchasers of, and with the public generally in connection with, Securities Contracts. 9. GROUP ANNUITY CONTRACTS For purposes of this Agreement, a group annuity contract which has not been registered under the 1933 Act and which is to be issued in connection with a stock bonus, pension, or profit-sharing plan which meets the requirements for qualification under section 401 of the Internal Revenue Code (or in connection with another kind of plan specified in Section 3(a)(2) of the 1933 Act) ("Exempt Group Contract") shall be deemed to be an Insurance Contract, but a sale of an Exempt Group Contract by a Securities Agent shall be subject to any applicable NASD rules. Broker-Dealer shall supervise and maintain records with respect to such transactions as may be required by any applicable NASD rules. 10. FIDELITY BOND AND OTHER LIABILITY COVERAGE Each of General Agent and Broker-Dealer represents that it and its directors, officers and employees and the Insurance Agents, in the case of General Agent, and the Securities Agents, in the case of Broker-Dealer, are and shall be covered by a blanket fidelity bond, issued by a reputable bonding company, and other errors and omissions or liability insurance, acceptable to John Hancock USA ("Liability Coverage"). Each of General Agent and Broker-Dealer shall maintain its Liability Coverage at its expense. Liability Coverage shall be in a form, type and amount and issued by a bonding company or other insurance company satisfactory to John Hancock USA. Any fidelity bond maintained by Broker-Dealer which meets the requirements of the NASD Conduct Rules applicable to fidelity bonds shall be deemed to be satisfactory. John Hancock USA may require evidence, satisfactory to it, that such coverage is in force, and General Agent and Broker-Dealer shall give prompt written notice to John Hancock USA of any cancellation or change of coverage. Each of General Agent and Broker-Dealer assigns any proceeds received from the Liability Coverage to John Hancock USA to the extent of its loss, and to John Hancock Distributors LLC to the extent of its loss, due to activities covered by the Liability Coverage and agrees to pay promptly any deficiency whether due to a deductible or otherwise. 11. COMPLAINTS, INVESTIGATIONS AND PROCEEDINGS Each of General Agent and Broker-Dealer shall promptly notify John Hancock USA and John Hancock Distributors LLC if it receives notice of any customer complaint or of any threatened or pending regulatory investigation or proceeding, civil action or arbitration (a "Proceeding") involving the Contracts. John Hancock USA or John Hancock Distributors LLC will promptly notify General Agent or Broker-Dealer if it receives notice of any customer complaint or of any Proceeding involving General Agent or Broker-Dealer and the Contracts. Each party shall cooperate with the other parties in investigating and responding to any such complaint or Proceeding, and in any settlement or trial of any actions arising out of the conduct of business under this Agreement. No response by General Agent or Broker-Dealer to an individual customer complaint involving a Contract will be sent until it has been approved by John Hancock USA or John Hancock Distributors LLC or dealt with otherwise in accordance with John Hancock USA's administrative procedures. 12. INDEMNIFICATION a. General Agent and Broker Dealer, jointly and severally, indemnify and hold harmless John Hancock USA, John Hancock Distributors LLC, and their respective affiliates, officers, directors, employees and agents against any and all loss, claim, damage, liability or expense (including reasonable attorneys' fees), joint or several, insofar as such loss, claim, damage, liability or expense arises out of or is based upon any breach of this Agreement, any applicable law or regulation, or any applicable rule of any self-regulatory organization, by General Agent, Broker-Dealer or any of the Agents. This indemnification will be in addition to any liability which the General Agent and Broker-Dealer may otherwise have. b. John Hancock USA and John Hancock Distributors LLC, jointly and severally, indemnify and hold harmless General Agent, Broker-Dealer and their respective affiliates, officers, directors, employees and Agents against any and all loss, claim, damage, liability or expense (including reasonable attorneys' fees), joint or several, insofar as such loss, claim, damage, liability or expense arises out of or is based upon any breach of this Agreement, any applicable law or regulation, or any applicable rule of any self-regulatory organization, by John Hancock USA or John Hancock Distributors LLC. This indemnification will be in addition to any liability which John Hancock USA and John Hancock Distributors LLC may otherwise have. AG2006US (01/2005) 5 of 11 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 13. TERMINATION a. Any party may terminate this Agreement in its discretion without cause upon thirty (30) days written notice to the other parties. b. John Hancock USA or John Hancock Distributors LLC may terminate this Agreement effective with the mailing of a notice of termination to General Agent or Broker-Dealer if the reasons for the termination include (i) conversion, fraud, embezzlement or similar activity, (ii) failure to maintain Liability Coverage as required by Section 10 or (iii) a rebate of, offer to rebate or withholding of any payment due on a Contract by General Agent or Broker-Dealer. c. This Agreement will terminate automatically without notice, effective as of the immediately preceding date, if: General Agent or Broker-Dealer ceases to have the requisite registrations and regulatory licenses (but only as to the jurisdictions and Contracts affected by the absence of such registrations and licenses); applicable laws or regulations otherwise prohibit General Agent or Broker-Dealer from continuing to market the Contracts; or General Agent or Broker-Dealer files for bankruptcy or financial or corporate reorganization under federal or state insolvency law. d. No provision of this Agreement shall continue in force after any termination, other than Sections 11, 12, 14, 15, 18, 19, 20 and 21, and the Contracts Schedule. 14. CONFIDENTIALITY Each party to this Agreement shall maintain the confidentiality of any customer list and any material designated as confidential and/or proprietary by another party ("Confidential Information"), and shall not use or disclose such information without the prior written consent of the party designating such material as confidential and/or proprietary. Each party to this Agreement shall take reasonable steps to protect such Confidential Information, applying at least the same security measures and level of care as it employs to protect its own Confidential Information. If any party to this Agreement is compelled by applicable law to disclose any Confidential Information, it shall promptly notify the party designating such material as confidential and/or proprietary in writing. The General Agent and Broker-Dealer shall cause Agents to comply with this provision. 15. AMENDMENTS This Agreement may be amended in a writing signed by all the parties. If John Hancock USA and John Hancock Distributors LLC send written notice of a proposed amendment to this Agreement to General Agent and Broker-Dealer, General Agent and Broker-Dealer shall be deemed to have agreed to the amendment if either submits an application for a Contract on or after the fifth business day after the date on which the notice was sent. John Hancock USA may also unilaterally suspend distribution of any of the Contracts and amend the Schedules to this Agreement in any and all respects, from time to time in its sole discretion, with prior or concurrent written notice to General Agent and Broker-Dealer. Any change in compensation shall apply to compensation due on applications received by John Hancock USA after the effective date of the notice. John Hancock USA may also amend the Contracts from time to time, in its sole discretion, and nothing in this Agreement shall be deemed to affect its right to so amend the Contracts. 16. BOOKS AND RECORDS a. General Agent and Broker-Dealer shall maintain such books and records concerning the activities of the Agents as may be required under applicable insurance and securities laws and regulations and the rules of the NASD, and as may be reasonably required by John Hancock USA or John Hancock Distributors LLC to reflect adequately the Contracts business processed through General Agent or Broker-Dealer. General Agent and Broker-Dealer shall maintain such books and records at their respective principal places of business in good and legible condition for a period of six calendar years following the year in which this Agreement is terminated (the "Post-Termination Period") and shall make them available during normal business hours to John Hancock USA or John Hancock Distributors LLC from time to time while this Agreement is in effect and during the Post-Termination Period upon 10 days' written request. b. The parties shall promptly furnish each other any reports and information that another party may reasonably request for the purpose of meeting its reporting and recordkeeping requirements under the insurance laws of any state or under any applicable federal or state securities laws or regulations or NASD rules. 17. NOTICES a. All notices under this Agreement shall be given in writing and sent to the address of a party shown on the signature page or to such other address as the party may designate in writing. b. Each of General Agent and Broker-Dealer shall provide written notice to John Hancock USA no less than thirty days prior to the closing date of its proposed merger into or consolidation with another entity, a sale of substantially all its assets or a sale, transfer or assignment of a controlling interest in it. AG2006US (01/2005) 6 of 11 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 18. EFFECTIVE DATE This Agreement supersedes in its entirety any other effective agreement between the General Agent or Broker-Dealer and John Hancock USA or John Hancock Distributors LLC. If this Agreement is executed by General Agent and Broker-Dealer and returned to John Hancock USA, it shall be effective as of the date of its execution by John Hancock USA. 19. REGULATIONS All parties agree to observe and comply with all existing laws, rules and regulations of all applicable local, state or federal regulatory authorities (including the rules of the NASD), and with all existing rules and regulations of any self-regulatory organization, and to observe and comply with those laws, rules and regulations which may be enacted, adopted or promulgated during the term of this Agreement, which relate to the business contemplated hereby in any jurisdiction in which the business described herein is to be transacted. 20. OTHER This Agreement contains the entire understanding of the parties with respect to the subject matter hereof, supersedes all prior agreements and understandings among the parties regarding the subject matter, may be executed in two or more counterparts which together shall constitute a single agreement, may not be assigned by any party without the written consent of the other parties (except that it may be assigned by John Hancock USA to a successor in connection with a merger, consolidation or sale of all or substantially all of the assets of John Hancock USA, and may be assigned by John Hancock Distributors LLC to an affiliate or successor) and shall inure to the benefit of and to be binding upon the parties and their respective successors and assigns. Forbearance by a party to require performance of any provision hereof shall not constitute or be deemed a waiver by that party of such provision or of the right thereafter to enforce the same, and no waiver by a party of any breach or default hereunder shall constitute or be deemed a waiver of any subsequent breach or default, whether of the same or similar nature or of any other nature, or a waiver of the provision or provisions with respect to which such breach or default occurred. This Agreement shall be governed and construed in all respects by the laws of the State of Michigan without reference to the principles of conflict or choice of law thereof. 21. ARBITRATION Any and all disputes under this Agreement shall be settled by arbitration in Massachusetts under the then existing rules of the American Arbitration Association and judgment may be entered upon the award in any court of competent jurisdiction. The determination of the arbitrators shall be final and binding on all parties. The costs of arbitration shall be borne equally by the parties to the arbitration, provided however, that the arbitrators may assess one party more heavily than the other for these costs upon a finding that such party did not make a good faith effort to settle the dispute informally when it first arose. AG2006US (01/2005) 7 of 11 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date set forth below. GENERAL AGENT BROKER-DEALER ______________________________________ ______________________________________ Name Name ______________________________________ ______________________________________ Street Address Street Address ______________________________________ ______________________________________ City, State & Zip City, State & Zip By:___________________________________ By:___________________________________ Title:________________________________ Title:________________________________ Date:_________________________________ Date:_________________________________ JOHN HANCOCK LIFE INSURANCE JOHN HANCOCK DISTRIBUTORS LLC COMPANY (U.S.A.) P.O. Box 4700 P.O. Box 600 Buffalo, NY Buffalo, NY 14240-4700 14201-0600 Attn: Agency Department Attn: Operations Department By:___________________________________ By:___________________________________ Title:________________________________ Title:________________________________ Date:_________________________________ Date:_________________________________ AG2006US (01/2005) 8 of 11 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Exhibit A Contracts, Commissions and Fees Schedule General Provisions Compensation. Unless otherwise provided in this Contracts Schedule, commissions will be paid as a percentage of premiums or purchase payments (collectively, "Payments") received in cash or other legal tender and accepted by John Hancock USA on applications obtained by Agents. Such Payments will be payable in respect of the sale of such Contracts, in such amounts, and upon such terms as are set forth in the applicable commission schedules together with any accompanying schedules relating to the Payments, (the "Commission Schedules"), established by John Hancock USA and John Hancock Distributors LLC and covering each Contract, as are in effect from time to time, to which such Payments relate. John Hancock USA and John Hancock Distributors LLC expressly reserve the right to transfer future compensation on a Contract to another General Agent or Broker-Dealer if the owner of the Contract so requests. Upon termination of the Agreement, General Agent and Broker-Dealer shall receive no further compensation, except for compensation for all Payments which are in process at the time of termination of the Agreement or are received subsequently on Contracts in force at the time of termination of the Agreement, unless otherwise provided in an applicable Commission Schedule. Notwithstanding the foregoing, no Payments will be made with respect to an increase in the face amount of a Contract when the Agreement is terminated prior to such increase, and when the Agreement is terminated, no Payments with respect to any Securities Contracts shall be made after the Broker-Dealer ceases to be properly licensed to sell Securities Contracts. General Agent and Broker-Dealer shall continue to be liable for any chargebacks pursuant to the provisions of this Contracts Schedule, and for any other amounts advanced by or otherwise due John Hancock USA or John Hancock Distributors LLC under the Agreement. Joint Business. Any Contract sold by General Agent or Broker-Dealer in conjunction with any other person authorized to sell the Contracts shall be considered as joint business and, unless otherwise agreed to by John Hancock USA, the amount of the compensation due on the Payments accepted under that Contract shall be apportioned equally among each participant in the sale. General Agent or Broker-Dealer shall provide John Hancock USA with written notice of any such joint business and of the existence of any agreement among participants for unequal apportionment of compensation. Prohibition Against Rebates. General Agent and Broker-Dealer shall not, and shall cause the Agents not to, rebate, offer to rebate or withhold any part of any payments due on the Contracts. If General Agent, Broker-Dealer or any Agent shall at any time induce or endeavor to induce any owner of any Contract to discontinue payments or to relinquish any such Contract, except under circumstances where there is reasonable grounds for believing the Contract is not suitable for such person, John Hancock USA shall forthwith cease paying any and all compensation that would otherwise be due General Agent or Broker-Dealer under this Agreement. Right of Set Off. Each of General Agent and Broker-Dealer hereby authorizes John Hancock USA to set off its liabilities to John Hancock USA and John Hancock Distributors LLC against any and all amounts otherwise payable to General Agent or Broker-Dealer, including amounts payable under the Agreement or under any other agreement pursuant to which General Agent or Broker-Dealer receive compensation directly or indirectly from John Hancock USA. Each of General Agent and Broker-Dealer shall be liable for the portion of any debit balance equal to advances on unearned compensation which appears in their respective Advance Accounts. Such portion of the debit balance shall be payable by General Agent or Broker-Dealer, as applicable, upon demand by John Hancock USA. At the option of John Hancock USA, interest at the maximum rate permissible by state law will accrue on such portion of the debit balance from the time a debit balance occurs in such account. Paying Agent for Insurance Contracts. At the request of General Agent, John Hancock USA, at its discretion, may agree to act as General Agent's paying agent and make payments of compensation directly to such Insurance Agents and such other appropriate parties who are not employees of General Agent but are appointed with John Hancock USA and are entitled to compensation from General Agent in connection with the sale of those Insurance Contracts that are not variable annuity contracts or variable life insurance policies, as General Agent may designate from time to time. AG2006US (01/2005) 9 of 11 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Exhibit B General Letter of Recommendation General Agent hereby certifies to John Hancock USA that all of the following requirements will be fulfilled in conjunction with the submission by General Agent of licensing/appointment papers for all applicants to become Agents ("Applicants"). General Agent will, upon request, forward proof of compliance with same to John Hancock USA in a timely manner. 1. We have made a thorough and diligent inquiry and investigation relative to each Applicant's identity, residence, business reputation and experience and declare that each Applicant is personally known to us, has been examined by us, is known to have a good business reputation, is reliable, is financially responsible and is worthy of a license and appointment as an Agent. Each individual is trustworthy, competent and qualified to act as an agent for John Hancock USA and hold himself out in good faith to the general public. We vouch for each Applicant. 2. We have on file a Form B-300, B-301 or U-4 which was completed by each Applicant. With respect to each Applicant to become a Securities Agent, we have fulfilled all the necessary investigative requirements for the registration of each such Applicant as a registered representative through our NASD member firm, and each such Applicant is presently registered as an NASD registered representative. The above information in our files indicates no fact or condition which would disqualify the Applicant from receiving a license, and all the findings of all investigative information is favorable. 3. We certify that all educational requirements have been met for the specific state in which each Applicant is requesting a license and that all such persons have fulfilled the appropriate examination, education and training requirements. 4. If the Applicant is required to submit his or her picture, signature and securities registration in the state in which he or she is applying for a license, we certify that those items forwarded to John Hancock USA are those of the Applicant and the securities registration is a true copy of the original. 5. We hereby warrant that the Applicant is not applying for a license with John Hancock USA in order to place insurance chiefly or solely on his or her life or property or on the lives, property or liability of his or her relatives or associates. 6. We certify that each Applicant will receive close and adequate supervision, and that we will make inspection when needed of any or all risks written by these Applicants, to the end that the insurance interest of the public will be properly protected. 7. We will not permit any Applicant to transact insurance as an agent until duly licensed therefor. No Applicants have been given a contract or furnished supplies, nor have any Applicants been permitted to write, solicit business or act as an agent in any capacity, and they will not be so permitted until the certificate of authority or license applied for is received. 8. We certify that General Agent, Broker-Dealer and Applicant shall have entered into a written agreement pursuant to which: (a) Applicant is appointed a Sub-agent of General Agent and a registered representative of Broker-Dealer; (b) Applicant agrees that his or her activities relating to the Securities Contracts shall be under the supervision and control of Broker-Dealer and his or her activities relating to the Insurance Contracts shall be under the supervision and control of General Agent; and (c) that Applicant's right to continue to service such Contracts is subject to his or her continued compliance with such agreement and any procedures, rules or regulations implemented by Broker-Dealer or General Agent. AG2006US (01/2005) 10 of 11 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Exhibit C Policies and Procedures Schedule In addition to its administrative procedures, John Hancock USA has adopted the following Codes which contain policies and procedures applicable to the offer, sale and servicing of the Contracts: Privacy Code Agent's Code of Conduct AG2006US (01/2005) 11 of 11 -------------------------------------------------------------------------------- EX-99.27(C)(4) 3 dex9927c4.txt FORM OF GENERAL AGENT AND BROKER DEALER SELLING AGREEMENT [LOGO OF JOHN HANCOCK COMPANY] General Agent and Broker-Dealer Selling Agreement -------------------------------------------------------------------------------- AG1010US (01/2005) [LOGO OF JOHN HANCOCK COMPANY] General Agent and Broker-Dealer Selling Agreement -------------------------------------------------------------------------------- AGREEMENT, dated as of the effective date as provided below, by and among John Hancock Life Insurance Company (U.S.A.) ("John Hancock USA"), John Hancock Distributors LLC, the undersigned general agent ("General Agent") and the undersigned broker-dealer ("Broker-Dealer"). WHEREAS, John Hancock USA issues life insurance and annuity contracts, some of which are exempted securities pursuant to Section 3 of the Securities Act of 1933 (the "1933 Act") and therefore not subject to registration under the 1933 Act ("Insurance Contracts"), and some of which are not exempted securities pursuant to Section 3 of the 1933 Act and therefore subject to registration under the 1933 Act unless sold in exempt transactions ("Securities Contracts"); and WHEREAS, John Hancock USA has appointed John Hancock Distributors LLC as the principal underwriter for the Securities Contracts; and WHEREAS, General Agent and Broker-Dealer desire to sell certain Securities Contracts and Insurance Contracts (collectively, the "Contracts") in accordance with the provisions set forth in the Contracts, Commissions and Fees Schedule (the "Contracts Schedule") which is Exhibit A to this Agreement; WHEREAS, General Agent desires to have its sub-agents who are not also registered representatives of Broker-Dealer appointed as agents of John Hancock USA for the purpose of selling some or all of the Insurance Contracts ("Insurance Agents"), and General Agent and Broker-Dealer desire to have General Agent's sub-agents who are also registered representatives of Broker-Dealer appointed as agents of John Hancock USA for the purpose of selling some or all of the Contracts ("Securities Agents")(lnsurance Agents and Securities Agents are hereinafter collectively referred to as "Agents"); and WHEREAS, if General Agent and Broker-Dealer are the same person, the term "General Agent" in this Agreement shall refer to Broker-Dealer, which shall undertake all the duties, responsibilities and privileges of General Agent under this Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: 1. APPOINTMENT AND AUTHORIZATION a. John Hancock USA and John Hancock Distributors LLC appoint and authorize, on a non-exclusive basis, General Agent and Broker-Dealer to solicit sales of the Contracts in those jurisdictions in which John Hancock USA is admitted to do business, the Contracts have been approved for sale by the appropriate regulatory authorities and General Agent and Broker-Dealer are properly licensed to conduct business. General Agent and Broker-Dealer accept such appointment and authorization, and each agrees to use its best efforts to find purchasers of the Contracts acceptable to John Hancock USA and to provide ongoing services to those purchasers with respect to the Contracts. b. Each of General Agent and Broker-Dealer is performing the acts covered by this Agreement in the capacity of an independent contractor and not as an employee or partner of or a joint venturer with John Hancock USA or John Hancock Distributors LLC and is authorized to represent John Hancock USA and John Hancock Distributors LLC only to the extent expressly authorized by this Agreement. No further authority is granted or implied. 2. LICENSING AND APPOINTMENT OF AGENTS a. General Agent is authorized to designate persons for appointment by John Hancock USA as Agents to solicit applications for the Contracts, to deliver the Contracts and to collect the premium (as used herein, the term "premium" shall refer to any premium payment, deposit or contribution, as applicable, paid or payable in connection with a Contract) thereon in conformance with applicable state laws and John Hancock USA's rules and procedures. General Agent shall not propose an Agent for appointment unless such Agent is duly licensed as an insurance agent in the state(s) in which it is proposed that such Agent solicit applications for the Contracts and, if the Agent is to sell Securities Contracts, unless the Agent is a registered representative of Broker-Dealer. General Agent shall be responsible for such Agents' continuing compliance with applicable licensing requirements under state insurance laws, and Broker-Dealer shall be responsible for such Agents' continuing compliance with applicable registration requirements under federal and state securities laws. b. General Agent shall assist John Hancock USA in the appointment of Agents under applicable insurance laws and, in that connection, shall prepare and transmit to John Hancock USA appropriate licensing and appointment forms, shall fulfill all requirements set forth in the General Letter of Recommendation attached as Exhibit B to this Agreement and shall comply with such other related policies and procedures as John Hancock USA from time to time may establish or amend in its sole discretion. c. John Hancock USA shall pay the initial appointment fees and renewal fees required under state insurance laws to appoint each previously licensed person as an agent of John Hancock USA for the sale of Contracts. General Agent shall be responsible for all other state insurance appointment and licensing fees with respect to the Agents, including license issue, transfer and termination fees. Broker-Dealer shall be responsible for all fees, including registration and examination fees, necessary to maintain Securities Agents' continuing compliance with applicable registration requirements under federal and state securities laws and the rule of self-regulatory organizations. AG1010US (01/2005) 1 of 11 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- d. John Hancock USA, in its discretion, may refuse to appoint any Agent designated by General Agent or, after it has appointed an Agent, may terminate or refuse to renew such Agent's appointment or may withdraw the Agent's right to solicit applications for some or all of the Contracts, in which case General Agent shall cause such Agent to cease solicitations. e. With the frequency reasonably requested by John Hancock USA, General Agent shall provide John Hancock USA with a list of all Agents, indicating which of them are Securities Agents, and the jurisdictions where such Agents are licensed to solicit sales of the Contracts. With the frequency reasonably requested by General Agent, John Hancock USA shall provide General Agent with a list which shows the jurisdictions in which John Hancock USA is admitted to do business and the Contracts that have been approved for sale in each of those jurisdictions. 3. SUPERVISION OF AGENTS a. Except to the extent that Broker-Dealer is responsible therefor, General Agent shall supervise all Agents and be responsible for their training and compliance with applicable insurance laws and regulations, and if any act or omission of an Agent or employee of General Agent is the proximate cause of any loss, claim, damage, liability or expense (including reasonable attorneys' fees) to John Hancock USA or John Hancock Distributors LLC, General Agent shall be liable therefor. Broker-Dealer shall supervise Securities Agents and be responsible for their training and compliance with applicable federal and state securities laws and regulations and the rules of the National Association of Securities Dealers, Inc. ("NASD"), and if any act or omission of a Securities Agent or employee of Broker-Dealer is the proximate cause of any loss, claim, damage, liability or expense (including reasonable attorneys' fees) to John Hancock USA or John Hancock Distributors LLC, Broker-Dealer shall be liable therefor. General Agent and Broker-Dealer shall insure that only Securities Agents solicit applications for Securities Contracts. John Hancock USA and John Hancock Distributors LLC shall not have any responsibility for the supervision, training or compliance with any law or regulation of any Agent or any employee of General Agent or Broker-Dealer, and nothing in this Agreement shall be deemed to make such an Agent or employee an agent or employee of John Hancock USA or John Hancock Distributors LLC. b. General Agent shall (i) supervise Agents' compliance with all applicable suitability requirements under state insurance laws and regulations and (ii) provide adequate training to insure that Agents have thorough knowledge of each Insurance Contract and the ability to make appropriate product presentations and suitability determinations in compliance with applicable law. Broker-Dealer shall (i) supervise Securities Agents' compliance with all applicable suitability requirements under federal and state securities laws and regulations and NASD rules and (ii) provide adequate training to insure that Securities Agents have thorough knowledge of each Securities Contract and the ability to make appropriate product presentations and suitability determinations in compliance with applicable law. Each of General Agent and Broker-Dealer shall not, and shall cause the Agents not to, recommend the purchase of a Contract to a prospective purchaser unless it has reasonable grounds to believe that such purchase is suitable for the prospective purchaser and is in accordance with applicable rules and regulations of any regulatory authority, including, in the case of Securities Contracts, the Securities and Exchange Commission ("SEC") and the NASD. General Agent, in submitting an application for an Insurance Contract, and Broker-Dealer, in submitting an application for a Securities Contract, will be deemed to have warranted to John Hancock USA, and to John Hancock Distributors LLC in the case of a Securities Contract, that it has made a determination of suitability based on information concerning the prospective purchaser's insurance and investment objectives, risk tolerance, need for liquidity, and financial and insurance situation and needs, or on such other factors that General Agent or Broker-Dealer deems to be appropriate under the circumstances and in compliance with applicable law. c. If an Agent performs any unauthorized transaction with respect to a Contract, fails to submit to the supervision of or otherwise meet the rules and standards of General Agent or Broker-Dealer, or fails to hold any required license, appointment, registration or association with Broker-Dealer, General Agent and Broker-Dealer immediately shall notify John Hancock USA in writing and act to terminate the sales activities of such Agent relating to the Contracts. d. Upon request by John Hancock USA or John Hancock Distributors LLC, General Agent and Broker-Dealer shall furnish appropriate records or other documentation to evidence the diligent supervision of Agents by General Agent and Broker-Dealer. 4. OBLIGATIONS OF GENERAL AGENT AND BROKER-DEALER a. General Agent and Broker-Dealer shall permit Agents to solicit applications for Contracts only if they (i) are duly licensed insurance Agents and appointed by John Hancock USA and (ii) in the case of Securities Contracts, are also registered representatives of Broker-Dealer. b. All applications for Contracts shall be made on application forms supplied by John Hancock USA; shall be reviewed by General Agent, in the case of Insurance Contracts, and by Broker-Dealer, in the case of Securities Contracts, for completeness and correctness, as well as compliance with applicable suitability standards; in the case of Securities Contracts, shall be approved by an appropriate principal of Broker-Dealer as to suitability; when completed, shall, before the Contract is issued, be forwarded promptly, but in no case later than the end of the next business day following receipt by General Agent, Broker-Dealer or an Agent, to John Hancock USA or as otherwise provided in John Hancock USA's administrative procedures; shall be sent to John Hancock USA at the address shown on the application or such other address as John Hancock USA may specify from time to time; and shall be accompanied by any premium payment received with such applications, without any deduction or offset for any reason, including but not limited to compensation payable to General Agent or Broker-Dealer, unless John Hancock USA or John Hancock Distributors LLC and General Agent or Broker-Dealer have previously agreed to an arrangement for deduction or offset. Checks or money orders for the payment of premiums shall be drawn to the order of "John Hancock Life Insurance Company (U.S.A.)", or such other name as John Hancock USA shall authorize from time to time. General Agent and Broker-Dealer do not have authority to deposit or endorse checks payable to John Hancock USA without the prior written approval of John Hancock USA. John Hancock USA has the right in its sole discretion to reject any application for a Contract and return any premium payment made in connection with the sale of the Contract. c. John Hancock USA may require that any medical examination made in conjunction with an application for a Contract be made by a medical examiner approved by John Hancock USA and shall pay only those fees in connection with medical examinations that have been expressly authorized by it. AG1010US (01/2005) 2 of 11 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- d. Contracts issued on accepted applications shall be delivered to the contract owners according to administrative procedures established by John Hancock USA. e. General Agent and Broker-Dealer shall not, directly or indirectly, expend or contract for the expenditure of any funds of John Hancock USA or John Hancock Distributors LLC. John Hancock USA and John Hancock Distributors LLC shall not be obligated to pay any expense incurred by General Agent or Broker-Dealer in the performance of this Agreement, unless otherwise specifically provided for in this Agreement or agreed to in advance in writing by John Hancock USA or John Hancock Distributors LLC. f. General Agent and Broker-Dealer are not authorized: to incur indebtedness or make contracts on behalf of John Hancock USA or John Hancock Distributors LLC; to alter or amend any of the provisions of the Contracts or the forms prescribed by John Hancock USA or John Hancock Distributors LLC; to discharge, waive any forfeitures under or extend the time for making payments under the Contracts; to pay any premium or other payment on behalf of a Contract applicant; to enter into any court or regulatory proceeding in the name of or on behalf of John Hancock USA or John Hancock Distributors LLC; or to bind John Hancock USA or John Hancock Distributors LLC in any way not specifically authorized in writing by the party to be bound. g. General Agent and Broker-Dealer shall not induce any employee or agent of John Hancock USA to terminate that relationship, persuade owners of insurance or annuity contracts issued by John Hancock USA to discontinue their contracts or otherwise do anything prejudicial to the interests of John Hancock USA or the owners of contracts issued by it. h. General Agent and Broker-Dealer agree to comply with, and to cause the Agents to comply with, the administrative procedures of John Hancock USA relating to the Contracts and the policies and procedures adopted by John Hancock USA relating to privacy, agent conduct and similar matters and identified in the Policies and Procedures Schedule which is Exhibit C to this Agreement, to the extent such policies and procedures are applicable to the offer, sale and servicing of the Contracts, as those administrative procedures and other policies and procedures are now in effect or may be amended or established in the future by John Hancock USA in its sole discretion and communicated to General Agent and Broker-Dealer, as appropriate. General Agent and Broker-Dealer acknowledge receipt of those policies of John Hancock USA set forth in the Policies and Procedures Schedule. i. Each of General Agent and Broker-Dealer agrees to carry out its activities and obligations under this Agreement, and to cause each Agent for which it has primary supervisory responsibility to carry out the Agent's activities and obligations in connection with the offer, sale and servicing of the Contracts, in continuous compliance with applicable laws, rules and regulations of applicable federal and state regulatory authorities (including the rules of the NASD), including those governing securities and insurance-related activities or transactions, and to notify John Hancock USA and John Hancock Distributors LLC immediately in writing if it or any such Agent fails to comply with any of those laws and regulations. j. Broker-Dealer shall execute any electronic or telephone orders only in accordance with the current prospectus applicable to the Securities Contracts and agrees that, in consideration for electronic and telephone transfer privileges, John Hancock USA will not be liable for any loss incurred as a result of acting upon electronic or telephone instructions containing unauthorized, incorrect or incomplete information received from Broker-Dealer or its representatives. 5.COMPENSATION a. John Hancock USA shall pay General Agent compensation for the sale of Insurance Contracts and, on behalf of John Hancock Distributors LLC, shall pay Broker-Dealer for the sale of Securities Contracts as set forth in the Contracts Schedule. Unless otherwise provided in the Contracts Schedule, John Hancock USA will make these payments within 15 days after the end of the calendar month in which it accepts the premiums and purchase payments on which the payments are based. Notwithstanding any other provision of this Agreement, Broker-Dealer shall return to John Hancock USA all compensation paid to it with respect to a Securities Contract if the Securities Contract is tendered for redemption within seven business days after John Hancock USA's acceptance of the application for the Securities Contract. b. Except as otherwise set forth in this Agreement including the Contracts Schedule, General Agent shall be exclusively responsible for setting the compensation of and promptly paying Agents for sales of Insurance Contracts, and Broker-Dealer shall be exclusively responsible for setting the compensation of and promptly paying Agents for Securities Contracts. 6.ASSOCIATED INSURANCE AGENCY a. If they are not the same person, General Agent and Broker-Dealer represent and warrant that they are in compliance with the terms and conditions of no-action letters issued by the staff of the SEC with respect to non-registration as a broker-dealer of an insurance agency associated with a registered broker-dealer. If Broker-Dealer has entered into an agreement with one or more insurance agencies other than General Agent (each, an "Associated Agency") for purposes of selling Securities Contracts in those states in which neither Broker-Dealer nor General Agent can obtain an insurance license necessary to sell the Contracts, Broker-Dealer represents and warrants that it and each such Associated Agency are in compliance with the terms and conditions of no-action letters issued by the staff of the SEC with respect to non-registration as a broker-dealer of an insurance agency associated with a registered broker-dealer. The Broker-Dealer will supervise agents of an Associated Agency in the same manner as it is required to supervise Agents under this Agreement, as applicable. General Agent and Broker-Dealer shall notify John Hancock USA and John Hancock Distributors LLC immediately in writing if General Agent, Broker-Dealer or any Associated Agency fails to comply with any such terms and conditions and shall take such measures as may be necessary to comply with any such terms and conditions. AG1010US (01/2005) 3 of 11 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- b. In reliance on such representations and warranties, John Hancock USA, on behalf of John Hancock Distributors LLC, agrees to pay any compensation otherwise due to Broker-Dealer for sales of Securities Contracts to General Agent or Associated Agencies as authorized in writing by Broker- Dealer. c. Broker-Dealer shall have the same obligations under this Agreement with respect to sales of Securities Contracts for which compensation is paid to General Agent or an Associated Agency as it has for sales of Securities Contracts for which it receives compensation directly from John Hancock Distributors LLC or John Hancock USA. In addition, Broker-Dealer shall insure that compensation paid to General Agent or an Associated Agency is distributed only to duly licensed Securities Agents. 7. REPRESENTATIONS AND WARRANTIES a. Each of John Hancock USA, John Hancock Distributors LLC, Broker-Dealer and General Agent represents to the others that it and its officers signing below have full power and authority to enter into this Agreement, that this Agreement has been duly and validly executed by it and that this Agreement, assuming due and valid execution by the other parties, constitutes a legal, valid and binding agreement. b. General Agent represents and warrants to John Hancock USA and John Hancock Distributors LLC that General Agent is, and at all times when performing its functions and fulfilling its obligations under this Agreement will be, a properly licensed insurance agency in each jurisdiction in which such licensing is required for the sale of the Contracts. c. Broker-Dealer represents and warrants to John Hancock USA and John Hancock Distributors LLC that Broker-Dealer is, and at all times when performing its functions and fulfilling its obligations under this Agreement will be, registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934 (the "1934 Act") and under the securities laws of each state in which such registration is required for the sale of the Securities Contracts and a member of the NASD. Broker-Dealer will notify John Hancock Distributors LLC promptly in writing if any such registration or membership is terminated or suspended. d. John Hancock Distributors LLC represents and warrants to Broker-Dealer that John Hancock Distributors LLC is, and at all times when performing its functions and fulfilling its obligations under this Agreement will be, registered as a broker-dealer with the SEC under the 1934 Act and under the securities laws of each state in which such registration is required for underwriting the Securities Contracts and a member of the NASD. e. John Hancock USA represents and warrants to General Agent and Broker-Dealer that the Securities Contracts, including any variable account(s) supporting the Securities Contracts, shall comply in all material respects with applicable registration and other requirements of the 1933 Act and the Investment Company Act of 1940 (the "1940 Act"), and the rules and regulations thereunder, including the terms of any order of the SEC with respect thereto. f. John Hancock USA represents and warrants to General Agent and Broker-Dealer that the prospectuses included in John Hancock USA's registration statements for the Contracts, and in post-effective amendments thereto, and any supplements thereto, as filed or to be filed with the SEC, as of their respective effective dates, contain or will contain in all material respects all statements and information which are required to be contained therein by the 1933 Act. 8. SALES LITERATURE, ADVERTISEMENTS AND OTHER PROMOTION MATERIAL a. General Agent and Broker-Dealer shall not use, and shall cause the Agents not to use, any sales literature, advertisements or other promotional material ("Sales Material") in connection with the offer and sale of the Contracts unless the Sales Material has been approved in writing prior to use by John Hancock USA, in the case of Insurance Contracts, or John Hancock Distributors LLC, in the case of Securities Contracts. For purposes of this Agreement, Sales Material shall include but not be limited to: i. material published, or designed for use in, a newspaper, magazine or other periodical, radio, television, telephone or tape recording, video-tape display, signs or billboards, motion pictures, telephone directories (other than routine listings), electronic or other public media, or direct mail; ii. descriptive literature and sales aids of all kinds, including, but not limited to, circulars, leaflets, booklets, marketing guides, seminar material, audiovisual material, computer print-outs, depictions, illustrations and form letters; iii. material used for training and education which is designed to be used or is used to induce the public to purchase or retain a Contract; and iv. prepared sales talks and other presentations and material prepared for use with prospective purchasers of the Contracts or with the public generally. b. John Hancock USA or John Hancock Distributors LLC will provide Broker-Dealer, without charge, with as many copies of the prospectuses and statements of additional information for the Securities Contracts and the underlying investment funds as may be reasonably requested ("Registration Material"). Upon receipt of updated Registration Material, Broker-Dealer will promptly discard or destroy all copies of Registration Material previously provided to it, except as needed to maintain proper records. c. Upon notice to General Agent or Broker-Dealer, John Hancock USA or John Hancock Distributors LLC may terminate at any time and for any reason the use of any Sales Material previously approved by it or of any Registration Material, and General Agent and Broker-Dealer shall promptly comply with any such request and shall not use, or permit an Agent to use, such material thereafter. AG1010US (01/2005) 4 of 11 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- d. General Agent and Broker-Dealer are not authorized, and may not authorize anyone else, to give any information or to make any representation concerning John Hancock USA, the Contracts, the separate accounts of John Hancock USA or the underlying investment funds for the Contracts other than those contained in the current Registration Material and Sales Material authorized for use by John Hancock USA or John Hancock Distributors LLC. Broker-Dealer, General Agent and Agents may not modify or represent that they are authorized to modify any such material. e. General Agent shall be responsible for all communications by Agents with prospective purchasers of, and with the public generally in connection with, Insurance Contracts. Broker-Dealer shall be responsible for all communications by Securities Agents with prospective purchasers of, and with the public generally in connection with, Securities Contracts. 9. GROUP ANNUITY CONTRACTS For purposes of this Agreement, a group annuity contract which has not been registered under the 1933 Act and which is to be issued in connection with a stock bonus, pension, or profit-sharing plan which meets the requirements for qualification under section 401 of the Internal Revenue Code (or in connection with another kind of plan specified in Section 3(a)(2) of the 1933 Act) ("Exempt Group Contract") shall be deemed to be an Insurance Contract, but a sale of an Exempt Group Contract by a Securities Agent shall be subject to any applicable NASD rules. Broker-Dealer shall supervise and maintain records with respect to such transactions as may be required by any applicable NASD rules 10. FIDELITY BOND AND OTHER LIABILITY COVERAGE Each of General Agent and Broker-Dealer represents that it and its directors, officers and employees and the Insurance Agents, in the case of General Agent, and the Securities Agents, in the case of Broker-Dealer, are and shall be covered by a blanket fidelity bond, issued by a reputable bonding company, and other errors and omissions or liability insurance, acceptable to John Hancock USA ("Liability Coverage"). Each of General Agent and Broker-Dealer shall maintain its Liability Coverage at its expense. Liability Coverage shall be in a form, type and amount and issued by a bonding company or other insurance company satisfactory to John Hancock USA. Any fidelity bond maintained by Broker-Dealer which meets the requirements of the NASD Conduct Rules applicable to fidelity bonds shall be deemed to be satisfactory. John Hancock USA may require evidence, satisfactory to it, that such coverage is in force, and General Agent and Broker-Dealer shall give prompt written notice to John Hancock USA of any cancellation or change of coverage. Each of General Agent and Broker-Dealer assigns any proceeds received from the Liability Coverage to John Hancock USA to the extent of its loss, and to John Hancock Distributors LLC to the extent of its loss, due to activities covered by the Liability Coverage and agrees to pay promptly any deficiency whether due to a deductible or otherwise. 11. COMPLAINTS, INVESTIGATIONS AND PROCEEDINGS Each of General Agent and Broker-Dealer shall promptly notify John Hancock USA and John Hancock Distributors LLC if it receives notice of any customer complaint or of any threatened or pending regulatory investigation or proceeding, civil action or arbitration (a "Proceeding") involving the Contracts. John Hancock USA or John Hancock Distributors LLC will promptly notify General Agent or Broker-Dealer if it receives notice of any customer complaint or of any Proceeding involving General Agent or Broker-Dealer and the Contracts. Each party shall cooperate with the other parties in investigating and responding to any such complaint or Proceeding, and in any settlement or trial of any actions arising out of the conduct of business under this Agreement. No response by General Agent or Broker-Dealer to an individual customer complaint involving a Contract will be sent until it has been approved by John Hancock USA or John Hancock Distributors LLC or dealt with otherwise in accordance with John Hancock USA's administrative procedures. 12. INDEMNIFICATION a. General Agent and Broker Dealer, jointly and severally, indemnify and hold harmless John Hancock USA, John Hancock Distributors LLC, and their respective affiliates, officers, directors, employees and agents against any and all loss, claim, damage, liability or expense (including reasonable attorneys' fees), joint or several, insofar as such loss, claim, damage, liability or expense arises out of or is based upon any breach of this Agreement, any applicable law or regulation, or any applicable rule of any self-regulatory organization, by General Agent, Broker-Dealer or any of the Agents. This indemnification will be in addition to any liability which the General Agent and Broker-Dealer may otherwise have. b. John Hancock USA and John Hancock Distributors LLC, jointly and severally, indemnify and hold harmless General Agent, Broker-Dealer and their respective affiliates, officers, directors, employees and Agents against any and all loss, claim, damage, liability or expense (including reasonable attorneys' fees), joint or several, insofar as such loss, claim, damage, liability or expense arises out of or is based upon any breach of this Agreement, any applicable law or regulation, or any applicable rule of any self-regulatory organization, by John Hancock USA or John Hancock Distributors LLC. This indemnification will be in addition to any liability which John Hancock USA and John Hancock Distributors LLC may otherwise have. AG1010US (01/2005) 5 of 11 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 13. TERMINATION a. Any party may terminate this Agreement in its discretion without cause upon thirty (30) days written notice to the other parties. b. John Hancock USA or John Hancock Distributors LLC may terminate this Agreement effective with the mailing of a notice of termination to General Agent or Broker-Dealer if the reasons for the termination include (i) conversion, fraud, embezzlement or similar activity, (ii) failure to maintain Liability Coverage as required by Section 10 or (iii) a rebate of, offer to rebate or withholding of any payment due on a Contract by General Agent or Broker-Dealer. c. This Agreement will terminate automatically without notice, effective as of the immediately preceding date, if: General Agent or Broker-Dealer ceases to have the requisite registrations and regulatory licenses (but only as to the jurisdictions and Contracts affected by the absence of such registrations and licenses); applicable laws or regulations otherwise prohibit General Agent or Broker-Dealer from continuing to market the Contracts; or General Agent or Broker-Dealer files for bankruptcy or financial or corporate reorganization under federal or state insolvency law. d. No provision of this Agreement shall continue in force after any termination, other than Sections 11, 12, 14, 15, 18, 19, 20 and 21, and the Contracts Schedule. 14. CONFIDENTIALITY Each party to this Agreement shall maintain the confidentiality of any customer list and any material designated as confidential and/or proprietary by another party ("Confidential Information"), and shall not use or disclose such information without the prior written consent of the party designating such material as confidential and/or proprietary. Each party to this Agreement shall take reasonable steps to protect such Confidential Information, applying at least the same security measures and level of care as it employs to protect its own Confidential Information. If any party to this Agreement is compelled by applicable law to disclose any Confidential Information, it shall promptly notify the party designating such material as confidential and/or proprietary in writing. The General Agent and Broker-Dealer shall cause Agents to comply with this provision. 15. AMENDMENTS This Agreement may be amended in a writing signed by all the parties. If John Hancock USA and John Hancock Distributors LLC send written notice of a proposed amendment to this Agreement to General Agent and Broker-Dealer, General Agent and Broker-Dealer shall be deemed to have agreed to the amendment if either submits an application for a Contract on or after the fifth business day after the date on which the notice was sent. John Hancock USA may also unilaterally suspend distribution of any of the Contracts and amend the Schedules to this Agreement in any and all respects, from time to time in its sole discretion, with prior or concurrent written notice to General Agent and Broker-Dealer. Any change in compensation shall apply to compensation due on applications received by John Hancock USA after the effective date of the notice. John Hancock USA may also amend the Contracts from time to time, in its sole discretion, and nothing in this Agreement shall be deemed to affect its right to so amend the Contracts. 16. BOOKS AND RECORDS a. General Agent and Broker-Dealer shall maintain such books and records concerning the activities of the Agents as may be required under applicable insurance and securities laws and regulations and the rules of the NASD, and as may be reasonably required by John Hancock USA or John Hancock Distributors LLC to reflect adequately the Contracts business processed through General Agent or Broker-Dealer. General Agent and Broker-Dealer shall maintain such books and records at their respective principal places of business in good and legible condition for a period of six calendar years following the year in which this Agreement is terminated (the "Post-Termination Period") and shall make them available during normal business hours to John Hancock USA or John Hancock Distributors LLC from time to time while this Agreement is in effect and during the Post-Termination Period upon 10 days' written request. b. The parties shall promptly furnish each other any reports and information that another party may reasonably request for the purpose of meeting its reporting and recordkeeping requirements under the insurance laws of any state or under any applicable federal or state securities laws or regulations or NASD rules. AG1010US (01/2005) 6 of 11 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 17. NOTICES a. All notices under this Agreement shall be given in writing and sent to the address of a party shown on the signature page or to such other address as the party may designate in writing. b. Each of General Agent and Broker-Dealer shall provide written notice to John Hancock USA no less than thirty days prior to the closing date of its proposed merger into or consolidation with another entity, a sale of substantially all its assets or a sale, transfer or assignment of a controlling interest in it. 18. EFFECTIVE DATE This Agreement supersedes in its entirety any other effective selling agreement between the General Agent or Broker-Dealer and John Hancock USA, or John Hancock Distributors LLC. If this Agreement is executed by General Agent and Broker-Dealer and returned to John Hancock USA, it shall be effective as of the date of its execution by John Hancock USA. 19. REGULATIONS All parties agree to observe and comply with all existing laws, rules and regulations of all applicable local, state or federal regulatory authorities (including the rules of the NASD), and with all existing rules and regulations of any self-regulatory organization, and to observe and comply with those laws, rules and regulations which may be enacted, adopted or promulgated during the term of this Agreement, which relate to the business contemplated hereby in any jurisdiction in which the business described herein is to be transacted. John Hancock Distributors LLC and Broker-Dealer agree to comply with all applicable anti-money laundering laws, regulations, rules and government guidance, including the reporting, record-keeping and compliance requirements of the Bank Secrecy Act ("BSA"), as amended by the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2002, Title III of the USA PATRIOT Act ("the Act"), its implementing regulations, and related SEC, SRO, and NASD rules. Further, Broker/Dealer agrees to comply with the economic sanctions programs administered by the U.S. Treasury Department's Office of Foreign Assets Control ("OFAC"). Broker-Dealer acknowledges that John Hancock Distributors LLC will rely on Broker-Dealer to perform the requirements of the Customer Identification Program ("CIP") mandated under the USA Patriot Act and rules thereunder with respect to the sale of the Contracts solicited and sold by Broker-Dealer. Broker-Dealer further agrees to certify annually to John Hancock Distributors LLC that Broker-Dealer has implemented an anti-money laundering program and will perform the specific requirements of the CIP for John Hancock Distributors LLC regarding the sale of the Contracts solicited and sold by Broker-Dealer. 20. OTHER This Agreement contains the entire understanding of the parties with respect to the subject matter hereof, supersedes all prior agreements and understandings among the parties regarding the subject matter, may be executed in two or more counterparts which together shall constitute a single agreement, may not be assigned by any party without the written consent of the other parties (except that it may be assigned by John Hancock USA to a successor in connection with a merger, consolidation or sale of all or substantially all of the assets of John Hancock USA, and may be assigned by John Hancock Distributors LLC to an affiliate or successor and shall inure to the benefit of and to be binding upon the parties and their respective successors and assigns. Forbearance by a party to require performance of any provision hereof shall not constitute or be deemed a waiver by that party of such provision or of the right thereafter to enforce the same, and no waiver by a party of any breach or default hereunder shall constitute or be deemed a waiver of any subsequent breach or default, whether of the same or similar nature or of any other nature, or a waiver of the provision or provisions with respect to which such breach or default occurred. This Agreement shall be governed and construed in all respects by the laws of the State of Michigan without reference to the principles of conflict or choice of law thereof. 21. ARBITRATION Any and all disputes under this Agreement shall be settled by arbitration in Massachusetts under the then existing rules of the American Arbitration Association and judgment may be entered upon the award in any court of competent jurisdiction. The determination of the arbitrators shall be final and binding on all parties. The costs of arbitration shall be borne equally by the parties to the arbitration, provided however, that the arbitrators may assess one party more heavily than the other for these costs upon a finding that such party did not make a good faith effort to settle the dispute informally when it first arose. AG1010US (01/2005) 7 of 11 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date set forth below. GENERAL AGENT BROKER-DEALER ______________________________________ ______________________________________ Name Name ______________________________________ ______________________________________ Street Address Street Address ______________________________________ ______________________________________ City, State & Zip City, State & Zip By: __________________________________ By: __________________________________ Title: _______________________________ Title: _______________________________ Date: ________________________________ Date: ________________________________ JOHN HANCOCK LIFE INSURANCE JOHN HANCOCK DISTRIBUTORS LLC COMPANY (U.S.A.) P.O. Box 4700 P.O. Box 600 Buffalo, NY Buffalo, NY 14240-4700 14201-0600 Attn: Agency Department Attn: Operations Department By: __________________________________ By: __________________________________ Title: _______________________________ Title: _______________________________ Date: ________________________________ Date: ________________________________ AG1010US (01/2005) 8 of 11 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Exhibit A Contracts, Commissions and Fees Schedule General Provisions Compensation. Unless otherwise provided in this Contracts Schedule, commissions will be paid as a percentage of premiums or purchase payments (collectively, "Payments") received in cash or other legal tender and accepted by John Hancock USA on applications obtained by Agents. Such Payments will be payable in respect of the sale of such Contracts, in such amounts, and upon such terms as are set forth in the applicable commission schedules together with any accompanying schedules relating to the Payments, (the "Commission Schedules"), established by John Hancock USA and John Hancock Distributors LLC and covering each Contract, as are in effect from time to time, to which such Payments relate. John Hancock USA and John Hancock Distributors LLC expressly reserve the right to transfer future compensation on a Contract to another General Agent or Broker-Dealer if the owner of the Contract so requests. Upon termination of the Agreement, General Agent and Broker-Dealer shall receive no further compensation, except for compensation for all Payments which are in process at the time of termination of the Agreement or are received subsequently on Contracts in force at the time of termination of the Agreement, unless otherwise provided in an applicable Commission Schedule. Notwithstanding the foregoing, no Payments will be made with respect to an increase in the face amount of a Contract when the Agreement is terminated prior to such increase, and when the Agreement is terminated, no Payments with respect to any Securities Contracts shall be made after the Broker-Dealer ceases to be properly licensed to sell Securities Contracts. General Agent and Broker-Dealer shall continue to be liable for any chargebacks pursuant to the provisions of this Contracts Schedule, and for any other amounts advanced by or otherwise due John Hancock USA or John Hancock Distributors LLC under the Agreement. Joint Business. Any Contract sold by General Agent or Broker-Dealer in conjunction with any other person authorized to sell the Contracts shall be considered as joint business and, unless otherwise agreed to by John Hancock USA, the amount of the compensation due on the Payments accepted under that Contract shall be apportioned equally among each participant in the sale. General Agent or Broker-Dealer shall provide John Hancock USA with written notice of any such joint business and of the existence of any agreement among participants for unequal apportionment of compensation. Prohibition Against Rebates. General Agent and Broker-Dealer shall not, and shall cause the Agents not to, rebate, offer to rebate or withhold any part of any payments due on the Contracts. If General Agent, Broker-Dealer or any Agent shall at any time induce or endeavor to induce any owner of any Contract to discontinue payments or to relinquish any such Contract, except under circumstances where there is reasonable grounds for believing the Contract is not suitable for such person, John Hancock USA shall forthwith cease paying any and all compensation that would otherwise be due General Agent or Broker-Dealer under this Agreement. Right of Set Off. Each of General Agent and Broker-Dealer hereby authorizes John Hancock USA to set off its liabilities to John Hancock USA and John Hancock Distributors LLC against any and all amounts otherwise payable to General Agent or Broker-Dealer, including amounts payable under the Agreement or under any other agreement pursuant to which General Agent or Broker-Dealer receive compensation directly or indirectly from John Hancock USA. Each of General Agent and Broker-Dealer shall be liable for the portion of any debit balance equal to advances on unearned compensation which appears in their respective Advance Accounts. Such portion of the debit balance shall be payable by General Agent or Broker-Dealer, as applicable, upon demand by John Hancock USA. At the option of John Hancock USA, interest at the maximum rate permissible by state law will accrue on such portion of the debit balance from the time a debit balance occurs in such account. Paying Agent for Insurance Contracts. At the request of General Agent, John Hancock USA, at its discretion, may agree to act as General Agent's paying agent and make payments of compensation directly to such Insurance Agents and such other appropriate parties who are not employees of General Agent but are appointed with John Hancock USA and are entitled to compensation from General Agent in connection with the sale of those Insurance Contracts that are not variable annuity contracts or variable life insurance policies, as General Agent may designate from time to time. AG1010US (01/2005) 9 of 11 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Exhibit B General Letter of Recommendation General Agent hereby certifies to John Hancock USA that all of the following requirements will be fulfilled in conjunction with the submission by General Agent of licensing/appointment papers for all applicants to become Agents ("Applicants"). General Agent will, upon request, forward proof of compliance with same to John Hancock USA in a timely manner. 1. We have made a thorough and diligent inquiry and investigation relative to each Applicant's identity, residence, business reputation and experience and declare that each Applicant is personally known to us, has been examined by us, is known to have a good business reputation, is reliable, is financially responsible and is worthy of a license and appointment as an Agent. Each individual is trustworthy, competent and qualified to act as an agent for John Hancock USA and hold himself out in good faith to the general public. We vouch for each Applicant. 2. We have on file a Form B-300, B-301 or U-4 which was completed by each Applicant. With respect to each Applicant to become a Securities Agent, we have fulfilled all the necessary investigative requirements for the registration of each such Applicant as a registered representative through our NASD member firm, and each such Applicant is presently registered as an NASD registered representative. The above information in our files indicates no fact or condition which would disqualify the Applicant from receiving a license, and all the findings of all investigative information is favorable. 3. We certify that all educational requirements have been met for the specific state in which each Applicant is requesting a license and that all such persons have fulfilled the appropriate examination, education and training requirements. 4. If the Applicant is required to submit his or her picture, signature and securities registration in the state in which he or she is applying for a license, we certify that those items forwarded to John Hancock USA are those of the Applicant and the securities registration is a true copy of the original. 5. We hereby warrant that the Applicant is not applying for a license with John Hancock USA in order to place insurance chiefly or solely on his or her life or property or on the lives, property or liability of his or her relatives or associates. 6. We certify that each Applicant will receive close and adequate supervision, and that we will make inspection when needed of any or all risks written by these Applicants, to the end that the insurance interest of the public will be properly protected. 7. We will not permit any Applicant to transact insurance as an agent until duly licensed therefor. No Applicants have been given a contract or furnished supplies, nor have any Applicants been permitted to write, solicit business or act as an agent in any capacity, and they will not be so permitted until the certificate of authority or license applied for is received. 8. We certify that General Agent, Broker-Dealer and Applicant shall have entered into a written agreement pursuant to which: (a) Applicant is appointed a Sub-agent of General Agent and a registered representative of Broker-Dealer; (b) Applicant agrees that his or her selling activities relating to the Securities Contracts shall be under the supervision and control of Broker-Dealer and his or her selling activities relating to the Insurance Contracts shall be under the supervision and control of General Agent; and (c) that Applicant's right to continue to sell such Contracts is subject to his or her continued compliance with such agreement and any procedures, rules or regulations implemented by Broker-Dealer or General Agent. AG1010US (01/2005) 10 of 11 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Exhibit C Policies and Procedures Schedule In addition to its administrative procedures, John Hancock USA has adopted the following Codes which contain policies and procedures applicable to the offer, sale and servicing of the Contracts: Privacy Code Agent's Code of Conduct AG1010US (01/2005) 11 of 11 -------------------------------------------------------------------------------- EX-99.27(D)(1) 4 dex9927d1.txt FORM OF SPECIMEN FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY [LOGO OF JOHN HANCOCK COMPANY] Life Insurance Company (U.S.A.) A Stock Company LIFE INSURED [John J. Doe] POLICY NUMBER [12 345 678] PLAN NAME [Corporate VUL] FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY ADJUSTABLE DEATH BENEFIT BENEFIT PAYABLE ON LIFE INSURED'S DEATH FLEXIBLE PREMIUMS PAYABLE TO ATTAINED AGE 100 DURING THE LIFE INSURED'S LIFETIME NON-PARTICIPATING (NOT ELIGIBLE FOR DIVIDENDS) Subject to the conditions and provisions of this policy, if the Life Insured dies while the policy is in force, the John Hancock Life Insurance Company (U.S.A.) ("the Company") agrees to pay the Insurance Benefit to the beneficiary in a lump sum, and to provide the other benefits, rights, and privileges, if any, of the policy. The Insurance Benefit is described in Section 6. If the Company makes other plans of payment available other than a lump sum, then a Beneficiary may request written election of any such other plans in lieu of a lump sum. Your Net Premiums are added to your Policy Value. You may allocate them to one or more of the Investment Accounts and to the Fixed Account, subject to Section 16, and any other applicable provisions of the policy. The portion of your Policy Value that is in an Investment Account will vary from day to day. The amount is not guaranteed; it may increase or decrease, depending on the investment experience of the underlying Subaccounts for the Investment Accounts that you have chosen. The portion of your Policy Value that is in the Fixed Account will accumulate, after deductions, at rates of interest we determine. Such rates will not be less than the Fixed Account Annual Rate shown in Section 1. The amount of the Insurance Benefit, or the duration of the insurance coverage, or both, may be variable or fixed under specified conditions and may increase or decrease as described in Section 6. READ YOUR POLICY CAREFULLY. It is a contract between you and us. RIGHT TO RETURN POLICY. If for any reason you are not satisfied with your policy, you may return it for cancellation by delivering or mailing it to us or to the agent who sold it. If this policy does not replace another policy, you may return it within TEN days after receiving it, or if it replaces another policy, you may return it within TWENTY days after receiving it. We will refund in full the payment made. The policy will be void from the beginning. Signed for the Company by: SPECIMEN SPECIMEN /s/ John DesPrez III /s/ James D. Gallagher -------------------- ---------------------- President Secretary 05CVUL C0105A Policy Provisions Section 1. Policy Specifications 2. Table of Rates 3. Definitions 4. Qualification as Life Insurance 5. Total Face Amount 6. Insurance Benefit 7. Interest On Proceeds 8. Premiums 9. Grace Period 10. Policy Termination 11. Reinstatement 12. Coverage at and after Attained Age 100 13. Policy Value 14. Loan Account, Fixed Account, Investment Accounts 15. Separate Account and Subaccounts 16. Allocations and Transfers 17. Loans 18. Surrenders and Withdrawals 19. Owner and Beneficiary 20. Assignment 21. Misstatements 22. Suicide 23. Incontestability 24. The Contract 25. Right to Postpone Payment of Benefits 26. Claims Of Creditors 27. Reports To Owner 28. How Values Are Computed 2 --------------------------------------------------------------------------------------- 1. POLICY SPECIFICATIONS --------------------------------------------------------------------------------------- Life Insured [JOHN DOE] Plan Name [Corporate VUL] Age at Policy Date [35] Policy Number [12 345 678] Sex [MALE] Issue Date [July 1, 2005] Risk Classification [Non Smoker] [Standard] Policy Date [July 1, 2005] Additional Ratings [not applicable] Owner, Beneficiary As designated in the application or subsequently changed Death Benefit Option at Issue [Option 1] Life Insurance Qualification [Cash Value Accumulation Test] Test Elected Base Face Amount at Issue $[500,000] Supplemental Face Amount at Issue $[ 0] ---------- Total Face Amount at Issue $[500,000] Governing Law [Alaska] [Other Benefits and Specifications] [As hereinafter described in this Section 1] [Enhanced Cash Value Rider] PREMIUMS AT ISSUE Premium Mode [Annual] Planned Premium $ [20,295.00 per year] Minimum Initial Premium $ [1,691.25] [Limiting Premium] $ [20,295.00]
Notice: This policy provides life insurance coverage for the lifetime of the Life Insured if sufficient premiums are paid. Premium payments in addition to the planned premium shown may need to be made to keep this policy and coverage in force. Keeping the policy and coverage in force will be affected by factors such as: changes in the current cost of insurance rates; the amount, timing and frequency of premium payments; the interest rate being credited to the Fixed Account; the investment experience of the Investment Accounts; changes to the death benefit option; changes in the Total Face Amount; loan activity; withdrawals; and deductions for any applicable Supplementary Benefit riders that are attached to, and made a part of, this policy. Also refer to the Grace Period and Policy Termination provisions in Sections 9 and 10. 3 C0305A ------------------------------------------------------------------------------------------------ 1. POLICY SPECIFICATIONS (continued) - Policy [12 345 678] ------------------------------------------------------------------------------------------------ MAXIMUM EXPENSE CHARGES Deductions from Premium Payments Premium Charge [7.00%] of each premium paid [Enhanced Cash [0.5%] of premium paid up to the Limiting Premium in each Value Rider of the first [7] Policy Years as defined under Rider Information Charge] in this Section 1] Monthly Deductions: the following charges are deducted monthly from the Policy Value Administrative Charge $ 12.00 Face Amount Charge $ [0.21] per $1000 of Base Face Amount for the first 10 Policy Years Cost of Insurance Determined in accordance with Section 13. Maximum monthly rates Charge per $1,000 are shown in Section 2. Asset-Based Risk Percentage of Investment Account assets as shown below Charge (percentage shown is deducted monthly): Percent of Investment Policy Years Account assets 1-10 [0.075]% 11+ [0.03]% Supplementary Benefit Charges for applicable riders are shown under Supplementary rider charges Benefits of this Section 1. Withdrawal Fee $ 25.00 per withdrawal, or 2 % of the withdrawal if less.
3A C03A05A --------------------------------------------------------------------------------------------- 1. POLICY SPECIFICATIONS (continued) - Policy [12 345 678] --------------------------------------------------------------------------------------------- TABLE OF VALUES Refer to your policy provisions for details on the terms and values shown in this table. Minimum Total Face Amount $ 100,000 Minimum Base Face Amount $ 50,000 Maximum Supplemental Face Amount [$ .00] Allocation Date [10TH day after the Issue Date] Fixed Account Annual Rate Not less than 3% Loan Interest Credited Annual Rate Not less than 3% Maximum Loan Interest Charged Annual Rate Policy Years 1-10 3.75% Policy Years 11+ 3.25% Maximum Loan Interest Credited Differential Policy Years 1-10 0.75% Policy Years 11+ 0.25% Minimum Loan Amount $ 500 Minimum Withdrawal Amount $ 500 Death Benefit Discount Factor 1.0024663 Maximum Transfer Fee $25 (See Section 16 for Transfer Restrictions) Fixed Account Maximum Transfer Percentage 25% Fixed Account Maximum Transfer Amount $2,000 Investment Account Maximum Transfer Amount $ 1,000,000 Maximum Annual Premium $ 1,000,000
3B C03B05A ------------------------------------------------------------------------------------- 2. TABLE OF RATES- Policy [12 345 678] ------------------------------------------------------------------------------------- A. RATE TABLE Minimum Minimum Maximum Monthly Death Maximum Monthly Death Attained Rates per $1,000 of Benefit Attained Rates per $1,000 of Benefit Age Net Amount at Risk Factors Age Net Amount at Risk Factors ------------------------------------------------------------------------------------- 35 0.176 3.9726 79 7.924 1.2737 36 0.187 3.8433 80 8.635 1.2560 37 0.200 3.7186 81 9.431 1.2392 38 0.215 3.5985 82 10.339 1.2232 39 0.233 3.4829 83 11.374 1.2082 40 0.252 3.3717 84 12.514 1.1942 41 0.275 3.2649 85 13.738 1.1812 42 0.297 3.1623 86 15.022 1.1692 43 0.323 3.0636 87 16.357 1.1580 44 0.350 2.9689 88 17.738 1.1475 45 0.380 2.8779 89 19.172 1.1374 46 0.411 2.7904 90 20.678 1.1277 47 0.444 2.7064 91 22.287 1.1181 48 0.480 2.6255 92 24.064 1.1082 49 0.519 2.5477 93 26.120 1.0979 50 0.561 2.4728 94 28.813 1.0869 51 0.610 2.4008 95 32.818 1.0748 52 0.666 2.3317 96 39.643 1.0616 53 0.729 2.2654 97 53.066 1.0476 54 0.800 2.2019 98 83.333 1.0334 55 0.877 2.1412 99 83.333 1.0198 56 0.960 2.0831 100+ 0.000 1.0000 57 1.047 2.0275 58 1.140 1.9742 59 1.239 1.9230 60 1.350 1.8740 61 1.474 1.8269 62 1.613 1.7818 63 1.772 1.7387 64 1.949 1.6976 65 2.143 1.6584 66 2.351 1.6211 67 2.573 1.5855 68 2.809 1.5516 69 3.065 1.5191 70 3.354 1.4880 71 3.682 1.4583 72 4.060 1.4301 73 4.496 1.4033 74 4.984 1.3781 75 5.513 1.3546 76 6.077 1.3325 77 6.666 1.3117 78 7.276 1.2922 The above rates will be adjusted for any applicable Additional Ratings shown in Section 1.
4 C0405A -------------------------------------------------------------------------------- 3. DEFINITIONS -------------------------------------------------------------------------------- The term "Additional Rating" is an increase in the Cost of Insurance that is applied when a Life Insured does not meet, at a minimum, our underwriting requirements for the standard Risk Classification. The term "Age" means, on any policy anniversary, the age of the person in question at his or her birthday nearest that date. The term "Annual Processing Date" means every 12th Processing Date starting with the Processing Date next after the Policy Date. The term "Attained Age" on any date means the Age plus the number of whole years that have elapsed since the Policy Date. The term "Business Day" means any day that we are open for business and the New York Exchange is open for trading. The net asset value of the underlying shares of a Subaccount will be determined at the end of each Business Day. We will deem each Business Day to end at the close of regularly scheduled trading of the New York Stock Exchange (currently 4:00 p.m. Eastern Time) on that day. The term "date" means a calendar day ending at midnight local time at our Service Office. The term "Fixed Account" is that part of the Policy Value which reflects the value you have in our general account. The term "Fund" means each division, with a specific investment objective, of a Series Fund. The term "in force" means that the policy has not terminated in accordance with Section 10, or surrendered in accordance with Section 18. The term "Investment Account" means that part of the Policy Value which reflects the value you have in one of our Subaccounts. The term "Issue Date" is the date shown in the Policy Specifications of this policy from which the Suicide and Incontestability provisions are applied. The term "Minimum Initial Premium" means the minimum premium needed to put the policy in force and is shown in Section 1. The term "Loan Account" is that part of the Policy Value which reflects amounts transferred from the Fixed Account or the Investment Accounts as collateral for a policy loan. The term "Net Cash Surrender Value" equals the Policy Value less the Policy Debt. The term "Net Policy Value" equals the Policy Value less the value in the Loan Account. The term "Net Premium" is the gross premium paid less any Premium Charge. It is the amount of premium allocated to the Fixed Account and or to the Investment Accounts. The term "Planned Premium" means the premium that is selected in the application for the policy, which is intended to be paid on a regular modal basis. The term "Policy Date" is the date from which charges for the first Monthly Deduction are calculated. The Policy Date is shown in Section 1. Policy Years, Policy Months, and Policy Anniversaries are determined from the Policy Date. The term "Policy Debt" as of any date equals (a) plus (b) plus (c), minus (d), where: (a) is the total amount of loans borrowed as of such date; (b) is the total amount of any unpaid loan interest charges borrowed against the policy on a Policy Anniversary; (c) is any interest charges accrued from the last Policy Anniversary to the current date; and (d) is the total amount of loan repayments as of such date. The term "Policy Value" is the sum of the values in the Loan Account, the Investment Accounts, and the Fixed Account. The term "Policy Year" means (a) or (b) below whichever is applicable. (a) The first Policy Year is the period beginning on the Policy Date and ending on the Business Day immediately preceding the first Annual Processing Date. (b) Each subsequent Policy Year is the period beginning on an Annual Processing Date and ending on the Business Day immediately preceding the next Annual Processing Date. 5 C0505A -------------------------------------------------------------------------------- 3. DEFINITIONS (continued) -------------------------------------------------------------------------------- The term "Processing Date" means the first day of a Policy Month. A Policy Month shall begin on the day in each calendar month that corresponds to the day of the calendar month on which the Policy Date occurred. If the Policy Date is the 29th, 30th, or 31st day of a calendar month, then for any calendar month that has fewer days, the first day of the Policy Month will be the last day of such calendar month. The Policy Date is not a Processing Date. The term "Separate Account" means Separate Account N of the John Hancock Life Insurance Company (U.S.A.). The term "Series Fund" means a series type mutual fund registered under the Investment Company Act of 1940 as an open-end diversified management investment company. The term "Service Office" is the office that we designate to service this policy as shown on the back cover of your policy. The term "Subaccount" refers to one of the subaccounts of the Separate Account. The terms "we", "us", and "our" refer only to the Company. The term "written request" is your request to us which must be in a form satisfactory to us, signed and dated by you, and filed at our Service Office or, if permitted by our administrative practices, an electronic mail message ("e-mail") received by us at the internet address specified by us for receipt of such messages. The terms "you" and "your" refer only to the Owner of this policy. -------------------------------------------------------------------------------- 4. QUALIFICATION AS LIFE INSURANCE -------------------------------------------------------------------------------- It is the intent that this policy be considered as life insurance for federal income tax purposes, notwithstanding any other provisions of the policy to the contrary, in order to comply with Section 7702 of the Internal Revenue Code of 1986, or any other equivalent section of the Code. We reserve the right to make any reasonable adjustments to the terms or conditions of this policy if it becomes necessary to allow it to qualify as life insurance. This provision should not be construed to guarantee that this policy will receive tax treatment as life insurance or that the tax treatment of life insurance will never be changed by the future actions of any tax authority. In order for this policy to qualify as life insurance, one of the following tests will apply to the policy. The test you elected is shown in Section 1. Your election cannot be changed after issue. Guideline Premium Test Under this test, the sum of the premiums paid into the policy may not at any time exceed the guideline premium limitation as of such time. The guideline premium limitation, is as of any date, the greater of: (a) the Guideline Single Premium; and (b) the sum of the Guideline Level Premiums to such date. If you elected this test, the Guideline Single Premium and the Guideline Level Premium are shown in Section 1. If at any time the premiums received under the policy exceed the amount allowable for such tax qualification, such excess amount shall be removed from the policy as of the date of its payment, together with interest and/or investment experience thereon from such date, and any appropriate adjustment in the Death Benefit shall be made as of such date. This excess amount shall be refunded to you no later than 60 days after the end of the applicable Policy Year. If this excess amount is not refunded by then, the Total Face Amount under the policy shall be increased retroactively so that at no time is the Death Benefit ever less than the amount necessary to ensure or maintain such tax qualification. In no event, however, will we refuse to accept any premium necessary to prevent the policy from terminating but only if such premium payment would result in a zero Policy Value at the end of the policy year. In addition, the Minimum Death Benefit, as described in section 6, must be maintained. Cash Value Accumulation Test Under this test, the Minimum Death Benefit, as described in section 6, must be maintained. We reserve the right to modify the Minimum Death Benefit Factors shown in Section 2, retroactively if necessary, to ensure or maintain qualification of this policy as a life insurance contract for federal income tax purposes, notwithstanding any other provisions of this policy to the contrary. Effect on Life Insurance Qualification Tests A change in Death Benefit Option or Total Face Amount, or certain other policy changes, will often change the policy's limits under the Life Insurance Qualification Test that you elected. As applicable, the Guideline Single Premium and the Guideline Level Premium may be changed. We reserve the right to refuse or limit any request for a change if the change would cause the policy to fail to qualify as life insurance for tax purposes. 6 -------------------------------------------------------------------------------- 5. TOTAL FACE AMOUNT -------------------------------------------------------------------------------- The Total Face Amount is made up of two components: (i) the Base Face Amount, and (ii) any Supplemental Face Amount. Minimum Base Face Amount, minimum Total Face Amount and maximum Supplemental Face Amount limits are shown in Section 1. Upon request, we will consider waiving such limits. The Total Face Amount remains equal to the Total Face Amount at Issue, shown in Section 1, unless we agree to a change. If scheduled increases in any Supplemental Face Amount are permitted, they are elected on the application. After the first Policy Year, while the Life Insured is alive and the policy is in force, unscheduled changes to the Base Face Amount and Supplemental Face Amount may be requested in writing. We reserve the right to limit the number of such unscheduled changes to one per Policy Year. We also reserve the right to limit the maximum and minimum amounts of unscheduled changes. All requested changes will be subject to our approval. Increase in Total Face Amount As a condition of our approval of any unscheduled increase in Total Face Amount, we may require evidence of insurability satisfactory to us. A minimum premium payment may also be required. When a requested change becomes effective, and if required by our then current rules, a change in future Planned Premiums will automatically be effected to comply with those rules. Any change will be effective on the next Annual Processing Date after our approval. Reduction of Total Face Amount You may request a reduction in Total Face Amount while this policy is in force. Any reduction in the Total Face Amount will be implemented by first reducing any Supplemental Face Amount. We reserve the right to allow a reduction in Base Face Amount first. Without our prior approval, the Base Face Amount cannot be reduced below the minimum as shown in Section 1. Any reduction in Supplemental Face Amount or Base Face Amount will be effective on the next Processing Date after our approval. -------------------------------------------------------------------------------- 6. INSURANCE BENEFIT -------------------------------------------------------------------------------- If the Life Insured dies while the policy is in force, we will pay the Insurance Benefit upon receipt of due proof of death of the Life Insured, subject to any applicable provisions of the policy. If the Life Insured dies on or after the date we receive a request from you to surrender the policy, no Insurance Benefit will be paid. We will pay the amount payable under the Surrenders and Withdrawals provision instead. Insurance Benefit The Insurance Benefit payable is: (a) the Death Benefit as described below; plus (b) any amounts payable under any Supplementary Benefit riders as a result of the Life Insured's death that form part of the contract; less (c) any outstanding Policy Debt at the date of death. If the Life Insured dies during a grace period, the Insurance Benefit payable described above will be modified as follows: (a) the Insurance Benefit will be reduced by any outstanding Monthly Deductions due; and (b) the Policy Value used in the calculation of the Death Benefit will be the Policy Value as of the date of death of the Life Insured. Death Benefit The Death Benefit will depend on whether Option 1 or Option 2 is in effect on the date of the Life Insured's death. Death Benefit Options Under Option 1, the Death Benefit is equal to the Total Face Amount at the date of death of the Life Insured. Under Option 2, the Death Benefit is equal to the Total Face Amount at the date of death of the Life Insured plus the Policy Value at the date of death of the Life Insured. The Death Benefit after the Life Insured's Attained Age 100 will be as described in Section 12. 7 C0705A -------------------------------------------------------------------------------- 6. INSURANCE BENEFIT (continued) -------------------------------------------------------------------------------- If any withdrawals are made, the Death Benefit, whether Option 1 or Option 2 is in effect, will be less than it would have been if no withdrawals were made. Withdrawals reduce the Death Benefit by reducing: (a) the Total Face Amount if Option 1 is in effect, as specified in Section 18; or (b) the Policy Value if Option 2 is in effect. Change of Death Benefit Option You may request in writing to change your Death Benefit Option from 2 to 1 while the policy is in force, subject to the Minimum Base Face Amount shown in Section 1. The change will be effective on the next Processing Date, and the Total Face Amount after the change will be equal to the Total Face Amount immediately before the change plus the Policy Value as of the effective date of the change. Minimum Death Benefit The sum of the Death Benefit as described above and any amounts payable upon death of the Life Insured under any Supplementary Benefit riders will never be less than the Minimum Death Benefit. The Minimum Death Benefit is equal to the Policy Value on the date of death multiplied by the Minimum Death Benefit Factor for the Attained Age of the Life Insured. The Minimum Death Benefit Factors are shown in Section 2. To the extent that the Net Amount at Risk associated with the Minimum Death Benefit that results from this calculation exceeds our guidelines and limitations that may be in effect, we reserve the right to: (a) distribute to you a portion of the Policy Value such that the Net Amount at Risk associated with the resulting Minimum Death Benefit does not exceed our guidelines and limitations in effect; or (b) if we should decide to accept the additional death benefit, require evidence of insurability satisfactory to us. -------------------------------------------------------------------------------- 7. INTEREST ON PROCEEDS -------------------------------------------------------------------------------- We will pay interest on proceeds paid in one sum in the event of the Life Insured's death from the date of death to the date of payment. If the state does not specify the interest rate, we will use the rate for insurance benefits left on deposit with us. -------------------------------------------------------------------------------- 8. PREMIUMS -------------------------------------------------------------------------------- The Minimum Initial Premium is shown in Section 1. No insurance will take effect under this policy until our underwriters approve issuance of this policy and the conditions specified in the application form have been satisfied, including receipt of at least the Minimum Initial Premium at our Service Office. When we receive a premium, we first deduct any amount specified as payment of accrued interest on loans then due under Section 17 and any amount specified as loan repayment. The remainder will constitute Premium. We then deduct the applicable Deductions from Premium Payments (maximum amounts are shown in Section 1). If coverage under the policy takes effect in accordance with the provisions of the application, we will process any premium payment as of the end of the Business Day the payment is received at our Service Office, subject to the limitations of the life insurance qualification test elected by you and to our maximum limits then in effect, unless one of the following exceptions applies. (i) We will process a payment received prior to the Policy Date as if received on the Policy Date. (ii) We will process the portion of any premium payment for which we require evidence of the Life Insured's continued insurability on the first Business Day after we have received such evidence and found it satisfactory to us. (iii) If our receipt of any premium payment (or portion thereof) would cause a problem for the policy to qualify as a "life insurance contract" under the federal income tax laws, we will not process such payment or portion. However, in the case of certain other tax situations, we will process the payment (or portion thereof) on the first Business Day after we have received satisfactory written instructions from you. 8 -------------------------------------------------------------------------------- 8. PREMIUMS (continued) -------------------------------------------------------------------------------- You may pay premiums until the Life Insured reaches Attained Age 100, at which time Monthly Deductions cease and no further premiums may then be paid as described in Section 12. If any premium payment would result in an increase in the Minimum Death Benefit, we reserve the right to either refund the premium or to require evidence of insurability satisfactory to us for any increase in the Minimum Death Benefit. Subject to these limitations, you may pay premiums until the Life Insured reaches, or would have reached Attained Age 100. On request, we will give you a receipt signed by one of our officers. Continuation of Insurance Upon Discontinuance of Premium Payments If you discontinue paying premiums, we will continue taking the Monthly Deductions from the Policy Value. Your insurance coverage will continue subject to the Grace Period, and Policy Termination provisions in Sections, 9 and 10. -------------------------------------------------------------------------------- 9. GRACE PERIOD -------------------------------------------------------------------------------- Default The policy and any Supplementary Benefit riders will go into default if, at the beginning of any Policy Month, the Net Cash Surrender Value is less than or equal to zero after we take the Monthly Deduction that is due for that month. Grace Period Duration We will allow 61 days from the date the policy goes into default, for you to pay the amount that is required to bring the policy out of default. At least 30 days prior to termination of coverage, we will send notice to your last known address, specifying the amount you must pay to bring the policy out of default. If we have notice of a policy assignment on file at our Service Office, we will also mail a copy of the notice of the amount due to the assignee on record. Default Payment The amount required to bring the policy out of default, referred to as the Default Payment, is equal to (a) plus (b) plus (c) where: (a) is the amount by which all unpaid monthly deductions exceeds the Net Cash Surrender Value at the date of default;; (b) is an amount equal to all Premium Payments (as described in section 8) on the date of default; (c) is an amount equal to 2 times the Monthly Deduction due on the date of default. When payment is received, any expense charges which are past due and unpaid will be immediately deducted from the Net Policy Value. If the Default Payment has not been paid by the end of the grace period, the policy will terminate. Upon termination of the policy, the remaining Net Cash Surrender Value, if any, will be paid to the Owner. If the Life Insured dies while the policy is in default, then we will deduct from the proceeds all Monthly Deductions due and unpaid as of the date of the Life Insured's death. No Supplementary Benefit riders will be in effect after the policy terminates. -------------------------------------------------------------------------------- 10. POLICY TERMINATION -------------------------------------------------------------------------------- This policy terminates on the earliest of the following events: (a) the end of the grace period for which we have not received the amount necessary to bring the policy out of default; (b) surrender of the policy for its Net Cash Surrender Value; or (c) the death of the Life Insured. -------------------------------------------------------------------------------- 11. REINSTATEMENT -------------------------------------------------------------------------------- If the policy terminates at the end of a grace period in which you did not make a required payment, the policy may be reinstated within 3 years from the date of default. The policy cannot be reinstated if it has been surrendered for its Net Cash Surrender Value. Without our prior approval, the requirements for reinstatement are as follows: (1) we must receive written request for reinstatement; (2) we must receive evidence of insurability satisfactory to us for the Life Insured, and for any insureds covered under any Supplementary Benefit rider that you wish to reinstate; (3) we must receive a premium equal to the amount that was required to bring the policy out of default immediately prior to termination, plus the amount needed to keep the policy in force to the next scheduled date for payment of the Planned Premium. 9 C0905A -------------------------------------------------------------------------------- 11. REINSTATEMENT (continued) -------------------------------------------------------------------------------- Requirements (2) and (3) must be satisfied within 60 days after the date we receive written request for reinstatement. If we approve your request, (a) the reinstatement date will be the date we receive the required payment at our Service Office; (b) the Policy Value on the date of reinstatement, prior to the crediting of any Net Premium paid on the reinstatement, will be equal to the Policy Value on the date the policy terminated. -------------------------------------------------------------------------------- 12. COVERAGE AT AND AFTER ATTAINED AGE 100 -------------------------------------------------------------------------------- Coverage under this policy at and after the Life Insured's Attained Age 100 is subject to the stipulations stated below. Death Benefit The Death Benefit will be determined in the same respect as specified in Section 6 except that the amount of any Supplemental Face Amount will be limited to the Policy Value on the date of death if the Policy Value is less than the Supplemental Face Amount on the date of death. Premiums and Monthly Deductions We will not accept any further premium payments. We will cease to take Monthly Deductions for charges listed in Section 1. Credited Interest We will continue to credit interest monthly to the Fixed Account portion of the Policy Value. Policy Debt and Default Loan interest will continue to be charged if there is an outstanding loan when Monthly Deductions and premium payments cease at the Life Insured's Attained Age 100 The policy will go into default at any time the Policy Debt exceeds the Policy Value, and Section 9, Grace Period, and Section 17, Loans, will apply. -------------------------------------------------------------------------------- 13. POLICY VALUE -------------------------------------------------------------------------------- Net Premiums Added When we receive your premium payments at our Service Office, we deduct a Premium Charge which will not exceed the amount shown in Section 1 and add the balance remaining (the Net Premium) to your Policy Value. We will do this before we take any deductions due on that Business Day. Investment allocation of the initial premium payment and any subsequent premium payments will be in accordance with the Allocations provision of Section 16. While a loan exists, we will treat the amounts you pay as premiums unless you request in writing that they be treated as loan repayments. If you instruct us to do so, we will first deduct from such payments the amount of accrued interest on loans and then deduct the amount specified as a loan repayment before applying any balance remaining as a premium payment. Monthly Deductions A deduction is due and will be taken from your Policy Value as of the Policy Date and as of each applicable Processing Date. Monthly Deductions are calculated from the Policy Date. If, at your request, we set the Policy Date to a date which precedes the date on which we receive the initial premium, Monthly Deductions due for the period prior to receipt of the initial premium will be taken on the later of the date we receive the initial premium and the date our underwriters approve issuance of this policy. Unless we agree otherwise, or you do not have sufficient funds in an account, we will take Monthly Deductions from the Investment Accounts and the Fixed Account in the same proportion that the Policy Value in each of these accounts bears to the Net Policy Value immediately prior to the deduction. Monthly Deductions are due until the Policy Anniversary on which the Life Insured reaches Attained Age 100 at which time we will cease to take any further Monthly Deductions as described in Section 12. 10 -------------------------------------------------------------------------------- 13. POLICY VALUE (continued) -------------------------------------------------------------------------------- The Monthly Deduction for any Policy Month that will be deducted from your Policy Value consists of charges (a) through (f) listed below, each of which will be deducted in the order as listed, where: (a) is the Asset-Based Risk Charge; (b) is the Face Amount Charge, if any; (c) is the Administrative Charge; (d) is the sum of the charges for riders which are part of the policy, if any, provided such charges are deducted from the Policy Value and are not based on the Cost of Insurance Charge; (e) is the sum of all charges for ratings, if applicable; and (f) is the Cost of Insurance Charge, as described below. Cost of Insurance Charge The rates for the Cost of Insurance Charge, as of the Policy Date and subsequently for each increase in Total Face Amount, are based on the Life Insured's Sex, if applicable, Age, Risk Classification, Net Amount at Risk, and duration that the coverage has been in force. The Cost of Insurance Charge for a specific Policy Month is the charge for the Net Amount at Risk, including any ratings and any supplementary benefit riders which are part of the policy. The charge for the Net Amount at Risk is an amount equal to the per dollar cost of insurance rate for that month multiplied by the Net Amount at Risk, and will be based on our expectations of future mortality, persistency, investment earnings, expense experience, capital and reserve requirements, and tax assumptions. The Maximum Monthly Rates at any age are shown in Section 2 as a rate per $1,000 of Net Amount at Risk. These rates per $1,000 will be increased for any applicable Additional Rating shown in Section 1. To get the maximum rate per dollar, the rate shown must be divided by 1,000. Each Cost of Insurance Charge is deducted in advance of the applicable insurance coverage for which we are at risk. The Cost of Insurance calculation will reflect any adjustment for the Minimum Death Benefit. We review our Cost of Insurance rates from time to time, and may re-determine Cost of Insurance rates at that time on a basis that does not discriminate unfairly within any class of lives insured. Net Amount at Risk The Net Amount at Risk is the amount determined by subtracting (a) from the greater of (b) or (c) where: (a) is the Policy Value at the end of the immediately preceding Business Day less all charges due on the Policy Date or Processing Date; (b) (i) is the Total Face Amount divided by the Death Benefit Discount Factor shown in Section 1 for Death Benefit Option 1; or (ii) is the Total Face Amount divided by the Death Benefit Discount Factor shown in Section 1 plus the Policy Value for Death Benefit Option 2; and (c) is the amount defined in (a) multiplied by the applicable Minimum Death Benefit Factor for the Life Insured's Attained Age as shown in Section 1. -------------------------------------------------------------------------------- 14. LOAN ACCOUNT, FIXED ACCOUNT, INVESTMENT ACCOUNTS -------------------------------------------------------------------------------- The Policy Value at any time is equal to the sum of the values you have in the Loan Account, the Fixed Account, and the Investment Accounts. Loan Account Value The amount you have in the Loan Account at any time equals: (a) amounts transferred to it for loans or borrowed loan interest; plus (b) interest credited to it; less (c) amounts transferred from it for loan repayment. For details regarding the Loan Account, see Section 17. Fixed Account Value The amount you have in the Fixed Account at any time equals: (a) Net Premiums allocated to it; plus (b) amounts transferred to it; plus (c) interest credited to it; less (d) amounts deducted from it; less (e) amounts transferred from it; less (f) amounts withdrawn from it. 11 C1105A -------------------------------------------------------------------------------- 14. LOAN ACCOUNT, FIXED ACCOUNT, INVESTMENT ACCOUNTS (continued) -------------------------------------------------------------------------------- We will determine the rate or rates of interest to be credited to the Fixed Account. Any additional interest will be credited no less frequently than annually. Additional interest is nonforfeitable after crediting. The rate or rates of interest will be determined prospectively and will be based on our expectations for the Fixed Account's future investment earnings, persistency, mortality, expense and reinsurance costs and future tax, reserve, and capital requirements, but in no event will the minimum credited interest be less than the Fixed Account Annual Rate shown in Section 1. The rate or rates of interest will be determined on a uniform basis for life insureds with the same timing and amount of premium, same amount of Policy Debt, and whose policies have been in force for the same length of time. For all transactions, interest is calculated from the date of the transaction. Investment Account Value The amount you have in an Investment Account at any time equals the number of units in that Investment Account multiplied by the unit value of the corresponding Subaccount at that time. The number of units in an Investment Account at any time equals (a) minus (b), where: (a) is the number of units credited to the Investment Account because of: (1) Net Premiums allocated to it; and (2) amounts transferred to it; and (b) is the number of units canceled from the Investment Account because of: (1) amounts deducted from it; (2) amounts transferred from it; and (3) amounts withdrawn from it. The number of units credited or canceled for a given transaction is equal to the dollar amount of the transaction, divided by the unit value on the Business Day of the transaction. See the Unit Value Calculation provision in Section 15 for details on how unit values are determined. -------------------------------------------------------------------------------- 15. SEPARATE ACCOUNT AND SUBACCOUNTS -------------------------------------------------------------------------------- The Separate Account is authorized to invest in the shares of the John Hancock Trust or of other management investment companies. Each Subaccount of the Separate Account purchases shares of corresponding Funds of a Series Fund of the John Hancock Trust or of other management investment companies. The assets of the Separate Account are the property of the Company. They are used to support the Policy Values of variable life insurance policies. Income, gains, and losses of the Separate Account are credited to, or charged against, the Separate Account without regard to other income, gains and losses. The part of the assets that is equal to the Investment Account values in respect of all variable life insurance policies will not be charged with liabilities from any other business we conduct. We can transfer to our general account, Separate Account assets in excess of the liabilities of the Separate Account arising under the variable life insurance policies supported by the Separate Account. Right to Make Changes We reserve the right to make certain changes if, in our judgment, they would best serve the interests of the owners of policies such as this or would be appropriate in carrying out the purposes of such policies. Any changes will be made only to the extent and in the manner permitted by applicable laws. Also, when required by law, we will obtain your approval of the changes and approval from any appropriate regulatory authority. Examples of the changes we may make include the following: (a) To operate a Separate Account in any form permitted under the Investment Company Act of 1940, or in any other form permitted by law. (b) To take any action necessary to comply with or obtain and continue any exemptions from the Investment Company Act of 1940. (c) To create new separate accounts, or to combine any two or more separate accounts including the Separate Account, or to de-register the Separate Account under the Investment Company Act of 1940, or to transfer assets between the Separate Account and other separate accounts. 12 -------------------------------------------------------------------------------- 15. SEPARATE ACCOUNT AND SUBACCOUNTS (continued) -------------------------------------------------------------------------------- (d) To transfer any assets in a Subaccount to another Subaccount, or to add, combine or remove Subaccounts. (e) To substitute, for the investment company shares held in any Subaccount, another class of shares of the investment company or the shares of another investment company or any other investment permitted by law. (f) To make any other necessary technical changes in this policy in order to conform with any action this provision permits us to take. The investment policy of a Subaccount within the Separate Account shall not be materially changed unless a statement of the change is first filed with any jurisdiction requiring such a filing. In the event of such a change in investment policy, and while this policy is in force, you may elect a transfer to the Fixed Account as described in Section 16. Unit Value Calculation We will determine the unit values for each Subaccount as of the end of each Business Day. The unit value for each Subaccount was established at $10 for the first Business Day that an amount was allocated, or transferred to the particular Subaccount. For any subsequent Business Day, the unit value for that Subaccount is obtained by multiplying the unit value for the immediately preceding Business Day by the net investment factor for the particular Subaccount on such subsequent Business Day. Net Investment Factor The net investment factor for a Subaccount on any Business Day is equal to (a) divided by (b) minus (c), where: (a) is the net asset value of the underlying Fund shares held by that Subaccount as of the end of such Business Day before any policy transactions are made on that day; (b) is the net asset value of the underlying Fund shares held by that Subaccount as of the end of the immediately preceding Business Day after all policy transactions were made for that day; and (c) is a charge not exceeding the daily Asset-Based Risk Charge shown in Section 1. We reserve the right to adjust the above formula for any taxes determined by us to be attributable to the operations of the Subaccount. -------------------------------------------------------------------------------- 16. ALLOCATIONS AND TRANSFERS -------------------------------------------------------------------------------- Allocations We process Net Premiums as described in Section 13. Any Net Premium credited to the Policy Value prior to the Allocation Date, as shown in Section 1, will automatically be invested in the money market investment account. On the Allocation Date (or on the date such Net Premium is received, if later), we will reallocate the amount in the money market investment account attributable to any such Net Premium in accordance with the allocation instructions then in effect. We will allocate all other Net Premiums and credits to the Fixed Account and to any Investment Accounts in accordance with the allocation instructions then in effect. Initial allocation instructions are elected in your application for this policy. You may elect to change your allocation instructions at any time. A change can be elected by written request or by any telephone or internet notification if a currently valid written authorization to make changes in this manner is on file with us. A change will be effective as of the end of the Business Day on which we receive notice satisfactory to us. Instructions to us must express allocation percentages as greater than or equal to zero and less than or equal to 100%, and the sum of the allocation percentages must equal 100%. Allocation percentages must be whole numbers. The date for allocation percentage changes will be as of the end of the Business Day on which we are contacted, as described above, to make the changes. We reserve the right to impose a limit on the number and frequency of such changes and to set minimum and maximum percentages that may be allocated to any Investment Account and the Fixed Account. Transfers In the same way as described above in the Allocations provision, instructions may be given to us at any time while the policy is in force to transfer portions of your Policy Value among the Investment Accounts and the Fixed Account. Transfers are subject to the restrictions described below. 13 C1305A -------------------------------------------------------------------------------- 16. ALLOCATIONS AND TRANSFERS (continued) -------------------------------------------------------------------------------- General Restrictions on Transfers You can make up to 2 transfers per calendar month. You can transfer 100% of the Policy Value to the money market investment account after this limit has been reached. If such transfer to the money market investment account is made, no subsequent transfers from the money market investment account to another Investment Account may be made within 30 days. In lieu of the two transfers per month restriction, we may permit a corporation or other entity that purchases this policy as a means to finance liabilities created by an employee benefit plan to transfer Policy Value among the Investment Accounts within other limits that we will specify. There is no charge for the first 12 transfers in any Policy Year. If you make more than 12 transfers in any Policy Year, the Transfer Fee shown in Section 1 will apply to each subsequent transfer in the Policy Year. We will consider all transfer requests made on the same day as one transfer. Transfers made pursuant to the Asset Allocation Balancer or Dollar Cost Averaging options described below are not subject to the foregoing general restrictions. Without our approval, the maximum amount that may be transferred to or from an Investment Account in any Policy Year may not exceed the Investment Account Maximum Transfer Amount shown in Section 1. We and the John Hancock Trust reserve the right to impose additional restrictions to restrict short-term trading. Additional restrictions that may be imposed regarding transfers include, but are not limited to restricting: (a) the number of transfers made during a defined period; (b) the dollar amount of transfers; (c) the method used to submit transfers; and (d) transfers into and out of certain Investment Accounts. We or the John Hancock Trust may terminate transfer privileges at any time. Restrictions on Transfers to the Fixed Account You may transfer the Policy Value from any of the Investment Accounts to the Fixed Account without incurring any transfer charges, regardless of the number of transfers previously made, provided such transfers occur: (a) within 18 months after the Issue Date, as shown in Section 1; or (b) within the later of (i) or (ii) where (i) is 60 days from the effective date of a material change in the investment objectives of any of the Subaccounts, and (ii) is 60 days from the notification date of such change. Restrictions on Transfers out of the Fixed Account The maximum amount that you can transfer out of the Fixed Account in any one Policy Year is limited to the greater of: (a) the Fixed Account Maximum Transfer Percentage shown in Section 1 multiplied by the value in the Fixed Account at the previous Annual Processing Date; and (b) the Fixed Account Maximum Transfer Amount shown in Section 1. Any transfer out of the Fixed Account may not involve a transfer to the money market investment account. Asset Allocation Balancer Transfers If you elect this option, we will automatically transfer amounts among your specified Investment Accounts in order to maintain your designated percentage in each account. We will effect the transfers 6 months after the Policy Date and each 6 month interval thereafter. When you change your premium allocation instructions, your Asset Allocation Balancer will change so the two are identical. This change will automatically occur unless you instruct us otherwise, or a Dollar Cost Averaging request is in effect. We reserve the right to cease to offer this option as of 90 days after we send you written notice. Dollar Cost Averaging Transfers If you elect this option, we will automatically transfer amounts each month from one Investment Account to one or more of the other Investment Accounts or the Fixed Account. You must select the amount to be transferred and the accounts. If the value in the Investment Account from which the transfer is being made is insufficient to cover the transfer amount, we will not effect the transfer and we will notify you. We reserve the right to cease to offer this option as of 90 days after we send you written notice. 14 -------------------------------------------------------------------------------- 17. LOANS -------------------------------------------------------------------------------- At any time while this policy is in force and sufficient loan value is available, you can get a loan by written request. Each loan must be for at least the Minimum Loan Amount shown in Section 1. We may require a loan agreement from you as the policy is the only security for the loan. We may defer loans as provided by law or as provided in Section 25. Loans, except those used to pay premiums on policies with us, may not be made if the policy is in the Grace Period as described in Section 9. Available Loan Value The available loan value on any date will be an amount equal to (i) the Net Cash Surrender Value, less (ii)12 times the Monthly Deductions then being deducted from the Policy Value, less (iii) an amount determined as follows: (a) Deduct (ii) above from (i) above. (b) Multiply the result by the difference between the effective annual rate then being charged on loans and the effective annual rate then being credited on the Loan Account. Values will be determined, subject to Section 25, as of the end of the Business Day on which the loan application is received at our Service Office. Loan Account When you take out a loan, or when loan charges are borrowed, we will transfer amounts from the Fixed Account and the Investment Accounts, as applicable, into the Loan Account. Amounts we transfer into the Loan Account cover the loan principal. A Loan Subaccount exists for each Investment Account and for the Fixed Account. Amounts transferred to the Loan Account are allocated to the appropriate Loan Subaccount to reflect the account from which the transfer was made. We will allocate the amounts to be transferred in the same proportion that your value in the Subaccounts bears to the new Policy Value, unless you request otherwise, and our then current rules allow you to designate different proportions. When an amount to be transferred is allocated to an Investment Account, we will redeem units of that Investment Account sufficient in value to cover the allocated amount. These transfers do not count as a transfer for the purposes of the Transfer provisions described in Section 16. Interest is credited to the Loan Account and interest is also charged on the Policy Debt, as described in the Loan Interest Charged and the Loan Interest Credited provisions. Loan Interest Charged Interest will accrue daily on loans. Loan interest will be payable on each Annual Processing Date and on the date the loan is settled. Interest may be paid in advance at the equivalent effective rate. In the event that you do not pay the loan interest charged in any Policy Year, it will be borrowed against the policy and added to the Policy Debt in arrears at the Policy Anniversary. We will allocate the amount borrowed for interest payment in the same proportion that your value in the Fixed Account and the Investment Accounts bears to the Net Policy Value as of the Policy Anniversary. The effective loan interest charged rate will not exceed the Loan Interest Charged Annual Rate shown in Section 1. We will increase the Loan Interest Charged Annual Rate at any time it is determined that the rate being charged would cause a loan to be taxable under any applicable ruling, regulation, or court decision. In such case, we will increase the Loan Interest Charged Annual Rate to an amount that would result in the transaction being treated as a loan under federal tax law. Loan interest will continue to be charged, as described in Section 12, when Monthly Deductions and premium payments cease at the Life Insured's Attained Age 100. Loan Interest Credited Loan interest will accrue daily to amounts in the Loan Account. The effective loan interest rate credited is the difference between the effective loan interest rate charged and the Loan Interest Credited Differential. The difference, in terms of dollars, is the cost of keeping a loan. The differential will not exceed the Loan Interest Credited Differential shown in Section 1. Loan Repayment You may repay the Policy Debt in whole or in part at any time prior to the death of the Life Insured and while the policy is in force. When you make a loan payment or repay a loan, we credit the amount remaining after deduction of the cost of keeping a loan, specified above, to the Loan Account, and make a transfer to the Fixed Account and the Investment Accounts, as applicable. 15 C1505A -------------------------------------------------------------------------------- 17. LOANS (continued) -------------------------------------------------------------------------------- Upon loan repayment, the same proportionate amount of the entire loan as was borrowed from the Fixed Account will be repaid to the Fixed Account. The remainder of the loan repayment will be allocated to the appropriate Investment Accounts in accordance with the allocation instructions then in effect (unless our then current rules allow you to designate a different allocation with your repayment and you in fact do so). Subject to any rider, endorsement, or other provisions, while a loan exists, we will treat any amounts you pay as premiums, unless you request in writing that they be treated as loan repayments. However, when a portion of the Loan Account is allocated to the Fixed Account, we reserve the right, where permitted by state law, to require that premium payments be applied as loan repayments. -------------------------------------------------------------------------------- 18. SURRENDERS AND WITHDRAWALS -------------------------------------------------------------------------------- Surrender of the Policy You may surrender this policy upon written request for its Net Cash Surrender Value at any date prior to the death of the Life Insured. We will determine the Net Cash Surrender Value as of the end of the Business Day on which we have received at our Service Office your written request for full surrender of the policy. We will process the request and pay the Net Cash Surrender Value only if we have not received due proof that the Life Insured died prior to the Surrender Date. After we receive your written request to surrender the policy, no insurance will be in force. Withdrawals Once per Policy Month after the first Policy Anniversary, you may request a withdrawal of part of the Net Cash Surrender Value if available. For each withdrawal we reserve the right to deduct a Withdrawal Fee as shown in Section 1. Withdrawals are subject to the following conditions: (a) without our approval, each withdrawal must be for at least the Minimum Withdrawal Amount shown in Section 1; (b) after the withdrawal, the remaining Net Cash Surrender must be at least equal to 3 times the Monthly Deductions at the time of the withdrawal; (c) we will process the withdrawal, thereby reducing the Policy Value, as of the end of the Business Day on which we receive your written request; (d) we will reduce the amount of the withdrawal if the amount in all accounts is not sufficient to pay the withdrawal plus the Withdrawal Fee; (e) you may specify which Investment Accounts as well as the Fixed Account from which we should make the withdrawal. If we do not receive such instructions, we will allocate the deduction of the withdrawal in the same proportion that the value in the Fixed Account and the Investment Accounts bears to the Net Policy Value; and (f) we will reduce the amount of the withdrawal if it would otherwise cause the Base Face Amount to fall below the Minimum Base Face Amount shown in Section 1. If Death Benefit Option 1 is in effect at the time of the withdrawal, an amount equal to any withdrawal plus any Withdrawal Fee, will be deducted from the Policy Value until the Policy Value multiplied by the appropriate Minimum Death Benefit Factor becomes equal to the Total Face Amount. Your Death Benefit will be continued in accordance with Sections 6 and 12. Withdrawals will reduce, dollar for dollar, Supplemental Face Amount first, and then Base Face Amount. We reserve the right to allow a reduction in Base Face Amount prior to fully reducing Supplemental Face Amount. If the Death Benefit on any given day is equal to the Policy Value times the applicable Minimum Death Benefit Factor, withdrawals on such day will reduce the Death Benefit by the amount withdrawn times the applicable Minimum Death Benefit Factor until the Death Benefit is equal to the Total Face Amount. Your Death Benefit will continue to be determined in accordance with Sections 6 and 12, subject to these provisions. If Death Benefit Option 2 is in effect, an amount equal to any withdrawal and Withdrawal Fee will be deducted from the Policy Value. Withdrawals will not affect the Total Face Amount. Your Death Benefit will continue to be determined in accordance with Sections 6 and 12. 16 -------------------------------------------------------------------------------- 19. OWNER AND BENEFICIARY -------------------------------------------------------------------------------- Until the Life Insured's death, without the consent of any revocable beneficiaries, you can receive any amount payable under the policy and exercise all rights and privileges granted by the policy. Change of Owner Until the Life Insured's death, the owner can change the ownership of the policy by written request. The change will take effect as of the date you signed the written request. It will not apply to any payments we made or any action we may have taken before we received your written request. Trustee Owner Should the owner be a trustee, payment to the trustee(s) of any amount to which the trustee(s) is (are) entitled under the policy, either by death or otherwise, will fully discharge us from all liability under the policy to the extent of the amount so paid. Joint Ownership Two or more owners will own the policy as joint tenants with right of survivorship, unless otherwise requested on the application or in any subsequent assignment of the policy. On death of any of the owners, the deceased owner's interest in the policy passes to the surviving owner(s). Successor Owner Upon the owner's death during the Life Insured's lifetime, a named successor owner will, if then living, have all the owner's rights and interest in the policy. Until the Life Insured's death, the owner, without the consent of any beneficiary or any successor owner, can cancel or change the designation of successor owner. This may be done from time to time by agreement in writing with us. The following four provisions will apply unless there is a beneficiary appointment in force that provides otherwise. Beneficiary Classification You can appoint beneficiaries for the Insurance Benefit in three classes: primary, secondary, and final. Beneficiaries in the same class will share equally in the Insurance Benefit payable to them. Payment To Beneficiaries We will pay the Insurance Benefit: (a) to any primary beneficiaries who are alive when the life insured dies; or (b) if no primary beneficiary is then alive, to any secondary beneficiaries who are then alive; or (c) if no primary or secondary beneficiary is then alive, to any final beneficiaries who are then alive. Change Of Beneficiary Until the Life Insured's death, you can change the beneficiary by written request unless you make an irrevocable designation. We are not responsible if the change does not achieve your purpose. The change will take effect as of the date you signed such request. It will not apply to any payments we made or any action we may have taken before we received your written request. Death Of Beneficiary If no beneficiary is alive when the Life Insured dies, the Insurance Benefit will be payable to you; or if you are the Life Insured, to your estate. Unless otherwise provided, if a beneficiary dies before the seventh day after the death of the Life Insured, we will pay the Insurance Benefit as if the beneficiary had died before the Life Insured. -------------------------------------------------------------------------------- 20. ASSIGNMENT -------------------------------------------------------------------------------- Your interest in this policy may be assigned without the consent of any revocable Beneficiary. Your interest, any interest of the Life Insured and of any revocable Beneficiary shall be subject to the terms of the assignment. We will not be on notice of any assignment unless it is in writing, nor will we be on notice until a duplicate of the original assignment has been filed at our Service Office. We assume no responsibility for the validity or sufficiency of any assignment. -------------------------------------------------------------------------------- 21. MISSTATEMENTS -------------------------------------------------------------------------------- If the age or sex of the Life Insured was misstated in the application, we will, if necessary, change the Base Face Amount, any Supplemental Face Amount, and every other benefit to that which would have been purchased at the correct age or sex by the most recent Cost of Insurance Charge. 17 C1705A -------------------------------------------------------------------------------- 22. SUICIDE -------------------------------------------------------------------------------- If the Life Insured commits suicide, while sane or insane, within 2 years from the Issue Date, the policy will terminate on the date of such suicide and we will pay (in place of all other benefits, if any) an amount equal to the premiums paid less the amount of any Policy Debt on the date of death and less any withdrawals. If the Life Insured commits suicide, while sane or insane, after 2 years from the Issue Date and within 2 years from the effective date of any increase in the Death Benefit including an increase resulting from any payment of premium we are authorized to refuse under Section 4, the benefits payable under the policy will not include the amount of such Death Benefit increase but will include the amount of premium that pertains to the increase. We reserve the right under this provision to obtain evidence of the manner and cause of death of the Life Insured. -------------------------------------------------------------------------------- 23. INCONTESTABILITY -------------------------------------------------------------------------------- This policy shall be incontestable after it has been in force during the lifetime of the Life Insured for two Policy Years from the Issue Date, except for fraud or policy termination, or any provision for reinstatement or policy change requiring evidence of insurability. In the case of reinstatement or any policy change requiring evidence of insurability, the incontestable period shall be two years from the effective date of such reinstatement or policy change. Any premium payment which we accept subject to insurability, and any increase in the Death Benefit resulting from such payment, shall be considered a policy change for purposes of this Section. -------------------------------------------------------------------------------- 24. THE CONTRACT -------------------------------------------------------------------------------- The written application for the policy is attached at issue. The entire contract between the applicant and us consists of the policy, such application, and any riders and endorsements. However, additional written requests or applications for policy changes or acceptance of excess payment may be submitted to us after issue and such additional requests may become part of the policy. All statements made in any application shall, in the absence of fraud, be deemed representations and not warranties. We will use no statement made by or on behalf of the Life Insured to defend a claim under the policy unless it is in a written application. An exchange of this policy for a new policy on a different plan may be made by agreement between you and us in accordance with our published rules in effect at that time. We reserve the right to make any changes necessary in order to keep this policy in compliance with any changes in federal or state tax laws. Other changes in this policy may be made by agreement between you and us. Only the President, Vice President, the Secretary, or an Assistant Secretary of the Company has authority to waive or agree to change in any respect any of the conditions or provisions of the policy, or to extend credit or to make an agreement for us. -------------------------------------------------------------------------------- 25. RIGHT TO POSTPONE PAYMENT OF BENEFITS -------------------------------------------------------------------------------- We reserve the right to postpone the payment of Net Cash Surrender Value, withdrawals, policy loans, and the portion of the Insurance Benefit that depends on Investment Account values, for any period during which: (a) the New York Stock Exchange (Exchange) is closed for trading (other than customary week-end and holiday closings), or trading on the Exchange is otherwise restricted; (b) an emergency exists as defined by the Securities and Exchange Commission (SEC), or the SEC requires that trading be restricted; or (c) the SEC permits a delay for the protection of policyholders. We also reserve the right to postpone payments, including loans, for up to 6 months if such payments are based on values that do not depend on the investment performance of the Investment Accounts. In addition, we may deny transfers under the circumstances stated in (a), (b) and (c) above, and in the Allocations and Transfers provision. -------------------------------------------------------------------------------- 26. CLAIMS OF CREDITORS -------------------------------------------------------------------------------- The proceeds and any income payments under the policy will be exempt from the claims of creditors to the extent permitted by law. These proceeds and payments may not be assigned or withdrawn before becoming payable without our agreement. 18 -------------------------------------------------------------------------------- 27. REPORTS TO OWNER -------------------------------------------------------------------------------- Within 30 days after each Policy Anniversary, we will send you a report at no charge showing: (a) the Death Benefit; (b) the Policy Value; (c) the current allocation in the Fixed Account, the Loan Account, and each of the Investment Accounts; (d) the value of the units in each chosen Investment Account; (e) the Loan Account balance and loan interest charged since the last report; (f) the premiums paid and policy transactions for the year; and (g) any further information required by law. Upon request, we will provide you with a report of projected future values. We will provide one report annually without charge. For additional reports you request, we reserve the right to charge a reasonable fee, not to exceed $50. -------------------------------------------------------------------------------- 28. HOW VALUES ARE COMPUTED -------------------------------------------------------------------------------- We provide Net Cash Surrender Values that are at least equal to those required by law. We base minimum Net Cash Surrender Values on the Commissioners 1980 Standard Ordinary Sex-distinct Aggregate Mortality Tables, with substandard ratings as applicable. However, if this policy is issued on a unisex basis, we base minimum Net Cash Surrender Values on the Commissioners 1980 Standard Ordinary Male Mortality Table, with substandard ratings as applicable. We also use these tables in determining Guaranteed Maximum Cost of Insurance Charges. Reserves will be at least as great as the minimum required by the law. A detailed statement of the method of computing the values of this policy has been filed with the insurance department of the state shown in Section 1. 19 C1905A Communications about this policy may be sent to the Company's Service Office, which is currently at [192 Clarendon Street, Boston, Massachusetts 02117. Our toll-free number is 1-800-521-1234]. Flexible Premium Variable Life Insurance policy Death Benefit payable at death of Life Insured Not eligible for dividends Benefits, Premiums, and the Risk Classification are shown in Section 1. 05CVUL CBP05A EX-99.27(D)(2) 5 dex9927d2.txt FORM OF SPECIMEN ENHANCED CASH VALUE RIDER [LOGO OF JOHN HANCOCK Company] Life Insurance Company (U.S.A.) -------------------------------------------------------------------------------- ENHANCED CASH VALUE RIDER ADDITIONAL CASH VALUE PAYABLE UPON SURRENDER OF THE POLICY AS DEFINED AND LIMITED -------------------------------------------------------------------------------- This rider is made a part of the policy to which it is attached, in consideration of: (a) the application, a copy of which is attached to and made a part of the policy; and (b) the Enhanced Cash Value Rider Charge as shown under Deduction from Premium Payments in Section 1 of the policy. The rider becomes effective on the rider's Policy Date, which is the Policy Date of the policy. This rider may not be issued subsequent to the Issue Date of the policy. The Owner under this rider will be the Owner under the policy to which this rider is attached. We agree, subject to the terms and conditions of this rider and the policy to pay, in addition to the Net Cash Surrender Value otherwise payable, the amount of Enhanced Cash Value benefit to the Owner upon receipt at our Servicing Office of written notice of surrender from you, if all the following conditions are met: (a) your written notice is received at our Servicing Office prior to the death of the Life Insured, or Surviving Life Insured if applicable; (b) such surrender is not the result of an exchange under Section 1035 of the Internal Revenue Code; and (c) this rider has not terminated under the "Termination" provision below. Such Enhanced Cash Value benefit shall be equal to the amount described under "Rider Information" in Section 1 of the policy. EFFECT ON MINIMUM DEATH BENEFIT The Minimum Death Benefit is equal to the sum of the Policy Value and the Enhanced Cash Value benefit, both on the date of death, multiplied by the Minimum Death Benefit Factor for the Attained Age of the Life Insured. EFFECT ON WITHDRAWALS AND LOAN VALUE Neither the amount available for Withdrawal or the Loan Value of the policy will in any way be increased due to this Enhanced Cash Value Rider. DEFERRAL OF DETERMINATIONS We may defer the payment of any Enhanced Cash Value benefit in the same manner that we may defer payment of any Net Cash Surrender Value under the policy. TERMINATION This rider will terminate without value, on the earliest of: a. the end of the [seventh] Policy Year; b. the exchange, or termination of the policy; c. death of the Life Insured or Surviving Life Insured if applicable; or d. your written request to discontinue this rider. SPECIMEN Signed for the Company by: /s/ John DesPrez III -------------------- 05CVULECVR -------------------------------------------------------------------------------- 1. POLICY SPECIFICATIONS (continued) - Policy [12 345 678] -------------------------------------------------------------------------------- Life Insured [JOHN DOE] Plan [Corporate VUL] Policy Number [12 345 678] Rider Issue Date [July 1, 2005] Rider Information
------------------------------------------------------------------------------------------------------- Type Description of Benefit Rider Charge ------------------------------------------------------------------------------------------------------- [Enhanced Cash The Enhanced Cash Value Rider benefit shall [As previously shown under Deductions Value Rider] be an amount equal to (a) times (b) where: from Premium Payments in this Section 1] (a) is the sum of the cumulative premiums paid to date, less all withdrawals to date and less indebtedness; (b) is a percentage that varies by Policy Year as follows: ------------------------------------------------------------------------------------------------------- Policy Year Percentage ---------------------------------------------- [Policy Year 1] [11]% ---------------------------------------------- [Policy Year 2] [10.5]% ---------------------------------------------- [Policy Year 3] [10]% ---------------------------------------------- [Policy Year 4] [8]% ---------------------------------------------- [Policy Year 5] [5.5]% ---------------------------------------------- [Policy Year 6] [3.5% ---------------------------------------------- [Policy Year 7] [1.75]% ---------------------------------------------- [Policy Year 8+] [0.00] ---------------------------------------------- ------------------------------------------------------------------------------------------------------- The cumulative premiums for any Policy Year is equal to the lesser of the actual premium paid in that Policy Year and the Limiting Premium shown on page 3. -------------------------------------------------------------------------------------------------------
EX-99.27(E) 6 dex9927e.txt FORM OF SPECIMEN APPLICATION FOR A MASTER COLI INSURANCE POLICY [LOGO OF JOHN HANDCOCK COMPANY] Master COLI Application John Hancock Life Insurance Company (U.S.A.) (hereinafter referred to as The Company) Service Office: 200 BLOOR STREET EAST TORONTO, ONTARIO CANADA M4W 1E5 . For Corporate Owned Life Insurance (COLI) only. . Print and use black ink. Any changes must be initialed by the Owner's Authorized Officer. ------------------------------------------------------------------------------------------------------- Owner 1. a) Name of Owner ABC COMPANY b) Tax ID No. 1 2 - 3 4 5 6 7 8 ---------------------------------------------- c) Address 456 CENTER STREET, ANYTOWN AS 12346 --------------------------------------------------------------------------------------- Policy Details - Non Participating 2. a) Plan Name CORPORATE VARIABLE UNIVERSAL LIFE ------------------------------------------------------------------------------------- 3. Supplementary Benefits: [ ] Flexible Term Insurance Option (FTIO) [ ] Other: --------------------------------------------------------------- 4. Death Benefit Option [X] Option 1 (Face Amount) [ ] Option 2 (Face Amount plus Policy Value) 5. Loan Interest Rate: [ ] Variable [X] Fixed [ ] Other: ________ % 6. Life Insurance Qualification Test Note: Elected test cannot be changed after the policy is issued. [X] Guideline Premium [ ] Cash Value Accumulation Premiums 7. Frequency: [X] Annual [ ] Other: --------------------------------------------------------------- Existing Insurance 8. Are there any existing life insurance and/or annuity policies owned by the Owner (including existing policies in the process of being lapsed or surrendered)? [X] No [ ] Yes - Complete Important Notice: Replacement of Life Insurance or Annuities. Special Requests 9. a) [ ] INSURANCE TO BE APPLIED FOR IN ACCORDANCE WITH INSURANCE SCHEDULE OR CENSUS AND CONSENT TO LIFE INSURANCE FORMS. b) Special Policy Date: ------------------------------ c) Other: ------------------------------------------------------------------------------------- Beneficiary Information 10. The beneficiary is to be the Owner unless shown otherwise on the Consent to Life Insurance form that is signed by the Proposed Life Insured. Corrections or Amendments 11.
CP3210US (01/2005) Page 1 of 3 Declarations and Owner/Taxpayer Certification DECLARATIONS I declare that the statements and answers in this application and any form that is made part of this application are complete and true to the best of my knowledge and believe they are correctly recorded. In addition, I understand and agree that: 1. The Insurance Schedule and the Consent to Life Insurance forms shall form part of the application for life insurance. 2. Insurance under any policy issued as a result of this application will not be effective, and no insurance shall be provided prior to the later of the date the first premium is paid in full and the date the policy has been delivered; provided that at the time of delivery there has been no deterioration in the insurability of any person proposed for life insurance as stated in the application, since the date of the application. 3. Acceptance of the policy will, where permitted by law, constitute agreement to its terms and ratification of any changes specified by The Company in the policy, except that any change of amount, classification, plan, benefits or age at issue will be made only with the Owner's written consent. Any person who knowingly and with intent to defraud any insurer: (a) files an application for insurance or statement of claim containing any materially false information, or (b) conceals for the purpose of misleading any insurer, information concerning any material fact thereto, may be committing a fraudulent insurance act. OWNER/TAXPAYER CERTIFICATION Under penalties of perjury, I the Owner, certify that: (1) The number shown on Page 1 of this application is my correct taxpayer identification number (if number has not yet been issued, write "Applied for" in the box on Page 1) , AND (2) Check the applicable box: [X] I am not subject to Backup Tax Withholding either because I have not been notified by the Internal Revenue Service (IRS) that I am subject to Backup Tax Withholding as a result of a failure to report all interest of dividends, or the IRS has notified me that I am no longer subject to Backup Tax Withholding. [ ] The Internal Revenue Service (IRS) has notified me that I am subject to Backup Tax Withholding. (3) [X] I am [ ] I am not, a U.S. person (including a U.S. resident alien). The Internal Revenue Service does not require your consent to any provision of this document other than the certifications required to avoid backup withholding. Signatures (Please read all of the above Declarations and Owner/Taxpayer Certification before you sign this form.) Signed at this day of ------------------------------ ------- ---------- ------ City/State Month Year [X] -------------------------------------- --------------------------------------- Witness Owner's Name [X] --------------------------------------- Signature and Title of Authorized Officer [X] [X] ------------------------------------- --------------------------------------- Agent/Registered Representative, if Countersignature of Licensed other than Witness Resident Agent/Registered Representative (where required by law) CP3210US (01/2005) Page 2 of 3 AGENT'S REPORT PLEASE PRINT Agent's Questions (To be completed by the Agent/Registered Representative) 1. a) Planned Premium $ 2,450 b) Total Collected $ 2,450 2. Are there any existing life insurance and/or annuity policies owned by the Owner (including existing policies in the process of being lapsed or surrendered)? [X] No [ ] Yes - If "Yes", the Agent/Registered Representative is required to present and read Important Notice: Replacement of Life Insurance or Annuities to the Owner. The completed form must be submitted with Application. 3. If applicable, indicate the type of ownership for the policy and provide the names of all individuals authorized to transact business on behalf of the entity. [X] Corporation [ ] Partnership [ ] Trust [ ] Other legal entity DONALD P. JAMES, PRESIDENT --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- For Variable Life Insurance, the NASD requires such entity to provide The Company with documentation detailing the names of all individuals authorized to transact business on behalf of the entity. This requirement will be satisfied by submitting a copy of the Corporation Resolution, Partnership Agreement, or Trust Certification form. 4. Agent Information (Always complete.) -------------------------------------------------------------------------------- Name of Agent Social Agent / Entity Code Security No. Telephone E-mail Address Share -------------------------------------------------------------------------------- JOHN J. CORCORAN 99999 987654321 (905) 123-6900 jcorcoran@agency.com 100% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 100% ---- Certification and Signatures (All Agents / Registered Representatives sharing commissions for this policy must sign this form.) I certify that I have truly and accurately recorded on the application all the information supplied by the Owner. (X) ------------------------------------------------- ---------------------------- Signature of Agent / Registered Representative Place and Date (X) ------------------------------------------------- ---------------------------- Signature of Agent / Registered Representative Place and Date (X) ------------------------------------------------- ---------------------------- Signature of Agent / Registered Representative Place and Date (X) ------------------------------------------------- ---------------------------- Signature of Agent / Registered Representative Place and Date CP3210US (01/2005) Page 3 of 3 EX-99.27(F)(1)(A) 7 dex9927f1a.txt AMENDMENT TO THE ARTICLES OF REDOMESTICATION OF JOHN HANCOCK LIFE INSURANCE CO. [LOGO OF MANULIFE FINANCIAL COMPANY] THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SECRETARY'S CERTIFICATE I, KWONG L. YIU, Assistant Secretary of THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) (the "Company"), a corporation existing under the laws of the State of Michigan, hereby certify that the following is a true copy of a Resolution adopted by the Board of Directors at its meeting held on Wednesday, June 2nd, 2004, and that the same has not been revoked or modified and remains in full force and effect as of the date of this Certificate: Approval of Name Change RESOLVED, that subject to approval of the stockholder and the Michigan Office of Financial Insurance Services, the Articles of Redomestication of the Company be amended by changing the name of the Company from The Manufacturers Life Insurance Company (U.S.A.) to John Hancock Life Insurance Company (U.S.A.) and specifically, Article I of the Company's Articles of Redomestication (the "Articles") shall be amended to read in its entirety as follows: Article I "The name assumed by this corporation and by which it shall be known in law is: JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) and its principal office for the transaction of business shall be in the City of Bloomfield Hills, State of Michigan." FURTHER RESOLVED, that the change of the Company's name shall take effect on the later of January 1, 2005 or the date approval of the revised Articles by the Michigan Office of Financial Insurance Services is received; FURTHER RESOLVED, that the change of the Company's name be recommended to the stockholder of the Company; FURTHER RESOLVED, that on such date the change of the Company's name shall take effect, Article I of the By-laws of the Company shall be deleted in its entirety and replaced with the following: ARTICLE I - NAME This corporation shall be known as John Hancock Life Insurance Company (U.S.A.) (formerly The Manufacturers Life Insurance Company (U.S.A.)). The Manufacturers Life Insurance Company (U.S.A.) Executive Office 200 Bloor Street East, Toronto, ON M4W 1E5 www.manulife.com -------------------------------------------------------------------------------- Manulife Financial and the block design are registered service marks and trademarks of The Manufacturers Life Insurance Company and are used by it and its affiliates including Manulife Financial Corporation. -2- FURTHER RESOLVED that if any state requires the re-appointment of the Commissioner of Insurance or any other public official as attorney to accept service of process for (Company name) that such official is hereby so appointed, FURTHER RESOLVED, that the President, the Chief Financial Officer, the Chief Administrative Officer, and the General Counsel and Secretary of the Company, or any one of them, be and hereby are, authorized and directed to file or caused to be filed with Michigan Office of Financial Insurance Services and any other official in the states in which the Company conducts business such Certificate of Amendment and any and all other documents including, but not limited, Application to amend the Company's Certificate of Authority, Consent to Service of Process, Appointment of Attorney to Accept Service of Process, and to take all such actions as he or she may deem necessary or appropriate to effectuate the change of the Company's name provided for in these resolutions. GIVEN AND CERTIFIED, at the City of Toronto, Province of Ontario, with the Common Seal hereto affixed by the undersigned having custody of the same as Secretary of the Company, this 16th day of July, 2004. THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) By: /s/ Kwong L. Yiu ---------------------------------------- Assistant Secretary EX-99.27(F)(2) 8 dex9927f2.txt BY-LAWS OF THE JOHN HANCOCK LIFE INSURANCE COMPANY CERTIFICATE OF ASSISTANT SECRETARY THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) The undersigned, being the duly elected Assistant Secretary of The Manufacturers Life Insurance Company (U.S.A.), (the "Corporation"), does hereby certify that the attached By-laws of the Corporation, are true and correct copies of the By-laws of the Corporation, as adopted by the Board of Directors on December 2, 1992. IN WITNESS WHEREOF, the undersigned has executed this certificate this 15th day of January, 1993. /s/ Stephen Rosen ---------------------------------------- Stephen Rosen Assistant Secretary The Manufacturers Life Insurance Company (U.S.A.) THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) BY-LAWS ARTICLE I - NAME This corporation shall be known as The Manufacturers Life Insurance Company (U.S.A.) (formerly Maine Fidelity Life Insurance Company). ARTICLE II - PURPOSES This Company shall, through its officers, Board of Directors and persons duly authorized to act for and on behalf of the Company, cause to be issued contracts or policies of insurance in the form and for the purposes as provided for under the statutes of the State of Michigan relating thereto, and the rules and regulations of the Michigan Insurance Bureau and as provided by the laws, rules and regulations of any other states in which the Company may qualify to do business. ARTICLE III - COMPANY BUSINESS AND PRINCIPAL OFFICE The business of the Company may be conducted anywhere in the State of Michigan, and in such other states of the United States or elsewhere wherein the Company may qualify for the purpose of the conduct of the business, as authorized by its Restated Articles of Redomestication and amendments thereto. The home office of the Company shall be in Bloomfield Hills, Michigan. The Company may establish branch or district offices, or agencies, elsewhere in the State of Michigan, as well as in such other states in which it may qualify to do the business of insurance. ARTICLE IV - SEAL The Company has adopted a seal, a copy of which is impressed herewith, that shall hereafter be used by the Company wherever a seal may be required. ARTICLE V - STOCKHOLDERS' MEETINGS Section 1. Place of Meeting - All Annual and Special meetings of the Stockholders shall be held in the city set forth in the Company's Restated Articles of Redomestication as the location of its principal office or such other place as determined by the Board of Directors unless otherwise required by law. 2 Section 2. Annual Meeting - The annual meeting of the stockholders of the Company shall be held on the second Tuesday of May of each year. Section 3. Special Meeting - Special meetings of the stockholders may be convened at the request of the majority of the members of the Board of Directors, by the President, or at the written request of stockholders representing forty percent (40%) of the outstanding stock of this Company, duly submitted to the Secretary at least forty-five days before the date of such meeting. The call for a special meeting shall designate the time and place of the said meeting, and as set forth in Section 5. The notice must also set forth the particular purpose or purposes for which the said meeting is being called. Section 4. Quorum - A quorum for the purpose of transacting the business of any meeting shall consist of a majority of the outstanding stock represented either in person or by proxy. A proxy must be filed with the Secretary at least five days prior to any meeting, as provided for in Section 7. Section 5. Notice of Meeting - Except as may otherwise be provided by the Michigan Insurance Code, notice of the annual or any special meetings of the stockholders shall be given to the stockholders either by publication, when required under the Code, or by personal notice mailed, postage prepaid, to the last known address as it appears on the books and records of the Company, at least twenty one days prior to the date of such meeting. Any meeting occurring on a holiday, not attended by a quorum, or at the request of the majority of those present at any meeting, may be continued or adjourned from day to day or to any other day certain without the necessity of any further notice being given to stockholders. Section 6. Business of the Meeting - The annual meeting of the stockholders of the Company shall be an open meeting for all business of any nature, kind or character relating to the affairs of the Company. At this meeting, elections shall be held for members of the Board of Directors whose term expires at the annual meeting, or to fill any existing vacancy. Any business of the meeting may be continued from day to day or to a day certain. Section 7. Voting - Each stockholder shall be entitled to one vote for each share of stock. Each stockholder may vote by proxy. The proxy shall be in writing and must be filed with the Secretary of the Company at least five days prior to the date of the meeting. In all elections for directors, each stockholder having a right to vote may cast the whole number of his votes for one candidate or distribute them among the candidates as he may prefer. Section 8. Action Without a Meeting - Except as otherwise provided in the Restated Articles of Redomestication, or by law, any action required or permitted to be taken at any annual or 3 special meeting of the stockholders may be taken without a meeting, prior notice or a vote, if a consent in writing setting forth the action so taken shall be signed by the holders of all the outstanding shares entitled to vote thereon. ARTICLE VI - DIRECTORS Section 1. Number and Term - There shall be not less than seven nor more than seventeen members of the Board of Directors. The exact number of directors within said limits shall be determined by the Board of Directors. Each director shall be elected for a period of one year or until his successor has been duly elected and qualified as required herein. A director need not be a stockholder. Section 2. Meetings - An annual meeting of the newly elected Board of Directors shall be held as soon after the annual meeting of shareholders as convenient, but in no event later than thirty days after the annual meeting of the shareholders. Special meetings of the Board of Directors may be called at any time by the President or Chairman and shall be called by the President upon the written request of one-third (1/3) of the directors. Notice of the time and place of each special meeting shall be given to each director no later than the day before the meeting. Section 3. Quorums - A majority of the members of the Board of Directors shall constitute a quorum for the transaction of business at any meeting. If a quorum shall not be in attendance, a meeting may be adjourned from time to time until a quorum shall be present. Section 4. Action Without a Meeting - Except as otherwise provided in the Restated Articles of Redomestication or by law, any action required or permitted to be taken at any regular or special meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting, prior notice or a vote, if a consent in writing setting forth the action so taken shall be signed by all the members of the Board of Directors or the committee. Section 5. Vacancies - Any vacancy in the Board of Directors which shall occur by death, resignation, removal or for any other cause may be filled by a vote of the majority of the remaining members of the Board at the next regular or special meeting. The person elected shall hold office for the unexpired term or until a successor is duly elected and qualified. Section 6. Election of Officers - At its annual meeting, the Board of Directors shall elect from among its members a Chairman. It shall also elect a President, Secretary and Treasurer, and if the majority of the Board deems it necessary, may elect Vice 4 Presidents, Assistant Secretaries, Assistant Treasurers, and such other officers as it may designate. Any person may be elected to two or more offices, but may not hold the position of both President and Vice President at one and the same time. Section 7. Removal - The Board of Directors by a majority vote may, for cause, at any time remove any officer or director of the company from office and upon such removal the rights of such persons to the emolument and compensation for services in such office shall forthwith cease and terminate. Section 8. Security - The Board of Directors may from time to time designate the nature, kind and amount, if any, of security that may be required of any officer for the faithful performance of his duty. Section 9. Powers of Board of Directors - The Board of Directors shall generally be in charge of the business and affairs of the Company. The business and affairs of the Company in its details shall be conducted and managed by its elected officers. The Board of Directors may by resolution duly adopt, designate or appoint any one to act for and on behalf of the Company, and may delegate specific authority to any elected officer or to any person to do or perform any act or deed for and on behalf of this Company. The Board of Directors may enter into any contract or agreement on any matters relating to the business and affairs of this Company, and it shall be binding upon the Company though extending beyond the terms of office of any or all the members of the Board of Directors. It shall receive reports from its officers and employees, and shall be authorized to issue directives to them. It shall set the policy and the manner of the conduct of the business of the Company. It shall set the salary and compensation, if any, to be paid its elected officers. Subject to the provisions of the Michigan Insurance Code, the investment of the funds of this Company shall be in accordance with the policies prescribed by the Board of Directors, and the elected officers shall act only subject to and within the limits authorized by the Board of Directors. The Board of Directors shall generally have all the duties, powers, rights and privileges granted them by the laws of the State of Michigan as they presently exist or are amended or changed from time to time. ARTICLE VII - COMMITTEES Section 1. Executive Committee - There shall be elected at each annual meeting of the Board of Directors an Executive Committee. The Executive Committee shall have all the powers of the Board of Directors in the interim between Board Meetings. The Executive Committee shall consist of two or more members. Any vacancy shall be filled by the Board of Directors. 5 Regular minutes of the proceedings of the Executive Committee shall be kept, which shall be presented to the meeting of the Board next succeeding such meeting. Section 2. Other Committees - The Board of Directors may elect such other committees as it deems appropriate and desirable at such times, for such durations, for such purposes, under such conditions, and with such authority of the Board as the Board of Directors shall designate. ARTICLE VIII - OFFICERS AND THEIR DUTIES Section l. - The general management of the business and affairs of this Company shall be conducted and managed by its elected officers in accordance with the duties assigned to each of the said officers by these by-laws or by directives from the Board of Directors, and they shall have the duty to generally supervise the details and procedure or daily operation of the said business and see to the proper performance of same by employees, agents or persons hired or engaged by them on behalf of the Company. Section 2. Chairman - The Chairman shall preside at all meetings of the Board of Directors and stockholders. The Chairman shall not be an officer of the Company. He shall have such other powers and perform such other duties as may from time to time be assigned to him by the Board of Directors. Vice Chairman - The Vice Chairman, if one is elected, shall preside at all meetings of the Board of Directors and stockholders in the absence of the Chairman. He shall not be an officer of the Company. He shall have such other powers and perform such other duties as may from time to time be assigned to him by the Board of Directors. President - The President, unless otherwise provided by the Board, shall be the chief executive officer of the Company, and shall have entire supervision of the affairs of the Company subject to the regulations of the Board of Directors. He shall preside at all meetings of the Board of Directors and stockholders in the absence of the Chairman and Vice Chairman. He shall perform all acts properly pertaining to the executive officer of the Company, or that he may be directed to perform by the Board of Directors from time to time. He shall from time to time bring before the Board of Directors such information affecting the business and property of the Company as may be required or advisable. Vice President - Each Vice President shall have such powers and perform such duties as may from time to time be assigned to him or them by the Board of Directors. Unless otherwise ordered by the Board of Directors, the Vice Presidents in the order of their seniority shall, in the absence or the inability of the President, perform the duties of that office until the return of 6 the President or the disability shall have been removed or a new President shall have been elected. Secretary - The Secretary shall have such particular powers as pertains to his office, and such authority as may be granted to him by the Board of Directors. He shall have a custody of the corporate seal, attend all the regular and special meetings of the stockholders, Board of Directors, and committees, keep accurate minutes of the proceedings at each of such meetings and report the same at a succeeding meeting of the committee, Board of Directors, or of the stockholders. He shall attend to the giving of all notices required by law or by these by-laws to be given to stockholders, directors or committees unless and except as the President or the Board of Directors may from time to time designate some other officer to perform such functions. The Secretary may delegate any of his ministerial duties to any Assistant Secretary. Assistant Secretaries - The Assistant Secretaries shall have such powers and perform such duties as may be assigned to them by the Board of Directors or by the Secretary of the Company. Treasurer - The Treasurer shall be the custodian of all the funds and securities of the Company. He shall have such powers and authorities as may be granted to him by the Board of Directors. He shall have the right to delegate any of his ministerial duties to the Assistant Treasurer and shall also have the right to enter into custodian agreements with banks or trust companies or other corporations authorized by law to act as custodians. Assistant Treasurer - Assistant Treasurers shall have such power and duties as may be granted to him or them by the Board of Directors or as may be assigned to him or them by the Treasurer. The Treasurer and Assistant Treasurer may be required to file a bond in the sum of at least Five Thousand Dollars ($5,000.00) with corporate surety. The amount of the bond may from time to time be increased or decreased by the Board of Directors. Other Officers - The Board of Directors shall have the power from time to time at any of its regular meetings or special meetings called for that purpose, to create such additional officers, to elect persons to such offices and assign their duties and powers. Section 3. Delegation of Authority - In the event of death, resignation, absence, disability or removal of any officer, the Board of Directors may delegate the power and duties of such office to any other officer, or appoint any other person to said position for the balance of the term. Section 4. Bonds - Every officer and employee of the Company may be required by the Board of Directors to furnish a bond for the faithful performance of their duties and trust at the expense of the Company. Said bond shall be in an amount prescribed by the 7 Board of Directors and with such surety and in such form and amount as required by the Board of Directors. ARTICLE IX - CERTIFICATES OF STOCK The certificates for shares of capital stock of the Company shall be in such form, not inconsistent with the Restated Articles of Redomestication, as shall be approved by the Board of Directors. Certificates of stock shall be issued under the seal of the Company and shall be signed by the President or a Vice President and the Secretary, and countersigned by the Treasurer. Shares of stock of the Company shall be transferable only on the books of the Company by the registered holder thereof in person or by attorney duly authorized, and upon the surrender and cancellation of the certificate thereof duly endorsed. The Board of Directors may direct the proper officers to issue new certificates of stock in lieu of others which may have been lost or destroyed, after the expiration of thirty days from receipt of request therefor, provided the person requesting the new certificate shall make an affidavit of the facts concerning loss or destruction and shall give the Company a bond of indemnity in such form, amount, and with such surety, as is acceptable to the Board of Directors. ARTICLE X - FISCAL YEAR The fiscal year of the Company shall begin on the first day of January and terminate on the thirty-first day of December in each year. ARTICLE XI - BANK ACCOUNTS The Board of Directors shall have the authority on behalf of the company and in its name to open or close an account or accounts in any reputable banks or trust companies wherein there shall be deposited the funds of the Company. Withdrawals from the said bank deposit shall be made by cheque or draft signed only by such person or persons as may be specifically authorized so to do by the Board of Directors. The Board of Directors may authorize a facsimile signature on all cheques or drafts drawn for any amount. ARTICLE XIa 1. All deeds, powers of attorney, contracts, documents, and instruments in writing requiring to be executed by the Company under Seal shall be signed on behalf of the Company by such Officer or Officers, or person or persons as may be designated from time to time by Resolution of the Board of Directors. 8 2. All instruments and documents necessary to sell, assign, transfer, purchase or accept shares, stocks, bonds, debentures and other like securities out of or into the name of the Company shall be signed on behalf of the Company by such Officer or Officers, or person or persons as may be designated from time to time by Resolution of the Board of Directors. ARTICLE XII - REINSURANCE The Board of Directors shall have the right to reinsure all or any of the Company's liabilities under all or any of its policy contracts, subject to the laws of the State of Michigan. ARTICLE XIII - NOTICES Wherever any notice is required by these by-laws, such notice may be waived in writing by all of the persons entitled to such notice, anything to the contrary herein notwithstanding. ARTICLE XIV - AMENDMENTS These by-laws may be altered, amended, or repealed, except as otherwise provided by law, by the affirmative vote of a majority of the Board of Directors, if notice of the proposed alteration, amendment or repeal be contained in the notice of the meeting of the Board of Directors at which such action is proposed. EX-99.27(F)(2)(A) 9 dex9927f2a.txt AMENDMENT TO THE BY-LAWS OF THE JOHN HANCOCK LIFE INSURANCE COMPANY THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SECRETARY'S CERTIFICATE I, STPHEN L. ROSEN, Assistant Secretary of THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) (the "Company"), a corporation existing under the laws of the State of Michigan, hereby certify that the following is a true copy of a Resolution adopted at the meeting of the Board of Directors of the Company held on June 7th, 2000, and that the same has not been revoked or modified and remains in full force and effect as of the date of this Certificate: Amendment of the Company's By-laws RESOLVED, that: 1. Paragraph 2 of Section 1 of Article VII of the By-laws of the Company is hereby deleted and replaced by the following: "The Executive Committee shall consist of two or more members. Any vacancy shall be filled by the Board of Directors." 2. The amendment shall take effect upon filing with the Department of Insurance of the State of Michigan. GIVEN AND CERTIFIED, at the City of Toronto, Province of Ontario, with the Common Seal hereto affixed by the undersigned having custody of the same as Secretary of the Company, this 7th day of June, 2000. THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) By: /s/ Stephen Rosen ------------------------------------ Assistant Secretary EX-99.27(F)(2)(B) 10 dex9927f2b.txt AMENDMENT TO THE BY-LAWS OF THE JOHN HANCOCK LIFE INSURANCE COMPANY THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) SECRETARY'S CERTIFICATE I, STEPHEN ROSEN, Assistant Secretary of THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.), (the "Company"), a corporation existing under the laws of the State of Michigan, hereby certify that the following is a true copy of a Resolution adopted by the Board of Directors at its meeting held on March 4, 1999: Amendment of the By-laws RESOLVED THAT Article VII Section 1 of the By-laws of the Company are hereby amended to the extent that the second paragraph of Section 1 shall be deleted in its entirety and replaced with the following: "The Executive Committee shall consist of three or more members. Any vacancy shall be filled by the Board of Directors." GIVEN AND CERTIFIED, at the City of Toronto, Province of Ontario, with the Common Seal hereto affixed by the undersigned having custody of the same as Assistant Secretary of the Company this 12th day of March, 1999. THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) By: /s/ Stephen Rosen ------------------------------------ Assistant Secretary EX-99.27(H)(1) 11 dex9927h1.txt FORM OF PARTICIPATION AGREEMENT JHUSA, JHNY, PIMCO PARTICIPATION AGREEMENT Among THE MANUFACTURERS INSURANCE COMPANY (U.S.A.), THE MANUFACTURERS INSURANCE COMPANY OF NEW YORK, PIMCO VARIABLE INSURANCE TRUST, and PIMCO ADVISORS DISTRIBUTORS LLC THIS AGREEMENT, dated as of the 30th day April, 2004, by and among The Manufacturers Insurance Company (U.S.A.), a Michigan life insurance company ("ManUSA") and The Manufacturers Insurance Company of New York ("MNY"), (ManUSA and MNY are collectively referred to as the "Company"), on their own behalf and on behalf of each segregated asset account of the Company set forth on Schedule A hereto as may be amended from time to time (each account hereinafter referred to as the "Account"), PIMCO Variable Insurance Trust (the "Fund"), a Delaware business trust, and PIMCO Advisors Distributors LLC (the "Underwriter"), a Delaware limited liability company. WHEREAS, the Fund engages in business as an open-end management investment company and is available to act as the investment vehicle for separate accounts established for variable life insurance and variable annuity contracts (the "Variable Insurance Products") to be offered by insurance companies which have entered into participation agreements with the Fund and Underwriter ("Participating Insurance Companies"); WHEREAS, the shares of beneficial interest of the Fund are divided into several series of shares, each designated a "Portfolio" and representing the interest in a particular managed portfolio of securities and other assets; WHEREAS, the Fund has obtained an order from the Securities and Exchange Commission (the "SEC") granting Participating Insurance Companies and variable annuity and variable life insurance separate accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended, (the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, if and to the extent necessary to permit shares of the Fund to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated life insurance companies (the "Mixed and Shared Funding Exemptive Order"); WHEREAS, the Fund is registered as an open-end management investment company under the 1940 Act and shares of the Portfolios are registered under the Securities Act of 1933, as amended (the "1933 Act"); WHEREAS, Pacific Investment Management Company LLC (the "Adviser"), which serves as investment adviser to the Fund, is duly registered as an investment adviser under the federal Investment Advisers Act of 1940, as amended; WHEREAS, the Company has issued or will issue certain variable life insurance and/or variable annuity contracts supported wholly or partially by the Account (the "Contracts"), and said Contracts are listed in Schedule A hereto, as it may be amended from time to time by mutual written agreement; WHEREAS, the Account is duly established and maintained as a segregated asset account, duly established by the Company, on the date shown for such Account on Schedule A hereto, to set aside and invest assets attributable to the aforesaid Contracts; WHEREAS, the Underwriter, which serves as distributor to the Fund, is registered as a broker dealer with the SEC under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member in good standing of the National Association of Securities Dealers, Inc. (the "NASD"); and WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase Advisor or M Class shares in the Portfolios listed in Schedule A hereto (as set forth on Schedule A), as it may be amended from time to time by mutual written agreement (the "Designated Portfolios") on behalf of the Account to fund the aforesaid Contracts, and the Underwriter is authorized to sell such shares to the Account at net asset value; NOW, THEREFORE, in consideration of their mutual promises, the Company, the Fund and the Underwriter agree as follows: ARTICLE I. Sale of Fund Shares 1.1. The Fund has granted to the Underwriter exclusive authority to distribute the Fund's shares, and has agreed to instruct, and has so instructed, the Underwriter to make available to the Company for purchase on behalf of the Account Fund Advisor or M Class shares of those Designated Portfolios selected by the Underwriter. Pursuant to such authority and instructions, and subject to Article X hereof, the Underwriter agrees to make available to the Company for purchase on behalf of the Account, Advisor or M Class shares of those Designated Portfolios listed on Schedule A to this Agreement, such purchases to be effected at net asset value in accordance with Section 1.3 of this Agreement. Notwithstanding the foregoing, (i) Fund series (other than those listed on Schedule A) in existence now or that may be established in the future will be made available to the Company only as the Underwriter may so provide, and (ii) the Board of Trustees of the Fund (the "Board") may suspend or terminate the offering of Fund shares of any Designated Portfolio or class thereof, if such action is required by law or by regulatory authorities having jurisdiction or if, in the sole discretion of the Board acting in good faith and in light of its fiduciary duties under federal and any applicable state laws, suspension or termination is necessary in the best interests of the shareholders of such Designated Portfolio. 1.2. The Fund shall redeem, at the Company's request, any full or fractional Designated Portfolio shares held by the Company on behalf of the Account, such redemptions to be effected at net asset value in accordance with Section 1.3 of this Agreement. Notwithstanding the foregoing, (i) the Company shall not redeem Fund shares attributable to Contract owners except in the circumstances permitted in Section 10.3 of this Agreement, and (ii) the Fund may delay redemption of Fund shares of any Designated Portfolio to the extent permitted by the 1940 Act, and any rules, regulations or orders thereunder. 1.3. Purchase and Redemption Procedures (a) The Fund hereby appoints the Company as an agent of the Fund for the limited purpose of receiving purchase and redemption requests on behalf of the Account (but not with respect to any Fund shares that may be held in the general account of the Company) for shares of those Designated Portfolios made available hereunder, based on allocations of amounts to the Account or subaccounts thereof under the Contracts and other transactions relating to the Contracts or the Account. Receipt of any such request (or relevant transactional information therefor) on any day the New York Stock Exchange is open for trading and on which the Fund calculates its net asset value pursuant to the rules of the SEC (a "Business Day") by the Company as such limited agent of the Fund prior to the time that the Fund ordinarily calculates its net asset value as described from time to time in the Fund Prospectus (which as of the date of execution of this Agreement is 4:00 p.m. Eastern Time) shall constitute receipt by the Fund on that same Business Day, provided that the Fund receives notice of such request by 9:00 a.m. Eastern Time on the next following Business Day. (b) The Company shall pay for shares of each Designated Portfolio on the same day that it notifies the Fund of a purchase request for such shares. Payment for Designated Portfolio shares shall be made in federal funds transmitted to the Fund by wire to be received by the Fund by 4:00 p.m. Eastern Time on the Business Day the Fund is notified of the purchase request for Designated Portfolio shares (unless the Fund determines and so advises the Company that sufficient proceeds are available from redemption of shares of other Designated Portfolios effected pursuant to redemption requests tendered by the Company on behalf of the Account). If federal funds are not received on time, such funds will be invested, and Designated Portfolio shares purchased thereby will be issued, as soon as practicable and the Company shall promptly, upon the Fund's request, reimburse the Fund for any charges, costs, fees, interest or other expenses incurred by the Fund in connection with any advances to, or borrowing or overdrafts by, the Fund, or any similar expenses incurred by the Fund, as a result of portfolio transactions effected by the Fund based upon such purchase request. Upon receipt of federal funds so wired, such funds shall cease to be the responsibility of the Company and shall become the responsibility of the Fund. (c) Payment for Designated Portfolio shares redeemed by the Account or the Company shall be made in federal funds transmitted by wire to the Company or any other designated person by 2 p.m. on the next Business Day after the Fund is properly notified of the redemption order of such shares (unless redemption proceeds are to be applied to the purchase of shares of other Designated Portfolios in accordance with Section 1.3(b) of this Agreement), except that the Fund reserves the right to redeem Designated Portfolio shares in assets other than cash and to delay payment of redemption proceeds to the extent permitted under Section 22(e) of the 1940 Act and any Rules thereunder, and in accordance with the procedures and policies of the Fund as described in the then current prospectus. The Fund shall not bear any responsibility whatsoever for the proper disbursement or crediting of redemption proceeds by the Company; the Company alone shall be responsible for such action. (d) Any purchase or redemption request for Designated Portfolio shares held or to be held in the Company's general account shall be effected at the net asset value per share next determined after the Fund's receipt of such request, provided that, in the case of a purchase request, payment for Fund shares so requested is received by the Fund in federal funds prior to close of business for determination of such value, as defined from time to time in the Fund Prospectus. 1.4. The Fund shall use its best efforts to make the net asset value per share for each Designated Portfolio available to the Company by 7:00 p.m. Eastern Time each Business Day, and in any event, as soon as reasonably practicable after the net asset value per share for such Designated Portfolio is calculated, and shall calculate such net asset value in accordance with the Fund's Prospectus. Neither the Fund, any Designated Portfolio, the Underwriter, nor any of their affiliates shall be liable for any information provided to the Company pursuant to this Agreement which information is based on incorrect information supplied by the Company or any other Participating Insurance Company to the Fund or the Underwriter. 1.5. The Fund shall furnish notice (by wire or telephone followed by written confirmation) to the Company as soon as reasonably practicable of any income dividends or capital gain distributions payable on any Designated Portfolio shares. The Company, on its behalf and on behalf of the Account, hereby elects to receive all such dividends and distributions as are payable on any Designated Portfolio shares in the form of additional shares of that Designated Portfolio. The Company reserves the right, on its behalf and on behalf of the Account, to revoke this election and to receive all such dividends and capital gain distributions in cash. The Fund shall notify the Company promptly of the number of Designated Portfolio shares so issued as payment of such dividends and distributions. 1.6. Issuance and transfer of Fund shares shall be by book entry only. Stock certificates will not be issued to the Company or the Account. Purchase and redemption orders for Fund shares shall be recorded in an appropriate ledger for the Account or the appropriate subaccount of the Account. 1.7. (a) The parties hereto acknowledge that the arrangement contemplated by this Agreement is not exclusive; the Fund's shares may be sold to other insurance companies (subject to Section 1.8 hereof) and the cash value of the Contracts may be invested in other investment companies. (b) The Company shall not, without prior notice to the Underwriter (unless otherwise required by applicable law), take any action to operate the Account as a management investment company under the 1940 Act. (c) The Company shall not, without prior notice to the Underwriter (unless otherwise required by applicable law), induce Contract owners to change or modify the Fund or change the Fund's distributor or investment adviser. (d) The Company shall not, without prior notice to the Fund, induce Contract owners to vote on any matter submitted for consideration by the shareholders of the Fund in a manner other than as recommended by the Board of Trustees of the Fund. 1.8. The Underwriter and the Fund shall sell Fund shares only to Participating Insurance Companies and their separate accounts and to persons or plans ("Qualified Persons") that communicate to the Underwriter and the Fund that they qualify to purchase shares of the Fund under Section 817(h) of the Internal Revenue Code of 1986, as amended (the "Code") and the regulations thereunder without impairing the ability of the Account to consider the portfolio investments of the Fund as constituting investments of the Account for the purpose of satisfying the diversification requirements of Section 817(h). The Underwriter and the Fund shall not sell Fund shares to any insurance company or separate account unless an agreement complying with Article VI of this Agreement is in effect to govern such sales, to the extent required. The Company hereby represents and warrants that it and the Account are Qualified Persons. The Fund reserves the right to cease offering shares of any Designated Portfolio in the discretion of the Fund. 1.9. The Parties acknowledge that market timing, short-term trading or excessive trading (hereinafter "Market Timing") may be harmful to the Designated Portfolios. The Parties agree to establish policies and procedures reasonably designed to prevent Market Timing trading abuses. ARTICLE II. Representations and Warranties 2.1. The Company represents and warrants that the Contracts (a) are, or prior to issuance will be, registered under the 1933 Act, or (b) are not registered because they are properly exempt from registration under the 1933 Act or will be offered exclusively in transactions that are properly exempt from registration under the 1933 Act. The Company further represents and warrants that the Contracts will be issued and sold in compliance in all material respects with all applicable federal securities and state securities and insurance laws and that the sale of the Contracts shall comply in all material respects with state insurance suitability requirements. ManUSA further represents and warrants that it is an insurance company duly organized and in good standing under applicable law, that it has legally and validly established the Account prior to any issuance or sale thereof as a segregated asset account under Michigan insurance laws. MNY further represents and warrants that it is an insurance company duly organized and in good standing under applicable law, that it has legally and validly established the Account prior to any issuance or sale thereof as a segregated asset account under New York insurance laws. The Company further represents that it (a) has registered or, prior to any issuance or sale of the Contracts, will register the Account as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a segregated investment account for the Contracts, or alternatively (b) has not registered the Account in proper reliance upon an exclusion from registration under the 1940 Act. The Company shall register and qualify the Contracts or interests therein as securities in accordance with the laws of the various states only if and to the extent deemed advisable by the Company. 2.2. The Fund represents and warrants that Fund shares sold pursuant to this Agreement shall be registered under the 1933 Act, duly authorized for issuance and sold in compliance with applicable state and federal securities laws and that the Fund is and shall remain registered under the 1940 Act. The Fund shall amend the registration statement for its shares under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its shares. The Fund shall register and qualify the shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by the Fund or the Underwriter. 2.3. The Fund may make payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act. Prior to financing distribution expenses pursuant to Rule 12b-1, the Fund will have the Board, a majority of whom are not interested persons of the Fund, formulate and approve a plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution expenses. 2.4. The Fund makes no representations as to whether any aspect of its operations, including, but not limited to, investment policies, fees and expenses, complies with the insurance and other applicable laws of the various states. 2.5. The Fund represents that it is lawfully organized and validly existing under the laws of the State of Delaware and that it does and will comply in all material respects with the 1940 Act. 2.6. The Underwriter represents and warrants that it is a member in good standing of the NASD and is registered as a broker-dealer with the SEC. The Underwriter further represents that it will sell and distribute the Fund shares in accordance with any applicable state and federal securities laws. 2.7. The Fund and the Underwriter represent and warrant that all of their trustees/directors, officers, employees, investment advisers, and other individuals or entities dealing with the money and/or securities of the Fund are and shall continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Fund in an amount not less than the minimum coverage as required currently by Rule 17g-1 under the 1940 Act or related provisions as may be promulgated from time to time. The aforesaid bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company. 2.8. The Company represents and warrants that all of its directors, officers, employees, and other individuals/entities employed or controlled by the Company dealing with the money and/or securities of the Account are covered by a blanket fidelity bond or similar coverage for the benefit of the Account, in an amount not less than $5 million. The aforesaid bond includes coverage for larceny and embezzlement and is issued by a reputable bonding company. The Company agrees to hold for the benefit of the Fund and to pay to the Fund any amounts lost from larceny, embezzlement or other events covered by the aforesaid bond to the extent such amounts properly belong to the Fund pursuant to the terms of this Agreement. The Company agrees to make all reasonable efforts to see that this bond or another bond containing these provisions is always in effect, and agrees to notify the Fund and the Underwriter in the event that such coverage no longer applies. 2.9. Each Party shall comply with applicable anti-money laundering laws and regulations, including the relevant provisions of the USA PATRIOT Act (Pub. L. No. 107-56 (2001)) and the regulations issued thereunder, and the Company represents and warrants that it has in place an anti-money laundering program consistent with the requirements of such Act. 2.10. Each Party shall comply with any applicable privacy and notice provisions of 15 U.S.C. Sections 6801-6827 and any applicable regulations promulgated thereunder (including but not limited to 17 C.F.R. Part 248) as they may be amended. 2.11. The Company acknowledges that, pursuant to Form 24F-2, the Fund is not required to pay fees to the SEC for registration of its shares under the 1933 Act with respect to its shares issued to a Separate Account that is a UIT that offers interests that are registered under the 1933 Act and on which a registration fee has been or will be paid to the SEC (a "Registered Account"). The Company agrees to provide the Fund each year within 60 days of the end of the Fund's fiscal year, or when reasonably requested by the Fund, information as to the number of shares purchased by a Registered Account and any other Separate Account the interests of which are not registered under the 1933 Act. The Company acknowledges that the Trust intends to rely on the information so provided and represents and warrants that such information shall be accurate. 2.12. The Company represents and warrants that (a) all transactions submitted with respect to a Business Day in accordance with Article I will be processed by the Company in compliance with Rule 22c-1 under the 1940 Act; and (b) the Company will provide the Fund or its agent with assurances regarding the compliance of its order handling with the requirements of Rule 22c-1 upon reasonable request. ARTICLE III. Prospectuses and Proxy Statements; Voting 3.1. The Underwriter shall provide the Company with as many copies of the Fund's current prospectus as the Company may reasonably request for delivery to existing Contract owners. The Company shall bear the expense of printing copies of the current prospectus for the Contracts that will be distributed to existing Contract owners, and the Company shall bear the expense of printing copies of the Fund's prospectus that are used in connection with offering the Contracts issued by the Company. If requested by the Company in lieu thereof, the Fund shall provide such documentation (including a final copy of the new prospectus in electronic format at the Fund's expense) and other assistance as is reasonably necessary in order for the Company once each year (or more frequently if the prospectus for the Fund is amended) to have the prospectus for the Contracts and the Fund's prospectus printed together in one document (such printing to be at the Company's expense). 3.2. The Fund's prospectus shall state that the current Statement of Additional Information ("SAI") for the Fund is available, and the Underwriter (or the Fund), at its expense, shall provide a reasonable number of copies of such SAI free of charge to the Company for itself and for any owner of a Contract who requests such SAI. 3.3. The Fund shall provide the Company with information regarding the Fund's expenses, which information may include a table of fees and related narrative disclosure for use in any prospectus or other descriptive document relating to a Contract. The Company agrees that it will use such information in the form provided. The Company shall provide prior written notice of any proposed modification of such information, which notice will describe in detail the manner in which the Company proposes to modify the information, and agrees that it may not modify such information in any way without the prior consent of the Fund. 3.4. The Fund, at its expense, or at the expense of its designee, shall provide the Company with copies of its proxy material, reports to shareholders, and other communications to shareholders in such quantity as the Company shall reasonably require for distributing to Contract owners. 3.5. The Company shall: (i) solicit voting instructions from Contract owners; (ii) vote the Fund shares in accordance with instructions received from Contract owners; and (iii) vote Fund shares for which no instructions have been received in the same proportion as Fund shares of such portfolio for which instructions have been received, so long as and to the extent that the SEC continues to interpret the 1940 Act to require pass-through voting privileges for variable contract owners or to the extent otherwise required by law. The Company will vote Fund shares held in any segregated asset account in the same proportion as Fund shares of such portfolio for which voting instructions have been received from Contract owners, to the extent permitted by law. 3.6. Participating Insurance Companies shall be responsible for assuring that each of their separate accounts participating in a Designated Portfolio calculates voting privileges as required by the Shared Funding Exemptive Order and consistent with any reasonable standards that the Fund may adopt and provide in writing. ARTICLE IV. Sales Material and Information 4.1. The Company shall furnish, or shall cause to be furnished, to the Fund or its designee, each piece of sales literature or other promotional material that the Company develops and in which the Fund (or a Designated Portfolio thereof) or the Adviser or the Underwriter is named. No such material shall be used until approved by the Fund or its designee, and the Fund will use its best efforts for it or its designee to review such sales literature or promotional material within ten Business Days after receipt of such material. The Fund or its designee reserves the right to reasonably object to the continued use of any such sales literature or other promotional material in which the Fund (or a Designated Portfolio thereof) or the Adviser or the Underwriter is named, and no such material shall be used if the Fund or its designee so object. 4.2. The Company shall not give any information or make any representations or statements on behalf of the Fund or concerning the Fund or the Adviser or the Underwriter in connection with the sale of the Contracts other than the information or representations contained in the registration statement or prospectus or SAI for the Fund shares, as such registration statement and prospectus or SAI may be amended or supplemented from time to time, or in reports or proxy statements for the Fund, or in sales literature or other promotional material approved by the Fund or its designee or by the Underwriter, except with the permission of the Fund or the Underwriter or the designee of either. 4.3. The Fund and the Underwriter, or their designee, shall furnish, or cause to be furnished, to the Company, each piece of sales literature or other promotional material that it develops and in which the Company, and/or its Account, is named. No such material shall be used until approved by the Company, and the Company will use its best efforts to review such sales literature or promotional material within ten Business Days after receipt of such material. The Company reserves the right to reasonably object to the continued use of any such sales literature or other promotional material in which the Company and/or its Account is named, and no such material shall be used if the Company so objects. 4.4. The Fund and the Underwriter shall not give any information or make any representations on behalf of the Company or concerning the Company, the Account, or the Contracts other than the information or representations contained in a registration statement, prospectus (which shall include an offering memorandum, if any, if the Contracts issued by the Company or interests therein are not registered under the 1933 Act), or SAI for the Contracts, as such registration statement, prospectus, or SAI may be amended or supplemented from time to time, or in published reports for the Account which are in the public domain or approved by the Company for distribution to Contract owners, or in sales literature or other promotional material approved by the Company or its designee, except with the permission of the Company. 4.5. The Fund will provide to the Company at least one complete copy of all registration statements, prospectuses, SAIs, reports, proxy statements, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to the Fund or its shares, promptly after the filing of such document(s) with the SEC or other regulatory authorities. 4.6. The Company will provide to the Fund at least one complete copy of all registration statements, prospectuses (which shall include an offering memorandum, if any, if the Contracts issued by the Company or interests therein are not registered under the 1933 Act), SAIs, reports, solicitations for voting instructions, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to the Contracts or the Account, promptly after the filing of such document(s) with the SEC or other regulatory authorities. The Company shall provide to the Fund and the Underwriter any complaints received from the Contract owners pertaining to the Fund or the Designated Portfolio. 4.7. The Fund will provide the Company with as much notice as is reasonably practicable of any proxy solicitation for any Designated Portfolio, and of any material change in the Fund's registration statement, particularly any change resulting in a change to the registration statement or prospectus for any Account. The Fund will work with the Company so as to enable the Company to solicit proxies from Contract owners, or to make changes to its prospectus or registration statement, in an orderly manner. The Fund will make reasonable efforts to attempt to have changes affecting Contract prospectuses become effective simultaneously with the annual updates for such prospectuses. 4.8. For purposes of this Article IV, the phrase "sales literature and other promotional materials" includes, but is not limited to, any of the following that refer to the Fund or any affiliate of the Fund: advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, and registration statements, prospectuses, SAIs, shareholder reports, proxy materials, and any other communications distributed or made generally available with regard to the Fund. ARTICLE V. Fees and Expenses 5.1. The Fund and the Underwriter shall pay no fee or other compensation to the Company under this Agreement, except that if the Fund or any Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then the Fund or Underwriter may make payments to the Company or to the underwriter for the Contracts if and in amounts agreed to by the Underwriter in writing, and such payments will be made out of existing fees otherwise payable to the Underwriter, past profits of the Underwriter, or other resources available to the Underwriter. Currently, no such payments are contemplated. 5.2. All expenses incident to performance by the Fund under this Agreement shall be paid by the Fund. The Fund shall see to it that all its shares are registered and authorized for issuance in accordance with applicable federal law and, if and to the extent deemed advisable by the Fund, in accordance with applicable state laws prior to their sale. The Fund shall bear the expenses for the cost of registration and qualification of the Fund's shares, preparation and filing of the Fund's prospectus and registration statement, proxy materials and reports, setting the prospectus in type, setting in type and printing the proxy materials and reports to shareholders (including the costs of printing a prospectus that constitutes an annual report), the preparation of all statements and notices required by any federal or state law, and all taxes on the issuance or transfer of the Fund's shares. 5.3. The Company shall bear the expenses of distributing the Fund's prospectus to owners of Contracts issued by the Company and of distributing the Fund's proxy materials and reports to such Contract owners. ARTICLE VI. Diversification and Qualification 6.1. The Fund will invest its assets in such a manner as to ensure that the Contracts will be treated as annuity or life insurance contracts, whichever is appropriate, under the Code and the regulations issued thereunder (or any successor provisions). Without limiting the scope of the foregoing, each Designated Portfolio has complied and will continue to comply with Section 817(h) of the Code and Treasury Regulation Section 1.817-5, and any Treasury interpretations thereof, relating to the diversification requirements for variable annuity, endowment, or life insurance contracts, and any amendments or other modifications or successor provisions to such Section or Regulations. In the event of a breach of this Article VI by the Fund, it will take all reasonable steps (a) to notify the Company of such breach and (b) to adequately diversify the Fund so as to achieve compliance within the grace period afforded by Regulation 1.817-5. 6.2. The Fund represents that it is or will be qualified as a Regulated Investment Company under Subchapter M of the Code, and that it will make every effort to maintain such qualification (under Subchapter M or any successor or similar provisions) and that it will notify the Company immediately upon having a reasonable basis for believing that it has ceased to so qualify or that it might not so qualify in the future. 6.3. The Company represents that the Contracts are currently, and at the time of issuance shall be, treated as life insurance or annuity insurance contracts, under applicable provisions of the Code, and that it will make every effort to maintain such treatment, and that it will notify the Fund and the Underwriter immediately upon having a reasonable basis for believing the Contracts have ceased to be so treated or that they might not be so treated in the future. The Company agrees that any prospectus offering a contract that is a "modified endowment contract" as that term is defined in Section 7702A of the Code (or any successor or similar provision), shall identify such contract as a modified endowment contract. ARTICLE VII. Potential Conflicts The following provisions shall apply only upon issuance of the Mixed and Shared Funding Order and the sale of shares of the Fund to variable life insurance separate accounts, and then only to the extent required under the 1940 Act. 7.1. The Board will monitor the Fund for the existence of any material irreconcilable conflict between the interests of the Contract owners of all separate accounts investing in the Fund. An irreconcilable material conflict may arise for a variety of reasons, including: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Portfolio are being managed; (e) a difference in voting instructions given by variable annuity contract and variable life insurance contract owners; or (f) a decision by an insurer to disregard the voting instructions of contract owners. The Board shall promptly inform the Company if it determines that an irreconcilable material conflict exists and the implications thereof. 7.2. The Company will report any potential or existing conflicts of which it is aware to the Board. The Company will assist the Board in carrying out its responsibilities under the Mixed and Shared Funding Exemptive Order, by providing the Board with all information reasonably necessary for the Board to consider any issues raised. This includes, but is not limited to, an obligation by the Company to inform the Board whenever Contract owner voting instructions are disregarded. 7.3. If it is determined by a majority of the Board, or a majority of its disinterested members, that a material irreconcilable conflict exists, the Company and other Participating Insurance Companies shall, at their expense and to the extent reasonably practicable (as determined by a majority of the disinterested Board members), take whatever steps are necessary to remedy or eliminate the irreconcilable material conflict, up to and including: (1) withdrawing the assets allocable to some or all of the separate accounts from the Fund or any Portfolio and reinvesting such assets in a different investment medium, including (but not limited to) another Portfolio of the Fund, or submitting the question whether such segregation should be implemented to a vote of all affected contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., annuity contract owners, life insurance contract owners, or variable contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected contract owners the option of making such a change; and (2) establishing a new registered management investment company or managed separate account. 7.4. If a material irreconcilable conflict arises because of a decision by the Company to disregard Contract owner voting instructions and that decision represents a minority position or would preclude a majority vote, the Company may be required, at the Fund's election, to withdraw the Account's investment in the Fund and terminate this Agreement with respect to each Account; provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested members of the Board. Any such withdrawal and termination must take place within six (6) months after the Fund gives written notice that this provision is being implemented, and until the end of that six month period the Fund shall continue to accept and implement orders by the Company for the purchase (and redemption) of shares of the Fund. 7.5. If a material irreconcilable conflict arises because a particular state insurance regulator's decision applicable to the Company conflicts with the majority of other state regulators, then the Company will withdraw the affected Account's investment in the Fund and terminate this Agreement with respect to such Account within six months after the Board informs the Company in writing that it has determined that such decision has created an irreconcilable material conflict; provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested members of the Board. Until the end of the foregoing six month period, the Fund shall continue to accept and implement orders by the Company for the purchase (and redemption) of shares of the Fund. 7.6. For purposes of Section 7.3 through 7.6 of this Agreement, a majority of the disinterested members of the Board shall determine whether any proposed action adequately remedies any irreconcilable material conflict, but in no event will the Fund be required to establish a new funding medium for the Contracts. The Company shall not be required by Section 7.3 to establish a new funding medium for the Contract if an offer to do so has been declined by vote of a majority of Contract owners materially adversely affected by the irreconcilable material conflict. In the event that the Board determines that any proposed action does not adequately remedy any irreconcilable material conflict, then the Company will withdraw the Account's investment in the Fund and terminate this Agreement within six (6) months after the Board informs the Company in writing of the foregoing determination; provided, however, that such withdrawal and termination shall be limited to the extent required by any such material irreconcilable conflict as determined by a majority of the disinterested members of the Board. 7.7. If and to the extent the Mixed and Shared Funding Exemption Order or any amendment thereto contains terms and conditions different from Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement, then the Fund and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with the Mixed and Shared Funding Exemptive Order, and Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall continue in effect only to the extent that terms and conditions substantially identical to such Sections are contained in the Mixed and Shared Funding Exemptive Order or any amendment thereto. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act or the rules promulgated thereunder with respect to mixed or shared funding (as defined in the Mixed and Shared Funding Exemptive Order) on terms and conditions materially different from those contained in the Mixed and Shared Funding Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable; and (b) Sections 3.5, 3.6, 7.1., 7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue in effect only to the extent that terms and conditions substantially identical to such Sections are contained in such Rule(s) as so amended or adopted. ARTICLE VIII. Indemnification 8.1. Indemnification By the Company 8.1(a). The Company agrees to indemnify and hold harmless the Fund and the Underwriter and each of its trustees/directors and officers, and each person, if any, who controls the Fund or Underwriter within the meaning of Section 15 of the 1933 Act or who is under common control with the Underwriter (collectively, the "Indemnified Parties" for purposes of this Section 8.1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company) or litigation (including legal and other expenses), to which the Indemnified Parties may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements: (i) arise out of or are based upon any untrue statement or alleged untrue statements of any material fact contained in the registration statement, prospectus (which shall include a written description of a Contract that is not registered under the 1933 Act), or SAI for the Contracts or contained in the Contracts or sales literature for the Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Company by or on behalf of the Fund for use in the registration statement, prospectus or SAI for the Contracts or in the Contracts or sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Fund shares; or (ii) arise out of or as a result of statements or representations (other than statements or representations contained in the registration statement, prospectus, SAI, or sales literature of the Fund not supplied by the Company or persons under its control) or wrongful conduct of the Company or its agents or persons under the Company's authorization or control, with respect to the sale or distribution of the Contracts or Fund Shares; or (iii) arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, SAI, or sales literature of the Fund or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such a statement or omission was made in reliance upon information furnished to the Fund by or on behalf of the Company; or (iv) arise as a result of any material failure by the Company to provide the services and furnish the materials under the terms of this Agreement (including a failure, whether unintentional or in good faith or otherwise, to comply with the qualification requirements specified in Article VI of this Agreement); or (v) arise out of or result from any material breach of any representation and/or warranty made by the Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Company; or (vi) as limited by and in accordance with the provisions of Sections 8.1(b) and 8.1(c) hereof. 8.1(b). The Company shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of its obligations or duties under this Agreement. 8.1(c). The Company shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Company in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Company of any such claim shall not relieve the Company from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against an Indemnified Party, the Company shall be entitled to participate, at its own expense, in the defense of such action. The Company also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Company to such party of the Company's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Company will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 8.1(d). The Indemnified Parties will promptly notify the Company of the commencement of any litigation or proceedings against them in connection with the issuance or sale of the Fund shares or the Contracts or the operation of the Fund. 8.2. Indemnification by the Underwriter 8.2(a). The Underwriter agrees to indemnify and hold harmless the Company and each of its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 8.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Underwriter) or litigation (including legal and other expenses) to which the Indemnified Parties may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements: (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement or prospectus or SAI or sales literature of the Fund (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Underwriter or Fund by or on behalf of the Company for use in the registration statement, prospectus or SAI for the Fund or in sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Fund shares; or (ii) arise out of or as a result of statements or representations (other than statements or representations contained in the registration statement, prospectus, SAI or sales literature for the Contracts not supplied by the Underwriter or persons under its control) or wrongful conduct of the Fund or Underwriter or persons under their control, with respect to the sale or distribution of the Contracts or Fund shares; or (iii) arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, SAI or sales literature covering the Contracts, or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading, if such statement or omission was made in reliance upon information furnished to the Company by or on behalf of the Fund or the Underwriter; or (iv) arise as a result of any failure by the Fund or the Underwriter to provide the services and furnish the materials under the terms of this Agreement (including a failure of the Fund, whether unintentional or in good faith or otherwise, to comply with the diversification and other qualification requirements specified in Article VI of this Agreement); or (v) arise out of or result from any material breach of any representation and/or warranty made by the Underwriter in this Agreement or arise out of or result from any other material breach of this Agreement by the Underwriter; as limited by and in accordance with the provisions of Sections 8.2(b) and 8.2(c) hereof. 8.2(b). The Underwriter shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement or to the Company or the Account, whichever is applicable. 8.2(c). The Underwriter shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Underwriter in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Underwriter of any such claim shall not relieve the Underwriter from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Party, the Underwriter will be entitled to participate, at its own expense, in the defense thereof. The Underwriter also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Underwriter to such party of the Underwriter's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Underwriter will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. The Company agrees promptly to notify the Underwriter of the commencement of any litigation or proceedings against it or any of its officers or directors in connection with the issuance or sale of the Contracts or the operation of the Account. 8.3. Indemnification By the Fund 8.3(a). The Fund agrees to indemnify and hold harmless the Company and each of its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 8.3) against any and all losses, claims, expenses, damages, liabilities (including amounts paid in settlement with the written consent of the Fund) or litigation (including legal and other expenses) to which the Indemnified Parties may be required to pay or may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, expenses, damages, liabilities or expenses (or actions in respect thereof) or settlements, are related to the operations of the Fund and: (i) arise as a result of any failure by the Fund to provide the services and furnish the materials under the terms of this Agreement (including a failure, whether unintentional or in good faith or otherwise, to comply with the diversification and other qualification requirements specified in Article VI of this Agreement); or (ii) arise out of or result from any material breach of any representation and/or warranty made by the Fund in this Agreement or arise out of or result from any other material breach of this Agreement by the Fund; as limited by and in accordance with the provisions of Sections 8.3(b) and 8.3(c) hereof. 8.3(b). The Fund shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement or to the Company, the Fund, the Underwriter or the Account, whichever is applicable. 8.3(c). The Fund shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Fund in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Fund of any such claim shall not relieve the Fund from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Fund will be entitled to participate, at its own expense, in the defense thereof. The Fund also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Fund to such party of the Fund's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Fund will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 8.3(d). The Company and the Underwriter agree promptly to notify the Fund of the commencement of any litigation or proceeding against it or any of its respective officers or directors in connection with the Agreement, the issuance or sale of the Contracts, the operation of the Account, or the sale or acquisition of shares of the Fund. ARTICLE IX. Applicable Law 9.1. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the State of California. 9.2. This Agreement shall be subject to the provisions of the 1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder, including such exemptions from those statutes, rules and regulations as the SEC may grant (including, but not limited to, any Mixed and Shared Funding Exemptive Order) and the terms hereof shall be interpreted and construed in accordance therewith. If, in the future, the Mixed and Shared Funding Exemptive Order should no longer be necessary under applicable law, then Article VII shall no longer apply. ARTICLE X. Termination 10.1. This Agreement shall continue in full force and effect until the first to occur of: (a) termination by any party, for any reason with respect to some or all Designated Portfolios, by three (3) months advance written notice delivered to the other parties; provided, however, the Company may cease sales of any Designated Portfolio at any time; or (b) termination by the Company by written notice to the Fund and the Underwriter based upon the Company's determination that shares of the Fund are not reasonably available to meet the requirements of the Contracts; or (c) termination by the Company by written notice to the Fund and the Underwriter in the event any of the Designated Portfolio's shares are not registered, issued or sold in accordance with applicable state and/or federal law or such law precludes the use of such shares as the underlying investment media of the Contracts issued or to be issued by the Company; or (d) termination by the Fund or Underwriter in the event that formal administrative proceedings are instituted against the Company by the NASD, the SEC, the Insurance Commissioner or like official of any state or any other regulatory body regarding the Company's duties under this Agreement or related to the sale of the Contracts, the operation of any Account, or the purchase of the Fund's shares; provided, however, that the Fund or Underwriter determines in its sole judgment exercised in good faith, that any such administrative proceedings will have a material adverse effect upon the ability of the Company to perform its obligations under this Agreement; or (e) termination by the Company in the event that formal administrative proceedings are instituted against the Fund or Underwriter by the NASD, the SEC, or any state securities or insurance department or any other regulatory body; provided, however, that the Company determines in its sole judgment exercised in good faith, that any such administrative proceedings will have a material adverse effect upon the ability of the Fund or Underwriter to perform its obligations under this Agreement; or (f) termination by the Company by written notice to the Fund and the Underwriter with respect to any Designated Portfolio in the event that such Portfolio ceases to qualify as a Regulated Investment Company under Subchapter M or fails to comply with the Section 817(h) diversification requirements specified in Article VI hereof, or if the Company reasonably believes that such Portfolio may fail to so qualify or comply; or (g) termination by the Fund or Underwriter by written notice to the Company in the event that the Contracts fail to meet the qualifications specified in Article VI hereof; or (h) termination by either the Fund or the Underwriter by written notice to the Company, if either one or both of the Fund or the Underwriter respectively, shall determine, in their sole judgment exercised in good faith, that the Company has suffered a material adverse change in its business, operations, financial condition, or prospects since the date of this Agreement or is the subject of material adverse publicity; or (i) termination by the Company by written notice to the Fund and the Underwriter, if the Company shall determine, in its sole judgment exercised in good faith, that the Fund, Adviser, or the Underwriter has suffered a material adverse change in its business, operations, financial condition or prospects since the date of this Agreement or is the subject of material adverse publicity; or (j) termination by the Company upon any substitution of the shares of another investment company or series thereof for shares of a Designated Portfolio of the Fund in accordance with the terms of the Contracts, provided that the Company has given at least 45 days prior written notice to the Fund and Underwriter of the date of substitution; or (k) termination by any party in the event that the Fund's Board of Trustees determines that a material irreconcilable conflict exists as provided in Article VII. 10.2. Notwithstanding any termination of this Agreement, the Fund and the Underwriter shall, at the option of the Company, continue to make available additional shares of the Fund pursuant to the terms and conditions of this Agreement, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"), unless the Underwriter requests that the Company seek an order pursuant to Section 26(b) of the 1940 Act to permit the substitution of other securities for the shares of the Designated Portfolios. The Underwriter agrees to split the cost of seeking such an order, and the Company agrees that it shall reasonably cooperate with the Underwriter and seek such an order upon request. Specifically, the owners of the Existing Contracts may be permitted to reallocate investments in the Fund, redeem investments in the Fund and/or invest in the Fund upon the making of additional purchase payments under the Existing Contracts (subject to any such election by the Underwriter). The parties agree that this Section 10.2 shall not apply to any terminations under Article VII and the effect of such Article VII terminations shall be governed by Article VII of this Agreement. The parties further agree that this Section 10.2 shall not apply to any terminations under Section 10.1(g) of this Agreement. 10.3. The Company shall not redeem Fund shares attributable to the Contracts (as opposed to Fund shares attributable to the Company's assets held in the Account) except (i) as necessary to implement Contract owner initiated or approved transactions, (ii) as required by state and/or federal laws or regulations or judicial or other legal precedent of general application (hereinafter referred to as a "Legally Required Redemption"), (iii) upon 30 days prior written notice to the Fund and Underwriter, as permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act, but only if a substitution of other securities for the shares of the Designated Portfolios is consistent with the terms of the Contracts, or (iv) as permitted under the terms of the Contract. Upon request, the Company will promptly furnish to the Fund and the Underwriter reasonable assurance that any redemption pursuant to clause (ii) above is a Legally Required Redemption. Notwithstanding any termination of this Agreement, each party's obligation under Article VIII to indemnify the other parties shall survive. ARTICLE XI. Notices Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. If to the Fund: 840 Newport Center Drive Newport Beach, CA 92660 Attention: Jeff Sargent If to the Company: 73 Tremont Street Boston, MA 02108 Attention: Jim Gallagher If to Underwriter: 2187 Atlantic Street Stamford, CT 06902 Attention: Newton Schott ARTICLE XII. Miscellaneous 12.1. All persons dealing with the Fund must look solely to the property of the Fund, and in the case of a series company, the respective Designated Portfolios listed on Schedule A hereto as though each such Designated Portfolio had separately contracted with the Company and the Underwriter for the enforcement of any claims against the Fund. The parties agree that neither the Board, officers, agents or shareholders of the Fund assume any personal liability or responsibility for obligations entered into by or on behalf of the Fund. 12.2. Subject to the requirements of legal process and regulatory authority, each party hereto shall treat as confidential the names and addresses of the owners of the Contracts and all information reasonably identified as confidential in writing by any other party hereto and, except as permitted by this Agreement, shall not disclose, disseminate or utilize such names and addresses and other confidential information without the express written consent of the affected party until such time as such information has come into the public domain. 12.3. The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 12.4. This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 12.5. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 12.6. Each party hereto shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the NASD, and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. Notwithstanding the generality of the foregoing, each party hereto further agrees to furnish the Insurance Commissioner of any state where contracts issued by the Company may be sold with any information or reports in connection with services provided under this Agreement which such Commissioner may request in order to ascertain whether the variable annuity operations of the Company are being conducted in a manner consistent with such state's variable insurance laws and regulations and any other applicable law or regulations. 12.7. The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies, and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws. 12.8. This Agreement or any of the rights and obligations hereunder may not be assigned by any party without the prior written consent of all parties hereto. 12.9. The Company shall furnish, or shall cause to be furnished, to the Fund or its designee copies of the following reports: (a) the Company's annual statement (prepared under statutory accounting principles) and annual report (prepared under generally accepted accounting principles) filed with any state or federal regulatory body or otherwise made available to the public, as soon as practicable and in any event within 10 days after such report is publicly available; and (b) any registration statement (without exhibits) and financial reports of the Company filed with the Securities and Exchange Commission or any state insurance regulatory, as soon as practicable after the filing thereof. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and on its behalf by its duly authorized representative and its seal to be hereunder affixed hereto as of the date specified below. The Manufacturers Life Insurance Company (U.S.A.) By its authorized officer By: --------------------------------- Name: --------------------------------- Title: --------------------------------- Date: --------------------------------- The Manufacturers Life Insurance Company of New York By its authorized officer By: --------------------------------- Name: --------------------------------- Title: --------------------------------- Date: --------------------------------- PIMCO VARIABLE INSURANCE TRUST By its authorized officer By: --------------------------------- Name: Jeff Sargent Title: Senior Vice President Date: --------------------------------- PIMCO ADVISORS DISTRIBUTORS LLC By its authorized officer By: --------------------------------- Name: Newton B. Schott, Jr. Title: Managing Director Date: --------------------------------- Schedule A PIMCO Variable Insurance Trust Portfolios: All Asset Portfolios, Advisor Class and Class M Segregated Asset Accounts: ManUSA Class of Shares of the All Asset Portfolio to be Purchased Separate Account A (M Class) March 20, 1997 Separate Account H (Advisor Class) December 4, 2001 Separate Account N (M Class) December 4, 2001 MNY Separate Account A (M Class) March 4, 1992 Separate Account B (Advisor Class) May 6, 1997 EX-99.27(H)(2) 12 dex9927h2.txt PARTICIPATION AGREEMENT JHUSA, JHNY, JHLICO, JHVLICO, JHT PARTICIPATION AGREEMENT THIS AGREEMENT is made and entered into this 1st day of July, 2003, as amended and restated May 1, 2004 and April 20, 2005 by and among JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) (formerly, The Manufacturers Life Insurance Company (U.S.A.), a stock life insurance company existing under the laws of Michigan ("Manulife USA"), JOHN HANCOCK LIFE INSURANCE COMPANY OF NEW YORK (formerly, The Manufacturers Life Insurance Company of New York, a stock life insurance company organized under the laws of New York ("Manulife New York"), JOHN HANCOCK LIFE INSURANCE COMPANY ("John Hancock") and JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY ("John Hancock Life") (Manulife USA Manulife New York, John Hancock and John Hancock Life are each referred to herein as a "Company" and collectively as the "Companies"), each on behalf of itself and its variable annuity and variable life insurance separate accounts (each an "Account;" collectively, the "Accounts"), and JOHN HANCOCK TRUST, formerly, Manufacturers Investment Trust, a business trust organized under the laws of the Commonwealth of Massachusetts (the "Trust"). WHEREAS, the Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and its shares are registered under the Securities Act of 1933, as amended (the "1933 Act"); WHEREAS, the Trust serves as an investment vehicle underlying variable life insurance and variable annuity contracts issued by the Companies (the "Contracts"); WHEREAS, the beneficial interest in the Trust is divided into separate series of shares as identified in the Trust's registration statement under the 1933 Act (as amended from time to time) (the "Funds), each representing the interest in a particular portfolio of securities and other assets and each of which may issue multiple classes of shares; WHEREAS, the Trust has obtained from the Securities and Exchange Commission ("SEC") an order granting exemptions from certain provisions of and rules under the 1940 Act to the extent necessary to permit shares of the Trust to be sold to and held by, among others, variable annuity and variable life insurance separate accounts ("separate accounts") of both affiliated and unaffiliated life insurance companies ("Participating Insurance Companies") and certain qualified pension and retirement plans ("Qualified Plans") (the "Exemptive Order"); WHEREAS, each of the Companies has registered or will register its Contracts under the 1933 Act, except to the extent a particular Contract is or will be exempt from such registration; WHEREAS, each of the Companies has registered or will register each of its Accounts as a unit investment trust under the 1940 Act, except to the extent a particular Account is or will be exempt from such registration; and WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Companies intend to purchase shares of the Funds on behalf of their respective Accounts to fund the Contracts, and the Trust is authorized to sell such shares to unit investment trusts such as each Account at net asset value; NOW, THEREFORE, in consideration of their mutual promises set forth herein, the Companies and the Trust agree as follows: 1. Purchase and Redemption of Fund Shares 1.1 Subject to the terms of the Distribution Agreement in effect from time to time between the Trust and John Hancock Distributors, LLC (formerly, Manulife Financial Securities LLC), a Delaware limited liability company ("Manulife Securities"), the Trust agrees to make shares of the Funds available for purchase by the Accounts (including the subaccounts thereof) at the applicable net asset value per share next computed, in accordance with the provisions of the then current prospectus and statement of additional information of the Trust, after receipt by the Trust or its designee of an order for purchase. The Trust agrees to use reasonable efforts to calculate such net asset value on each day on which the New York Stock Exchange is open for trading. Notwithstanding the foregoing, the Board of Trustees of the Trust (the "Board" or the "Trustees") may refuse to sell shares of any Fund to any person, or suspend or terminate the offering of shares of any Fund, if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Trustees acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, in the best interests of such Fund and its shareholders (including variable contract owners). 1.2 Each of the Companies shall submit payment for the purchase of shares of a Fund on behalf of an Account on the next Business Day after an order to purchase such shares is made in accordance with the provisions of Section 1.1 hereof. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which the Trust calculates the net asset value of shares of the Funds. Payment shall be in federal funds transmitted by wire to the Trust's custodian. 1.3 The Trust agrees to redeem for cash (except as otherwise provided in the Trust's prospectus) any full or fractional shares of any Fund, when requested by a Company on behalf of an Account, at the net asset value next computed, in accordance with the provisions of the then current prospectus and statement of additional information of the Trust, after receipt by the Trust or its designee of a request for redemption. The Trust shall make payment for such shares in the manner established from time to time by the Trust. Payment of redemption proceeds will normally be paid to a Company on behalf of its Account in federal funds transmitted by wire on the next Business Day after receipt by the Trust or its designee of a request for redemption. 1.4 Each of the Companies agrees that all purchases and redemptions by its Accounts of shares of the Funds will be in accordance with the provisions of then current prospectus and statement of additional information of the Trust and in accordance with any procedures that the Trust, Manulife Securities or the Trust's transfer agent may establish from time to time governing purchases and redemptions of shares of the Funds generally. 1.5 Payments by a Company for the purchase of shares of the Funds by its Accounts under Section 1.2 and payments by the Trust of the proceeds of the redemption of shares of the Funds by such Accounts under Section 1.3 may be netted against one another on any Business Day for the purpose of determining the amount of any wire transfer on that Business Day. 1.6 Issuance and transfer of the Trust's shares will be by book entry only. Share certificates will not be issued. Shares ordered from the Trust will be recorded on the transfer records of the Trust in an appropriate title for each Account or the appropriate subaccount of each Account. 1.7 The Trust will furnish same day notice by e-mail, fax or telephone (if by telephone, it must be followed by written confirmation) to the Companies of any income dividends or capital gain distributions payable on the shares of the Funds. Each of the Companies hereby elects to receive all such income dividends and capital gain distributions as are payable on shares of a Fund in additional shares of that Fund. Each of the Companies reserves the right to revoke this election and to receive all such income 2 dividends and capital gain distributions in cash. The Trust will notify the Companies or their designee(s) of the number of shares so issued as payment of such dividends and distributions. 1.8 The Trust will make the net asset value per share for each Fund available to the Companies on a daily basis as soon as reasonably practical after the net asset value per share is calculated and shall use its best efforts to make such net asset value per share available by 7:00 p.m. New York time. 1.9 For purposes of this Article 1, each of the Companies shall be the designee of the Trust for receipt of purchase orders and requests for redemption relating to the Funds from each of its Accounts, and receipt by a Company will constitute receipt by the Trust , provided that the Trust receives notice of a purchase order or request for redemption by 10:00 am New York time on the next following Business Day. 1.10 The Trust agrees that shares of the Funds will be sold only to Participating Insurance Companies and their separate accounts, Qualified Plans, and other purchasers of the kind specified in Treas. Reg. Section 1.817-5(f)(3) (or any successor regulation) ("Other Purchasers") as from time to time in effect. 1.11 Each of the Companies has received a copy of the Exemptive Order and agrees to perform the obligations of a Participating Insurance Company under such Order. 2. Prospectuses and Proxy Statements; Voting 2.1 The Trust will prepare and be responsible for filing with the SEC and any state regulatory authorities requiring such filing all shareholder reports, proxy materials and prospectuses and statements of additional information of the Trust. The Trust will bear the costs of registration and qualification of the shares of the Funds, preparation and filing of the documents listed in this Section 2.1, and all taxes to which an issuer is subject on the issuance and transfer of its shares. 2.2 At the option of each of the Companies, the Trust will either (a) provide the Company with as many copies of the Trust's current prospectus, statement of additional information, annual report, semi-annual report, proxy materials and other shareholder communications, including any amendments or supplements to any of the foregoing, as the Company may reasonably request; or (b) provide the Company with camera ready copies of such documents in a form suitable for printing. Subject to Section 4.1 hereof, expenses of furnishing such documents for marketing purposes will be borne by the Companies, and expenses of furnishing such documents to current Contract owners will be borne by the Trust. The Companies assume sole responsibility for ensuring that the Trust's proxy materials are delivered to Contract owners in accordance with applicable federal and state securities laws. 2.3 The Trust will use its best efforts to provide the Companies, on a timely basis, with such information about the Trust, the Funds and the investment adviser and any subadvisers to any Fund, as the Companies may reasonably request in connection with the preparation of registration statements, prospectuses and other materials relating to the Contracts. 2.4 As long as and to the extent that the SEC interprets the 1940 Act to require pass-through voting privileges for variable contract owners, each of the Companies (i) will provide pass-through voting privileges to Contract owners whose Contract values are invested, through Accounts registered with the SEC under the 1940 Act, in shares of the Funds, (ii) may, to the extent it deems appropriate, provide pass-through voting privileges to Contract owners whose contract values are invested, through Accounts which are not so registered with the SEC, in shares of the Funds, (iv) when it provides pass-through voting privileges to Contract owners whose Contract values are invested through an Account in shares of a Fund, will vote shares held in that Account for which no Contract owner instructions are timely received by the 3 Company in the same proportion as those shares of the Fund held in that Account for which Contract owner instructions are timely received, and (iii) will vote shares of a Fund which it is otherwise entitled to vote on any matter in the same proportion as the voting instructions which it has timely received from Contract owners with respect to that matter. Notwithstanding the foregoing, each of the Companies may vote shares of a Fund in such other manner as may be required or permitted by Rule 6e-2 or Rule 6e-3(T) under the 1940 Act or otherwise by the SEC or its staff. 3. Sales Material and Information 3.1 Each of the Companies will use its best efforts to ensure that sales literature and other promotional material prepared by it or on its behalf in which the Trust, a Fund, any investment adviser or subadviser to any Fund or Manulife Securities (in its capacity as distributor of the Trust shares) is named, conforms to all requirements of all applicable federal and state laws and rules and regulations, including all applicable rules and regulations of the National Association of Securities Dealers, Inc. (the "NASD"). 3.2 Neither of the Companies will give any information or make any representations or statements on behalf of the Trust or concerning the Trust in connection with the sale of the Contracts other than the information or representations contained in the registration statement, prospectus or statement of additional information for the Trust shares, as such registration statement, prospectus and statement of additional information may be amended or supplemented from time to time, or in reports or proxy statements for the Trust, or in sales literature or other promotional material approved by the Trust or its designee, except with the written approval of the Trust or its designee. 3.3 The Trust will use its best efforts to ensure that sales literature and other promotional material prepared by it or on its behalf in which a Company, the Accounts or the Contracts are named, conforms to all requirements of all applicable federal and state laws and rules and regulations, including all applicable rules and regulations of the NASD. 3.4 The Trust will not give any information or make any representations or statements on behalf of or concerning the Companies, the Accounts or the Contracts in connection with the sale of Trust shares other than the information or representations contained in the registration statements, prospectuses or statements of additional information for the Contracts, as such registration statements, prospectuses and statements of additional information may be amended or supplemented from time to time, or in published reports for each Account which are in the public domain or approved by a Company for distribution to Contract owners, or in sales literature or promotional material approved by a Company or its designee, except with the written permission of the Company or its designee. 3.5 The Trust will provide to each of the Companies at least one complete copy of all registration statements, prospectuses, statements of additional information, shareholder annual, semi-annual and other reports, proxy statements, applications for exemptions, requests for no-action letters and any amendments to any of the foregoing, that relate to the Trust or any Fund promptly after the filing of each such document with the SEC or any other regulatory authority. 3.6 Each of the Companies will provide to the Trust at least one complete copy of all registration statements, prospectuses, statements of additional information, shareholder annual, semi-annual and other reports, solicitations for voting instructions, applications for exemptions, requests for no-action letters and any amendments to any of the foregoing, that relate to its Contracts or any of its Accounts promptly after the filing of each such document with the SEC or any other regulatory authority. 4 3.7. Each party hereto will provide to each other party, to the extent it is relevant to the Contracts or the Trust, a copy of any comment letter received from the staff of the SEC or the NASD, and such party's response thereto, following any examination or inspection by the staff of the SEC or the NASD. 3.8 As used herein, the phrase "sales literature and other promotional material" includes, but is not limited to, advertisements (such as material published or designed for use in a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, sign or billboard, motion picture or other public medium), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees. 4. Fees and Expenses 4.1 The Trust will pay no fee or other compensation to the Companies under this Agreement. If the Trust or any Fund (or any class of shares thereof) adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution and other expenses, then the Trust's principal underwriter, Manulife Securities, or an affiliate thereof, may make payments to the Companies to the extent consistent with applicable laws, regulations and rules and such plan. 5. Diversification 5.1 The Trust and each of the Funds will at all times comply with Section 817(h) of the Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury Regulations thereunder, as the same may be amended or modified from time to time, relating to the diversification requirements for variable annuity, endowment or life insurance contracts. In addition, neither the Trust nor the Funds will take any action, or fail to take any action, that results in the inability of any Account investing in the Funds to treat a portion of each asset of a Fund as an asset of the Account, in accordance with Treas. Reg. Section 1.817-5(f), for purposes of satisfying the diversification requirements of Section 817(h) of the Code and the Treasury Regulations thereunder. 6. Potential Conflicts 6.1 To the extent required by the Exemptive Order or by applicable law, the Board will monitor the Trust for the existence of any material irreconcilable conflict between or among the interests of variable contract owners whose contract values are invested through separate accounts, participants in Qualified Plans and Other Purchasers investing in the Trust and will determine what action, if any, should be taken in response to any such conflict. A material irreconcilable conflict may arise for a variety of reasons, including: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Fund are being managed; (e) a difference in voting instructions given by variable annuity contract owners, variable life insurance contract owners and, where applicable, participants in Qualified Plans; (f) a decision by a Participating Insurance Company to disregard the voting instructions of variable contract owners; or (g) a decision by a Qualified Plan, where applicable, to disregard participant voting instructions. The Trust will promptly inform the Companies if it determines that a material irreconcilable conflict exists and of the implications thereof. 5 6.2 Each of the Companies, on behalf of itself, its Accounts and any of its affiliates investing in a Fund, will report to the Board any potential or existing conflict as described in Section 6.1 of which it is or becomes aware. Each Company will assist the Board in carrying out its responsibilities under the Exemptive Order and under applicable law by providing the Board with all information reasonably necessary for the Board to consider any issues raised with respect to such conflict and by furnishing to the Board, at its reasonable request annually or more frequently, such other materials or reports as the Board may deem appropriate. Each of the Companies will inform the Board whenever it determines to disregard Contract owner voting instructions, and each of the Companies will carry out its responsibility under this Article 6 with a view only to the interests of its Contract owners. 6.3 If it is determined by a majority of the Board, or a majority of the disinterested Trustees, that a material irreconcilable conflict exists with respect to any Fund, each of the Companies, as applicable, shall, at its own expense, take whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, which steps could include: (1) withdrawing the assets allocable to some or all of its Accounts from the Fund and reinvesting such assets in a different investment medium, including (but not limited to) another Fund, or submitting the question of whether such segregation should be implemented to a vote of all affected Contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., variable annuity contract owners or variable life insurance contract owners) that votes in favor of such segregation, or offering to the affected Contract owners the option of making such a change; and (2) establishing a new registered management investment company or managed separate account. In the event that the Board determines that any proposed action by a Company does not adequately remedy any material irreconcilable conflict, that Company will withdraw the affected Account's investment in the Trust or a Fund within six months after the Board informs the Company in writing of the foregoing determination, provided, however, that such withdrawal will be limited to the extent required by any such material irreconcilable conflict as determined by a majority of the disinterested Trustees. 6.4 If a material irreconcilable conflict arises because of a decision by a Company to disregard Contract owner voting instructions and that decision represents a minority position or would preclude a majority vote, the Company may be required, at the Trust's election, to withdraw the relevant Account's investment in the Trust or a Fund, as applicable, provided, however, that any such withdrawal will be limited to the extent required by such material irreconcilable conflict as determined by a majority of the disinterested Trustees. Any such withdrawal will take place within six months after the Trust gives written notice that this provision is being implemented. No charge or penalty will be imposed as a result of any such withdrawal. 6.5 For purposes of Sections 6.3 through 6.4 of this Agreement, a majority of the Trustees who are not "interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of the Trust will determine whether any proposed action adequately remedies any material irreconcilable conflict, but in no event will the Trust be required to establish a new funding medium for the Contracts. Nor shall a Company be required by Section 6.3 to establish any new funding medium for the Contracts if an offer to do so has been declined by vote of a majority of Contract owners materially adversely affected by the material irreconcilable conflict. 6.6 If and to the extent that Rule 6e-2 and Rule 6e-3(T) under the 1940 Act are amended, or proposed Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act or the rules promulgated thereunder with respect to "mixed or shared funding" (as understood for purposes of the Exemptive Order) on terms and conditions materially different from those contained in the Exemptive Order, then (a) the Trust and/or the Companies as well as the other Participating Insurance Companies, as appropriate, will take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable; and (b) Sections 2.4, 6.1, 6.2, 6.3 and 6.4 of this 6 Agreement shall continue in effect only to the extent that terms and conditions substantially identical to such Sections are contained in such Rule(s) as so amended or adopted. 6.7 The Trust hereby notifies the Companies that it may be appropriate to include in prospectuses for the Contracts disclosure regarding potential conflicts as described in Section 6.1 hereof. 7. Representations and Warranties 7.1 Representations and Warranties of the Companies. (a) Each of the Companies represents and warrants that it is a life insurance company duly organized or existing and in good standing under applicable law and that each of its Accounts, prior to any issuance or sale of any Contracts by such Account and during the term of this Agreement, will be legally and validly established as a separate account pursuant to relevant state insurance law and either: (i) will be registered as a unit investment trust in accordance with the provisions of the 1940 Act; or (ii) will be exempt from such registration. (b) Each of the Companies represents and warrants that the Contracts issued by it are or, prior to the purchase of shares of any Fund in connection with funding such Contracts, will be registered under the 1933 Act, except to the extent a particular Contract is exempt from such registration, and will be issued and sold in compliance in all material respects with all applicable federal and state laws, including all applicable customer suitability requirements. (c) Each of the Companies represents and warrants that its registration statements for the Contracts and any amendments or supplement thereto will, when they become effective, conform in all material respects to the requirements of the 1933 Act and the 1940 Act and the rules and regulations of the SEC thereunder and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, provided, however, that this representation and warranty will not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of the Trust expressly for use therein. (d) Each of the Companies represents and warrants that its Contracts are currently and at the time of issuance will be treated as modified endowment, annuity or life insurance contracts under applicable provisions of the Code and agrees that it will make every effort to maintain such treatment and will notify the Trust immediately upon having a reasonable basis for believing that its Contracts or any of them have ceased to be so treated or might not be so treated in the future. (e) Each of the Companies represents and warrants that it will not, without the prior written consent of the Trust, purchase shares of the Trust with Account assets derived from the sale of Contracts to individuals or entities which would cause the investment policies of any Fund to be subject to any limitations not in the Trust's then current prospectus or statement of additional information with respect to any Fund. 7.2 Representations and Warranties of the Trust (a) The Trust represents and warrants that it is lawfully organized and validly existing under the laws of the Commonwealth of Massachusetts and that it does and will at all times during the term of this Agreement comply in all material respects with the 1940 Act. 7 (b) The Trust represents and warrants that shares of the Funds offered and sold pursuant to this Agreement will be registered under the 1933 Act, duly authorized for issuance and sold in compliance with the laws of the Commonwealth of Massachusetts and all applicable federal and state securities laws and that the Trust is and will remain during the term of this Agreement registered as an open-end management investment company under the 1940 Act. The Trust agrees that it will amend the registration statement for its shares under the 1933 Act and the 1940 Act from time to time as required in order to permit the continuous offering of its shares in accordance with the 1933 Act. The Trust will register and qualify the shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by the Trust or Manulife Securities. (c) The Trust represents and warrants that the registration statement for shares of the Funds and any amendments or supplement thereto will, when they become effective, conform in all material respects to the requirements of the 1933 Act and the 1940 Act and the rules and regulations of the SEC thereunder and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, provided, however, that this representation and warranty will not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Trust by or on behalf of a Company expressly for use therein. (d) The Trust represents and warrants that each Fund is currently qualified as a "regulated investment company" under subchapter M of the Code and agrees that the Trust will make every effort to maintain such qualification (under Subchapter M or any successor or similar provision) and will notify the Companies promptly upon having a reasonable basis for believing that any Fund has ceased to so qualify or might not so qualify in the future. 8. Applicable Law 8.1 This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the Commonwealth of Massachusetts without reference to the principles of conflicts or choice of law thereof. 8.2 This Agreement shall be subject to the provisions of the 1933, 1934 and 1940 Acts, and the rules and regulations thereunder, including such exemptions from those statutes, rules and regulations as the SEC or its staff may grant (including, but not limited to, the Exemptive Order) and the terms hereof shall be interpreted and construed in accordance therewith. 9. Termination 9.1 This Agreement may be terminated: (a) by the Trust or a Company, in its entirety or with respect to one or more Funds, for any reason or for no reason, upon 60 days' advance written notice to the other party; (b) by a Company, immediately upon written notice to the Trust, if any Fund ceases to qualify as a "regulated investment company" under Subchapter M of the Code or under any successor or similar provision, or if the Company reasonably believes that any Fund may fail to so qualify; or (c) pursuant to the provisions of Article 6 ("Potential Conflicts") hereof. 9.2 Notwithstanding any termination of this Agreement, the Trust will, at the option of a Company, continue to make available to the Company additional shares of each Fund pursuant to the terms and 8 conditions of this Agreement, for all Contracts in effect on the effective date of termination of this Agreement (the "Existing Contracts"). Specifically, without limitation, the owners of the Existing Contracts shall be permitted to reallocate investments in the Trust, redeem investments in the Trust and/or invest in the Trust upon the making of additional purchase payments under the Existing Contracts. The parties agree that this Section 10.2 shall not apply to any terminations under Article 6 of this Agreement and that terminations under Article 6 shall be governed by that Article. 10. Notices 10.1 Any notice required under this Agreement shall be sufficiently given when sent by registered or certified mail, by facsimile transmission (provided that a copy is also sent by registered or certified mail) or by a nationally recognized overnight delivery service, to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. If to the Trust: John Hancock Trust 601 Congress Street Boston, Massachusetts 02210 Attention: Betsy Anne Seel Fax No.: (617) 663-2197 If to Manulife USA: John Hancock Life Insurance Company (U.S.A.) 601 Congress Street Boston, Massachusetts 02210 Attention: Betsy Anne Seel Fax No.: (617) 663-2197 If to Manulife New York: John Hancock Life Insurance Company of New York 601 Congress Street Boston, Massachusetts 02210 Attention: Nicole Humblias Fax No.: (617) 663-2197 11. Miscellaneous 11.1 A copy of the Agreement and Declaration of Trust establishing the Trust (as amended from time to time) is on file with the Office of the Secretary of the Commonwealth of Massachusetts, and notice is hereby given that this Agreement is executed on behalf of the Trust by officers of the Trust as officers and not individually and that the obligations of the Trust or of any Fund under or arising out of this Agreement are not binding upon any of the Trustees, officers or shareholders of the Trust individually but are binding only upon the assets and property belonging to the Trust or to a particular Fund as the case may be. 11.2 The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 9 11.3 This Agreement contains the entire understanding of the parties with respect to the subject matter hereof, may be executed in two or more counterparts which together will constitute one and the same instrument, may not be assigned by a Company or the Trust without the written consent of the other, and will inure to the benefit of and be binding upon the parties and their respective successors and assigns. 11.4 If any provision of this Agreement is held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement will not be affected thereby. 11.5 Each party hereto will cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, NASD and state insurance regulators) and will permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. 11.6 The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, to which the parties hereto are entitled or subject under state and federal laws. 12. Disruptive Short Term Trading Policies 12.1 Each Company agrees that each will, if requested by the Trust, impose on Contracts issued by them restrictions on transfers among subaccounts investing in Funds (the purpose of such restrictions being to deter trading that is significantly disrupting (or may potentially significantly disrupt) management of a portfolio, materially increase portfolio transaction costs or diluting interest in a portfolio held for long-term investment ("Disruptive Short-Term Trading). 12.2 Each Company agrees that the Trust may provide to them the contract/policy numbers for insurance contracts/policies which provide an access person of the Trust with any direct or indirect beneficial ownership of shares of the Trust. If the Trust provides such contract numbers to a Company, the Company agrees to monitor such access person's trading in shares of the Trust and to promptly alert the Trust to any Disruptive Short Term Trading. 10 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and on its behalf by its duly authorized representative as of the date first written above. JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.) (on behalf of itself and its Accounts) By: /s/ James D. Gallagher ------------------------------------------------- Name: James D. Gallagher Title: Executive Vice President, Secretary And General Counsel JOHN HANCOCK LIFE INSURANCE COMPANY OF NEW YORK (on behalf of itself and its Accounts) By: /s/ James D. Gallagher ------------------------------------------------- Name: James D. Gallagher, Title: President JOHN HANCOCK INSURANCE COMPANY By: /s/ James D. Gallagher ------------------------------------------------- Name: James D. Gallagher Title: President JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY By: /s/ James M. Benson ------------------------------------------------- Name: James M. Benson Title: President & Chief Executive Officer JOHN HANCOCK TRUST By: /s/ Gordon M. Shone ------------------------------------------------- Name: Gordon M. Shone, Title: Chief Financial Officer and Vice President 11 EX-99.27(N) 13 dex9927n.txt CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNT FIRM Consent of Independent Registered Public Accounting Firm We consent to the reference to our firm under the caption "Independent Registered Public Accounting Firm" and to the use of our reports dated March 25, 2005, with respect to the financial statements of John Hancock Life Insurance Company (U.S.A.) (formerly, The Manufacturers Life Insurance Company (U.S.A.)) and dated March 18, 2005,with respect to the financial statements of John Hancock Life Insurance Company (U.S.A) Separate Account N (formerly, The Manufacturers Life Insurance Company (U.S.A.) Separate Account N), which are contained in the Statement of Additional Information in Pre- Effective Amendment No. 1 in the Registration Statement (Form N-6 No. 333-126668) and related Prospectus of John Hancock Life Insurance Company (U.S.A) Separate Account N (formerly, The Manufacturers Life Insurance Company (U.S.A.) Separate Account N). /s/ ERNST & YOUNG LLP Boston, MA October 6, 2005 EX-99.27(VI) 14 dex9927vi.txt POWERS OF ATTORNEY -------------------------------------------------------------------------------- John Hancock Life Insurance Company (U.S.A.) [LOGO OF JOHN HANCOCK COMPANY] POWER OF ATTORNEY I, Alison Alden, in my capacity as a Director of John Hancock Life Insurance Company (U.S.A.) (the "Company"), do hereby constitute and appoint James P. O'Malley, Marc Costantini, Emanuel Alves, Frank Knox, John Danello, Arnold R. Bergman, and James C. Hoodlet or any of them individually, with full power of substitution, my true and lawful attorneys and agents to execute, in the name of, and on behalf of, the undersigned as a member of said Board of Directors, the Registration Statements under the Securities Act of 1933 and the Investment Company Act of 1940, each amendment to the Registration Statements, and filings required by the Securities Exchange Act of 1934, to be filed with the Securities and Exchange Commission for the Company, the Company's registered Separate Accounts as described on the attached page, and any other variable annuity or variable life insurance separate account of the Company in existence on the date hereof or hereafter lawfully created and to take any and all action and to execute in the name of, and on behalf of, the undersigned as a member of said Board of Directors or otherwise any and all instruments, including applications for exemptions from such Acts, which said attorneys and agents deem necessary or advisable to enable the Company or any variable annuity or variable life insurance separate account of the Company to comply with the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the Investment Company Act of 1940, as amended, and the rules, regulations and requirements of the Securities and Exchange Commission in respect thereof; and the undersigned hereby ratifies and confirms as his or her own act and deed all that each of said attorneys and agents shall do or cause to have done by virtue hereof. Each of said attorneys and agents shall have, and may exercise, all of the powers hereby conferred. This Power of Attorney is intended to supersede any and all prior Power of Attorneys in connection with the above mentioned acts, and is effective June 29, 2005 and remains in effect until revoked or revised. Signature Title Date /s/ Alison Alden Director June 29, 2005 ------------------------------ Alison Alden Separate Account Names: 1. John Hancock Life Insurance Company (U.S.A.) Separate Account A 2. John Hancock Life Insurance Company (U.S.A.) Separate Account H 3. John Hancock Life Insurance Company (U.S.A.) Separate Account I 4. John Hancock Life Insurance Company (U.S.A.) Separate Account J 5. John Hancock Life Insurance Company (U.S.A.) Separate Account K 6. John Hancock Life Insurance Company (U.S.A.) Separate Account L 7. John Hancock Life Insurance Company (U.S.A.) Separate Account M 8. John Hancock Life Insurance Company (U.S.A.) Separate Account N 9. John Hancock Life Insurance Company (U.S.A.) Separate Account O -------------------------------------------------------------------------------- John Hancock Life Insurance Company (U.S.A.) [LOGO OF JOHN HANCOCK COMPANY] POWER OF ATTORNEY I, James R. Boyle, in my capacity as a Director of John Hancock Life Insurance Company (U.S.A.) (the "Company"), do hereby constitute and appoint James P. O'Malley, Marc Costantini, Emanuel Alves, Frank Knox, John Danello, Arnold R. Bergman, and James C. Hoodlet or any of them individually, with full power of substitution, my true and lawful attorneys and agents to execute, in the name of, and on behalf of, the undersigned as a member of said Board of Directors, the Registration Statements under the Securities Act of 1933 and the Investment Company Act of 1940, each amendment to the Registration Statements, and filings required by the Securities Exchange Act of 1934, to be filed with the Securities and Exchange Commission for the Company, the Company's registered Separate Accounts as described on the attached page, and any other variable annuity or variable life insurance separate account of the Company in existence on the date hereof or hereafter lawfully created and to take any and all action and to execute in the name of, and on behalf of, the undersigned as a member of said Board of Directors or otherwise any and all instruments, including applications for exemptions from such Acts, which said attorneys and agents deem necessary or advisable to enable the Company or any variable annuity or variable life insurance separate account of the Company to comply with the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the Investment Company Act of 1940, as amended, and the rules, regulations and requirements of the Securities and Exchange Commission in respect thereof; and the undersigned hereby ratifies and confirms as his or her own act and deed all that each of said attorneys and agents shall do or cause to have done by virtue hereof. Each of said attorneys and agents shall have, and may exercise, all of the powers hereby conferred. This Power of Attorney is intended to supersede any and all prior Power of Attorneys in connection with the above mentioned acts, and is effective June 29, 2005 and remains in effect until revoked or revised. Signature Title Date /s/ James R. Boyle Director June 29, 2005 ------------------------------ James R. Boyle Separate Account Names: 1. John Hancock Life Insurance Company (U.S.A.) Separate Account A 2. John Hancock Life Insurance Company (U.S.A.) Separate Account H 3. John Hancock Life Insurance Company (U.S.A.) Separate Account I 4. John Hancock Life Insurance Company (U.S.A.) Separate Account J 5. John Hancock Life Insurance Company (U.S.A.) Separate Account K 6. John Hancock Life Insurance Company (U.S.A.) Separate Account L 7. John Hancock Life Insurance Company (U.S.A.) Separate Account M 8. John Hancock Life Insurance Company (U.S.A.) Separate Account N 9. John Hancock Life Insurance Company (U.S.A.) Separate Account O -------------------------------------------------------------------------------- John Hancock Life Insurance Company (U.S.A.) [LOGO OF JOHN HANCOCK COMPANY] POWER OF ATTORNEY I, Robert A. Cook, in my capacity as a Director of John Hancock Life Insurance Company (U.S.A.) (the "Company"), do hereby constitute and appoint James P. O'Malley, Marc Costantini, Emanuel Alves, Frank Knox, John Danello, Arnold R. Bergman, and James C. Hoodlet or any of them individually, with full power of substitution, my true and lawful attorneys and agents to execute, in the name of, and on behalf of, the undersigned as a member of said Board of Directors, the Registration Statements under the Securities Act of 1933 and the Investment Company Act of 1940, each amendment to the Registration Statements, and filings required by the Securities Exchange Act of 1934, to be filed with the Securities and Exchange Commission for the Company, the Company's registered Separate Accounts as described on the attached page, and any other variable annuity or variable life insurance separate account of the Company in existence on the date hereof or hereafter lawfully created and to take any and all action and to execute in the name of, and on behalf of, the undersigned as a member of said Board of Directors or otherwise any and all instruments, including applications for exemptions from such Acts, which said attorneys and agents deem necessary or advisable to enable the Company or any variable annuity or variable life insurance separate account of the Company to comply with the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the Investment Company Act of 1940, as amended, and the rules, regulations and requirements of the Securities and Exchange Commission in respect thereof; and the undersigned hereby ratifies and confirms as his or her own act and deed all that each of said attorneys and agents shall do or cause to have done by virtue hereof. Each of said attorneys and agents shall have, and may exercise, all of the powers hereby conferred. This Power of Attorney is intended to supersede any and all prior Power of Attorneys in connection with the above mentioned acts, and is effective June 29, 2005 and remains in effect until revoked or revised. Signature Title Date /s/ Robert A. Cook Director June 29/05 ------------------------------ Robert A. Cook Separate Account Names: 1. John Hancock Life Insurance Company (U.S.A.) Separate Account A 2. John Hancock Life Insurance Company (U.S.A.) Separate Account H 3. John Hancock Life Insurance Company (U.S.A.) Separate Account I 4. John Hancock Life Insurance Company (U.S.A.) Separate Account J 5. John Hancock Life Insurance Company (U.S.A.) Separate Account K 6. John Hancock Life Insurance Company (U.S.A.) Separate Account L 7. John Hancock Life Insurance Company (U.S.A.) Separate Account M 8. John Hancock Life Insurance Company (U.S.A.) Separate Account N 9. John Hancock Life Insurance Company (U.S.A.) Separate Account O -------------------------------------------------------------------------------- John Hancock Life Insurance Company (U.S.A.) [LOGO OF JOHN HANCOCK COMPANY] POWER OF ATTORNEY I, John DesPrez III, in my capacity as a Director of John Hancock Life Insurance Company (U.S.A.) (the "Company"), do hereby constitute and appoint James P. O'Malley, Marc Costantini, Emanuel Alves, Frank Knox, John Danello, Arnold R. Bergman, and James C. Hoodlet or any of them individually, with full power of substitution, my true and lawful attorneys and agents to execute, in the name of, and on behalf of, the undersigned as a member of said Board of Directors, the Registration Statements under the Securities Act of 1933 and the Investment Company Act of 1940, each amendment to the Registration Statements, and filings required by the Securities Exchange Act of 1934, to be filed with the Securities and Exchange Commission for the Company, the Company's registered Separate Accounts as described on the attached page, and any other variable annuity or variable life insurance separate account of the Company in existence on the date hereof or hereafter lawfully created and to take any and all action and to execute in the name of, and on behalf of, the undersigned as a member of said Board of Directors or otherwise any and all instruments, including applications for exemptions from such Acts, which said attorneys and agents deem necessary or advisable to enable the Company or any variable annuity or variable life insurance separate account of the Company to comply with the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the Investment Company Act of 1940, as amended, and the rules, regulations and requirements of the Securities and Exchange Commission in respect thereof; and the undersigned hereby ratifies and confirms as his or her own act and deed all that each of said attorneys and agents shall do or cause to have done by virtue hereof. Each of said attorneys and agents shall have, and may exercise, all of the powers hereby conferred. This Power of Attorney is intended to supersede any and all prior Power of Attorneys in connection with the above mentioned acts, and is effective June 29, 2005 and remains in effect until revoked or revised. Signature Title Date /s/ John DesPrez III Director 6/29/05 ------------------------------ John DesPrez III Separate Account Names: 1. John Hancock Life Insurance Company (U.S.A.) Separate Account A 2. John Hancock Life Insurance Company (U.S.A.) Separate Account H 3. John Hancock Life Insurance Company (U.S.A.) Separate Account I 4. John Hancock Life Insurance Company (U.S.A.) Separate Account J 5. John Hancock Life Insurance Company (U.S.A.) Separate Account K 6. John Hancock Life Insurance Company (U.S.A.) Separate Account L 7. John Hancock Life Insurance Company (U.S.A.) Separate Account M 8. John Hancock Life Insurance Company (U.S.A.) Separate Account N 9. John Hancock Life Insurance Company (U.S.A.) Separate Account O -------------------------------------------------------------------------------- John Hancock Life Insurance Company (U.S.A.) [LOGO OF JOHN HANCOCK COMPANY] POWER OF ATTORNEY I, James P. O'Malley, in my capacity as a Director of John Hancock Life Insurance Company (U.S.A.) (the "Company"), do hereby constitute and appoint James P. O'Malley, Marc Costantini, Emanuel Alves, Frank Knox, John Danello, Arnold R. Bergman, and James C. Hoodlet or any of them individually, with full power of substitution, my true and lawful attorneys and agents to execute, in the name of, and on behalf of, the undersigned as a member of said Board of Directors, the Registration Statements under the Securities Act of 1933 and the Investment Company Act of 1940, each amendment to the Registration Statements, and filings required by the Securities Exchange Act of 1934, to be filed with the Securities and Exchange Commission for the Company, the Company's registered Separate Accounts as described on the attached page, and any other variable annuity or variable life insurance separate account of the Company in existence on the date hereof or hereafter lawfully created and to take any and all action and to execute in the name of, and on behalf of, the undersigned as a member of said Board of Directors or otherwise any and all instruments, including applications for exemptions from such Acts, which said attorneys and agents deem necessary or advisable to enable the Company or any variable annuity or variable life insurance separate account of the Company to comply with the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the Investment Company Act of 1940, as amended, and the rules, regulations and requirements of the Securities and Exchange Commission in respect thereof; and the undersigned hereby ratifies and confirms as his or her own act and deed all that each of said attorneys and agents shall do or cause to have done by virtue hereof. Each of said attorneys and agents shall have, and may exercise, all of the powers hereby conferred. This Power of Attorney is intended to supersede any and all prior Power of Attorneys in connection with the above mentioned acts, and is effective June 29, 2005 and remains in effect until revoked or revised. Signature Title Date /s/ James P. O'Malley Director June 28, 2005 ------------------------------ James P. O'Malley Separate Account Names: 1. John Hancock Life Insurance Company (U.S.A.) Separate Account A 2. John Hancock Life Insurance Company (U.S.A.) Separate Account H 3. John Hancock Life Insurance Company (U.S.A.) Separate Account I 4. John Hancock Life Insurance Company (U.S.A.) Separate Account J 5. John Hancock Life Insurance Company (U.S.A.) Separate Account K 6. John Hancock Life Insurance Company (U.S.A.) Separate Account L 7. John Hancock Life Insurance Company (U.S.A.) Separate Account M 8. John Hancock Life Insurance Company (U.S.A.) Separate Account N 9. John Hancock Life Insurance Company (U.S.A.) Separate Account O -------------------------------------------------------------------------------- John Hancock Life Insurance Company (U.S.A.) [LOGO OF JOHN HANCOCK COMPANY] POWER OF ATTORNEY I, John R. Ostler, in my capacity as a Director of John Hancock Life Insurance Company (U.S.A.) (the "Company"), do hereby constitute and appoint James P. O'Malley, Marc Costantini, Emanuel Alves, Frank Knox, John Danello, Arnold R. Bergman, and James C. Hoodlet or any of them individually, with full power of substitution, my true and lawful attorneys and agents to execute, in the name of, and on behalf of, the undersigned as a member of said Board of Directors, the Registration Statements under the Securities Act of 1933 and the Investment Company Act of 1940, each amendment to the Registration Statements, and filings required by the Securities Exchange Act of 1934, to be filed with the Securities and Exchange Commission for the Company, the Company's registered Separate Accounts as described on the attached page, and any other variable annuity or variable life insurance separate account of the Company in existence on the date hereof or hereafter lawfully created and to take any and all action and to execute in the name of, and on behalf of, the undersigned as a member of said Board of Directors or otherwise any and all instruments, including applications for exemptions from such Acts, which said attorneys and agents deem necessary or advisable to enable the Company or any variable annuity or variable life insurance separate account of the Company to comply with the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the Investment Company Act of 1940, as amended, and the rules, regulations and requirements of the Securities and Exchange Commission in respect thereof; and the undersigned hereby ratifies and confirms as his or her own act and deed all that each of said attorneys and agents shall do or cause to have done by virtue hereof. Each of said attorneys and agents shall have, and may exercise, all of the powers hereby conferred. This Power of Attorney is intended to supersede any and all prior Power of Attorneys in connection with the above mentioned acts, and is effective June 29, 2005 and remains in effect until revoked or revised. Signature Title Date /s/ John R. Ostler Director June 29, 2005 ------------------------------ John R. Ostler Separate Account Names: 1. John Hancock Life Insurance Company (U.S.A.) Separate Account A 2. John Hancock Life Insurance Company (U.S.A.) Separate Account H 3. John Hancock Life Insurance Company (U.S.A.) Separate Account I 4. John Hancock Life Insurance Company (U.S.A.) Separate Account J 5. John Hancock Life Insurance Company (U.S.A.) Separate Account K 6. John Hancock Life Insurance Company (U.S.A.) Separate Account L 7. John Hancock Life Insurance Company (U.S.A.) Separate Account M 8. John Hancock Life Insurance Company (U.S.A.) Separate Account N 9. John Hancock Life Insurance Company (U.S.A.) Separate Account O -------------------------------------------------------------------------------- John Hancock Life Insurance Company (U.S.A.) [LOGO OF JOHN HANCOCK COMPANY] POWER OF ATTORNEY I, Rex Schlaybaugh, in my capacity as a Director of John Hancock Life Insurance Company (U.S.A.) (the "Company"), do hereby constitute and appoint James P. O'Malley, Marc Costantini, Emanuel Alves, Frank Knox, John Danello, Arnold R. Bergman, and James C. Hoodlet or any of them individually, with full power of substitution, my true and lawful attorneys and agents to execute, in the name of, and on behalf of, the undersigned as a member of said Board of Directors, the Registration Statements under the Securities Act of 1933 and the Investment Company Act of 1940, each amendment to the Registration Statements, and filings required by the Securities Exchange Act of 1934, to be filed with the Securities and Exchange Commission for the Company, the Company's registered Separate Accounts as described on the attached page, and any other variable annuity or variable life insurance separate account of the Company in existence on the date hereof or hereafter lawfully created and to take any and all action and to execute in the name of, and on behalf of, the undersigned as a member of said Board of Directors or otherwise any and all instruments, including applications for exemptions from such Acts, which said attorneys and agents deem necessary or advisable to enable the Company or any variable annuity or variable life insurance separate account of the Company to comply with the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the Investment Company Act of 1940, as amended, and the rules, regulations and requirements of the Securities and Exchange Commission in respect thereof; and the undersigned hereby ratifies and confirms as his or her own act and deed all that each of said attorneys and agents shall do or cause to have done by virtue hereof. Each of said attorneys and agents shall have, and may exercise, all of the powers hereby conferred. This Power of Attorney is intended to supersede any and all prior Power of Attorneys in connection with the above mentioned acts, and is effective June 29, 2005 and remains in effect until revoked or revised. Signature Title Date /s/ Rex Schlaybaugh Director ------------------------------ ------------------------- Rex Schlaybaugh Separate Account Names: 1. John Hancock Life Insurance Company (U.S.A.) Separate Account A 2. John Hancock Life Insurance Company (U.S.A.) Separate Account H 3. John Hancock Life Insurance Company (U.S.A.) Separate Account I 4. John Hancock Life Insurance Company (U.S.A.) Separate Account J 5. John Hancock Life Insurance Company (U.S.A.) Separate Account K 6. John Hancock Life Insurance Company (U.S.A.) Separate Account L 7. John Hancock Life Insurance Company (U.S.A.) Separate Account M 8. John Hancock Life Insurance Company (U.S.A.) Separate Account N 9. John Hancock Life Insurance Company (U.S.A.) Separate Account O -------------------------------------------------------------------------------- John Hancock Life Insurance Company (U.S.A.) [LOGO OF JOHN HANCOCK COMPANY] POWER OF ATTORNEY I, Diana Scott, in my capacity as a Director of John Hancock Life Insurance Company (U.S.A.) (the "Company"), do hereby constitute and appoint James P. O'Malley, Marc Costantini, Emanuel Alves, Frank Knox, John Danello, Arnold R. Bergman, and James C. Hoodlet or any of them individually, with full power of substitution, my true and lawful attorneys and agents to execute, in the name of, and on behalf of, the undersigned as a member of said Board of Directors, the Registration Statements under the Securities Act of 1933 and the Investment Company Act of 1940, each amendment to the Registration Statements, and filings required by the Securities Exchange Act of 1934, to be filed with the Securities and Exchange Commission for the Company, the Company's registered Separate Accounts as described on the attached page, and any other variable annuity or variable life insurance separate account of the Company in existence on the date hereof or hereafter lawfully created and to take any and all action and to execute in the name of, and on behalf of, the undersigned as a member of said Board of Directors or otherwise any and all instruments, including applications for exemptions from such Acts, which said attorneys and agents deem necessary or advisable to enable the Company or any variable annuity or variable life insurance separate account of the Company to comply with the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the Investment Company Act of 1940, as amended, and the rules, regulations and requirements of the Securities and Exchange Commission in respect thereof; and the undersigned hereby ratifies and confirms as his or her own act and deed all that each of said attorneys and agents shall do or cause to have done by virtue hereof. Each of said attorneys and agents shall have, and may exercise, all of the powers hereby conferred. This Power of Attorney is intended to supersede any and all prior Power of Attorneys in connection with the above mentioned acts, and is effective June 29, 2005 and remains in effect until revoked or revised. Signature Title Date /s/ Diana Scott Director 6/28/05 ------------------------------ Diana Scott Separate Account Names: 1. John Hancock Life Insurance Company (U.S.A.) Separate Account A 2. John Hancock Life Insurance Company (U.S.A.) Separate Account H 3. John Hancock Life Insurance Company (U.S.A.) Separate Account I 4. John Hancock Life Insurance Company (U.S.A.) Separate Account J 5. John Hancock Life Insurance Company (U.S.A.) Separate Account K 6. John Hancock Life Insurance Company (U.S.A.) Separate Account L 7. John Hancock Life Insurance Company (U.S.A.) Separate Account M 8. John Hancock Life Insurance Company (U.S.A.) Separate Account N 9. John Hancock Life Insurance Company (U.S.A.) Separate Account O -------------------------------------------------------------------------------- John Hancock Life Insurance Company (U.S.A.) [LOGO OF JOHN HANCOCK COMPANY] POWER OF ATTORNEY I, Warren Thomson, in my capacity as a Director of John Hancock Life Insurance Company (U.S.A.) (the "Company"), do hereby constitute and appoint James P. O'Malley, Marc Costantini, Emanuel Alves, Frank Knox, John Danello, Arnold R. Bergman, and James C. Hoodlet or any of them individually, with full power of substitution, my true and lawful attorneys and agents to execute, in the name of, and on behalf of, the undersigned as a member of said Board of Directors, the Registration Statements under the Securities Act of 1933 and the Investment Company Act of 1940, each amendment to the Registration Statements, and filings required by the Securities Exchange Act of 1934, to be filed with the Securities and Exchange Commission for the Company, the Company's registered Separate Accounts as described on the attached page, and any other variable annuity or variable life insurance separate account of the Company in existence on the date hereof or hereafter lawfully created and to take any and all action and to execute in the name of, and on behalf of, the undersigned as a member of said Board of Directors or otherwise any and all instruments, including applications for exemptions from such Acts, which said attorneys and agents deem necessary or advisable to enable the Company or any variable annuity or variable life insurance separate account of the Company to comply with the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the Investment Company Act of 1940, as amended, and the rules, regulations and requirements of the Securities and Exchange Commission in respect thereof; and the undersigned hereby ratifies and confirms as his or her own act and deed all that each of said attorneys and agents shall do or cause to have done by virtue hereof. Each of said attorneys and agents shall have, and may exercise, all of the powers hereby conferred. This Power of Attorney is intended to supersede any and all prior Power of Attorneys in connection with the above mentioned acts, and is effective June 29, 2005 and remains in effect until revoked or revised. Signature Title Date /s/ Warren Thomson Director June 29, 2005 ------------------------------ Warren Thomson Separate Account Names: 1. John Hancock Life Insurance Company (U.S.A.) Separate Account A 2. John Hancock Life Insurance Company (U.S.A.) Separate Account H 3. John Hancock Life Insurance Company (U.S.A.) Separate Account I 4. John Hancock Life Insurance Company (U.S.A.) Separate Account J 5. John Hancock Life Insurance Company (U.S.A.) Separate Account K 6. John Hancock Life Insurance Company (U.S.A.) Separate Account L 7. John Hancock Life Insurance Company (U.S.A.) Separate Account M 8. John Hancock Life Insurance Company (U.S.A.) Separate Account N 9. John Hancock Life Insurance Company (U.S.A.) Separate Account O CORRESP 15 filename15.txt John Hancock Financial Services, Inc. John Hancock Place [LOGO OF JOHN HANCOCK FINANCIAL Post Office Box 111 SERVICES, INC] Boston, Massachusetts 02117 (617) 572-9197 Fax: (617) 572-9161 E-mail: jchoodlet@jhancock.com James C. Hoodlet Vice President and Counsel October 12, 2005 Via EDGAR U.S. Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 RE: John Hancock Variable Life Insurance Company (U.S.A.) Account N File Nos. 811-5130; 333-126668 Commissioner: Conveyed herewith via EDGAR for filing under the Securities Act of 1933 ("1933 Act"), pursuant to Rule 101(a)(2)(i) of Regulation S-T, is Pre-Effective Amendment No. 1 to the Form N-6 Registration Statement of John Hancock Variable Life Account N ("Registrant") relating to certain variable life insurance policies offered by John Hancock Life Insurance Company (U.S.A.) ("JH USA"). Background of Enclosed Filing The above-referenced registration statement relates to the Corporate VUL product. The purpose of this filing is to incorporate SEC Staff comments to the initial registration, add exhibits and financial statements previously omitted, and to otherwise complete the filing. Request for Acceleration We hereby request an order to accelerate the effectiveness of the above-referenced amendment to October 12, 2005. The Registrant and its Principal Underwriter have authorized us to hereby state to the Commission on their behalf that they are aware of their obligations under the Securities Act of 1933. The Commission staff has requested that the Registrant acknowledge and agree, and the Registrant does, hereby acknowledge and agree, that: . should the Commission or the Staff, acting pursuant to delegated authority, declare the filing effective, it does not foreclose the Commission from taking any action with respect to the filing; . the action of the Commission or the Staff, acting pursuant to delegated authority, in declaring the filing effective, does not relieve the Registrant from its full responsibility for the adequacy and accuracy of the disclosure in the filing; and . the Registrant may not assert this action as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. Please direct all questions and comments to me at (617) 572-9197. Very truly yours, /s/ James C. Hoodlet -------------------- James C. Hoodlet Enclosure