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