-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QdSWEihoiLvmjLOadf9y3TJCUlHWLOxAmNuYvOP+es63+K+Npz/jIPvn9kkMW2bI vPu3W4lzZmnWyKMcYb9hUw== 0000950150-96-000835.txt : 19960814 0000950150-96-000835.hdr.sgml : 19960814 ACCESSION NUMBER: 0000950150-96-000835 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEPARATE ACCOUNT TWO OF MANUFACTURERS LIFE INS CO OF AMERI CENTRAL INDEX KEY: 0000814501 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-57018 FILM NUMBER: 96609702 BUSINESS ADDRESS: STREET 1: 200 BLOOR STREET EAST ST 11 STREET 2: TORONTO M4W 1E5 CITY: ONTARIO CANADA STATE: A6 BUSINESS PHONE: 416-926-6302 MAIL ADDRESS: STREET 1: P O BOX 600 CITY: BUFFALO STATE: NY ZIP: 14201-0600 497 1 PROSPECTUS SUPPLEMENT DATED AUGUST 14, 1996 1 Prospectus for Multi-Account Flexible Payment Variable Annuity Issued by The Manufacturers Life Insurance Company of America 2 Prospectus The Manufacturers Life Insurance Company of America Separate Account Two Multi-Account Flexible Payment Variable Annuity Policies This prospectus describes Multi-Account Flexible Payment Variable Annuity Policies ("Policies" or "Policy") issued by The Manufacturers Life Insurance Company of America ("Manufacturers Life of America"), a stock life insurance company that is an indirect wholly-owned subsidiary of The Manufacturers Life Insurance Company ("Manufacturers Life" or the "Company"). The Policies are designed for use in connection with retirement plans that may or may not be entitled to special income tax treatment. The Policies will be offered on both an individual basis and in connection with group or sponsored arrangements. The Policies provide for the accumulation of values on a fixed or variable basis. Annuity payments are available on a fixed basis only. Values accumulated on a variable basis will be held in one or more of the sub-accounts of The Manufacturers Life of America's Separate Account Two ("Account"). The assets of each sub-account will be used to purchase shares of a particular investment portfolio ( a "Portfolio") of Manulife Series Fund, Inc. ("Manulife Series Fund"). The accompanying prospectus for Manulife Series Fund and the corresponding statement of additional information describes the investment objectives of the Portfolios in which net premiums may be invested. The Portfolios available for allocation of net premiums are: the Emerging Growth Equity Fund, the Balanced Assets Fund, the Capital Growth Bond Fund, the Money-Market Fund, the Common Stock Fund, the Real Estate Securities Fund, the International Fund, and the Pacific Rim Emerging Markets Fund. Other sub-accounts and Portfolios may be added in the future. This prospectus sets forth concisely the information concerning Separate Account Two that a prospective purchaser ought to know before making a purchase. Please read this prospectus carefully and keep it for future reference. It is valid only when accompanied by a current prospectus for Manulife Series Fund, Inc. Additional information concerning Separate Account Two has been filed with the Securities and Exchange Commission and is available upon request and without charge by writing to the Service Office address or calling the number listed below and requesting the "Statement of Additional Information of Separate Account Two of The Manufacturers Life Insurance Company of America." The table of contents of the Statement of Additional Information is included in the prospectus following the listing of the prospectus contents. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. 1 3 The Manufacturers Life Insurance Company of America 500 N. Woodward Ave. Bloomfield Hills, Michigan 48304 Service Office: 200 Bloor Street East Toronto, Ontario, Canada M4W 1E5 Telephone: 1 (800) 827-4546 1 (800) VARILIN(E) The date of this Prospectus and of the Statement of Additional Information is May 1, 1996 as amended August 14, 1996. The date of the Statement of Additional Information is May 1, 1996. 2 4 PROSPECTUS CONTENTS Page Definitions...................................... Summary Of Policies.............................. Policyowner Inquiries............................ Expense Table.................................... Condensed Financial Information General Information About Manufacturers Life of America, Separate Account Two and Manulife Series Fund..................... Who Are Manufacturers Life of America And Manufacturers Life?............................ What Is Manufacturers Life of America's Separate Account Two?.......................... What Is Manulife Series Fund, Inc. .............. What Are The Investment Objectives Of The Portfolios?................................ Description Of The Policies...................... What Are The Policy Charges?..................... How Is A Policy Purchased?....................... What Restrictions Apply To Purchase Payments?...................................... What Is The Variable Policy Value And How Is It Determined?.......................... What Are The Provisions On Transfers?............ What Surrender Or Withdrawal Rights Are Available?................................. What Are The Death Benefit Provisions?........... When Do Annuity Payments Commence?............... Under What Circumstances May Fund Shares Be Substituted?......................... What Are The Other General Policy Provisions?............................. Federal Tax Matters.............................. How Is Manufacturers Life of America Taxed?................................. What Is The Tax Treatment Of The Policies?....... What Qualified Plans May Utilize The Policies?.................................. Other Matters.................................... What Voting Rights Do Policyowners Have?......... Where Can Financial Information Be Found?...................................... Performance And Other Comparative Information.................................... Appendix A....................................... What Is The Guaranteed Interest Account?......... What Are The Annuity Options?.................... STATEMENT OF ADDITIONAL INFORMATION CONTENTS Who Sells The Policies? What Responsibilities Has Manufacturers Life Assumed? Who Are The Directors And Officers Of Manufacturers Life of America? What State Regulations Apply? Is There Any Litigation Pending? Where Can Further Information Be Found? Legal Matters Experts Financial Statements THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. 3 5 Definitions "Accumulation Period" is the period from the date we receive the first purchase payment to the Annuity Date. "Annuity Date" means the date on which the first annuity payment is due. "General Account" is all assets of Manufacturers Life of America except those allocated to Separate Account Two or other separate accounts of Manufacturers Life of America. "Guaranteed Interest Account" is the account in which allocated purchase payments earn interest at a guaranteed rate set each Policy Anniversary. "Guaranteed Interest Rate" is the rate of interest accrued on a compounded annual basis and credited monthly on amounts allocated to the Guaranteed Interest Account and will be no less than 4% per year. "Qualified Policy" means a Policy used in connection with a retirement plan which receives favorable federal income tax treatment under sections 401, 408 or 457 of the Internal Revenue Code of 1986, as amended ("Code"). (See page 19 for a brief discussion of the qualified plans which may use the Policies.) "Policy Years" and "Policy Anniversaries" are determined from the date the application was signed. The first Policy Anniversary will be the first date of the same month one year later. "Purchase Payment" is an amount paid under the Policy. "Service Office" is the office designated by Manufacturers Life of America to service the Policy. "Total Policy Value" means the value during the Accumulation Period of amounts accumulated under the Policy. The Total Policy Value is the sum of the Variable Policy Value and the Guaranteed Interest Account. "Unit" is an index used to measure the value of a Policy's interest in a Variable Account. "Valuation Period" is the period between two successive valuation dates measured from the times on such dates as of which the valuations are made. A valuation date is each day that the net asset value of the underlying shares of Manulife Series Fund, Inc. is determined. "Variable Account" is a sub-account of Separate Account Two of Manufacturers Life of America. "Variable Policy Value" is the sum of the value of a Policy's interest in each of the Variable Accounts. 4 6 Summary Of Policies Eligible Purchasers. The Multi-Account Flexible Payment Variable Annuity Policies described in this prospectus are designed to provide a flexible investment program for the accumulation of amounts for retirement purposes under plans which receive favorable federal income tax treatment pursuant to sections 401, 408 or 457 of the Internal Revenue Code of 1986, as amended ("Qualified Policies"), or under plans and trusts not entitled to any special tax treatment ("Nonqualified Policies"). The Policies will be offered on both an individual basis and in connection with group or sponsored arrangements. (See "How Is A Policy Purchased?") Funding Arrangements. The Policies are designed to provide flexibility as to the timing and amount of purchase payments and the available funding media. Purchase payments may be allocated among two types of accounts--Variable Accounts and a Guaranteed Interest Account. The Variable Accounts are sub-accounts of Separate Account Two, each sub-account investing in a corresponding portfolio of the Series Fund. The Guaranteed Interest Account is an account in which allocated purchase payments earn interest at a guaranteed rate set each Policy Anniversary. The fixed portion of the Policies, including provisions relating to the Guaranteed Interest Account and the annuity options, is described only in Appendix A to this prospectus unless specific reference to the fixed portion is otherwise made. Purchase Payments. The minimum initial purchase payment is $1,000. This may be allocated to any of the Variable Accounts or to the Guaranteed Interest Account in increments of not less than $50. Subsequent purchase payments may be as little as $50. The minimum amount that may be allocated to any one Variable Account or to the Guaranteed Interest Account from purchase payments is $50. A Policyowner should specify how each purchase payment is to be allocated. If no allocation is specified, a purchase payment will be allocated entirely to the Guaranteed Interest Account. (See "What Restrictions Apply To Purchase Payments?") Charges And Deductions. There is no deduction from purchase payments for sales expenses. However, full surrender of a Policy or a cash withdrawal thereunder may be subject to a withdrawal charge (contingent deferred sales charge), which is a percentage of the amount of the requested withdrawal subject to the withdrawal charge. The applicable percentage will depend upon when the purchase payment to which such amount is deemed attributable was made. The maximum withdrawal charge is 8% of the amount withdrawn, decreasing by 1% each year after the first. However, in no event may the charge exceed 8% of the total purchase payments made. In addition, an administration fee equal to 2% of the Total Policy Value up to a maximum of $30 will be deducted annually if the Total Policy Value on the last day of any Policy Year is less than $25,000. This fee will also be deducted on a pro rata basis in the event the Policy is surrendered on other than the last day of a Policy Year if the Total Policy Value is less than $25,000. The administration fee will be taken before any withdrawal charge is applied. A deduction for mortality and expense risks is made from the Variable Policy Value at an annual rate of 1.00%. This charge is deducted daily from amounts invested in the Variable Accounts. A deduction may also be made for any applicable premium taxes 5 7 attributable to the Policies (currently such taxes range from 0% to 3%). In addition, those Policyowners who wish to participate in the Dollar Cost Averaging program will be charged $5 per transfer or series of transfers occurring on the same transfer date if Total Policy Value is $15,000 or less. (See "What Are The Policy Charges?") Annuity Payments. Annuity payments will begin on the Annuity Date and will be on a fixed basis only. The Policyowner may change the Annuity Date to any date so long as payments will commence by the end of the year in which the annuitant reaches age 85. Under some Qualified Policies, annuity payments must commence no later than April 1 following the year the annuitant attains the age of 70 1/2. If application of the Total Policy Value would result in annuity payments of less than $20 monthly, $60 quarterly, $100 semi-annually or $200 annually, the Total Policy Value will be paid to the Policyowner in a single sum. (See "When Do Annuity Payments Commence?") Surrenders And Withdrawals. At any time prior to the Annuity Date, a Policyowner may fully surrender the Policy for, or make a cash withdrawal in an amount not exceeding, its Total Policy Value, reduced by any applicable withdrawal charge and administration fee. A full surrender or cash withdrawal may be subject to a tax penalty. (See "What Is The Tax Treatment Of The Policies?") The minimum cash withdrawal that may be requested at any one time is $300. Some Qualified Policies must contain restrictions on withdrawal rights. (See "What Surrender Or Withdrawal Rights Are Available?") Transfers. Transfers may be made at any time among the Guaranteed Interest Account and Variable Accounts. Transfers to any Variable Account must be at least $500 or, if less, the balance of the account. Transfers to the Guaranteed Interest Account may be made in any amount. (See "What Are The Provisions On Transfers?") Free Look Right. Within ten days after receiving a Policy, the Policyowner may return it for cancellation by mailing it to the Service Office. Within seven days after receipt, except where state insurance law requires return of the Policy Value, Manufacturers Life of America will refund in full any purchase payments made. *** The above summary is qualified in its entirety by the detailed information appearing elsewhere in this prospectus and the accompanying prospectus of the Series Fund to which reference should be made. Policyowner Inquiries All communications or inquiries relating to a Policy should be addressed to the Manufacturers Life of America Service Office at 200 Bloor Street East, Toronto, Ontario, Canada, M4W 1E5. All notices and elections under a Policy must be received at that Service Office to be effective. 6 8 EXPENSE TABLE
Number of Complete Policy Years Elapsed Since Purchase Charge Payment Made Withdrawal - ------ -------------- ---------- POLICYOWNER TRANSACTION EXPENSES Withdrawal Charge (contingent deferred sales charge) (as a percentage of the lesser of amount surrendered or purchase payments) 1: 0 8.00% 1 7.00% 2 6.00% 3 5.00% 4 4.00% 5 3.00% 6 2.00% 7 1.00% Thereafter none Dollar Cost Averaging Charge 2 $ 5 (if selected and applicable) ANNUAL CONTRACT FEE $30 3
1 The withdrawal charge decreases 1% each Policy Year elapsed since the purchase to which the withdrawal is deemed attributable was made. A withdrawal other than one made pursuant to the free withdrawal provision is deemed to be a liquidation of a purchase payment. The free withdrawal provision allows the Policyowner to withdraw in any Policy Year after the first up to 10% of the Total Policy Value as of the most recent Policy Anniversary free of the withdrawal charge. 2 Transfers pursuant to the optional Dollar Cost Averaging program are free if Policy Value exceeds $15,000 at the time of the transfer, but otherwise incur a $5 charge. 3 An administration fee equal to 2% of the Total Policy Value up to a maximum of $30 is deducted during the accumulation period on the last day of a Policy Year if the Total Policy Value on that date is less than $25,000. The fee is also deducted on a pro rata basis upon full surrender of a Policy on a date other than the last day of a Policy Year. 7 9 SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average account value) Mortality and Expense Risks Charge 1.00% ----- 1.00% MANULIFE SERIES FUND, INC. International Fund Management Fees .85% 6 Other Expenses .50% Pacific Rim Emerging Markets Fund Management Fees .85% 5 Other Expenses .65% All Other Manulife Series Fund Portfolios Management Fees .50% TOTAL MANULIFE SERIES FUND ANNUAL EXPENSE International Fund 1.35% Pacific Rim Emerging Markets Fund 1.50% All Other Manulife Series Fund Portfolios .50%
6 The management fee will drop to .70% on assets over $100 million. 8 10 EXAMPLE7 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- If you surrender your Policy at the end of the applicable time period: You would pay the following expenses on a $1,000 investment, assuming a 5% annual return on assets: MANULIFE SERIES FUND INTERNATIONAL FUND $94 $123 $158 $273 PACIFIC RIM EMERGING MARKETS FUND $96 $128 $165 $288 EMERGING GROWTH EQUITY FUND $86 $99 $114 $183 COMMON STOCK FUND $86 $99 $114 $183 REAL ESTATE SECURITIES FUND $86 $99 $114 $183 BALANCED ASSETS FUND $86 $99 $114 $183 CAPITAL GROWTH BOND FUND $86 $99 $114 $183 MONEY-MARKET FUND $86 $99 $114 $183 If you do not surrender your Policy or if you annuitize at the end of the applicable time period: You would pay the following expenses on a $1,000 investment, assuming a 5% annual return on assets: MANULIFE SERIES FUND INTERNATIONAL FUND $24 $75 $128 $273 PACIFIC RIM EMERGING MARKETS FUND $26 $79 $135 $288 EMERGING GROWTH EQUITY FUND $16 $49 $84 $183 COMMON STOCK FUND $16 $49 $84 $183 REAL ESTATE SECURITIES FUND $16 $49 $84 $183 BALANCED ASSETS FUND $16 $49 $84 $183 CAPITAL GROWTH BOND FUND $16 $49 $84 $183 MONEY-MARKET FUND $16 $49 $84 $183
7 In the example above, the $30 annual administration charge has been reflected in the calculation of annual expenses by converting it to a percentage charge, adding the percentage charge to the Total Separate Account Annual Expenses (1.00%) and total Manulife Series Fund, Inc. Annual Expenses shown above and multiplying the resulting percentage figure by the average annual assets of the hypothetical account. The charge has been converted to a percentage by dividing the total administration charges collected during 1995 by the average total net assets attributable to the Policies during 1995, which values include amounts allocated to both Separate Account Two and the Guaranteed Interest Account. The purpose of the above table is to assist a Policyowner in understanding the various costs and expenses that he or she will bear directly or indirectly, irrespective of the Variable Account to which purchase payments have been allocated. The table reflects expenses of Separate Account Two, Manulife Series Fund, Inc. but it does not reflect any deduction made to cover any premium taxes attributable to a Policy. Such taxes may be as much as 3% depending on the law of the applicable state or local jurisdiction. The example included in the above table should not be considered a representation of past or future expenses, and actual expenses may be greater or less than those shown. Information concerning charges assessed under the Policies is set forth under the caption "What Are The Policy Charges?" below. Information concerning the management fees paid by Manulife Series Fund, Inc. is provided under the caption "Investment Management Arrangements" in the Fund prospectus. 9 11 CONDENSED FINANCIAL INFORMATION SCHEDULE OF ACCUMULATION UNIT VALUES AND ACCUMULATION UNITS OUTSTANDING The accumulation unit values set forth in the following table are accounting data that do not reflect the impact of the following charges (which are not deducted as part of the calculation of accumulation unit values): withdrawal charges, administration fees, premium tax deductions (if any), transfer charges (if applicable) and Dollar Cost Averaging charges. Accordingly, the change in accumulation unit values over time should not be viewed as an accurate measure of the investment performance of Separate Account Two. For the Period November 3, 1987 through December 31, 1995 SUB-ACCOUNTS
MANULIFE SERIES FUND EMERGING GROWTH EQUITY FUND ------------------------------- 1987 1988 1989 1990 1991 1992 1993 1994 1995 ------ ------ ------ --------- --------- --------- ------- --------- --------- November 3 (commencement) $10.00 January 1 value $10.87 $12.58 $17.72 $14.93 $25.33 $30.55 $37.47 $35.58 December 31 value $10.87 $12.58 $17.72 $14.93 $25.33 $30.55 $37.47 $35.58 $45.01 December 31 units 329 11,285 22,539 41,687 76,705 288,277 874,970 1,454,901 1,670,956
MANULIFE SERIES FUND BALANCED ASSETS FUND ------------------------- 1987 1988 1989 1990 1991 1992 1993 1994 1995 ------ ------ ------ ------- ------- ------- --------- --------- --------- November 3 (commencement) $10.00 January 1 value $10.20 $10.87 $13.06 $13.13 $16.04 $16.87 $18.70 $17.75 December 31 value $10.20 $10.87 $13.06 $13.13 $16.04 $16.87 $18.70 $17.75 $21.91 December 31 units 1,645 21,509 47,074 118,664 201,901 515,812 1,293,920 2,001,928 2,189,632
MANULIFE SERIES FUND CAPITAL GROWTH BOND FUND ---------------------------- 1987 1988 1989 1990 1991 1992 1993 1994 1995 ------ ------ ------ -------- -------- -------- ------- ------- ------- November 3 (commencement) $10.00 January 1 value $10.15 $10.77 $12.14 $12.81 $14.76 $15.47 $16.94 $16.02 December 31 value $10.15 $10.77 $12.14 $12.81 $14.76 $15.47 $16.94 $16.02 $19.07 December 31 units 1,039 17,737 36,191 51,268 69,024 168,747 499,877 672,365 789,655
10 12
MANULIFE SERIES FUND MONEY-MARKET FUND ------------------------- 1987 1988 1989 1990 1991 1992 1993 1994 1995 ------ ------ ------ ------- ------- ------- ------- ------- --------- November 3 (commencement) $10.00 January 1 value $10.07 $10.68 $11.51 $12.28 $12.84 $13.15 $13.37 $13.75 December 31 value $10.07 $10.68 $11.51 $12.28 $12.84 $13.15 $13.37 $13.75 $14.38 December 31 units 7,161 23,091 32,907 160,484 122,681 176,160 328,922 918,869 1,290,129
MANULIFE SERIES FUND COMMON STOCK FUND ------------------------- 1987 1988 1989 1990 1991 1992 1993 1994 1995 ------ ------ ------ ------- ------- ------- ------- ------- ------- November 3 (commencement) $10.00 January 1 value $10.43 $11.35 $14.68 $13.94 $17.97 $18.88 $21.19 $20.10 December 31 value $10.43 $11.35 $14.68 $13.94 $17.97 $18.88 $21.19 $20.10 $25.72 December 31 units 709 7,257 20,202 43,044 78,327 194,079 485,195 803,568 977,871
MANULIFE SERIES FUND REAL ESTATE SECURITIES FUND ------------------------------- 1987 1988 1989 1990 1991 1992 1993 1994 1995 ------ ------ ------ --------- --------- --------- ------- --------- --------- November 3 (commencement) $10.00 January 1 value $9.99 $11.05 $11.95 $11.30 $15.78 $18.96 $23.01 $22.16 December 31 value $9.99 $11.05 $11.95 $11.30 $15.78 $18.96 $23.01 $22.16 $25.26 December 31 units 1,642 12,733 17,676 17,834 24,956 134,707 711,630 1,205,880 1,149,409
MANULIFE SERIES FUND INTERNATIONAL FUND --------------------------------- 1994 1995 ------ ------- October 4 (commencement) $10.00 January 1 value $9.72 December 31 value $9.72 $10.71 December 31 units 89,180 354,776 MANULIFE SERIES FUND PACIFIC RIM EMERGING MARKETS FUND --------------------------------- ------ ------- 1994 1995 ------ ------- October 4 (commencement) $10.00 January 1 value $9.41 December 31 value $9.41 $10.38 December 31 units 67,272 261,208
11 13 General Information About Manufacturers Life of America, Separate Account Two and Manulife Series Fund Who Are Manufacturers Life of America And Manufacturers Life? Manufacturers Life of America, a wholly-owned subsidiary of Manulife Reinsurance Corporation (U.S.A.) (formerly The Manufacturers Life Insurance Company of Michigan), is a stock life insurance company organized under the laws of Pennsylvania on April 11, 1977 and redomesticated under the laws of Michigan on December 9, 1992. It is authorized to do business in the District of Columbia and all states of the United States except New York. Manulife Reinsurance Corporation (U.S.A.) is a life insurance company organized in 1983 under the laws of Michigan and is a wholly-owned subsidiary of Manufacturers Life, a mutual life insurance company based in Toronto, Canada. Manufacturers Life of America was acquired by Manufacturers Life in 1982. Manufacturers Life and its subsidiaries, together, constitute one of the largest life insurance companies in North America as measured by assets. Manufacturers Life and Manufacturers Life of America have received the following ratings from independent rating agencies: Standard and Poor's Insurance Rating Service - AA+, A.M. Best Company - A++, Duff & Phelps Credit Rating Co. - AAA, and Moody's Investors Service, Inc. - Aa3. What Is Manufacturers Life of America's Separate Account Two? Manufacturers Life of America established its Separate Account Two on May 25, 1983 as a separate account under Pennsylvania law. Since December 9, 1992 it has been operated under Michigan law. The Account holds assets that are segregated from all of Manufacturers Life of America's other assets. The Account is currently used only to support variable annuity contracts. Manufacturers Life of America is the legal owner of the assets in the Account. The income, gains and losses of the Account, whether or not realized, are, in accordance with applicable contracts, credited to or charged against the Account without regard to the other income, gains or losses of Manufacturers Life of America. Manufacturers Life of America will at all times maintain assets in the Account with a total market value at least equal to the reserves and other liabilities relating to variable benefits under all Policies participating in the Account. These assets may not be charged with liabilities which arise from any other business Manufacturers Life of America conducts. However, all obligations under the Policies are general corporate obligations of Manufacturers Life of America. The Account is registered with the Securities and Exchange Commission ("S.E.C.") under the Investment Company Act of 1940 ("1940 Act") as a unit investment trust. A unit investment trust is a type of investment company which invests its assets in specified securities, such as the shares of one or more investment companies, rather than in a portfolio of unspecified securities. Registration under the 1940 Act does not involve any supervision by the S.E.C. of the management or investment policies or practices of the Account. For state law purposes the Account is treated as a part or division of Manufacturers Life of America. 12 14 What Is Manulife Series Fund, Inc.? Each sub-account of the Account will purchase shares only of a particular Portfolio of Manulife Series Fund. Manulife Series Fund is registered under the 1940 Act as an open-end management investment company. The Account will purchase and redeem shares of Manulife Series Fund at net asset value. Shares will be redeemed to the extent necessary for Manufacturers Life of America to provide benefits under the Policies, to transfer assets from one sub-account to another or to the general account as requested by Policyowners, and for other purposes not inconsistent with the Policies. Any dividend or capital gain distribution received from a Portfolio with respect to the Policies will be reinvested immediately at net asset value in shares of that Portfolio and retained as assets of the corresponding sub-account. Manulife Series Fund shares are issued to fund benefits under both variable annuity contracts and variable life insurance policies issued by Manufacturers Life of America and shares of Manulife Series Fund are issued to its general account for certain limited investment purposes including initial portfolio seed money. For a description of the procedures for handling potential conflicts of interest arising from the funding of such benefits, see the accompanying Manulife Series Fund prospectus. Manulife Series Fund receives investment management services from Manufacturers Adviser Corporation. Manufacturers Adviser Corporation is a registered investment adviser under the Investment Advisers Act of 1940. Certain expenses are assessed against the assets of Manulife Series Fund. These are: (1) an investment management fee of (a) .50% of the average daily value of the aggregate net assets of the Emerging Growth Equity Fund, Common Stock Fund, Real Estate Securities Fund, Balanced Assets Fund, Capital Growth Bond Fund and Money-Market Fund, and (b) .85% of the average daily value of the first $100 million of net assets and .70% of the average daily value of the net assets over $100 million of each of the International Fund and the Pacific Rim Emerging Markets Fund and (2) expenses of up to .50% and .65% per annum assessed against the assets of the International Fund and the Pacific Rim Emerging Markets Fund, respectively. What Are The Investment Objectives Of The Portfolios? The investment objectives of the Portfolios currently available to Policyowners through corresponding sub-accounts are set forth below. There is, of course, no assurance that these objectives will be met. Emerging Growth Equity Fund. The investment objective of the Emerging Growth Equity Fund is to achieve growth of capital by investing primarily in equity securities of companies believed to offer growth potential over both the intermediate and the long term. Current income is not a significant consideration. In selecting investments, emphasis will be placed on securities of progressive companies with aggressive and competent managements. A substantial portion of the Fund's assets may be invested in emerging growth companies, which at the time of the Fund's investment may be paying no dividends to their shareholders. Balanced Assets Fund. The investment objective of the Balanced Assets Fund is to achieve intermediate and long-term growth through capital appreciation and income by investing in both debt and equity securities. The Fund will maintain at all times a balance between debt securities or preferred stocks, on the one 13 15 hand, and common stocks, on the other. At least 25% of the Fund's assets will be invested in each of the two basic categories. Capital Growth Bond Fund. The investment objective of the Capital Growth Bond Fund is to achieve growth of capital by investing in medium-grade or better debt securities with income as a secondary consideration. The Capital Growth Bond Fund differs from most "bond" funds in that its primary objective is capital appreciation, not income. The Fund will be carefully positioned in relation to the term of debt obligations and the anticipated movement of interest rates. Money-Market Fund. The investment objective of the Money-Market Fund is to provide maximum current income consistent with capital preservation and liquidity by investing in a portfolio of high-quality money market instruments. Common Stock Fund. The investment objective of the Common Stock Fund is to achieve intermediate and long-term growth through capital appreciation and current income by investing in common stocks and other equity securities of well established companies with promising prospects for providing an above-average rate of return. In selecting investments, emphasis will be placed on companies with good financial resources, strong balance sheet, satisfactory rate of return on capital, good industry position, superior management skills and earnings that tend to grow consistently. The Fund's investments are not limited to any particular type or size of company, but high-quality growth stocks are emphasized. Real Estate Securities Fund. The investment objective of the Real Estate Securities Fund is to achieve a combination of long-term capital appreciation and satisfactory current income by investing in real estate related equity and debt securities. In pursuit of its objective, the Real Estate Securities Fund will invest principally in real estate investment trust equity and debt securities and other securities issued by companies which invest in real estate or interests therein. The Fund may also purchase the common stocks, preferred stocks, convertible securities and bonds of companies operating in industry groups relating to the real estate industry. This would include companies engaged in the development of real estate, building and construction, and other market segments related to real estate. The Fund will not invest directly in real property nor will it purchase mortgage notes directly. Under normal circumstances, at least 65% of the value of the Fund's total assets will be invested in real estate related equity and debt securities. International Fund. The investment objective of the International Fund is to achieve long-term growth of capital by investing in a diversified portfolio that is comprised primarily of common stocks and equity-related securities of companies domiciled in countries other than the United States and Canada. It invests primarily in the securities markets of Western European countries, Australia, the Far East, Mexico and South America. The Fund will, under normal conditions, invest at least 65% of its net assets in common stocks and equity-related securities of established larger-capitalization companies that have attractive long-term prospects for growth of capital. Pacific Rim Emerging Markets Fund. The investment objective of the Pacific Rim Emerging Markets Fund is to achieve long-term growth of capital by investing in 14 16 a diversified portfolio that is comprised primarily of common stocks and equity-related securities of companies domiciled in the countries of the Pacific Rim region. The Fund will, under normal conditions, invest at least 65% of its net assets in common stocks and equity-related securities of established larger-capitalization companies that have attractive long-term prospects for growth of capital. A full description of Manulife Series Fund, its investment objectives, policies and restrictions, its expenses, the risks associated therewith, and other aspects of its operation is contained in the accompanying Manulife Series Fund prospectus, which should be read together with this prospectus. Description Of The Policies What Are The Policy Charges? The following charges will apply to the Policies in the circumstances indicated. The imposition of the charges depends on the average net value of amounts invested in the Variable Accounts (mortality and expense risks charge), how large the Total Policy Value is (administration fee), whether cash withdrawals in excess of prescribed amounts are made or the Policy is fully surrendered (withdrawal charge), where the Policyowner resides (premium tax charge), and whether he or she makes transfers in excess of six per year (transfer charge). No deduction is made from purchase payments, unless the Policyowner lives in a jurisdiction that requires premium taxes to be so deducted, and consequently, 100% of the Policyowner's payment is usually credited in full to the Policy on the date made. Administration Fee. An administration fee equal to 2% of the Total Policy Value up to a maximum of $30 will be deducted during the accumulation period from a Policy on the last day of a Policy Year if the Total Policy Value on that date is less than $25,000. The Total Policy Value is the sum of the Variable Policy Value and the Guaranteed Interest Account. The administration fee will also be deducted on a pro rata basis upon full surrender of a Policy on a date other than the last day of a Policy Year if on the date of full surrender the Total Policy Value is less than $25,000. The fee will be taken before any withdrawal charge is applied. The fee will be deducted from the Guaranteed Interest Account and, if necessary, from the value of the Policy in the Variable Accounts in the following order: the Variable Account invested in shares of the Money-Market Fund, the Variable Account invested in shares of the Capital Growth Bond Fund, the Variable Account invested in shares of the Emerging Growth Equity Fund, the Variable Account invested in shares of the Balanced Assets Fund, the Variable Account invested in shares of the Common Stock Fund, the Variable Account invested in shares of the Real Estate Securities Fund, the Variable Account invested in shares of the International Fund, and the Variable Account invested in shares of the Pacific Rim Emerging Markets Fund. The administration fee is paid to Manufacturers Life of America to compensate it for the administrative costs associated with the Policies and the operations of Separate Account Two, including the establishment and maintenance of Policy records, processing transactions and communicating with Policyowners. Although 15 17 administrative expenses may rise in the future, Manufacturers Life of America guarantees that it will not increase the amount of the administration fee under outstanding Policies. Moreover, Manufacturers Life of America does not expect to recover from the administration fee any amount in excess of its accumulated administrative expenses. Withdrawal Charge. A withdrawal charge (contingent deferred sales charge) may be imposed on cash withdrawals from, and the full surrender of, a Policy. A cash withdrawal will result in a reduction in the Total Policy Value by an amount equal to the amount withdrawn. A full surrender will reduce the Total Policy Value to zero, thus resulting in termination of the Policy. The withdrawal charge is designed to partially compensate Manufacturers Life of America for the cost of selling and distributing the Policies. The cost includes agents' commissions, advertising, agent training and the printing of prospectuses and sales literature. Agents' commissions will not exceed 5% of purchase payments. Under certain circumstances agents may be eligible for a bonus payment not exceeding 1% of purchase payments. In addition, agents who meet certain productivity and persistency standards will be eligible for additional compensation. In any Policy Year after the first and before the Annuity Date, up to 10% of the Total Policy Value as of the most recent Policy Anniversary may be surrendered or withdrawn free of the withdrawal charge. Amounts surrendered or withdrawn during a Policy Year which exceed 10% of the Total Policy Value as of the most recent Policy Anniversary will be subject to a withdrawal charge. The withdrawal charge is determined by applying a percentage to the amount of the requested withdrawal subject to the withdrawal charge, which percentage is based upon when the purchase payments to which such amount is deemed attributable were made, as follows: Number of complete Policy Years elapsed since purchase payment was made: Withdrawal Charge 0 8% 1 7% 2 6% 3 5% 4 4% 5 3% 6 2% 7 1% 8 0%
Where the amount withdrawn is deemed attributable to purchase payments made in different Policy Years, different percentages will be applied to the portions of the amount withdrawn attributable to such payments. For purposes of determining the withdrawal charge applicable to a full surrender or cash withdrawal, any amount surrendered or withdrawn, other than an amount not subject to a withdrawal charge by reason of the 10% withdrawal provision described above, will be deemed to be a liquidation of a purchase payment, and 16 18 the oldest previously unliquidated purchase payment will be deemed to have been liquidated first, then the next oldest and so forth. In addition, all purchase payments made during a Policy Year will be deemed to have been made on the first day of such year. Once all purchase payments have been liquidated, additional amounts surrendered or withdrawn will not be subject to a withdrawal charge. Thus, in no event may the withdrawal charge exceed 8% of the total purchase payments made. No withdrawal charge will be applied: (1) at the Annuity Date, (2) when the Policyowner is an individual and a death benefit payment is being made or (3) when the Policyowner is not an individual and a death benefit payment is being made on account of the death of the annuitant. A withdrawal charge will apply if the Policy is not owned by an individual and a death benefit payment is being made solely because a new annuitant has been named. (See "What Are The Death Benefit Provisions?") A death benefit not subject to the withdrawal charge also includes any payment to the spouse of the individual Policyowner after the Policyowner's death, except for a full surrender or cash withdrawal attributable to purchase payments made after the death of the Policyowner. Any withdrawal charge applicable to a full surrender or cash withdrawal and any applicable administration fee will be deducted from the amount being withdrawn. The minimum cash withdrawal that can be requested at any one time is $300. Manufacturers Life of America does not expect to recover its total sales expenses through the withdrawal charge. To the extent that the withdrawal charge is insufficient to recover sales expenses, Manufacturers Life of America will pay sales expenses from its other assets or surplus. These assets may include proceeds from the mortality and expense risks charge described below. Mortality And Expense Risks Charge. A charge at an annual rate of 1.00% of the Variable Policy Value is made for the mortality and expense risks that Manufacturers Life of America assumes. This charge is deducted daily from amounts invested in the Variable Accounts by assessing a charge against the assets of Separate Account Two at an annual rate of 1.00%, consisting of .10% for the mortality risk and .90% for the expense risk. The mortality risk assumed is the risk that annuitants may live for longer periods of time than the periods indicated in the mortality tables on which Manufacturers Life of America calculated the annuity tables in the Policies and the risk that mortality will cause a Policy to terminate prematurely before the assumed annuitization date. The expense risk assumed is that expenses in administering the Policies will be greater than Manufacturers Life of America estimated. Manufacturers Life of America will realize a gain from this charge to the extent it is not needed to provide benefits and pay expenses under the Policies. Premium Tax Charge. Manufacturers Life of America will deduct any premium or similar state or local tax attributable to a Policy. Currently, such taxes range up to 3% depending on applicable law. Although the deduction can be made either from purchase payments or from the Total Policy Value, it is anticipated that premium taxes will be deducted from the Total Policy Value at the time it is applied to provide an annuity unless required otherwise by applicable law. When 17 19 taken from the Total Policy Value before annuitization, the premium tax deduction will be made first from the Guaranteed Interest Account and, if necessary, from the Variable Accounts in the manner described above for the administration fee. Dollar Cost Averaging Charge. Currently, there is no charge for Dollar Cost Averaging transfers if Policy Value exceeds $15,000; otherwise there is a charge of $5.00 per transfer or series of transfers taking place on the same transfer date. This charge will be deducted from the account from which funds are transferred. If insufficient funds exist to effect a Dollar Cost Averaging transfer, including the charge, if applicable, the transfer will not be effected. Asset Allocation Balancer Charge. Currently there is no charge for Asset Allocation Balancer transfers; however, Manufacturers Life of America reserves the right to institute a charge on 90 days' written notice to the Policyowner. How Is A Policy Purchased? The Policies are designed for use in connection with retirement plans entitled to special tax treatment under Sections 401, 408 or 457 of the Code and retirement plans and trusts not entitled to any special tax treatment. The Policies are appropriate for plans with individual accounts or for purchase directly by individuals. Persons seeking to purchase Policies must submit an application and a check for the initial purchase payment. The application is subject to underwriting standards adopted by Manufacturers Life of America, and Manufacturers Life of America reserves the right to reject any application. A properly completed application that is accompanied by the first purchase payment and all information necessary for the processing of the application will normally be accepted within two business days. An incomplete application which is subsequently made complete will normally be accepted within two business days of completion; however, if an application is not completed properly or necessary information is not obtained within five business days, Manufacturers Life of America will offer to return the purchase payment. Free Look Right. Within ten days after receiving a Policy, the Policyowner may return it for cancellation by mailing it to the Service Office. Immediately upon its receipt, the Policy will be deemed void from the beginning. Within seven 18 20 days after receipt, except where state insurance law requires return of the Policy Value, Manufacturers Life of America will refund in full any purchase payment made. What Restrictions Apply To Purchase Payments? Purchase payments are made directly by the Policyowner. They may be made at any time until the Annuity Date or until the Policy is fully surrendered. If the Policyowner is an individual, purchase payments will not be permitted after the Policyowner's death unless the beneficiary is the Policyowner's spouse. If the Policyowner is not an individual, purchase payments will not be permitted after the annuitant's death, unless the Policyowner is the trustee of a trust which is part of a qualified retirement plan described in section 401(a) of the Code. Purchase payments must be made to the Manufacturers Life of America Service Office. The minimum initial purchase payment is $1,000. This may be allocated to any of the Variable Accounts or to the Guaranteed Interest Account in increments of not less than $50. Subsequent purchase payments may be as little as $50, although higher or lower increments may be invoked with respect to purchase payments payable pursuant to a pre-authorized payment plan. The minimum amount that may be allocated to any one Variable Account or to the Guaranteed Interest Account from purchase payments is $50. If an additional purchase payment would cause the Total Policy Value to exceed $1,000,000, or if the Total Policy Value should already exceed $1,000,000, the prior approval of Manufacturers Life of America will be required for an additional purchase payment. If the Total Policy Value should fall to zero, the Policy will be terminated and no further purchase payments may be made. A Policyowner should specify how each purchase payment is to be allocated. If no allocation is specified, a purchase payment will be allocated entirely to the Guaranteed Interest Account. Allocations will be made at the end of the valuation period in which the purchase payment is received at the Manufacturers Life of America Service Office. Manufacturers Life of America will send a confirmation of its receipt of each purchase payment mailed by the Policyowner. If a purchase payment is allocated to the Guaranteed Interest Account because no allocation was specified, a notice of that fact will accompany the confirmation. What Is The Variable Policy Value And How Is It Determined? The Variable Policy Value is the sum of a Policy's interest in each of the Variable Accounts. It is determined by multiplying the number of units credited to the policy for each Variable Account by the current unit value. The Variable Policy Value on any date that is not a valuation date will be determined as of the next valuation date. Crediting Units. Upon receipt of a purchase payment at its Service Office, or other office or entity so designated by Manufacturers Life of America, Manufacturers Life of America credits the Policy with a number of units for each Variable Account based upon the portion of the purchase payment allocated to the 19 21 Variable Account. The number of units to be credited for each Variable Account is determined by dividing the portion of the purchase payment allocated to that Variable Account by the unit value for the valuation period in which the purchase payment and, with respect to the initial payment only, all required documentation properly completed was received at the Service Office. Units for a Variable Account are also credited in a similar manner to reflect any transfers to a Variable Account. The value of a unit varies from one valuation period to the next depending upon the investment results of the applicable Variable Account. The value of a unit for each Variable Account was arbitrarily set at $10 for the first valuation period in which monies were first allocated to that Variable Account. The value of a unit for any subsequent valuation period is determined by multiplying the value for the immediately preceding valuation period by the net investment factor for that Variable Account for the valuation period for which the value is being determined. Net Investment Factor. The net investment factor is an index applied to measure the investment performance of a Variable Account from one valuation period to the next. The net investment factor may be greater than, less than or equal to one. Therefore, the value of a unit may increase, decrease or remain the same. The net investment factor for any Variable Account for any valuation period is determined by adding one to the fraction obtained by dividing (a) by (b) and then subtracting (c) from the result, where: (a) is the investment income plus realized and unrealized gains and losses of the Variable Account during the valuation period; (b) is the value of the net assets of the Variable Account as of the beginning of the valuation period adjusted for allocations and transfers to and withdrawals and transfers from the Variable Account; and (c) is the risk charge factor determined by Manufacturers Life of America for the valuation period to reflect its charge for assuming the mortality and expense risks. This mortality and expense risks charge will be deducted at an annual rate of 1%. Manufacturers Life of America reserves the right to adjust the above formula to provide for any taxes determined by it to be attributable to the operations of the Variable Account. Cancelling Units. Units will be cancelled to reflect the assessment of any administration fee or premium tax deduction assessed against a Variable Account and any transfers or withdrawals from a Variable Account. The number of units cancelled will be based upon the applicable unit value for the valuation period in which the assessment, transfer or withdrawal is made. Units will also be cancelled on the Annuity Date or upon surrender of the Policy or payment of a death benefit. 20 22 What Are The Provisions On Transfers? Subject to the minimums described below, transfers may be made among any of the accounts at any time during the Policy Year. There is no minimum transfer amount required for transfers to the Guaranteed Interest Account, for transfers pursuant to the Asset Allocation Balancer program, or for transfers designed to reallocate assets among accounts. Otherwise the minimum dollar amount of all transfers pursuant to a single transfer request is $500. Manufacturers Life of America will allow a Policyowner to direct transfers free of charge during a Policy Year. Manufacturers Life of America does, however, reserve the right to limit, upon notice, the maximum number of transfers a Policyowner may make to one per month or six at any time within a Policy Year. In addition, Manufacturers Life of America reserves the right to defer the transfer privilege at any time that it is unable to purchase or redeem shares of the portfolios. Manufacturers Life of America also reserves the right to modify or terminate the transfer privilege at any year in accordance with applicable law. Transfer requests must be in a format satisfactory to Manufacturers Life of America and in writing, or by telephone if a currently valid telephone transfer authorization form is on file. Although failure to follow reasonable procedures may result in Manufacturers Life of America's liability for any losses resulting from unauthorized or fraudulent telephone transfers, Manufacturers Life of America will not be liable for following instructions communicated by telephone that it reasonably believes to be genuine. Manufacturers Life of America will employ reasonable procedures to confirm that instructions communicated by telephone are genuine. Such procedures shall consist of confirming a valid telephone authorization form is on file, tape recording all telephone transactions and providing written confirmation thereof. Dollar Cost Averaging. Manufacturers Life of America will offer Policyowners a Dollar Cost Averaging program. Under this program amounts will be automatically transferred at predetermined intervals from one Variable Account to any other Variable Account(s) or the Guaranteed Interest Account. Under the Dollar Cost averaging program the Policyowner will designate a dollar amount of available assets to be transferred each month from one Variable Account into any other Variable Account(s) or the Guaranteed Interest Account. Each transfer under the Dollar Cost Averaging program must be at least $500 and Manufacturers Life of America reserves the right to change this minimum at any time upon notice to the Policyowner. Currently, there is no charge for this program if Total Policy Value exceeds $15,000; otherwise a charge of $5.00 per transfer or series of transfers occuring on the same transfer date will apply. If insufficient funds exist to effect a Dollar Cost Averaging transfer, including the charge, if applicable, the transfer will not be effected and the Policyowner will be so notified. Manufacturers Life of America reserves the right to cease to offer the Dollar Cost Averaging program on 90 days' written notice to the Policyowner. Asset Allocation Balancer. Manufacturers Life of America will also offer Policyowners the ability to have amounts automatically transferred among stipulated accounts to maintain an allocated percentage in each stipulated account. 21 23 Under the Asset Allocation Balancer program the Policyowner will designate an allocation of Total Policy Value among the Variable Accounts. At six month intervals beginning six months after the date the application was signed, Manufacturers Life of America will move amounts out of Variable Accounts and into other Variable Accounts as necessary to maintain the Policyowner's chosen allocation. A change to the Policyowner's premium allocation instruction will automatically result in a change in Asset Allocation Balancer instructions so that the two are identical unless the Policyowner instructs Manufacturers Life of America otherwise or a Dollar Cost Averaging request is in effect. Currently, there is no charge for this program. However, Manufacturers Life of America reserves the right to institute a charge on 90 days' written notice to the Policyowner. Manufacturers Life of America reserves the right to cease to offer the Asset Allocation Balancer Program on 90 days' written notice to the Policyowner. What Surrender Or Withdrawal Rights Are Available? At any time prior to the Annuity Date, a Policyowner may fully surrender the Policy for, or make a cash withdrawal in an amount not exceeding, its Total Policy Value, reduced by any applicable withdrawal charge and administration fee. For certain Qualified Policies, exercise of the right to surrender may require the consent of the Policyowner's spouse under regulations promulgated by the Treasury or Labor Department. In the case of a full surrender of a Policy, Manufacturers Life of America will pay the Total Policy Value less any applicable withdrawal charge and administration fee as of the valuation period in which the request for surrender is received at its Service Office, and the Policy will be cancelled. In the case of a cash withdrawal from the Variable Account, Manufacturers Life of America will pay the amount requested less any applicable withdrawal charge and cancel that number of units credited to each Variable Account necessary to equal the amount of the withdrawal. For a cash withdrawal, the Policyowner should specify the account from which the withdrawal should be made. If no specification is made, the withdrawal will be made first from the Guaranteed Interest Account and, if necessary, from the value of the Policy in the Variable Accounts in the following order: the Variable Account invested in shares of the Money-Market Fund, the Variable Account invested in shares of the Capital Growth Bond Fund, the Variable Account invested in shares of the Emerging Growth Equity Fund, the Variable Account invested in shares of the Balanced Assets Fund, the Variable Account invested in shares of the Common Stock Fund, the Variable Account invested in shares of the Real Estate Securities Fund, the Variable Account invested in shares of the International Fund and the Variable Account invested in shares of the Pacific Rim Emerging Markets Fund. There is no limit on the frequency of cash withdrawals; however, the requested withdrawal must be at least $300. Any request for a cash withdrawal or to fully surrender a Policy must be in writing and delivered to the Manufacturers Life of America Service Office. If the amount withdrawn exceeds $10,000, Manufacturers Life of America reserves the right to require that the request be accompanied by a guarantee of the Policyowner's signature by a commercial bank, trust company, 22 24 member of the National Association of Securities Dealers, Inc., a notary public, or any other individual or association designated by Manufacturers Life of America. What Are The Death Benefit Provisions? If the Policyowner dies before the Annuity Date and the beneficiary is not the Policyowner's spouse, the entire value of the Policy must either be distributed to the beneficiary in a lump sum within five years of the Policyowner's death or applied to provide an annuity. If applied to provide an annuity, the annuity must begin within one year of the Policyowner's death. Until a lump-sum distribution is made or an annuity option is elected, the Variable Policy Value will continue to reflect the investment performance of the selected Variable Accounts unless a transfer or withdrawal is made by the beneficiary. The Total Policy Value on the date the Service Office receives notice of the beneficiary's election of an annuity will be used to purchase an annuity. All of the annuity options available on the Annuity Date are available to a beneficiary, except that the beneficiary may not select a joint and survivor annuity or an annuity with a certain period that is longer than the beneficiary's life expectancy. (See "What Are The Annuity Options?" in Appendix A.) If the Policyowner's spouse is the beneficiary, the Policy will continue with the spouse as the Policyowner. If the Policyowner was also the annuitant, the spouse must choose a new annuitant. If the Policyowner is not an individual and either the annuitant dies before the Annuity Date or the Policyowner changes the annuitant, the entire value of the Policy must be paid to the Policyowner in a lump sum not later than five years after the annuitant's death or the change in annuitant. The Policyowner may select the date of payment. If a Qualified Policy is owned by the trustee of a plan described in section 401 of the Code, the trustee may continue the Policy after the death of the annuitant. If the trustee continues the Policy, a new annuitant must be named. When Do Annuity Payments Commence? Annuity payments will begin on the Annuity Date. Such payments will be made by application of the Total Policy Value to provide an annuity. Annuity payments will be made on a fixed basis only. The annuity options available are described in Appendix A under "What Are The Annuity Options?". The Policyowner selects the Annuity Date in the application. The Policyowner may change the Annuity Date to any date prior to the end of the Policy Year in which the annuitant reaches age 85 except in the case of Qualified Policies. Written request for such change must be received by the Manufacturers Life of America Service Office at least thirty days prior to the new Annuity Date. There are legal restrictions on the Annuity Date for Qualified Policies. In general, annuity payments for Qualified Policies owned by an individual cannot begin later than April 1 following the calendar year in which the Policyowner 23 25 attains age 70. There are some exceptions to this requirement. If the Policy is owned by the trustee of a trust established pursuant to an employer retirement plan, the Annuity Date is determined by the terms of the trust and plan. Annuity payments may be made either monthly, quarterly, semi-annually or annually. If application of the Total Policy Value would result in annuity payments of less than $20 monthly, $60 quarterly, $100 semi-annually or $200 annually, Manufacturers Life of America will pay the Total Policy Value to the Policyowner in a single sum in lieu of annuity payments. If a Qualified Policy is held by a trustee under an employee benefit plan described in section 401(a) of the Code, the trustee may, prior to the Annuity Date, have part of the Total Policy Value applied to provide an annuity (partial annuitization). The same rules that apply to annuity payments commencing on the Annuity Date apply to partial annuitization. If the trustee partially annuitizes, the Total Policy Value will be reduced by the amount applied to provide an annuity. Any withdrawal or surrender made after partial annuitization will continue to be subject to withdrawal charges. For purposes of determining the amount of the withdrawal charge, the amounts applied to provide an annuity will not be treated as a liquidation of a purchase payment. (See "What Surrender Or Withdrawal Rights Are Available?") Under What Circumstances May Fund Shares Be Substituted? Although Manufacturers Life of America believes it to be highly unlikely, it is possible that in the judgment of its management, one or more of the Funds may become unsuitable for investment by the Account because of a change in investment policy or a change in the tax laws, because the shares are no longer available for investment, or for some other reason. In that event, Manufacturers Life of America may seek to substitute the shares of another Fund or of an entirely different mutual fund. Before this can be done, the approval of the S.E.C. and one or more state insurance departments may be required. Manufacturers Life of America also reserves the right to combine other separate accounts with the Account, to establish additional sub-accounts within the Account, to operate the Account as a management investment company or other form permitted by law, and to deregister the Account under the 1940 Act. Any such change would be made only if permissible under applicable federal and state law. What Are The Other General Policy Provisions? Deferral Of Payments. Manufacturers Life of America reserves the right to postpone the transfer or payment of any value or benefit available under a Policy based upon the assets allocated to Separate Account Two for any period: (1) when the New York Stock Exchange ("Exchange") is closed (other than customary weekend and holiday closings); (2) when trading on the Exchange is restricted; (3) when an emergency exists as a result of which disposal of securities held in Separate Account Two is not reasonably practicable or it is not reasonably practicable to determine the value of the Account's net assets; or (4) during any other period when the S.E.C., by order, so permits for the protection of security holders; 24 26 provided that applicable rules and regulations of the S.E.C. shall govern as to whether the conditions described in (2) and (3) exist. Manufacturers Life of America also reserves the right to delay transfer or payment of assets from the Guaranteed Interest Account for up to six months and will pay interest at a rate determined by it if there is a delay in payment for more than 30 days. Annual Statements. Within 30 days after each Policy Anniversary, Manufacturers Life of America will send the Policyowner a statement showing: (1) the summary of each active account up to the most recent Policy Anniversary including the Total Policy Value up to the Policy Anniversary date; and (2) a description of the transactions affecting each active account during the Policy Year including total units cancelled, amounts deducted from each account for fees, and total units and amounts credited to each account as allocations or interest. Ownership. The Policyowner is the person entitled to exercise all rights under a Policy. As such, any Policy rights or privileges may be exercised without the consent of the annuitant, beneficiary or any other individual, except as provided by the Policyowner. Except as discussed below, ownership of the Policy may be changed or the Policy collaterally assigned at any time prior to the Annuity Date, subject to the rights of any irrevocable beneficiary or other person. Any change of ownership or assignment must be made in writing and will not take effect until received at the Manufacturers Life of America Service Office. Manufacturers Life of America assumes no responsibility for the validity of any assignment. In the case of a Qualified Policy, there may be restrictions on the privileges of ownership. Some plans do not permit the exercise of certain of the Policyowner's rights without the written consent of the owner's spouse. Among the rights limited are the right to choose an optional form of payment; to make withdrawals; or to surrender the Policy. A Qualified Policy which is not owned by a trustee of a trust which qualifies under section 401(a) of the Code, or by an employer under a plan which satisfies section 457 of the Code, may not be sold, assigned, transferred, discounted or pledged as collateral for a loan or as security for the performance of an obligation or for any other purpose to any person other than to Manufacturers Life of America except as may be provided by applicable state or federal law. Beneficiary. Ownership of the Policy will pass to the designated beneficiary on the death of the Policyowner. The beneficiary is the person designated in the application or as subsequently named. The beneficiary may be changed at any time by written notice to Manufacturers Life of America. Any change will be effective on the date written notice is received at the Manufacturers Life of America Service Office. If no beneficiary survives the Policyowner, ownership will pass to the Policyowner's estate. In the case of Qualified Policies, regulations promulgated by the Departments of Labor and Treasury prescribe certain limitations on the designation of a beneficiary. 25 27 Modification. A Policy may not be modified by Manufacturers Life of America without the consent of the Policyowner, except where required to conform to any applicable law or regulation or any ruling issued by a government agency. Federal Tax Matters How Is Manufacturers Life of America Taxed? Manufacturers Life of America is taxed as a life insurance company under Subchapter L of the Code. Since the operations of the Account are part of, and are taxed with, the operations of Manufacturers Life of America, the Account is not separately taxed as a "regulated investment company" under Subchapter Manulife Financial of the Code. Under existing federal income tax laws, investment income and capital gains of the Account are not taxed to the extent they are applied to increase reserves under the Policies. Since, under the Policies, investment income and realized capital gains are automatically applied to increase reserves, Manufacturers Life of America does not anticipate that it will incur any federal income tax liability attributable to the Account, and therefore Manufacturers Life of America does not intend to make provision for any such taxes. However, if changes in the federal tax laws or interpretations thereof result in Manufacturers Life of America being taxed on such income or gains, then Manufacturers Life of America may impose a charge against the Account in order to make provision for such taxes. What Is The Tax Treatment Of The Policies? The Policies are designed for use in connection with retirement plans that may or may not qualify for special income tax treatment under the provisions of the Code. The following discussion of federal income tax aspects of amounts received under a variable annuity contract is not exhaustive, does not purport to cover all situations, and is not intended as tax advice. A qualified tax adviser should always be consulted with regard to the application of law to individual circumstances. The United States Congress has, in the past, considered legislation that, if enacted, would have taxed the inside build-up in certain annuities. While this proposal was not enacted, Congress remains interested in the taxation of the inside build-up of annuity contracts. Policyholders should consult their tax advisor regarding the status of new, similar provisions before purchasing the Policy. Section 72 of the Code governs taxation of annuities in general. Under existing provisions of the Code, except as described below, any increase in the value of an annuity contract is not taxable to the contract owner or annuitant until received, either in the form of annuity payments, as contemplated by the 26 28 contract, or in some other form of distribution. However, as a general rule, deferred annuity contracts held by a corporation, trust or other similar entity, as opposed to a natural person, are not treated as annuity contracts for federal tax purposes. The investment income on such contracts is taxed as ordinary income that is received or accrued by the owner of the contract during the taxable year. In certain circumstances, contracts will be treated as held by a natural person if the nominal owner is a non-natural person and the beneficial owner is a natural person, but this special exception will not apply in the case of any employer who is the nominal owner of an annuity contract providing non-qualified deferred compensation for its employees. Exceptions to the general rule (of immediate taxation) for contracts which are held by a corporation, trust, or similar entity may apply with respect to (1) annuities held by an estate of a decedent, (2) annuity contracts issued in connection with qualified retirement plans, or IRAs, (3) certain annuities purchased by employers upon the termination of a qualified retirement plan, (4) certain annuities used in connection with structured settlement agreements, and (5) annuities purchased with a single premium when the annuity starting date is no later than a year from purchase of the annuity. When annuity payments commence, each payment is taxable under Section 72 of the Code as ordinary income in the year of receipt if the Policyowner has not previously been taxed on any portion of the purchase payments. If any portion of the purchase payments has been included in the taxable income of the Policyowner, this aggregate amount will be considered the "investment in the contract." For fixed annuity payments, there is no tax on the portion of each payment which represents the same ratio that the "investment in the contract" bears to the total expected value of the annuity payments for the term of the contract; the remainder of each payment is taxable. However, once the total amount of the taxpayer's investment in the contract is excluded using this ratio, annuity payments will be fully taxable. If annuity payments cease before the total amount of the taxpayer's investment in the contract is recovered, the unrecovered amount will be allowed as a deduction to the Policyowner in his or her last taxable year. In the case of a withdrawal, amounts received are taxable as ordinary income to the extent that the cash value of the contract (determined without regard to any withdrawal charges) before the withdrawal exceeds the "investment in the contract." Amounts loaned under an annuity contract or amounts received pursuant to an assignment or pledge of an annuity contract are treated as withdrawals. There are special rules for loans to participants from annuity contracts held in connection with qualified retirement plans or IRAs. With respect to contracts issued after April 22, 1987, if an individual transfers an annuity contract without adequate consideration to a person other than his or her spouse (or former spouse incident to divorce), he or she will be taxed on the difference between the contract value minus any withdrawal charge and the investment in the contract at the time of transfer. In such case, the transferee's investment in the contract will be increased to reflect the increase in the transferor's income. 27 29 In addition, there is a 10% penalty tax on the taxable amount of any payment unless the payment is: (a) received on or after the contract owner reaches age 59 1/2; (b) attributable to the contract owner's becoming disabled; (c) made to a beneficiary on the death of the contract owner; (d) made to a beneficiary on the death of the primary annuitant if the contract owner is not a natural person; (e) made as a series of substantially equal periodic payments for the life of the annuitant (or the joint lives of the annuitant and beneficiary), subject to certain recapture rules; (f) made under an annuity contract that is purchased with a single premium whose annuity starting date is no later than a year from purchase of the annuity; (g) attributable to investment in the contract before August 14, 1982; and (h) made with respect to certain annuities issued in connection with structured settlement agreements. Also, special rules may apply to annuity contracts issued in connection with qualified retirement plans. For both withdrawals and annuity payments under some types of plans qualifying for special federal income tax treatment ("qualified plans"), there may be no "investment in the contract" and the total amount received may be taxable. Where the Policy is owned by an individual, Manufacturers Life of America will withhold and remit to the U.S. Government a part of the taxable portion of each distribution made under a Policy unless the distributee notifies Manufacturers Life of America at or before the time of the distribution that he or she elects not to have any amounts withheld. The withholding rates applicable to the taxable portion of periodic annuity payments are the same as the withholding rates generally applicable to payments of wages. The withholding rate applicable to the taxable portion of nonperiodic payments (including withdrawals prior to the annuity commencement date) is 10%. Where the Policy is not owned by an individual or it is owned in connection with a qualified plan, or when the owner is a non-resident alien, special withholding rules may apply. In connection with the issuance of temporary regulations relating to diversification requirements for separate accounts or funds underlying variable life and annuity policies, the Treasury Department has announced that such regulations do not provide guidance concerning the extent to which Policyowners may direct their investments to particular sub-accounts of the Account. Regulations in this regard are expected in the near future. It is not clear what these regulations will provide or whether they will be prospective only. It is possible that when regulations are issued, the Policy may need to be modified to comply with such regulations. For purposes of determining a Policyholder's gross income from distributions which are not in the form of an annuity, the Code provides that all deferred annuity contracts issued by the same company to the same Policyholder during any calendar year shall be treated as one annuity contract. Additional rules may be promulgated under this provision to prevent avoidance of its effect. For further information on current aggregation rules under this and other Code provisions, see your tax adviser. 28 30 What Qualified Plans May Utilize The Policies? The contracts are available for use with several types of qualified plans. The tax rules applicable to participants in such qualified plans vary according to the type of plan and the terms and conditions of the plan itself. Therefore, no attempt is made to provide more than general information about the use of the Policies with the various types of qualified plans. Policyowners, annuitants and beneficiaries are cautioned that the rights of any person to any benefits under such qualified plans may be subject to the terms and conditions of the Policy. Following are brief descriptions of the various types of qualified plans in connection with which Manufacturers Life of America will issue a Policy. Individual Retirement Annuities. Section 408 of the Code permits eligible individuals to contribute to an individual retirement program known as an "Individual Retirement Annuity" or "IRA." These IRAs are subject to limits on the amount that may be contributed, the persons who may be eligible and on the time when distributions may commence. Also, distributions from certain other types of qualified plans may be "rolled over" on a tax-deferred basis into an IRA. Distributions from these qualified plans are subject to special withholding rules. Consult your plan administrator before taking a distribution which you wish to roll over. A direct rollover from a qualified plan is permitted and is exempt from the special witholding rules. Sales of the Policies for use with IRAs may be subject to special requirements of the Internal Revenue Service. When issued in connection with an IRA, a Policy will be amended as necessary to conform to the requirements of federal laws governing such plans. Corporate and Self-Employed (H.R. 10 and Keogh) Pension and Profit Sharing Plans. Section 401(a) of the Code permits corporate employers to establish various types of tax-favored retirement plans for employees. Self-employed individuals may establish plans for themselves and their employees. Such retirement plans may permit the purchase of the Policies in order to provide benefits under the plans. Employers intending to use Policies in connection with such plans should seek competent advice. State And Local Government Deferred Compensation Plans. Section 457 of the Code permits employees of state and local governments, rural electric cooperatives and tax-exempt organizations to defer a portion of their compensation without paying current taxes. The employees must be participants in an eligible deferred compensation plan. To the extent Policies are used in connection with an eligible plan, employees are considered general creditors of the employer and the employer as owner of the Policy has the sole right to the proceeds of the Policy. Those who intend to use Policies in connection with such plans should seek qualified advice as to the tax and legal consequences of such an investment. Purchase of Policies by Charitable Remainder Trusts The Policies may be purchased by Charitable Remainder Trusts. If a Charitable Remainder Trust is the Policyowner, the character of amounts received by the income beneficiary of the Charitable Remainder Trust depends on the character of the income in the trust. To the extent the trust has any undistributed ordinary income, amounts received by the income beneficiary from the trust are taxed as 29 31 ordinary income. The Internal Revenue Service has held in at least one private letter ruling that any increase in the value of a Policy will be treated as income to the trust in the year it accrues regardless whether it is actually received by the trust. However, a private letter ruling cannot be relied on as precedent by anyone other than the taxpayer who requests it. Other Matters What Voting Rights Do Policyowners Have? As stated above, all of the assets held in the Variable Accounts will be invested in shares of a particular Portfolio of Manulife Series Fund. Manufacturers Life of America is the legal owner of those shares and as such has the right to vote upon matters that are required by the 1940 Act to be approved or ratified by the shareholders of a mutual fund and to vote upon any other matters that may be voted upon at a shareholders' meeting. However, Manufacturers Life of America will vote shares held in the Variable Accounts in accordance with instructions received from Policyowners having an interest in such Accounts. Shares held in each Variable Account for which no timely instructions from Policyowners are received, including shares not attributable to Policies, will be voted by Manufacturers Life of America in the same proportion as those shares in that Variable Account for which instructions are received. Should the applicable federal securities laws or regulations change so as to permit Manufacturers Life of America to vote shares held in the Variable Accounts in its own right, it may elect to do so. The number of shares in each Variable Account for which instructions may be given by a Policyowner is determined by dividing the portion of that Policy's Variable Policy Value derived from participation in that Variable Account, if any, by the value of one share of the corresponding Portfolio. The number will be determined as of a date chosen by Manufacturers Life of America, but not more than 90 days before the shareholders' meeting. Fractional votes are counted. Voting instructions will be solicited in writing at least 14 days prior to the meeting of the shareholders' of Manulife Series Fund. Where Can Financial Information Be Found? Financial statements of Manufacturers Life of America and of the Account are included in the Statement of Additional Information. Performance And Other Comparative Information From time to time, in advertisements or in reports to Policyowners, Manufacturers Life of America may quote various independent quotation services for the purpose of comparing Manufacturers Life of America's Policies' performance and other rankings with other companies' variable annuity policies and for the purpose of comparing any of the Portfolios of Manulife Series Fund with other mutual funds with similar investment objectives. Performance rankings are not to be considered indicative of the future performance of the Portfolios. The quotation services which are currently followed by the Company include Lipper Analytical 30 32 Services, Inc.("Lipper"), Morningstar, Inc., Variable Annuity Research and Data Service, and Money Magazine; however, other nationally recognized rating services may be quoted in the future. The performance of certain indices may also be quoted in advertisements or in reports to Policyowners. These indices include Standard & Poor's 500 Index, National Association of Real Estate A11 REIT's Index, Salomon Brothers (broad corporate index), Dow Jones Industrial Average, Donoghue Prime Money Fund Index, 3 month Treasury Bills, the National Association of Securities Dealers Automated Quotation System, the Financial Times Actuaries World Index and the following Lipper Indices: Money-Market Funds, Corporate Bond Funds, Balanced Funds, Growth Funds, Small-Company Growth Funds, Real Estate Funds, International Funds and Pacific Region Funds. Advertising Performance Of Variable Accounts. Manufacturers Life of America may publish advertisements or distribute sales literature that contain performance data relating to the sub-accounts of Separate Account Two. Performance data will include average annual return quotations for one-year, five-year (when applicable) and ten-year (when applicable) periods ending the last day of the month. Quotations for the period since inception of the Portfolio underlying a sub-account will replace such periods for a Portfolio that has not been in existence for a full five-year or ten-year period. In the case of a new Portfolio that is less than one year old, the one-year figure would be replaced by an aggregate for the period since inception. Average annual total returns may also be advertised for three-year periods and one-year periods as of the last day of any month. Average annual total return is the average annual compounded rate of return that equates a purchase payment to the market value of that purchase payment on the last day of the period for which the return is calculated. Aggregate total return, which will also be advertised from time to time, is the percentage change that equates a purchase payment to the market value of that purchase payment on the last day of the period. For the purpose of the calculations it is assumed that an initial payment of $1,000 is made on the first day of the period for which the total return is calculated. All recurring charges are reflected in the calculations. Asset charges are reflected in changes in unit values. For purposes of the calculations, the annual administration charge is estimated by dividing the total administration charges collected during a given year by the average total assets attributable to the policies during that year (including amounts allocated to both Separate Account Two and the Guaranteed Interest Account), multiplying that percentage by the average of the beginning and ending values of the hypothetical investment and subtracting the result from the year-end account value. The contingent deferred sales charge that would be applicable to withdrawals at the end of periods for which the total return is measured are assumed to be deducted at the end of the period. The Policies were first offered to the public in 1987. However, total return data may be advertised for as long a period of time as the underlying separate account has been active. The results for any period prior to the Policies' being offered would be calculated as if the Policies had been offered during that period, with all Policy charges and the daily mortality and expense charges deducted. Policy charges for periods prior to 1988 are based on the average rate for the first six years in which the Policies were offered. 31 33 Total returns if surrendered for the period ending December 31, 1995 were as follows:
AVG. ANNUALAGGREGATE AVG. ANNUAL AVG. ANNUAL AVG. ANNUAL AVG. ANNUAL TOTAL RETURNTOTAL RETURN TOTAL RETURNTOTAL RETURN TOTAL RETURNTOTAL RETURN SINCE SINCE ONE YEAR THREE YEARS FIVE YEARS TEN YEARS** INCEPTION*INCEPTION* ------------ ------------ ------------ ------------ -------------------------- Emerging Growth Equity 19.43% 12.43% 24.37% 13.61% 14.13% 358.51% Balanced Assets 16.40% 7.64% 10.32% 9.21% 11.31% 243.77% Capital Growth Bond 11.99% 5.69% 7.79% 8.21% 10.34% 210.77% Common Stock 20.89% 9.44% 12.59% N/A 8.75% 107.03% Real Estate Securities 6.95% 8.59% 17.07% N/A 10.00% 128.66% Money-Market (2.47%) 1.42% 2.62% 4.54% 4.83% 72.26% International 3.13% N/A N/A N/A 0.94% 1.17% Pacific Rim Emerging Markets 3.32% N/A N/A N/A (2.55%) (3.15)%
* June 26, 1984 for the Emerging Growth Equity, Balanced Assets, Capital Growth and Money-Market Funds; May 1, 1987 for the Common Stock and Real Estate Securities Funds; October 4, 1994 for the International and Pacific Rim Emerging Markets Fund. ** Policies have been offered only since November 3, 1987. Performance data for earlier periods are hypothetical figures based on the performance of the Fund in which policy assets may be invested. Total returns if not surrendered are as follows: AVG. ANNUAL AGGREGATE AVG. ANNUAL AVG. ANNUAL AVG. ANNUAL AVG. ANNUAL TOTAL RETURNTOTAL RETURN TOTAL RETURN TOTAL RETURN TOTAL RETURNTOTAL RETURN SINCE SINCE ONE YEAR THREE YEARS FIVE YEARS TEN YEARS** INCEPTION* INCEPTION* - ---------------------------- ---------------- ---------------- ------------ ------------ ------------ ------------ Emerging Growth Equity 26.43% 13.73% 24.62% 13.61% 14.13% 358.51% Balanced Assets 23.40% 9.06% 10.72% 9.21% 11.31% 243.77% Capital Growth Bond 18.99% 7.16% 8.23% 8.21% 10.34% 210.77% Common Stock 27.89% 10.81% 12.96% N/A 8.75% 107.03% Real Estate Securities 13.95% 9.98% 17.39% N/A 10.00% 128.66% Money-Market 4.53% 2.99% 3.15% 4.54% 4.83% 72.26% International 10.13% N/A N/A N/A 6.53% 8.17% Pacific Rim Emerging Markets 10.32% N/A N/A N/A 3.09% 3.85%
* June 26, 1984 for the Emerging Growth Equity, Balanced Assets, Capital Growth and Money-Market Funds; May 1, 1987 for the Common Stock and Real Estate Securities Funds; October 4, 1994 for the International and Pacific Rim Emerging Markets Fund. ** Policies have been offered only since November 3, 1987. Performance data for earlier periods are hypothetical figures based on the performance of the Fund in which policy assets may be invested. 32 34 Aggregate total returns if surrendered as of the end of each year since inception are as follows:
1995 1994 1993 1992 1991 1990 ------- -------- -------- -------- ------- -------- Emerging Growth Equity 19.43% (11.74)% 14.60% 12.55% 61.53% (21.71)% Balanced Assets 16.40% (11.79)% 2.83% (2.89)% 14.06% (7.48)% Capital Growth Bond 11.99% (12.10)% 1.41% (3.21)% 7.15% (2.57)% Common Stock 20.89% (11.82)% 4.21% (3.04)% 20.80% (11.74)% Real Estate Securities 6.95% (10.51)% 13.34% 12.03% 31.60% (12.17)% Money-Market (2.47%) (4.19)% (6.34)% (5.68)% (3.52)% (1.35)% International 3.13% N/A N/A N/A N/A N/A Pacific Rim Emerging Markets 3.32% N/A N/A N/A N/A N/A 1989 1988 1987 1986 1985 1984 - ---------------------------- ------- -------- -------- -------- ------- -------- Emerging Growth Equity 32.63% 7.74% (12.47)% (14.05)% 14.08% (3.17)% Balanced Assets 11.99% (1.50)% (9.60)% 8.11% 17.95% 5.13% Capital Growth Bond 4.62% (1.96)% (9.54)% 13.08% 16.79% 5.11% Common Stock 21.22% 0.73% (21.50)% N/A N/A N/A Real Estate Securities 0.03% 2.57% (15.44)% N/A N/A N/A Money-Market (0.32)% (2.04)% (3.45)% (3.05)% (2.00)% (3.79)% International N/A N/A N/A N/A N/A N/A Pacific Rim Emerging Markets N/A N/A N/A N/A N/A N/A
All of the above performance data are based on the actual historical performance of the Funds for specified periods, and the figures are not intended to indicate future performance. 33 35 Aggregate total returns as of the end of each year since inception, if not surrendered are as follows:
1995 1994 1993 1992 1991 1990 ------ ------- -------- ------- ------ -------- Emerging Growth Equity 26.43% (5.09)% 22.60% 20.55% 69.53% (15.82)% Balanced Assets 23.40% (5.15)% 10.83% 5.11% 22.06% 0.52% Capital Growth Bond 18.99% (5.48)% 9.41% 4.79% 15.15% 5.43% Common Stock 27.89% (5.19)% 12.21% 4.96% 28.80% (5.10)% Real Estate Securities 13.95% (3.77)% 21.34% 20.03% 39.60% (5.56)% Money-Market 4.53% 2.81% 1.66% 2.32% 4.48% 6.65% Internationa 10.13% (1.79)% N/A N/A N/A N/A Pacific Rim Emerging Markets 10.32% (5.86)% N/A N/A N/A N/A 1989 1988 1987 1986 1985 1984 - ---------------------------- ------ ------- -------- ------- ------ -------- Emerging Growth Equity 40.63% 15.74% (5.88)% (7.58)% 22.08% 4.83% Balanced Assets 19.99% 6.50% (2.80)% 16.11% 25.95% 13.13% Capital Growth Bond 12.62% 6.04% (2.73)% 21.08% 24.79% 13.11% Common Stock 29.22% 8.73% (15.59)% N/A N/A N/A Real Estate Securities 8.03% 10.57% (9.07)% N/A N/A N/A Money-Market 7.68% 5.96% 4.55% 4.95% 6.00% 4.21% International N/A N/A N/A N/A N/A N/A Pacific Rim Emerging Markets N/A N/A N/A N/A N/A N/A
All of the above performance data are based on the actual historical performance of the Funds for specified periods, and the figures are not intended to indicate future performance. 34 36 APPENDIX A This Appendix describes the fixed portion of the Policies, which consists of the provisions based on the general account of Manufacturers Life of America, including those relating to the Guaranteed Interest Account and the annuity options. The interests of Policyowners arising from the allocation of purchase payments or the transfer of values to the Guaranteed Interest Account are not registered under the Securities Act of 1933, and the general account of Manufacturers Life of America is not registered as an investment company under the Investment Company Act of 1940. Accordingly, the fixed portion of the Policies is not subject to the provisions that would apply if registration under such acts were required. Manufacturers Life of America has been advised that the staff of the Securities and Exchange Commission has not reviewed the disclosures in this prospectus that relate to the Guaranteed Interest Account. Disclosures regarding the Guaranteed Interest Account and the general account, however, may be subject to certain generally applicable provisions of the federal securities laws relating to the accuracy and completeness of statements made in the prospectus. What Is The Guaranteed Interest Account? As noted in the prospectus, Policyowners may accumulate funds on a variable basis, by allocating purchase payments for investment in one or more of the Funds of Manulife Series Fund, Inc., or on a fixed basis by allocating purchase payments to the Guaranteed Interest Account. The Guaranteed Interest Account provides for the credit of a guaranteed rate of interest of at least 4% per year to amounts allocated to such account. Amounts in the Guaranteed Interest Account will receive a Guaranteed Interest Rate set by Manufacturers Life of America on each Policy Anniversary for the ensuing Policy Year. The $30 annual administration fee, if any, and any premium tax to be deducted against the Total Policy Value will be assessed against the Guaranteed Interest Account first to the extent sufficient amounts are available. What Are The Annuity Options? The Policyowner may elect one of the following annuity options described below. If no option is specified, annuity payments will be made as a life annuity with a ten-year certain period. Treasury or Labor Department regulations may require a different annuity option if no option is specified and may preclude the availability of certain options in connection with Qualified Policies. There may also be state insurance law requirements that limit the availability of certain options. The amounts payable under each option will be no less than amounts determined on the basis of tables contained in each Policy. Such tables are based on the 1983 Individual Annuity Mortality Tables and an assumed interest rate of 4% per year. Option 1: Annuity Certain--payments in equal installments for a period of not less than five years and not more than twenty years. 35 37 Option 2(a): Life Annuity Without Refund--payments in equal installments during the lifetime of an annuitant. Upon the death of the annuitant, payments will cease. Since there is no guarantee that any minimum number of payments will be made, the payee may receive only one payment if he or she dies before the date the second payment is due. Option 2(b): Life Annuity With Certain Period--payments in equal installments during the lifetime of an annuitant and if the annuitant dies before installments have been paid for a designated period, either five, ten or twenty years, payments will continue for the remainder of the period selected. Option 2(c): Life Annuity With Installment Refund--payments in equal installments during the lifetime of an annuitant and if the annuitant dies before the total installments paid equal the Total Policy Value applied to provide the annuity, payments will continue until the Total Policy Value has been paid. Option 3(a): Joint and Survivor Annuity Without Refund--payments in equal installments during the lifetime of two annuitants with payments continuing in full amount to the survivor upon death of either. Since there is no guarantee that any minimum number of payments will be made, the payees may receive only one payment if they both die before the date the second payment is due. Option 3(b): Joint and Survivor Annuity With Certain Period--payments in equal installments during the lifetime of two annuitants and if both die before installments have been paid for a ten-year period, payments will continue for the remainder of the period. Under Options 2(b), 2(c) and 3(b), upon the death of the annuitant or second to die of joint annuitants, the beneficiary may elect to receive the commuted value of any remaining payments. Any such commutation will be at the interest rate used to determine the amount of the annuity payments plus 1/2%. 36 38 Please tear off, complete and return the form below to order a Statement of Additional Information for the Multi-Account Flexible Payment Variable Annuity Policy offered by this prospectus. Address the form to the Service Office as follows: The Manufacturers Life Insurance Company of America Service Office 200 Bloor Street East Toronto, Ontario, Canada M4W 1E5 Multi-Account Flexible Payment Variable Annuity Policy Please send me a free copy of the Statement of Additional Information for the Multi-Account Flexible Payment Variable Annuity Policy. (Please Print or Type) Name: Policy#: Address: T E A R O U T 37 -----END PRIVACY-ENHANCED MESSAGE-----