<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549
                               ------------------

                                    FORM 10-K

                 X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1998
                              ---------------------

              Securities and Exchange Commission File No. 812-06037

           THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
             (Exact name of registrant as specified in its charter)

                                    DELAWARE
         (State or other jurisdiction of incorporation or organization)

                                   22-2265014
                      (I.R.S. Employer Identification No.)

                              116 Huntington Avenue
                           Boston, Massachusetts 02116
                    (Address of principal executive offices)

                                 (617) 266-6008
              (Registrant's telephone number, including area code)

        Securities registered pursuant to Section 12(g) of the Act: None

                              ---------------------

Indicated by check mark whether the registrant (1) has filed reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                    X Yes                No
                   ---                --- 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 
of Regulation S-K (section 229.405 of this chapter) is not contained herein, 
and will not be contained, to the best of registrant's knowledge, in definitive 
proxy or information statements incorporated by reference in Part II of this 
Form 10-K or any amendment to this Form 10-K. [X] 

No shares of voting stock are held by nonaffiliates of the Registrant.

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares outstanding of the issuer's sole class of common stock, as
of December 31, 1998 was 2,600.

                      DOCUMENTS INCORPORATED BY REFERENCE


None.


                                       1
<PAGE>   2



                                     PART 1

Item 1 - Business

Description of Company, Reportable Segments and Products

The Registrant consists of The Manufacturers Life Insurance Company of North
America ("MNA"), The Manufacturers Life Insurance Company of New York ("MNY")
and Manufacturers Securities Services, LLC ("MSS") and is hereinafter referred
to collectively as the "Company". The Company's principal office is located at
116 Huntington Avenue, Boston, Massachusetts 02116 and is a wholly-owned
subsidiary of Manulife-Wood Logan Holding Co., Inc. ("MWL"). MWL is 62.5% owned
by The Manufacturers Life Insurance Company (USA) ("ManUSA"), 22.5% by MRL
Holding, LLC ("MRL") and 15% by minority interest shareholders. ManUSA and MRL
are indirectly wholly-owned subsidiaries of The Manufacturers Life Insurance
Company ("Manulife Financial"), a federally chartered Canadian mutual life
insurance company. MNA is licensed to sell fixed and variable annuities,
traditional life and variable life insurance, and accident and health insurance
in all states except New Hampshire and New York. MNY is licensed to sell fixed
and variable annuities, traditional life insurance, and accident and health
insurance in New York only.



MNA is a stock life insurance company organized under the laws of Delaware in
1979 and has two subsidiaries, MNY and MSS. MNY is an insurance subsidiary
licensed to conduct business in the State of New York. MSS, a majority-owned
broker dealer, acts as investment advisor to the Manufacturers Investment Trust
("MIT"), a no-load, open-end investment management company organized as a
Massachusetts business trust and as the principal underwriter of the Company's
variable annuity and life insurance contracts and is the exclusive distributor
of its insurance products in New York. MSS is the successor to NASL Financial
Services, Inc. ("NASL Financial"), a broker dealer that conducted operations
until September 30, 1997, when it was reorganized into MSS. Prior to October 1,
1997, NASL Financial also acted as investment advisor to North American Funds
(NAF), a no-load, open-end management investment company organized as a
Massachusetts business trust.

Prior to 1998, the Company reported two segments, Annuities and Mutual Funds.
The Mutual Fund segment consisted solely of NAF, a group of thirteen mutual
funds. During 1997, the Company disposed of NAF to an unrelated party. In 1997
and 1998, pursuant to a revised plan of operations for MNY, the Company entered
the Savings and Retirement Services and Life Insurance businesses in the state
of New York. The Company now reports three segments: Annuities, Savings and
Retirement Services, and Life Insurance. The Company's reportable segments have
been determined based on differences in product features and distribution; the
segment definitions are also consistent with the Company's management structure.
No significant assets or revenues have been generated to date in the Savings and
Retirement Services and Life Insurance segments. However, start-up costs
reported for these two segments contributed to lower net income levels during
1998 and 1997.

Through its three segments, the Company issues individual and group annuity
contracts and life insurance contracts. Within its Annuities segment, the
Company issues fixed and variable annuities. Prior to July 1, 1998, the Company
also issued variable life insurance contracts within its Annuities segment.
Amounts invested in the fixed portion of the Company's contracts are allocated
to the general accounts of the Company or, in the case of the market value
adjusted annuity contract, to non-insulated separate accounts of the Company.
Amounts invested in the variable portion of the contracts are allocated to
separate accounts of the Company, each subaccount of which invests in shares of
one of the portfolios of MIT or in open-end investment management companies
offered and managed by unaffiliated third parties. As a result, the variable
annuity and life products provide returns based upon the returns of the
underlying mutual funds. Those returns will fluctuate based on market
performance and are not guaranteed.

The segment discussion below focuses solely on the Annuities segment due to the
limited assets, effects on net income, and revenues associated with the start-up
nature of the Savings and Retirement Services and Life Insurance segments.


                                ANNUITIES SEGMENT

Annuities provide insurance protection against the risk of outliving an
individual's income during his or her lifetime. Annuities also provide
tax-deferred savings during the accumulation savings phase and tax-favored
retirement income during the income phase. The Company's variable annuity sales
occur via its Venture annuity series: Venture, Venture Vision and Venture
Vantage. All three variable annuities offer multiple variable investment options
and one or more fixed investment options as well as competitive minimum death
benefit guarantees. In addition to the variable investment options, the Venture
series products offer multiple fixed investment options that guarantee the
interest rate return for the stated guaranteed duration. However, certain of the
Venture products impose a market value charge for premature withdrawals or
transfers prior to the end of the guaranteed

                                       2
<PAGE>   3


duration. All Venture products impose an annual asset based fee on amounts held
in variable investment options and certain of those products contain a graded
contingent deferred sales charge. In addition to the variable Venture series,
the Company also sells the Venture Market Value Annuity which offers only fixed
investment options and imposes a market value adjustment upon surrender. Within
its Annuities segment, the Company also administers a closed block of modified
single premium variable life insurance product called Venture Life. Generally,
Venture Life was issued as a modified endowment contract ("MEC") which provides
tax treatment and product features which are similar to those of an annuity with
additional tax-efficient death proceeds features. For 1997, the last full year
for which the contract was sold, Venture Life sales were less than 2% of
Annuities segment sales.

Under current law, returns credited on annuities and life insurance policies
during the accumulation phase (the period during which interest is credited and
annuity payments have not yet begun) are not subject to federal or state income
tax. Proceeds payable on death from a life insurance policy are also free from
such taxes. At maturity or payment date of an annuity policy, the policyholder
is entitled to receive the original deposit plus accumulated returns. The
policyholder may elect to take this amount in either a lump sum or receive a
series of payments over a stated period of time. The return component of such
payments is taxed at the time of receipt as ordinary income.

Sales and Asset Retention

Annuity sales are primarily driven by the U.S. domestic and international equity
markets, distribution capabilities, attractive policy features and client
servicing capabilities. The variable options tend to be more attractive in low
interest rate environments as they provide potential for higher returns through
equity investments. For this potential higher return, the policyholder assumes
directly the investment risk of the underlying mutual funds. Higher interest
rate environments tend to favor the fixed investment options as the policyholder
may lock in guaranteed interest rates without assuming the investment risk
associated with variable investment options.

The Venture annuity series products offer a variety of investment options, death
benefit options, administrative features and customer services that enhance both
sales and asset retention. The variable investment options offered by the
Company employ a multi-manager approach through the use of subadvisers to the
underlying mutual funds. Currently fifteen investment management firms provide
investment management expertise to the thirty-five variable investment options.
The Company also offers five Lifestyle portfolios which are "funds of funds".
These variable investment options strategically allocate deposits over various
investment disciplines with the long-term goal of matching return to the risk
profile of the policyholder. The ability to provide superior investment returns
under the variable options is essential to the retention of assets.

Policyholders are permitted to withdraw all or part of their account value at
any time subject to possible contingent deferred sales charges and/or market
value charges. Such premature terminations result in a loss of the Company's
anticipated future earnings related to the annuity deposit and accelerated
recognition of expenses related to policy acquisition, principally commissions,
which are otherwise deferred and amortized over the life of the policy.
Contingent deferred sales charges, if imposed by the product, are designed to
compensate the Company for the accelerated recognition of those expenses and act
as a deterrent against policyholders surrendering their policies prematurely.
Generally, contingent deferred sales charges do not apply to withdrawals up to
the higher of 10% of payments or accumulated earnings. Market value charges are
imposed to offset the cost of selling depressed asset values in increasing
interest rate environments.

The Venture, Venture Vision and Venture Vantage annuities provide innovative
minimum death benefits to policyholders. For issue ages 80 and younger, Venture
and Venture Vision guarantee a death benefit equal to the greater of deposits
net of withdrawals or the highest account value on any contract anniversary
increased by subsequent deposits net of withdrawals, up to attained age 80.
Venture Vantage provides a minimum death benefit equal to the larger of deposits
net of withdrawals or the contract value on the ninth contract anniversary. The
minimum death benefits are designed to act as a deterrent to policyholders
surrendering their policies after the contingent deferred sales charge period
has expired.


The Company, along with its ultimate parent company Manulife Financial, enjoys
strong financial ratings that enhance its ability to attract new sales and
retain assets. Distributors and consumers of variable and fixed annuity products
have begun to utilize the relative financial strength ratings as a criteria in
choosing an annuity carrier. The Company has received financial strength ratings
of A++ (Superior) by A.M. Best, AA+ (Very Strong) by Standards and Poor's
("S&P") and Aa2 (Excellent) by Moody's Investor Services. The Company is rated
AAA (Highest) by Duff & Phelps in terms of the Company's ability to meet its
contractual obligations to its policyholders.

The ability to service policyholders in an effective, efficient and courteous
manner is an important success factor for sales and asset retention. The Company
has received high service ratings through independent surveys. To maintain this
level of service the Company has and will continue to make significant
investments in its infrastructure.

                                       3

<PAGE>   4



Marketing and Distribution

The variable annuity market in the United States is relatively young and has
realized significant growth in the past few years. According to the Value Survey
conducted by Tillinghast, sales grew 16% in 1998 over 1997 with total 1998 sales
of $96.2 billion. The Company, with 1998 total sales of $2.4 billion, captured
market share of 2.44%, ranking it 16th for variable annuity products issued in
the United States. Wood Logan Associates, Inc. ("WLA"), a registered broker
dealer and an affiliate of the Company, provides sales and marketing services
through a team of wholesalers soliciting broker dealer firms across the United
States through wirehouses, regional brokerage firms, financial planners and
banks.

                    Percentage Sales of Annuities by Channel
                         For the years ended December 31

<TABLE>
<CAPTION>
                                     1998              1997             1996
                                     ----              ----             ----
<S>                                  <C>               <C>              <C>  
Wirehouse Firms                      23.8%             21.9%            22.7%
Regional Brokerage Firms             16.5              19.6             24.4
Financial Planner Firms              48.5              46.7             42.2
Banks                                11.2              11.8             10.7
                                    -----             -----            -----
      Total                         100.0%            100.0%           100.0%
</TABLE>


                                   REGULATION

MNA is subject to the laws of the State of Delaware governing insurance
companies and to the regulation of the Delaware Insurance Department. MNY is
subject to the laws and regulation of the State of New York. In addition, the
Company is subject to regulation under the insurance laws of other jurisdictions
in which the Company operates. Regulation by each insurance department includes
periodic examination of the Company's financial position and operations,
including contract liabilities and reserves. Regulation by supervisory agencies
includes licensing to transact business, overseeing trade practices, licensing
agents, approving policy forms, establishing reserve requirements, fixing
maximum interest rates on life insurance policy loans and minimum rates for
accumulation of surrender values, prescribing the form and content of required
financial statements and regulation of the type and amounts of permitted
investments. The Company's books and accounts are subject to review by each
insurance department and other supervisory agencies at all times, and the
Company files annual statements with these agencies.


Several insurers affiliated with the Company, including ManUSA, are domiciled in
Michigan and therefore are subject to Michigan regulation. Consequently, the
Michigan Insurance Bureau has jurisdiction in applying its laws and regulations
to transactions which may occur between the Company and any of Manulife
Financial's United States subsidiaries. Under Michigan holding company laws and
other laws and regulations, intercompany transactions, transfers of assets and
dividend payments may be subject to prior notification or approval depending
upon the size of such transfers and payments in relation to the financial
positions of the companies. Transactions between the Company and Manulife
Financial or any if its subsidiaries are primarily regulated by Delaware but may
also be subject to Michigan or New York regulation.

Under insurance guaranty fund laws in most states, insurers doing business
therein can be assessed (up to prescribed limits) for policyholder losses
incurred by insolvent companies. The amount of any future assessments on the
Company under these laws cannot be reasonably estimated. Most of these laws do
provide, however, that an assessment may be excused or deferred if it would
threaten an insurer's own financial strength.

Although the federal government generally does not directly regulate the
business of insurance, federal initiatives often have an impact on the business
in a variety of ways. Federal legislation that removed barriers preventing banks
from engaging in the insurance business or that changed the Federal income tax
treatment of insurance companies, insurance company products, or employee
benefit plans could significantly affect the insurance business.

On January 20, 1998, the Board of Directors of Manulife Financial asked its
management to prepare a plan for conversion from a mutual life insurance company
to an investor-owned, publicly-traded stock company. Any demutualization plan
for Manulife Financial is subject to the approval of its Board of Directors and
policyholders, as well as regulatory approval.


Item 2 - Properties

The Registrant owns no property.

Item 3. Legal Proceedings

                                       4

<PAGE>   5


Nothing to report

Item 4 - Submission of Matters to a Vote of Security Holders

Nothing to report

                                       5
<PAGE>   6


                                     PART II

Item 5 - Market for Registrant's Common Equity and Related Stockholder Matters

MWL is the sole record holder of the Registrant's shares. Therefore, there is no
public trading market for Registrant's common stock. The Registrant has declared
no cash dividends on its common stock at any time during the two most recent
fiscal years.

The Company currently sells Venture Group Annuity, a flexible premium payment
deferred variable unallocated group annuity, to retirement plans that qualify
for special tax treatment under Section 401(a) of the Internal Revenue Code.
Sales of these securities are not required to be registered under the Securities
Act of 1933 (Section 3(a)(2) of this Act). MSS is the principal underwriter of
the contracts, and WLA provides sales and marketing services. There are no
maximum or minimum purchase payments required to establish a contract. The value
of a contract will vary according to the investment performance, charges and
expenses of the subaccounts in which the contract is vested. As of December 31,
1998, the total variable assets in the Venture Group Annuity was $120,748,895.

Item 6 - Selected Financial Data

<TABLE>
<CAPTION>
                                                                       For the Years Ended December 31
                                               ---------------------------------------------------------------------------
                                                    1998            1997            1996            1995           1994*
                                                    ----            ----            ----            ----           -----
                                                                               (in thousands)
<S>                                            <C>             <C>             <C>             <C>                <C>
Under Generally Accepted Accounting Principles:

Total Revenues                                 $   274,216     $   202,751     $   147,772     $   143,896

Net Income                                          44,420          33,233          15,735          11,032

Total Separate Account Assets                   12,188,420       9,529,160       6,820,599       5,131,536

Total Assets                                    13,496,414      10,633,763       7,811,370       6,244,352

Shareholder's Equity                               254,030         208,726         127,070          95,256
</TABLE>

[FN]
* Selected financial data under generally accepted accounting principles is not
available for 1994. Prior to 1996, the Company prepared its financial statements
in conformity with accounting practices prescribed or permitted by the Delaware
Insurance Department which practices were considered GAAP for mutual life
insurance companies. FASB Interpretation 40, Applicability of Generally Accepted
Accounting Principles to Mutual Life Insurance and other Enterprises (FIN 40),
as amended, which was effective for 1996 annual financial statements, no longer
permitted statutory-basis financial statements to be described as being prepared
in conformity with GAAP. Accordingly, the Company has adopted various accounting
pronouncements, principally Statement of Financial Accounting Standards No. 120,
Accounting and Reporting by Mutual Life Insurance Enterprises and by Insurance
Enterprises for Certain Long-Duration Participating Contracts (SFAS No. 120),
which addresses the accounting for long-duration insurance contracts.
</FN>

Pursuant to the requirements of the above pronouncements, the effect of the
changes in accounting have been applied retroactively and the previously issued
1995 financial statements have been restated for the change.


                                       6
<PAGE>   7


<TABLE>
<CAPTION>
                                                                 For the Years Ended December 31
                                       -----------------------------------------------------------------------------
                                            1998            1997            1996            1995          1994*
                                            ----            ----            ----            ----          -----
                                                                       (in thousands)
<S>                                    <C>             <C>             <C>             <C>            <C>
On Statutory Basis **:

Total Revenues                         $  2,210,418    $  1,944,058    $  1,128,313    $  1,058,882    $  1,226,602

Net Income (Loss)                            28,067          22,259           3,067         (7,288)        (30,454)

Total Separate Account Assets            11,354,727       8,931,967       6,459,290       4,914,728       3,661,278

Total Assets                             11,494,116       9,055,820       6,517,773       4,962,504       4,240,248

Capital and Surplus                         157,940         139,171          69,554          50,158          59,408
</TABLE>

[FN]
** Statutory accounting practices differ in certain respects from generally
accepted accounting principles. The significant differences relate to
consolidation accounting, investments, deferred acquisition costs, deferred
income taxes, non-admitted asset balances and reserve calculation assumptions.
Charges for investment management, administration and contract guarantees have
been reclassified from net transfers to total revenues for 1994-1997 to conform
to the current year statutory presentation.
</FN>

All information presented elsewhere in this document is presented under
generally accepted accounting principles.

Item 7 - Management's Discussion and Analysis of Financial Condition and Results
         of Operations

OVERVIEW

The following analysis of the consolidated results of operations and financial
condition of the Company should be read in conjunction with the consolidated
financial statements and the related notes to consolidated financial statements.

Prior to 1998, the Company reported two segments, Annuities and Mutual Funds.
The Mutual Fund segment consisted solely of NAF, a group of thirteen mutual
funds. During 1997, the Company disposed of its Mutual Fund segment to an
unrelated party. In 1998 and 1997, pursuant to a revised plan of operations for
MNY, the Company entered the Savings and Retirement Services and the Life
Insurance businesses in New York. The Company now reports three segments:
Annuities, Savings and Retirement Services, and Life Insurance. Because two of
the Company's segments, Savings and Retirement Services and Life Insurance, were
recently introduced, the assets, revenues and operations of those segments are
not material to the Company's 1998 financial position or results of operations.

The remainder of this discussion will be limited to the Annuities segment except
as noted.

The Company's primary source of earnings from the Annuities segment are fees
assessed against policyholder account balances held in the Company's separate
accounts including: mortality and expense risk charges, surrender charges and an
annual administrative charge. In addition, the segment earns a spread between
the advisory fees charged to manage the separate account assets invested in MIT
and the subadvisory fees paid to external managers of those assets. A key factor
in the Company's profitability is sustained growth in the underlying assets
through market performance coupled with the ability to acquire and retain
variable annuity and life deposits.

BASIS OF PRESENTATION

During 1996, the Company adopted generally accepted accounting principles
("GAAP") in conformity with the requirements of the Financial Accounting
Standards Board. A description of accounting policies can be found in Note 2 to
the consolidated financial statements.

                                       7

<PAGE>   8



REVIEW OF CONSOLIDATED OPERATING RESULTS

1998 Compared to 1997


The Company recorded net income from continuing operations of $43.8 million in
1998 versus net income of $27.4 million in 1997, an increase of $16.4 million or
60%. The increase was primarily a result of fee income earned on additional
separate account assets. Separate account assets grew by 28% while total assets
increased by 27% during 1998. This growth is attributed to record sales of $2.4
billion for 1998 compared to 1997 sales of $2.2 billion, strong equity market
performance during 1998 and favorable contract persistency. Total fees,
including advisory fees, generated by separate accounts and policyholder funds
increased by $67.0 million or 34% in 1998. Net investment income grew by $4.3
million or 54% due to additional fixed account sales. In addition, the Company
recognized additional net investment income for the full year of 1998 associated
with the $47.7 million capital infusion received in the fourth quarter of 1997
to support expanded operations in New York.

The Company incurred total benefits and expenses in 1998 of $206.5 million, an
increase of $46.2 million, or 29% compared to 1997. The additional expenses are
associated with higher subadvisory fees generated from higher asset levels in
MIT, an increase in non-capitalized acquisition expenses and other costs
associated with growth in the Company's business, and additional start-up
expenses associated with expanding the Company's operations in New York.

The discontinued Mutual Fund segment, under the terms of the sale agreement
concluded in 1997, received a contingent payment of $1.0 million payment on
October 1, 1998. After taxes and an adjustment to the final sales price, this
segment recorded an additional $0.6 million gain on sale in 1998 compared to net
income of $5.8 million, including a $5.9 million gain on sale, in 1997.

1997 Compared to 1996


The Company recorded net income of $33.2 million in 1997 versus net income of
$15.7 million in 1996, an increase of $17.5 million or 112%. A portion of the
increase, $6.6 million, is attributed to the gain on the disposal of the
Company's mutual fund segment and the decreased loss from its operations in
1997. The increase in net income from continuing operations was primarily a
result of fee income earned on additional separate account assets. Separate
account assets grew by 40% while total assets increased by 36% during 1997. This
growth is attributed to record sales of $2.2 billion for 1997 compared to 1996
sales of $1.4 billion, strong equity market performance during 1997 and
favorable contract persistency. The record sales for 1997 were attributable to
the Company's implementation of the Efficient Frontier Investment model in early
1997 and the addition of competitively performing funds, including additional
investment options. The latter includes five Lifestyle funds which offer the
buyer the opportunity to invest in a pre-determined "fund of funds". In addition
the Company also modified its product features and pricing to directly compete
in a profitable manner with its key competitors. Total fees, including advisory
fees, generated by separate accounts and policyholder funds increased by $52.7
million or 37% in 1997. Net investment income grew by $2.4 million or 45% due to
higher fixed account sales and a $47.7 million capital infusion received in the
fourth quarter of 1997 to support expanded operations in MNY.

The Company incurred total benefits and expenses in 1997 of $160.3 million, an
increase of $38.2 million, or 31% compared to 1996. The additional expenses are
associated with higher subadvisory fees generated from higher asset levels in
MIT, an increase in non-capitalized acquisition expenses and other costs
associated with growth in the Company's business, and additional operating
expenses associated with expanding the Company's operations in New York.

The mutual fund segment net loss from operations improved by $0.6 million
between 1997 and 1996. The decrease in the loss is primarily attributable to
higher advisory fees and other revenues through the nine month period ended
September 30, 1997 (date of disposal). Total revenues for this segment were
$10.5 million (nine month period) in 1997 compared to $12.5 million (twelve
month period) for 1996.

                                       8
<PAGE>   9


FINANCIAL POSITION

1998 Compared to 1997

Total assets increased from $10.6 billion at December 31, 1997 to $13.5 billion
at December 31, 1998, an increase of $2.9 billion or 27%. Separate account
assets increased by 28% in 1998 compared to 1997 and represent 90% of total
assets as the Company continues to focus on its variable option insurance
products. The Company continues to own high quality investment grade fixed
maturity investments to support its general account liabilities and
shareholder's equity. The Company's deferred acquisition costs (DAC) asset grew
by 23% as the Company experienced record sales volumes during 1998 and deferred
the related costs, net of current amortization, associated with those sales. Due
from reinsurers increased $88.0 million as a result of higher fixed deferred
account values related to 1998 dollar cost averaging promotions offered to
policyholders in 1998.

Total liabilities increased proportionately with the growth in the related
assets during 1998, primarily in the Company's separate accounts. During 1998,
the Company borrowed an additional $57.5 million from Manulife Financial to
support its record sales volumes and related acquisition expenses. Amount
payable to reinsurers increased by $81.0 million primarily as a result of higher
fixed annuity deposits and increased account values associated with the policies
reinsured under the fixed annuity coinsurance agreement.

The growth in retained earnings is due to net income from continuing operations
and discontinued operations of $43.8 million and $0.6 million, respectively,
during 1998. In addition, shareholders equity increased $0.9 million due to
higher market values associated with invested assets at December 31, 1998.


1997 Compared to 1996

Total assets increased from $7.8 billion at December 31, 1996 to $10.6 billion
at December 31, 1997, an increase of $2.8 billion or 36%. Separate account
assets increased by 40% in 1997 compared to 1996 and represented 90% of total
assets as the Company continues to focus on its variable option insurance
products. Fixed maturity and short-term investments, included in invested
assets, increased by 56% during 1997. This increase is a result of a $47.7
million capital infusion in the fourth quarter of 1997 to support expansion of
MNY's operations to include individual life insurance and pension products in
the state of New York. The Company continues to own high quality investment
grade fixed maturity investments to support its general account. The Company's
DAC asset grew by 25% as the Company experienced record sales volumes during
1997 and deferred the related costs, net of current amortization, associated
with the sales. Due from reinsurers decreased $19.6 million as a result of lower
fixed deferred account values associated with the policies reinsured under the
Company's coinsurance agreement.

Total liabilities have increased proportionately with the growth in the related
assets during 1997, primarily in the Company's separate accounts. During 1997,
the Company borrowed an additional $25.0 million from Manulife Financial to
support the record sales volumes and related acquisition expenses. Amount
payable to reinsurers decreased $22.0 million primarily as a result of lower
fixed deferred account values associated with the policies reinsured under the
Company's coinsurance agreement.

The Company received $47.7 million of additional capital to support expansion of
its New York operations. The growth in retained earnings is due to net income
from continuing operations and discontinued operations of $27.4 million and $5.8
million, respectively, during 1997. In addition, shareholders equity increased
$0.7 million due to higher market values associated with invested assets at
December 31, 1997.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity describes the ability of a company to generate sufficient cash flows
to meet the cash requirements of business operations. Historically, the
Company's principal cash flow sources have been deposits and charges on
contracts, investment income, maturing investments, and proceeds from sales of
investment assets. In addition to the need for cash flow to meet operating
expenses, the liquidity requirements of the Company relate principally to its
annuity liabilities and to the funding of investments in new products,
processes, and technologies. The liabilities mentioned above include the payment
of benefits under its annuity contracts along with contract withdrawals and
policy loans.

The general account liabilities consist of policyholder funds whose liquidity
requirements do not fluctuate significantly from one year to the next.
Policyholder transactions related to separate accounts do not materially impact
the cash flow of the Company.

                                       9

<PAGE>   10



The substantial increase in the Company's sales since 1993 has resulted in the
Company requiring cash financing to support this growth. The Company must invest
all of its variable option deposits in the separate accounts while paying
commissions and acquisition expenses related to these deposits and other sales
from its general account. Prior to 1995, the Company used capital and general
account assets to fund these costs. Since 1995, the Company's fixed account
acquisition expenses are largely funded through a fixed account reinsurance
agreement. Substantially all variable account acquisition costs are financed
through borrowing from Manulife Financial, starting in 1996, and internally
generated cash flows.

The Company maintains a prudent amount invested in cash and short term
investments. At the end of 1998, this amounted to $44.4 million or 21% of total
investments compared to $ 22.3 million in 1997 or 13%. In addition, the
Company's liquidity is managed by maintaining an easily marketable portfolio of
fixed maturity securities. Because of the excess expense over income which
arises from the cost of new policy issues, the continued success in generating
sales will not only result in losses in the results from operations, but will
create a cash flow strain as well. As a result, the Company on an annual basis
forecasts its capital and financing requirements to support its operations. The
Company looks to Manulife Financial for the necessary capital or financing to
support the Company's growth.

The Company's net cash flows from operating activities were ($18.7) million,
($38.8) million and ($34.2) million for the years ended December 31, 1998, 1997
and 1996, respectively. The negative cash flows from operations are primarily
related to increased commissions and acquisition expenses associated with
increasing sales volumes. Offsetting these items each year are increases in
total fees, including net advisory fees, generated by separate accounts and
policyholder funds.

The Company's net cash flows from investing activities were ($33.3) million,
($39.1) million and ($3.3) million for the years ended December 31, 1998, 1997
and 1996, respectively. The decrease in cash flows for 1998 resulted primarily
from fixed maturity securities maturing or sold offset by an increase in
purchases of fixed maturity securities to meet the Company's cash flow needs.
The negative cash flows in 1997 were primarily attributable to the purchases of
fixed maturity securities associated with the capital infusion of $47.7 million
and were partially offset by the disposal of the Mutual Fund segment in 1997 and
the disposal of foreclosed real estate. The negative cash flows in 1996 were
primarily attributable to the purchases of fixed maturity securities associated
with the capital infusion of $18.0 million and were offset by the liquidation of
"seed money" invested in the underlying MIT and NAF funds and the disposal of
foreclosed real estate.

The Company's net cash flows from financing activities were $55.1 million, $73.2
million, and $38.5 million, for the years ended December 31, 1998, 1997 and
1996, respectively. The increase in net cash flows for all three years is
primarily related to additional borrowings from Manulife Financial to support
the Company's growth. Net deposits to policyholder funds for 1998 and 1997 and
capital contributions in 1997 and 1996 also contributed additional cash to the
Company. Offsetting the cash flows for all three years are reinsurance costs
and, in 1996, the Company incurred net redemptions from policyholder funds.

Aside from the financing required to partially fund acquisition costs, the
Company's cash flows are adequate to meet the general obligations on all annuity
contracts.

CAPITAL REQUIREMENTS AND SOLVENCY PROTECTION


In order to enhance the regulation of insurer solvency, the NAIC has established
minimum Risk Based Capital (RBC) requirements. The requirements are designed to
monitor capital adequacy and to raise the level of protection that statutory
surplus provides for policyholders. The RBC model law requires that life
insurance companies report on a formula-based RBC standard which is calculated
by applying various factors to asset, premium and reserve items. The formula
takes into account risk characteristics of the life insurer, including asset
risk, insurance risk, interest risk and business risk. If an insurer's ratio
falls below certain thresholds, regulators will be authorized, and in some
circumstance required, to take regulatory action.

The Company's policy is to maintain capital and surplus balances well in excess
of the minimums required under government regulations in all jurisdictions in
which the Company does business. At December 31, 1998 the Company's capital and
surplus balances exceeded all such required minimums.


                                       10
<PAGE>   11




IMPACT OF YEAR 2000

The Company makes extensive use of information systems in the operations of its
various businesses, including for the exchange of financial data and other
information with customers, suppliers and other counterparties. The Company also
uses software and information systems provided by third parties in its
accounting, business and investment systems.

The Year 2000 risk, as it is commonly known, is the result of computer programs
being written using two digits, rather than four, to define the applicable year.
Any of the Company's computer programs that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the Year 2000. This
could result in systems failures or miscalculations causing disruptions of
operations, including among other things, a temporary inability to process
transactions, send premium billing notices, make claims payments or engage in
other normal business activities.

The systems used by the Company have been assessed as part of a comprehensive
written plan conducted by The Manufacturers Life Insurance Company (collectively
with its subsidiaries "Manulife Financial"), to ensure that computer systems and
processes of Manulife Financial and its subsidiaries and affiliates, including
the Company, will continue to perform through the end of this century and in the
next.

In 1996, in order to make Manulife Financial's systems Year 2000 compliant, a
program was instituted to modify or replace both Manulife Financial's
information technology systems ("IT systems") and embedded technology systems
("Non-IT systems"). The phases of this program include (i) an inventory and
assessment of all systems to determine which are critical, (ii) planning and
designing the required modifications and replacements, (iii) making these
modifications and replacements, (iv) testing modified or replaced systems, (v)
redeploying modified or replaced systems and (vi) final management review and
certification. For most IT and non-IT systems identified as critical,
certification has been completed for the Company. Of those systems classified as
critical, management believes that over 99% were Year 2000 compliant at the end
of 1998. Management continues to focus attention on the remaining 1% of critical
systems. Those that affect the Company are expected to be compliant by the end
of the second quarter in 1999. Management believes that the Company's
non-critical systems will be Year 2000 compliant by the end of the first quarter
1999.

In addition to efforts directed at Manulife Financial's own systems, Manulife
Financial is presently consulting vendors, customers, and other third parties
with which it deals in an effort to ensure that no material aspect of Manulife
Financial's operations will be hindered by Year 2000 problems of these third
parties. This process includes providing third parties with questionnaires
regarding the state of their Year 2000 readiness and, where possible or where
appropriate, conducting further due diligence activities.

Manulife Financial recognizes the importance of preparing for the change to the
Year 2000 and, in January 1999, commenced preparation of contingency plans, in
the event that Manulife Financial's Year 2000 program has not fully resolved its
Year 2000 issues. The Year 2000 Project Management Office for Manulife
Financial's U.S. Division is coordinating the preparation of the Year 2000
contingency plan on behalf of U.S. Division affiliates and subsidiaries.
Contingency planning is targeted for completion by mid-1999.

Management currently believes that, with modifications to existing software and
conversions to new software, the Year 2000 risk will not pose significant
operational problems for Manulife Financial's computer systems. As part of the
Year 2000 program, critical systems were "time-shift" tested in the Year 2000
and beyond to confirm that they will continue to function properly before,
during and after the change to the Year 2000. However, there can be no assurance
that Manulife Financial's Year 2000 program, including consulting third parties
and its contingency planning, will avoid any material adverse effect on Manulife
Financial's operations, customer relations or financial condition. Manulife
Financial estimates the total cost of its Year 2000 program will be
approximately $59 million, of which $49.5 million has been incurred through
December 31, 1998; however, there can be no assurance that the actual cost
incurred will not be materially higher than such estimate. Most costs will be
expensed as incurred; however, those costs attributed to the purchase of new
software and hardware will generally be capitalized. The total cost of the Year
2000 program is not expected to have a material effect on Manulife Financial's
net operating income.


Item 7A.  Quantitative and Qualitative Disclosure About Market Risk

Market risk is the risk that the Company will incur losses due to adverse
changes in market rates and prices. The primary market risk exposure for the
Company is the impact of lower than expected equity market performance on its
asset-related fee revenue. The Company also has certain exposures to changes in
interest rates.

Equity Risk

                                       11
<PAGE>   12




The Company earns asset based fees based on the asset levels invested in the
separate accounts. As a result, the Company is subject to equity risk and the
effect changes in equity market levels will have on the amounts invested in the
separate accounts. The Company estimates that the effect of a 10% decline in
equity fair values in force at December 31, 1998, if the decline existed
throughout 1999, would adversely affect the Company's asset based fees for 1999
by $28.6 million.

Interest Rate Risk

Interest rate risk is the risk that the Company will incur economic losses due
to adverse changes in interest rates. This risk arises from the issuance of
certain interest sensitive annuity products and the investing of those proceeds
in fixed rate investments. The Company manages its interest rate risk through an
asset/liability management program. The Company has established a target
portfolio mix which takes into account the risk attributes of the liabilities
supported by the assets, expectations of market performance, and a generally
conservative investment philosophy. Preservation of capital and maintenance of
income flows are key objectives of this program. In addition, the Company has
diversified its product portfolio offerings to include products that contain
features that will protect it against fluctuations in interest rates. Those
features include adjustable crediting rates, policy surrender charges, and
market value adjustments on liquidations.

Based upon the Company's investment strategy, asset-liability management
process, and the calculated durations of its assets and liabilities at December
31, 1998, management estimates that a 100 basis point immediate, parallel
increase in interest rates for the entire year of 1999 would decrease the fair
value of its duration managed assets by approximately $1.2 million. There would
be no effect on the fair value of the Company's liabilities because of the
features inherent in the Company's products.



Item 8 - Financial Statements and Supplementary Data

The Report of Independent Auditors and the Company's consolidated financial
statements attached hereto are incorporated herein. See following page.


                                       12
<PAGE>   13



FINANCIAL STATEMENTS
THE MANUFACTURERS LIFE INSURANCE
COMPANY OF NORTH AMERICA

YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
WITH REPORT OF INDEPENDENT AUDITORS

<TABLE>
<CAPTION>
CONTENTS

<S>                                                               <C>
Report of Independent Auditors                                    14
Audited Consolidated Financial Statements                         15
  Consolidated Balance Sheets                                     15
  Consolidated Statements of Income                               16
  Consolidated Statements of Changes in Shareholder's Equity      17
  Consolidated Statements of Cash Flows                           18
Notes to Consolidated Financial Statements                        19
</TABLE>


                                       13

<PAGE>   14



Report of Independent Auditors


The Board of Directors and Shareholder
The Manufacturers Life Insurance Company of North America


We have audited the accompanying consolidated balance sheets of The
Manufacturers Life Insurance Company of North America (formerly North American
Security Life Insurance Company and hereinafter referred to as the Company) as
of December 31, 1998 and 1997, and the related consolidated statements of
income, changes in shareholder's equity, and cash flows for each of the three
years in the period ended December 31, 1998. Our audit also included the
financial statement schedules listed in the Index at Item 14(a). These financial
statements and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.


We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Manufacturers Life Insurance Company of North America at December 31, 1998 and
1997, and the consolidated results of its operations and its cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.







Boston, Massachusetts
February 22, 1999                   Ernst & Young LLP


                                       14
<PAGE>   15




THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

As at December 31
ASSETS  ($ thousands)                                                              1998                   1997
                                                                              -------------           ------------  

<S>                                                                           <C>                     <C>    
INVESTMENTS
Fixed maturity securities  available-for-sale, at fair value (note 3)         $     157,743           $    143,307
(amortized cost:  1998 $152,969; 1997 $140,573)
Short-term investments                                                               34,074                 14,992
Policy loans                                                                          5,175                  3,276
                                                                              -------------           ------------  
TOTAL INVESTMENTS                                                             $     196,992           $    161,575
                                                                              -------------           ------------  

Cash and cash equivalents                                                     $      10,320           $      7,339
Accrued investment income                                                             3,132                  2,641
Deferred acquisition costs (note 4)                                                 449,332                364,983
Receivable from affiliates                                                                -                  4,605
Other assets                                                                          6,360                  9,626
Due from reinsurers                                                                 641,858                553,834
Separate account assets                                                          12,188,420              9,529,160
                                                                              -------------           ------------  
TOTAL ASSETS                                                                  $  13,496,414           $ 10,633,763
                                                                              =============           =============  

LIABILITIES AND SHAREHOLDER'S EQUITY ($ thousands)
LIABILITIES:
Policyholder liabilities and accruals                                         $     102,252           $     92,750
Payable to affiliates                                                                 4,644                      -
Notes payable to affiliates (note 9)                                                241,419                183,955
Deferred income taxes (note 5)                                                       23,777                 16,428
Other liabilities                                                                    25,980                 27,862
Due to reinsurers                                                                   655,892                574,882
Separate account liabilities                                                     12,188,420              9,529,160
                                                                              -------------           ------------  
TOTAL LIABILITIES                                                             $  13,242,384           $ 10,425,037
                                                                              -------------           ------------  

SHAREHOLDER'S EQUITY:
Common stock (note 7)                                                         $       2,600           $      2,600
Additional paid-in capital                                                          179,053                179,053
Retained earnings                                                                    70,293                 25,873
Accumulated other comprehensive income                                                2,084                  1,200
                                                                              -------------           ------------  
TOTAL SHAREHOLDER'S EQUITY                                                    $     254,030           $    208,726
                                                                              -------------           ------------  
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY                                    $  13,496,414           $ 10,633,763
                                                                              =============           =============  
</TABLE>

See accompanying notes.


                                       15

<PAGE>   16


             MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
                       CONSOLIDATED STATEMENTS OF INCOME

                        FOR THE YEARS ENDED DECEMBER 31
                                 ($ thousands)
                                              
<TABLE>
                                                                    1998          1997          1996
                                                                 -----------    ----------    ----------
<S>                                                              <C>            <C>           <C>
REVENUES:
     Fees from separate accounts and policyholder funds          $   166,498    $  126,636    $   95,323
     Advisory fees and other distribution revenues                    94,821        67,678        46,233
     Net investment income (note 3)                                   12,178         7,906         5,452
     Net realized investment gains (note 3)                              719           531           764
                                                                 -----------    ----------    ----------
TOTAL REVENUE                                                    $   274,216    $  202,751    $  147,772
                                                                 -----------    ----------    ----------

BENEFITS AND EXPENSES:
     Policyholder benefits and claims                            $     4,885    $    4,986    $    4,242
     Amortization of deferred acquisition costs (note 4)              53,499        40,649        30,830
     Other insurance expenses (note 10)                              135,624       100,385        71,255
     Financing costs                                                  12,497        14,268        15,821
                                                                 -----------    ----------    ----------
TOTAL BENEFITS AND EXPENSES                                      $   206,505    $  160,288    $  122,148
                                                                 -----------    ----------    ----------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
                                                                 $    67,711    $   42,463    $   25,624
                                                                 -----------    ----------    ----------
INCOME TAX EXPENSE (NOTE 5)                                      $    23,873    $   15,044    $    9,079
                                                                 -----------    ----------    ----------
INCOME FROM CONTINUING OPERATIONS                                $    43,838    $   27,419    $   16,545
                                                                 -----------    ----------    ----------
Discontinued operations (note 15):
     Loss from operations, net of tax                            $         -    $     (141)   $     (810)
     Gain on disposal, net of tax                                $       582    $    5,955    $        -
                                                                 -----------    ----------    ----------
NET INCOME                                                       $    44,420    $   33,233    $   15,735
                                                                 -----------    ----------    ----------
</TABLE>

See accompanying notes.


                                       16

<PAGE>   17


THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY


<TABLE>
<CAPTION>
                                                                                        ACCUMULATED
                                                                            RETAINED       OTHER          TOTAL
                                             COMMON         ADDITIONAL      EARNINGS   COMPREHENSIVE  SHAREHOLDER'S
  ($thousands)                                STOCK      PAID-IN CAPITAL   (DEFICIT)      INCOME         EQUITY
                                             -------     ---------------   ---------     --------       ----------
  
<S>                                           <C>           <C>           <C>            <C>           <C>         
  Balance at January 1, 1996                  $2,600        $113,322       $(23,095)     $  2,430       $   95,257
  Capital contribution                             -          18,000              -             -           18,000
  Comprehensive income (note 2)                    -               -         15,735        (1,921)          13,814
                                             -------        --------       --------      --------       ----------
  BALANCE, DECEMBER 31, 1996                  $2,600        $131,322       $ (7,360)     $    509       $  127,071
  Capital contribution                             -          47,731              -             -           47,731
  Comprehensive income (note 2)                    -               -         33,233           691           33,924
                                             -------        --------       --------      --------       ----------
  BALANCE, DECEMBER 31, 1997                  $2,600        $179,053        $25,873      $  1,200       $  208,726
  Comprehensive income (note 2)                    -               -         44,420           884           45,304
                                             -------        --------       --------      --------       ----------
  BALANCE, DECEMBER 31, 1998                  $2,600        $179,053       $ 70,293      $  2,084       $  254,030
                                             -------        --------       --------      --------       ----------
</TABLE>

See accompanying notes

                                       17
<PAGE>   18


           THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                        FOR THE YEARS ENDED DECEMBER 31
                                 ($ thousands)
<TABLE>
<CAPTION>
                                                                                  1998        1997           1996
                                                                              -----------    --------      ---------
<S>                                                                           <C>            <C>           <C>    
OPERATING ACTIVITIES:
Net income                                                                    $    44,420    $ 33,233      $  15,735
Adjustments  to  reconcile  net  income  to 
 net  cash  used  in  operating activities:
     Write-down of foreclosed real estate                                               -           -            342
     Amortization of bond discount and premium                                        685         401            197
     Benefits to policyholders                                                      4,885       4,986          4,242
     Gain on interest rate swap                                                         -           -         (1,632)
     Provision for deferred income tax                                              6,872      15,767          7,614
     Provision for deferred income tax included in discontinued operations              -           -            331
     Net realized investment gains                                                  (719)       (531)          (764)
     Amortization of deferred acquisition costs                                    53,499      40,649         30,830
     Amortization of deferred  acquisition  costs included in discontinued              -       1,707          2,214
     operations
     Policy acquisition costs deferred                                          (138,527)    (123,965)       (89,535)
     Gain on disposal of discontinued operations                                       -       (9,394)             -
     Changes in assets and liabilities:
         Accrued investment income                                                  (491)        (835)           146
         Other assets                                                               3,266      (1,396)         2,061
         Receivable from affiliates                                                 4,605      (4,605)             -
         Payable to affiliates                                                      4,644      (1,462)        (4,204)
         Other liabilities                                                        (1,882)       6,642         (1,789)
                                                                              -----------    --------      ---------
Net cash used in operating activities                                         $  (18,743)    $(38,803)     $ (34,212)
                                                                              -----------    --------      ---------
INVESTING ACTIVITIES:
Fixed maturity securities sold, matured or repaid                             $    37,694    $ 74,626      $  41,269
Fixed maturity securities purchased                                              (50,056)    (118,765)       (48,300)
Equity securities sold                                                                 -            1         12,738
Equity securities purchased                                                            -         (250)        (6,034)
Foreclosed real estate sold                                                            -        2,268          1,602
Disposal of discontinued operations                                                    -       16,338              -
Net change in short-term investments                                             (19,082)    (10,697)         (3,984)
Policy loans advanced, net                                                        (1,899)     (2,639)           (570)
                                                                              -----------    --------      ---------
Cash used in investing activities                                             $  (33,343)   $(39,118)     $   (3,279)
                                                                              -----------    --------      ---------
FINANCING ACTIVITIES:
Net reinsurance consideration                                                 $   (7,014)    $(5,443)      $  (4,116)
Deposits and interest credited to policyholder funds                              15,551      20,607          20,923
Return of policyholder funds                                                     (10,934)    (15,462)        (24,658)
Increase in notes payable to affiliates                                           57,464      25,754         138,201
Notes payable repaid                                                                   -           -        (109,867)
Capital contribution by Parent                                                         -      47,731          18,000
                                                                              -----------    --------      ---------
Cash provided by financing activities                                         $   55,067    $ 73,187      $   38,483
                                                                              -----------    --------      ---------
CASH AND CASH EQUIVALENTS:
Increase (decrease) during the year                                                2,981      (4,734)            992
Balance, beginning of year                                                         7,339      12,073          11,081
                                                                              -----------    --------      ---------
BALANCE, END OF YEAR                                                          $   10,320    $  7,339      $   12,073
                                                                              -----------    --------      ---------
</TABLE>


See accompanying notes.


                                       18

<PAGE>   19


The Manufacturers Life Insurance Company of North America

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1998
                            (IN THOUSANDS OF DOLLARS)

1.   ORGANIZATION

     The Manufacturers Life Insurance Company of North America (formerly North
     American Security Life Insurance Company and hereinafter referred to as
     "MNA"), is a wholly-owned subsidiary of Manulife-Wood Logan Holding Co.,
     Inc. (formerly NAWL Holding Company, Inc. and hereinafter referred to as
     "MWL"). MWL is 62.5% owned by The Manufacturers Life Insurance Company
     (USA) ("ManUSA"), 22.5% by MRL Holding, LLC, ("MRL") and 15% by minority
     interest shareholders. ManUSA and MRL are indirectly wholly-owned
     subsidiaries of The Manufacturers Life Insurance Company ("Manulife
     Financial"), a federally chartered Canadian mutual life insurance company.

     MNA owns 100% of The Manufacturers Life Insurance Company of New York
     (formerly First North American Life Assurance Company, hereinafter "MNY")
     and is the managing member with a 90% interest in Manufacturers Securities
     Services, LLC ("MSS"). MNY owns a 10% interest in MSS. MNA, MNY and MSS are
     hereinafter referred to collectively as "the Company".

     MNA issues individual and group annuity contracts in forty-eight states,
     excluding New York and New Hampshire. Prior to July 1, 1998, MNA also
     issued individual variable life insurance contracts. MNY issues individual
     and group annuity contracts and individual life insurance contracts in New
     York. Amounts invested in the fixed portion of the contracts are allocated
     to the general accounts of the Company or non-insulated separate accounts
     of the Company. Amounts invested in the variable portion of the contracts
     are allocated to the separate accounts of the Company. Each of these
     separate accounts invests in shares of the various portfolios of the
     Manufacturers Investment Trust (formerly NASL Series Trust and hereinafter
     referred to as "MIT"), a no-load, open-end investment management company
     organized as a Massachusetts business trust, or in open-end investment
     management companies offered and managed by unaffiliated third parties.

     Prior to October 1, 1997, NASL Financial Services Inc. ("NASL Financial"),
     a subsidiary of MNA, acted as investment adviser to MIT and as principal
     underwriter of the variable contracts issued by the Company. Effective
     October 1, 1997, MSS, the successor to NASL Financial, replaced NASL
     Financial as the investment advisor to MIT and as the principal underwriter
     of all variable contracts issued by MNA. MSS also acts as the principal
     underwriter for the variable contracts and is the exclusive distributor for
     all contracts issued by MNY

     On October 31, 1998, MNA transferred a 10% interest in the members' equity
     of MSS to MNY as a contribution of capital valued at $175.

                                       19

<PAGE>   20


2.   SIGNIFICANT ACCOUNTING POLICIES

     A)   BASIS OF PRESENTATION

          The accompanying consolidated financial statements of the Company have
          been prepared in conformity with generally accepted accounting
          principles ("GAAP").

          The preparation of financial statements in conformity with GAAP
          requires management to make estimates and assumptions that affect the
          amounts reported in the financial statements and accompanying notes.
          Actual results could differ from reported results using those
          estimates.

     B)   RECENT ACCOUNTING STANDARDS

     i)   During 1998, the Company adopted Statement of Financial Accounting
          Standards (SFAS) No. 130, "Reporting Comprehensive Income", SFAS No.
          130 establishes standards for reporting and displaying comprehensive
          income and its components in a full set of general-purpose annual
          financial statements. Comprehensive income includes all changes in
          shareholder's equity during a period except those resulting from
          investments by and distributions to shareholders. The adoption of SFAS
          No. 130 resulted in revised and additional disclosures but had no
          effect on the financial position, results of operations, or liquidity
          of the Company.

          Total comprehensive income was as follows:

<TABLE>
<CAPTION>
            FOR THE YEARS ENDED DECEMBER 31
            ($ thousands)                                                         1998         1997         1996
                                                                               --------    ---------     -------- 
            <S>                                                                <C>         <C>           <C>
            NET INCOME                                                         $ 44,420    $  33,233     $ 15,735
            OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
              Unrealized holding gains (losses) arising during the period         1,351        1,036       (1,424)
               Less:
               Reclassification  adjustment  for realized  gains included 
                  in net income                                                     467          345          497
                                                                               --------    ---------     -------- 
            Other comprehensive income (loss)                                       884          691       (1,921)
                                                                               --------    ---------     -------- 
            COMPREHENSIVE INCOME                                               $ 45,304    $  33,924     $ 13,814
                                                                               --------    ---------     -------- 
</TABLE>


          Other comprehensive income (loss) is reported net of taxes of $476,
          $372, and ($1,034) for 1998, 1997, and 1996, respectively.

     ii)  During 1998, the Company adopted SFAS No. 131, "Disclosures about
          Segments of an Enterprise and Related Information". SFAS No. 131
          establishes standards for the disclosure of information about the
          Company's operating segments, including disclosures about products and
          services, geographic areas, and major customers. The adoption of SFAS
          No. 131 did not affect results of operations or financial position,
          nor did it affect the manner in which the Company defines its
          operating segments. The Company reports three business segments:
          Annuities, Savings and Retirement Services, and Life Insurance.

                                       20

<PAGE>   21



2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     The Annuities segment consists of annuity contracts that provide the
     customer with the opportunity to invest in mutual funds managed by
     independent investment managers and the Company or in the general accounts
     of the Company, with investment returns accumulating on a tax-deferred
     basis. The Savings and Retirement Services segment offers 401(k) products
     to customers in the State of New York. The Individual Life Insurance
     segment offers traditional non-participating life insurance to the New York
     market. The Savings and Retirement Services segment was launched in mid -
     1998 and the Individual Life Insurance segment was launched in late 1997.
     Both segments are considered to be in the start-up phase. No significant
     assets or revenues have been generated to date in these two segments.
     Start-up costs, on a pre-tax basis, reported for these two segments totaled
     approximately $534 and $2,399, respectively, in 1998 and $1,551 for the
     Individual Life Insurance segment in 1997.

     In 1997 and 1996, the Company reported two business segments: Annuities and
     Mutual Fund Operations. The Company sold its mutual fund operations in 1997
     as described further in Note 15 of these financial statements.

     C)   INVESTMENTS

          The Company classifies all of its fixed maturity securities as
          available-for-sale and records these securities at fair value.
          Realized gains and losses on sales of securities classified as
          available-for-sale are recognized in net income using the specific
          identification method. Changes in the fair value of securities
          available-for-sale are reflected directly in accumulated other
          comprehensive income after adjustments for deferred taxes and deferred
          acquisition costs. Discounts and premiums on investments are amortized
          using the effective interest method.

          The cost of fixed maturity securities is adjusted for the amortization
          of premiums and accretion of discounts using the interest method. This
          amortization or accretion is included in net investment income.

          For the mortgage-backed bond portion of the fixed maturity securities
          portfolio, the Company recognizes amortization using a constant
          effective yield based on anticipated prepayments and the estimated
          economic life of the securities. When actual prepayments differ
          significantly from anticipated prepayments, the effective yield is
          recalculated to reflect actual payments to date and anticipated future
          payments. The net investment in the security is adjusted to the amount
          that would have existed had the new effective yield been applied since
          the acquisition of the security. That adjustment is included in net
          investment income.

          Policy loans are reported at aggregate unpaid balances which
          approximate fair value.

          Short-term investments, which include investments with maturities of
          less than one year and greater than 90 days at the date of
          acquisition, are reported at amortized cost which approximates fair
          value.

                                       21

<PAGE>   22


2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     D)   CASH EQUIVALENTS

          The Company considers all highly liquid debt instruments purchased
          with an original maturity date of three months or less to be cash
          equivalents. Cash equivalents are stated at cost plus accrued
          interest, which approximates fair value.

     E)   DEFERRED ACQUISITION COSTS (DAC)

          Commissions, net of commission allowances for reinsurance ceded, and
          other expenses which vary with and are primarily related to the
          production of new business are deferred to the extent recoverable and
          included as an asset. Acquisition costs associated with annuity
          contracts and investment pension contracts are being amortized
          generally in proportion to the present value of expected gross profits
          from surrender charges and investment, mortality and expense margins.
          The amortization is adjusted retrospectively when estimates of current
          or future gross profits are revised. DAC associated with traditional
          non-participating individual insurance policies is charged to expense
          over the premium paying period of the related policies. DAC is
          adjusted for the impact on estimated future gross profits assuming the
          unrealized gains or losses on securities had been realized at
          year-end. The impact of any such adjustments is included in net
          unrealized gains (losses) in accumulated other comprehensive income.
          DAC is reviewed annually to determine recoverability from future
          income and, if not recoverable, it is immediately expensed.

     F)   POLICYHOLDER LIABILITIES

          Policyholder liabilities equal the policyholder account value for the
          fixed portions of annuity, variable life and investment pension
          contracts with no substantial mortality or morbidity risk. Account
          values are increased for deposits received and interest credited and
          are reduced by withdrawals. For traditional non-participating life
          insurance policies, policyholder liabilities are computed using the
          net level premium method and are based upon estimates as to future
          mortality, persistency, maintenance expenses and interest rate yields
          that are applicable in the year of issue. The assumptions include a
          provision for the risk of adverse deviation.

     G)   SEPARATE ACCOUNTS

          Separate account assets and liabilities that are reported in the
          accompanying balance sheets represent investments in MIT, which are
          mutual funds that are separately administered for the exclusive
          benefit of the policyholders of the Company and its affiliates, or
          open-end investment management companies offered and managed by
          unaffiliated third parties, which are mutual funds that are separately
          administered for the benefit of the Company's policyholders and other
          contract owners. These assets and liabilities are reported at fair
          value. The policyholders, rather than the Company, bear the investment
          risk. The operations of the separate accounts are not included in the
          accompanying financial statements. Fees charged on separate account
          policyholder funds are included in revenues.


                                       22

<PAGE>   23


2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     H)   REVENUE RECOGNITION

          Fee income from separate accounts, annuity contracts and investment
          pension contracts consists of charges for mortality, expenses and
          surrender and administration charges that have been assessed against
          the policyholder account balances. Premiums on traditional
          non-participating life insurance policies are recognized as revenue
          when due and currently are included in Fees from Separate Accounts and
          Policyholder Liabilities in the statements of income. Investment
          income is recorded as revenue when due.

          MSS and formerly NASL Financial (collectively the Advisor) are
          responsible for managing the corporate and business affairs of MIT and
          act as investment advisor to MIT. As compensation for its investment
          advisory services, the Advisor receives advisory fees based on the
          daily average net assets of the portfolios. The Advisor, as part of
          its advisory services, is responsible for selecting and compensating
          subadvisors to manage the investment and reinvestment of the assets of
          each portfolio, subject to the supervision of the Board of Trustees of
          MIT. The Company's discontinued operations include the compensation of
          NASL Financial for investment advisory fees and subadvisor
          compensation from the North American Funds ("NAF") through October 1,
          1997, the date the Company sold NAF. Subadvisor compensation for MIT
          is included in other insurance expenses.

     I)   POLICYHOLDER BENEFITS AND CLAIMS

          Benefits for annuity contracts and investment pension contracts
          include interest credited to policyholder account balances and benefit
          claims incurred during the period in excess of policyholder account
          balances.

     J)   FINANCING AGREEMENTS

          MNA has entered into various financing agreements with reinsurers and
          an affiliated company. All assets and liabilities related to these
          contracts are reported on a gross basis. Due to the nature of MNA's
          products, these agreements are accounted for under the deposit method
          whereby the net premiums paid to the reinsurers are recorded as
          deposits.

     K)   INCOME TAXES

          Income taxes have been provided using the liability method in
          accordance with Statement of Financial Accounting Standards No. 109,
          "Accounting for Income Taxes." Under this method, deferred tax assets
          and liabilities are determined based on differences between the
          financial reporting and tax bases of assets and liabilities and are
          measured using the enacted tax rates and laws that likely will be in
          effect when the differences are expected to reverse. The measurement
          of deferred tax assets is reduced by a valuation allowance if, based
          upon the available evidence, it is more likely than not that some or
          all of the deferred tax assets will not be realized.

     L)   RECLASSIFICATIONS

          Certain prior year amounts have been reclassified to conform to the
          current year presentation.


                                       23

<PAGE>   24




3.   INVESTMENTS AND INVESTMENT INCOME

     A)   FIXED MATURITY SECURITIES

At December 31, 1998, the amortized cost and fair value of fixed maturity
securities available for sale are summarized as follows:

<TABLE>
<CAPTION>
                                                                        GROSS            GROSS
                                                AMORTIZED COST        UNREALIZED      UNREALIZED          FAIR VALUE
           AS AT DECEMBER 31,                                           GAINS           LOSSES
           ($ thousands)                        1998       1997      1998    1997       1998    1997     1998        1997
                                             ---------   --------   ------- -------    -----   -----   ---------  ---------
           <S>                               <C>         <C>        <C>      <C>        <C>     <C>    <C>        <C>      
           U.S. government                   $  18,266   $ 14,333   $ 1,144  $  566     ($28)   ($13)  $  19,382  $  14,886
           Corporate                           100,705    110,191     3,376   1,905      (35)    (23)    104,046    112,073
           Mortgage-backed                      16,812     10,455       131      74      (68)     (3)     16,875     10,526
           Foreign governments                  16,129      4,535       151     194       (8)      -      16,272      4,729
           States/political subdivisions         1,057      1,059       111      34        -       -       1,168      1,093
                                             ---------   --------   ------- -------    -----   -----   ---------  ---------
           Total fixed maturity securities   $ 152,969   $140,573   $ 4,913 $ 2,773    ($139)   ($39)  $ 157,743  $ 143,307
                                             ---------   --------   ------- -------    -----   -----   ---------  ---------
</TABLE>

          Proceeds from sales of fixed maturity securities during 1998 were
          $18,780 (1997 $53,325; 1996 $15,152).

          The contractual maturities of fixed maturity securities at December
          31, 1998 are shown below. Expected maturities may differ from
          contractual maturities because borrowers may have the right to call or
          prepay obligations with or without prepayment penalties. Corporate
          requirements and investment strategies may result in the sale of
          investments before maturity.

<TABLE>
<CAPTION>
         ($ thousands)                                                     AMORTIZED COST           FAIR VALUE
                                                                          --------------           ----------
         <S>                                                                 <C>                    <C>
         FIXED MATURITY SECURITIES
            One year or less                                                  $ 23,380               $23,454
            Greater than 1; up to 5 years                                       69,250                71,105
            Greater than 5; up to 10 years                                      24,610                25,815
            Due after 10 years                                                  18,917                20,494
            Mortgage-backed securities                                          16,812                16,875
                                                                              --------               -------
         TOTAL FIXED MATURITY SECURITIES                                      $152,969              $157,743
                                                                              --------              --------
</TABLE>

          Investments with a fair value of $6,105 and $6,284 at December 31,
          1998 and 1997, respectively, were on deposit with, or in custody
          accounts on behalf of, state insurance departments to satisfy
          regulatory requirements.



                                       24
<PAGE>   25




3.   INVESTMENTS AND INVESTMENT INCOME (CONTINUED)

     B)   INVESTMENT INCOME AND NET REALIZED INVESTMENT GAINS

         Income by type of investment was as follows:

<TABLE>
<CAPTION>
         FOR THE YEARS ENDED DECEMBER 31
         ($ thousands)                                             1998               1997              1996
                                                                 -------            -------            ------
         <S>                                                    <C>               <C>                <C>   
         Fixed maturity securities                                $9,904            $ 7,250            $5,197
         Equity securities                                             -                  -                35
         Short-term investments                                    2,503              1,126             1,187
         Other invested assets                                        19                  -                 -
         Foreclosed real estate                                        -                  -               433
                                                                 -------            -------            ------
         Gross investment income                                  12,426              8,376             6,852
                                                                 -------            -------            ------
         Investment expenses                                        (248)              (470)           (1,400)
                                                                 -------            -------            ------
         NET INVESTMENT INCOME                                   $12,178            $ 7,906            $5,452
                                                                 =======            =======            ======
</TABLE>

          The gross realized gains and losses on the sales of investments were
          as follows:

<TABLE>
<CAPTION>
         FOR THE YEARS ENDED DECEMBER 31
         ($ thousands)                                             1998               1997               1996
                                                                 -------            -------             ------
         <S>                                                     <C>               <C>                 <C>   
         Fixed maturity securities:
           Gross realized gains                                     $724               $788               $430
           Gross realized losses                                      (5)                (7)                (4)
         Equity securities
           Gross realized gains                                        -                  -                988
           Gross realized losses                                       -               (250)               (15)
         Foreclosed real estate
           Gross realized losses                                       -                  -               (635)
                                                                    ----               ----               ----
         NET REALIZED GAIN                                          $719               $531               $764
                                                                    ====               ====               ====
</TABLE>


4.   DEFERRED ACQUISITION COSTS

     The components of the change in DAC were as follows:

<TABLE>
<CAPTION>
         FOR THE YEARS ENDED DECEMBER 31
           ($ thousands)                                          1998                1997                 1996
                                                              -----------         -----------           ---------
         <S>                                                     <C>               <C>                 <C>   
           Balance at January 1,                              $   364,983         $   290,610           $ 234,715
           Capitalization                                         138,527             123,965              89,535
           Amortization                                           (53,499)            (40,649)            (30,830)
           Amortization    included   in   discontinued                 -              (1,707)             (2,214)
           operations
           Amortization included in gain on disposal                    -              (6,943)                  -
             of discontinued operations
           Effect   of   net   unrealized    gains   on              (679)               (293)               (596)
             securities available for sale
                                                              -----------         -----------           ---------
           BALANCE AT DECEMBER 31                             $   449,332         $   364,983           $ 290,610
                                                              ===========         ===========           =========
</TABLE>


     To date, the DAC balance is primarily attributable to the Annuities
     segment.



5.   INCOME TAXES

     The components of income tax expense from continuing operations were as
     follows:

     FOR THE YEARS ENDED DECEMBER 31
                                       25
<PAGE>   26


<TABLE>
<CAPTION>
        ($ thousands)                                             1998             1997             1996
                                                              ----------         --------         --------
     <S>                                                      <C>                <C>              <C>   
     Current expense (benefit)                                $  17,001           $   (723)        $  1,465
     Deferred expense                                             6,872             15,767            7,614
     TOTAL EXPENSE                                            $  23,873           $ 15,044         $  9,079
                                                              =========           ========         ========
</TABLE>


     Significant components of the Company's net deferred tax liability are as
     follows:

<TABLE>
<CAPTION>
         AS AT DECEMBER 31
         ($ thousands)                                                                  1998               1997
                                                                                      ---------         ----------
        <S>                                                                           <C>               <C>    
         DEFERRED TAX ASSETS:
            Financing arrangements                                                    $   1,289         $    2,699
            Interest on notes payable                                                         -              1,283
            Guaranty fund assessment liabilities                                            315                315
            Real estate                                                                     571                608
            Other                                                                           169                117
                                                                                      ---------         ----------
       Total deferred tax assets                                                          2,344              5,022
                                                                                      ---------         ----------
       DEFERRED TAX LIABILITIES:
            Deferred policy acquisition costs                                           (22,017)           (18,430)
            Unrealized gains on securities available-for-sale                            (1,122)              (646)
            Other                                                                        (2,982)            (2,374)
                                                                                      ---------         ----------
         Total deferred tax liabilities                                                 (26,121)           (21,450)
                                                                                      ---------         ----------
         NET DEFERRED TAX LIABILITY                                                   $ (23,777)        $  (16,428)
                                                                                      =========         ========== 
</TABLE>

     The Company is a member of the MWL affiliated group, filing a consolidated
     federal income tax return. MNA and MNY file separate state income tax
     returns. The method of allocation between the companies is subject to a
     written tax sharing agreement under which the tax liability is allocated to
     each member of the group on a pro rata basis based on the relationship that
     the member's tax liability (computed on a separate return basis) bears to
     the tax liability of the consolidated group. The tax charge to MNA or MNY
     will not be more than either company would have paid on a separate return
     basis. Settlements of taxes are made through an increase or reduction to
     the payable to parent, subsidiaries and affiliates which are settled
     periodically.

     The Company made estimated tax payments of $12,516, $531 and $0 in 1998,
     1997 and 1996, respectively.


                                       26

<PAGE>   27


6.   FINANCING AND REINSURANCE AGREEMENTS

     The financing agreements entered into with reinsurance companies relate
     primarily to the products sold by MNA. Most of MNA's reinsured products are
     considered investment products under generally accepted accounting
     principles and, as such, the reinsurance agreements are considered
     financing arrangements and are accounted for under the deposit method.
     Under this method, net premiums received by the reinsurer are recorded as
     deposits. Financing transactions have been entered into primarily to
     improve cash flow and statutory capital. All financing agreements discussed
     below were in effect for the full year in 1998, 1997 and 1996 unless
     otherwise indicated.

     MNA has entered into an indemnity coinsurance agreement with an
     unaffiliated reinsurer to reinsure 100% of all contractual liabilities
     arising from the fixed portion of both in-force and new variable annuity
     business written by MNA prior to December 31, 1998. Under this agreement,
     the reinsurer receives the fixed portion of all premiums and transfers
     received by MNA. The reinsurer reimburses MNA for all claims and provides
     expense allowances to cover commissions and other costs associated with the
     reinsured business.

     MNA has treaties with two unaffiliated reinsurers to reinsure its Minimum
     Death Benefit Guarantee risk for new business through June 30, 1998. Each
     reinsurer has assumed 50% of the risk. In addition, MNA reinsured 50% of
     its risk related to the waiving of surrender charges at death with one of
     these reinsurers. MNA is paying the reinsurers an asset based premium, the
     level of which varies with both the amount of exposure to this risk and the
     realized experience. Effective July, 1, 1998, the treaties were amended to
     divide the risks between the two unaffiliated reinsurers and an affiliated
     reinsurer for new business based upon specific products.

     MNA has a treaty with an unaffiliated reinsurer to reinsure a 50% quota
     share of the variable portion of MNA's variable life insurance contracts.
     In addition, the reinsurer assumes 100% of this product's net amount at
     risk in excess of MNA's retention limit of $100 on a YRT basis.

     MNA cedes 95% of the variable portion of certain annuity contracts written
     prior to December 31, 1996 to an unaffiliated reinsurer under a modified
     coinsurance agreement. At the inception of the contract, MNA received
     ceding commissions which were recorded as surplus relief. The outstanding
     reinsurance payable related to this agreement was $3,053 and $7,156 at
     December 31, 1998 and 1997, respectively.


                                       27

<PAGE>   28


6.   FINANCING AND REINSURANCE AGREEMENTS (CONTINUED)
         
     MNA has modified coinsurance agreements with two unaffiliated life
     insurance companies to reinsure a quota share of all elements of risk under
     the variable portion of certain policy forms for business written by
     brokers of their affiliated broker dealers. The quota share reinsured
     varies depending on policy form and the issue date of the business. The
     second agreement was established in 1997.

     During 1998, MNY entered into reinsurance agreements with various
     reinsurers to reinsure face amounts in excess of $100 for its traditional
     non-participating insurance product. To date, there have been no
     reinsurance recoveries under these agreements.

     In the event of insolvency of a reinsurer, the Company remains primarily
     liable to its policyholders. Failure of reinsurers to honor their
     obligations could result in losses to the Company and, accordingly, the
     Company periodically monitors the financial condition of its reinsurers.

     The Company has not entered into any reinsurance agreements in which the
     reinsurer may unilaterally cancel any reinsurance for reasons other than
     nonpayment of premiums or other similar credits or a significant change in
     the ownership of the Company. The Company does not have any reinsurance
     agreements in effect under which the amount of losses paid or accrued
     through December 31, 1998 would result in a payment to the reinsurer of
     amounts which, in the aggregate and allowing for offset of mutual credits
     from other reinsurance agreements with the same reinsurer, exceed the total
     direct premiums collected under the reinsured policies.

7.   SHAREHOLDER'S EQUITY

     The Company has one class of capital stock:
<TABLE>
           AS AT DECEMBER 31:
           ($ thousands)                                              1998             1997
                                                                     -------         -------
          <S>                                                       <C>              <C>
           AUTHORIZED:
               3,000 Common shares, Par value $1,000 
           ISSUED AND OUTSTANDING:
               2,600 Common shares                                   $ 2,600         $ 2,600
</TABLE>

     Generally, the net assets of MNA and MNY available for the Parent as
     dividends are limited to and cannot be made except from earned statutory
     basis profits. The maximum amount of dividends that may be paid by life
     insurance companies without prior approval of the Insurance Commissioners
     of the States of Delaware and New York is subject to restrictions relating
     to statutory surplus and net gain from operations on a statutory basis.

                                       28


<PAGE>   29

7.   SHAREHOLDER'S EQUITY (CONTINUED)

     Net income (loss) and capital and surplus, as determined in accordance with
     statutory accounting principles for MNA and MNY were as follows:

<TABLE>
<CAPTION>
         FOR THE YEARS ENDED DECEMBER 31
         ($ thousands)                                     1998              1997               1996
                                                         -------           --------            ------
        <S>                                             <C>               <C>                 <C>
         MNA:
            Net income                                   $28,067           $ 22,259            $3,067
            Net capital and surplus                      157,940            139,171            69,554
         MNY:
            Net income (loss)                             (5,678)            (1,562)              231
            Net capital and surplus                       62,881             68,336            22,265
                                                         -------           --------            ------
</TABLE>

     State regulatory authorities prescribe statutory accounting practices that
     differ in certain respects from generally accepted accounting principles
     followed by stock life insurance companies. The significant differences
     relate to investments, deferred acquisition costs, deferred income taxes,
     non-admitted asset balances and reserve calculation assumptions.

     MNA's broker dealer subsidiaries, MSS and formerly NASL Financial (through
     October 1, 1997), are subject to the Securities and Exchange Commission's
     (SEC) "Net Capital Rule" as defined under rule 15c3-1. At December 31, 1998
     and 1997, the net capital of each of the broker dealers exceeded the SEC's
     minimum capital requirements.

8.   RELATED-PARTY TRANSACTIONS

     The Company utilized various services provided by Manulife Financial in
     1998, 1997 and 1996, such as legal, personnel, investment accounting and
     other corporate services. The charges for these services were approximately
     $13,317, $8,229 and $6,053 in 1998, 1997 and 1996, respectively. At
     December 31, 1998 and 1997, the Company had a net liability to MLI for
     these services and interest accrued on notes payable of $180 and $2,079,
     respectively. At December 31, 1998 and 1997, the payable is offset by a
     receivable from MIT and MLI for expenses paid on their behalf of $792 and
     $8,251, respectively. In addition, the Company has an intercompany payable
     to MWL relating to federal income taxes of $5,256 and $1,567 reflected in
     the intercompany payable at December 31, 1998 and 1997, respectively.

     The financial statements have been prepared from the records maintained by
     the Company and may not necessarily be indicative of the financial
     conditions or results of operations that would have occurred if the Company
     had been operated as an unaffiliated corporation (see also Notes 1, 5, 9,
     11, and 13 for additional related-party transactions).

                                       29

<PAGE>   30



9.   NOTES PAYABLE TO AFFILIATES AND LINES OF CREDIT

     MNA has promissory notes from ManUSA for $221,000 including an additional
     borrowing of $57,500 during 1998. Interest on the loan is calculated at a
     fluctuating rate equal to LIBOR plus 32.5 basis points and is payable in
     quarterly installments. Principal and accrued interest are payable within
     45 days of demand. Accrued interest payable at December 31, 1998 and 1997
     is $419 and $455, respectively.

     MNA has a surplus note of $20,000 with interest at 8% due to ManUSA. The
     note and accrued interest are subordinated to payments due to policyholders
     and other claimants. Principal and interest payments and interest accruals
     can be made only upon prior approval of the Insurance Department of the
     State of Delaware. Interest accrued at December 31, 1998 and 1997 was $0
     and $3,191, respectively.

     MNA and MNY have unsecured lines of credit with State Street Bank and Trust
     totaling $15 million, bearing interest at the bank's money market rate plus
     50 basis points. There were no outstanding advancements under the lines of
     credit at December 31, 1998 and 1997.

     Interest expense and interest paid in 1998 were $13,634 and $16,861,
     respectively (1997 $11,073 and $9,354; 1996 $8,775 and $11,727).

10.  OTHER INSURANCE EXPENSES

     Other insurance expenses were as follows:

<TABLE>
<CAPTION>
         FOR THE YEARS ENDED DECEMBER 31
         ($ thousands)                                             1998                1997                1996
                                                                 --------            --------             -------

         <S>                                                    <C>                 <C>                 <C>    
         Selling and administrative expenses                     $ 49,732            $ 42,581             $29,207
         Subadvisory fees                                          38,701              26,364              15,883
         General operating expenses                                47,191              31,440              26,165
                                                                 --------            --------             -------
         TOTAL
                                                                 $135,624            $100,385             $71,255
                                                                 ========            ========             =======
</TABLE>

11.  EMPLOYEE BENEFITS

     A)   EMPLOYEE RETIREMENT PLAN

          Prior to July 1, 1998, MNA and MNY participated in a non-contributory
          defined benefit pension plan (the "Nalaco Plan") sponsored by Manulife
          Financial, covering its employees. A similar plan (the "Manulife
          Plan") also existed for ManUSA. Both plans provided pension benefits
          based on length of service and final average earnings. Vested benefits
          are fully funded; current pension costs are funded as they accrue.

                                       30
<PAGE>   31


11.  EMPLOYEE BENEFITS (CONTINUED)

     Effective July 1, 1998, the Nalaco Plan was merged into the Manulife Plan
     as approved by the Board of Directors of Manulife Financial. The merged
     plan was then restated as a cash balance pension plan entitled, "The
     Manulife Financial U.S. Cash Balance Pension Plan" ("Cash Balance Plan").
     Participants in the two prior plans ceased accruing benefits under the old
     plan effective June 30, 1998, and became participants in the Cash Balance
     Plan on July 1, 1998. Also effective July 1, ManUSA became the sponsor of
     the Cash Balance Plan. Each participant who was a participant in one of the
     prior plans received an opening account balance equal to the present value
     of their June 30, 1998 accrued benefit under the prior plan, using Pension
     Benefit Guaranty Corporation (PBCG) rates. Future contribution credits
     under the Cash Balance Plan vary by service, and interest credits are a
     function of interest rate levels. Pension benefits are provided to those
     participants after three years of vesting service, and the normal
     retirement benefit is actuarially equivalent to the cash balance account at
     normal retirement date. The normal form of payment under the Cash Balance
     Plan is a life annuity with various optional forms available.

     Actuarial valuation of accumulated plan benefits are based on projected
     salaries and best estimates of investment yields on plan assets, mortality
     of participants, employee termination and ages at retirement. Pension costs
     relating to current service and amortization of experience gains and losses
     are amortized to income over the estimated average remaining service lives
     of the participants. No pension expense was recognized by the sponsor in
     1998, 1997, or 1996 because the plan was subject to the full funding
     limitation under the Internal Revenue Code.

     At December 31, 1998, the projected benefit obligation based on an assumed
     interest rate of 6.5% was $51,757. The fair value of plan assets invested
     in ManUSA's general fund deposit administration insurance contracts and in
     an investment portfolio of equities and fixed income securities managed by
     an affiliate were $52,541 and $32,145, respectively.

     Prior to July 1, 1998, MNA also participated in an unfunded Supplemental
     Executive Retirement Plan (Manulife SERP) sponsored by Manulife Financial
     for executives. This was a non qualified plan that provides defined pension
     benefits in excess of limits imposed by the law to those retiring after age
     50 with 10 or more years of vesting service. The SERP covers selected
     executives of MNA. Pension benefits are provided to those participants
     after 5 years of vesting service, and the pension benefit is a final
     average benefit based on the executive's highest 5-year average earnings.
     Compensation is not limited, and benefits are not restricted by the
     Internal Revenue Code Section 415.


                                       31

<PAGE>   32


11.      EMPLOYEE BENEFITS (CONTINUED)

         Effective  July 1, 1998,  the  Manulife  SERP was  restated to become a
         supplemental  cash balance plan,  and each  participant in the SERP who
         became a participant  in the restated plan was provided with an opening
         account  balance  equal to the  present  value of their  June 30,  1998
         accrued benefit under the SERP, using PBGC rates.  Future  contribution
         credits  vary by  service,  and  interest  credits  are a  function  of
         interest  rate levels.  These annual  contribution  credits are made in
         respect  of the  participant's  compensation  that is in  excess of the
         limit in Internal Revenue Code Section 401(a)(17).  In addition,  a one
         time  contribution may be made for a participant if it is determined at
         the time of their  termination  of  employment  that the  participant's
         pension  benefit  under the Cash  Balance  Plan is limited by  Internal
         Revenue  Code  Section  415.  Together,  these  contributions  serve to
         restore  to the  participant  the  benefit  that they  would  have been
         entitled to under the Cash Balance Plan's  benefit  formula but for the
         limitation  in  Internal  Revenue  Code  Sections  401(a)(17)  and 415.
         Benefits are  provided to those  participants  after three  years.  The
         default  form  of  payment  under  the  plan  is a lump  sum,  although
         participants  may elect to  receive  payment  in the form of an annuity
         provided that such  election is made within the time period  prescribed
         in the plan.  If an  annuity  form of payment  is  elected,  the amount
         payable  is  equal to the  actuarial  equivalent  of the  participant's
         balance under the supplemental Cash Balance Plan, using the factors and
         assumptions for determining immediate annuity amounts applicable to the
         participant under the qualified Cash Balance Plan.

      b) 401(K) PLAN

         Prior  to  July  1,  1998,   the  Company  also   sponsored  a  defined
         contribution  plan,  the North  American  Security Life 401(k)  Savings
         Plan,  which was subject to the  provisions of the Employee  Retirement
         Income  Security Act of 1974  ("ERISA").  A similar plan,  the Manulife
         Financial  401K Savings  Plan,  also  existed for  employees of ManUSA.
         These  two  plans  were  merged  on  July  1,  1998  into  one  defined
         contribution  plan  sponsored  by ManUSA,  as  approved by the Board of
         Directors on March 26, 1998. The Company  contributed  $285,  $353, and
         $307 in 1998, 1997, and 1996, respectively.

      c) POSTRETIREMENT BENEFIT PLAN

         In addition to the  retirement  plan, the Company  participates  in the
         postretirement  benefit plan of ManUSA which provides  retiree  medical
         and life  insurance  benefits to those who have attained age 55 with 10
         or more  years of  service.  The plan  provides  medical  coverage  for
         retirees  and spouses  under age 65.  When the  retirees or the covered
         dependents  reach age 65, Medicare  provides  primary  coverage and the
         plan provides secondary coverage. There is no contribution for post-age
         65 coverage,  and no  contributions  are required for retirees for life
         insurance coverage. The plan is unfunded.

         The  postretirement  benefit  cost to the Company,  which  includes the
         expected cost of postretirement  benefits for newly eligible  employees
         and for vested  employees,  interest cost, and gains and losses arising
         from differences  between actuarial  assumptions and actual experience,
         is accounted for by the plan sponsor, ManUSA.

                                       32

<PAGE>   33


12.      LEASES

         The Company leases its office space and various office  equipment under
         operating lease agreements. For the years ended December 31, 1998, 1997
         and 1996,  the  Company  incurred  rent  expense of $1,617,  $1,316 and
         $1,224, respectively.  The Company's current office space lease expires
         in 2002.  The  lease  for the  offices  of MNY  expires  in 1999 and is
         subject to a renewal  option at market rates  prevailing at the time of
         renewal.

         The minimum lease payments associated with the office space and various
         office equipment under operating lease agreements are as follows:

<TABLE>
<CAPTION>
Year ended:                                      Minimum Lease Payments
-------------------------------------------------
<S>                                              <C>   
  1999                                           $1,261
  2000                                            1,197
  2001                                            1,197
  2002                                              198
-------------------------------------------------

Total                                            $3,853
-------------------------------------------------
</TABLE>

13.      GUARANTEE AGREEMENT

         Pursuant to a guarantee agreement,  Manulife Financial  unconditionally
         guarantees that it will, on demand, make funds available to the Company
         for the  timely  payment  of  contractual  claims  made under the fixed
         portion of the variable annuity  contracts issued by MNA. The guarantee
         covers the  outstanding  fixed portion of variable  annuity  contracts,
         including those issued prior to the date of the guarantee agreement.

14.      INTEREST RATE SWAP

         MNA entered into a  variable-for-fixed  interest rate swap in 1995 with
         Canadian  Imperial  Bank of Commerce and Deutsche AG for the purpose of
         minimizing  exposure to  fluctuations in interest rates on a portion of
         the variable-rate outstanding debt held by MNA. This interest rate swap
         was prematurely terminated in 1996 concurrent with the restructuring of
         MNA's revolving line of credit,  resulting in a gain of $1,632 recorded
         as an offset to interest expense.

                                       33

<PAGE>   34


15.      DISCONTINUED OPERATIONS

         On May 6, 1997,  MNA signed a letter of intent to sell its mutual  fund
         operations.  This  disposal  has  been  accounted  for as  discontinued
         operations in accordance with Accounting  Principles  Board Opinion No.
         30, which, among other provisions,  required the plan of disposal to be
         carried out within one year.  On October 1, 1997,  the Company sold its
         advisory  operations for NAF and the pre-existing  deferred  commission
         assets related to the mutual fund operations.  In 1998,  related to the
         sale,  the  Company  received a  contingent  payment of $1,000,  before
         income taxes, less an adjustment of $105 to the final settlement of the
         purchase price.  For 1998 and 1997, the Company realized a gain of $895
         and $9,161,  before applicable taxes of $313 and $3,206,  respectively.
         Included in the gain for 1997 is a provision of $10, before  applicable
         taxes  of $3,  for the  loss  from  continuing  operations  during  the
         phase-out  period.  Expenses of $223 in 1997 were  incurred on the sale
         and netted against the realized gain.

         The operating results related to discontinued operations are summarized
         as follows:

<TABLE>
<CAPTION>
         FOR THE YEARS ENDED DECEMBER 31
         ($ thousands)                                            1997                 1996
         -------------------------------------------------------------------------------------

         Advisory fees, commissions
<S>                                                        <C>                     <C>     
            and distribution revenues                      $     4,605             $ 12,445
         -------------------------------------------------------------------------------------
         Loss from operations before provision for
            income (tax) benefit                                $ (217)            $ (1,246)
         Provision for income (tax) benefit:
              Current                                               76                  766
              Deferred                                                                 (330)
         -------------------------------------------------------------------------------------
                                                                    76                  436
         -------------------------------------------------------------------------------------

         Loss from operations, net of tax                  $      (141)            $   (810)
         -------------------------------------------------------------------------------------
</TABLE>

                                       34

<PAGE>   35


16.      FAIR VALUE OF FINANCIAL INSTRUMENTS

         The  carrying  values  and  estimated  fair  values  of  the  Company's
financial instruments are as follows:

<TABLE>
<CAPTION>
                                                           1998                           1997
      ---------------------------------------- ----------------------------- -------------------------------
      ($ thousands)                            CARRYING VALUE   FAIR VALUE    CARRYING VALUE    FAIR VALUE
      ---------------------------------------- ---------------- ------------ ----------------- -------------
      ASSETS:
<S>                                                 <C>            <C>             <C>            <C>    
          Fixed maturity securities                 157,743        157,743         143,307        143,307
          Short-term investments                     34,074         34,074          14,992         14,992
          Policy loans                                5,175          5,175           3,276          3,276
          Cash and cash equivalents                  10,320         10,320           7,339          7,339
          Due from reinsurers                       641,858        641,858         553,834        553,834
      LIABILITIES:
          Policyholder liabilities and              102,252         98,312          92,750         87,375
      accruals
          Due to reinsurers                         655,892        655,892         574,882        574,882
          Notes payable to affiliates               241,419        241,419         183,955        183,955
      ---------------------------------------- ---------------- ------------ ----------------- -------------
</TABLE>

         The  following  methods  and  assumptions  were used by the  Company in
         estimating the fair value disclosures for financial instruments:

         Fixed Maturity Securities:  Fair values for fixed maturity securities 
         are obtained from an independent pricing service.

         Short-Term Investments and Cash and Cash Equivalents:  Carrying values 
         approximate fair values.

         Policy Loans:  Carrying values approximate fair values.

         Due from Reinsurers:  Fair value is equal to deposits made under the 
         contract and approximates the carrying value.

         Policyholder  Liabilities  and  Accruals:  Fair values of the Company's
         liabilities  under contracts not involving  significant  mortality risk
         (deferred  annuities) are estimated to be the cash surrender  value, or
         the cost the Company would incur to extinguish the liability.

         Due to  Reinsurers:  Amounts on deposit from and payable to  reinsurers
         reflects the net  reinsured  cash flow related to financing  agreements
         which  is  primarily  a  current   liability.   As  such,   fair  value
         approximates carrying value.

         Notes Payable to  Affiliates:  Fair value is considered to  approximate
         carrying  value  as the  majority  of  notes  payable  are at  variable
         interest rates that fluctuate with market interest rate levels.

                                       35

<PAGE>   36


17.      CONTINGENCIES

         The  Company is subject to  various  lawsuits  that have  arisen in the
         course of its business. Contingent liabilities arising from litigation,
         income taxes and other matters are not considered  material in relation
         to the financial position of the Company.

18.      UNCERTAINTY DUE TO THE YEAR 2000 RISK (UNAUDITED)

         The Year 2000 risk is the result of  computer  programs  being  written
         using two digits,  rather than four, to define the applicable year. Any
         of the Company's  computer programs that have  date-sensitive  software
         may  recognize  a date using "00" as the year 1900 rather than the year
         2000. The effects of the Year 2000 risk may be experienced  before, on,
         or after January 1, 2000 and, if not addressed, could result in systems
         failures or  miscalculations  causing  disruptions  of normal  business
         operations.  It is not possible to be certain that the  Company's  Year
         2000  program  will fully  resolve  all  aspects of the Year 2000 risk,
         including those related to third parties.

         A full  discussion  of the  Company's  Year 2000  program and Year 2000
         review is contained in the Management's Discussion and Analysis Section
         of the Company's Annual Report on Form
         10-K.

                                       36

<PAGE>   37



Item 9 - Changes in and Disagreements with Accountants on Accounting and 
         Financial Disclosure

Nothing to report.

                                       37

<PAGE>   38


PART III

Item 10 - Directors and Executive Officers of the Registrant (also referred to
          as the "Company")

Officers and Directors of the Company

The  directors  and  executive  officers  of the  Company,  together  with their
principal occupations during the past five years, are as follows:


<TABLE>
<CAPTION>
Name                         Position with the Company                 Principal Occupation

<S>                          <C>                                       <C>
John D. DesPrez III          Director*                                 Executive   Vice   President,    U.S.   Operations,
Age: 42                                                                Manulife Financial,  December 1998 to present,Senior
                                                                       Vice President, U.S. Annuities,  Manulife Financial,
                                                                       September  1996  to  December  1998;  Director  and
                                                                       President  of  the  Company,   September   1996  to
                                                                       present;  Vice President,  Mutual Funds,  Manulife 
                                                                       Financial, January,  1995 to September 1996, President
                                                                       and Chief  Executive  Officer,  North  American  Funds,
                                                                       March 1993 to September  1996;  Vice  President and
                                                                       General  Counsel of the  Company,  January  1991 to
                                                                       June 1994.

Theodore F. Kilkuskie, Jr.   President                                 President, the Company and Senior Vice President, U.S.
Age: 43                                                                Insurance, Manulife Financial, February 1998 to
                                                                       December 1998, Vice President U.S. Insurance,  June
                                                                       1995 to February 1998, Executive Vice President Mutual
                                                                       Fund Sales & Marketing, Metropoitan Life Insurance
                                                                       Company, March 1994 to
                                                                       June 1995.

Peter S. Hutchison           Director*                                 Senior   Vice   President,    Corporate   Taxation,
Age: 49                                                                Manulife Financial,  January 1996 to present; Director 
                                                                       of the Company January 1991 to present; Executive Vice
                                                                       President and Chief Financial Officer, North American
                                                                       Life, September 1994 to December 31, 1995; Senior
                                                                       Vice President and Chief Actuary, North American Life
                                                                       Assurance Company, April 1992 to August 1994.

John D. Richardson           Director* and Chairman of the Board       Senior  Executive  President  and General  Manager,
Age: 61                                                                U.S.  Operations,  Manulife Financial,  January 1995
                                                                       to present; Director of Manulife Financial, January
                                                                       1999 to present; Director and Chairman of the Board
                                                                       of the Company, March 1997 to present; Senior Vice
                                                                       President and General Manager, Canadian Operations,
                                                                       Manulife Financial, June 1992 to January
                                                                       1995.

Robert Boyda                 Vice President, Investment                Vice President,  Investment  Management Services of
Age: 42                      Management Services                       the  Company,  January  1997 to present;  Assistant
                                                                       Vice      President,       Management      Service,
                                                                       Manulife Financial,  August  1994 to  January  1997;
                                                                       General  Manager,  Retail  Banking,  CIBC,  January
                                                                       1987 to April 1994.

James D. Gallagher           Vice President, Secretary and             Vice  President,  Legal  Services U.S.  Operations,
Age: 44                      General Counsel                           Manulife Financial,  January  1996 to present;  Vice

                                                                       President, Secretary and General Counsel of the
                                                                       Company, June 1994 to present; Vice
 </TABLE>

                                       38


<PAGE>   39

<TABLE>
<CAPTION>

<S>                          <C>                                       <C>

                                                                       President and Associate General Counsel, The
                                                                       Prudential Insurance Company of America, 1990-1994.

Hugh C. McHaffie             Vice   President,   U.S Annuities         Vice President, Product and Development, Annuities,
Age: 40                      Product and Development                   Manulife Financial,   January  1996  to present; Vice
                                                                       President U.S. Annuities Product and Development of
                                                                       the Company August 1994 to present; Product
                                                                       Development Executive of the Company, August 1990 to
                                                                       August 1994.

David W. Libbey              Vice   President,   Treasurer,   and      Vice   President  and  Chief   Financial   Officer,
Age: 51                      Chief Financial Officer                   Annuities,  Manulife Financial,   December  1997  to
                                                                       present; Vice President, Treasurer and Chief
                                                                       Financial Officer of the Company December 1997 to
                                                                       present; Vice President, Finance of the Company
                                                                       June 1997 to December 1997; Vice President & Actuary,
                                                                       Paul Revere Insurance Group June 1970 to March 1997.

Janet Sweeney                Vice President, Corporate Services        Vice President,  Human Resources,  U.S. Operations,
Age: 48                                                                Manulife Financial,  January  1996 to present;  Vice
                                                                       President,   Corporate  Services  of  the  Company,
                                                                       January  1995  to  present;  Executive,   Corporate
                                                                       Services  of the  Company,  July  1989 to  December
                                                                       1994.

John G. Vrysen               Vice President and Chief Actuary          Vice President and Chief  Financial  Officer,  U.S.
Age: 43                                                                Operations,  Manulife Financial,   January  1996  to
                                                                       present;  Vice  President  and Chief Actuary of the
                                                                       Company, January 1986 to present.

William Hayward              Vice President, Administration            Vice President,  Administration, the Company, June,
Age: 43                                                                1998 to present;  Vice  President,  Administration,
                                                                       Allmerica Financial Services, August, 1994 to
                                                                       May, 1998; Executive, Administration,
                                                                       the Company (formerly, North American Security Life
                                                                       Insurance Company) May, 1991 to August
                                                                       1994.

Cindy Granata                Vice President, Information Systems       Vice President,  Information  Systems, the Company,
Age: 47                                                                1998 to  present;  Director,  Information  Systems,
                                                                       Allmerica  Financial,   1996-1998;  Assistant  Vice
                                                                       President,   Strategic   Planning,    Massachusetts
                                                                       Casualty Insurance Company,  1991-1996.
</TABLE>

Item 11 - Executive Compensation of the Registrant (also referred to as \
          "Manulife North America")

Manulife North America's executive officers may also serve as officers of one or
more of Manulife's  affiliates.  Allocations have been made as to such officers'
time  devoted to duties as executive  officers of Manulife  North  America.  The
following table shows the allocated compensation paid or awarded to or earned by
Manulife  North  America's  Chief  Executive  Officer for  services  provided to
Manulife  North America and any other  executive  officer who had allocated cash
compensation in excess of $100,000.


                           Summary Compensation Table

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
<S>                   <C>     <C>        <C>          <C>           <C>           <C>             <C>        <C>
Name and Principal    Year    Salary      Bonus(1)     Other         Restricted    Securities      LTIP       All Other
Position                                               Annual        Stock         Under-lying     Payout     Compensa-
                                                       Compensa-     Award(s)      Options/SARs               tion(3)
                                                       tion(2)
-------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       39


<PAGE>   40

<TABLE>
<CAPTION>


<S>                    <C>       <C>          <C>            <C>     <C>           <C>             <C>              <C>   
John D.  DesPrez III,  1998      $118,250     $70,735        $4,274  N/A           N/A             N/A              $3,557
President

David   W.    Libbey,  1998      $111,998     $41,000       $10,679  N/A           N/A             N/A             $1,858
Vice        President
Treasurer

John  D.  Richardson,  1998       $74,167     $57,333        $9,000  N/A           N/A             $11,698           $104
Chairman
</TABLE>



1 Bonus for 1997 performance paid in 1998.

2 Does not include group health  insurance  since the plans are the same for all
salaried employees.

3 Other Compensation  includes the value of term life insurance premiums paid by
Manulife for the benefit of the executive officer and for US domiciled  officers
it includes Company paid 401(k) plan contributions.  In prior years, this column
included company paid pension plan  contributions for US domiciled  officers but
this year there were no company paid contributions since the plan is overfunded.


The Management  Resources and  Compensation  Committee (the  "Committee") of the
Board of  Directors is comprised  of six  external  directors.  The  Committee's
principal mandate is to approve the appointment,  succession and remuneration of
Manulife's  Executive Vice Presidents and Senior Vice Presidents,  including the
Named  Executive  Officers.  For the  President and Chief  Executive  Officer of
Manulife,  the  Committee  makes  compensation  recommendations  that  are  then
approved by the entire  Board.  The  Committee  also  approves the  compensation
programs  for all other  officers  as well as the  annual  review of the  Annual
Incentive  Plan awards and Long-Term  Incentive  Plan grants for all officers of
Manulife and it's subsidiaries.

In addition to the annual reviews,  the Committee  approves any major changes to
all  policies  which are  designed to  attract,  retain,  develop  and  motivate
employees and all pension plans of Manulife and it's subsidiaries.

Manulife's executive  compensation policies are designed to recognize and reward
individual  performance as well as provide a total compensation package which is
competitive with the median of Manulife's  comparator group,  which is comprised
of  Schedule  I banks and major  life  insurance  companies.  Further,  Manulife
ensures  that its  compensation  levels are  competitive  within  local  markets
outside of Canada.

Manulife's executive  compensation program is comprised of three key components;
base salary,  annual incentives and long-term  incentives.  Officers of Manulife
North America participate in the following Manulife compensation programs.

                                       40

<PAGE>   41


SALARY

The Committee  approves the salary ranges and salary  increase levels for all of
Manulife's  Executive  and Senior  Vice  Presidents  individually,  and all Vice
Presidents  as a group,  based on  competitive  industry data for all markets in
which Manulife  operates.  Salary  increases for  Manulife's  officers have been
consistent with the salary increase programs approved for all employees.

In establishing  Manulife's  competitive  position and developing  annual salary
increase  programs,   Manulife  uses  several  annual  surveys  as  prepared  by
independent  compensation  consulting firms with reference to publicly disclosed
information.

ANNUAL INCENTIVE PLAN

Manulife's Annual Incentive Plan ("AIP") provides executive officers of Manulife
with the  opportunity  to earn  incentive  bonuses based on the  achievement  of
pre-established  corporate and divisional earnings objectives and divisional and
individual performance objectives.

The Committee  and  management  periodically  review the design of the incentive
plan to ensure that it: (i) is competitive  with Manulife's  comparator  groups;
(ii) supports,  and aligns,  with  Manulife's  strategic  objectives;  and (iii)
recognizes and rewards individual contributions and value creation.

In conducting these reviews, Manulife obtains advice from independent,  external
consultants.

The AIP  uses  earnings  and  performance  measures  to  determine  awards  with
predetermined  thresholds  for  each  component  as  approved  by the  Committee
annually.  Incentive  awards  are  established  for  each  participant  based on
organizational  level.  Incentive  award  levels  range  from 12% to 60% of base
salary assuming achievement of targeted performance  objectives.  When corporate
and divisional performance objectives are significantly  exceeded, a participant
can  receive  incentive  awards  ranging  from  30% to 150% of base  salary.  If
corporate and divisional  performance objectives are below targeted performance,
the incentive awards are adjusted  downward  according to plan  guidelines.  The
Named Executive  Officers  participate in the AIP on the same basis as all other
officers.

LONG TERM INCENTIVE PLAN

<TABLE>
<CAPTION>
                                                              Estimated Future Payouts Under
                                                         Non-Securities-Price-Based Plans (US $)3
         Name             Securities     Performance or   Threshold  Target ($ or #)4 Maximum ($
                        Units or Other    Other Period    ($ or #)                       or #)
                         Rights (#)1         Until
                                         Maturation or
                                            Payout2

<S>                         <C>                <C>           <C>         <C>              <C>                 
John D. DesPrez III         5,245         Jan. 1, 2002       N/A         $35,787          N/A


David W. Libbey             4,338         Jan. 1, 2002       N/A         $29,599          N/A


John D. Richardson          7,831         Jan. 1, 2002       N/A          $6,412          N/A
</TABLE>


Notes:
1 Each grant has two components: Cash Appreciation Rights and Retirement 
  Appreciation Rights.

2 The appreciation in the value of Cash  Appreciation  Rights are redeemed 
  four years following the grant date. Retirement Appreciation Rights are only
  redeemed upon retirement or cessation of employment with Manulife.

                                       41

<PAGE>   42



3 Canadian dollars converted to US dollars using a book rate of 1.50.

4 The target is calculated  assuming Cash  Appreciation  Rights are exercised in
the  fourth  year.  At that time 50% of the target is  redeemed  in cash and the
balance  continues to appreciate  until redeemed upon retirement or cessation of
employment.

Manulife's  Board  of  Directors  approved  the  implementation  of a  Long-Term
Incentive  Plan  ("LTIP")  effective  April 1, 1994.  All  employees at the Vice
President level and above are eligible to participate in the LTIP.

The  purpose  of the  LTIP  is to  encourage  executive  officers  to act in the
long-term  interests of Manulife and to provide an opportunity to share in value
creation as measured by changes in Manulife's  statutory surplus. The LTIP is an
appreciation  rights  plan  which  requires  that a  substantial  portion of any
accumulated gain remain invested with Manulife during the  participant's  career
with Manulife

The  Committee  reviews the LTIP on an annual basis having  regard to Manulife's
performance,  targeted growth and competitive  position.  The Committee approves
grants on a  prospective  basis  considering  management's  recommendations  for
participation, size and terms of grant.

Grants of  appreciation  rights are generally made to  participants  in the LTIP
each  year.  The  number of  appreciation  rights  granted  to  participants  is
determined based on the net present value of the potential payout represented by
the appreciation  rights,  assuming that Manulife's  surplus grows at a targeted
rate.  Appreciation  rights  are  granted  such  that  this  net  present  value
represents between 20% and 115% of the participant's salary level on the date of
grant

PERQUISITES

In  addition  to cash  compensation,  all  officers  are  entitled to a standard
benefit package including medical,  dental,  basic and dependent life insurance,
long and  short-term  disability  coverage and defined  contribution  or defined
benefit plan.

US domiciled  officers at the Vice President  levels and above are provided with
an  automobile  and  parking  benefit,  cellular  telephone  and  computer.  The
automobile benefit covers insurance and maintenance.  There are no other benefit
packages which currently enhance overall compensation by more than 10%.

Canadian  domiciled officers at the Vice President levels and above are eligible
to receive the Executive Flexible Spending Account. The objective of the program
is to assist and encourage the executive officers to represent the interests and
high standards of Manulife, both from a business and a personal perspective. The
program's  flexibility  allows use of the allowance  for benefit  choices from a
comprehensive  list of  options,  including:  car,  mortgage  subsidy  and  club
memberships.

US RETIREMENT PLANS

With the  integration  of the Manulife and North  American  Life  operations,  a
review of the  retirement  programs for the  employees in the United  States was
conducted in 1998. As a result of this review,  effective  July 1, 1998, (i) the
two defined benefit pension plans (The Manulife Financial United States Salaried
Employees  Pension Plan and the North  American Life Staff Pension Fund 1948 for
United  States  Members)  were  merged and  converted  to a Cash  Balance  Plan,
entitled "The Manulife  Financial U.S. Cash Balance Plan"; (ii) the Supplemental
Pension  Plan  for  United  States  Salaried  Employees  of  Manufacturers  Life
Insurance Company was converted into a Cash Balance  Supplemental Plan, entitled
"The Manulife Financial U.S. Supplemental Cash Balance Plan"; and, (iii) the two
401(k) plans (The Manulife  Financial 401(k) Savings Plan and the North American
Security Life 401(k)  Savings  Plans) were merged and restated into The Manulife
Financial U.S. 401(k) Savings Plan.

The  executives  of Manulife  North America are eligible to  participate  in the
three  restated  retirement  plans  as  sponsored  by  The  Manufacturer's  Life
Insurance Company (U.S.A.).

                                       42
<PAGE>   43




The Manulife Financial Cash Balance Plan

To implement the conversion to the Cash Balance Plan, participants in the two
former defined benefit plans were provided with opening account balances equal
to the value of their accrued benefit under their respective prior plan
participation as at June 30, 1998, using interest rate assumption equal to the
Pension Benefit Guaranty Corporation (PBGC) rate for 1998.

Under this plan, which is a defined benefit plan, a separate account is
established for each participant. The account receives company contribution
credits based on vesting service and earnings as outlined in the table below.
The account earns semi-annual interest credits based on the yield of one-year
Treasury bills plus half a percentage point, subject to a minimum interest
credit of 5.25%. The yearly maximum amount of eligible pay allowed under the
qualified plan is $160,000 for 1998. Employees are vested after 3 years of
vesting service. Normal retirement age is 65. Pension benefits are provided to
those who terminate after three years of vesting service, and the normal
retirement benefit is actuarially equivalent to the cash balance account at
normal retirement date. Early benefits are actuarially equivalent to the normal
retirement benefits but are subsidized for participants who were age 45 and 5 or
more years of vesting service on July 1, 1998 and who terminate employment after
attaining age 50 and completing 10 years of service. For these grandfathered
participants, the prior early retirement factors under the Manulife Plan apply.
The normal form of payment under the Cash Balance Plan is a life annuity, with
various optional forms available, including a lump sum equal to the cash balance
account.


                          Company Contribution Credits

<TABLE>
<CAPTION>
Years of Vesting Service                             Percentage of Eligible Pay
<S>                                                            <C>
Less than 6                                                       4%
6, but less than 11                                               5%
11, but less than 16                                              7%
16, but less than 21                                              9%
21 or more                                                       11%
</TABLE>

Projected Cash Balance Plan pension benefits at age 65 payable as an annual life
annuity.

<TABLE>
<CAPTION>
                                               Years of Service
    Renumeration ($)       15           20          25          30          35
                           $            $           $           $           $
      <S>               <C>          <C>         <C>         <C>         <C>    
      $150,000          16,960       30,178      49,664      76,018      111,659
       175,000          18,090       32,190      52,975      81,086      119,103
       200,000          18,090       32,190      52,975      81,086      119,103
       225,000          18,090       32,190      52,975      81,086      119,103
       250,000          18,090       32,190      52,975      81,086      119,103
       300,000          18,090       32,190      52,975      81,086      119,103
       400,000          18,090       32,190      52,975      81,086      119,103
       500,000          18,090       32,190      52,975      81,086      119,103
</TABLE>

The Manulife Financial U.S. Supplemental Cash Balance Plan

In addition to their pension plan benefits, executives are eligible for benefits
under The Manulife Financial U.S. Supplemental Cash Balance Plan. This is a
non-contributory, non-qualified plan, the purpose of which is to provide the
executives with the same level of retirement benefits they would have been
entitled to but for the limitations prescribed for qualified plans under the
Internal Revenue Code. Opening account balances were established using the same
method as The Manulife Financial U.S. Cash Balance Plan. During the period of an
executive's active participation in the plan, annual company contributions are
made with respect to the portion of the executives earnings which is in excess
of $160,000 for 1998 as outlined below with interest credited under this plan at
the same rate as provided under the Cash Balance Plan. In addition, a one time
contribution may be made for a participant if it is determined at the time of
their termination of employment, that the participant's pension benefit under
the Cash Balance Plan is limited by Internal Revenue Code Section 415. Together,
these contributions serve to restore to the participant the benefit that they
would have been entitled to under the Cash Balance Plan's benefit formula but
for the limitations, in Internal Revenue Code Sections 401(a) (17) and 415.
Benefits are provided to those who terminate after three years. The default form
of

                                       43

<PAGE>   44


payment under the plan is a lump sum, although participants may elect to receive
payment in the form of an annuity provided that such election is made within the
time period prescribed in the plan.

<TABLE>
<CAPTION>
Complete Years of Cash
Balance Service Credits as of              Percentage of Eligible Pay          Percentage of Eligible Pay
December 31st                                  up to $200,000                      over $200,000
<S>                                                <C>                                <C>
Less than 6                                          4%                                 4%
6, but less than 11                                  5%                                 5%
11, but less than 16                                 7%                                 5%
16, but less than 21                                 9%                                 5%
21 or more                                           11%                                5%
</TABLE>


Projected Supplemental pension benefits at age 65 payable as an annual life 
annuity

<TABLE>
<CAPTION>
                                            Years of Service
    Renumeration ($)       15          20          25          30          35
                           $           $            $           $           $
     <S>                <C>         <C>          <C>         <C>         <C>
      $150,000             0           0            0           0           0
       175,000           1,696       3,018        4,966       7,602      11,166
       200,000           4,523       8,048       13,244      20,271      29,776
       225,000           7,081       12,178      19,501      29,404      42,797
       250,000           9,639       16,309      25,757      38,536      55,818
       300,000          14,756       24,570      38,271      56,801      81,861
       400,000          24,990       41,092      63,298      93,330      133,946
       500,000          35,224       57,615      88,325      129,859     186,031
</TABLE>

Projected Cash Balance and Supplemental pension benefits at age 65 payable as 
an annual annuity.

<TABLE>
<CAPTION>
                                            Years of Service
    Renumeration ($)       15          20          25          30          35
                           $           $            $           $           $
     <S>                <C>         <C>          <C>         <C>         <C>
      $150,000          16,960       30,178      49,664      76,018      111,659
       175,000          19,786       35,208      57,941      88,688      130,269
       200,000          22,613       40,238      66,219      101,357     148,879
       225,000          25,171       44,368      72,476      110,490     161,900
       250,000          27,729       48,499      78,732      119,622     174,921
       300,000          32,846       56,760      91,246      137,887     200,964
       400,000          43,080       73,282      116,273     174,416     253,049
       500,000          53,314       89,805      141,300     210,945     305,134
</TABLE>

The Manulife Financial U.S. 401(k) Savings Plan

In addition to the above plans a 401(k) Savings Plan is also offered. The plan
allows employees of Manulife North America to contribute on a pre-tax basis 1%
to 15% of their earnings up to the yearly limit of $160,000 for 1998. The yearly
maximum an employee can contribute is $10,000 for 1998. The company matches 50%
of the first 6% of contributions. Employees become 100% vested in the employer
matching contributions as outlined in the vesting schedule below. Additionally
they become 100% vested if they retire on or after age 65, become disabled or
die.

                                       44

<PAGE>   45


<TABLE>
<CAPTION>

         Years of Vesting Service                    Vested Percentage
        <S>                                                  <C>
         Less than 2 years                                      0%
         2 years but less than 3                               50%
         3 years and thereafter                               100%
</TABLE>


Messrs DesPrez and Libbey have 8.0 and 1.6 years of credited service,
respectively as at December 31, 1998.

CANADIAN RETIREMENT PLANS

Executive officers domiciled in Canada, and certain executive officers formerly
domiciled in Canada, are eligible to participate in Manulife's Canadian Staff
Pension Plan and to receive supplemental pension benefits under Manulife's
supplemental retirement income program. Under these plans, income is payable for
the life of the executive officer, with a guarantee of a minimum of 120 monthly
payments. If the executive officer is married, the income is actuarially
adjusted to a joint and survivor pension which pays a set amount during the life
of the executive officer. Upon the death of the executive officer, this amount
is reduced by one-third and is payable for the life of the spouse (provided that
in no event is this amount reduced prior to 60 months from the date of
retirement).

Pensionable earnings for this purpose are calculated as the highest average of
the base earnings and bonuses earned over any 36 consecutive months. The pension
benefit is determined by years of service multiplied by the sum of 1.3% of
pensionable earnings up to the average of the last three years maximum
pensionable earnings ("YMPE") plus 2.0% of the excess of pensionable earnings
over the average YMPE, without regard to the maximum pension limit for
registered pension plans imposed by Revenue Canada.

Employees hired after the age of 40 who become executive officers at the vice
president level and above within one year of hire may also receive additional
service credits equal to their actual period of service, to a maximum of 10
years.

The following table sets forth the aggregate standard annual benefits payable to
executive officers under Manulife's Canadian Staff Pension Plan and supplemental
retirement income program.

                                                                            
<TABLE>
<CAPTION>

                                                         Years of Service
 Remuneration                    15             20               25              30             35
      $                          $               $               $               $               $
 <S>                        <C>             <C>              <C>             <C>             <C>   
   125,000                    34,978          46,637           58,296          69,955          81,615
   150,000                    42,478          56,637           70,796          84,955          99,115
   175,000                    49,978          66,637           83,296          99,955         116,615
   200,000                    57,478          76,637           95,796         114,955         134,115
   225,000                    64,978          86,637          108,296         129,955         151,615
   250,000                    72,478          96,637          120,796         144,955         169,115
   300,000                    87,478         116,637          145,796         174,955         204,115
   400,000                   117,478         156,637          195,796         234,955         274,115
   450,000                   132,478         176,637          220,796         264,955         309,115
   500,000                   147,478         196,637          245,796         294,955         344,115
   600,000                   177,478         236,637          295,796         354,955         414,115
   700,000                   207,478         276,637          345,796         414,955         484,115
   800,000                   237,478         316,637          395,796         474,955         554,115
   900,000                   267,478         356,637          445,796         534,955         624,115
  1,000,000                  297,478         396,637          495,796         594,955         694,115
</TABLE>

Mr. Richardson has 13.9 years of credited service, as at December 31, 1998. His
entitlement includes additional service credits under the terms of the
additional service credit program described above.


                                       45


<PAGE>   46


EMPLOYMENT CONTRACT

Mr. DesPrez's previous compensation package with North American Security Life
Insurance Company (the "Previous Agreement") included a termination provision
which was subsequently incorporated into his employment agreement with The
Manufacturers Life Insurance Company (U.S.A.). The Previous Agreement was due to
expire 3 years from the date (January 1, 1996) North American Life Assurance
Company merges with Manulife. The provision provides that if a termination
occurs without just and proper cause prior to January 1, 1999, Mr. DesPrez shall
be entitled to receive the following severance allowances and benefits in equal
semi-monthly installments on the date of termination for a period of 18 months:
one twelfth the sum of his annual base salary and the average of his last two
years bonus payments multiplied by the number of months in the severance period.
He would also receive a lump sum payment equal to the monthly average of his
annual bonus payments for the last two years multiplied by the number of full
months in which he provided employment services to the Employer during the
calendar year in which he is terminated. The Employer will continue to pay for
premiums for the benefit of Mr. DesPrez under the Employer's group life,
medical, dental and vision insurance plans. Any unvested pension benefits shall
vest at date of termination. The employer will pay for outplacement counseling
services up to a maximum of $25,000.



Item 12 - Security Ownership of Certain Beneficial Owners and Management

(a)

<TABLE>
<CAPTION>

                        Name & Address of      Amount & Nature of      Percent of
   Title of Class       Beneficial Owner      Beneficial Ownership       Class
   --------------       ----------------      --------------------     ----------
   <S>                       <C>                 <C>                     <C> 
    Common Stock               MWL                2,600 shares            100%
</TABLE>

(b) Nothing to report

(c) Nothing to report

Item 13 - Certain Relationships and Related Transactions

Refer to Item 7 - Liquidity and Capital Resources


                                       46
<PAGE>   47



                                     PART IV

Item 14 - Exhibits, Financial Statements, Schedules and Reports on Form 8-K

(a) Financial Statements and Exhibits

(1) The following consolidated financial statements of the Registrant are filed
as part of this report:

a.   Report of Independent Auditors of Ernst & Young, LLP dated February 22,
     1999.

b.   Consolidated Balance Sheets at December 31, 1998 and1997.

c.   Consolidated Statement of Income for the Years ended December 31, 1998,
     1997 and 1996.

d.   Consolidated Statements of Changes in Shareholder's Equity for the Years
     ended December 1998, 1997 and 1996.

e.   Consolidated Statements of Cash Flows for the Years Ended December 31,
     1998, 1997 and 1996.

f.   Notes to Financial Statements - December 31, 1998

(2)  Financial Statement Schedules:

a.   Schedule I - Summary of Investments - Other than Investments in Related
     Parties.

b.   Schedule III - Supplemental Insurance Information

c.   Schedule IV - Reinsurance

(3)  Exhibits (the Registrant is also referred to as the "Company")

<TABLE>
<CAPTION>
Exhibit No.                      Description
-----------                      -----------
<S>                              <C> 
1(a)                             Underwriting   Agreement  between  the  Company  and
                                 Manufacturers  Securities  Services,  LLC,  formerly
                                 NASL Financial Services, Inc. (Underwriter)1/

1(b)i                            Promotional  Agent Agreement  between  Manufacturers
                                 Securities  Services,  LLC,  formerly NASL Financial
                                 Services, Inc.  (Underwriter),  the Company and Wood
                                 Logan Associates, Inc. (Promotional Agent) 2/

1(b)ii                           Amendment to Promotional Agent Agreement 1/

2                                Not Applicable

3(i)(a)                          Certificate of Incorporation of the Company 3/

3(i)(b)                          Certificate   of   Amendment   of   Certificate   of
                                 Incorporation  of the  Company,  Name  Change,  July
                                 1984 3/
</TABLE>

                                       47

<PAGE>   48


<TABLE>
<CAPTION>
Exhibit No.                      Description
-----------                      -----------
<S>                              <C> 
3(i)(c)                          Certificate   of   Amendment   of   Certificate   of
                                 Incorporation  of  the  Company,   Authorization  of
                                 Capital, December 1994 3/

3(i)(d)                          Certificate   of   Amendment   of   Certificate   of
                                 Incorporation  of the Company,  Name  Change,  March
                                 1997 4/

3(i)(e)                          Certificate   of   Amendment   of   Certificate   of
                                 Incorporation  of  the  Company,  Registered  Agent,
                                 July 1997 3/

3(ii)                            Amended and Restated By-Laws of the Company 3/

4(i)                             Form of Individual  Single  Payment  Deferred  Fixed
                                 Annuity Non-Participating Contract - 10/

4(ii)                            Form of Group Single Payment  Deferred Fixed Annuity
                                 Non-Participating Contract - 10/

4(iii)                           Individual  Retirement Annuity Endorsement - 10/

4(iv)                            ERISA Tax-Sheltered Annuity Endorsement - 10/

4(v)                             Tax-Sheltered Annuity Endorsement - 10/

4(vi)                            Section 401 Plans Endorsement - 10/

5                                Opinion  and Consent of James D.  Gallagher,  Esq. - 11/

6                                Not Applicable

7                                Not Applicable

8                                Not Applicable

9                                Not Applicable

10(i)                            -   Form  of  broker-dealer   agreement  between  the
                                     Company,   Manufacturers   Securities  Services,
                                     LLC,  formerly  NASL  Financial  Services,  Inc.
                                     (underwriter),   Wood  Logan  Associates,   Inc.
                                     (Promotional Agent) and broker-dealers 5/
(10)(ii)
                                 -   Reinsurance   and   Guaranteed   Death   Benefits
                                     Agreement  between the  Company and  Connecticut
                                     General Life Insurance Company 8/
(10)(iii)
                                 -   Reinsurance  Agreement  between  the  Company and
                                     PaineWebber Life Insurance Company 9/
(10)(iv)
                                 -   Coinsurance  Agreement  between  the  Company and
                                     Peoples Security Life Insurance Company - 12/

(10)(v)                          -   Reinsurance  and Accounts  Receivable  Agreements
                                     between the Company and ITT Lyndon Life - 12/

(10)(vi)                         -   Automatic   Modified   -Coinsurance   Reinsurance
                                     Agreement  between the Company and  Transamerica
                                     Occidental Life Insurance Company  - 12/
</TABLE>

                                       48

<PAGE>   49

<TABLE>
<CAPTION>
Exhibit No.                      Description
-----------                      -----------
<S>                              <C> 
(10)(vii)                        -   Automatic   Yearly   Renewable  Term  Reinsurance
                                     Agreement  between the Company and  Transamerica
                                     Occidental Life Insurance Company - 12/

(10)(viii)                       Amendment No. 1 to the Variable  Annuity  Guaranteed
                                 Death  Benefit  Reinsurance  Agreement  between  the
                                 Company  and  Connecticut   General  Life  Insurance
                                 Company -12/

                                 Coinsurance  Agreement  between  the Company and The
                                 Manufacturers Life Insurance Company (USA) 13/

(10)(ix)                         Not Applicable

11                               Not Applicable

12                               Not Applicable

13                               Not Applicable

14                               Not Applicable

15                               Not Applicable

16                               Not Applicable

17                               Not Applicable

18                               Not Applicable

19                               Not Applicable

20                               Not Applicable

21                               The   Company   has  the   following   subsidiaries:
                                 Manufacturers   Securities  Services,  LLC  and  The
                                 Manufacturers Life Insurance Company of New York

22                               Not Applicable

23(i)                            Not Applicable

23(ii)                           Not Applicable

24 (i)                           Power of  Attorney  - John D.  Richardson,  Director
                                 and Chairman of the Company

24(ii)                           Power  of  Attorney  - David  W.  Libbey,  Principal
                                 Financial Officer of the Company 3/

24(iii)                          Power of  Attorney - Peter  Hutchison,  Director  of
                                 the Company 1/

25                               Not Applicable

26                               Not Applicable

27                               Financial Data Schedule - 13/

28                               Not Applicable
</TABLE>


                                       49


<PAGE>   50



1/   Incorporated by reference to Post-Effective Amendment No. 4 to Registration
     Statement on Form N-4, file number 33-76162, filed February 25, 1988 on
     behalf of The Manufacturers Life Insurance Company of North America
     Separate Account A.

2/   Incorporated by reference to Post-Effective Amendment No. 3 to Registration
     Statement on Form N-4, file number 33-76162, filed April 29, 1997 on behalf
     of The Manufacturers Life Insurance Company of North America Separate
     Account A.

3/   Incorporated by reference to Form 10Q, file number 812-06037, filed
     November 14, 1997 on behalf of The Manufacturers Life Insurance Company of
     North America.

4/   Incorporated by reference to Post-Effective Amendment No. 1 to Registration
     Statement on Form S-1, file number 333-6011, filed October 9, 1997 on
     behalf of The Manufacturers Life Insurance Company of North America.

5/   Incorporated by reference to Exhibit (b)(3)(iii) to pre-effective amendment
     no. 1 to Form N-4, file number 33-9960, filed February 2, 1987 on behalf of
     the NASL Variable Account of the Company, now known as The Manufacturers
     Life Insurance Company of North America Separate Account A

6/   not applicable

7/   not applicable

8/   Incorporated by reference to Exhibit (b)(7)(i) to Registration Statement on
     Form N-4, file number 33-76162, filed March 1, 1996

9/   Incorporated by reference to Exhibit (b)(7)(iii) to Registration Statement
     on Form N-4, file number 33-76162, filed March 1, 1996

10/  Incorporated by reference to Exhibit 4 to Registration Statement on Form
     S-1, file number 33-6011, filed June 14, 1996

11/  Incorporated by reference to Exhibit 5 to Pre-Effective Amendment No. 1 to
     the Registration Statement on Form S-1, file number 33-6011, filed January
     29, 1997

12/  Incorporated by reference to Exhibits (10)(iv) through (10)(viii) to
     Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1,
     file number 33-6011, filed January 29, 1997

13/  Filed herewith


                                       50

<PAGE>   51


(b)  Reports on Form 8-K

          No reports on Form 8-K were filed during the quarter.

Supplemental Information to be Furnished with Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act.

No Annual Report covering the Registrant's last fiscal year or proxy material
has been or will be sent to Registrant's security holders.

                                       51

<PAGE>   52


                          FINANCIAL STATEMENT SCHEDULES

                                       

                                       52
<PAGE>   53


            The Manufacturers Life Insurance Company of North America
                      Schedule I - Summary of Investments
                                December 31, 1998
                                  ($ Thousands)

<TABLE>
<CAPTION>

                                                                                                  Amount Shown in the
                                                                           Fair                   Consolidated Balance
Type of Investment                               Cost                     Value                          Sheet
<S>                                          <C>                       <C>                           <C>
Fixed maturities:
   United States Government                   $   18,266                $   19,382                    $   19,382
   Corporate debt securities                     100,705                   104,046                       104,046
   Mortgage-backed securities                     16,812                    16,875                        16,875
   Foreign Governments                            16,129                    16,272                        16,272
   States / Political subdivisions                 1,057                     1,168                         1,168
                                              ----------                ----------                    ----------
Total fixed maturities                        $  152,969                $  157,743                    $  157,743
                                              ==========                ==========                    ==========

Policy loans                                       5,175                                                   5,175
Short-term investments                            34,074                                                  34,074
                                              ----------                                              ----------
Total investments                             $  192,218                                              $  196,992
                                              ==========                                              ==========
</TABLE>


                                       53


<PAGE>   54



            The Manufacturers Life Insurance Company Of North America
               Schedule III - Supplementary Insurance Information
                                  ($ Thousands)

<TABLE>
<CAPTION>
                                Future Policy                Other                             Benefits,                  
                                  Benefits                   Policy                             Claims     Amortization
                   Deferred    Losses,Claims               Claims and               Net       Losses and    of Deferred
                 Acquisition      and Loss     Unearned     Benefits   Premium   Investment    Settlement   Acquisition
    Segment         Costs         Expenses     Premiums     Payable    Revenue    Income        Expenses      Costs*     Expenses*
<S>               <C>              <C>            <C>          <C>      <C>       <C>            <C>         <C>          <C>
      1998
Annuities         $449,281         $102,720        -            -        -        $12,148       $4,877       $53,493      $132,691
Savings and                                                                                
Retirement
Services                 -              525        -            -        -             28            8             -           534
Life Insurance          51                7        -            -        -              2            -             6         2,399
                   -------          -------       --           --        --        ------        -----        ------       -------
Total             $449,332         $102,252        -            -        -        $12,178       $4,885       $53,499      $135,624
                   =======          =======       ==           ==        ==        ======        =====        ======       =======
      1997
Annuities         $364,984          $92,750        -            -        -        $ 7,906       $4,986       $40,649      $100,385
Mutual funds             -                -        -            -        -              -            -         1,707         9,836
                   -------          -------       --           --        --        ------        -----        ------       -------
Total             $364,984          $92,750        -            -        -        $ 7,906       $4,986       $42,356      $110,221
                   =======          =======       ==           ==        ==        ======        =====        ======       =======
      1996
Annuities         $283,420          $82,619        -            -        -        $ 5,452       $4,242       $30,830      $ 71,255
Mutual funds         7,190                -        -            -        -              -            -         2,214        11,730
                   -------          -------                                        ------        -----        ------       -------
Total             $290,610          $82,619        -            -        -        $ 5,452       $4,242       $33,044      $ 82,985
                   =======          =======       ==           ==        ==        ======        =====        ======       =======
</TABLE>


[FN]
*    For 1997 and 1996 Mutual fund segment related items are included in
     discontinued operations: loss from operations, net of tax and gain on
     disposal, net of tax in the consolidated statements of income
</FN>


                                       54

<PAGE>   55



            The Manufacturers Life Insurance Company Of North America
                            Schedule IV - Reinsurance
                                  ($ Thousands)



<TABLE>
<CAPTION>
                                                                          Assumed                  Percentage of
                                                        Ceded to           From                        Amount
                                          Gross           Other            Other        Net            Assumed
             Segment                      Amount        Companies        Companies      Amount         to Net
<S>                                      <C>            <C>                  <C>       <C>                <C>          
Year ended December 31, 1998
Life insurance inforce                   $269,738       $170,655              -        $99,083             0%
Insurance premiums life                         -              -              -              -             0%
                                          -------        -------             --         ------             - 
Total                                           -              -              -              -             0%
                                          =======         ======             ==         ======             = 
Year ended December 31, 1997
Life insurance inforce                   $151,259       $ 84,130              -        $67,129             0%
Insurance premiums life                         -              -              -              -             0%
                                          -------        -------             --         ------             - 
Total                                           -              -              -              -             0%
                                          =======         ======             ==         ======             = 
Year ended December 31, 1996
Life insurance inforce                    $45,597        $23,932              -        $21,665             0%
Insurance premiums life                         -              -              -              -             0%
                                          -------        -------             --         ------             - 
Total                                           -              -              -              -             0%
                                          =======         ======             ==         ======             = 
</TABLE>



                                       55




<PAGE>   56



                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report on Form 10-K to be
signed on its behalf by the undersigned thereunto duly authorized.

THE MANUFACTURERS LIFE INSURANCE COMPANY OF NORTH AMERICA
(Registrant)



By: /s/Theodore F. Kilkuskie
    -------------------------------------------------- 
    Theodore F. Kilkuskie, Principal Executive Officer


By:/s/David W. Libbey
   -------------------------------------------------------------- 
   David W. Libbey, Vice President, Treasurer and Chief Financial
   Officer (Principal Financial Officer)

Date:  March 29, 1999


                                       56

<PAGE>   57


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
on Form 10-K has been signed by the following persons in the capacities with the
Registrant and on the dates indicated.


<TABLE>
<CAPTION>
SIGNATURE                                      TITLE                                        DATE

<S>                                            <C>                                          <C>
/s/John D. DesPrez III                         Director and Chairman of the Board           **
-------------------------------------------                                                 -------------------------
John D. DesPrez III                                                                         Date


/s/Theodore F. Kilkuskie                       President   and   Director    (Principal     **
-------------------------------------------    Executive Officer)                           -------------------------
Theodore F. Kilkuskie                                                                       Date
                                               


                                               Director                                     **
-------------------------------------------                                                 -------------------------
*John D. Richardson                                                                         Date


/s/David W. Libbey                             Vice  President,   Treasurer  and  Chief     **
-------------------------------------------    Financial    Officer    (Principal   and     -------------------------
David W. Libbey                                Accounting Officer)                          Date
                                               
                                               


/s/James D. Gallagher                                                                       **
-------------------------------------------                                                 -------------------------
*By James D. Gallagher                                                                      Date
  Attorney-in-Fact  Pursuant  to Powers of
  Attorney
                                                                                            **March 29, 1999
</TABLE>

                                       57


<PAGE>   58


                                  EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No.              Description
-----------              -----------
<S>                      <C>                                                                                   
10(ix)                   Coinsurance   Agreement   between   the   Company   and   The
                         Manufacturers Life Insurance Comany (USA)

27                       Financial Data Schedule
</TABLE>


                                       58