Group Investment Reportgroupsavings.manulife.com/groupretirement/CPOv2.nsf/LookupFiles/... · Group Investment Report December 31, 2005. 2 Table of Contents PAGE The Importance of

Group Investment Report

December 31, 2005

2

Table of Contents

PAGE

The Importance of Diversification 3

Asset Classes 4

Investment Platform - Style Grid 5

Volatility Rating Overview 6

Fund Managers 8

Rates of Return Overview 10

How to Read Fund Descriptions 12

Funds Available

Asset Allocation 14

Guaranteed Interest Accounts and Money Market 25

Fixed Income 28

Balanced 34BalancedGlobal Balanced

Canadian Equity 44Canadian Large Cap EquityCanadian Small/Mid Cap Equity

U.S. Equity 58U.S. Large Cap Equity

International/Global Equity 65

Investment Watch (i-Watch) 73

Statement of Investment Policies, Procedures and Goals 74

3

The Importance of Diversification

Diversification is the key to a well-balancedportfolio; it is perhaps the most importantconsideration when choosing where to investyour money.

1. Is my money invested in more than one asset class?

An asset class is an investment type defined by the

nature of securities held within a mutual or pooled fund.

For example, broad asset classes include Canadian Bond,

Canadian Equity, U.S. Equity and International/Global

Equity. Predicting the best performing asset class (such as

Canadian Bond, U.S. Equity) with any degree of success

is extremely difficult. If you diversify your portfolio by

asset class, you decrease the chance of losing a large

amount of your investment if an event in the market

affects one asset class adversely. Refer to page 4 for

more information on Manulife asset classes.

2. How volatile are the funds I’m invested in?

Volatility is the fluctuation of a fund’s performance – upor down – based on its historical monthly track record.Where available, Manulife discloses the volatility of fundsbased on the last three years’ worth of performancedata. The greater a fund’s volatility, the greater the range

Why should you diversify your investment portfolio?

Have you ever heard the saying “don’t put all your eggs in one basket?” If you apply that same philosophy to investing, itmeans don't invest all your money in one fund or market. It’s difficult to accurately predict how individual funds ormarkets will perform over time. A well-diversified portfolio offers you the opportunity to achieve better returns on yourinvestments with less risk, helping you reach your long-term retirement savings goals.

When creating your investment portfolio, take these factors into consideration: asset class, volatility and fund managers.

To help ensure you are developing a diversified investment portfolio, ask yourself these questions:

of returns it has experienced over the time period underconsideration. Although a fund’s historical volatility is notnecessarily an accurate indication of future volatility, itdoes provide some valuable insight into the level of riskassociated with the fund. The Volatility RatingOverview on pages 6 – 7 show how different fundsrank relative to the other funds in your plan.

3. What are fund managers doing to ensure the fundI invest in is meeting its stated objectives?

Fund managers typically differentiate themselvesthrough the application of distinct investmentapproaches and expertise, often known as fundmanager style. Investing with more than one fundmanager allows you to take advantage of managers’distinct approaches to investing. Diversifying by fundmanager is a good way to ensure you are benefittingfrom the range of opportunities available to help yourretirement savings grow. The fund manager for eachfund is listed on the corresponding fund page.

Achieving the right balance between asset class, volatility and fund managers in yourinvestment portfolio can help you reach your retirement savings goal.

4

Asset Classes

ASSET ALLOCATION: A fund that invests in a diverse

range of asset classes, investor styles and fund

managers with the goal of maximizing expected return

while minimizing volatility for each investor profile.

GUARANTEED INTEREST ACCOUNT: A fund that

earns a fixed interest rate from the date of deposit until

the date of maturity. The interest rate is determined on

the date of deposit and does not change.

MONEY MARKET: A fund that invests in short-term

securities.

FIXED INCOME: A fund that invests in fixed income

securities that pay interest, such as corporate and

government bonds. The interest rate earned is more

commonly referred to as a ‘coupon rate’ and is

expressed as a percentage.

BALANCED: A fund that invests primarily in a

combination of common and preferred stocks, bonds

and short-term securities. A typical balanced fund

concentrates on capital preservation and growth while

mitigating risk.

GLOBAL BALANCED: A fund that invests in a

combination of common and preferred stocks, bonds

and short-term securities worldwide with the goal of

providing a balance between capital preservation and

growth while minimizing excessive risk.

CANADIAN LARGE CAP EQUITY: A fund that invests

primarily in shares of companies incorporated in

Canada. While the fund may hold some shares of small

companies, it invests primarily in medium to large

companies listed on Canadian stock exchanges.

CANADIAN SMALL/MID CAP EQUITY: A fund that

invests primarily in shares of small and medium

companies incorporated in Canada.

U.S. LARGE CAP EQUITY: A fund that invests primarily

in shares of companies incorporated in the U.S. While

the fund may hold some shares of small companies, the

fund invests primarily in medium to large companies.

INTERNATIONAL EQUITY: A fund that invests

primarily in shares of companies incorporated outside

North America.

GLOBAL EQUITY: A fund that invests in shares of

companies incorporated in one of the following three

geographic regions – Asia, Europe and the Americas.

Each asset class is represented by a differentcolour. The fund pages in this Group InvestmentReport and on Manulife's website are colour-coded to reflect the asset class they represent.

5

Investment Platform – Style GridA

ctiv

ely

Man

aged

Pass

ivel

y M

anag

ed (I

ndex

)

ASS

ET A

LLO

CA

TIO

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ulife

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ASSET ALLOCATION

MONEY MARKET

FIXED INCOME

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2103 M

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4131 M

an

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(M

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4161 M

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4141 M

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5241 M

an

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rase

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6

Volatility Rating OverviewTh

e tr

iang

le r

epre

sent

s th

e fu

nd's

rat

ing

on t

he v

olat

ility

met

er.

7131

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uli

feC

an

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eC

ap

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uit

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nd

(MFC

)

7

CANADIAN LARGE CAP EQUITY

CANADIAN SMALL\ MID CAP EQUITY

U.S. LARGE CAP EQUITY GLOBAL EQUITYINTERNATIONAL EQUITY

7132 M

an

uli

fe M

FC G

lob

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an

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In

dex F

un

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. Eq

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8261 M

an

uli

fe L

eg

g M

aso

n U

.S.

Valu

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7131 M

an

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an

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qu

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MFC

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7141 M

an

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an

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an

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Tatt

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7122 M

an

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fe E

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th O

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s Fu

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8241 M

an

uli

fe J

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rase

r In

tern

ati

on

al

Eq

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8

172 M

an

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fe S

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MA

RK

In

tern

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al

Eq

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8192 M

an

uli

fe I

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al

Eq

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d (

Tem

ple

ton

)

C

L A S S

8142 M

an

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fe F

ideli

ty G

row

th A

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ca F

un

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8131 M

an

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fe M

FC G

lob

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Po

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d U

.S.

Ind

ex F

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8

191 M

an

uli

fe U

.S.

Eq

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Bern

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8132 M

an

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FC G

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.S.

Eq

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8181 M

an

uli

fe T

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8161 M

an

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cLean

Bu

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Eq

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Vo

lati

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Mete

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8

141 M

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Fu

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7164 M

an

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fe M

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8321 M

an

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fe B

GI

Inte

rnati

on

al

Eq

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nd

ex F

un

d

The

vola

tility

rat

ing

is b

ased

on

the

stan

dard

dev

iatio

n of

mon

thly

ret

urns

of

the

fund

or

unde

rlyin

g fu

nds

over

a t

hree

-yea

r pe

riod

as o

f

Dec

embe

r 31

, 20

05.

Stan

dard

dev

iatio

n is

a m

easu

re o

f ris

k an

d in

dica

tes

the

degr

ee t

o w

hich

the

fun

d’s

valu

e ha

s flu

ctua

ted.

A f

und

with

a hi

gh v

olat

ility

has

exp

erie

nced

mor

e va

riabi

lity

in m

onth

-to-

mon

th r

etur

ns t

han

a fu

nd w

ith lo

w v

olat

ility

.

8

Fund Managers

AIM Trimark Investments is one of Canada’s largest

investment management companies. AIM Trimark offers a

diversified suite of investment solutions to institutions,

organizations, companies, high-net worth individuals and

millions of investors in Canada and around the world. A

subsidiary of U.K.-based AMVESCAP PLC, which is among

the world’s largest independent investment managers, AIM

Trimark leverages the global expertise of several hundred

AMVESCAP investment professionals worldwide.

www.aimtrimark.com

Sanford C. Bernstein, LLC (founded in 1967) was

acquired by Alliance Capital Management (founded in

1971) to become AllianceBernstein in the year 2000.

Both equity investment teams remain separate and distinct

entities. AllianceBernstein manages approximately $555

billion US in assets, including $342 billion US for

institutional clients around the world.

www.alliancebernstein.com

Barclays Global Investors (BGI) is one of the world's

largest investment management firms and one of the

world's largest providers of structured investment

strategies including indexing, exchange traded funds

(ETFs), tactical asset allocation and quantitative active

products. BGI manages over $1.7 trillion Cdn for almost

2700 clients in 47 countries around the world. From

offices in Toronto and Montreal, BGI manages over

$56 billion Cdn of assets for 175 Canadian clients. These

clients include pension and savings plans, mutual fund

companies, governments, corporations, charitable

foundations & endowments and universities.

www.barclaysglobal.com

CI Investments was established in the early 1960s. In

1994, CI Financial (then CI Fund Management Inc.) was

listed on the TSX under the symbol (CIX) with assets under

administration at the time of $3.7 billion Cdn. Since then,

CI has grown quickly, launching new funds and products,

and increasing the breadth and depth of product and

portfolio management expertise available to its clients.

Due to these new product launches, strong net sales and

strategic acquisition, CI has grown to manage

approximately $50 billion Cdn in assets as of June 30, 2005.

www.cifunds.com

Elliott & Page Limited has one of the longest track

records in money management in Canada. Founded in

1949, Elliott & Page is one of Canada’s oldest registered

investment counsellors. Today the firm manages more than

$40 billion Cdn in assets, and ranks as one of the nation’s

leading investment counselling firms.

www.elliotandpage.com

Fidelity Investments opened its Canadian operations

in 1987 and has grown to become Canada's eighth

largest mutual fund company, with more than $36 billion

Cdn, as at June 30, 2005 in assets under management.

www.fidelity.ca

Franklin Templeton Investments Corp. is the

Canadian subsidiary of Franklin Resources, Inc., a global

investment management organization known as Franklin

Templeton Investments. Franklin Templeton Investments

Corp has assets under management of $540.2 billion

Cdn, as of December 31, 2005.

www.templeton.ca

Founded in 1962 to serve private clients, Howson

Tattersall Investment Counsel (Howson Tattersall) has

grown over the years to provide investment services to a

wide range of institutional investors for their pension

plans, endowments, foundations and corporate reserves.

In August 2003, Howson Tattersall merged with Lancet

Asset Management, a subsidiary of the Canadian Medical

Association (CMA). The merged firm which has its

headquarters in Toronto, Canada, continues to operate

under the trusted Howson Tattersall name and manages

over $7 billion Cdn in assets including the Saxon Mutual

Funds.

www.htic.ca

9

Jarislowsky Fraser Limited is a registered investment

counselling firm managing pension funds, pooled funds,

endowment funds, and corporate and private portfolios

for clients in North America and Europe. The company

was founded in 1955 as an investment research firm. In

the early 1960s, the firm began to use research material

to counsel private investors and, in 1966, extended its

client base to include pension funds. Today, the firm

manages investment funds on behalf of governments,

corporations, universities, institutions and labour unions

with assets exceeding $58.9 billion Cdn.

www.jfl.ca

Founded in 1972 and headquartered in Toronto, Legg

Mason Canada Inc. serves institutional and private clients

from offices in Montreal, Toronto, Vancouver, and

Waterloo. Legg Mason Canada serves the Canadian

institutional and private client investment communities.

Currently, they manage $12.4 billion Cdn in assets.

www.leggmasoncanada.com

Leith Wheeler Investment Counsel Ltd. is a fully

independent investment counsel firm based in Vancouver,

B.C. Founded in 1982, it manages over $5 billion Cdn for

clients including corporations, endowments and

foundations. As well, they manage assets for multi-

employer and union pension plans in private and public

sectors across Canada.

www.leithwheeler.com

Mackenzie Financial Corporation is an integrated

financial services company, operating directly

in North America and internationally through partner

sub-advisor firms. Mackenzie offers more than 100

investment funds in Canada and the United States and

manages more than $45 billion Cdn for over one million

investors and their financial advisors. In addition

Mackenzie and its subsidiaries offer an array of loan,

deposit and other financial products and services and

employ over 1,400 people.

www.mackenziefinancial.com

McLean Budden Limited is one of Canada's oldest

investment counselling firms. From offices in Toronto,

Montreal, Vancouver and Chicago, the firm manages over

$30 billion Cdn of pension, foundation and mutual fund

assets as well as personal wealth.

www.mcleanbudden.com

MFC Global Investment Management has more

than 100 years of experience managing the assets of The

Manufacturers Life Insurance Company and other clients.

In April 2004, it more than doubled its size through the

merger of Manulife Financial and John Hancock Financial

Services, Inc. Today it is a leading global investment

manager, with over $240 billion Cdn ($206 billion US) in

assets under management as of September 30, 2005.

www.mfcglobal.com

SEAMARK Asset Management Ltd., based in Halifax,

Nova Scotia, was founded in 1982 as Atlantic Canada's first

full-service investment counsel firm. SEAMARK manages

over $10 billion Cdn in assets on behalf of pensions,

endowments, mutual funds and private clients. SEAMARK

has consistently been one of Canada's top performing

investment management firms.

www.seamark.ca

J. Zechner Associates Inc. manages money for

pension funds, institutions, and mutual fund companies,

family trust and endowments. The firm was founded in

1993 by John Zechner and is owned by its investment

professionals. Total assets under management have grown

to over $2 billion Cdn.

www.jzechner.com

10

Rates of Return Overview

Gross rates of return (%) as of December 31, 2005. Gross rates show rates before any management fees are deducted.ANNUALIZED RETURN ANNUAL RETURN2

Fund code Fund nameFund name

Year to date1

1year

2year

3year

4year

5year

10year 2005 2004 2003 2002 2001

Page number

ASSET ALLOCATION2001 Manulife Conservative Asset Allocation Fund 7.8 7.8 7.5 8.2 6.4 6.1 n/a 7.8 7.3 9.5 1.1 4.9 15

2101 Manulife Conservative Index Asset Allocation Fund 7.2 7.2 6.9 7.2 5.9 5.5 n/a 7.2 6.6 7.9 2.1 3.7 16

2002 Manulife Moderate Asset Allocation Fund 9.7 9.7 9.2 10.3 7.1 6.2 n/a 9.7 8.8 12.6 -2.2 3.0 17

2102 Manulife Moderate Index Asset Allocation Fund 8.9 8.9 8.1 8.8 5.7 4.5 n/a 8.9 7.2 10.1 -3.0 0.0 18

2003 Manulife Balanced Asset Allocation Fund 11.5 11.5 10.9 12.5 7.7 6.5 n/a 11.5 10.2 15.9 -5.5 1.9 19

2103 Manulife Balanced Index Asset Allocation Fund 10.9 10.9 9.6 10.5 5.7 3.7 n/a 10.9 8.3 12.4 -7.4 -4.2 20

2004 Manulife Growth Asset Allocation Fund 13.6 13.6 12.8 15.1 8.7 7.2 n/a 13.6 12.0 19.9 -8.5 1.5 21

2104 Manulife Growth Index Asset Allocation Fund 14.8 14.8 12.5 13.9 7.1 3.9 n/a 14.8 10.3 16.7 -11.0 -7.9 22

2005 Manulife Aggressive Asset Allocation Fund 16.0 16.0 14.8 17.9 9.7 8.2 n/a 16.0 13.6 24.3 -11.5 2.2 23

2105 Manulife Aggressive Index Asset Allocation Fund 18.7 18.7 15.3 17.1 8.1 3.7 n/a 18.7 12.0 20.9 -15.0 -12.2 24

MONEY MARKET3132 Manulife Canadian Money Market Fund (MFC) 2.8 2.8 2.6 2.7 2.7 3.2 n/a 2.8 2.4 3.0 2.8 5.2 27

Scotia Capital 91-Day Treasury Bill Index 2.6 2.6 2.4 2.6 2.6 3.0 3.8 2.6 2.3 2.9 2.5 4.7

FIXED INCOME4131 Manulife Canadian Bond Fund (MFC)¥ 6.5 6.5 6.7 6.6 7.0 7.2 n/a 6.5 6.9 6.4 8.3 7.9 29

4141 Manulife Fidelity Canadian Bond Fund 7.1 7.1 7.2 7.4 7.8 7.9 8.0 7.1 7.3 7.7 9.0 8.2 30

4161 Manulife McLean Budden Fixed Income Fund 6.3 6.3 7.0 6.8 7.1 7.4 8.0 6.3 7.7 6.5 8.0 8.7 31

4171 Manulife SEAMARK Bond Fund 5.2 5.2 5.9 5.8 6.4 6.8 n/a 5.2 6.5 5.8 8.3 8.0 32

4191 Manulife MFC Global Pooled Canadian Bond Index Fund 6.4 6.4 6.7 6.8 7.3 7.4 n/a 6.4 7.1 6.8 9.0 8.1 33

Scotia Capital Universe Bond Index 6.5 6.5 6.8 6.8 7.3 7.4 7.7 6.5 7.1 6.7 8.7 8.1

BALANCED5132 Manulife Elliott & Page Monthly High Income FundÞ 15.1 18.4 19.7 18.4 19.0 n/a 21.8 22.2 14.8 21.5 35

5161 Manulife McLean Budden Balanced Growth Fund 11.3 11.3 9.9 11.4 6.5 5.7 9.9 11.3 8.5 14.4 -6.9 2.8 36

5162 Manulife Canadian Balanced Ethics Fund 10.9 10.9 9.7 11.1 6.8 5.9 n/a 10.9 8.6 13.8 -5.1 2.7 37

5164 Manulife McLean Budden Balanced Fund 10.9 10.9 9.9 11.0 7.0 6.4 n/a 10.9 8.9 13.4 -4.4 4.4 38

5171 Manulife SEAMARK Balanced Fund 9.7 9.7 7.7 9.7 5.5 5.6 n/a 9.7 5.7 13.9 -6.1 5.8 39

5181 Manulife Trimark Income Growth Fund 6.8 6.8 11.2 12.3 10.1 11.2 10.9 6.8 15.8 14.5 3.8 15.6 40

5241 11.3 11.3 10.4 10.3 7.7 7.0 n/a 11.3 9.6 10.1 0.2 4.3 41

5301 11.6 11.6 12.7 13.8 10.7 n/a n/a 11.6 13.9 16.1 2.0 n/a 42

Balanced Benchmark‡ 10.7 10.7 9.7 10.3 5.5 3.3 7.8 10.7 8.6 11.6 -7.9 -4.8

GLOBAL BALANCED5231 Manulife CI International Balanced Fund 4.0 4.0 5.2 8.0 3.0 -0.9 7.5 4.0 6.4 13.9 -10.5 -15.3 43

Global Balanced Benchmark¢ 0.6 0.6 2.9 2.7 0.2 -1.1 4.9 0.6 5.2 2.5 -6.9 -6.2

1 Year to date (YTD) rates of return are not annualized.2 The rates of return that a fund earned over a specific 12-month period. As an example: a one-year annual return as at June 2005 would measure performance from

¥Page Pooled Bond.

Þ

‡ Comprised of 35% S&P/TSX Composite Index, 35% Scotia Capital Universe Bond Index (Total Return), 10% S&P 500 Index ($C), 10% MSCI EAFE Index ($C), and 10% 91-Day T-bills.

¢ Comprised of 60% MSCI World Index and 40% JP Morgan Government Bond Index.† On May 21, 2004, the underlying fund changed from the Elliott & Page Blue Chip fund to the Elliott & Page Canadian Equity Fund. Performance prior to this data was derived from the

Elliott & Page Blue Chip Fund.§ On September 30, 2002, the underlying fund changed from Elliot & Page Pooled Canadian Equity to Manulife Canadian Large Cap Value Equity. Performance prior to this date was

derived from the Elliott & Page Pooled Canadian Equity.£ The non-shaded area represents the returns of a similarly managed fund for the period before the start date of the Manulife fund.¤ On June 1, 2003, the underlying fund changed from the Elliott & Page Emerging Growth to Elliott & Page Growth Opportunities. Performance prior to this date was derived from the

Elliott & Page Emerging Growth.

Manulife Leith Wheeler Diversified Pooled Fund

Manulife Jarislowsky Fraser Balanced Fund

July 1, 2004 to June 30, 2005.On September 30, 2002, the underlying fund changed from Elliott & Page Pooled Bond to the Manulife Canadian Bond. Performance prior to this date was derived from the Elliott &

The Manulife Elliot & Page Monthly High Income Fund's primary objective is to provide investors with a steady flow of monthly income and capital growth. The fund investsin a variety of equity securities, fixed income securities and income trusts. .

15.1 15.1

11

ANNUALIZED RETURN ANNUAL RETURN2

Fund code Fund nameFund name

Year to date1

1year

2year

3year

4year

5year

10year 2005 2004 2003 2002 2001

Page number

CANADIAN LARGE CAP EQUITY7121 Manulife Elliott & Page Canadian Equity Fund† 24.5 24.5 20.4 20.6 10.8 6.2 n/a 24.5 16.5 20.9 -13.9 -10.5 45

7131 Manulife Canadian Large Cap Value Equity Fund (MFC)§ 24.3 24.3 22.6 23.7 15.8 11.3 n/a 24.3 20.9 26.0 -5.0 -5.2 46

7132 Manulife MFC Global Pooled Canadian Index Fund 24.2 24.2 19.2 21.6 12.0 6.5 n/a 24.2 14.5 26.6 -12.7 -12.7 47

7141 Manulife Fidelity Canadian Large Cap Fund 32.7 32.7 23.8 24.4 13.8 9.7 12.2 32.7 15.4 25.7 -12.9 -5.1 48

7161 Manulife McLean Budden Canadian Equity Growth Fund 22.9 22.9 17.2 21.6 11.4 9.3 14.5 22.9 11.8 30.7 -14.1 1.0 49

7164 Manulife McLean Budden Canadian Equity Fund 21.3 21.3 16.6 19.5 12.2 10.6 15.2 21.3 12.1 25.4 -7.1 4.7 50

7171 Manulife SEAMARK Canadian Equity Fund 19.9 19.9 14.9 18.7 12.0 11.1 n/a 19.9 10.1 26.6 -5.7 7.7 51

7181 Manulife Trimark Canadian Fund 11.3 11.3 11.3 15.2 8.7 8.2 10.5 11.3 11.2 23.4 -8.7 6.5 52

7192 Manulife Canadian Large Cap Top Down Equity Fund (Zechner) 17.3 17.3 17.2 22.1 9.0 n/a n/a 17.3 17.0 32.6 -22.5 n/a 53

7241 Manulife Jarislowsky Fraser Canadian Equity Fund 27.6 27.6 24.2 24.4 17.2 14.8 n/a 27.6 20.9 24.7 -1.9 5.5 54

7351 Manulife Maxxum Dividend Growth Fund (Mackenzie)£ 12.8 14.8 16.0 9.8 10.1 14.4 17.7 18.2 -6.8 11.5 55

S&P/TSX Composite Index 24.1 24.1 19.2 21.7 12.1 6.6 11.0 24.1 14.5 26.7 -12.4 -12.6

CANADIAN SMALL/MID CAP EQUITY7122 Manulife Elliott & Page Growth Opportunities Fund¤ 22.3 22.3 22.2 26.0 18.3 14.0 n/a 22.3 22.1 34.1 -2.2 -1.7 56

7191 Manulife Canadian Small Cap Equity Fund (Tattersall) 15.5 15.5 16.6 22.3 16.8 18.3 n/a 15.5 17.8 34.6 1.5 24.7 57

BMO Nesbitt Burns Small Cap Index 19.7 19.7 16.9 24.9 17.9 14.8 11.3 19.7 14.1 42.7 -0.9 3.4

U.S. LARGE CAP EQUITY8131 Manulife MFC Global Pooled U.S. Index Fund 1.3 1.3 2.1 2.9 -4.4 -4.9 n/a 1.3 2.9 4.6 -23.2 -7.1 59

8132 Manulife MFC Global Pooled U.S. Equity Fund 5.3 5.3 7.0 5.1 -4.7 -7.4 n/a 5.3 8.7 1.4 -28.9 -17.4 60

8142 Manulife Fidelity Growth America Fund 8.0 8.0 5.5 7.0 -1.2 -2.2 7.1 8.0 3.0 10.1 -22.1 -6.1 61

8171 Manulife SEAMARK U.S. Equity Fund 1.2 1.2 -1.0 3.6 -3.7 -2.2 n/a 1.2 -3.2 13.5 -22.8 4.2 62

8191 Manulife U.S. Equity Fund (Bernstein) 1.4 1.4 2.3 2.9 -2.7 -3.9 n/a 1.4 3.3 3.9 -17.7 -9.1 63

8261 Manulife Legg Mason U.S. Value Fund 4.0 4.0 4.4 8.7 1.1 0.6 n/a 4.0 4.8 17.9 -18.7 -2.7 64

S&P 500 Index ($ Cdn) 1.6 1.6 2.4 3.4 -3.9 -4.4 7.4 1.6 3.3 5.3 -22.7 -6.5

INTERNATIONAL EQUITY8172 Manulife SEAMARK International Equity Fund 6.1 6.1 4.2 5.7 -0.8 -3.1 n/a 6.1 2.3 8.9 -18.0 -11.8 66

8192 Manulife International Equity Fund (Templeton) 9.8 9.8 12.1 13.3 4.4 1.7 n/a 9.8 14.4 15.6 -18.2 -8.0 67

8241 Manulife Jarislowsky Fraser International Equity Fund 5.0 5.0 5.4 5.8 0.1 -1.6 9.1 5.0 5.9 6.6 -15.1 -10.7 68

8321 Manulife BGI International Equity Index Fund 11.2 11.2 11.2 11.6 3.8 -0.6 4.3 11.2 11.2 13.2 -16.6 -16.3 69

MSCI EAFE Index ($ Cdn) 10.4 10.4 11.4 12.2 4.3 -0.2 4.5 10.4 12.4 13.9 -16.3 -16.4

GLOBAL EQUITY8141 Manulife Fidelity International Portfolio Fund 11.8 11.8 9.3 10.7 2.8 0.6 8.7 11.8 6.9 13.5 -17.7 -7.9 70

8161 Manulife McLean Budden Global Equity Fund 5.7 5.7 5.6 6.6 -0.1 -1.4 n/a 5.7 5.5 8.5 -17.6 -6.6 71

8181 Manulife Trimark Fund 6.8 6.8 6.7 7.6 4.5 5.9 10.2 6.8 6.6 9.4 -4.1 11.7 72

MSCI World Index ($ Cdn) 6.6 6.6 7.0 7.8 0.0 -2.4 5.8 6.6 7.3 9.4 -20.2 -11.4

Manulife Return: These numbers represent the gross rates of return of the Manulife fund.

Additional Historical Information: In order to provide historic gross rates of return information, we have included the returns for each of the respective underlying funds.

The investment mangement fees (IMFs) you pay appear on the secure member website at www.manulife.ca/GRO.

12.8 12.8

12

How to Read Fund Descriptions

Fund code:

A specific code has been assigned to each fund. This code

makes it easier for you and Manulife to identify a specific

fund. Use this code in all communications with Manulife.

When you use Manulife’s secure website and telephone

services to access your account, you will be able to identify

funds using the fund codes.

Asset class:

The fund pages in this Group Investment Report and on

the website (www.manulife.ca/GRO) reflect the colour

of their asset classes. For more information on asset

classes, read page 5.

2

1

Volatility meter:

You can use the volatility meter of each fund to help you

choose funds that suit your tolerance for risk. The volatility

meter is based on the standard deviation of monthly

returns of the fund or the underlying fund over a three-

year period where available. For any funds with less than a

three-year history, the rating was based on the next

longest available time period. Generally, the greater the

return you hope to earn on your investments, the greater

risk you must assume. A fund with high volatility has

experienced larger fluctuations of monthly returns than a

fund with low volatility. Investors expect the potential for

higher return in exchange for assuming the higher risk of

more volatile investments. Volatility is ranked from lowest

to highest - the left side represents low volatility and the

right side represents high volatility.

How the underlying fund is invested:

The pie chart depicts the mix of investments held by the

underlying fund.

Top holdings:

The primary security holdings based on the percentage

weighting of the underlying fund’s net market value.

Fund commentary/Underlying fund commentary:

These commentaries offer the fund managers' reviews of

fund activity and/or performance over a specified time

period. They include an outlook reflecting economic trends

or conditions that may affect the fund. Commentaries

appear in the format provided by the fund manager(s).

Underlying fund:

The market-based investment options in your group plan

are fund-on-fund investments which invest in existing

pooled or mutual funds (referred to as underlying funds).

When a deposit is made into a Manulife fund, the deposit

is used to purchase units of the corresponding underlying

fund. For example, if you purchase units of the “Manulife

Trimark Canadian Fund,” this Manulife fund invests in

units of the “Trimark Canadian Fund.” Due to the timing

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6

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3

Volatility meter

Based on three−year standard deviation from Globe HySales

GLOBAL EQUITY Code 8141

Manulife Fidelity International Portfolio Fund

United Kingdom 9.70%

Germany 3.80%

Australia 2.90%

Switzerland 3.20%

Canada 5.40%

Japan 14.70%

Other 18.60%United States 41.70%

How the underlying fund is invested

Top holdings within the underlying fund(As at December 31, 2005)

BP PLC −

Ericsson LM Telephone −

Genentech Inc. −

GlaxoSmithKline PLC −

Goldman Sachs −

Monster Worldwide −

Novartis AG −

Peabody Energy Corp −

Total SA −

Univision Communication −

Total 10.10%

Underlying fund commentary

(As at December 31, 2005)

Global equity markets performed well during the fourthquarter of 2005, with the MSCI World index gaining 3.7%(all returns in Canadian−dollar terms). The Japanese equitymarket posted strong gains, advancing (+13%), followed bythe Asia ex−Japan region (+7.0%) and the U.S. (+2.9%).The European equity market lagged the other regions butstill posted positive returns (+2.6%). Japanese equitiesmirrored the strong gains of the previous quarter, surging toa five−year high. Improving economic conditions andearnings growth continued to attract overseas investors toJapanese equities. The financials, industrials, and materialssectors performed particularly well with the latter sectorbenefiting from rising gold prices, which broke through the$500 US barrier in December. Weaker performance wasseen in the energy and telecommunication−services sectors.Energy prices fell to more moderate levels due to a softeningin demand. The Fund rose 3.7% during the fourth quarter,trailing the return of its benchmark index slightly. Securityselection was the primary driver of relative returns,particularly within the Japanese market. The largestdetractor from performance was being overweight theunderperforming energy sector.Lead portfolio manager, Dick Habermann, continues toobserve differing levels of strength in global economies.Persistently high oil prices and strong raw material demandin China are continuing themes. Mr. Habermann isunderweighted in the U.S. where continued interest rate hikes and sustained high energy prices have negatively impacted consumer sentiment. European stocks are alsounderweighted, despite improved corporate earnings,structural problems persist. Japan is overweight in the Fundand Mr. Habermann remains positive in his outlook for theJapanese market.

UNDERLYING FUND −> Fidelity International Portfolio−A

Objective This fund invests primarily in equity securities of companies anywhere in theworld with the objective of achieving long−term capital growth. The fund is not subjectto any geographic constraints with regard to the allocation of portfolio assets amongdifferent markets.

Managed by Fidelity Investments Canada Ltd.

Fund managers Richard Habermann, BA, MBA.

Inception date November 1987 Total assets $1,337.2 million

Historical gross returnsGross rates of return are shown before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in July 1997. To provide further historical information, the shaded arearepresents the returns of the underlying fund for the period before the start date of theManulife fund.

−20%

0%

20%

40%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Fidelity Int’l PortfolioFidelity International Portfolio−A

11.8 6.9

13.5

−17.7 −7.9 −7.3

23.7 27.8 27.7 19.4

*Only full calendar year returns are shown.

Overall past performanceThis graph shows how a $10,000 investment in this fund would have changed in value over time, based on grossreturns.

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

$24,000

Jan96 Dec96 Dec97 Dec98 Dec99 Dec00 Dec01 Dec02 Dec03 Dec04 Dec05

MLI Fidelity Int’l PortfolioMSCI World ($ Cdn)Fidelity International Portfolio−A

$21,922*

$17,129

*For illustration purposes only. Includes mutual/pooled fund performance as indicated. Actual fund performance couldbe expected to vary.

Annual compound returns (As at December 31, 2005)

This table shows the historical annual compound total return of the fund compared withthe MSCI World ($ Cdn).

1−year 2−year 3−year 5−yearSince

inception

Manulifeinception

date

MLI Fidelity Int’l Portfolio 11.77% 9.31% 10.69% 0.57% 5.57% Jul 1997

MSCI World ($ Cdn) 6.58% 6.96% 7.78% −2.41% −

Rate of return expectation The fund seeks to achieve returns comparable to, or better than, the MSCI World Index ($ Cdn).

Source: Bell Globemedia Publishing Inc.

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17

18

19

14

13

12

7

11109

8

123

4

5

6

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of these transactions, each Manulife fund may contain a

small cash component in addition to the underlying fund's

cash component. The goal of the fund-on-fund strategy is

to produce returns on the Manulife fund that are similar

to the returns on the underlying fund.

Objective:

The fund’s primary investment goal(s) as determined by

the fund manager.

Managed by:

The fund management company that manages the

underlying fund.

Fund managers:

The name of the lead fund manager(s) responsible for the

investment decisions regarding the underlying fund.

Inception date:

The date the underlying fund was made available for

purchase by investors.

Total assets:

The total market value of all the assets invested in the

underlying fund as of the specified date.

Historical gross returns:

Historical performance of the fund over a specified time

period. All performance histories are offered for illustrative

purposes only and are not a guarantee of future

performance. Unit values will fluctuate with the market

value of the underlying fund’s assets. Gross returns are the

rates of return earned before the deduction of investment

management fees. An individual investing in the fund

earns a net return after applicable management fees are

charged. Management fees can vary by client depending

on the products purchased. The returns shown here are

returns for the Manulife fund and/or the underlying fund.

Returns for individual plans will differ as investment

management fees are applied.

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Year by year returns:

The one-year return of the fund for each year specified,

based upon calendar year from January to December.

Overall past performance:

The graph shows you how a $10,000 investment in a fund

would change in value for the specific number of years

compared with a related broad-based index.

Index:

The index shown represents a broad-based market view

and is not necessarily the fund’s specific benchmark. It

should be used as a reference to compare funds against a

broad asset class. The fund’s objective may differ from the

style of the index.

Annual compound returns:

The return for historical period specified, converted to an

annualized rate.

Manulife inception date:

The first full month the fund was made available for

investment by Manulife Group Savings and Retirement

Solutions.

Rate of return expectation:

The benchmark the fund manager expects to meet or

exceed over the long-term.

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Asset Allocation

Asset allocation funds are portfolios of underlying funds diversified by fund manager, asset class and

investor style. Asset allocation funds are designed to make investing convenient. They provide fund

participants with a balance of capital growth and preservation consistent with five investor styles ranging

from conservative to aggressive. Asset allocation funds diversify by investing in a number of underlying

funds so plan members do not need to manage these portfolios.

Manulife offers two types of asset allocation funds: five actively-managed asset allocation funds and five

passively-managed index asset allocation funds. The actively-managed funds strive to out-perform a

variety of benchmark index composites while the passively-managed portfolios are designed to track to

the returns of these benchmark index composites. (Please note: The passively-managed index asset

allocation funds do not track to the same benchmarks as their actively managed counterparts.)

The funds are re-balanced periodically to maintain their respective long-term target asset mixes which

ensures each fund's underlying composition fulfills its objectives.

Asset Allocation FUND PAGECODE NUMBER

Manulife Conservative Asset Allocation Fund 2001 15

Manulife Moderate Asset Allocation Fund 2002 17

Manulife Balanced Asset Allocation Fund 2003 19

Manulife Growth Asset Allocation Fund 2004 21

Manulife Aggressive Asset Allocation Fund 2005 23

Index Asset Allocation

Manulife Conservative Index Asset Allocation Fund 2101 16

Manulife Moderate Index Asset Allocation Fund 2102 18

Manulife Balanced Index Asset Allocation Fund 2103 20

Manulife Growth Index Asset Allocation Fund 2104 22

Manulife Aggressive Index Asset Allocation Fund 2105 24

Volatility meter


ASSET ALLOCATION Code 2001

Manulife Conservative Asset Allocation Fund

Bonds 70.20%

Money Market 9.50%

US Equity 5.70%

Canadian Equity 11.60%

Int’l Equity 3.00%

How the fund is invested

Target allocationMLI Cdn Universe Bond (TAL) 28.70%

MLI Cdn Bond (MFC) 24.00%

MLI Mortgage Backed Fund (MFC) 17.50%

MLI Cdn Money Market (MFC) 9.50%

MLI U.S. Equity (Bernstein) 5.70%

MLI Cdn Large Cap Val Equity (MFC) 5.10%

MLI Cdn Large Cap Growth Eq (MB) 4.20%

MLI International Equ (Templeton) 3.00%

MLI Cdn Lg Cap Top Dn Eq (Zechner) 2.30%

Total 100.00%

Fund commentary


The economic and market fundamentals are sound, andvaluation levels are reasonably attractive. Investor sentimenthas been dampened by the increase in the price of oil and bythe U.S. trade and budget deficits. On the positive side,inflation remains tame and earnings continue to grow at anattractive rate, although that rate is decreasing.

For the year, all of the Portfolio’s components added toperformance. The largest single performance contributioncame from Canadian equities such as the MLI CanadianLarge Cap Value Equity Fund and the MLI Canadian LargeCap Growth Fund both of which had strong, double−digitgains. Other contributors were Canadian bonds such as theMLI Canadian Bond Fund and the MLI Canadian UniverseBond Fund with single−digit gains.

The consensus outlook is that the market will grow slowly,displaying single−digit positive returns. The Portfolio is well−positioned to offer capital protection in volatile markets aswell as conservative upside potential when markets arepositive. The Portfolio remains fully invested, weightedprimarily in a diversified portfolio of fixed income holdingswith a smaller exposure to a broad range of domestic, U.S.,and international equities and management styles.

Objective The Manulife Conservative Asset Allocation Fund is managed to provide ahigh level of current income and capital preservation with some consideration given togrowth of capital. This fund is diversified by asset class and investment styles with theobjective of achieving superior risk−adjusted returns over the long term. The fund willgenerally maintain 80% of its investments in bond funds and 20% in equity funds,though each segment may vary up to 10% from time to time.

Managed by Manulife Financial

Fund managers Various (please refer to target allocation on this page).

Inception date February 1999 Total assets $220.0 million

Historical gross returnsGross rates of return are shown before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in February 1999.

0.0%

5.0%

10.0%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Conservative Asset Allocation

7.8 7.3

9.5

1.1

4.9

8.1



$9,000

$10,000

$11,000

$12,000

$13,000

$14,000

$15,000

$16,000

Jan99 Dec99 Dec00 Dec01 Dec02 Dec03 Dec04 Dec05

MLI Conservative Asset AllocationBlend: MLI Conservative Asset Allocation

$15,168*

$14,291



This table shows the historical annual compound total return of the fund compared withthe composite benchmark, as outlined in the Rate of return expectation below.


inception

Manulifeinception

date

MLI Conservative AssetAllocation

7.77% 7.54% 8.19% 6.07% 6.21% Feb 1999

Blend: MLI ConservativeAsset Allocation

7.57% 6.84% 7.17% 5.19% −

Rate of return expectation Over the long term, the fund attempts to outperform a benchmark portfolio that is comprised of thefollowing:· 7% BARRA Value Total Return Index· 5% BARRA Growth Total Return Index· 5% S&P 500 Total Return Index ($ Cdn)· 3% MSCI EAFE Total Return Index ($ Cdn)· 53% Scotia Capital Universe Bond Total Return Index· 9% Scotia Capital 91−Day T−bill Total Return Index· 18% Scotia Capital Mortgage Total Return Index


15

Volatility meter



Manulife Conservative Index Asset Allocation Fund

Bonds 80.00%

US Equity 7.00%




Target allocationMFC Global Pooled Cdn Bond Index 55.00%

MFC Global Pooled Short Term 25.00%

MFC Global Pooled Canadian Index 10.00%

MFC Global Pooled U.S. Equity Index 7.00%

MLI BGI International Eq Index 3.00%

Total 100.00%



For the year, all of the Portfolio’s asset classes added toperformance. The largest contribution to the Portfolio’sperformance came from Canadian large−cap equities with again of 24.1% as measured by the S&P/TSX CompositeIndex. To a lesser extent, positive performance byinternational large−cap equities and U.S. large−cap equities,also contributed to the Portfolio’s performance.

The Portfolio was rebalanced in April, May, July, August, andSeptember. The Fund was rebalanced so frequently(primarily) to respond to the outperformance of theCanadian equities market and the fact that eachrebalancing did not move the Portfolio all the way back tothe target mix, but left the Portfolio overweight in Canadianequities. This was done to reduce transaction costs andexploit the momentum of the Canadian equities market.

Objective The Manulife Conservative Index Asset Allocation Fund is managed toprovide a high level of current income and capital preservation with some considerationgiven to growth of capital. This fund is expected to track the performance of a blend ofmarket indices that is diversified by asset class. It will generally maintain 80% of itsinvestments in passively managed bond funds and 20% in passively managed equityfunds though each segment may vary up to 10% from time to time.



Inception date June 1999 Total assets $6.9 million

Historical gross returnsGross rates of return are shown before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in June 1999.

0.0%

2.0%

4.0%

6.0%

8.0%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Conservative Index Asset Alloc

7.2 6.6

7.9

2.1

3.7

7.3



$10,000

$11,000

$12,000

$13,000

$14,000

$15,000

Dec99 Dec00 Dec01 Dec02 Dec03 Dec04 Dec05

MLI Conservative Index Asset AllocBlend: MLI Conservative Indx Asset Alloc

$14,579* $14,454





inception

Manulifeinception

date

MLI Conservative IndexAsset Alloc

7.19% 6.87% 7.21% 5.45% 5.90% Jun 1999

Blend: MLI ConservativeIndx Asset Alloc

7.00% 6.68% 7.06% 5.28% −

Rate of return expectation Over the long term, the fund attempts to track the performance of a benchmark portfolio that iscomprised of the following:· 10% S&P/TSX Composite Total Return Index· 7% S&P 500 Total Return Index ($ Cdn)· 3% MSCI EAFE Total Return Index ($ Cdn)· 55% Scotia Capital Universe Bond Total Return Index· 25% Scotia Capital 91−Day T−bill Total Return Index


16

Volatility meter



Manulife Moderate Asset Allocation Fund

Bonds 59.80%

US Equity 9.30%











MLI Cdn Small Cap Equ (Tattersall) 4.20%


MLI Growth Opportunities Fund (MFC) 2.50%

Total 100.00%

Fund commentary


The economic and market fundamentals are sound andvaluation levels are reasonably attractive. Investor sentimenthas been dampened by the increase in the price of oil and bythe U.S. trade and budget deficits. On the positive side,inflation remains tame, and earnings continue to grow at anattractive rate, although that rate is decreasing.


The consensus outlook is that the market will grow slowly,displaying single−digit positive returns. The Portfolio is well−positioned to offer capital protection in volatile markets aswell as moderate upside potential when markets arepositive. The Portfolio remains fully invested, with a slightmajority of the holdings in a diversified fixed incomeportfolio, while maintaining a comfortable exposure to abroad range of domestic, U.S., and international equitiesand management styles.

Objective The Manulife Moderate Asset Allocation Fund is managed to provide abalance between current income and growth of capital with a greater emphasis onincome and capital preservation. This fund is diversified by asset class and investmentstyles with the objective of achieving superior risk−adjusted returns over the long term.The fund will generally maintain 60% of its investments in bond funds and 40% in equityfunds, though each segment may vary up to 10% from time to time.





−5%

0%

5%

10%

15%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Moderate Asset Allocation

9.7 8.8

12.6

−2.2

3.0

7.5



$9,000

$10,000

$11,000

$12,000

$13,000

$14,000

$15,000

$16,000


MLI Moderate Asset AllocationBlend: MLI Moderate Asset Allocation

$15,590*

$14,219





inception

Manulifeinception

date

MLI Moderate AssetAllocation

9.68% 9.25% 10.35% 6.23% 6.63% Feb 1999

Blend: MLI Moderate AssetAllocation

9.82% 8.36% 9.06% 4.59% −

Rate of return expectation Over the long term, the fund attempts to outperform a benchmark portfolio that is comprised of thefollowing:· 13% BARRA Value Total Return Index· 9% BARRA Growth Total Return Index· 3% Nesbitt Burns Small Cap Index· 9% S&P 500 Total Return Index ($ Cdn)· 6% MSCI EAFE Total Return Index ($ Cdn)· 44% Scotia Capital Universe Bond Total Return Index· 3% Scotia Capital 91−Day T−bills Total Return Index· 13% Scotia Capital Mortgage Total Return Index


17

Volatility meter



Manulife Moderate Index Asset Allocation Fund

Bonds 60.00%

US Equity 15.00%




Target allocationMFC Global Pooled Cdn Bond Index 39.00%

MFC Global Pooled Canadian Index 21.00%




Total 100.00%




The Portfolio was rebalanced in April, May, July, August, andSeptember. The Fund was rebalanced (primariy) to respondto the outperformance of the Canadian equities market andthe fact that each rebalancing did not move the Portfolio allthe way back to the target mix, but left the Portfoliooverweight in Canadian equities. This was done to reducetransaction costs and exploit the momentum of theCanadian equities market.

Objective The Manulife Moderate Index Asset Allocation Fund is managed to provide abalance between current income and growth of capital with a greater emphasis onincome and capital preservation. This fund is expected to track the performance of ablend of market indices that is diversified by asset class. It will generally maintain 60% ofits investments in passively managed bond funds and 40% in passively managed equityfunds though each segment may vary up to 10% from time to time.




Historical gross returnsGross rates of return are shown before investment management fees have beendeducted. This solid area represents the gross returns of the Manulife fund since itsinception in June 1999.

−5%

0%

5%

10%

15%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Moderate Index Asset Allocation

8.9 7.2

10.1

−3.0 0.0

5.8



$10,000

$11,000

$12,000

$13,000

$14,000

$15,000


MLI Moderate Index Asset AllocationBlend: MLI Moderate Index Asset Alloc

$14,333* $14,290





inception

Manulifeinception

date

MLI Moderate Index AssetAllocation

8.95% 8.08% 8.76% 4.54% 5.62% Jun 1999

Blend: MLI Moderate IndexAsset Alloc

8.70% 7.79% 8.54% 4.37% −



18

Volatility meter



Manulife Balanced Asset Allocation Fund


US Equity 14.10%

Bonds 39.00%













Total 100.00%

Fund commentary




The consensus outlook is that the market will grow slowly,displaying single−digit positive returns. The Portfolio is well−positioned to offer relative value in volatile markets as wellas upside potential when markets are positive. The Portfolioremains fully invested with a balanced exposure to adiversified fixed income portfolio and a broad range ofdomestic, U.S., and international equities and managementstyles.

Objective The Manulife Balanced Asset Allocation Fund is managed to provide abalance between growth of capital and current income with a greater emphasis ongrowth of capital. This fund is diversified by asset class and investment styles with theobjective of achieving superior risk−adjusted returns over the long term. The fund willgenerally maintain 60% of its investments in equity funds and 40% in bond funds,though each segment may vary up to 10% from time to time.



Inception date February 1999 Total assets $1,239.0 million


−10%

0%

10%

20%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Balanced Asset Allocation

11.5 10.2

15.9

−5.5 1.9

8.8



$9,000

$10,000

$11,000

$12,000

$13,000

$14,000

$15,000

$16,000

$17,000


MLI Balanced Asset AllocationBlend: MLI Balanced Asset Allocation

$16,370*

$14,236





inception

Manulifeinception

date

MLI Balanced AssetAllocation

11.49% 10.87% 12.51% 6.52% 7.39% Feb 1999

Blend: MLI Balanced AssetAllocation

11.87% 9.94% 11.05% 3.95% −

Rate of return expectation Over the long term, the fund attempts to outperform a benchmark portfolio that is comprised of thefollowing:· 18% BARRA Value Total Return Index· 14% BARRA Growth Total Return Index· 5% Nesbitt Burns Small Cap Total Return Index· 14% S&P 500 Total Return Index ($ Cdn)· 9% MSCI EAFE Total Return Index ($ Cdn)· 31% Scotia Capital Universe Bond Total Return Index· 1% Scotia Capital 91−Day T−bill Total Return Index· 8% Scotia Capital Mortgage Total Return Index


19

Volatility meter



Manulife Balanced Index Asset Allocation Fund


US Equity 18.00%


Bonds 40.00%


Target allocationMFC Global Pooled Canadian Index 30.00%

MFC Global Pooled Cdn Bond Index 25.00%




Total 100.00%





Objective The Manulife Balanced Index Asset Allocation Fund is managed to provide abalance between growth of capital and current income with a greater emphasis ongrowth of capital. This fund is expected to track the performance of a blend of marketindices that is diversified by asset class. It will generally maintain 60% of its investmentsin passively managed equity funds and 40% in passively managed bond funds thougheach segment may vary up to 10% from time to time.





−10%

0%

10%

20%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Balanced Index Asset Alloc

10.9 8.3

12.4

−7.4 −4.2

5.2



$9,000

$10,000

$11,000

$12,000

$13,000

$14,000

$15,000


MLI Balanced Index Asset AllocBlend: MLI Balanced Index Asset Alloc

$14,094* $14,180





inception

Manulifeinception

date

MLI Balanced Index AssetAlloc

10.93% 9.62% 10.52% 3.67% 5.35% Jun 1999

Blend: MLI Balanced IndexAsset Alloc

10.66% 9.27% 10.36% 3.56% −



20

Volatility meter



Manulife Growth Asset Allocation Fund


US Equity 17.50%


Bonds 18.30%


Target allocationMLI Cdn Large Cap Growth Eq (MB) 18.80%






MLI Cdn Universe Bond (TAL) 7.40%




Total 100.00%

Fund commentary



For the year, all of the Portfolio’s components added toperformance. The largest single performance contributioncame from Canadian equities such as the MLI CanadianLarge Cap Value Equity Fund and the MLI Canadian LargeCap Growth Fund both of which had strong, double−digit gains. Other contributors were Canadian bonds such asthe MLI Canadian Bond Fund and the MLI CanadianUniverse Bond Fund with single−digit gains.

The consensus outlook is that the market will grow slowly,displaying single−digit positive returns. The Portfolio is well−positioned to offer relative value in volatile markets as wellas healthy growth potential in positive markets. ThePortfolio remains fully invested, with a majority exposure toequities, diversified by a broad range of domestic, U.S., andinternational equities and management styles.

Objective The Manulife Growth Asset Allocation Fund is managed to provide long−term growth of capital with some consideration given to current income. This fund isdiversified by asset class and investment styles with the objective of achieving superiorrisk−adjusted returns over the long term. The fund will generally maintain 80% of itsinvestments in equity funds and 20% in bond funds though each segment may vary upto 10% from time to time.





−10%

0%

10%

20%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Growth Asset Allocation

13.6 12.0

19.9

−8.5 1.5

10.5



$9,000

$10,000

$11,000

$12,000

$13,000

$14,000

$15,000

$16,000

$17,000

$18,000


MLI Growth Asset AllocationBlend: MLI Growth Asset Allocation

$17,616*

$15,121





inception

Manulifeinception

date

MLI Growth AssetAllocation

13.61% 12.82% 15.12% 7.22% 8.53% Feb 1999

Blend: MLI Growth AssetAllocation

15.15% 12.46% 14.46% 4.52% −

Rate of return expectation Over the long term, the fund attempts to outperform a benchmark portfolio that is comprised of thefollowing:· 25% BARRA Value Total Return Index· 19% BARRA Growth Total Return Index· 11% Nesbitt Burns Small Cap Total Return Index· 15% S&P 500 Total Return Index ($ Cdn)· 10% MSCI EAFE Total Return Index ($ Cdn)· 17% Scotia Capital Universe Bond Total Return Index· 3% Scotia Capital Mortgage Total Return Index


21

Volatility meter



Manulife Growth Index Asset Allocation Fund


US Equity 18.00%

Bonds 20.00%





MFC Global Pooled Cdn Bond Index 15.00%



Total 100.00%





Objective The Manulife Growth Index Asset Allocation Fund is managed to providelong−term growth of capital with some consideration given to current income. This fundis expected to track the performance of a blend of market indices that is diversified byasset class. It will generally maintain 80% of its investments in passively managed equityfunds and 20% in passively managed bond funds though each segment may vary up to10% from time to time.





−20%

−10%

0%

10%

20%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Growth Index Asset Allocation

14.8 10.3

16.8

−11.0 −7.9 4.4



$9,000

$10,000

$11,000

$12,000

$13,000

$14,000

$15,000


MLI Growth Index Asset AllocationBlend: MLI Growth Index Asset Allocation

$14,709* $14,798





inception

Manulifeinception

date

MLI Growth Index AssetAllocation

14.84% 12.53% 13.92% 3.91% 6.04% Jun 1999

Blend: MLI Growth IndexAsset Allocation

14.54% 11.98% 13.59% 3.72% −

Rate of return expectation Over the long term, the fund attempts to track the performance of a benchmark portfolio that iscomprised of the following:·50% S&P/TSX Composite Total Return Index·18% S&P 500 Total Return Index ($ Cdn)·12% MSCI EAFE Total Return Index ($ Cdn)·15% Scotia Capital Universe Bond Total Return Index· 5% Scotia Capital 91−Day T−bill Total Return Index


22

Volatility meter



Manulife Aggressive Asset Allocation Fund



US Equity 17.20%


Target allocationMLI Cdn Large Cap Growth Eq (MB) 24.30%







Total 100.00%

Fund commentary


The economic and market fundamentals are sound andvaluation levels are reasonably attractive. Investor sentimenthas been dampened by the increase in the price of oil and bythe U.S. trade and budget deficits. On the positive side,inflation remains tame and earnings continue to grow at anattractive rate, although that rate is decreasing.


The consensus outlook is that the market will grow slowly,displaying single−digit positive returns. The Portfolio is well−positioned to offer relative value in volatile markets as wellas significant upside potential in positive markets. ThePortfolio remains fully invested and with a full exposure toequities, diversified by a broad range of domestic, U.S., andinternational equities and management styles.

Objective The Manulife Aggressive Asset Allocation Fund is managed to provide long−term growth of capital with no consideration given to current income. This fund isdiversified by asset class and investment styles with the objective of achieving superiorrisk−adjusted returns over the long term. This fund will generally maintain 100% of itsinvestments in equity funds though each segment may vary up to 10% from time to time.





−20%

0%

20%

40%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Aggressive Asset Allocation

16.0 13.6

24.3

−11.5 2.2

11.6



$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000


MLI Aggressive Asset AllocationBlend: MLI Aggressive Asset Allocation

$18,895*

$15,426





inception

Manulifeinception

date

MLI Aggressive AssetAllocation

15.95% 14.76% 17.86% 8.18% 9.64% Feb 1999

Blend: MLI Aggressive AssetAllocation

17.84% 14.41% 17.39% 4.46% −

Rate of return expectation Over the long term, the fund attempts to outperform a benchmark portfolio that is comprised of thefollowing:· 31% BARRA Value Total Return Index· 20% BARRA Growth Total Return Index· 19% Nesbitt Burns Small Cap Total Return Index· 18% S&P 500 Total Return Index ($ Cdn)· 12% MSCI EAFE Total Return Index ($ Cdn)


23

Volatility meter



Manulife Aggressive Index Asset Allocation Fund



US Equity 18.00%





Total 100.00%




The Portfolio was rebalanced in April, May, July, August, andSeptember. The Fund was rebalanced so frequently(primarily) to respond to the outperformance of theCanadian equities market, and the fact that eachrebalancing did not move the Portfolio all the way back tothe target mix, but left the Portfolio overweight in Canadianequities. This was done to reduce transaction costs andexploit the momentum of the Canadian equities market.

Objective The Manulife Aggressive Index Asset Allocation Fund is managed to providelong−term growth of capital with no consideration given to current income. This fund isexpected to track the performance of a blend of equity market indices that is diversifiedby geographic region. This fund will generally maintain 100 % of its investments inpassively managed equity funds though each segment may vary up to 10% from time totime.





−20%

0%

20%

40%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Aggressive Index Asset Alloc

18.7 12.0

20.9

−15.0−12.2 3.9



$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

$14,000

$15,000

$16,000


MLI Aggressive Index Asset AllocBlend: MLI Aggressive Index Asset Alloc

$15,032* $15,098





inception

Manulifeinception

date

MLI Aggressive Index AssetAlloc

18.70% 15.29% 17.14% 3.69% 6.39% Jun 1999

Blend: MLI AggressiveIndex Asset Alloc

18.27% 14.47% 16.63% 3.58% −

Rate of return expectation Over the long term, the fund attempts to track the performance of a benchmark portfolio that iscomprised of the following:· 70% S&P/TSX Composite Total Return Index· 18% S&P 500 Total Return Index ($ Cdn)· 12% MSCI EAFE Total Return Index ($ Cdn)


24

25

Guaranteed Interest Accountsand Money Market

Guaranteed Interest Accounts (GIA)

Similar to guaranteed investment certificates (GICs) offered by banks and trust

companies, these accounts guarantee an interest rate from the date of contribution

until maturity. At maturity, original investments and interest earned will reinvest for

the same term unless you provide Manulife with different instructions.

When contributions are invested in these accounts, they earn the current interest

rate at the time of the deposit. That interest is credited to the account monthly and

is compounded annually. Each contribution made to a GIA accumulates for the

term selected at the guaranteed rate in effect on the date Manulife’s head office

receives the contribution. The GIA operates on a compound interest basis which

means the guaranteed interest rate applies to both principal and accumulated

interest.

Manulife offers GIAs for these terms: daily interest, 1-year, 2-year, 3-year, 4-year, 5-

year and 10-year.

Money Market

Money Market funds invest in high-quality, short-term fixed income securities. By

investing in fixed income securities, these funds are essentially making a short-term

loan to a government or corporation and earning interest on its principal. Money

Market funds are typically managed to maintain liquidity, protect the initial

investment and provide a moderate level of income. These funds are ideal for

investors who want to preserve capital, who are saving for the short term or who

want to maintain a cash reserve and are comfortable only with the very lowest

levels of volatility.

Guaranteed Interest Accounts and Money Market Funds FUND PAGE

CODE NUMBER

Manulife Daily Interest Account 1000 26

Manulife Guaranteed Interest

Accounts 1001, 1002, 1003, 1004, 1005, 1010 26

Manulife Canadian Money Market Fund (MFC) 3132 27

26

HOW THE DAILY INTEREST ACCOUNT WORKS

Similar to a daily interest account at a bank or trust company, this account earns interestdaily at the current rate for that account. While Manulife always guarantees the principaland interest, the interest rate may change at any time.

Deposits begin earning interest when received by Manulife Financial's head office. AsManulife Financial receives deposits, those funds begin to earn interest at a rate similarto a bank savings account.

HOW THE DAILY INTEREST ACCOUNT IS PROTECTED

Manulife Financial is a founding member of Assuris. With Assuris, consumers may beentitled to protection against the loss of their savings and retirement incomes if amember financial institution becomes insolvent. You can call Assuris at 1-800-268-8099for details about maximum coverage guarantees.

Volatility and risk

This account is backed by the general assets of ManulifeFinancial. It has the lowest risk and lowest volatility, butearns the lowest rate of interest over the long term.Consider this account as a short-term holding accountwhile you decide on your long-term investment strategy.Once you have determined your investment strategy, youcan transfer your funds at any time.

Manulife Daily Interest Accounts

Code 1000GUARANTEED INTEREST ACCOUNTSVOLATILITY METER

WHAT THESE ACCOUNTS OFFER

• Guaranteed returns when held to maturity • Principal and interest backed by the assets of Manulife Financial• Choice of 1, 2, 3, 4, 5 and 10-year terms

Investment codes respectively (1001, 1002, 1003, 1004, 1005, 1010)

HOW THE GUARANTEED INTEREST ACCOUNT IS PROTECTED

Manulife Financial is a founding member of Assuris. With Assuris, consumers may beentitled to protection against the loss of their savings and retirement incomes if amember financial institution becomes insolvent. You can call Assuris at 1-800-268-8099for details about maximum coverage guarantees.

Volatility and risk

These accounts offer good returns and excellent investmentsecurity. Consider these accounts if you are an investor whoneeds guaranteed security for your investment and cancommit to investments for a fixed period of time. There isno volatility associated with the return in this account andthere is minimal risk as this is a guaranteed investmentbacked by the general assets of Manulife Financial.

Manulife Guaranteed Interest Accounts

Codes 1001, 1002, 1003, 1004, 1005, 1010GUARANTEED INTEREST ACCOUNTSVOLATILITY METER

Sources : Manulife Financial

Volatility meter


MONEY MARKET Code 3132

Manulife Canadian Money Market Fund (MFC)

Cash 99.75%

Other 0.25%



Short Term Investment 100.00%

Total 100.00%



During the first two−thirds of the year, the Bank of Canadaleft interest rates unchanged with the overnight rate at2.5%. In the second and third quarters, sentiment started tochange with the futures market pricing in a possible rateincrease in September. A 25−basis−point increase took placeon September 7, followed by another in October and a thirdin December bringing the overnight rate to 3.25% by year−end.

The Federal Reserve has been tightening for the lasteighteen months, and while an end may be in sight, at leastone or two more increases seem likely. The Bank of Canadaalso appears to be in a tightening mode, with a similarnumber of increases expected. The Fund will continue tomaintain an average term to maturity, between neutral andslightly longer, adding yield on weakness in the treasury billcurve and taking profits on strength.

UNDERLYING FUND −> MLI Cdn Money Market (MFC)

Objective The Manulife Canadian Money Market Fund is managed to achieve aconsistent level of interest income while preserving capital and maintaining liquidity. Thisfund invests primarily in money market securities guaranteed by the Government ofCanada, its provinces or municipalities, corporations and chartered banks.


Fund managers MFC Global Invest Mgmt (Tor)−Mgmt Team

Inception date January 1999 Total assets $238.8 million


0.0%

2.0%

4.0%

6.0%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Canadian Money MarketMLI Cdn Money Market (MFC)

2.8 2.4 3.0 2.8

5.2 5.7

4.8



$10,000

$11,000

$12,000

$13,000

Dec98 Dec99 Dec00 Dec01 Dec02 Dec03 Dec04 Dec05

MLI Canadian Money Market91 Day Treasury Bill IndexMLI Cdn Money Market (MFC) $12,996*

$12,801



This table shows the historical annual compound total return of the fund compared withthe 91 Day Treasury Bill Index.


inception

Manulifeinception

date

MLI Canadian MoneyMarket

2.80% 2.60% 2.74% − 2.78% Jul 2002

91 Day Treasury Bill Index 2.58% 2.44% 2.60% 3.00% −

Rate of return expectation The fund is expected to outperform the SCM 91 Day T−bill Total Return Index over a moving three−year annualized period.


27

28

Fixed Income

Fixed income funds invest in debt securities issued by corporations, as well as

federal, provincial and municipal governments. By investing in bonds, the fund

earns a specified amount of interest based on the coupon rate (interest rate) on

the bonds. These funds are exposed to risks relating to the issuers' ability to repay

the debt at maturity plus changes in interest rates.

Bond funds are appropriate for investors who have less tolerance for volatility and

would like to emphasize preservation of capital.

Fixed Income FUND PAGE

CODE NUMBER

Manulife Canadian Bond Fund (MFC) 4131 29

Manulife Fidelity Canadian Bond Fund 4141 30

Manulife McLean Budden Fixed Income Fund 4161 31

Manulife SEAMARK Bond Fund 4171 32

Manulife MFC Global Pooled Canadian Bond Index Fund 4191 33

Volatility meter


FIXED INCOME Code 4131

Manulife Canadian Bond Fund (MFC)

Provincial Bonds 18.40%

Other 21.73%

Municipal Bonds 0.16%

Federal Bonds 32.27%

Corporate Debentures 27.44%



Gov’t of Canada, 4.50%, September 1, 2007 7.47%

Gov’t of Canada, 5.75%, June 1, 2033 5.95%


Province of Ontario, 5.60%, June 2, 2035 4.10%



Province of Quebec, 5.50%, December 1, 2014 3.12%

Canada Housing Trust, 3.55%, March 15, 2009 2.59%

Province of Quebec, 6.25%, June 1, 2032 2.58%

Province of Ontario, 4.50%, March 8, 2015 2.06%

Total 39.26%



The Bank of Canada resumed tightening in September,bringing the rate to 3.25% by year−end. The yield curve forGovernment of Canada bonds flattened significantly: yieldson two−year bonds rose to 3.85% while yields on 30−yearbonds fell to 4.04%.

The Federal Reserve raised rates eight times in 2005,bringing the rate to 4.25%. Longer−maturity Treasuriesrallied considerably, with 30−year yields declining to 4.53partly due to a glut in global savings. Demand alsostemmed from the recycling of trade surpluses of Asianexporting countries into U.S. Treasuries, demand from assetliability matching activities, and tame core inflation numbers.Fixed−income credit spreads in the U.S. widened; weaknesswas concentrated in the auto and auto part manufacturingsectors. Credit spreads in Canada were relatively unchanged.

A flattening bias in yield curve positioning positivelyimpacted portfolio returns while the contribution fromduration was mixed.

The growth of the North American economy is expected tobe slower in 2006. The housing market and its effect onconsumers is expected to lead the slowdown. With coreinflation in the U.S. and Canada gradually declining, bothcentral banks have hinted they will soon end their tighteningcycles. The Fund managers are reviewing their yield curveand duration strategies to position the portfolio for the newenvironment.

UNDERLYING FUND −> MLI Cdn Bond (MFC)

Objective The Manulife Canadian Bond Fund is managed to maximize stable, long−term growth through a combination of income and capital appreciation. This fund investsprimarily in securities guaranteed by the Government of Canada, its provinces ormunicipalities, corporations and chartered banks.




Historical gross returnsGross rates of return are shown before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in September 1998. The underlying fund was changed on September 30, 2002from the Elliott & Page Pooled Bond Fund to the Manulife Canadian Bond Fund.

−5.0%

0.0%

5.0%

10.0%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Canadian Bond

6.5 6.9 6.4 8.3 7.9

9.9

−3.1



$9,000

$10,000

$11,000

$12,000

$13,000

$14,000

$15,000

$16,000


MLI Canadian BondSC Universe Bond Total Return Index

$15,059*

$15,587



This table shows the historical annual compound total return of the fund compared withthe SC Universe Bond Total Return Index.


inception

Manulifeinception

date

MLI Canadian Bond 6.50% 6.68% 6.60% 7.19% 6.54% Sep 1998

SC Universe Bond TotalReturn Index

6.46% 6.80% 6.77% 7.42% −

Rate of return expectation Over the long term, the fund is expected to outperform the SCM Universe Bond Total Return Indexover a moving three−year annualized period by 0.5% per year.

Source: Bell Globemedia Publishing Inc.29

Volatility meter



Manulife Fidelity Canadian Bond Fund




Other 30.60%




Province of Nova Scotia, 6.25%, June 1, 2011 5.88%



Gov’t of Canada, 4.25%, December 1, 2021 2.55%

Province of Newfoundland, 6.15%, April 17, 2028 1.88%

Province of Manitoba, 7.75%, December 22,2025

1.87%

Province of New Brunswick, 5.88%, December 6,2012

1.78%

Province of Quebec, 6.00%, October 1, 2029 1.75%



Total 24.31%



Canadian bonds, as measured by the RBC CM CanadianBond Market index, rose 0.7% during the fourth quarter of2005. The Bank of Canada upheld its tightening stance byraising its key overnight rate to 3.25% with 25−basis−pointincreases in October and December. The yield curvecontinued to flatten during the three−month period, asseveral strong economic indicators pushed shorter−datedyields higher. Decades−low unemployment, resilient retailsales, and strong productivity growth − even in themanufacturing sector − have been indicative of a solidCanadian economy. The yield on the benchmarkGovernment of Canada 10−year bond held steady asheadline inflation retreated along with gasoline prices. In thecorporate bond market, spreads remained tight. The Fundrose 0.5% in this environment to trail its benchmark indexslightly. The Fund’s modest overweight exposure toprovincial bonds, the best performer during the quarter,helped relative performance.

The portfolio manager, David Prothro, continues to hold anoverweighted position in structured products at the expenseof corporate bonds. In the current market environment, Mr.Prothro prefers corporate bonds with shorter maturities.Federal bonds remain underweight relative to thebenchmark index. A barbell strategy remains in place to takeadvantage of a flattening yield curve.

As spreads between corporate and government bondsremain very tight, Mr. Prothro is watchful of the Fund’sposition in corporate bonds. Instead, the Fund has focusedon yield opportunities in the asset−backed and commercial−mortgage−backed securities markets for more attractiverisk−return characteristics. If short−term rates continue torise in 2006, bond markets will face a more challengingenvironment than they have in the past few years.

UNDERLYING FUND −> Fidelity Canadian Bond

Objective This fund aims to provide a steady flow of income and invests primarily inCanadian fixed income securities. It delivers enhanced return potential through adisciplined investment approach, which seeks to add value primarily through securityselection and yield−curve strategies rather than interest rate anticipation.


Fund managers David Prothro, BA, MBA, CFA



−5%

0%

5%

10%

15%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Fidelity Canadian BondFidelity Canadian Bond−A

7.1 7.3 7.7 9.0 8.2 10.4

−0.8

9.1 9.9 12.1



$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000


MLI Fidelity Canadian BondRBC CM Canadian Bond Market IndexFidelity Canadian Bond−A

$20,999* $20,651



This table shows the historical annual compound total return of the fund compared withthe RBC CM Canadian Bond Market Index.


inception

Manulifeinception

date

MLI Fidelity Canadian Bond 7.14% 7.23% 7.38% 7.87% 7.35% Jul 1997

RBC CM Canadian BondMarket Index

6.50% 6.80% 6.74% 7.37% −

Rate of return expectation The fund seeks to achieve returns comparable to, or better than, the RBC CM Canadian Bond MarketIndex.


30

Volatility meter



Manulife McLean Budden Fixed Income Fund

Other 10.61%
















Province of Ontario, 5.38%, December 2, 2012 2.58%

Total 45.53%



The fourth quarter ended with a continued overweightposition in long−term bonds that resulted in a duration thatwas 0.7 of a year longer than the Index, up 0.1 of a yearfrom the beginning of the period. Relative to the Index,mid−term bonds remained overweight by 8% throughoutthe quarter resulting in an underweight position in short−term bonds. There were no net changes in the provincial orcorporate sector weights. New additions in the corporatesector included Bank of Nova Scotia, CARDS II Trust Asset−Backed Security (ABS), National Bank of Canada andManulife Bank, all with a 5−year term and a 7−yearEnbridge Pipelines position. These were offset with sales ofvarious shorter dated bank and ABS paper. The U.S. payposition was increased 1.5% to end the quarter at 7%.

The Fund’s performance for the quarter was moderatelyahead of the Index. The key contribution came fromduration management as the Fund maintained aconsiderably longer duration than the Index during a periodof declining yields for long−term bonds. The higher yieldsprovided by the U.S. pay component also added value.

UNDERLYING FUND −> MB Fixed Income

Objective The McLean Budden Fixed Income Fund is managed for a balance of securityand growth over a period of at least four years. This fund provides moderate real rates ofreturn, primarily through income, by investing in a diversified portfolio of high qualityCanadian debt securities such as bonds, debentures and T−bills.

Managed by McLean Budden Limited

Fund managers Cort Conover, CFA; Peter Kotsopoulos, CFA; Tony Magri, CFA, MBA;Paul Marcogliese, CFA and Cindy Nam

Inception date January 1981 Total assets $3,276.3 million


−5%

0%

5%

10%

15%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI McLean Budden Fixed IncomeMB Fixed Income

6.3 7.7 6.5 8.0 8.7 11.8

−2.1

12.6 11.3 12.6



$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000


MLI McLean Budden Fixed IncomeSC Universe Bond Total Return IndexMB Fixed Income

$20,906* $20,712





inception

Manulifeinception

date

MLI McLean Budden FixedIncome

6.31% 6.99% 6.83% 7.44% 7.20% Jul 1997


6.46% 6.80% 6.77% 7.42% −

Rate of return expectation Scotia Capital Universe Bond Index + 0.5% (annualized) over a moving four−year period.


31

Volatility meter



Manulife SEAMARK Bond Fund



Other 6.15%








Province of British Columbia, 5.62%, August 17,2028

5.63%


Quebec Housing, 11.38%, September 6, 2010 5.35%

Toronto Dominion Bank, 5.20%, September 4,2012

4.93%

Citibank Canada, 4.78%, June 15, 2009 4.23%

Royal Bank of Canada, 7.10%, January 25, 2015 4.12%


Total 55.58%



The Canadian yield curve continued to flatten during thequarter. The two-year bond yield increased 53 basis pointsto 3.83%, while the 30-year bond yield declined 17 basispoints to 4.04%. The rise in the front end of the yield curvewas driven by two rate hikes by the Bank of Canada (BoC),increasing the Bank Rate to 3.50%. The decline in thelonger end of the yield curve reflects an expectation thatfurther rate hikes will dampen future growth prospects.

The U.S. Federal Reserve (Fed) in December adopted a lesshawkish tone, indicating the end is in sight to the U.S. ratetightening cycle. The BoC appears to have more work todo. While inflation remains benign, tight labour marketsand capacity utilization make one or possibly two more BoCrate hikes likely in 2006. We therefore expect the short−endof the Canadian yield curve to continue to rise, while thelonger end stabilizes near current levels.

The Fund is positioned to take advantage of the anticipatedupward rate adjustment. It is focused on high credit qualityissues out of concern that credit spreads for lower qualityborrowers could widen from the current unusually narrowconditions.

UNDERLYING FUND −> SEAMARK Pooled Canadian Bond

Objective The SEAMARK Pooled Canadian Bond Fund is managed to preserve capitalwhile generating current income. The fund will seek to enhance returns throughmoderate capital gains under appropriate market conditions while seeking to preventcapital losses under adverse conditions. The fund will invest primarily in Canadian dollardenominated fixed income investments.

Managed by SEAMARK Asset Management Ltd.

Fund managers Tom R. MacLaren, BBA, FCSI, CFA; Rob Weatherston, CFA; Remi Roger,CFA; and Heather Hurshman, MA.


Historical gross returnsGross rates of return are shown before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in August 1997. To provide further historical information, the shaded arearepresents the returns of the underlying fund for the period before the start date of theManulife fund.

−5%

0%

5%

10%

15%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI SEAMARK Bond

5.2 6.5 5.8 8.3 8.0

10.6

−2.5

8.9



$10,000

$11,000

$12,000

$13,000

$14,000

$15,000

$16,000

$17,000

$18,000

$19,000

Dec97 Dec98 Dec99 Dec00 Dec01 Dec02 Dec03 Dec04 Dec05

MLI SEAMARK BondSC Universe Bond Total Return IndexSEAMARK Pooled Canadian Bond

$17,465*

$18,034





inception

Manulifeinception

date

MLI SEAMARK Bond 5.24% 5.87% 5.84% 6.76% 6.39% Aug 1997


6.46% 6.80% 6.77% 7.42% −

Rate of return expectation The fund’s performance is benchmarked against the Scotia Capital Universe Bond Index. Returns inexcess of this benchmark, is an objective only, and is not guaranteed by any party.


32

Volatility meter



Manulife MFC Global Pooled Canadian Bond IndexFund

Cash 0.06%
















Province of Quebec, 6.25%, June 1, 2032 1.64%

Total 36.37%



The Bank of Canada resumed tightening in September,bringing the rate to 3.25% by year−end. The yield curve forGovernment of Canada bonds flattened significantly; yieldson two−year bonds rose to 3.85%, while yields on 30−yearbonds fell to 4.04%.

The Federal Reserve raised rates eight times in 2005,bringing the rate to 4.25%. Longer−maturity Treasuriesrallied considerably, with 30−year yields declining to 4.53partly due to a glut in global savings. Demand alsostemmed from the recycling of trade surpluses of Asianexporting countries into U.S. Treasuries, demand from assetliability matching activities, and tame core inflation numbers.Fixed−income credit spreads in the U.S. widened; weaknesswas concentrated in the auto and auto part manufacturingsectors. Credit spreads in Canada were relatively unchanged.

A flattening bias in yield curve positioning positivelyimpacted portfolio returns, while the contribution fromduration was mixed.

The growth of the North American economy is expected tobe slower in 2006. The housing market and its effect onconsumers is expected to lead the slowdown. With coreinflation in the U.S. and Canada gradually declining, bothcentral banks have hinted they will soon end their tighteningcycles. The Fund managers are reviewing their yield curveand duration strategies to position the portfolio for the newenvironment.

UNDERLYING FUND −> MFC Global Pooled Cdn Bond Index

Objective The MFC Global Pooled Canadian Bond Index Fund is managed to provide arate of return based on the performance of the Scotia Capital Universe Bond Index. Thisfund seeks to earn returns that replicate, as closely as possible, the Scotia Capital UniverseBond Index. This is a passively managed fund. To achieve its investment objective, thefund will invest directly in bonds and may use derivative instruments in order to replicatethe securities of the Scotia Capital Universe Bond Index.

Managed by MFC Global Investment Management (Toronto)


Inception date April 1999 Total assets $120.6 million

Historical gross returnsGross rates of return are shown before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in October 2001. To provide further historical information, the shaded arearepresents the returns of the underlying fund for the period before the start date of theManulife fund.

0%

5%

10%

15%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI MFC Global Pooled Cdn Bond IndxMFC Global Pooled Cdn Bond Index

6.4 7.1 6.8 9.0 8.1

10.0



$9,000

$10,000

$11,000

$12,000

$13,000

$14,000

$15,000

$16,000

Mar99 Dec99 Dec00 Dec01 Dec02 Dec03 Dec04 Dec05

MLI MFC Global Pooled Cdn Bond IndxSC Universe Bond Total Return IndexMFC Global Pooled Cdn Bond Index

$15,269* $15,469





inception

Manulifeinception

date

MLI MFC Global Pooled CdnBond Indx

6.40% 6.75% 6.76% − 7.06% Oct 2001


6.46% 6.80% 6.77% 7.42% −

Rate of return expectation Over the long term, the fund is expected to track the performance of the Scotia Capital Universe BondTotal Return Index.


33

34

Balanced

Balanced funds typically aim to provide investors with a balance of capital growth

and income. Balanced funds accomplish this by investing in a blend of equity and

fixed income securities. Balanced fund managers typically set a long-term target for

the mix of bonds and equities in the fund and may make moderate changes to the

mix to reflect their outlook on which asset class represents the best opportunity.

Balanced funds are ideal for investors who seek a diversified portfolio with an

average level of volatility and who do not want to manage the mix of asset classes

on their own. Balanced funds are appropriate for investors who are looking for a

mix of growth and income over the long-term and are comfortable with some

short-term volatility in their investment returns.

Balanced FUND PAGE

CODE NUMBER

Manulife Elliott & Page Monthly High Income Fund 5132 35

Manulife McLean Budden Balanced Growth Fund 5161 36

Manulife Canadian Balanced Ethics Fund 5162 37

Manulife McLean Budden Balanced Fund 5164 38

Manulife SEAMARK Balanced Fund 5171 39

Manulife Trimark Income Growth Fund 5181 40

Manulife Jarislowsky Fraser Balanced Fund 5241 41

Manulife Leith Wheeler Diversified Pooled Fund 5301 42

Global Balanced

Manulife CI International Balanced Fund 5231 43

Volatility meter


BALANCED Code 5132

Manulife Elliott & Page Monthly High Income Fund

Other 10.11%

REIT 4.30%

Oil & Gas Income Trust 8.10%

Cash 4.75%

Non−Oil & Gas Income Trust 17.29%

Bond 16.80%Stock 38.65%



E&P Money Fund − I (MFC) 9.42%

BCE Inc. 4.00%

Petro−Canada 3.11%

ARC Energy Trust 2.94%

TD Bank 2.76%

BFI Canada Income Fund 2.51%

Bank of Nova Scotia 2.23%

Power Financial Corp. 1.95%

Sun Life Financial Inc. 1.91%

Brookfield Asset Management 1.90%

Total 32.73%



Every asset class posted positive returns in 2005. Incometrusts, as measured by the Scotia Capital Income Trust IndexOverall, performed best, returning 29.40%. Canadianequities, as measured by the S&P/TSX Index, returned24.13%. Bonds, as measured by the Scotia Capital BondUniverse Overall, lagged returning 6.46%. Energy pricesdominated the news, with the price of oil increasing 40%.

The Fund managers’ decision to hold an underweight inenergy, based on valuation, had the greatest impact on Fundperformance: the managers do not weight energy heavily,not wanting to sacrifice future capital for a higher level ofcurrent income. During the year, the Fund’s equity allocationwas increased to 39%, bonds and cash were increased toapproximately 30%, and the income trust weighting wasdecreased to 31%. Equities appeared to be more attractivelyvalued than income trusts. The risk profile of the Fund,however, was not changed significantly, and the asset mixremains 70% equities and income trusts and 30% cash andbonds, compared to 60% equities and 40% bonds for thebenchmark.

The federal government’s announcement that it would leavethe tax treatment of income trusts unchanged and increasethe dividend tax credit was positive for both income trustsand dividend−paying stocks, and should remain so in 2006.In September, the Bank of Canada began raising rates:continued increases and consequent changes in bond priceswould prove to be negative for the portfolio, which is highlyinterest sensitive. The Fund managers will continue to seeksecurities that are undervalued and provide the best risk−return profile.

UNDERLYING FUND −> Elliott & Page Monthly High Income Fund

Objective The Elliott & Page Monthly High Income Fund seeks to provide investors witha steady flow of monthly income and capital growth through investments in Canadianfixed income and large cap securities. The Fund may also invest in units or royalty trustsand real estate investment trusts.


Fund managers Alan Wicks, CFA

Inception date September 1997 Total assets $3,435.9 million

Historical gross returnsGross rates of return are shown before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in December 2004. To provide further historical information, the shaded arearepresents the returns of the underlying fund for the period before the start date of theManulife fund.

−20%

0%

20%

40%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI E&P Monthly High IncomeElliott & Page Monthly High Income

15.1 21.8 22.2

14.8 21.5

30.6

8.0 −2.5



$0

$10,000

$20,000

$30,000

$40,000


MLI E&P Monthly High IncomeBlend: 60% S&P/TSX, 40% Scotia UniverseElliott & Page Monthly High Income

$30,506*

$17,876





inception

Manulifeinception

date

MLI E&P Monthly HighIncome

15.09% − − − 17.18% Dec 2004

Blend: 60% S&P/TSX, 40%Scotia Universe

15.95% 13.43% 14.37% 6.96% −

Rate of return expectation Over the long term, the fund is expected to outperform a benchmark portfolio that is comprised of:· 60% S&P/TSX Composite Total Return Index· 40% Scotia Capital Universe Bond Index


35

Volatility meter


BALANCED Code 5161

Manulife McLean Budden Balanced Growth Fund

International Equity 12.93%

United States Equity 14.69%

Cash 6.16%

Other 0.12%

Bond 34.37%




MB Global Equity Growth 8.71%




Talisman Energy 1.85%


Manulife Financial 1.65%

Royal Bank of Canada 1.65%


TD Bank 1.60%

Total 26.03%



Most global equity markets generated positive returnsduring the quarter despite continued tightening by severalmajor central banks. The Bank of Canada and the U.S.Federal Reserve increased overnight rates by 50 basis pointsduring the period, while the European Central Bankannounced its first interest rate increase in five years, movingthe region’s benchmark rate off a six−decade low.

The Fund registered a solid 2.7% return for the quarter andoutpaced the benchmark with relatively favourable resultsachieved in all underlying asset classes. Within the Canadianequity component, strong stock selection in energy andmaterials more than offset negative sector allocation duringthe period. Globally, strong stock selection within energy,combined with an underweight position in thisunderperforming sector, drove relative results. The bondportfolio benefited from its long duration position as theyield curve continued to flatten during the period. Theimpact from asset mix was minimal during the quarter.

Asset mix changes during the period were modest. TheFund began the quarter targeting total equity contentslightly higher than benchmark, while remainingunderweight in bonds and overweight in cash. During thethird quarter, when the adverse impact of hurricanes in the U.S. led to a spike in macroeconomic and inflation risks, cashlevels were raised. As subsequent economic data showedevidence of stabilization, the Fund’s targeted cash allocationwas reduced by 1.0% with half of the proceeds used toincrease the overweight position in foreign equities and theother half deployed into bonds. Relative to the benchmark,the Fund closed out 2005 with an asset mix target thatcontinued to favour global equities at the expense ofCanadian equities, while remaining underweight in bonds and modestly overweight in cash.

UNDERLYING FUND −> MB Balanced Growth

Objective The McLean Budden Balanced Growth Fund is managed for a balance ofsecurity and growth. This fund invests in Canadian and foreign equities and fixed incomesecurities issued by Canadian governments and corporations. This fund provides superiorreal rates of return both through income and capital appreciation.


Fund managers Tony Magri, CFA, MBA; Doug Andrews; Alan Daxner; John Ackerl,CFA, MBA; and Mary Hallward, BA, MBA

Inception date January 1997 Total assets $2,226.6 million

Historical gross returnsGross rates of return are before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in July 1997. To provide further historical information, the shaded arearepresents the returns of the underlying fund for the period before the start date of theManulife fund.

−10%

0%

10%

20%

30%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI McLean Budden Balanced GrowthMB Balanced Growth

11.3 8.5 14.4

−6.9 2.8

12.2 13.7

6.5

16.2 22.1



$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

Dec96 Dec97 Dec98 Dec99 Dec00 Dec01 Dec02 Dec03 Dec04 Dec05

MLI McLean Budden Balanced GrowthBlend: MLI McLean Budden Balanced GrowthMB Balanced Growth

$20,504*

$19,242





inception

Manulifeinception

date

MLI McLean BuddenBalanced Growth

11.30% 9.87% 11.36% 5.72% 7.64% Jul 1997

Blend: MLI McLean BuddenBalanced Growth

13.11% 11.37% 12.13% 5.09% −

Rate of return expectation Over a moving four−year period, the fund strives to outperform by 1% per year a benchmark portfoliocomposed of the following:· 37% Scotia Capital Universe Bond Index· 33% BMO/TSX Composite Cap 10% Index· 25% MSCI World Index ($ Cdn)· 5% Scotia Capital 91−Day T−bill Index


36

Volatility meter


BALANCED Code 5162

Manulife Canadian Balanced Ethics Fund

Cash 3.54%



Bond 36.36%



MB Select Fixed Income 36.36%

MB Select Canadian Equity 32.55%

MB Select Global Equity 27.55%

Total 96.46%




The Fund registered a solid 2.4% return for the quarter andoutpaced the benchmark with relatively strong resultsachieved in all underlying asset classes. Within the Canadianequity component, stock selection bolstered results as keyholdings, Dofasco and Placer Dome, were targets oftakeover offers. Globally, relatively weak results intelecommunication services were more than offset by strongstock selection in energy. The bond portfolio benefited fromits long duration position as the yield curve continued toflatten during the period. The impact from asset mix wasminimal during the quarter.

Asset mix changes during the period were modest. TheFund began the quarter targeting total equity contentslightly higher than benchmark, while remainingunderweight in bonds and overweight in cash. During the third quarter, when the adverse impact of hurricanes in the U.S. led to a spike in macroeconomic and inflation risks, cashlevels were raised. As subsequent economic data showedevidence of stabilization, the Fund’s targeted cash allocationwas reduced by 1.0%, with half of the proceeds used toincrease the overweight position in foreign equities and theother half deployed into bonds. Relative to the benchmark,the Fund closed out 2005 with an asset mix target thatcontinued to favour global equities at the expense ofCanadian equities, while remaining underweight in bonds and modestly overweight in cash.

UNDERLYING FUND −> MB Select Balanced

Objective The McLean Budden Select Balanced Fund is managed to provide a superiorreal rate of return through both income and capital appreciation. This fund invests inCanadian and global equities and fixed income securities issued by Canadiangovernments and corporations. The fund screens for tobacco, alcohol, and gamingcompanies. Companies must adhere to employment standards and may not derive morethan 10% of their gross annual revenue from armaments.


Fund managers McLean Budden − Mgmt. Team

Inception date September 2000 Total assets $57.4 million

Historical gross returnsGross rates of return are before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in February 2001. To provide further historical information, the shaded arearepresents the returns of the underlying fund for the period before the start of theManulife fund.

−10%

0%

10%

20%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Canadian Balanced EthicsMB Select Balanced

10.9 8.6 13.8

−5.1 2.7



$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

Dec00 Dec01 Dec02 Dec03 Dec04 Dec05

MLI Canadian Balanced EthicsBlend: MLI Canadian Balanced EthicsMB Select Balanced

$12,627*

$10,710





inception

Manulifeinception

date

MLI Canadian BalancedEthics

10.88% 9.72% 11.07% − 5.58% Feb 2001

Blend: MLI CanadianBalanced Ethics

10.99% 9.93% 10.58% 3.30% −

Rate of return expectation Over a moving four−year period, the fund strives to outperform by 1% per year a benchmark portfoliocomposed of the following:· 33% S&P/TSX Composite Index· 25% MSCI World Index ($ Cdn)· 37% Scotia Capital Universe Bond Index· 5% Scotia 91−Day T−bill Index


37

Volatility meter


BALANCED Code 5164

Manulife McLean Budden Balanced Fund



Cash 5.26%

Other 0.20%

Bond 34.66%











EnCana Corp. 1.45%



Total 17.25%




The Fund registered a solid 2.5% return for the quarter andoutpaced the benchmark with relatively strong resultsachieved in all underlying asset classes. Within the Canadianequity component, stock selection bolstered results as keyholdings, Dofasco and Placer Dome, were targets oftakeover offers. Globally, relatively weak results intelecommunication services were more than offset by strongstock selection in energy. The bond portfolio benefitedfrom its long duration position as the yield curve continuedto flatten during the period. The impact from asset mix wasminimal during the quarter.

Asset mix changes during the period were modest. TheFund began the quarter targeting total equity contentslightly higher than benchmark, while remainingin underweight bonds and overweight in cash. During the third quarter, when the adverse impact of hurricanes in the U.S. led to a spike in macroeconomic and inflation risks, cashlevels were raised. As subsequent economic data showedevidence of stabilization, the Fund’s targeted cash allocationwas reduced by 1.0%, with half of the proceeds used toincrease the overweight position in foreign equities and theother half deployed into bonds. Relative to the benchmark,the Fund closed out 2005 with an asset mix target thatcontinued to favour global equities at the expense ofCanadian equities, while remaining underweight in bonds and modestly overweight in cash.

UNDERLYING FUND −> MB Balanced

Objective The fund aims to provide a superior real rate of return through both incomeand capital appreciation by investing in a diversified portfolio of equity and fixed incomeassets. The Canadian equity component is managed on a 50/50 blend of growth andvalue styles. The foreign equities have a growth bias.


Fund managers Susan Shuter, Ted Thompson, Benoit Paradis, Hans Van Monsjou, Alan Daxner, Doug Andrews, Colin Sinclare, Roger Beachemin and John Ackerl

Inception date March 1999 Total assets $1,450.6 million

Historical gross returnsGross rates of return are before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in August 2004. To provide further historical information, the shaded arearepresents the returns of the underlying fund for the period before the start date of theManulife fund.

−5%

0%

5%

10%

15%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI McLean Budden BalancedMB Balanced

10.9 8.9

13.4

−4.4

4.4

12.9



$10,000

$11,000

$12,000

$13,000

$14,000

$15,000

$16,000

$17,000

$18,000


MLI McLean Budden BalancedBlend: MLI McLean Budden BalancedMB Balanced

$17,070*

$15,396





inception

Manulifeinception

date

MLI McLean BuddenBalanced

10.86% − − − 11.24% Aug 2004

Blend: MLI McLean BuddenBalanced

13.11% 11.37% 12.13% 5.09% −

Rate of return expectation The rate of return is expected to exceed the benchmark by 1%. The benchmark is composed of:·33% BMO/TSX Comp. Cap 10% ·25% MSCI World ·37% SC Universe Bond ·5% SC 91−Day T−Bills


38

Volatility meter


BALANCED Code 5171

Manulife SEAMARK Balanced Fund



Cash 0.80%

Bond 35.34%





TD Bank 5 3.30%


Alberta Municipal Finance, 5.85%, June 1, 2012 2.54%


Thomson Corporation

Royal Bank of Canada

Suncor Energy

Petro-Canada

Sun Life Financial Inc.

Total 25.84%



North American markets recovered from a sharp Octobercorrection to finish modestly higher for the quarter. Thecorrection was driven by renewed concerns over U.S.inflation and the level of future economic growth. Marketsbegan recovering in late October as inflation and growthconcerns eased, and the price per barrel of oil stabilized inthe high $50 US range.

The Fund returned 1.04% for the quarter. Modest fixed income underperformance resulted from the Fund’sdefensive positioning with limited exposure to higher riskbonds out of concern that credit spreads could widenfrom current unusually narrow conditions.

The Canadian stock market posted a 2.86% return for thequarter. The Fund was well positioned in general terms, butunderperformed our expectations due to disappointingdeclines towards year end in the price of Quebecor World,Thomson, and BCE. Better performance came from oursubstantial materials and financials holdings as well as fromCN Rail and Gildan Activewear.

Financials and materials stocks were the S&P500’s bestperformers. The Fund’s de−emphasis on these two sectors,in the U.S., combined with a pullback by technology, healthcare and consumer holdings, that have generally done wellthis year, led the Fund’s U.S. equities to lag the index. Theportfolio’s best performing stocks were in financials andenergy with JP Morgan and Citigroup both out−performingthe S&P 500 Financials' index and Schlumberger, the world’slargest oilfield services company, appreciating 15%.

UNDERLYING FUND −> SEAMARK Pooled Balanced

Objective The SEAMARK Pooled Balanced Fund is managed to preserve capital andminimize market value fluctuations while generating superior long−term returns throughcapital gains augmented by current income. The fundwill invest in fixed income andequity investments.


Fund managers Peter Marshall, B.Comm.; Tom R. MacLaren, BBA, FCSI, CFA;George V. Loughery, CGA, CFA; and Lance Speck, CFA.

Inception date June 1997 Total assets $1,037.4 million


−10%

0%

10%

20%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI SEAMARK Balanced

9.7 5.7

13.9

−6.1

5.8

16.6 16.9

9.5



$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000


MLI SEAMARK BalancedBlend: MLI SEAMARK BalancedSEAMARK Pooled Balanced

$20,305*

$15,658





inception

Manulifeinception

date

MLI SEAMARK Balanced 9.65% 7.67% 9.72% 5.58% 8.20% Aug 1997

Blend: MLI SEAMARKBalanced

8.42% 8.08% 8.57% 2.62% −

Rate of return expectation The fund’s performance is benchmarked against a blend of: · 5% Scotia Capital 91−Day T−bills · 40% Scotia Capital Universe Bond Index · 30% S&P/TSX Composite Total Return Index · 25% MSCI world (ex Canada) Index ($ Cdn)

Returns in excess of this benchmark, is an objective only, and is not guaranteed by any party.


1.80%

2.12%

2.19%

2.20%

2.02%

39

Volatility meter


BALANCED Code 5181

Manulife Trimark Income Growth Fund

Cash 2.16%



Bond 38.42%




Canada Govt 5.75%, June 1, 2029 5.11%


TD Bank 3.44%

Gov’t of Canada, June 1, 2014 2.87%

BCE Inc. 2.70%

Loblaw Companies 2.29%

IGM Financial 2.19%

Onex Corporation 2.05%

CIBC 2.04%

Canada Housing Trust, February 15, 2008 1.86%

Total 28.08%


(As at December 31, 2005).

Ross Stores Inc. and The Bank of Nova Scotia were majorcontributors to the Fund’s performance in the fourthquarter of 2005. Earlier this year, Ross Stores had problemswith new inventory management systems that adverselyaffected results. The stock did well in the fourth quarter, asstrong same−store−sales results are an indication that theseproblems are being resolved. The Bank of Nova Scotia hastremendous growth prospects embedded in its Mexicansubsidiaryrepresenting a competitive advantage for thebank versus its industry peers.

As yields continue to rise, the portfolio management team ismaintaining the Fund’s modified duration at approximately0.5 years shorter than the benchmark Scotia CapitalUniverse Bond Index. Recently, the declining attractiveness ofcorporate spreads has been such that the Fund’s corporateweighting has been reduced slightly, although it remainsslightly higher than the benchmark index at 30% versus26%, respectively.

The Fund has underperformed in the short term due to anabsence of energy holdings. The Trimark discipline involvesinvesting in businesses with strong opportunities for growthat attractive prices. Investing in a business only at a discountto its true economic value is a key risk managementmechanism for the Fund. At the beginning of 1999, theFund had made significant investments in energy companiesthat generated strong returns for the Fund from 1999 to2004. Valuations of energy businesses are now veryexpensive and the team has moved capital into newbusinesses that it believes will significantly outperformenergy stocks over the next three to five years.

UNDERLYING FUND −> Trimark Income Growth

Objective The Trimark Income Growth Fund seeks to generate capital growth andincome over the long term. The fund invests primarily in Canadian equities, fixed−income securities of Canadian issuers, both government and corporate,and foreign equities and fixed−income securities up to the maximum allowable foreigncontent limit.

Managed by AIM Trimark Investments

Fund managers Geoff MacDonald, BBA, MBA, CFA; Alfred Samson; Rex Chong, CFA,MBA; and Anthony Imbesi, CFA, BComm.



−10%

0%

10%

20%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Trimark Income GrowthTrimark Income Growth − SC

6.8

15.8 14.5

3.8

15.6 18.3

12.8

−1.2

4.6

19.9



$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

$24,000

$26,000

$28,000


MLI Trimark Income GrowthBlend: 60% S&P/TSX, 40% Scotia UniverseTrimark Income Growth − SC

$27,215*

$23,847





inception

Manulifeinception

date

MLI Trimark Income Growth 6.84% 11.22% 12.31% 11.20% 9.44% Oct 1997

Blend: 60% S&P/TSX, 40%Scotia Universe

15.95% 13.43% 14.37% 6.96% −

Rate of return expectation To be the top of its respective category over the long term, while striving to outperform a benchmarkportfolio composed of:· 60% S&P/TSX Composite Index· 40% Scotia Capital Universe Bond Index


40

Volatility meter


BALANCED Code 5241

Manulife Jarislowsky Fraser Balanced Fund (Availableto Registered Plans Only)



Cash 7.90%


Bond 35.10%




Nexen 2.20%




TD Bank 1.90%

Shell Canada 1.60%

Canadian Tire Corporation 1.20%

Imperial Oil 1.20%

TransCanada Corp. 1.20%

Total 17.70%



Raw material prices soared as supply shortages materializedwith the start of the rebuilding of New Orleans andsurrounding areas following the devastating hurricanes. Onthe other hand, the price of oil slipped below $60 US/barrelfor the first time since mid−summer in response to earlysigns of slowing demand. Around the world, in recent years,the real strength in equities has been in smaller companies.Starved for yield as interest rates declined, investors moveddown the capitalization spectrum in search of greatercapital gains.

On the equity side, strong performance continued to mainlycome from sectors where we were underexposed. Thisincluded stocks that had smaller capitalization or a cyclicalelement, a trend that has continued for several years. Theextended rally in the energy sector also came to an end. Inaddition, this year’s strong run in the Japanese stock markethas hampered relative performance in the EAFE portfolio.

An inverted yield curve has historically been the harbinger ofrecession. We do not necessarily anticipate such anoutcome at this point in time. However, it is likely that highenergy prices, a slowing real estate market, low savingsrates, and high borrowing levels will eventually lead to aslowdown in the global economy. It is only a matter of timebefore the more cyclical companies begin to suffer earningssetbacks. At that time, money will flow out of the high betastocks in those sectors and into the more defensive, higher−quality areas that we favour such as consumer staples andhealth care companies. Our philosophy points us towardscompanies that are able to continue to grow earnings in apredictable manner no matter what direction the economyis heading.

UNDERLYING FUND −> JF Balanced

Objective The Jarislowsky Fraser Balanced Fund is a diversified portfolio consisting offixed income assets, North American equities and International equities. It seeks to addvalue through longer−term asset mix positioning and stock selection rather than short−term trading. The portfolio’s volatility is kept to a minimum by implementing onlyincremental asset mix changes and buying large cap, blue−chip equity holdings and highquality, non−cyclical bonds.

Managed by Jarislowsky Fraser Ltd.

Fund managers Jarislowsky Fraser − Mgmt. Team

Inception date April 1997 Total assets $3,762.6 million


0%

5%

10%

15%

20%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI JF BalancedJF Balanced

11.3 9.6 10.1

0.2

4.3

17.9

7.6 11.0



$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

$24,000

Mar97 Dec97 Dec98 Dec99 Dec00 Dec01 Dec02 Dec03 Dec04 Dec05

MLI JF BalancedBlend: MLI JF BalancedJF Balanced

$22,758*

$20,510





inception

Manulifeinception

date

MLI JF Balanced 11.26% 10.43% 10.34% − 8.36% Oct 2001

Blend: MLI JF Balanced 12.64% 11.01% 11.77% 5.76% −

Rate of return expectation Benchmark changed as at July 1, 2005. Over the long term, this fund is expected to outperform abenchmark comprised of the following:· 30% S&P/TSX Composite Index,· 13% S&P 500 Index ($Cdn),· 10% MSCI EAFE Index ($Cdn),· 40% Scotia Capital Universe Bond Index,· 7% Scotia Capital 91−Day T−Bill Index


41

Volatility meter


BALANCED Code 5301

Manulife Leith Wheeler Diversified Pooled Fund



Cash 4.48%


Bond 35.07%



Leith Wheeler International Fund 14.72%

Nexen 3.22%

TD Bank 3.07%


Canada Housing Trust 5.1%, September 15, 2007 2.59%




Province of Ontario, March 8, 2033 2.10%

Canada Housing Trust, March 15, 2010 1.90%

Total 37.62%



For the third successive year, the Canadian equity marketproduced double-digit gains resulting in a three-year totalmarket return of almost 22% per annum. Internationalequity performance was also very strong in 2005 with themarket gaining 10% for the year. In comparison, the U.S.equity market appreciated 4.9% in $U.S. terms; however, this increase was offset by a decline in the value of the U.S.dollar versus the Loonie resulting in a relatively flat year for U.S. equities.

Long-term interest rates continued to fall over the course ofthe fourth quarter and the year. Overall, declining long termrates had a positive impact on the portfolio.

In this market environment, we are pleased by the absolutereturn achieved by the portfolio in 2005 with the fundreturning 11.4% for the year.

Over this time frame, the Diversified Fund has beenoverweighted in Canadian equity and has benefited from thisperiod of exceptional strength. Part of our overweighting inCanadian equities has been funded by underweightingthe much weaker U.S. equity market. While the U.S. dollarappreciated against most of the world’s major currencies in2005 (Yen, Euro and Sterling), it continued to decline relativeto the Canadian dollar.

We now find that the increase in the valuation of many ofthe companies in our Canadian equity portfolio has reducedtheir expected return forecasts. This has resulted in areduction in the Canadian equity weighting of the portfolioto a more neutral position. However, we are expectingreasonable returns, particularily in comparison to bonds,from the stocks we continue to hold.

UNDERLYING FUND −> Leith Wheeler Diversified Pool

Objective The objective of the Leith Wheeler Diversified Pooled Fund seeks to provideinvestors with a relatively stable, superior long−term rate of return through a balancedportfolio of common shares and fixed income securities.

Managed by Leith Wheeler Inv Counsel Ltd.

Fund managers Leith Wheeler Inv. Counsel − Mgmt. Team


Historical gross returnsGross rates of return are before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in October 2003. To provide further historical information, the shaded arearepresents the returns of the underlying fund for the period before the start date of theManulife fund.

0%

5%

10%

15%

20%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Leith Wheeler DiversifiedLeith Wheeler Diversified Pool

11.6 13.9

16.1

2.0



$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

$14,000

$15,000

$16,000

Feb01 Dec01 Dec02 Dec03 Dec04 Dec05

MLI Leith Wheeler DiversifiedBlend: MLI Leith Wheeler DiversifiedLeith Wheeler Diversified Pool

$15,957*

$12,889





inception

Manulifeinception

date

MLI Leith WheelerDiversified

11.60% 12.74% − − 14.81% Oct 2003

Blend: MLI Leith WheelerDiversified

12.54% 10.80% 11.66% 4.60% −

Rate of return expectation The fund’s performance is benchmarked against a blend of:· 35% S&P/TSX Composite Index · 12.5% S&P 500 Index ($ Cdn)· 12.5% MSCI EAFE Index ($ Cdn) · 35% Scotia Capital Universe Bond Index· 5% Scotia Capital 91−Day T−bill Index


42

Volatility meter


GLOBAL BALANCED Code 5231

Manulife CI International Balanced Fund

Cash 8.10%

Bond 22.12%





Government of France, 4.00%, April 25, 2009 1.90%

Government of Netherlands, 3.00%, January 15,2010

1.83%

Canada Housing Trust, 5.10%, September 15,2007

1.75%

Republic of Germany, 5.00%, January 4, 2012 1.73%

Microsoft 1.46%

Federal Home Loan Bank, 3.63%, June 20, 2007 1.15%

General Electric 1.13%

Government of Mexico, 10.00%, December 5,2024

1.12%

Everest Re Group 1.05%

Samsung Electronics 0.99%

Total 14.11%



International equity markets were a mixed picture in 2005,with the emerging markets and Japan providing strongreturns. However, the strength of the Canadian dollaragainst the U.S. dollar and especially against the Euro andYen reduced returns for Canadian investors on foreignsecurities.

Looking ahead, we anticipate another year of globaleconomic growth, which should create a constructivebackdrop for equity markets − even as the composition ofgrowth and relative market performance is likely to shift.We would not be surprised to see foreign markets continueto outpace the U.S. market in 2006. Valuations remainmore attractive in many foreign markets. Even thoughinterest rates may rise this year in Europe and Japan,monetary policy in those regions is likely to remain moreaccommodative.

Markets in Europe and non−Japan Asia are trading at anattractive 12 to 13 times earnings, while many emergingmarket stocks still trade on single−digit multiples. Withgovernment bond yields still quite low in most nations,comparisons of bond yields to equity earnings yields stillsuggest that equities on average are still more than 40%undervalued relative to bonds. Accordingly, we continue tofavour equities in the Fund, which maintained a target of70% equities and 30% fixed income.

In the Fund, holdings in the consumer discretionary, energy,financial and health−care sectors added the most relativevalue over the quarter. An overweight allocation toconsumer discretionary stocks and underweight allocationto energy stocks also helped performance. Geographically,the Fund’s holdings outperformed the benchmark’s regionalconstituents in all regions, and exposure to emergingmarket stocks was also beneficial to relative performance.

UNDERLYING FUND −> CI International Balanced

Objective The CI International Balanced Fund is managed to provide maximum long−term total return. The fund invests primarily in equities, equity−related securities andfixed income securities of issuers located throughout the world. The fund is not limitedto how much it invests in a country or asset class or keeps invested in each asset class.This will vary according to market conditions.

Managed by CI Investments Inc.

Fund managers William Sterling, PhD, Robert Beckwitt, BA and Greg Gigliotti

Inception date October 1994 Total assets $525.0 million

Historical gross returnsGross rates of return are before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in February 2001. To provide further historical information, the shaded arearepresents the returns of the underlying fund for the period before the start date of theManulife fund. Note: Gross returns have been estimated as net return plus managementexpense ratio.

−20%

0%

20%

40%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI CI International BalancedCI International Balanced

4.0 6.4 13.9

−10.5−15.3 4.0

22.9 22.6 18.8 16.2



$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000


MLI CI International BalancedBlend: MLI CI International BalancedCI International Balanced

$20,506*

$15,964





inception

Manulifeinception

date

MLI CI InternationalBalanced

3.97% 5.15% 8.00% − −0.44% Feb 2001

Blend: MLI CI InternationalBalanced

0.57% 2.87% 2.75% −1.08% −

Rate of return expectation Over the long term, the fund is expected to outperform a benchmark portfolio that is comprised of:· 60% MSCI World Index ($ Cdn)· 40% JP Morgan Government Bond Index


43

44

Canadian Equity

Canadian Equity funds typically aim to achieve long-term capital growth by

investing in a diversified portfolio of shares issued by Canadian companies. Some

Canadian Equity funds invest a portion of their assets in shares of foreign

companies. A share represents an ownership stake in a company; therefore, how

the fund performs depends on the success of the company holdings within the

fund. A fund's performance can also be affected by factors such as currency

exchange rates and economic and political trends.

Canadian Large Cap Equity funds are ideal for investors who have a long-term

focus, prefer to invest in Canadian companies, and are comfortable accepting

some degree of volatility.

Canadian Small/Mid Cap Equity funds are suitable for investors who have a long-

term focus, prefer to invest in Canadian companies, and are comfortable accepting

a higher degree of volatility.

Canadian Large Cap Equity FUND PAGE

CODE NUMBER

Manulife Elliott & Page Canadian Equity Fund 7121 45

Manulife Canadian Large Cap Value Equity Fund (MFC) 7131 46

Manulife MFC Global Pooled Canadian Index Fund 7132 47

Manulife Fidelity Canadian Large Cap Fund 7141 48

Manulife McLean Budden Canadian Equity Growth Fund 7161 49

Manulife McLean Budden Canadian Equity Fund 7164 50

Manulife SEAMARK Canadian Equity Fund 7171 51

Manulife Trimark Canadian Fund 7181 52

Manulife Canadian Large Cap Top Down Equity Fund (Zechner) 7192 53

Manulife Jarislowsky Fraser Canadian Equity Fund 7241 54

Manulife Maxxum Dividend Growth Fund (Mackenzie) 7351 55

Canadian Small/Mid Cap Equity

Manulife Elliott & Page Growth Opportunities Fund 7122 56

Manulife Canadian Small Cap Equity Fund (Tattersall) 7191 57

Volatility meter


CANADIAN LARGE CAP EQUITY Code 7121

Manulife Elliott & Page Canadian Equity Fund

Cash 0.50%

Information Technology 4.98%

Industrials 6.90%

Consumer Discretionary 6.70%

Other 10.14%

Materials 18.91%

Energy 25.35%Financials 26.52%





EnCana Corp. 4.45%

TD Bank 4.44%



Falconbridge 3.29%

Shell Canada 3.22%

TELUS 3.10%

Canadian National Railway 3.03%

Total 38.61%



The Canadian stock market generated a gain of 2.9% in thefourth quarter, finishing the year with a total gain of 24.2%.Market performance was evenly split over the quarter withfive sectors posting positive gains and five sectors postingnegative gains. Materials led all sectors with a gain of 10%,followed by financials (+7.7%) and utilities (+5.9%).consumer staples (−7.2%), telecommunications (−6.2%)and energy (−2.1%) lagged. The stock market began thequarter with a pullback in October that spread across allsectors, but rebounded strongly in November and Decemberas the economy, employment and consumer confidenceremained strong.

During the quarter the Fund initiated several positions in U.S. equities to compliment the portfolio strategy. The Fundnow holds high-quality U.S. growth stocks in the industrial,consumer discretionary, consumer staples and health caresectors. The Fund remains invested in nine out of tensectors with overweight positions in energy, materials,industrials and consumers (staples and discretionary) andunderweight financials, utilities, health care and technology.

While it appears that we may be headed toward anotherminority government, the event itself is unlikely to impactthe market to any significant degree. With Canada in anenviable position among G7 nations as the only memberwith a government surplus, of greater interest is how muchthe new government will flow back to Canadians and inwhat form. Over the near−term, we are likely to seecontinued interest rate hikes in Canada; continued strongglobal demand for our energy and commodities, which willkeep upward pressure on our dollar; and a moderatelystrong economy with low unemployment.

UNDERLYING FUND −> Elliott & Page Canadian Equity − Class A

Objective The Elliott & Page Canadian Equity Fund seeks to provide long−term capitalgrowth. The fund invests primarily in equity securities of large, established Canadiancompanies and Canadian securities that offer potential for capital growth.


Fund managers Shauna Sexsmith, BA, CFA


Historical gross returnsGross rates of return are shown before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in August 1997. Underlying fund was changed on May 21, 2004 from theElliott & Page Blue Chip Fund to the Elliott & Page Canadian Equity Fund.

−20%

0%

20%

40%

60%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Elliott & Page Canadian EquityElliott & Page Canadian Equity−Cl A

24.5 16.5 20.9

−13.9−10.5 8.5

49.9

7.7 14.2 19.7



$0

$10,000

$20,000

$30,000

$40,000


MLI Elliott & Page Canadian EquityS&P/TSX Total ReturnElliott & Page Canadian Equity−Cl A

$31,707*

$26,850



This table shows the historical annual compound total return of the fund compared withthe S&P/TSX Total Return.


inception

Manulifeinception

date

MLI Elliott & Page CanadianEquity

24.50% 20.41% 20.57% 6.21% 10.44% Aug 1997

S&P/TSX Total Return 24.13% 19.21% 21.66% 6.63% −

Rate of return expectation Over the long term, the fund is expected to outperform the S&P/TSX Composite Index.

Source: Bell Globemedia Publishing Inc.45

Volatility meter



Manulife Canadian Large Cap Value Equity Fund (MFC)


Telecommunication Services 5.13%

Other 9.42%


Cash 8.46%

Materials 13.68%





TD Bank 4.49%



BCE Inc. 3.76%


Power Corp of Canada 3.46%

Power Financial Corp. 3.44%


Husky Energy 3.17%

Total 38.03%



The past year was strong for Canadian investors and theS&P/TSX Composite Index returned 24.13%. Energy,returning 63.43%, utilities, returning 38.29%, andfinancials, returning 23.93%, were the best−performingsectors; the laggards were health care, returning −2.65%and information technology, returning −15.77%. Energyprices dominated the news in 2005, as the price of oilincreased 40%. The energy sector was by far the top−performing sector of the stock market, accounting for morethan half of the year’s gain on the S&P/TSX Index.

The Fund managers’ decision to hold an underweight inenergy, based on valuation, had the greatest impact onFund performance. The Fund’s turnover remains low, andfew changes were made to the portfolio during the year.The most significant change was the addition of incometrusts. During the year, Precision Drilling converted from anequity to an income trust, thus becoming the first incometrust held by the portfolio. The risk profile of the Fund hasnot changed significantly, and the asset mix, relative to theS&P/TSX Index, remains unchanged at 90% in equities and10% in cash.

Standard & Poor announced in September that it wouldinclude income trust units in the S&P/TSX Composite Indexin two steps, after the close on December 16, 2005, and onMarch 17, 2006. This move increases the Fund’s investmentuniverse and should provide greater investmentopportunities in 2006. The addition of 72 trusts to the TSXIndex will boost the energy sector’s weighting toapproximately 30% of the TSX Index. It is unlikely that theFund would ever overweight the energy sector, unlessvaluations became extremely compelling. The Fund willcontinue to purchase good−quality companies at attractivevaluations and sell companies that become overpriced.

UNDERLYING FUND −> MLI Cdn Large Cap Val Equity (MFC)

Objective The Fund is managed to achieve above average long−term capital growth,primarily through investment in common shares of listed Canadian companies withrelatively large market capitalization.




Historical gross returnsGross rates of return are shown before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in July 1997. The underlying fund was changed on September 30, 2002 fromthe Elliott & Page Pooled Canadian Equity Fund to the Manulife Canadian Large CapValue Equity Fund.

−10%

0%

10%

20%

30%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Canadian Large Cap Value Equity

24.3 20.9

26.0

−5.0 −5.2

10.4 6.4

−5.3



$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000


MLI Canadian Large Cap Value EquityS&P/TSX Total Return

$20,020*

$19,502





inception

Manulifeinception

date

MLI Canadian Large CapValue Equity

24.31% 22.57% 23.71% 11.26% 7.25% Jul 1997


Rate of return expectation The fund is expected to outperform the S&P/TSX Composite Total Return Index over moving three−year annualized period by 1.5% per year.


46

Volatility meter



Manulife MFC Global Pooled Canadian Index Fund

Cash 1.32%



Industrials 5.99%

Other 7.60%

Materials 16.82%







EnCana Corp. 3.95%

TD Bank 3.81%

Suncor Energy 2.94%

Bank of Montreal 2.85%

Canadian Natural Resources 2.71%


BCE Inc. 2.26%

Total 34.77%



For the calendar year ending December 31, the S&P/TSXComposite Index advanced 24.13%. Almost all of the tensectors increased over the course of the year, save forinformation technology, health care, and consumer staples,returning −15.77%, −2.65%, and −1.09%, respectively. Thebest−performing sectors were energy, utilities, andfinancials, returning 63.43%, 38.29%, and 23.93%respectively.

Given the large weightings in the S&P/TSX Index for energy,financials, and materials, it is not surprising that the marketdid so well, as these were among the best performers forthe year. For example, the energy, mining, banks, andinsurance sectors all rose in excess of 20% in 2005.

The Canadian economy continues to grow at a steady pace,evidenced by real GDP growth rising at a 3.2% year−over−year rate in October. The labour market finished 2005 withthe unemployment rate at 6.5% which, while an increase,still represents multi−decade lows. The new housing marketfinished strong despite short−term interest rate hikes andrising home prices.

Headline inflation slowed to an annual pace of 2% inNovember from 2.6% in October. The core rate, however,came in a tick ahead of market expectations. An above−consensus core rate of 1.6% does not sound alarm bells, butthe threat of tight labour markets and rising inflationexpectations warrant further action by the Bank of Canada.

Canada’s international trade surplus stood at $7.2 billion inOctober. Higher natural gas prices helped push the value oftotal exports up by 1% to $40 billion and imports rose by1.2% to $33 billion. This trade report shows that theCanadian economy has carried forward momentum fromthe third quarter into the fourth.

UNDERLYING FUND −> MFC Global Pooled Canadian Index

Objective The MFC Global Pooled Canadian Index Fund seeks to achieve investmentresults that approximate the total return of the S&P/TSX Composite Index, one of themost watched indexes of the Canadian Equity Market.




Historical gross returnsGross rates of return are shown before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in January 1998.

−20%

0%

20%

40%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI MFC Global Pooled Cdn Index

24.2

14.5

26.6

−12.7−12.7 7.9

30.9

0.4



$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000


MLI MFC Global Pooled Cdn IndexS&P/TSX Total Return

$19,464* $19,193





inception

Manulifeinception

date

MLI MFC Global Pooled CdnIndex

24.22% 19.23% 21.64% 6.53% 8.68% Jan 1998


Rate of return expectation Over the long term, the fund is expected to track the performance of the S&P/TSX Composite Index.


47

Volatility meter



Manulife Fidelity Canadian Large Cap Fund

Cash 1.30%




Other 7.40%

Materials 14.20%




Bank of Montreal −

Canadian National Railway −

Canadian Natural Resources −

EnCana Corp. −

Imperial Oil −

Research In Motion −

Sun Life Financial −

TD Bank −

TELUS −

Talisman Energy −

Total 44.60%



The Canadian equity market, as represented by the S&P/TSXComposite Index, posted a modest gain of 2.4% over thequarter, bringing the year-to-date total return to 21.9%.Materials rose 9.4% as prices of precious metals such asgold and copper rallied in response to indications thatconstrained resource supply would be insufficient to meetglobal demand, particularly from China and India. Financialsgained 7.1% as the banks continued to report strongearnings in a slow rising interest rate environment. Theindustrials and utilities sectors both gained during the quarteras investors purchased dividend stocks following the lateNovember government announcement of an increase in thedividend tax credit. Energy fell for the first time this year by−2.4% as global oil and gas supply improved for the firsttime since the hurricanes and prices subsequently retreatedto lower levels. As corporate spending on research anddevelopment remained constrained, the healthcare and techsectors lagged in performance during the quarter, andended the year down −3.5% and −15.8% respectively. TheCanadian dollar remained near its high of $86 US, while theBank of Canada kept a hawkish stance on inflation bytightening the lending rate by 50 basis points during thequarter. The Fund rose 1.8% for the quarter endingDecember 30, compared to benchmark at 2.9%, bringingthe one−year total return to 28.7%. Large cap stocks have outperformed the broader marketrecently. Doug Lober believes this will likely continue asinvestors seek sector leadership, the earnings growth andconsistant dividend yield. With Bank of Canada’s tighteningstance on interest rates and potential uncertainty in consumer spending, he remains focused on companies that can exceed estimates while trading at reasonable valuations, and willing to concentrate on fewer quality names rather than general broad market exposure.

UNDERLYING FUND −> Fidelity Canadian Large Cap

Objective The Fidelity Canadian Large Cap Fund aims to achieve long−term capitalgrowth by investing primarily in equity securities of Canadian companies with a focus onlarge companies. The portfolio manager searches for investment opportunities by usingFidelity’s traditional bottom−up investment style, selecting securities for the fund on astock−by−stock basis.


Fund managers Doug Lober



−20%

0%

20%

40%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Fidelity Cdn Large CapFidelity Canadian Large Cap−A

32.7

15.4 25.7

−12.9 −5.1

24.5

36.0

−9.1 5.8

21.2



$5,000

$10,000

$15,000

$20,000

$25,000

$30,000


MLI Fidelity Cdn Large CapS&P/TSX Total ReturnFidelity Canadian Large Cap−A

$29,904*

$26,850





inception

Manulifeinception

date

MLI Fidelity Cdn Large Cap 32.73% 23.75% 24.39% 9.73% 11.03% Jul 1997


Rate of return expectation Over the long term, the fund is expected to outperform the S&P/TSX Composite Index.


48

Volatility meter



Manulife McLean Budden Canadian Equity GrowthFund

Cash 2.00%

Industrials 6.91%


Other 9.72%


Materials 13.74%





TD Bank 5.11%




Magna International 4.18%

Research In Motion 3.94%

Cameco Corp. 3.93%


Canadian Natural Resources 3.83%

Total 46.01%



The Fund increased its commitment to informationtechnology during the quarter. The Index’s inclusion ofincome trusts (at half weight), in December resulted in achange in the weight of a number of sectors, most notablyenergy (increased) and financials (decreased). The remainingweight in income trusts will be added mid−March 2006. Atthe Fund level, these moves resulted in an increase in theunderweight position in energy. Fund activity saw energyholdings, Canadian Natural Resources, Cameco andTalisman, reduced following strong price gains while therewas buying in EnCana. In industrials, the elimination ofCanadian Pacific Railway more than offset additions toCanadian National Railway and Finning. Materials saw somebuying in Novelis, while Dofasco was reduced on a sharpjump in value, as it was the target of two suitors, Arcelorand ThyssenKrupp. Thomson and Magna were increased inconsumer discretionary, while the only activity in health carewas a reduction in Biovail as the stock rallied strongly onnews of the U.S. Food and Drug Administration’s approvalof its pain relief medication Tramadol ER. In financials,Manulife was increased. Information technology holdingResearch In Motion was increased while ATI Technologieswas reduced. The Fund continues to favour informationtechnology while maintaining a relatively low exposure tomaterials, financials and energy.

The Fund posted a solid absolute return and outperformedthe Index for the quarter due to good stock selection inenergy (Cameco) and materials (Dofasco and Alcan), whichmore than offset weak results in consumer discretionary(Thomson and Magna). Sector allocation had a modestlynegative impact with a high commitment to consumerstaples combined with low exposure to financials the mostnotable factors.

UNDERLYING FUND −> MB Canadian Equity Growth

Objective The McLean Budden Canadian Equity Growth Fund is managed for a balanceof security and growth over a period of at least four years. This stock fund invests in adiversified portfolio of Canadian stocks and convertible securities. The fund wasdeveloped to provide superior rates of return, primarily through capital appreciation, byinvesting in a diversified portfolio of Canadian equities.


Fund managers Bill Giblin; Bruce Murray; Mary Hallward, BA, MBA; Doug Andrews;John Durfy; and Miranda Hubbs


Historical gross returnsGross rates of return are shown before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in July 1997. In order to provide further historical information, the shaded arearepresents the returns of the underlying fund for the period before the start date of theManulife fund.

−20%

0%

20%

40%

60%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI McLean Budden Cdn Equity GrowthMB Canadian Equity Growth

22.9 11.8

30.7

−14.1 1.0

18.3 26.6

−2.6

18.6

41.9



$0

$10,000

$20,000

$30,000

$40,000


MLI McLean Budden Cdn Equity GrowthBMO/TSX Composite Cap 10% Index TotalMB Canadian Equity Growth

$35,900*

$33,726



This table shows the historical annual compound total return of the fund compared withthe BMO/TSX Composite Cap 10% Index Total.


inception

Manulifeinception

date

MLI McLean Budden CdnEquity Growth

22.90% 17.23% 21.56% 9.28% 10.50% Jul 1997

BMO/TSX Composite Cap10% Index Total

24.13% 19.20% 21.66% 7.57% −

Rate of return expectation This fund is expected to outperform the BMO/TSX Composite Cap 10% Index over a movingfour−year annualzed period by 1.5% per year.


49

Volatility meter



Manulife McLean Budden Canadian Equity Fund

Cash 3.72%


Other 12.37%

Industrials 7.08%


Materials 16.96%







EnCana Corp. 4.26%


Alcan Inc. 3.58%

TD Bank 3.54%

CIBC 3.43%



Total 38.41%



The Fund increased its commitment to materials during thequarter while the S&P/TSX Composite Index’s reclassificationof Rogers Communications from consumer discretionary totelecommunication services had little impact on the Fund’srelative exposure to the two sectors. The Index’s inclusion ofincome trusts (at half weight), in December resulted in achange in the weight of a number of sectors, most notablyenergy (increased) and financials (decreased). The remainingweight in income trusts will be added mid−March 2006. Atthe Fund level, these moves resulted in an increase in theunderweight position in energy. Other Fund activity sawCanadian Natural Resources, Cameco and Talisman allreduced within energy. In industrials, buying in CanadianNational Railway, Finning and Quebecor World was offset byreductions in Canadian Pacific Railway. The materials sectorwas increased as buying in Inco, NOVA Chemicals andNovelis offset trimming in Placer Dome and Dofasco, eachexperiencing a sharp jump on takeover offers. Consumerstaples holdings, George Weston and Shoppers Drug Mart,were reduced. MDS was a new addition to health care. Infinancials, there was an increase in Manulife. In informationtechnology, additions to Research In Motion more thanoffset the elimination of GEAC following its acquisition by aprivate equity firm, and a reduction in ATI Technologies.Finally, there was some buying in TELUS withintelecommunication services. The Fund continues to favourinformation technology and remains significantlyunderweight the energy sector and to a lesser extentfinancials.

UNDERLYING FUND −> MB Canadian Equity

Objective The Fund aims to provide superior real rate of return primarily throughcapital appreciation, by investing in a diversified portfolio of Canadian equities. Securityselections will emphasize companies which are undervalued or have prospects for aboveaverage earnings growth.


Fund managers Benoit Paradis; Hans Van Monsjou, BComm, CFA; Doug Andrews;Alan Daxner; Colin Sinclare; Susan Shuter, CFA, MBA; Ted Thompson; John Ackerl, CFA,MBA; and Roger Beachemin.

Inception date March 1998 Total assets $2,465.0 million

Historical gross returnsGross rates of return are shown before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in April 2003. In order to provide further historical information, the shadedarea represents the returns of the underlying fund for the period before the start date ofthe Manulife fund.

−10%

0%

10%

20%

30%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI McLean Budden Canadian EquityMB Canadian Equity

21.3

12.1

25.4

−7.1 4.7

23.8 23.6



$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

$24,000

Mar98 Dec98 Dec99 Dec00 Dec01 Dec02 Dec03 Dec04 Dec05

MLI McLean Budden Canadian EquityS&P/TSX Total ReturnMB Canadian Equity

$22,681*

$16,947





inception

Manulifeinception

date

MLI McLean BuddenCanadian Equity

21.34% 16.65% − − 23.59% Apr 2003


Rate of return expectation The gross rate of return over a full economic cycle is expected to exceed the S&P/TSX CompositeIndex.


50

Volatility meter



Manulife SEAMARK Canadian Equity Fund



Cash 1.14%

Other 7.28%

Industrials 8.58%

Materials 16.72%




TD Bank n 8.74%



Thomson Corporation 5.31%

Alcan Inc. 4.62%

Suncor Energy 4.56%

BCE Inc. 4.26%


Great−West Lifeco 4.20%

Bank of Montreal 4.14%

Total 53.04%



This quarter, for the first time in 2005, the energy sector didnot lead the market, giving way to the materials andfinancial sectors. The Fund was well positioned in generalterms, but underperformed our expectations for the quarterdue to disappointing declines towards year end in the stockprice of Quebecor World, Thomson, and BCE. Betterperformance came from our substantial materials andfinancial holdings, as well as from CN Rail, GildanActivewear, and CHC Helicopter.

Strong demand from Asia drove base metals higher.Aluminum and zinc surged over 20%, benefiting Alcan andTeck Cominco. Newmont Mining performed well as goldcontinued to climb. We also saw increased M&A activity, apotential harbinger of more gains to come, as Barrick Goldpurchased Placer Dome to form the world’s largest goldproducer.

Banks and life insurance companies reported good financialresults, benefiting from strong consumer demand for creditand investment products, low levels of loan losses, and goodexpense management. Major Fund holdings TD Bank, RoyalBank and Bank of Montreal all exceeded the financialssector return.

The outlook for the Canadian market remains generallypositive, with strong corporate earnings environmentsupported by good economic growth. This could betempered by renewed strength from the Canadian dollar,rising interest rates, or unforeseen geopolitical events.

UNDERLYING FUND −> SEAMARK Pooled Canadian Equity

Objective The SEAMARK Pooled Canadian Equity Fund is managed to preserve andenhance capital through long−term capital gains with some current dividend income. Thefund will invest primarily in Canadian equity securities.


Fund managers Peter Marshall, B.Comm; George V. Loughery, CGA, CFA; and Chad King, CA, CFA.



−10%

0%

10%

20%

30%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI SEAMARK Canadian Equity

19.9

10.1

26.6

−5.7

7.7

27.4 22.4

−5.5



$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

$24,000

$26,000


MLI SEAMARK Canadian EquityS&P/TSX Total ReturnSEAMARK Pooled Canadian Equity

$25,434*

$20,131





inception

Manulifeinception

date

MLI SEAMARK CanadianEquity

19.92% 14.88% 18.67% 11.14% 11.00% Aug 1997


Rate of return expectation The fund’s performance is benchmarked against the S&P/TSX Composite Total Return Index. Returnsin excess of this benchmark, is an objective only, and is not guaranteed by any party.


51

Volatility meter



Manulife Trimark Canadian Fund

Cash 1.93%


Other 13.33%

Industrials 9.03%

Materials 9.21%

Consumer Staples 13.34%

Consumer Discretionary 18.09%Financials 28.90%




TD Bank 4.97%

Thomson Corporation 4.22%

BCE Inc. 3.42%

Power Corp of Canada 3.25%


Molson Coors Canada 2.81%

Barrick Gold Corp. 2.69%

Toromont Industries 2.66%


Total 34.80%



Kinross Gold Corp. and The Toronto−Dominion Bank weremajor contributors to the Fund’s performance in the fourthquarter. Kinross’ stock benefited from higher gold prices inthe quarter, as well as optimism over the company’s newCEO. Strategic moves made by TD Bank’s managementearlier this year - such as TD Waterhouse’s merger withAmeritrade and TD Bank North’s acquisition of HudsonUnited Bancorp, a regional bank in northeastern UnitedStates - have brought attention to the bank’s growthstrategy.

The Fund’s management team views the increasedconcentration of the Canadian market as increasingly riskyfor investors. Energy alone now represents over 25% of theS&P/TSX Composite Index. To have 25% of the Fund’s assetsin a relatively narrow and volatile sector that has alreadyexperienced huge returns would expose unitholders to thepossibility of significant capital loss. The Fund is aconcentrated portfolio, but is well−diversified by businessline and is well−positioned to offer better downsideprotection than funds that more closely mimic the S&P/TSXComposite Index. The Fund is further diversified throughforeign investments that provide exposure to sectors under−represented in Canada.

UNDERLYING FUND −> Trimark Canadian − SC

Objective The Trimark Canadian Fund seeks to provide strong capital growth with ahigh degree of reliability over the long term; it invests primarily in common shares ofCanadian companies.


Fund managers Ian Hardacre, CFA, MBA



−10%

0%

10%

20%

30%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Trimark CanadianTrimark Canadian − SC

11.3 11.2

23.4

−8.7

6.5

18.1 18.3

−3.6 4.8

28.1



$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

$24,000

$26,000

$28,000


MLI Trimark CanadianS&P/TSX Total ReturnTrimark Canadian − SC

$26,133*

$26,850





inception

Manulifeinception

date

MLI Trimark Canadian 11.31% 11.27% 15.16% 8.24% 8.00% Oct 1997


Rate of return expectation To be the top of its respective category over the long−term, while striving to outerform the S&P/TSXComposite Total Return Index.


52

Volatility meter



Manulife Canadian Large Cap Top Down Equity Fund(Zechner)


Industrials 8.93%

Energy 11.75%

Materials 9.39%


Other 13.22%

Cash 14.14%Financials 22.78%



TD Bank 4.81%


BCE Inc. 4.45%

TELUS 4.23%

Rogers Communications 3.78%




Falconbridge 2.22%

Nortel Networks Corp. 2.13%

Total 35.53%



For the fourth quarter of 2005 the SP/TSX composite indexwas up by 2.87%. Sector performance was mixed with fivesectors up and five sectors down. The basic materials sectorwas the big winner with a 9.44% quarterly gain on a14.75% increase in the gold sub−sector. Financials werealso strong while telecom, staples, health care and energylagged the market as they all fell during the quarter.

With a return of 2.83% the Fund performance was right inline with the market averages for the quarter. The Fund hada relatively high cash position as many stocks reached ourshort−term price targets. Value was added by beingunderweight energy stocks and overweight golds during thequarter and through strong stock picking in financials andbasic materials.

Within the stock market we still have a defensive posturewith overweight sector positions in consumer staples,telecom and health care. We also remain overweight intechnology as the companies are still growing andgenerating cash while valuations look more attractive thanthey have since the early 1990s. The largest ’alphagenerating’ names in the portfolio for the year aheadinclude Rogers and Telus in wireless communications, mid−sized gold stocks such as Glamis, Goldcorp, Agnico andLamgold as well as the travel stocks which, in our view,should benefit from a rising Canadian dollar and falling oilprices. Our stock strategy is premised on the view thatglobal economic growth is in the process of slowing downdue to the combined impact of record debt levels and risinginterest rates. Commoditiy prices are being artificiallysustained at high levels due to an influx of financial investorsinto those markets. Commodity prices could fall sharply asthese funds ultimately move elsewhere. With over 30% ofthe Canadian market in energy, this index could beextremely volatile and we expect it to be lower by year−end.

UNDERLYING FUND −> MLI Cdn Lg Cap Top Dn Eq (Zechner)

Objective The fund is managed to achieve above average long−term capital growth,primarily through investment in common shares of listed Canadian companies withrelatively large market capitalization. The fund employs a mix of growth and sectorrotation and is driven by top−down sector themes while also incorporating bottom−upsecurity selection. This fund has the ability to shift completely out of sectors as well ascarry very large weights (up to 400% of TSX weight in some cases) in attractive sectors.


Fund managers J. Zechner Associates − Mgmt. Team

Inception date July 2001 Total assets $166.6 million

Historical gross returnsGross rates of return are shown before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in October 2001.

−40%

−20%

0%

20%

40%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Cdn Large Cap Top Down Equity

17.3 17.0

32.6

−22.5



$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

$14,000

$15,000

$16,000

Dec01 Dec02 Dec03 Dec04 Dec05

MLI Cdn Large Cap Top Down EquityS&P/TSX Total ReturnMLI Cdn Lg Cap Top Dn Eq (Zechner)

$14,660*

$15,798





inception

Manulifeinception

date

MLI Cdn Large Cap TopDown Equity

17.35% 17.16% 22.11% − 14.13% Oct 2001


Rate of return expectation The fund is expected to outperform the S&P/TSX Composite Total Return Index over moving three−year annualized period by 1.5% per year.


53

Volatility meter



Manulife Jarislowsky Fraser Canadian Equity Fund

Cash 1.70%

Industrials 4.70%


Other 10.10%


Materials 4.80%





Nexen 6.40%




TD Bank 5.50%

Jarislowsky Special Equity Fund 5.30%

Shell Canada 4.60%

Imperial Oil 3.50%

Great−West Lifeco 3.40%

Total 53.70%



Raw material prices soared as supply shortages materialized,with the start of the rebuilding of New Orleans andsurrounding areas following the devastating hurricanes. Onthe other hand, the price of oil slipped below $60 US/barrelfor the first time since mid−summer in response to earlysigns of slowing demand. In Canada, cyclical stocksextended their year−long rally as investors focused onseveral high profile takeover situations in the fourth quarter.The rally in gold stocks was also a major factor in the fourthquarter and year as a whole.

After an extended period of strong performance, ourCanadian equity portfolios lagged the S&P/TSX index duringthe fourth quarter. Our overweight position in high quality,large capitalization oil and gas companies has helpedgenerate substantial outperformance over the past fewyears. However, these same stocks were caught in thedownward revaluation of the sector as a whole, during thesudden decline in the price of oil in October.

An inverted yield curve has historically been the harbinger ofrecession. We do not necessarily anticipate such anoutcome at this point in time. However, it is likely that highenergy prices, a slowing real estate market, low savingsrates, and high borrowing levels will eventually lead to aslowdown in the global economy. It is only a matter of timebefore the more cyclical companies begin to suffer earningssetbacks. At that time, money will flow out of the high betastocks in those sectors and into the more defensive, higherquality areas that we favour. Our philosophy points ustowards companies that are able to continue to growearnings in a predictable manner, no matter what directionthe economy is heading.

UNDERLYING FUND −> JF Canadian Equity

Objective Jarislowsky Fraser’s equity style emphasizes buying long−term growth at areasonable price. Internal resources are primarily relied on to generate investment ideas.Each year, the investment professionals contact and interview more than 200 Canadiancompanies. The portfolio focuses on industry leaders with strong balance sheets andcash flow as well as depth and quality at the management level.





−20%

0%

20%

40%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI JF Canadian EquityJF Canadian Equity

27.6 20.9 24.7

−1.9 5.5

31.5 25.5

11.4



$0

$10,000

$20,000

$30,000

$40,000

$50,000

Mar97 Dec97 Dec98 Dec99 Dec00 Dec01 Dec02 Dec03 Dec04 Dec05

MLI JF Canadian EquityS&P/TSX Total ReturnJF Canadian Equity

$44,825*

$22,254





inception

Manulifeinception

date

MLI JF Canadian Equity 27.60% 24.20% 24.35% − 18.32% Oct 2001


Rate of return expectation Over the long term, this fund is expected to outperform the S&P/TSX Composite Index.


54

Volatility meter



Manulife Maxxum Dividend Growth Fund (Mackenzie)

Other 8.09%

Energy 7.45%

Industrials 2.41%



Cash 14.24%

Consumer Discretionary 15.71%Financials 41.64%




TD Bank 5.23%

Ensign Energy Services 5.00%

Citigroup 4.51%


CIBC 3.35%

TJX Companies 3.13%

Yellow Pages Income Fund 2.92%


Reitmans (Canada) 2.61%

Total 39.18%



The Mackenzie Maxxum Dividend Growth Fund returned5.1% for the six−month period ending Dec 31, 2005, wellshort of the S&P/TSX Composite Index (TSX) of 14.8%. Theshortfall relative to the broad Canadian market was primarilydue to the Fund’s very low exposure to the resource sectors.The two other factors were a cash position of approximately15% and the foreign holdings, accounting for 18% of theFund which mirrored the performance of the U.S. market.

Not surprising, the best performers were energy stocks, ledby Ensign Energy Services (+59%) followed by TalismanEnergy (+35%). However, as mentioned, the Fund’s totalexposure to oil and gas stocks was very low at only 8%compared to the Canadian benchmark of 27%.

The largest industry exposure at 37% remains financialservices which has been a core part of the portfolio for manyyears. The group once again delivered solid performance,led by Royal Bank (+21%) and Manulife Financial (+18%).The only disappointment in the group was Fairfax (−13%)which was negatively impacted by Hurricane Katrina.

Global growth is likely to moderate this year, in response toa mid−cycle U.S. consumer−led slowdown but a recessionshould be avoided and inflation is benign. The exceptionalgains experienced this year in Canada are unlikely to berepeated but equity prices should make further gains givenreasonable valuation levels, low interest rates and sustainedglobal economic growth. As well, given the U.S. hasunderperformed Canada for the last four consecutive years,one could certainly argue for a reversal of fortunes whichwould assist the Fund’s relative performance. As always, theMaxxum team continues to search for high quality,attractively valued dividend−paying stocks.

UNDERLYING FUND −> Mackenzie Maxxum Dividend Growth

Objective The Manulife Maxxum Dividend Growth Fund, managed by MackenzieFinancial, seeks a satisfactory return from a balance between long−term growth securitiesand current income securities. This fund is a conservative Canadian equity fund with abias towards stocks currently offering an attractive dividend yield. The fund will also investin growth companies and low−yielding stocks that exhibit good long−term potential forcapital gains.

Managed by Mackenzie Financial Corporation

Fund managers Bill Procter, MBA

Inception date May 1975 Total assets $1,255.6 million

Historical gross returnsGross rates of return are shown before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in January 2005. To provide further historical information, the shaded arearepresents the returns of the underlying fund for the period before the start date of theManulife fund.

−20%

0%

20%

40%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Maxxum Dividend Growth (Mack)Mackenzie Maxxum Dividend Growth

12.8 17.7 18.2

−6.8

11.5

32.0

2.2 1.8

29.2 33.6



$10,000

$20,000

$30,000

$40,000


MLI Maxxum Dividend Growth (Mack)S&P/TSX 60 Total Return IndexMackenzie Maxxum Dividend Growth

$37,324*

$30,251



This table shows the historical annual compound total return of the fund compared withthe S&P/TSX 60 Total Return Index.


inception

Manulifeinception

date

MLI Maxxum DividendGrowth (Mack)

12.78% − − − 12.78% Jan 2005

S&P/TSX 60 Total ReturnIndex

26.29% 19.90% 21.75% 5.74% −

Rate of return expectation Over the long term, the fund is expected to outperform the S&P/TSX 60 Index.


55

Volatility meter


CANADIAN SMALL/MID CAP EQUITY Code 7122

Manulife Elliott & Page Growth Opportunities Fund

Cash 1.28%

Health Care 5.06%

Financials 6.16%


Industrials 11.29%

Other 19.80%

Energy 23.69%Materials 27.45%



E&P Money Fund − I (MFC) 9.35%

Teck Cominco Ltd. 2.33%

Mullen Group Income Fund 2.18%

Yamana Gold Inc. 2.14%

Geac Computer Corporation 2.11%

Real Resources 2.10%

Trican Well Service 2.00%

Penn West Energy Trust 1.97%

Trinidad Energy Services 1.79%

Russel Metals 1.77%

Total 27.74%



It was an exceptional year for the markets, commodities,and the currency. The S&P/TSX Composite Index climbedover 24.13%, nearing record levels not seen since 2000.Meanwhile, the Nesbitt Burns Small Cap Index (NBSCI) rose19.68 % and closed the year at an all−time high. A recordcrude price of $70.85 a barrel was reached on August 30,the day after Hurricane Katrina hit. Incessant investordemand drove gold to $541 an ounce, its highest price sinceJanuary 1981. Meanwhile, commodities such as copper,zinc, and silver continued their uptrends, driving theCanadian dollar to its highest level since January 1992.

Strong gains for the Elliot & Page Growth OpportunitiesFund were driven by strength in the resources and interest−sensitive sectors. The energy, financials, and materials sectorsappreciated significantly in the NBSCI, rising 62.1%, 31.2%,and 18.9%, respectively.

In 2006, material changes will be made to the Fund, due tothe adoption of a new benchmark. Effective January 1, theFund will be using the blended NBSCI, which will includeincome trusts representing nearly one−third of thebenchmark. Sectors with significant adjustments includeenergy, materials, and financials. The energy and financialsector weightings will increase by approximately 4% each,while the materials sector weighting will decline by nearly8%.

The Fund managers are optimistic about the beginning of2006. Near−term momentum remains positive, the period isseasonally strong, inflation remains benign, valuationsremain reasonable, and it appears that the Fed could benear the end of its tightening phase, with the real estatemarket cooling.

UNDERLYING FUND −> Elliott & Page Growth Opportunities Fund

Objective The Elliott & Page Growth Opportunities Fund seeks long−term capitalgrowth. The fund invests primarily in high−quality securities and convertible instrumentsof small and mid cap Canadian companies.


Fund managers Ted Whitehead, B.Comm, CFA

Inception date November 1998 Total assets $730.8 million

Historical gross returnsGross rates of return are shown before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in August 1997. The underlying fund was changed on June 1, 2003 from theElliott & Page Emerging Growth Fund to the Elliott & Page Growth Opportunities Fund.

−20%

0%

20%

40%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI E&P Growth Opportunities

22.3 22.1

34.1

−2.2 −1.7 −1.6

24.7

−12.3



$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

$24,000

$26,000

$28,000


MLI E&P Growth OpportunitiesBMO Nesbitt Burns Cdn Small Cap Index

$25,346*

$27,315



This table shows the historical annual compound total return of the fund compared withthe BMO Nesbitt Burns Cdn Small Cap Index.


inception

Manulifeinception

date

MLI E&P GrowthOpportunities

22.29% 22.18% 26.04% 13.99% 8.74% Aug 1997

BMO Nesbitt Burns CdnSmall Cap Index

19.68% 16.87% 24.92% 14.85% −

Rate of return expectation Over the long term, the fund is expected to outperform the Nesbitt Burns Canadian Small Cap Index.


56

Volatility meter


CANADIAN SMALL/MID CAP EQUITY Code 7191

Manulife Canadian Small Cap Equity Fund (Tattersall)


Financials 6.94%

Energy 10.67%


Cash 12.70%

Other 15.92%

Industrials 18.26%Materials 22.56%



Lundin Mining 3.34%

Gentry Resources 2.87%

NQL Energy Services 2.32%

GSI Group 2.06%

Martinrea International 2.01%

Enerflex Systems 1.99%

Intertape Polymer Group 1.99%

Aur Resources 1.96%

Canadian Hydro Developers 1.88%

Total 20.42%



The Canadian equity markets were able to achieve a modestgain during the fourth quarter. A decline in the price of oiland uncertainty over the federal election outcomepresumably sent investors to the sidelines, in spite ofreassuring words from the Finance Minister about incometrusts and lower taxes on dividend income.

The portfolio increased by 4.4% for the quarter − about inline with the index − but lagged for the year with a gain ofonly 12.5%. Our performance was restrained by a growingunderexposure to the energy sector, minimal exposure toincome trusts, several problem stocks in the industrialproducts category, plus our ongoing preference for microcapnames. Buying and selling were about in line with E&P SmallCap Value during the quarter, and the cash reserve increasedfrom 1% to 10% as of December 31.

As the fixation with energy stocks and income trusts beginsto wane, we are hoping for improved relative performancefrom the fund. We recognize that the price of oil will likelyremain high by historical standards, but the recentescalation in the price of energy will lead to conservation,alternative sources and increased production from existingwells. This will have a moderating effect on the price of oil,but we are not convinced that this possibility is included inthe price of many oil stocks. So, we expect to replace oursale candidates in the energy sector of the portfolio, but notincrease the exposure significantly.

UNDERLYING FUND −> MLI Cdn Small Cap Equ (Tattersall)

Objective The fund is managed to achieve above average long−term capital growth,primarily through investment in common shares of listed Canadian companies withrelatively small market capitalization. The manager uses a value−oriented investmentstyle to select stocks that will, as a group, out perform market averages over time.


Fund managers Howson Tattersall − Mgmt. Team


Historical gross returnsGross rates of return are shown before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund sinceJanuary 1999. To provide further historical information, the shaded area represents thereturns of the underlying fund for the period before the start date of the Manulife fund.

0%

10%

20%

30%

40%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Canadian Small Cap Equity

15.5 17.8

34.6

1.5

24.7

9.4 9.0



$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

$24,000

$26,000

$28,000


MLI Canadian Small Cap EquityBMO Nesbitt Burns Cdn Small Cap Index

$27,651* $25,788



This table shows the historical annual compound total return of the fund compared withthe BMO Nesbitt Burns Cdn Small Cap Index.


inception

Manulifeinception

date

MLI Canadian Small CapEquity

15.51% 16.65% 22.34% 18.31% 15.64% Jan 1999

BMO Nesbitt Burns CdnSmall Cap Index

19.68% 16.87% 24.92% 14.85% −

Rate of return expectation The fund is expected to outperform the NB Small Cap (Weighted) Total Return Index over movingthree−year annualized period by 2.0% per year.


57

58

U.S. Equity

U.S. Equity funds are a form of foreign equity and invest in shares of U.S. companies.

These types of funds typically aim to achieve long-term capital growth by investing

in shares of companies based in the United States. A share represents an

ownership stake in a company; therefore, how the fund performs depends on the

success of the company holdings within the fund. The fund’s performance can also

be affected by such factors as currency exchange rates and economic and political

trends.

These funds are ideal for investors who have a long-term focus, want to include

U.S. holdings in their portfolios, and are comfortable with a higher-than-average

level of volatility.

U.S. Equity funds can vary greatly depending on such factors as the size and types

of companies in which they invest and the criteria the manager uses to decide the

best companies to invest in.

U.S. Large Cap Equity FUND PAGE

CODE NUMBER

Manulife MFC Global Pooled U.S. Index Fund 8131 59

Manulife MFC Global Pooled U.S. Equity Fund 8132 60

Manulife Fidelity Growth America Fund 8142 61

Manulife SEAMARK U.S. Equity Fund 8171 62

Manulife U.S. Equity Fund (Bernstein) 8191 63

Manulife Legg Mason U.S. Value Fund 8261 64

Volatility meter


U.S. LARGE CAP EQUITY Code 8131

Manulife MFC Global Pooled U.S. Index Fund

Cash 4.32%

Energy 9.15%


Industrials 11.30%

Health Care 12.24%


Other 15.30%Financials 20.77%




Exxon Mobil 3.05%

Citigroup 2.14%

Microsoft 2.09%

Procter & Gamble 1.69%

Bank of America 1.62%

Johnson & Johnson 1.56%

American International Group 1.54%

Pfizer 1.50%

Altria Group Inc. 1.36%

Total 19.78%



Financial markets performed largely as expected in 2005.The S&P 500 generated a modest 4.91% (U.S.) total return,small and mid cap stocks outperformed large cap whilegrowth and value performed in line with each other. TheFed continued to tighten and earnings growth moderated.Energy prices dominated the news as oil rose 40% to closethe year at $61 per barrel. As a result, the energy sectorwas by far the top−performing sector of the stock market.

While GDP growth seems likely to moderate as we movefurther into 2006, there is plenty of positive economic news.Payroll employment is growing, consumer sentiment isstrong, wages are growing, business investment is strong,and inflation remains well behaved.

In 2006, some of the bearish factors that held back stocks in2005 may improve. Above normal energy inventories maycause oil prices to moderate; the second year of thePresidential cycle is somewhat better for stocks; the Fed willlikely soon end its policy of tightening; and the deteriorationof both the trade and budget deficits may moderate.

In each of the past two years, the stock market providedpositive but modest returns as strong earnings growth wasoffset by a declining P/E ratio. For the coming year, thereappears to be a good chance for both strong earningsgrowth and an increase in the market’s valuation, therebyresulting in only the second year of positive double−digitreturns since 1999.

UNDERLYING FUND −> MFC Global Pooled U.S. Equity Index

Objective The Fund aims to achieve investment results that approximate the totalreturn of the S&P 500 Stock Index, one of the most well−regarded benchmarks for the U.S. equity market. This is a passively managed fund. To achieve its investment objective,the fund will invest directly in common shares and may use derivative instruments such asfutures in order to replicate the returns of the S&P 500 Stock Index. The fund may alsoinvest a portion of its funds in cash.




Historical gross returnsGross rates of return are shown before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in January 1998.

−50%

0%

50%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI MFC Global Pooled U.S. Index

1.3 2.9 4.6−23.2 −7.1 −6.0

14.0

40.9



$9,000

$10,000

$11,000

$12,000

$13,000

$14,000

$15,000

$16,000

$17,000


MLI MFC Global Pooled U.S. IndexS&P 500 Composite Total Return Idx($Cdn)

$11,738* $11,856



This table shows the historical annual compound total return of the fund compared withthe S&P 500 Composite Total Return Idx($Cdn).


inception

Manulifeinception

date

MLI MFC Global Pooled U.S.Index

1.31% 2.11% 2.92% −4.91% 2.02% Jan 1998

S&P 500 Composite TotalReturn Idx($Cdn)

1.61% 2.43% 3.37% −4.40% −

Rate of return expectation Over the long term, the fund is expected track the performance of the S&P 500 Total Return Index($ Cdn).


59

Volatility meter



Manulife MFC Global Pooled U.S. Equity Fund

Health Care 12.02%

Energy 8.86%


Industrials 9.07%


Other 17.01%Financials 22.85%




Microsoft 2.82%

Citigroup 2.65%

Medtronic Inc. 2.63%

Wachovia 2.61%

Fannie Mae 2.60%

Johnson & Johnson 2.51%

ConocoPhillips 2.43%


Pepsico Inc. 2.17%

Total 26.51%



Financial markets performed largely as expected in 2005.The S&P 500 generated a modest 4.91% (U.S.) total return,small and mid cap stocks outperformed large cap whilegrowth and value performed in line with each other. TheFed continued to tighten and earnings growth moderated.Energy prices dominated the news as oil rose 40% to closethe year at $61 per barrel. As a result, the energy sectorwas by far the top−performing sector of the stock market.

While GDP growth seems likely to moderate as we movefurther into 2006, there is plenty of positive economic news.Payroll employment is growing, consumer sentiment isstrong, wages are growing, business investment is strong,and inflation remains well behaved.

In 2006, some of the bearish factors that held back stocks in2005 may improve. Above normal energy inventories maycause oil prices to moderate; the second year of thePresidential cycle is somewhat better for stocks; the Fed willlikely soon end its policy of tightening; and the deteriorationof both the trade and budget deficits may moderate.

In each of the past two years, the stock market providedpositive but modest returns as strong earnings growth wasoffset by a declining P/E ratio. For the coming year, thereappears to be a good chance for both strong earningsgrowth and an increase in the market’s valuation, therebyresulting in only the second year of positive double−digitreturns since 1999.

UNDERLYING FUND −> MFC Global Pooled U.S. Equity

Objective The MFC Global Pooled U.S. Equity Fund is managed for aggressive growthover a period of at least four years. The fund is invested broadly, principally in large andmid−capitalization stocks.




Historical gross returnsGross rates of return are shown before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in September 1998. To provide further historical information, the shaded arearepresents the returns of the underlying fund for the period before the start date of theManulife fund.

−50%

0%

50%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI MFC Global Pooled U.S. EquityMFC Global Pooled U.S. Equity

5.3 8.7 1.4−28.9−17.4

11.4 19.4

44.3



$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000


MLI MFC Global Pooled U.S. EquityS&P 500 Composite Total Return Idx($Cdn)MFC Global Pooled U.S. Equity

$12,635*

$11,856





inception

Manulifeinception

date

MLI MFC Global Pooled U.S.Equity

5.32% 6.99% 5.08% −7.39% 1.72% Sep 1998


1.61% 2.43% 3.37% −4.40% −

Rate of return expectation Over the long term, the fund is expected to outperform the S&P 500 Total Return Index ($ Cdn).


60

Volatility meter



Manulife Fidelity Growth America Fund

Cash 0.40%



Health Care 10.10%

Financials 11.70%

Other 13.90%

Energy 18.30%Information Technology 24.80%



BJ Services −

Exxon Mobil −

Genentech Inc. −

KLA−Tencor −

Liz Claiborne −

Noble Corp. −


Sprint Nextel Corp. −

Texas Instruments −

UnitedHealth Group −

Total 25.10%



U.S. equity markets, as represented by the S&P 500 indexrose 2.9% in Canadian−dollar terms during the fourthquarter of 2005. The markets rose as energy pricesmoderated, allowing U.S. consumer to continue to be theengine of economic growth. The market rallied towardsyear−end on speculation that the U.S. Federal Reserve willsoon end their tightening cycle. In the fourth quarter, theFund gained 1.6%, underperforming its benchmark by1.3% and effective stock selection in the energy and industrials sectors was the greatest contributor to the Fund’s return, while an unfavourable overweight position in the energy sector and an unfavourable underweight position in the financials sector were the greatest detractors from the Fund’s return.At the end of the period, the Fund’s largest overweightpositions, relative to its benchmark index, were in theinformation technology and energy sectors respectively.The most notable change in exposure occurred within thetelecommunication services sector, which was modified froma modest underweight to a modest overweight position. TheFund’s largest underweight positions at the end of theperiod were in the financials and industrials sectorrespectively.The portfolio manager, John Power, believes the long−termoutlook for U.S. energy companies is extremely positive, ascontinued supply constraints coupled with steadily increasingglobal demand will serve to keep energy prices at historicallyhigh levels. His notable overweight position within theinformation technology sector is based on his belief thatcorporations are poised to increase their technologyspending. Within this sector, he favours the semiconductorindustry. Conversely, he has taken a very selective approachto the industrial and financial sectors, which he believeshave less favourable growth prospects and may, in manyinstances, be overvalued.

UNDERLYING FUND −> Fidelity Growth America−A

Objective The Fund seeks to achieve long−term capital growth by investing primarily inequity securities of U.S. companies. The fund may invest in small, medium and largecompanies. The portfolio manager searches for investment opportunities by usingFidelity’s traditional bottom−up investment style, selecting securities for the fund on astock−by−stock basis.


Fund managers John Power

Inception date September 1990 Total assets $143.7 million


−40%

−20%

0%

20%

40%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Fidelity Growth AmericaFidelity Growth America−A

8.0 3.0 10.1

−22.1 −6.1 −8.0

16.2 24.5

36.8

21.9



$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

$24,000

$26,000

$28,000


MLI Fidelity Growth AmericaS&P 500 Composite Total Return Idx($Cdn)Fidelity Growth America−A

$18,679*

$19,551





inception

Manulifeinception

date

MLI Fidelity Growth America 8.03% 5.46% 6.99% −2.18% 3.76% Jul 1997


1.61% 2.43% 3.37% −4.40% −

Rate of return expectation The fund seeks to achieve returns comparable to, or better than, the S&P 500 Total Return Index($ Cdn).


61

Volatility meter



Manulife SEAMARK U.S. Equity Fund

Cash 2.07%

Health Care 19.32%

Financials 11.97%

Other 2.09%

Industrials 11.50%

Other sectors 3.05%

Consumer Discretionary 26.22%Information Technology 23.78%



Citigroup 4.05%


Amgen 3.93%

Time Warner Inc. 3.86%

Comcast Corp. 3.42%

Agilent Technologies Inc. 3.20%

Cisco Systems 3.11%

McGraw−Hill Companies 3.00%

Biomet Inc. 2.99%

Wyeth 2.95%

Total 34.51%


(As at December, 31 2005)

The S&P 500 recovered from a sharp correction in Octoberto finish modestly higher for the quarter. The correction wasdriven by renewed concerns over U.S. inflation and the levelof future economic growth.

The Fund returned 1.78% (U.S.$), for the quarter, with thebest performing stocks in financials and energy. JP Morganand Bank of America both out−performed the S&P 500Financials index and Schlumberger, the world’s largestoilfield services company, appreciated 15%. Record cashflows for oil companies, maturing oilfields and futuredevelopment from more remote and less conventionalsources, bode well for Schlumberger going forward. As inCanada, financials and materials stocks were the S&P 500’sbest performers. A pullback by technology, health care andconsumer holdings, that have generally done well this year,led the Fund to lag the index.

Heading into 2006, the Fund is focused on health care,media and entertainment, and technology. In health care,earnings growth for pharmaceutical companies is set to re−accelerate as revenue losses from patent expirations subsideand companies continue to restructure their cost bases. Inmedia & entertainment, companies such as Viacom andTime Warner continue to restructure in order to unlockshareholder value. With increasing demand for content andhistorically low valuations these stocks provide solid value. Intechnology, we like the prospects for Teradyne and AppliedMaterials, two semiconductor equipment stocks which wereweak in 2005 as the semiconductor industry struggled withexcess inventory and manufacturing capacity. With excessinventory worked off and a transition underway to fasterand more complex chips, these companies should benefitfrom increased industry spending.

UNDERLYING FUND −> SEAMARK Pooled U.S. Equity

Objective The SEAMARK Pooled U.S. Equity Fund is managed to preserve and enhancecapital through long−term capital gains with some current dividend income. The fund willinvest primarily in U.S. equity securities.


Fund managers Peter Marshall, B.Comm; George V. Loughery, CGA, CFA; and Lance Speck, CFA.



−40%

−20%

0%

20%

40%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI SEAMARK U.S. Equity

1.2 −3.2

13.5

−22.8 4.2 12.8

33.5 32.2



$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

$24,000


MLI SEAMARK U.S. EquityS&P 500 Composite Total Return Idx($Cdn)SEAMARK Pooled U.S. Equity

$19,000*

$13,565





inception

Manulifeinception

date

MLI SEAMARK U.S. Equity 1.19% −1.02% 3.61% −2.19% 6.58% Aug 1997


1.61% 2.43% 3.37% −4.40% −

Rate of return expectation The fund’s performance is benchmarked against the S&P 500 Total Return Index ($ Cdn). Returns inexcess of this benchmark, is an objective only, and is not guaranteed by any party.


62

Volatility meter



Manulife U.S. Equity Fund (Bernstein)


Energy 9.06%


Industrials 10.49%

Other 16.22%

Information Technology 13.60%Financials 24.94%




Citigroup 2.72%

Exxon Mobil 2.70%

Microsoft 2.63%

Procter & Gamble 2.08%


Altria Group Inc. 1.93%

Intel 1.87%

Pfizer 1.58%

IBM 1.57%

Total 22.85%



The S&P 500 increased 2.8% for the quarter as increasedhopes that the Federal Reserve is nearing the end of its ratetightening cycle offset concerns of an economic slowdownin 2006. Positive economic data provided an additionalboost to U.S. and global equity markets. Specifically, reportsindicated that economic growth, retail sales excludingautomobiles and consumer confidence were all higher.Growth stocks outperformed their value counterparts as theRussell 1000 Growth Index rose 3.7% compared to a 1.9%increase for the Russell 1000 Value Index. Cyclically sensitivestocks gained, including industrial resources andtransportation stocks. In contrast, energy shares fell as oilprices retreated from their recent highs.

Within the U.S. equity market, valuation differencesbetween attractively−priced and expensive stocks areunusually compressed and the value opportunity remainsbelow average. A central tenet of our strategy is to keep therisks in the portfolio proportional to the value opportunitywe identify. We continue to use our large, bottom−upresearch effort to uncover value opportunities that do existamong individual stocks.

UNDERLYING FUND −> MLI U.S. Equity (Bernstein)

Objective The fund is managed to achieve long−term capital appreciation, primarilythrough investments in equity securities of large, well−capitalized U.S. corporations. Themanager’s approach is research based and value−oriented.


Fund managers Alliance Bernstein Inv Mgmt.−Mgmt. Team



−20%

0%

20%

40%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI U.S. EquityMLI U.S. Equity (Bernstein)

1.4 3.3 3.9−17.7 −9.1−12.6

22.6



$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

$14,000


MLI U.S. EquityS&P 500 Composite Total Return Idx($Cdn)MLI U.S. Equity (Bernstein)

$8,741* $8,610





inception

Manulifeinception

date

MLI U.S. Equity 1.38% 2.35% 2.86% − −0.33% Oct 2001


1.61% 2.43% 3.37% −4.40% −

Rate of return expectation The fund is expected to outperform the S&P 500 Total Return Index ($ Cdn) over moving three−yearannualized period by 1.5% per year.


63

Volatility meter



Manulife Legg Mason U.S. Value Fund

Financials 16.20%

Other 5.80%


Industrials 7.50%

Health Care 17.60%

Information Technology 16.70%Consumer Discretionary 26.30%



Sprint Nextel 6.44%

UnitedHealth Group 5.69%

Amazon.com 5.58%

Tyco International 5.52%

Google 4.38%

AES Corp. 4.16%

JP Morgan Chase & Co 3.80%

eBay 3.42%

Aetna 3.28%

Qwest Communications Intl. 3.21%

Total 45.48%



The Fund’s fundamental investment objective is investmentsprimarily in equity securities of companies based in theUnited States that the portfolio advisors view as undervaluedand that offer potential for above average total returns inthe form of capital gains over a longer term. A portion ofthe fund may invest in large foreign companies traded onnon−U.S. exchanges.

The major U.S. equity market indices posted respectablereturns for the fourth quarter of 2005, primarily driven bystrong returns in November. A powerful rally in bothabsolute and relative terms led this Fund’s manager to thefifteenth consecutive calendar year of outperformancerelative to the S&P 500 Index. Holdings in the electroniccommerce sector rallied strongly. Google (+31.1%) postedstronger−than−expected quarterly results, Expedia (+21.0%)responded to strong revenue and profit growth alongwith a turnaround at its Hotels.com subsidiary, while Yahoo(+15.8%) saw its differentiation strategy bear fruit. Thelong−term growth potential for the managed care industrywas recognized in steady performance by these holdings.Substantial cost savings from the repurchase of Qwest’shigh−coupon bonds was rewarded with a nearly 40%advance in that stock in the quarter.

Stocks have advanced by less than their underlying earningsgrowth rate for the last two years, resulting in a compressionof valuations. An optimistic economic outlook and theanticipated end to Federal Reserve Board tightening shouldallow for some multiple expansion in 2006. Combined withprofit growth of roughly 10%, and a couple of points ofdividend yield, this should result in returns in the 12% to15% range for the year. We think large−capitalization willoutperform small caps, on a combination of more attractivevaluation and superior cash flow generation, and also thatgrowth stocks will outperform value stocks.

UNDERLYING FUND −> Legg Mason U.S. Value Pool

Objective The Legg Mason U.S. Value Fund is managed to invest primarily in commonshares of companies based in the United States that the portfolio advisor views asundervalued and that offer potential for above average total returns in the form of capitalgains over a longer−term. A portion of the fund may invest in large foreign companiestraded on non−U.S. exchanges.

Managed by Legg Mason Canada Inc.

Fund managers Bill Miller, CFA and Mary Chris Gay

Inception date May 2000 Total assets $626.8 million


−20%

−10%

0%

10%

20%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Legg Mason U.S. ValueLegg Mason U.S. Value Pool

4.0 4.8

17.9

−18.7 −2.7



$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

Dec00 Dec01 Dec02 Dec03 Dec04 Dec05

MLI Legg Mason U.S. ValueS&P 500 Composite Total Return Idx($Cdn)Legg Mason U.S. Value Pool

$9,087*

$7,259





inception

Manulifeinception

date

MLI Legg Mason U.S. Value 4.03% 4.43% 8.73% − 2.67% Oct 2001


1.61% 2.43% 3.37% −4.40% −

Rate of return expectation Over the long−term, the fund is expected to outperform the S&P 500 Index ($ Cdn).


64

65

International/Global Equity

International Equity funds invest in shares of non-North American companies.

Global Equity funds typically aim to achieve long-term capital growth by investing

in shares of companies in Asia, Europe and the Americas.

A share represents an ownership stake in a company; therefore, how the fund

performs depends on the success of the company holdings within the fund. The

fund’s performance can also be affected by such factors as currency exchange rates

and economic and political trends around the world.

International/Global Equity funds are ideal for investors who have a long-term

focus, want to include foreign holdings in their portfolio, and are comfortable with

a higher degree of volatility.

These funds vary greatly depending on such factors as the size and types of

companies in which they invest, the countries or regions in which they invest, and

the criteria the fund manager uses to decide the best companies to invest in.

International Equity FUND PAGE

CODE NUMBER

Manulife SEAMARK International Equity Fund 8172 66

Manulife International Equity Fund (Templeton) 8192 67

Manulife Jarislowsky Fraser International Equity Fund 8241 68

Manulife BGI International Equity Index Fund 8321 69

Global Equity

Manulife Fidelity International Portfolio Fund 8141 70

Manulife McLean Budden Global Equity Fund 8161 71

Manulife Trimark Fund 8181 72

Volatility meter


INTERNATIONAL EQUITY Code 8172

Manulife SEAMARK International Equity Fund

Mexico 9.05%

Germany 5.35%

Spain 4.93%

Netherlands 5.68%

Japan 7.99%

Switzerland 10.43%

Other 20.90%United Kingdom 35.67%



Telefonica SA 4.93%

Royal Bank Scotland Group PLC 4.55%

Barclays Bank PLC 4.43%

Pearson PLC 4.32%

Nestle 4.24%

Nokia 4.10%

Cemex 4.00%

XL Capital 3.89%

Canon Inc. 3.47%

Rio Tinto 3.28%

Total 41.21%



Stock selection, rather than country allocation, remains thekey focus of the International Equity Fund as we believe thisa better source of value added over longer periods of time.The Fund outperformed the index during the quarterdespite a low exposure to Japan, which was the strongestperforming global market during the period.

From its low at the end of July, the Japanese market hasgained more than 36%. Such a macro driven move of anequity market is rare and should not be consideredsustainable or even stable. Fundamentals are indeed on themend in Japan but they have not improved nearly as muchas the market has appreciated in the past three months. Thehealth of most Japanese companies continues to lag theirglobal peers.

Looking out into 2006 we expect the market to rewardcompanies that deliver steady growth over time without areliance on a strong upward trend in commodity prices. Theportfolio is well-positioned to benefit from current strengthin base metal prices through our holdings in BHP Billiton andRio Tinto. As the commodity cycle continues, there may bean opportunity to capture these gains.

UNDERLYING FUND −> SEAMARK Pooled International Equity

Objective The SEAMARK International Equity Fund is managed to preserve andenhance capital through long−term, capital gains with some dividend income. The fundinvests primarily in the equity securities of companies domiciled outside of Canada andthe United States.


Fund managers Peter Marshall, B.Comm; George V. Loughery, CGA, CFA; and Lance Speck, CFA.



−20%

0%

20%

40%

60%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI SEAMARK International Equity

6.1 2.3 8.9

−18.0−11.8

14.3

41.8 38.0



$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

$24,000


MLI SEAMARK International EquityMSCI EAFE ($ Cdn)SEAMARK Pooled International Equity

$19,886*

$12,977



This table shows the historical annual compound total return of the fund compared withthe MSCI EAFE ($ Cdn).


inception

Manulifeinception

date

MLI SEAMARKInternational Equity

6.13% 4.17% 5.74% −3.10% 7.92% Aug 1997

MSCI EAFE ($ Cdn) 10.45% 11.42% 12.23% −0.22% −

Rate of return expectation The fund’s performance is benchmarked against the MSCI EAFE Index ($ Cdn). Returns in excess of thisbenchmark, is an objective only, and is not guaranteed by any party.


66

Volatility meter



Manulife International Equity Fund (Templeton)

Switzerland 4.99%

Hong Kong 5.65%

Netherlands 9.13%

Korea 5.99%

France 7.29%

Japan 13.28%

United Kingdom 22.99%Other 30.68%



Kookmin Bank 1.94%

BAE Systems Canada 1.91%

Nomura Holdings Inc. 1.88%

Cheung Kong Hld 1.64%

Samsung Electronics 1.61%

UBS AG 1.58%

ING Groep NV 1.54%

CI Master LP 1.53%

Accor Sa Adr 1.51%

Securitas AB B 1.50%

Total 16.64%



In a year marked by record−breaking energy prices, thefourth quarter posted a good performance. During thatsame period, the European Central Bank raised rates 25basis points to 2.25% for the first time in 29 months due toexcess liquidity concerns and the more solid footing of theeconomy. Crude oil prices declined slightly while natural gasbecame the topic of a bitter dispute between Moscow andKiev over Russian natural gas exports transiting throughUkraine.

Meanwhile corporate profit growth in the U.S., Japan, andGermany was very strong. Stock market performance,particularly in the non−U.S. markets, continued to reflect thegood news. Foreign investors helped push the Nikkei Indexbeyond the 15 000 mark with an inflow of capital intoJapanese equities. However, only a select group of Japanesecompanies have met our valuation parameters for stockselection, and as such we have added them to our bargainlist. We have found increasing value in the globaltelecommunications industry, particularly in Europe. Over thepast several years, telecom companies have focused oncutting costs, repairing balance sheets, and growing cashflow and are now returning cash to shareholders. Indeed,the dividend yield for many telecommunications stocks isnow more attractive than European utility stocks, aphenomenon not seen in the past ten plus years.

We believe that the broad−based economic expansionshould continue over the foreseeable future. In our view,populating our portfolios with stocks that we considerundervalued is the correct approach to address our clients’investment needs.

UNDERLYING FUND −> MLI International Equ (Templeton)

Objective The fund is managed to achieve long−term capital appreciation, primarilythrough investments in equity securities of companies outside Canada and the UnitedStates. Franklin Templeton’s investment philosophy is based on identifying undervaluedcompanies that, over time, may produce the greatest share price returns with minimumrisk. Bottom up analysis and a worldwide network of experienced research professionalsare used to identify undervalued stocks.


Fund managers Franklin Templeton Mgmt − Mgmt. Team



−20%

−10%

0%

10%

20%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI International EquityMLI International Equ (Templeton)

9.8 14.4 15.6

−18.2 −8.0 3.7

19.8



$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

$14,000


MLI International EquityMSCI EAFE ($ Cdn)MLI International Equ (Templeton)

$13,569*

$10,619





inception

Manulifeinception

date

MLI International Equity 9.85% 12.12% 13.27% − 6.55% Oct 2001

MSCI EAFE ($ Cdn) 10.45% 11.42% 12.23% −0.22% −

Rate of return expectation The fund is expected to outperform the MSCI EAFE Total Return Index ($ Cdn) over moving three−yearannualized period by 2.0% per year.


67

Volatility meter



Manulife Jarislowsky Fraser International Equity Fund

Other 60.00%

Japan 14.70%




ING Groep NV 3.80%

AXA 3.60%

Total SA 3.60%

Reed Elsevier NV 3.10%

Banco Santander S A 3.00%

Fresenius Med Care Hlds Pfd 3.00%

Nestle 2.90%

Royal Bank of Scotland Group 2.90%

Air Liquide(L) 2.80%

HSBC Holdings PLC 2.80%

Total 31.50%



World economies remain unbalanced with the heavilyindebted American consumer on the demand side and theChinese producer on the supply side. With a U.S. currentaccount deficit nearing $800 billion (70% of the world’s external deficits), the state of disequilibrium in the world isincreasingly precarious. So far, those imbalances have beensustained by Asia’s huge savings surplus as well as the oilexporting countries. The year 2006 could be the time whenU.S. consumption finally slows. The effects would be feltworldwide with lesser developed economies hurting themost.

The Jarislowsky Fraser International Equity Fund returned2.3% compared with 4.8 % for the MSCI EAFE Index ($ Cdn)for the fourth quarter of 2005.

We believe it will be problematic for value and cyclical stocksto extend their 2005 rally into 2006 as it will be difficult tosustain the same level of earnings growth. Anothercharacteristic of our portfolio is its greater exposure to largecapitalization stocks than the MSCI EAFE Index. Largecapitalization stocks have significantly underperformed theIndex over the last few years and are currently inexpensiverelative to small capitalization stocks. The expected slowingin earnings momentum for the overall market shouldtherefore bode well for the relative outperformance of largecapitalization stocks and our portfolio.

UNDERLYING FUND −> JF International Equity

Objective The Jarislowsky Fraser International Equity Fund focuses on the largecapitalization multinationals, which have demonstrated global leadership in their sectorand which have a minimum of $1 billion US of market capitalization. These companieshave consistent growth records and high returns on invested capital and dominantmarket positions.





−20%

0%

20%

40%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI JF International EquityJF International Equity

5.0 5.9 6.6−15.1−10.7

9.1

27.7 34.8

20.1 15.1



$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

$24,000

$26,000


MLI JF International EquityMSCI EAFE ($ Cdn)JF International Equity

$22,294*

$15,381





inception

Manulifeinception

date

MLI JF International Equity 4.97% 5.43% 5.81% − 1.26% Oct 2001

MSCI EAFE ($ Cdn) 10.45% 11.42% 12.23% −0.22% −

Rate of return expectation Over the long term, this fund is expected to outperform the MSCI EAFE Index ($ Cdn).


68

Volatility meter



Manulife BGI International Equity Index Fund

Netherlands 4.90%

Australia 5.21%

Switzerland 6.86%

Germany 6.71%

France 8.95%

Other 18.94%

United Kingdom 22.78%Japan 25.65%



BP PLC 2.18%


Toyota Motor Corporation 1.47%

GlaxoSmithKline PLC 1.44%

Total SA 1.37%

Vodafone Group PLC 1.33%

Royal Dutch Shell PLC 1.21%

Novartis AG 1.19%

Nestle SA 1.18%

Roche Holdings 1.03%

Total 14.17%



Continental Europe seems to be experiencing a recoverywith solid gains in France, Germany and Switzerland.Business confidence has returned across the region,unemployment has begun to fall and corporate earnings arebetter than expected. Consumer spending tends to lag dueto the cumbersome labour laws in Europe, but asunemployment slowly decreases, spending will improve.

In the UK, consumer spending picked up in the fourthquarter, but is expected to be sluggish going forward. Someof the reasons include large consumer debt burdens, lowunemployment and weak productivity growth. Other non−Continental countries such as Norway continue to see risingequity markets as demand for oil (Norway) and financialservices (Switzerland) continue to increase.

Over the past six months, foreigners’ net investment inJapanese equities have surged to the strongest level in morethan a decade, helping to explain why Japan’s stock markethas leapt almost 40% since its low back in April. An upturnin consumer spending and hiring has kindled hopes thatthis time Japan’s recovery may be sustained, while itsexport−dominated stock market is expected to benefit fromthe global upswing.

UNDERLYING FUND −> BGI Daily EAFE Equity Index

Objective The BGICL Daily EAFE Equity Index Fund’s objective is to match the returns ofthe MSCI EAFE Index ("index") as closely as possible. BGICL uses an indexing approach,where they own assets to match those of the index, in about the same names, weights,sectors, and countries. The index currently contains over 1000 of the world’s largestpublicly traded firms, in 21 countries that are in the developed markets outside NorthAmerica. This fund is considered foreign in registered plans.

Managed by Barclays Global Investors Canada Ltd.

Fund managers Rajiv Silgardo

Inception date April 1999 Total assets $288.1 million

Historical gross returnsGross rates of return are shown before investment management fees have beendeducted. The solid area represents the gross returns of the Manulife fund since itsinception in November 2003. To provide further historical information, the shaded arearepresents the returns of the underlying fund for the period before the start date of theManulife fund.

−20%

−10%

0%

10%

20%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI BGI International Eq IndexBGI Daily EAFE Equity Index

11.2 11.2 13.2

−16.6−16.3−10.8



$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000


MLI BGI International Eq IndexMSCI EAFE ($ Cdn)BGI Daily EAFE Equity Index

$9,962* $10,614





inception

Manulifeinception

date

MLI BGI International EqIndex

11.25% 11.24% − − 13.29% Nov 2003

MSCI EAFE ($ Cdn) 10.45% 11.42% 12.23% −0.22% −

Rate of return expectation Over the long term, this fund is expected to track the return and risk profile of the MSCI EAFE Index($ Cdn).


69

Volatility meter



Manulife Fidelity International Portfolio Fund


Germany 3.80%

Australia 2.90%

Switzerland 3.20%

Canada 5.40%

Japan 14.70%




BP PLC −

Ericsson LM Telephone −

Genentech Inc. −

GlaxoSmithKline PLC −

Goldman Sachs −

Monster Worldwide −

Novartis AG −


Total SA −

Univision Communication −

Total 10.10%



Global equity markets performed well during the fourthquarter of 2005, with the MSCI World index gaining 3.7%(all returns in Canadian−dollar terms). The Japanese equitymarket posted strong gains, advancing (+13%), followed bythe Asia ex−Japan region (+7.0%) and the U.S. (+2.9%).The European equity market lagged the other regions butstill posted positive returns (+2.6%). Japanese equitiesmirrored the strong gains of the previous quarter, surging toa five−year high. Improving economic conditions andearnings growth continued to attract overseas investors toJapanese equities. The financials, industrials, and materialssectors performed particularly well with the latter sectorbenefiting from rising gold prices, which broke through the$500 US barrier in December. Weaker performance wasseen in the energy and telecommunication−services sectors.Energy prices fell to more moderate levels due to a softeningin demand. The Fund rose 3.7% during the fourth quarter,trailing the return of its benchmark index slightly. Securityselection was the primary driver of relative returns,particularly within the Japanese market. The largestdetractor from performance was being overweight theunderperforming energy sector.Lead portfolio manager, Dick Habermann, continues toobserve differing levels of strength in global economies.Persistently high oil prices and strong raw material demandin China are continuing themes. Mr. Habermann isunderweighted in the U.S. where continued interest rate hikes and sustained high energy prices have negatively impacted consumer sentiment. European stocks are alsounderweighted, despite improved corporate earnings,structural problems persist. Japan is overweight in the Fundand Mr. Habermann remains positive in his outlook for theJapanese market.

UNDERLYING FUND −> Fidelity International Portfolio−A

Objective This fund invests primarily in equity securities of companies anywhere in theworld with the objective of achieving long−term capital growth. The fund is not subjectto any geographic constraints with regard to the allocation of portfolio assets amongdifferent markets.


Fund managers Richard Habermann, BA, MBA.

Inception date November 1987 Total assets $1,337.2 million


−20%

0%

20%

40%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI Fidelity Int’l PortfolioFidelity International Portfolio−A

11.8 6.9

13.5

−17.7 −7.9 −7.3

23.7 27.8 27.7 19.4



$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

$24,000


MLI Fidelity Int’l PortfolioMSCI World ($ Cdn)Fidelity International Portfolio−A

$21,922*

$17,129





inception

Manulifeinception

date

MLI Fidelity Int’l Portfolio 11.77% 9.31% 10.69% 0.57% 5.57% Jul 1997

MSCI World ($ Cdn) 6.58% 6.96% 7.78% −2.41% −

Rate of return expectation The fund seeks to achieve returns comparable to, or better than, the MSCI World Index ($ Cdn).


70

Volatility meter



Manulife McLean Budden Global Equity Fund

Japan 10.27%

Switzerland 5.18%

Sweden 2.18%

France 3.61%

Germany 7.25%





Citigroup 2.95%

Pfizer 2.37%

BP PLC 2.08%

Deutsche Bk−Adr 1.94%

Toyota 1.94%

Microsoft 1.86%

Fannie Mae 1.76%

Alcoa 1.72%

Nestle 1.49%


Total 19.59%



Most global equity markets generated positive returnsduring the quarter despite continued tightening by severalmajor central banks. The Bank of Canada and the U.S.Federal Reserve increased overnight rates by 50 basis pointsduring the period, while the European Central Bankannounced its first interest rate increase in five years movingthe region’s benchmark rate off a six−decade low.

The Fund posted a solid absolute return and outperformedthe Index for the quarter due to good stock selection inenergy (Transocean and Schlumberger) which more thanoffset weak results in telecommunication services (FranceTelecom and NTT). Overall sector allocation was relativelyneutral.

There was a significant amount of activity during the quarteras six companies were added and seven eliminated. TheFund increased its weighting in materials and utilities whilelowering exposure to consumer discretionary and financials.There was no significant activity in energy, however,exposure to industrials was raised as the addition of Fanucand buying in Deutsche Post offset selling in Fluor and theelimination of ABB.

UNDERLYING FUND −> MB Global Equity

Objective The McLean Budden Global Equity Fund is managed to provide a superiorrate of return, primarily through capital appreciation. The fund invests in a diversifiedportfolio of 60−80 non−Canadian equities. Security selections emphasize large companieswith prospects for above average earnings growth.


Fund managers Mary Hallward, BA, MBA; Bruce Murray; Bill Giblin; Brian Dawson,BA, CFA; Bruce MacNabb; and Benoit Paradis.

Inception date June 1996 Total assets $1,505.6 million


−20%

0%

20%

40%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI McLean Budden Global EquityMB Global Equity

5.7 5.5 8.5−17.6 −6.6 1.4

29.0 24.4 20.9



$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

Dec96 Dec97 Dec98 Dec99 Dec00 Dec01 Dec02 Dec03 Dec04 Dec05

MLI McLean Budden Global EquityMSCI World ($ Cdn)MB Global Equity

$19,235*

$16,384





inception

Manulifeinception

date

MLI McLean Budden GlobalEquity

5.69% 5.58% 6.56% −1.41% 5.45% Jul 1997

MSCI World ($ Cdn) 6.58% 6.96% 7.78% −2.41% −

Rate of return expectation The fund is expected to outperform the MSCI World Index ($ Cdn) over a moving four−yearannualized period by 1.0% per year.


71

Volatility meter



Manulife Trimark Fund

Other 7.64%

Japan 5.10%

France 4.78%

Netherlands 5.38%

Ireland 7.39%

Mexico 11.16%

United Kingdom 21.00%United States 37.55%



Cemex 5.10%

WPP Group 4.48%

Reed Elsevier PLC 4.41%

Grupo Televisa 4.01%

Sherwin−Williams Co. 3.23%

Engelhard Corp. 3.16%

Smiths Group PLC 3.14%

Canon Inc. 3.11%

Oracle 3.10%

Compass Group PLC 3.07%

Total 36.81%



Today, there is a consensus that the world is running out ofoil, natural gas and base/precious metals, and as such,buying into companies that will benefit from these risingcommodity prices is the smart thing to do. However, theportfolio management team believes that consensus can bevery dangerous for investing. The consensus on emergingmarkets 10 years ago and "new economy" businesses in thetechnology, media and telecommunications sectors fiveyears ago have proven to be destructive to returns over longperiods of time.

The team maintains they are not experts in forecastingcommodity prices in the short term. As such, they have shiedaway from investing in businesses whose fortunes dependon commodity prices. The higher the price goes, the morepeople will look for a substitute or just simply use less of it.At the same time, the higher priced commodity leads tomore supply coming on stream as producers of thecommodity try to capitalize on the high prices. Thecombination of falling demand and increasing supply alwaysleads to lower prices of a commodity product. The teamdoes not believe this time is different.

Looking forward, the team is encouraged by the progress ofthe companies in the Fund and their long−term prospects. Ina market that continues to be increasingly focused on short−term results and "consensus" investing, the team continuesto firmly believe that investors who can think in terms oflonger time periods, such as three to five years, should standto benefit. As always, the portfolio management teamcontinually strives to upgrade the quality of the portfoliowith the long term in mind.

UNDERLYING FUND −> Trimark Fund

Objective The Trimark Fund seeks to achieve strong capital growth with a high degreeof reliability over the long term. The fund invests primarily in equities of companiesanywhere in the world.


Fund managers Tye Bousada, CFA; and Dana Love, MSc, CFA.



−10%

0%

10%

20%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MLI TrimarkTrimark Fund − SC

6.8 6.6 9.4

−4.1

11.7 14.2

17.1

7.7

17.9 16.6



$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

$22,000

$24,000

$26,000

$28,000


MLI TrimarkMSCI World ($ Cdn)Trimark Fund − SC

$26,561*

$17,129





inception

Manulifeinception

date

MLI Trimark 6.78% 6.67% 7.59% 5.95% 8.22% Oct 1997

MSCI World ($ Cdn) 6.58% 6.96% 7.78% −2.41% −

Rate of return expectation To be the top of its respective category over the long term, while striving to outperform the MSCIWorld Index ($ Cdn).


72

73

i-Watch

The philosophy

The Investment Management Services (IMS) team focuses on quality, not quantity. They believe past performance is not an accurate indicator of future performance, butrather high-quality investment firms who adhere todocumented investment policies and procedures are morelikely to deliver superior results over time. It is their job tomonitor the fund managers on Manulife's platform soinvestors don’t have to. They understand how important itis for Manulife Financial’s stakeholders to have sufficientinformation to make prudent investment decisions. This iswhy i-Watch exists.

Investment Management Services

One of Manulife Financial’s core competencies is providinginvestment management services in the countries in whichwe operate, including the U.S., Canada, Hong Kong, Japan,and other countries in the Far East. In Canada, theInvestment Management Services team is comprised of ateam of analysts and industry professionals whosecredentials match professionals in the most respectedinvestment consulting firms.

By operating objectively and independently of any businessunits, the IMS team ensures fund partners meet stringentrequirements for fund management. Given that moneymanagement is a global concern, team members oftenconsult with their Manulife counterparts throughout theworld. Fund partners adhere to the same best practicesparticularly when IMS is selecting or monitoring investmentfunds representing non-North American mandates.

i-Watch

Fund selection

Funds available through Manulife Financial are screened andselected using a strict process. Performance is one screeningcriterion, but is not the most important determinant offuture returns. In IMS’ view, the consideration of aninvestment firm’s qualitative aspects, together with itsquantitative aspects, is a better indicator of the fund’s long-term viability.

Reflecting this viewpoint, Manulife Financial’s selectionprocess includes an in-depth review of factors thatdetermine the underlying quality of the fund manager.IMS emphasizes their qualitative review in the decision-making process and screens for the following qualities:

• The stability of the organization, including successionplanning and adherence to a code of ethics.

• The depth, quality and overall experience level of thepeople managing the assets.

• A clearly defined investment process that has beenapplied consistently over time.

• A record of performance that compares favourably toappropriate benchmarks and peer managers.

• Risk characteristics that are in line with investmentmandates.

The IMS team of independent professionals get ‘behindthe numbers’ by visiting and interviewing fund managerson a regular basis, probing issues in a way that can onlycome from years of experience.

Ongoing monitoring process

While the selection process is important, the ongoing

monitoring process makes i-Watch unique. Once an

investment fund is selected, the IMS team continues to

apply the same level of analysis used to select the fund

manager originally. With regular on-site due diligence

meetings, the IMS team conducts ongoing systematic

reviews of every fund available through Manulife Financial.

The due diligence review includes a comprehensive

examination of the evolving characteristics of the fund and

face-to-face meetings with the fund manager.

We believe in forming long-term relationships with our

manager partners. If a fund fails to live up to its mandate,

we will work with the fund manager to address specific

concerns. If these additional steps fail to address our

expectations, the fund manager will be replaced or the

mandate will be capped. The choice of actions is based on

minimizing any disruption to investors.

74

Pension legislation requirements

Pension law requires plan sponsors to establish

appropriate policies and investment strategies for their

pension plan assets. A sound governance plan includes a

statement of investment policies, procedures and goals

that is commonly referred to as the “SIPP&G”. This

documentation helps ensure the pension plan is operating

in the best interests of its plan members. A sound

governance plan outlines the steps and processes plan

sponsors need to follow to set-up and maintain a pension

plan. As part of their responsibilities, plan sponsors must

exercise due diligence in selecting and monitoring

investment managers; offer a range of investment

alternatives; give plan members the opportunity to make

regular investment changes; and provide plan members

with detailed investment information.

Clearly identifying and defining the roles and

responsibilities of each participant in the governance and

operation of the pension plan is an important part of this

plan management. Pension management roles and

activities are identified in the lists that follow.

Plan sponsor obligations

The plan sponsor is required to:

• Select the fund custodian to administer the pension

fund assets.

• Communicate with plan members on plan

documentation.

• Establish and review, a statement of investment policies,

procedures and goals annually or as required.

• Educate and inform plan members about the risk and

return characteristics of each asset class and the

benefits of diversification.

• Communicate information on historic rates of return

and fees for each investment option, the expected

future returns and the importance of diversification.

• Monitor fund performance and report results to the

plan members.

• Select the classes of assets and investment alternatives

that are appropriate investments for the pension fund.

Statement of Investment Policies, Procedures and Goals

• Provide plan members information received from the

investment agencies in connection with the various

investment alternatives offered under the plan.

• Review and approve any benefit payments from the

plan.

• Maintain overall responsibility for the administration of

plan member accounts.

Manulife Financial’s obligations

As the plan fiduciary and fund custodian, Manulife is

required to:

• Establish and maintain records for each plan member.

• Maintain detailed records of all plan transactions.

• Select and monitor the investment agencies.

• Establish, monitor and review performance

benchmarks for the investment funds.

• Select and offer an appropriate range of investment

funds to allow for an acceptable level of liquidity and

to provide for investment diversification to maximize

return and minimize risk.

• Process allocations to the funds and disbursements of

benefit payments from the fund as directed by the

plan sponsor.

• Provide plan sponsors with regular investment reviews

obtained by investment agencies.

Fund manager obligations

As the investment agency, the fund manager is required to:

• Present current economic analysis and related

investment strategy.

• Be responsible for the timing and selection of

individual securities.

• Be responsible for maintaining an appropriate level of

liquidity through diligent cash management and timely

scheduling of maturities.

• Present regular reviews in investment performance.

• Monitor the investment performance of the individual

securities to meet or exceed established performance

benchmarks and to maximize return and minimize risk.

75

Information availableManulife currently offers the Guaranteed Interest Accounts

and market-based investment funds described in this

report to help achieve the specific objectives of plan

sponsors. Plan sponsors may use the information provided

in this Group Investment Report to establish a customized

statement of investment policies, procedures and goals,

based on their plan’s specific investment strategies.

General information regarding the market-based funds for

a pension plan’s statement of investment policies,

procedures and goals is provided below. Information

specific to each fund is found on the fund description

pages in this report.

Market-based funds

All funds are established and maintained under the

authority of the Insurance Companies Act. The funds may

invest in underlying mutual funds or other segregated

funds in accordance with applicable guidelines established

by Canadian securities regulators.

We intend to maintain a reasonable portfolio

diversification. We do not intend to invest in securities for

the purpose of exercising control or management. No

fund may purchase more than 10% of the common stock

of any one corporation unless the investment is made

through a mutual or pooled fund that complies with

applicable investment regulations.

Limitation on loans

There will be no plan loans from the funds.

Limitation on share ownership

No single security will represent more than 10% of the book

value of any fund, with the exception of the index funds.

Derivatives

A derivative is a financial instrument whose characteristics

and value depend on the value of such underlying

instruments or assets as stocks, bonds or cash. Two

examples are futures and options.

A future is a standardized, transferable, exchange-traded

contract that requires delivery of a commodity, bond,

currency or stock index at a specified price on a specified

future date.

An option is the right, but not obligation, to buy (a call

option) or sell (a put option) a specific amount of a given

stock, bond, currency, index or debt at a specified price

during a specified period of time.

The funds may, from time to time, invest in or use

derivative instruments consistent with their investment

objectives to the extent, and for the purposes, permitted

by Canadian securities regulators.

The Manulife market-based funds do not invest directly in

derivatives. However, except where otherwise specified,

the underlying fund may invest in derivatives for hedging

or achieving the duration target. In particular, the use of

derivative instruments is prohibited in the acquisition of

investment exposures not otherwise permitted in the

underlying fund’s investment objectives and description.

Voting rights

The fund manager will exercise any voting rights on the

shares in the best interests of the investment objectives of

the fund.

Valuation of investments notregularly traded

Securities and other investments will be valued using the

best available quotation in Manulife Financial’s estimation.

Conflict of interest

No employee of Manulife or any fund manager shall act

on investment knowledge or information of the fund to

his or her direct or indirect benefit, unless the knowledge

or information has been generally disclosed to the public

and the employee satisfies all the requirements of

Manulife’s Code of Business Conduct and Conflict of

Interest Statement.

Group retirement and savings products and services are offered throughManulife Financial (The Manufacturers Life Insurance Company).Manulife Financial is a leading Canadian-based financial services group serving millions of customers in19 countries and territories worldwide. Operating as Manulife Financial in Canada and Asia, andprimarily through John Hancock in the United States, the Company offers clients a diverse range offinancial protection products and wealth management services through its extensive network ofemployees, agents and distribution partners.

Manulife Financial Corporation trades as ‘MFC’ on the TSX, NYSE and PSE, and under ‘0945’ on the SEHK. Manulife Financial can be found on the Internet at www.manulife.com.

Manulife Financial and the block design are registered service marks and trademarks of The Manufacturers Life Insurance Company and are used by it and its affiliates including ManulifeFinancial Corporation.

GP0083E (12/2005)

A secure website designed to help you.

At www.manulife.ca/GRO, you can:• find your plan level Investment Management Fees on-line,

• get a duplicate RRSP tax receipt,

• check account balances,

• view personal rates of return,

• receive detailed investment information on the funds offered,

• see current unit values and Guaranteed Interest Accounts (GIA) rates,

• view your transaction history, and

• much more.

You need your customer number and your personal identification number (PIN) to access this service. If you need a PIN,or have forgotten it, call toll-free 1-888-727-7766 and press '0' to speak with a Customer Service Representative.

Available 24 hours a day, 7 days a weekat www.manulife.ca/GRO.

Documents

Group Investment Reportgroupsavings.manulife.com/groupretirement/CPOv2.nsf/LookupFiles/... · Group Investment Report December 31, 2005. 2 Table of Contents PAGE The Importance of