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Fidelity Variable Account of Monarch Life Insurance Co – ‘N-30D’ for 12/31/14

On:  Friday, 5/1/15, at 1:19pm ET   ·   Effective:  5/1/15   ·   For:  12/31/14   ·   Accession #:  778209-15-178   ·   File #:  811-04758

Previous ‘N-30D’:  ‘N-30D’ on 4/29/14 for 12/31/13   ·   Next:  ‘N-30D’ on 4/27/16 for 12/31/15   ·   Latest:  ‘N-30D’ on 4/26/19 for 12/31/18

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 5/01/15  Fidelity Var Acct of Monarch … Co N-30D      12/31/14    1:414K                                   WRL Series Life Account
          → Fidelity Variable Account of Monarch Life Insurance Co. ⇒ 3 Classes/Contracts

Annual or Semi-Annual Report Mailed to Shareholders   —   Rule 30d-1
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Document/Exhibit                   Description                      Pages   Size 

 1: N-30D       Annual or Semi-Annual Report Mailed to              HTML    202K 
                          Shareholders

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VARIABLE ACCOUNT C
OF MONARCH LIFE INSURANCE COMPANY

ANNUAL REPORT
DECEMBER 31, 2014



This is a copy of the annual report of the variable account in which your Monarch Life Insurance Company variable life insurance policy invests.  We take pride in our continued commitment to provide prompt, courteous service to our policyowners.  For inquiries regarding your policy, please call our Variable Life Service Center at 1-800-544-0049.


















 








The investment results presented in this report are historical and are no indication of future performance.

 
 
 



Report of Independent Registered Public Accounting Firm
 

 
To the Receiver of Monarch Life Insurance Company and Policyholders of Variable Account C of Monarch Life Insurance Company:
 

In our opinion, the accompanying statement of net assets and the related statement of operations and changes in net assets present fairly, in all material respects, the financial position of each of the investment divisions constituting Variable Account C, a separate account of Monarch Life Insurance Company, (the “Sponsor Company”) at December 31, 2014 and 2013, the results of its operations for the years then ended, the changes in its net assets for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Sponsor Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2014 and 2013 by correspondence with custodians, provide a reasonable basis for our opinion.

 

PricewaterhouseCoopers LLP

April 24, 2015

 

 
1
 

VARIABLE ACCOUNT C
            
MONARCH LIFE INSURANCE COMPANY
            
STATEMENT OF NET ASSETS AT DECEMBER 31, 2014
            
             
ASSETS
  
Cost
  
Shares
  
Market Value
Investments in Variable Insurance Products Fund and Fund V:
            
  Money Market Portfolio
$
3,308,260
  
          3,308,260
$
3,308,260
  Investment Grade Bond Portfolio
  
1,193,409
  
               91,299
  
1,167,711
  Equity-Income Portfolio
  
9,052,380
  
             425,787
  
10,333,862
  Growth Portfolio
  
11,041,075
  
             282,966
  
17,962,654
  Asset Manager Portfolio
  
2,191,514
  
             144,845
  
2,484,085
  High Income Portfolio
  
2,517,399
  
             455,112
  
2,512,216
  Overseas Portfolio
  
4,595,558
  
             261,176
  
4,883,988
Total Invested Assets
$
33,899,595
      
42,652,776
             
             
LIABILITIES
            
  Payable to Monarch Life Insurance Company
          
99,824
  Total Liabilities
          
99,824
             
  Net Assets
        
$
42,552,952
             
             


The accompanying notes are an integral part of these financial statements.
 
 
 

 
2
 


 
VARIABLE ACCOUNT C
            
MONARCH LIFE INSURANCE COMPANY
            
STATEMENT OF NET ASSETS AT DECEMBER 31, 2013
            
             
ASSETS
  
Cost
  
Shares
  
Market Value
Investments in Fidelity Variable Insurance Products Fund and Fund V:
            
  Money Market Portfolio
$
3,893,172
  
         3,893,172
$
3,893,172
  Investment Grade Bond Portfolio
  
1,378,801
  
            104,737
  
1,294,555
  Equity-Income Portfolio
  
8,800,130
  
            426,569
  
9,934,785
  Growth Portfolio
  
10,825,537
  
            288,055
  
16,459,467
  Asset Manager Portfolio
  
1,784,854
  
            125,975
  
2,171,809
  High Income Portfolio
  
2,703,929
  
            494,612
  
2,868,751
  Overseas Portfolio
  
4,674,948
  
            269,135
  
5,554,942
Total Invested Assets
$
34,061,371
      
42,177,481
             
             
LIABILITIES
            
  Payable to Monarch Life Insurance Company
          
61,892
  Total Liabilities
          
61,892
             
  Net Assets
        
$
42,115,589
             
 
The accompanying notes are an integral part of these financial statements.
 
 
 

 
3
 

VARIABLE ACCOUNT C
                                
MONARCH LIFE INSURANCE COMPANY
                              
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
                        
FOR THE YEAR ENDED DECEMBER 31, 2014
                            
                                 
       
Money
  
Investment
  
Equity-
      
Asset
  
High
    
       
Market
  
Grade Bond
  
Income
  
Growth
  
Manager
  
Income
  
Overseas
   
Total
  
Division
  
Division
  
Division
  
Division
  
Division
  
Division
  
Division
Investment Income:
                                
  Dividends
$
606,531
$
393
$
25,368
$
290,846
$
33,016
$
37,679
$
148,618
$
70,611
Expenses:
                                
  Risk Charges and Administrative Expenses
  
(424,444)
  
(39,072)
  
(12,348)
  
(99,444)
  
(169,675)
  
(24,980)
  
(27,101)
  
(51,824)
    Net Investment Income (Loss)
  
182,087
  
(38,679)
  
13,020
  
191,402
  
(136,659)
  
12,699
  
121,517
  
18,787
                                 
Gains and (Losses) on Investments:
                                
  Net Realized Gains (Losses)
  
908,607
  
                  --
  
       (13,316)
  
        213,840
  
        477,279
  
         86,821
  
             62,404
  
          81,579
  Net Unrealized Gains (Losses)
  
637,071
  
                  --
  
         58,548
  
        146,827
  
     1,287,649
  
       (94,384)
  
         (170,005)
  
      (591,564)
  Capital Gain Distributions
  
253,076
  
                  --
  
               507
  
        139,603
  
                    --
  
       111,657
  
                      --
  
             1,309
    Net Gains (Losses)
  
1,798,754
  
                  --
  
         45,739
  
        500,270
  
     1,764,928
  
       104,094
  
         (107,601)
  
      (508,676)
                                 
Net Increase (Decrease) in Net Assets
                                
  Resulting from Operations
  
1,980,841
  
(38,679)
  
58,759
  
691,672
  
1,628,269
  
116,793
  
13,916
  
(489,889)
                                 
                                 
Transfers Due to Deaths
  
      (524,688)
  
     (103,543)
  
             (827)
  
         (70,322)
  
      (234,211)
  
          (1,760)
  
           (58,820)
  
        (55,205)
Transfers Due to Other Terminations
  
(695,779)
  
     (499,349)
  
       (10,696)
  
         (76,004)
  
      (109,013)
  
               371
  
                   (24)
  
           (1,064)
Transfers Due to Policy Loans
  
(54,162)
  
         63,858
  
                   --
  
                945
  
         (57,552)
  
       (22,461)
  
3,080
  
(42,032)
Transfers of Cost of Insurance
  
(182,669)
  
(17,124)
  
(4,689)
  
(43,383)
  
(70,433)
  
(11,865)
  
(11,618)
  
(23,557)
Transfers of Net Loan Cost
  
(86,180)
  
(7,949)
  
193
  
(24,001)
  
(40,149)
  
(5,261)
  
(2,947)
  
(6,066)
Transfers Among Investment Divisions
  
                    --
  
15,843
  
     (170,417)
  
(89,435)
  
368,389
  
233,832
  
(301,791)
  
(56,421)
                                 
Net Increase (Decrease) in Net Assets
                                
  Resulting from Principal Transactions
  
(1,543,478)
  
(548,264)
  
(186,436)
  
(302,200)
  
(142,969)
  
192,856
  
(372,120)
  
(184,345)
                                 
Total Increase (Decrease) in Net Assets
  
437,363
  
(586,943)
  
(127,677)
  
389,472
  
1,485,300
  
309,649
  
(358,204)
  
(674,234)
Net Assets - Beginning of Year
  
42,115,589
  
3,887,460
  
1,292,656
  
9,920,206
  
16,435,314
  
2,168,622
  
2,864,539
  
5,546,792
Net Assets - End of Year
$
42,552,952
$
3,300,517
$
1,164,979
$
10,309,678
$
17,920,614
$
2,478,271
$
2,506,335
$
4,872,558
                                 
The accompanying notes are an integral part of these financial statements.
 
 
 

 
4
 


 
VARIABLE ACCOUNT C
                                
MONARCH LIFE INSURANCE COMPANY
                              
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
                        
FOR THE YEAR ENDED DECEMBER 31, 2013
                            
                                 
       
Money
  
Investment
  
Equity-
      
Asset
  
High
    
       
Market
  
Grade Bond
  
Income
  
Growth
  
Manager
  
Income
  
Overseas
   
Total
  
Division
  
Division
  
Division
  
Division
  
Division
  
Division
  
Division
Investment Income:
                                
  Dividends
$
576,886
$
1,172
$
31,313
$
233,038
$
42,697
$
33,061
$
165,436
$
70,169
Expenses:
                                
  Risk Charges and Administrative Expenses
  
(391,341)
  
(38,523)
  
(15,281)
  
(91,147)
  
(145,849)
  
(22,336)
  
(28,996)
  
(49,209)
    Net Investment Income (Loss)
  
185,545
  
(37,351)
  
16,032
  
141,891
  
(103,152)
  
10,725
  
136,440
  
20,960
                                 
Gains and (Losses) on Investments:
                                
  Net Realized Gains (Losses)
  
550,067
  
                  --
  
            6,559
  
         (63,588)
  
        737,700
  
         55,099
  
             72,348
  
      (258,051)
  Net Unrealized Gains (Losses)
  
6,772,251
  
                  --
  
       (77,978)
  
     1,413,552
  
     3,770,781
  
       235,210
  
           (73,030)
  
     1,503,716
  Capital Gain Distributions
  
666,042
  
                  --
  
         16,060
  
        615,457
  
           10,166
  
            5,124
  
                      --
  
          19,235
    Net Gains (Losses)
  
7,988,360
  
                  --
  
       (55,359)
  
     1,965,421
  
     4,518,647
  
       295,433
  
                 (682)
  
     1,264,900
                                 
Net Increase (Decrease) in Net Assets
                                
  Resulting from Operations
  
8,173,905
  
(37,351)
  
(39,327)
  
2,107,312
  
4,415,495
  
306,158
  
135,758
  
1,285,860
                                 
                                 
Transfers Due to Deaths
  
   (1,388,325)
  
       (27,342)
  
     (122,521)
  
      (287,018)
  
      (468,528)
  
     (367,306)
  
         (115,182)
  
              (428)
Transfers Due to Other Terminations
  
(1,173,349)
  
       (10,823)
  
            1,186
  
         (59,142)
  
      (878,423)
  
     (155,732)
  
           (16,572)
  
        (53,843)
Transfers Due to Policy Loans
  
166,601
  
         14,019
  
               (56)
  
           90,640
  
           49,535
  
(8,828)
  
24,437
  
(3,146)
Transfers of Cost of Insurance
  
(169,744)
  
(16,072)
  
(6,256)
  
(40,893)
  
(61,383)
  
(10,289)
  
(12,511)
  
(22,340)
Transfers of Net Loan Cost
  
(95,894)
  
(7,460)
  
689
  
(26,288)
  
(37,423)
  
(12,666)
  
(6,576)
  
(6,170)
Transfers Among Investment Divisions
  
 --
  
(364,908)
  
(610,187)
  
814,654
  
113,947
  
129,319
  
33,602
  
(116,427)
                                 
Net Increase (Decrease) in Net Assets
                                
  Resulting from Principal Transactions
  
(2,660,711)
  
(412,586)
  
(737,145)
  
491,953
  
(1,282,275)
  
(425,502)
  
(92,802)
  
(202,354)
                                 
Total Increase (Decrease) in Net Assets
  
5,513,194
  
(449,937)
  
(776,472)
  
2,599,265
  
3,133,220
  
(119,344)
  
42,956
  
1,083,506
Net Assets - Beginning of Year
  
36,602,395
  
4,337,397
  
2,069,128
  
7,320,941
  
13,302,094
  
2,287,966
  
2,821,583
  
4,463,286
Net Assets - End of Year
$
42,115,589
$
3,887,460
$
1,292,656
$
9,920,206
$
16,435,314
$
2,168,622
$
2,864,539
$
5,546,792
                                 
The accompanying notes are an integral part of these financial statements.
 
 
 
 


 
5
 
VARIABLE ACCOUNT C
OF MONARCH LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS



NOTE 1-ORGANIZATION

Variable Account C of Monarch Life Insurance Company (the Account), is a segregated account of Monarch Life Insurance Company (Monarch Life) and is registered as The Fidelity Variable Account of Monarch Life Insurance Company, a unit investment trust registered under the Investment Company Act of 1940, as amended (1940 Act), and is currently comprised of seven investment divisions.  Four investment divisions of the Account are invested solely in the shares of four corresponding portfolios of the Fidelity Variable Insurance Products Fund, and the remaining three investment divisions are invested solely in the shares of three corresponding portfolios of the Fidelity Variable Insurance Products Fund V (the Funds), both are open-end management investment companies registered under the 1940 Act.  The Funds’ investment advisor is Fidelity Management & Research Company.

The change in net assets maintained in the Account provides the basis for the periodic determination of the amount of increased or decreased benefits under the policies.  The net assets may not be less than the amount required under state insurance law to provide for death benefits (without regard to the minimum guaranteed death benefit) and other policy benefits.  Additional assets are held in Monarch Life’s general account to cover the contingency that the guaranteed death benefit might exceed the death benefit which would have been payable in the absence of such guarantee.

Monarch Life is a wholly-owned subsidiary of Regal Reinsurance Company (Regal Re).  On June 9, 1994, the Insurance Commissioner of the Commonwealth of Massachusetts (the Commissioner) was appointed receiver (the Receiver) of Monarch Life in a rehabilitation proceeding pending before the Supreme Judicial Court for Suffolk County, Massachusetts (the Court).  A term sheet dated July 19, 1994 (the Term Sheet) among the Commissioner (in her capacity as Commissioner and Receiver) and certain Regal Re shareholders and noteholders and holders of Monarch Life’s surplus notes (representing approximately 85% of both the total outstanding Regal Re notes and common stock) (the Holders) was approved by the Court on September 1, 1994.  Pursuant to the Term Sheet, the Holders transferred their notes and stock into voting trusts for which the Commissioner is the sole trustee, which effectively vests control of Monarch Life and Regal Re in the Commissioner.

Some insurance departments have either suspended, revoked or not renewed Monarch Life’s certificate of authority, ordered Monarch Life to cease writing new business, or have requested a voluntary suspension of sales.

Monarch Life currently limits its business to maintaining its existing blocks of disability income insurance policies, variable life insurance policies, and annuity contracts.  Monarch Life ceased issuing new variable life insurance policies and new annuity contracts effective May 1, 1992, and new disability income insurance policies effective June 15, 1993.

Under applicable insurance law, the assets and liabilities of the Account are clearly identified and distinguished from the other assets and liabilities of Monarch Life and Regal Re.  The Account cannot be charged with liabilities arising out of any other business of Monarch Life or Regal Re and is held for the exclusive benefit of the policyowners participating in the Account.

NOTE 2-SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by the Account in preparation of its financial statements.  Preparation of financial statements requires the use of estimates made by management.  Actual results may differ from these estimates.  The policies are in conformity with accounting principles generally accepted in the United States of America.
 
INVESTMENTS:  The investments in shares of the Funds are stated at market value, which is the net asset value per share of the respective portfolios of the Funds each day that the New York Stock Exchange is open.  Investment transactions are accounted for on the date the shares are purchased or sold.  The cost of shares redeemed and realized gains and losses are determined on the first-in, first-out method.  Dividend income and capital gain distributions received from the Funds are reinvested in additional shares of the Funds and are recorded by the Account on the ex-dividend date.
 
FEDERAL INCOME TAXES:  For federal income tax purposes, operations of the Account are combined with those of Monarch Life, which is taxed as a life insurance company.  Under existing federal income tax law, Monarch Life anticipates no tax liability resulting from the operations of the Account.

 
6
 
VARIABLE ACCOUNT C
OF MONARCH LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS



NOTE 2-SIGNIFICANT ACCOUNTING POLICIES (Continued)

FAIR VALUE MEASUREMENT:  At December 31, 2014 and December 31, 2013, all the Account’s recurring fair value measurements, which consist solely of mutual funds and marketable securities, represent Level 1 fair value measurements, which, as defined in Financial Accounting Standards Board Accounting Standards Codification 820, Fair Value Measurements and Disclosures, are quoted prices in active markets for identical securities.

NOTE 3-PURCHASES AND SALES OF SECURITIES

Total cost of purchases and proceeds from sales of shares of the Funds by the Account for the year ended December 31, 2014 are shown below:

     
Purchases
  
Sales
 
Money Market Portfolio
  
$1,552,244
  
$2,137,156
  
 
Investment Grade Bond Portfolio
  
344,099
  
516,175
  
 
Equity-Income Portfolio
  
1,641,952
  
1,603,542
  
 
Growth Portfolio
  
1,034,932
  
1,296,673
  
 
Asset Manager Portfolio
  
778,505
  
458,666
  
 
High Income Portfolio
  
440,349
  
689,283
  
 
Overseas Portfolio
  
455,731
  
616,700
  
 
Totals
  
$6,247,812
  
$7,318,195
  

NOTE 4-EXPENSES

Monarch Life assumes mortality and expense risks, minimum guaranteed death benefit risks and annual administrative expenses related to the operations of the Account.  Monarch Life deducts a daily charge from the assets of the Account to cover these risks.  The charge is equal to a rate of 1% (on an annual basis) of the policyowners’ investment base.

NOTE 5-CHANGES IN UNITS OUTSTANDING

The changes in units outstanding for the years ended December 31, 2014 and 2013 are shown below:


 
2014                            
2013                              
 
 
Issued
 
Redeemed
   Net Increase
  (Decrease)
 
  Issued
 
   Redeemed
Net Increase
(Decrease)
Money Market Division
71,736
97,106
(25,370)
138,718
160,021
(21,303)
Investment Grade Bond Division
8,304
13,207
(4,903)
11,920
32,163
(20,243)
Equity-Income Division
14,353
18,508
(4,155)
30,191
23,816
6,375
Growth Division
10,682
12,461
(1,779)
21,966
41,297
(19,331)
Asset Manager Division
12,320
8,334
3,986
19,386
29,136
(9,750)
High Income Division
6,062
13,766
(7,704)
13,610
16,430
(2,820)
Overseas Division
9,612
14,141
(4,529)
22,936
29,915
(6,979)

NOTE 6-POLICY CHARGES

Monarch Life periodically deducts a charge for mortality cost from a policyowner’s investment base.  This charge is for the cost of providing life insurance coverage for the insured.

Policies that have outstanding policyowner loans are charged a 1.50% annual net loan cost.  A policyowner’s investment base is reduced by the net loan cost.

 
7
 
VARIABLE ACCOUNT C
OF MONARCH LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS



NOTE 7-POLICYOWNERS’ INVESTMENT BASE

Policyowners’ investment base for 2014, 2013, 2012, 2011, and 2010 consists of the following:


 
At December 31,
For the year ended December 31,
 
 
 
2014
 
 
 
Units
 
Separate
Account Index
 
Policyowner
Investment
Base
 
Investment
Income
Ratio*
Expenses as a % of Average Investment Base**
 
 
Total Return***
Money Market Division
153,553
$21.54
$3,308,260
0.01%
1.00%
(0.98%)
Investment Grade Bond Division
30,254
38.60
1,167,711
2.05%
1.00%
4.78%
Equity-Income Division
118,402
87.28
10,333,862
2.90%
1.00%
7.64%
Growth Division
180,206
99.68
17,962,654
0.19%
1.00%
10.20%
Asset Manager Division
47,520
52.27
2,484,085
1.51%
1.00%
4.79%
High Income Division
53,513
46.95
2,512,216
5.47%
1.00%
0.15%
Overseas Division
128,815
37.91
4,883,988
1.35%
1.00%
(8.99%)
2013
            
Money Market Division
178,923
$21.76
$3,893,172
0.03%
1.00%
(0.96%)
Investment Grade Bond Division
35,157
36.84
1,294,555
2.03%
1.00%
(2.75%)
Equity-Income Division
122,557
81.08
9,934,785
2.57%
1.00%
26.88%
Growth Division
181,985
90.46
16,459,467
0.29%
1.00%
34.99%
Asset Manager Division
43,534
49.89
2,171,809
1.48%
1.00%
14.56%
High Income Division
61,217
46.87
2,868,751
5.68%
1.00%
4.90%
Overseas Division
133,344
41.66
5,554,942
1.42%
1.00%
29.15%
2012
            
Money Market Division
200,226
$21.97
$4,398,802
0.13%
1.00%
(0.86%)
Investment Grade Bond Division
55,400
37.88
2,098,422
2.39%
1.00%
4.84%
Equity-Income Division
116,182
63.90
7,424,572
3.00%
1.00%
16.14%
Growth Division
201,316
67.01
13,490,366
0.60%
1.00%
13.55%
Asset Manager Division
53,284
43.55
2,320,344
1.57%
1.00%
11.36%
High Income Division
64,037
44.69
2,861,523
5.60%
1.00%
13.09%
Overseas Division
140,323
32.26
4,526,417
1.93%
1.00%
19.54%
2011
            
Money Market Division
168,336
$22.16
$3,730,312
0.11%
1.00%
(0.88%)
Investment Grade Bond Division
60,153
36.13
2,173,159
3.66%
1.00%
6.27%
Equity-Income Division
136,129
55.02
7,490,283
2.37%
1.00%
(0.03%)
Growth Division
216,797
59.02
12,794,381
0.38%
1.00%
(0.79%)
Asset Manager Division
65,325
39.10
2,554,453
1.96%
1.00%
(3.52%)
High Income Division
77,953
39.51
3,080,137
6.75%
1.00%
3.00%
Overseas Division
153,057
26.98
4,130,154
1.33%
1.00%
(17.98%)
2010
            
Money Market Division
175,457
$22.36
$3,922,614
0.18%
1.00%
(0.75%)
Investment Grade Bond Division
44,537
33.99
1,514,022
3.85%
1.00%
6.72%
Equity-Income Division
159,556
55.04
8,781,666
1.87%
1.00%
14.03%
Growth Division
217,393
59.48
12,931,399
0.29%
1.00%
22.94%
Asset Manager Division
68,287
40.53
2,767,779
1.69%
1.00%
13.12%
High Income Division
78,278
38.36
3,002,793
8.00%
1.00%
12.69%
Overseas Division
187,431
32.90
6,166,706
1.44%
1.00%
11.98%


 
8
 
VARIABLE ACCOUNT C
OF MONARCH LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS



NOTE 7-POLICYOWNERS’ INVESTMENT BASE (Continued)

*These ratios represent dividends received by the Account’s divisions from the underlying investments, divided by the respective division’s average net assets.  These ratios exclude those expenses, such as mortality and expense risk charges, that result in direct reductions to the Account’s unit values.  The recognition of investment income by the Account’s divisions is affected by the timing of the declaration of dividends by the underlying investments.

**These ratios represent the expenses of the Account (consisting primarily of mortality and expense risk charges) which result in a direct reduction to the Account’s unit values.  Expenses of the underlying investments and any charges made directly to a policy (through the redemption of units) are excluded.

***These ratios represent the total return of the Account’s divisions.  These ratios include changes in the values of the underlying investments and deductions for items included in the expense ratios.  These ratios do not include any policy charges; inclusion of these amounts in the calculations would result in reductions in the ratios.

NOTE 8-DIVERSIFICATION REQUIREMENTS

Under the provisions of Section 817(h) of the Internal Revenue Code, as amended (the Code), a variable life insurance policy, other than a policy issued in connection with certain types of employee benefit plans, will not be treated as a life insurance policy for federal tax purposes for any period for which the investments of the segregated asset account, on which the policy is based, are not adequately diversified.  The Code provides that the “adequately diversified” requirement may be met if the underlying investments satisfy either a statutory safe harbor test or diversification requirements set forth in regulations issued by the Secretary of the Treasury.

The Internal Revenue Service has issued regulations under Section 817(h) of the Code.  Monarch Life believes, based on assurances from the Funds, that the Account satisfies the current requirements of the regulations.

 NOTE 9-PRINCIPAL UNDERWRITER AND GENERAL DISTRIBUTOR

Baystate Capital Services, Inc. (BCSI), is the principal underwriter and general distributor of the policies maintained in the Account.  BCSI is a wholly-owned subsidiary of Monarch Life.

NOTE 10-SUBSEQUENT EVENTS

As of April 24, 2015, the date in which the financial statements were available to be issued, management has determined that no subsequent events have occurred following the balance sheet date of December 31, 2014 which require recognition or disclosure in the financial statements.



 
9
 



Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘N-30D’ Filing    Date    Other Filings
Filed on / Effective on:5/1/15
4/24/15
For Period End:12/31/1424F-2NT,  NSAR-U
12/31/1324F-2NT,  N-30D,  NSAR-U
9/1/94
7/19/94
6/9/94
6/15/93
5/1/92
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