HANCOCK JOHN VARIABLE ANNUITY ACCOUNT H, 497, 1998-10-28

HANCOCK JOHN VARIABLE ANNUITY ACCOUNT H
497, 1998-10-28

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JOHN HANCOCK MUTUAL
LIFE INSURANCE COMPANY

DEFERRED COMBINATION FIXED AND
VARIABLE ANNUITY CONTRACTS

JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V

PROSPECTUS

October 21, 1998

The deferred annuity contracts described in this prospectus may be funded by any
one or more of twenty-nine subaccounts ("Subaccounts") of John Hancock Variable
Annuity Account H ("Account H") and John Hancock Variable Annuity Account V
("Account V") (collectively referred to as the "Separate Accounts"), and by the
Market Value Adjustment Fixed Account ("MVA Fixed Account"). The Separate
Accounts are separate investment accounts of John Hancock Mutual Life Insurance
Company ("Company"). The contracts are issued as group or individual contracts.
An individual's interest in a group contract is evidenced by the issuance of a
separate Certificate. In some states, contracts are offered on an individual
basis, with the issuance of an individual contract. The Certificates and
individual contracts are collectively referred to herein as the "Contracts."

The Contracts are designed to provide retirement benefits under tax qualified
plans, as well as under non-qualified arrangements. All funds accumulate on a
tax-deferred basis under the Contracts. You may elect a variable return
investment option through the Separate Accounts or a guaranteed interest
investment option through the MVA Fixed Accounts, or a combination of these two
options.

Under the variable return investment option, you can choose among one or more of
the available Subaccounts of the Separate Accounts. The following Subaccounts of
Account H are available: V.A. Growth, V.A. Sovereign Investors, V.A. Growth &
Income, V.A. Independence Equity, V.A. Special Opportunities, V.A. Emerging
Growth, V.A. Financial Industries, V.A. Strategic Income, V.A. Bond (formerly,
V.A. Sovereign Bond), V.A. High Yield Bond, and V.A. Money Market. The following
Subaccounts of Account V are available: Managed, Equity Index, Large Cap Value,
Large Cap Growth, Mid Cap Value, Mid Cap Growth, Real Estate Equity, Small/Mid
Cap CORE, Small Cap Value, Global Equity, International Balanced, International
Equity Index, International Opportunities, Emerging Markets Equity, Short-Term
Bond, Bond Index, Strategic Bond, and High Yield Bond.

The assets of each Subaccount of Account H will be invested in a corresponding
fund ("Fund") of the John Hancock Declaration Trust ("Declaration Trust"), a
"series" type mutual fund advised by John Hancock Advisers, Inc., ("JH
Advisers"). The assets of each Subaccount of Account V will be invested in a
corresponding portfolio ("Portfolio") of the John Hancock Variable Series Trust
I ("VST"), a "series" type mutual fund advised by John Hancock Mutual Life
Insurance Company ("John Hancock"). The Declaration Trust and the VST are
collectively referred to as the "Trusts." John Hancock and JH Advisers are
collectively referred to as the "Investment Advisers." The prospectus for each
Trust accompanies this prospectus and describes the investment objectives,
policies, and risks of the Trusts.

Under the MVA Fixed Account guaranteed interest investment option, you can
choose among various available Guarantee Periods, each of which has its own
interest rate and expiration date. Amounts allocated to the MVA Fixed Account
are credited with interest at a fixed rate for the entire Guarantee Period. A
Market Value Adjustment, or "MVA," positive or negative, may be made upon
annuitization or any withdrawal, surrender or transfer prior to the last day of
any Guarantee Period. However, the amount of any MVA is subject to the
limitations described under "The MVA Fixed Account."

(continued on next page)

THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. IT IS NOT
VALID UNLESS ACCOMPANIED BY THE CURRENT PROSPECTUS FOR EACH TRUST.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

INTERESTS IN THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED,
ENDORSED, OR GUARANTEED BY THE U.S. GOVERNMENT, ANY BANK, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, ENTITY OR
PERSON, AND INVOLVE INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

[JOHN HANCOCK FUNDS LOGO] [Printed on Recycled Paper LOGO].
PVAMIP 10/98

<PAGE>

(continued from prior page)

Currently, the number of investment options that may be selected to fund the
Contracts is limited to 18.

This prospectus sets forth information about the Contracts that a prospective
investor ought to know before investing. A statement of additional information
("SAI") for the Separate Accounts, dated October 21, 1998, has been filed with
the Securities and Exchange Commission ("Commission") and is incorporated herein
by reference. The SAI, the table of contents of which appears at page 31 of this
prospectus, is available without charge upon written or oral request made to the
Company's Servicing Office at the address or telephone number below.

Servicing Office
John Hancock Servicing Center
P.O. Box 9298
Boston, Massachusetts 02205-9298

Telephone 800-824-0335

<PAGE>

<TABLE>
<CAPTION>
Page
TABLE OF CONTENTS ----
<S> <C>
SPECIAL TERMS............................................... 5
SYNOPSIS OF EXPENSE INFORMATION............................. 5
CONDENSED FINANCIAL INFORMATION............................. 8
SUMMARY INFORMATION......................................... 9
THE COMPANY................................................. 11
THE SEPARATE ACCOUNTS....................................... 11
THE TRUSTS.................................................. 13
THE MVA FIXED ACCOUNT....................................... 15
Guaranteed Rates/Guarantee Periods........................ 15
Market Value Adjustment................................... 15
MVA Gain and Loss Limitations............................. 16
Investments by the Company................................ 16
CHARGES UNDER THE CONTRACTS................................. 16
Charges For Mortality And Expense Risks................... 16
Charges for Administrative Services....................... 16
Contingent Deferred Sales Load............................ 17
Nursing Home Waiver of CDSL............................... 18
Optional Death Benefit Charges............................ 18
Variations in Charges..................................... 18
Premium or Similar Taxes.................................. 19
THE CONTRACTS............................................... 19
Purchase of Contracts..................................... 19
Premium Payments by Wire.................................. 19
THE ACCUMULATION PERIOD..................................... 20
Allocation of Premium Payments............................ 20
Value of Accumulation Units............................... 20
Determination of MVA Fixed Account Value.................. 20
Transfers Among Subaccounts and Guarantee Periods......... 20
Dollar Cost Averaging..................................... 21
Surrender of Contract; Partial Withdrawals................ 21
Systematic Withdrawal..................................... 21
Standard Death Benefit.................................... 22
Optional One Year Stepped-Up Death Benefit................ 22
Optional Accidental Death Benefit......................... 22
Payment of Death Benefits................................. 22
THE ANNUITY PERIOD.......................................... 23
Variable Monthly Annuity Payments......................... 23
Fixed Monthly Annuity Payments............................ 24
Annuity Options........................................... 24
Transfers................................................. 24
Other Conditions.......................................... 25
VARIABLE ACCOUNT VALUATION PROCEDURES....................... 25
MISCELLANEOUS PROVISIONS.................................... 25
Restriction on Assignment................................. 25
Deferment of Payment...................................... 25
Reservation of Rights..................................... 26
Owner and Beneficiary..................................... 26
FEDERAL INCOME TAXES........................................ 26
The Separate Accounts, the MVA Fixed Account, and the
Company................................................ 26
Contracts Purchased Other Than to Fund a Tax Qualified
Plan................................................... 26
Diversification Requirements.............................. 27
Contracts Purchased to Fund a Tax Qualified Plan.......... 27
SEPARATE ACCOUNT PERFORMANCE................................ 29
REPORTS..................................................... 29
VOTING PRIVILEGES........................................... 29
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Page
TABLE OF CONTENTS (CONTINUED) ----
<S> <C>
CHANGES IN APPLICABLE LAW--FUNDING AND OTHERWISE............ 30
DISTRIBUTION OF THE CONTRACTS............................... 30
YEAR 2000................................................... 30
REGISTRATION STATEMENTS..................................... 30
EXPERTS AND FINANCIAL STATEMENTS............................ 30
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.... 31
APPENDIX A--SAMPLE MARKET VALUE ADJUSTMENT CALCULATIONS..... 32
APPENDIX B--VARIABLE ANNUITY INFORMATION FOR INDIVIDUAL
RETIREMENT ANNUITIES...................................... 34
</TABLE>

THE CONTRACTS OFFERED BY THIS PROSPECTUS MAY NOT BE AVAILABLE IN ALL STATES.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE OR SOLICIT AN OFFER IN THAT STATE.

<PAGE>

SPECIAL TERMS

As used in this prospectus, the following terms have the indicated meanings:

ACCUMULATION PERIOD: the period referred to in the term "Accumulation Unit."

ACCUMULATION UNIT: a unit of measurement used in determining the value of an
Owner's interest in a Subaccount during the period prior to the commencement of
annuity payments or, if earlier, the surrender of the Contract. The value of an
Accumulation Unit will reflect the investment experience of the Subaccount and
vary in dollar amount.

ACCUMULATED VALUE: accumulated value of all Subaccounts and the MVA Fixed
Account Value under a Contract.

DATE OF MATURITY: the date elected by the Owner as of which annuity payments
will commence. The election is subject to certain conditions described in "The
Annuity Period." The Contract specifies a "Date of Maturity" as discussed under
"The Annuity Period."

ANNUITANT: the person designated in the Contract as such.

ANNUITY OPTION: the provisions under which a series of annuity payments is made
to the Annuitant or other payee, such as the Life Annuity with Ten Years
Certain.

ANNUITY UNIT: a unit of measurement used in determining the amount of any
variable annuity payment. The value of an Annuity Unit for each Subaccount will
depend upon the assumed investment rate and the investment experience of that
Subaccount, and will vary in dollar amount.

CONTRACT YEAR: the 12-month period following the date of issue of the Contract
and each 12-month period thereafter. In Certificates issued under group
Contracts, these periods are the "Certificate Year."

FIXED ANNUITY OPTION: an annuity option under which the Company promises to pay
the Annuitant, or any other payee designated by the Owner, fixed payments.

GENERAL ACCOUNT: comprises all assets of the Company other than those in the
Separate Accounts, and other than those in any other legally segregated separate
account established by the Company.

GUARANTEE PERIOD: the period for which a Guaranteed Rate is credited.

GUARANTEED RATE: the rate of interest credited during any Guarantee Period, on
an effective annual basis.

MARKET VALUE ADJUSTMENT: positive or negative adjustment, subject to limitation,
to MVA Fixed Account Value that is paid out at a time other than the last day of
a Guarantee Period.

MVA FIXED ACCOUNT VALUE: the amount of premium payments allocated or transferred
to Guarantee Periods, plus interest and any positive Market Value Adjustment,
less any withdrawals (including any contingent deferred sales load) and
deductions for fees, charges and any premium or similar taxes, and any negative
Market Value Adjustment.

OWNER: the person(s) or entity, usually the person(s) or entity to whom the
Contract is issued, who has the sole right to exercise all rights and privileges
under the Contract except as otherwise provided in the Contract. As used in this
prospectus, Owner includes the "Participant" referred to in Certificates under
Contracts issued on a group basis.

SURRENDER VALUE: the amount that is payable upon a surrender of the Contract
prior to the Date of Maturity. Surrender Value is equal to the Accumulated Value
of a Contract after all applicable adjustments and deduction of all applicable
charges.

VARIABLE ANNUITY OPTION: an annuity option under which the Company makes to the
Annuitant, or any other payee designated by the Owner, payments which vary in
amount in accordance with the net investment experience of the Subaccounts
selected by the Owner. Not all of the Subaccounts are available under the
Contracts during the annuity period.

WE, US, OUR: mean the Company.

YOU, YOUR: mean the Owner.

SYNOPSIS OF EXPENSE
INFORMATION

The purpose of this synopsis is to provide an understanding of the various costs
and expenses that the Owner will bear directly or indirectly. The synopsis
includes expenses of the Separate Accounts and the Trusts. For a more complete
description of the fees and charges applicable under the Contracts, see "Charges
Under the Contracts." The management fees charged the Funds and Portfolios and
their annual operating expenses are more fully described in the prospectuses for
the Trusts.

CONTRACT OWNER TRANSACTION EXPENSES

CONTINGENT DEFERRED SALES LOAD (or "CDSL," as a percentage of premium payments
withdrawn in excess of the Free Withdrawal Value)(1)

<TABLE>
<CAPTION>
YEARS FROM DATE OF
PREMIUM PAYMENT TO CDSL
DATE OF SURRENDER OR WITHDRAWAL PERCENTAGE
- ---------------------------------------------------- ----------
<S> <C>
7 or more........................................... 0%
6 but less than 7................................... 2%
5 but less than 6................................... 3%
4 but less than 5................................... 4%
3 but less than 4................................... 5%
2 but less than 3................................... 5%
less than 2......................................... 6%
ANNUAL CONTRACT FEE(2).............................. $30
</TABLE>

- ---------------
(1) In any Contract Year an Owner may withdraw, without a CDSL, an amount equal
to 10% of the Accumulated Value as of the beginning of the Contract Year
less any prior withdrawals during the Contract Year. This is the "Free
Withdrawal Value."

(2) The annual Contract Fee is deducted on Contracts having an Accumulated Value
of less than $10,000. The Contract Fee is deducted at the beginning

<PAGE>
of each Contract Year after the first and at a full surrender during a
Contract Year. The Contract Fee is assessed only during the Accumulation
Period, and is referred to as the "Certificate Fee" in Certificates issued
under group Contracts. The Company reserves the right to increase the annual
Contract Fee up to $50, subject to applicable state regulations.

SEPARATE ACCOUNT ANNUAL EXPENSES

(as a percentage of Account Value)

<TABLE>
<CAPTION>
INITIAL PREMIUM
PAYMENT
---------------------
LESS THAN $250,000
$250,000 OR MORE
--------- --------
<S> <C> <C>
Mortality and Expense Risk Charge......... 0.90% 0.90%
Administration Charge..................... 0.35% 0.10%
---- ----
Total..................................... 1.25% 1.00%
==== ====
</TABLE>

DECLARATION TRUST ANNUAL EXPENSES

(as a percentage of average net assets)

OTHER FUND
MANAGEMENT EXPENSES TOTAL FUND
FUND FEES AFTER LIMITATION(*) EXPENSES(*)
- ---------------------- ---------- ------------------- -----------
<S> <C> <C> <C>
V.A. Financial
Industries 0.80% 0.25% 1.05%
V.A. Emerging Growth 0.75% 0.25% 1.00%
V.A. Special
Opportunities 0.75% 0.25% 1.00%
V.A. Growth 0.75% 0.25% 1.00%
V.A. Growth & Income 0.60% 0.25% 0.85%
V.A. Independence
Equity 0.70% 0.25% 0.95%
V.A. Sovereign
Investors 0.60% 0.25% 0.85%
V.A. Bond 0.50% 0.25% 0.75%
V.A. Strategic Income 0.60% 0.25% 0.85%
V.A. High Yield Bond 0.60% 0.25% 0.85%
V.A. Money Market 0.50% 0.25% 0.75%
</TABLE>

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

(*) Other Fund expenses are based on expenses for the past fiscal year except
V.A. Special Opportunities, V.A. Growth & Income, and V.A. High Yield Bond
Funds which were not in existence during the year. Advisers agreed to limit
temporarily other expenses of each Fund to 0.25% of the Fund's average daily
net assets.

Without these limitations, other expenses for V.A. Financial Industries,
V.A. Emerging Growth, V.A. Growth, V.A. Independence Equity, V.A. Sovereign
Investors, V.A. Bond, V.A. Strategic Income, and V.A. Money Market Funds
would be 0.59%, 1.97%, 1.62%, 0.89%, 0.56%, 2.03%, 0.77%, and 0.77%,
respectively. As a result, total fund operating expenses without these
limitations for V.A. Financial Industries, V.A. Emerging Growth, V.A.
Growth, V.A. Independence Equity, V.A. Sovereign Investors, V.A. Bond, V.A.
Strategic Income, and V.A. Money Market Funds would be 1.39%, 2.72%, 2.37%,
1.59%, 1.16%, 2.53%, 1.37%, and 1.27%, respectively. Other Fund expenses and
total Fund expenses as a percentage of average net assets are expected to
decrease as the net assets of the Funds grow.

VST ANNUAL EXPENSES
(as a percentage of average net assets)

<TABLE>
<CAPTION>
OTHER PORTFOLIO
EXPENSES
MANAGEMENT AFTER TOTAL PORTFOLIO
PORTFOLIO FEES REIMBURSEMENT** EXPENSES
- --------------------- ---------- ------------------- ---------------
<S> <C> <C> <C>
Managed 0.33% 0.04% 0.37%
Equity Index 0.15% 0.25% 0.40%
Large Cap Value 0.75% 0.25% 1.00%
Large Cap Growth 0.39% 0.05% 0.44%
Mid Cap Value 0.80% 0.25% 1.05%
Mid Cap Growth 0.85% 0.25% 1.10%
Real Estate Equity 0.60% 0.09% 0.69%
Small/Mid Cap CORE 0.80% 0.25% 1.05%
Small Cap Value 0.80% 0.25% 1.05%
Global Equity 0.90% 0.25% 1.15%
International
Balanced 0.85% 0.25% 1.10%
International Equity
Index 0.18% 0.19% 0.37%
International
Opportunities 0.97% 0.25% 1.22%
Emerging Markets
Equity 1.30% 0.25% 1.55%
Short-Term Bond 0.30% 0.21% 0.51%
Bond Index 0.15% 0.25% 0.40%
Strategic Bond 0.75% 0.25% 1.00%
High Yield Bond 0.65% 0.25% 0.90%
</TABLE>

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

** Other Portfolio Expenses are based upon expenses for the past fiscal year,
except that Other Portfolio Expenses for Small/Mid Cap CORE, Global Equity,
Emerging Markets Equity, Bond Index, and High Yield Bond Funds are based upon
estimates for the current fiscal year because these Portfolios are new and
expenses for the past fiscal year are therefore unavailable. John Hancock
reimburses the Portfolio when the Portfolio's Other Expenses exceeds 0.25% of
its average daily net asset value. Other Portfolio expenses and total
Portfolio expenses as a percentage of average net assets are expected to
decrease as the net assets of the Portfolios grow. Without these
reimbursements, Other Portfolio Expenses for the Equity Index, Large Cap
Value, Mid Cap Value, Mid Cap Growth, International Balanced, International
Opportunities, and Strategic Bond Portfolios would have been 0.40%, 0.31%,
0.34%, 0.50%, 0.71%, 0.60% and 0.57%, respectively.

<PAGE>

EXAMPLES

If you surrender your Contract at the end of the applicable time period, you
would pay the following current expenses on a $1,000 investment allocated to one
of the Subaccounts listed, assuming 5% annual return on assets:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
V.A. Financial Industries..... 78 118 161 269
V.A. Emerging Growth.......... 77 117 159 264
V.A. Special Opportunities.... 77 117 159 264
V.A. Growth................... 77 117 159 264
V.A. Growth & Income.......... 76 112 151 248
V.A. Independence Equity...... 77 115 156 259
V.A. Sovereign Investors...... 76 112 151 248
V.A. Bond..................... 75 109 146 238
V.A. Strategic Income......... 76 112 151 248
V.A. High Yield Bond.......... 76 112 151 248
V.A. Money Market............. 75 109 146 238
Managed....................... 71 97 126 198
Equity Index.................. 71 98 128 201
Large Cap Value............... 77 117 159 264
Large Cap Growth.............. 72 99 130 205
Mid Cap Value................. 78 118 161 269
Mid Cap Growth................ 78 120 164 274
Real Estate Equity............ 74 107 143 232
Small/Mid Cap CORE............ 78 118 161 269
Small Cap Value............... 78 118 161 269
Global Equity................. 79 121 166 279
International Balanced........ 78 120 164 274
International Equity Index.... 71 97 126 198
International Opportunities... 80 123 170 286
Emerging Markets Equity....... 83 133 186 318
Short-Term Bond............... 72 102 133 213
Bond Index.................... 71 98 128 201
Strategic Bond................ 77 117 159 264
High Yield Bond............... 76 114 153 253
</TABLE>

If you annuitize at the end of the applicable time period, or if you do not
surrender your Contract, you would pay the following current expenses on a
$1,000 investment allocated to one of the Subaccounts listed, assuming 5% annual
return on assets:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
V.A. Financial Industries..... 24 73 126 269
V.A. Emerging Growth.......... 23 72 123 264
V.A. Special Opportunities.... 23 72 123 264
V.A. Growth................... 23 72 123 264
V.A. Growth & Income.......... 22 67 115 248
V.A. Independence Equity...... 23 70 121 259
V.A. Sovereign Investors...... 22 67 115 248
V.A. Bond..................... 21 64 110 238
V.A. Strategic Income......... 22 67 115 248
V.A. High Yield Bond.......... 22 67 115 248
V.A. Money Market............. 21 64 110 238
Managed....................... 17 53 91 198
Equity Index.................. 17 54 92 201
Large Cap Value............... 23 72 123 264
Large Cap Growth.............. 18 55 94 205
Mid Cap Value................. 24 73 126 269
Mid Cap Growth................ 24 75 128 274
Real Estate Equity............ 20 62 107 232
Small/Mid Cap CORE............ 24 73 126 269
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Small Cap Value............... 24 73 126 269
Global Equity................. 25 76 131 279
International Balanced........ 24 75 128 274
International Equity Index.... 17 53 91 198
International Opportunities... 26 78 134 286
Emerging Markets Equity....... 29 88 150 318
Short-Term Bond............... 18 57 98 213
Bond Index.................... 17 54 92 201
Strategic Bond................ 23 72 123 264
High Yield Bond............... 22 69 118 253
</TABLE>

The annual Contract Fee reflected in the examples has been expressed as an
annual percentage of assets based on the Company's experience with other
variable annuity contracts using the same contract fee provision.

The examples do not give effect to any premium taxes that may be applicable, or
to any of the charges described under "Optional Benefit Riders," below. The
examples should not be considered representations of past or future expenses;
actual expenses may be greater than or less than those shown above.

OPTIONAL BENEFIT RIDERS

The Company offers, subject to state availability, three optional benefit riders
that may be elected by the Owner. A separate monthly charge is made for each
rider selected. The charge, as applicable, is made pro rata based on relative
values through a reduction in Accumulation Units of the Subaccounts and dollar
amounts in the Guarantee Periods under a Contract.

The applicable charge is equal to the Accumulated Value at the beginning of each
month multiplied by 1/12th of the following annual percentage rates. With
respect to the Nursing Home Waiver of CDSL Rider, the applicable charge will be
assessed only upon the Accumulated Value associated with premium payments upon
which a CDSL would continue to be applicable at the time the charge is assessed.

<TABLE>
<S> <C>
ONE YEAR STEPPED-UP DEATH BENEFIT RIDER.................... 0.15%
ACCIDENTAL DEATH BENEFIT RIDER (terminates at age 80)...... 0.10%
NURSING HOME WAIVER OF CDSL RIDER.......................... 0.05%
</TABLE>

For a description of these riders, see "One Year Stepped-Up Death Benefit Rider"
and "Accidental Death Benefit Rider" under "The Accumulation Period," and
"Nursing Home Waiver of CDSL Rider" under "Charges Under the Contracts."

MARKET VALUE ADJUSTMENT AND CHARGES
APPLICABLE TO THE MVA FIXED ACCOUNT

Except when effected on the last day of a Guarantee Period, surrenders,
transfers or partial withdrawals from the MVA Fixed Account, including amounts
withdrawn to provide an annuity or death benefit, are subject to a Market Value
Adjustment that may increase or reduce the amount of MVA Fixed Account Value
paid out by the Company. The Market Value Adjustment is computed pursuant to a
formula that includes upward and downward limitations, as described under "The
MVA Fixed Account-Market Value Adjustment." Of the expenses summarized above,
only the "Contingent Deferred Sales Load," "Annual Contract Fee," and "Optional
Benefit Riders" charges are applicable to the MVA Fixed Account.

<PAGE>

JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H CONDENSED FINANCIAL INFORMATION

Selected data for each Accumulation Share of Account H outstanding throughout
the period shown are set forth below. No similar information is included for
Account V because that Account was not offered with the Contracts prior to the
date of this prospectus.

FOR CONTRACTS WITH INITIAL PURCHASE PAYMENTS LESS THAN $250,000:

PERIOD FROM
APRIL 14, 1997
(COMMENCEMENT OF
OPERATIONS)
TO
DECEMBER 31, 1997
-----------------
<S> <C>
V.A. Financial Industries Subaccount
Accumulation share value:
Beginning of Period........................ $10.00
End of Period.............................. $13.39

Number of Accumulation Shares outstanding at
end of period................................ 554,940.05

V.A. Emerging Growth Subaccount Accumulation
share value:
Beginning of Period........................ $10.00
End of Period.............................. $10.20

Number of Accumulation Shares outstanding at
end of period................................ 84,279.23

V.A. Growth Subaccount
(formerly V.A. Discovery Subaccount)
Accumulation share value:
Beginning of Period........................ $10.00
End of Period.............................. $10.55

Number of Accumulation Shares outstanding at
end of period................................ 64,523.58
V.A. Independence Equity Subaccount
Accumulation share value:
Beginning of Period........................ $10.00
End of Period.............................. $14.36

Number of Accumulation Shares outstanding at
end of period................................ 178,470.46

V.A. Sovereign Investors Subaccount
Accumulation share value:
Beginning of Period........................ $10.00
End of Period.............................. $13.68

Number of Accumulation Shares outstanding at
end of period................................ 246,897.95

V.A. Bond Subaccount Accumulation
share value:
Beginning of Period........................ $10.00
End of Period.............................. $11.31

Number of Accumulation Shares outstanding at
end of period................................ 73,099.69

V.A. Strategic Income Subaccount Accumulation
share value:
Beginning of Period........................ $10.00
End of Period.............................. $11.78

Number of Accumulation Shares outstanding at
end of period................................ 100,609.26

V.A. Money Market Subaccount Accumulation
share value:
Beginning of Period........................ $ 1.00
End of Period.............................. $ 1.05

Number of Accumulation Shares outstanding at
end of period................................ 1,931,652.09
</TABLE>

FOR CONTRACTS WITH INITIAL PURCHASE PAYMENTS GREATER THAN $250,000:

Number of Accumulation Shares outstanding at
end of period................................ 144,561.61

V.A. Emerging Growth Subaccount Accumulation
share value:
Beginning of Period........................ $10.00
End of Period.............................. $10.23

Number of Accumulation Shares outstanding at
end of period................................ 14,188.65

V.A. Growth Subaccount (formerly V.A.
Discovery Subaccount) Accumulation share
value:
Beginning of Period........................ $10.00
End of Period.............................. $10.59

Number of Accumulation Shares outstanding at
end of period................................ 16,760.71

V.A. Independence Equity Subaccount
Accumulation share value:
Beginning of Period........................ $10.00
End of Period.............................. $14.41

Number of Accumulation Shares outstanding at
end of period................................ 35,170.78

V.A. Sovereign Investors Subaccount
Accumulation share value:
Beginning of Period........................ $10.00
End of Period.............................. $13.72

Number of Accumulation Shares outstanding at
end of period................................ 8,359.80

V.A. Bond Subaccount Accumulation
share value:
Beginning of Period........................ $10.00
End of Period.............................. $11.35

Number of Accumulation Shares outstanding at
end of period................................ 52,286.26

V.A. Strategic Income Subaccount Accumulation
share value:
Beginning of Period........................ $10.00
End of Period.............................. $11.82

Number of Accumulation Shares outstanding at
end of period................................ 8,206.74

V.A. Money Market Subaccount Accumulation
share value:
Beginning of Period........................ $ 1.00
End of Period.............................. $ 1.05

Number of Accumulation Shares outstanding at
end of period................................ 508,715.60
</TABLE>

<PAGE>

SUMMARY INFORMATION

The Contracts are designed for purchase by individuals doing their own
retirement planning, including plans and trusts
that do not qualify for special tax treatment under the Internal Revenue Code of
1986, as amended ("Code"), and for purchase in connection with (1) pension and
profit-sharing plans qualified under Section 401(c) of the Code, known as "H.R.
10 plans," (2) pension or profit-sharing plans qualified under Sections 401(a)
or 403(a) of the Code, known as "corporate plans," (3) plans qualifying under
Section 401(k) of the Code, (4) annuity purchase plans adopted under the
provisions of Section 403(b) of the Code by public school systems and certain
other tax-exempt organizations, and (5) individual retirement annuity plans
satisfying the requirements of Section 408 of the Code. For additional
information pertaining to the purchase of a Contract as an Individual Retirement
Annuity, see "Appendix B--Variable Annuity Information for Individual Retirement
Annuities."

The John Hancock Servicing Center (the "Servicing Center") handles various
administrative, processing, servicing and similar functions related to the
Contracts. The Servicing Center may be reached at the address and telephone
number shown on the second page of this prospectus.

In order to accommodate "employer-related" plans funded by the Contracts,
Contract forms using "unisex" purchase rates, i.e., rates the same for males and
females, are available. Any questions you have as to whether you are
participating in an employer-related plan should be directed to your employer.
Any other question you or your employer may have with respect to this topic can
be directed to the Servicing Center.

THE CONTRACTS

The Contracts offered are "flexible premium" deferred annuity Contracts under
which premium payments may be made in a single sum or at intervals until the
Date of Maturity. At that time annuity payments by the Company will commence
unless the Owner elects to surrender the Contract, in which case, the Surrender
Value will be paid.

An application for a Contract is available from broker-dealers and certain
financial institutions who are participating in the distribution of the
Contracts. Applications are also available directly from the Company by
contacting the Servicing Center. Upon completion, the application is
transmitted, along with the premium payment, to the Servicing Center for
processing. See "The Contracts."

JOHN HANCOCK VARIABLE ANNUITY ACCOUNTS H AND V

The Separate Accounts are separate investment accounts of the Company. Each is
operated as a unit investment trust and supports the variable benefits payable
under the Contracts. Eleven Subaccounts within Account H are currently available
to Owners: V.A. Growth, V.A. Sovereign Investors, V.A. Growth & Income, V.A.
Independence Equity, V.A. Special Opportunities, V.A. Emerging Growth, V.A.
Financial Industries, V.A. Strategic Income, V.A. Bond, V.A. High Yield Bond,
and V.A. Money Market. Eighteen Subaccounts within Account V are currently
available to Owners: Managed, Equity Index, Large Cap Value, Large Cap Growth,
Mid Cap Value, Mid Cap Growth, Real Estate Equity, Small/Mid Cap CORE, Small Cap
Value, Global Equity, International Balanced, International Equity Index,
International Opportunities, Emerging Markets Equity, Short-Term Bond, Bond
Index, Strategic Bond, and High Yield Bond. Each Subaccount of Account H invests
in a corresponding Fund of the Declaration Trust. Each Subaccount of Account V
invests in a corresponding Portfolio of the VST.

Each Fund and Portfolio has a different investment objective. JH Advisers
receives a fee from each Fund of the Declaration Trust for providing investment
management services. In turn, JH Advisers pays a fee to the following
sub-investment managers (both of which are indirect, wholly-owned subsidiaries
of John Hancock) for providing sub-investment services to the Funds indicated:

<TABLE>
<CAPTION>
NAME OF FUND NAME OF SUB-INVESTMENT MANAGER
- ------------ ------------------------------
<S> <C>
V.A. Independence Equity Independence Investment Associates, Inc.
V.A. Sovereign Investors Sovereign Asset Management Corporation
</TABLE>

John Hancock receives a fee from each Portfolio of the VST for providing
investment management services. In turn, John Hancock pays a fee to the
following sub-investment managers for providing sub-investment management
services to the various Portfolios:

<TABLE>
<CAPTION>
NAME OF PORTFOLIO NAME OF SUB-INVESTMENT MANAGER
- ----------------- ------------------------------
<S> <C>
Managed Independence Investment Associates, Inc.
Equity Index State Street Bank & Trust, N.A.
Large Cap Value T. Rowe Price Associates, Inc.
Large Cap Growth Independence Investment Associates, Inc.
Mid Cap Value Neuberger & Berman Management, Inc.
Mid Cap Growth Janus Capital Corp
Real Estate Equity Independence Investment Associates, Inc.
Small/Mid Cap CORE Goldman Sachs Asset Management
Small Cap Value INVESCO Management & Research, Inc.
Global Equity Scudder--Kemper Investments
International Balanced Brinson Partners, Inc.
International Equity Index Independence International Associates, Inc.
International Opportunities Rowe Price-Fleming International, Inc.
Emerging Markets Equity Montgomery Asset Management, LLC
Short-Term Bond Independence Investment Associates, Inc.
Bond Index Mellon Bond Associates
Strategic Bond J.P. Morgan Investment Management, Inc.
High Yield Bond Wellington Management Company, LLP
</TABLE>

Independence International Associates, Inc., is another indirect, wholly-owned
subsidiary of John Hancock. The fees paid by the Investment Advisers to the
sub-investment managers for investment advisory service are borne by the
Investment Advisers and are not charged to the Trusts, the Separate Accounts, or
the Owners. For a full description of the Trusts, see the prospectuses for the
Trusts following this prospectus.

MVA FIXED ACCOUNT INVESTMENT OPTIONS

Any amount allocated by the Owner to the MVA Fixed Account earns interest at a
Guaranteed Rate. The level of the Guaranteed Rate depends on the length of the
Guarantee Period selected by

<PAGE>

the Owner. We currently make available various Guarantee Periods with durations
of up to ten years.

If amounts are transferred, surrendered or otherwise paid out at any time other
than the last day of the applicable Guarantee Period, a Market Value Adjustment
will be applied that will increase or decrease the amount of MVA Fixed Account
Value paid out. Accordingly, the Market Value Adjustment can result in gains or
losses which are subject to limitations as described under the "MVA Fixed
Account."

For a more complete discussion of the MVA Fixed Account investment options and
Market Value Adjustment, see "The MVA Fixed Account."

PRINCIPAL UNDERWRITER AND DISTRIBUTOR

John Hancock Funds, Inc. ("JHFI"), a registered broker-dealer affiliate of the
Company, acts as principal underwriter and principal distributor of the
Contracts. The Contracts are offered through broker-dealers and financial
institutions.

INVESTMENT OF PREMIUM PAYMENTS

Premium payments received under Contracts, after deduction of any premium or
similar taxes, are allocated to one or more of the Subaccounts and/or one or
more of the Guarantee Periods in the MVA Fixed Account, as directed by the
Owner.

Premium payments may be mailed to John Hancock Servicing Center, P.O. Box 9298,
Boston, Massachusetts 02205-9298. All checks or other money orders should be
made payable to John Hancock. Procedures also have been established for the
receipt of premium payments by wire order. See "Payments by Wire" under "The
Contracts."

MINIMUM AND MAXIMUM PREMIUM PAYMENTS

Each premium payment must be at least $500. The total premium payments may not
exceed $1,000,000 in any Contract Year, without our prior approval. No premium
payments may be made within six months prior to the Annuitant's 85th birthday or
thereafter. These limits may be waived by the Company.

SEPARATE ACCOUNT CHARGES

Charges made directly to the Separate Accounts include daily charges aggregating
0.90% annually for mortality and expense risks, and daily charges at the annual
rate of 0.35% and 0.10% under Contracts with initial premium payments of less
than $250,000 and $250,000 or more, respectively. These charges are based on the
average daily net asset value of each Subaccount, and reduce the unit values of
the Subaccounts.

FUND AND PORTFOLIO CHARGES

Management fees at annual rates ranging from 0.10% to 1.30% of average daily net
assets are paid by the Funds and Portfolios to the Investment Advisers. The
Funds and Portfolios also incur charges for other expenses incurred in their
operations. Management fees and other expenses are reflected in the net asset
value of the shares of each Fund and Portfolio.

WITHDRAWAL CHARGES

A withdrawal charge, or contingent deferred sales load (the CDSL), if
applicable, is deducted from the amount of any premium payment withdrawn from
the Accumulated Value under a Contract, including any partial withdrawal or any
full withdrawal upon a surrender of the Contract. The charge is 6% for
withdrawals made in the first two years from the date we receive a premium
payment, and decreases decrementally to zero in the seventh year. The charge
does not apply to any premium payments withdrawn after seven years from the date
we receive the payments. In any Contract Year, up to 10% of the Accumulated
Value as of the beginning of the Contract Year, less any prior withdrawals
during the Contract Year, may be withdrawn without a CDSL. The CDSL also does
not apply to a withdrawal made to provide an annuity or a death benefit or, if
necessary, to meet minimum distribution requirements under qualified plans, or
under the waiver described in the next paragraph.

NURSING HOME WAIVER OF CDSL CHARGE

Subject to state availability, an optional "Nursing Home Waiver of CDSL" rider
may be elected at the time the Owner applies for a Contract. Under this benefit,
the CDSL, if otherwise applicable, will be waived on any withdrawals if
beginning at least 90 days after the date of issue, the Owner becomes confined
to a long term care facility ("LTCF") for at least 90 consecutive days, subject
to certain conditions. At the beginning of each month, we make a charge for this
rider equal to 1/12th of 0.05% (annual percentage rate) of the Accumulated Value
associated with premium payments upon which a CDSL would continue to be
applicable at the time the charge is assessed. The benefit is not available for
applicants over age 75.

CONTRACT FEE AND CERTAIN OTHER CHARGES

An annual Contract Fee of $30 is deducted during the Accumulation Period under
Contracts having an Accumulated Value of less than $10,000. The Company reserves
the right to increase the Contract Fee up to $50, subject to applicable state
regulations. No Contract Fee will be deducted if the Accumulated Value is
$10,000 or more. Charges also may be made for any taxes or interest expenses
attributable to the Contracts or the Separate Accounts.

Deductions are also made for any applicable premium or similar taxes based on
the amount of a premium payment. Currently, such taxes in certain states are up
to 5% of each premium payment. In addition, separate monthly charges are made
for the optional death benefit riders described under "Death Benefits" below.

A more detailed description of all fees and charges applicable under the
Contracts appears under "Charges Under the Contracts." Fees and charges of the
Trusts are described in their prospectuses which are attached to this
prospectus.

<PAGE>

WITHDRAWAL PRIOR TO DATE OF MATURITY

At any time before annuity payments begin, if the Annuitant is living, a
Contract may be surrendered in full for its Surrender Value or a portion of the
Accumulated Value may be withdrawn, subject to applicable charges and certain
limits. See "Surrender of Contract; Partial Withdrawals" under "The Contracts."
A 10% tax penalty may be applicable to withdrawals before the Owner attains age
59 1/2. A Market Value Adjustment may also be applied. See "The MVA Fixed
Account."

SYSTEMATIC WITHDRAWAL

The Accumulated Value of a Contract may be systematically withdrawn on a
monthly, quarterly, semiannual or annual basis, as elected by the Owner.
Systematic withdrawals in any Contract Year in excess of 10% of the Accumulated
Value as of the beginning of the Contract Year may be subject to a CDSL. See
"Contingent Deferred Sales Load" under "Charges Under the Contracts." A minimum
Accumulated Value of $15,000 is required to start the program and certain other
conditions apply. See "Systematic Withdrawal" under "The Accumulation Period."

DOLLAR COST AVERAGING

The Owner may elect to have amounts automatically transferred from any variable
Subaccount into one or more of the other Subaccounts. Transfers of $250 or more
may be made monthly, quarterly, semiannually or annually. A minimum Accumulated
Value of $15,000 is required to start the program. See "Dollar Cost Averaging"
under "The Accumulation Period."

STANDARD DEATH BENEFIT

The Contracts include a standard death benefit payable upon the death of the
Annuitant prior to the Date of Maturity. The beneficiary will receive the
greater of (a) the Accumulated Value, adjusted by any Market Value Adjustment,
and (b) the aggregate amount of the premium payments made under the Contract,
less any prior withdrawals and CDSLs applied to such partial withdrawals.

OPTIONAL ONE YEAR STEPPED-UP DEATH BENEFIT

At the time a Contract is applied for, the Owner may elect a one year stepped-up
death benefit rider designed to enhance the death benefit payable to the
beneficiary. Under this rider the benefit payable will be the greater of (a) the
standard death benefit, and (b) the highest Accumulated Value, adjusted by a
Market Value Adjustment, of the Contract as of any Contract anniversary
preceding the date of receipt of due proof of death together with any required
settlement instructions and preceding the Contract anniversary nearest the
Annuitant's 81st birthday, plus any premium payments, less any withdrawals and
CDSLs, since such Contract anniversary. See "Optional One Year Stepped-Up Death
Benefit" under "The Accumulation Period." At the beginning of each month, we
make a charge for this rider equal to 1/12th of 0.15% (annual percentage rate)
of the Accumulated Value of the Contract at that time. This one year stepped-up
death benefit is not available for applicants over age 79.

OPTIONAL ACCIDENTAL DEATH BENEFIT

Subject to state availability, at the option of the Owner, an accidental death
benefit rider may be elected. Under this rider, upon the accidental death of the
Annuitant prior to the earlier of the Date of Maturity or the Annuitant's 80th
birthday, the beneficiary will receive, in addition to any other death benefit,
an amount equal to the Accumulated Value of the Contract, as of the date of the
accident, upon receipt of due proof of the Annuitant's death together with any
required instructions as to method of settlement, up to a maximum of $200,000.
The benefit only may be elected at the time the Contract is applied for, and is
not available to applicants over age 79. At the beginning of each month, we make
a charge for this rider equal to 1/12th of 0.10% (annual percentage rate) of the
Accumulated Value of the Contract at that time.

10 DAY FREE-LOOK PROVISION

An Owner may return an individual Contract for any reason within 10 days after
its receipt and receive in cash the Accumulated Value, adjusted by any Market
Value Adjustment, plus any deductions previously made from premium payments for
premium or similar taxes. Owners returning individual Contracts issued in
Hawaii, Idaho, Missouri, Nebraska, North Carolina, Oklahoma, Oregon, South
Carolina, Washington, West Virginia, and Utah, and all individual Contracts
issued under an individual retirement account, will receive gross premium
payments made. If the individual Contract is issued in California to an Owner 60
years of age or older, the Owner may return the individual Contract within 30
days after its receipt, and, in that event, the gross premium payments made will
be refunded to the Owner.

In most states, the rights to return Contracts described in the preceding
paragraph apply only to Contracts issued in individual form. In some states,
however, such rights may also apply to certificates under Contracts issued in
group form.

THE COMPANY

The Company is a mutual life insurance company organized under the laws of the
Commonwealth of Massachusetts in 1862. The Company's Home Office is located at
200 Clarendon Street, Boston, Massachusetts 02117.

The Company is a major financial services company with more than $115.9 billion
of assets under management.

THE SEPARATE ACCOUNTS

Accounts H and V are separate accounts of the Company established under
Massachusetts law on April 8, 1996, and May 11, 1987, respectively. Each
Separate Account, although an integral part of the Company, meets the definition
of a "separate account" under the Federal Securities Laws and is registered as

<PAGE>

a unit investment trust under the Investment Company Act of 1940, as amended
("1940 Act").

Each Separate Account's assets are the property of the Company and the
obligations under the Contracts are the obligations of the Company. Each
Contract provides that the portion of a Separate Account's assets equal to the
reserves and other liabilities under the Contract with respect to that Separate
Account shall not be chargeable with liabilities arising out of any other
business the Company may conduct. In addition to the net assets and other
liabilities for Contracts, each Separate Account's assets include assets derived
from charges made by the Company and, possibly, funds contributed by the Company
to commence operation of the Subaccounts. From time to time these additional
assets may be transferred in cash by the Company to its general account. Before
making any such transfer, the Company will consider any possible adverse impact
the transfer might have on any Subaccount.

Income, gains and losses, whether or not realized, from assets allocated to a
Separate Account are, in accordance with the Contracts, credited to or charged
against that Separate Account without regard to other income, gains or losses of
the Company.

Eleven Subaccounts within Account H are currently available to Owners: V.A.
Growth, V.A. Sovereign Investors, V.A. Growth & Income, V.A. Independence
Equity, V.A. Special Opportunities, V.A. Emerging Growth, V.A. Financial
Industries, V.A. Strategic Income, V.A. Bond, V.A. High Yield Bond, and V.A.
Money Market. Eighteen Subaccounts within Account V are currently available to
Owners: Managed, Equity Index, Large Cap Value, Large Cap Growth, Mid Cap Value,
Mid Cap Growth, Real Estate Equity, Small/Mid Cap CORE, Small Cap Value, Global
Equity, International Balanced, International Equity Index, International
Opportunities, Emerging Markets Equity, Short-Term Bond, Bond Index, Strategic
Bond, and High Yield Bond. The assets in each Subaccount of Account H are
invested in shares of a corresponding Fund of the Declaration Trust. The assets
in each Subaccount of Account V are invested in shares of a corresponding
Portfolio of the VST. The assets of one Subaccount are not necessarily legally
insulated from liabilities associated with another Subaccount. New subaccounts
may be added and made available to Owners.

<PAGE>

THE TRUSTS

Each Trust is a "series" type of mutual fund that is registered under the 1940
Act as an open-end diversified management investment company and organized as a
Massachusetts business trust. The Trusts serve as investment mediums for the
Separate Accounts and other unit investment trust separate accounts established
for other variable life insurance policies and variable annuity contracts. A
full description of each Trust, its investment objectives, policies and
restrictions, its charges and expenses, and all other aspects of its operation
is contained in its attached prospectus (which should be read carefully before
investing) and the SAI referred to therein, which should be read together with
this prospectus. Among other items, the description of the need to monitor
events on the part of each Trust's Board of Trustees for possible conflicts
between separate accounts and other consequences should be noted.

The following is a brief summary of the investment objectives of each available
Fund of the Declaration Trust.

JOHN HANCOCK V.A. FINANCIAL INDUSTRIES FUND seeks capital appreciation primarily
through investments in equity securities of financial services companies
throughout the world.

JOHN HANCOCK V.A. EMERGING GROWTH FUND seeks long-term growth of capital. The
potential for growth of capital is the sole basis for selection of portfolio
securities. Current income is not a factor in this selection.

JOHN HANCOCK V.A. SPECIAL OPPORTUNITIES FUND seeks long-term capital
appreciation. The Fund invests primarily in equity securities of domestic and
foreign issuers in various economic sectors, selected according to both
macroeconomic factors and the outlook for each sector.

JOHN HANCOCK V.A. GROWTH FUND (formerly, John Hancock V.A. Discovery Fund) seeks
long-term capital appreciation. The Fund invests principally in common stocks
(and in securities convertible into or with rights to purchase common stocks) of
companies which the Fund's management believes offer outstanding growth
potential over both the intermediate and long term.

JOHN HANCOCK V.A. GROWTH & INCOME FUND seeks the highest total return (capital
appreciation plus current income) that is consistent with reasonable safety of
capital.

JOHN HANCOCK V.A. INDEPENDENCE EQUITY FUND seeks above-average total return,
consisting of capital appreciation and income. The Fund will diversify its
investments to create a portfolio focused on stocks of companies that management
believes are undervalued and have improving fundamentals over both the
intermediate and long term.

JOHN HANCOCK V.A. SOVEREIGN INVESTORS FUND seeks long-term growth of capital and
income without assuming undue market risks. At times, however, because of market
conditions, the Fund may find it advantageous to invest primarily for current
income. The Fund invests primarily in common stocks of seasoned companies in
sound financial condition with a long record of paying increasing dividends.

JOHN HANCOCK V.A. BOND FUND seeks a high level of current income
consistent with prudent investment risk. The Fund invests primarily in a
diversified portfolio of investment grade fixed income securities of U.S. and
foreign issuers, although the Fund may invest up to 25% of its total assets in
lower-rated high-yield, high-risk fixed income securities.

JOHN HANCOCK V.A. STRATEGIC INCOME FUND seeks a high level of current income.
The Fund invests primarily in foreign government and corporate fixed income
securities, U.S. Government securities and lower-rated high-yield, high-risk
fixed income securities of U.S. issuers.

JOHN HANCOCK V.A. HIGH YIELD BOND FUND seeks to maximize current income without
assuming undue risk. The Fund invests primarily in junk bonds, i.e.,
lower-rated, high-yielding debt securities. The Fund also seeks capital
appreciation, but only when consistent with its primary goal.

JOHN HANCOCK V.A. MONEY MARKET FUND seeks maximum current income consistent with
capital preservation and liquidity. The Fund invests only in high-quality money
market instruments.

The following is a brief summary of the investment objectives of each available
Portfolio of the VST:

MANAGED PORTFOLIO seeks to achieve maximum long-term total return consistent
with prudent investment risk. Investments will be made in common stocks,
convertibles and other equity investments, in bonds and other fixed income
securities and in money market instruments.

EQUITY INDEX PORTFOLIO seeks to provide investment results that correspond to
the total return of the U.S. market as represented by the S&P 500 utilizing
common stocks that are publicly traded in the United States.

LARGE CAP VALUE PORTFOLIO seeks to provide substantial dividend income, as well
as long-term capital appreciation, through investments in the common stocks of
established companies believed to offer favorable prospects for increasing
dividends and capital appreciation.

<PAGE>

LARGE CAP GROWTH PORTFOLIO seeks to achieve above-average capital appreciation
through the ownership of common stocks (and securities convertible into with
rights to purchase common stocks) of companies believed to offer above-average
capital appreciation opportunities. Current income is not an objective of the
Portfolio.

MID CAP VALUE PORTFOLIO seeks to provide long-term growth of capital primarily
through investment in the common stocks of medium capitalization companies
believed to sell at a discount to their intrinsic value.

MID CAP GROWTH PORTFOLIO seeks to provide long-term growth of capital through a
non-diversified portfolio investing primarily in common stocks of medium
capitalization companies.

REAL ESTATE EQUITY PORTFOLIO seeks to provide above-average income and long-term
growth of capital by investment principally in equity securities of companies in
the real estate and related industries.

SMALL/MID CAP CORE PORTFOLIO seeks to achieve long-term growth of capital
through a broadly diversified portfolio of equity securities of U.S. issuers
which are included in the Russell 2500 Index at the time of investment.

SMALL CAP VALUE PORTFOLIO seeks is to provide long-term growth of capital by
investing in a well diversified portfolio of equity securities of small
capitalization companies exhibiting value characteristics.

GLOBAL EQUITY PORTFOLIO seeks to achieve long-term growth of capital through a
diversified portfolio of marketable securities, primarily equity securities, of
both U.S. and foreign issuers.

INTERNATIONAL BALANCED PORTFOLIO seeks to maximize total U.S. dollar return,
consisting of capital appreciation and current income, through investment in
non-U.S. equity and fixed income securities.

INTERNATIONAL EQUITY INDEX PORTFOLIO seeks to provide investment results that
correspond to the total return of the major developed international (non-U.S.)
equity markets, as represented by the MSCI AEFE GDP Index.

INTERNATIONAL OPPORTUNITIES PORTFOLIO seeks is to provide capital appreciation
through investments in common stocks of primarily well-established, non-United
States companies.

EMERGING MARKETS EQUITY PORTFOLIO seeks to achieve capital appreciation by
investing primarily in equity securities of companies in countries having
economies and markets generally considered by the World Bank or the United
Nations to be emerging or developing.

SHORT-TERM BOND PORTFOLIO seeks to provide a high level of current income
consistent with a low degree of share price fluctuation through investment
primarily in a diversified portfolio of short- and intermediate-term
investment-grade debt obligations.

BOND INDEX PORTFOLIO seeks to provide investment results that correspond to the
total return and risk characteristics of the U.S. investment grade fixed income
market, as represented by a Lehman Brothers bond index that tracks the
performance of investment grade debt securities.

STRATEGIC BOND PORTFOLIO seeks to provide total return consistent with moderate
risk of capital and maintenance of liquidity, through a portfolio of domestic
and international fixed income securities.

HIGH YIELD BOND PORTFOLIO seeks to provide high current income and capital
appreciation with capital preservation through investing primarily in high yield
(below investment grade) debt securities.

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

The Company will purchase and redeem shares of the Trusts for the Separate
Accounts at their net asset value without any sales or redemption charges. The
shares of the Trusts represent an interest in the Funds and Portfolios that
correspond to the Subaccounts of each Separate Account. Any dividend or capital
gains distributions received by a Separate Account will be reinvested in shares
of the respective Funds or Portfolios at their net asset value as of the dates
paid. Any such distribution will result in a reduction in the value of the
shares of the Fund or Portfolio from which the distribution was made. However,
the total net asset value of each Separate Account, or of any Fund or Portfolio,
will not change because of such distribution.

On each Valuation Date, shares of each Fund and Portfolio are purchased or
redeemed by the Company for each Subaccount based on, among other things, the
amount of net premium payments allocated to the Subaccount, dividends and
distributions reinvested, transfers to, from and among Subaccounts, all to be
effected as of that date. Such purchases and redemptions are effected at the net
asset value per share for each Fund and Portfolio determined on that same
Valuation Date. See "Valuation Date" under "Variable Account Valuation
Procedures."

<PAGE>

THE MVA FIXED ACCOUNT

The MVA Fixed Account is a "nonunitized" separate account established by the
Company. A nonunitized separate account is a separate account in which the
Contract Owner has no claim on, or participation in the performance of, the
assets held in the account. Investments purchased with amounts allocated to the
MVA Fixed Account are the property of the Company, and any favorable investment
performance on the assets held in the MVA Fixed Account accrues solely to the
Company's benefit. All benefits relating to the Accumulated Value of amounts
allocated to the MVA Fixed Account are guaranteed by the Company to the extent
provided under the Contracts.

GUARANTEED RATES/GUARANTEE PERIODS

Amounts allocated by the Owner to the MVA Fixed Account earn interest at a
Guaranteed Rate commencing with the date of allocation. The Guaranteed Rate
continues for a number of years, i.e., the Guarantee Period, selected by the
Owner. At the end of the Guarantee Period, the Accumulated Value in that
Guarantee Period, including interest accrued thereon, will be automatically
transferred to the V.A. Money Market Subaccount unless the Owner elects to: (a)
withdraw such Accumulated Value from the Contract, (b) allocate all or a portion
of the Accumulated Value to a new Guarantee Period of the same duration as the
expiring Guarantee Period, or (c) allocate all or a portion of the Accumulated
Value to a different Guarantee Period or periods or to one or more of the
Subaccounts. The Company must be notified of any election by the Owner at the
Servicing Center's office in a form satisfactory to it within 30 days prior to
the end of the expiring Guarantee Period. The first day of any new Guarantee
Period or other reallocation will be the day after the end of the prior
Guarantee Period. The Company will notify the Owner at least 30 days prior to
the end of any Guarantee Period. A Guarantee Period will not be available if it
extends beyond the Date of Maturity.

The Company currently makes available Guarantee Periods of various durations. At
any time, the Guarantee Periods may be one year and multiple year periods of up
to ten years. The Company reserves the right to add or delete Guarantee Periods
from those that are available at any time for new allocations. Each Guarantee
Period has its own Guaranteed Rate, which may differ from those for other
Guarantee Periods. We may, at our discretion, change the Guaranteed Rate for
future Guarantee Periods. These changes will not affect the Guaranteed Rates
being paid on Guarantee Periods that have already commenced. Each allocation or
transfer of an amount to a Guarantee Period commences the running of a new
Guarantee Period with respect to that amount, which will earn a Guaranteed Rate
that will continue unchanged until the end of that period. With respect to all
Contracts issued on an individual basis, and to Contracts issued on a group
basis where required under state law, the Company will not make available any
Guarantee Period offering a Guaranteed Rate below 3%.

The Company declares the Guaranteed Rates from time to time as market conditions
and other factors dictate. The Company advises an Owner of the Guaranteed Rate
for a chosen Guarantee Period at the time a premium payment is received, a
transfer is effectuated or a Guarantee Period is renewed.

The Company has no specific formula for establishing the Guaranteed Rates for
the Guarantee Periods. The rates may be influenced by, but not necessarily
correspond to, interest rates generally available on the types of investments
acquired with amounts allocated to the Guarantee Period. See "Investments by the
Company," below. The Company, in determining Guaranteed Rates, may also
consider, among other factors, the duration of a Guarantee Period, regulatory
and tax requirements, sales and administrative expenses borne by the Company,
risks assumed by the Company, the Company's profitability objectives, and
general economic trends.

THE COMPANY'S MANAGEMENT MAKES THE FINAL DETERMINATION OF THE GUARANTEED RATES
TO BE DECLARED. THE COMPANY CANNOT PREDICT OR ASSURE THE LEVEL OF ANY FUTURE
GUARANTEED RATES.

Information concerning the Guaranteed Rates applicable to the various Guarantee
Periods, and the durations of the Guarantee Periods offered, at any time may be
obtained from the Company by calling the Servicing Center at the telephone
number indicated on the second page of this prospectus.

MARKET VALUE ADJUSTMENT

If any MVA Fixed Account Value is withdrawn, transferred or otherwise paid out
before the end of the Guarantee Period in which it is being held, a Market Value
Adjustment will be applied. This generally includes amounts that are paid out as
death benefits pursuant to the Contract, amounts applied to an annuity option,
and amounts paid as a single sum in lieu of an annuity. No Market Value
Adjustment will be applied to amounts that are paid out on the last day of a
Guarantee Period.

The Market Value Adjustment may increase or decrease the amount of MVA Fixed
Account Value being withdrawn, transferred or otherwise paid out. The comparison
of two Guaranteed Rates determines whether the Market Value Adjustment produces
an increase or a decrease. The first rate to compare is the Guaranteed Rate for
the existing Guarantee Period from which amounts are being transferred or
withdrawn. The second rate is the Guaranteed Rate then being offered for new
Guarantee Periods of the same duration as that remaining in the existing
Guarantee Period. If the first rate exceeds the second by more than 1/2%, the
Market Value Adjustment produces an increase. If the first rate does not exceed
the second by at least 1/2%, the Market Value Adjustment produces a decrease.
Sample calculations are shown in Appendix A.

The Market Value Adjustment will be determined by multiplying the amount being
withdrawn or transferred from the Guarantee

<PAGE>

Period (before deduction of any applicable CDSL) by the following factor:

n/12
1 + g
( ------------) -1
1 + c + .005

where,

- - g is the Guaranteed Rate in effect for the current Guarantee Period (in
decimal form).

- - c is the current Guaranteed Rate (in decimal form) in effect for new Guarantee
Periods with durations equal to the number of years remaining in the current
Guarantee Period (rounded up to the nearest whole number of years). If not
available, the Company will declare a Guaranteed Rate solely for this purpose
that is consistent with interest rates for Guarantee Periods that are
currently available.

- - n is the number of complete months from the date of withdrawal to the end of
the current Guarantee Period. (Where less than one complete month remains, n
will equal one unless the withdrawal is made on the last day of the Guarantee
Period, in which case no adjustment will apply.)

MVA GAIN AND LOSS LIMITATIONS

In no event will the Market Value Adjustment exceed, in a positive or negative
direction, the amount of any excess interest earned during a Guarantee Period up
to the point of withdrawal or surrender. Excess interest means the dollar amount
of interest earned on the amount being withdrawn or transferred since the
beginning of the Guarantee Period in excess of the amount of interest that would
have been earned had the effective annual interest rate been 3%. See Appendix A.

INVESTMENTS BY THE COMPANY

The Company's obligations with respect to the MVA Fixed Account are supported by
its General Account assets, which also support other general obligations
incurred by the Company. Subject to applicable law, the Company has sole
discretion over the investment of assets in the MVA Fixed Account and the
General Account, and neither account is subject to registration under the 1940
Act.

Amounts in the Company's General Account and the MVA Fixed Account will be
invested in compliance with applicable state insurance laws and regulations
concerning the nature and quality of investments for the General Account.

The Company intends to consider the return available on the instruments in which
it intends to invest amounts allocated to the MVA Fixed Account when it
establishes Guaranteed Rates. Such return is only one of the factors considered
in establishing the Guaranteed Rates. See "Guaranteed Rates/Guarantee Periods,"
above.

The Company expects that amounts allocated to the MVA Fixed Account will be
invested according to its detailed investment policy and guidelines, in fixed
income obligations, including corporate bonds, mortgages, mortgage-backed and
asset-backed securities and government and agency issues having durations in the
aggregate consistent with those of the Guarantee Periods. The Company intends to
invest proceeds from the Contracts attributable to the MVA Fixed Account
primarily in domestic investment-grade securities. In addition, derivative
contracts will be used only for hedging purposes, to reduce the ordinary
business risk of the Contracts associated with changes in interest rates, and
not for speculating on future changes in the financial markets. Notwithstanding
the foregoing, the Company is not obligated to invest amounts allocated to the
MVA Fixed Account according to any particular strategy.

Because of exemptive and exclusionary provisions, interests in the MVA Fixed
Account have not been registered under the Securities Act of 1933 and the MVA
Fixed Account has not been registered under the Investment Company Act of 1940.
Accordingly, neither the MVA Fixed Account nor any interests therein are subject
to the provisions of these Acts, and the Company has been advised that the staff
of the Commission has not reviewed the disclosure in this Prospectus relating to
the MVA Fixed Account. Disclosure regarding the MVA Fixed Account may, however,
be subject to certain generally-applicable provisions of the Federal securities
laws relating to accuracy and completeness of statements made in prospectuses.

CHARGES UNDER THE CONTRACTS

CHARGES FOR MORTALITY AND EXPENSE RISKS

While variable annuity payments to Annuitants will vary in accordance with the
investment performance of the Separate Accounts, the amount of such payments
will not be decreased because of adverse mortality experience of Annuitants as a
class or because of an increase in actual expenses of the Company over the
expense charges provided for in the Contracts. The Company assumes the risk that
Annuitants as a class may live longer than expected (necessitating a greater
number of annuity payments) and that its expenses may be higher than the
deductions for such expenses. The Company also provides a standard death benefit
and waives any CDSL upon the death of the Annuitant.

In return for the assumption of these mortality and expense risks, the Company
makes a daily charge to the assets of each Separate Account. The daily charge is
at the rate of 0.002466%, or 0.90% annually, of which 0.45% is for mortality
risks, and 0.45% for expense risks. The Company reserves the right to revise the
amounts of the charge as between mortality risks and expense risks, should
estimates change, but the aggregate charge will not exceed 0.90% on an annual
basis.

CHARGES FOR ADMINISTRATIVE SERVICES

The Company maintains an account for each Owner and Annuitant and makes all
disbursements of benefits. The Company also furnishes such administrative and
clerical

<PAGE>

services, including the calculation of Accumulation Unit values and the values
and interests determined thereby, as are required for each Subaccount. The
Company makes disbursements from Separate Account funds to pay obligations
chargeable to that Separate Account and maintains the accounts, records, and
other documents relating to the business of each Separate Account required by
regulatory authorities. These administrative services may be performed by the
Company or an authorized third party administrator. For these and other
administrative services, the Company makes a daily charge to the assets of each
Separate Account and assesses, during the Accumulation Period, a Contract Fee of
$30 on all Contracts having an Accumulated Value of less than $10,000. The
Contract Fee will be deducted at the beginning of each Contract Year after the
first and at a full surrender during a Contract Year. The Company reserves the
right to increase this fee up to a maximum of $50 subject to state regulations.
No Contract Fee will be deducted if the Accumulated Value is $10,000 or more.
The Contract Fee will be deducted from each Subaccount and each Guarantee Period
in the same proportion that the Accumulated Value in that Subaccount or
Guarantee Period bears to the full Accumulated Value.

The daily administrative charge is 0.000959%, or 0.35% on an annual basis, under
any Contracts with an initial premium payment of less than $250,000. The charge
is reduced to 0.000274%, or 0.10% on an annual basis, under any Contracts with
an initial premium payment of $250,000 or more. The different charges reflect
the fact that the cost of administering larger Contracts will tend to be smaller
in proportion to the Contract's Accumulated Value and that amounts realized by
the Company from expense charges made under smaller Contracts will be lower.

The administrative services charges are not designed, nor are they expected, to
exceed the Company's cost in providing these services.

CONTINGENT DEFERRED SALES LOAD

A contingent deferred sales load, or CDSL, may be assessed whenever a Contract
is surrendered for cash prior to the Date of Maturity ("total withdrawal" or
"surrender") or whenever an amount less than the total Accumulated Value is
withdrawn from a Contract prior to the Date of Maturity ("partial withdrawal").
This charge is used to help defray expenses relating to the sales of the
Contracts, including commissions paid and other distribution costs.

An Owner may withdraw in any Contract Year up to 10% of the Accumulated Value as
of the beginning of the Contract Year without the assessment of any CDSL. This
is the Free Withdrawal Value. If, in any Contract Year, the Owner withdraws an
aggregate amount in excess of 10% of the Accumulated Value as of the beginning
of the Contract Year, the amount withdrawn in excess of 10% is subject to a CDSL
to the extent that the excess is attributable to premium payments made within
seven years of the date of withdrawal or surrender.

No CDSL is assessed on amounts applied to provide an annuity or to pay a death
benefit. Also, no CDSL will apply to certain withdrawals if an Owner has elected
the nursing home waiver of CDSL rider described under "Nursing Home Waiver of
CDSL" below. Amounts withdrawn to satisfy the minimum distribution requirements
for tax qualified plans funded by a Contract are not subject to a CDSL in any
Contract Year. Amounts above the minimum distribution requirements are subject
to a CDSL.

The CDSL percentage charge depends upon the number of years that have elapsed
from the date of premium payment to the date of its withdrawal, as follows:

6 but less than 7................................... 2%

5 but less than 6................................... 3%

4 but less than 5................................... 4%

3 but less than 4................................... 5%

2 but less than 3................................... 5%

less than 2......................................... 6%
</TABLE>

Whenever a CDSL is imposed, it is deducted from each Subaccount of the Separate
Accounts and each Guarantee Period of the MVA Fixed Account in the proportion
that the amount subject to the CDSL in each bears to the total amount subject to
the CDSL. In calculating the CDSL, all amounts withdrawn plus all Contract Fees
and CDSLs are assumed to be deducted first from the earliest purchase payment,
and then from the next earliest purchase payment, and so forth until all
payments have been exhausted, satisfying the first-in first out, or "FIFO,"
method of accounting. The CDSL only applies to premium payments, not to any
earnings or appreciation. For a discussion of the taxation of partial
withdrawals, see "Contracts Purchased Other Than to Fund a Tax Qualified Plan"
under "Federal Income Taxes."

To the extent that any CDSL is applicable, the Accumulated Value will generally
be reduced by the amount of the CDSL, as well as by the actual dollar amount of
the withdrawal request. Any positive MVA will reduce the amount deducted from
the Accumulated Value by the amount of the positive MVA. Any negative MVA will
increase the amount deducted by the amount of the negative MVA. The CDSL is
calculated based upon the full amount by which the Accumulated Value is reduced,
adjusted for any MVA, and subject to the conditions noted above.

<PAGE>

FOR EXAMPLE, ASSUME A CONTRACT IS ISSUED ON JANUARY 1, 1996, AND THAT
THE OWNER MAKES PREMIUM PAYMENTS OF $5,000 ON JANUARY 1, 1996, $1,000 ON
JANUARY 1, 1997, AND $1,000 ON JANUARY 1, 1998. ASSUME THAT THE
ACCUMULATED VALUE ON JANUARY 1, 1999, IS $9,000 AND THAT A PARTIAL
WITHDRAWAL IS MADE BY THE OWNER IN THE AMOUNT OF $6,000 (NO TAX
WITHHOLDING) ON JUNE 1, 1999. THE CDSL IN THIS CASE, ASSUMING NO PRIOR
PARTIAL WITHDRAWALS, WOULD EQUAL $272.23.

IN CALCULATING THE CDSL UNDER THE FIFO METHOD, THE JANUARY 1, 1996,
$5,000 PREMIUM PAYMENT IS FIRST REDUCED BY THE THREE $30 CONTRACT FEES
ASSESSED ON JANUARY 1, 1997, 1998, AND 1999, I.E., TO $4,910. TEN
PERCENT OF THE ACCUMULATED VALUE ON JANUARY 1, 1999, I.E., $900, THE
FREE WITHDRAWAL AMOUNT, IS THEN DEDUCTED LEAVING $4,010.

THE REMAINING BALANCE OF THE $5,000 JANUARY 1, 1996, PREMIUM PAYMENT,
I.E., $4,010, IS THEN WITHDRAWN IN ITS ENTIRETY AND IS ASSESSED A CDSL
OF $200.50 (.05 X $4,010). ALL OF THE $1,000 JANUARY 1, 1997, PREMIUM
PAYMENT IS TO BE WITHDRAWN AND IS ASSESSED A CDSL OF $50 (.05 X $1,000).
TO MAKE UP THE REMAINDER OF THE $6,000 PAID TO THE OWNER, $362.23 IS
WITHDRAWN FROM THE JANUARY 1, 1998, PREMIUM PAYMENT. THIS IS ASSESSED A
CDSL OF $21.73 (.06 X $362.23).

THEREFORE, THE TOTAL AMOUNT PAID TO THE OWNER IS $6,000 AND THE TOTAL
CDSL IS $272.23. THE ABOVE EXAMPLE ASSUMES ALL AMOUNTS WITHDRAWN ARE
AFTER THE APPLICATION OF ANY MARKET VALUE ADJUSTMENT.

Withdrawals made prior to the Owner attaining age 59 1/2 may be subject to
certain adverse tax consequences. A federal penalty of 10% is generally
applicable to the taxable portion (earnings) of a premature withdrawal from the
Contract. See "Penalty for Premature Withdrawals" under "Federal Income Taxes."

To the extent that the proceeds from the CDSLs may be insufficient to cover
distribution costs, the Company may recover them from its General Account assets
which may consist of, among other things, proceeds derived from mortality and
expense risk charges deducted from a Separate Account, and charges for the
optional benefits described in this prospectus.

NURSING HOME WAIVER OF CDSL

Subject to state availability, an optional Nursing Home Waiver of CDSL rider may
be elected when the Contract is applied for. Under this benefit, the CDSL, if
otherwise applicable, will be waived as to any withdrawals if, beginning at
least 90 days after the Contract date of issue, the Owner becomes confined to a
nursing home facility for at least 90 consecutive days and receives skilled
nursing care. The Company must receive a request for a withdrawal and adequate
proof of confinement no later than 90 days after discharge from the facility,
and the confinement must be prescribed by a physician and medically necessary.
This rider is not available to Contract applicants 75 years of age or older, or
to applicants who were confined to a nursing home within the prior two years.
Reference should be made to the rider for a complete description of its terms,
conditions and benefits. At the beginning of each month, a charge equal to
1/12th of .05% (annual percentage rate) is made against the Accumulated Value
associated with premium payments upon which a CDSL would continue to be
applicable at the time the charge is assessed. The charge is made through a pro
rata reduction in Accumulation Units of the Subaccounts and dollar amounts in
the Guarantee Periods, based on relative values.

OPTIONAL DEATH BENEFIT CHARGES

Separate monthly charges are made for the optional One Year Stepped-Up Death
Benefit and Accidental Death Benefit riders offered by the Company. In each
case, the charge for the rider is made through a pro rata reduction in
Accumulation Units of the Subaccounts and dollar amounts in the Guarantee
Periods, based on relative values. The charge, made at the beginning of each
month, is equal to the Accumulated Value at that time multiplied by 1/12th of
the following applicable annual percentage rates: One Year Stepped-Up Death
Benefit rider--0.15%; Accidental Death Benefit rider--0.10%. See "Optional One
Year Stepped-Up Death Benefit Rider" and "Optional Accidental Death Benefit
Rider" under "The Accumulation Period."

VARIATIONS IN CHARGES

In the future, the Company may allow a reduction in or the elimination of the
CDSL, the charge for the Nursing Home Waiver of CDSL rider, the charge for
expense risks, the administrative services charge, or the annual Contract Fee,
or the charge for the One Year Stepped-Up Death Benefit rider or Accidental
Death Benefit rider, under Contracts sold to groups or classes of individuals in
a manner resulting in a reduction in the expenses associated with the sale of
such Contracts and the benefits offered, or the costs associated with
administering or maintaining the Contracts.

The entitlement to such a reduction in or elimination of charges and fees will
be determined by the Company based upon factors such as the following: (1) the
size of the initial premium payment, (2) the size of the group or class, (3) the
total amount of premium payments expected to be received from the group or class
and the manner in which premium payments are remitted, (4) the nature of the
group or class for which the Contracts are being purchased and the persistency
expected from that group or class as well as the mortality risks associated

<PAGE>

with that group or class, (5) the purpose for which the Contracts are being
purchased and whether that purpose makes it likely that costs and expenses will
be reduced, or (6) the level of commissions paid to selling broker-dealers or
certain financial institutions with respect to Contracts within the same group
or class.

The Company will make any reduction in charges or fees according to its own
rules in effect at the time an application for a Contract is approved. The
Company reserves the right to change these rules from time to time. Any
variation in charges or fees will reflect differences in costs and services,
will apply uniformly to all prospective Contract purchasers in the group or
class, and will not be unfairly discriminatory to the interests of any Owner.

PREMIUM OR SIMILAR TAXES

Several states and local governments impose a premium or similar tax on
annuities. Currently, such taxes range up to 5% of the Accumulated Value applied
to an Annuity Option. Ordinarily, any state-imposed premium or similar tax will
be deducted from the Accumulated Value only at the time of annuitization.

For Contracts issued in South Dakota and Kentucky, the Company pays a tax on
each premium payment at the time it is made. The Company will deduct a charge
for these taxes from the Accumulated Value at the time of annuitization, death,
surrender, or withdrawal. Such a charge is equal to the applicable premium tax
percentage times the amount of Accumulated Value that is applied to an Annuity
Option, surrendered, withdrawn, or at death. The net economic effect of this
procedure is not significantly different than if the Company deducted the
premium tax from each premium payment when received.

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

The charges described above (exclusive of taxes) and the Contracts' annuity
purchase rates will apply for the duration of each Contract and, except as noted
above, will not be increased by the Company. However, these charges do not
include all of the expenses that may be incurred for the account of Owners and
Annuitants. Additional charges will be made directly to a Separate Account for
taxes, if any, based on the income of, capital gains of, assets in, or the
existence of, that Separate Account and interest on funds borrowed. In addition,
the Company reserves the right to deduct premium taxes from premiums when paid.
Moreover, each Separate Account purchases and redeems shares of a Fund or
Portfolio of the Trusts at net asset value, a value which reflects the deduction
from the assets of the Trusts of the applicable investment management fees and
of certain operating expenses listed under "Synopsis of Expense Information."

THE CONTRACTS

The descriptions herein are based on certain provisions of the Contracts.
Reference should be made to the actual Contracts and to the terms and
limitations of any tax qualified plan which is to be funded by such Contracts.
Tax qualified plans are subject to several requirements and limitations which
may affect the terms of any particular Contract or the advisability of taking
certain action permitted thereby.

PURCHASE OF CONTRACTS

Authorized representatives of the broker-dealer or financial institution
participating in the distribution of the Contracts will assist in the completion
of the application or the placing of an order for a Contract and will be
responsible for its transmittal, together with the necessary premium payment, to
the Servicing Center. If the application or order is complete and the Contract
applied for is suitable, the Contract will be issued and delivered to the Owner.
If the completed application or order is received in proper form, the initial
premium payment accompanying the completed application or order is applied
within two business days after receipt. If an initial premium payment is not
applied within five business days after receipt, it will be refunded unless the
applicant consents to the retention of the premium payment until receipt of
information necessary to allow the issuance of the Contract. Purchase payments
after the initial purchase payment will be applied at the value next determined
after receipt in good order.

The Company may employ a procedure under which the issuance of the Contract will
be triggered by an order from the broker-dealer or financial institution but the
effectiveness of the Contract will depend upon the later submission of a signed
application. If such a procedure is employed and the signed application is not
received within the required time period, the Contract will be deemed to be void
from the beginning and any premium payment will be refunded.

Each premium payment must be at least $500 in amount. The total premium payments
in any Contract Year may not exceed $1,000,000. The maximum dollar amount of
transfers and payments to any one Subaccount in a Contract Year is $1,000,000.
While the Annuitant is living and the Contract is in force, premium payments may
be made at any time before the Date of Maturity, except that no new premium
payments may be made after the Annuitant reaches age 84 1/2 under Contracts
funding non-qualified arrangements, or age 70 1/2 under tax qualified plans. A
Contract will not be issued if the proposed Annuitant is older than age 84. The
foregoing limits may be waived by the Company.

All checks or other forms of premium payment must be made payable to John
Hancock.

PREMIUM PAYMENTS BY WIRE

The initial premium payment may be transmitted by wire order from broker-dealers
and financial institutions participating in the distribution of the Contracts.
Wire orders accepted by the Company will be invested in the investment options
selected by the prospective Owner at the value next determined following receipt
in good order. Wire orders must include information necessary to allocate the
payment among the investment options selected by the prospective Owner. Wire
orders not

<PAGE>

accompanied by complete information may be held for up to five business days in
order to obtain the missing information. If that information is not obtained
within the five business day period, the Company will so advise the
broker-dealer or financial institution involved and return the premium payment
immediately to the prospective Owner, unless he or she consents to the retention
of the premium payment by the Company until the Company has received at its
Servicing Center the information not provided. A Contract will, nevertheless,
not be issued, until the Company receives and accepts a properly completed
application. Until a signed application is received and accepted, no further
premium payments or other transactions will be allowed.

If within ten days of the receipt of the initial premium payment by wire a
completed application is not received or an incomplete application received
cannot be completed, the initial premium payment will be returned to the
prospective Owner.

After a Contract has been issued, subsequent premium payments may be transmitted
by wire through the Owner's bank. Information as to the name of the Company's
bank, our account number and the ABA routing number may be obtained by calling
the Servicing Center at the telephone number on the second page of this
prospectus. The wire order must identify the Subaccounts and Guarantee Periods
to which the premium payment is to be allocated, and the dollar amount to be
allocated to each Subaccount and Guarantee Period. Banks may charge a fee for
wire services.

THE ACCUMULATION PERIOD

ALLOCATION OF PREMIUM PAYMENTS

Premium payments are allocated by the Company to one or more of the Subaccounts
or Guarantee Periods, or among the Subaccounts and Guarantee Periods, as
specified by the Owner at the time of purchasing the Contract, and as directed
by the Owner from time to time thereafter. Any change in the allocations will be
effective as to premium payments made after the receipt by John Hancock at its
Servicing Center of notice in form satisfactory to the Company.

Each premium payment allocated to a Subaccount purchases Accumulation Units of
that Subaccount at the value of such units next determined after the receipt of
such premium payment at the Servicing Center. See "Variable Account Valuation
Procedures."

Currently, premium payments may be allocated to a maximum of 18 Subaccounts and
Guarantee Periods over the lifetime of the Contract. However, it is the
Company's intention to raise that limit later in 1998 to ninety-nine Subaccounts
and Guarantee Periods. For purposes of this limit, each deposit or transfer of
funds into a Subaccount or Guarantee Period will count as one "allocation to" a
Subaccount or Guarantee Period even if the Subaccount or Guarantee Period has
been used before.

VALUE OF ACCUMULATION UNITS

The number of Accumulation Units of a Subaccount purchased with a specific
premium payment will be determined by dividing the premium payment by the value
of an Accumulation Unit in that Subaccount when the premium payment is applied.
The value of the Accumulation Units so purchased will vary in amount thereafter,
depending upon the investment performance of the Subaccount and the charges and
deductions made against the Subaccount. At any date prior to the Date of
Maturity, the total value of the Accumulation Units in a Subaccount which have
been credited to a Contract can be computed by multiplying the number of such
Accumulation Units by the appropriate Accumulation Unit Value in effect for such
date.

DETERMINATION OF MVA FIXED ACCOUNT VALUE

A Contract's MVA Fixed Account Value is guaranteed by the Company. The Company
bears the investment risk with respect to amounts allocated to the MVA Fixed
Account, except that (a) the Company may vary the Guaranteed Rate for future
Guarantee Periods (subject to the 3% effective annual minimum guaranteed rate
applicable to all Contracts issued on an individual basis and to Contracts
issued on a group basis where required under state law) and (b) the Market Value
Adjustment imposes investment risks on the Owner.

The Contract's MVA Fixed Account Value is the sum of the MVA Fixed Account
Values in each Guarantee Period on any date. The MVA Fixed Account Value in a
Guarantee Period is equal to the following amounts, in each case increased by
accrued interest at the applicable Guaranteed Rate:

- - The amount of premium payments or transferred amounts allocated to the
Guarantee Period, including the amount of any positive Market Value
Adjustment; less

- - The amount of any withdrawals, including any CDSLs, or transfers out of the
Guarantee Period; less

- - The amount of any charges and fees deducted from that Guarantee Period; less

- - The amount of any negative Market Value Adjustment.

TRANSFERS AMONG SUBACCOUNTS AND GUARANTEE PERIODS

Not more than 12 times in each Contract Year the Owner may (a) transfer all or
any part of the Accumulation Units credited under a Contract from one Subaccount
to another Subaccount, or into a Guarantee Period or (b) transfer all or any
part of the dollar amount in one Guarantee Period to another Guarantee Period,
or to a Subaccount. However, transfers may not be made within 30 days of the
Date of Maturity, and transfers from one Subaccount or Guarantee Period to
another may not exceed $1,000,000 in value in any Contract Year without our
prior approval. A transfer pursuant to the dollar cost averaging feature
discussed below does not count toward the limitation of 12 transfers per
Contract Year.

Transfers involving the Subaccounts will result in the redemption and/or
purchase of Accumulation Units on the basis

<PAGE>

of the respective unit values next determined after receipt of notice
satisfactory to the Company at the Servicing Center. Transfers from a Guarantee
Period before its expiration date are subject to a Market Value Adjustment. The
amount of any positive or negative Market Value Adjustment will be added to or
deducted from the transferred amount.

An Owner may request a transfer in writing or, if a telephone transfer
authorization is in effect, by telephoning 800-824-0335. The Owner may send a
written request to the Servicing Center at P.O. Box 9298, Boston, Massachusetts
02205-9298. Any written request should include the Owner's name, daytime
telephone number, and Contract number, and identify the Subaccounts or Guarantee
Periods from which and to which transfers are to be made. Transfers will be
effective on the date of receipt at our Servicing Center, of a request in form
satisfactory to us. The Company reserves the right to modify, suspend, or
terminate telephone transfers at any time without notice to the Owners.

An Owner who authorizes telephone transfers will be liable for any loss, expense
or cost arising out of any unauthorized or fraudulent telephone transfer
instructions which the Company reasonably believes to be genuine, unless such
loss, expense or cost is the result of the Company's mistake or negligence. The
Company employs procedures which provide safeguards against the execution of
unauthorized transfers, and which are reasonably designed to confirm that
transfer instructions received by telephone are genuine. These procedures
include requiring personal identification, tape recording calls, and providing
written confirmation to the Owner.

DOLLAR COST AVERAGING

The Owner may elect to have automatically transferred on a monthly, quarterly,
semiannual or annual basis, at no cost, Accumulation Units from any variable
Subaccount into one or more of the other Subaccounts. The minimum amount of each
transfer is $250. To begin the program, the Accumulated Value must be at least
$15,000. The program continues until it is discontinued by the Owner, or the
full liquidation of the variable Subaccount from which the transfers are being
made. Changes in your dollar cost averaging instructions may be made by
telephone or in writing provided the telephone authorization option has been
elected by the Owner. The Company reserves the right to terminate the dollar
cost averaging program at any time. Automatic transfers into the Guarantee
Periods are not permitted.

SURRENDER OF CONTRACT; PARTIAL WITHDRAWALS

Prior to the Date of Maturity, if the Annuitant is living, a Contract may be
surrendered for a cash payment of its Surrender Value, or a partial withdrawal
of the Accumulated Value may be made. The Surrender Value of a Contract is the
Accumulated Value, after any Market Value Adjustment, less any applicable
charges, including any CDSL. Accumulation Units will be redeemed at their value
next determined after the receipt by the Servicing Center of notice of surrender
or partial withdrawal in form satisfactory to the Company. The amount of MVA
Fixed Account Value will be determined on the date of receipt by the Servicing
Center of such notice. The value of any Accumulation Units redeemed may be more
or less than the premium payments applied under the Contract, depending upon the
value of the Trust's shares held in a Subaccount at the time. Additionally, the
Surrender Value of the MVA Fixed Account, as adjusted by any applicable Market
Value Adjustment, may be more or less than the MVA Fixed Account Value. See
"Market Value Adjustment" under "The MVA Fixed Account" above. The resulting
cash payment upon a surrender will be reduced by any applicable CDSL and any
unpaid Contract Fees or other charges.

Unless directed otherwise by the Owner, that portion of the Accumulated Value of
the Contract redeemed in a partial withdrawal will be redeemed in each
Subaccount and each Guarantee Period in the same proportion as the Accumulated
Value of the Contract is then allocated among the Subaccounts and the Guarantee
Periods. The Company will redeem Accumulation Units and/or withdraw dollar
amounts from the MVA Fixed Account so that the total amount of a partial
withdrawal (after any Market Value Adjustment) equals the dollar amount of the
partial withdrawal request. Any applicable CDSL will be determined after any
Market Value Adjustment and will reduce the remaining Accumulated Value in the
Separate Accounts and MVA Fixed Account, as the case may be. The CDSL, if any,
will not reduce the partial withdrawal payment made to the owner so long as the
Accumulated Value is sufficient to cover the CDSL.

Payments of Surrender Value, in a single sum, and partial withdrawal payments,
ordinarily will be made within seven days after receipt of the above notice by
John Hancock at its Servicing Center. As described under "Miscellaneous
Provisions-Deferment of Payment," however, redemptions and payments may be
delayed under certain circumstances. See "Federal Income Taxes" for possible
adverse tax consequences of certain surrenders and partial withdrawals.

Any request for a surrender or partial withdrawal should be mailed to the
Servicing Center, P.O. Box 9298, Boston, Massachusetts 02205-9298.

Without our approval, a partial withdrawal is not permitted for an amount less
than $100, nor may a partial withdrawal be made if the total remaining
Accumulated Value would be less than $1,000. If the CDSL Free Withdrawal Value
is at any time less than $100, then that amount must be withdrawn in full, in a
single withdrawal, before any further partial withdrawal is made. The Contract
may be terminated by the Company if the Accumulated Value of the Contract at any
time becomes zero.

SYSTEMATIC WITHDRAWAL

An optional systematic withdrawal plan enables the Owner to preauthorize
periodic withdrawals. Owners electing the plan instruct the Company to withdraw
a percentage or a level dollar amount from the Contract on a monthly, quarterly,
semiannual, or annual basis. The amount withdrawn will result in the
cancellation of Accumulation Units from each applicable

<PAGE>

Subaccount, and the deduction of dollar amounts from each applicable Guarantee
Period in the MVA Fixed Account, in the ratio that the value of each bears to
the total Accumulated Value. Currently, systematic withdrawal is available to
Owners who have an Accumulated Value of $15,000 or more. The Company reserves
the right to modify the eligibility rules or other terms and conditions of this
program at any time, without notice. Systematic withdrawals in any Contract Year
in excess of 10% of the Accumulated Value as of the beginning of the Contract
Year may be subject to a CDSL. The minimum systematic withdrawal is $100. In the
event that the modal amount of the withdrawal drops below $100 or the
Accumulated Value becomes less than $5,000, the plan will be suspended by the
Company and the Owner will be notified. The systematic withdrawal will terminate
upon cancellation by the Owner.

Systematic withdrawals are subject to the CDSL and Market Value Adjustment
described above. There may be tax consequences associated with the systematic
withdrawal plan. See "Federal Income Taxes."

STANDARD DEATH BENEFIT

If the Annuitant dies before the Date of Maturity, a standard death benefit is
payable. The death benefit will be the greater of (a) the Accumulated Value,
adjusted by any Market Value Adjustment, next determined following receipt by
John Hancock at its Servicing Center of due proof of death together with any
required instructions as to method of settlement, and (b) the aggregate amount
of the premium payments made under the Contract, less any partial withdrawals
and CDSLs applied to such partial withdrawals.

Payment of the death benefit will be made in a single sum to the beneficiary
designated by the Owner prior to the Annuitant's death unless an optional method
of settlement has been elected by the Owner. If an optional method of settlement
has not been elected by the Owner, the beneficiary may elect an optional method
of settlement in lieu of a single sum. No deduction is made for sales or other
expenses upon such election. Payment will be made in a single sum in any event
if the death benefit is less than $5,000. See "Annuity Options" under "The
Annuity Period." If there is no surviving beneficiary, the Owner, or his or her
estate is the beneficiary.

OPTIONAL ONE YEAR STEPPED-UP DEATH BENEFIT

The Owner may elect a one year stepped-up death benefit rider that is designed
to enhance the standard death benefit payable to the beneficiary. Under this
rider, upon the death of the Annuitant before the Date of Maturity, the benefit
payable will be the greater of (a) the standard death benefit, and (b) the
highest Accumulated Value, adjusted by any Market Value Adjustment, of the
Contract as of any Contract anniversary preceding the date of receipt of due
proof of death together with any required settlement instructions and preceding
the Contract anniversary nearest the Annuitant's 81st birthday, plus any premium
payments, less any withdrawals and CDSLs, since such Contract anniversary. The
rider is elected at the time a Contract is applied for. Reference should be made
to the rider for a complete description of its terms, conditions and benefits. A
monthly charge is made for this benefit, so long as the rider is in effect. See
"Charges Under the Contracts." This one year stepped-up death benefit is not
available for applicants age 80 or older.

OPTIONAL ACCIDENTAL DEATH BENEFIT

Subject to state availability, at the option of the Owner, an accidental death
benefit may be elected at the time the Contract is applied for. Under this
rider, upon the accidental death of the Annuitant prior to the earlier of the
Date of Maturity or the Annuitant's 80th birthday, the beneficiary will receive,
in addition to any other death benefit, an amount equal to the Accumulated Value
of the Contract, as of the date of the accident, upon receipt of due proof of
the Annuitant's death together with any required instructions as to method of
settlement, up to a maximum of $200,000. This benefit is not available to
applicants age 80 or older. Reference should be made to the rider for a complete
description of its terms, conditions and benefits. A monthly charge is made for
this rider as described under "Charges Under the Contracts."

PAYMENT OF DEATH BENEFITS

The Code requires certain distribution provisions to be included in any Contract
used to fund other than a tax qualified plan. See "Federal Income Taxes."
Failure to include the required distribution provisions results in the Contract
not being treated as an annuity for Federal Tax Law purposes. The Code imposes
comparable distribution requirements for Contracts used to fund tax qualified
plans. These required provisions for tax qualified plans will be reflected by
means of separate disclosures and endorsements furnished to Owners.

The Code distribution requirements are expected to present few practical
problems when the Annuitant and Owner are the same person. Nevertheless, all
Owners of Contracts not used to fund a tax qualified plan and IRA Contract
Owners should be aware that the following distribution requirements are
applicable notwithstanding any provision to the contrary in the Contract (or in
this prospectus) relating to payment of the death benefit or death of the
Annuitant.

If the Owner dies before annuity payments have begun: (a) if the beneficiary is
the surviving spouse of the Owner, the beneficiary may continue the Contract in
force as Owner; or (b) if the beneficiary is not the surviving spouse of the
Owner, or if the beneficiary is the surviving spouse of the Owner but does not
choose to continue the Contract, the entire interest in the Contract on the date
of death of the Owner must be: (i) paid out in full within five years of the
Owner's death, or (ii) applied in full towards the purchase of a life annuity on
the beneficiary with payments commencing within one year of the Owner's death.
If the Owner dies on or after annuity payments have begun, any remaining benefit
must be paid out at least as rapidly as under the method of making annuity
payments then in effect.

<PAGE>

The Code imposes comparable distribution requirements on tax qualified plans.

If the Owner is not the Annuitant, "the entire interest in the Contract on the
date of death of the Owner" is equal to the Surrender Value if paid out in full
within five years of the Owner's death, or is equal to the Accumulated Value if
applied in full towards the purchase of a life annuity on the beneficiary with
payments commencing within one year of the Owner's death. Note that "the entire
interest in the Contract on the date of death of the Owner" which is payable if
the Owner dies before annuity payments have begun may be an amount less than the
death benefit which would have been payable if the Annuitant had died instead.

Notice should be furnished promptly to the Servicing Center upon the death of
the Owner.

THE ANNUITY PERIOD

During the annuity period, the total value of a Contract may be allocated among
no more than four "Accounts." For this purpose, all Guarantee Periods comprising
the MVA Fixed Account are counted as one Account; each of the Subaccounts is
counted as one Account. Amounts allocated to the MVA Fixed Account will provide
annuity payments on a fixed basis; amounts allocated to the Subaccounts will
provide annuity payments on a variable basis. If more than four Accounts are
being used on the Date of Maturity, the Company will divide the total
Accumulated Value proportionately among the four Accounts with the largest
Accumulated Values.

Any Accumulated Value in the MVA Fixed Account at the Date of Maturity will be
subject to any positive or negative Market Value Adjustment that is applicable
at that time, before such amount is applied to provide annuity payments.

Annuity payments will begin on the Date of Maturity if the Annuitant is then
living and the Contract has been in force for at least six months. Each Contract
will provide at the time of its issuance for a Life Annuity with Ten Years
Certain. Under this form of annuity, annuity payments are made monthly to the
Annuitant for life and, if the Annuitant dies within ten years after the Date of
Maturity, the payments remaining in the ten-year period will be made to the
contingent payee, subject to the terms of any supplementary agreement issued. A
different form of annuity may be elected by the Owner, as described in "Annuity
Options," below, prior to the Date of Maturity. However, the minimum Accumulated
Value that may be applied to an annuity form, other than a Life Annuity with Ten
Years Certain, is $5,000. Once a given form of annuity takes effect, it may not
be changed.

If the initial monthly annuity payment under a Contract would be less than $50,
the Company may make a single sum payment equal to the total Surrender Value of
the Contract on the date the initial payment would be payable, in place of all
other benefits.

Each Contract specifies a Date of Maturity at the time of its issuance, which
may be no earlier than six months after the date the first payment is applied to
the Contract. The Owner may subsequently elect a different Date of Maturity,
however. Unless otherwise permitted by the Company, such subsequent date may be
any earlier date provided it is no earlier than six months after the date the
first payment is applied to the Contract, nor later than the maximum age
specified in the Contract, generally age 95. The election is made by written
notice received by the Servicing Center before the Date of Maturity specified in
the Contract and at least 31 days prior to the new Date of Maturity. Particular
care should be taken in electing the Date of Maturity for Contracts issued under
tax qualified plans. See "Federal Income Taxes."

VARIABLE MONTHLY ANNUITY PAYMENTS

Variable monthly annuity payments under a Contract are determined by converting
each Subaccount's Accumulation Units credited to the Contract (less any
applicable premium tax) into the respective Annuity Units of each applicable
Subaccount on the Date of Maturity or some other date elected for commencement
of variable annuity payments.

The amount of each variable annuity payment after the first payment will depend
on the investment performance of the Subaccounts being used. If the actual net
investment return (after deducting all charges) of a Subaccount during the
period between the dates for determining two monthly payments based on that
Subaccount exceeds the "assumed investment rate" (explained below), the latter
monthly payment will be larger than the former. On the other hand, if the actual
net investment return is less than the assumed investment rate, the latter
monthly payment will be smaller than the former.

ASSUMED INVESTMENT RATE

The assumed investment rate for the variable annuity portion of the Contracts
will be 3 1/2% per year except as provided below. The assumed investment rate is
significant in determining the amount of the initial variable monthly annuity
payment and the amount by which subsequent variable monthly payments are more or
less than the initial variable monthly payment.

Where applicable state law so provides, an Owner may elect a Variable Annuity
Option with assumed investment rates of 5% or 6%, if such a rate is available in
the Owner's state. Election of a higher assumed investment rate produces a
larger initial annuity payment but also means that eventually the monthly
annuity payments would be smaller than if a lower assumed investment rate had
been elected.

CALCULATION OF ANNUITY UNITS

Accumulation Units are converted into Annuity Units by first multiplying the
number of each Subaccount's Accumulation Units credited to the Contract on the
date of conversion by the appropriate Accumulation Unit Value as of ten calendar
days prior to the date the initial variable monthly annuity payment is due. For
each Subaccount the resulting value (less any applicable premium tax) is then
multiplied by the applicable annuity purchase rate, which reflects the age and,
possibly, sex

<PAGE>

of the Annuitant and the assumed investment rate, specified in the Contract.
This computation determines the amount of each Subaccount's initial monthly
variable annuity payment to the Annuitant. The number of each Subaccount's
Annuity Units to be credited to the Contract is then determined by dividing the
amount of each Subaccount's initial variable monthly annuity payment by each
Subaccount's Annuity Unit Value as of ten calendar days prior to the date the
initial payment is due.

FIXED MONTHLY ANNUITY PAYMENTS

The dollar amount of each fixed monthly annuity payment, specified during the
entire period of annuity payments according to the provisions of the annuity
form selected, will be determined by dividing the amount applied under the Fixed
Annuity Option (net of any applicable premium taxes) by $1,000 and multiplying
the result by the greater of: (a) the applicable factor shown in the appropriate
table in the Contract; or (b) the factor currently offered by the Company at the
time of annuitization. This current factor may be based on the sex of the payee
unless prohibited by law.

ANNUITY OPTIONS

The Owner may elect an Annuity Option during the lifetime of the Annuitant by
written notice received by the Servicing Center prior to the Date of Maturity of
the Contract. If no option is selected, Option A with Ten Years Certain will be
used. A beneficiary entitled to payment of a death benefit in a single sum may,
if no election has been made by the Owner prior to the Annuitant's death, elect
an Annuity Option by written notice received by the Servicing Center prior to
the date the proceeds become payable. No option may be elected, other than the
Life Annuity with Ten Years Certain, if the Accumulated Value to be applied is
less than $5000, in which case we will make a payment equal to the total
Surrender Value on the date the initial payment would be payable in place of all
other benefits. Among the options available are the following Annuity Options.

OPTION A: LIFE ANNUITY WITH PAYMENTS FOR A GUARANTEED PERIOD

Monthly payments will be made for a guaranteed period of 5, 10 or 20 years as
selected by the Owner or Beneficiary and thereafter for as long as the payee
lives, with the guarantee that if the payee dies prior to the end of the
guaranteed period selected, payments will continue for the remainder of the
guaranteed period to a contingent payee, subject to the terms of any
supplementary agreement issued.

OPTION B: LIFE ANNUITY WITHOUT FURTHER PAYMENT ON DEATH OF PAYEE

Monthly payments will be made to the payee as long as he or she lives. No
minimum number of payments is guaranteed.

OPTION C: JOINT AND LAST SURVIVOR

Payments will be provided monthly, quarterly, semiannually or annually for your
life and the life of your spouse/joint payee. Upon the death of one payee,
payments will continue to the surviving payee and stop upon the death of the
surviving payee.

OPTION D: JOINT AND 1/2 SURVIVOR
JOINT AND 2/3 SURVIVOR

Payments will be provided monthly, quarterly, semiannually or annually for your
life and the life of your spouse/joint payee. Upon the death of one payee,
payments (reduced to 1/2 or 2/3 the full payment amount) will continue to the
surviving payee. Payments stop upon the death of the surviving payee.

OPTION E: LIFE INCOME WITH CASH REFUND

Payments will be provided monthly, quarterly, semiannually or annually for your
life. Upon your death, your contingent payee will receive a lump-sum payment, if
the total payments to you were less than your accumulated value at the time of
annuitization. The lump-sum payment, if any, will be for the balance.

OPTION F: INCOME FOR A FIXED PERIOD

Payments will be provided monthly, quarterly, semiannually or annually for a
pre-determined period of time to a maximum of 30 years. If you die before the
end of the fixed period, payments will continue to your contingent payee until
the end of the period.

OPTION G: INCOME OF A SPECIFIC AMOUNT

Payments will be provided for a specific amount. Payments stop only when the
premium deposit applied and earnings have been completely paid out. If you die
before all payments are made, payments continue to your contingent payee until
the end of the contract.
------------------------

Fixed and variable annuity payments are available with Annuity Options A, B, C
and D. Only fixed annuity payments are available with Annuity Options E, F, and
G. With respect to Options F and G, payments must continue for 10 years unless
the Contract has been in force for 5 years or more.

The Option A life annuity with five years guaranteed and Option B life annuity
without further payment on the death of payee are not available if the Annuitant
is more than 85 years of age on the Date of Maturity.

TRANSFERS

The procedures for and terms and conditions of transfers by an Annuitant among
Subaccounts during the annuity period are the same as for transfers by Owners
among Subaccounts during the Accumulation Period. See "Accumulation
Period--Transfers Among Subaccounts and Guarantee Periods." Such transactions
involve the redemption and purchase of Annuity Units in the same manner that
transfers during the Accumulation Period involve the redemption and purchase of
Accumulation Units. No transfers to or from a Fixed Annuity Option are
permitted.

<PAGE>

OTHER CONDITIONS

The Company reserves the right at its sole discretion to make available to
Owners and other payees optional methods of payment in addition to the Annuity
Options described in this prospectus and the applicable Contract.

Federal income tax requirements currently applicable to H.R. 10 and individual
retirement annuity plans provide that the period of years guaranteed under
Option A cannot be any greater than the joint life expectancies of the payee and
his or her designated beneficiary.

If the Owner dies on or after annuity payments have begun, any remaining benefit
must be paid out at least as rapidly as under the method of making annuity
payments then in effect. The Code imposes a comparable distribution requirement
for Contracts used to fund tax qualified plans.

VARIABLE ACCOUNT VALUATION PROCEDURES

VALUATION DATE. A Valuation Date is any date on which the New York Stock
Exchange is open for trading. On any date other than a Valuation Date, the
Accumulation Unit Value or Annuity Unit Value will be the same as that on the
next following Valuation Date.

VALUATION PERIOD. A Valuation Period is that period of time from the beginning
of the day following a Valuation Date to the end of the next following Valuation
Date.

ACCUMULATION UNIT VALUE. The Accumulation Unit Value is calculated separately
for each Subaccount. The value of one Accumulation Unit on any Valuation Date is
determined for each Subaccount by multiplying the immediately preceding
Accumulation Unit Value by the applicable Net Investment Factor for the
Valuation Period ending on such Valuation Date.

ANNUITY UNIT VALUE. The Annuity Unit Value is calculated separately for each
Subaccount. The value of one Annuity Unit on any Valuation Date is determined
for each Subaccount by first multiplying the immediately preceding Annuity Unit
Value by the applicable Net Investment Factor for the Valuation Period ending on
such date and then multiplying this product by an adjustment factor which will
neutralize the assumed investment rate used in determining the amounts of
annuity payable. The adjustment factor for a Valuation Period of one day for
Contracts with an assumed investment rate of 3 1/2% per year is 0.999905754. The
assumed investment rate is neutralized by applying the adjustment factor so that
the variable annuity payments will increase only if the actual net investment
rate of the Subaccount exceeds 3 1/2% per year and will decrease only if it is
less than 3 1/2% per year.

NET INVESTMENT FACTOR. The Net Investment Factor for each Subaccount for any
Valuation Period is equal to 1 plus the applicable net investment rate for such
Valuation Period. A Net Investment Factor may be more or less than 1. The net
investment rate for each Subaccount for any Valuation Period is equal to (a) the
accrued investment income and capital gains and losses, whether realized or
unrealized, of the Subaccount for such Valuation Period less (b) the sum of a
deduction for any applicable income taxes and, for each calendar day in the
Valuation Period, a deduction of 0.003425% or 0.002740% (depending on whether
the total asset-based charge for mortality and expense risks and for
administration is 1.25% or 1.00%, respectively, on an annual basis) of the value
of the Subaccount at the beginning of the Valuation Period, the result then
being divided by (c) the value of the total net assets of the Subaccount at the
beginning of the Valuation Period.

ADJUSTMENT OF UNITS AND VALUES. The Company reserves the right to change the
number and value of the Accumulation Units or Annuity Units or both credited to
any Contract, without the consent of the Owner or any other person, provided
strict equity is preserved and the change does not otherwise affect the
benefits, provisions or investment return of the Contract.

MISCELLANEOUS PROVISIONS

RESTRICTION ON ASSIGNMENT

In order to qualify for favorable tax treatment, certain Contracts may not be
sold, assigned, discounted or pledged as collateral for a loan or as security
for the performance of an obligation or for any other purpose, to any person,
unless the Owner is the trustee of a trust described in Section 401(a) of the
Code. Because an assignment, pledge or other transfer may be a taxable event an
Owner should consult a competent tax adviser before taking any such action.

DEFERMENT OF PAYMENT

The Company may defer for up to 15 days the payment of any amount attributable
to a premium payment made by check to allow the check reasonable time to clear.

Payment of the value of any Accumulation Units in a single sum upon a surrender
or partial withdrawal will ordinarily be made within seven days after receipt of
the written request therefor by the Servicing Center. However, redemption may be
suspended and payment may be postponed at times (a) when the New York Stock
Exchange is closed, other than customary weekend and holiday closings, (b) when
trading on that Exchange is restricted, (c) when an emergency exists as a result
of which disposal of securities in a Subaccount is not reasonably practicable or
it is not reasonably practicable to determine the value of the net assets of a
Subaccount or (d) when a governmental body having jurisdiction over a Separate
Account by order permits such suspension. Rules and regulations of the
Commission, if any are applicable, will govern as to whether conditions
described in (b) or (c) exist.

The Company may also defer payment of surrender proceeds payable out of the MVA
Fixed Account for a period of up to six months.

<PAGE>

RESERVATION OF RIGHTS

The Company reserves the right to add or delete Subaccounts, to change the
underlying investments of any Subaccount, to operate any Separate Account in any
form permitted by law and to terminate any Separate Account's registration under
the 1940 Act if such registration should no longer be legally required. Certain
changes may, under applicable laws and regulations, require notice to or
approval of Owners. Otherwise, changes do not require such notice or approval.

OWNER AND BENEFICIARY

The Owner has the sole and absolute power to exercise all rights and privileges
under the Contract, except as otherwise provided by the Contract or by written
notice of the Owner. The Owner and the beneficiary are designated in the
application and may be changed by the Owner, effective upon receipt of written
notice at the Servicing Center, subject to the rights of any assignee of record,
any action taken prior to receipt of the notice and certain other conditions.
While the Annuitant is alive, the Owner may be changed by written notice. The
beneficiary may be changed by written notice no later than receipt of due proof
of the death of the Annuitant. The change will take effect whether or not the
Owner or the Annuitant is then alive.

FEDERAL INCOME TAXES

THE SEPARATE ACCOUNTS, THE MVA FIXED

ACCOUNT, AND THE COMPANY

The Company is taxed as a life insurance company under the Code. Each Separate
Account is part of the Company's total operations and is not taxed separately as
a "regulated investment company" or otherwise.

The Contracts permit the Company to charge against each Separate Account and the
MVA Fixed Account any taxes, or provisions for taxes, attributable to the
operation or existence of the Contracts or the Separate Account. Currently, the
Company does not anticipate making a charge for income and other taxes because
of the level of such taxes. If the level of current tax is increased, or is
expected to increase in the future, the Company reserves the right to make a
charge in the future.

The Company assumes no responsibility for determining whether a particular
retirement plan satisfies the applicable requirements of the Code or whether a
particular employee is eligible for inclusion under a plan.

CONTRACTS PURCHASED OTHER THAN
TO FUND A TAX QUALIFIED PLAN

THE OWNER OR OTHER PAYEE

The Contracts are considered annuity contracts under Section 72 of the Code.
Currently no Federal Income Tax is payable on increases in Accumulated Value
until payments are made to the Owner or other payee under such Contract.
However, a Contract owned other than by a natural person is not generally an
annuity for tax purposes and any increase in value thereunder is taxable as
ordinary income as accrued.

When payments under a Contract are made in the form of an annuity, the amount of
each payment is taxed to the Owner or other payee as ordinary income to the
extent that such payment exceeds an allocable portion of the Owner's "investment
in the contract" (as defined in the Code). In general, an Owner's "investment in
the contract" is the aggregate amount of premium payments made by him, reduced
by any amounts previously distributed under the Contract that were not subject
to tax. The portion of each variable annuity payment to be excluded from income
is determined by dividing the "investment in the contract," adjusted by any
refund feature, by the number of periodic payments anticipated during the time
that periodic payments are to be made. In the case of a fixed annuity payment,
the amount to be excluded in each year is determined by dividing the "investment
in the contract," adjusted by any refund feature, by the amount of "expected
return" during the time that periodic payments are to be made, and then
multiplying by the amount of the payment. After the entire "investment in the
contract" has been distributed, any remaining payment is fully taxable.

When a payment under a Contract is made in a single sum, the amount of the
payment is taxed as ordinary income to the Owner or other payee to the extent it
exceeds the Owner's "investment in the contract."

For purposes of determining the amount of taxable income resulting from a
partial or complete withdrawal, all Contracts and other annuity contracts issued
by the Company or its affiliates to the Owner within the same calendar year will
be treated as if they were a single contract.

PARTIAL WITHDRAWALS BEFORE DATE OF MATURITY

When a payment under a Contract, including a payment under a systematic
withdrawal plan, is less than the amount that would be paid upon the Contract's
complete surrender and such payment is made prior to the commencement of annuity
payments under the Contract, part or all of the payment (the partial withdrawal)
may be taxed to the Owner or other payee as ordinary income.

On the date of the partial withdrawal, if the cash value of the Contract is
greater than the investment in the Contract, any part of such excess value so
withdrawn is subject to tax as ordinary income.

If an individual assigns or pledges any part of the value of a Contract, the
value so pledged or assigned is taxed as ordinary income to the same extent as a
partial withdrawal.

PENALTY FOR PREMATURE WITHDRAWALS

In addition to being included in ordinary income, the taxable portion of any
withdrawal may be subject to a ten-percent penalty tax. The penalty tax does not
apply to payments made to the Owner or other payee after the Owner attains age
59 1/2, or on account of the Owner's death or disability. If the withdrawal is

<PAGE>

made in substantially equal periodic payments over the life of the Annuitant or
other payee or over the joint lives of the Annuitant and the Annuitant's
beneficiary the penalty will also not apply.

DIVERSIFICATION REQUIREMENTS

Each Fund and Portfolio of the Trusts intends to qualify as a regulated
investment company under Subchapter M of the Code and will have to meet the
investment diversification tests of Section 817(h) of the Code and the
underlying regulations. The Treasury Department and the Internal Revenue Service
may, at some future time, issue a ruling or a regulation presenting situations
in which it will deem "investor control" to be present over the assets of the
Funds and Portfolios of the Trusts, causing the Owner to be taxed currently on
income credited to the Contracts. In such a case, the Company reserves the right
to amend the Contract or the choice of investment options to avoid current
taxation to the Owners.

CONTRACTS PURCHASED TO FUND A TAX QUALIFIED PLAN

WITHHOLDING ON ELIGIBLE ROLLOVER DISTRIBUTIONS

Recent legislation requires 20% withholding on certain distributions from tax
qualified plans. An Owner wishing to roll-over his entire distribution should
have it paid directly to the successor plan. Otherwise, the Owner's distribution
will be reduced by the 20% mandatory income tax. Consult a qualified tax adviser
before taking such a distribution.

CONTRACTS PURCHASED UNDER INDIVIDUAL
RETIREMENT ANNUITY PLANS (IRA)

In general, the maximum amount of premium payments deductible each year with
respect to an individual retirement annuity contract (as defined in Section 408
of the Code) issued on the life of an eligible purchaser is the lesser of $2,000
or 100% of compensation includible in gross income. A person may also purchase a
contract for the benefit of his or her spouse (including for example a homemaker
who does not work outside the home). Where an individual elects to deduct
amounts contributed on his or her own behalf and on behalf of a spouse, the
maximum amount of premium payments deductible is up to $2,000 for each spouse if
their combined compensation is at least equal to the contributed amount.
However, not more than $2,000 can be allocated to either person's account. If
you or your spouse is an active participant in an employer-sponsored retirement
plan, you are permitted to make a deductible premium payment only if your
adjusted gross incomes are below certain amounts.

No deduction is allowed for premium payments made in or after the taxable year
in which the Owner has attained the age of 70 1/2 years nor is a deduction
allowed for a "rollover contribution" as defined in the Code.

When payments under a Contract are made in the form of an annuity, or in a
single sum such as on surrender of the Contract or by partial withdrawal, the
payment is taxed as ordinary income.

IRS required minimum distributions must begin no later than April 1 of the year
following the year in which the Owner attains age 70 1/2. The Owner may incur
adverse tax consequences if a distribution on surrender of the Contract or by
partial withdrawal is made prior to his attaining age 59 1/2, except in the
event of his death or total disability or in certain other circumstances.

CONTRACTS PURCHASED UNDER NON-DEDUCTIBLE
IRAS (ROTH IRAS)

In general, for years after 1997, an individual may make purchase payments of up
to $2,000 each year for a new type of non-deductible IRA, known as a ROTH IRA.
This $2,000 maximum on purchase payments applies to all of an individual's
annual IRA contributions (deductible and non-deductible), except for rollover
contributions. The maximum amount that can be made to a ROTH IRA is phased out
for adjusted gross incomes between $95,000 and $110,000 in the case of single
taxpayers, between $150,000 and $160,000 in the case of married taxpayers filing
jointly, and between $0 and $15,000 in the case of married taxpayers filing
separately.

"Qualified distributions" for ROTH IRAs are not includible in gross income or
subject to the penalty tax on early withdrawals. As defined in Section 408A of
the Code, a qualified distribution requires that the individual has held the
ROTH IRA for at least five years and, in addition, that the distribution is made
after the individual reaches age 59 1/2, on the individual's death or
disability, or to qualified first-time home purchaser, subject to a $10,000
lifetime maximum, for the individual, a spouse, a child, a grandchild, or an
ancestor. Non-qualified distributions are treated as being made from
contributions first. When all distributions exceed the amount of contributions,
the excess is includible in gross income. The age 70 1/2 pre-death distribution
rules do not apply to ROTH IRAs.

An individual may make a rollover contribution from a non-ROTH IRA, unless the
individual has adjusted gross income over $100,000 or the individual is a
married taxpayer filing a separate return. The individual must pay tax on any
portion of the IRA being rolled over that represents income on a previously
deductible IRA contribution. For rollovers in 1998, the individual may pay that
tax ratably in 1998 and over the succeeding three years. There are no similar
limitations on rollovers from a ROTH IRA to another ROTH IRA.

CONTRACTS PURCHASED UNDER SECTION 403(b)
PLANS (TSA)

Premium payments made by an employer which is a public school system or a
tax-exempt organization described in Section 501(c)(3) of the Code under annuity
purchase arrangements described in Section 403(b) of the Code are not taxable
currently to the Owner, to the extent that the aggregate of such amounts does
not exceed the Owner's "exclusion allowance" (as defined in the Code). In
general, an Owner's "exclusion allowance" is determined by multiplying 20% of
his

<PAGE>

"includible compensation" (as defined in the Code) by the number of years of his
service with the employer and then subtracting from that product the aggregate
amount of premium payments previously excluded from income and certain other
employer payments to retirement plans in which the Owner is a participant.
Additional limitations applicable to premium payments are described in Section
415 of the Code. Deferrals under all plans made at the election of the Owner
generally are limited to an aggregate of $9500 annually.

When payments under a Contract are made in the form of an annuity, such payments
are taxed to the Owner or other payee under the same rules that apply to such
payments under corporate plans (discussed below) except that five-year averaging
and capital gain phase-out are not available.

When payment under a Contract is made in a single sum, such as on surrender of
the contract or by partial withdrawal, the taxable portion of the payment is
taxed as ordinary income and the penalty for premature withdrawals may be
applicable.

Ordinarily an Owner in a Section 403(b) plan does not have any "investment in
the contract" and, thus, any distribution is fully taxed as ordinary income.

Distributions are prohibited before the Owner is age 59 1/2, except on the
Owner's separation from service, death, or disability and except with respect to
distributions attributable to assets held as of December 31, 1988. This
prohibition does not (1) preclude transfers and exchanges to other products that
qualify under Section 403(b) or (2) restrict withdrawals of certain amounts
attributable to pre-January 1, 1989, premium payments.

CONTRACTS PURCHASED UNDER CORPORATE PLANS

In general, premium payments made by a corporation under a qualified pension or
profit-sharing plan described in Section 401(a) of the Code or a qualified
annuity plan described in Section 403(a) of the Code are deductible by the
corporation and are not taxable currently to the employees.

When payments under a Contract are made in the form of an annuity, the amount of
each payment is taxed to the Annuitant or other payee as ordinary income except
in those cases where the Annuitant has an "investment in the contract" (as
defined in the Code). In general, an Annuitant's "investment in the contract" is
the aggregate amount of premium payments made by him. If an Annuitant has an
"investment in the contract," a portion of each annuity payment is excluded from
income until the investment in the contract is recovered. The amount to be
excluded in each year, in the case of a variable annuity payment, is determined
by dividing the "investment in the contract," adjusted by any refund feature, by
the number of periodic payments anticipated during the time that periodic
payments are to be made. The calculation for fixed annuity payments is somewhat
different. For fixed annuity payments, in general, prior to recovery of the
"investment in the Contract," there is no tax on the amount of each payment
which bears the same ratio to that payment as the "investment on the Contract"
bears to the total expected value of the annuity payments for the term of the
payments. However, the remainder of each annuity payment is taxable. The taxable
portion of a distribution (in the form of an annuity or a single sum payment) is
taxed as ordinary income.

When payment under a Contract is made in a single sum or a total distribution is
made within one taxable year of the Annuitant or other payee, the amount of the
payment is taxed to the Annuitant or other payee to the extent it exceeds the
Annuitant's "investment in the contract." If such payment is made after the
Annuitant has attained age 59 1/2, or on account of his death, retirement or
other termination of employment or on account of his death after termination of
employment, five year averaging and a phase-out of capital gains treatment for
pre-1974 contributions may be available with respect to one distribution. Other
rules may be available to taxpayers who have attained age 50 prior to January 1,
1986.

IRS required minimum distributions must begin no later than April 1 of the year
following the year in which the Annuitant attains age 70 1/2 even if the
Annuitant has not retired.

CONTRACTS PURCHASED UNDER H.R. 10 PLANS
(SELF-EMPLOYED)

Self-employed persons, including partnerships, may establish tax qualified
pension and profit-sharing plans and annuity plans for themselves and for their
employees. Generally, the maximum amount of premium payments deductible each
year with respect to variable annuity contracts issued on the life of
self-employed persons under such plans is $30,000 or 25% of "earned income" (as
defined in the Code), whichever is less. Self-employed persons must also make
premium payments for their employees (who have met certain eligibility
requirements) at least at the same rate as they do for themselves. In general,
such premium payments are deductible in full and are not taxable currently to
such employees.

Tax qualified plans may permit self-employed persons and their employees to make
additional premium payments themselves (which are not deductible) of up to 10%
of earned income or compensation.

When payments under a Contract are made in the form of an annuity, such payments
are taxed to the Annuitant or other payee under the same rules that apply to
such payments under corporate plans (discussed earlier).

The tax treatment of single sum payments is also the same as under corporate
plans except that five-year averaging may be unavailable to a self-employed
Annuitant on termination of service for reasons other than disability.

The same rules that apply to commencement of annuity payments under corporate
plans apply to H.R. 10 plans.

CONTRACTS PURCHASED BY TOP-HEAVY PLANS

Certain corporate and H.R. 10 plans may be characterized under Section 416 of
the Code as "top-heavy plans" if a significant portion of the plan assets is
held for the benefit of the "key employees" (as defined in the Code). Care must
be taken to

<PAGE>

consider the special limitations applicable to top-heavy plans and the
potentially adverse tax consequences to key employees.

WITHHOLDING OF TAXES

The Company is obligated to withhold taxes from certain payments unless the
recipient elects otherwise. The withholding rate varies depending upon the
nature and the amount of the distribution. The Company will notify the Owner or
other payee of his or her right to elect out of withholding and furnish a form
on which the election may be made. Any election must be received by the
Servicing Center in advance of the payment in order to avoid withholding.

SEE YOUR OWN TAX ADVISER

The above description of Federal income tax consequences of owning a Contract
and of the different kinds of tax qualified plans which may be funded by the
Contracts is only a brief summary and is not intended as tax advice. The rules
governing the provisions of tax qualified plans are extremely complex and often
difficult to understand. Anything less than full compliance with the applicable
rules, all of which are subject to change from time to time, can have adverse
tax consequences. For example, premature withdrawals are generally subject to a
ten-percent penalty tax. The taxation of an Annuitant or other payee has become
so complex and confusing that great care must be taken to avoid pitfalls. For
further information a prospective purchaser should consult a qualified tax
adviser.

SEPARATE ACCOUNT
PERFORMANCE

The Subaccounts may include total return in advertisements. When a Subaccount
advertises its total return, it will usually be calculated for one year, five
years, and ten years or for the life of the applicable Fund or Portfolio. Total
return is the percentage change between the value of a hypothetical investment
in the Subaccount at the beginning of the relevant period to the value of the
investment at the end of the period, assuming the deduction of any CDSL which
would be payable if the Contract Owner surrendered the Contract at the end of
the period indicated. Total return at the Separate Account level will reflect
the CDSL, mortality and expense risk charges, administrative charge, and the
annual Contract Fee. The total return figures will not reflect any premium tax
charge or any charges for optional benefits, including the Nursing Home Waiver
of CDSL, One Year Stepped-Up Death Benefit and Accidental Death Benefit riders.
The total return for a Separate Account will be lower than total return at the
Trust level where comparable charges are not deducted.

The Subaccounts may also advertise total returns in a non-standard format in
conjunction with the standard format described above. The non-standard format
will be the same as the standard format except that it will not reflect any
CDSL.

The Money Market Subaccount may advertise "current yield" and "effective yield."
Current yield refers to the income earned by the Subaccount over a seven-day
period and then annualized; i.e., the income earned in the period is assumed to
be earned every seven days over a 52-week period and stated as a percentage of
the investment. Effective yield is calculated similarly but, when annualized,
the income earned by the investment is assumed to be reinvested in the
Subaccount and thus compounded in the course of a 52-week period. The effective
yield will be slightly higher than the current yield because of this compounding
effect of the assumed reinvestment.

The other Subaccounts may also advertise current yield. For these Subaccounts,
the current yield will be calculated by dividing the annualization of the income
earned by the Subaccount during a recent 30-day period by the maximum offering
price per unit at the end of such period. In all cases, current yield and
effective yield will reflect the recurring charges at the Separate Account level
including the annual Contract Fee, but will not reflect any premium tax charge,
any CDSL, or any charges for optional benefit riders.

Performance information for the Subaccounts may be compared to other variable
annuity separate accounts or other investment products surveyed by Lipper
Analytical Services, Inc., an independent service that monitors and ranks the
performance of investment companies.

Ibbotson and Associates, CDA/Wiesenberger and F.C. Towers are also used for
comparison purposes, as well as the Russell and Wilshire Indexes. Performance
rankings and ratings reported periodically in national financial publications
such as Money Magazine, Forbes, Business Week, The Wall Street Journal,
Micropal, Inc., Morningstar, Stanger's and Barron's may also be utilized.
Performance figures are calculated in accordance with standardized methods
established by each reporting service.

REPORTS

The Company intends to deliver to Owners of outstanding Contracts annual account
statements and such other periodic reports as may be required by law.

VOTING PRIVILEGES

All of the assets in the Subaccounts of each Separate Account are invested in
shares of the corresponding Funds or Portfolios of the Trusts. The Company will
vote the shares of each Fund or Portfolio which are deemed attributable to the
Contracts at meetings of the Trusts' shareholders in accordance with
instructions received from Owners of the Contracts. Units of the Trusts held in
the Separate Accounts which are not attributable to the Contracts and those for
which instructions from owners are not received will be represented by the
Company at the meeting and will be voted for and against each matter in the same
proportion as the votes based upon the instructions received from the owners of
all annuity contracts funded

<PAGE>

through the Separate Accounts' corresponding variable Subaccounts.

The number of shares of a Fund or Portfolio held in each Subaccount deemed
attributable to each Owner is determined by dividing a Contract's Accumulation
Unit Value (or for a Contract under which annuity payments have commenced, the
equivalent) in the Subaccount by the net asset value of one share in the
corresponding Fund or Portfolio in which the assets of that Subaccount are
invested. Fractional votes will be counted. The number of shares as to which the
Owner may give instructions will be determined as of the record date for each
Trust's meeting.

Owners of Contracts may give instructions regarding the election of the Boards
of Trustees of the Trusts, ratification of the selection of independent
auditors, approval of the Trusts' investment management agreements and other
matters requiring a vote under the 1940 Act. Owners will be furnished
information and forms by the Company in order that voting instructions may be
given.

CHANGES IN APPLICABLE LAW--FUNDING AND OTHERWISE

The voting privileges described in this prospectus are afforded based on the
Company's understanding of applicable Federal Securities Law requirements. To
the extent that applicable law, regulations or interpretations change to
eliminate or restrict the need for such voting privileges, the Company reserves
the right to proceed in accordance with any such revised requirements. The
Company also reserves the right, subject to compliance with applicable law,
including approval of Owners if so required, to transfer assets determined by
the Company to be associated with the class of contracts to which the Contracts
belong from the Separate Accounts to another separate account or Subaccount by
withdrawing the same percentage of each investment in the Separate Accounts with
appropriate adjustments to avoid odd lots and fractions.

DISTRIBUTION OF THE CONTRACTS

JHFI is registered as a broker-dealer under the Securities Exchange Act of 1934
and is a member of the National Association of Securities Dealers, Inc. JHFI
acts as principal underwriter and principal distributor of the Contracts. The
Contracts may be purchased through broker-dealers and certain financial
institutions who have entered into selling agreements with JHFI and the Company,
and whose representatives are authorized by applicable law to sell annuity
products. The compensation paid to such broker-dealers and financial
institutions is not expected to exceed 7.0% of premium payments. The offering of
the Contracts is intended to be continuous, but neither the Company nor JHFI is
obligated to sell any particular amount of Contracts.

The Company reimburses JHFI for direct and indirect expenses actually incurred
in connection with the marketing and sale of the Contracts.

YEAR 2000

The advent of the Year 2000 presents a technological challenge to the Company.
Responding to that challenge, the Company has developed a plan to modify or
replace significant portions of its computer information and automated
technologies so that its systems will function properly with respect to dates in
the year 2000 and thereafter. The plan also involves coordination and testing
with business partners to ensure that external factors do not adversely impact
the Company's systems. The Company presently believes that with modifications to
existing systems and conversions to new technologies, the year 2000 will not
pose significant operational problems for its computer systems. However, if
certain modifications and conversions are not made, or are not completed on
time, the year 2000 issue could have an adverse impact on the operations of the
Company.

The Company expects the project to be substantially complete by early 1999. This
completion target was derived utilizing numerous assumptions of future events,
including availability of certain resources and other factors. However, there
can be no guarantee that this estimate will be achieved, that these steps will
be sufficient or that actual results may not differ materially from those
anticipated.

REGISTRATION STATEMENTS

This Prospectus omits certain information contained in the Registration
Statements which have been filed with the Securities and Exchange Commission.
More details may be attained from the Commission upon payment of the prescribed
fee.

EXPERTS AND FINANCIAL STATEMENTS

Financial statements of John Hancock, Account H, and Account V, found in the
Statement of Additional Information, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing. The financial statements of
John Hancock should be distinguished from the financial statements of the
Accounts and should be considered only as bearing upon the ability of John
Hancock to meet its obligations under the Contracts.

<PAGE>

TABLE OF CONTENTS OF STATEMENT
OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
CROSS REFERENCE TO
PAGE PAGE IN PROSPECTUS
---- ------------------
<S> <C> <C>
The Separate Accounts....................................... 2 11
Services Agreement.......................................... 2 NA
Calculation of Performance Data............................. 2 29
Calculation of Annuity Payments............................. 3 23
Financial Statements........................................ 6 8
</TABLE>

<PAGE>

APPENDIX A -- SAMPLE MARKET VALUE ADJUSTMENT CALCULATIONS

The formula which will be used to determine the Market Value Adjustment is:

<TABLE>
<S> <C>
SAMPLE CALCULATION 1: Positive Adjustment
Premium Payment $10,000
Guarantee Period 7 years
Time of withdrawal or transfer beginning of 3rd year of Guarantee Period
Amount withdrawn or transferred $11,664
Guaranteed Rate(g) 8%
Guaranteed Rate for new 5 year guarantee(c) 7%
Remaining Guarantee Period(n) 60 months
Maximum positive adjustment:
$10,000 x (1.08(2) - 1.03(2)) = $1,055
i.e., the maximum withdrawal adjusted for Market Value Adjustment is $12,719 ($11,664 + $1,055)
</TABLE>

Market Value Adjustment:

Amount withdrawn or transferred (adjusted for Market Value Adjustment):
$11,664 + $273.79 = $11,937.79

<TABLE>
<S> <C>
SAMPLE CALCULATION 2: Negative Adjustment
Premium Payment $10,000
Guarantee Period 7 years
Time of withdrawal or transfer beginning of 3rd year of Guarantee Period
Amount withdrawn or transferred $11,664
Guaranteed Rate(g) 8%
Guaranteed Rate for new 5 year guarantee(c) 9%
Remaining Guarantee Period(n) 60 months
Maximum negative adjustment:
$10,000 X (1.08(2) - 1.03(2)) = $1,055
i.e., the maximum withdrawal adjusted for Market Value Adjustment is $10,609 ($11,664 - $1,055)
</TABLE>

Market Value Adjustment:

Amount withdrawn or transferred (adjusted for Market Value Adjustment):
$11,664 - $777.31 = $10,886.69

<TABLE>
<S> <C>
SAMPLE CALCULATION 3: Positive Adjustment Limited by Amount of Excess Interest
Premium Payment $10,000
Existing Guarantee Period 7 years
Time of withdrawal or transfer beginning of 3rd year of Guarantee Period
Amount withdrawn or transferred $11,664
Guaranteed Rate(g) 8%
Guaranteed Rate for new 5 year guarantee(c) 5%
Remaining Guarantee Period(n) 60 months
Amount of Excess Interest:
$10,000 X (1.08(2) - 1.03(2)) = $1,055
i.e., the maximum withdrawal adjusted for Market Value Adjustment is $12,719 ($11,664 + $1,055)
</TABLE>

<PAGE>

Market Value Adjustment:

Since the Market Value Adjustment exceeds the amount of excess interest of
$1,055, the actual Market Value Adjustment is $1,055.

Amount withdrawn or transferred (adjusted for Market Value Adjustment):
$11,664 + $1,055 = $12,719

<TABLE>
<S> <C>
SAMPLE CALCULATION 4: Negative Adjustment Limited by Amount of Excess Interest
Premium Payment $10,000
Existing Guarantee Period 7 years
Time of withdrawal or transfer beginning of 3rd year of Guarantee Period
Amount withdrawn or transferred $11,664
Guaranteed Rate(g) 8%
Guaranteed Rate for new 5 year guarantee(c) 10%
Remaining Guarantee Period(n) 60 months
Amount of Excess Interest:
$10,000 X (1.08(2) - 1.03(2)) = $1,055
i.e., the minimum withdrawal adjusted for Market Value Adjustment is $10,609 ($11,664 - $1,055)
</TABLE>

Market Value Adjustment:

Since the Market Value Adjustment exceeds the amount of excess interest of
$-1,055, the actual Market Value Adjustment is $-1,055.

Amount withdrawn or transferred (adjusted for Market Value Adjustment):
$11,664 - $1,055 = $10,609

<PAGE>

APPENDIX B--VARIABLE ANNUITY INFORMATION
FOR INDIVIDUAL RETIREMENT ANNUITIES

To help you understand your purchase of this Contract as an Individual
Retirement Annuity (IRA), we are providing the following summary.

I. ACCUMULATION UNITS AND THE MVA FIXED ACCOUNT. Each net premium payment you
make into your Contract is allocated to the Subaccounts and/or Guarantee Periods
you select. Accumulation Units are acquired under the Contract with amounts you
allocate to the Subaccounts. This is the unit of measurement used to determine
the value of the variable portion of your Contract. The number of units acquired
in any Subaccount is based on the unit value of that Subaccount next determined
after receipt of the payment at the Servicing Center. The values of Accumulation
Units fluctuate with the daily investment performance of the corresponding
Subaccount. The growth in the value of your Contract, to the extent invested in
the Separate Accounts, is neither guaranteed nor projected and varies with the
investment performance of the Fund or Portfolio underlying the Subaccount you
have selected. Each net premium payment allocated to a Guarantee Period in the
MVA Fixed Account will be credited interest, as determined by the Company. A
minimum guaranteed interest rate of 3% applies to Contracts where required under
state law. Amounts withdrawn or surrendered from a Guarantee Period may be
increased or decreased by a Market Value Adjustment. More details appear under
"Accumulation Period" and "The MVA Fixed Account" in this prospectus.

II. SEPARATE ACCOUNT AND TRUST CHARGES. The assets of the Separate Accounts
are charged for services and certain expense guarantees. The annualized charge
equals a maximum of 1.25%. Trust fees varying by Fund and Portfolio are charged
against the Funds and Portfolios for investment management and advisory
services, and other expenses. Details appear under "Charges Under the Contracts"
in this prospectus and in the accompanying prospectuses of the Trusts.

III. DEDUCTIONS FROM THE CONTRACT. The full amount of each premium payment,
net of any premium taxes deducted, is applied to the Contract. At or after the
payment dates, one or more of the following charges may be made, depending on
circumstances.

1. CDSL. In each Contract Year you may withdraw as much as 10% of
the Accumulated Value of your Contract as of the beginning of the Contract
Year without charge. Withdrawals in excess of this amount will be subject
to the following charges:

<TABLE>
<CAPTION>
YEARS FROM DATE OF
PREMIUM PAYMENT TO CDSL
DATE OF SURRENDER OR WITHDRAWAL PERCENTAGE
------------------------------- ----------
<S> <C>
7 or more................................................... 0%
6 but less than 7........................................... 2%
5 but less than 6........................................... 3%
4 but less than 5........................................... 4%
3 but less than 4........................................... 5%
2 but less than 3........................................... 5%
less than 2................................................. 6%
</TABLE>

For the purpose of calculating the CDSL, deposits are considered to be withdrawn
on a "first-in first-out" basis. Earnings are considered to be withdrawn last,
and are withdrawn without charge. Under certain circumstances the CDSL is not
assessed. This is described in more detail under "Contingent Deferred Sales
Load" under "Charges Under the Contracts" in this prospectus.

2. CONTRACT FEE. The Company currently deducts $30 from the
Accumulated Value as a Contract Fee if the Accumulated Value is less than
$10,000. This occurs annually or at the time of surrender. Please refer to
"Charges for Administrative Services" under "Charges Under the Contracts"
in this prospectus.

3. STATE PREMIUM TAX. Some states and local governments impose a
premium or similar tax on annuities. The Company only deducts this tax when
required to do so. Please refer to "Premium or Similar Taxes" under
"Changes Under Contracts" in this prospectus.

4. OPTIONAL BENEFIT RIDERS. Three optional benefit riders are
available under the Contracts, including the One Year Stepped-Up Death
Benefit, Accidental Death Benefit and Nursing Home Waiver of CDSL riders.
The charges for these riders are 0.15%, 0.10% and 0.05% (annual percentage
rates), respectively, of Accumulated Value. Please refer to "Nursing Home
Waiver of CDSL" and "Optional Death Benefit Charges" under "Charges Under
the Contracts."

<PAGE>

JOHN HANCOCK VARIABLE ANNUITY ACCOUNTS H AND V

SUPPLEMENT DATED October 21, 1998

TO PROSPECTUS DATED October 21, 1998

Prospectuses delivered in New York to residents of that state are amended as set
forth in this Supplement.

Under the heading "Contingent Deferred Sales Load" on page 15 of the prospectus,
the Table of CDSL percentage is deleted and replaced with the following:

<TABLE>
<CAPTION>
YEARS FROM DATE OF
PREMIUM PAYMENT TO CDSL
DATE OF SURRENDER OR WITHDRAWAL PERCENTAGE
------------------------------- ----------
<S> <C>
7 or more........................................... 0%
6 but less than 7................................... 1%
5 but less than 6................................... 2%
4 but less than 5................................... 3%
3 but less than 4................................... 4%
2 but less than 3................................... 5%
less than 2......................................... 6%
</TABLE>

Under the heading "Market Value Adjustment and Charges Applicable to the MVA
Fixed Account" on page 9 of the prospectus, the first sentence of the paragraph
is amended by deleting the words "or death benefit."

Under the heading "MVA Fixed Account Investment Options" on page 9 of the
prospectus, the first sentence of the second paragraph is amended by adding,
after the words "applicable Guarantee Period," the words "but not including
amounts to pay death benefits pursuant to the Contracts."

Under the heading "Standard Death Benefit" on page 22 of the prospectus, the
second sentence of the paragraph is amended by deleting the words "adjusted by
any Market Value Adjustment."

Under the heading "Optional One Year Stepped-Up Death Benefit" on page 22 of the
prospectus, the second sentence is amended by deleting the words "adjusted by a
Market Value Adjustment."

The section headed "Market Value Adjustment" on pages 15 and 16 of the
prospectus is deleted and replaced with the following:

MARKET VALUE ADJUSTMENT

If any MVA Fixed Account Value is withdrawn, transferred or otherwise paid out
before the end of the Guarantee Period in which it is being held other than to
pay death benefits pursuant to the Contract, a Market Value Adjustment will be
applied. This generally includes amounts applied to an annuity option, and
amounts paid as a single sum in lieu of an annuity. No Market Value Adjustment
will be applied to amounts that are paid out on the last day of a Guarantee
Period.

The Market Value Adjustment may increase or decrease the amount of MVA Fixed
Account Value being withdrawn, transferred or otherwise paid out. The comparison
of two Guaranteed Rates determines whether the Market Value Adjustment produces
an increase or a decrease. The first rate to compare is the Guaranteed Rate for
the existing Guarantee Period from which amounts are being transferred or
withdrawn. The second rate is the Guaranteed Rate then being offered for new
Guarantee Periods of the same duration as that remaining in the existing
Guarantee Period. If the first rate exceeds the second by more than 1/4%, the
Market Value Adjustment produces an increase. If the first rate does not exceed
the second by at least 1/4%, the Market Value Adjustment produces a decrease.
Sample calculations are shown in Appendix A.

The Market Value Adjustment will be determined by multiplying the amount being
withdrawn or transferred from the Guarantee Period (before deduction of any
applicable CDSL) by the following factor:

where,

- - g is the Guaranteed Rate in effect for the current Guarantee Period (in
decimal form).

Under the heading "Contingent Deferred Sales Load," the Table of CDSL percentage
on page 17 of the prospectus is deleted and replaced with the following:

<TABLE>
<CAPTION>
YEARS FROM DATE OF
PREMIUM PAYMENT TO CDSL
DATE OF SURRENDER OR WITHDRAWAL PERCENTAGE
------------------------------- ----------
<S> <C>
7 or more........................................... 0%
6 but less than 7................................... 1%
5 but less than 6................................... 2%
4 but less than 5................................... 3%
3 but less than 4................................... 4%
2 but less than 3................................... 5%
less than 2......................................... 6%
</TABLE>

<PAGE>

Under the heading "Contingent Deferred Sales Load," the example given under the
sixth paragraph starting on page 18 of the prospectus is deleted and replaced
with the following:

FOR EXAMPLE, ASSUME A CONTRACT IS ISSUED ON JANUARY 1, 1996, THAT THE
OWNER MAKES PREMIUM PAYMENTS OF $5,000 ON JANUARY 1, 1996, $1,000 ON
JANUARY 1, 1997, AND $1,000 ON JANUARY 1, 1998. ASSUME THAT THE
ACCUMULATED VALUE ON JANUARY 1, 1999, IS $9,000 AND THAT A PARTIAL
WITHDRAWAL IS MADE BY THE OWNER IN THE AMOUNT OF $6,000 (NO TAX
WITHHOLDING) ON JUNE 1, 1999. THE CDSL IN THIS CASE, ASSUMING NO PRIOR
PARTIAL WITHDRAWALS, WOULD EQUAL $229.57.

THE REMAINING BALANCE OF THE $5,000 JANUARY 1, 1996, PREMIUM PAYMENT,
I.E., $4,010, IS THEN WITHDRAWN IN ITS ENTIRETY AND IS ASSESSED A CDSL
OF $160.40 (.04 X $4,010). ALL OF THE $1,000 JANUARY 1, 1997, PREMIUM
PAYMENT IS TO BE WITHDRAWN AND IS ASSESSED A CDSL OF $50 (.05 X $1,000).
TO MAKE UP THE REMAINDER OF THE $6,000 PAID TO THE OWNER, $319.57 IS
WITHDRAWN FROM THE JANUARY 1, 1998, PREMIUM PAYMENT. THIS IS ASSESSED A
CDSL OF $19.17 (.06 X $319.57).

THEREFORE, THE TOTAL AMOUNT PAID TO THE OWNER IS $6,000 AND THE TOTAL
CDSL IS $229.57. THE ABOVE EXAMPLE ASSUMES AMOUNTS WITHDRAWN ARE AFTER
THE APPLICATION OF ANY MARKET VALUE ADJUSTMENT.

Under the heading "Standard Death Benefit" on page 22 of the prospectus, the
second sentence of the first paragraph is amended by deleting the words
"adjusted by any Market Value Adjustment."

Under the heading "Optional One Year Stepped-Up Death Benefit" on page 22 of the
prospectus, the second sentence is amended by deleting the words "adjusted by
any Market Value Adjustment."

<PAGE>

Appendix A to the Prospectus is replaced with the following:

APPENDIX A--SAMPLE MARKET VALUE ADJUSTMENT CALCULATIONS

The formula which will be used to determine the Market Value Adjustment is:

SAMPLE CALCULATION 1: Positive Adjustment

<TABLE>
<S> <C>
Premium Payment $10,000
Guarantee Period 7 years
Time of withdrawal or transfer beginning of 3rd year of Guarantee Period
Amount withdrawn or transferred $11,664
Guaranteed Rate(g) 8%
Guaranteed Rate for new 5 year guarantee(c) 7%
Remaining Guarantee Period(n) 60 months
</TABLE>

Maximum positive adjustment:

$10,000 x (1.08(2) - 1.03(2)) = $1,055

i.e., the maximum withdrawal adjusted for Market Value Adjustment is $12,719
($11,664 + $1,055)

Market Value Adjustment:

Amount withdrawn or transferred (adjusted for Market Value Adjustment):
$11,664 + $413.58 = $12,077.58

SAMPLE CALCULATION 2: Negative Adjustment

<TABLE>
<S> <C>
Premium Payment $10,000
Guarantee Period 7 years
Time of withdrawal or transfer beginning of 3rd year of Guarantee Period
Amount withdrawn or transferred $11,664
Guaranteed Rate(g) 8%
Guaranteed Rate for new 5 year guarantee(c) 9%
Remaining Guarantee Period(n) 60 months
</TABLE>

Maximum negative adjustment:

$10,000 X (1.08(2) - 1.03(2)) = $1,055

i.e., the maximum withdrawal adjusted for Market Value Adjustment is $10,609
($11,664 - $1,055)

Market Value Adjustment:

Amount withdrawn or transferred (adjusted for Market Value Adjustment):
$11,664 - $652.18 = $11,011.82

<PAGE>

SAMPLE CALCULATION 3: Positive Adjustment Limited by Amount of Excess Interest

<TABLE>
<S> <C>
Premium Payment $10,000
Existing Guarantee Period 7 years
Time of withdrawal or transfer beginning of 3rd year of Guarantee Period
Amount withdrawn or transferred $11,664
Guaranteed Rate(g) 8%
Guaranteed Rate for new 5 year guarantee(c) 5%
Remaining Guarantee Period(n) 60 months
</TABLE>

Amount of Excess Interest:

$10,000 X (1.08(2) - 1.03(2)) = $1,055

i.e., the maximum withdrawal adjusted for Market Value Adjustment is $12,719
(11,664 + 1,055)

Market Value Adjustment:

Since the Market Value Adjustment exceeds the amount of excess interest of
$1,055, the actual Market Value Adjustment is $1,055.

Amount withdrawn or transferred (adjusted for Market Value Adjustment):
$11,664 + $1,055 = $12,719

SAMPLE CALCULATION 4: Negative Adjustment Limited by Amount of Excess Interest

<TABLE>
<S> <C>
Premium Payment $10,000
Existing Guarantee Period 7 years
Time of withdrawal or transfer beginning of 3rd year of Guarantee Period
Amount withdrawn or transferred $11,664
Guaranteed Rate(g) 8%
Guaranteed Rate for new 5 year guarantee(c) 10%
Remaining Guarantee Period(n) 60 months
</TABLE>

Amount of Excess Interest:

$10,000 X (1.08(2) - 1.03(2)) = $1,055

i.e., the minimum withdrawal adjusted for Market Value Adjustment is $10,609
(11,664 - 1,055)

Market Value Adjustment:

Since the Market Value Adjustment exceeds the amount of excess interest of
$-1,055, the actual Market Value Adjustment is $-1,055.

Amount withdrawn or transferred (adjusted for Market Value Adjustment):
$11,664 - $1,055 = $10,609

In Appendix B to the prospectus, under the section headed "Deductions from the
Contract," the Table of CDSL percentages is deleted and replaced with the
following:

<TABLE>
<CAPTION>
YEARS FROM DATE OF
PREMIUM PAYMENT TO CDSL
DATE OF SURRENDER OR WITHDRAWAL PERCENTAGE
- ------------------------------- ----------
<S> <C>
7 or more................................................... 0%
6 but less than 7........................................... 1%
5 but less than 6........................................... 2%
4 but less than 5........................................... 3%
3 but less than 4........................................... 4%
2 but less than 3........................................... 5%
less than 2................................................. 6%
</TABLE>

4
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

DEFERRED COMBINATION FIXED AND VARIABLE ANNUITY CONTRACTS

JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H

JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V

STATEMENT OF ADDITIONAL INFORMATION

___________________

This statement of additional information ("SAI"), dated October 21,
1998 is not a prospectus. It is intended that this SAI be read in conjunction
with the prospectus of John Hancock Variable Annuity Account H and John Hancock
Variable Annuity Account V, dated October 21, 1998, for the Contracts being
offered. Capitalized terms used in this SAI that are not otherwise defined
herein have the same meanings given to them in the prospectus. A copy of the
prospectus may be obtained from the Servicing Center, P.O. Box 9298, Boston,
Massachusetts 02205-9298, telephone number 800-824-0335.

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

Cross Reference to
Page Pages in Prospectus
---- -------------------

The Separate Accounts......................... 2 11
Services Agreement............................ 2 NA
Calculation of Performance Data............... 2 29
Calculation of Annuity Payments............... 3 23
Financial Statements.......................... 6 8

VAHVSAI 10/98
<PAGE>

THE SEPARATE ACCOUNTS

John Hancock Variable Annuity Account H and John Hancock Variable
Annuity Account V (collectively, "Separate Accounts") are separate accounts of
John Hancock Mutual Life Insurance Company ("Company"), established under the
laws of the Commonwealth of Massachusetts. Each Separate Account is organized as
a unit investment trust and registered with the Securities and Exchange
Commission ("Commission") under the Investment Company Act of 1940, as amended
("1940 Act"). Each Separate Account is made up of variable subaccounts
("Subaccounts") that fund the variable portion of the Company's deferred
combination fixed and variable annuity contracts ("Contracts"). John Hancock
Variable Annuity Account H ("Account H") has eleven Subaccounts: the V.A.
Financial Industries, V.A. Emerging Growth, V.A. Special Opportunities, V.A.
Growth, V.A. Growth & Income, V.A. Independence Equity, V.A. Sovereign
Investors, V.A. Bond (formerly, V.A. Sovereign Bond), V.A. Strategic Income,
V.A. High Yield Bond, and V.A. Money Market Subaccounts. The assets of each
Subaccount of Account H are, in turn, invested in a corresponding Fund of John
Hancock Declaration Trust ("Declaration Trust"), a registered open-end
management investment company advised by John Hancock Advisers, Inc. John
Hancock Variable Annuity Account V ("Account V") has eighteen Subaccounts:
Managed, Equity Index, Large Cap Value, Large Cap Growth, Mid Cap Value, Mid Cap
Growth, Real Estate Equity, Small/Mid Cap CORE, Small Cap Value, Global Equity,
International Equity Index, International Opportunities, Emerging Markets
Equity, Short-Term Bond, Bond Index, Strategic Bond, and High Yield Bond
Subaccount. The assets of each Subaccount of Account H are, in turn, invested in
a corresponding Portfolio of the John Hancock Variable Series Trust I ("VST"), a
registered open-end management investment company advised by John Hancock. The
Owner may also choose to fund the Contracts through the MVA Fixed Account,
providing Guaranteed Rates for various Guarantee Periods.

SERVICES AGREEMENT

The Company and John Hancock Funds, Inc.("JHFI") have entered into a
Responsibility and Cost Allocation Agreement ("Agreement") for the allocation of
services and related costs with respect to various functions, duties and
responsibilities associated with the Contracts and other variable annuity
contracts that may be offered by the Company. The Agreement provides for the
allocation of such matters as regulatory compliance, insurance underwriting and
issuance, pricing and unit valuation, accounting, record maintenance,
surrenders, benefit payments, commissions payments, reports to annuity contract
owners, and distribution and marketing. The cost of performing the duties
allocated will be borne by the party responsible for discharging the function,
unless agreed upon otherwise. The Company and JHFI may delegate any of their
respective duties to their subsidiaries or affiliates.

CALCULATION OF PERFORMANCE DATA

Each Separate Account may, from time to time, include in advertisements,
sales literature and reports to Owners or prospective investors information
relating to the performance of its Subaccounts. The performance information that
may be presented is not an estimate or a guarantee of future investment
performance, and does not represent the actual experience of amounts invested by
a particular Owner. Set out below is a description of the methods used in
calculating the performance information for the Subaccounts.

Each Separate Account will calculate the average annual total return for
each Subaccount (other than the V.A. Money Market Subaccount), according to the
following formula prescribed by the Commission:

n
P x ( 1 + T ) = ERV

where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment,
made at the beginning of a period (or fractional portion
thereof)

Average annual total return is the annual compounded rate of return that
would have produced the cash redemption value under a Contract had the
Subaccount been invested in a specified Fund of the Declaration Trust or
Portfolio of the VST over the stated period and had the performance remained
constant throughout. The calculation assumes a single $1,000 payment made at the
beginning of the period and full redemption at the end of the period. It
reflects adjustments for all Trust, Fund, Portfolio, and Contract level charges
except any premium tax charge or charges for optional benefits described in the
prospectus.

<PAGE>

On the basis, the following table shows the average total return for each
Subaccount for the periods ended December 31, 1997:
<TABLE>
<CAPTION>
Subaccount* Average Annualized
- ----------- ------------------

1 year 5 year 10 year
period or since period or since period or since
commencement of commencement of commencement of
operations, operations, operations,
if earlier if earlier if earlier
----------------- ----------------- -----------------
<S> <C> <C> <C>
V.A. Financial Industries 28.5%(a) N/A N/A
V.A. Emerging Growth 4.2% (2.6%)(b) N/A
V.A. Growth 7.4% 0.0% (b) N/A
V.A. Independence Equity 23.7% 27.4% (b) N/A
V.A. Sovereign Investors 21.5% 22.6% (b) N/A
V.A. World Bond (5.5%) (0.6%)(b) N/A
V.A. Strategic Income 4.6% 9.1% (b) N/A
V.A. Sovereign Bond 2.1% 5.7% (b) N/A
V.A. Money Market (2.5%) (0.5%)(b) N/A
Managed 11.9% 11.0% 11.3%
Equity Index 25.8% 24.0% (c) N/A
Large Cap Value 21.6% 21.3% (c) N/A
Large Cap Growth 24.0% 16.3% 16.1%
Mid Cap Value 25.3% 25.0% (c) N/A
Mid Cap Growth 9.9% 7.0% (c) N/A
Real Estate Equity 10.4% 10.4% 10.4%(e)
Small Cap Value 18.7% 17.2% (c) N/A
International Balanced (4.1%) 1.1% (c) N/A
International Equity Index (11.7%) 5.0% 5.0%(e)
International Opportunity (4.8%) 0.6% (c) N/A
Short-Term Bond (0.4%) 3.8% (d) N/A
Strategic Bond 2.3% 5.0% (c) N/A
</TABLE>

* Absent expense reimbursements to certain Portfolios, total return figures
for the related subaccounts would have been lower. The following
subaccounts are not shown because they were not in existence during 1997:
V.A. Special Growth; V.A. Growth & Income; V.A. High Yield Bond; Small/Mid
Cap CORE; Global Equity; Emerging Markets Equity; Bond Index; High Yield
Bond.

(a) Commenced operations on April 30, 1997.

(b) Commenced operations on August 29, 1996.

(d) Commenced operations on September 23, 1994.

(e) Commenced operations on February 1, 1989.

For the 7-day period ending December 31, 1997, the V.A. Money Market
Subaccounts's current yield was 2.92% and its effective yield was 2.96%.

Each Separate Account will calculate current yield for each Subaccount
(other than the V.A. Money Market Subaccount) according to the following formula
prescribed by the Commission:

a - b 6
Yield = 2[(------- + 1) - 1 ]
cd

where: a = net investment income earned during the period by the Fund
whose shares are owned by the Subaccount

b = expenses accrued for the period (net of any reimbursements)

c = the average daily number of Accumulation Units outstanding
during the period

d = the maximum offering price per Accumulation Unit on the last
day of the period.

According to this formula, yield is determined by dividing the net
investment income per Accumulation Unit earned during the period (minus the
deduction for mortality and expense risk charge, administration charge and
Contract Fee) by the Accumulation Unit Value on the last day of the period and
annualizing the resulting figure. The calculation is based on specified 30-day
periods identified in the advertisement. Neither the CDSL nor any charges for
premium taxes or optional benefits are reflected in the calculation.

<PAGE>

Account H may calculate current yield and effective yield figures for
the V.A. Money Market Subaccount. The current yield of the V.A. Money Market
Subaccount for a seven-day period ("base period") will be computed by
determining the "net change in value" (calculated as set forth below) of a
hypothetical Owner account having a balance of one Unit at the beginning of the
period, dividing the net change in account value by the value of the account at
the beginning of the base period to obtain the base period return, and
multiplying the base period return by 365/7 with the resulting yield figure
carried to the nearest hundredth of one percent. Net changes in value of the
hypothetical Owner account will include net investment income of that account
(accrued daily dividends as declared by the V.A. Money Market Fund, less daily
expense charges of the Separate Account) for the period, but will not include
realized gains or losses or unrealized appreciation or depreciation on the
underlying V.A. Money Market Fund shares. The mortality and expense risk
charges, administration charge and Contract Fee are reflected, but the CDSL and
any charge for premium taxes and optional benefits are not.

The effective yield reflects the effects of compounding and represents an
annualization of the current return with all dividends reinvested. The formula
for effective yield, as prescribed by the Commission, is:

(365/7)
Effective yield = (Base period return + 1) - 1

CALCULATION OF ANNUITY PAYMENTS

The variable monthly annuity payment to an Annuitant under a Contract
is equal to the sum of the products of the number of each Subaccount's Annuity
Units credited to the Contract multiplied by the applicable Annuity Unit Value,
as these terms are defined under "Special Terms" and "Variable Account Valuation
Procedures," respectively, in each Separate Account's prospectus. The number of
each Subaccount's Annuity Units credited to the Contract is multiplied by the
applicable Annuity Unit Value as of ten calendar days prior to the date the
payment is due. The value of the Annuity Units varies from day to day, depending
on the investment performance of the Subaccount, the deductions made against the
Subaccount, and the assumed investment rate used in computing Annuity Unit
Values. Thus, the variable monthly annuity payments vary in amount from month to
month.

The amount of the initial variable monthly payment is determined on the
assumption that the actual net investment rate of each Subaccount used in
calculating the Net Investment Factor (as described under "Variable Account
Valuation Procedures" in the Account's prospectus) will be equal on an annual
basis to the assumed investment rate. If the actual net investment rate between
the dates for determining two monthly annuity payments is greater than the
assumed investment rate, the latter monthly payment will be larger in amount
than the former. On the other hand, if the actual net investment rate between
the dates for determining two monthly annuity payments is less than the assumed
investment rate, the latter monthly payment will be smaller in amount than the
former.

The mortality tables used as a basis for both variable and fixed annuity
purchase rates are the 1983a Mortality Tables, with projections of mortality
improvements and with certain age adjustments based on the Contract Year of
annuitization. The mortality table used in a Contract purchased in connection
with certain employer-related plans and used in all Contracts issued in Montana
will be the Female Annuity Table of the 1983a Mortality Tables. The impact of
this change will be lower benefits (5% to 15%) from a male's viewpoint than
would otherwise be the case.

4
<PAGE>

An illustration of the method of calculation of variable monthly annuity
payments and the number of Annuity Units under the Contracts is shown below.

GENERAL FORMULAE TO DETERMINE ACCUMULATION UNIT VALUES AND ANNUITY UNIT VALUES

Net Investment Rate =

Subaccount Charges (0.003425% per
Investment Capital Capital Taxes Day of the Value of the Subaccount at
Income + Gains - Losses - (if any) - the Beginning of the Valuation Period)*
- ------------------------------------------------------------------------------------------------------------
Value of the Subaccount at the Beginning of the Valuation Period
<S> <C> <C> <C> <C>
Net Investment
Factor = 1.00000000 + Net Investment Rate

Accumulation Accumulation Unit Value on Net Investment
Unit Value = Preceding Valuation Date X Factor

Annuity Unit Net
Annuity Unit Value on Preceding Investment Factor to Neutralize
Value = Valuation Date X Factor X Assumed Investment Rate
</TABLE>

_________________________

* The 0.003425% daily charge is based on charges for mortality and expense
risk and administration at the annual rate of 1.25%. A lower decimal amount
of daily charge would apply under the 1.00% annual rate. See "Charges Under
the Contracts" in the prospectus.

HYPOTHETICAL EXAMPLE ILLUSTRATING THE CALCULATION OF ACCUMULATION UNIT VALUES
AND ANNUITY UNIT VALUES

Assume at the beginning of the Valuation Period being considered, the value
of a particular Subaccount was $4,000,000. Investment income during the
Valuation Period totaled $2000 while capital gains were $3000 and capital losses
were $1000. No taxes accrued. Charges against the beginning value of the
Subaccount amount to [$137.00] assuming a one day Valuation Period. The
[$137.00] was computed by multiplying the beginnings Subaccount value of
$4,000,000 by the factor [0.00003425]. By substituting in the first formula
above, the net investment rate is equal to [$3863.00 ($2000 + $3000 - $1000 -
$137.00)] divided by $4,000,000 or [0.0009658.] The Net Investment Factor would
then be [1.0009658].

Assume further that each Accumulation Unit had a value of $11.250000 on the
previous Valuation Date, and the value of an Annuity Unit on such date was
$1.0850000. Based upon the experience of the Subaccount during the Valuation
Period, the value of an Accumulation Unit at the end of the Valuation Period
would be [$11.260865 ($11.250000 x 1.0009658)]. The value of an Annuity Unit at
the end of the Valuation Period would be [$1.085946 ($1.0850000 x 1.0009658 x
.999905754)]. The final figure, [.999905754], neutralizes the effect of a 3 1/2%
assumed investment rate so that the Annuity Unit recognizes only the actual
investment experience.

<PAGE>

GENERAL FORMULAE TO DETERMINE AMOUNT OF MONTHLY VARIABLE ANNUITY PAYMENTS AND
NUMBER OF ANNUITY UNITS

Amount of First Variable Annuity Payment =

Number of Accumulation Accumulation Unit Value First Monthly Annuity
Shares Applied X 10 Days Before Maturity Date X Payment Factor
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
$1000

Number of
Annuity Units = Amount of First Variable Annuity Payment
-----------------------------------------------
Annuity Unit Value 10 Days Before Maturity Date

Amount of Subsequent Annuity Unit Value 10 Days
Variable Annuity Payment = Number of Annuity Units X Before Payment Date
</TABLE>

HYPOTHETICAL EXAMPLE ILLUSTRATING THE CALCULATION OF THE AMOUNT OF MONTHLY
VARIABLE ANNUITY PAYMENT

Assume that 10 days before the date of maturity a Contract has credited to
it 4000.000 Accumulation Units each having a value of $12.000000. The
appropriate annuity purchase rate in the Contract for an assumed investment rate
of 3 1/2% is $5.47 per $1000 of proceeds for the Annuity Option elected. The
Annuitant's first monthly payment would then be $262.56.

4000.000 x $12.000000 x 5.47
- ---------------------
$1000

If the value of an Annuity Unit 10 days before the date of maturity was
$1.4000000, the number of Annuity Units represented by the first and subsequent
payments would be 187.543 ($262.56/$1.4000000). If the Annuity Unit Value 10
days before the due date of the second monthly payment was $1.405000, the amount
of the second payment would be $263.50 (187.543 x $1.405000).

FINANCIAL STATEMENTS

The financial statements for John Hancock are included on the next page.
The financial statements for Account H are included immediately following the
financial statements for John Hancock. The fiancial statements for Account V are
included immediately following the financial statements for Account H.

6
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

To the Directors and Policyholders
John Hancock Mutual Life Insurance Company

We have audited the accompanying statutory-basis statements of financial
position of John Hancock Mutual Life Insurance Company as of December 31, 1997
and 1996, and the related statutory-basis statements of operations and changes
in policyholders' contingency reserves and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Commonwealth of Massachusetts Division of Insurance, which
practices differ from generally accepted accounting principles. The variances
between such practices and generally accepted accounting principles also are
described in Note 1. The effects on the financial statements of these variances
are not reasonably determinable but are presumed to be material.

In our opinion, because of the effects of the matter described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of John Hancock Mutual Life Insurance Company at December 31, 1997 and 1996, or
the results of its operations or its cash flows for the year December 31, 1997.

Also, in our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of John Hancock Mutual Life
Insurance Company at December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance.

ERNST & YOUNG LLP

Boston, Massachusetts
February 18, 1998

<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION

December 31
1997 1996
---------------------------------------
(In millions)
<S> <C> <C>
ASSETS

Bonds--Note 6 $22,986.0 $22,467.0

Stocks:
Preferred 640.6 416.2
Common 256.9 249.8
Investments in affiliates 1,442.0 1,268.9
---------------------------------------
2,339.5 1,934.9

Mortgage loans on real estate--Note 6 7,851.2 7,964.0

Real estate:
Company occupied 375.1 372.1
Investment properties 1,893.4 2,042.3
---------------------------------------
2,268.5 2,414.4

Policy loans 1,577.3 1,589.3

Cash items:
Cash in banks and offices 176.0 348.4
Temporary cash investments 548.8 1,068.3
---------------------------------------
724.8 1,416.7

Premiums due and deferred 222.3 278.4

Investment income due and accrued 505.8 547.8

Other general account assets 948.6 1,009.9

Assets held in separate accounts 16,021.7 13,969.1
---------------------------------------

TOTAL ASSETS $55,445.7 $53,591.5

=======================================
</TABLE>

2
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION -- CONTINUED

<TABLE>
<CAPTION>
December 31
1997 1996
----------------------------------------
(In millions)

OBLIGATIONS AND POLICYHOLDERS' CONTINGENCY
RESERVES
<S> <C> <C>
OBLIGATIONS
Policy reserves $19,206.6 $18,544.0

Policyholders' and beneficiaries' funds 13,985.1 14,679.3

Dividends payable to policyholders 399.7 395.5

Policy benefits in process of payment 115.5 236.3

Other policy obligations 214.8 210.5

Asset valuation reserve--Note 1 1,165.7 1,064.8

Federal income and other accrued
taxes--Note 1 96.9 125.1

Other general account obligations 1,084.5 1,521.7

Obligations related to separate accounts 16,019.1 13,958.2
-----------------------------------
TOTAL 52,287.9 50,735.4
OBLIGATIONS

POLICYHOLDERS' CONTINGENCY RESERVES
Surplus notes--Note 2 450.0 450.0
Special contingency reserve for group insurance 151.8 194.8
General contingency reserve 2,556.0 2,211.3
-----------------------------------

TOTAL POLICYHOLDERS' CONTINGENCY RESERVES 3,157.8 2,856.1
-----------------------------------

TOTAL OBLIGATIONS AND POLICYHOLDERS'
CONTINGENCY RESERVES $55,445.7 $53,591.5

===================================

</TABLE>

The accompanying notes are an integral part of the statutory-basis financial
statements.

3
<PAGE>

<TABLE>
<CAPTION>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

STATUTORY-BASIS STATEMENTS OF OPERATIONS AND CHANGES IN
POLICYHOLDERS' CONTINGENCY RESERVES

Year ended December 31
1997 1996
----------------------------------------
(In millions)
<S> <C> <C>
INCOME

Premiums, annuity considerations and pension
fund contributions $ 7,371.6 $ 8,003.1
Net investment income--Note 4 2,856.1 2,803.1
Other, net 119.0 68.6
----------------------------------------
10,346.7 10,874.8
BENEFITS AND EXPENSES
Payments to policyholders and beneficiaries:
Death benefits 737.4 886.8
Accident and health benefits 121.4 300.9
Annuity benefits 1,668.2 1,539.4
Surrender benefits and annuity fund withdrawals 6,293.1 5,565.4
Matured endowments 21.0 20.6
----------------------------------------
8,841.1 8,313.1

Additions to reserves to provide for future payments to
policyholders and beneficiaries (186.7) 880.5
Expenses of providing service to policyholders and
obtaining new insurance:
Field sales compensation and expenses 278.3 275.0
Home office and general expenses 479.7 514.8
Payroll, state premium and miscellaneous taxes 49.9 70.9
----------------------------------------
9,462.3 10,054.3
GAIN FROM OPERATIONS BEFORE DIVIDENDS
TO POLICYHOLDERS, FEDERAL INCOME TAXES
AND NET REALIZED CAPITAL LOSSES 884.4 820.5

Dividends to policyholders 398.2 399.4
Federal income taxes--Note 1 18.9 107.1
---------------------------------------
417.1 506.5
----------------------------------------

GAIN FROM OPERATIONS BEFORE NET
REALIZED CAPITAL LOSSES 467.3 314.0

Net realized capital losses--Note 5 ( 89.8) (43.6)
---------------------------------------
NET INCOME 377.5 270.4

</TABLE>

4
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

STATUTORY-BASIS STATEMENTS OF OPERATIONS AND CHANGES IN
POLICYHOLDERS' CONTINGENCY RESERVES -- CONTINUED

Year ended December 31
1997 1996
----------------------------------------
(In millions)

Other increases (decreases) in policyholders'
contingency Reserves:
Net unrealized capital gains and other
adjustments--Note 5 $ 58.6 $ 191.7
Valuation reserve changes--Note 1 1.4 (27.5)
Prior years' federal income taxes ( 35.6) (28.9)
Other reserves and adjustments, net (100.2) (83.1)
----------------------------------------
NET INCREASE IN POLICYHOLDERS'
CONTINGENCY RESERVES 301.7 322.6

Policyholders' contingency reserves at beginning 2,856.1 2,533.5
of year ---------------------------------------

POLICYHOLDERS' CONTINGENCY
RESERVES AT END OF YEAR $3,157.8 $2,856.1
========================================

</TABLE>

The accompanying notes are an integral part of the statutory-basis financial
statements.

5
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

STATUTORY-BASIS STATEMENTS OF CASH FLOWS

Year ended December 31
1997 1996
-------------------------------------
(In millions)

<S> <C> <C>
Cash flows from operating activities:
Insurance premiums, annuity considerations and
deposits $ 7,518.8 $ 8,120.4
Net investment income 2,988.7 2,965.5
Benefits to policyholders and beneficiaries ( 9,030.3) (8,476.6)
Dividends paid to policyholders ( 394.0) ( 382.6)
Insurance expenses and taxes ( 815.3) ( 884.1)
Net transfers from separate accounts 896.8 198.2
Other, net ( 798.3) ( 602.7)
-------------------------------------
NET CASH PROVIDED FROM OPERATIONS 366.4 938.1
-------------------------------------

Cash flows used in investing activities:
Bond purchases (18,003.6) (7,590.7)
Bond sales 13,541.1 2,812.4
Bond maturities and scheduled redemptions 2,927.6 2,241.0
Bond prepayments 1,096.3 1,223.2
Stock purchases (1,125.7) ( 391.2)
Proceeds from stock sales 921.7 573.2
Real estate purchases ( 243.0) ( 447.7)
Real estate sales 444.5 382.1
Other invested assets purchases ( 171.1) ( 214.7)
Proceeds from the sale of other invested assets 109.3 183.6
Mortgage loans issued (1,165.8) (1,582.7)
Mortgage loan repayments 1,176.9 2,247.3
Other, net ( 333.8) 205.3
-------------------------------------
NET CASH USED IN INVESTING ACTIVITIES ( 825.6) ( 358.9)
-------------------------------------

Cash flows from financing activities:
Net (decrease) increase in short-term note payable ( 16.4) 90.0
Issuance of REMIC notes payable 0.0 292.0
Repayment of REMIC notes payable ( 216.3) ( 85.2)
-------------------------------------
NET CASH (USED IN) PROVIDED FROM FINANCING
ACTIVITIES ( 232.7) 296.8
-------------------------------------

(DECREASE) INCREASE IN CASH AND
TEMPORARY CASH INVESTMENTS ( 691.9) 876.0
Cash and temporary cash investments at beginning of year 1,416.7 540.7
-------------------------------------

CASH AND TEMPORARY CASH INVESTMENTS
AT END OF YEAR $ 724.8 $ 1,416.7
=====================================

</TABLE>

The accompanying notes are an integral part of the statutory-basis financial
statements.

<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES

John Hancock Mutual Life Insurance Company (the Company) provides a broad range
of financial services and insurance products. The Company's insurance operations
focus principally in three segments: the Retail Sector, which encompasses the
Company's individual life, annuity, and long-term care operations; Group
Pension, which offers single premium annuity and guaranteed investment contracts
through both the general and separate accounts; and Business Insurance, its
group life, health, and long-term care operations including administrative
services provided to group customers. In addition, through its subsidiaries and
affiliates, the Company also offers a wide range of investment management and
advisory services and other related products including life insurance products
for the Canadian market, sponsorship and distribution of mutual funds, real
estate financing and management, and various other financial services.
Investments in these subsidiaries and other affiliates are recorded on the
statutory equity method.

On February 28, 1997, the Company sold its group accident and health business
and related group life business to UNICARE Life & Health Insurance Company
(UNICARE), a wholly-owned subsidiary of WellPoint Health Networks Inc. The
Company retained its group long-term care operations. Assets equal to
liabilities of approximately $562.4 million at February 28, 1997, subject to the
completion of a closing audit, were transferred to UNICARE in connection with
the sale. The corresponding amount of assets and liabilities at December 31,
1996 was $559.4 million. The gain from operations in both periods was not
significant. The insurance business sold was transferred to UNICARE through a
100% coinsurance agreement. The Company remains liable to its policyholders to
the extent that UNICARE does not meet its contractual obligations under the
coinsurance agreement. As a result, the Company has secured a $397 million
letter of credit facility with a group of banks led by Morgan Guaranty Trust
Company of New York. The banks have agreed to issue a letter of credit to the
Company pursuant to which the Company may draw up to $397 million for any claims
not satisfied by UNICARE under the coinsurance agreement after the Company has
incurred the first $113 million of losses from such claims. The amount available
pursuant to the letter of credit agreement and any letter of credit issued
thereunder will be automatically reduced on a scheduled basis consistent with
the anticipated runoff of liabilities related to the business reinsured under
the coinsurance agreement. The letter of credit agreement and any letter of
credit issued thereunder are scheduled to expire on March 1, 2002.

The Company is domiciled in the Commonwealth of Massachusetts and licensed in
all fifty of the United States, the District of Columbia, Puerto Rico, Guam, the
US Virgin Islands, and Canada. The Company distributes its individual products
in North America primarily through a career agency system. The career agency
system is composed of company-owned, unionized branch offices and independent
general agencies. The Company also distributes its individual products through
several alternative distribution channels, including banks, brokers/dealers and
direct marketing efforts.

The Company markets pension and other investment-related products primarily to
sponsors of retirement and savings plans covering employees of private sector
companies, and plans covering public employees and collective bargaining unions
and non-profit organizations. Products are marketed and sold through a
combination of group pension field employee representatives, as well as
marketing personnel and investment professionals employed by the Company.

The Company distributes its group benefit products through group
representatives, who are John Hancock employees or through intermediaries, in
key markets nationwide.

The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
accompanying notes. Such estimates

7
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED

and assumptions could change in the future as more information becomes known,
which could impact the amounts reported and disclosed herein.

Basis of Presentation: The financial statements have been prepared using
accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance and in conformity with the practices of the
National Association of Insurance Commissioners (NAIC), which practices differ
from generally accepted accounting principles (GAAP).

The significant differences from GAAP include: (1) policy acquisition costs are
charged to expense as incurred rather than deferred and amortized over the
related premium-paying period; (2) policy reserves are based on statutory
mortality, morbidity, and interest requirements without consideration of
withdrawals and Company experience; (3) certain assets designated as
"nonadmitted assets" are excluded from the balance sheet by direct charges to
surplus; (4) reinsurance recoverables are netted against reserves and claim
liabilities rather than reflected as an asset; (5) bonds held as available for
sale are recorded at amortized cost or market value as determined by the NAIC
rather than at fair value; (6) an Asset Valuation Reserve and Interest
Maintenance Reserve as prescribed by the NAIC are not calculated under GAAP.
Under GAAP, realized capital gains and losses are reported in the income
statement on a pretax basis as incurred and investment valuation allowances are
provided when there has been a decline in value deemed other than temporary; (7)
investments in affiliates are carried at their net equity value with changes in
value being recorded directly to policyholders' contingency reserves rather than
consolidated in the financial statements; (8) no provision is made for the
deferred income tax effects of temporary differences between book and tax basis
reporting; (9) certain items, including modifications to required policy
reserves resulting from changes in actuarial assumptions or increased benefits,
are recorded directly to policyholders' contingency reserves rather than being
reflected in income; and (10) surplus notes are reported as surplus rather than
as liabilities. The effects of the foregoing variances from GAAP have not been
determined, but are presumed to be material.

The significant accounting practices of the Company are as follows:

Pending Statutory Standards: The NAIC currently is in the process of recodifying
statutory accounting practices, the result of which is expected to constitute
the only source of prescribed statutory accounting practices. Accordingly, that
project, which is expected to be approved by the NAIC in 1998 will likely
change, to some extent, prescribed statutory accounting practices, and may
result in changes to the accounting practices that the Company uses to prepare
its statutory-basis financial statements. The impact of any such changes on the
Company's statutory surplus is not expected to be material.

Revenues and Expenses: Premium revenues are recognized over the premium-paying
period of the policies whereas expenses, including the acquisition costs of new
business, are charged to operations as incurred and policyholder dividends are
provided as paid or accrued.

Cash and Temporary Cash Investments: Cash includes currency on hand and demand
deposits with financial institutions. Temporary cash investments are short-term,
highly-liquid investments both readily convertible to known amounts of cash and
so near maturity that there is insignificant risk of changes in value because of
changes in interest rates.

Valuation of Assets: General account investments are carried at amounts
determined on the following bases:

8
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED

Bond and stock values are carried as prescribed by the NAIC; bonds
generally at amortized amounts or cost, preferred stocks generally at
cost and common stocks at fair value. The discount or premium on bonds
is amortized using the interest method.

Investments in affiliates are included on the statutory equity method.

Loan-backed bonds and structured securities are valued at amortized
cost using the interest method including anticipated prepayments.
Prepayment assumptions are obtained from broker dealer surveys or
internal estimates and are based on the current interest rate and
economic environment. The retrospective adjustment method is used to
value all such securities except for interest-only securities, which
are valued using the prospective method.

The net interest effect of interest rate and currency rate swap
transactions is recorded as an adjustment of interest income as
incurred. The initial cost of interest rate cap and floor agreements
is amortized to net investment income over the life of the related
agreement. Gains and losses on financial futures contracts used as
hedges against interest rate fluctuations are deferred and recognized
in income over the period being hedged.

Mortgage loans are carried at outstanding principal balance or
amortized cost.

Investment and company-occupied real estate is carried at depreciated
cost, less encumbrances. Depreciation on investment and
company-occupied real estate is recorded on a straight-line basis.
Accumulated depreciation amounted to $470.5 million and $393.5 million
at December 31, 1997 and 1996, respectively.

Real estate acquired in satisfaction of debt and held for sale, which
is classified with investment properties, is carried at the lower of
cost or fair value as of the date of foreclosure.

Policy loans are carried at outstanding principal balance, not in
excess of policy cash surrender value.

Other invested assets, which are classified with other general account
assets, include real estate and energy joint ventures and limited
partnerships and generally are valued based on the Company's equity in
the underlying net assets.

Asset Valuation and Interest Maintenance Reserves: The Asset Valuation Reserve
(AVR) is computed in accordance with the prescribed NAIC formula and represents
a provision for possible fluctuations in the value of bonds, equity securities,
mortgage loans, real estate and other invested assets. The Company makes
additional contributions to the AVR in excess of the required amounts to account
for potential losses and risks in the investment portfolio when the Company
believes such provisions are prudent. Changes to the AVR are charged or credited
directly to policyholders' contingency reserves.

The Company also records the NAIC prescribed Interest Maintenance Reserve (IMR)
that represents that portion of the after tax net accumulated unamortized
realized capital gains and losses on sales of fixed income securities,
principally bonds and mortgage loans, attributable to

9
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED

changes in the general level of interest rates. Such gains and losses are
deferred and amortized into income over the remaining expected lives of the
investments sold. At December 31, 1997, the IMR, net of 1997 amortization of
$25.2 million, amounted to $165.6 million which is included in other policy
obligations. The corresponding 1996 amounts were $18.9 million and $121.7
million, respectively.

Property and Equipment: Data processing equipment, which amounted to $30.0
million in 1997 and $41.6 million in 1996 and is included in other general
account assets, is reported at depreciated cost, with depreciation recorded on a
straight-line basis. Nonadmitted furniture and equipment also is depreciated on
a straight-line basis. The useful lives of these assets range from three to
twenty years. Depreciation expense was $21.8 million in 1997 and $31.0 million
in 1996.

Separate Accounts: Separate account assets and liabilities reported in the
accompanying statements of financial position represent funds that are
separately administered, principally for annuity contracts and variable life
insurance policies, and for which the contractholder, rather than the Company,
generally bears the investment risk. Separate account obligations are intended
to be satisfied from separate account assets and not from assets of the general
account. Separate accounts generally are reported at fair value. The operations
of the separate accounts are not included in the statement of operations;
however, income earned on amounts initially invested by the Company in the
formation of new separate accounts is included in other income.

Fair Value Disclosure of Financial Instruments: Statement of Financial
Accounting Standards (SFAS) No. 107, "Disclosure about Fair Value of Financial
Instruments," requires disclosure of fair value information about certain
financial instruments, whether or not recognized in the statement of financial
position, for which it is practicable to estimate the value. In situations where
quoted market prices are not available, fair values are based on estimates using
present value or other valuation techniques. SFAS No. 107 excludes certain
financial instruments and all nonfinancial instruments from its disclosure
requirements. Therefore, the aggregate fair value amounts presented do not
represent the underlying value of the Company. See Note 15.

The methods and assumptions utilized by the Company in estimating its fair value
disclosures for financial instruments are as follows:

The carrying amounts reported in the statement of financial position for
cash and temporary cash investments approximate their fair values.

Fair values for public bonds are obtained from an independent pricing
service. Fair values for private placement securities and publicly traded
bonds not provided by the independent pricing service are estimated by the
Company by discounting expected future cash flows using current market
rates applicable to the yield, credit quality and maturity of the
investments.

The fair values for common and preferred stocks, other than subsidiary
investments which are carried at equity values, are based on quoted market
prices.

10
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED

The fair value for mortgage loans is estimated using discounted cash flow
analyses using interest rates adjusted to reflect the credit
characteristics of the underlying loans. Mortgage loans with similar
characteristics and credit risks are aggregated into qualitative categories
for purposes of the fair value calculations.

The carrying amounts in the statement of financial position for policy
loans approximates their fair value.

The fair value of interest rate swaps and currency rate swaps is estimated
using a discounted cash flow method adjusted for the difference between the
rate of the existing swap and the current swap market rate. Discounted cash
flows in foreign currencies are converted to U.S. dollars using current
exchange rates.

The fair value for outstanding commitments to purchase long-term bonds and
issue real estate mortgages is estimated using a discounted cash flow
method incorporating adjustments for the difference in the level of
interest rates between the dates the commitments were made and December 31,
1997. The fair value for commitments to purchase real estate approximates
the amount of the initial commitment.

Fair values for the Company's guaranteed investment contracts are estimated
using discounted cash flow calculations, based on interest rates currently
being offered for similar contracts with maturities consistent with those
remaining for the contracts being valued. The fair value for fixed-rate
deferred annuities is the cash surrender value, which represents the
account value less applicable surrender charges. Fair values for immediate
annuities without life contingencies and supplementary contracts without
life contingencies are estimated based on discounted cash flow calculations
using current market rates.

Capital Gains and Losses: Realized capital gains and losses are determined using
the specific identification basis. Realized capital gains and losses, net of
taxes and amounts transferred to the IMR, are included in net income. Unrealized
gains and losses, which consist of market value and book value adjustments, are
shown as adjustments to policyholders' contingency reserves.

Foreign Exchange Gains and Losses: Foreign exchange gains and losses are
reflected as direct credits or charges to policyholders' contingency reserves
through unrealized capital gains and losses.

Policy Reserves: Life, annuity, and accident and health benefit reserves are
developed by actuarial methods and are determined based on published tables
using statutorily specified interest rates and valuation methods that will
provide, in the aggregate, reserves that are greater than or equal to the
minimum or guaranteed policy cash values or the amounts required by the
Commonwealth of Massachusetts Division of Insurance. Reserves for traditional
individual life insurance policies are maintained using the 1941, 1958 and 1980
Commissioner's Standard Ordinary and American Experience Mortality Tables, with
assumed interest rates ranging from 2 1/2% to 6%, and using principally the net
level premium method for policies issued prior to 1978 and a modified
preliminary term method for policies issued in 1979 and later. Annuity and
supplementary contracts with life contingency reserves are based principally on
modifications of the 1937 Standard Annuity Table, the Group Annuity Mortality
Tables for 1951, 1971 and 1983, the 1971 Individual Annuity Mortality Table and
the a-1983 Individual Annuity Mortality Table, with interest rates generally
ranging from 2% to 8 3/4%.

11
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED

Reserves for deposit administration funds and immediate participation guarantee
funds are based on accepted actuarial methods at various interest rates.
Accident and health policy reserves generally are calculated using either the
two-year preliminary term or the net level premium method based on various
morbidity tables.

The statement value and fair value for investment-type insurance contracts are
as follows:

December 31, 1997 December 31, 1996
-----------------------------------------------------------------
Statement Fair Statement Fair
Value Value Value Value
-----------------------------------------------------------------
(In millions)
<S> <C> <C> <C> <C>

Guaranteed investment contracts $11,499.4 $11,516.8 $11,921.6 $11,943.2
Fixed-rate deferred and
immediate annuities 4,289.1 4,290.4 3,909.3 3,886.1
Supplementary contracts without
life contingencies 40.9 42.1 45.6 46.0
-----------------------------------------------------------------

$15,829.4 $15,849.3 $15,876.5 $15,875.3
=================================================================
</TABLE>

Federal Income Taxes: Federal income taxes are reported in the financial
statements based on amounts determined to be payable as a result of operations
within the current accounting period. The operations of the Company and its
subsidiaries and affiliates are combined in filing a consolidated federal income
tax return for the group. The federal income taxes of the Company are determined
on a separate return basis with certain adjustments.

Income before taxes differs from taxable income principally due to tax-exempt
investment income, dividends-received tax deductions, the limitation placed on
the tax deductibility of mutual companies' policyholder dividends, accelerated
depreciation, differences in policy and contract liabilities for tax return and
financial statement purposes, capitalization of policy acquisition expenses for
tax purposes and other adjustments prescribed by the Internal Revenue Code.

When determining its consolidated federal income tax expense, the Company uses a
number of estimated amounts that may change when the actual tax return is
completed. In addition, the Company must also use an estimated differential
earnings rate (DER) to compute the equity tax portion of its federal income tax
expense. Because the DER is set by the Internal Revenue Service after completion
of the financial statements, a true-up adjustment (i.e., effect of the
difference between the estimated and final DER) is necessary.

Amounts for disputed tax issues relating to prior years are charged or credited
directly to policyholders' contingency reserves.

Certain subsidiaries acquired by the Company have potential tax loss
carryforwards of $14.3 million expiring in 1998. These amounts may be used in
the consolidated tax return, but

12
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED

only to offset future taxable income related to those subsidiaries. The Company
made federal tax payments of $146.4 million in 1997 and $309.9 million in 1996.

Adjustments to Policy Reserves and Policyholders' and Beneficiaries' Funds: From
time to time, the Company finds it appropriate to modify certain required policy
reserves because of changes in actuarial assumptions or increased benefits.
Reserve modifications resulting from such determinations are recorded directly
to policyholders' contingency reserves. During 1997, the Company refined certain
actuarial assumptions inherent in the calculation of reserves related to
guaranteed investment contracts and AIDS claims under individual insurance
policies resulting in a net $1.4 million increase in policyholders' contingency
reserves at December 31, 1997. Similar refinements to the actuarial assumptions
inherent in the calculation of reserves related to guaranteed investment
contracts were made in 1996 resulting in a $27.5 million decrease in
policyholders' contingency reserves at December 31, 1996.

Reinsurance: Premiums, commissions, expense reimbursements, benefits and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies issued and the terms of
the reinsurance contracts. Premiums ceded to other companies have been reported
as a reduction of premium income. Amounts applicable to reinsurance ceded for
future policy benefits, unearned premium reserves and claim liabilities have
been reported as reductions of these items.

Guaranty Fund Assessments: Guaranty fund assessments are accrued when the
Company receives notice that an amount is payable to a guaranty fund.

NOTE 2--SURPLUS NOTES

On February 25, 1994, the Company issued $450 million of surplus notes that bear
interest at 7 3/8% and are scheduled to mature on February 15, 2024. The
issuance of the surplus notes was approved by the Commonwealth of Massachusetts
Division of Insurance and any payment of interest on and principal of the notes
may be made only with the prior approval of the Commissioner of the Commonwealth
of Massachusetts Division of Insurance. Surplus notes are reported as part of
policyholders' contingency reserves rather than liabilities. Interest of $33.2
million was paid on the notes during each of 1997 and 1996.

NOTE 3--BORROWED MONEY

At December 31, 1997, the Company had a $500 million syndicated line of credit.
There are 26 banks who are part of the syndicate which is under the leadership
of Morgan Guaranty Trust Company of New York. The banks will commit, when
requested, to loan funds at prevailing interest rates as determined in
accordance with the line of credit agreement, which terminates on June 30, 2001.
The agreement does not contain a material adverse change clause. Under the terms
of the agreement, the Company is required to maintain certain minimum levels of
net worth and comply with certain other covenants. As of December 31, 1997,
these covenants were met; however, no amounts had been borrowed under this
agreement.

13
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 3--BORROWED MONEY--CONTINUED

In 1995, the Company issued $213.1 million of debt through a Real Estate
Mortgage Investment Conduit (REMIC). As collateral to the debt, the Company
pledged $1,065.8 million of commercial mortgages to the REMIC Trust. In
addition, the Company has guaranteed the timely payment of principal and
interest on the debt. The debt was issued in two notes of equal amounts. The
interest rates on the class A1 and A2 notes are calculated on a floating basis,
based on the monthly LIBOR rates plus 22 and 27 basis points, respectively. The
LIBOR rates were 5.72% and 5.50%, respectively, at December 31, 1997 and 1996.
The class A1 notes were fully repaid on March 25, 1997 and the class A2 notes
have a last scheduled payment date of June 25, 1998. The outstanding balances of
the notes totaled $42.6 million and $127.9 million at December 31, 1997 and
1996, respectively, and are included in other general account obligations.

In 1996, the Company issued $292.0 million of additional debt through a REMIC
(REMIC II). As collateral to the debt, the Company pledged $1,455.4 million of
commercial mortgages to the REMIC II Trust. The debt was issued in two notes.
The interest rates on the class A1 and A2 notes are calculated on a floating
basis, based on the monthly LIBOR rate plus 5 and 19 basis points, respectively.
The class A1 notes were fully repaid on December 26, 1997 and the class A2 notes
have a last scheduled payment date of July 26, 1999. The outstanding balances of
the notes totaled $161.0 million and $292.0 million at December 31, 1997 and
1996, respectively, and are included in other general account obligations.

On December 31, 1997, the Company had outstanding a short-term note of $75.0
million payable to an affiliate at a variable rate of interest. The note, which
is included in other general account obligations, was repaid on January 5, 1998.

Interest paid on borrowed money was $19.3 million and $10.4 million during 1997
and 1996, respectively.

NOTE 4--NET INVESTMENT INCOME

Investment income has been reduced by the following amounts:

1997 1996
-------------------------------
(In millions)

Investment expenses $339.6 $333.8
Interest expense 57.9 48.1
Depreciation on real estate and other
invested assets 76.6 73.3
Real estate and other investment taxes 61.5 65.2
-------------------------------
$535.6 $520.4
===============================

14
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 5--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS

Net realized capital losses consist of the following items:

1997 1996
-----------------------------------
(In millions)

Net gains from asset sales and foreclosures $ 63.4 $ 81.2
Capital gains tax (84.1) (53.7)
Net capital gains transferred to the
IMR (69.1) (71.1)
-----------------------------------

Net Realized Capital Losses $(89.8) $(43.6)
===================================

Net unrealized capital gains and other adjustments consist of the following
items:

1997 1996
-----------------------------------
(In millions)

Net gains from changes in security
values and book value adjustments $ 159.5 $242.2
Increase in asset valuation reserve (100.9) (50.5)
-----------------------------------

Net Unrealized Capital Gains
and Other Adjustments $ 58.6 $191.7
====================================

15
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 6--INVESTMENTS

The statement value and fair value of bonds are shown below:

Year ended December 31, 1997

Gross Gross
Statement Unrealized Unrealized
Value Gains Losses Fair Value
-------------------------------------------------------------
(In millions)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and
agencies $ 258.9 $ 9.3 $ 0.0 $ 268.2

Obligations of states and political
subdivisions 149.6 16.3 0.0 165.9

Debt securities issued by foreign governments
259.7 53.2 0.1 312.8

Corporate securities 17,336.1 1,485.9 113.4 18,708.6

Mortgage-backed securities 4,981.7 115.9 28.3 5,069.3
-------------------------------------------------------------

Total bonds $22,986.0 $1,680.6 $141.8 $24,524.8
=============================================================

Year ended December 31, 1996

U.S. Treasury securities and obligations of
U.S. government corporations and agencies
$ 430.2 $ 8.8 $ 4.2 $ 434.8

Obligations of states and political
subdivisions 175.2 8.8 3.9 180.1

Debt securities issued by foreign governments
203.5 30.1 0.0 233.6

Corporate securities 16,902.1 1,083.2 112.6 17,872.7

Mortgage-backed securities 4,756.0 116.3 54.5 4,817.8
-------------------------------------------------------------

Total bonds $22,467.0 $1,247.2 $175.2 $23,539.0
=============================================================
</TABLE>

16
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 6--INVESTMENTS--CONTINUED

The statement value and fair value of bonds at December 31, 1997, by contractual
maturity, are shown below. Maturities will differ from contractual maturities
because eligible borrowers may exercise their right to call or prepay
obligations with or without call or prepayment penalties.

Statement Fair
Value Value
-----------------------------------
(In millions)

<S> <C> <C>
Due in one year or less $ 1,386.4 $ 1,426.6
Due after one year through five years 5,809.6 6,079.2
Due after five years through ten years 5,465.5 5,867.1
Due after ten years 5,342.8 6,082.6
-----------------------------------
18,004.3 19,455.5
Mortgage-backed securities 4,981.7 5,069.3
-----------------------------------

$22,986.0 $24,524.8
===================================
</TABLE>

Gross gains of $61.5 million in 1997 and $43.8 million in 1996 and gross losses
of $86.6 million in 1997 and $27.6 million in 1996 were realized from the sale
of bonds.

At December 31, 1997, bonds with an admitted asset value of $19.2 million were
on deposit with state insurance departments to satisfy regulatory requirements.

The cost of common stocks was $148.0 million and $136.1 million at December 31,
1997 and 1996, respectively. At December 31, 1997, gross unrealized appreciation
on common stocks totaled $139.3 million, and gross unrealized depreciation
totaled $30.4 million. The fair value of preferred stock totaled $695.8 million
at December 31, 1997 and $451.0 million at December 31, 1996.

The Company participates in a security lending program for the purpose of
enhancing income on securities held. At December 31, 1997 and 1996, $217.0
million and $540.5 million, respectively, of the Company's bonds and stocks were
on loan to various brokers/dealers, but were fully collateralized by cash and
U.S. government securities in an account held in trust for the Company. Such
assets reflect the extent of the Company's involvement in securities lending,
not the Company's risk of loss.

Mortgage loans with outstanding principal balances of $71.7 million, bonds with
amortized cost of $98.9 million and real estate with depreciated cost of $18.0
million were nonincome producing for the twelve months ended December 31, 1997.

<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 6--INVESTMENTS--CONTINUED

Restructured commercial mortgage loans aggregated $314.3 million and $385.8
million as of December 31, 1997 and 1996, respectively. The expected gross
interest income that would have been recorded had the loans been current in
accordance with the original loan agreements and the actual interest income
recorded were as follows:

Year ended December 31
1997 1996
-----------------------------------
(In millions)
Expected $33.8 $46.3
Actual 24.9 29.1

Generally, the terms of the restructured mortgage loans call for the Company to
receive some form or combination of an equity participation in the underlying
collateral, excess cash flows or an effective yield at the maturity of the loans
sufficient to meet the original terms of the loans.

At December 31, 1997, the mortgage loan portfolio was diversified by geographic
region and specific collateral property type as displayed below. The Company
controls credit risk through credit approvals, limits and monitoring procedures.

Statement Statement Value
Property Type Value Geographic Concentration
- ----------------------------------------------------------------------------------------------------------
(In millions) (In millions)

<S> <C> <C> <C>
Apartments $1,677.7 East North Central $ 891.5
Hotels 186.7 East South Central 163.4
Industrial 858.1 Middle Atlantic 1,410.2
Office buildings 1,748.7 Mountain 362.2
Retail 1,609.4 New England 836.9
1-4 Family 6.0 Pacific 1,770.6
Agricultural 1,426.5 South Atlantic 1,475.4
Other 338.1 West North Central 260.1
West South Central 613.1
Other 67.8
----------------- ------------------
$7,851.2 $7,851.2
================= ==================

</TABLE>

At December 31, 1997, the fair values of the commercial and agricultural
mortgage loan portfolios were $6.7 billion and $1.5 billion, respectively. The
corresponding amounts as of December 31, 1996 were approximately $6.6 billion
and $1.8 billion, respectively.

The maximum and minimum lending rates for mortgage loans during 1997 were 18.0%
and 7.66% for agricultural loans, 10.0% and 7.19% for other properties, and
7.27% and 7.25% for purchase money mortgages. Generally, the percentage of any
loan to the value of security at the time of the loan, exclusive of insured,
guaranteed or purchase money mortgages, is 75%. For city mortgages, fire
insurance is carried on all commercial and residential properties at least equal
to the excess of

18
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 6--INVESTMENTS--CONTINUED

the loan over the maximum loan which would be permitted by law on the land
without the building, except as permitted by regulations of the Federal Housing
Commission on loans fully insured under the provisions of the National Housing
Act. For agricultural mortgage loans, fire insurance is not normally required on
land based loans except in those instances where a building is critical to the
farming operation. Fire insurance is required on all agri-business facilities in
an aggregate amount equal to the loan balance.

NOTE 7--REINSURANCE

Premiums, benefits and reserves associated with reinsurance assumed in 1997 were
$787.1 million, $386.6 million, and $7.5 million, respectively. The
corresponding amounts in 1996 were $742.0 million, $317.8 million, and $14.2
million, respectively.

The Company cedes business to reinsurers to share risks under life, health and
annuity contracts for the purpose of reducing exposure to large losses.
Premiums, benefits and reserves ceded to reinsurers in 1997 were $801.8 million,
$767.9 million and $594.9 million, respectively. The corresponding amounts in
1996 were $304.0 million, $217.0 million and $251.2 million, respectively.

Premiums, benefits, and reserves ceded related to the business sold in 1997,
included in the amounts above, were $487.4 million, $503.3 million, and $247.9
million, respectively, at December 31, 1997.

Amounts recoverable on paid claims and funds withheld from reinsurers were as
follows:

Year ended December 31
1997 1996
----------------- -----------------
(In millions)

Reinsurance recoverables $12.5 $26.5
Funds withheld from reinsurers 35.1 23.4

The Company has a coinsurance agreement with another insurer to cede 100% of its
individual disability business. Reserves ceded under this agreement, included in
the amount shown above, were $236.3 million at December 31, 1997 and $226.4
million at December 31, 1996.

John Hancock Variable Life Insurance Company (Variable Life, a wholly-owned
affiliate) has a modified coinsurance agreement with the Company to reinsure 50%
of Variable Life's 1994 through 1997 issues of flexible premium variable life
insurance and scheduled premium variable life insurance policies. In connection
with this agreement, the Company transferred $22.0 million and $24.5 million of
cash for tax, commission, and expense allowances to Variable Life, which
decreased the Company's net gain from operations by $10.1 million and $15.7
million in 1997 and 1996, respectively.

Variable Life has a modified coinsurance agreement with the Company to reinsure
50% of Variable Life's 1995 through 1997 issues of certain retail annuity
contracts (Independence Preferred and Declaration). In connection with this
agreement, the Company received $1.1 million in 1997 and transferred $35.0
million in 1996 of cash for surrender benefits, tax, reserve increase,
commission,

19
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 7--REINSURANCE--CONTINUED

expense allowances and premium. This agreement decreased the Company's net gain
from operations by $9.8 million and $15.1 million in 1997 and 1996,
respectively.

Effective January 1, 1997, Variable Life entered into a stop-loss agreement with
the Company to reinsure mortality claims in excess of 110% of expected mortality
claims in 1997 for all policies that are not reinsured under any other indemnity
agreement. In connection with the agreement, the Company transferred $2.4
million of cash for mortality claims to Variable Life, which decreased the
Company's net gain from operations by $1.3 million in 1997.

Reinsurance ceded contracts do not relieve the Company from its obligations to
policyholders. The Company remains liable to its policyholders for the portion
reinsured to the extent that any reinsurer does not meet its obligations for
reinsurance ceded to it under the reinsurance agreements. Failure of the
reinsurers to honor their obligations could result in losses to the Company;
consequently, estimates are established for amounts deemed or estimated to be
uncollectible. To minimize its exposure to significant losses from reinsurance
insolvencies, the Company evaluates the financial condition of its reinsurers
and monitors concentration of credit risk arising from similar characteristics
of the insurer.

Neither the Company, nor any of its related parties, control, either directly or
indirectly, any external reinsurers with which the Company conducts business. No
policies issued by the Company have been reinsured with a foreign company which
is controlled, either directly or indirectly, by a party not primarily engaged
in the business of insurance.

The Company has not entered into any reinsurance agreements in which the
reinsurer may unilaterally cancel any reinsurance for reasons other than
nonpayment of premiums or other similar credits. The Company does not have any
reinsurance agreements in effect in which the amount of losses paid or accrued
through December 31, 1997 would result in a payment to the reinsurer of amounts
which, in the aggregate and allowing for offset of mutual credits from other
reinsurance agreements with the same reinsurer, exceed the total direct premiums
collected under the reinsured policies.

NOTE 8--BENEFIT PLANS

The Company provides retirement benefits to substantially all employees and
general agency personnel. These benefits are provided through both defined
benefit and defined contribution pension plans. Pension benefits under the
defined benefit plans are based on years of service and average compensation
generally during the five years prior to retirement. Benefits related to the
Company's defined benefit pension plans paid to employees and retirees covered
by annuity contracts issued by the Company amounted to $89.7 million in 1997 and
$84.4 million in 1996. The Company's funding policy for qualified defined
benefit plans is to contribute annually an amount in excess of the minimum
annual contribution required under the Employee Retirement Income Security Act
(ERISA). This amount is limited by the maximum amount that can be deducted for
federal income tax purposes. The funding policy for nonqualified defined benefit
plans is to contribute the amount of the benefit payments made during the year.
Plan assets consist principally of listed equity securities, corporate
obligations and U.S. government securities.

Defined contribution plans include The Investment Incentive Plan (TIP) and the
Savings and Investment Plan (SIP). Employees are eligible to participate in TIP
after one year of service and

20
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 8--BENEFIT PLANS--CONTINUED

may contribute up to the lesser of 15% of their salary or $9,500 annually to the
plan. The Company matches the first 2% of pre-tax contributions and makes an
additional annual profit sharing contribution for employees who have completed
at least two years of service. Through SIP, marketing representatives, sales
managers and agency managers are eligible to contribute up to the lesser of 13%
of their salary or $9,500. The Company matches the first 3% of pretax
contributions for marketing representatives and the first 2% of pretax
contributions for sales managers and agency managers. The Company makes an
annual profit sharing contribution of up to 1% for sales managers and agency
managers who have completed at least two years of service.

The Company provides additional compensation to employees based on achievement
of annual and long-term corporate financial objectives.

Pension (benefit) expense is summarized as follows:

<TABLE>
<CAPTION>
Year ended December 31
1997 1996
-----------------------------------
(In millions)
<S> <C> <C>
Defined benefit plans:
Service cost--benefits earned during the period $ 30.7 $ 32.4
Interest cost on the projected benefit obligation 109.3 107.4
Actual return on plan assets (177.7) (225.1)
Net amortization and deferral 23.7 85.0
----------------------------------
( 14.0) ( 0.3)

Defined contribution plans 6.2 21.4
-----------------------------------

Total pension (benefit) expense $( 7.8) $ 21.1
===================================
</TABLE>

Assumptions used in accounting for the defined benefit pension plans were as
follows:

1997 1996
---------------------------

Discount rate 7.00% 7.25%
Weighted rate of increase in compensation levels 4.80% 4.80%
Expected long-term rate of return on assets 8.50% 8.50%

21
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 8--BENEFIT PLANS--CONTINUED

The following table sets forth the funded status and actuarially determined
amounts related to the Company's defined benefit pension plans:

Year ended December 31
1997 1996
----------------- -----------------
(In millions)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $(1,462.2) $(1,344.8)
================= =================

Accumulated benefit obligation $(1,507.6) $(1,387.7)
================= =================

Projected benefit obligation $(1,704.0) $(1,582.4)
Plan assets fair value 1,877.7 1,787.6
----------------- -----------------
Excess of plan assets over projected benefit
obligation 173.7 205.2

Unrecognized net gain ( 101.7) ( 176.1)

Prior service cost not yet recognized in net
periodic pension cost 29.6 42.8

Unrecognized net asset, net of amortization ( 93.2) ( 95.9)
----------------- -----------------

Net pension asset (liability) $ 8.4 $( 24.0)
================= =================

</TABLE>

Since 1988, the Massachusetts Division of Insurance has provided the Company
with approval to recognize the pension plan prepaid expense, if any, in
accordance with the requirements of SFAS No. 87, "Employers' Accounting for
Pensions." The Company furnishes the Division of Insurance with an actuarial
certification of the prepaid expense computation on an annual basis.

22
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 9--OTHER POSTRETIREMENT BENEFIT PLANS

In addition to the Company's defined benefit pension plans, the Company has
employee welfare plans for medical, dental, and life insurance covering most of
its retired employees and general agency personnel. Substantially all employees
may become eligible for these benefits if they reach retirement age while
employed by the Company. The postretirement health care and dental coverages are
contributory based on service for post January 1, 1992 non-union retirees. A
small portion of pre-January 1, 1992 non-union retirees also contribute. The
applicable contributions are based on service.

In 1993, the Company changed its method of accounting for the costs of its
retiree benefit plans to the accrual method and elected to amortize its
transition liability for retirees and fully eligible or vested employees over
twenty years.

Since 1993, the Company funded a portion of the postretirement obligation. The
Company's policy is to fund postretirement benefits for non-union employees to
the maximum amount that can be deducted for federal income tax purposes and to
fund the benefits for union employees, which are fully tax qualified, at
sufficient amounts so that the total accrued liability related to postretirement
benefits is zero. As of December 31, 1997, plan assets related to non-union
employees were comprised of an irrevocable health insurance contract to provide
future health benefits to retirees while plan assets related to union employees
were comprised of approximately 70% equity securities and 30% fixed income
investments.

The following table shows the plans' combined funding status for vested benefits
reconciled with the amounts recognized in the Company's statements of financial
position.

December 31
1997 1996
------------------------------ -------------------------------
Medical Medical
And Life and Life
Dental Insurance Dental Insurance
Plans Plans Plans Plans
--------------- -------------- --------------- ---------------
(In millions)
<S> <C> <C> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees $(228.8) $( 95.7) $(234.2) $(100.6)
Fully eligible active plan participants ( 38.7) ( 17.9) ( 46.4) ( 19.4)
--------------- -------------- --------------- ---------------
(267.5) (113.6) (280.6) (120.0)

Plan assets at fair value 172.7 0.0 132.4 0.0
--------------- -------------- --------------- ---------------
Accumulated postretirement benefit
obligation in excess of plan assets ( 94.8) (113.6) (148.2) (120.0)
Unrecognized prior service cost 14.9 4.8 16.7 5.3
Unrecognized prior net gain (122.8) ( 4.2) ( 93.0) 4.0
Unrecognized transition obligation 240.7 75.0 256.8 78.4
--------------- -------------- --------------- ---------------

Accrued postretirement benefit cost $ 38.0 $( 38.0) $ 32.3 $( 32.3)
=============== ============== =============== ===============
</TABLE>

23
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 9--OTHER POSTRETIREMENT BENEFIT PLANS--CONTINUED

Net postretirement benefits costs for the years ended December 31, 1997 and 1996
were $40.8 million and $47.4 million, respectively, and include the expected
cost of such benefits for newly eligible or vested employees, interest cost, and
amortization of the transition liability.

Net periodic postretirement benefits cost included the following components:

December 31
1997 1996
------------------------------ -------------------------------
Medical Medical
And Life and Life
Dental Insurance Dental Insurance
Plans Plans Plans Plans
--------------- -------------- --------------- ---------------
(In millions)
<S> <C> <C> <C> <C>
Eligibility cost $ 6.9 $ 1.6 $ 7.1 $ 1.8
Interest cost 17.8 7.6 19.8 8.3
Actual return on plan assets (31.0) 0.0 (15.9) 0.0
Net amortization and deferral 32.8 5.1 20.9 5.4
--------------- -------------- --------------- ---------------

Net periodic postretirement benefit cost $ 26.5 $14.3 $31.9 $15.5
=============== ============== =============== ===============
</TABLE>

The discount rate used in determining the accumulated postretirement benefit
obligation at December 31, 1997 was 7.0% (7.25% for 1996). The expected
long-term rates of return on plan assets were 8.5% and 7.0% at December 31, 1997
and 1996, respectively. The annual assumed rate of increase in the health care
cost trend rate for the medical coverages is 5.75% for 1998 (8.0% was assumed
for 1997) and is assumed to decrease gradually to 5.00% in 2001 and remain at
that level thereafter. The health care cost trend rate assumption has a
significant effect on the amounts reported. For example, increasing the assumed
health care cost trend rates by one percentage point in each year would increase
the accumulated post retirement benefit obligation for the medical coverages as
of December 31, 1997 by $26.2 million and the aggregate of the eligibility and
interest cost components of net periodic postretirement benefit cost by $3.0
million for 1997 and $2.9 million for 1996.

Postretirement welfare benefits for non-vested employees are not reflected in
the above expenses or accumulated postretirement benefit obligations. As of
December 31, 1997, the accumulated postretirement benefit obligations for
non-vested employees amounted to $49.5 million for medical and dental plans and
$10.4 million for life insurance plans. The corresponding amounts as of December
31, 1996 were $69.4 million and $10.7 million, respectively.

24
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 10--AFFILIATES

The Company has subsidiaries and affiliates in a variety of industries including
domestic and foreign life insurance and domestic property casualty insurance,
real estate, mutual funds, investment brokerage and various other financial
services entities.

Total assets of unconsolidated affiliates amounted to $12.4 billion at December
31, 1997 and $9.6 billion at December 31, 1996; total liabilities amounted to
$11.1 billion at December 31, 1997 and $8.5 billion at December 31, 1996; and
total net income was $184.8 million in 1997 and $193.0 million in 1996.

During 1996, the Company sold certain of its affiliates including its ongoing
property and casualty business and its broker-dealer operations to realign its
business objectives.

The Company customarily engages in transactions with its unconsolidated
affiliates, including the cession and assumption of certain insurance business
under the terms of established reinsurance agreements. Various services are
performed by the Company for certain affiliates for which the Company is
reimbursed on the basis of cost. Certain affiliates have entered into various
financial arrangements relating to borrowings and capital maintenance under
which agreements the Company would be obligated in the event of nonperformance
by an affiliate (see Note 14).

The Company received dividends of $65.9 million and $9.4 million in 1997 and
1996, respectively, from unconsolidated affiliates.

NOTE 11--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

The Company utilizes a variety of off-balance sheet financial instruments as
part of its efforts to hedge and manage fluctuations in the market value of its
investment portfolio attributable to changes in general interest rate levels and
to manage duration mismatch of assets and liabilities. Those instruments include
swaps, caps, floors, and future contracts.

The Company enters into interest rate swap contracts for the purpose of
converting the interest rate characteristics (fixed or variable) of certain
investments to match those of related insurance liabilities. Maturities of
current agreements range from 1998 to 2026. These swaps involve, to varying
degrees, interest rate risk in excess of amounts recognized in the statements of
financial position.

The Company enters into interest rate cap and floor contracts to manage exposure
on underlying security values due to a rise in interest rates. Maturities of
current agreements range through 2007.

25
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 11--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK--CONTINUED

The Company also uses financial futures contracts to hedge risks associated with
interest rate fluctuations on sales of guaranteed investment contracts. The
Company is subject to the risks associated with changes in the value of the
underlying securities; however, such changes in value generally are offset by
opposite changes in the value of the hedged items. The contract or notional
amounts of the contracts represent the extent of the Company's involvement but
not the future cash requirements, as the Company intends to close the open
positions prior to settlement. Net deferred losses on future contracts were $6.4
million and $0.5 million at December 31, 1997 and 1996, respectively.

The Company enters into currency rate swap agreements to manage exposure to
foreign exchange rate fluctuations. Maturities of current agreements range
through 2009. Should the counterparty fail to meet the terms of the contract,
the Company's market risk is limited to the currency rate differential.

The contract or notional amount of the foregoing financial instruments, which
indicates the Company's involvement and, in certain instances, maximum credit
risk related to those instruments, is as follows:

<TABLE>
<CAPTION>
December 31
1997 1996
-----------------------------------
(In millions)
<S> <C> <C>
Futures contracts to purchase securities $ 154.0 $ 117.6
===================================

Futures contracts to sell securities $ 414.2 $ 136.4
===================================

Notional amount of interest rate swaps, interest rate
swaptions, currency rate swaps, interest rate caps
and interest rate floors to:

Receive variable rates $5,043.7 $3,822.8
===================================

Receive fixed rates $2,596.7 $2,912.5
===================================
</TABLE>

The Company's exposure to credit risk is the risk of loss from a counterparty
failing to perform according to the terms of the contract. The Company
continually monitors its positions and the credit ratings of the counterparties
to these financial instruments. To limit exposure associated with counterparty
nonperformance on interest rate and currency agreements, the Company enters into
master netting agreements with its counterparties. The Company believes the risk
of incurring losses due to nonperformance by its counterparties is remote and
that such losses, if any, would not be material.

Based on market rates in effect at December 31, 1997, the Company's interest
rate swaps, currency rate swaps, interest rate caps, and interest rate floors
represented (assets) liabilities to the Company with fair values of $58.3
million, $9.7 million, $(0.6) million and $(0.4) million, respectively. The
corresponding amounts as of December 31, 1996 were $16.4 million, $41.1 million,
$(0.6) million and $(0.1) million, respectively. The fair values of the swap
agreements are not recognized in the financial statements.

26
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 12--LEASES

The Company leases office space and furniture and equipment under various
operating leases including furniture and equipment leased under a series of
sales-leaseback agreements with a nonaffiliated organization. Rental expense for
all operating leases totaled $27.4 million in 1997 and $32.1 million in 1996.
Future minimum rental commitments under noncancellable operating leases for
office space and furniture and equipment are as follows:

December 31, 1997
-----------------------------------
(In millions)

1998 $19.5
1999 17.0
2000 14.5
2001 11.5
2002 8.1
Thereafter 12.2
-----------------------------------

Total minimum payments $82.8
===================================

NOTE 13--POLICY RESERVES, POLICYHOLDERS' AND BENEFICIARIES' FUNDS AND
OBLIGATIONS RELATED TO SEPARATE ACCOUNTS

The Company's annuity reserves and deposit fund liabilities and related separate
account liabilities that are subject to discretionary withdrawal (with
adjustment), subject to discretionary withdrawal (without adjustment), and not
subject to discretionary withdrawal provisions are summarized as follows:

December 31, 1997 Percent
------------------------ -----------------
(In millions)
<S> <C> <C>
Subject to discretionary withdrawal (with adjustment):
With market value adjustment $ 3,881.6 10.5%
At book value less surrender charge 2,881.4 7.8
------------------------ -----------------
Total with adjustment 6,763.0 18.3
Subject to discretionary withdrawal (without
adjustment) at book value 3,574.2 9.6
Subject to discretionary withdrawal - separate
accounts 13,455.3 36.3
Not subject to discretionary withdrawal:
General account 11,996.1 32.4
Separate accounts 1,274.1 3.4
------------------------ -----------------
Total annuity reserves, deposit fund liabilities and
separate accounts--before reinsurance 37,062.7 100.0%
======

Less reinsurance ceded 0.0
------------------------

Net annuity reserves, deposit fund liabilities and
separate accounts $37,062.7
========================

</TABLE>

27
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 13-- POLICY RESERVES, POLICYHOLDERS' AND BENEFICIARIES' FUNDS AND
OBLIGATIONS RELATED TO SEPARATE ACCOUNTS--CONTINUED

Any liquidation costs associated with the $13.5 billion of separate accounts
subject to discretionary withdrawal are sustained by the separate account
contractholders and not by the general account.

NOTE 14--COMMITMENTS AND CONTINGENCIES

The Company has extended commitments to purchase long-term bonds, preferred and
common stocks, and real estate and issue real estate mortgages totaling $693.6
million, $27.6 million, $122.3 million and $467.2 million, respectively, at
December 31, 1997. If funded, loans related to real estate mortgages would be
fully collateralized by related properties. The Company monitors the credit
worthiness of borrowers under long-term bond commitments and requires collateral
as deemed necessary. The estimated fair value of the commitments described above
is $1.3 billion at December 31, 1997. The majority of these commitments expire
in 1998.

The Company has contingent liabilities, pursuant to guarantee agreements issued
in connection with real estate joint ventures, in the amount of $43.3 million.

During 1996, the Company entered into a credit support and collateral pledge
agreement with the Federal National Mortgage Association (FNMA). Under the
agreement, the Company sold $532.8 million of commercial mortgage loans and
acquired an equivalent amount of FNMA securities. The Company completed similar
transactions with FNMA in 1991 for $1.042 billion and in 1993 for $71.9 million.
FNMA is guarantying the full face value of the bonds of the three transactions
to the bondholders. However, the Company has agreed to absorb the first 12.25%
of the principal and interest losses (less buy-backs) for the pools of loans
involved in the three transactions, based on the total outstanding principal
balance of $1.036 billion as of July 1, 1996, but is not required to commit
collateral to support this loss contingency. At December 31, 1997, the aggregate
outstanding principal balance of all the remaining pools of loans from 1991,
1993, and 1996 is $672.0 million.

Historically, the Company has experienced losses of less than one percent on its
multi-family mortgage portfolio. Mortgage loan buy-backs required by the FNMA in
1997 and 1996 amounted to $4.1 million and $3.4 million, respectively.

During 1996, the Company entered into a credit support and collateral pledge
agreement with the Federal Home Loan Mortgage Corporation (FHLMC). Under the
agreement, the Company sold $535.3 million of multi-family loans and acquired an
equivalent amount of FHLMC securities. FHLMC is guarantying the full face value
of the bonds to the bondholders. However, the Company has agreed to absorb the
first 10.5% of original principal and interest losses (less buy-backs) for the
pool of loans involved but is not required to commit collateral to support this
loss contingency. Historically, the Company has experienced total losses of less
than one percent on its multi-family loan portfolio. At December 31, 1997, the
aggregate outstanding principal balance of the pools of loans was $500.8
million. There were no mortgage loans buy-backs in 1997 and 1996.

28
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 14--COMMITMENTS AND CONTINGENCIES--CONTINUED

The Company has a support agreement with Variable Life under which the Company
agrees to continue directly or indirectly to own all of Variable Life's common
stock and maintain Variable Life's net worth at not less than $1 million.

The Company has a support agreement with John Hancock Capital Corporation
(JHCC), a non-consolidated wholly-owned subsidiary, under which the Company
agrees to continue directly or indirectly to own all of JHCC's common stock and
maintain JHCC's net worth at not less than $1 million. JHCC's outstanding
borrowings as of December 31, 1997 were $351.1 million for short-term borrowings
and $163.2 million for notes payable.

The Company is subject to insurance guaranty fund laws in the states in which it
does business. These laws assess insurance companies amounts to be used to pay
benefits to policyholders and claimants of insolvent insurance companies. Many
states allow these assessments to be credited against future premium taxes. The
Company believes such assessments in excess of amounts accrued will not
materially affect its financial position.

In the normal course of its business operations, the Company is involved with
litigation from time to time with claimants, beneficiaries and others, and a
number of litigation matters were pending as of December 31, 1997. It is the
opinion of management, after consultation with counsel, that the ultimate
liability with respect to these claims, if any, will not materially affect the
financial position or results of operations of the Company.

During 1997, the Company entered into a court approved settlement relating to a
class action lawsuit involving certain individual life insurance policies sold
from 1979 through 1996. In entering into the settlement, the Company
specifically denied any wrongdoing. The Company has established a litigation
reserve in connection with the settlement to provide for relief to class members
and for legal and administrative costs associated with the settlement. The
reserve has been charged, net of the related tax effect, directly to
policyholders' contingency reserves of the Company. Given the uncertainties
associated with estimating the reserve, it is possible that the final cost of
the settlement could be different from the amounts presently provided for by the
Company. However, the Company does not believe that the ultimate resolution of
the settlement will have a material adverse effect on the Company's financial
position.

29
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 15--FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents the carrying amounts and fair values of the
Company's financial instruments:

<TABLE>
<CAPTION>
Year ended December 31
1997 1996
------------------------------ -------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------------- -------------- --------------- ---------------
(In millions)
<S> <C> <C> <C> <C>
Assets
Bonds--Note 6 $22,986.0 $24,524.8 $22,467.0 $23,539.0
Preferred stocks--Note 6 640.6 695.8 416.2 451.0
Common stocks--Note 6 256.9 256.9 249.8 249.8
Mortgage loans on real estate--Note 6 7,851.2 8,215.9 7,964.0 8,400.2
Policy loans--Note 1 1,577.3 1,577.3 1,589.3 1,589.3
Cash and cash equivalents--Note 1 724.8 724.8 1,416.7 1,416.7

Liabilities
Guaranteed investment contracts--Note 1 11,499.4 11,516.8 11,921.6 11,943.2
Fixed rate deferred and immediate
annuities--Note 1 4,289.1 4,290.4 3,909.3 3,886.1
Supplementary contracts without
life contingencies--Note 1 40.9 42.1 45.6 46.0

Derivatives liabilities relating to:--Note 11
Interest rate swaps - 58.3 - 16.4
Currency rate swaps - 9.7 - 41.1
Interest rate caps - (0.6) - (0.6)
Interest rate floors - (0.4) - (0.1)
-
Commitments--Note 14 - 1,332.3 - 1,095.7
</TABLE>

The carrying amounts in the table are included in the statutory-basis statements
of financial position. The methods and assumptions utilized by the Company in
estimating its fair value disclosures are described in Note 1.

NOTE 16--IMPACT OF YEAR 2000 (UNAUDITED)

The Company has developed a plan to modify or replace significant portions of
its computer information and automated technologies so that its systems will
function properly with respect to the dates in the year 2000 and thereafter. The
Company presently believes that with modifications to existing systems and
conversions to new technologies, the year 2000 will not pose significant
operational problems for its computer systems. However, if certain modifications
and conversions are not made, or are not completed timely, the year 2000 issue
could have an adverse impact on the operations of the Company.

30
<PAGE>

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 16--IMPACT OF YEAR 2000 (UNAUDITED)--CONTINUED

The Company as early as 1994 had begun assessing, modifying and converting the
software related to its significant systems and has initiated formal
communications with its significant business partners and customers to determine
the extent to which the Company's interface systems are vulnerable to those
third parties' failure to remediate their own year 2000 issues. While the
Company is developing alternative third party processing arrangements as it
deems appropriate, there is no guarantee that the systems of other companies on
which the Company's systems rely will be converted timely or will not have an
adverse effect on the Company's systems.

The Company expects the project to be substantially complete by early 1999 and
expects the incremental cost to be between $35 million and $45 million. The cost
of the project and the date on which the Company believes it will complete the
year 2000 modifications are based on management's best estimates, which were
derived utilizing numerous assumptions of future events, including availability
of certain resources and other factors. However, there can be no guarantee that
these estimates will be achieved and actual results may differ materially from
those anticipated.

31
<PAGE>

Report of Ernst & Young LLP, Independent Auditors

Contractowners
John Hancock Variable Annuity Account H
of John Hancock Variable Life Insurance Company

We have audited the accompanying statement of assets and liabilities of John
Hancock Variable Annuity Account H (the Account) (comprising, respectively, the
V.A. Independence Equity, V.A. Sovereign Bond, V.A. Discovery, V.A. Financial
Industries, V.A. World Bond, V.A. International, V.A. Emerging Growth, V.A.
Money Market, V.A. Strategic Income, V.A. Sovereign Investors and V.A. 500 Index
Subaccounts) as of December 31, 1997, and the related statement of operations
and statement of changes in net assets for the period from April 14, 1997
(commencement of investment operations) to December 31, 1997. These financial
statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards.
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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
subaccounts constituting John Hancock Variable Annuity Account H at December 31,
1997, the results of their operations and the changes in their net assets for
the period from April 14, 1997 (commencement of investment operations) to
December 31, 1997, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Boston, Massachusetts
February 6, 1998

<PAGE>

John Hancock Variable Annuity Account H

Statement of Assets and Liabilities

December 31, 1997

V.A. V.A. V.A. V.A.
Independence Sovereign V.A. Financial V.A. V.A. Emerging
Equity Bond Discovery Industries World Bond International Growth
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Investment in shares of
portfolios $3,070,472 $1,423,049 $858,318 $8,968,447 $156,881 $555,778 $1,004,706
of Declaration Trust, at
value
Receivable from Declaration 7,815 44 29 54,383 5 30,232 33
Trust
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
Total assets 3,078,287 1,423,093 858,347 9,022,830 156,886 586,010 1,004,739

Liabilities
Payable to John Hancock
Variable Life Insurance 7,714 - 1 54,090 - 30,212 -
Company
Asset charges payable 101 44 28 293 5 20 33
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
Total liabilities 7,815 44 29 54,383 5 30,232 33
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------

Net assets $3,070,472 $1,423,049 $858,318 $8,968,447 $156,881 $555,778 $1,004,706
====================================================================================================

See accompanying notes.
</TABLE>

V.A. V.A. V.A.
Money Strategic Sovereign V.A.
Market Income Investors 500 Index
Subaccount Subaccount Subaccount Subaccount
---------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investment in shares of
portfolios $2,641,375 $1,287,125 $3,491,692 $3,539,996
of Declaration Trust, at
value
Receivable from Declaration 86 35,623 40,546 114
Trust
---------------------------------------------------------
---------------------------------------------------------
Total assets 2,641,461 1,322,748 3,532,238 3,540,110

Liabilities
Payable to John Hancock
Variable Life Insurance - 35,581 40,429 -
Company
Asset charges payable 86 42 117 114
---------------------------------------------------------
---------------------------------------------------------
Total liabilities 86 35,623 40,546 114
---------------------------------------------------------
---------------------------------------------------------

Net assets $2,641,375 $1,287,125 $3,491,692 $3,539,996
=========================================================

</TABLE>

See accompanying notes.

<PAGE>

<TABLE>
<CAPTION>
John Hancock Variable Annuity Account H

Statement of Operations

Period ended December 31, 1997

Expenses:
Mortality and expense risks 9,956 2,960 3,928 25,325 745 2,847 4,202
------------------------------------------------------------------------------------------------
Net investment income (loss) 42,765 22,477 (3,928) 12,508 3,152 28,783 (4,167)

Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) 30,355 1,664 12,965 52,481 27 (80) 10,298
Net unrealized appreciation
(depreciation) during the 68,631 3,735 32,217 550,449 (2,037) (75,770) (21,053)
period
------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 98,986 5,399 45,182 602,930 (2,010) (75,850) (10,755)
------------------------------------------------------------------------------------------------

Net increase (decrease) in net
assets resulting from operations $141,751 $27,876 $41,254 $615,438 $ 1,142 $(47,067) $(14,922)
================================================================================================
</TABLE>

* From April 14, 1997 (commencement of investment operations).

See accompanying notes.

V.A. V.A. V.A.
Money Strategic Sovereign V.A.
Market Income Investors 500 Index
Subaccount* Subaccount* Subaccount* Subaccount*
--------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Distributions received from
portfolios of Declaration Trust $31,696 $ 40,142 $ 20,306 $163,836

Expenses:
Mortality and expense risks 7,823 3,853 11,823 12,168
--------------------------------------------------------
Net investment income (loss) 23,873 36,289 8,483 151,668

Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) - 1,779 28,518 12,229
Net unrealized appreciation
(depreciation) during the - (13,385) 184,787 (41,691)
period
--------------------------------------------------------
Net realized and unrealized gain
(loss) on investments - (11,606) 213,305 (29,462)
------------------------------------------------------

Net increase (decrease) in net
assets resulting from operations $23,873 $ 24,683 $221,788 $122,206
========================================================
</TABLE>

* From April 14, 1997 (commencement of investment operations).

See accompanying notes.

<PAGE>

<TABLE>
<CAPTION>
John Hancock Variable Annuity Account H

Statement of Changes in Net Assets

Period ended December 31, 1997

V.A. V.A. V.A. V.A.
Independence Sovereign V.A. Financial V.A. V.A. Emerging
Equity Bond Discovery Industries World Bond International Growth
Subaccount* Subaccount* Subaccount* Subaccount* Subaccount* Subaccount* Subaccount*
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ 42,765 $ 22,477 $ (3,928) $ 12,508 $ 3,152 $ 28,783 $ (4,167)
Net realized gain (loss) 30,355 1,664 12,965 52,481 27 (80) 10,298
Net unrealized appreciation
(depreciation) during the 68,631 3,735 32,217 550,449 (2,037) (75,770) (21,053)
period
---------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from 141,751 27,876 41,254 615,438 1,142 (47,067) (14,922)
operations

From contractowner transactions:
Net premiums from 2,988,907 1,395,748 822,891 8,451,337 155,911 641,822 1,027,764
contractowners
Net benefits to contractowners 60,186 575 5,827 98,328 172 38,977 8,136
---------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from contractowner 2,928,721 1,395,173 817,064 8,353,009 155,739 602,845 1,019,628
transactions
---------------------------------------------------------------------------------------------------

Net increase in net assets 3,070,472 1,423,049 858,318 8,968,447 156,881 555,778 1,004,706
Net assets at beginning of period - - - - - - -
---------------------------------------------------------------------------------------------------

Net assets at end of period $3,070,472 $1,423,049 $858,318 $8,968,447 $156,881 $555,778 $1,004,706
===================================================================================================
</TABLE>

* From April 14, 1997 (commencement of investment operations).

See accompanying notes.

<TABLE>
<CAPTION>
V.A. V.A. V.A.
Money Strategic Sovereign V.A.
Market Income Investors 500 Index
Subaccount* Subaccount* Subaccount* Subaccount*
--------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss) $ 23,873 $ 36,289 $ 8,483 $ 151,668
Net realized gain (loss) - 1,779 28,518 12,229
Net unrealized appreciation
(depreciation) during the - (13,385) 184,787 (41,691)
period
--------------------------------------------------------
Net increase (decrease) in net
assets resulting from 23,873 24,683 221,788 122,206
operations

From contractowner transactions:
Net premiums from 3,182,410 1,266,875 3,349,658 3,463,534
contractowners
Net benefits to contractowners 564,908 4,433 79,754 45,744
--------------------------------------------------------
Net increase in net assets
resulting from contractowner 2,617,502 1,262,442 3,269,904 3,417,790
transactions
--------------------------------------------------------

Net increase in net assets 2,641,375 1,287,125 3,491,692 3,539,996
Net assets at beginning of period - - - -
--------------------------------------------------------

Net assets at end of period $2,641,375 $ 1,287,125 $3,491,692 $3,539,996
========================================================
* From April 14, 1997 (commencement of investment operations).
</TABLE>

See accompanying notes.
<PAGE>

John Hancock Variable Annuity Account H

Notes to Financial Statements

1. Organization

John Hancock Variable Annuity Account H (the Account) is a separate investment
account of John Hancock Variable Life Insurance Company (JHVLICO), a
wholly-owned subsidiary of John Hancock Mutual Life Insurance Company (John
Hancock). The Account commenced investment operations on April 14, 1997. The
Account was formed to fund variable annuity contracts (Contracts) issued by
JHVLICO. The Account is operated as a unit investment trust registered under the
Investment Company Act of 1940, as amended, and currently consists of eleven
subaccounts. The assets of each subaccount are invested exclusively in shares of
a corresponding Portfolio of John Hancock Funds' Declaration Trust (the Fund).
New subaccounts may be added as new Portfolios are added to the Fund, or as
other investment options are developed, and made available to contractowners.
The eleven Portfolios of the Fund which are currently available are V.A.
Independence Equity, V.A. Sovereign Bond, V.A. Discovery, V.A. Financial
Industries, V.A. World Bond, V.A. International, V.A. Emerging Growth, V.A.
Money Market, V.A. Strategic Income, V.A. Sovereign Investors and V.A. 500
Index. Each Portfolio has a different investment objective.

The net assets of the Account may not be less than the amount required under
state insurance law to provide for death benefits (without regard to the minimum
death benefit guarantee) and other contracts benefits. Additional assets are
held in JHVLICO's general account to cover the contingency that the guaranteed
minimum death benefit might exceed the death benefit which would have been
payable in the absence of such guarantee.

The assets of the Account are the property of JHVLICO. The portion of the
Account's assets applicable to the contracts may not be charged with liabilities
arising out of any other business JHVLICO may conduct.

2. Significant Accounting Policies

Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities, at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Valuation of Investments

Investment in shares of the Fund are valued at the reported net asset values of
the respective Portfolios. Investment transactions are recorded on the trade
date. Dividend income is recognized on the ex-dividend date. Realized gains and
losses on sales of fund shares are determined on the basis of identified cost.
Significant Accounting Policies (continued)

Federal Income Taxes

The operations of the Account are included in the federal income tax return of
JHVLICO, which is taxed as a life insurance company under the Internal Revenue
Code. JHVLICO has the right to charge the Account any federal income taxes, or
provision for federal income taxes, attributable to the operations of the
Account or to the contracts funded in the Account. Currently, JHVLICO does not
make a charge for income or other taxes. Charges for state and local taxes, if
any, attributable to the Account may also be made.

Expenses

JHVLICO assumes mortality and expense risks of the contracts for which asset
charges are deducted at various rates ranging from .50% to .625%, depending on
the type of contract, of net assets of the Account. In addition, a monthly
charge at varying levels for the cost of insurance is deducted from the net
assets of the Account.

<PAGE>

JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

JHVLICO makes certain deductions for administrative expenses and state premium
taxes from premium payments before amounts are transferred to the Account.

3. Transaction with Affiliates

John Hancock Advisers, Inc. acts as the distributor, principal underwriter and
investment advisor for the Fund.

Certain officers of the Account are officers and directors of JHVLICO, the Fund,
John Hancock Advisers, Inc. or John Hancock.

4. Details of Investments

The details of the shares owned and cost and value of investments in the
Portfolios of the Fund at December 31, 1997 were as follows:

Shares Owned
Subaccount Cost Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
V.A. Independence Equity 217,610 $3,001,841 $3,070,472
V.A. Sovereign Bond 137,360 1,419,314 1,423,049
V.A. Discovery 79,992 826,102 858,318
V.A. Financial Industries 667,295 8,417,998 8,968,447
V.A. World Bond 16,107 158,917 156,881
V.A. International 52,931 631,549 555,778
V.A. Emerging Growth 97,073 1,025,759 1,004,706
V.A. Money Market 2,641,375 2,641,375 2,641,375
V.A. Strategic Income 122,935 1,300,510 1,287,125
V.A. Sovereign Investors 256,931 3,306,905 3,491,692
V.A. 500 Index 280,507 3,581,686 3,539,996
</TABLE>

Purchases, including reinvestment of dividend distributions and proceeds from
sales of shares in the Portfolios of the Fund during 1997, were as follows:

Subaccount Purchases Sales
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
V.A. Independence Equity $3,208,746 $237,259
V.A. Sovereign Bond 1,472,444 54,794
V.A. Discovery 902,627 89,491
V.A. Financial Industries 8,692,404 326,888
V.A. World Bond 185,024 26,133
V.A. International 735,982 104,352
V.A. Emerging Growth 1,072,415 56,954
V.A. Money Market 3,169,913 528,539
V.A. Strategic Income 1,365,411 66,680
V.A. Sovereign Investors 3,582,125 303,739
V.A. 500 Index 3,740,979 171,521
</TABLE>

<PAGE>

JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

5. New Assets

Accumulation shares attributable to net assets of contractowners and
accumulation share values for each subaccount at December 31, 1997 were as
follows:

Class 1 Class 2
(greater than 250,000) (Less than 250,000)
Accumulation Accumulation Accumulation Accumulation
Subaccount Shares Share Values Shares Share Values
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
V.A. Independence Equity 178,470.46 $14.36 35,170.78 $14.41
V.A. Sovereign Bond 73,099.69 11.31 52,286.26 11.35
V.A. Discovery 64,523.58 10.55 16,760.71 10.59
V.A. Financial Industries 554,940.05 13.39 114,561.61 13.41
V.A. World Bond 14,948.67 10.47 - 10.50
V.A. International 50,395.35 11.03 - 11.07
V.A. Emerging Growth 84,279.23 10.20 14,188.65 10.23
V.A. Money Market 1,931,652.09 1.05 580,715.60 1.05
V.A. Strategic Income 100,609.26 11.78 8,206.74 11.82
V.A. Sovereign Investors 246,897.95 13.68 8,359.80 13.72
V.A. 500 Index 179,896.96 14.20 69,164.82 14.25
</TABLE>

6. Impact of Year 2000 (Unaudited)

The John Hancock Variable Annuity Account H, along with John Hancock Mutual Life
Insurance Company, its ultimate parent (together, John Hancock), have developed
a plan to modify or replace significant portions of the Account's computer
information and automated technologies so that its systems will function
properly with respect to the dates in the year 2000 thereafter. The Account
presently believes that with modifications to existing systems and conversions
to new technologies, the year 2000 will not pose significant operational
problems for its computer systems. However, if certain modifications are not
made, or are not completed timely, the year 2000 issue could have an adverse
impact on the operations of the Account.

John Hancock as early as 1994 had begun assessing, modifying and converting the
software related to its significant systems and has initiated formal
communications with its significant business partners and customers to determine
the extent to which John Hancock's interface systems are vulnerable to those
third parties' failure to remediate their own year 2000 issues. While John
Hancock is developing alternative third party processing arrangements as it
deems appropriate, there is no guarantee that the systems of other companies on
which the Account's systems rely will be converted timely or will not have an
adverse effect on the Account's systems.

The Account expects the project to be substantially complete by early 1999. This
completion target was derived utilizing numerous assumptions of future events,
including availability of certain resources and other factors. However, there
can be no guarantee that this completion target will be achieved.

<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Contractowners
John Hancock Variable Annuity Account V of
John Hancock Mutual Life Insurance Company

We have audited the accompanying statement of assets and liabilities of John
Hancock Variable Annuity Account V (the Account) (comprising, respectively,
the Large Cap Growth, Sovereign Bond, International Equities, Small Cap
Growth, International Balanced, Mid Cap Growth, Large Cap Value, Money Market,
Mid Cap Value, Special Opportunities, Real Estate Equity, Growth & Income,
Managed, Short-Term U.S. Government, Small Cap Value, International
Opportunities, Equity Index and Strategic Bond Subaccounts) as of December 31,
1997, and the related statement of operations for the year then ended, and the
statements of changes in net assets for each of the periods indicated therein.
These financial statements are the responsibility of the Account's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of each of the respective
subaccounts constituting John Hancock Variable Annuity Account V at December
31, 1997, the results of their operations for the year then ended and the
changes in their net assets for each of the periods indicated, in conformity
with generally accepted accounting principles.

ERNST & YOUNG LLP

Boston, Massachusetts
February 6, 1998

<PAGE>

JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V

STATEMENT OF ASSETS AND LIABILITIES

DECEMBER 31, 1997

<TABLE>
<CAPTION>
LARGE CAP SOVEREIGN INTERNATIONAL SMALL CAP INTERNATIONAL MID CAP LARGE CAP MONEY MID CAP
GROWTH BOND EQUITIES GROWTH BALANCED GROWTH VALUE MARKET VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ------------- ---------- ------------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value.......... $65,788,738 $66,024,173 $11,085,621 $6,206,065 $1,155,758 $6,433,256 $10,257,343 $23,746,136 $8,606,864
Receivable from
John Hancock
Variable Series
Trust I........ 31,923 308,331 8,934 5,561 1,053 7,302 10,094 20,571 116,868
----------- ----------- ----------- ---------- ---------- ---------- ----------- ----------- ----------
Total assets.... 65,820,661 66,332,504 11,094,555 6,211,626 1,156,811 6,440,558 10,267,437 23,766,707 8,723,732
LIABILITIES
Payable to John
Hancock Mutual
Life Insurance
Company........ 29,412 305,918 8,510 5,321 1,006 7,043 9,679 19,663 116,532
Assets charges
payable........ 2,511 2,413 424 240 47 259 415 908 336
----------- ----------- ----------- ---------- ---------- ---------- ----------- ----------- ----------
Total
liabilities.... 31,923 308,331 8,934 5,561 1,053 7,302 10,094 20,571 116,868
----------- ----------- ----------- ---------- ---------- ---------- ----------- ----------- ----------
Net assets...... $65,788,738 $66,024,173 $11,085,621 $6,206,065 $1,155,758 $6,433,256 $10,257,343 $23,746,136 $8,606,864
=========== =========== =========== ========== ========== ========== =========== =========== ==========
</TABLE>

See accompanying notes.

<PAGE>

JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V

STATEMENT OF ASSETS AND LIABILITIES--(CONTINUED)

DECEMBER 31, 1997

<TABLE>
<CAPTION>
SHORT-TERM
SPECIAL REAL ESTATE GROWTH & U.S. SMALL CAP INTERNATIONAL EQUITY STRATEGIC
OPPORTUNITIES EQUITY INCOME MANAGED GOVERNMENT VALUE OPPORTUNITIES INDEX BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------- ----------- ------------ ------------ ---------- ---------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value........... $34,602,378 $16,189,095 $223,347,854 $402,307,547 $8,550,693 $5,117,560 $3,011,974 $11,497,159 $3,216,511
Receivable from
John Hancock
Variable Series
Trust I......... 5,911 22,604 467,110 659,530 3,454 3,177 2,748 226,476 3,216
----------- ----------- ------------ ------------ ---------- ---------- ---------- ----------- ----------
Total assets.... 34,608,289 16,211,699 223,814,964 402,967,077 8,554,147 5,120,737 3,014,722 11,723,635 3,219,727
LIABILITIES
Payable to John
Hancock Mutual
Life Insurance
Company......... 4,529 21,994 458,773 644,919 3,107 2,975 2,627 226,022 3,086
Assets charges
payable......... 1,392 610 8,337 14,611 347 202 121 454 130
----------- ----------- ------------ ------------ ---------- ---------- ---------- ----------- ----------
Total
liabilities..... 5,911 22,604 467,110 659,530 3,454 3,177 2,748 226,476 3,216
----------- ----------- ------------ ------------ ---------- ---------- ---------- ----------- ----------
Net assets...... $34,602,378 $16,189,095 $223,347,854 $402,307,547 $8,550,693 $5,117,560 $3,011,974 $11,497,159 $3,216,511
=========== =========== ============ ============ ========== ========== ========== =========== ==========
</TABLE>
See accompanying notes.

<PAGE>

JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V

STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
LARGE CAP SOVEREIGN INTERNATIONAL SMALL CAP INTERNATIONAL MID CAP LARGE CAP MONEY MID CAP
GROWTH BOND EQUITIES GROWTH BALANCED GROWTH VALUE MARKET VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ---------- ------------- ---------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
income:
Distributions
received from
the portfolios
of John Hancock
Variable Series
Trust I......... $ 5,927,247 $5,037,977 $ 559,426 $ 2,426 $58,774 $ -- $ 421,570 $1,388,851 $619,647
Expenses:
Mortality and
expense risks... 780,298 853,543 170,997 63,733 15,049 67,090 98,166 365,555 59,393
----------- ---------- ----------- -------- ------- -------- ---------- ---------- --------
Net investment
income (loss).... 5,146,949 4,184,434 388,429 (61,307) 43,725 (67,090) 323,404 1,023,296 560,254
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain............ 1,291,499 514,719 158,616 43,117 14,962 32,384 154,133 -- 90,441
Net unrealized
appreciation
(depreciation)
during the year. 7,278,480 679,637 (1,372,343) 503,431 (51,498) 818,415 1,088,057 -- 187,079
----------- ---------- ----------- -------- ------- -------- ---------- ---------- --------
Net realized and
unrealized gain
(loss) on
investments...... 8,569,979 1,194,356 (1,213,727) 546,548 (36,536) 850,799 1,242,190 -- 277,520
----------- ---------- ----------- -------- ------- -------- ---------- ---------- --------
Net increase
(decrease) in net
assets resulting
from operations.. $13,716,928 $5,378,790 $ (825,298) $485,241 $ 7,189 $783,709 $1,565,594 $1,023,296 $837,774
=========== ========== =========== ======== ======= ======== ========== ========== ========
</TABLE>

See accompanying notes.

<PAGE>

JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V

STATEMENT OF OPERATIONS--(CONTINUED)

YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
SHORT-TERM
SPECIAL REAL ESTATE GROWTH & U.S. SMALL CAP INTERNATIONAL EQUITY STRATEGIC
OPPORTUNITIES EQUITY INCOME MANAGED GOVERNMENT VALUE OPPORTUNITIES INDEX BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------- ----------- ----------- ----------- ---------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
income:
Distributions
received from
the portfolios
of John Hancock
Variable Series
Trust I......... $ 3,449,753 $1,113,560 $28,241,006 $38,599,474 $467,602 $393,924 $ 44,913 $ 310,970 $201,126
Expenses:
Mortality and
expense risks... 494,302 188,061 2,636,904 5,081,678 118,020 38,904 36,594 87,977 33,955
----------- ---------- ----------- ----------- -------- -------- --------- ---------- --------
Net investment
income........... 2,955,451 925,499 25,604,102 33,517,796 349,582 355,020 8,319 222,993 167,171
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain (loss)..... 1,126,199 487,843 2,376,560 6,175,265 (23,864) 42,977 65,558 288,759 4,783
Net unrealized
appreciation
(depreciation)
during the year. (3,364,862) 700,267 18,872,400 21,200,526 51,606 120,277 (112,748) 812,331 10,914
----------- ---------- ----------- ----------- -------- -------- --------- ---------- --------
Net realized and
unrealized gain
(loss) on
investments...... (2,238,663) 1,188,110 21,248,960 27,375,791 27,742 163,254 (47,190) 1,101,090 15,697
----------- ---------- ----------- ----------- -------- -------- --------- ---------- --------
Net increase
(decrease) in net
assets resulting
from operations.. $ 716,788 $2,113,609 $46,853,062 $60,893,587 $377,324 $518,274 $ (38,871) $1,324,083 $182,868
=========== ========== =========== =========== ======== ======== ========= ========== ========
</TABLE>

See accompanying notes.

<PAGE>

JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V

STATEMENTS OF CHANGES IN NET ASSETS

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
LARGE CAP SOVEREIGN INTERNATIONAL SMALL CAP
GROWTH BOND EQUITIES GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------ ------------------------- ------------------------ -----------------------
1997 1996 1997 1996 1997 1996 1997 1996*
----------- ----------- ------------ ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease)
in net assets:
From operations:
Net investment
income (loss)...... $ 5,146,949 $ 5,868,430 $ 4,184,434 $ 3,870,459 $ 388,429 $ (6,828) $ (61,307) $ (11,170)
Net realized gain
(loss)............. 1,291,499 478,115 514,719 234,092 158,616 147,281 43,117 (11,683)
Net unrealized
appreciation
(depreciation)
during the period.. 7,278,480 (830,544) 679,637 (2,384,658) (1,372,343) 647,349 503,431 (74,502)
----------- ----------- ------------ ----------- ----------- ----------- ----------- ----------
Net increase
(decrease) in net
assets resulting
from operations..... 13,716,928 5,516,090 5,378,790 1,719,893 (825,298) 787,802 485,241 (97,355)
From contractowner
transactions:
Net premiums from
contractowners..... 16,139,943 14,966,199 9,129,234 11,650,762 2,857,788 4,741,455 4,274,222 3,174,587
Net benefits to
contractowners..... (7,139,613) (4,906,509) (12,119,596) (9,980,999) (3,074,937) (2,300,437) (1,206,158) (424,472)
----------- ----------- ------------ ----------- ----------- ----------- ----------- ----------
Net increase
(decrease) in net
assets from
contractowner
transactions........ 9,000,330 10,059,690 (2,990,362) 1,669,763 (217,149) 2,441,018 3,068,064 2,750,115
----------- ----------- ------------ ----------- ----------- ----------- ----------- ----------
Net increase
(decrease) in net
assets.............. 22,717,258 15,575,691 2,388,428 3,389,656 (1,042,447) 3,228,820 3,553,305 2,652,760
Net assets at
beginning of period. 43,071,480 27,495,789 63,635,745 60,246,089 12,128,068 8,899,248 2,652,760 --
----------- ----------- ------------ ----------- ----------- ----------- ----------- ----------
Net assets at end of
period.............. $65,788,738 $43,071,480 $ 66,024,173 $63,635,745 $11,085,621 $12,128,068 $ 6,206,065 $2,652,760
=========== =========== ============ =========== =========== =========== =========== ==========
</TABLE>
- -----
* From May 1, 1996 (commencement of operations).

See accompanying notes.

<PAGE>

JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V

STATEMENTS OF CHANGES IN NET ASSETS--(CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
INTERNATIONAL
BALANCED MID CAP GROWTH LARGE CAP VALUE MONEY MARKET
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------------- ----------------------- ----------------------- --------------------------
1997 1996* 1997 1996* 1997 1996* 1997 1996
---------- -------- ----------- ---------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase in net
assets:
From operations:
Net investment
income.......... $ 43,725 $ 5,963 $ (67,090) $ (4,676) $ 323,404 $ 48,502 $ 1,023,296 $ 842,792
Net realized
gain............ 14,962 195 32,384 (24) 154,133 4,527 -- --
Net unrealized
appreciation
(depreciation)
during the
period.......... (51,498) 16,955 818,415 35,740 1,088,057 117,692 -- --
---------- -------- ----------- ---------- ----------- ---------- ------------ ------------
Net increase in
net assets
resulting from
operations....... 7,189 23,113 783,709 31,040 1,565,594 170,721 1,023,296 842,792
From
contractowner
transactions:
Net premiums
from
contractowners.. 709,717 602,530 3,495,070 3,454,735 6,570,928 3,117,307 28,918,004 29,572,298
Net benefits to
contractowners.. (182,703) (4,388) (1,177,188) (154,110) (1,102,978) (64,229) (32,942,480) (22,022,250)
---------- -------- ----------- ---------- ----------- ---------- ------------ ------------
Net increase
(decrease) in net
assets from
contractowner
transactions..... 527,014 598,142 2,317,882 3,300,625 5,467,950 3,053,078 (4,024,476) 7,550,048
---------- -------- ----------- ---------- ----------- ---------- ------------ ------------
Net increase
(decrease) in net
period........... 534,203 621,255 3,101,591 3,331,665 7,033,544 3,223,799 (3,001,180) 8,392,840
Net assets at
beginning of
period........... 621,255 -- 3,331,665 -- 3,223,799 -- 26,747,316 18,354,476
---------- -------- ----------- ---------- ----------- ---------- ------------ ------------
Net assets at end
of period........ $1,155,758 $621,255 $ 6,433,256 $3,331,665 $10,257,343 $3,223,799 $ 23,746,136 $ 26,747,316
========== ======== =========== ========== =========== ========== ============ ============
<CAPTION>
MID CAP VALUE
SUBACCOUNT
-----------------------
1997 1996*
----------- -----------
<S> <C> <C>
Increase in net
assets:
From operations:
Net investment
income.......... $ 560,254 $ 24,420
Net realized
gain............ 90,441 1,638
Net unrealized
appreciation
(depreciation)
during the
period.......... 187,079 93,767
----------- -----------
Net increase in
net assets
resulting from
operations....... 837,774 119,825
From
contractowner
transactions:
Net premiums
from
contractowners.. 6,966,453 1,364,695
Net benefits to
contractowners.. (619,978) (61,905)
----------- -----------
Net increase
(decrease) in net
assets from
contractowner
transactions..... 6,346,475 1,302,790
----------- -----------
Net increase
(decrease) in net
period........... 7,184,249 1,422,615
Net assets at
beginning of
period........... 1,422,615 --
----------- -----------
Net assets at end
of period........ $8,606,864 $1,422,615
=========== ===========
</TABLE>
- -----
* From May 1, 1996 (commencement of operations).

See accompanying notes.

<PAGE>

JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V

STATEMENTS OF CHANGES IN NET ASSETS--(CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
REAL ESTATE
SPECIAL OPPORTUNITIES EQUITY GROWTH & INCOME MANAGED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------ ------------------------ -------------------------- --------------------------
1997 1996 1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase in net
assets:
From operations:
Net investment
income............. $ 2,955,451 $ 948,617 $ 925,499 $ 405,154 $ 25,604,102 $ 17,816,863 $ 33,517,796 $ 40,660,526
Net realized gain.. 1,126,199 479,654 487,843 95,726 2,376,560 552,624 6,175,265 2,338,033
Net unrealized
appreciation
(depreciation)
during the period.. (3,364,862) 3,216,931 700,267 1,901,728 18,872,400 4,394,652 21,200,526 (11,935,373)
----------- ----------- ----------- ----------- ------------ ------------ ------------ ------------
Net increase in net
assets resulting
from operations..... 716,788 4,645,202 2,113,609 2,402,608 46,853,062 22,764,139 60,893,587 31,063,186
From contractowner
transactions:
Net premiums from
contractowners..... 10,052,617 24,012,130 6,692,536 3,401,275 41,759,743 42,535,469 35,209,787 62,824,890
Net benefits to
contractowners..... (8,369,858) (4,389,166) (3,491,935) (1,998,364) (23,467,946) (14,497,027) (60,922,245) (41,931,579)
----------- ----------- ----------- ----------- ------------ ------------ ------------ ------------
Net increase
(decrease) in net
assets from
contractowner
transactions........ 1,682,759 19,622,964 3,200,601 1,402,911 18,291,797 28,038,442 (25,712,458) 20,893,311
Net increase
(decrease) in net
period.............. 2,399,547 24,268,166 5,314,210 3,805,519 65,144,859 50,802,581 35,181,129 51,956,497
Net assets at
beginning of period. 32,202,831 7,934,665 10,874,885 7,069,366 158,202,995 107,400,414 367,126,418 315,169,921
----------- ----------- ----------- ----------- ------------ ------------ ------------ ------------
Net assets at end of
period.............. $34,602,378 $32,202,831 $16,189,095 $10,874,885 $223,347,854 $158,202,995 $402,307,547 $367,126,418
=========== =========== =========== =========== ============ ============ ============ ============
</TABLE>
- -----
* From May 1, 1996 (commencement of operations).

See accompanying notes.

<PAGE>

JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
SHORT-TERM SMALL CAP INTERNATIONAL
U.S. GOVERNMENT VALUE OPPORTUNITIES EQUITY INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------ ---------------------- ---------------------- -----------------------
1997 1996 1997 1996* 1997 1996* 1997 1996*
----------- ----------- ---------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase
(decrease) in net
assets:
From operations:
Net investment
income (loss)... $ 349,582 $ 246,011 $ 355,020 $ 21,391 $ 8,319 $ (2,156) $ 222,993 $ 31,170
Net realized
gain (loss)..... (23,864) (7,429) 42,977 1,223 65,558 2,121 288,759 7,516
Net unrealized
appreciation
(depreciation)
during the
period.......... 51,606 (66,125) 120,277 46,285 (112,748) 72,186 812,331 90,134
----------- ----------- ---------- ---------- ---------- ---------- ----------- ----------
Net increase
(decrease) in net
assets resulting
from operations.. 377,324 172,457 518,274 68,899 (38,871) 72,151 1,324,083 128,820
From
contractowner
transactions:
Net premiums
from
contractowners.. 2,277,100 6,095,377 3,931,113 1,026,699 1,958,041 1,716,141 10,201,049 1,730,492
Net benefits to
contractowners.. (1,911,203) (1,653,919) (369,139) (58,286) (585,790) (109,698) (1,684,296) (202,989)
----------- ----------- ---------- ---------- ---------- ---------- ----------- ----------
Net increase
(decrease) in net
assets from
contractowner
transactions..... 365,897 4,441,458 3,561,974 968,413 1,372,251 1,606,443 8,516,753 1,527,503
----------- ----------- ---------- ---------- ---------- ---------- ----------- ----------
Net increase in
net assets....... 743,221 4,613,915 4,080,248 1,037,312 1,333,380 1,678,594 9,840,836 1,656,323
Net assets at
beginning of
period........... 7,807,472 3,193,557 1,037,312 -- 1,678,594 -- 1,656,323 --
----------- ----------- ---------- ---------- ---------- ---------- ----------- ----------
Net assets at end
of period........ $ 8,550,693 $ 7,807,472 $5,117,560 $1,037,312 $3,011,974 $1,678,594 $11,497,159 $1,656,323
=========== =========== ========== ========== ========== ========== =========== ==========
<CAPTION>
STRATEGIC BOND
SUBACCOUNT
-----------------------
1997 1996*
----------- -----------
<S> <C> <C>
Increase
(decrease) in net
assets:
From operations:
Net investment
income (loss)... $ 167,171 $ 32,257
Net realized
gain (loss)..... 4,783 1,486
Net unrealized
appreciation
(depreciation)
during the
period.......... 10,914 (4,798)
----------- -----------
Net increase
(decrease) in net
assets resulting
from operations.. 182,868 28,945
From
contractowner
transactions:
Net premiums
from
contractowners.. 2,115,324 1,371,974
Net benefits to
contractowners.. (310,465) (172,135)
----------- -----------
Net increase
(decrease) in net
assets from
contractowner
transactions..... 1,804,859 1,199,839
----------- -----------
Net increase in
net assets....... 1,987,727 1,228,784
Net assets at
beginning of
period........... 1,228,784 --
----------- -----------
Net assets at end
of period........ $3,216,511 $1,228,784
=========== ===========
</TABLE>
- -----
* From May 1, 1996 (commencement of operations).

See accompanying notes.

<PAGE>

JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1997

1. ORGANIZATION

John Hancock Variable Annuity Account V (the Account) is a separate
investment account of John Hancock Mutual Life Insurance Company (JHMLICO or
John Hancock). The Account was formed to fund variable annuity contracts
(Contracts) issued by JHMLICO. The Account is operated as a unit investment
trust registered under the Investment Company Act of 1940, as amended, and
currently consists of eighteen subaccounts. The assets of each subaccount are
invested exclusively in shares of a corresponding Portfolio of John Hancock
Variable Series Trust I (the Fund). New subaccounts may be added as new
Portfolios are added to the Fund or as other investment options are developed
and made available to contractowners. The eighteen Portfolios of the Fund
which are currently available are the Large Cap Growth, Sovereign Bond,
International Equities, Small Cap Growth, International Balanced, Mid Cap
Growth, Large Cap Value, Money Market, Mid Cap Value, Special Opportunities,
Real Estate Equity, Growth & Income, Managed, Short-Term U.S. Government,
Small Cap Value, International Opportunities, Equity Index and Strategic Bond
Portfolios. Each Portfolio has a different investment objective.

The assets of the Account are the property of JHMLICO. The portion of the
Account's assets applicable to the Contracts may not be charged with
liabilities arising out of any other business JHMLICO may conduct.

2. SIGNIFICANT ACCOUNTING POLICIES

Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, and liabilities and
disclosure of contingent assets and liabilities, at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Valuation of Investments

Investment in shares of the Fund are valued at the reported net asset values
of the respective Portfolios. Investment transactions are recorded on the
trade date. Dividend income is recognized on the ex-dividend date. Realized
gains and losses on sales of Fund shares are determined on the basis of
identified cost.

Federal Income Taxes

The operations of the Account are included in the federal income tax return
of JHMLICO, which is taxed as a life insurance company under the Internal
Revenue Code. JHMLICO has the right to charge the Account any federal income
taxes, or provision for federal income taxes, attributable to the operations
of the Account or to the Contracts funded in the Account. Currently, John
Hancock does not make a charge for income or other taxes. JHMLICO retains the
right to charge the Account for any federal income taxes arising from changes
in the tax law. Charges for state and local taxes, if any, attributable to the
Account may also be made.

Expenses

JHMLICO assumes mortality and expense risks of the Contracts and provides
administrative services to the Account for which asset charges are deducted at
an annual rate of 1.25% of net assets of the Account.

JHMLICO makes certain other deductions from contractowner payments for
premium taxes and sales and withdrawal charges, which are accounted for as a
reduction of net assets resulting from contractowner transactions.

<PAGE>

JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

3. DETAILS OF INVESTMENTS

The details of the shares owned and cost and value of investments in the
Portfolios of the Fund at December 31, 1997 were as follows:

<TABLE>
<CAPTION>
SHARES
SUBACCOUNT OWNED COST VALUE
---------- ---------- ------------ ------------
<S> <C> <C> <C>
Large Cap Growth..................... 3,160,049 $ 55,956,292 $ 65,788,738
Sovereign Bond....................... 6,636,276 64,259,276 66,024,173
International Equities............... 729,325 11,631,291 11,085,621
Small Cap Growth..................... 547,083 5,777,136 6,206,065
International Balanced............... 114,316 1,190,300 1,155,758
Mid Cap Growth....................... 539,452 5,579,111 6,433,256
Large Cap Value...................... 755,904 9,051,594 10,257,343
Money Market......................... 2,374,614 23,746,136 23,746,136
Mid Cap Value........................ 620,713 8,326,018 8,606,864
Special Opportunities................ 2,249,081 34,241,407 34,602,378
Real Estate Equity................... 1,017,511 13,523,769 16,189,095
Growth & Income...................... 13,450,228 186,278,473 223,347,854
Managed.............................. 28,036,563 353,315,585 402,307,547
Short-Term U.S. Government........... 848,000 8,546,762 8,550,693
Small Cap Value...................... 412,663 4,950,998 5,117,560
International Opportunities.......... 283,422 3,052,536 3,011,974
Equity Index......................... 808,908 10,594,694 11,497,159
Strategic Bond....................... 314,030 3,210,395 3,216,511
</TABLE>

Purchases, including reinvestment of dividend distributions, and proceeds
from sales of shares in the Portfolios of the Fund during 1997, were as
follows:

<TABLE>
<CAPTION>
SUBACCOUNT PURCHASES SALES
---------- ----------- -----------
<S> <C> <C>
Large Cap Growth.................................. $17,283,294 $ 1,844,517
Sovereign Bond.................................... 8,272,605 6,518,779
International Equities............................ 2,676,172 2,338,952
Small Cap Growth.................................. 4,289,901 1,240,027
International Balanced............................ 788,559 202,559
Mid Cap Growth.................................... 3,583,911 1,300,724
Large Cap Value................................... 6,610,747 665,260
Money Market...................................... 17,847,906 22,098,987
Mid Cap Value..................................... 7,286,377 289,207
Special Opportunities............................. 9,805,940 4,038,536
Real Estate Equity................................ 6,626,841 2,012,899
Growth & Income................................... 50,901,126 4,628,668
Managed........................................... 45,180,734 31,200,131
Short-Term U.S. Government........................ 2,389,973 1,698,357
Small Cap Value................................... 4,134,293 174,321
International Opportunities....................... 2,193,608 747,254
Equity Index...................................... 9,949,784 921,279
Strategic Bond.................................... 2,251,348 274,535
</TABLE>

<PAGE>

JOHN HANCOCK VARIABLE ANNUITY ACCOUNT V

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. NET ASSETS

Accumulation shares attributable to net assets of contractowners and
accumulation share values for each subaccount at December 31, 1997 were as
follows:

<TABLE>
<CAPTION>
ACCOMMODATOR INDEPENDENCE
------------------------- -------------------------
ACCUMULATION ACCUMULATION ACCUMULATION ACCUMULATION
SUBACCOUNT SHARES SHARE VALUES SHARES SHARE VALUES
---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Large Cap Growth........... 568,010 $45.711 2,074,430 $19.198
Sovereign Bond............. 1,987,067 21.707 1,765,587 12.969
International Equities..... 295,725 15.572 580,528 11.168
Small Cap Growth........... 116,968 11.135 442,227 11.089
International Balanced..... 14,927 10.728 93,191 10.684
Mid Cap Growth............. 39,707 11.734 510,743 11.687
Large Cap Value............ 49,212 14.341 668,796 14.282
Money Market............... 628,977 15.661 1,238,762 11.217
Mid Cap Value.............. 87,481 15.049 486,455 14.987
Special Opportunities...... 239,625 17.521 1,747,007 17.403
Real Estate Equity......... 338,164 24.175 466,871 17.165
Growth & Income............ 2,585,296 45.699 5,327,037 19.746
Managed.................... 9,068,834 30.058 8,216,039 15.788
Short-Term U.S. Government. 52,176 11.742 685,486 11.665
Small Cap Value............ 69,972 13.577 308,239 13.521
International Opportuni-
ties...................... 50,931 10.655 232,719 10.611
Equity Index............... 91,506 14.856 685,246 14.794
Strategic Bond............. 25,885 11.397 257,401 11.350
</TABLE>

5. TRANSACTIONS WITH AFFILIATES

John Hancock acts as the distributor, principal underwriter and investment
advisor for the Fund. Certain officers of the Account are officers and
directors of JHMLICO or the Fund.

6. IMPACT OF YEAR 2000 (UNAUDITED)

The John Hancock Variable Annuity Account V, along with John Hancock Mutual
Life Insurance Company, its ultimate parent (together, John Hancock), have
developed a plan to modify or replace significant portions of the Account's
computer information and automated technologies so that its systems will
function property with respect to the dates in the year 2000 and thereafter.
The Account presently believes that with modifications to existing systems and
conversions to new technologies, the year 2000 will not pose significant
operational problems for its computer systems. However, if certain
modifications and conversions are not made, or not completed timely, the year
2000 issue could have an adverse impact on the operations of the Account.

John Hancock, as early as 1994, had begun assessing, modifying and
converting the software related to its significant systems and has initiated
formal communications with its significant business partners and customers to
determine the extent to which John Hancock's interface systems are vulnerable
to those third parties' failure to remediate their own year 2000 issues. While
John Hancock is developing alternative third-party processing arrangements as
it deems appropriate, there is no guarantee that the systems of other
companies on which the Account's systems rely will be converted timely or will
not have an adverse effect on the Account's systems.

The Account expects the project to be substantially complete by early 1999.
This completion target was derived utilizing numerous assumptions of future
events, including availability of certain resources and other factors.
However, there can be no guarantee that this completion target will be
achieved.