<PAGE>
As filed with the Securities and Exchange Commission on May 2, 2000
File Nos. 333-81103
811-07711
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 1 [X ]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 7 [X ]
(Check Appropriate Box or Boxes)
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
(Exact Name of Registrant)
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
(Name of Depositor)
JOHN HANCOCK PLACE, BOSTON, MA 02117
(Address Of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, Including Area Code: (617) 572-8050
RONALD J. BOCAGE, ESQUIRE
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE
BOSTON, MA 02117
(Name and Address of Agent for Service)
It is proposed that this filing become effective (check appropriate box)
[X] immediately upon filing pursuant to paragraph (b) of Rule 485
[_] on May 1, 2000 pursuant to paragraph (b) of Rule 485
[_] 60 days after filing pursuant to paragraph (a) (1) of Rule 485
[_] on (date) pursuant to paragraph (a) (1) of Rule 485
If appropriate check the following box
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Pursuant to Rule 24f-2, Registrant has registered an indefinite amount of
securities under the Securities Act of 1933.
<PAGE>
PROSPECTUS DATED MAY 1, 2000
REVOLUTION VALUE VARIABLE ANNUITY
a deferred combination fixed and variable annuity contract
issued by
JOHN HANCOCK LIFE INSURANCE COMPANY ("JOHN HANCOCK")
The contract enables you to earn fixed rates of interest that we guarantee for
stated periods of time ("guarantee periods") and investment-based returns in the
following variable investment options:
<TABLE>
<CAPTION>
VARIABLE INVESTMENT OPTION MANAGED BY:
-------------------------- -----------
<S> <C>
V.A. Sovereign Investors............ John Hancock Advisers, Inc.
Independence Investment Associates,
V.A. Core Equity.................... Inc.
Independence Investment Associates,
Aggressive Balanced................. Inc.
Fidelity VIP Contrafund(R).......... Fidelity Management & Research Company
Equity Index........................ State Street Global Advisors
Large Cap Value CORE................ Goldman Sachs Asset Management
V.A. Relative Value................. John Hancock Advisers, Inc.
V.A. Financial Industries........... John Hancock Advisers, Inc.
Large Cap Aggressive Growth......... Alliance Capital Management L.P.
Fidelity VIP Growth................. Fidelity Management & Research Company
MFS Growth.......................... MFS Investment Management(R)
V.A. Technology..................... John Hancock Advisers, Inc.
Large/Mid Cap Value................. Wellington Management Company, LLP
Independence Investment Associates,
Mid Cap Blend....................... Inc.
AIM V.I. Value...................... A I M Advisors, Inc.
MFS Research........................ MFS Investment Management(R)
AIM V.I. Growth..................... A I M Advisors, Inc.
Fundamental Mid Cap Growth.......... OppenheimerFunds, Inc.
Mid Cap Growth...................... Janus Capital Corporation
The Boston Company Asset Management,
Small/Mid Cap Value................. LLC
Small/Mid Cap CORE.................. Goldman Sachs Asset Management
Small/Mid Cap Growth................ Wellington Management Company, LLP
Small Cap Growth.................... John Hancock Advisers, Inc.
MFS New Discovery................... MFS Investment Management(R)
Global Balanced..................... Brinson Partners, Inc.
Templeton International Securities.. Templeton Investment Counsel, Inc.
International Equity................ Goldman Sachs Asset Management
Fidelity VIP Overseas............... Fidelity Management & Research Company
Templeton Developing Markets
Securities........................ Templeton Asset Management, Ltd.
Independence Investment Associates,
Short-Term Bond..................... Inc.
Bond Index.......................... Mellon Bond Associates, LLP
V.A. Bond........................... John Hancock Advisers, Inc.
V.A. Strategic Income............... John Hancock Advisers, Inc.
High Yield Bond..................... Wellington Management Company, LLP
V.A. Money Market................... John Hancock Advisers, Inc.
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
The variable investment options shown on page 1 are those available as of the
date of this prospectus. We may add, modify or delete variable investment
options in the future.
When you select one or more of these variable investment options, we invest
your money in the corresponding investment option(s) of one or more of the
following: the John Hancock Declaration Trust, the John Hancock Variable Series
Trust I, AIM Variable Insurance Funds, Inc., the Franklin Templeton Variable
Insurance Products Trust (Class 2 Shares), Fidelity's Variable Insurance
Products Fund (Service Shares) and Variable Insurance Products Fund II (Service
Shares) and the MFS Variable Insurance Trust (together, "the Trusts"). In this
prospectus, the investment options of the Trusts are referred to as "Funds".
In the prospectuses for the Trusts, the investment options may also be
referred to as "funds", "portfolios" or "series".
Each Trust is a so-called "series" type mutual fund registered with the
Securities and Exchange Commission ("SEC"). The investment results of each
variable investment option you select will depend on those of the corresponding
fund of one of the Trusts. Each of the funds is separately managed and has its
own investment objective and strategies. Attached at the end of this prospectus
is a prospectus for each Trust. The Trust prospectuses contain detailed
information about each available fund. Be sure to read those prospectuses before
selecting any of the variable investment options shown on page 1.
For amounts you don't wish to invest in a variable investment option, you can
choose among several guarantee periods, each of which has its own guaranteed
interest rate and expiration date. If you remove money from a guarantee period
prior to its expiration, however, we may increase or decrease your contract's
value to compensate for changes in interest rates that may have occurred
subsequent to the beginning of that guarantee period. This is known as a "market
value adjustment".
JOHN HANCOCK ANNUITY SERVICING OFFICE
--------------------------------------
Mail Delivery Phone:
------------- ------
1-800-824-0335
529 Main Street
Charlestown, MA 02129
Fax:
----
1-617-886-3070
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,
other than John Hancock. They involve investment risks including the possible
loss of principal.
********************************************************************************
Please note that the SEC has not approved or disapproved these securities, or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
<PAGE>
GUIDE TO THIS PROSPECTUS
This prospectus contains information that you should know before you buy a
contract or exercise any of your rights under the contract. We have arranged the
prospectus in the following way:
. The first section contains an "INDEX OF KEY WORDS."
. Behind the index is the "FEE TABLE." This section highlights the various
fees and expenses you will pay directly or indirectly, if you purchase a
contract.
. The next section is called "BASIC INFORMATION." It contains basic
information about the contract presented in a question and answer format.
You should read the Basic Information before reading any other section of
the prospectus.
. Behind the Basic Information is "ADDITIONAL INFORMATION." This section
gives more details about the contract. It generally does not repeat
information contained in the Basic Information.
The Trusts' prospectuses are attached at the end of this prospectus. You should
save these prospectuses for future reference.
IMPORTANT NOTICES
This is the prospectus - it is not the contract. The prospectus simplifies many
contract provisions to better communicate the contract's essential features.
Your rights and obligations under the contract will be determined by the
language of the contract itself. On request, we will provide the form of
contract for you to review. In any event, when you receive your contract, we
suggest you read it promptly.
We've also filed with the SEC a "Statement of Additional Information," dated
May 1, 2000. This Statement contains detailed information not included in the
prospectus. Although a separate document from this prospectus, the Statement of
Additional Information has the same legal effect as if it were a part of this
prospectus. We will provide you with a free copy of the Statement upon your
request. To give you an idea what's in the Statement, we have included a copy of
the Statement's table of contents on page 46.
The contracts are not 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.
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3
<PAGE>
INDEX OF KEY WORDS
We define or explain each of the following key words used in this prospectus
on the pages shown below:
KEY WORD PAGE
Accumulation units................................ 34
Annuitant......................................... 11
Annuity payments.................................. 11
Annuity period.................................... 35
Contract year..................................... 12
Date of issue..................................... 12
Date of maturity.................................. 35
Free withdrawal amount............................ 21
Funds............................................. 2
Guarantee periods................................. 2
Investment options................................ 16
Market value adjustment........................... 14
Premium payments.................................. 11
Surrender value................................... 23
Surrender......................................... 23
Variable investment options....................... cover
Withdrawal charge................................. 21
Withdrawal........................................ 23
4
<PAGE>
FEE TABLE
The following fee table shows the various fees and expenses that you will pay,
either directly or indirectly, if you purchase a contract. The table does not
include charges for premium taxes (which may vary by state) or fees for any
optional benefit riders that you select.
OWNER TRANSACTION EXPENSES AND ANNUAL CONTRACT FEE
. Maximum Withdrawal Charge (as % of amount withdrawn) 7%
. Annual Contract Fee (applies only to contracts of less than $50,000)
$30
ANNUAL CONTRACT EXPENSES (AS A % OF THE AVERAGE TOTAL VALUE OF THE CONTRACT)
. Asset-based Charge (for administration and mortality and expense risk)
1.25%
This charge doesn't apply to amounts held in the guarantee periods.
ANNUAL FUND EXPENSES (BASED ON % OF AVERAGE NET ASSETS)
The Funds must pay investment management fees and other operating expenses.
These fees and expenses are different for each Fund and reduce the investment
return of each Fund. Therefore, they also indirectly reduce the return you will
earn on any variable investment options you select.
The following figures for the Funds are based on historical Fund expenses, as
a percentage (rounded to two decimal places) of each Fund's average daily net
assets for 1999, except as indicated in the Notes beginning on page 6. Expenses
of the Funds are not fixed or specified under the terms of the contracts, and
expenses may vary from year to year.
<TABLE>
<CAPTION>
Investment Distribution and Other Operating Total Fund Other Operating
Management Service Expenses With Operating Expenses Absent
Fund Name Fee (12b-1) Fees Reimbursement Expenses Reimbursement
- --------- ---------- ---------------- --------------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
JOHN HANCOCK VARIABLE SERIES TRUST
(NOTE 1):
Aggressive Balanced.................. 0.68% N/A 0.10% 0.78% 0.29%
Equity Index......................... 0.14% N/A 0.00% 0.14% 0.08%
Large Cap Value CORE................. 0.75% N/A 0.10% 0.85% 0.42%
Large Cap Aggressive Growth.......... 0.98% N/A 0.10% 1.08% 0.19%
Large/Mid Cap Value.................. 0.95% N/A 0.10% 1.05% 0.47%
Mid Cap Blend........................ 0.75% N/A 0.10% 0.85% 0.45%
Mid Cap Growth....................... 0.82% N/A 0.10% 0.92% 0.11%
Fundamental Mid Cap Growth........... 0.85% N/A 0.10% 0.95% 0.24%
Small/Mid Cap CORE................... 0.80% N/A 0.10% 0.90% 0.66%
Small/Mid Cap Value.................. 0.95% N/A 0.10% 1.05% 1.44%
Small/Mid Cap Growth................. 0.75% N/A 0.10% 0.85% 0.10%
Small Cap Growth..................... 0.75% N/A 0.10% 0.85% 0.14%
Global Balanced*..................... 0.85% N/A 0.10% 0.95% 0.46%
International Equity................. 1.00% N/A 0.10% 1.10% 0.71%
Short-Term Bond...................... 0.30% N/A 0.10% 0.40% 0.13%
Bond Index........................... 0.15% N/A 0.10% 0.25% 0.20%
High Yield Bond...................... 0.65% N/A 0.10% 0.75% 0.39%
JOHN HANCOCK DECLARATION TRUST (NOTE
2):
V.A. Sovereign Investors............. 0.60% N/A 0.10% 0.70% 0.10%
V.A. Core Equity..................... 0.70% N/A 0.13% 0.83% 0.13%
V.A. Financial Industries............ 0.80% N/A 0.10% 0.90% 0.10%
V.A. Relative Value.................. 0.60% N/A 0.17% 0.77% 0.17%
V.A. Bond............................ 0.50% N/A 0.25% 0.75% 0.51%
V.A. Strategic Income................ 0.60% N/A 0.25% 0.85% 0.27%
V.A. Money Market.................... 0.50% N/A 0.16% 0.66% 0.16%
V.A. Technology...................... 0.80% N/A 0.25% 1.05% N/A
AIM VARIABLE INSURANCE FUNDS, INC.:
AIM V.I. Growth...................... 0.63% N/A 0.10% 0.73% 0.10%
AIM V.I. Value....................... 0.61% N/A 0.15% 0.76% 0.15%
VARIABLE INSURANCE PRODUCTS FUND -
SERVICE CLASS (NOTE 3):
Fidelity VIP Growth.................. 0.58% 0.10% 0.07% 0.75% 0.09%
Fidelity VIP Overseas................ 0.73% 0.10% 0.15% 0.98% 0.18%
VARIABLE INSURANCE PRODUCTS FUND II -
SERVICE CLASS (NOTE 3):
Fidelity VIP Contrafund(R)........... 0.58% 0.10% 0.07% 0.75% 0.10%
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST - CLASS 2 SHARES
(NOTE 4):
Templeton International Securities... 0.69% 0.25% 0.19% 1.13%
Templeton Developing Markets
Securities.......................... 1.25% 0.25% 0.31% 1.81% 0.31%
MFS VARIABLE INSURANCE TRUST
(NOTE 5):
MFS Growth........................... 0.75% N/A 0.16% 0.91% 0.71%
MFS Research......................... 0.75% N/A 0.11% 0.86% 0.11%
MFS New Discovery.................... 0.90% N/A 0.17% 1.07% 1.59%
</TABLE>
5
<PAGE>
NOTES TO ANNUAL FUND EXPENSES
(1) John Hancock Variable Series Trust I Funds' percentages reflect
management fees and other fund expenses based on the allocation
methodology and expense reimbursement policy adopted April 23, 1999.
Under the policy, John Hancock Life Insurance Company voluntarily
reimburses a Fund when the Fund's "other fund expenses" exceed 0.10% of
the Fund's average daily net assets (0.00% for Equity Index).
* Global Balanced was formerly "International Balanced."
(2) John Hancock Declaration Trust Funds' percentages reflect the investment
management fees currently payable and other fund expenses allocated in
1999. John Hancock Advisers, Inc., has agreed to limit temporarily other
expenses of each Fund to 0.25% of the fund's average daily assets.
Percentages for the V.A. Technology Fund are estimates for this fiscal
year because the Fund was not in oper-
6
<PAGE>
ation prior to the date of this prospectus.
(3) A portion of the brokerage commissions that certain of the Fidelity Funds
pay was used to reduce fund expenses. In addition, through arrangements
with certain Funds' custodian, credits realized as a result of uninvested
cash balances were used to reduce a portion of each applicable Fund's
expenses. Without these reductions, the operating expenses of the Funds
would have been higher, as shown in the last column of this table.
(4) On February 8, 2000, shareholders of each Fund approved a merger and
reorganization that combined the Templeton International Equity Fund with
the Templeton International Securities Fund and combined the Templeton
Developing Markets Equity Fund with the Templeton Developing Markets
Securities Fund, effective May 1, 2000. Shareholders of the Templeton
International Securities Fund and shareholders of the Templeton
Developing Markets Securities Fund had approved new management fees,
which apply to each of the combined funds effective May 1, 2000. The
table shows restated total expenses for the Funds based on the new fees
and the assets, as of December 31, 1999, of either the Templeton
International Securities Fund or the Templeton Developing Markets
Securities Fund, as applicable. However, if the table reflected both the
new fees and the combined assets of the Templeton International Equity
Fund and the Templeton International Securities Fund, the estimated
expenses for that combined Fund after May 1, 2000 would be: Management
Fees 0.65%, Distribution and Service Fees 0.25%, Other Expenses 0.20%,
and Total Fund Operating Expenses 1.10%. If the table reflected both the
new fees and the combined assets of the Templeton Developing Markets
Equity Fund and the Templeton Developing Markets Securities Fund, the
estimated expenses for that combined Fund after May 1, 2000 would be:
Management Fees 1.25%, Distribution and Service Fees 0.25%, Other
Expenses 0.29%, and Total Fund Operating Expenses 1.79%.
(5) MFS Variable Insurance Trust Funds have an expense offset arrangement
which reduces each Fund's custodian fee based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent.
Each Fund may enter into other such arrangements and directed brokerage
arrangements, which would also have the effect of reducing the Fund's
expenses. Expenses do not take into account these expense reductions, and
are therefore higher than the actual expenses of the Fund. MFS Investment
Management(R) (also doing business as Massachusetts Financial Services
Company) has contractually agreed to bear expense for the Growth and New
Discovery Funds, subject to reimbursement by the Fund, such that each
such Fund's "other fund expenses" shall not exceed 0.15% of the average
daily net assets of the Fund during the current fiscal year.
We may receive payments from a Fund or its affiliates at an annual rate
of up to approximately 0.25% of the average net assets that holders of
our variable life insurance policies and variable annuity contracts have
invested in that Fund. Any such payments do not, however, result in any
charge to you in addition to what is disclosed above.
EXAMPLES
The following examples on pages 8 and 9 illustrate the current expenses you
would pay, directly or indirectly, on a $1,000 investment allocated to one of
the variable investment options, assuming a 5% annual return on assets. These
examples do not include any applicable premium taxes or any fees for optional
benefit riders. The examples should not be considered representations of past or
future expenses; actual charges may be greater or less than those shown above.
The examples assume Fund expenses at rates set forth above for 1999, after
reimbursements. The annual contract fee has been included as an annual
percentage of assets.
7
<PAGE>
If you "surrender" (turn in) your contract at the end of the applicable time
period, you would pay:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
V.A. SOVEREIGN INVESTORS $84 $108 $135 $235
- -----------------------------------------------------------------------------
V.A. CORE EQUITY $85 $112 $142 $248
- -----------------------------------------------------------------------------
AGGRESSIVE BALANCED $84 $ 11 $139 $243
1
- -----------------------------------------------------------------------------
FIDELITY VIP CONTRAFUND(R) $84 $11 $ 13 $ 24
1 9 3
- -----------------------------------------------------------------------------
EQUITY INDEX $78 $ 91 $105 $175
- -----------------------------------------------------------------------------
LARGE CAP VALUE CORE $85 $113 $143 $250
- -----------------------------------------------------------------------------
VA RELATIVE VALUE $84 $110 $139 $242
- -----------------------------------------------------------------------------
V.A. FINANCIAL INDUSTRIES $86 $114 $145 $255
- -----------------------------------------------------------------------------
LARGE CAP AGGRESSIVE GROWTH $87 $120 $155 $274
- -----------------------------------------------------------------------------
FIDELITY VIP GROWTH $84 $110 $13 $ 24
9 2
- -----------------------------------------------------------------------------
MFS GROWTH $86 $115 $146 $256
- -----------------------------------------------------------------------------
V.A. TECHNOLOGY $87 $119 $153 $271
- -----------------------------------------------------------------------------
LARGE/MID CAP VALUE $87 $119 $153 $271
- -----------------------------------------------------------------------------
MID CAP BLEND $85 $113 $143 $250
- -----------------------------------------------------------------------------
AIM V.I. VALUE $84 $110 $138 $241
- -----------------------------------------------------------------------------
MFS RESEARCH $85 $113 $143 $251
- -----------------------------------------------------------------------------
AIM V.I. GROWTH $ 8 $ 1 $ 1 $ 2
4 09 37 38
- -----------------------------------------------------------------------------
FUNDAMENTAL MID CAP GROWTH $86 $116 $148 $261
- -----------------------------------------------------------------------------
MID CAP GROWTH $86 $115 $147 $ 25
7
- -----------------------------------------------------------------------------
SMALL/MID CAP CORE $86 $114 $145 $255
- -----------------------------------------------------------------------------
SMALL/MID CAP VALUE $87 $119 $153 $271
- -----------------------------------------------------------------------------
SMALL/MID CAP GROWTH $85 $113 $143 $250
- -----------------------------------------------------------------------------
SMALL CAP GROWTH $85 $113 $143 $250
- -----------------------------------------------------------------------------
MFS NEW DISCOVERY $87 $120 $154 $273
- -----------------------------------------------------------------------------
GLOBAL BALANCED $86 $116 $148 $261
- -----------------------------------------------------------------------------
TEMPLETON INTERNATIONAL SECURITIES $88 $121 $157 $279
- -----------------------------------------------------------------------------
INTERNATIONAL EQUITY $88 $120 $156 $276
- -----------------------------------------------------------------------------
FIDELITY VIP OVERSEAS $ 8 $ 11 $ 15 $ 26
7 8 1 7
- -----------------------------------------------------------------------------
TEMPLETON DEVELOPING MARKETS $95 $142 $328 $344
SECURITIES
- -----------------------------------------------------------------------------
SHORT-TERM BOND $80 $ 99 $119 $203
- -----------------------------------------------------------------------------
BOND INDEX $79 $ 95 $111 $187
- -----------------------------------------------------------------------------
V.A. BOND $84 $110 $138 $240
- -----------------------------------------------------------------------------
V.A. STRATEGIC INCOME $85 $113 $143 $250
- -----------------------------------------------------------------------------
HIGH YIELD BOND $84 $110 $138 $240
- -----------------------------------------------------------------------------
V.A. MONEY MARKET $83 $107 $133 $231
- -----------------------------------------------------------------------------
</TABLE>
8
<PAGE>
If you begin receiving payments under one of our annuity payment options at
the end of the applicable time period, or if you do not surrender your contact,
you would pay:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
V.A. Sovereign Investors $21 $63 $109 $235
- -------------------------------------------------------------------------------
V.A. Core Equity $22 $67 $115 $248
- -------------------------------------------------------------------------------
Aggressive Balanced $21 $66 $113 $243
- -------------------------------------------------------------------------------
Fidelity VIP Contrafund(R) $21 $ 6 $ 11 $24
5 1 0
- -------------------------------------------------------------------------------
Equity Index $15 $46 $ 80 $175
- -------------------------------------------------------------------------------
Large Cap Value CORE $22 $68 $116 $250
- -------------------------------------------------------------------------------
VA Relative Value $21 $65 $112 $242
- -------------------------------------------------------------------------------
V.A. Financial Industries $23 $69 $119 $255
- -------------------------------------------------------------------------------
Large Cap Aggressive Growth $24 $75 $128 $274
- -------------------------------------------------------------------------------
Fidelity VIP Growth $21 $65 $ 11 $ 24
1 0
- -------------------------------------------------------------------------------
MFS Growth $23 $70 $119 $256
- -------------------------------------------------------------------------------
V.A. Technology $24 $74 $127 $271
- -------------------------------------------------------------------------------
Large/Mid Cap Value $24 $74 $127 $271
- -------------------------------------------------------------------------------
Mid Cap Blend $22 $68 $116 $250
- -------------------------------------------------------------------------------
AIM V.I. Value $21 $65 $112 $241
- -------------------------------------------------------------------------------
MFS Research $22 $68 $117 $251
- -------------------------------------------------------------------------------
AIM V.I. Growth $21 $64 $ 11 $238
0
- -------------------------------------------------------------------------------
Fundamental Mid Cap Growth $23 $71 $122 $261
- -------------------------------------------------------------------------------
Mid Cap Growth $23 $70 $120 $ 25
7
- -------------------------------------------------------------------------------
Small/Mid Cap CORE $23 $69 $119 $255
- -------------------------------------------------------------------------------
Small/Mid Cap Value $24 $74 $127 $271
- -------------------------------------------------------------------------------
Small/Mid Cap Growth $22 $68 $116 $250
- -------------------------------------------------------------------------------
Small Cap Growth $22 $68 $116 $250
- -------------------------------------------------------------------------------
MFS New Discovery $24 $75 $128 $273
- -------------------------------------------------------------------------------
Global Balanced $23 $71 $122 $261
- -------------------------------------------------------------------------------
Templeton International Securities $25 $76 $131 $279
- -------------------------------------------------------------------------------
International Equity $25 $75 $129 $276
- -------------------------------------------------------------------------------
Fidelity VIP Overseas $ 2 $ 7 $ 12 $ 26
3 2 3 4
- -------------------------------------------------------------------------------
Templeton Developing Markets $32 $97 $164 $344
Securities
- -------------------------------------------------------------------------------
Short-Term Bond $17 $54 $ 93 $203
- -------------------------------------------------------------------------------
Bond Index $16 $50 $ 86 $187
- -------------------------------------------------------------------------------
V.A. Bond $21 $65 $111 $240
- -------------------------------------------------------------------------------
V.A. Strategic Income $22 $68 $116 $250
- -------------------------------------------------------------------------------
High Yield Bond $21 $65 $111 $240
- -------------------------------------------------------------------------------
V.A. Money Market $20 $62 $107 $231
- -------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
BASIC INFORMATION
This "Basic Information" section provides answers to commonly asked questions
about the contract. Here are the page numbers where the questions and answers
appear:
<TABLE>
<CAPTION>
QUESTION PAGES TO SEE
-------- ------------
<S> <C>
What is the contract?...................................................... 11
Who owns the contract?..................................................... 11
Is the owner also the annuitant?........................................... 11
How can I invest money in a contract?...................................... 11
How will the value of my investment in the contract change over time?...... 14
What annuity benefits does the contract provide?........................... 15
What are the tax consequences of owning a contract?........................ 15
How can I change my contract's investment allocations?..................... 16
What fees and charges will be deducted from my contract?................... 20
How can I withdraw money from my contract?................................. 23
What happens if the annuitant dies before my contract's date of maturity?.. 25
What other benefits can I purchase under a contract?....................... 27
Can I return my contract?.................................................. 29
</TABLE>
10
<PAGE>
WHAT IS THE CONTRACT?
The contract is a "deferred payment variable annuity contract." An annuity
contract provides a person (known as the "annuitant" or "payee") with a series
of periodic payments. Because this contract is also a deferred payment contract,
the "annuity payments" will begin on a future date, called the contract's "date
of maturity." Under a variable annuity contract, the amount you have invested
can increase or decrease in value daily based upon the value of the variable
investment options chosen. If your annuity is provided under a master group
contract, the term "contract" as used in this prospectus refers to the
certificate you will be issued and not to the master group contract.
WHO OWNS THE CONTRACT?
That's up to you. Unless the contract provides otherwise, the owner of the
contract is the person who can exercise the rights under the contract, such as
the right to choose the investment options or the right to surrender the
contract. In many cases, the person buying the contract will be the owner.
However, you are free to name another person or entity (such as a trust) as
owner. In writing this prospectus, we've assumed that you, the reader, are the
person or persons entitled to exercise the rights and obligations under
discussion. If a contract has joint owners, both must join in any written notice
or request.
IS THE OWNER ALSO THE ANNUITANT?
Again, that's up to you. The annuitant is the person upon whose death the
contract's death benefit becomes payable. Also, the annuitant receives payments
from us under any annuity option that commences during the annuitant's lifetime.
In many cases, the same person is both the annuitant and the owner of a
contract. However, you are free to name another person as annuitant or joint
annuitant. You could also name as joint annuitants two persons other than
yourself.
HOW CAN I INVEST MONEY IN A CONTRACT?
Premium payments
We call the investments you make in your contract "premiums" or "premium
payments." In general, you need at least a $5,000 initial premium payment to
purchase a contract. If you purchase your contract under any of the
tax-qualified plans shown on page 31 or if you purchase your contract through
the automatic investment program, different minimums will apply. If you choose
to contribute more money into your contract, each subsequent premium payment
must be at least $200 ($100 for the annuity direct deposit program). If your
contract's total value ever falls to zero, we may terminate it. Therefore, you
may need to pay more premiums to keep the contract in force.
11
<PAGE>
Applying for a contract
An authorized representative of the broker-dealer or financial institution
through whom you purchase your contract will assist you in (1) completing an
application or placing an order for a contract and (2) transmitting it, along
with your initial premium payment, to the John Hancock Annuity Servicing Office.
Once we receive your initial premium payment and all necessary information, we
will issue your contract and invest your initial premium payment within two
business days. If the information is not in good order, we will contact you to
get the necessary information. If for some reason, we are unable to complete
this process within 5 business days, we will either send back your money or get
your permission to keep it until we get all of the necessary information.
In certain situations, we will issue a contract upon receiving the order of
your broker-dealer or financial institution but delay the effectiveness of the
contract until we receive your signed application. (What we mean by "delaying
effectiveness" is that we will not allow allocations to the variable investment
options until we receive your signed application.) In those situations, if we do
not receive your signed application within our required time period, we will
deem the contract void from the beginning and return your premium payment.
We measure the years and anniversaries of your contract from its date of
issue. We use the term "contract year" to refer to each period of time between
anniversaries of your contract's date of issue.
Limits on premium payments
You can make premium payments of up to $1,000,000 in any one contract year.
The total of all new premium payments and transfers that you allocate to any
one variable investment option in any one contract year may not exceed
$1,000,000. While the annuitant is alive and the contract is in force, you can
make premium payments at any time before the date of maturity. However,
<TABLE>
<CAPTION>
YOU MAY NOT MAKE ANY
IF YOUR CONTRACT IS USED TO FUND PREMIUM PAYMENTS AFTER THE
ANNUITANT REACHES AGE
<S> <C>
- -----------------------------------------------------------------------------------------------------
a "tax qualified plan"* 70 1/2**
- -----------------------------------------------------------------------------------------------------
a non-tax qualified plan 8
5
- -----------------------------------------------------------------------------------------------------
</TABLE>
* as that term is used in "Tax Information," beginning on page 39.
** except for a Roth IRA, which has no age limit.
We will not issue a contract if the proposed annuitant is older than age 84.
We may waive any of these limits, however.
12
<PAGE>
Ways to make premium payments
Premium payments made by check or money order must be:
. drawn on a U.S. bank,
. drawn in U.S. dollars, and
. made payable to "John Hancock."
Premium payments after the initial premium payment should be sent to the John
Hancock Annuity Servicing Office at the address shown on page 2 of this
prospectus. We will also accept premium payments by wire. We will accept your
initial premium payment by exchange from another insurance company. You can find
information about wire payments under "Premium payments by wire," below.
You can find information about other methods of premium payment by contacting
your broker-dealer or by contacting the John Hancock Annuity Servicing Office.
Once we have issued your contract and it becomes effective, we credit you with
any additional premiums you pay as of the day we receive them at the John
Hancock Annuity Servicing Office.
Premium payments by wire
If you purchase your contract through a broker-dealer firm or financial
institution, you may transmit your initial premium payment by wire order. Your
wire orders must include information necessary to allocate the premium payment
among your selected investment options.
If your wire order is complete, we will invest the premium payment in your
selected investment options as of the day we received the wire order. If the
wire order is incomplete, we may hold your initial premium payment for up to 5
business days while attempting to obtain the missing information. If we can't
obtain the information within 5 business days, we will immediately return your
premium payment, unless you tell us to hold the premium payment for 5 more days
pending completion of the application. Nevertheless, until we receive and accept
a properly completed and signed application, we will not:
. issue a contract;
. accept premium payments; or
. allow other transactions.
After we issue your contract, subsequent premium payments may be transmitted
by wire through your bank. Information about our bank, our account number, and
the ABA routing
13
<PAGE>
number may be obtained from the John Hancock Annuity Servicing Office. Banks
may charge a fee for wire services.
HOW WILL THE VALUE OF MY INVESTMENT IN THE CONTRACT CHANGE OVER TIME?
Prior to a contract's date of maturity, the amount you've invested in any
variable investment option will increase or decrease based upon the investment
experience of the corresponding Fund. Except for certain charges we deduct, your
investment experience will be the same as if you had invested in the Fund
directly and reinvested all Fund dividends and distributions in additional
shares.
Like a regular mutual fund, each Fund deducts investment management fees and
other operating expenses. These expenses are shown in the fee table beginning on
page 5. However, unlike a mutual fund, we will also deduct charges relating to
the annuity guarantees and other features provided by the contract. These
charges reduce your investment performance and the amount we have credited to
your contract in any variable investment option. We describe these charges under
"What fees and charges will be deducted from my contract?" beginning on page 20.
The amount you've invested in a guarantee period will earn interest at the
rate we have set for that period. The interest rate depends upon the length of
the guarantee period you select. We currently make available various guarantee
periods with durations of up to ten years. As long as you keep your money in a
guarantee period until its expiration date, we bear all the investment risk on
that money.
However, if you prematurely transfer, "surrender" or otherwise withdraw money
from a guarantee period we will increase or reduce the remaining value in your
contract by an amount that approximates the impact that any changes in interest
rates would have had on the market value of a debt instrument with terms
comparable to that guarantee period. This "market value adjustment" (or "MVA")
imposes investment risks on you. We describe how the market value adjustments
work in "Calculation of market value adjustment ("MVA")" beginning on page 33.
At any time before the date of maturity, the "total value of your contract"
equals
. the total amount you invested,
. minus all charges we deduct,
. minus all withdrawals you have made,
. plus or minus any positive or negative MVAs that we have made at the
time of any premature withdrawals or transfers you have made from a
guarantee period,
. plus or minus each variable investment option's positive or negative
investment return that we credit daily to any of your contract's value
while it is in that option, and
14
<PAGE>
. plus the interest we credit to any of your contract's value while it is
in a guarantee period or in the guarantee rate account (see "Dollar-cost
averaging value program" on page 18).
WHAT ANNUITY BENEFITS DOES THE CONTRACT PROVIDE?
If your contract is still in effect on its date of maturity, it enters what is
called the "annuity period". During the annuity period, we make a series of
fixed or variable payments to you as provided under one of our several annuity
options. The form in which we will make the annuity payments, and the proportion
of such payments that will be on a fixed basis and on a variable basis, depend
on the elections that you have in effect on the date of maturity.
Therefore you should exercise care in selecting your date of maturity and your
choices that are in effect on that date.
You should carefully review the discussion under "The annuity period,"
beginning on page 35, for information about all of these choices you can make.
WHAT ARE THE TAX CONSEQUENCES OF OWNING A CONTRACT?
In most cases, no income tax will have to be paid on amounts you earn under a
contract until these earnings are paid out. All or part of the following
distributions from a contract may constitute a taxable payout of earnings:
. partial withdrawal (including systematic withdrawals)
. full withdrawal ("surrender")
. payment of death benefit proceeds as a single sum upon the
annuitant's death
. periodic payments under one of our annuity payment options
In addition, if you elect the accumulated value enhancement rider, the
Internal Revenue Service might take the position that the annual charge for this
rider is deemed a withdrawal from the contract which is subject to income tax
and, if applicable, the special 10% penalty tax for withdrawals before the age
of 59 1/2.
How much you will be taxed on a distribution is based upon complex tax rules
and depends on matters such as
. the type of the distribution,
. when the distribution is made,
. the nature of any tax qualified retirement plan for which the
contract is being used, if any, and
15
<PAGE>
. the circumstances under which the payments are made.
If your contract is issued in connection with a tax-qualified retirement plan,
all or part of your premium payments may be tax-deductible.
Special 10% tax penalties apply in many cases to the taxable portion of any
distributions from a contract before you reach age 59 1/2. Also, most
tax-qualified plans require that distributions from a contract commence and/or
be completed by a certain period of time. This effectively limits the period of
time during which you can continue to derive tax deferral benefits from any
tax-deductible premiums you paid or on any earnings under the contract.
THE FAVORABLE TAX BENEFITS AVAILABLE FOR ANNUITY CONTRACTS ISSUED IN
CONNECTION WITH TAX-QUALIFIED PLANS ARE ALSO GENERALLY AVAILABLE FOR OTHER TYPES
OF INVESTMENTS OF TAX-QUALIFIED PLANS, SUCH AS INVESTMENTS IN MUTUAL FUNDS,
EQUITIES AND DEBT INSTRUMENTS. YOU SHOULD CAREFULLY CONSIDER WHETHER THE
EXPENSES UNDER AN ANNUITY CONTRACT ISSUED IN CONNECTION WITH A TAX-QUALIFIED
PLAN, AND THE INVESTMENT OPTIONS, DEATH BENEFITS AND LIFETIME ANNUITY INCOME
OPTIONS PROVIDED UNDER SUCH AN ANNUITY CONTRACT, ARE SUITABLE FOR YOUR NEEDS AND
OBJECTIVES.
HOW CAN I CHANGE MY CONTRACT'S INVESTMENT ALLOCATIONS?
Allocation of premium payments
When you apply for your contract, you specify the variable investment options
or guarantee periods (together, your "investment options") in which your premium
payments will be allocated. You may change this investment allocation for future
premium payments at any time. Any change in allocation will be effective as of
receipt of your request at the John Hancock Annuity Servicing Office.
Currently, you may use a maximum of 18 investment options over the life of
your contract. For purposes of this limit, each contribution or transfer of
assets into a variable investment option or guarantee period that you are not
then using or have not previously used counts as one "use" of an investment
option. Renewing a guarantee period upon its expiration does not count as a new
use, however, if the new guarantee period has the same number of years as the
expiring one.
Transferring your assets
Up to 12 times during each year of your contract, you may transfer, free of
any charge,
. all or part of the assets held in one VARIABLE INVESTMENT OPTION to any
other available variable investment option or guarantee period, or
. all or part of the assets held in one GUARANTEE PERIOD to any other
available guarantee period or variable investment option.
16
<PAGE>
Currently, we impose no charge for transfers of more than 12 per contract year.
However, we reserve the right to impose a charge of up to $25 on any transfers
in excess of the 12 free transfers or to prohibit any such transfers altogether.
Transfers under our strategic rebalancing or dollar-cost averaging programs do
not count toward the 12 you are allowed each year. However, you may not
. transfer more than $1,000,000 in a contract year from any one variable
investment option or guarantee period, without our prior approval,
. make any transfer that would cause you to exceed the above-mentioned
maximum of 18 investment options,
. make any transfers, during the annuity period, to or from a guarantee
period, or
. make any transfer during the annuity period that would result in more
than four investment options being used at once.
We reserve the right to prohibit a transfer less than 30 days prior to the
contract's date of maturity.
The contract you are purchasing was not designed for professional market
timing organizations or other persons or entities that use programmed or
frequent transfers. The use of such transfers may be disruptive to a Fund. We
reserve the right to reject any premium payment or transfer request from any
person, if in our judgment, a Fund would be unable to invest effectively in
accordance with its investment objectives and policies, or would otherwise be
potentially adversely affected.
Procedure for transferring your assets
You may request a transfer in writing or, if you have authorized telephone
transfers, by telephone or fax. All transfer requests should be directed to the
John Hancock Annuity Servicing Office at the location shown on page 2. Your
request should include
. your name,
. daytime telephone number,
. contract number,
. the names of the investment options to and from which assets are
being transferred, and
. the amount of each transfer.
The request becomes effective on the day we receive your request, in proper
form, at the John Hancock Annuity Servicing Office.
17
<PAGE>
Telephone transfers
Once you have completed a written authorization, you may request a transfer by
telephone or by fax. If the fax request option becomes unavailable, another
means of telecommunication will be substituted.
If you authorize telephone transactions, you will be liable for any loss,
expense or cost arising out of any unauthorized or fraudulent telephone
instructions which we reasonably believe to be genuine, unless such loss,
expense or cost is the result of our mistake or negligence. We employ procedures
which provide safeguards against the execution of unauthorized transactions, and
which are reasonably designed to confirm that instructions received by telephone
are genuine. These procedures include requiring personal identification, tape
recording calls, and providing written confirmation to the owner. If we do not
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, we may be liable for any loss due to unauthorized or
fraudulent instructions.
The contract you are purchasing was not designed for professional market
timing organizations or other persons or entities that use programmed or
frequent transfers. For reasons such as that, we reserve the right to change our
telephone transaction policies or procedures at any time. We also reserve the
right to suspend or terminate the privilege altogether.
Dollar-cost averaging value program
You may elect to deposit any new premium payment of $5,000 or more in the
guarantee rate account. Each deposit will be depleted over the 6 or 12 month
period you select. The assets in this account will be automatically transferred
to one or more variable investment options over the period selected, beginning
on the date your new premium is deposited in the selected guarantee rate
account. At the time of deposit, you will designate:
. the variable investment options to which assets will be transferred;
. the percentage amount to be transferred to each such variable
investment option; and
. the period over which the transfers will occur.
Under our current administrative rules, you may have multiple deposits under
this program at the same time, but the time period for each such deposit must be
the same (i.e., all must be for 6 month periods or all must be for 12 month
periods). Transfers to the guarantee periods are not permitted under this
program, and transfers of your account value from a variable investment option
are not currently permitted to initiate the program. Assets in the account will
earn a fixed rate of return at the effective annual rate in effect at the time
the deposit is made into the account. Such rate will apply to any portion of the
deposit remaining in the account until the full amount of such deposit has been
transferred to the selected variable investment options. We will declare the
rate for the account from time to time.
18
<PAGE>
The guarantee rate account is part of our general account. You have no
interest in or preferential claim on any of the assets held in our general
account. The investments we purchase with amounts you allocate to the guarantee
rate account belong to us; any favorable investment performance on the assets
allocated to the account belongs to us. Instead, you earn interest at the
applicable fixed rate of return.
The dollar-cost averaging value program and the standard dollar-cost averaging
program (described below) cannot be used at the same time.
Standard dollar-cost averaging program
You may elect, at no cost, to automatically transfer assets from any variable
investment option to one or more other variable investment options on a monthly,
quarterly, semiannual, or annual basis. The following conditions apply to the
standard dollar-cost averaging program:
. You may elect the program only if the total value of your contract
equals $15,000 or more.
. The amount of each transfer must equal at least $250.
. You may change your dollar-cost averaging instructions at any time in
writing or, if you have authorized telephone transfers, by telephone.
. You may not use the standard dollar-cost averaging program and the
dollar-cost averaging value program at the same time.
. You may discontinue the program at any time.
. The program automatically terminates when the variable investment option
from which we are taking the transfers has been exhausted.
. Automatic transfers to or from guarantee periods are not permitted.
. We reserve the right to suspend or terminate the program at any time.
Strategic rebalancing
This program automatically re-sets the percentage of your account value
allocated to the variable investment options. Over time, the variations in the
investment results for each variable investment option you've elected will shift
the percentage allocations among them. The strategic rebalancing program will
periodically transfer your account value among the variable investment options
to reestablish the preset percentages you have chosen. Strategic rebalancing
would usually result in transferring amounts from a variable investment option
with relatively higher investment performance since the last rebalancing to one
with relatively lower investment performance. However, rebalancing can also
result in transferring amounts from a
19
<PAGE>
variable investment option with relatively lower current investment performance
to one with relatively higher current investment performance.
This program can be elected by sending the appropriate form to our Annuity
Servicing Office. You must specify the frequency for rebalancing (monthly,
quarterly, semi-annually or annually), the preset percentage for each variable
investment option, and a future beginning date.
Once elected, strategic rebalancing will continue until we receive notice of
cancellation of the option or notice of the death of the insured person.
The guarantee periods do not participate in and are not affected by strategic
rebalancing. We reserve the right to modify, terminate or suspend the strategic
rebalancing program at any time.
WHAT FEES AND CHARGES WILL BE DEDUCTED FROM MY CONTRACT?
Asset-based charge
We deduct a daily asset-based charge that compensates us primarily for our
administrative expenses and for the mortality and expense risks that we assume
under the contracts. On an annual basis, this charge equals 1.25% of the value
of the assets you have allocated to the variable investment options. (This
charge does not apply to assets you have in our guarantee periods.)
In return for the mortality risk charge, we assume the risk that annuitants as
a class will live longer than expected, requiring us to pay a greater number of
annuity payments. In return for the expense risk charge, we assume the risk that
our expenses relating to the contracts may be higher than we expected when we
set the level of the contracts' other fees and charges, or that our revenues
from such other sources will be less than expected.
Annual contract fee
Prior to the date of maturity of your contract, we will deduct $30 each year
from your contract if it has a total value on the contract anniversary of less
than $50,000. We deduct this annual contract fee at the beginning of each
contract year after the first contract year. We also deduct it if you surrender
your contract, unless your contract's total value is $50,000 or more at the time
of surrender. We take the deduction proportionally from each variable investment
option and each guarantee period you are then using. We reserve the right to
increase the annual contract fee to up to $50.
Premium taxes
We make deductions for any applicable premium or similar taxes based on the
amount of a premium payment. Currently, certain local jurisdictions assess a tax
of up to 5% of each premium payment.
20
<PAGE>
In most cases, we deduct a charge in the amount of the tax from the total
value of the contract only at the time of annuitization, death, surrender, or
withdrawal. We reserve the right, however, to deduct the charge from each
premium payment at the time it is made. We compute the amount of the charge by
multiplying the applicable premium tax percentage times the amount you are
withdrawing, surrendering, annuitizing or applying to a death benefit.
Withdrawal charge
If you withdraw some of your premiums from your contract prior to the date of
maturity ("partial withdrawal") or if you surrender (turn in) your contract, in
its entirety, for cash prior to the date of maturity ("total withdrawal" or
"surrender"), we may assess a withdrawal charge. Some people refer to this
charge as a "contingent deferred sales load." We use this charge to help defray
expenses relating to the sales of the contracts, including commissions paid and
other distribution costs.
Free withdrawal amounts: If you have any profit in your contract, you can
-----------------------
always withdraw that profit without any withdrawal charge. By "profit," we mean
the amount by which your contract's total value exceeds the premiums you have
paid and have not (as discussed below) already withdrawn. If your contract
doesn't have any profit (or you have withdrawn it all) you can still make
charge-free withdrawals, unless and until all of your withdrawals during the
same contract year exceed 10% of all of the premiums you have paid to date.
Here's how we determine the charge: If the amount you withdraw or surrender
----------------------------------
totals more than the free withdrawal amount during the contract year, we will
assess a withdrawal charge on any amount of the excess that we attribute to
premium payments you made within seven years of the date of the withdrawal or
surrender.
The withdrawal charge percentage depends upon the number of years that have
elapsed from the date you paid the premium to the date of its withdrawal, as
follows:
<TABLE>
<CAPTION>
YEARS FROM DATE OF PREMIUM PAYMENT TO
DATE OF SURRENDER OR WITHDRAWAL WITHDRAWAL CHARGE*
- ------------------------------------- ------------------
- ------------------------------------------------------------
<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%
- ------------------------------------------------------------
1 but less than 2........ 6%
- ------------------------------------------------------------
less than 1.............. 7%
- ------------------------------------------------------------
</TABLE>
* AS A PERCENTAGE OF THE AMOUNT OF SUCH PREMIUM THAT WE CONSIDER TO HAVE BEEN
WITHDRAWN (INCLUDING THE WITHDRAWAL CHARGE), AS EXPLAINED IN THE TEXT
IMMEDIATELY BELOW.
21
<PAGE>
Solely for purposes of determining the amount of the withdrawal charge, we
assume that the amount of each withdrawal that exceeds the free withdrawal
amount (together with any associated withdrawal charge) is a withdrawal first
from the earliest premium payment, and then from the next earliest premium
payment, and so forth until all payments have been exhausted. Once a premium
payment has been considered to have been "withdrawn" under these procedures,
that premium payment will not enter into any future withdrawal charge
calculations.
Here's how we deduct the withdrawal charge: We deduct the withdrawal charge
------------------------------------------
proportionally from each variable investment option and each guarantee period
being reduced by the surrender or withdrawal. For example, if 60% of the
withdrawal amount comes from a Growth option and 40% from the V.A. Money Market
option, then we will deduct 60% of the withdrawal charge from the Growth option
and 40% from the V.A. Money Market option. If any such option has insufficient
remaining value to cover the charge, we will deduct any shortfall from all of
your other investment options, pro-rata based on the value in each. If your
contract as a whole has insufficient surrender value to pay the entire charge,
we will pay you no more than the surrender value.
You will find examples of how we compute the withdrawal charge in Appendix B
to this prospectus.
When withdrawal charges don't apply: We don't assess a withdrawal charge in
-----------------------------------
the following situations:
. on amounts applied to an annuity option at the contract's date of
maturity or to pay a death benefit;
. on certain withdrawals if you have elected the rider that waives the
withdrawal charge; and
. on amounts withdrawn to satisfy the minimum distribution requirements
for tax qualified plans. (Amounts above the minimum distribution
requirements are subject to any applicable withdrawal charge, however.)
How an MVA affects the withdrawal charge: If you make a withdrawal from a
----------------------------------------
guarantee period at a time when the related MVA results in an upward adjustment
in your remaining value, we will calculate the withdrawal charge as if you had
withdrawn that much more. Similarly, if the MVA results in a downward
adjustment, we will compute any withdrawal charge as if you had withdrawn that
much less.
22
<PAGE>
Other charges
We offer, subject to state availability, four optional benefit riders. We
charge a separate monthly charge for each rider selected. At the beginning of
each month, we charge an amount equal to 1/12/th/ of the following annual
percentages:
<TABLE>
<CAPTION>
<S> <C>
0.10% of that portion of your
contract's total value attributable
to premiums that are still
Waiver of withdrawal charge subject to surrender charges
- -----------------------------------------------------------------------------------------------------------
Enhanced death benefit 0.15 % of your contract's total value
- -----------------------------------------------------------------------------------------------------------
0.35% of your initial premium payment
(we reserve the right to increase
this percentage on a uniform basis
for all riders issued in the same
Accumulated value enhancement* state)
- -----------------------------------------------------------------------------------------------------------
Guaranteed retirement income benefit 0.30% of your contract's total value
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* If you choose the accumulated value enhancement, you must also choose the
waiver of withdrawal charge.
We deduct the charge proportionally from each of your investment options,
based on your value in each.
HOW CAN I WITHDRAW MONEY FROM MY CONTRACT?
Surrenders and partial withdrawals
Prior to your contract's date of maturity, if the annuitant is living, you
may:
. surrender your contract for a cash payment of its "surrender value,"
or
. make a partial withdrawal of the surrender value.
The "surrender value" of a contract is the total value of a contract, after
any market value adjustment, MINUS the annual contract fee, any applicable
premium tax, any withdrawal charges, and any applicable rider charges. We will
determine the amount surrendered or withdrawn as of the date we receive your
request at the John Hancock Annuity Servicing Office.
Certain surrenders and withdrawals may result in taxable income to you or
other tax consequences as described under "Tax information," beginning on page
39. Among other things, if you make a full surrender or partial withdrawal from
your contract before you reach age 59 1/2, an additional federal penalty of 10%
generally applies to any taxable portion of the withdrawal.
We will deduct any partial withdrawal proportionally from each of your
investment options based on the value in each, unless you direct otherwise.
23
<PAGE>
Without our prior approval, you may not make a partial withdrawal
. for an amount less than $100, or
. if the remaining total value of your contract would be less than $1,000.
We reserve the right to terminate your contract if the value of your contract
becomes zero.
You generally may not make any surrenders or partial withdrawals once we begin
making payments under an annuity option.
Waiver of withdrawal charge rider
If your state permits, you may purchase an optional waiver of withdrawal
charge rider at the time of application. The "covered persons" under the rider
are the owner and the owner's spouse, unless the owner is a trust. If the owner
is a trust, the "covered persons" are the annuitant and the annuitant's spouse.
Under this rider, we will waive withdrawal charge on any withdrawals, if a
"covered person" has been diagnosed with one of the critical illnesses listed in
the rider, or if all the following conditions apply:
. a covered person becomes confined to a nursing home beginning at least
30 days after we issue your contract;
. such covered person remains in the nursing home for at least 90
consecutive days receiving nursing care; and
. the covered person's confinement is prescribed by a doctor and medically
necessary because of a covered physical or mental impairment.
You may not purchase this rider if either of the covered persons (1) is older
than 74 years at application or (2) was confined to a nursing home within the
past two years.
There is a charge for this rider, as set forth under "Other charges" on page
23, above. This rider (and the related charges) will terminate on the contract's
date of maturity, upon your surrendering the contract, or upon your written
request that we terminate it.
For a more complete description of the terms and conditions of this benefit,
you should refer directly to the rider. We will provide you with a copy on
request. In certain marketing materials, this rider may be referred to as
"CARESolutions."
If you purchase this rider:
. you and your immediate family will also have access to a national
program designed to help the elderly maintain their independent living
by providing advice about an array of elder care services available to
seniors, and
24
<PAGE>
. you will have access to a list of long-term care providers in your area
who provide special discounts to persons who belong to the national
program.
Systematic withdrawal plan
Our optional systematic withdrawal plan enables you to preauthorize periodic
withdrawals. If you elect this plan, we will withdraw a percentage or dollar
amount from your contract on a monthly, quarterly, semiannual, or annual basis,
based upon your instructions. Unless otherwise directed, we will deduct the
requested amount from each applicable investment option in the ratio that the
value of each bears to the total value of your contract. Each systematic
withdrawal is subject to any withdrawal charge or market value adjustment that
would apply to an otherwise comparable non-systematic withdrawal. See "How will
the value of my investment in the contract change over time?" beginning on page
14, and "What fees and charges will be deducted from my contract?" beginning on
page 20. The same tax consequences also generally will apply.
The following conditions apply to systematic withdrawal plans:
. You may elect the plan only if the total value of your contract equals
$25,000 or more.
. The amount of each systematic withdrawal must equal at least $100.
. If the amount of each withdrawal drops below $100 or the total value of
your contract becomes less that $5,000, we will suspend the plan and
notify you.
. You may cancel the plan at any time.
. We reserve the right to modify the terms or conditions of the plan at
any time without prior notice.
WHAT HAPPENS IF THE ANNUITANT DIES BEFORE MY CONTRACT'S DATE OF MATURITY?
If the annuitant dies before your contract's date of maturity, we will pay a
death benefit to the contract's beneficiary. If you have named more than one
annuitant, the death benefit will be payable upon the death of the surviving
annuitant prior to the date of maturity.
If your contract has joint owners, each owner will automatically be deemed to
be the beneficiary of the other. This means that any death benefit payable upon
the death of one owner who is the annuitant will be paid to the other owner. In
that case, any other beneficiary you have named would receive the death benefit
only if neither joint owner remains alive at the time the death benefit becomes
payable. (For a description of what happens upon the death of an owner who is
not the annuitant, see "Distribution requirements following death of owner,"
beginning on page 38.)
25
<PAGE>
We will pay a "standard" death benefit, unless you have chosen the "enhanced
death benefit rider," as discussed below.
Standard death benefit
The standard death benefit is the greater of:
. the total value of your contract, adjusted by any then-applicable
market value adjustment, or
. the total amount of premium payments made, minus any partial withdrawals
and related withdrawal charges.
We calculate the death benefit value as of the day we receive, in proper order
at the John Hancock Annuity Servicing Office:
. proof of the annuitant's death, and
. any required instructions as to method of settlement.
Unless you have elected an optional method of settlement, we will pay the
death benefit in a single sum to the beneficiary you chose prior to the
annuitant's death. If you have not elected an optional method of settlement, the
beneficiary may do so. However, if the death benefit is less than $5,000, we
will pay it in a lump sum, regardless of any election. You can find more
information about optional methods of settlement under "Annuity options,"
beginning on page 37.
Enhanced death benefit rider
If you are under age 80 when you apply for your contract, you may elect to
enhance the standard death benefit by purchasing an enhanced death benefit
rider. Under this rider, if the annuitant dies before the contract's date of
maturity, we will pay the beneficiary the greatest of:
. the amount of each premium you have paid, accumulated at 5% effective
annual interest (less any partial withdrawals you have taken and not
including any interest on such amounts after they are withdrawn);
. the highest total value of your contract (adjusted by any market value
adjustment) as of any anniversary of your contract to date, PLUS any
premium payments you have made since that anniversary, MINUS any
withdrawals you have taken (and any related withdrawal charges) since
that anniversary; or
. the total value of your contract (adjusted by any market value
adjustment) as of the date we receive due proof of the annuitant's
death.
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For these purposes, however, we count only those contract anniversaries that
occur (1) BEFORE we receive proof of death and (2) BEFORE the annuitant attains
age 80 1/2.
You may elect this rider ONLY when you apply for the contract and only if this
rider is available in your state. As long as the rider is in effect, you will
pay a monthly charge for this benefit. For a description of this charge, refer
to page 23 under "Other charges." For a more complete description of the terms
and conditions of this benefit, you should refer directly to the rider. We will
provide you with a copy on request.
This rider (and related charges) will terminate on the contract's date of
maturity, upon your surrendering the contract, or upon your written request that
we terminate it.
WHAT OTHER BENEFITS CAN I PURCHASE UNDER A CONTRACT?
In addition to the enhanced death benefit and waiver of withdrawal charge
riders discussed above, we currently make available two other optional benefits
if your state permits and you are under age 75 when you apply for a contract.
These optional benefits are provided under riders that contain many terms and
conditions not set forth below. Therefore, you should refer directly to each
rider for more complete information. We will provide you with a copy on request.
Accumulated value enhancement. Under this rider, we will make a contribution
-----------------------------
to the total value of the contract on a monthly basis if the covered person (who
must be the annuitant):
. is unable to perform at least 2 activities of daily living without
human assistance or has a cognitive impairment, and
. is receiving certain qualified services described in the rider.
The amount of the contribution (called the "Monthly Benefit") is shown in the
specifications page of the contract. However, the rider contains an inflation
protection feature that will increase the Monthly Benefit by 5% each year after
the 7th contract year. The specifications page of the contract also contains a
limit on how much the total value of the contract can be increased by this rider
(the "benefit limit"). The rider must be in effect for 7 years before any
increase will occur.
You may elect this rider only when you apply for the contract. You cannot
elect this rider unless you have also elected the waiver of withdrawal charge
rider. There is a monthly charge for this rider. The charge is described under
"Other charges" on page 23.
The rider will terminate if the contract terminates, if the covered person
dies, if the benefit limit is reached, if the owner is the covered person and
the ownership of the contract changes, or if, before annuity payments start, the
total value of the contract falls below an amount equal to 25% of your initial
premium payment. You may cancel the rider by written notice at any time. The
rider charge will terminate when the rider terminates.
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If you choose to continue the rider after the contract's date of maturity,
charges for the rider will be deducted from annuity payments and any Monthly
Benefit for which the covered person qualifies will be added to the next annuity
payment.
In certain marketing materials, this rider may be referred to as
"CARESolutions Plus."
Guaranteed retirement income benefit. Under this rider, we will guarantee the
------------------------------------
amount of annuity payments you receive, if the following conditions are
satisfied:
. The date of maturity must be within the 30 day period following a
contract anniversary.
. If the annuitant was age 45 or older on the date of issue, the contract
must have been in effect for at least 10 contract years on the date of
maturity and the date of maturity must be on or after the annuitant's
60th birthday and on or before the annuitant's 90th birthday.
. If the annuitant was less than age 45 on the date of issue, the contract
must have been in effect for at least 15 contract years on the date of
maturity and the date of maturity must be on or before the annuitant's
90th birthday.
You cannot elect this rider at any time after your contract is issued. If you
elect this rider you need not choose to receive the guaranteed income benefit
that it provides. Rather, unless and until such time as you exercise your option
to receive a guaranteed income benefit under this rider, you will continue to
have the option of exercising any other right or option that you would have
under the contract (including withdrawal and annuity payment options) if the
rider had not been added to it.
If you do decide to add this rider to your contract, and if you do ultimately
decide to take advantage of the guaranteed income it provides, we will
automatically provide that guaranteed income in the form of fixed payments under
our "Option A: life annuity with payments for guaranteed period" described below
under "Annuity options." The guaranteed period will automatically be a number of
years that the rider specifies, based on the annuitant's age at the annuity date
and whether your contract is purchased in connection with a tax-qualified plan.
(These specified periods range from 5 to 10 years.) You will have no discretion
to vary this form of payment, if you choose the guaranteed income benefit under
this rider.
If you exercise your rights under this rider, we guarantee that the amount we
apply to this annuity payment option will be the same amount as if your premium
payments had earned a return prescribed by the rider, rather than the return
they earned in the subaccounts you actually chose. Under this rider, we would
apply that guaranteed amount to the fixed annuity payment option specified in
the rider in the same manner and on the same terms as if you had, in the absence
of this rider, elected to apply total contract value in the same amount to that
same annuity payment option.
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There is a monthly charge for this rider, which is described at page 22 under
"Other charges." The rider (and the related charges) automatically terminate if
your contract is surrendered or the annuitant dies. After you've held your
contract for 10 years, you can terminate the rider by written request.
CAN I RETURN MY CONTRACT?
In most cases, you have the right to cancel your contract within 10 days (or
longer in some states and for contracts issued as "IRAs" ) after you receive it.
To cancel your contract, simply deliver or mail it to:
. John Hancock at the address shown on page 2, or
. the John Hancock representative who delivered the contract to you.
In most states, you will receive a refund equal to the total value of your
contract on the date of cancellation, adjusted by any then-applicable market
value adjustments and increased by any charges for premium taxes deducted by us
to that date. In some states, or if your contract was issued as an "IRA", you
will receive a refund of any premiums you've paid. The date of cancellation will
be the date we receive the contract.
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ADDITIONAL INFORMATION
This section of the prospectus provides additional information that is not
contained in the Basic Information section on pages 10 through 29.
<TABLE>
<CAPTION>
CONTENTS OF THIS SECTION PAGES TO SEE
<S> <C>
Description of John Hancock................................. 31
Who should purchase a contract?............................. 31
How we support the variable investment options.............. 32
How we support the guarantee periods........................ 32
How the guarantee periods work.............................. 32
The accumulation period..................................... 34
The annuity period.......................................... 35
Variable investment option valuation procedures............. 38
Distribution requirements following death of owner.......... 38
Miscellaneous provisions.................................... 39
Tax information............................................. 39
Performance information..................................... 44
Reports..................................................... 45
Voting privileges........................................... 45
Certain changes............................................. 45
Distribution of contracts................................... 45
Experts..................................................... 46
Registration statement...................................... 46
Condensed Financial Information............................. 47
Appendix A - Details About Our Guarantee Periods............ 50
Appendix B - Example of Withdrawal Charge Calculation....... 55
</TABLE>
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DESCRIPTION OF JOHN HANCOCK
We are John Hancock, a stock life insurance company that was organized in 1862
under the laws of the Commonwealth of Massachusetts. On February 1, 2000, we
converted to a stock company by "demutualizing" and changed our name from "John
Hancock Mutual Life Insurance Company". As part of the demutualization process,
we became a subsidiary of John Hancock Financial Services, Inc., a newly-formed
publicly-traded corporation. Our home office is located at 200 Clarendon Street,
Boston, Massachusetts 02117. We have authority to transact business in all 50
states. As of December 31, 1999, we had more than $71 billion of assets.
WHO SHOULD PURCHASE A CONTRACT?
We designed these contracts for individuals doing their own retirement
planning, including purchases under plans and trusts that do not qualify for
special tax treatment under the Internal Revenue Code of 1986 (the "Code"). We
provide general federal income tax information for contracts not purchased in
connection with a tax qualified retirement plan beginning on page 39.We also
designed the contracts for purchase under:
. traditional individual retirement annuity ("IRA") plans satisfying
the requirements of Section 408 of the Code;
. non-deductible IRA plans ("Roth IRAs") satisfying the requirements of
Section 408A of the Code;
. SIMPLE IRA plans adopted under Section 408(p) of the Code;
. Simplified Employee Pension plans ("SEPs") adopted under Section
408(k) of the Code;
. annuity purchase plans adopted under Section 403(b) of the Code by
public school systems and certain other tax-exempt organizations; and
. pension or profit-sharing plans qualified under section 401(a) of
the Code.
When a contract forms part of a tax-qualified plan it becomes subject to
special tax law requirements, as well as the terms of the plan documents
themselves, if any. Additional requirements may apply to plans that cover a
"self-employed individual" or an "owner-employee". Also, in some cases, certain
requirements under "ERISA" (the Employee Retirement Income Security Act of 1974)
may apply. Requirements from any of these sources may, in effect, take
precedence over (and in that sense modify) the rights and privileges that an
owner otherwise would have under a contract. Some such requirements may also
apply to certain retirement plans that are not tax-qualified.
We may include certain requirements from the above sources in endorsements or
riders to the affected contracts. In other cases, we do not. In no event,
however, do we undertake to assure a contract's compliance with all plan, tax
law, and ERISA requirements applicable to a tax-qualified or non tax-qualified
retirement plan. Therefore, if you use or plan to use a contract in connection
with such a plan, you must consult with competent legal and tax advisers to
ensure that you know of (and comply with) all such requirements that apply in
your circumstances.
To accommodate "employer-related" pension and profit-sharing plans, we provide
"unisex" purchase rates. That means the annuity purchase rates are the same for
males and females. Any questions you have as to whether you are participating in
an "employer-related" pension or profit-sharing plan should be directed to your
employer. Any question you or your employer have about unisex rates may be
directed to the John Hancock Annuity Servicing Office.
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HOW WE SUPPORT THE VARIABLE INVESTMENT OPTIONS
We hold the Fund shares that support our variable investment options in John
Hancock Variable Annuity Account H (the "Account"), a separate account
established by John Hancock under Massachusetts law. Each Account is registered
as a unit investment trust under the Investment Company Act of 1940 ("1940
Act").
The Account's assets, including the Trusts' shares, belong to John Hancock.
Each contract provides that amounts we hold in the Account pursuant to the
policies cannot be reached by any other persons who may have claims against us.
All of John Hancock's general assets also support John Hancock's obligations
under the contracts, as well as all of its other obligations and liabilities.
These general assets consist of all John Hancock's assets that are not held in
the Account (or in another separate account) under variable annuity or variable
life insurance contracts that give their owners a preferred claim on those
assets.
HOW WE SUPPORT THE GUARANTEE PERIODS
All of John Hancock's general assets (discussed above) support its obligations
under the guarantee periods (as well as all of its other obligations and
liabilities). To hold the assets that support primarily the guarantee periods,
we have established a "non-unitized" separate account. With a non-unitized
separate account, you have no interest in or preferential claim on any of the
assets held in the account. The investments we purchase with amounts you
allocated to the guarantee periods belong to us; any favorable investment
performance on the assets allocated to the guarantee periods belongs to us.
Instead, you earn interest at the guaranteed interest rate you selected,
provided that you don't surrender, transfer, or withdraw your assets prior to
the end of your selected guarantee period.
HOW THE GUARANTEE PERIODS WORK
Amounts you allocate to the guarantee periods earn interest at a guaranteed
rate commencing with the date of allocation. At the expiration of the guarantee
period, we will automatically transfer its total value to the Money Market
option under your contract, unless you elect to:
. withdraw all or a portion of any such amount from the contract,
. allocate all or a portion of such amount to a new guarantee period or
periods of the same or different duration as the expiring guarantee
period, or
. allocate all or a portion of such amount to one or more of the
variable investment options.
You must notify us of any such election, by mailing a request to us at the
John Hancock Annuity Servicing Office at least 30 days prior to the end of the
expiring guarantee period. We will notify you of the end of the guarantee period
at least 30 days prior to its expiration. The first day of the new guarantee
period or other reallocation will begin the day after the end of the expiring
guarantee period.
We currently make available guarantee periods with durations up to ten years.
If you select a guarantee period that extends beyond your contract's date of
maturity, your maturity date will automatically be changed to the annuitant's
95th birthday (or a later date, if we approve). We reserve the right to add or
delete guarantee periods for new allocations to or from those that are available
at any time.
Guaranteed interest rates
Each guarantee period has its own guaranteed rate. 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
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commenced. Each time you allocate or transfer money to a guarantee period, a new
guarantee period, with a new interest rate, begins to run with respect to that
amount. The amount allocated or transferred earns a guaranteed rate that will
continue unchanged until the end of that period. We will not make available any
guarantee period offering a guaranteed rate below 3%.
We make the final determination of guaranteed rates to be declared. We cannot
predict or assure the level of any future guaranteed rates.
You may obtain information concerning the guaranteed rates applicable to the
various guarantee periods, and the durations of the guarantee periods offered,
at any time by calling the John Hancock Annuity Servicing Office at the
telephone number shown on page 2.
Calculation of market value adjustment ("MVA")
If you withdraw, surrender, transfer, or otherwise remove money from a
guarantee period prior to its expiration date, we will apply a market value
adjustment. A market value adjustment also generally applies to:
. death benefits pursuant to your contract,
. amounts you apply to an annuity option, and
. amounts paid in a single sum in lieu of an annuity.
The market value adjustment increases or decreases your remaining value in the
guarantee period. If the value in that guarantee period is insufficient to pay
any negative MVA, we will deduct any excess from the value in your other
investment options pro-rata based on the value in each. If there is insufficient
value in your other investment options, we will in no event pay out more than
the surrender value of the contract. Here is how the MVA works:
We compare
. the guaranteed rate of the guarantee period from which the
assets are being taken WITH
. the guaranteed rate we are currently offering for guarantee periods of
the same duration as remains on the guarantee period from which the
assets are being taken.
If the first rate exceeds the second by more than 1/2 %, the market value
adjustment produces an increase in your contract's value.
If the first rate does not exceed the second by at least 1/2 %, the market
value adjustment produces a decrease in your contract's value.
For this purpose, we consider that the amount withdrawn from the guarantee
period includes the amount of any negative MVA and is reduced by the amount of
any positive MVA.
The mathematical formula and sample calculations for the market value
adjustment appear in Appendix A.
Limitation on market value adjustments
In no event will the market value adjustment (positive or negative) exceed the
amount of any excess interest earned during the guarantee period up to the date
of computation. "EXCESS INTEREST" means the dollar amount of interest earned to
date on the amount being withdrawn in excess of what would have been earned if
the effective annual interest rate had been 3%.
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Because of exemptive and exclusionary provisions, interests in the guarantee
periods have not been registered under the Securities Act of 1933, and our
non-unitized separate account has not been registered as an investment company
under the Investment Company Act of 1940. Accordingly, neither the general
account nor any of its assets are subject to the provision of these acts. We
have been advised that the SEC staff has not reviewed the disclosure in this
prospectus relating to the guarantee periods. Disclosure regarding the guarantee
periods may, however, be subject to certain generally-applicable provisions of
the Federal securities laws relating to accuracy and completeness of statements
made in prospectuses.
THE ACCUMULATION PERIOD
Your value in our variable investment options
Each premium payment or transfer that you allocate to a variable investment
option purchases "accumulation units" of that variable investment option.
Similarly, each withdrawal or transfer that you take from a variable
investment option (as well as certain charges that may be allocated to that
option) result in a cancellation of such accumulation units.
Valuation of accumulation units
To determine the number of accumulation units that a specific transaction will
purchase or cancel, we use the following formula:
dollar amount of transaction
DIVIDED BY
value of one accumulation unit for the applicable
variable investment option at the time of such transaction
The value of each accumulation unit will change daily depending upon the
investment performance of the Fund that corresponds to that variable investment
option and certain charges we deduct from such investment option. (See below
under "Variable investment option valuation procedures.")
Therefore, at any time prior to the date of maturity, the total value of your
contract in a variable investment option can be computed according to the
following formula:
number of accumulation units in the variable investment options
TIMES
value of one accumulation unit for the applicable variable investment
option at that time
Your value in the guarantee periods
On any date, the total value of your contract in a guarantee period equals:
. the amount of premium payments or transferred amounts allocated to
the guarantee period, MINUS
. the amount of any withdrawals or transfers paid out of the guarantee
period, MINUS
. the amount of any negative market value adjustments resulting from
such withdrawals or transfers, PLUS
. the amount of any positive market value adjustments resulting from
such withdrawals and transfers, MINUS
. the amount of any charges and fees deducted from that guarantee
period, PLUS
. interest compounded daily on any amounts in the guarantee period from
time to time at the effective annual rate of interest we have declared
for that guarantee period.
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THE ANNUITY PERIOD
Annuity payments are made to the annuitant, if still living. If more than one
annuitant is living at the date of maturity, the payments are made to the
younger of them.
Date of maturity
Your contract specifies the date of maturity, when payments from one of our
annuity options are scheduled to begin. You initially choose a date of maturity
when you complete your application for a contract. Unless we otherwise permit,
the date of maturity must be
. at least 6 months after the date the first premium payment is applied
to your contract, and
. no later than the maximum age specified in your contract (normally
age 95).
Subject always to these requirements, you may subsequently change the date of
maturity. The John Hancock Annuity Servicing Office must receive your new
selection at least 31 days prior to the new date of maturity, however. Also, if
you are selecting or changing your date of maturity for a contract issued under
a tax qualified plan, special limits apply. (See "Contracts purchased for a tax
qualified plan," beginning on page 41.)
Choosing fixed or variable annuity payments
During the annuity period, the total value of your contract must be allocated
to no more than four investment options. During the annuity period, we do not
offer the guarantee periods. Instead, we offer annuity payments on a fixed basis
as one investment option, and annuity payments on a variable basis for EACH
variable investment option.
We will generally apply (1) amounts allocated to the guarantee periods as of
the date of maturity to provide annuity payments on a fixed basis and (2)
amounts allocated to variable investment options to provide annuity payments on
a variable basis. If you are using more than four investment options on the date
of maturity, we will divide your contract's value among the four investment
options with the largest values (considering all guarantee periods as a single
option), pro-rata based on the amount of the total value of your contract that
you have in each.
We will make a market value adjustment to any remaining guarantee period
amounts on the date of maturity, before we apply such amounts to an annuity
payment option. We will also deduct any premium tax charge.
Once annuity payments commence, you may not make transfers from fixed to
variable or from variable to fixed.
Selecting an annuity option
Each contract provides, at the time of its issuance, for annuity payments to
commence on the date of maturity pursuant to Option A: "life annuity with 10
years guaranteed" (discussed under "Annuity options" on page 37).
Prior to the date of maturity, you may select a different annuity option.
However, if the total value of your contract on the date of maturity is not at
least $5,000, Option A: "life annuity with 10 years guaranteed" will apply,
regardless of any other election that you have made. You may not change the form
of annuity option once payments commence.
If the initial monthly payment under an annuity option would be less than $50,
we may make a single sum payment equal to the total surrender value of your
contract on the date the initial payment would be payable. Such single payment
would replace all other benefits.
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Subject to that $50 minimum limitation, your beneficiary may elect an annuity
option if:
. you have not made an election prior to the annuitant's death;
. the beneficiary is entitled to payment of a death benefit of at least
$5,000 in a single sum; and
. the beneficiary notifies us of the election prior to the date the
proceeds become payable.
Variable monthly annuity payments
We determine the amount of the first variable monthly payment under any
variable investment option by using the applicable annuity purchase rate for the
annuity option under which the payment will be made. The contract sets forth
these annuity purchase rates. In most cases they vary by the age and gender of
the annuitant or other payee.
The amount of each subsequent variable annuity payment under that variable
investment option depends upon the investment performance of that variable
investment option. Here's how it works:
. we calculate the actual net investment return of the variable investment
option (after deducting all charges) during the period between the dates
for determining the current and immediately previous monthly payments.
. if that actual net investment return exceeds the "assumed investment
rate" (explained below), the current monthly payment will be larger than
the previous one.
. if the actual net investment return is less than the assumed investment
rate, the current monthly payment will be smaller than the previous one.
Assumed investment rate
The assumed investment rate for any variable portion of your annuity payments
will be 3 1/2% per year, except as follows.
You may elect an assumed investment rate of 5% or 6%, provided such a rate is
available in your state. If you elect a higher assumed investment rate, your
initial variable annuity payment will also be higher. Eventually, however, the
monthly variable annuity payments may be smaller than if you had elected a lower
assumed investment rate.
Fixed monthly annuity payments
The dollar amount of each fixed monthly annuity payment is specified during
the entire period of annuity payments, according to the provisions of the
annuity option selected. To determine such dollar amount we first, in accordance
with the procedures described above, calculate the amount to be applied to the
fixed annuity option as of the date of maturity. We then divide the difference
by $1,000 and multiply the result by the greater of
. the applicable fixed annuity purchase rate shown in the appropriate
table in the contract; or
. the rate we currently offer at the time of annuitization. (This current
rate may be based on the sex of the annuitant, unless prohibited by
law.)
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Annuity options
Here are some of the annuity options that are available, subject to the terms
and conditions described above. We reserve the right to make available optional
methods of payment in addition to those annuity options listed here and in your
contract.
OPTION A: LIFE ANNUITY WITH PAYMENTS FOR A GUARANTEED PERIOD - We will make
monthly payments for a guaranteed period of 5, 10, or 20 years, as selected by
you or your beneficiary, and after such period for as long as the payee lives.
If the payee dies prior to the end of such guaranteed period, we will continue
payments for the remainder of the guarantee period to a contingent payee,
subject to the terms of any supplemental agreement issued.
Federal income tax requirements currently applicable to contracts used with
H.R. 10 plans and individual retirement annuities 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.
OPTION B: LIFE ANNUITY WITHOUT FURTHER PAYMENT ON DEATH OF PAYEE - We will
make monthly payments to the payee as long as he or she lives. We guarantee no
minimum number of payments.
OPTION C: JOINT AND LAST SURVIVOR - We will provide payments monthly,
quarterly, semiannually, or annually, for the payee's life and the life of the
payee's spouse/joint payee. Upon the death of one payee, we will continue
payments to the surviving payee. All payments stop at the death of the surviving
payee.
OPTION D: JOINT AND 1/2 SURVIVOR; OR JOINT AND 2/3 SURVIVOR - We will provide
payments monthly, quarterly, semiannually, and annually for the payee's life and
the life of the payee's spouse/joint payee. Upon the death of one payee, we will
continue payments (reduced to 1/2 or 2/3 the full payment amount) to the
surviving payee. All payments stop at the death of the surviving payee.
OPTION E: LIFE INCOME WITH CASH REFUND - We will provide payments monthly,
quarterly, semiannually, or annually for the payee's life. Upon the payee's
death, we will provide a contingent payee with a lump-sum payment, if the total
payments to the payee were less than the 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 - We will provide payments monthly,
quarterly, semiannually, or annually for a pre-determined period of time to a
maximum of 30 years. If the payee dies before the end of the fixed period,
payments will continue to a contingent payee until the end of the period.
OPTION G: INCOME OF A SPECIFIC AMOUNT - We will provide payments for a
specific amount. Payments will stop only when the amount applied and earnings
have been completely paid out. If the payee dies before receiving all the
payments, we will continue payments to a contingent payee until the end of the
contract.
With Options A, B, C, and D, we offer both fixed and/or variable annuity
payments. With Options E, F, and G, we offer only fixed annuity payments.
Payments under Options F and G must continue for 10 years, unless your contract
has been in force for 5 years or more.
If the payee is more than 85 years old on the date of maturity, the following
two options are not available without our consent:
. Option A: "life annuity with 5 years guaranteed" and
. Option B: "life annuity without further payment on the death of
payee."
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VARIABLE INVESTMENT OPTION VALUATION PROCEDURES
We compute the net investment return and accumulation unit values for each
variable investment option as of the end of each business day. A business day is
any date on which the New York Stock Exchange is open for regular trading.
Each business day ends at the close of regular trading for the day on that
exchange. Usually this is 4:00 p.m., Eastern time. On any date other than a
business day, the accumulation unit value or annuity unit value will be the same
as the value at the close of the next following business day.
DISTRIBUTION REQUIREMENTS FOLLOWING DEATH OF OWNER
If you did not purchase your contract under a tax qualified plan (as that term
is used below), the Code requires that the following distribution provisions
apply if you die. We summarize these provisions in the adjacent box. (If your
contract has joint owners, these provisions apply upon the death of the first to
die.)
In most cases, these provisions do not cause a problem if you are also the
annuitant under your policy. If you have designated someone other than yourself
as the annuitant, however, your heirs will have less discretion than you would
have had in determining when and how the contract's value would be paid out.
The Code imposes very similar distribution requirements on contracts used to
fund tax qualified plans. We provide the required provisions for tax qualified
plans in separate disclosures and endorsements.
Notice of the death of an owner or annuitant should be furnished promptly to
the John Hancock Annuity Servicing Office.
IF YOU DIE BEFORE ANNUITY PAYMENTS HAVE BEGUN:
. if the contract's designated beneficiary is your surviving spouse, your
spouse may continue the contract in force as the owner.
. if the beneficiary is not your surviving spouse OR if the beneficiary
is your surviving spouse but chooses not to continue the contract, the
entire interest (as discussed below) in the contract on the date of
our death must be:
(1) paid out in full within five years of your death or
(2) applied in full towards the purchase of a life annuity on the
beneficiary with payments commencing within one year of your death
If you are the annuitant, as well as the owner, the entire interest in the
contract on the date of your death equals the death benefit that then becomes
payable. If you are the owner but not the annuitant, the entire interest equals
. the surrender value if paid out in full within five years of your death,
or
. the total value of your contract applied in full towards the purchase of
a life annuity on the beneficiary with payments commencing within one
year of your death.
IF YOU DIE ON OR AFTER ANNUITY PAYMENTS HAVE BEGUN
. any remaining amount that we owe must be paid out at least as rapidly as
under the method of making annuity payments that is then in use.
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MISCELLANEOUS PROVISIONS
Assignment; change of owner or beneficiary
To qualify for favorable tax treatment, certain contracts can't be sold;
assigned; discounted; or pledged as collateral for a loan, as security for
the performance of an obligation, or for any other purpose, unless the owner is
a trustee under section 401(a) of the Internal Revenue Code.
Subject to these limits, while the annuitant is alive, you may designate
someone else as the owner by written notice to the John Hancock Annuity
Servicing Office. You choose the beneficiary in the application for the
contract. You may change the beneficiary by written notice no later than receipt
of due proof of the death of the annuitant. Changes of owner or beneficiary will
take effect when we receive them, whether or not you or the annuitant is then
alive. However, these changes are subject to:
. the rights of any assignees of record and
. certain other conditions referenced in the contract.
An assignment, pledge, or other transfer may be a taxable event. See "Tax
information" below. Therefore, you should consult a competent tax adviser before
taking any such action.
TAX INFORMATION
Our income taxes
We are taxed as a life insurance company under the Internal Revenue Code (the
"Code"). The Account is taxed as part of our operations and is not taxed
separately.
The contracts permit us to deduct a charge for any taxes we incur that are
attributable to the operation or existence of the contracts or the Account.
Currently, we do not anticipate making a charge for such taxes. If the level of
the current taxes increases, however, or is expected to increase in the future,
we reserve the right to make a charge in the future.
Contracts not purchased to fund a tax qualified plan
Undistributed gains
We believe the contracts will be considered annuity contracts under Section 72
of the Code. This means that, ordinarily, you pay no federal income tax on any
gains in your contract until we actually distribute assets to you.
However, a contract owned other than by a natural person does not generally
qualify as an annuity for tax purposes. Any increase in value therefore would
constitute ordinary taxable income to such an owner in the year earned.
Annuity payments
When we make payments under a contract in the form of an annuity, each payment
will result in taxable ordinary income to the payee, to the extent that each
such payment exceeds an allocable portion of your "investment in the contract"
(as defined in the Code). In general, your "investment in the contract" equals
the aggregate amount of premium payments you have made over the life of the
contract, reduced by any amounts previously distributed from the contract that
were not subject to tax.
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The Code prescribes the allocable portion of each such annuity payment to be
excluded from income according to one formula if the payments are variable and a
somewhat different formula if the payments are fixed. In each case, speaking
generally, the formula seeks to allocate an appropriate amount of the investment
in the contract to each payment. After the entire "investment in the contract"
has been distributed, any remaining payment is fully taxable.
Surrenders and withdrawals before date of maturity
When we make a single sum payment from a contract, you have ordinary taxable
income, to the extent the payment exceeds your "investment in the contract"
(discussed above). Such a single sum payment can occur, for example, if you
surrender your contract or if no annuity payment option is selected for a death
benefit payment.
When you take a partial withdrawal from a contract, including a payment under
a systematic withdrawal plan, all or part of the payment may constitute taxable
ordinary income to you. If, on the date of withdrawal, the total value of your
contract exceeds the investment in the contract, the excess will be considered
"gain" and the withdrawal will be taxable as ordinary income up to the amount of
such "gain". Taxable withdrawals may also be subject to the special penalty tax
for premature withdrawals as explained below. When only the investment in the
contract remains, any subsequent withdrawal made before the date of maturity
will be a tax-free return of investment. If you assign or pledge any part of
your contract's value, the value so pledged or assigned is taxed the same way as
if it were a partial withdrawal.
For purposes of determining the amount of taxable income resulting from a
single sum payment or a partial withdrawal, all annuity contracts issued by John
Hancock or its affiliates to the owner within the same calendar year will be
treated as if they were a single contract.
Penalty for premature withdrawals
The taxable portion of any withdrawal or single sum payment may also trigger
an additional 10% penalty tax. The penalty tax does not apply to payments made
to you after age 59 1/2, or on account of your death or disability. Nor will it
apply to withdrawals in substantially equal periodic payments over the life of
the payee (or over the joint lives of the payee and the payee's beneficiary).
Accumulated value enhancement rider
If you have elected the accumulated value enhancement rider, the Internal
Revenue Service might take the position that each charge associated with this
rider is deemed a withdrawal from the contract which would be subject to income
tax and, if you have not yet attained age 59 1/2, the special 10% penalty tax
for withdrawals from contracts before the age of 59 1/2. You should consult a
competent tax adviser before electing this rider.
Diversification requirements
Each of the Funds of the Trusts intends to qualify as a regulated investment
company under Subchapter M of the Code and meet the investment diversification
tests of Section 817(h) of the Code and the underlying regulations. Failure to
do so could result in current taxation to you on gains in your contract for the
year in which such failure occurred and thereafter.
The Treasury Department or the Internal Revenue Service may, at some future
time, issue a ruling or regulation presenting situations in which it will deem
contract owners to exercise "investor control" over the Fund shares that are
attributable to their contracts. The Treasury Department has said informally
that this could limit the number or frequency of transfers among variable
investment options. This could cause you to be taxed as if you were the direct
owner of your allocable portion of Fund shares. We reserve the right to amend
the contracts or the choice of investment options to avoid, if possible, current
taxation to the owners.
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Contracts purchased for a tax qualified plan
We have 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.
Withholding on rollover distributions
The tax law requires us to withhold 20% from certain distributions from tax
qualified plans. We do not have to make the withholding, however, if you
rollover your entire distribution to another plan and you request us to pay it
directly to the successor plan. Otherwise, the 20% mandatory withholding will
reduce the amount you can rollover to the new plan, unless you add funds to the
rollover from other sources. Consult a qualified tax adviser before making such
a distribution.
Contracts purchased as traditional IRAs
A traditional individual retirement annuity (as defined in Section 408 of the
Code) generally permits an eligible purchaser to make annual contributions which
cannot exceed the lesser of (a) 100% of compensation includable in your gross
income, or (b) $2,000 per year. You may also purchase an IRA contract for the
benefit of your spouse (regardless of whether your spouse has a paying job).
You can generally contribute up to $2,000 for each of you and your spouse (or,
if less, your combined compensation).
You may be entitled to a full deduction, a partial deduction or no deduction
for your traditional IRA contribution on your federal income tax return. The
amount of your deduction is based on the following factors:
. whether you or your spouse is an active participant in an employer
sponsored retirement plan,
. your federal income tax filing status, and
. your "Modified Adjusted Gross Income".
Your traditional IRA deduction is subject to phase out limits, based on your
Modified Adjusted Gross Income, which are applicable according to your filing
status and whether you or your spouse are active participants in an employer
sponsored retirement plan. You can still contribute to a traditional IRA even if
your contributions are not deductible.
If you have made any non-deductible contributions to an IRA contract, all or
part of any withdrawal or surrender proceeds, single sum death benefit or any
annuity payment, may be excluded from your taxable income when you receive the
proceeds. In general, all other amounts paid out from a traditional IRA contract
(in the form of an annuity, a single sum, or partial withdrawal), are taxable to
the payee as ordinary income. As in the case of a contract not purchased under a
tax-qualified plan, you may incur additional adverse tax consequences if you
make a surrender or withdrawal before you reach age 59 1/2 (unless certain
exceptions apply similar to those described above for such non-qualified
contracts).
The tax law requires that annuity payments under a traditional IRA contract
begin no later than April 1 of the year following the year in which the owner
attains age 70 1/2.
Contracts purchased as Roth IRAs
In general, you may make purchase payments of up to $2,000 each year for a
type of non-deductible IRA contract, known as a Roth IRA. Any contributions made
during the year for any other IRA you have will reduce the amount you otherwise
could contribute to a Roth IRA. Also, the $2000 maximum for a Roth IRA phases
out for single taxpayers with adjusted gross incomes between $95,000 and
$110,000, for married taxpayers filing jointly with adjusted gross incomes
between $150,000 and $160,000, and for a married taxpayer filing
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separately with adjusted gross income between $0 and $10,000.
If you hold your Roth IRA for at least five years the payee will not owe any
federal income taxes or early withdrawal penalties on amounts paid out from the
contract:
. after you reach age 59 1/2,
. on your death or disability, or
. to qualified first-time homebuyers (not to exceed a lifetime limitation
of $10,000) as specified in the Code.
The Code treats payments you receive from Roth IRAs that do not qualify for
the above tax free treatment first as a tax-free return of the contributions you
made. However, any amount of such non-qualifying payments or distributions that
exceed the amount of your contributions is taxable to you as ordinary income and
possibly subject to the 10% penalty tax.
You can convert a traditional IRA to a Roth IRA, unless
. you have adjusted gross income over $100,000, or
. you are a married taxpayer filing a separate return.
The $2,000 Roth IRA contribution limit does not apply to converted amounts.
You must, however, pay tax on any portion of the converted amount that would
have been taxed if you had not converted to a Roth IRA. No similar limitations
apply to rollovers from one Roth IRA to another Roth IRA.
Contracts purchased under SIMPLE IRA plans
In general, a small business employer may establish a SIMPLE IRA retirement
plan if the employer employed 100 or fewer employees earning at least $5,000
during the preceding year. As an eligible employee of the business, you may make
pre-tax contibutions to the SIMPLE IRA plan. You may specify the percentage of
compensation that you want to contribute under a qualified salary reduction
arrangement, provided the amount does not exceed certain contribution limits
(currently $6,000 a year). Your employer must elect to make a matching
contribution of up to 3% of your compensation or a non-elective contribution
equal to 2% of your compensation.
Contracts purchased under Simplified Employee Pension plans (SEPs)
SEPs are employer sponsored plans that may accept an expanded rate of
contributions from one or more employers. Employer contributions are flexible,
subject to certain limits under the Code, and are made entirely by the business
owner directly to a SEP-IRA owned by the employee. Contributions are
tax-deductible by the business owner and are not includable in income by
employees until withdrawn. The maximum amount that may be contributed to an SEP
is the lesser of 15% of compensation or the IRS compensation limit for the year
($170,000 for the year 2000).
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Contracts purchased under Section 403(b) plans
Under these tax-sheltered annuity arrangements, public school systems and
certain tax-exempt organizations can make premium payments into contracts owned
by their employees that are not taxable currently to the employee.
The amount of such non-taxable contributions each year
. is limited by a maximum (called the "exclusion allowance") that is
computed in accordance with a formula prescribed under the Code;
. may not, together with all other deferrals the employee elects under
other tax-qualified plans, exceed $10,500 (subject to cost of living
increases); and
. is subject to certain other limits (described in Section 415 of the
Code).
When we make payments from a 403(b) contract on surrender of the contract,
partial withdrawal, death of the annuitant, or commencement of an annuity
option, the payee ordinarily must treat the entire payment as ordinary taxable
income.
Moreover, the Code prohibits distributions from a 403(b) contract before the
employee reaches age 59 1/2, except
. on the employee's separation from service, death, or disability,
. with respect to distributions of assets held under a 403(b) contract
as of December 31, 1988, and
. transfers and exchanges to other products that qualify under Section
403(b).
Contracts purchased for pension and profit sharing plans qualified under
Section 401(a)
In general, an employer may deduct from its taxable income premium payments it
makes under a qualified pension or profit-sharing plan described in Section
401(a) of the Code. Employees participating in the plan generally do not have to
pay tax on such contributions when made. Special requirements apply if a 401(a)
plan covers an employee classified under the Code as a "self-employed
individual" or as an "owner-employee."
Annuity payments (or other payments, such as upon withdrawal, death or
surrender) generally constitute taxable income to the payee; and the payee must
pay income tax on the amount by which a payment exceeds its allocable share of
the employee's "investment in the contract" (as defined in the Code), if any.
In general, an employee's "investment in the contract" equals the aggregate
amount of premium payments made by the employee.
The non-taxable portion of each annuity payment is determined, under the Code,
according to one formula if the payments are variable and a somewhat different
formula if the payments are fixed. In each case, speaking generally, the formula
seeks to allocate an appropriate amount of the investment in the contract to
each payment. Favorable procedures may also be available to taxpayers who had
attained age 50 prior to January 1, 1986.
IRS required minimum distributions to the employee must begin no later than
April 1 of the year following the year in which the employee reaches age 70 1/2
or, if later, retires.
Contracts purchased for "top-heavy" plans
Certain plans may fall within the definition of "top-heavy plans" under
Section 416 of the Code. This can happen if the plan holds a significant amount
of its assets for the benefit of "key employees" (as defined in the Code). You
should consider whether your plan meets the definition. If so, you should take
care to consider the special limitations applicable to
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top-heavy plans and the potentially adverse tax consequences to key employees.
Tax-free rollovers
The discussion above covers certain fully or partially tax-free "rollovers"
from a regular IRA to a Roth IRA. You may also make a tax-free rollover from
. a traditional IRA to another traditional IRA,
. any tax-qualified plan to a traditional IRA, and
. any tax-qualified plan to another tax-qualified plan of the same type
(i.e. 403(b) to 403(b), corporate plan to corporate plan, etc.)
We do not have to withhold tax if you roll over your entire distribution and
you request us to pay it directly to the successor plan. Otherwise, 20%
mandatory withholding will apply and reduce the amount you can roll over to the
new plan, unless you add funds to the rollover from other sources. Consult a
qualified tax adviser before taking such a distribution.
See your own tax adviser
The above description of Federal income tax consequences to owners of and
payees under contracts, 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 under the Code governing tax qualified plans are extremely
complex and often difficult to understand. Changes to the tax laws may be
enforced retroactively. 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. 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 you should consult a qualified tax adviser.
PERFORMANCE INFORMATION
We may advertise total return information about investments made in the
variable investment options. We refer to this information as "Account level"
performance. In our Account level advertisements, we usually calculate total
return for 1, 5, and 10 year periods or since the beginning of the applicable
variable investment option. Total return at the Account level is the percentage
change between
. the value of a hypothetical investment in a variable investment
option at the beginning of the relevant period, and
. the value at the end of such period.
At the Account level, total return reflects adjustments for
. the mortality and expense risk charges,
. the annual contract fee, and
. any withdrawal charge payable if the owner surrenders his contract at
the end of the relevant period.
Total return at the Account level does not, however, reflect any premium tax
charges or any charges for optional benefit riders. Total return at the Account
level will be lower than that at the Trust level where comparable charges are
not deducted.
We may also advertise total return in a non-standard format in conjunction
with the standard format described above. The non-standard format is generally
the same as the standard format except that it will not reflect any withdrawal
charge and it may be for additional durations.
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We may advertise "current yield" and "effective yield" for investments in the
Money Market investment option. CURRENT YIELD refers to the income earned on
your investment in the Money Market investment option over a 7-day period and
then annualized. In other words, the income earned in the period is assumed to
be earned every 7 days over a 52-week period and stated as a percentage of the
investment.
EFFECTIVE YIELD is calculated in a similar manner but, when annualized, the
income earned by your investment is assumed to be reinvested and thus compounded
over the 52-week period. Effective yield will be slightly higher than current
yield because of this compounding effect of reinvestment.
Current yield and effective yield reflect all the recurring charges at the
Account level, but will not reflect any premium tax, any withdrawal charge, or
any charge for optional benefit riders.
REPORTS
At least annually, we will send you (1) a report showing the number and value
of the accumulation units in your contract and (2) the financial statements of
the Trusts.
VOTING PRIVILEGES
At meetings of the Trusts' shareholders, we will generally vote all the shares
of each Fund that we hold in the Account in accordance with instructions we
receive from the owners of contracts that participate in the corresponding
variable investment option.
CERTAIN CHANGES
We reserve the right, subject to applicable law, including any required
shareholder approval,
. to transfer assets that we determine to be your assets from the Account
to another separate account or investment option by withdrawing the same
percentage of each investment in the Account with proper adjustments to
avoid odd lots and fractions,
. to add or delete variable investment options,
. to change the underlying investment vehicles,
. to operate the Account in any form permitted by law, and
. to terminate the Account's registration under the 1940 Act, if such
registration should no longer be legally required.
Unless otherwise required under applicable laws and regulations, notice to or
approval of owners will not be necessary for us to make such changes.
DISTRIBUTION OF CONTRACTS
John Hancock Funds, Inc. ("JHFI") acts as principal distributor of the
contracts sold through this prospectus. JHFI is registered as a broker-dealer
under the Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc. Its address is 101 Huntington Avenue,
Boston, Massachusetts 02199.
You can purchase a contract through broker-dealers and certain financial
institutions who have entered into selling agreements with JHFI and John Hancock
and whose representatives are authorized by applicable law to sell annuity
products. We do not expect the compensation to such broker-dealers and financial
institutions to exceed 8.0% of premium payments (on a present value basis). For
limited periods of time, we may pay additional compensation to broker-dealers as
part of special sales promotions. We offer these contracts on a continuous
basis, but neither John Hancock nor JHFI is obligated to sell any particular
amount of contracts. We reimburse JHFI for direct and indirect expenses actually
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incurred in connection with the marketing and sale of these contracts. JHFI is
a subsidiary of John Hancock.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the financial statements
of John Hancock Life Insurance Company and the Account that appear in the
Statement of Additional Information, which also is a part of the registration
statement that contains this prospectus. Those financial statements are included
in the registration statement in reliance upon Ernst & Young's reports given
upon the firm's authority as experts in accounting and auditing.
REGISTRATION STATEMENT
This prospectus omits certain information contained in the registration
statement that we filed with the SEC. You can get more details from the SEC upon
payment of prescribed fees or through the SEC's internet web site (www.sec.gov).
Among other things, the registration statement contains a "Statement of
Additional Information" that we will send you without charge upon request. The
Table of Contents of the Statement of Additional Information lists the following
subjects that it covers:
<TABLE>
<CAPTION>
page of SAI
<S> <C>
VARIATIONS IN CHARGES..................................... 2
DISTRIBUTION.............................................. 2
CALCULATION OF PERFORMANCE DATA........................... 2
CALCULATION OF ANNUITY PAYMENTS........................... 4
ADDITIONAL INFORMATION ABOUT DETERMINING UNIT VALUES...... 7
PURCHASES AND REDEMPTIONS OF FUND SHARES.................. 7
THE ACCOUNT............................................... 8
DELAY OF CERTAIN PAYMENTS................................. 8
LIABILITY FOR TELEPHONE TRANSFERS......................... 8
VOTING PRIVILEGES......................................... 9
FINANCIAL STATEMENTS...................................... 10
</TABLE>
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CONDENSED FINANCIAL INFORMATION
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
The following table provides selected data for Revolution accumulation shares
for the first year of operation, beginning on August 10, 1999, for each
investment option that was available through the contracts on December 31, 1999.
<TABLE>
<CAPTION>
Year Ended
December 31,
1999
------------
<S> <C>
V.A. SOVEREIGN INVESTORS
Accumulation share value:
Beginning of period.......................................... $ 15.78
End of period............................................... $ 16.19
Number of Accumulation Shares outstanding at end of period... 146,207
V.A. CORE EQUITY
Accumulation share value:
Beginning of period.......................................... $ 19.17
End of period............................................... $ 20.49
Number of Accumulation Shares outstanding at end of period... 50,045
AGGRESSIVE BALANCED Accumulation share value:
Beginning of period.......................................... $ 10.00
End of period............................................... $ 10.66
Number of Accumulation Shares outstanding at end of period... 106,227
FIDELITY VIP CONTRAFUND(R)
Accumulation share value:
Beginning of period.......................................... $ 10.00
End of period............................................... $ 11.61
Number of Accumulation Shares outstanding at end of period... 258,149
EQUITY INDEX Accumulation share value:
Beginning of period.......................................... $ 20.31
End of period............................................... $ 22.54
Number of Accumulation Shares outstanding at end of period... 96,446
LARGE CAP VALUE CORE
Accumulation share value:
Beginning of period.......................................... $ 10.00
End of period............................................... $ 10.31
Number of Accumulation Shares outstanding at end of period... 23,034
V.A. FINANCIAL INDUSTRIES
Accumulation share value:
Beginning of period.......................................... $ 13.56
End of period............................................... $ 14.25
Number of Accumulation Shares outstanding at end of period... 72,037
LARGE CAP AGGRESSIVE GROWTH
Accumulation share value:
Beginning of period.......................................... $ 10.00
End of period............................................... $ 11.97
Number of Accumulation Shares outstanding at end of period... 76,962
FIDELITY VIP GROWTH Accumulation share value:
Beginning of period.......................................... $ 10.00
End of period............................................... $ 12.04
Number of Accumulation Shares outstanding at end of period... 277,617
MFS GROWTH Accumulation share value:
Beginning of period.......................................... $ 10.00
End of period............................................... $ 12.36
Number of Accumulation Shares outstanding at end of period... 67,322
LARGE/MID CAP VALUE Accumulation share value:
Beginning of period.......................................... $ 10.00
End of period............................................... $ 10.43
Number of Accumulation Shares outstanding at end of period... 18,040
MID CAP BLEND Accumulation share value:
Beginning of period.......................................... $ 10.00
End of period............................................... $ 11.11
Number of Accumulation Shares outstanding at end of period... 19,277
AIM V.I. VALUE
Accumulation share value:
Beginning of period.......................................... $ 10.00
End of period............................................... $ 11.77
Number of Accumulation Shares outstanding at end of period... 232,933
MFS RESEARCH Accumulation share value:
Beginning of period.......................................... $ 10.00
End of period............................................... $ 11.86
Number of Accumulation Shares outstanding at end of period... 69,186
AIM V.I. GROWTH
Accumulation share value:
Beginning of period.......................................... $ 10.00
End of period............................................... $ 12.30
Number of Accumulation Shares outstanding at end of period... 125,305
FUNDAMENTAL MID CAP GROWTH
Accumulation share value:
Beginning of period.......................................... $ 10.00
End of period............................................... $ 15.39
Number of Accumulation Shares outstanding at end of period.... 57,042
SMALL/MID CAP CORE Accumulation share value:
Beginning of period.......................................... $ 11.00
End of period............................................... $ 12.73
Number of Accumulation Shares outstanding at end of period... 5,452
SMALL/MID CAP VALUE Accumulation share value:
Beginning of period.......................................... $ 10.00
End of period............................................... $ 10.46
Number of Accumulation Shares outstanding at end of period... 13,758
SMALL/MID CAP GROWTH Accumulation share value:
Beginning of period.......................................... $ 18.07
End of period............................................... $ 18.98
Number of Accumulation Shares outstanding at end of period... 8,624
SMALL CAP GROWTH Accumulation share value:
Beginning of period.......................................... $ 14.27
End of period............................................... $ 21.19
Number of Accumulation Shares outstanding at end of period... 66,426
MFS NEW DISCOVERY Accumulation share value:
Beginning of period.......................................... $ 10.00
End of period............................................... $ 15.26
Number of Accumulation Shares outstanding at end of period... 17,011
GLOBAL BALANCED Accumulation share value:
Beginning of period.......................................... $ 12.24
End of period............................................... $ 12.98
Number of Accumulation Shares outstanding at end of period... 4,357
TEMPLETON INTERNATIONAL Accumulation share value (1):
Beginning of period.......................................... $ 10.00
End of period............................................... $ 11.02
Number of Accumulation Shares outstanding at end of period... 33,891
INTERNATIONAL EQUITY Accumulation share value:
Beginning of period.......................................... $ 10.00
End of period............................................... $ 12.06
Number of Accumulation Shares outstanding at end of period... 12,095
FIDELITY VIP OVERSEAS Accumulation share value:
Beginning of period.......................................... $ 10.00
End of period............................................... $ 12.48
Number of Accumulation Shares outstanding at end of period... 54,981
TEMPLETON DEVELOPING MARKETS
Accumulation share value:
Beginning of period.......................................... $ 10.00
End of period............................................... $ 11.86
Number of Accumulation Shares outstanding at end of period... 33,609
SHORT TERM BOND Accumulation share value:
Beginning of period.......................................... $ 12.34
End of period............................................... $ 12.48
Number of Accumulation Shares outstanding at end of period... 32,658
BOND INDEX
Accumulation share value:
Beginning of period.......................................... $ 9.65
End of period............................................... $ 9.63
Number of Accumulation Shares outstanding at end of period... 65,027
V.A. BOND
Accumulation share value:
Beginning of period.......................................... $ 11.94
End of period............................................... $ 12.01
Number of Accumulation Shares outstanding at end of period... 48,019
V.A. STRATEGIC INCOME
Accumulation share value:
Beginning of period.......................................... $ 12.25
End of period............................................... $ 12.62
Number of Accumulation Shares outstanding at end of period... 55,644
HIGH YIELD BOND Accumulation share value:
Beginning of period.......................................... $ 10.05
End of period............................................... $ 10.27
Number of Accumulation Shares outstanding at end of period... 26,664
V.A. MONEY
MARKET Accumulation share value:
Beginning of period.......................................... $ 1.11
End of period............................................... $ 1.12
Number of Accumulation Shares outstanding at end of period... 5,076,900
</TABLE>
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APPENDIX A - DETAILS ABOUT OUR GUARANTEE PERIODS
INVESTMENTS THAT SUPPORT OUR GUARANTEE PERIODS
We back our obligations under the guarantee periods with John Hancock's
general assets. Subject to applicable law, we have sole discretion over the
investment of our general assets (including those held in our "non-unitized"
separate account that primarily supports the guarantee periods). We invest these
amounts in compliance with applicable state insurance laws and regulations
concerning the nature and quality of our general investments.
We invest the non-unitized separate account assets, according to our detailed
investment policies and guidelines, in fixed income obligations, including:
. corporate bonds,
. mortgages,
. mortgage-backed and asset-backed securities, and
. government and agency issues.
We invest primarily in domestic investment-grade securities. In addition, we
use derivative contracts only for hedging purposes, to reduce ordinary business
risks associated with changes in interest rates, and not for speculating on
future changes in the financial markets. Notwithstanding the foregoing, we are
not obligated to invest according to any particular strategy.
GUARANTEED INTEREST RATES
We declare the guaranteed rates from time to time as market conditions and
other factors dictate. We advise you of the guaranteed rate for a selected
guarantee period at the time we:
. receive your premium payment,
. effectuate your transfer, or
. renew your guarantee period.
We have no specific formula for establishing the guaranteed rates for the
guarantee periods. The rates may be influenced by interest rates generally
available on the types of investments acquired with amounts allocated to the
guarantee period. In determining guarantee rates, we may also consider, among
other factors, the duration of the guarantee period, regulatory and tax
requirements, sales and administrative expenses we bear, risks we assume, our
profitability objectives, and general economic trends.
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COMPUTATION OF MARKET VALUE ADJUSTMENT
We determine the amount of the market value adjustment by multiplying the
amount being taken from the guarantee period (before any applicable withdrawal
charge) by a factor expressed by the following formula:
LOGO
where,
. G is the guaranteed rate in effect for the current guarantee period.
. C is the current guaranteed rate in effect for new guarantee periods
with duration equal to the number of years remaining in the current
guarantee period (rounded to the nearest whole number of years). If we
are not currently offering such a guarantee period, we will declare a
guarantee rate, solely for this purpose, consistent with interest rates
currently available.
. N is the number of complete months from the date of withdrawal to the
end of the current guarantee period. (If less than one complete month
remains, N equals one unless the withdrawal is made on the last day of
the guarantee period, in which case no adjustment applies.)
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 guaranteed period
- -------------------------------------------------------------------------------------
Amount withdrawn or transferred $11,664
- -------------------------------------------------------------------------------------
Guaranteed rate (g) 8%
- -------------------------------------------------------------------------------------
Guaranteed rate for new 5 year 7%
guarantee (c)
- -------------------------------------------------------------------------------------
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,
or $11,664 + $1,055)
49
<PAGE>
MARKET VALUE ADJUSTMENT:
LOGO
Amount withdrawn or transferred (adjusted for market value adjustment): $11,664
+ $273.79 = $11,937.79
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 guaranteed period
- -------------------------------------------------------------------------------------
Amount withdrawn or transferred $11,664
- -------------------------------------------------------------------------------------
Guaranteed rate (g) 8%
- -------------------------------------------------------------------------------------
Guaranteed rate for new 5 year 9%
guarantee (c)
- -------------------------------------------------------------------------------------
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,or $11,664 -$1,055)
MARKET VALUE ADJUSTMENT:
LOGO
Amount withdrawn or transferred (adjusted for market value adjustment): $11,664
- - $777.31= $10,886.69
50
<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 guaranteed 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,
or $11,664 + $1,055)
MARKET VALUE ADJUSTMENT:
LOGO
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
- ------------------------------------------------------------------------------------------------------------------
Guarantee period 7 years
- ------------------------------------------------------------------------------------------------------------------
Time of withdrawal or transfer beginning of 3rd year of guaranteed 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>
51
<PAGE>
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,
or $11,664 - $1,055)
MARKET VALUE ADJUSTMENT:
LOGO
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
*All interest rates shown have been arbitrarily chosen for purposes of these
examples. In most cases they will bear little or no relation to the rates we are
actually guaranteeing at any time.
52
<PAGE>
APPENDIX B - EXAMPLE OF WITHDRAWAL CHARGE CALCULATION
ASSUME THE FOLLOWING FACTS:
On January 1, 2001, you make a $5,000 initial premium payment and we issue you
a contract.
On January 1, 2002, you make a $1,000 premium payment On January 1, 2003, you
make a $1,000 premium payment.
On January 1, 2004, the total value of your contract is $7,500 because of
favorable investment earnings.
Now assume you make a partial withdrawal of $7,000 (no tax withholding) on
January 2, 2004. In this case, assuming no prior withdrawals, we would
deduct a CDSL of $289.36. We withdraw a total of $7,289.36 from your
contract.
$7,000.00 -- withdrawal request payable to you
+ 289.36 -- withdrawal charge payable to us
---------
$7,289.36 -- total amount withdrawn from your contract
HERE IS HOW WE DETERMINE THE WITHDRAWAL CHARGE:
1. We FIRST distribute to you the $500 profit you have in your contract
($7,500 total contract value less $7,000 of premiums you have paid) under
the free withdrawal provision.
2. Next we repay to you the $5,000 premium you paid in 2001. Under the free
withdrawal provision, $200 of that premium is charge free ($7,000 total
premiums paid x 10%; less the $500 free withdrawal in the same contract
year described in paragraph 1 above). We assess a withdrawal charge on the
remaining balance of $4,800 from your 2001 premium. Because you made that
premium payment 3 years ago, the withdrawal charge percentage is 4%. We
deduct the resulting $192 from your contract to cover the withdrawal charge
on your 2001 premium payment. We pay the remainder of $4,608 to you as a
part of your withdrawal request.
$5,000
- 200 -- free withdrawal amount (payable to you)
------
$4,800
x.04
------
$ 192 -- withdrawal charge on 2001 premium payment (payable to us)
$4,800
- 192
------
$4,608 -- part of withdrawal request payable to you
3. We NEXT deem the entire amount of your 2002 PREMIUM PAYMENT to be withdrawn
and
53
<PAGE>
we assess a withdrawal charge on that $1,000 amount. Because you made this
premium payment 2 years ago, the withdrawal charge percentage is 5%. We
deduct the resulting $50 from your contract to cover the withdrawal charge
on your 2002 premium payment. We pay the remainder of $950 to you as a part
of your withdrawal request.
$1,000
x .05
------
$50 -- withdrawal charge on 2002 premium payment (payable to us)
$1,000
- 50
------
$950 -- part of withdrawal request payable to you
4. We NEXT determine what additional amount we need to withdraw to provide you
with the total $7,000 you requested, after the deduction of the withdrawal
charge on that additional amount. We have already allocated $500 from
profits under paragraph 1 above, $200 of additional free withdrawal amount
under paragraph 2, $4,608 from your 2001 premium payment under paragraph 2,
and $950 from your 2003 premium payment under paragraph 3. Therefore, $742
is needed to reach $7,000.
$7,000 -- total withdrawal amount requested - 500 -- profit - 200 -- free
withdrawal amount
-4,608 -- payment deemed from initial premium payment - 950 -- payment deemed
from 2002 premium payment
------
$ 742 -- additional payment to you needed to reach $7,000
We know that the withdrawal charge percentage for this remaining amount is 6%,
because you are already deemed to have withdrawn all premiums you paid prior
to 2003. We use the following formula to determine how much more we need to
withdraw:
Remainder due to you = Withdrawal needed - [applicable withdrawal
charge percentage times withdrawal needed]
$742 = x - [.06x]
$742 = .94x
$742/.94 = x
$789.36 = x
$789.36 -- deemed withdrawn from 2003 premium payment
- $742.00 -- part of withdrawal request payable to you
---------
$ 47.36 -- withdrawal charge on 2003 premium deemed withdrawn (payable
to us)
54
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
SUPPLEMENT DATED MAY 1, 2000
TO
PROSPECTUS DATED MAY 1, 2000
NEW YORK ONLY
Notwithstanding any language in the prospectus to the contrary, the following
shall apply with respect to REVOLUTION VALUE VARIABLE ANNUITY contracts
delivered or issued for delivery in New York:
. The maximum annual contract fee is $30 each year.
. The waiver of withdrawal charge rider described on page 24 is not
available.
. If the annuitant dies before your contract's date of maturity, the
"standard" death benefit is the greater of the total value of your contract
(without adjustment by any then-applicable market value adjustment), or the
total amount of premium payments made (minus any partial withdrawals and
related withdrawal charges).
. The enhanced death benefit rider described on page 26 is not available.
Instead, if you are under age 80 when you apply for your contract, you may
elect to enhance the standard death benefit by purchasing a "one year
stepped-up" death benefit rider. Under this rider, if the annuitant dies
before the contract's date of maturity, we will pay the beneficiary the
greater of (i) the standard death benefit, or (ii) the highest total value
of your contract as of any anniversary of your contract to date (prior to
the anniversary of the contract nearest the annuitant's 81st birthday), plus
any premium payments you have made since that anniversary, minus any
withdrawals you have taken (and any related withdrawal charges) since that
anniversary. We count only those contract anniversaries that occur before we
receive proof of death. We charge a separate monthly charge for this rider
at the beginning of each month. The charge is 1/12th of an annual percentage
equal to 0.15% of your contract's total value. For a more complete
description of the terms and conditions of this benefit, you should refer
directly to the rider. We will provide you with a copy on request. This
rider (and related charges) will terminate on the contract's date of
maturity, upon your surrendering the contract, or upon your written request
that we terminate it.
. The accumulated value enhancement and guaranteed retirement income
benefit described on pages 27 and 28 are not available.
. If you return your contract for any reason within 10 days after you
receive it, we will pay you the value of your contract, increased by any
charges deducted from your premium payments before allocation to the
variable investment options, and with no adjustments for the market value
adjustment. If your contract has no value, we will pay you at least the
amount we reserved for future liability under the contract.
. We will notify you of the end of a guarantee period at least 45 days
prior to its expiration. If you select a guarantee period that extends
beyond your contract's date.
55
<PAGE>
of maturity, your maturity date will automatically be changed to the
annuitant's 90th birthday.
. The market value adjustment described on page 33 will not apply to death
benefits. We will also calculate the MVA under a different formula then the
formula shown in Appendix A
We compare
. the guaranteed rate of the guarantee period from which the assets are
being taken WITH
. the guaranteed rate we are currently offering for guarantee periods of
the same duration as remains on the guarantee period from which the
assets are being taken.
If the first rate exceeds the second by more than 1/4%, the market value
adjustment produces an increase in your contract's value.
If the first rate does not exceed the second by at least 1/4%, the market value
adjustment produces a decrease in your contract's value.
. The factor we will use to compute the Market value adjustment is
expressed by the following formula:
LOGO
. In Sample Calculation 1: Positive Adjustment, shown on pages 51 and 52,
the MARKET VALUE ADJUSTMENT is::
LOGO
The amount withdrawn or transferred (adjusted for market value adjustment)
is
$11,664 + $413.58 = $$12,077.58
56
<PAGE>
. In Sample Calculation 2: Negative Adjustment, shown on page 51, the
MARKET VALUE ADJUSTMENT is:
LOGO
The amount withdrawn or transferred (adjusted for market value adjustment)
is
$11,664 - $652.18 = $11,011.82
. In Sample Calculation 3: Positive Adjustment Limited by Amount of Excess
Interest, shown on page 53, the MARKET VALUE ADJUSTMENT is: :
LOGO
Since the market value adjustment exceeds the amount of excess interest
of $1,055, the actual market value adjustment is - $1,055.
. In Sample Calculation 4: Negative Adjustment Limited by Amount of Excess
Interest, shown on pages 53 and 54, the MARKET VALUE ADJUSTMENT is:
LOGO
Since the market value adjustment exceeds the amount of excess interest
of $1,055, the actual market value adjustment is -$1,055.
57
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
REVOLUTION VALUE
DEFERRED COMBINATION FIXED AND VARIABLE ANNUITY CONTRACTS
FUNDED IN
JOHN HANCOCK LIFE INSURANCE COMPANY
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
__________________
This statement of additional information ("SAI"), dated May 1, 2000 is not a
prospectus. It is intended that this SAI be read in conjunction with the
prospectus of John Hancock Variable Annuity Account H (the "Account") dated May
1, 2000, for the contracts being offered. Terms used in this SAI that are not
otherwise defined herein have the same meanings given to them in the prospectus,
unless the context requires otherwise. A copy of the prospectus may be obtained
from the John Hancock Annuity Servicing Office, 529 Main Street, Charlestown,
Massachusetts 02129, telephone number 1-800-824-0335.
TABLE OF CONTENTS
_________________
<TABLE>
<CAPTION>
PAGE OF SAI
-----------
<S> <C>
Variations in Charges..................................................... 2
Distribution.............................................................. 2
Calculation of Performance Data .......................................... 2
Calculation of Annuity Payments........................................... 4
Additional Information About Determining Unit Values...................... 7
Purchases and Redemptions of Fund Shares.................................. 7
The Account............................................................... 8
Delay of Certain Payments................................................. 8
Liability for Telephone Transfers......................................... 8
Voting Privileges......................................................... 9
Financial Statements...................................................... 10
</TABLE>
ACCT H (REVVAL) 5/00
1
<PAGE>
VARIATIONS IN CHARGES
In the future, we may allow a reduction in or the elimination of the
withdrawal charge, the charge for mortality and expense risks, the
administrative services charge, the annual contract fee, or the charge for any
rider. The affected contracts would involve sales 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 John Hancock 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 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.
We will make any reduction in charges or fees according to our rules in
effect at the time an application for a contract is approved. We reserve 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.
DISTRIBUTION
The distribution of the contracts through John Hancock Funds, Inc. ("JHFI")
is continuous. Pursuant to a marketing and distribution agreement between John
Hancock and JHFI, the amounts we paid JHFI under that agreement for such
services were as follows:
YEAR AMOUNT PAID TO JHFI
---- -------------------
1999 6,338,774
1998 $4,655,842
1997 $1,869,477
CALCULATION OF PERFORMANCE DATA
The 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 variable investment options. 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 variable investment
options.
AVERAGE ANNUAL TOTAL RETURN
The Account will calculate the average annual total return for each
variable investment option (other than the Money Market option), according to
the following formula prescribed by the SEC:
P x ( 1 + T ) n = ERV
where P = a hypothetical initial premium payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 premium payment, made at the beginning of
such period (or fractional portion thereof)
2
<PAGE>
Average annual total return is the annual compounded rate of return for a
variable investment option that would have produced the ending redeemable value
over the stated period if the performance remained constant throughout. The
calculation assumes a single $1,000 premium payment made into the variable
investment option at the beginning of the period and full redemption at the end
of the period. It reflects adjustments for all Trust and contract level charges
except any premium tax charge or charges for optional rider benefits described
in the prospectus. The annual contract fee has been included as an annual
percentage of assets.
On the basis, the following table shows the average total return for each
variable investment option for the periods ended December 31, 1999:
AVERAGE ANNUALIZED TOTAL RETURNS
--------------------------------
<TABLE>
<CAPTION>
DATE OF
VARIABLE INVESTMENT OPTION/*/ YEAR TO DATE 1 YEAR/**/ 5 YEAR 10 YEAR INCEPTION/***/
- -----------------------------
<S> <C> <C> <C> <C> <C>
V.A. Sovereign
Investors......................... -3.05% -3.05% N/A N/A 8/29/96
V.A. Core Equity.................. 6.42% 6.42% N/A N/A 8/29/96
Aggressive Balanced............... N/A N/A N/A N/A 8/30/99
Fidelity VIP
Contrafund(R)..................... 16.55% 16.55% N/A N/A 8/29/96
Equity Index...................... 13.53% 13.53% N/A N/A 8/29/96
Large Cap Value CORE.............. N/A N/A N/A N/A 8/30/99
V.A. Financial
Industries........................ -6.15% -6.15% N/A N/A 8/29/96
Large Cap Aggressive
Growth............................ N/A N/A N/A N/A 8/30/99
Fidelity VIP Growth............... 29.53% 29.53% N/A N/A 8/29/96
MFS Growth........................ N/A N/A N/A N/A 5/3/99
Large/Mid Cap Value............... N/A N/A N/A N/A 8/30/99
Mid Cap Blend..................... N/A N/A N/A N/A 8/30/99
AIM V.I. Value.................... 22.28% 22.28% N/A N/A 8/29/96
MFS Research...................... 16.55% 16.55% N/A N/A 8/29/96
AIM V.I. Growth................... 27.53% 27.53% N/A N/A 8/29/96
Fundamental Mid Cap
Growth............................ N/A N/A N/A N/A 8/30/99
Small/Mid Cap Value............... N/A N/A N/A N/A 8/30/99
Small/Mid Cap CORE................ 12.99% 12.99% N/A N/A 4/30/98
Small/Mid Cap Growth.............. -1.84% -1.84% N/A N/A 8/29/96
Small Cap Growth.................. 62.22% 62.22% N/A N/A 8/29/96
MFS New Discovery................. 71.31% 71.31% N/A N/A 4/30/98
Global Balanced................... -1.87% -1.87% N/A N/A 8/29/96
Templeton International
Securities........................ 15.68% 15.68% N/A N/A 5/21/97
International Equity.............. N/A N/A N/A N/A 8/30/99
Fidelity VIP Overseas............. 34.58% 34.58% N/A N/A 8/29/96
Templeton Developing
Markets Securities................ 45.30% 45.30% N/A N/A 5/21/97
Short-Term Bond................... 1.68% 1.68% N/A N/A 8/29/96
Bond Index........................ -3.77% -3.77% N/A N/A 4/30/98
V.A. Bond......................... -1.76% -1.76% N/A N/A 8/29/96
V.A. Strategic Income............. 3.53% 3.53% N/A N/A 8/29/96
High Yield Bond................... 3.82% 3.82% N/A N/A 4/30/98
V.A. Money Market................. 3.40% 3.40% N/A N/A 8/29/96
</TABLE>
* Absent expense reimbursements to certain Funds, total return figures for
the related variable investment options would have been lower.
** or since inception of the applicable Fund or its predecessor.
*** of the Fund or its predecessor.
3
<PAGE>
CURRENT AND EFFECTIVE YIELD FOR THE V.A. MONEY MARKET OPTION
The Account may calculate current yield and effective yield figures for the
V.A. Money Market option. The current yield of the V.A. Money Market option 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 expenses of the 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 withdrawal charge 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. The formula for effective yield, as
prescribed by the SEC, is:
Effective yield = (Base period return + 1)/(365/7) / - 1
For the 7-day period ending December 31, 1999, the V.A. Money Market
option's current yield at the Account level was 3.65% and its effective yield
was 3.72%.
OTHER PERFORMANCE INFORMATION
You can compare performance information at the Account level 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.
We also use Ibottson and Associates, CDA Weisenberger, and F.C. Towers for
comparison purposes, as well as the Russell and Wilshire indexes. We may also
use 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. Such performance
figures are calculated in accordance with standardized methods established by
each reporting service.
CALCULATION OF ANNUITY PAYMENTS
CALCULATION OF ANNUITY UNITS
We use a measuring device called an "annuity unit" to help us compute the
amount of each monthly payment that is based on a variable investment option.
Each variable investment option has its own annuity unit with its own annuity
unit value.
The number of the contract's annuity units for each variable investment
option normally doesn't change while the payee continues to receive payments,
unless the payee makes a transfer from one variable investment option to
another. The amount of each monthly annuity payment based on a variable
investment option equals the number of the contract's annuity units in that
option times the value of one such unit as of the tenth day preceding the
payment's due date.
4
<PAGE>
To compute the amount of the first annuity payment that is based on any
variable investment option, we first determine the amount of your contract's
value that we will apply to that variable option. We do this as of 10 calendar
days prior to the date the initial monthly annuity payment is due, in the manner
described in the prospectus under "The annuity period - choosing fixed or
variable annuity payments."
For each variable investment option, we THEN divide:
the resulting value (minus any
premium tax charge)
by
$1,000
- --------------------------------------------------------------------------------
and multiply the result by the applicable annuity purchase rate set forth in the
contract and reflecting
(1) the age and, possibly, sex of the payee and
(2) the assumed investment rate (discussed below)
- --------------------------------------------------------------------------------
This computation determines the amount of initial monthly variable annuity
payment to the annuitant from each variable investment option.
We then determine the number of annuity units to be credited to the contract
from each of such variable investment options by dividing:
the amount of the initial monthly variable annuity payment from that variable
annuity option
BY
the annuity unit value of that variable investment option as of 10 calendar days
prior to the date the initial payment is due
- --------------------------------------------------------------------------------
For example, 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. Assume, further, that 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 first monthly annuity payment would be
$262.56.
LOGO
5
<PAGE>
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).
ANNUITY UNIT VALUES
The value of the annuity units varies from day to day, depending on the
investment performance of the variable investment option, the deductions made
against the variable investment option, and the assumed investment rate used in
computing annuity unit values. Thus, the variable monthly annuity payments vary
in amount from month to month.
We calculate annuity unit value separately for each variable investment
option. As of the close of each business day, we calculate the value of one
annuity unit by
(1) multiplying the immediately preceding annuity unit value by the sum of one
plus the applicable net investment rate for the period subsequent to such
preceding value and then
(2) multiplying this product by an adjustment factor to neutralize the assumed
investment rate used in determining the amounts of annuity payable. If your
contract has an assumed investment rate of 3 1/2 % per year, the adjustment
factor for a valuation period of one day would be 0.999905754. We
neutralize the assumed investment rate by applying the adjustment factor so
that the variable annuity payments will increase only if the actual net
investment rate of the variable investment option exceeds 3 1/2 % per year
and will decrease only if is less than 3 1/2 % per year.
The amount of the initial variable monthly payment is determined on the
assumption that the actual net investment rate of each variable investment
option used in calculating the "net investment factor" (described below) will be
equal on an annual basis to the "assumed investment rate" (described under "The
annuity period - variable monthly annuity payments" in the prospectus). 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.
MORTALITY TABLES
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.
6
<PAGE>
ADDITIONAL INFORMATION ABOUT DETERMINING UNIT VALUES
The general manner in which we compute annuity unit values is discussed
above. Like annuity unit values, we calculate accumulation unit values
separately for each variable investment option. As of the close of each
business day, we calculate the value of one accumulation unit of a variable
investment option by multiplying the immediately preceding accumulation unit
value by the sum of one plus the applicable "net investment rate" for the period
subsequent to such preceding value. See "Net investment rate" below.
NET INVESTMENT RATE
For any period, the net investment rate for a variable investment option
equals
(1) the percentage total investment return of the corresponding Fund for that
period (assuming reinvestment of all dividends and other distributions from
the Fund), less
(2) for each calendar day in the period, a deduction of 0.003425% of the value
of the variable investment option at the beginning of the period, and less
(3) a further adjustment in an appropriate amount if we ever elect to impose a
charge for our income taxes.
ADJUSTMENT OF UNITS AND VALUES
We reserve the right to change the number and value of the accumulation
units and/or annuity units credited to your contract, without notice, provided
that strict equity is preserved and the change does not otherwise affect the
benefits, provisions, or investment return of your contract.
HYPOTHETICAL EXAMPLES ILLUSTRATING THE CALCULATION OF ACCUMULATION UNIT VALUES
AND ANNUITY UNIT VALUES
Assume at the beginning of the period being considered, the value of a
particular variable investment option was $4,000,000. Investment income during
the period totaled $2000, while capital gains were $3000 and capital losses were
$1000. Assume also that we are not imposing any tax charge. Charges against
the beginning value of the variable investment option amount to $137.00 assuming
a one day period. The $137.00 was computed by multiplying the beginning 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.
Assume further that each accumulation unit had a value of $11.250000 on the
previous business day, and the value of an annuity unit on such previous date
was $1.0850000. Based upon the experience of the variable investment option
during the period, the value of an accumulation unit at the end of the period
would be $11.250000 x (1 + .0009658) or $11.260865. The value of an annuity
unit at the end of the period would be $1.0850000 x (1. + .0009658) x .999905754
or $1.085946. The final figure, .999905754, neutralizes the effect of a 3 1/2%
assumed investment rate so that the annuity unit's change in value reflects only
the actual investment experience of the variable investment option.
PURCHASES AND REDEMPTIONS OF FUND SHARES
John Hancock purchases and redeems Fund shares for the Account at their net
asset value without any sales or redemption charges. Each available Fund issues
its own separate series of Fund shares. Each such series represents an interest
in one of the Funds of the Trusts, which corresponds to one of our variable
investment options. Any dividend or capital gains distributions received by the
Account will be reinvested in shares of that same Fund at their net asset value
as of the dates paid.
On each business day, the account purchases and redeems shares of each fund
for each variable investment option based on, among other things, the amount of
premium payments allocated to that option, dividends
7
<PAGE>
reinvested, and transfers to, from and among investment options, all to be
effected as of that date. Such purchases and redemptions are effective at the
net asset value per Trust share for each fund determined on that same date.
THE ACCOUNT
In addition to the assets attributable to contracts, the Account includes
assets derived from charges made by and, possibly, funds contributed by John
Hancock to commence operations of the variable investment option. From time to
time these additional amounts may be transferred in cash by us to our general
account. Before any such transfer, we will consider any possible adverse impact
transfer might have on any variable investment option. The assets of one
variable investment option are not necessarily legally insulated from
liabilities associated with another variable investment option.
DELAY OF CERTAIN PAYMENTS
Ordinarily, upon a surrender or partial withdrawal, we will pay the value
of any accumulation units in a single sum within 7 days after receipt of a
written request at our Annuity Servicing Office. However, redemption may be
suspended and payment may be postponed under the following conditions:
(1) when the New York Stock Exchange is closed, other than customary weekend
and holiday closings;
(2) when trading on that Exchange is restricted;
(3) when an emergency exists as a result of which (a) disposal of securities in
a variable investment option is not reasonably practicable or (b) it is not
reasonably practicable to determine the value of the net assets of a
variable investment option; or
(4) when a governmental body having jurisdiction over the Account by order
permits such suspension.
Rules and regulations of the SEC, if any are applicable, will govern as to
whether conditions in (2) or (3) exist.
We 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.
We may also defer payment of surrender proceeds payable out of any
guarantee period for a period of up to 6 months.
LIABILITY FOR TELEPHONE TRANSFERS
If you authorize telephone transfers, you will be liable for any loss,
expense or cost arising out of any unauthorized or fraudulent telephone or fax
instructions which we reasonably believe to be genuine, unless such loss,
expense or cost is the result of our mistake or negligence. We employ
procedures which provide safeguards against unauthorized transactions, and which
are reasonably designed to confirm that instructions received by telephone are
genuine. These procedures include
. requiring personal identification,
. tape recording calls, and
. providing written confirmation to the owner.
If we do not employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, we may be liable for any loss due to
unauthorized or fraudulent instructions.
8
<PAGE>
VOTING PRIVILEGES
Here's the formula we use to determine the number of Fund shares as to
which you may give instructions:
the total value of your accumulation units value in a variable investment option
divided by
the net asset value of 1 share of the corresponding Fund
- --------------------------------------------------------------------------------
At a shareholders' meeting, you may give instructions regarding:
. the election of the Board of Trustees,
. the ratification of the selection of independent auditors,
. the approval of the Trusts' investment management agreements,
. and other matters requiring a vote under the 1940 Act.
The annuitant or other payee will also be entitled to give voting
instructions with respect to the Fund shares corresponding to any variable
investment option under which variable annuity payments are then being made. We
determine the number of Fund shares for which the payee can give instructions by
dividing the actuarially determined present value of the payee's annuity units
that correspond to that Fund by the net asset value of one share of that Fund.
We will furnish you information and forms so that you may give voting
instructions.
We may own Fund shares that we do not hold in any separate account whose
participants are entitled to give voting instructions. We will vote such shares
in proportion to the instructions we receive from all variable annuity contract
and variable life insurance policy owners who give us instructions for that
Fund's shares (including owners who participate in separate accounts other than
the Account).
We have designed your voting privileges based upon our understanding of the
requirements of the federal securities laws. If the applicable laws,
regulations, or interpretations change to eliminate or restrict the need for
such voting privileges, we reserve the right to proceed in accordance with any
such revised requirements.
9
<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, 1999
and 1998, 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 audit.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. 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 accounting principles generally accepted in the United
States. The variances between such practices and accounting principles generally
accepted in the United States 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 accounting principles generally accepted in the
United States, the financial position of John Hancock Mutual Life Insurance
Company at December 31, 1999 and 1998 or the results of its operations or its
cash flows for the years then ended.
However, 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, 1999 and 1998, 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
March 10, 2000
10
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31
-----------------------
1999 1998
---------- -----------
(in millions)
<S> <C> <C>
ASSETS
Bonds--Note 6 . . . . . . . . . . . . . . . . . . $26,188.1 $23,353.0
Stocks:
Preferred . . . . . . . . . . . . . . . . . . . 926.6 844.7
Common . . . . . . . . . . . . . . . . . . . . 458.4 269.3
Investments in affiliates . . . . . . . . . . . 1,465.8 1,520.3
--------- ---------
2,850.8 2,634.3
Mortgage loans on real estate--Note 6 . . . . . . 9,165.9 8,223.7
Real estate:
Company occupied . . . . . . . . . . . . . . . 366.6 372.2
Investment properties . . . . . . . . . . . . . 501.7 1,472.1
--------- ---------
868.3 1,844.3
Policy loans . . . . . . . . . . . . . . . . . . 1,577.8 1,573.8
Cash items:
Cash in banks and offices . . . . . . . . . . . 292.6 241.5
Temporary cash investments . . . . . . . . . . 868.0 1,107.4
--------- ---------
1,160.6 1,348.9
Premiums due and deferred . . . . . . . . . . . . 234.8 253.4
Investment income due and accrued . . . . . . . . 574.8 527.5
Other general account assets . . . . . . . . . . 1,364.7 1,156.6
Assets held in separate accounts . . . . . . . . 16,746.0 17,447.0
--------- ---------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . $60,731.8 $58,362.5
========= =========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
11
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31
-----------------------
1999 1998
---------- -----------
(in millions)
<S> <C> <C>
OBLIGATIONS AND POLICYHOLDERS' CONTINGENCY RESERVES
OBLIGATIONS
Policy reserves . . . . . . . . . . . . . . . . . $20,574.1 $19,804.8
Policyholders' and beneficiaries' funds . . . . . 16,128.3 14,216.9
Dividends payable to policyholders . . . . . . . . 464.8 449.1
Policy benefits in process of payment . . . . . . 132.3 111.4
Other policy obligations . . . . . . . . . . . . . 304.7 322.6
Asset valuation reserve--Note 1 . . . . . . . . . 1,242.9 1,289.6
Federal income and other accrued Taxes--Note 1 . . (12.1) 211.5
Other general account obligations . . . . . . . . 1,695.0 1,109.3
Obligations related to separate accounts . . . . . 16,745.1 17,458.6
--------- ---------
TOTAL OBLIGATIONS . . . . . . . . . . . . . . . . . 57,275.1 54,973.8
POLICYHOLDERS' CONTINGENCY RESERVES
Surplus note--Note 2 . . . . . . . . . . . . . . . 450.0 450.0
Special contingency reserve for group insurance. . 153.4 160.0
General contingency reserve . . . . . . . . . . . 2,853.3 2,778.7
--------- ---------
TOTAL POLICYHOLDERS' CONTINGENCY RESERVES . . . . . 3,456.7 3,388.7
--------- ---------
TOTAL OBLIGATIONS AND POLICYHOLDERS' CONTINGENCY
RESERVES. . . . . . . . . . . . . . . . . . . . . . $60,731.8 $58,362.5
========= =========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
12
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF OPERATIONS AND CHANGES IN POLICYHOLDERS'
CONTINGENCY RESERVES
<TABLE>
<CAPTION>
Year ended December 31
------------------------
1999 1998
----------- -----------
(In millions)
<S> <C> <C>
INCOME
Premiums, annuity considerations and pension
fund contributions . . . . . . . . . . . . . . $ 9,622.9 $ 8,844.0
Net investment income--Note 4 . . . . . . . . . 3,033.4 2,956.2
Other, net . . . . . . . . . . . . . . . . . . . 241.9 233.8
--------- ---------
12,898.2 12,034.0
BENEFITS AND EXPENSES
Payments to policyholders and beneficiaries:
Death benefits . . . . . . . . . . . . . . . 675.6 582.9
Accident and health benefits . . . . . . . . 94.4 76.9
Annuity benefits . . . . . . . . . . . . . . 1,734.3 1,612.4
Surrender benefits and annuity fund
withdrawals. . . . . . . . . . . . . . . . . 7,410.6 6,712.4
Matured endowments . . . . . . . . . . . . . 18.6 20.7
--------- ---------
9,933.5 9,005.3
Additions to reserves to provide for future
payments to policyholders and beneficiaries. . 1,238.9 1,106.7
Expenses of providing service to policyholders
and obtaining new insurance:
Field sales compensation and expenses . . . . 248.8 290.7
Home office and general expenses . . . . . . 717.8 529.0
Payroll, state premium and miscellaneous taxes . 48.9 52.0
--------- ---------
12,187.9 10,983.7
--------- ---------
GAIN FROM OPERATIONS BEFORE DIVIDENDS TO
POLICYHOLDERS, FEDERAL INCOME TAXES AND
NET REALIZED CAPITAL GAINS . . . . . . . 710.3 1,050.3
Dividends to policyholders . . . . . . . . . . . . 461.1 446.0
Federal income tax credit--Note 1 . . . . . . . . (216.9) (2.8)
--------- ---------
244.2 443.2
--------- ---------
GAIN FROM OPERATIONS BEFORE NET REALIZED
CAPITAL GAINS . . . . . . . . . . . . . . 466.1 607.1
Net realized capital gains--Note 5 . . . . . . . . 29.0 0.7
--------- ---------
NET INCOME . . . . . . . . . . . . . . . . 495.1 607.8
Other increases/(decreases) in policyholders'
contingency reserves:
Net unrealized capital losses and other
adjustments--Note 5 . . . . . . . . . . . . . (147.0) (214.5)
Prior years' federal income taxes . . . . . . . (21.9) (25.5)
Other reserves and adjustments, net--Notes 1, 7
and 13 . . . . . . . . . . . . . . . . . . . . (258.2) (136.9)
--------- ---------
NET INCREASE IN POLICYHOLDERS' CONTINGENCY
RESERVES. . . . . . . . . . . . . . . . . 68.0 230.9
Policyholders' contingency reserves at beginning
of year . . . . . . . . . . . . . . . . . . . . . 3,388.7 3,157.8
--------- ---------
POLICYHOLDERS' CONTINGENCY RESERVES AT END OF YEAR $ 3,456.7 $ 3,388.7
========= =========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
13
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
------------------------
1999 1998
----------- -----------
(In millions)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Insurance premiums, annuity considerations and
deposits . . . . . . . . . . . . . . . . . . . . . $ 9,816.6 $ 8,945.5
Net investment income . . . . . . . . . . . . . . . 2,966.1 2,952.8
Benefits to policyholders and beneficiaries . . . . (10,047.9) (9,190.4)
Dividends paid to policyholders . . . . . . . . . . (445.4) (396.6)
Insurance expenses and taxes . . . . . . . . . . . . (1,015.3) (874.4)
Net transfers from separate accounts . . . . . . . . 1,436.6 131.1
Other, net . . . . . . . . . . . . . . . . . . . . . (264.2) (181.7)
---------- ----------
NET CASH PROVIDED FROM OPERATIONS . . . . . . . . 2,446.5 1,386.3
---------- ----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Bond purchases . . . . . . . . . . . . . . . . . . . (15,946.3) (12,403.6)
Bond sales . . . . . . . . . . . . . . . . . . . . . 10,098.5 8,447.8
Bond maturities and scheduled redemptions . . . . . 2,443.9 2,537.7
Bond prepayments . . . . . . . . . . . . . . . . . . 644.9 1,202.7
Stock purchases . . . . . . . . . . . . . . . . . . (2,546.2) (623.2)
Proceeds from stock sales . . . . . . . . . . . . . 2,174.0 378.4
Real estate purchases . . . . . . . . . . . . . . . (188.7) (147.6)
Real estate sales . . . . . . . . . . . . . . . . . 1,258.4 630.5
Other invested assets purchases . . . . . . . . . . (127.9) (185.3)
Proceeds from the sale of other invested assets. . . 358.4 120.5
Mortgage loans issued . . . . . . . . . . . . . . . (2,254.2) (1,978.5)
Mortgage loan repayments . . . . . . . . . . . . . . 1,267.3 1,575.6
Other, net . . . . . . . . . . . . . . . . . . . . . 183.1 (38.6)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES . . . . . . (2,634.8) (483.6)
---------- ----------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Net decrease in short-term note payable . . . . . . 0.0 (75.0)
Repayment of REMIC notes payable . . . . . . . . . . 0.0 (203.6)
---------- ----------
NET CASH USED IN FINANCING ACTIVITIES . . . . . . 0.0 (278.6)
---------- ----------
(DECREASE) INCREASE IN CASH AND TEMPORARY CASH
INVESTMENTS . . . . . . . . . . . . . . . . . . . . . (188.3) 624.1
Cash and temporary cash investments at beginning
of year . . . . . . . . . . . . . . . . . . . . . . . 1,348.9 724.8
---------- ----------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR . . $ 1,160.6 $ 1,348.9
========== ==========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
14
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
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. Pursuant to a Plan of
Reorganization, effective February 1, 2000, the Company converted from a mutual
life insurance company to a stock life insurance company and became a wholly
owned subsidiary of John Hancock Financial Services, Inc., which is a holding
company. See Note 15--Subsequent Events.
The Company offers financial products in two major groups: (i) its retail
business, which offers protection and asset gathering products primarily to
retail consumers; and (ii) the investment and pension business, which offers
guaranteed and structured financial products primarily to institutional
customers. In addition, there is a corporate business unit. The Company's
reportable business units are strategic business units offering different
products and services. The reportable business units are managed separately, as
they focus on different products, markets or distribution channels.
In the Retail-Protection business unit, the Company offers a variety of
individual life insurance and individual and group long-term care insurance
products, including participating whole life, term life, and retail and group
long-term care insurance. Products are distributed through multiple distribution
channels, including insurance agents and brokers and alternative distribution
channels that include banks, financial planners, direct marketing and the
Internet.
In the Retail-Asset Gathering business unit, the Company offers individual
annuities, consisting of fixed deferred annuities, fixed immediate annuities,
single premium immediate annuities, and variable annuities. This business unit
distributes its products through distribution channels including insurance
agents and brokers affiliated with the Company, securities brokerage firms,
financial planners, and banks.
In the Investment and Pension business unit, the Company offers a variety of
retirement products to qualified defined benefit plans, defined contribution
plans and non-qualified buyers. The Company's products include guaranteed
investment contracts, funding agreements, single premium annuities, and general
account participating annuities and fund type products. These contracts provide
non-guaranteed, partially guaranteed, and fully guaranteed investment options
through general and separate account products. The business unit distributes its
products through a combination of dedicated regional representatives, pension
consultants and investment professionals.
The Corporate business unit primarily consists of certain corporate operations
and businesses that are either disposed or in run-off. Corporate operations
primarily include certain financing activities, income on capital not
specifically allocated to the business units and certain non-recurring expenses
not allocated to the business units. The disposed businesses primarily consist
of group health operations.
The Company established a "corporate account" as part of the Corporate business
unit to facilitate the capital management process. The corporate account
contains capital not allocated to support the operations of the Company's
business units.
Late in the fourth quarter of 1999, the Company transferred certain assets from
the business units to the corporate account. These assets include investments in
certain subsidiaries and the home office real estate complex (collectively
referred to as "corporate purpose assets"). Historically, the Company has
allocated the investment performance or other earnings of corporate purpose
assets among all of the business units. However, subsequent to the conversion to
a stock life insurance company, the Company will centrally manage the
performance of corporate purpose assets through the corporate account.
The asset transfer directly affected certain group pension participating
contractholders because those contracts have participating features under which
crediting rates and dividends are affected directly by portfolio earnings.
Certain
15
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
participating contractholders participate in contract experience related to net
investment income and realized capital gains and losses in the general account.
These participating contractholders were compensated for transferred assets
based on the fair value of the assets transferred, which amounted to $771.7
million. These participating contractholders were credited with their portion of
the difference between the fair value and carrying value of the assets
transferred through the crediting rates and dividends on their contracts. The
after-tax amount of the transfer was $170.8 million which was charged directly
to policyholders' contingency reserve.
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 preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
accompanying notes. Such estimates 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 or future estimated gross profits or gross
margins; (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 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: During March 1998, the NAIC adopted codified
statutory accounting principles ("Codification") effective January 1, 2001.
Codification 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. Codification will
require adoption by the various states before it becomes the prescribed
statutory basis of accounting for insurance companies domesticated within those
states. Accordingly, before Codification becomes effective for the Company, the
Commonwealth of Massachusetts must adopt Codification as the prescribed basis of
accounting on which domestic insurers must report their statutory-basis results
to the Division of Insurance. At this time, it is anticipated that the
Commonwealth of Massachusetts will
16
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
adopt Codification effective January 1, 2001. 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:
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. Net premiums
related to equity collar positions are amortized into income on a
straight-line basis over the term of the collars. The collars are carried at
fair value, with changes in fair value reflected directly in policyholders'
contingency reserves.
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. During 1998, the Company made a
strategic decision to sell the majority of its commercial real estate
portfolio. Properties with a book value of $1,057.3 million and $533.8 million
were sold in 1999 and 1998, respectively, and an additional $125.3 million of
real estate is expected to be sold in 2000. Net gains on the properties sold
amounted to $140.8 million and $64.3 million in 1999 and 1998, respectively.
Those properties to be sold subsequent to December 31, 1999 are carried at the
lower of depreciated cost at the date a determination to sell was made or fair
value. Accumulated depreciation amounted to $254.4 million and $370.0 million
at December 31, 1999 and 1998, respectively.
Real estate acquired in satisfaction of debt and real estate held for sale,
which are classified with investment properties, are carried at the lower of
cost or fair value.
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.
17
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
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 historically
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. In connection with the Company's
plans to dispose of certain real estate holdings, during 1998, an additional
contribution was recorded that resulted in the AVR exceeding the prescribed
maximum reserve level by $48.0 million and $111.3 million at December 31, 1999
and 1998, respectively. The Company received permission from the Massachusetts
Division of Insurance to record its AVR in excess of the prescribed maximum
reserve level. 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 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, 1999, the IMR, net of 1999 amortization of $51.4 million, amounted to $261.7
million that is included in other policy obligations. The corresponding 1998
amounts were $34.9 million and $261.6 million, respectively.
Property and Equipment: Data processing equipment, which amounted to $29.2
million in 1999 and $31.4 million in 1998 and is included in other general
account assets, is reported at depreciated cost, with depreciation recorded on a
straight-line basis. Non-admitted 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 $19.7 million in 1999 and $20.1 million
in 1998.
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 14.
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
18
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
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.
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
approximate their fair values.
Fair values for futures contracts are based on quoted market prices. Fair
values for interest rate swap, cap and floor agreements, swaptions, and
currency swap agreements and equity collar agreements are based on current
settlement values. The current settlement values are based on brokerage quotes
that utilize pricing models or formulas using current assumptions.
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, 1999. The fair
value for commitments to purchase other invested assets 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 method. 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 21/2% 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 83/4%.
19
<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:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
-------------------- ----------------------
Statement Fair Statement Fair
Value Value Value Value
--------- --------- --------- -----------
(in millions)
<S> <C> <C> <C> <C>
Guaranteed investment contracts $13,111.6 $12,617.2 $12,666.9 $12,599.7
Fixed rate deferred and immediate
annuities . . . . . . . . . . . . 4,685.7 4,656.9 4,375.0 4,412.2
Supplementary contracts without
life contingencies . . . . . . . 55.7 55.7 42.7 44.7
--------- --------- --------- ---------
$17,853.0 $17,329.8 $17,084.6 $17,056.6
========= ========= ========= =========
</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 Internal Revenue Service sets the DER 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.
The Company made federal tax payments of $115.0 million in 1999 and $74.9
million in 1998.
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. Reserve modifications
resulting from such determinations are recorded directly to policyholders'
contingency reserves. No such refinements were made during 1999 or 1998.
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 knowledge of an insurance insolvency.
20
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
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
and any payment of interest on and principal of the notes may be made only with
the prior approval of the Commissioner of Insurance of the Commonwealth of
Massachusetts. Surplus notes are reported as part of policyholders' contingency
reserves rather than liabilities. Interest of $33.2 million was paid on the
notes during 1999 and 1998.
NOTE 3--BORROWED MONEY
At December 31, 1999, the Company had two syndicated lines of credit with a
group of banks totaling $1.0 billion, $500.0 million of which expire on July 29,
2000 and $500.0 million of which expire on June 30, 2001. The banks will commit,
when requested, to loan funds at prevailing interest rates as determined in
accordance within each line of credit agreement. Under the terms of the
agreements, the Company is required to maintain certain minimum levels of net
worth and comply with certain other covenants, which were met at December 31,
1999. At December 31, 1999, the Company had no outstanding borrowings under
either agreement.
Interest paid on borrowed money was $7.9 million and $6.6 million during 1999
and 1998, respectively.
NOTE 4--NET INVESTMENT INCOME
Investment income has been reduced by the following amounts:
<TABLE>
<CAPTION>
1999 1998
------- --------
(In millions)
<S> <C> <C>
Investment expenses . . . . . . . . . . . . . . . . . . . $277.1 $317.5
Interest expense . . . . . . . . . . . . . . . . . . . . 41.4 44.3
Depreciation on real estate and other invested assets . . 22.9 41.6
Real estate and other investment taxes. . . . . . . . . . 41.8 60.1
------ ------
$383.2 $463.5
====== ======
</TABLE>
NOTE 5--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS
Net realized capital gains consist of the following items:
<TABLE>
<CAPTION>
1999 1998
-------- ----------
(In millions)
<S> <C> <C>
Net gains from asset sales and foreclosures $ 260.3 $ 303.3
Capital gains tax . . . . . . . . . . . . . . (179.8) (171.7)
Net capital gains transferred to the IMR. . . (51.5) (130.9)
------- -------
Net Realized Capital Gains . . . . . . . . $ 29.0 $ 0.7
======= =======
</TABLE>
21
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 5--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS--CONTINUED
Net unrealized capital losses and other adjustments consist of the following
items:
<TABLE>
<CAPTION>
1999 1998
-------- ---------
(In millions)
<S> <C> <C>
Net losses from changes in security values and book value
adjustments. . . . . . . . . . . . . . . . . . . . . . . $(193.7) $ (90.6)
Decrease (increase) in asset valuation reserve. . . . . . 46.7 (123.9)
------- -------
Net Unrealized Capital Losses and Other Adjustments . . . $(147.0) (214.5)
======= =======
</TABLE>
NOTE 6--INVESTMENTS
The statement value and fair value of bonds are shown below:
<TABLE>
<CAPTION>
Gross Gross
Statement Unrealized Unrealized
December 31, 1999 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 . . . . . . . . . . $ 162.3 $ 0.4 $ 2.5 $ 160.2
Obligations of states and
political subdivisions . . . 111.3 6.6 4.4 113.5
Debt securities issued by
foreign governments . . . . 510.0 56.4 7.0 559.4
Corporate securities . . . . 20,460.3 587.1 970.8 20,076.6
Mortgage-backed securities . 4,944.2 22.1 167.7 4,798.6
--------- -------- -------- ---------
Total bonds . . . . . . . . $26,188.1 $ 672.6 $1,152.4 $25,708.3
========= ======== ======== =========
December 31, 1998
-----------------
U.S. Treasury securities and
obligations of U.S.
government corporations and
agencies . . . . . . . . . . $ 123.3 $ 5.9 $ 0.0 $ 129.2
Obligations of states and
political subdivisions . . . 86.4 9.9 0.0 96.3
Debt securities issued by
foreign governments . . . . 264.5 29.4 8.2 285.7
Corporate securities . . . . 18,155.4 1,567.7 294.4 19,428.7
Mortgage-backed securities . 4,723.4 181.2 5.2 4,899.4
--------- -------- -------- ---------
Total bonds . . . . . . . . $23,353.0 $1,794.1 $ 307.8 $24,839.3
========= ======== ======== =========
</TABLE>
The statement value and fair value of bonds at December 31, 1999, 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.
<TABLE>
<CAPTION>
Statement Fair
Value Value
--------- -----------
(In millions)
<S> <C> <C>
Due in one year or less . . . . . . . . . $ 1,515.9 $ 1,513.2
Due after one year through five years. . . 5,876.1 5,871.2
Due after five years through ten years 6,801.3 6,684.9
Due after ten years . . . . . . . . . . . 7,050.6 6,840.4
--------- ---------
21,243.9 20,909.7
Mortgage-backed securities . . . . . . . . 4,944.2 4,798.6
--------- ---------
$26,188.1 $25,708.3
========= =========
</TABLE>
22
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 6--INVESTMENTS--CONTINUED
Gross gains of $99.1 million in 1999 and $126.4 million in 1998 and gross losses
of $94.4 million in 1999 and $62.3 million in 1998 were realized from the sale
of bonds.
At December 31, 1999, bonds with an admitted asset value of $26.6 million were
on deposit with state insurance departments to satisfy regulatory requirements.
The cost of common stocks was $345.3 million and $258.4 million at December 31,
1999 and 1998, respectively. At December 31, 1999, gross unrealized appreciation
on common stocks totaled $177.7 million, and gross unrealized depreciation
totaled $64.6 million. The fair value of preferred stock totaled $926.7 million
at December 31, 1999 and $832.4 million at December 31, 1998.
The Company participates in a security-lending program for the purpose of
enhancing income on securities held. At December 31, 1999 and 1998, $277.7
million and $421.5 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 $19.3 million, bonds with
amortized cost of $54.4 million and real estate with depreciated cost of $9.9
million were non-income as of December 31, 1999.
Restructured commercial mortgage loans aggregated $120.3 million and $230.5
million as of December 31, 1999 and 1998, 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:
<TABLE>
<CAPTION>
Year ended December 31
-----------------------
1999 1998
----------- ----------
(In millions)
<S> <C> <C>
Expected . . . . . . . . . . . . . . . . $10.8 $22.5
Actual . . . . . . . . . . . . . . . . . 6.9 11.6
</TABLE>
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, 1999, 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.
23
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 6--INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
Statement Geographic Statement
Property Type Value Concentration Value
------------- ------------- ------------- ---------------
(In millions) (In millions)
<S> <C> <C> <C>
Apartments . . . . . $1,809.1 East North Central . . $1,039.8
Hotels . . . . . . . 404.0 East South Central . . 289.7
Industrial . . . . . 816.8 Middle Atlantic . . . 1,657.5
Office buildings . . 2,309.1 Mountain . . . . . . . 326.7
Retail . . . . . . . 1,619.4 New England . . . . . 836.1
1-4 Family . . . . . 3.4 Pacific . . . . . . . 2,025.0
Agricultural . . . . 1,803.6 South Atlantic . . . . 1,823.5
Other . . . . . . . . 400.5 West North Central . . 362.7
West South Central . . 701.9
Other . . . . . . . . 103.0
-------- --------
$9,165.9 $9,165.9
======== ========
</TABLE>
At December 31, 1999, the fair values of the commercial and agricultural
mortgage loan portfolios were $7.2 billion and $1.8 billion, respectively. The
corresponding amounts as of December 31, 1998 were approximately $7.3 billion
and $1.3 billion, respectively.
The maximum and minimum lending rates for mortgage loans during 1999 were 14.24%
and 6.84% for agricultural loans, 9.0% and 6.50% for other properties, and 10.0%
and 7.125% 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 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 1999 were
$673.5 million, $42.8 million, and $153.1 million, respectively. The
corresponding amounts in 1998 were $784.0 million, $310.0 million, and $7.7
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 1999 were $1,018.3
million, $488.5 million and $823.7 million, respectively. The corresponding
amounts in 1998 were $873.9 million, $772.5 million and $712.2 million,
respectively.
Premiums, benefits, and reserves ceded related to the group accident and health
and related group life business sold in 1997, included in the amounts above,
were $463.9 million, $449.0 million, and $231.7 million, respectively, at
December 31, 1999. The corresponding amounts in 1998 were $458.2 million, $481.2
million, and $238.6 million, respectively.
24
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 7--REINSURANCE--CONTINUED
Amounts recoverable on paid claims and funds withheld from reinsurers were as
follows:
<TABLE>
<CAPTION>
December 31
-----------------
1999 1998
------- --------
(In millions)
<S> <C> <C>
Reinsurance recoverables . . . . . . . . $ 27.5 $18.6
Funds withheld from reinsurers . . . . . 227.3 49.5
</TABLE>
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 $245.7 million at December 31, 1999 and $251.1
million at December 31, 1998.
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 1999 issues of flexible premium variable life
insurance and scheduled premium variable life insurance policies. In connection
with this agreement, the Company transferred $44.5 million and $4.9 million of
cash to Variable Life in 1999 and 1998, respectively, for tax, commission, and
expense allowances to Variable Life, which decreased the Company's net gain from
operations by $20.6 million and $22.2 million in 1999 and 1998, respectively.
Variable Life also has a modified coinsurance agreement with the Company to
reinsure 50% of Variable Life's 1995 inforce block and 50% of 1996 and all
future issue years of certain retail annuity contracts. In connection with this
agreement, the Company made a net cash payment of $40.0 million and $12.7
million in 1999 and 1998, respectively, for surrender benefits, taxes, reserve
increase, commission expense allowances and premiums. This agreement decreased
the Company's net gain from operations by $26.9 million and $8.4 million in 1999
and 1998, 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 1999 and 1998 for all policies that are not reinsured under any other
indemnity agreement. In connection with the agreement, the Company received $0.8
million and $1.0 million in 1999 and 1998, respectively, for mortality claims
from Variable Life. This agreement increased the Company's net gain from
operations in both 1999 and 1998 by $0.5 million.
John Hancock Reassurance Company of Bermuda (JHReCo, a wholly-owned affiliate)
has a modified coinsurance agreement with the Company to reinsure 50% of the
Company's 1997 through 1999 issues of retail long-term care insurance policies.
In connection with this agreement, the Company transferred $22.6 million and
$1.9 million of cash to JHReCo in 1999 and 1998, respectively, for tax,
commission, and expense allowances to JHReCo. This agreement increased the
Company's net gain from operations by $17.4 million and $11.7 million in 1999
and 1998, respectively.
JHReCo has a modified coinsurance agreement with the Company to reinsure 30% of
the Company's issues prior to January 1, 1997 and 50% of the Company's 1997
through 1999 issues of group long-term care insurance policies. In connection
with this agreement, the Company transferred $49.9 million and $38.0 million of
cash to JHReCo in 1999 and 1998, respectively, for tax, commission, and expense
allowances to JHReCo. This agreement increased the Company's net gain from
operations by $3.6 million and $3.9 million in 1999 and 1998, respectively.
JHReCo also has a modified coinsurance agreement with the Company to reinsure
50% of one of the Company's single premium annuity contracts sold in 1999.
Premiums, benefits, and reserves ceded to JHReCo in 1999 were
25
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 7--REINSURANCE--CONTINUED
$169.4 million, $15.6 million and $166.1 million, respectively. This agreement
increased the Company's net gain from operations by $12.6 million in 1999.
On February 28, 1997, the Company sold a major portion of its group insurance
business to UNICARE Life & Health Insurance Company (UNICARE), a wholly owned
subsidiary of WellPoint Health Networks Inc. The business sold includes the
Company's group accident and health business and related group life business and
Cost Care, Inc., Hancock Association Services Group and Tri-State, Inc., all
indirect wholly-owned subsidiaries of the Company. The Company retained its
group long-term care operations. Assets equal to liabilities of approximately
$562.4 million at February 28, 1997 were transferred to UNICARE in connection
with the sale. The insurance business sold was transferred to UNICARE through a
100% coinsurance agreement.
The Company has secured a $397.0 million letter of credit facility with a group
of banks. The banks have agreed to issue a letter of credit to the Company
pursuant to which the Company may draw up to $397.0 million for any claims not
satisfied by UNICARE under the coinsurance agreement after the Company has
incurred the first $113.0 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 and any letter of credit
issued thereunder are scheduled to expire on March 1, 2002. The Company remains
liable to its policyholders to the extent that UNICARE does not meet its
contractual obligations under the coinsurance agreement.
Through the Company's group health insurance operations, the Company entered
into a number of reinsurance arrangements in respect of personal accident
insurance and the occupational accident component of workers compensation
insurance, a portion of which was originated through a pool managed by Unicover
Managers, Inc. Under these arrangements, the Company both assumed risks as a
reinsurer, and also passed 95% of these risks on to other companies. This
business had originally been reinsured by a number of different companies, and
has become the subject of widespread disputes. The disputes concern the
placement of the business with reinsurers and recovery of the reinsurance. The
Company is engaged in disputes, including a number of legal proceedings, in
respect of this business. The risk to the Company is that other companies that
reinsured the business from the Company may seek to avoid their reinsurance
obligations. However, the Company believes that it has a reasonable legal
position in this matter. During the fourth quarter of 1999 and early 2000, the
Company received additional information about its exposure to losses under the
various reinsurance programs. As a result of this additional information and in
connection with global settlement discussions initiated in late 1999 with other
parties involved in the reinsurance programs, during the fourth quarter the
Company recognized a charge to policyholders' contingency reserves for
uncollectible reinsurance of $186.1 million, aftertax, as its best estimate of
its remaining loss exposure. The Company believes that any exposure to loss from
this issue, in addition to amounts already provided for as of December 31, 1999,
would not be material.
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, controls, 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
26
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 7--REINSURANCE--CONTINUED
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, 1999 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--BENEFITS PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS
The Company provides pension benefits to substantially all employees and general
agency personnel. These benefits are provided through both qualified defined
benefit and defined contribution pension plans. In addition, through
nonqualified plans, the Company provided supplemental pension benefits to
employees with salaries and/ or pension benefits in excess of the qualified plan
limits imposed by federal tax law. 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 $97.6 million in 1999 and $92.6
million in 1998. Plan assets consist principally of listed equity securities,
corporate obligations and U.S. government securities.
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. Because the qualified defined benefit plans are overfunded, no amounts
were contributed to these plans in 1999 or 1998. The funding policy for
nonqualified defined benefit plans is to contribute the amount of the benefit
payments made during the year. The projected benefit obligation and accumulated
benefit obligation for the non-qualified defined benefit pension plans, which
are underfunded, for which accumulated benefit obligations are in excess of plan
assets were $257.4 million and $239.3 million, respectively, at December 31,
1999 and $221.3 million and $194.8 million, respectively, at December 31, 1998.
Non-qualified plan assets, at fair value, were $1.0 million and $1.2 million at
December 31, 1999 and 1998, respectively.
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 may contribute up to the lesser of 15% of their
salary or $10,000 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 $10,000. The Company
matches the first 3% of pre-tax contributions for marketing representatives and
the first 2% of pre-tax 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 expense for defined contribution plans was $8.5 million and $8.1 million in
1999 and 1998, respectively.
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.
27
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 8--BENEFITS PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS--CONTINUED
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.
The Company's policy is to fund postretirement benefits in amounts at or below
the annual tax qualified limits. As of December 31, 1999 and 1998, plan assets
related to non-union employees were comprised of an irrevocable health insurance
contract to provide future health benefits to retirees. Plan assets related to
union employees were comprised of approximately 70% equity securities and 30%
fixed income investments.
The changes in benefit obligation and plan assets are summarized as follows:
<TABLE>
<CAPTION>
Year ended December 31
----------------------------------------------
Pension Benefits Other Benefits
----------------------- --------------------
1999 1998 1999 1998
----------- ----------- -------- ----------
(In millions)
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning
of year . . . . . . . . . . . . $1,808.4 $1,704.0 $ 366.9 $ 381.0
Service cost . . . . . . . . . . 33.8 32.8 6.6 6.8
Interest cost . . . . . . . . . 119.0 115.5 23.9 24.4
Actuarial loss/(gain) . . . . . 30.7 55.5 (0.3) (16.8)
Amendments . . . . . . . . . . . 19.9 0.0 0.0 0.0
Benefits paid . . . . . . . . . (106.5) (99.4) (29.0) (28.5)
-------- -------- ------- -------
Benefit obligation at end of
year. . . . . . . . . . . . . . 1,905.3 1,808.4 368.1 366.9
-------- -------- ------- -------
Change in plan assets:
Fair value of plan assets at
beginning of year . . . . . . . 2,202.2 1,995.5 215.2 172.7
Actual return on plan assets . . 277.7 296.1 17.7 39.9
Employer contribution . . . . . 10.9 10.0 0.0 2.6
Benefits paid . . . . . . . . . (106.5) (99.4) 0.0 0.0
-------- -------- ------- -------
Fair value of plan assets at
end of year . . . . . . . . . . 2,384.3 2,202.2 232.9 215.2
-------- -------- ------- -------
Funded status . . . . . . . . . 479.0 393.8 (135.2) (151.7)
Unrecognized actuarial loss . . (349.7) (292.0) (155.7) (163.0)
Unrecognized prior service cost 39.1 23.1 16.0 17.8
Unrecognized net transition
(asset) obligation . . . . . . (11.8) (23.9) 273.3 294.3
-------- -------- ------- -------
Net amount recognized . . . . . $ 156.6 $ 101.0 $ (1.6) $ (2.6)
-------- -------- ------- -------
</TABLE>
28
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 8--BENEFITS PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS--CONTINUED
The assumptions used in accounting for the benefit plans were as follows:
<TABLE>
<CAPTION>
Year ended December 31
--------------------------------------------
Pension Benefits Other Benefits
----------------------- ------------------
1999 1998 1999 1998
----------- ----------- ------- ---------
<S> <C> <C> <C> <C>
Discount rate . . . . . . . . . . 7.00% 6.75% 7.00% 6.75%
Expected return on plan assets . . 8.50% 8.50% 8.50% 8.50%
Rate of compensation increase . . 4.77% 4.56% 4.77% 4.00%
</TABLE>
For measurement purposes, a 5.50 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 2000. The rate was
assumed to decrease gradually to 5.25 percent in 2001 and remain at that level
thereafter.
Net periodic benefit (credit) cost includes the following components:
<TABLE>
<CAPTION>
Year ended December 31
--------------------------------------------
Pension Benefits Other Benefits
----------------------- ------------------
1999 1998 1999 1998
----------- ----------- ------- ---------
(In millions)
<S> <C> <C> <C> <C>
Service cost . . . . . . . . . . . $ 33.8 $ 32.8 $ 6.6 $ 6.8
Interest cost . . . . . . . . . . 119.0 115.5 23.9 24.4
Expected return on plan assets . . (182.9) (165.6) (18.2) (39.9)
Amortization of transition
(assets) obligation . . . . . . . (12.1) (11.6) 21.0 20.9
Amortization of prior service
cost. . . . . . . . . . . . . . . 3.9 6.5 1.8 1.9
Recognized actuarial (gain) loss (6.3) (2.6) (7.1) 19.0
------- ------- ------ ------
Net periodic benefit (credit)
cost . . . . . . . . . . . . . $ (44.6) $ (25.0) $ 28.0 $ 33.1
======= ======= ====== ======
</TABLE>
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage point change in assumed
health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1-Percentage Point 1-Percentage Point
Increase Decrease
------------------ --------------------
(In millions)
<S> <C> <C>
Effect on total of service and
interest costs . . . . . . . . . . $ 2.9 $ (2.6)
Effect on postretirement benefit
obligations . . . . . . . . . . . . 29.0 (26.1)
</TABLE>
29
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 9--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
service entities.
Total assets of unconsolidated majority-owned affiliates amounted to $16.0
billion at December 31, 1999 and $13.8 billion at December 31, 1998; total
liabilities amounted to $14.5 billion at December 31, 1999 and $12.5 billion at
December 31, 1998; and total net income was $99.5 million in 1999 and $148.5
million in 1998.
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 (See Note 7). 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 13).
The Company received dividends of $129.0 million and $62.2 million in 1999 and
1998, respectively, from unconsolidated affiliates.
NOTE 10--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The notional amounts, carrying values and estimated fair values of the Company's
derivative instruments are as follows at December 31:
<TABLE>
<CAPTION>
Assets (Liabilities)
Number of Contracts/ -------------------------------------------
Notional Amounts 1999 1998
--------------------- --------------------- --------------------
Carrying Fair Carrying Fair
1999 1998 Value Value Value Value
---------- ---------- ---------- --------- -------- ----------
(In millions)
<S> <C> <C> <C> <C> <C> <C>
Futures contracts to
sell securities . . . $ 18,805 $ 11,286 $31.5 $ 31.5 $(3.1) $ (3.1)
Futures contracts to
acquire securities . . 4,006 1,464 (0.9) (0.9) (0.3) (0.3)
Interest rate swap
agreements . . . . . . 9,194.0 7,684.0 -- (27.2) -- (159.1)
Interest rate cap
agreements . . . . . . 115.0 115.0 0.2 0.2 0.4 0.4
Interest rate floor
agreements . . . . . . 125.0 125.0 0.1 0.1 0.7 0.7
Interest rate swaption
agreements . . . . . . 30.0 0.0 (3.6) (3.6) -- 0.0
Currency rate swap
agreements . . . . . . 5,797.0 2,881.5 -- (44.8) -- 16.2
Equity collar
agreements . . . . . . -- -- 53.0 53.0 28.6 28.6
</TABLE>
Financial futures contracts are used principally 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 contracts 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. The futures contracts expire in 2000.
The Company uses futures contracts, interest rate swap, cap and floor
agreements, swaptions, and currency rate swap agreements for other than trading
purposes to hedge and manage its exposure to changes in interest rate levels,
foreign exchange rate fluctuations and to manage duration mismatch of assets and
liabilities.
30
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 10--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK--CONTINUED
The Company invests in common stock that is subject to fluctuations from market
value changes in stock prices. The Company sometimes seeks to reduce its market
exposure to such holdings by entering into equity collar agreements. A collar
consists of a call that limits the Company's potential for gain from
appreciation in the stock price as well as a put that limits the Company's loss
potential from a decline in the stock price.
The interest rate swap agreements expire in 2000 to 2029. The interest rate cap
agreements expire in 2000 to 2008. Interest rate floor agreements expire in
2003. Interest rate swaption agreements expire in 2025. The currency rate swap
agreements expire in 2000 to 2021. The equity collar agreements expire in 2003.
The Company's exposure to credit risk is the risk of loss from counterparty
failing to perform to the terms of the contract. The Company continually
monitors its position and the credit ratings of the counterparties to these
derivative instruments. To limit exposure associated with counterparty
nonperformance on interest rate and currency swap 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 be immaterial. Futures contracts trade on
organized exchanges and, therefore, have minimal credit risk.
NOTE 11--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 $24.3 million in 1999 and $26.2 million in 1998.
Future minimum rental commitments under noncancellable operating leases for
office space and furniture and equipment are as follows:
<TABLE>
<CAPTION>
December 31, 1999
-------------------
(In millions)
<S> <C>
2000 . . . . . . . . . . . . . . . . . . . . $19.1
2001 . . . . . . . . . . . . . . . . . . . . 15.9
2002 . . . . . . . . . . . . . . . . . . . . 12.8
2003 . . . . . . . . . . . . . . . . . . . . 8.9
2004 . . . . . . . . . . . . . . . . . . . . 5.3
Thereafter . . . . . . . . . . . . . . . . . 7.0
-----
Total minimum payments . . . . . . . . . . . $69.0
=====
</TABLE>
31
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 12--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:
<TABLE>
<CAPTION>
December 31, 1999 Percent
----------------- ----------
(In millions)
<S> <C> <C>
Subject to discretionary withdrawal (with
adjustment):
With market value adjustment . . . . . . . . . $ 1,126.3 2.8%
At book value less surrender charge . . . . . . 2,845.0 7.1
--------- -----
Total with adjustment . . . . . . . . . . . . . 3,971.3 9.9
Subject to discretionary withdrawal (without
adjustment) at book
value . . . . . . . . . . . . . . . . . . . . 1,535.8 3.8
Subject to discretionary withdrawal--separate
accounts. . . . . . . . . . . . . . . . . . . 14,287.3 35.4
Not subject to discretionary withdrawal:
General account . . . . . . . . . . . . . . . . 19,320.6 48.0
Separate accounts . . . . . . . . . . . . . . . 1,175.7 2.9
--------- -----
Total annuity reserves, deposit fund liabilities
and separate accounts--before reinsurance. . . . 40,290.7 100.0%
=====
Less reinsurance ceded . . . . . . . . . . . . . (0.1)
---------
Net annuity reserves, deposit fund liabilities
and separate accounts . . . . . . . . . . . . . $40,290.6
=========
</TABLE>
Any liquidation costs associated with the $14.3 billion of separate accounts
subject to discretionary withdrawal are sustained by the separate account
contractholders and not by the general account.
NOTE 13--COMMITMENTS AND CONTINGENCIES
The Company has extended commitments to purchase long-term bonds, preferred and
common stocks, and other invested assets and issue real estate mortgages
totaling $706.7 million, $6.0 million, $281.1 million and $194.6 million,
respectively, at December 31, 1999. 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 $1.2 billion at December 31, 1999. The majority
of these commitments expire in 2000.
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, 1999, the aggregate
outstanding principal balance of all the remaining pools of loans from 1991,
1993, and 1996 was $493.4 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
1999 and 1998 amounted to $3.4 million and $4.6 million, respectively.
32
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 13--COMMITMENTS AND CONTINGENCIES--CONTINUED
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, 1999, the
aggregate outstanding principal balance of the pools of loans was $365.2
million. There were no mortgage loans buy-backs in 1999 and 1998.
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, 1999 were $380.6 million for short-term borrowings
and $163.0 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, 1999. 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 reserve held in connection with the
settlement to provide relief to class members and for legal and administrative
costs associated with the settlement amounted to $322.8 million and $283.8
million at December 31, 1999 and 1998, respectively. Costs incurred related to
the settlement were $91.1 million and $150.0 million in 1999 and 1998,
respectively, which were charged directly to policyholders' contingency
reserves. The estimated reserve is based on a number of factors, including the
estimated number of claims, the expected type of relief to be sought by class
members (general relief or alternative dispute resolution), the estimated cost
per claim and the estimated costs to administer the claims.
During 1999, the Company transferred $194.9 million of reserves related to the
settlement to Variable Life representing Variable Life's share of the
settlement. The Company also contributed $194.9 million of capital to Variable
Life during 1999. If Variable Life's share of the settlement increases, the
Company will contribute additional capital to Variable Life so that Variable
Life's total stockholder's equity would not be impacted.
During 1996, management determined that it was probable that a settlement would
occur and that a minimum loss amount could be reasonably estimated. Accordingly,
the Company recorded its best estimate based on the information available at the
time. The terms of the settlement agreement were negotiated throughout 1997 and
approved by the court on December 31, 1997. In accordance with the terms of the
settlement agreement, the Company contacted class members during 1998 to
determine the actual type of relief to be sought by class members.
33
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 13--COMMITMENTS AND CONTINGENCIES--CONTINUED
The majority of the responses from class members were received by the fourth
quarter of 1998. The type of relief sought by class members differed from the
Company's previous estimates, primarily due to additional outreach activities by
regulatory authorities during 1998 encouraging class members to consider
alternative dispute resolution relief. In 1999, the Company updated its estimate
of the cost of claims subject to alternative dispute resolution relief and
revised its reserve estimate accordingly.
Given the uncertainties associated with estimating the reserve, it is reasonably
possible that the final cost of the settlement could differ materially from the
amounts presently provided for by the Company. The Company will continue to
update its estimate of the final cost of the settlement as the claims are
processed and more specific information is developed, particularly as the actual
cost of the claims subject to alternative dispute resolution becomes available.
However, based on information available at this time, and the uncertainties
associated with the final claim processing and alternative dispute resolution,
the range of any additional costs related to the settlement cannot be reasonably
estimated.
NOTE 14--FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of the
Company's financial instruments:
<TABLE>
<CAPTION>
December 31
-----------------------------------------------
1999 1998
-------------------- ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- ---------- ---------- ------------
(In millions)
<S> <C> <C> <C> <C>
Assets
Bonds--Note 6 . . . . . . . . $26,188.1 $25,708.3 $23,353.0 $24,839.3
Preferred stocks--Note 6 . . 926.6 926.7 844.7 832.4
Common stocks--Note 6 . . . . 458.4 458.4 269.3 269.3
Mortgage loans on real
estate--Note 6 . . . . . . 9,165.9 9,009.5 8,223.7 8,619.7
Policy loans--Note 1 . . . . 1,577.8 1,577.8 1,573.8 1,573.8
Cash and cash
equivalents--Note 1 . . . . 1,160.6 1,160.6 1,348.9 1,348.9
Liabilities
Guaranteed investment
contracts--Note 1 . . . . . 13,111.6 12,617.2 12,666.9 12,599.7
Fixed rate deferred and
immediate annuities--Note
1 . . . . . . . . . . . . . 4,685.7 4,656.9 4,375.0 4,412.2
Supplementary contracts
without life
contingencies--
Note 1 . . . . . . . . . . 55.7 55.7 42.7 44.7
Derivatives assets
(liabilities) relating
to:--Note 10
Futures contracts . . . . . . 30.6 30.6 (3.4) (3.4)
Interest rate swaps . . . . . -- (27.2) -- (159.1)
Currency rate swaps . . . . . -- (44.8) -- 16.2
Interest rate caps . . . . . 0.2 0.2 0.4 0.4
Interest rate floors . . . . 0.1 0.1 0.7 0.7
Equity collar agreements . . 53.0 53.0 28.6 28.6
Commitments--Note 13 . . . . . -- 1,195.0 -- 1,114.2
</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.
34
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
NOTE 15--SUBSEQUENT EVENTS
Reorganization and Initial Public Offering
Pursuant to a Plan of Reorganization approved by the policyholders and the
Commonwealth of Massachusetts Division of Insurance, effective February 1, 2000,
the Company converted from a mutual life insurance company to a stock life
insurance company (i.e., demutualized) and became a wholly owned subsidiary of
John Hancock Financial Services, Inc., which is a holding company. All
policyholder membership interests in the Company were extinguished on that date
and eligible policyholders of the Company received, in the aggregate,
approximately 212.8 million shares of common stock, $1,438.7 million of cash and
$43.7 million policy credits as compensation. In connection with the
reorganization, the Company changed its name to John Hancock Life Insurance
Company.
In addition, on February 1, 2000, John Hancock Financial Services, Inc.
completed its initial public offering and 102 million shares of common stock
were issued at an initial public offering price of $17 per share. Net proceeds
from the offering were $1,657.7 million, of which $105.7 million was retained by
John Hancock Financial Services, Inc. and $1,552.0 million was contributed to
the Company.
Establishment of the Closed Block
Under the Plan of Reorganization, effective February 1, 2000, the Company
created a closed block for the benefit of policies included therein. The
policies included in the closed block are individual and joint traditional whole
life insurance policies of the Company that are paying or are expected to pay
dividends, and individual term life insurance policies that were in force on
February 1, 2000. The purpose of the closed block is to protect the policy
dividend expectations of these policies after the demutualization. Unless the
Commonwealth of Massachusetts Commissioner of Insurance and, in certain
circumstances, the New York Superintendent of Insurance consents to an earlier
termination, the closed block will continue in effect until the date none of
such policies is in force.
Acquisition of Long-Term Care Business
On January 3, 2000, the Company signed an agreement to purchase the individual
long-term care insurance business of Fortis, Inc. ("Fortis"). The business to be
acquired had earned premiums of approximately $124.4 million in 1999 and
included approximately 97,000 policies in force as of December 31, 1999. During
1999 the Company's individual long-term care earned premium was $177.3 million
and approximately 164,000 individual long-term care policies were in force.
35
<PAGE>
NOTE 16--IMPACT OF YEAR 2000 (UNAUDITED)
By late 1999, the Company completed its Year 2000 readiness plan to address
issues that could result from computer programs being written using two digits
to define the applicable year rather than four to define the applicable year and
century. As a result the Company prepared for the transition to the Year 2000
and did not experience any significant Year 2000 problems with respect to its
mission critical information technology ("IT") or non-IT systems, applications
or infrastructure. During the date rollover to the year 2000, the Company
implemented and monitored its millennium rollover plan and conducted business as
usual on Monday, January 3, 2000.
Since January 3, 2000, the Company's information systems, including its mission
critical systems, which in the event of a Year 2000 failure would have the
greatest impact on its operations, have functioned properly. In addition, the
Company has not experienced any significant Year 2000 issues related to
interactions with its material business partners. The Company has experienced no
disruption in its ability to process claims, update customer accounts, process
financial transactions, report accurate data to management and no business
interruptions due to Year 2000 issues. While the Company continues to monitor
its systems, and those of its material business partners closely to ensure that
no unexpected Year 2000 issues develop, the Company has no reason to expect any
such issues.
The costs of the Year 2000 project consist of internal IT personnel and external
costs such as consultants, programmers, replacement software, and hardware. The
costs of the Year 2000 project are expensed as incurred. The project is funded
partially through a reallocation of resources from discretionary projects.
Through December 31, 1999, the Company has incurred and expensed approximately
$20.8 million in related payroll costs for internal IT personnel on the project.
The estimated remaining IT personnel costs of the project are approximately $1.0
million. Through December 31, 1999, the Company incurred and expensed
approximately $47.0 million in external costs for the project. The estimated
remaining external cost of the project is approximately $2.0 million. The total
costs of the Year 2000 project, based on management's best estimates, include
approximately $21.7 million in internal IT personnel, $14.6 million in the
external modification of software, $18.3 million for external solution
providers, $9.1 million in replacement costs of non-compliant IT systems and
$6.9 million in oversight, test facilities and other expenses. Accordingly, the
estimated range of total costs of the Year 2000 project, internal and external,
is approximately $70 to $72.5 million. The Company's total Year 2000 project
costs include the estimated impact of external solution providers based on
presently available information.
36
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Contractowners of
John Hancock Variable Annuity Account H of John Hancock Mutual 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. Mid Cap Growth (formerly, Special Opportunities), V.A. Bond, V.A. Core
Equity (formerly, Independence Equity), V.A. Large Cap Growth (formerly,
Growth), V.A. Large Cap Value (formerly, Growth & Income), V.A. Financial
Industries, V.A. High Yield Bond, V.A. International, V.A. Regional Bank, V.A.
Small Cap Growth (formerly, Emerging Growth), V.A. Money Market, V.A. Strategic
Income, V.A. Sovereign Investors, V.A. 500 Index, Fundamental Mid Cap Growth,
Aggressive Balanced, International Equity, Small Cap Growth, International
Balanced, Mid Cap Blend, Large Cap Value CORE, Large/Mid Cap Value, Small/Mid
Cap Growth, Bond Index, Large Cap Aggressive Growth, Small/Mid Cap CORE,
Small/Mid Cap Value, Short-Term Bond, Equity Index, High Yield Bond, AIM V.I.
Growth, AIM V.I. Value, MFS Growth Series, MFS New Discovery Series, MFS
Research Series, VIP II Contrafund, VIP Growth, VIP Overseas Equity, Templeton
International and Templeton Development Market Subaccounts) as of December 31,
1999, the related statements of operations and 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 audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. 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 H at December 31,
1999, the results of their operations for the period then ended and the changes
in their net assets for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States.
ERNST & YOUNG LLP
Boston, Massachusetts
February 11, 2000
37
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
V.A. V.A.
MID CAP V.A. V.A. LARGE CAP
GROWTH BOND CORE EQUITY GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash....................................... $ 542 $ 1,330 $ 4,441 $ 2,321
Investment in shares of portfolios of:
Declaration Trust, at value............... 2,734,578 5,648,598 19,332,590 10,159,911
Variable Series Trust I, at value......... -- -- -- --
MFS Trust, at value....................... -- -- -- --
AIM Trust, at value....................... -- -- -- --
Fidelity Trust, at value -- -- -- --
Templeton Trust, at value................ -- -- -- --
Policy loans and accrued
interest receivable....................... -- -- -- --
Receivable from:
Declaration Trust......................... 40,049 79,395 139,028 2,206
Variable Series Trust I................... -- -- -- --
MFS Trust................................. -- -- -- --
AIM Trust................................. -- -- -- --
Fidelity Trust............................ -- -- -- --
Templeton Trust........................... -- -- -- --
----------- ----------- ----------- -----------
Total assets............................... 2,775,169 5,729,323 19,476,059 10,164,438
LIABILITIES
Payable to John Hancock
Mutual Life Insurance Company............. 39,951 79,207 138,392 1,875
Asset charges payable...................... 640 1,519 5,076 2,652
----------- ----------- ----------- -----------
Total liabilities.......................... 40,591 80,726 143,468 4,527
----------- ----------- ----------- -----------
Net assets................................. $ 2,734,578 $ 5,648,597 $19,332,591 $10,159,911
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
V.A. V.A. V.A.
LARGE CAP FINANCIAL HIGHYIELD V.A.
VALUE INDUSTRIES BOND INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ---------- --------------
<S> <C> <C> <C> <C>
ASSETS
Cash....................................... $ 4,035 $ 5,195 $ 971 $ 628
Investment in shares of portfolios of:
Declaration Trust, at value............... 18,466,518 23,569,364 4,187,765 2,712,000
Variable Series Trust I, at value......... -- -- -- --
MFS Trust, at value....................... -- -- -- --
AIM Trust, at value....................... -- -- -- --
Fidelity Trust, at value.................. -- -- -- --
Templeton Trust, at value................. -- -- -- --
Policy loans and accrued
interest receivable........................ -- -- -- --
Receivable from:
Declaration Trust......................... 81,779 150,750 138 90
Variable Series Trust I................... -- -- -- --
MFS Trust................................. -- -- -- --
AIM Trust................................. -- -- -- --
Fidelity Trust............................ -- -- -- --
Templeton Trust........................... -- -- -- --
----------- ----------- ---------- ----------
Total assets............................... 18,552,332 23,725,309 4,188,874 2,712,718
LIABILITIES
Payable to John Hancock
Mutual Life Insurance Company.............. 81,195 149,989 -- --
Asset charges payable...................... 4,619 5,956 1,109 718
----------- ----------- ---------- ----------
Total liabilities.......................... 85,814 155,945 1,109 718
----------- ----------- ---------- ----------
Net assets................................. $18,466,518 $23,569,364 $4,187,765 $2,712,000
=========== =========== ========== ==========
</TABLE>
See accompanying notes.
38
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
V.A.
V.A. SMALL CAP V.A. V.A. STRATEGIC
REGIONAL BANK GROWTH MONEY MARKET INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------- ----------- ------------ ---------------
<S> <C> <C> <C> <C>
ASSETS
Cash.......................................... $ 1,868 $ 2,032 $ 2,433 $ 2,017
Investment in shares of portfolios of:
Declaration Trust, at value 8,158,254 8,945,507 19,859,410 8,805,403
Variable Series Trust I, at value............ -- -- -- --
MFS Trust, at value.......................... -- -- -- --
AIM Trust, at value.......................... -- -- -- --
Fidelity Trust, at value..................... -- -- -- --
Templeton Trust, at value.................... -- -- -- --
Policy loans and accrued interest receivable.. -- -- -- --
Receivable from:
Declaration Trust............................ 268 8,332 340,538 1,487
Variable Series Trust I...................... -- -- -- --
MFS Trust.................................... -- -- -- --
AIM Trust.................................... -- -- -- --
Fidelity Trust............................... -- -- -- --
Templeton Trust.............................. -- -- -- --
----------- ----------- ------------ ---------------
Total assets.................................. 8,160,390 8,955,871 20,202,381 8,808,907
LIABILITIES
Payable to John Hancock Mutual
Life Insurance Company...................... 8,041 8,041 340,538 1,200
Asset charges payable........................ 2,136 2,323 2,433 2,304
----------- ----------- ------------ ---------------
Total liabilities............................ 2,136 10,364 342,971 3,504
----------- ----------- ------------ ---------------
Net assets................................... $ 8,158,254 $ 8,945,507 $ 19,859,410 $ 8,805,403
=========== =========== ============ ===============
</TABLE>
<TABLE>
<CAPTION>
V.A. FUNDAMENTAL
SOVEREIGN V.A. 500 MID CAP AGGRESSIVE
INVESTORS INDEX GROWTH BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash.............................................. $ 4,856 $ 4,114 $ 173 $ 237
Investment in shares of portfolios of:
Declaration Trust, at value...................... 21,789,017 17,623,306 -- --
Variable Series Trust I, at value................ -- -- 878,024 1,132,802
MFS Trust, at value.............................. -- -- -- --
AIM Trust, at value.............................. -- -- -- --
Fidelity Trust, at value......................... -- -- -- --
Templeton Trust, at value........................ -- -- -- --
Policy loans and accrued interest receivable...... -- -- -- --
Receivable from:
Declaration Trust................................ 14,263 28,716 -- --
Variable Series Trust I.......................... -- -- 30 136,226
MFS Trust........................................ -- -- -- --
AIM Trust........................................ -- -- -- --
Fidelity Trust................................... -- -- -- --
Templeton Trust.................................. -- -- -- --
----------- ----------- -------- ----------
Total assets...................................... 21,808,136 17,656,136 878,227 1,269,265
LIABILITIES
Payable to John Hancock
Mutual Life Insurance Company.................... 13,549 28,130 -- 136,192
Asset charges payable............................. 5,570 4,699 202 271
----------- ----------- -------- ----------
Total liabilities................................. 19,119 32,829 202 136,463
----------- ----------- -------- ----------
Net assets........................................ $21,789,017 $17,623,307 $878,025 $1,132,802
=========== =========== ======== ==========
</TABLE>
See accompanying notes.
39
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTERNATIONAL SMALL CAP INTERNATIONAL MID CAP
EQUITY GROWTH BALANCED BLEND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash.............................................. $ 29 $ 300 $ 14 $ 45
Investment in shares of portfolios of:
Declaration Trust, at value...................... -- -- -- --
Variable Series Trust I, at value................ 145,821 1,407,289 56,543 214,097
MFS Trust, at value.............................. -- -- -- --
AIM Trust, at value.............................. -- -- -- --
Fidelity Trust, at value......................... -- -- -- --
Templeton Trust, at value........................ -- -- -- --
Policy loans and accrued interest
receivable....................................... -- -- -- --
Receivable from:
Declaration Trust................................ -- -- -- --
Variable Series Trust I.......................... 5 48,795 2 7
MFS Trust........................................ -- -- -- --
AIM Trust........................................ -- -- -- --
Fidelity Trust................................... -- -- -- --
Templeton Trust.................................. -- -- -- --
-------- ---------- -------- --------
Total assets...................................... 145,855 1,456,384 56,559 214,149
LIABILITIES
Payable to John Hancock
Mutual Life Insurance Company.................... -- 48,749 -- --
Asset charges payable............................. 34 346 16 52
-------- ---------- -------- --------
Total liabilities................................. 34 49,095 16 52
-------- ---------- -------- --------
Net assets........................................ $145,821 $1,407,289 $ 56,543 $214,097
======== ========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP LARGE/MID SMALL/MID CAP
VALUE CORE CAP VALUE GROWTH BOND INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash.......................................... $ 50 $ 43 $ 39 $ 121
Investment in shares of portfolios of:
Declaration Trust, at value.................. -- -- -- --
Variable Series Trust I, at value............ 237,582 188,130 163,649 626,034
MFS Trust, at value.......................... -- -- -- --
AIM Trust, at value.......................... -- -- -- --
Fidelity Trust, at value..................... -- -- -- --
Templeton Trust, at value.................... -- -- -- --
Policy loans and accrued interest receivable.. -- -- -- --
Receivable from:
Declaration Trust............................ -- -- -- --
Variable Series Trust I...................... 8,000 6 6 12,255
MFS Trust.................................... -- -- -- --
AIM Trust.................................... -- -- -- --
Fidelity Trust............................... -- -- -- --
Templeton Trust.............................. -- -- -- --
-------- -------- -------- --------
Total assets.................................. 245,632 188,179 163,694 638,410
LIABILITIES
Payable to John Hancock
Mutual Life Insurance Company................ 7,992 -- -- 12,234
Asset charges payable......................... 58 50 44 142
-------- -------- -------- --------
Total liabilities............................. 8,050 50 44 12,376
-------- -------- -------- --------
Net assets.................................... $237,582 $188,129 $163,650 $626,034
======== ======== ======== ========
</TABLE>
See accompanying notes.
40
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
LARGE CAP
AGGRESSIVE SMALL/MID SMALL/MID SHORT-TERM
GROWTH CAP CORE CAP VALUE BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash.......................................... $ 202 $ 16 $ 22 $ 93
Investment in shares of portfolios of:
Declaration Trust, at value.................. -- -- -- --
Variable Series Trust I, at value............ 921,045 69,429 143,972 407,497
MFS Trust, at value.......................... -- -- -- --
AIM Trust, at value.......................... -- -- -- --
Fidelity Trust, at value..................... -- -- -- --
Templeton Trust, at value.................... -- -- -- --
Policy loans and accrued interest receivable... -- -- -- --
Receivable from:
Declaration Trust............................ -- -- -- --
Variable Series Trust I...................... 425 2 5 3,248
MFS Trust.................................... -- -- -- --
AIM Trust.................................... -- -- -- --
Fidelity Trust............................... -- -- -- --
Templeton Trust.............................. -- -- -- --
---------- -------- ---------- ----------
Total assets.................................. 921,672 69,447 143,999 410,838
LIABILITIES
Payable to John Hancock
Mutual Life Insurance Company................ 394 -- -- 3,234
Asset charges payable......................... 234 18 27 106
---------- -------- ---------- ----------
Total liabilities............................. 628 18 27 3,340
---------- -------- ---------- ----------
Net assets.................................... $ 921,044 $ 69,429 $ 143,972 $ 407,498
========== ======== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
AIM V.I.
EQUITY INDEX HIGH YIELD BOND GROWTH AIM V.I. VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ --------------- ---------- ----------------
<S> <C> <C> <C> <C>
ASSETS
Cash.......................................... $ 459 $ 50 $ 296 $ 551
Investment in shares of portfolios of:
Declaration Trust, at value.................. -- -- -- --
Variable Series Trust I, at value............ 2,173,924 273,729 -- --
MFS Trust, at value.......................... -- -- -- --
AIM Trust, at value.......................... -- -- 1,490,608 2,699,634
Fidelity Trust, at value..................... -- -- -- --
Templeton Trust, at value.................... -- -- -- --
Policy loans and accrued interest receivable.. -- -- -- --
Receivable from:
Declaration Trust............................ -- -- -- --
Variable Series Trust I...................... 8,425 7,100 -- --
MFS Trust.................................... -- -- -- --
AIM Trust.................................... -- -- 47,018 58,826
Fidelity Trust............................... -- -- -- --
Templeton Trust.............................. -- -- -- --
---------- -------- ---------- ----------
Total assets.................................. 2,182,808 280,879 1,537,922 2,759,011
LIABILITIES
Payable to John Hancock
Mutual Life Insurance Company................ 8,351 7,091 46,967 58,736
Asset charges payable......................... 533 60 347 642
---------- -------- ---------- ----------
Total liabilities............................. 8,884 7,151 47,314 59,378
---------- -------- ---------- ----------
Net assets.................................... $2,173,924 $273,728 $1,490,608 $2,699,633
========== ======== ========== ==========
</TABLE>
See accompanying notes.
41
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
MFS
MFS NEW DISCOVERY MFS VIP II
GROWTH SERIES SERIES RESEARCH SERIES CONTRAFUND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------- ------------- --------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash.......................................... $ 178 $ 51 $ 182 $ 615
Investment in shares of portfolios of:
Declaration Trust, at value.................. -- -- -- --
Variable Series Trust I, at value............ -- -- -- --
MFS Trust, at value.......................... 832,056 259,592 820,441 --
AIM Trust, at value.......................... -- -- -- --
Fidelity Trust, at value..................... -- -- -- 2,995,895
Templeton Trust, at value.................... -- -- -- --
Policy loans and accrued interest receivable.. -- -- -- --
Receivable from:
Declaration Trust............................ -- -- -- --
Variable Series Trust I...................... -- -- -- --
MFS Trust.................................... 28 3,418 28 --
AIM Trust.................................... -- -- -- --
Fidelity Trust............................... -- -- -- 15,616
Templeton Trust.............................. -- -- -- --
---------- -------- -------- ----------
Total assets.................................. 832,262 263,061 820,651 3,012,126
LIABILITIES
Payable to John Hancock
Mutual Life Insurance Company................ -- 3,410 -- 15,514
Asset charges payable......................... 206 60 210 717
---------- -------- -------- ----------
Total liabilities............................. 206 3,470 210 16,231
---------- -------- -------- ----------
Net assets.................................... $ 832,056 $259,591 $820,441 $2,995,895
========== ======== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
TEMPLETON
VIP OVERSEAS TEMPLETON DEVELOPMENT
VIP GROWTH EQUITY INTERNATIONAL MARKET
ASSETS SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Cash.......................................... $ 721 $ 124 $ 87 $ 83
Investment in shares of portfolios of:
Declaration Trust, at value.................. -- -- -- --
Variable Series Trust I, at value............ -- -- -- --
MFS Trust, at value.......................... -- -- -- --
AIM Trust, at value.......................... -- -- -- --
Fidelity Trust, at value..................... -- -- -- --
Templeton Trust, at value.................... 3,342,012 686,399 -- --
Policy loans and accrued interest receivable.. -- -- 373,640 398,517
Receivable from:
Declaration Trust............................ -- -- -- --
Variable Series Trust I...................... -- -- -- --
MFS Trust.................................... -- -- -- --
AIM Trust.................................... -- -- -- --
Fidelity Trust............................... 10,724 6,496 -- --
Templeton Trust.............................. -- -- 13 21,429
---------- -------- -------- --------
Total assets.................................. 3,353,457 693,019 373,740 420,029
LIABILITIES
Payable to John Hancock
Mutual Life Insurance Company................ 10,611 6,473 -- 21,417
Asset charges payable......................... 835 147 99 96
---------- -------- -------- --------
Total liabilities............................. 11,446 6,620 99 21,513
---------- -------- -------- --------
Net assets.................................... $3,342,011 $686,399 $373,641 $398,516
========== ======== ======== ========
</TABLE>
See accompanying notes.
42
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
STATEMENT OF OPERATIONS
PERIOD ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
V.A. MID V.A. CORE V.A. LARGE V.A. LARGE
CAP GROWTH V.A. BOND EQUITY CAP GROWTH CAP VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Investment Income
Distribution received from:
Declaration Trust............................. $ 2,236 $ 328,761 $ 459,209 $ 228,082 $ 720,673
Variable Series Trust I....................... -- -- -- -- --
MFS Trust..................................... -- -- -- -- --
AIM Trust..................................... -- -- -- -- --
Fidelity Trust................................ -- -- -- -- --
Templeton Trust............................... -- -- -- -- --
Interest income on policy loans............... -- -- -- -- --
--------- --------- ---------- ---------- ----------
Total investment income........................ 2,236 328,761 459,209 228,082 720,673
Expenses:
Mortality and expense risks................... 10,678 61,590 192,354 88,129 138,014
--------- --------- ---------- ---------- ----------
Net investment income (loss)................... (8,442) 267,171 266,855 139,953 582,659
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)...................... 22,272 (47,490) 1,277,793 283,894 569,290
Net unrealized appreciation (depreciation)
during the period............................ 628,790 (325,817) 364,256 936,999 4,933,786
--------- --------- ---------- ---------- ----------
Net realized and unrealized gain
(loss) on investments......................... 651,062 (373,307) 1,642,049 1,220,893 5,503,076
--------- --------- ---------- ---------- ----------
Net increase (decrease) in net
assets resulting from operations.............. $ 642,620 $(106,136) $1,908,904 $1,360,846 $6,085,735
========= ========= ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
V.A. V.A. V.A.
FINANCIAL V.A. HIGH V.A. REGIONAL SMALL CAP
INDUSTRIES YIELD BOND INTERNATIONAL BANK GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Investment Income
Distribution received from:
Declaration Trust............................. $ 254,467 $ 460,513 $ 92,412 $ 254,942 $ 189,646
Variable Series Trust I....................... -- -- -- -- --
MFS Trust..................................... -- -- -- -- --
AIM Trust..................................... -- -- -- -- --
Fidelity Trust................................ -- -- -- -- --
Templeton Trust............................... -- -- -- -- --
Interest income on policy loans............... -- -- -- -- --
--------- --------- -------- --------- ----------
Total investment income........................ 254,467 460,513 92,412 254,942 189,646
Expenses:
Mortality and expense risks................... 277,499 50,429 26,622 108,598 53,028
--------- --------- -------- --------- ----------
Net investment income (loss)................... (23,032) 410,084 65,790 146,344 136,618
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)...................... 513,229 (282,805) 81,477 (142,936) 242,520
Net unrealized appreciation (depreciation)
during the period............................ (656,480) 342,231 474,076 (335,881) 2,656,744
--------- --------- -------- --------- ----------
Net realized and unrealized gain
(loss) on investments......................... (143,251) 41,426 555,553 (478,817) 2,899,264
--------- --------- -------- --------- ----------
Net increase (decrease) in net
assets resulting from operations.............. $(166,283) $ 451,510 $621,343 $(332,473) $3,035,882
========= ========= ======== ========= ==========
</TABLE>
See accompanying notes.
43
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
STATEMENT OF OPERATIONS (CONTINUED)
PERIOD ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
V.A. FUNDAMENTAL
V.A. V.A. STRATEGIC SOVEREIGN V.A. 500 MID CAP
MONEY MARKET INCOME INVESTORS INDEX GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT*
------------ -------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Investment Income
Distribution received from:
Declaration Trust............................. $585,609 $ 571,632 $265,826 $ 269,329 $ --
Variable Series Trust I....................... -- -- -- -- 41,188
MFS Trust..................................... -- -- -- -- --
AIM Trust..................................... -- -- -- -- --
Fidelity Trust................................ -- -- -- -- --
Templeton Trust............................... -- -- -- -- --
Interest income on policy loans............... -- -- -- -- --
-------- --------- -------- ---------- --------
Total investment income........................ 585,609 571,632 265,826 269,329 41,188
Expenses:
Mortality and expense risks................... 146,007 85,244 200,525 176,807 866
-------- --------- -------- ---------- --------
Net investment income (loss)................... 439,602 486,388 65,301 92,522 40,322
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)...................... -- (174,460) 328,306 828,606 5,572
Net unrealized appreciation (depreciation)
during the period............................ -- (66,911) 29,039 1,687,532 93,167
-------- --------- -------- ---------- --------
Net realized and unrealized gain
(loss) on investments......................... -- (241,371) 357,345 2,516,138 98,739
-------- --------- -------- ---------- --------
Net increase (decrease) in net
assets resulting from operations.............. $439,602 $ 245,017 $422,646 $2,608,660 $139,061
======== ========= ======== ========== ========
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE INTERNATIONAL SMALL CAP INTERNATIONAL MID CAP
BALANCED EQUITY GROWTH BALANCED BLEND
SUBACCOUNT* SUBACCOUNT* SUBACCOUNT SUBACCOUNT SUBACCOUNT*
----------- ------------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Investment Income
Distribution received from:
Declaration Trust............................. $ -- $ -- $ -- $ -- $ --
Variable Series Trust I....................... 6,305 1,478 144,708 3,394 3,601
MFS Trust..................................... -- -- -- -- --
AIM Trust..................................... -- -- -- -- --
Fidelity Trust................................ -- -- -- -- --
Templeton Trust............................... -- -- -- -- --
Interest income on policy loans............... -- -- -- -- --
------- ------ -------- ------ ------
Total investment income........................ 6,305 1,478 144,708 3,394 3,601
Expenses:
Mortality and expense risks................... 1,206 115 1,076 128 140
------- ------ -------- ------ ------
Net investment income.......................... 5,099 1,363 143,632 3,266 3,461
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)...................... 7,217 455 4,912 (67) 601
Net unrealized appreciation (depreciation)
during the period............................ 22,665 7,172 24,733 (335) 5,763
------- ------ -------- ------ ------
Net realized and unrealized gain
(loss) on investments......................... 29,882 7,627 29,645 (402) 6,364
------- ------ -------- ------ ------
Net increase (decrease) in net
assets resulting from operations.............. $34,981 $8,990 $173,277 $2,864 $9,825
======= ====== ======== ====== ======
</TABLE>
- ---------
* From September 1, 1999 (commencement of investment operations).
See accompanying notes.
44
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
STATEMENT OF OPERATIONS (CONTINUED)
PERIOD ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
LARGE CAP
LARGE CAP LARGE/MID SMALL/MID AGGRESSIVE
VALUE CORE CAP VALUE CAP GROWTH BOND INDEX GROWTH
SUBACCOUNT* SUBACCOUNT* SUBACCOUNT SUBACCOUNT SUBACCOUNT*
----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Investment Income
Distribution received from:
Declaration Trust............................. $ -- $ -- $ -- $ -- $ --
Variable Series Trust I....................... 2,587 597 21,566 4,017 5,137
MFS Trust..................................... -- -- -- -- --
AIM Trust..................................... -- -- -- -- --
Fidelity Trust................................ -- -- -- -- --
Templeton Trust............................... -- -- -- -- --
Interest income on policy loans............... -- -- -- -- --
------ ------ -------- ------- -------
Total investment income........................ 2,587 597 21,566 4,017 5,137
Expenses:
Mortality and expense risks................... 255 177 182 653 878
------ ------ -------- ------- -------
Net investment income.......................... 2,332 420 21,384 3,364 4,259
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)...................... 12 15 (182) (1) 319
Net unrealized appreciation (depreciation)
during the period............................ 2,993 3,578 (11,311) (7,193) 48,482
------ ------ -------- ------- -------
Net realized and unrealized gain
(loss) on investments......................... 3,005 3,593 (11,493) (7,194) 48,801
------ ------ -------- ------- -------
Net increase (decrease) in net
assets resulting from operations.............. $5,337 $4,013 $ 9,891 $(3,830) $53,060
====== ====== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
SMALL/MID SMALL/MID SHORT-TERM EQUITY HIGH YIELD
CAP CORE CAP VALUE BOND INDEX BOND
SUBACCOUNT SUBACCOUNT* SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Investment Income
Distribution received from:
Declaration Trust............................. $ -- $ -- $ -- $ -- $ --
Variable Series Trust I....................... 4,590 2,258 3,216 53,766 1,820
MFS Trust..................................... -- -- -- -- --
AIM Trust..................................... -- -- -- -- --
Fidelity Trust................................ -- -- -- -- --
Templeton Trust............................... -- -- -- -- --
Interest income on policy loans............... -- -- -- -- --
------ ------ ------- ------- ------
Total investment income........................ 4,590 2,258 3,216 53,766 1,820
Expenses:
Mortality and expense risks................... 62 96 550 2,349 266
------ ------ ------- ------- ------
Net investment income.......................... 4,528 2,162 2,666 51,417 1,554
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)...................... 63 132 28 7,155 4
Net unrealized appreciation (depreciation)
during the period............................ 711 4,387 (2,544) 40,583 1,402
------ ------ ------- ------- ------
Net realized and unrealized gain
(loss) on investments......................... 774 4,519 (2,516) 47,738 1,406
------ ------ ------- ------- ------
Net increase (decrease) in net
assets resulting from operations.............. $5,302 $6,681 $ 150 $99,155 $2,960
====== ====== ======= ======= ======
</TABLE>
- ---------
* From September 1, 1999 (commencement of investment operations).
See accompanying notes.
45
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
STATEMENT OF OPERATIONS (CONTINUED)
PERIOD ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
MFS NEW MFS
AIM V.I. AIM V.I. MFS GROWTH DISCOVERY RESEARCH
GROWTH VALUE SERIES SERIES SERIES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Investment Income
Distribution received from:
Declaration Trust............................. $ -- $ -- $ -- $ -- $ --
Variable Series Trust I....................... -- -- -- -- --
MFS Trust..................................... -- -- 2,975 4,479 --
AIM Trust..................................... -- -- -- -- --
Fidelity Trust................................ -- -- -- -- --
Templeton Trust............................... -- -- -- -- --
Interest income on policy loans............... -- -- -- -- --
------- ------- ------- ------- -------
Total investment income........................ -- -- 2,975 4,479 --
Expenses:
Mortality and expense risks................... 1,413 1,949 787 159 1,009
------- ------- ------- ------- -------
Net investment income.......................... (1,413) (1,949) 2,188 4,320 (1,009)
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)...................... 3,526 129 1,989 12 4,125
Net unrealized appreciation (depreciation)
during the period............................ 76,982 91,722 67,184 21,851 71,925
------- ------- ------- ------- -------
Net realized and unrealized gain
(loss) on investments......................... 80,508 91,851 69,173 21,863 76,050
------- ------- ------- ------- -------
Net increase (decrease) in net
assets resulting from operations.............. $79,095 $89,902 $71,361 $26,183 $75,041
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
VIP TEMPLETON
VIP II VIP OVERSEAS TEMPLETON DEVELOPMENT
CONTRAFUND GROWTH EQUITY INTERNATIONAL MARKET
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Investment Income
Distribution received from:
Declaration Trust............................. $ -- $ -- $ -- $ -- $ --
Variable Series Trust I....................... -- -- -- -- --
MFS Trust..................................... -- -- -- -- --
AIM Trust..................................... -- -- -- -- --
Fidelity Trust................................ -- -- -- -- --
Templeton Trust............................... -- -- -- -- --
Interest income on policy loans............... -- -- -- -- --
-------- -------- ------- ------- -------
Total investment income........................ -- -- -- -- --
Expenses:
Mortality and expense risks................... 2,610 3,138 497 334 423
-------- -------- ------- ------- -------
Net investment income.......................... (2,610) (3,138) (497) (334) (423)
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)...................... 256 6,287 289 155 611
Net unrealized appreciation (depreciation)
during the period............................ 195,208 248,358 50,249 23,747 44,304
-------- -------- ------- ------- -------
Net realized and unrealized gain
(loss) on investments......................... 195,464 254,645 50,538 23,902 44,915
-------- -------- ------- ------- -------
Net increase (decrease) in net
assets resulting from operations.............. $192,854 $251,507 $50,041 $23,568 $44,492
======== ======== ======= ======= =======
</TABLE>
See accompanying notes.
46
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
STATEMENTS OF CHANGES IN NET ASSETS
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
V.A. V.A.
MID CAP V.A. CORE
GROWTH BOND EQUITY
SUBACCOUNT SUBACCCOUNT SUBACCOUNT
------------------------- -------------------------- -------------------------
1999 1998* 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)............... $ (8,442) $ (2,253) $ 267,171 $ 209,402 $ 266,855 $ 145,707
Net realized gains (losses)................ 22,272 (6,497) (47,490) 29,556 1,277,793 72,335
Net unrealized appreciation (depreciation)
during the period......................... 628,790 56,844 (325,817) 4,388 364,256 1,550,627
----------- ----------- ----------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations.................. 642,620 48,094 (106,136) 243,346 1,908,904 1,768,669
From contractowner transactions:
Net premiums from contractowners........... 1,740,610 589,145 2,853,134 3,908,345 11,067,913 8,687,135
Net benefits to contractowners............. (263,734) (22,157) (1,603,946) (1,069,195) (6,610,977) (559,525)
----------- ----------- ----------- ------------ ----------- -----------
Net increase in net assets resulting from
contractowner transactions................. 1,476,876 566,988 1,249,188 2,839,150 4,456,936 8,127,610
----------- ----------- ----------- ------------ ----------- -----------
Net increase in net assets.................. 2,119,496 615,082 1,143,052 3,082,496 6,365,840 9,896,279
Net assets at beginning of period........... 615,082 0 4,505,545 1,423,049 12,966,751 3,070,472
----------- ----------- ----------- ------------ ----------- -----------
Net assets at end of period................. $ 2,734,578 $ 615,082 $ 5,648,597 $ 4,505,545 $19,332,591 $12,966,751
=========== =========== =========== ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
V.A. V.A. V.A.
LARGE CAP LARGE CAP FINANCIAL
GROWTH VALUE INDUSTRIES
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------ ------------------------ --------------------------
1999 1998 1999 1998** 1999 1998
------------ ----------- ------------ ----------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)................ $ 139,953 $ (27,067) $ 582,659 $ (4,108) $ (23,032) $ 19,508
Net realized gains (losses)................. 283,894 59,808 569,290 12,915 513,229 337,276
Net unrealized appreciation (depreciation)
during the period.......................... 936,999 629,195 4,933,786 954,534 (656,480) 21,347
----------- ---------- ----------- ---------- ------------ -----------
Net increase (decrease) in net assets
resulting from operations................... 1,360,846 661,936 6,085,735 963,341 (166,283) 378,131
From contractowner transactions:
Net premiums from contractowners............ 5,778,345 3,229,683 7,294,133 8,400,284 7,841,714 23,261,882
Net benefits to contractowners.............. (1,576,675) (152,542) (3,602,469) (674,506) (10,303,964) (6,410,563)
----------- ---------- ----------- ---------- ------------ -----------
Net increase in net assets resulting from
contractowner transactions.................. 4,201,670 3,077,141 3,691,664 7,725,778 (2,462,250) 16,851,319
----------- ---------- ----------- ---------- ------------ -----------
Net increase in net assets................... 5,562,516 3,739,077 9,777,399 8,689,119 (2,628,533) 17,229,450
Net assets at beginning of period............ 4,597,395 858,318 8,689,119 0 26,197,897 8,968,447
----------- ---------- ----------- ---------- ------------ -----------
Net assets at end of period.................. $10,159,911 $4,597,395 $18,466,518 $8,689,119 $ 23,569,364 $26,197,897
=========== ========== =========== ========== ============ ===========
</TABLE>
- ---------
* From January 5, 1998 (commencement of investment operations).
** From May 1, 1998 (commencement of investment operations).
See accompanying notes.
47
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
V.A. V.A.
HIGH YIELD V.A. REGIONAL
BOND INTERNATIONAL BANK
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------- -------------------------- ----------------------------
1999 1998** 1999 1998 1999 1998**
------------ ----------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)................ $ 410,084 $ 176,585 $ 65,790 $ (879) $ 146,344 $ 10,512
Net realized gains (losses)................. (282,805) (70,619) 81,477 (38,507) (142,936) (370,654)
Net unrealized appreciation (depreciation)
during the period.......................... 324,231 (466,080) 474,076 203,266 (335,881) (105,324)
----------- ---------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations................... 451,510 (360,114) 621,343 163,880 (332,473) (465,466)
From contractowner transactions:
Net premiums from contractowners............ 1,601,032 4,353,911 528,902 1,762,369 2,982,191 12,264,782
Net benefits to contractowners.............. (1,526,188) (332,386) (663,401) (256,871) (3,834,412) (2,456,368)
----------- ---------- ----------- ----------- ----------- -----------
Net increase in net assets resulting from
contractowner transactions.................. 74,844 4,021,525 (134,499) 1,505,498 (852,221) 9,808,414
----------- ---------- ----------- ----------- ----------- -----------
Net increase in net assets................... 526,354 3,661,411 486,844 1,669,378 (1,184,694) 9,342,948
Net assets at beginning of period............ 3,661,411 0 2,225,156 555,778 9,342,948 0
----------- ---------- ----------- ----------- ----------- -----------
Net assets at end of period.................. $ 4,187,765 $3,661,411 $ 2,712,000 $ 2,225,156 $ 8,158,254 $ 9,342,948
=========== ========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
V.A.
SMALL CAP V.A. V.A.
GROWTH MONEY MARKET STRATEGIC INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------- ---------------------------- ---------------------------
1999 1998 1999 1998 1999 1998
------------ ----------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)............... $ 136,618 $ (24,554) $ 439,602 $ 203,885 $ 486,388 $ 253,672
Net realized gains (losses)................ 242,520 23,566 -- -- (174,460) (16,316)
Net unrealized appreciation (depreciation)
during the period......................... 2,656,744 393,076 -- -- (66,911) (129,004)
----------- ---------- ------------ ------------ ----------- ----------
Net increase (decrease) in net assetsfrom
resulting from operations.................. 3,035,882 392,088 439,602 203,885 245,017 108,352
From contractowner transactions:
Net premiums from contractowners........... 3,643,949 2,281,263 31,740,217 19,601,703 5,752,936 4,600,427
Net benefits to contractowners............. (1,072,910) (339,471) (20,027,145) (14,740,227) (2,589,287) (599,167)
----------- ---------- ------------ ------------ ----------- ----------
Net increase in net assets resulting from
contractowner transactions................. 2,571,039 1,941,792 11,713,072 4,861,476 3,163,649 4,001,260
----------- ---------- ------------ ------------ ----------- ----------
Net increase in net assets.................. 5,606,921 2,333,880 12,152,674 5,065,361 3,408,666 4,109,612
Net assets at beginning of period........... 3,338,586 1,004,706 7,706,736 2,641,375 5,396,837 1,287,125
----------- ---------- ------------ ------------ ----------- ----------
Net assets at end of period................. $ 8,945,507 $3,338,586 $ 19,859,410 $ 7,706,736 $ 8,805,403 $5,396,737
=========== ========== ============ ============ =========== ==========
</TABLE>
- ---------
** From May 1, 1998 (commencement of investment operations).
See accompanying notes.
48
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
V.A.
SOVEREIGN V.A. FUNDAMENTAL
INVESTORS 500 INDEX CAP GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------- ------------------------- -------------
1999 1998 1999 1998 1999***
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Increase in net assets from operations:
Net investment income....................... $ 65,301 $ 67,439 $ 92,522 $ 525,831 $ 40,322
Net realized gains.......................... 328,306 70,799 828,606 156,071 5,572
Net unrealized appreciation during
the period................................. 29,039 1,118,064 1,687,532 1,001,035 93,167
----------- ----------- ----------- ----------- --------
Net increase in net assets resulting from
operations.................................. 422,646 1,256,302 2,608,660 1,682,937 139,061
From contractowner transactions:
Net premiums from contractowners............ 10,879,972 9,106,163 8,595,672 7,789,626 740,169
Net benefits to contractowners.............. (2,894,509) (473,249) (5,382,835) (1,210,749) (1,205)
----------- ----------- ----------- ----------- --------
Net increase in net assets resulting from
contractowner transactions.................. 7,985,463 8,632,914 3,212,837 6,578,877 738,964
----------- ----------- ----------- ----------- --------
Net increase in net assets................... 8,408,109 9,889,216 5,821,497 8,261,814 878,025
Net assets at beginning of period............ 13,380,908 3,491,692 11,801,810 3,539,996 --
----------- ----------- ----------- ----------- --------
Net assets at end of period.................. $21,789,017 $13,380,908 $17,623,307 $11,801,810 $878,025
=========== =========== =========== =========== ========
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE INTERNATIONAL SMALL CAP INTERNATIONAL MID CAP
BALANCED EQUITY GROWTH BALANCED BLEND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ------------- ---------- ------------- ------------
1999*** 1999*** 1999*** 1999*** 1999***
---------- ------------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income........................ $ 5,099 $ 1,363 $ 143,632 $ 3,266 $ 3,461
Net realized gains (losses).................. 7,217 455 4,912 (67) 601
Net unrealized appreciation (depreciation)
during the period........................... 22,665 7,172 24,733 (335) 5,763
---------- -------- ---------- ------- --------
Net increase in net
assets resulting from operations............. 34,981 8,990 173,277 2,864 9,825
From contractowner transactions:
Net premiums from contractowners............. 1,097,821 136,831 1,238,603 53,679 204,272
Net benefits to contractowners............... -- -- (4,591) -- --
---------- -------- ---------- ------- --------
Net increase in net assets resulting from
contractowner transactions................... 1,097,821 136,831 1,234,012 53,679 204,272
---------- -------- ---------- ------- --------
Net increase in net assets.................... 1,132,802 145,821 1,407,289 56,543 214,097
Net assets at beginning of period............. -- -- -- -- --
---------- -------- ---------- ------- --------
Net assets at end of period................... $1,132,802 $145,821 $1,407,289 $56,543 $214,097
========== ======== ========== ======= ========
</TABLE>
- ---------
*** From September 1, 1999 (commencement of investment operations).
See accompanying notes.
49
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
LARGE CAP
LARGE CAP LARGE/MID SMALL/MID AGGRESSIVE
VALUE CORE CAP VALUE CAP GROWTH BOND INDEX GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ----------- ------------
1999*** 1999*** 1999*** 1999*** 1999***
---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income........................ $ 2,332 $ 420 $ 21,384 $ 3,364 $ 4,259
Net realized gains (losses).................. 12 15 (182) (1) 319
Net unrealized appreciation (depreciation)
during the period........................... 2,993 3,578 (11,311) (7,193) 48,482
-------- -------- -------- ---------- --------
Net increase (decrease) in net
assets resulting from operations............. 5,337 4,013 9,891 (3,830) 53,060
From contractowner transactions:
Net premiums from contractowners............. 232,245 184,116 153,759 629,864 867,984
Net benefits to contractowners............... -- -- -- -- --
-------- -------- -------- ---------- --------
Net increase in net assets resulting from
contractowner transactions................... 232,245 184,116 153,759 629,864 867,984
-------- -------- -------- ---------- --------
Net increase in net assets.................... 237,582 188,129 163,650 626,034 921,044
Net assets at beginning of period............. -- -- -- -- --
-------- -------- -------- ---------- --------
Net assets at end of period................... $237,582 $188,129 $163,650 $ 626,034 $921,044
======== ======== ======== ========== ========
</TABLE>
<TABLE>
<CAPTION>
SMALL/MID
CAP SMALL/MID SHORT-TERM EQUITY HIGH-YIELD
CORE CAP VALUE BOND INDEX BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ------------
1999*** 1999*** 1999*** 1999*** 1999***
---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income........................ $ 4,528 $ 2,162 $ 2,666 $ 51,417 $ 1,554
Net realized gains........................... 63 132 28 7,155 4
Net unrealized appreciation (depreciation)
during the period........................... 711 4,387 (2,544) 40,583 1,402
------- -------- -------- ---------- --------
Net increase in net
assets resulting from operations............. 5,302 6,681 150 99,155 2,960
From contractowner transactions:
Net premiums from contractowners............. 64,127 137,291 407,348 2,074,769 270,768
Net benefits to contractowners............... -- -- -- -- --
------- -------- -------- ---------- --------
Net increase in net assets resulting from
contractowner transactions................... 64,127 137,291 407,348 2,074,769 270,768
------- -------- -------- ---------- --------
Net increase in net assets.................... 69,429 143,972 407,498 2,173,924 273,728
Net assets at beginning of period............. -- -- -- -- --
------- -------- -------- ---------- --------
Net assets at end of period................... $69,429 $143,972 $407,498 $2,173,924 $273,728
======= ======== ======== ========== ========
</TABLE>
- ---------
*** From September 1, 1999 (commencement of investment operations).
See accompanying notes.
50
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MFS
AIM V.I. AIM V.I. MFS GROWTH NEW DISCOVERY MFS RESEARCH
GROWTH VALUE SERIES SERIES SERIES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ---------- ------------- --------------
1999*** 1999*** 1999*** 1999*** 1999***
----------- ----------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income........................ $ (1,413) $ (1,949) $ 2,188 $ 4,320 $ (1,009)
Net realized gains........................... 3,526 129 1,989 12 4,125
Net unrealized appreciation
during the period........................... 76,982 91,722 67,184 21,851 71,925
---------- ---------- -------- -------- --------
Net increase in net
assets resulting from operations............. 79,095 89,902 71,361 26,183 75,041
From contractowner transactions:
Net premiums from contractowners............. 1,433,635 2,609,731 760,769 233,408 745,400
Net benefits to contractowners............... (22,122) -- (74) -- --
---------- ---------- -------- -------- --------
Net increase in net assets resulting from
contractowner transactions................... 1,411,513 2,609,731 760,695 233,408 745,400
---------- ---------- -------- -------- --------
Net increase in net assets.................... 1,490,608 2,699,633 832,056 259,591 820,441
Net assets at beginning of period............. -- -- -- -- --
---------- ---------- -------- -------- --------
Net assets at end of period................... $1,490,608 $2,699,633 $832,056 $259,591 $820,441
========== ========== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
VIP TEMPLETON
VIP II OVERSEAS TEMPLETON DEVELOPMENT
CONTRAFUND VIP GROWTH EQUITY INTERNATIONAL MARKET
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ---------- ------------- -------------
1999*** 1999*** 1999*** 1999*** 1999***
----------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)................ $ (2,610) $ (3,138) $ (497) $ (334) $ (423)
Net realized gains.......................... 256 6,287 289 155 611
Net unrealized appreciation during
the period................................. 195,208 248,358 50,249 23,747 44,304
---------- ---------- -------- -------- --------
Net increase in net assets resulting from
operations.................................. 192,854 251,507 50,041 23,568 44,492
From contractowner transactions:
Net premiums from contractowners............ 2,803,041 3,107,393 636,358 350,073 354,024
Net benefits to contractowners.............. -- (16,889) -- -- --
---------- ---------- -------- -------- --------
Net increase in net assets resulting from
contractowner transactions.................. 2,803,041 3,090,504 636,358 350,073 354,024
---------- ---------- -------- -------- --------
Net increase in net assets................... 2,995,895 3,342,011 686,399 373,641 398,516
Net assets at beginning of period............ -- -- -- -- --
---------- ---------- -------- -------- --------
Net assets at end of period.................. $2,995,895 $3,342,011 $686,399 $373,641 $398,516
========== ========== ======== ======== ========
</TABLE>
- ---------
*** From September 1, 1999 (commencement of investment operations).
See accompanying notes.
51
<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 Mutual Life Insurance Company (JHMLICO or John Hancock).
The Account commenced investment operations on April 14, 1998. 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 forty subaccounts.
The assets of each subaccount are invested in shares of a corresponding
Portfolios of John Hancock Funds' Declaration Trust, John Hancock Variable
Series Trust I, MFS Trust, AIM Trust, Fidelity Trust and Templeton Trust
(collectively, the funds). 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 forty Portfolios of these Funds which are
currently available are V.A. Mid Cap Growth (formerly, Special Opportunities),
V.A. Bond, V.A. Core Equity (formerly, Independence Equity), V.A. Large Cap
Growth (formerly, Growth), V.A. Large Cap Value (formerly, Growth & Income),
V.A. Financial Industries, V.A. High Yield Bond, V.A. International, V.A.
Regional Bank, V.A. Small Cap Growth (formerly, Emerging Growth), V.A. Money
Market, V.A. Strategic Income, V.A. Sovereign Investors, V.A. 500 Index,
Fundamental Mid Cap Growth, Aggressive Balanced, International Equity, Small Cap
Growth, International Balanced, Mid Cap Blend, Large Cap Value CORE, Large/Mid
Cap Value, Small/Mid Cap Growth, Bond Index, Large Cap Aggressive Growth,
Small/Mid Cap CORE, Small/Mid Cap Value, Short-Term Bond, Equity Index, High
Yield Bond, AIM V.I. Growth, AIM V.I. Value, MFS Growth Series, MFS New
Discovery Series, MFS Research Series, VIP II Contrafund, VIP Growth, VIP
Overseas Equity, Templeton International and Templeton Development Market
Portfolios. 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 JHMLICO'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 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 Funds 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
52
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
funded in the Account. Currently, JHMLICO 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
JHMLICO assumes mortality and expense risks of the contracts for which asset
charges are deducted at various rates ranging from .90% to 1.25% (Declaration
Trust was .90%, Patriot Annuity 1.15% and the Revolution Annuity 1.25%),,
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.
JHMLICO 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 certain of the Funds.
Certain officers of the Account are officers and directors of JHMLICO, the
Funds, John Hancock Advisers, Inc. or John Hancock.
53
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. DETAILS OF INVESTMENTS
The details of the shares owned and cost and value of investments in the
Portfolios of the Funds at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
PORTFOLIO SHARES OWNED COST VALUE
--------- ------------- ----------- -------------
<S> <C> <C> <C>
V.A. Mid Cap Growth........................... 158,895 $ 2,048,944 $ 2,734,578
V.A. Bond..................................... 575,800 5,966,293 5,648,598
V.A. Core Equity.............................. 981,350 17,349,076 19,332,590
V.A. Large Cap Growth......................... 644,256 8,561,498 10,159,911
V.A. Large Cap Value.......................... 1,024,211 12,578,195 18,466,518
V.A. Financial Industries..................... 1,629,970 23,654,048 23,569,364
V.A. High Yield Bond.......................... 503,943 4,329,615 4,187,765
V.A. International............................ 175,534 2,110,429 2,712,000
V.A. Regional Bank............................ 953,067 8,599,460 8,158,254
V.A. Small Cap Growth......................... 452,708 5,916,740 8,945,507
V.A. Money Market............................. 19,859,410 19,859,410 19,859,410
V.A. Strategic Income......................... 901,269 9,014,703 8,805,403
V.A. Sovereign Investors...................... 1,365,227 20,457,127 21,789,017
V.A. 500 Index................................ 974,202 14,976,431 17,623,306
Fundamental Mid Cap Growth.................... 60,880 784,857 878,024
Aggressive Balanced........................... 106,689 1,110,136 1,132,802
International Equity.......................... 12,240 138,649 145,821
Small Cap Growth.............................. 73,620 1,382,556 1,407,289
International Balanced........................ 5,282 56,878 56,543
Mid Cap Blend................................. 20,011 208,334 214,097
Large Cap Value CORE.......................... 23,393 234,589 237,582
Large/Mid Cap Value .......................... 18,063 184,552 188,130
Small/Mid Cap Growth.......................... 11,660 174,959 163,649
Bond Index.................................... 67,184 633,227 626,034
Large Cap Aggressive Growth................... 77,168 872,562 921,045
Small/Mid Cap CORE............................ 7,073 68,718 69,429
Small/Mid Cap Value........................... 14,215 139,585 143,972
Short-Term Bond............................... 41,915 410,041 407,497
Equity Index.................................. 106,263 2,133,342 2,173,924
High Yield Bond............................... 30,460 272,327 273,729
AIM V.I. Growth............................... 46,220 1,413,626 1,490,608
AIM V.I. Value................................ 80,586 2,607,912 2,699,634
MFS Growth Series............................. 59,646 764,872 832,056
MFS New Discovery Series...................... 15,031 237,741 259,592
MFS Research Series........................... 35,152 748,516 820,441
VIP II Contrafund............................. 102,952 2,800,687 2,995,895
VIP Growth.................................... 60,986 3,093,654 3,342,012
VIP Overseas Equity .......................... 25,069 636,151 686,399
Templeton International....................... 16,884 349,892 373,640
Templeton Development Market.................. 51,488 354,213 398,517
</TABLE>
54
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Purchases, including reinvestment of dividend distributions, and proceeds from
sales of shares in the Portfolios of the Funds during 1999, were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
--------- ----------- -------------
<S> <C> <C>
V.A. Mid Cap Growth............................. $ 1,749,260 $ 280,827
V.A. Bond....................................... 3,071,201 1,554,841
V.A. Core Equity................................ 10,066,698 5,342,908
V.A. Large Cap Growth........................... 5,425,302 1,083,680
V.A. Large Cap Value............................ 7,285,180 3,010,858
V.A Financial Industries........................ 5,657,487 8,142,769
V.A. High Yield Bond............................ 1,819,661 1,334,733
V.A. International.............................. 585,210 653,918
V.A. Regional Bank.............................. 2,802,964 3,508,841
V.A. Small Cap Growth........................... 3,772,114 1,064,457
V.A. Money Market............................... 30,582,953 18,430,279
V.A. Strategic Income........................... 5,833,996 2,183,959
V.A. Sovereign Investors........................ 9,743,482 1,692,718
V.A. 500 Index.................................. 7,194,991 3,889,632
Fundamental Mid Cap Growth...................... 902,570 123,285
Aggressive Balanced............................. 1,627,354 524,435
International Equity............................ 142,733 4,539
Small Cap Growth................................ 1,460,328 82,684
International Balanced.......................... 94,823 37,878
Mid Cap Blend................................... 247,084 39,3651
Large Cap Value CORE............................ 242,067 7,490
Large/Mid Cap Value............................. 186,569 2,032
Small/Mid Cap Growth............................ 177,232 2,091
Bond Index...................................... 671,302 38,074
Large Cap Aggressive Growth..................... 876,875 4,632
Small/Mid Cap CORE.............................. 70,699 2,044
Small/Mid Cap Value............................. 146,558 7,105
Short-Term Bond................................. 425,802 15,789
Equity Index.................................... 2,276,077 149,890
High Yield Bond................................. 272,603 280
AIM V.I. Growth................................. 1,482,322 72,222
AIM V.I. Value.................................. 2,609,867 2,084
MFS Growth Series............................... 778,482 15,599
MFS New Discovery Series........................ 237,774 45
MFS Research Series............................. 804,308 59,917
VIP II Contrafund............................... 2,812,207 11,776
VIP Growth...................................... 3,206,410 119,043
VIP Overseas Equity............................. 637,861 1,999
Templeton International......................... 355,784 6,047
Templeton Development Market.................... 358,647 5,045
</TABLE>
55
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. NET ASSETS
Accumulation shares attributable to net assets of contractowners and
accumulation share values for each at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
NY DECLARATION #1 NY DECLARATION #2 NY PATRIOT #3
-------------------------- -------------------------- ----------------------------
ACCUMULATION ACCUMULATION ACCUMULATION ACCUMULATION ACCUMULATION ACCUMULATION
PORTFOLIO SHARES SHARE VALUES SHARES SHARE VALUES SHARES SHARE VALUES
--------- ------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
V.A. Mid Cap Growth............. 88,352 $16.81 31,645 $16.90 20,242 $16.81
V.A. Bond....................... 304,847 12.01 90,510 12.11 21,857 12.01
V.A. Core Equity................ 648,043 20.48 123,648 20.66 104,398 20.49
V.A. Large Cap Growth........... 429,626 15.48 115,682 15.61 99,743 15.48
V.A. Large Cap Value............ 635,204 18.55 242,190 18.64 88,492 18.55
V.A. Financial Industries....... 1,157,509 14.25 295,624 14.35 90,466 14.25
V.A. High Yield Bond............ 316,168 9.92 21,096 9.97 36,772 9.92
V.A. International.............. 144,860 16.52 19,116 16.66 -- --
V.A. Regional Bank.............. 766,063 8.72 159,095 8.75 -- --
V.A. Small Cap Growth........... 399,570 19.44 19.60 19.44
V.A. Money Market............... 7,491,484 1.12 2,751,938 1.13 2,299,646 1.12
V.A. Strategic Income........... 401,947 12.62 55,104 12.73 71,791 12.62
V.A. Sovereign Investors........ 810,279 16.19 186,953 16.33 141,539 16.19
V.A. 500 Index.................. 702,650 21.48 116,519 21.67 -- --
Fundamental Cap Growth.......... -- -- -- -- -- --
Aggressive Balanced............. -- -- -- -- -- --
International Equity............ -- -- -- -- -- --
Small Cap Growth................ -- -- -- -- -- --
International Balanced.......... -- -- -- -- -- --
Mid Cap Blend................... -- -- -- -- -- --
Large Cap Value CORE............ -- -- -- -- -- --
Large/Mid Cap Value............. -- -- -- -- -- --
Small/Mid Cap Growth............ -- -- -- -- -- --
</TABLE>
56
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
NY PATRIOT #4 NY REVOLUTION #5 NY REVOLUTION #6
--------------------------- -------------------------- --------------------------
ACCUMULATION ACCUMULATION ACCUMULATION ACCUMULATION ACCUMULATION ACCUMULATION
PORTFOLIO SHARES SHARE VALUES SHARES SHARE VALUES SHARES SHARE VALUES
--------- ------------ ------------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
V.A. Mid Cap Growth............. 22,139 $ 16.90 -- -- $ -- $ --
V.A. Bond....................... 4,193 12.11 -- -- 48,019 12.01
V.A. Core Equity................ 16,343 20.66 -- -- 50,045 20.49
V.A. Large Cap Growth........... 10,211 15.61 -- -- -- --
V.A. Large Cap Value............ 28,303 18.64 -- -- -- --
V.A. Financial Industries....... 25,683 14.35 -- -- 72,037 14.25
V.A. High Yield Bond............ 46,700 9.97 -- -- -- --
V.A. International.............. -- -- -- -- -- --
V.A. Regional Bank.............. -- -- -- -- -- --
V.A. Small Cap Growth........... 4,610 19.60 -- -- -- --
V.A. Money Market............... 37,415 1.13 -- -- 5,076,900 1.12
V.A. Strategic Income........... 110,963 12.73 -- -- 55,644 12.62
V.A. Sovereign Investors........ 58,839 16.33 -- -- 146,207 16.19
V.A. 500 Index.................. -- -- -- -- -- --
Fundamental Cap Growth.......... -- -- -- -- 57,042 15.39
Aggressive Balanced............. -- -- -- -- 106,227 10.66
International Equity............ -- -- -- -- 12,095 12.06
Small Cap Growth................ -- -- -- -- 66,426 21.19
International Balanced.......... -- -- -- -- 4,357 12.98
Mid Cap Blend................... -- -- -- -- 19,277 11.11
Large Cap Value CORE............ -- -- -- -- 23,034 10.31
Large/Mid Cap Value............. -- -- -- -- 18,040 10.43
Small/Mid Cap Growth............ -- -- -- -- 8,624 18.98
</TABLE>
57
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS.
1. Condensed Financial Information
2. Statement of Assets and Liabilities, John Hancock Variable Annuity
Account H.
3. Statement of Operations, John Hancock Variable Annuity Account H.
4. Statement of Changes in Net Assets, John Hancock Variable Annuity
Account H.
5. Notes to Financial Statements, John Hancock Variable Annuity Account H.
6. Statement of Financial Position, John Hancock Mutual Life Insurance
Company.
7. Summary of Operations and Unassigned Deficit, John Hancock Mutual Life
Insurance Company.
8. Statement of Cash Flows, John Hancock Mutual Life Insurance Company.
9. Notes to Financial Statements, John Hancock Mutual Life Insurance
Company.
(B) EXHIBITS:
1. John Hancock Mutual Life Insurance Company Board Resolution
establishing the John Hancock Variable Annuity Account H, dated April
8, 1996.*
2. Not Applicable.
3. (a) Form of Variable Annuity Contracts Marketing and Distribution
Agreement Between John Hancock Mutual Life Insurance Company and
John Hancock.*
(b) Form of Soliciting Dealer Agreement between John Hancock Funds, Inc.,
and soliciting broker-dealers or financial institutions participating
in distribution of Contracts.*
4. (a) Reserved.
(b) Reserved.
<PAGE>
(c) Form of deferred combination fixed and variable annuity contract
Filed to this File on August 9, 1999.
(d) Form of waiver of withdrawal charge rider Filed to this File on
August 9, 1999.
(e) Form of guaranteed retirement income benefit rider Filed to this File
on August 9, 1999.
(f) Form of death benefit enhancement rider Filed to this File on August
9, 1999.
(g) Form of accumulated value enhancement rider Filed to this File on
August 9, 1999.
5. Form of contract application.
6. (a) Articles of Organization and By-Laws of John Hancock Mutual Life
Insurance Company.*
7. Not Applicable.
8. (a) Form of Responsibility and Cost Allocation Agreement Between John
Hancock Mutual Life Insurance Company and John Hancock Funds, Inc.*
(b) Participation Agreement Among Templeton Variable Products Series
Fund, Franklin Templeton distributors, Inc. and John Hancock Life
Insurance Company, John Hancock Variable Life Insurance company, and
Investors Partner Life Insurance Company, filed in Post-Effective
Amendment No. 1 to file No. 333-81127, contemporaneously herewith.
(c) Participation Agreement Among Variable Insurance Products Fund II,
Fidelity Distributors Corporation and John Hancock Mutual Life
Insurance Company, filed in Post-Effective Amendment No. 1 to file
No. 333-81127, contemporaneously herewith.
(d) Participation Agreement Among Variable Insurance Products Fund,
Fidelity Distributors Corporation and John Hancock Mutual Life
Insurance Company, filed in Post-Effective Amendment No. 1 to file
No. 333-81127, contemporaneously herewith.
(e) Participation Agreement Among MFS Variable Insurance Trust, John
Hancock Mutual Life Insurance Company, and Massachusetts Financial
Services Company, filed in Post-Effective Amendment No. 1 to file
No. 333-81127, contemporaneously herewith.
(f) Participation Agreement By And Among AIM Variable Insurance Funds,
Inc., AIM Distributors, Inc., John Hancock Mutual Life Insurance
Company and Certain Of Its Affiliated Insurance Companies, Each On
Behalf Of Itself And Its Separate Accounts, And John Hancock Funds,
Inc., filed in Post-Effective Amendment No. 1 to file No. 333-81127,
contemporaneously herewith.
9. Opinion and Consent of Counsel as to legality of securities Filed to
this File on August 9, 1999.
10. (a) Representation of counsel.
(b) Consent of independent auditors.
(c) Powers of Attorney for all directors except Robert J. Tarr, Jr.,*
Power of Attorney for director Robert J. Tarr, Jr.**
11. Not Applicable.
12. Not Applicable.
13. Diagram of Subsidiaries of John Hancock***
14. Not Applicable.
27. Not Applicable.
* Incorporated by reference from N-4EL (File nos. 333-08345 and 811-07711) on
July 18, 1996, accession number 0000950109-96-004518.
** Incorporated by reference from 485BPOS (File nos. 333-08345 and 811-07711) on
April 30, 1997, accession number 00001010521-97-000280.
*** Incorporated by reference from 485BPOS (File Nos. 333-08345 and 811-07711)
on April 29, 1999, accession number 0000950109-99-001624.
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
Directors Principal Occupations
--------- ---------------------
<S> <C>
Samuel W. Bodman Chairman of the Board and Chief Executive
Officer, Cabot Corporation (chemicals)
Nelson S. Gifford Principal, Fleetwing Capital Management
(financial services)
Kathleen F. Feldstein President, Economics Studies Inc. (economic
consulting)
E. James Morton Director, former Chairman of the Board and
former Chief Executive Officer, John
Hancock
John M. Connors, Jr Chief Executive Officer and Director, Hill,
Holliday, Connors, Cosmopoulos, Inc.
(advertising)
Stephen L. Brown Chairman of the Board and Chief Executive
Officer, John Hancock
I. MacAllister Booth Retired Chairman of the Board and Chief
Executive Officer, Polaroid Corporation
(photographic products)
Robert J. Tarr, J Former President, Chief Executive Officer
and Chief Operations Officer, Harcourt
General, Inc. (publishing)
David F. D'Alessandro President and Chief Operating Officer, John
Hancock
Robert E. Fast Senior Partner, Hale and Dorr (law firm)
Foster L. Aborn Vice Chairman of the Board, John Hancock
Richard F. Syron Chairman of the Board and Chief Executive
Officer, American Stock Exchange
Michael C. Hawley President and Chief Operating Officer, The
Gillette Company (razors, etc.)
Wayne A. Budd Group President, Bell Atlantic - New
England (telecommunications)
Edward H. Linde President & CEO, Boston Properties, Inc.
</TABLE>
<TABLE>
<CAPTION>
Executive Officers
- ------------------
<S> <C>
Thomas E. Moloney............... Chief Financial Officer
Richard S. Scipione............. General Counsel
Derek Chivers................... Chairman and Chief Executive Officer of John Hancock International
Holdings, Inc,
John M. DeCiccio................ Executive Vice President and Chief Investment Officer-Elect
Maureen R. Ford................. President, Broker-Dealer Distribution and Financial Advisory Network
Kathleen M. Graveline........... Executive Vice President - Retail
Barry J. Rubenstein............. Vice President, Counsel and Secretary
</TABLE>
<PAGE>
The principal business address for each of the above-named directors and
officers of John Hancock is John Hancock Life Insurance Company, John Hancock
Place, P.O. Box 111, Boston, MA 02117.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR
REGISTRANT
Registrant is a separate account of JHLICO, operated as a unit investment
trust. Registrant supports benefits payable under JHLICO's variable annuity
contracts by investing assets allocated to various investment options in shares
of John Hancock Variable Series Trust I and John Hancock Declaration Trust, (the
"Trusts"), both of which are "series" types of mutual funds registered under the
investment Company Act of 1940 (the "Act") as open-end management investment
companies. The Registrant and other separate accounts of John Hancock and JHLICO
own controlling interests of the Trusts' outstanding shares. The purchasers of
variable annuity and variable life insurance contracts, in connection with which
the Trusts are used, will have the opportunity to instruct John Hancock and
JHLICO with respect to the voting of the shares of the Series Fund held by
Registrant as to certain matters. Subject to the voting instructions, JHLICO
directly controls Registrant.
A diagram of the subsidiaries of John Hancock is incorporated by reference
from Exhibit 13 to Post-Effective Amendment No. 5 to Form N-4 Registration
Statement of John Hancock Variable Annuity Account H (File No. 333-08345) filed
April 29, 1999.
ITEM 27. NUMBER OF CONTRACT OWNERS
Registrant had 2,524 Contract Owners as of June 30, 1999.
ITEM 28. INDEMNIFICATION
Pursuant to Article 9 of the Company's Bylaws and Section 67 of the
Massachusetts Business Corporation Law, the Company indemnifies each director,
former director, officer, and former officer, and his heirs and legal
representatives from liability incurred or imposed in connection with any legal
action in which he may be involved by reason of any alleged act or omission as
an officer or a director of the Company.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 ("Securities Act") may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by a controlling precedent, submit to a court of
appropriate jurisdiction the question of whether indemnification by it is
against
<PAGE>
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) JHFI acts as principal underwriter, depositor, sponsor or investment adviser
for the following investment companies:
John Hancock Investment Trust
John Hancock Investment Trust II
John Hancock Investment Trust III
John Hancock Cash Reserve, Inc.
John Hancock Current Interest
John Hancock Bond Trust
John Hancock California Tax-Free Income Fund
John Hancock Capital Series
John Hancock Institutional Series Trust
John Hancock Variable Series Trust I
John Hancock Sovereign Bond Fund
John Hancock Special Equities Fund
John Hancock Strategic Series
John Hancock Tax-Exempt Series Fund
John Hancock Tax-Free Bond Trust
John Hancock World Fund
John Hancock Declaration Trust
John Hancock Variable Annuity Account JF
John Hancock Variable Annuity Account H
John Hancock Variable Annuity Account V (with respect to certain contracts)
(b) The following lists the names and positions with underwriter of the
directors and officers of JHFI.
Foster L. Aborn Director
Stephen L. Brown Director and Chairman
David F. D'Alessandro Director
John M. DeCiccio Director
Maureen R. Ford Director and Vice Chairman
Anne C. Hodsdon Director
David A. King Director
Jeanne M. Livermore Director
Thomas E. Moloney Director
Richard S. Scipione Director
Robert H. Watts Director
Maureen R. Ford Vice Chairman and Chief Executive Officer
James V. Bowhers President
Robert H. Watts Executive Vice President and Chief Compliance Officer
Osbert M. Hood Senior Vice President and Chief Financial Officer
Susan S. Newton Vice President and Secretary
Anne C. Hodsdon Executive Vice President
<PAGE>
Kathleen M. Graveline Senior Vice President
Keith Hartstein Senior Vice President
Peter Mawn Senior Vice President
Dale Bearden Vice President
J. William Benintende Vice President
Thomas H. Connors Vice President
Gary Cronin Vice President
Renee Humphrey Vice President
Kristine Pancare Vice President
Karen F. Walsh Vice President
Mary Ellen Higgins Second Vice President
Marty Thomas Second Vice President
William H. King Assistant Treasurer
Andrew R. Lynch Assistant Treasurer
Theresa Apruzzese Assistant Secretary
Timothy M. Fagan Assistant Secretary
Bron E. Langenfeld Assistant Secretary
Carmen M. Pelissier Assistant Secretary
The business address for each of the above-named officers and directors is John
Hancock Funds, Inc., 101 Huntington Avenue, Boston, Massachusetts 02199-7603.
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The following entities prepare, maintain, and preserve the records required by
Section 31(a) of the Act for the Registrant through written agreements between
the parties to the effect that such services will be provided to the Registrant
for such periods prescribed by the Rules and Regulations of the Commission under
the Act and such records will be surrendered promptly on request:
The Company, John Hancock Place, P.O. Box 111, Boston, Massachusetts 02117,
prepares, maintains and preserves all other records required by Section 31(a) of
the Act.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Registrant hereby undertakes to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old for so long as payments under the variable annuity contracts may be
accepted.
(b) Registrant hereby undertakes to include as part of any application to
purchase a Contract offered by the prospectus a space that an applicant can
check to request a Statement of Additional Information, or to provide a
toll-free telephone number that applicants may call for this purpose.
(c) Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements
<PAGE>
required to be made available under Form N-4 promptly upon written or oral
request.
(d) Registrant represents that, in connection with the sale of the Contracts
offered pursuant to this Registration Statement, it has complied with the
conditions of the SEC no-action letter regarding the purchase of variable
annuity contracts under retirement plans meeting the requirements of Section
403(b) of the Internal Revenue Code (American Council of Life Insurance (pub.
avail. Nov. 28, 188)). Specifically, Registrant (1) has included appropriate
disclosure regarding the redemption restrictions imposed by Section 403(b)(11)
in the prospectus; (2) will include appropriate disclosure regarding the
redemption restrictions imposed by Section 403(b)(11) in any sales literature
used in connection with the offer of the Contracts; (3) will instruct sales
representatives specifically to bring the redemption restrictions imposed by
Section 403(b)(11) to the attention of potential plan participants; and (4) will
obtain from each plan participant who purchases a Section 403(b) annuity
contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant's understanding of (a) the restrictions on
redemptions imposed by Section 403(b)(11) and (b) the investment alternatives
available under the employer's Section 403(b) arrangement to which the
participant may elect to transfer his Accumulated Value or Surrender Value.
(e) John Hancock Mutual Life Insurance Company represents that the fees and
charges deducted under the Contracts, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by the insurance company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, Registrant has caused this amendment to the registration statement to be
signed on its behalf, in the City of Boston and the Commonwealth of
Massachusetts, on the 1st day of May, 2000.
---
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT H
(REGISTRANT)
By John Hancock Life Insurance Company
By /Stephen L. Brown/
------------------
STEPHEN L. BROWN
Chairman of the Board and Chief Executive Officer
JOHN HANCOCK LIFE INSURANCE COMPANY
(DEPOSITOR)
By /Stephen L. Brown/
------------------
STEPHEN L. BROWN
Chairman of the Board and Chief Executive Officer
As required by the Securities Act of 1933, this amendment to the registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Thomas E. Moloney
- ---------------------
Thomas E. Moloney Chief Financial Officer May 1, 2000
(Principal Financial Officer
and Principal Accounting
Officer)
/s/ Stephen L. Brown
- --------------------
Stephen L. Brown Chairman of the Board, Chief May 1, 2000
Executive Officer and
Principal Executive Officer
</TABLE>
as
Attorney-in-Fact
For:
Samuel W. Bodman Director
Nelson S. Gifford Director
E. James Morton Director
<PAGE>
John M. Connors, Jr. Director
I. MacAllister Booth Director
Robert J. Tarr, Jr. Director
David F. D'Alessandro Director
Robert F. Fast Director
Foster L. Aborn Director
Richard F. Syron Director
Michael C. Hawley Director
Edward H. Linde Director
Wayne A. Budd Directors
Kathleen F. Feldstein Director
<PAGE>
[John Hancock Life Insurance Company Letterhead]
May 1, 2000
SECURITIES & EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: John Hancock Variable Annuity Account H
(File Nos. 333-81103 and 811-07711)
Commissioners:
This opinion is being furnished with respect to the filing of
Post-Effective Amendment No. 10 under the Securities Act of 1993 (Post-Effective
Amendment No. 1 under the Investment Company Act of 1940) of the Form N-4
Registration Statement of John Hancock Variable Annuity Account H as required by
Rule 485 under the 1993 Act.
I have acted as counsel to Registrant for the purpose of preparing this
Post-Effective Amendment which is being filed pursuant to paragraph (b) of Rule
485 and hereby represent to the Commission that in my opinion this
Post-Effective Amendment does not contain disclosures which would render it
ineligible to become effective pursuant to paragraph (b).
I hereby consent to the filing of this opinion with and as part of the
Post-Effective Amendment to the Registrant's Registration Statement with the
Commission.
Very truly yours,
/s/ RONALD J. BOCAGE
--------------------
Ronald J. Bocage
Counsel
<PAGE>
EXHIBIT 10(b)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Prospectus in Pre-Effective Amendment Number 1 to the Registration Statement
(Form N-4, No. 333-81103) of John Hancock Variable Annuity Account H.
We also consent to the inclusion of our reports dated February 11, 2000 on the
financial statements included in the Annual Report of the John Hancock Variable
Annuity Account H and dated March 10, 2000 on the financial statements
included in the Annual Report of the John Hancock Mutual Life Insurance Company
for the year ended December 31, 1998.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Boston, Massachusetts
April 26, 2000
