<PAGE>
As filed with the Securities and Exchange Commission on April 23, 1997
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-6
Registration Statement Under
THE SECURITIES ACT OF 1933
----------------------
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT G
(Exact name of trust)
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
(Name of depositor)
JOHN HANCOCK PLACE
BOSTON, MASSACHUSETTS 02117
(Complete address of depositor's principal executive offices)
--------------------
RONALD J BOCAGE, ESQ.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE, BOSTON, 02117
(Name and complete address of agent for service)
--------------------
Copy to:
GARY O. COHEN, ESQ.
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
--------------------
Approximate date of proposed public offering: as soon as practicable after the
effective date of this Registration Statement.
An indefinite amount of the Registrant's securities has been registered pursuant
to a declaration under Rule 24f-2, under the Investment Company Act of 1940, set
out in a previously filed Form S-6 Registration Statement of Registrant and
Registrant's Depositor (File No. 33-64366). Registrant filed its Rule 24f-2
Notice for the December 31, 1995 fiscal year on February 22, 1996.
Title and amount of securities being registered: interests under group flexible
premium variable life policies.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
CROSS-REFERENCE TABLE
Form N-8B-2 Item Caption in Prospectus
- ---------------- ---------------------
1, 2 Cover, The Separate Account, The
Funds, John Hancock
3 Inapplicable
4 Cover, Sale of Group Plans
and Sales Commissions
5,6 The Separate Account, The Funds,
State Regulation
7, 8, 9 Inapplicable
10(a),(b),(c),(d),(e) Detailed Information About
the Certificates
10(f) Voting Rights
10(g),(h) Changes that John Hancock
Can Make
10(i) Detailed Information About
the Certificates
11, 12 Summary Information, The Separate Account,
The Funds,
13 Summary Information, Charges Deducted from Cash
Value or Subaccounts, State Premium Tax Charge
and Federal DAC Tax Charge, Reduction of
Charges
14, 15 Summary Information, Sale of Group Plans
and Sales Commissions, Premiums,
Allocation of Premiums
16 The Separate Account, The Funds
17 Summary Information, Full Surrender,
Withdrawals, Loans
18 The Separate Account, The Funds,
Tax Treatment of Certificate Benefits,
ERISA Considerations
19 Reports
20 Changes that John Hancock
Can Make
21 Loans
22 Detailed Information About the Certificate
<PAGE>
23 Sale of Group Plans
and Sales Commissions
24 Not Applicable
25 John Hancock
26 Not Applicable
27,28,29,30 John Hancock, Board
of Directors and Executive
Officers of John Hancock
31,32,33,34 Not Applicable
35 John Hancock
36,37 Not Applicable
38,39,40,41(a) Sale of Group Plans and
Sales Commissions, John Hancock, Summary
Information, Charges Deducted from Cash Value
or Subaccounts, State Premium Tax Charge and
Federal DAC Tax Charge, Reduction of Charges
41(b)-(d), 42, 43 Not Applicable
44 The Separate Account, The Funds,
Detailed Information About the
Certificates
45 Not Applicable
46 The Separate Account, The Funds,
Detailed Information About the
Certificates
47 Not Applicable
48,49,50 Not Applicable
51 Cover, John Hancock, Detailed Information
About the Certificates
52 The Separate Account, The Funds,
Changes that John Hancock
Can Make
53,54,55 Not Applicable
56,57,58,59 Not Applicable
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
JOHN HANCOCK MUTUAL VARIABLE LIFE ACCOUNT G
GROUP VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
200 CLARENDON STREET
JOHN HANCOCK PLACE
BOSTON, MASSACHUSETTS 02117
TELEPHONE 1-800-XXX-XXXX
FAX XXX-XXX-XXXX
PROSPECTUS DATED AUGUST XX, 1998
This prospectus describes Group Variable Universal Life Insurance Policies
("Group Policies") offered by John Hancock Mutual Life Insurance Company ("John
Hancock") which are designed for use in group-sponsored insurance programs.
The Group Policies and Certificates provide life insurance protection with
flexible premium payments and a choice of underlying investment options. The
Death Benefit and Cash Surrender Value of a Certificate will vary daily with the
performance of the investment options selected, but the Death Benefit will not
be less than the Face Amount of the Certificate. Surrenders, withdrawals, and
loans are available, although certain requirements and limitations apply.
Group Policies may be issued to employers, associations, unions, trusts in
which employers participate, or other sponsoring organizations. Each Eligible
Group Member or "eligible applicant owner" (as defined under "APPLICANT OWNER
PROVISION") who elects to obtain coverage under the Group Policy ("Participant")
will receive a Certificate describing the coverage. Certain Group Plans may
also permit a Participant to apply for separate insurance coverage for his or
her dependents.
The Cash Value of the Certificates will vary with the investment experience
of the John Hancock Variable Life Account G (the "Separate Account"). The
Separate Account is composed of multiple variable investment divisions (each, a
"Subaccount"). The assets of each Subaccount may be invested in a corresponding
Portfolio of the John Hancock Variable Series Trust I (the "Series Trust") or in
certain other mutual funds available to insurance company separate accounts
(collectively with the Portfolios, the "Funds.") Each Group Policyholder will
be permitted to select those Funds to be made available to Participants,
according to certain limitations imposed by John Hancock. Each
<PAGE>
Participant will then be allowed to direct premium payments to (i) any of the
Subaccounts corresponding to the selected Funds or (ii) the Fixed Account, an
investment option under which John Hancock guarantees an effective annual
interest rate of at least 4%.
The Funds in which the Separate Account may invest are briefly described
under "THE FUNDS." In addition, prospectuses for the Series Trust and for any
Funds that are not a Portfolio of the Series Trust are attached to this
Prospectus and describe in detail the investment objectives and policies of the
Portfolios and the other Funds, if any, and the risks of investing in them.
As in the case of other life insurance policies, it may not be advantageous
to purchase group variable universal life insurance as a replacement for an
existing individual life insurance policy or in addition to an existing
individual variable universal life insurance policy.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. IT IS NOT
VALID UNLESS ACCOMPANIED BY A CURRENT PROSPECTUS FOR EACH FUND AVAILABLE TO THE
PARTICIPANT WHEN THIS PROSPECTUS IS DELIVERED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
A FORM OF THE CERTIFICATE TO BE ISSUED UNDER THE APPLICABLE GROUP PLAN CAN BE
OBTAINED BY CALLING 1-800-XXX-XXXX.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SPECIAL TERMS........................................................................ 5
SUMMARY INFORMATION.................................................................. 8
JOHN HANCOCK, THE SEPARATE ACCOUNT, AND INVESTMENT OPTIONS...........................15
JOHN HANCOCK.....................................................................15
THE SEPARATE ACCOUNT.............................................................15
THE FUNDS........................................................................16
THE FIXED ACCOUNT................................................................20
DETAILED INFORMATION ABOUT THE CERTIFICATES..........................................21
ELIGIBILITY......................................................................21
ISSUANCE OF A CERTIFICATE........................................................22
APPLICANT OWNER PREMIUMS.........................................................22
PROCEDURES.......................................................................23
PREMIUMS.........................................................................24
EFFECTIVE DATE OF INSURANCE......................................................24
ALLOCATION OF PREMIUMS...........................................................25
TRANSFERS........................................................................26
DOLLAR COST AVERAGING............................................................26
DEATH BENEFITS...................................................................27
CHANGES IN FACE AMOUNT..........................................................29
CHARGES DEDUCTED FROM CASH VALUE OR SUBACCOUNTS..................................29
STATE PREMIUM TAX CHARGE AND FEDERAL DAC TAX CHARGE..............................32
REDUCTION OF CHARGES.............................................................32
DIVIDENDS........................................................................32
CASH SURRENDER VALUE.............................................................33
FULL SURRENDER...................................................................33
ELECTION OF PAID-UP INSURANCE....................................................34
WITHDRAWALS......................................................................34
LOANS............................................................................35
TELEPHONE TRANSACTIONS...........................................................37
LAPSE............................................................................38
TERMINATION OF GROUP PLAN........................................................38
PARTICIPANTS WHO ARE NO LONGER ELIGIBLE GROUP MEMBERS............................39
OPTIONS ON TERMINATION OF COVERAGE...............................................39
REINSTATEMENT....................................................................41
TAX TREATMENT OF CERTIFICATE BENEFITS............................................41
ERISA CONSIDERATIONS.............................................................45
WHEN PROCEEDS ARE PAID...........................................................47
BENEFICIARY......................................................................47
INCONTESTABILITY.................................................................48
</TABLE>
3
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<TABLE>
<CAPTION>
<S> <C>
MISSTATEMENTS....................................................................48
SUICIDE EXCLUSION................................................................48
ASSIGNMENT.......................................................................49
VOTING RIGHTS....................................................................49
CHANGES THAT JOHN HANCOCK CAN MAKE...............................................50
ADDITIONAL INSURANCE BENEFITS....................................................51
REPORTS..........................................................................52
SALE OF GROUP PLANS AND SALES COMMISSIONS........................................53
LEGAL MATTERS....................................................................53
STATE REGULATION.................................................................54
EXPERTS..........................................................................54
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF JOHN HANCOCK...........................55
FINANCIAL STATEMENTS OF JOHN HANCOCK.................................................57
HYPOTHETICAL ILLUSTRATIONS OF DEATH BENEFITS AND CASH SURRENDER VALUES...............89
</TABLE>
THE GROUP POLICY AND CERTIFICATE ARE NOT AVAILABLE IN ALL STATES. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE. JOHN HANCOCK DOES NOT AUTHORIZE ANY
INFORMATION OR REPRESENTATION REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR ANY ACCOMPANYING
PROSPECTUS OR ANY SUPPLEMENT THERETO OR ANY STATEMENT OF ADDITIONAL INFORMATION
OR ANY SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY JOHN HANCOCK.
4
<PAGE>
SPECIAL TERMS
ALLOCATION - The manner in which a Participant divides his or her net premium
payments among the various investment options. The minimum percentage that a
Participant may allocate to any investment option is 5%.
AGE - A person's age as defined in the Certificate.
BENEFICIARY - The person or persons chosen to receive any benefit payable
because of death.
BILLING MONTH - means (i) the period of time that begins on the Plan Effective
Date and extends to the corresponding date in the next calendar month and (ii)
each succeeding one month period that begins on such corresponding date of the
month. However, during Continuation Coverage "Billing Month" means each
calendar month.
CASH VALUE - On any date, the amount equal to the sum of the amounts under that
Certificate allocated to (1) the Subaccounts, (2) the Fixed Account, and (3) the
Loan Account.
CASH SURRENDER VALUE - The amount payable to the Participant upon surrender of
the Certificate. The Cash Surrender Value is equal to the Participant's Cash
Value on the date of surrender less any Certificate Debt, any outstanding
charges, and any applicable transaction charge.
CERTIFICATE - A document issued to a Participant setting forth or summarizing
the Participant's rights and benefits under the Group Plan.
CERTIFICATE ANNIVERSARY - The same date each year as the Certificate Date.
CERTIFICATE DATE - The effective date of coverage under a Certificate.
CERTIFICATE DEBT - The principal amount of any outstanding loans to the
Participant under his or her Certificate plus any unpaid interest charged on the
loan that has not yet been added to principal and minus any unearned interest
that has been added to principal.
CERTIFICATE YEAR - The year from the Certificate Date to the first Certificate
Anniversary or from one Certificate Anniversary to the next.
CONTINUATION COVERAGE. - Coverage provided under a Certificate pursuant to a
continuation right in those circumstances described herein under "TERMINATION OF
GROUP PLAN" and "PARTICIPANTS WHO ARE NO LONGER ELIGIBLE GROUP MEMBERS".
5
<PAGE>
COVERED PERSON - The person whose life is insured under any given Certificate.
The Covered Person is generally the Participant. Some Group Plans may permit a
Participant to apply for insurance under a separate Certificate naming the
Participant's spouse as the Covered Person
DEATH BENEFIT - An amount equal to the Face Amount of the Participant's
Certificate plus the Cash Value as of the date of death less any Certificate
Debt, any outstanding charges and any amounts paid under an Accelerated Death
Benefit provision. See "ADDITIONAL INSURANCE BENEFITS."
DIVIDEND - A portion of John Hancock's divisible surplus attributable to the
Group Plan that may be credited to the Group Plan as determined annually by John
Hancock's Board of Directors.
ELIGIBLE GROUP MEMBERS - The persons specified in the Group Plan as eligible to
apply for insurance protection under the Group Plan.
EVIDENCE OF INSURABILITY - Proof that the Covered Person is insurable in
accordance with John Hancock's underwriting rules then in effect.
FACE AMOUNT - The amount of life insurance specified as such in a Participant's
Certificate. At age 95, the Face Amount reduces to zero.
FIXED ACCOUNT - An investment option under which John Hancock guarantees that
interest will be added to the amount deposited at a rate declared periodically
in advance.
FUNDS - The Series Trust Portfolios and other mutual funds in which the
Separate Account invests.
GROUP PLAN - Either (i) a particular plan of benefits that is provided under a
Group Policy issued to a multiple employer trust or other sponsoring
organization and that is defined in a joinder agreement executed by a
participating employer, union, or other entity, or (ii) a Group Policy under
which only one plan of benefits is provided.
GROUP POLICY - A Group Variable Universal Life Insurance Policy issued to a
Group Policyholder by John Hancock.
GROUP POLICYHOLDER - The employer, association, sponsoring organization or trust
that is issued a Group Policy. In the case of a Group Policy that contains
multiple Group Plans, the rights and obligations of a Group Policyholder as
described throughout this prospectus shall be exercised by the participating
employer, union, or other entity that executes the joinder agreement.
6
<PAGE>
INTERNAL REVENUE CODE or CODE - The Federal Internal Revenue Code of 1986, as
amended.
JOHN HANCOCK SERVICING OFFICE - The office that performs certain administrative
services on behalf of John Hancock in connection with a Group Policy. Its
location is specified in the Certificate.
LOAN ACCOUNT - An account within John Hancock's general account to which an
amount equal to the principal amount of any loan is transferred from the
Separate Account and/or the Fixed Account and which is adjusted for interest
earned on the Loan Account.
LOAN VALUE - The amount that a Participant may borrow at any given time under
his or her Certificate. The Loan Value at any time is determined by subtracting
from the Cash Value any Certificate Debt and any outstanding charges.
MONTHLY DEDUCTION - For any given month, an amount equal to the sum of the
following charges for that month: the Maintenance Charge, the Insurance Charge,
and the Charge for any Additional Insurance Benefits.
NET PREMIUM - A Participant's premium payment minus any applicable charges
attributable to premiums. Net Premiums are the amounts available for allocation
to the Subaccounts and/or the Fixed Account.
PARTICIPANT - An Eligible Group Member or "eligible applicant owner" under a
Group Plan who obtains insurance under the Group Policy. The Participant will
be the person entitled to exercise all rights under a Certificate, regardless of
whether the Covered Person under the Certificate is the Participant or his or
her spouse. References to rights that a Participant may exercise under a
Certificate shall include exercise of such rights by any person to whom the
Participant has validly assigned such rights.
PLAN ANNIVERSARY - Each anniversary of the Plan Effective Date.
PLAN EFFECTIVE DATE - The effective date of (1) a Group Policy under which only
one plan of benefits is provided or (2) the joinder agreement executed by a
participating employer, union or other entity under a Group Policy issued to a
multiple employer trust or other sponsoring organization.
VALUATION DATE - Each day on which the New York Stock Exchange is open for
trading and on which the Funds valuetheir shares.
VALUATION PERIOD - The period of time from the beginning of the day following a
Valuation Date to the end of the next following Valuation Date.
7
<PAGE>
SUMMARY INFORMATION
The following section provides brief answers to some common questions about
the more significant features of the Group Policies and Certificates. More
detailed information is provided in the subsequent sections of this prospectus
and in the Group Policies and Certificates themselves.
WHAT IS GROUP VARIABLE UNIVERSAL LIFE INSURANCE?
Group Variable Universal Life Insurance is insurance coverage, issued by an
insurance company to an employer or other sponsoring entity, under which
eligible members of the group (i) can obtain life insurance protection for
themselves and, under some Group Plans, their dependents as well, and (ii) have
the ability to build cash value through investment options that are made
available under the Group Variable Universal Life Insurance Policy. Eligible
Group Members who obtain such insurance receive a Certificate describing their
coverage. Group Variable Universal Life Insurance Certificates provide for a
Death Benefit and a Cash Value. Both the Death Benefit and the Cash Value of a
Certificate will vary daily with the performance of the variable investment
options chosen by the Participant.
WHO IS THE ISSUER OF THE GROUP POLICIES AND CERTIFICATES?
John Hancock Mutual Life Insurance Company is the issuer of the Group Policies
and Certificates. John Hancock is a mutual life insurance company that was
chartered in Massachusetts in 1862. Its Home Office is at 200 Clarendon Street,
Boston, Massachusetts 02117. John Hancock is authorized to transact business in
all states of the United States, the District of Columbia and Puerto Rico. Its
assets are approximately $59 billion.
WHAT PREMIUMS MUST BE PAID?
A Participant generally has flexibility to select the frequency and amount
of premium payments, and the insurance will remain in force as long as the Cash
Value less any Certificate Debt and any outstanding charges is sufficient to pay
the monthly charges under the Certificate when due. There may be an initial
minimum premium required to enroll as a Participant. If there are not
sufficient funds to pay the monthly charges when due, and the Participant fails
to make the minimum required premium payment during the grace period, the
Participant's insurance will lapse. See "PREMIUMS" and "LAPSE."
8
<PAGE>
HOW IS THE DEATH BENEFIT UNDER A CERTIFICATE COMPUTED?
A Participant will choose a Face Amount of insurance for his or her
Certificate, within certain limits. The Death Benefit will be that Face Amount
plus the Participant's Cash Value as of the date of death less any Certificate
Debt and any outstanding charges. The Cash Value will vary daily to reflect
the investment performance of the selected option(s) and the deduction of
charges by John Hancock. See "DEATH BENEFITS."
CAN A PARTICIPANT ADJUST THE CERTIFICATE'S FACE AMOUNT?
Some Group Plans may allow Participants to elect to increase the Face Amount
of their insurance at certain times. Other Group Plans may provide for
increasing Face Amounts based on factors such as salary increases. In either
case, additional evidence of insurability may be required. An increase in the
Face Amount will result in higher insurance charges. SEE "CHANGES IN FACE
AMOUNT." Some Group Plans may also permit Participants to decrease the Face
Amount of their insurance at certain times. In no event, however, may the Face
Amount be decreased below $10,000 or below the minimum amount required to
maintain life insurance status under the Federal tax laws. See "TAX TREATMENT
OF CERTIFICATE BENEFITS."
WHAT INVESTMENT OPTIONS ARE AVAILABLE?
The Participant may allocate the Net Premiums paid under the Certificate
among the Fixed Account and various investment divisions of the Separate
Account. The Separate Account is currently composed of multiple Subaccounts,
each of which invests in a single corresponding Fund. A Group Policyholder will
select the number of such Funds to be made available to the Participants
according to certain limitations imposed by John Hancock. Each Participant will
then be allowed to direct premium payments to the Fixed Account or to any of the
Subaccounts corresponding to the selected Funds.
The following chart shows each of the Funds, their investment managers, and
their Fund expenses. The figures in the chart are expressed as a percentage of
each Fund's average daily net assets. The figures reflect the investment
management fees currently payable and the 1997 other fund expenses allocated to
the Funds (except that other fund expenses for the Small/Mid Cap CORE, Global
Equity, Emerging Markets Equity, Bond Index, and High Yield Bond Funds are based
upon estimates for the current fiscal year).
9
<PAGE>
<TABLE>
<CAPTION>
FUND AND INVESTMENT OTHER FUND TOTAL FUND OTHER FUND EXPENSES
SUB-INVESTMENT MANAGEMENT FEE EXPENSES OPERATING ABSENT REIMBURSEMENT*
ADVISER EXPENSES
<S> <C> <C> <C> <C>
MANAGED 0.33% 0.04% 0.37% 0.04%
John Hancock Advisers,
Inc.
GROWTH & INCOME 0.25% 0.03% 0.28% 0.03%
Independence Investment
Associates, Inc.
EQUITY INDEX 0.00% 0.00% 0.00% 0.40%
State Street Bank &
Trust Company
LARGE CAP VALUE 0.75% 0.25% 1.00% 0.31%
T. Rowe Price
Associates, Inc.
LARGE CAP GROWTH 0.39% 0.05% 0.44% 0.05%
Independence Investment
Associates, Inc.
MID CAP VALUE 0.80% 0.25% 1.05% 0.34%
Neuberger & Berman
Management, LLC
MID CAP GROWTH 0.85% 0.25% 1.10% 0.57%
Janus Capital Corporation
DIVERSIFIED MID-CAP GROWTH 0.75% 0.10% 0.85% 0.10%
John Hancock Advisers,
Inc.
REAL ESTATE EQUITY 0.60% 0.09% 0.69% 0.09%
Independence Investment
Associates, Inc.
SMALL/MID CAP CORE 0.80% 0.25% 1.05% N/A
Goldman Sachs
Asset Management
SMALL CAP VALUE 0.80% 0.25% 1.05% 0.50%
INVESCO Management &
Research, Inc.
SMALL CAP GROWTH 0.75% 0.25% 1.00% 0.37%
John Hancock Advisers,
Inc.
</TABLE>
10
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<TABLE>
<S> <C> <C> <C> <C>
GLOBAL EQUITY 0.90% 0.25% 1.15% N/A
Scudder Kemper
Investments, Inc.
INTERNATIONAL BALANCED 0.85% 0.25% 1.10% 0.71%
Brinson Partners, Inc.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
INTERNATIONAL 0.18% 0.19% 0.37% N/A
EQUITY INDEX
Independence International
Associates, Inc.
INTERNATIONAL 0.97% 0.25% 1.22% 0.60%
OPPORTUNITIES
Rowe Price-Fleming,
International, Inc.
EMERGING MARKETS 1.30% 0.25% 1.55% N/A
EQUITY
Montgomery Asset
Management, LLC
SHORT-TERM BOND 0.36% 0.21% 0.57% 0.21%
Independence Investment
Associates, Inc.
BOND INDEX 0.15% 0.25% 0.40% N/A
Mellon Bond
Associates
SOVEREIGN BOND 0.25% 0.06% 0.31% 0.06%
John Hancock Advisers,
Inc.
STRATEGIC BOND 0.75% 0.25% 1.00% 0.57%
J.P. Morgan Investment
Management, Inc.
HIGH YIELD BOND 0.65% 0.25% 0.90% N/A
Wellington Management
Company, LLC
MONEY MARKET 0.25% 0.08% 0.33% 0.08%
John Hancock Mutual Life
Insurance Company
</TABLE>
* John Hancock reimburses a Portfolio of the Series Trust when the
Portfolio's other fund expenses exceed 0.25% of the Portfolio's average
daily net assets.
The above Funds are described under "THE FUNDS." In addition, the
prospectus(es) for the Funds, which are attached and accompany this Prospectus,
describe in detail the investment objectives and policies of the Funds, the
risks of investing in them, and the investment management fee charged for each
of them. For more information about the Fixed Account, see "THE FIXED ACCOUNT."
John Hancock will notify affected Participants concerning a material change
in a Fund's investment objective. As discussed more fully under "SUBSTITUTION
OF FUND SHARES" under "THE FUNDS," John Hancock may seek to substitute the
shares of a different mutual fund for shares of a Fund and would notify Group
Policyholders and Participants of any such substitution. Changes that John
Hancock may make to the Group Policies or the Certificates are detailed in those
documents.
11
<PAGE>
In selecting the Funds to make available to the Participants, the Group
Policyholder may wish to consult with an independent investment adviser. The
Funds available to a particular Participant are identified in the supplement to
this Prospectus.
HOW ARE THE NET PREMIUMS ALLOCATED?
In the enrollment form, the Participant determines what portions, if any, of
Net Premiums are to be allocated to the Subaccounts and/or the Fixed Account.
The Participant may change allocations of future Net Premiums at any time by
notifying John Hancock as provided under "ALLOCATION OF PREMIUMS." Subject to
certain limitations, the Participant may also transfer amounts among the
Subaccounts or between the Subaccounts and the Fixed Account. See "TRANSFERS."
A Participant may also elect to participate in the Dollar Cost Averaging
program. See "DOLLAR COST AVERAGING."
DO CERTIFICATES PROVIDE PARTICIPANTS WITH CHOICE AND FLEXIBILITY IN ADDRESSING A
RANGE OF DIFFERENT INSURANCE PROTECTION AND INVESTMENT OBJECTIVES?
Because the Cash Value of a Participant's insurance will vary with the
investment experience of the investment options, a Certificate provides an
opportunity for the Cash Value to appreciate more than it would under
comparable insurance without variable investment options. It is also possible,
however, for the Cash Value to decrease if the investment experience of the
selected investment option(s) is unfavorable. The variable investment options
vary in their risks, and Participants can choose to direct a portion of their
Cash Value to more aggressive or more conservative variable investment options
as their personal circumstances and investment objectives may dictate over time.
Participants who prefer to avoid or reduce the risks involved in any of the
variable options may elect to allocate all or a portion of Net Premiums to the
Fixed Account. John Hancock guarantees that the part of the Cash Value
allocated to this option will accrue interest daily at a rate that John Hancock
declares periodically. Although this rate will change from time to time, it
will not be less than an effective annual rate of 4%. See "THE FIXED ACCOUNT."
In short, the Certificate's investment options and premium flexibility can
be used to meet the changing needs of Participants over time.
12
<PAGE>
WHAT CHARGES ARE ASSESSED IN CONNECTION WITH THE CERTIFICATES?
Premium Tax Charges. Charges are deducted from each premium payment to fund
-------------------
the cost of state premium taxes and the Federal deferred acquisition cost, or
"DAC," tax. The state premium tax portion will not exceed 5% of each payment.
The DAC tax portion is currently 0.35% of each payment. See "STATE PREMIUM TAX
CHARGE AND FEDERAL DAC TAX CHARGE."
Charges deducted from Cash Value. The following charges are deducted from
---------------------------------
Cash Value: (i) a Maintenance Charge (a monthly charge for providing
administrative services) not to exceed $5; (ii) an Insurance Charge (a monthly
charge for providing insurance coverage, based upon the Face Amount, John
Hancock's then current monthly insurance rates, and the age and risk
classifications of the Covered Person); (iii) a Transaction Charge (a charge of
up to $25 assessed under certain Group Plans upon each surrender or withdrawal);
and (iv) a Charge for Additional Insurance Benefits (a monthly charge for
purchasing any Additional Insurance Benefits by rider). See "CHARGES DEDUCTED
FROM CASH VALUE OR SUBACCOUNTS."
Charges deducted from the Subaccounts. A Mortality and Expense Risk Charge
-------------------------------------
is deducted daily from the assets of the Subaccounts at a maximum effective
annual rate of 0.90% of the assets of each Subaccount. See "CHARGES DEDUCTED
FROM CASH VALUE OR SUBACCOUNTS."
IS THERE A CHARGE AGAINST THE SEPARATE ACCOUNT FOR FEDERAL INCOME TAX?
Currently, no charge is made against the Separate Account or any Subaccount
for Federal income taxes, but if, in the future, John Hancock incurs, or expects
to incur, income taxes attributable to the Separate Account, any Subaccount, or
this class of Group Policies, it reserves the right to impose such a charge.
WHAT WITHDRAWAL OR LOAN RIGHTS DO PARTICIPANTS HAVE?
At any time while a Certificate is in effect, a Participant may elect to
surrender his or her insurance and receive its Cash Surrender Value. A
Participant may also request a withdrawal from the Cash Value. See "FULL
SURRENDER" and "WITHDRAWALS." Certificates under certain Group Plans may be
subject to a transaction charge of up to $25 for surrenders and/or withdrawals.
Surrenders and withdrawals may have certain tax consequences.
A Participant may borrow a total amount up to the Loan Value of his or her
Certificate. The Loan Value of a Certificate at any time is determined by
subtracting from the Cash Value any Certificate Debt, any outstanding charges
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and the amount of the next month's Monthly Deduction. When a loan is taken, an
amount equal to the loan is transferred from the investment options to a Loan
Account that remains part of the Cash Value. This Loan Account earns interest
at an effective annual rate that is up to 2% less than the interest charged on
the loan. Any Certificate Debt and any outstanding charges will be deducted
from proceeds payable at the Insured's death or upon surrender. See "LOANS."
IS THERE A SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK" PERIOD?
Generally, if a Participant returns the Certificate and such Certificate is
received at the John Hancock Servicing Office within 30 days after the
Participant received his or her Certificate, the Participant will receive a
refund of all premium payments made, with no adjustment for investment
experience . Some states allow a longer period of time during which a
Certificate may be returned for a refund and some states require a refund of all
premium payments made, plus or minus any change in the value of the invested
portion of the premiums due to investment experience through the date the
Certificate is returned. A refund can be requested by mailing or delivering the
Certificate to John Hancock (or its designated agent) at the address specified
on the cover of this Prospectus. A refund of premiums paid by check may be
delayed until the check clears the bank upon which it is drawn. Any refund will
be reduced by withdrawals and Certificate Debt.
Premium payments received on or after the Certificate Date and prior to the
expiration of the "free look" period will be invested in the Series Trust Money
Market Portfolio until the end of the Valuation Date next following the
expiration of the "free look" period. John Hancock reserves the right to limit
contributions during the "free look" period.
HOW IS A PARTICIPANT'S INSURANCE AFFECTED IF HE OR SHE IS NO LONGER A MEMBER OF
THE GROUP?
Depending on the terms of the particular Group Plan, a Participant may be
able to elect to continue the insurance provided by the Group Plan if he or she
ceases to be an Eligible Group Member (or, where the Participant is an "eligible
applicant owner", if the Covered Person ceases to be an Eligible Group Member).
Certificates continued in this fashion may be subject to higher charges up to
the maximum charges set forth in the Certificate. A Participant may also elect
to surrender the insurance for its Cash Surrender Value, use the Cash Surrender
Value of the insurance to purchase paid-up insurance, or convert the insurance
to an individual life insurance policy. See "OPTIONS ON TERMINATION OF
COVERAGE."
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WHAT IS THE FEDERAL INCOME TAX STATUS OF AMOUNTS RECEIVED UNDER A CERTIFICATE?
The benefits under the Certificates described in this Prospectus are
expected to receive the same tax treatment under the Internal Revenue Code as
benefits under traditional fixed-benefit life insurance policies. Thus, the
death benefits payable under the Group Policies will not be included in the
beneficiary's gross income. Also, the Participant is not taxed on interest and
gains under the Group Policies unless and until values are actually received
through withdrawal, surrender, or other distributions.
Under Federal tax law, distributions from Certificates on which premiums
greater than a "7-pay" premium limit (as defined in the law) have been paid,
will be subject to special taxation. See "TAX TREATMENT OF CERTIFICATE
BENEFITS" for a discussion of how the "7-pay" premium limit may be exceeded
under a Certificate. A distribution on such a Certificate (called a "modified
endowment") will be taxed to the extent there is any income (gain) to the owner
and an additional penalty tax may be imposed on the taxable amount.
JOHN HANCOCK, THE SEPARATE ACCOUNT,
AND INVESTMENT OPTIONS
JOHN HANCOCK
John Hancock is a mutual life insurance company chartered in Massachusetts
in 1862. Its Home Office is at 200 Clarendon Street, Boston, Massachusetts
02117. It conducts a conventional life insurance business in all of the United
States, the District of Columbia and Puerto Rico. John Hancock sells insurance
policies and annuity contracts directly to customers or through a career agency
system, broker/dealers, employer groups, unions, trusts, or banks.
THE SEPARATE ACCOUNT
The Separate Account, a separate account established under Massachusetts
law, meets the definition of "separate account" under the Federal securities
laws and is registered as a unit investment trust under the Investment Company
Act of 1940 ("1940 Act").
The Separate Account's assets are the property of John Hancock. Each Group
Policy provides that the portion of the Separate Account's assets equal to the
reserves and other liabilities under the Group Policy shall not be chargeable
with liabilities arising out of any other business John Hancock may conduct. In
addition to the assets attributable to variable life policies, the Separate
Account's
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assets include assets derived from charges made by John Hancock. From time to
time these additional assets may be transferred in cash by John Hancock to its
general account. Before making any such transfer, John Hancock will consider any
possible adverse impact the transfer might have on any Subaccount.
The Separate Account is registered with the Securities and Exchange
Commission (the "Commission") under the 1940 Act. Such registration does not
involve supervision by the Commission of the management or policies of the
Separate Account or John Hancock.
The assets in each Subaccount are invested in the corresponding Fund, but
the assets of one Subaccount are not necessarily legally insulated from
liabilities associated with another Subaccount. New Subaccounts may be added or
existing Subaccounts may be deleted as new Funds are added or deleted.
THE FUNDS
Set out below is a list of each Fund, its investment objectives, and its
investment adviser.
THE SERIES TRUST
The Series Trust is "series" type of mutual fund registered with the
Commission under the 1940 Act as an open-end diversified management investment
company. It serves as an investment medium for the Separate Account and other
unit investment trust separate accounts established for other variable insurance
policies and variable annuity contracts. (See the attached Series Trust
Prospectus for a description of a need to monitor for possible conflicts and
other consequences.) The Series Trust is currently made up of the following
Portfolios:
Growth & Income Portfolio. The investment objective of this Portfolio is to
--------------------------
achieve intermediate and long-term growth of capital, with income as a secondary
consideration. This objective will be pursued by investments principally in
common stocks (and securities convertible into or with rights to purchase common
stocks) of companies believed to offer growth potential over both the
intermediate and long-term.
Large Cap Growth Portfolio. The investment objective of this Portfolio is
--------------------------
to achieve above-average capital appreciation through the ownership of common
stocks (and securities convertible into or with rights to purchase common
stocks) of companies believed to offer above-average capital appreciation
opportunities. Current income is not an objective of the Portfolio.
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Sovereign Bond Portfolio. The investment objective of this Portfolio is to
-------------------------
provide as high a level of long-term total rate of return as is consistent with
prudent investment risk, through investment primarily in a diversified portfolio
of freely marketable debt securities. Total rate of return consists of current
income, including interest and discount accruals, and capital appreciation.
Money Market Portfolio. The investment objective of this Portfolio is to
----------------------
provide maximum current income consistent with capital preservation and
liquidity. It seeks to achieve this objective by investing in a managed
portfolio of high quality money market instruments.
Managed Portfolio. The investment objective of this Portfolio is to achieve
-----------------
maximum long-term total return consistent with prudent investment risk.
Investments will be made in common stocks, convertibles and other equity
investments, in bonds and other fixed income securities and in money market
instruments.
Real Estate Equity Portfolio. The investment objective of this Portfolio is
----------------------------
to provide above-average income and long-term growth of capital by investment
principally in equity securities of companies in the real estate and related
industries.
Diversified Mid Cap Growth Portfolio. The investment objective of this
------------------------------------
Portfolio is to provide long-term growth of capital through a diversified
portfolio investing primarily in common stocks of medium capitalization growth
companies.
Short-Term Bond Portfolio. The investment objective of this Portfolio is to
-------------------------
provide a high level of current income consistent with a low degree of share
price fluctuation through investment primarily in a diversified portfolio of
short-term and intermediate-term investment-grade debt obligations.
Equity Index Portfolio: The investment objective of this Portfolio is to
----------------------
provide investment results that correspond to the total return of the U.S.
market as represented by the S&P 500 utilizing common stocks that are publicly
traded in the United States.
Large Cap Value Portfolio: The investment objective of this Portfolio is to
--------------------------
provide substantial dividend income, as well as long-term capital appreciation,
through investment in the common stocks of established companies believed to
offer favorable prospects for increasing dividends and capital appreciation.
Mid Cap Growth Portfolio: The investment objective of this Portfolio is to
------------------------
provide long-term growth of capital through a non-diversified portfolio
investing largely in common stocks of medium capitalization companies.
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Mid Cap Value Portfolio: The investment objective of this Portfolio is to
-----------------------
provide long-term growth of capital primarily through investment in the common
stocks of medium capitalization companies believed to sell at a discount to
their intrinsic value.
Small Cap Growth Portfolio: The investment objective of this Portfolio is
--------------------------
to provide long-term growth of capital through a diversified portfolio investing
primarily in common stocks of small capitalization emerging growth companies.
Small Cap Value Portfolio: The investment objective of this Portfolio is to
-------------------------
provide long-term growth of capital by investing in a well diversified portfolio
of equity securities of small capitalization companies exhibiting value
characteristics.
Small/Mid Cap CORE Portfolio: The investment objective of this Portfolio is
----------------------------
to achieve long-term growth of capital through a broadly diversified portfolio
of equity securities of U.S. issuers which are included in the Russell 2500
Index at the time of investment.
Strategic Bond Portfolio: The investment objective of this Portfolio is to
------------------------
provide a high total return consistent with moderate risk of capital and
maintenance of liquidity, from a portfolio of domestic and international fixed
income securities.
High Yield Bond Portfolio: The investment objective of this Portfolio is to
-------------------------
provide high current income and capital appreciation with capital preservation
through investing primarily in high yield (below investment grade) debt
securities.
Bond Index Portfolio: The investment objective of this Portfolio is to
--------------------
provide investment results that correspond to the total return and risk
characteristics of the U.S. investment grade fixed income market, as represented
by a Lehman Brothers bond index that tracks the performance of investment grade
debt securities.
Global Equity Portfolio: The investment objective of this Portfolio is to
-----------------------
achieve long-term growth of capital through a diversified portfolio of
marketable securities, primarily equity securities, of both U.S. and foreign
issuers.
International Equity Index Portfolio: The investment objective of this
------------------------------------
Portfolio is to provide investment results that correspond to the total return
of the major developed international (non-U.S.) equity markets, as represented
by the MSCI AEFE GDP Index.
Emerging Markets Equity Portfolio: The investment objective of this
---------------------------------
Portfolio is to achieve capital appreciation by investing primarily in equity
securities of companies in countries having economies and markets generally
considered by the World Bank or the United Nations to be emerging or developing.
International Opportunities Portfolio: The investment objective of this
--------------------------------------
Portfolio is to provide capital appreciation through investment in common stocks
of primarily well-established, non-United States companies.
International Balanced Portfolio: The investment objective of this
--------------------------------
Portfolio is to maximize total U.S. dollar return, consisting of capital
appreciation and current income, through investment in non-U.S. equity and fixed
income securities.
John Hancock acts as the investment adviser for the Portfolios described
above. John Hancock's indirectly owned subsidiary, Independence Investment
Associates, Inc., with its principal place of business at 53 State Street,
Boston, MA 02109, provides sub-investment advice with respect to the Growth &
Income, Large Cap Growth, Managed, Real Estate Equity and Short-Term Bond
Portfolios. Another indirectly owned subsidiary, John Hancock Advisers, Inc.,
located at 101 Huntington Avenue, Boston, MA 02199, provides sub-investment
advice with respect to the Sovereign Bond, Small Cap Growth, and Diversified
Mid-Cap Growth Portfolios
T. Rowe Price Associates, Inc., located at 100 East Pratt St., Baltimore, MD
21202, provides sub-investment advice with respect to the Large Cap Value
Portfolio and its subsidiary, Rowe Price-Fleming International Inc., also
located at 100 East Pratt St., Baltimore, MD 21202, provides sub-investment
advice with respect to the International Opportunities Portfolio.
State Street Bank & Trust, N.A., at Two International Place, Boston, MA
02110, is sub-investment adviser to the Equity Index Portfolio. INVESCO
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Management and Research located at 101 Federal Street, Boston, MA 02110, is the
sub-investment adviser to the Small Cap Value Portfolio. Janus Capital
Corporation, with its principal place of business at 100 Filmore Street, Denver,
CO 80206, is the sub-investment adviser to the Mid Cap Growth Portfolio.
Neuberger & Berman, LLC, of 605 Third Avenue, New York, NY 10158, provides sub-
investment advice to the Mid Cap Value Portfolio. J.P. Morgan Investment
Management, Inc., located at 522 Fifth Avenue, New York, NY 10036, provides
sub-investment advice with respect to the Strategic Bond Portfolio and Brinson
Partners, Inc., of 209 S. LaSalle Street, Chicago, IL 60604, does likewise with
respect to the International Balanced Portfolio.
Goldman Sachs & Company, located at One New York Plaza, New York, New York
10004, is sub-investment adviser to the Small/Mid Cap CORE Portfolio. Scudder
Kemper Investments, Inc., located at 345 Park Avenue, New York, New York 10154,
is the sub-investment adviser to the Global Equity Portfolio. Montgomery Asset
Management, LLC, located at 101 California Street, San Francisco, California
94111, is the sub-investment adviser to the Emerging Markets Equity Portfolio.
Mellon Bond Associates, located at One Mellon Bank Center, Suite 4135,
Pittsburgh, Pennsylvania 15258, is the sub-investment adviser to the Bond Index
Portfolio. Wellington Management Company, LLC, located at 75 State Street,
Boston, Massachusetts 02109, is the sub-investment adviser to the High Yield
Bond Portfolio.
Each Fund pays a fee to its investment adviser for providing investment
advisory services. Each Fund also pays for certain non-investment advisory Fund
expenses (so-called "other fund expenses"). Such fees and expenses are shown in
the fee table included under "SUMMARY INFORMATION."
OTHER FUNDS
From time to time, in the future, one or more other mutual funds registered
with the Commission under the 1940 Act as open-end management investment
companies may be offered as available investment options for the Separate
Account.
ADDITIONAL INFORMATION
John Hancock will purchase and redeem Fund shares for the Separate Account
at their net asset value without any sales or redemption charges. Each Fund
share represents an interest in one of the Funds which corresponds to a
Subaccount of the Separate Account. Any dividend or capital gains distributions
received by the Separate Account will be reinvested in Fund shares at their net
asset value as of the dates paid.
On each Valuation Date, shares of each Fund are purchased or redeemed by
John Hancock for each Subaccount based on, among other things, the amount of Net
Premiums allocated to the Subaccount, distributions reinvested, and transfers
to, from and among Subaccounts, all to be effected as of that date. Such
purchases and redemptions are effected at the net asset value per Fund share for
each Fund determined on that same Valuation Date. A Valuation Date is any date
on which the New York Stock Exchange is open for trading and on which the Fund
values its shares. A Valuation Period is that period of time from the beginning
of the day following a Valuation Date to the end of the next following Valuation
Date.
A full description of each Fund, its investment objectives, its policies and
restrictions, its charges and expenses, and all other aspects of its operation
is contained in the attached prospectus for such Fund and the corresponding
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statement of additional information referred to therein, which should be read
together with this Prospectus.
Investment Risk
There is no assurance that the investment objective of any of the Funds
will be met. A Participant bears the complete investment risk for those
portions of his Cash Value allocated to a Fund. Each Fund involves inherent
investment risk, and such risk varies significantly among the Funds.
Participants should read each Fund's prospectus carefully and understand the
Fund's relative degrees of risk before making or changing investment choices.
Additional Funds may, from time to time, be made available as underlying
investments for the Group Plans. However, the right to make such additions will
be limited by the terms and conditions imposed by John Hancock.
SUBSTITUTION OF FUND SHARES
Although John Hancock believes it to be unlikely, it is possible that in
the judgment of its management, one or more of the available Funds may become
unsuitable for investment by Participants. This may occur because of investment
policy changes, tax law changes or considerations, or the unavailability of
shares for investment or may occur at the discretion of John Hancock. In such
event, John Hancock may seek to substitute the shares of another existing Fund
or of an entirely new mutual fund. Before this can be done, the approval of the
SEC, and possibly one or more state insurance departments, will be required.
Group Policyholders and Participants will be notified of any such substitution.
THE FIXED ACCOUNT
A Participant may elect to allocate all or part of the amount in his or her
Cash Value to the Fixed Account. The amount so allocated or transferred becomes
a part of John Hancock's general assets, commonly referred to as the general
account. Subject to applicable law, John Hancock has sole discretion over the
investment of the assets of the general account, and Participants do not share
in the investment experience of those assets. Instead, John Hancock guarantees
that the part of the Cash Value allocated to the Fixed Account will accrue
interest daily at a rate that John Hancock declares periodically. This rate may
not be less than an effective annual rate of 4%, but John Hancock may, in its
sole discretion, periodically declare a higher rate. At least annually, and on
request, a Participant will be advised of the interest rate that currently
applies to his or her Certificate.
By allocating premium payments to the Fixed Account in amounts only
sufficient to cover the monthly charges to the Cash Value, a Participant can use
the Certificate as a way to obtain life insurance coverage, with little or no
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<PAGE>
accumulation of Cash Value. Even such a Participant retains, of course, the
option to build a Cash Value by paying larger premiums and applying the excess
amount to any of the investment options available under the Certificate.
Transfers from the Fixed Account are subject to limits. See "TRANSFERS."
The payment of any Cash Value attributable to the Fixed Account through loans,
withdrawals, or surrenders may be delayed for up to 6 months. See "WHEN PROCEEDS
ARE PAID."
Because of exemptive and exclusionary provisions, interests in the Fixed
Account have not been registered under the Securities Act of 1933 and John
Hancock has not been registered as an investment company under the Investment
Company Act of 1940. Accordingly, interests in the Fixed Account are not
subject to the provisions of these Acts, and John Hancock has been advised that
the staff of the Securities and Exchange Commission has not reviewed the
disclosure in this Prospectus relating to the Fixed Account. Disclosures
concerning the Fixed Account may, however, be subject to certain provisions of
the Federal securities laws relating to the accuracy of statements made in a
prospectus.
DETAILED INFORMATION ABOUT THE CERTIFICATES
ELIGIBILITY
The Group Policies will be sold to Group Policyholders who wish to make
variable universal life insurance coverage available to their Eligible Group
Members. Generally, prospective Participants apply for coverage under the Group
Policy on a "guaranteed issue" basis within certain limits and subject to
certain requirements as expressed in the Group Policy. However, if such limits
are exceeded or such requirements are not met, the prospective Participant may
be required to provide Evidence of Insurability with his or her enrollment
form.
Depending upon the coverage selected by the Group Policyholder, several
different family coverage and continuation options may be available.
Participants may be able to apply for variable universal life insurance coverage
on their spouses or term life coverage on their spouses. Participants may also
be able to purchase term life insurance coverage on their children.
Participants may be able to continue their coverage upon retirement, leave of
absence, and /or termination of employment. Spouses may be able to continue
coverage upon divorce or death of the Eligible Group Member.
If a minimum number or percentage of Eligible Group Members is required to
apply for coverage under a Group Plan and such minimum is not achieved,
21
<PAGE>
John Hancock may refuse to issue any Certificates under that Group Plan. These
minimums will be determined by John Hancock, based on group characteristics in
advance of the offering to the Eligible Group Members. No Certificate will be
issued to any person for whom variable universal life coverage appears to be an
unsuitable investment.
ISSUANCE OF A CERTIFICATE
Eligible Group Members wishing to obtain insurance coverage through a Group
Plan must complete the appropriate enrollment form and undergo any required
medical underwriting, including in some cases a medical examination. If the
enrollment form is accepted, John Hancock will issue a Certificate to that
individual (the "Participant") which will describe the rights, benefits,
coverage, and obligations with respect to the coverage. The minimum Face Amount
for a Certificate is $10,000. All Group Plans will designate a "Limiting Age"
at which certain changes occur. This Limiting Age is generally age 95. Under
some Group Plans, coverage under the Certificate will terminate at the Limiting
Age. However, under most Group Plans the Participant may: (1) elect to receive
the Cash Surrender Value of the Certificate; (2) elect to purchase Paid-Up
Insurance (subject to the limitations expressed in "ELECTION OF PAID-UP
INSURANCE"); or (3) continue to hold the Certificate. If the third option is
chosen, monthly charges attributable to the cost of insurance and additional
insurance benefits will be waived and the Death Benefit will equal the Cash
Value reduced by any Certificate Debt and any outstanding charges. At the
Limiting Age and beyond, the Participant cannot make premium contributions,
although loan repayments will be permitted. John Hancock believes a cash
distribution upon termination of coverage will be subject to the same tax
treatment as other cash surrenders. See "TAX TREATMENT OF CERTIFICATE BENEFITS."
Participants should refer to their particular Certificate for the details of
when coverage will terminate. The maximum age at which a Certificate may
initially be issued is generally one year prior to the Limiting Age.
Generally, the Participant is the Covered Person under a Certificate. Some
Group Plans, however, may permit an Eligible Group Member to also apply for a
Certificate naming his or her spouse as the Covered Person. A separate
Certificate will be issued for such spousal coverage, but under each Certificate
the Participant and/or Assignee(s) are the only persons eligible to exercise the
rights provided under the Certificate.
APPLICANT OWNER PROVISION
The "applicant owner provision," included as part of the Group Policy,
allows an "eligible applicant owner" to apply for insurance coverage on the life
of an Eligible Group Member and, if allowed under the Group Plan, on the life of
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<PAGE>
such Eligible Group Member's spouse. An "eligible applicant owner" is a person
other than the Eligible Group Member who may be, but is not limited to, the
Eligible Group Member's spouse, child, parent, grandparent, grandchild, sister,
brother, or the trustee of any trust of which the Eligible Group Member is the
grantor. At any one time, only one person may be an "eligible applicant owner"
with respect to a Certificate.
The "eligible applicant owner" must complete the appropriate
enrollment form, which may require the Eligible Group Member to undergo any
required medical underwriting, including in some cases a medical examination.
The enrollment form must also be signed by the Eligible Group Member. If the
enrollment form is accepted, John Hancock will issue a Certificate to the
"eligible applicant owner" which will describe the rights, benefits, coverage,
and obligations with respect to the coverage. In such a case, references in
this prospectus to "Participant" will be deemed to include reference to an
"eligible applicant owner".
PROCEDURES
The procedures for submitting enrollment forms, premium payments,
transfer orders, reallocations, loan or withdrawal requests or other
communications from a Participant relating to his or her insurance will depend
on the specific terms of the particular Group Policy. Under some Group
Policies, communications relating to a Participant's insurance may be submitted
to the Group Policyholder or its agent who then passes the communications on to
John Hancock. Under some Group Policies, the Participant may communicate
directly with John Hancock at the John Hancock Servicing Office with respect to
certain types of transactions. Each Group Policy and the Certificates issued
thereunder will set forth the applicable procedures, so a Participant should
consult his or her Certificate in determining how to submit a payment or
document, make transfers, request loans and withdrawals, or reallocate premium
payments. In all cases, enrollment forms and other documents, payments, orders
and all other communications will be deemed received by John Hancock when
received in good order at the John Hancock Servicing Office.
PREMIUMS
Participants will generally have flexibility in determining the amount
and timing of premium payments, although a prospective Participant may be
required to pay an appropriate specified initial premium to become a
Participant. The minimum initial premium will vary by Group Plan, but will
always be at least the Monthly Deduction plus any applicable premium related
charges. A Certificate will remain in force so long as the Cash Value minus any
Certificate Debt and any outstanding charges is sufficient to cover monthly
charges. In general, if the Cash Value minus any Certificate Debt and any
outstanding charges as of the
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<PAGE>
first day of each Billing Month is insufficient to cover the charges for that
month, then the coverage will be in default and a grace period will begin. See
"LAPSE." Participants should refer to their particular Certificates for the
details of this default protection.
In addition to any premium paid on a routine basis (for example,
through salary deduction), a Participant may make additional premium payments at
any time, subject to any applicable charges. There is no minimum amount for
premiums paid on a routine basis, but any additional premium payment must be at
least $50. John Hancock reserves the right to limit the maximum amount of such
additional premiums.
The method by which premiums will be paid is set forth in the Group
Policy. Some Participants will make payments to the Group Policyholder (or its
agent), which will then remit them to the John Hancock Servicing Office as
premium payments. Other Participants will make premium payments directly to the
John Hancock Servicing Office or authorize John Hancock to receive payment using
electronic funds transfers. There may be higher monthly administrative charges
when premium payments are not remitted by the Group Policyholder directly to
John Hancock. See "CHARGES DEDUCTED FROM CASH VALUE OR SUBACCOUNTS."
Because of the payment of additional premiums, or investment growth,
the total amount of insurance may have to be increased for the insurance to
continue to qualify as life insurance for Federal tax purposes. In addition, if
a Participant makes premium payments in excess of certain limits, the tax status
of the insurance may change to that of a "Modified Endowment Contract" under
Section 7702A of the Internal Revenue Code, which could be significantly
disadvantageous from a tax standpoint. See "TAX TREATMENT OF CERTIFICATE
BENEFITS." John Hancock reserves the right to make such changes, including
imposing premium limits, as it deems necessary to assure that the Group Policy
and Certificates continue to qualify as life insurance under applicable tax
laws.
EFFECTIVE DATE OF INSURANCE
A Participant's insurance will go into effect on the later of (i) the
first Valuation Date after his or her enrollment form for participation under
the Group Plan is approved and (ii) the date specified by the Group Plan
procedures. That effective date is the Certificate Date.
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ALLOCATION OF PREMIUMS
The Participant at the time of enrollment must elect an Investment
Rule which will allocate Net Premiums among the available investment options.
The percentage allocated to any one investment option must be a whole number not
less than 5% and the total of all allocations must equal 100%. If a
Participant's insurance is not in default, he or she may change the way in which
premiums are allocated among the investment options. The request for a change
in the Investment Rule may be in writing or, if a telephone authorization form
has been completed, by telephone or fax. See "TELEPHONE TRANSACTIONS." The
same rules that apply to the initial election of the Investment Rule also apply
with respect to any change. Currently, there is no transaction charge for
changing the Investment Rule, although John Hancock reserves the right to impose
such a transaction charge in the future. Any change will be effective as of the
end of the Valuation Period during which the Participant's request is received
in good order at the John Hancock Servicing Office.
All premium payments received before the Certificate Date will be
reduced by any applicable charges attributable to premiums and then held without
interest, for the benefit of the Participant, in John Hancock's general account.
On the Certificate Date, such Net Premiums will be applied to the Series Trust
Money Market Portfolio and remain there until the end of the Valuation Date next
following the expiration of the "free look" period before being allocated to the
investment options in accordance with the Investment Rule selected by the
Participant. (See "IS THERE A SHORT-TERM CANCELLATION RIGHT OR `FREE LOOK'
PERIOD?" in "SUMMARY INFORMATION.")
Any premium payment received on or after the Certificate Date and
prior to expiration of the "free look" period will be reduced by any applicable
charges attributable to premiums and then applied to the Series Trust Money
Market Portfolio as of the end of the Valuation Period in which John Hancock
receives such premium payment. Such Net Premiums invested in the Series Trust
Money Market Portfolio will remain there until the end of the Valuation Date
next following the expiration of the "free look" period. On that Valuation
Date, all funds in the Money Market Portfolio will be allocated to the
investment options in accordance with the Investment Rule elected by the
Participant.
Any premium payment received after expiration of the "free look"
period will be reduced by any applicable charges attributable to premiums and
then allocated to the Participant's selected investment options as of the end of
the Valuation Period in which John Hancock receives such premium payment.
All premium payments not made through payroll deduction, whether
periodic or on a lump sum basis, will be deemed received when actually received
by John Hancock or its designated agent at the John Hancock Servicing Office. A
premium payment made by payroll deduction will be deemed received on the
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later of (i) the date of receipt of the premium payment at the John Hancock
Servicing Office or (ii) the business day following receipt of a reconciliation
statement with respect to such premium payment that properly identifies the
Group Policyholder, the Certificate numbers, the Participants, and the amount of
premium received for each Certificate. Also, if payroll deduction premium
payments are made by wire transfer, such premium payments will not be deemed
received until John Hancock has confirmed receipt of the wire transfer into a
bank account maintained by John Hancock for receipt of premium from Group
Policyholders.
TRANSFERS
If a Participant's insurance is not in default, he or she may transfer
amounts from one Subaccount to another Subaccount or to the Fixed Account.
There is no limit on the number of transfers among Subaccounts or to the Fixed
Account. Transfers from the Fixed Account to a Subaccount are currently
permitted only once each Certificate Year. During the first Certificate Year,
the transfer out of the Fixed Account may be made at any time. During all
subsequent Certificate Years, each transfer out of the Fixed Account must be at
least 180 days after the prior transfer. The amount of each transfer cannot
exceed 25% of the balance in the Fixed Account at the time of the transfer.
These limits are subject to change in the future.
The transfer request may be in dollar amounts or in percentages. The
minimum amount that may be transferred from any one investment option is $50 or
the entire balance in that investment option, whichever is less. For transfer
requests in percentages, such percentages must be in whole numbers.
A Participant may request a transfer in writing or, once a written
telephone transfer authorization form is completed, by fax or telephone. See
"TELEPHONE TRANSACTIONS." Transfers will take effect as of the end of the
Valuation Period in which the transfer request is received in good order at the
John Hancock Servicing Office.
DOLLAR COST AVERAGING
Each Group Policy will include a provision under which a Participant may
elect Dollar Cost Averaging ("DCA"). DCA enables a Participant to
systematically transfer the Participant's selected specified dollar amounts from
the Money Market Subaccount to the other available Subaccounts at regular
intervals. The Participant can request that only a certain number of transfers
be made under the DCA feature. Once the designated number of transfers has been
made, DCA will terminate.
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To initiate DCA, a Participant must have a balance of at least $1,000 in
the Money Market Subaccount. The minimum transfer amount is $50. All DCA
transfers will be made effective as of the end of the first Valuation Period
following the first day of a calendar month. Election of this arrangement may
occur at any time after the Certificate Date by properly completing the DCA
election form and returning it by mail or, if the telephone authorization form
has been completed by the Participant, by fax to the John Hancock Servicing
Office. If the DCA election form is received by the tenth day of a month, then
DCA processing will commence during the next month. If the DCA election form is
received after the tenth day of a month, then DCA processing will commence
during the month immediately following the next succeeding month.
DCA will terminate when any of the following occurs: (1) the number of
designated transfers has been completed; (2) the Money Market Subaccount value
on a transfer date is less than the amount required to be transferred; (3) John
Hancock (or its designated agent) receives a written request for termination by
the tenth day of the month to cancel the transfer scheduled to take effect the
following month (written requests received after the tenth day of the month will
take effect during the month immediately following the next succeeding month);
or (4) the Certificate has lapsed, surrendered, or otherwise terminated.
There is currently no charge for DCA; however, John Hancock reserves the
right to charge for this feature in the future.
The main objective of DCA is to shield investments from short-term price
fluctuations. Since the same dollar amount is transferred to an available
Subaccount with each transfer, more Subaccount units are purchased if the
Subaccount unit value is low, and fewer Subaccount units are purchased if the
unit value is high. Therefore, a lower than average cost per unit may be
achieved over the long term. This plan of investing allows investors to take
advantage of market fluctuations but does not assure a profit or protect against
a loss in declining markets.
DEATH BENEFITS
A Death Benefit is payable upon the death of the Covered Person. The Death
Benefit is generally the Face Amount of the Certificate plus the Cash Value of
the Certificate as of the date of death and less any Certificate Debt and any
outstanding charges. If the insurance is kept in force for several years and/or
substantial premium payments are made, the Cash Value may grow to a point where
it is necessary to increase the Face Amount in order to ensure that the
insurance will satisfy the Internal Revenue Code's definition of life insurance.
In that case, the Death Benefit (before the subtraction of Certificate Debt and
outstanding charges) must at least equal the following "corridor percentage" of
the Cash Value based on the Covered Person's Age:
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<TABLE>
<CAPTION>
INSURED'S CORRIDOR
AGE PERCENTAGE
--- ----------
<S> <C> <C>
FROM: TO:
----- ---
Less than age 40 250 250
40 but less than 45 250 215
45 but less than 50 215 185
50 but less than 55 185 150
55 but less than 60 150 130
60 but less than 65 130 120
65 but less than 70 120 115
70 but less than 75 115 105
75 but less than 90 105 105
90 but less than 95 105 100
</TABLE>
Under those Group Plans that allow coverage to continue beyond the Limiting
Age (usually age 95), the Death Benefit after the Limiting Age on Certificates
that are continued will be equal to the Cash Value less any Certificate Debt and
any outstanding charges.
The Death Benefit will be paid within seven days after receipt of due proof
of the Covered Person's death plus such other documentation as John Hancock may
require. Death Benefits will generally be deposited into John Hancock's
Guaranteed Access Account. However, under some Group Plans, the Death Benefit
may be payable directly to the beneficiary in a lump sum.
John Hancock's Guaranteed Access Account is an interest-bearing account
that holds the Death Benefit while the beneficiary takes time to consider other
options. The beneficiary has complete ownership of funds held in the
Guaranteed Access Account, and may draw on all or part of those funds by writing
a draft. Interest earnings in the Guaranteed Access Account are compounded
daily and credited monthly. Proceeds placed in the Guaranteed Access Account
can be transferred to other modes of settlement at any time. The proceeds
contained in the Guaranteed Access Account are part of John Hancock's general
account.
The Participant or the beneficiary may arrange with John Hancock for the
Death Benefit to be paid in another mode of settlement made available by John
Hancock other than the payment options listed above
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CHANGES IN FACE AMOUNT
Some Group Plans may allow Participants to elect to increase the Face
Amount of their insurance at certain times. Other Group Plans may provide for
increasing Face Amounts based on factors such as salary increases. Additional
underwriting requirements may have to be satisfied in either case. An increase
in the Face Amount will result in higher insurance charges because the net
amount at risk for John Hancock will increase.
Some Group Plans may also permit Participants to decrease the Face Amount
of their insurance at certain times. In no event, however, may the Face Amount
be decreased below $10,000 or below the minimum amount required to maintain the
insurance's status as life insurance under the Federal tax laws. See "TAX
TREATMENT OF CERTIFICATE BENEFITS."
Under certain Group Plans, there may be a retirement/age adjustment in the
Participant's Face Amount. Under the retirement/age adjustment provision, the
Face Amount is adjusted at a predetermined age or qualifying event ("triggering
event") to an amount equal to five times the then-existing Cash Value minus
Certificate Debt and any outstanding charges. However, in no event will the
adjusted Face Amount exceed the then-existing Face Amount or be less than
$25,000. This adjustment in the Face Amount occurs at the latest of retirement,
age 70, or the tenth Certificate Anniversary. For Continuation Coverage and for
Certificates issued under the Dependent Benefits Life coverage, the adjustment
will occur at the later of age 70 or the tenth Certificate Anniversary. The
retirement/age adjustment to the Participant's Face Amount will be determined as
of the end of the Valuation Period in which the triggering event occurs but the
actual adjustment to the Participant's Face Amount will be effective on the
first day of the Billing Month next following this determination.
An increase or decrease in Face Amount, or the addition or removal of
certain additional insurance benefits, may create the potential for the
insurance to be treated as a Modified Endowment Contract under the Internal
Revenue Code. This is particularly true of decreases in Face Amount during the
first seven years that insurance is in force. See "TAX TREATMENT OF CERTIFICATE
BENEFITS." In addition, a decrease in coverage may limit the amount of premiums
that a Participant may contribute in the future.
CHARGES DEDUCTED FROM CASH VALUE OR SUBACCOUNTS
The following charges are deducted from Cash Value or the Subaccounts, as
indicated below. The maximum deductions and charges described below will not be
increased by John Hancock with respect to any Certificate in effect regardless
of any changes in mortality and expense experience. Where current charges are
lower than maximum charges, John Hancock reserves the right to
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<PAGE>
increase the current charges. Participants should refer to their Certificate for
further information on applicable charges.
Maintenance Charge. John Hancock will deduct from Cash Value a monthly
------------------
charge not to exceed $5. This charge helps to compensate John Hancock for
administrative expenses, including recordkeeping, processing death claims
and surrenders, making Group Policy changes, reporting and other
communications to Participants and Group Policyholders, and other similar
expenses and overhead. John Hancock will realize a gain from this charge to
the extent it is not needed to cover such administrative expenses.
Insurance Charge. The insurance charge, deducted monthly from Cash Value,
----------------
is based on the age of the Covered Person and the amount at risk. The amount
at risk is the Face Amount. The amount of the insurance charge is
determined by multiplying John Hancock's then current monthly rate of
insurance by the amount at risk. Current monthly rates for insurance are
based on the sex, age, smoking status, and underwriting class of the Covered
Person, the length of time the coverage has been in effect, and particular
aspects of the Group Plan. Separate insurance charge rates may apply to
Certificates providing Continuation Coverage. Because the insurance charge
rate applicable under a Certificate increases as the Covered Person ages,
the monthly insurance charge deducted from the Cash Value will increase as
the Covered Person ages, and this increased charge will be reflected in the
Cash Surrender Value and Death Benefit under a Certificate.
Under some Group Plans, any additional insurance benefits provided may
be taken into account in determining the insurance charge rates. The rate
classes for a particular Group Plan may include classes for smokers and
nonsmokers, active and retired Participants, Certificates providing
Continuation Coverage, and other criteria agreed to by John Hancock and the
Group Policyholder.
The actual insurance charge rates will be set by John Hancock based on
its expectations as to future experience in mortality and total expenses
and may be adjusted periodically based on a number of factors including the
number of Certificates in force, the number of Certificates surrendered or
providing Continuation Coverage and the actual and anticipated mortality and
expense experience of the group. The expense experience considered by John
Hancock in this regard includes whether a Group Plan sponsor or a party
acting on the sponsor's behalf performs administrative or other services
related to the Certificates and the extent to which the sponsor may receive
compensation for its services. Any change in the insurance charge rates
will apply to all persons of the same age and
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<PAGE>
group underwriting classification. Certificates providing Continuation
Coverage may be considered a separate group. The insurance charge rate
applicable to a Participant may not, however, be greater than the guaranteed
cost of insurance rate set forth in his or her Certificate. That guaranteed
rate will be no higher than a rate based upon 150% of the 1980 CSO Table.
The maximum guaranteed rates are 150% of the 1980 CSO Table because John
Hancock uses simplified underwriting and guaranteed issue procedures that
may not require a medical examination of a prospective Covered Person and
may provide coverage to groups with substandard risk characteristics from an
underwriting standpoint. The current cost of insurance charges are generally
lower than 100% of the 1980 CSO Table.
Charges for Additional Insurance Benefits. Under certain Group Plans,
-----------------------------------------
Additional Insurance benefits may be available by rider. See "ADDITIONAL
INSURANCE BENEFITS." An additional charge will be deducted monthly from
Cash Value for any such Additional Insurance benefit.
Charge for Mortality and Expense Risks. A charge for the mortality and
--------------------------------------
expense risks assumed by John Hancock is deducted daily from the assets of
the Subaccounts. The charge is guaranteed not to exceed an effective annual
rate of 0.90% of the value of the assets in each of the Subaccounts. This
charge compensates John Hancock for assuming the mortality and expense risks
of the insurance provided through the Group Plan. The mortality risk
assumed is that Covered Persons may live for shorter periods of time than
estimated and, therefore, a greater amount of death benefit than expected
will be payable in relation to the amount of premiums received. The expense
risk assumed is that expenses incurred in issuing and administering the
Certificatesand Group Policies will be greater than estimated. John Hancock
will realize a gain from this charge to the extent it is not needed to
provide for benefits and pay expenses under the Certificates.
Differences in the mortality and expense risk charge rates applicable
to different Group Plans will be determined by John Hancock based on
differences in the levels of mortality and expense risks under those Group
Plans. Differences in mortality and expense risks arise principally
because: (i) the factors (discussed above) upon which the insurance charge
and maintenance charge are based are more uncertain in some cases than in
others and (ii) John Hancock's ability to recover any unexpected mortality
and administrative expense costs from the insurance charge and maintenance
charge will vary from case to case depending on the maximum rates for such
charges agreed upon by John Hancock and the Policyholder. John Hancock will
determine the insurance charge, the maintenance charge, and the mortality
and expense risk rates pursuant to established actuarial procedures, and in
doing so John Hancock will not
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<PAGE>
discriminate unreasonably or unfairly among Participants under any Group
Policy.
Transaction Charge. A transaction charge of up to $25 may be assessed under
------------------
certain Group Plans for each surrender or withdrawal.
STATE PREMIUM TAX CHARGE AND FEDERAL DAC TAX CHARGE.
Two charges for taxes attributable to premiums are deducted from each
premium payment before it is invested in the Separate Account or the Fixed
Account. The first is for state premium taxes and will not exceed 5% of the
premiums received by John Hancock. The second charge is for a Federal deferred
acquisition cost ("DAC") tax and is currently equal to 0.35% of premiums.
Current charges will reflect the actual costs of John Hancock.
REDUCTION OF CHARGES
John Hancock may reduce or waive the charges under certain Group Plans, if it
is expected that the Group Plan will involve reduced administrative expenses.
John Hancock determines both the eligibility for such reduced or waived
charges, as well as the amount of such reductions, by considering the following
factors: (1) the size of the group; (2) the total amount of premium payments
expected to be received; (3) the expected persistency of the individual
Certificates; (4) the purpose for which the Group Plan is purchased and whether
that purpose makes it likely that expenses will be reduced; and (5) any other
circumstances which John Hancock believes to be relevant in determining whether
reduced administrative expenses may be expected. Some of the reductions in or
waivers of charges for cases may be contractually guaranteed; other reductions
or waivers may be discontinued or modified by John Hancock. John Hancock's
reductions in, or waivers of, charges for these cases will not be unfairly
discriminatory to the interests of any individual Participants.
DIVIDENDS
Because the Group Policy is issued by John Hancock, a mutual life insurance
company, it is a participating contract. This means it is eligible to be
credited with part of John Hancock's divisible surplus attributable to the Group
Plan ("Dividends"), as determined annually by John Hancock's Board of Directors.
Most of the Group Plans are expected to be priced such that there will be no
source of distributable surplus attributable to those Group Plans. However,
certain Group Plans may be priced such that Dividends may be declared.
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<PAGE>
CASH SURRENDER VALUE
The Cash Surrender Value of the Certificate is equal to the Participant's
Cash Value, reduced by any Certificate Debt, any outstanding charges and any
applicable transaction charge. The Cash Value on any day equals the sum of the
amounts in the Subaccounts, the amount invested in the Fixed Account, and the
Loan Account. See "LOANS." The Cash Surrender Value will change daily,
reflecting the Net Premiums paid, withdrawals made, increases or decreases in
the value of the Fund shares in which the assets of the Subaccounts have been
invested, interest credited on any amounts allocated to the Fixed Account and on
the Loan Account, interest charged on any loan, and the daily asset charge for
mortality and expense risks assessed against the variable investment options.
The Cash Surrender Value will also reflect Monthly Deductions. Upon request,
John Hancock will inform a Participant as to the Cash Surrender Value of his or
her Certificate. There is no guaranteed minimum Cash Surrender Value and it is
possible for the Cash Surrender Value of a Certificate to decline to zero.
The tables shown under "HYPOTHETICAL ILLUSTRATIONS OF DEATH BENEFITS AND
CASH SURRENDER VALUES" illustrate approximately what the Cash Surrender Values
would be for selected Certificates with the specified premium payments (assuming
uniform hypothetical investment results in the Subaccount portfolios).
FULL SURRENDER
A Participant may surrender his or her Certificate for its Cash Surrender
Value at any time. All insurance will end at that time. The Cash Surrender
Value will be calculated as of the end of the Valuation Period during which the
Participant's request is received in good order at the John Hancock Servicing
Office and the proceeds will be paid as described in "WHEN PROCEEDS ARE PAID."
Under certain Group Plans, there may be a transaction charge of up to $25 upon
surrender. A surrender may have tax consequences. See "TAX TREATMENT OF
CERTIFICATE BENEFITS."
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ELECTION OF PAID-UP INSURANCE
At any time, a Participant may elect to convert his/her existing group
variable universal life insurance coverage into fixed paid-up insurance on the
life of the Covered Person. If the Participant elects to do this, all other
insurance, benefits, and options, under the Policy will end. However, the paid-
up insurance will stay in force until the death of the Covered Person or until
the Certificate is surrendered. The minimum amount of Cash Surrender Value that
a Participant can apply to purchase the fixed paid-up insurance is $1,000.
The paid-up insurance amount cannot be more than the lesser of: (i) the
amount that can be purchased using the Certificate's Cash Surrender Value or
(ii) the Death Benefit under the Certificate at the time of the conversion. The
rates applied for the purchase of paid-up insurance will be set by John Hancock
based on its expectations as to future experience in mortality and total
expenses and may be adjusted periodically
A conversion is effective as of the end of the Valuation Period during
which the Participant's request is received in good order at the John Hancock
Servicing Office. Once a conversion occurs, all other coverages provided by the
Certificate will end, including additional insurance benefits, if any. A
conversion may result in the paid-up insurance becoming a Modified Endowment
Contract. See "TAX TREATMENT OF CERTIFICATE BENEFITS."
Any amounts not used in a conversion will be withdrawn from the Cash Value
as of the end of the Valuation Period during which the conversion was
effective, and the proceeds will be paid as described under "WHEN PROCEEDS ARE
PAID." Such withdrawal may have tax consequences. See "TAX TREATMENT OF
CERTIFICATE BENEFITS."
WITHDRAWALS
A Participant may withdraw all or a portion of the Cash Surrender Value of
his or her Certificate during the lifetime of the Covered Person provided that
the Certificate is not in default. When a withdrawal is made, an amount equal to
the withdrawal will be taken out of each of the Participant's selected
Subaccounts and the Fixed Account, if applicable, on a pro-rata basis, unless
otherwise specified by the Participant. Such withdrawals will be effected as of
the end of the Valuation Period during which the Participant's request is
received in good order at the John Hancock Servicing Office, and the proceeds
will be paid as described under "WHEN PROCEEDS ARE PAID." There is no limit on
the number of withdrawals a Participant can make each year, but under certain
Group Plans there may be a transaction charge of up to $25 for each withdrawal.
This transaction charge will be deducted from the amount withdrawn from the Cash
Value. The withdrawal of all or any portion of the Cash Surrender Value of a
34
<PAGE>
Certificate may have tax consequences. See "TAX TREATMENT OF CERTIFICATE
BENEFITS."
The minimum amount of any withdrawal is $200. The maximum amount of any
withdrawal is the Cash Surrender Value of the Certificate. If all of the Cash
Surrender Value is withdrawn, there is no automatic termination of insurance
coverage as is the case with a surrender of the Certificate. See "FULL
SURRENDER."
A withdrawal is not a loan and, as such, any amount withdrawn may not be
repaid.
LOANS
A Participant may borrow up to the Loan Value of the Certificate from John
Hancock. However, only one loan may be in effect at any given time. At any
time, the Loan Value is determined by subtracting from the Cash Value , any
outstanding charges and the amount of the next month's Monthly Deduction. The
minimum amount that may be borrowed at any one time is $200. Loan proceeds will
be paid as described under "WHEN PROCEEDS ARE PAID."
When a loan is made, an amount equal to the loan will be taken out of each
of the Participant's selected Subaccounts and the Fixed Account, if applicable,
on a pro-rata basis, unless otherwise specified by the Participant. At the same
time, a Loan Account will be started for the Participant and will be credited
with an amount equal to the loan.
Interest charged on a loan will either be fixed or variable, depending upon
the terms of the Group Plan. The rate will never be more than the maximum rate
permitted by applicable state law. If the rate is variable, it will not be
changed more than once a year. The Participant will be given notice of the rate
applicable when the loan is made and, if the rate is variable, notice of any
change in the rate.
Loan interest will be charged either in arrears or in advance, depending
upon the terms of the Group Plan. If interest is charged in arrears, then
interest will first be due and payable on the first Plan Anniversary that is
more than 31 days after the date of the loan and such interest will cover the
period from the date of the loan up to (but not including) such Plan
Anniversary. Interest will also be due and payable on each succeeding Plan
Anniverary for the twelve month period preceding such Plan Anniversary. If
interest is charged in advance, then interest will first be due payable on the
date of the loan for the period from the date of the loan up to (but not
including) the next Plan Anniversary that is more than 31 days after the date of
the loan. Thereafter, interest will be due and
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<PAGE>
payable on each Plan Anniversary for the twelve month period following such Plan
Anniversary.
Interest due and payable on the date of the loan will automatically be paid
through a reduction in the amount paid to the Participant. The amount of the
loan and the amount in the Loan Account will not be affected by any such
reduction in the payment to the Participant. Interest due and payable on any
Plan Anniversary will be payable at the option of the Participant. The
Participant will receive a notice at least 31 days before such interest is due.
If such interest is not paid within 31 days following the Plan Anniversary, (1)
the unpaid interest will be added to the principal amount of the loan and will
bear interest from and after the next Plan Anniversary at the same rate charged
on the rest of the loan, and (2) the amount of the unpaid interest will be added
to the Loan Account through transfers from the Participant's selected
Subaccounts and the Fixed Account in the same proportion as the Cash Value is
then allocated among them.
John Hancock will credit interest to the amount in the Loan Account at an
annual rate of up to 2% less than the interest rate charged on the loan. On the
Valuation Date immediately prior to each Plan Anniversary, the interest then
credited to the Loan Account will automatically be transferred to the
Subaccounts and the Fixed Account in accordance with the Investment Rule then in
effect. As a result, on each Plan Anniversary the Loan Account will always be
exactly equal to Certificate Debt.
A Participant may repay a part or all of the loan at any time. Loans may
be repaid by payment or by withdrawing amounts from the Cash Value. Participants
should designate whether a payment is intended as a premium payment or as a loan
repayment. If no such designation is made, any payment other than those made on
a routine basis (e.g., by salary deduction) will be treated as a loan repayment.
If a loan is repaid by using the Cash Value, John Hancock will treat such
repayment as a withdrawal from the Cash Value. A withdrawal from the Cash Value
may have tax consequences. See "TAX TREATMENT OF CERTIFICATE BENEFITS." The
balance in a Participant's Loan Account will be reduced by the amount of any
loan repayment. Upon each loan repayment, the same proportionate amount of the
entire loan as was borrowed from the Fixed Account will be repaid to the Fixed
Account. The remainder of the loan repayment will be allocated to the
appropriate Subaccounts as stipulated in the then current Investment Rule. For
example, if the entire loan outstanding is $3,000 of which $1,000 was borrowed
from the Fixed Account, then upon a repayment of $1,500, $500 would be allocated
to the Fixed Account and the remaining $1,000 would be allocated to the
appropriate Subaccounts as stipulated in the then current Investment Rule.
If a Participant's Loan Account is still outstanding when the Certificate
is surrendered or allowed to lapse, the borrowed amount may become taxable. In
addition, loans from Modified Endowment Contracts may be treated, for tax
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<PAGE>
purposes, as distributions of income. See "TAX TREATMENT OF CERTIFICATE
BENEFITS."
Should a Death Benefit become payable while a loan is outstanding, or
should the Certificate be surrendered while a loan is outstanding, any proceeds
otherwise payable will be reduced by the amount of the Certificate Debt.
A loan will have a permanent effect on a Certificate's Cash Surrender Value
and may have a permanent effect on the Death Benefit. This is because the
investment results of the selected Subaccounts will apply only to the amount
remaining in those Subaccounts after the loan amount is transferred to the Loan
Account. The longer the loan is outstanding, the greater the effect is likely
to be. The effect could be favorable or unfavorable. If investment results are
greater than the rate being credited to the Loan Account while the loan is
outstanding, Cash Surrender Values will not be as high as they would have been
if no loan had been made.
TELEPHONE TRANSACTIONS
Some Group Plans permit Participants to transfer amounts among their
available investment options, change their investment allocation of premiums,
make surrenders and withdrawals, and/or obtain loans by telephone or fax
provided they are authorized to use John Hancock's telephone transfer system.
Under such Group Plans, once a Participant has completed a telephone
authorization form, he or she may request one of these transactions, by
telephoning the John Hancock Servicing Office or sending a written request via
the John Hancock Servicing Office fax machine. The telephone and fax numbers
are shown in the Certificate. Any written request should include the
Participant's name, daytime telephone number, and Certificate number as well as
the details of the transaction being requested. John Hancock reserves the right
to modify, suspend, or terminate telephone transactions at any time without
notice to the Participants. If the fax request option becomes unavailable,
another means of telecommunication will be substituted.
A Participant who authorizes telephone transactions will be liable for any
loss, expense or cost arising out of any unauthorized or fraudulent telephone
transfer instructions which John Hancock reasonably believes to be genuine,
unless such loss, expense or cost is the result of John Hancock's mistake or
negligence. John Hancock employs procedures which provide safeguards against
the execution of unauthorized transfers, and which are reasonably designed to
confirm that the instructions received by telephone are genuine. These
procedures include requiring personal identification, tape recording calls, and
providing written confirmation to the Participant. If John Hancock does not
employ reasonable procedures to confirm that instructions communicated by
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telephone are genuine, it may be liable for any loss due to unauthorized or
fraudulent instructions.
LAPSE
In general, a Certificate will remain in force so long as the balance in
the Cash Value less any Certificate Debt and any outstanding charges is
sufficient to pay the monthly charges when due. If it is not, the Participant's
insurance is in default and will lapse if a grace period expires without a
sufficient payment being made. A Certificate that lapses with any Certificate
Debt or outstanding charges may result in tax consequences. See "TAX TREATMENT
OF CERTIFICATE BENEFITS."
John Hancock will send a notice to a Participant in default at the last
known address on file with John Hancock, specifying the amount of premium
required to keep the Certificate in force and the date the payment is due. The
grace period expires 61 days after the date of default. If the required premium
payment is not received at the John Hancock Servicing Office within the grace
period, the Participant's insurance will lapse and have no remaining value.
TERMINATION OF GROUP PLAN
The Group Policyholder may decide to terminate the Group Plan with John
Hancock. In addition, John Hancock may terminate its coverage under the Group
Plan if the aggregate Face Amount of all Certificates and/or the number of
Certificates issued under the Group Plan falls below the minimum permissible
levels established by John Hancock or if the Group Policyholder or its agent
fails to timely remit premiums to John Hancock.
The terminating party must provide ninety days written notice to the other
party, as well as to all Participants, before termination occurs. Termination
of the Group Plan or termination of coverage under the Group Plan means that the
Group Policyholder or its agent will no longer remit premiums to John Hancock
under the Group Plan and that no new Certificates will be issued under the Group
Plan. If the Group Plan or coverage under the Group Plan is terminated, the
effect on any Participant depends on (a) whether the Group Policyholder replaces
the Group Plan with another life insurance policy that provides for accumulation
of cash value and (b) whether the Group Plan allows such Participant to continue
coverage under the Group Policy. In general, if the Group Policyholder does
purchase such a replacement policy, Certificates will be terminated and the Cash
Surrender Value of each such Certificate will be directly transferred to the new
policy, unless the Participant elects to receive the Cash Surrender Value of the
Certificate. If the Group Plan provides for continuation rights, the
Certificate will describe such rights, including any conditions and limitations
that may apply.
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PARTICIPANTS WHO ARE NO LONGER ELIGIBLE GROUP MEMBERS
The terms of each Group Plan will determine the effect on a Participant's
insurance coverage if the Participant is no longer an Eligible Group Member (or,
where the Participant is an "eligible applicant owner," if the Covered Person is
no longer an Eligible Group Member). Some Group Plans may provide that
insurance coverage will continue even if the Participant is no longer an
Eligible Group Member. Under such Group Plans, within 61 days after the
Participant is no longer an Eligible Group Member, John Hancock will notify the
Participant that John Hancock will now mail periodic premium reminders directly
to the Participant, who will remit premium payments directly to the John Hancock
Servicing Office. Continuation of insurance may be subject to certain
conditions and limitations specified in the Group Plan. The notice will also
explain the charges and expenses applicable to such continued coverage. See
"CHARGES DEDUCTED FROM CASH VALUE OR SUBACCOUNTS." These charges and expenses
may be higher than those paid by the Participant while he or she was still an
Eligible Group Member, but will not exceed the maximum charges and expenses
described in the Certificate.
Under other Group Plans, the continuation option described above will not
be available. Participants under those Group Plans will have the options
described in "OPTIONS ON TERMINATION OF COVERAGE."
OPTIONS ON TERMINATION OF COVERAGE
In those circumstances in which a Participant's coverage under the Group
Policy terminates without any continuation right because (a) the Group Plan
terminates and the Group Policyholder does not enter into a new life insurance
policy that provides for accumulation of cash value and that covers such
Participant or (b) the Participant is no longer an Eligible Group Member (or,
where the Participant is an "eligible applicant owner", the Covered Person is no
longer an Eligible Group Member), the Participant will have the following
options:
CONVERSION. A Participant may elect to convert the Certificate to an
individual life insurance policy without showing Evidence of Insurability. If a
Participant elects this option, he or she must apply for the individual contract
and pay the first premium within 31 days after the coverage under the
Certificate ends. The Participant may select any form of individual life
insurance (other than term insurance) that John Hancock normally makes available
to insureds who are the same age and requesting the same amount of insurance.
Premiums will be based on the form and amount of insurance elected by the
Participant, as well as the Covered Person's risk class and age.
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If the insurance is ending because the Participant is no longer eligible to
participate in the Group Policy, the amount of insurance under the individual
policy cannot be more than the Face Amount of the Certificate under the Group
Plan.
If the insurance is ending because the Group Plan is terminating, the
Participant will be eligible for conversion provided that the Participant has
been insured for at least five years (or less under certain Certificates) under
the Group Policy and/or any other John Hancock rider or group policy replaced by
the Group Policy. The amount of individual insurance may, depending on
applicable state law, be limited to the lesser of (1) $10,000 or (2) the Face
Amount of the Certificate under the Group Plan less the amount of any group
insurance the Participant becomes eligible for in the next 45 days.
If a Covered Person dies within 31 days after the insurance ends under the
Group Plan and the Participant had the right to convert to an individual policy,
a Death Benefit equal to the maximum amount of individual insurance the
Participant could have purchased upon conversion on the life of the Covered
Person will be payable by John Hancock.
PAID-UP INSURANCE. The Participant may, at any time the Certificate is in
force, elect to purchase fixed paid-up insurance on the Covered Person with the
Cash Surrender Value of the Certificate. The Participant must have at least
$1,000 of Cash Surrender Value for this option to be available. The insurance
amount will depend on the Cash Surrender Value on the date of termination and
the age of the Covered Person but cannot exceed the Death Benefit immediately
before the paid-up purchase. The election is effective as of the end of the
Valuation Period during which the Participant's request is received in good
order at the John Hancock Servicing Office. Acquisition of reduced paid-up
insurance may result in that insurance becoming a Modified Endowment Contract.
See "TAX TREATMENT OF CERTIFICATE BENEFITS."
PAYMENT OF CASH SURRENDER VALUE. The Participant may receive the Cash
Surrender Value by surrendering the Certificate and making a proper request on a
form approved by John Hancock.
The above options apply whether the Participant or a spouse is the Covered
Person under the Certificate. A Participant who does not choose any of the
above options will be provided with Paid-Up Insurance if his or her Certificate
has at least $1,000 of Cash Surrender Value and, if not, will be paid the Cash
Surrender Value.
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REINSTATEMENT
Except as indicated in the next sentence, a lapsed Certificate may be
reinstated at any time within 3 years after the end of the grace period and
before the Covered Person reaches the maximum age at which a Certificate may be
held. A lapsed Certificate may not be reinstated if the Group Plan is
terminated and/or the Participant would not have been eligible for Continuation
Coverage on the date reinstatement is requested. The Face Amount of the
reinstated Certificate will be the same as the Face Amount the Participant would
have been eligible for on the date of reinstatement had the Certificate not
lapsed. To reinstate coverage, a Participant must submit the following items to
the John Hancock Servicing Office: (1) a written request for reinstatement; (2)
Evidence of Insurability satisfactory to John Hancock; and (3) a premium payment
(less any applicable charges) that is at least equal to all unpaid Monthly
Deductions through the end of the grace period, plus two additional Monthly
Deductions. See "CHARGES DEDUCTED FROM CASH VALUE OR SUBACCOUNTS."
The reinstatement is effective on the first day of the month following the
date John Hancock approves the request. The terms of the original Certificate
will apply to the reinstated Certificate. A reinstated Certificate is subject
to a new two-year incontestability period and a new suicide exclusion period.
All Certificate Debt is retired at the same time the Certificate lapses and will
not be reestablished.
No transaction charge is currently imposed in connection with a
reinstatement, although John Hancock reserves the right to impose such a
transaction charge in the future.
TAX TREATMENT OF CERTIFICATE BENEFITS
Each prospective Participant is urged to consult a qualified tax adviser.
The following discussion is not intended as tax advice, and it is not a complete
statement of what the effect of Federal income taxes will be under all
circumstances. Rather, it provides information about how John Hancock believes
the Federal income tax laws apply in the most commonly occurring circumstances.
There is no guarantee, however, that the current Federal income tax laws and
regulations or interpretations will not change.
TREATMENT AS LIFE INSURANCE AND INVESTOR CONTROL. The Certificate will be
treated as "life insurance," as long as it satisfies certain definitional tests
set forth in section 7702 of the Internal Revenue Code and as long as the
underlying investments for the Certificate satisfy diversification requirements
under section 817(h) of the Code. For further details on diversification
requirements, see the applicable Fund prospectuses and Statements of Additional
Information.
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John Hancock believes that it has taken adequate steps under the Code and
existing regulations under it to cause the Certificates to be treated as life
insurance for tax purposes. This means that: (1) except as noted below, the
Participant should not be taxed on any part of the Cash Value, including
additions attributable to interest, dividends, or appreciation; and (2) the
Death Benefit should be excludable from the gross income of the beneficiary
under section 101 (a) of the Code.
Although John Hancock believes the Certificate should qualify as "life
insurance" for Federal tax purposes, there are uncertainties. Section 7702 of
the Code which defines life insurance for tax purposes gives the Secretary of
the Treasury authority to prescribe regulations to carry out the purposes of the
Section. In this regard, proposed regulations governing mortality charges were
issued in 1991 and proposed regulations under Sections 101, 7702 and 7702A
governing the treatment of life insurance policies that provide accelerated
death benefits were issued in 1992. None of these proposed regulations have yet
been finalized. Additional regulations under Section 7702 may also be
promulgated in the future.
Moreover, Internal Revenue Service ("IRS") regulations issued to date do
not provide guidance concerning the extent to which Participants may direct
their investments to the particular available Subaccounts of a Separate Account
without causing the Participants, instead of John Hancock, to be considered the
owners of the underlying assets. Such guidance will be included in regulations
or revenue rulings under Section 817(d) relating to the definition of a variable
contract. The ownership rights under the Certificate are similar to, but
different in certain respects from, those addressed by the IRS in Rulings in
which it was determined that contract owners were not owners of separate account
assets. For example, such Rulings did not address the issue of a Group
Policyholder selecting the investment strategies. Also, Participants have the
choice of more Funds (including Funds with similar broad investment strategies
and different investment managers) and Participants may be able to reallocate
amounts between available Subaccounts more frequently than in such Rulings.
While John Hancock believes it will be considered the owner of the Separate
Account assets, these differences could result in the Participant being
considered the owner of the assets.
John Hancock intends to comply with final regulations issued under Sections
7702 and 817. Therefore, because of this uncertainty, it reserves the right to
make such changes as it deems necessary to assure that the Group Policy and
Certificates continue to qualify as variable life insurance for tax purposes.
Any such changes will apply uniformly to affected Participants and will be made
only after advance written notice to the Group Policyholder.
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PRE-DEATH DISTRIBUTIONS. The taxation of pre-death distributions depends
on whether the Certificate is classified as a Modified Endowment Contract. The
following discussion first deals with distributions under Certificates not so
classified, and then with Modified Endowment Contracts.
1. A surrender or lapse of the Certificate may have tax consequences. Under
surrender, the Participant will not be taxed on the Cash Surrender Value except
for the amount, if any, that exceeds the gross premiums paid less the untaxed
portion of any prior withdrawals. The amount of any unpaid Certificate Debt
will, upon surrender or lapse, be added to the Cash Surrender Value and treated,
for this purpose, as if it had been received. Any loss incurred upon surrender
is generally not deductible.
A withdrawal generally is not taxable unless it exceeds total premiums paid
to the date of withdrawal less the untaxed portion of any prior withdrawals.
However, under certain limited circumstances, in the first 15 Certificate Years
all or a portion of a withdrawal may be taxable if the Cash Value exceeds the
total premiums paid less the untaxed portions of any prior withdrawals, even if
total withdrawals do not exceed total premiums paid to date.
Extra premiums for additional insurance benefits generally do not count in
computing gross premiums paid, which in turn determines the extent to which a
withdrawal might be taxed.
Loans received under the Certificate will ordinarily be treated as
indebtedness of the Participant and will not be considered to be distributions
subject to tax. However, if a loan is still outstanding when the Certificate is
surrendered or allowed to lapse, the outstanding Certificate Debt will be
taxable at that time to the extent the Cash Surrender Value exceeds gross
premiums paid less the untaxed portion of any prior withdrawals.
2. Some of the above rules are changed if the Certificate is classified as a
Modified Endowment Contract under Section 7702A of the Code. It is possible for
the Certificate to be classified as a Modified Endowment Contract under at least
two circumstances: (i) premiums in excess of the 7-pay premiums allowed under
Section 7702A are paid or (ii) a decrease in the Death Benefit or a removal of
certain additional insurance benefits is made during the first seven Certificate
Years. Moreover, the addition of certain additional insurance benefits (or an
increase in the Death Benefit) after the Certificate Date may have an impact on
the Certificate's status as a Modified Endowment Contract. Participants
contemplating any of these steps should first consult a qualified tax advisor.
If the Certificate is classified as a Modified Endowment Contract, then
pre-death distributions, including loans, assignments and pledges are includible
in income to the extent that the Cash Value exceeds the gross premiums paid for
the Certificate increased by the amount of any loans previously includible in
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income and reduced by any untaxed amounts previously received other than the
amount of any loans excludable from income. These rules may also apply to pre-
death distributions, including loans, made during the two-year period prior to
the Certificate becoming a Modified Endowment Contract. In addition, pre-death
distributions from such Certificates (including full surrenders) will be subject
to a penalty tax of 10 percent of the amount includible in income unless the
amount is distributed on or after age 59 1/2, on account of the taxpayer's
disability or as a life annuity. It is presently unclear how the penalty tax
provisions apply to contracts owned by non-natural persons such as trusts.
Under certain circumstances, multiple Modified Endowment Contracts issued
to the same Participant during any calendar year will be treated as a single
contract for purposes of applying the above rules.
Any Dividends (to the extent not redeposited in the Certificate) will
effectively reduce the gross premiums paid for purposes of the above rules.
TREATMENT AS GROUP TERM LIFE INSURANCE. Section 79 of the Code and the
regulations thereunder provide for the treatment of certain life insurance as
group term life insurance ("GTLI"). In most cases, employee-pay-all coverage
under the Group Plan will not qualify as GTLI or be deemed to be part of an
employer GTLI plan, and the Certificate will be treated the same as any
individually-purchased life insurance policy for tax purposes. However,
depending on the structure of the arrangement under which the Group Plan is
held, including other insurance plans offered by or through the employer, a
portion of the coverage under the Group Plan may qualify as GTLI and, in
addition, covered employees may be taxable on certain increases in Cash Value
under an IRS-prescribed formula.
WITHHOLDING. The taxable portion of any amounts received under the
Certificate will be subject to withholding to meet Federal income tax
obligations, if the Participant fails to elect that no taxes be withheld. John
Hancock will provide the Participant with forms and instructions concerning the
right to elect that no taxes be withheld from the taxable portion of any
payment. All recipients may be subject to penalties under the estimated tax
payment rules if withholding and estimated tax payments are not sufficient.
Participants who do not provide a social security number or other taxpayer
identification number will not be permitted to elect out of withholding.
Special withholding rules apply to payments to non-resident aliens.
OTHER TAX CONSIDERATIONS. Transfer of the Certificate to a new owner or
assignment of the Certificate may have tax consequences depending on the
circumstances. In the case of a transfer of the Certificate for valuable
consideration, the Death Benefit may be subject to Federal income taxes under
Section 101(a)(2) of the Code. In addition, a transfer of the Certificate to or
the designation of a beneficiary who is either at least 37 1/2 years younger
than the
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Participant or a grandchild of the Participant may have Generation Skipping
Transfer tax consequences under Section 2601 of the Code.
In most circumstances, deductions for interest paid or accrued on
Certificate Debt or on other loans that are incurred or continued to purchase or
carry the Certificate will be denied under Sections 163 of the Code as personal
interest or under Section 264 of the Code. Participants should consult a
qualified tax advisor regarding the application of these provisions to their
circumstances.
The individual situation of each Participant or beneficiary will determine
the Federal estate taxes and the state and local estate, inheritance and other
taxes due if the Participant or Covered Person dies.
The earnings of the Separate Account are taxed as part of the operations of
John Hancock. Accordingly, the Separate Account does not intend to qualify as a
regulated investment company under the Code.
ERISA CONSIDERATIONS
DEFINITION OF AN EMPLOYEE BENEFIT PLAN. An "employee benefit plan" is
defined under the Employee Retirement Income Security Act of 1974, as amended
("ERISA") to include two broad categories of arrangements that are established
by certain entities (employers or unions) to cover employees -- "pension" plans
or "welfare" plans.
A "pension plan" under ERISA includes any program that provides retirement
income to employees, or results in a deferral of income by employees for periods
extending to the termination of covered employment or beyond. For these
purposes, the term "pension plan" includes, but is not limited to, retirement
plans qualified under Section 401 (a) of the Code (for example, a "Section 401
(k) plan"), as well as other arrangements which, by their operation, are
intended to provide retirement income or deferrals beyond termination of
employment. The decision to invest plan assets in a Group Policy would be
subject to these rules. Any plan fiduciary which proposes to cause a plan to
acquire a Group Policy should consult with its counsel with respect to the
potential consequences under ERISA and the Code of the plan's acquisition and
ownership of such Group Policy.
A "welfare plan" under ERISA includes a program established or maintained
for the purposes of providing to employees, among other things, medical,
accident, disability, death, vacation, and unemployment benefits.
Regulations issued by the United States Department of Labor clarify when
specific plans, programs or other arrangements will not be either pension or
welfare plans (and thus not considered "employee benefit plans" for purposes of
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ERISA). Among other exceptions, "group" or "group-type insurance programs"
offered by an insurer to employees of an employer will not be a "plan" where:
(i) no contributions are made by the employer for the coverage; (ii)
participation in the program is completely voluntary for employees; (iii) the
"sole" function of the employer with respect to the program is, without
endorsing the arrangement, to permit the insurer to publicize the program, to
collect premiums through payroll deductions and to remit them to the insurer;
and (iv) the employer does not receive any consideration in connection with the
program, other than reasonable compensation (excluding any profit) for
administrative services actually provided in connection with payroll deductions.
Whether or not a particular group insurance arrangement satisfies these
conditions is a question of fact depending on the particular circumstances.
Counsel and other competent advisers should be consulted to determine whether,
under the facts of the particular case, a particular Group Plan might be treated
as an "employee benefit plan" (either a pension or a welfare plan) subject to
the requirements of ERISA, particularly in view of an employer's right to select
which Funds are made available to Participants..
FIDUCIARY/PROHIBITED TRANSACTION REQUIREMENTS UNDER ERISA. If applicable,
ERISA and Section 4975 of the Code impose certain restrictions on employee
benefit plans subject to ERISA and/or subject to the requirements of Section
4975 of the Code, and on persons who are (1) "parties in interest" (as defined
under ERISA) or "disqualified persons" (as defined under the Code)
(collectively, "parties in interest") and (2) "fiduciaries" with respect to such
plans. These restrictions may, in particular, prohibit certain transactions in
connection with a Group Plan, absent a statutory or administrative exemption.
Counsel and other competent advisers should be consulted to determine the
application of ERISA under these circumstances.
For example, administrative exemptions issued by the Department of Labor
under ERISA permit transactions (including the sale of insurance contracts like
the Group Policy) between insurance agents and employee benefit plans. To be
able to rely upon such exemptions, certain information must be disclosed to the
plan fiduciary approving such purchase on behalf of the plan. The information
that must be disclosed includes: (1) the relationship between the agent and the
insurer; (2) a description of any charges, fees, discounts, penalties or
adjustments that may be imposed in connection with the purchase, holding,
exchange or termination of the Group Plan; and (3) the commissions received by
the agent. Information about any applicable charges, fees, discounts, penalties
or adjustments may be found under "CHARGES DEDUCTED FROM CASH VALUE OR
SUBACCOUNTS." Information about sales representatives and commissions may be
found under "SALE OF GROUP PLANS AND SALES COMMISSIONS."
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Execution of a Group Policy or a joinder agreement by a Group Policyholder
and an enrollment form by a Participant will be deemed to be an acknowledgment
of receipt of this information and approval of transactions under the Group
Policy or Group Plan.
WHEN PROCEEDS ARE PAID
John Hancock will generally pay any Death Benefit, Cash Surrender Value,
withdrawal or loan proceeds supported by the Separate Account within seven days
after all the documents required for such a payment are received in good order
at the John Hancock Servicing Office. Other than the Death Benefit, which is
determined as of the date of death, the amount will be determined as of the end
of the Valuation Period in which the necessary documents are received in good
order. John Hancock may, however, delay payment of proceeds from the Separate
Account and the variable portion of the Death Benefit due under a Participant's
insurance, if the disposal or valuation of the Separate Account's assets is not
reasonably practicable because the New York Stock Exchange is closed for other
than a regular holiday or weekend, trading is restricted by the SEC, or the SEC
declares that an emergency exists. Also, that portion of any Death Benefit,
Cash Surrender Value, withdrawal or loan proceeds attributable to any premium
paid by check may be delayed until such check clears the bank upon which it is
drawn.
With respect to the amount of any Cash Surrender Value allocated to the
Fixed Account, and with respect to a Certificate in force as paid-up insurance,
John Hancock expects to pay the Cash Surrender Value promptly upon request.
However, John Hancock has the right to delay payment of such Cash Surrender
Value for up to six months (or a shorter period, if required by applicable law).
John Hancock will pay interest at a rate no less than 4% per annum if it delays
such a payment for more than 30 days (or a shorter period if required by
applicable law).
BENEFICIARY
The Participant has the right to designate and name a beneficiary to
receive Death Benefits under the Certificate. The Participant must designate a
beneficiary on a form approved by John Hancock. A Participant may change the
beneficiary at any time without the consent of the present beneficiary in
accordance with the terms of the Group Plan, unless the present beneficary has
been designated as an irrevocable beneficiary. If there is more than one
beneficiary at the death of the Covered Person, each will receive equal payments
unless otherwise specified by the Participant.
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INCONTESTABILITY
Any statement made concerning the health of a Covered Person or a qualified
dependent will not be used to contest insurance under this Certificate after
such insurance has been in force for 2 years during the lifetime of the Covered
Person or qualified dependent, as the case may be. If there is an increase in
the Face Amount for a Covered Peron or qualified dependent, John Hancock will
not contest the increase after it has been in force for 2 years during the
lifetime of the Covered Person or qualified dependent, as the case may be. John
Hancock will not contest any statement made unless it is in a signed, written
instrument and a copy of that instrument has been given to the Participant.
MISSTATEMENTS
If a Covered Person's or qualified dependent's stated age is incorrect in
the Certificate and John Hancock discovers that fact after such person's death,
John Hancock will adjust the Death Benefit payable, as required by law, to
reflect the correct age.
If any important facts about a Covered Person or qualified dependent in
relation to his or her insurance (including, but not limited to, age) are
discovered during the lifetime of such Covered Person or qualified dependent to
be misstated, John Hancock will adjust the insurance charge to reflect the
correct information. Also, if such misstatement resulted in the issuance of an
amount of insurance that would not have been permissible in the absence of the
misstatement, John Hancock will make the required adjustment in the Face Amount.
SUICIDE EXCLUSION
Generally, if a Covered Person, whether sane or insane, dies by suicide
within two years from the effective date of the Certificate, John Hancock will
pay no more under the Certificate than the sum of the premiums paid less any
Certificate Debt, outstanding charges, and less any withdrawals.
If a Covered Person, whether sane or insane, dies by suicide within two
years from the effective date of an increase in the Face Amount of insurance
that was requested after issue and required approval, such increase will not be
reflected in the Death Benefit. However, the Death Benefit otherwise payable
will be increased by that portion of the Monthly Deductions attributable to the
increase.
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ASSIGNMENT
A Participant may assign the insurance coverage and all rights, benefits or
privileges that he or she has under a Certificate. John Hancock will be bound
by an assignment of insurance or the rights, benefits or privileges under the
insurance only if: (1) it is in writing on a form approved by John Hancock;
(2) it is signed by the Participant and is consented to in writing by any
beneficiary who has been designated as irrevocable; and (3) John Hancock
receives a duplicate of the original assignment at the John Hancock Servicing
Office. John Hancock is not responsible for determining the validity or
sufficiency of any assignment. References in this prospectus to rights that a
Participant may exercise shall include exercise of such rights by any person to
whom the Participant has validly assigned such rights. Assignment of a
Certificate, particularly one that is a Modified Endowment Contract, could have
adverse Federal income tax consequences. See "TAX TREATMENT OF CERTIFICATE
BENEFITS."
VOTING RIGHTS
As stated above, all of the assets held in the Subaccounts of the Separate
Account will be invested in shares of the corresponding Funds. John Hancock is
the legal owner of those shares and as such has the right to vote on any matter
voted on at any shareholders meetings of the Funds. However, John Hancock will,
as required by law, vote the shares of the Funds at any regular and special
shareholders meetings the Funds hold in accordance with voting instructions
received from Participants. A Fund may not hold annual shareholders meetings
when not required to do so under the laws of the state of its incorporation or
the 1940 Act. Fund shares for which no timely instructions from Participants
are received, and any shares attributable to general account investments of John
Hancock, will be voted in the same proportion as shares in the respective Funds
for which instructions are received. Should the applicable Federal securities
laws or regulations, or their current interpretation, change so as to permit
John Hancock to vote shares of the Funds in its own right, it may elect to do
so.
Generally, a Participant may give voting instructions on matters that would
be changes in fundamental policies and any matter requiring a vote of the
shareholders of the Funds. With respect to approval of the investment advisory
agreement or any change in a Fund's fundamental investment policy, Participants
participating in such Funds will vote separately by Fund on the matter, pursuant
to the requirements of Rule 18f-2 under the 1940 Act.
The number of Fund shares for which instructions may be given by a
Participant is determined by dividing the portion of the Cash Value derived from
participation in a Subaccount by the value of one share in the corresponding
Fund. The number of votes for which each Participant may give John Hancock
instructions will be determined as of the record date chosen by the Board of the
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applicable Fund. John Hancock will furnish Participants with proper forms and
proxies to enable them to give these instructions. John Hancock reserves the
right to modify the manner in which the weight to be given voting instructions
is calculated where such a change is necessary to comply with current Federal
regulations or interpretations of those regulations.
John Hancock may, if required by state insurance regulations, disregard
voting instructions if such instructions would require shares to be voted so as
to cause a change in the sub-classification or investment objectives of one or
more of the Funds, or to approve or disapprove an investment advisory contract
for a Fund. In addition, John Hancock itself may disregard voting instructions
that would require changes in the investment policy or investment manager of one
or more of the Funds, provided that John Hancock reasonably disapproves such
changes in accordance with applicable Federal regulations. If John Hancock does
disregard voting instructions, it will advise Participants of that action and
its reasons for such action in the next annual or semi-annual report to
Participants.
Participants also share with the owners of all John Hancock contracts and
policies the right to vote in elections for members of the Board of Directors of
John Hancock.
CHANGES THAT JOHN HANCOCK CAN MAKE
The voting privileges described in this Prospectus are afforded based on
John Hancock's understanding of applicable Federal securities law requirements.
To the extent that applicable law, regulations or interpretations change to
eliminate or restrict the need for such voting privileges, John Hancock reserves
the right to proceed in accordance with any such revised requirements. John
Hancock also reserves the right, subject to compliance with applicable law,
including approval of shareholders if so required, (1) to transfer assets
determined by John Hancock to be associated with the class of policies to which
the Group Policy belongs from the Separate Account to another separate account
or Subaccount by withdrawing the same percentage of each investment in the
Separate Account with appropriate adjustments to avoid odd lots and fractions,
(2) to operate the Separate Account as a "management-type investment company"
under the 1940 Act, or in any other form permitted by law, the investment
adviser of which would be John Hancock or an affiliate, (3) to deregister the
Separate Account under the 1940 Act, (4) to substitute for the Fund shares held
by a Subaccount any other investment permitted by law, and (5) to take any
action necessary to comply with or obtain any exemptions from the 1940 Act.
John Hancock would notify shareholders of any of the foregoing changes and, to
the extent legally required, obtain approval of shareholders and any regulatory
body prior thereto. Such notice and approval, however, may not be legally
required in all cases.
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ADDITIONAL INSURANCE BENEFITS
Depending on the terms of the Group Plan, one or more of the following
additional insurance benefits may be available to Participants through their
Group Plan. Under some Group Plans, some or all of these benefits may be
provided to all Participants while under other Group Plans, individual
Participants may elect whether to receive some or all of these benefits for an
additional charge. The Participant should refer to his or her Certificate for
further details on additional insurance benefits.
ACCELERATED DEATH BENEFIT. Under some Group Plans, Participants may be
provided an accelerated death benefit that allows the Participant to elect to
receive an accelerated payment of part of the Certificate's Face Amount if the
Covered Person is diagnosed as terminally ill with a life expectancy of 12
months or less. When satisfactory evidence is provided, John Hancock will
provide to the Participant an accelerated payment, which may be received in a
lump sum, of the portion of the Face Amount selected by the Participant as an
accelerated death benefit. The accelerated death benefit may be discounted for
interest under certain Group Plans and where permitted by law. The Face Amount
will be lowered by the undiscounted accelerated death benefit claimed. In some
cases, part of the Cash Value may have to be paid in addition to the accelerated
payment of Face Amount in order to preserve qualification of the Certificate as
life insurance.
No accelerated death benefit will be payable if the Participant is required
to elect it in order to meet the claims of creditors or to obtain a government
benefit. John Hancock can furnish details about the amount of accelerated death
benefit that is available to an eligible Participant. Unless required by law, a
Participant who has elected to receive an accelerated death benefit can no
longer request an increase in the Face Amount of his or her Certificate, and the
amount of future premium payments he or she can make will be limited.
Adding the accelerated death benefit to the Group Plan has no adverse
consequences. Electing to use the accelerated death benefit could, however.
The Federal Health Insurance Portability and Accountability Act of 1996 excludes
from income the accelerated death benefit if the insured is terminally ill.
Receipt of an accelerated death benefit payment may also affect a Participant's
eligibility for certain government benefits or entitlements.
ACCIDENTAL DEATH AND DISMEMBERMENT BENEFIT. Under some Group Plans,
Participants may be provided an accidental death and dismemberment benefit that
provides insurance for accidental loss of life, sight, hand, or foot. This
benefit will exclude losses due to suicide, attempted suicide, diseases,
infirmities, medical or surgical treatments, and acts of war. It may be subject
to
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other exclusions from coverage, age limitations, and benefit limitations set
forth in the Group Policy.
EXTENDED DEATH PROTECTION DURING TOTAL DISABILITY. Under some Group Plans,
Participants will be provided with extended death protection during their total
disability. Under this provision, even if a Participant's insurance (or that of
a spouse) has otherwise ended, insurance equal to the Face Amount of the
Certificate will continue if the Participant became totally disabled prior to
age 60. The extended death protection will continue for up to one year, as long
as the Participant provides satisfactory proof of continued total disability.
DEPENDENT LIFE BENEFITS. Under some Group Plans, Participants may be
provided dependent life benefits, which provide insurance on the life of a
qualified dependent. A qualified dependent may be the Participant's spouse
and/or unmarried child.
WAIVER OF PREMIUM BENEFIT. Under some Group Plans, Participants may be
provided a waiver of premium benefit that waives the Monthly Deductions while
the Participant is totally disabled. The total disability must start prior to
age 60 and must continue for at least 9 consecutive months. Monthly Deductions
will not be waived after age 65. Proof of total disability must be provided to
John Hancock not more than one year from the date the Participant ceased to
work. John Hancock also has the right to require proof of continuing total
disability from time to time. The benefit is subject to certain eligibility
requirements and benefit limitations set forth in the Group Policy.
REPORTS
At least once each Certificate Year, Participants will be sent statements
that provide certain information pertinent to their own insurance. These
statements detail values and transactions made and specific insurance data that
apply only to the Participant. On request, a Participant will be sent a current
statement in a form similar to that of the annual statement described above, but
John Hancock may limit the number of such requests.
The Group Policyholder and each Participant will also be sent an annual and
semi-annual report listing the securities held in each available Fund, as
required by the 1940 Act. Records with respect to the Separate Account are kept
in accordance with the 1940 Act.
If a Participant invests in a Fund through more than one variable insurance
contract, then the Participant will receive only one copy of each annual and
semi-annual report issued by the Fund. However, if such Participant wishes to
receive multiple copies of any such report, a request may be made by calling the
telephone number listed on the cover page of this Prospectus.
52
<PAGE>
SALE OF GROUP PLANS AND SALES COMMISSIONS
John Hancock Distributors, Inc. ("Distributors"), a direct wholly-owned
subsidiary of John Hancock, acts as the principal underwriter of the Group
Policies and Certificates. Distributors, organized in 1974, is registered as a
broker-dealer under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. Distributors principal
business address is 197 Clarendon Street, Boston, MA 02117. Distributors also
acts as principal underwriter with respect to the securities of other John
Hancock investment companies.
The Group Policies and Certificates are sold by registered representatives
of Distributors who are also authorized by state insurance departments to sell
variable life insurance policies. The maximum commission payable to a
representative of Distributors upon the purchase of a Group Plan is 15% of the
premium payment received. The representative may be required to return all of
the first year commission if the Group Plan is not continued through the first
year. Distributors will generally receive a commission of no more than 15% of
the premium payment. The commission percentages will depend on factors such as
the size of the group involved and the amount of sales and administrative effort
required in connection with the particular Group Plan and will not exceed, in
the aggregate, 15% of the premium payment
The Group Plans and Certificates may also be sold through other broker-
dealers who have entered into selling agreements with Distributors and whose
representatives are authorized by applicable state law to sell variable life
insurance policies. Registered representatives of such other broker-dealers may
be paid on a different basis than that described below. The amount paid to the
broker-dealer other than Distributors to cover both the individual
representative's commission and other distribution expenses will not exceed 15%
of the premium payment.
In addition, registered representatives of Distributors and other broker-
dealers may earn "credits" toward qualification for attendance at certain
business meetings sponsored by John Hancock.
LEGAL MATTERS
The legal validity of the Group Policies described in this Prospectus has
been passed on by Ronald J. Bocage, Vice President and Counsel for John Hancock.
In addition, the law firm of Freedman, Levy, Kroll & Simonds, Washington, D.C.,
has advised John Hancock on certain Federal securities laws in connection with
the Group Policies.
53
<PAGE>
STATE REGULATION
John Hancock is subject to regulation and supervision by the Massachusetts
Commissioner of Insurance, who periodically examines its operations and
financial condition. It is also subject to the insurance laws and regulations
of all jurisdictions in which it is authorized to do business. John Hancock
reserves the right to change the Group Policy and Certificate to comply with
applicable state insurance laws and interpretations thereof.
John Hancock is required to submit annual statements of its operations,
including financial statements, to the insurance departments of the various
jurisdictions in which it does business to determine solvency and compliance
with local insurance laws and regulations.
EXPERTS
The financial statements of John Hancock and the Separate Account included
in this prospectus have been audited by Ernst & Young LLP, independent auditors,
for the periods indicated in their reports thereon which appear elsewhere herein
and have been included in reliance on their reports given on their authority as
experts in accounting and auditing.
Actuarial matters included in this prospectus have been examined by Sue
Sames, F.S.A., an actuary of John Hancock.
54
<PAGE>
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF JOHN HANCOCK
The Directors and Executive Officers of John Hancock and their principal
occupations are as follows:
Directors Principal Occupations
- --------- ---------------------
John F. Magee..................Chairman, Arthur D. Little, Inc. (industrial
research and consulting)
Nelson S. Gifford..............Principal, Fleetwing Capital Management
(financial services)
Stephen L. Brown...............Chairman of the Board and Chief Executive
Officer, John Hancock
William L. Boyan, Jr...........Vice Chairman of the Board, John Hancock
E. James Morton................Director, formerly Chairman, John Hancock
C. Vincent Vappi...............Former President and Chief Executive Officer,
Vappi & Company, Inc. (construction)
David F. D'Alessandro..........President and Chief Operating Officer, John
Hancock
Foster L. Aborn................Vice Chairman of the Board, John Hancock
Joan T. Bok....................Chairman of the Board, New England Electric
System (electric utility)
Robert E. Fast.................Senior Partner, Hale and Dorr (law firm)
John M. Connors, Jr............Chief Executive Officer and Director, Hill,
Holiday, Connors Cosmopulos (advertising
agent)
I. Macallister Booth...........Retired Chairman of the Board and Chief
Executive Officer, Polaroid Corporation
(photographic products)
Samuel W. Bodman...............Chairman of the Board and Chief Executive
Officer, Cabot Corporation (chemicals)
Lawrence Fish..................Chairman, President and Chief Executive
Officer,Citizens Financial Group, Inc.
(banking)
Kathleen L. Feldstein..........President, Economic Studies, Inc. (economic
consulting)
Richard F. Syron...............Chairman and Chief Executive Officer,
American Stock Exchange
Michael C. Hawley..............President & Chief Operating Officer, The
Gillette Company (razors, etc.)
Robert J. Tarr, Jr.............Former President, Chief Executive Officer,
Chief Operations Officer, Harcourt General,
Inc. (publishers)
Wayne A. Budd..................Group President, Bell Atlantic---New England
(telecommunications)
55
<PAGE>
Executive Officers Titles
- ------------------ ------
Diane M. Capstaff........Executive Vice President
Thomas E. Moloney........Executive Vice President
Richard S. Scipione......General Counsel
Barry J. Rubenstein......Vice President and Secretary
56
<PAGE>
FINANCIAL STATEMENTS OF JOHN HANCOCK
The financial statements of John Hancock included herein should be
distinguished from the financial statements of the Separate Account and should
be considered only as bearing upon the ability of John Hancock to meet its
obligations under the Group Policies.
57
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Directors and Policyholders
John Hancock Mutual Life Insurance Company
We have audited the accompanying statutory-basis statements of financial
position of John Hancock Mutual Life Insurance Company as of December 31, 1997
and 1996, and the related statutory-basis statements of operations and changes
in policyholders' contingency reserves and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Commonwealth of Massachusetts Division of Insurance, which
practices differ from generally accepted accounting principles. The variances
between such practices and generally accepted accounting principles also are
described in Note 1. The effects on the financial statements of these variances
are not reasonably determinable but are presumed to be material.
In our opinion, because of the effects of the matter described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of John Hancock Mutual Life Insurance Company at December 31, 1997 and 1996, or
the results of its operations or its cash flows for the years then ended.
Also, in our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of John Hancock Mutual Life
Insurance Company at December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance.
______________, 1998
58
<PAGE>
STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
December 31
1997 1996
------------------------------------------
<S> <C> <C>
(In millions)
ASSETS
BONDS--NOTE 6 $22,986.0 $22,467.0
STOCKS:
Preferred 640.6 416.2
Common 256.9 249.8
Investments in affiliates 1,442.0 1,268.9
------------------------------------------
2,339.5 1,934.9
Mortgage loans on real estate--Note 6 7,851.2 7,964.0
Real estate:
Company occupied 375.1 372.1
Investment properties 1,893.4 2,042.3
------------------------------------------
2,268.5 2,414.4
Policy loans 1,577.3 1,589.3
Cash items:
Cash in banks and offices 176.0 348.4
Temporary cash investments 548.8 1,068.3
------------------------------------------
724.8 1,416.7
Premiums due and deferred 222.3 278.4
Investment income due and accrued 505.8 547.8
Other general account assets 948.6 1,009.9
Assets held in separate accounts 16,021.7 13,969.1
------------------------------------------
TOTAL ASSETS $55,445.7 $53,591.5
==========================================
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
December 31
1997 1996
------------------------------------------
<S> <C> <C>
(In millions)
OBLIGATIONS AND POLICYHOLDERS' CONTINGENCY
RESERVES
OBLIGATIONS
POLICY RESERVES $19,206.6 $18,544.0
Policyholders' and beneficiaries' funds 13,985.1 14,679.3
Dividends payable to policyholders 399.7 395.5
Policy benefits in process of payment 115.5 236.3
Other policy obligations 214.8 210.5
Asset valuation reserve--Note 1 1,165.7 1,064.8
Federal income and other accrued
taxes--Note 1 96.9 125.1
Other general account obligations 1,084.5 1,521.7
Obligations related to separate accounts 16,019.1 13,958.2
------------------------------------------
TOTAL OBLIGATIONS 52,287.9 50,735.4
POLICYHOLDERS' CONTINGENCY RESERVES
Surplus notes--Note 2 450.0 450.0
Special contingency reserve for group insurance 151.8 194.8
General contingency reserve 2,556.0 2,211.3
------------------------------------------
TOTAL POLICYHOLDERS' CONTINGENCY RESERVES 3,157.8 2,856.1
------------------------------------------
TOTAL OBLIGATIONS AND POLICYHOLDERS'
CONTINGENCY RESERVES $55,445.7 $53,591.5
==========================================
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
60
<PAGE>
STATUTORY-BASIS STATEMENTS OF OPERATIONS AND CHANGES IN
POLICYHOLDERS' CONTINGENCY RESERVES
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
Year ended December 31
1997 1996
-------------------------------------------
<S> <C> <C>
(In millions)
INCOME
Premiums, annuity considerations and pension
fund contributions $ 7,371.6 $ 8,003.1
Net investment income--note 4 2,856.1 2,803.1
Other, net 119.0 68.6
-------------------------------------------
10,346.7 10,874.8
BENEFITS AND EXPENSES
Payments to policyholders and beneficiaries:
Death benefits 737.4 886.8
Accident and health benefits 121.4 300.9
Annuity benefits 1,668.2 1,539.4
Surrender benefits and annuity fund withdrawals 6,293.1 5,565.4
Matured endowments 21.0 20.6
-------------------------------------------
8,841.1 8,313.1
Additions to reserves to provide for future payments to
policyholders and beneficiaries (186.7) 880.5
Expenses of providing service to policyholders and
obtaining new insurance:
Field sales compensation and expenses 278.3 275.0
Home office and general expenses 479.7 514.8
Payroll, state premium and miscellaneous taxes 49.9 70.9
9,462.3 10,054.3
GAIN FROM OPERATIONS BEFORE DIVIDENDS
TO POLICYHOLDERS, FEDERAL INCOME TAXES
AND NET REALIZED CAPITAL LOSSES 884.4 820.5
DIVIDENDS TO POLICYHOLDERS 398.2 399.4
FEDERAL INCOME TAXES--NOTE 1 18.9 107.1
-------------------------------------------
417.1 506.5
-------------------------------------------
GAIN FROM OPERATIONS BEFORE NET
REALIZED CAPITAL LOSSES 467.3 314.0
NET REALIZED CAPITAL LOSSES--NOTE 5 ( 89.8) (43.6)
-------------------------------------------
NET INCOME 377.5 270.4
</TABLE>
61
<PAGE>
STATUTORY-BASIS STATEMENTS OF OPERATIONS AND CHANGES IN
POLICYHOLDERS' CONTINGENCY RESERVES--(CONTINUED)
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
Year ended December 31
1997 1996
-------------------------------------------
<S> <C> <C>
(In millions)
Other increases (decreases) in policyholders' contingency
Reserves:
Net unrealized capital gains and other
adjustments--Note 5 $ 58.6 $ 191.7
Valuation reserve changes--Note 1 1.4 (27.5)
Prior years' federal income taxes ( 35.6) (28.9)
Other reserves and adjustments, net (100.2) (83.1)
-------------------------------------------
NET INCREASE IN POLICYHOLDERS'
CONTINGENCY RESERVES 301.7 322.6
POLICYHOLDERS' CONTINGENCY RESERVES AT BEGINNING OF YEAR 2,856.1 2,533.5
-------------------------------------------
POLICYHOLDERS' CONTINGENCY
RESERVES AT END OF YEAR $3,157.8 $2,856.1
===========================================
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
62
<PAGE>
STATUTORY-BASIS STATEMENTS OF CASH FLOWS
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
Year ended December 31
1997 1996
---------------------------------------
<S> <C> <C>
(In millions)
Cash flows from operating activities:
Insurance premiums, annuity considerations and
deposits $ 7,518.8 $ 8,120.4
Net investment income 2,988.7 2,965.5
Benefits to policyholders and beneficiaries ( 9,030.3) (8,476.6)
Dividends paid to policyholders ( 394.0) ( 382.6)
Insurance expenses and taxes ( 815.3) ( 884.1)
Net transfers from separate accounts 896.8 198.2
Other, net ( 798.3) ( 602.7)
---------------------------------------
NET CASH PROVIDED FROM OPERATIONS 366.4 938.1
---------------------------------------
Cash flows used in investing activities:
Bond purchases ( 18,003.6) ( 7,590.7)
Bond sales 13,541.1 2,812.4
Bond maturities and scheduled redemptions 2,927.6 2,241.0
Bond prepayments 1,096.3 1,223.2
Stock purchases ( 1,125.7) ( 391.2)
Proceeds from stock sales 921.7 573.2
REAL ESTATE PURCHASES ( 243.0) ( 447.7)
REAL ESTATE SALES 444.5 382.1
Other invested assets purchases ( 171.1) ( 214.7)
Proceeds from the sale of other invested assets 109.3 183.6
Mortgage loans issued ( 1,165.8) ( 1,582.7)
Mortgage loan repayments 1,176.9 2,247.3
Other, net ( 333.8) 205.3
---------------------------------------
NET CASH USED IN INVESTING ACTIVITIES ( 825.6) ( 358.9)
---------------------------------------
Cash flows from financing activities:
Net (decrease) increase in short-term note payable ( 16.4) 90.0
Issuance of REMIC notes payable 0.0 292.0
Repayment of REMIC notes payable ( 216.3) ( 85.2)
---------------------------------------
NET CASH (USED IN) PROVIDED FROM FINANCING
ACTIVITIES ( 232.7) 296.8
---------------------------------------
(DECREASE) INCREASE IN CASH AND
TEMPORARY CASH INVESTMENTS ( 691.9) 876.0
Cash and temporary cash investments at beginning of year 1,416.7 540.7
---------------------------------------
CASH AND TEMPORARY CASH INVESTMENTS
AT END OF YEAR $ 724.8 $ 1,416.7
=======================================
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
63
<PAGE>
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES
John Hancock Mutual Life Insurance Company (the Company) provides a broad range
of financial services and insurance products. The Company's insurance
operations focus principally in three segments: the Retail Sector, which
encompasses the Company's individual life, annuity, and long-term care
operations; Group Pension, which offers single premium annuity and guaranteed
investment contracts through both the general and separate accounts; and
Business Insurance, its group life, health, and long-term care operations
including administrative services provided to group customers. In addition,
through its subsidiaries and affiliates, the Company also offers a wide range of
investment management and advisory services and other related products including
life insurance products for the Canadian market, sponsorship and distribution of
mutual funds, real estate financing and management, and various other financial
services. Investments in these subsidiaries and other affiliates are recorded
on the statutory equity method.
On February 28, 1997, the Company sold its group accident and health business
and related group life business to UNICARE Life & Health Insurance Company
(UNICARE), a wholly-owned subsidiary of WellPoint Health Networks Inc. The
Company retained its group long-term care operations. Assets equal to
liabilities of approximately $562.4 million at February 28, 1997, subject to the
completion of a closing audit, were transferred to UNICARE in connection with
the sale. The corresponding amount of assets and liabilities at December 31,
1996 was $559.4 million. The gain from operations in both periods was not
significant. The insurance business sold was transferred to UNICARE through a
100% coinsurance agreement. The Company remains liable to its policyholders to
the extent that UNICARE does not meet its contractual obligations under the
coinsurance agreement. As a result, the Company has secured a $397 million
letter of credit facility with a group of banks led by Morgan Guaranty Trust
Company of New York. The banks have agreed to issue a letter of credit to the
Company pursuant to which the Company may draw up to $397 million for any claims
not satisfied by UNICARE under the coinsurance agreement after the Company has
incurred the first $113 million of losses from such claims. The amount
available pursuant to the letter of credit agreement and any letter of credit
issued thereunder will be automatically reduced on a scheduled basis consistent
with the anticipated runoff of liabilities related to the business reinsured
under the coinsurance agreement. The letter of credit agreement and any letter
of credit issued thereunder are scheduled to expire on March 1, 2002.
The Company is domiciled in the Commonwealth of Massachusetts and licensed in
all fifty of the United States, the District of Columbia, Puerto Rico, Guam, the
US Virgin Islands, and Canada. The Company distributes its individual products
in North America primarily through a career agency system. The career agency
system is composed of company-owned, unionized branch offices and independent
general agencies. The Company also distributes its individual products through
several alternative distribution channels, including banks, brokers/dealers and
direct marketing efforts.
The Company markets pension and other investment-related products primarily to
sponsors of retirement and savings plans covering employees of private sector
companies, and plans covering public employees and collective bargaining unions
and non-profit organizations. Products are marketed and sold through a
combination of group pension field employee representatives, as well as
marketing personnel and investment professionals employed by the Company.
The Company distributes its group benefit products through group
representatives, who are John Hancock employees or through intermediaries, in
key markets nationwide.
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
accompanying notes. Such estimates
64
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
and assumptions could change in the future as more information becomes known,
which could impact the amounts reported and disclosed herein.
Basis of Presentation: The financial statements have been prepared using
- ----------------------
accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance and in conformity with the practices of the
National Association of Insurance Commissioners (NAIC), which practices differ
from generally accepted accounting principles (GAAP).
The significant differences from GAAP include: (1) policy acquisition costs are
charged to expense as incurred rather than deferred and amortized over the
related premium-paying period; (2) policy reserves are based on statutory
mortality, morbidity, and interest requirements without consideration of
withdrawals and Company experience; (3) certain assets designated as
"nonadmitted assets" are excluded from the balance sheet by direct charges to
surplus; (4) reinsurance recoverables are netted against reserves and claim
liabilities rather than reflected as an asset; (5) bonds held as available for
sale are recorded at amortized cost or market value as determined by the NAIC
rather than at fair value; (6) an Asset Valuation Reserve and Interest
Maintenance Reserve as prescribed by the NAIC are not calculated under GAAP.
Under GAAP, realized capital gains and losses are reported in the income
statement on a pretax basis as incurred and investment valuation allowances are
provided when there has been a decline in value deemed other than temporary;
(7) investments in affiliates are carried at their net equity value with changes
in value being recorded directly to policyholders' contingency reserves rather
than consolidated in the financial statements; (8) no provision is made for the
deferred income tax effects of temporary differences between book and tax
basis reporting; (9) certain items, including modifications to required policy
reserves resulting from changes in actuarial assumptions or increased benefits,
are recorded directly to policyholders' contingency reserves rather than being
reflected in income; and (10) surplus notes are reported as surplus rather than
as liabilities. The effects of the foregoing variances from GAAP have not been
determined, but are presumed to be material.
The significant accounting practices of the Company are as follows:
Pending Statutory Standards: The NAIC currently is in the process of
- ---------------------------
recodifying statutory accounting practices, the result of which is expected to
constitute the only source of prescribed statutory accounting practices.
Accordingly, that project, which is expected to be approved by the NAIC in 1998
will likely change, to some extent, prescribed statutory accounting practices,
and may result in changes to the accounting practices that the Company uses to
prepare its statutory-basis financial statements. The impact of any such
changes on the Company's statutory surplus is not expected to be material.
Revenues and Expenses: Premium revenues are recognized over the premium-paying
- ---------------------
period of the policies whereas expenses, including the acquisition costs of new
business, are charged to operations as incurred and policyholder dividends are
provided as paid or accrued.
Cash and Temporary Cash Investments: Cash includes currency on hand and demand
- -----------------------------------
deposits with financial institutions. Temporary cash investments are short-
term, highly-liquid investments both readily convertible to known amounts of
cash and so near maturity that there is insignificant risk of changes in value
because of changes in interest rates.
Valuation of Assets: General account investments are carried at amounts
- -------------------
determined on the following bases:
65
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
Bond and stock values are carried as prescribed by the NAIC; bonds
generally at amortized amounts or cost, preferred stocks generally at cost
and common stocks at fair value. The discount or premium on bonds is
amortized using the interest method.
Investments in affiliates are included on the statutory equity method.
Loan-backed bonds and structured securities are valued at amortized cost
using the interest method including anticipated prepayments. Prepayment
assumptions are obtained from broker dealer surveys or internal estimates
and are based on the current interest rate and economic environment. The
retrospective adjustment method is used to value all such securities except
for interest-only securities, which are valued using the prospective
method.
The net interest effect of interest rate and currency rate swap
transactions is recorded as an adjustment of interest income as incurred.
The initial cost of interest rate cap and floor agreements is amortized to
net investment income over the life of the related agreement. Gains and
losses on financial futures contracts used as hedges against interest rate
fluctuations are deferred and recognized in income over the period being
hedged.
Mortgage loans are carried at outstanding principal balance or amortized
cost.
Investment and company-occupied real estate is carried at depreciated cost,
less encumbrances. Depreciation on investment and company-occupied real
estate is recorded on a straight-line basis. Accumulated depreciation
amounted to $470.5 million and $393.5 million at December 31, 1997 and
1996, respectively.
Real estate acquired in satisfaction of debt and held for sale, which is
classified with investment properties, is carried at the lower of cost or
fair value as of the date of foreclosure.
Policy loans are carried at outstanding principal balance, not in excess of
policy cash surrender value.
Other invested assets, which are classified with other general account
assets, include real estate and energy joint ventures and limited
partnerships and generally are valued based on the Company's equity in the
underlying net assets.
Asset Valuation and Interest Maintenance Reserves: The Asset Valuation Reserve
- -------------------------------------------------
(AVR) is computed in accordance with the prescribed NAIC formula and represents
a provision for possible fluctuations in the value of bonds, equity securities,
mortgage loans, real estate and other invested assets. The Company makes
additional contributions to the AVR in excess of the required amounts to account
for potential losses and risks in the investment portfolio when the Company
believes such provisions are prudent. Changes to the AVR are charged or
credited directly to policyholders' contingency reserves.
The Company also records the NAIC prescribed Interest Maintenance Reserve (IMR)
that represents that portion of the after tax net accumulated unamortized
realized capital gains and losses on sales of fixed income securities,
principally bonds and mortgage loans, attributable to
66
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
changes in the general level of interest rates. Such gains and losses are
deferred and amortized into income over the remaining expected lives of the
investments sold. At December 31, 1997, the IMR, net of 1997 amortization of
$25.2 million, amounted to $165.6 million which is included in other policy
obligations. The corresponding 1996 amounts were $18.9 million and $121.7
million, respectively.
Property and Equipment: Data processing equipment, which amounted to $30.0
- ----------------------
million in 1997 and $41.6 million in 1996 and is included in other general
account assets, is reported at depreciated cost, with depreciation recorded on a
straight-line basis. Nonadmitted furniture and equipment also is depreciated on
a straight-line basis. The useful lives of these assets range from three to
twenty years. Depreciation expense was $21.8 million in 1997 and $31.0 million
in 1996.
Separate Accounts: Separate account assets and liabilities reported in the
- -----------------
accompanying statements of financial position represent funds that are
separately administered, principally for annuity contracts and variable life
insurance policies, and for which the contractholder, rather than the Company,
generally bears the investment risk. Separate account obligations are intended
to be satisfied from separate account assets and not from assets of the general
account. Separate accounts generally are reported at fair value. The operations
of the separate accounts are not included in the statement of operations;
however, income earned on amounts initially invested by the company in the
formation of new separate accounts is included in other income.
Fair Value Disclosure of Financial Instruments: Statement of Financial
- ----------------------------------------------
Accounting Standards (SFAS) No. 107, "Disclosure about Fair Value of Financial
Instruments," requires disclosure of fair value information about certain
financial instruments, whether or not recognized in the statement of financial
position, for which it is practicable to estimate the value. In situations where
quoted market prices are not available, fair values are based on estimates using
present value or other valuation techniques. SFAS No. 107 excludes certain
financial instruments and all nonfinancial instruments from its disclosure
requirements. Therefore, the aggregate fair value amounts presented do not
represent the underlying value of the company. See Note 15.
The methods and assumptions utilized by the Company in estimating its fair value
disclosures for financial instruments are as follows:
The carrying amounts reported in the statement of financial position for cash
and temporary cash investments approximate their fair values.
Fair values for public bonds are obtained from an independent pricing service.
Fair values for private placement securities and publicly traded bonds not
provided by the independent pricing service are estimated by the Company by
discounting expected future cash flows using current market rates applicable
to the yield, credit quality and maturity of the investments.
The fair values for common and preferred stocks, other than subsidiary
investments which are carried at equity values, are based on quoted market
prices.
67
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
The fair value for mortgage loans is estimated using discounted cash flow
analyses using interest rates adjusted to reflect the credit characteristics
of the underlying loans. Mortgage loans with similar characteristics and
credit risks are aggregated into qualitative categories for purposes of the
fair value calculations.
The carrying amounts in the statement of financial position for policy loans
approximates their fair value.
The fair value of interest rate swaps and currency rate swaps is estimated
using a discounted cash flow method adjusted for the difference between the
rate of the existing swap and the current swap market rate. Discounted cash
flows in foreign currencies are converted to U.S. dollars using current
exchange rates.
The fair value for outstanding commitments to purchase long-term bonds and
issue real estate mortgages is estimated using a discounted cash flow method
incorporating adjustments for the difference in the level of interest rates
between the dates the commitments were made and December 31, 1997. The fair
value for commitments to purchase real estate approximates the amount of the
initial commitment.
Fair values for the company's guaranteed investment contracts are estimated
using discounted cash flow calculations, based on interest rates currently
being offered for similar contracts with maturities consistent with those
remaining for the contracts being valued. The fair value for fixed-rate
deferred annuities is the cash surrender value, which represents the account
value less applicable surrender charges. Fair values for immediate annuities
without life contingencies and supplementary contracts without life
contingencies are estimated based on discounted cash flow calculations using
current market rates.
Capital Gains and Losses: Realized capital gains and losses are determined
- ------------------------
using the specific identification basis. Realized capital gains and losses, net
of taxes and amounts transferred to the IMR, are included in net income.
Unrealized gains and losses, which consist of market value and book value
adjustments, are shown as adjustments to policyholders' contingency reserves.
Foreign Exchange Gains and Losses: Foreign Exchange Gains and Losses are
- ---------------------------------
reflected as direct credits or charges to policyholders' contingency reserves
through unrealized capital gains and losses.
Policy Reserves: Life, annuity, and accident and health benefit reserves are
- ----------------
developed by actuarial methods and are determined based on published tables
using statutorily specified interest rates and valuation methods that will
provide, in the aggregate, reserves that are greater than or equal to the
minimum or guaranteed policy cash values or the amounts required by the
commonwealth of Massachusetts division of insurance. Reserves for traditional
individual life insurance policies are maintained using the 1941, 1958 and 1980
commissioner's standard ordinary and american experience mortality tables, with
assumed interest rates ranging from 2 1/2% to 6%, and using principally the net
level premium method for policies issued prior to 1978 and a modified
preliminary term method for policies issued in 1979 and later. Annuity and
supplementary contracts with life contingency reserves are based principally on
modifications of the 1937 standard annuity table, the group annuity mortality
tables for 1951, 1971 and 1983, the 1971 individual annuity mortality table and
the A-1983 individual annuity mortality table, with interest rates generally
ranging from 2% to 8 3/4%.
68
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
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, 1997 December 31, 1996
------------------------------------------------------------------------
Statement Fair Statement Value Fair
Value Value Value
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(In millions)
Guaranteed investment contracts $11,499.4 $11,516.8 $11,921.6 $11,943.2
Fixed-rate deferred and
immediate annuities 4,289.1 4,290.4 3,909.3 3,886.1
Supplementary contracts without
life contingencies 40.9 42.1 45.6 46.0
------------------------------------------------------------------------
$15,829.4 $15,849.3 $15,876.5 $15,875.3
========================================================================
</TABLE>
Federal Income Taxes: Federal income taxes are reported in the financial
- --------------------
statements based on amounts determined to be payable as a result of operations
within the current accounting period. The operations of the Company and its
subsidiaries and affiliates are combined in filing a consolidated federal income
tax return for the group. The federal income taxes of the Company are
determined on a separate return basis with certain adjustments.
Income before taxes differs from taxable income principally due to tax-exempt
investment income, dividends-received tax deductions, the limitation placed on
the tax deductibility of mutual companies' policyholder dividends, accelerated
depreciation, differences in policy and contract liabilities for tax return and
financial statement purposes, capitalization of policy acquisition expenses for
tax purposes and other adjustments prescribed by the Internal Revenue Code.
When determining its consolidated federal income tax expense, the Company uses a
number of estimated amounts that may change when the actual tax return is
completed. In addition, the Company must also use an estimated differential
earnings rate (DER) to compute the equity tax portion of its federal income tax
expense. Because the DER is set by the Internal Revenue Service after
completion of the financial statements, a true-up adjustment (i.e., effect of
the difference between the estimated and final DER) is necessary.
Amounts for disputed tax issues relating to prior years are charged or credited
directly to policyholders' contingency reserves.
Certain subsidiaries acquired by the Company have potential tax loss
carryforwards of $14.3 million expiring in 1998. These amounts may be used in
the consolidated tax return, but
69
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
only to offset future taxable income related to those subsidiaries. The Company
made federal tax payments of $146.4 million in 1997 and $309.9 million in 1996.
Adjustments to Policy Reserves and Policyholders' and Beneficiaries' Funds:
- --------------------------------------------------------------------------
From time to time, the Company finds it appropriate to modify certain required
policy reserves because of changes in actuarial assumptions or increased
benefits. Reserve modifications resulting from such determinations are recorded
directly to policyholders' contingency reserves. During 1997, the Company
refined certain actuarial assumptions inherent in the calculation of reserves
related to guaranteed investment contracts and AIDS claims under individual
insurance policies resulting in a net $1.4 million increase in policyholders'
contingency reserves at December 31, 1997. Similar refinements to the actuarial
assumptions inherent in the calculation of reserves related to guaranteed
investment contracts were made in 1996 resulting in a $27.5 million decrease in
policyholders' contingency reserves at December 31, 1996.
Reinsurance: Premiums, commissions, expense reimbursements, benefits and
- -----------
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies issued and the terms of
the reinsurance contracts. Premiums ceded to other companies have been reported
as a reduction of premium income. Amounts applicable to reinsurance ceded for
future policy benefits, unearned premium reserves and claim liabilities have
been reported as reductions of these items.
Guaranty Fund Assessments: Guaranty fund assessments are accrued when the
- -------------------------
Company receives notice that an amount is payable to a guaranty fund.
NOTE 2--SURPLUS NOTES
On February 25, 1994, the Company issued $450 million of surplus notes that bear
interest at 7 3/8% and are scheduled to mature on February 15, 2024. The
issuance of the surplus notes was approved by the Commonwealth of
Massachusetts Division of Insurance and any payment of interest on and
principal of the notes may be made only with the prior approval of the
Commissioner of the Commonwealth of Massachusetts Division of Insurance.
Surplus notes are reported as part of policyholders' contingency reserves
rather than liabilities. Interest of $33.2 million was paid on the notes
during each of 1997 and 1996.
NOTE 3--BORROWED MONEY
At December 31, 1997, the Company had a $500 million syndicated line of credit.
there are 26 banks who are part of the syndicate which is under the leadership
of Morgan Guaranty Trust Company of New York. The banks will commit, when
requested, to loan funds at prevailing interest rates as determined in
accordance with the line of credit agreement, which terminates on June 30, 2001.
the agreement does not contain a material adverse change clause. Under the
terms of the agreement, the company is required to maintain certain minimum
levels of net worth and comply with certain other covenants. As of December 31,
1997, these covenants were met; however, no amounts had been borrowed under this
agreement.
70
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 3--BORROWED MONEY--CONTINUED
In 1995, the Company issued $213.1 million of debt through a real estate
mortgage investment conduit (REMIC). As collateral to the debt, the company
pledged $1,065.8 million of commercial mortgages to the REMIC trust. In
addition, the Company has guaranteed the timely payment of principal and
interest on the debt. the debt was issued in two notes of equal amounts. The
interest rates on the class A1 and A2 notes are calculated on a floating basis,
based on the monthly libor rates plus 22 and 27 basis points, respectively. The
libor rates were 5.72% and 5.50%, respectively, at December 31, 1997 and 1996.
The class A1 notes were fully repaid on March 25, 1997 and the class A2 notes
have a last scheduled payment date of June 25, 1998. The outstanding balances of
the notes totaled $42.6 million and $127.9 million at December 31, 1997 and
1996, respectively, and are included in other general account obligations.
In 1996, the Company issued $292.0 million of additional debt through a REMIC
(REMIC II). As collateral to the debt, the Company pledged $1,455.4 million of
commercial mortgages to the REMIC II Trust. The debt was issued in two notes.
The interest rates on the class A1 and A2 notes are calculated on a floating
basis, based on the monthly LIBOR rate plus 5 and 19 basis points, respectively.
The class A1 notes were fully repaid on December 26, 1997 and the class A2 notes
have a last scheduled payment date of July 26, 1999. The outstanding balances of
the notes totaled $161.0 million and $292.0 million at December 31, 1997 and
1996, respectively, and are included in other general account obligations.
On December 31, 1997, the Company had outstanding a short-term note of $75.0
million payable to an affiliate at a variable rate of interest. The note, which
is included in other general account obligations, was repaid on January 5, 1998.
Interest paid on borrowed money was $19.3 million and $10.4 million during 1997
and 1996, respectively.
NOTE 4--NET INVESTMENT INCOME
Investment income has been reduced by the following amounts:
<TABLE>
<CAPTION>
1997 1996
--------------------------------------
(In millions)
<S> <C> <C>
Investment expenses $339.6 $333.8
Interest expense 57.9 48.1
Depreciation on real estate and other invested assets 76.6 73.3
Real estate and other investment taxes 61.5 65.2
--------------------------------------
$535.6 $520.4
======================================
</TABLE>
71
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 5--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS
Net realized capital losses consist of the following items:
<TABLE>
<CAPTION>
1997 1996
---------------------------------------
(IN MILLIONS)
<S> <C> <C>
Net gains from asset sales and foreclosures $ 63.4 $ 81.2
Capital gains tax (84.1) (53.7)
Net capital gains transferred to the IMR (69.1) (71.1)
---------------------------------------
Net Realized Capital Losses $(89.8) $(43.6)
=======================================
</TABLE>
Net unrealized capital gains and other adjustments consist of the following
items:
<TABLE>
<CAPTION>
1997 1996
---------------------------------------
(In millions)
<S> <C> <C>
Net gains from changes in security values and book
value adjustments $ 159.5 $242.2
Increase in asset valuation reserve (100.9) (50.5)
Net Unrealized Capital Gains
and Other Adjustments $ 58.6 $191.7
=======================================
</TABLE>
72
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 6--INVESTMENTS
The statement value and fair value of bonds are shown below:
<TABLE>
<CAPTION>
Year ended December 31, 1997
GROSS GROSS
STATEMENT UNREALIZED UNREALIZED
VALUE GAINS LOSSES FAIR VALUE
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
(In millions)
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies $ 258.9 $ 9.3 $ 0.0 $ 268.2
Obligations of states and political
subdivisions 149.6 16.3 0.0 165.9
Debt securities issued by foreign
governments 259.7 53.2 0.1 312.8
Corporate securities 17,336.1 1,485.9 113.4 18,708.6
Mortgage-backed securities 4,981.7 115.9 28.3 5,069.3
--------------------------------------------------------------------
Total bonds $22,986.0 $1,680.6 $141.8 $24,524.8
====================================================================
Year ended December 31, 1996
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies $ 430.2 $ 8.8 $ 4.2 $ 434.8
Obligations of states and political
subdivisions 175.2 8.8 3.9 180.1
Debt securities issued by foreign
governments 203.5 30.1 0.0 233.6
Corporate securities 16,902.1 1,083.2 112.6 17,872.7
Mortgage-backed securities 4,756.0 116.3 54.5 4,817.8
--------------------------------------------------------------------
Total bonds $22,467.0 $1,247.2 $175.2 $23,539.0
====================================================================
</TABLE>
73
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 6--INVESTMENTS--CONTINUED
The statement value and fair value of bonds at December 31, 1997, by contractual
maturity, are shown below. Maturities will differ from contractual maturities
because eligible borrowers may exercise their right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
STATEMENT FAIR
VALUE VALUE
--------------------------------------
(In millions)
<S> <C> <C>
Due in one year or less $ 1,386.4 $ 1,426.6
Due after one year through five years 5,809.6 6,079.2
Due after five years through ten years 5,465.5 5,867.1
Due after ten years 5,342.8 6,082.6
--------------------------------------
18,004.3 19,455.5
Mortgage-backed securities 4,981.7 5,069.3
--------------------------------------
$22,986.0 $24,524.8
======================================
</TABLE>
Gross gains of $61.5 million in 1997 and $43.8 million in 1996 and gross losses
of $86.6 million in 1997 and $27.6 million in 1996 were realized from the sale
of bonds.
At December 31, 1997, bonds with an admitted asset value of $19.2 million were
on deposit with state insurance departments to satisfy regulatory requirements.
The cost of common stocks was $148.0 million and $136.1 million at December 31,
1997 and 1996, respectively. At December 31, 1997, gross unrealized
appreciation on common stocks totaled $139.3 million, and gross unrealized
depreciation totaled $30.4 million. The fair value of preferred stock totaled
$695.8 million at December 31, 1997 and $451.0 million at December 31, 1996.
The Company participates in a security lending program for the purpose of
enhancing income on securities held. At December 31, 1997 and 1996, $217.0
million and $540.5 million, respectively, of the Company's bonds and stocks were
on loan to various brokers/dealers, but were fully collateralized by cash and
U.S. government securities in an account held in trust for the Company. Such
assets reflect the extent of the Company's involvement in securities lending,
not the Company's risk of loss.
Mortgage loans with outstanding principal balances of $71.7 million, bonds with
amortized cost of $98.9 million and real estate with depreciated cost of $18.0
million were nonincome producing for the twelve months ended December 31, 1997.
74
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 6--INVESTMENTS--CONTINUED
Restructured commercial mortgage loans aggregated $314.3 million and $385.8
million as of December 31, 1997 and 1996, respectively. The expected gross
interest income that would have been recorded had the loans been current in
accordance with the original loan agreements and the actual interest income
recorded were as follows:
<TABLE>
<CAPTION>
Year ended December 31
1997 1996
--------------------------------------
<S> <C> <C>
(In millions)
Expected $33.8 $46.3
Actual 24.9 29.1
</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, 1997, the mortgage loan portfolio was diversified by geographic
region and specific collateral property type as displayed below. The Company
controls credit risk through credit approvals, limits and monitoring procedures.
<TABLE>
<CAPTION>
Statement Statement
Property Type Value Geographic Concentration Value
- ------------------------------------------------------------------------------------------------------------
(In millions) (In millions)
<S> <C> <C> <C>
Apartments $1,677.7 East North Central $ 891.5
Hotels 186.7 East South Central 163.4
Industrial 858.1 Middle Atlantic 1,410.2
Office buildings 1,748.7 Mountain 362.2
Retail 1,609.4 New England 836.9
1-4 Family 6.0 Pacific 1,770.6
Agricultural 1,426.5 South Atlantic 1,475.4
Other 338.1 West North Central 260.1
West South Central 613.1
Other 67.8
------------------- -------------------
$7,851.2 $7,851.2
=================== ===================
</TABLE>
At December 31, 1997, the fair values of the commercial and agricultural
mortgage loan portfolios were $6.7 billion and $1.5 billion, respectively.
The corresponding amounts as of December 31, 1996 were approximately $6.6
billion and $1.8 billion, respectively.
The maximum and minimum lending rates for mortgage loans during 1997 were 18.0%
and 7.66% for agricultural loans, 10.0% and 7.19% for other properties, and
7.27% and 7.25% for purchase money mortgages. Generally, the percentage of any
loan to the value of security at the time of the loan, exclusive of insured,
guaranteed or purchase money mortgages, is 75%. For city mortgages, fire
insurance is carried on all commercial and residential properties at least equal
to the excess of
75
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 6--INVESTMENTS--CONTINUED
the loan over the maximum loan which would be permitted by law on the land
without the building, except as permitted by regulations of the Federal Housing
Commission on loans fully insured under the provisions of the National Housing
Act. For agricultural mortgage loans, fire insurance is not normally required
on land based loans except in those instances where a building is critical to
the farming operation. Fire insurance is required on all agri-business
facilities in an aggregate amount equal to the loan balance.
NOTE 7--REINSURANCE
Premiums, benefits and reserves associated with reinsurance assumed in 1997 were
$787.1 million, $386.6 million, and $7.5 million, respectively. The
corresponding amounts in 1996 were $742.0 million, $317.8 million, and $14.2
million, respectively.
The company cedes business to reinsurers to share risks under life, health and
annuity contracts for the purpose of reducing exposure to large losses.
Premiums, benefits and reserves ceded to reinsurers in 1997 were $801.8 million,
$767.9 million and $594.9 million, respectively. The corresponding amounts in
1996 were $304.0 million, $217.0 million and $251.2 million, respectively.
Premiums, benefits, and reserves ceded related to the business sold in 1997,
included in the amounts above, were $487.4 million, $503.3 million, and $247.9
million, respectively, at december 31, 1997.
<TABLE>
<CAPTION>
Amounts recoverable on paid claims and funds withheld from reinsurers were as follows:
YEAR ENDED DECEMBER 31
1997 1996
--------------------------------------
<S> <C> <C>
(In millions)
Reinsurance recoverables $12.5 $26.5
Funds withheld from reinsurers 35.1 23.4
</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 $236.3 million at December 31, 1997 and $226.4
million at December 31, 1996.
John Hancock Variable Life Insurance Company (Variable Life, a wholly-owned
affiliate) has a modified coinsurance agreement with the Company to reinsure 50%
of variable life's 1994 through 1997 issues of flexible premium variable life
insurance and scheduled premium variable life insurance policies. In connection
with this agreement, the Company transferred $22.0 million and $24.5 million of
cash for tax, commission, and expense allowances to Variable Life, which
decreased the Company's net gain from operations by $10.1 million and $15.7
million in 1997 and 1996, respectively.
Variable Life has a modified coinsurance agreement with the Company to reinsure
50% of Variable Life's 1995 through 1997 issues of certain retail annuity
contracts (Independence Preferred and Declaration). In connection with this
agreement, the company received $1.1 million in 1997 and transferred $35.0
million in 1996 of cash for surrender benefits, tax, reserve increase,
commission,
76
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 7--REINSURANCE--CONTINUED
expense allowances and premium. This agreement decreased the Company's net gain
from operations by $9.8 million and $15.1 million in 1997 and 1996,
respectively.
Effective January 1, 1997, Variable Life entered into a stop-loss agreement with
the Company to reinsure mortality claims in excess of 110% of expected mortality
claims in 1997 for all policies that are not reinsured under any other indemnity
agreement. In connection with the agreement, the Company transferred $2.4
million of cash for mortality claims to Variable Life, which decreased the
Company's net gain from operations by $1.3 million in 1997.
Reinsurance ceded contracts do not relieve the Company from its obligations to
policyholders. The Company remains liable to its policyholders for the portion
reinsured to the extent that any reinsurer does not meet its obligations for
reinsurance ceded to it under the reinsurance agreements. Failure of the
reinsurers to honor their obligations could result in losses to the Company;
consequently, estimates are established for amounts deemed or estimated to be
uncollectible. To minimize its exposure to significant losses from reinsurance
insolvencies, the Company evaluates the financial condition of its reinsurers
and monitors concentration of credit risk arising from similar characteristics
of the insurer.
Neither the Company, nor any of its related parties, control, either directly or
indirectly, any external reinsurers with which the Company conducts business.
No policies issued by the Company have been reinsured with a foreign company
which is controlled, either directly or indirectly, by a party not primarily
engaged in the business of insurance.
The Company has not entered into any reinsurance agreements in which the
reinsurer may unilaterally cancel any reinsurance for reasons other than
nonpayment of premiums or other similar credits. The Company does not have any
reinsurance agreements in effect in which the amount of losses paid or accrued
through December 31, 1997 would result in a payment to the reinsurer of amounts
which, in the aggregate and allowing for offset of mutual credits from other
reinsurance agreements with the same reinsurer, exceed the total direct premiums
collected under the reinsured policies.
NOTE 8--BENEFIT PLANS
The Company provides retirement benefits to substantially all employees and
general agency personnel. These benefits are provided through both defined
benefit and defined contribution pension plans. Pension benefits under the
defined benefit plans are based on years of service and average compensation
generally during the five years prior to retirement. Benefits related to the
Company's defined benefit pension plans paid to employees and retirees covered
by annuity contracts issued by the Company amounted to $89.7 million in 1997 and
$84.4 million in 1996. The Company's funding policy for qualified defined
benefit plans is to contribute annually an amount in excess of the minimum
annual contribution required under the Employee Retirement Income Security Act
(ERISA). This amount is limited by the maximum amount that can be deducted for
federal income tax purposes. The funding policy for nonqualified defined benefit
plans is to contribute the amount of the benefit payments made during the year.
Plan assets consist principally of listed equity securities, corporate
obligations and U.S. government securities.
Defined contribution plans include The Investment Incentive Plan (TIP) and the
Savings and Investment Plan (SIP). Employees are eligible to participate in TIP
after one year of service and
77
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 8--BENEFIT PLANS--CONTINUED
May contribute up to the lesser of 15% of their salary or $9,500 annually to the
plan. The company matches the first 2% of pre-tax contributions and makes an
additional annual profit sharing contribution for employees who have completed
at least two years of service. Through sip, marketing representatives, sales
managers and agency managers are eligible to contribute up to the lesser of 13%
of their salary or $9,500. The Company matches the first 3% of pretax
contributions for marketing representatives and the first 2% of pretax
contributions for sales managers and agency managers. The Company makes an
annual profit sharing contribution of up to 1% for sales managers and agency
managers who have completed at least two years of service.
The Company provides additional compensation to employees based on achievement
of annual and long-term corporate financial objectives.
Pension (benefit) expense is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996
---------------------------------------
<S> <C> <C>
(In millions)
Defined benefit plans:
Service cost--benefits earned during the period $ 30.7 $ 32.4
Interest cost on the projected benefit obligation 109.3 107.4
Actual return on plan assets (177.7) (225.1)
Net amortization and deferral 23.7 85.0
---------------------------------------
( 14.0) ( 0.3)
Defined contribution plans 6.2 21.4
---------------------------------------
Total pension (benefit) expense $( 7.8) $ 21.1
=======================================
</TABLE>
Assumptions used in accounting for the defined benefit pension plans were as
follows:
<TABLE>
<CAPTION>
1997 1996
---------------------------------------
<S> <C> <C>
Discount rate 7.00% 7.25%
Weighted rate of increase in compensation levels 4.80% 4.80%
Expected long-term rate of return on assets 8.50% 8.50%
</TABLE>
78
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 8--BENEFIT PLANS--CONTINUED
The following table sets forth the funded status and actuarially determined
amounts related to the Company's defined benefit pension plans:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996
---------------------------------------
<S> <C> <C>
(In millions)
Actuarial present value of benefit obligations:
Vested benefit obligation $(1,462.2) $(1,344.8)
=======================================
Accumulated benefit obligation $(1,507.6) $(1,387.7)
=======================================
Projected benefit obligation $(1,704.0) $(1,582.4)
Plan assets fair value 1,877.7 1,787.6
---------------------------------------
Excess of plan assets over projected benefit
obligation 173.7 205.2
Unrecognized net gain ( 101.7) ( 176.1)
Prior service cost not yet recognized in net
periodic pension cost 29.6 42.8
Unrecognized net asset, net of amortization ( 93.2) ( 95.9)
---------------------------------------
Net pension asset (liability) $ 8.4 $( 24.0)
=======================================
</TABLE>
Since 1988, the Massachusetts Division of Insurance has provided the Company
with approval to recognize the pension plan prepaid expense, if any, in
accordance with the requirements of SFAS No. 87, "Employers' Accounting for
Pensions." The Company furnishes the Division of Insurance with an actuarial
certification of the prepaid expense computation on an annual basis.
79
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 9--OTHER POSTRETIREMENT BENEFIT PLANS
In addition to the company's defined benefit pension plans, the Company has
employee welfare plans for medical, dental, and life insurance covering most of
its retired employees and general agency personnel. Substantially all employees
may become eligible for these benefits if they reach retirement age while
employed by the Company. The postretirement health care and dental coverages are
contributory based on service for post January 1, 1992 non-union retirees. A
small portion of pre-January 1, 1992 non-union retirees also contribute. The
applicable contributions are based on service.
In 1993, the Company changed its method of accounting for the costs of its
retiree benefit plans to the accrual method and elected to amortize its
transition liability for retirees and fully eligible or vested employees over
twenty years.
Since 1993, the Company funded a portion of the postretirement obligation. The
Company's policy is to fund postretirement benefits for non-union employees to
the maximum amount that can be deducted for federal income tax purposes and to
fund the benefits for union employees, which are fully tax qualified, at
sufficient amounts so that the total accrued liability related to postretirement
benefits is zero. As of December 31, 1997, plan assets related to non-union
employees were comprised of an irrevocable health insurance contract to provide
future health benefits to retirees while plan assets related to union employees
were comprised of approximately 70% equity securities and 30% fixed income
investments.
The following table shows the plans' combined funding status for vested benefits
reconciled with the amounts recognized in the Company's statements of financial
position.
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
-----------------------------------------------------------------------
MEDICAL MEDICAL
AND LIFE AND LIFE
DENTAL INSURANCE DENTAL INSURANCE
PLANS PLANS PLANS PLANS
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
(In millions)
Accumulated postretirement benefit
obligation:
Retirees $(228.8) $( 95.7) $(234.2) $(100.6)
Fully eligible active plan participants ( 38.7) ( 17.9) ( 46.4) ( 19.4)
-----------------------------------------------------------------------
(267.5) (113.6) (280.6) (120.0)
Plan assets at fair value 172.7 0.0 132.4 0.0
-----------------------------------------------------------------------
Accumulated postretirement benefit
obligation in excess of plan assets ( 94.8) (113.6) (148.2) (120.0)
Unrecognized prior service cost 14.9 4.8 16.7 5.3
Unrecognized prior net gain (122.8) ( 4.2) ( 93.0) 4.0
Unrecognized transition obligation 240.7 75.0 256.8 78.4
-----------------------------------------------------------------------
Accrued postretirement benefit cost $ 38.0 $( 38.0) $ 32.3 $ 32.3)
=======================================================================
</TABLE>
80
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 9--OTHER POSTRETIREMENT BENEFIT PLANS--CONTINUED
Net postretirement benefits costs for the years ended December 31, 1997 and 1996
were $40.8 million and $47.4 million, respectively, and include the expected
cost of such benefits for newly eligible or vested employees, interest cost, and
amortization of the transition liability.
Net periodic postretirement benefits cost included the following components:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
----------------------------------------------------------------------
MEDICAL MEDICAL
AND LIFE AND LIFE
DENTAL INSURANCE DENTAL INSURANCE
PLANS PLANS PLANS PLANS
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
(In millions)
Eligibility cost $ 6.9 $ 1.6 $ 7.1 $ 1.8
Interest cost 17.8 7.6 19.8 8.3
Actual return on plan assets (31.0) 0.0 (15.9) 0.0
Net amortization and deferral 32.8 5.1 20.9 5.4
Net periodic postretirement benefit cost $ 26.5 $14.3 $ 31.9 $15.5
======================================================================
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation at December 31, 1997 was 7.0% (7.25% for 1996). The expected long-
term rates of return on plan assets were 8.5% and 7.0% at December 31, 1997 and
1996, respectively. The annual assumed rate of increase in the health care cost
trend rate for the medical coverages is 5.75% for 1998 (8.0% was assumed for
1997) and is assumed to decrease gradually to 5.00% in 2001 and remain at that
level thereafter. The health care cost trend rate assumption has a significant
effect on the amounts reported. For example, increasing the assumed health care
cost trend rates by one percentage point in each year would increase the
accumulated post retirement benefit obligation for the medical coverages as of
December 31, 1997 by $26.2 million and the aggregate of the eligibility and
interest cost components of net periodic postretirement benefit cost by $3.0
million for 1997 and $2.9 million for 1996.
Postretirement welfare benefits for non-vested employees are not reflected in
the above expenses or accumulated postretirement benefit obligations. As of
December 31, 1997, the accumulated postretirement benefit obligations for non-
vested employees amounted to $49.5 million for medical and dental plans and
$10.4 million for life insurance plans. The corresponding amounts as of
December 31, 1996 were $69.4 million and $10.7 million, respectively.
81
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 10--AFFILIATES
The Company has subsidiaries and affiliates in a variety of industries including
domestic and foreign life insurance and domestic property casualty insurance,
real estate, mutual funds, investment brokerage and various other financial
services entities.
Total assets of unconsolidated affiliates amounted to $12.4 billion at December
31, 1997 and $9.6 billion at December 31, 1996; total liabilities amounted to
$11.1 billion at December 31, 1997 and $8.5 billion at December 31, 1996; and
total net income was $184.8 million in 1997 and $193.0 million in 1996.
During 1996, the Company sold certain of its affiliates including its ongoing
property and casualty business and its broker-dealer operations to realign its
business objectives.
The Company customarily engages in transactions with its unconsolidated
affiliates, including the cession and assumption of certain insurance business
under the terms of established reinsurance agreements. Various services are
performed by the Company for certain affiliates for which the Company is
reimbursed on the basis of cost. Certain affiliates have entered into various
financial arrangements relating to borrowings and capital maintenance under
which agreements the Company would be obligated in the event of nonperformance
by an affiliate (see Note 14).
The Company received dividends of $65.9 million and $9.4 million in 1997 and
1996, respectively, from unconsolidated affiliates.
NOTE 11--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company utilizes a variety of off-balance sheet financial instruments as
part of its efforts to hedge and manage fluctuations in the market value of its
investment portfolio attributable to changes in general interest rate levels and
to manage duration mismatch of assets and liabilities. Those instruments
include swaps, caps, floors, and future contracts.
The Company enters into interest rate swap contracts for the purpose of
converting the interest rate characteristics (fixed or variable) of certain
investments to match those of related insurance liabilities. Maturities of
current agreements range from 1998 to 2026. These swaps involve, to varying
degrees, interest rate risk in excess of amounts recognized in the statements of
financial position.
The Company enters into interest rate cap and floor contracts to manage exposure
on underlying security values due to a rise in interest rates. Maturities of
current agreements range through 2007.
The Company also uses financial futures contracts to hedge risks associated with
interest rate fluctuations on sales of guaranteed investment contracts. The
Company is subject to the risks associated with changes in the value of the
underlying securities; however, such changes in value generally are offset by
opposite changes in the value of the hedged items. The contract or notional
amounts of the contracts represent the extent of the Company's involvement but
not the future cash requirements, as the Company intends to close the open
positions prior to settlement. Net deferred losses on future contracts were $6.4
million and $0.5 million at December 31, 1997 and 1996, respectively.
82
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 11--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK--CONTINUED
The Company enters into currency rate swap agreements to manage exposure to
foreign exchange rate fluctuations. Maturities of current agreements range
through 2009. Should the counterparty fail to meet the terms of the contract,
the Company's market risk is limited to the currency rate differential.
The contract or notional amount of the foregoing financial instruments, which
indicates the Company's involvement and, in certain instances, maximum credit
risk related to those instruments, is as follows:
<TABLE>
<CAPTION>
December 31
1997 1996
--------------------------------------
<S> <C> <C>
(In millions)
Futures contracts to purchase securities $ 154.0 $ 117.6
======================================
Futures contracts to sell securities $ 414.2 $ 136.4
======================================
Notional amount of interest rate swaps, interest rate
swaptions, currency rate swaps, interest rate caps
and interest rate floors to:
Receive variable rates $5,043.7 $3,822.8
======================================
Receive fixed rates $2,596.7 $2,912.5
======================================
</TABLE>
The Company's exposure to credit risk is the risk of loss from a counterparty
failing to perform according to the terms of the contract. The Company
continually monitors its positions and the credit ratings of the counterparties
to these financial instruments. To limit exposure associated with counterparty
nonperformance on interest rate and currency agreements, the Company enters into
master netting agreements with its counterparties. The Company believes the
risk of incurring losses due to nonperformance by its counterparties is remote
and that such losses, if any, would not be material.
Based on market rates in effect at December 31, 1997, the Company's interest
rate swaps, currency rate swaps, interest rate caps, and interest rate floors
represented (assets) liabilities to the Company with fair values of $58.3
million, $9.7 million, $(0.6) million and $(0.4) million, respectively. The
corresponding amounts as of December 31, 1996 were $16.4 million, $41.1 million,
$(0.6) million and $(0.1) million, respectively. The fair values of the swap
agreements are not recognized in the financial statements.
83
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 12--LEASES
The Company leases office space and furniture and equipment under various
operating leases including furniture and equipment leased under a series of
sales-leaseback agreements with a nonaffiliated organization. Rental expense
for all operating leases totaled $27.4 million in 1997 and $32.1 million in
1996. Future minimum rental commitments under noncancellable operating leases
for office space and furniture and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------------------
(IN MILLIONS)
<S> <C>
1998 $19.5
1999 17.0
2000 14.5
2001 11.5
2002 8.1
THEREAFTER 12.2
-------------------------------------
TOTAL MINIMUM PAYMENTS $82.8
=====================================
</TABLE>
NOTE 13--POLICY RESERVES, POLICYHOLDERS' AND BENEFICIARIES' FUNDS AND
OBLIGATIONS RELATED TO SEPARATE ACCOUNTS
The Company's annuity reserves and deposit fund liabilities and related separate
account liabilities that are subject to discretionary withdrawal (with
adjustment), subject to discretionary withdrawal (without adjustment), and not
subject to discretionary withdrawal provisions are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 PERCENT
----------------------------------------------
(In millions)
Subject to discretionary withdrawal (with adjustment):
<S> <C> <C>
With market value adjustment $ 3,881.6 10.5%
At book value less surrender charge 2,881.4 7.8
----------------------------------------------
Total with adjustment 6,763.0 18.3
Subject to discretionary withdrawal (without
adjustment) at book value 3,574.2 9.6
Subject to discretionary withdrawal - separate
accounts 13,455.3 36.3
Not subject to discretionary withdrawal:
General account 11,996.1 32.4
Separate accounts 1,274.1 3.4
----------------------------------------------
Total annuity reserves, deposit fund liabilities and
separate accounts--before reinsurance 37,062.7 100.0%
=====
Less reinsurance ceded 0.0
--------------------------
Net annuity reserves, deposit fund liabilities and
separate accounts $37,062.7
==========================
</TABLE>
84
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 13-- POLICY RESERVES, POLICYHOLDERS' AND BENEFICIARIES' FUNDS AND
OBLIGATIONS RELATED TO SEPARATE ACCOUNTS--CONTINUED
Any liquidation costs associated with the $13.5 billion of separate accounts
subject to discretionary withdrawal are sustained by the separate account
contractholders and not by the general account.
NOTE 14--COMMITMENTS AND CONTINGENCIES
The Company has extended commitments to purchase long-term bonds, preferred and
common stocks, and real estate and issue real estate mortgages totaling $693.6
million, $27.6 million, $122.3 million and $467.2 million, respectively, at
December 31, 1997. If funded, loans related to real estate mortgages would be
fully collateralized by related properties. The company monitors the credit
worthiness of borrowers under long-term bond commitments and requires collateral
as deemed necessary. The estimated fair value of the commitments described above
is $1.3 billion at December 31, 1997. The majority of these commitments expire
in 1998.
The Company has contingent liabilities, pursuant to guarantee agreements issued
in connection with real estate joint ventures, in the amount of $43.3 million.
During 1996, the Company entered into a credit support and collateral pledge
agreement with the Federal National Mortgage Association (FNMA). Under the
agreement, the Company sold $532.8 million of commercial mortgage loans and
acquired an equivalent amount of FNMA securities. The Company completed similar
transactions with FNMA in 1991 for $1.042 billion and in 1993 for $71.9 million.
FNMA is guarantying the full face value of the bonds of the three transactions
to the bondholders. However, the Company has agreed to absorb the first 12.25%
of the principal and interest losses (less buy-backs) for the pools of loans
involved in the three transactions, based on the total outstanding principal
balance of $1.036 billion as of July 1, 1996, but is not required to commit
collateral to support this loss contingency. At December 31, 1997, the aggregate
outstanding principal balance of all the remaining pools of loans from 1991,
1993, and 1996 is $672.0 million.
Historically, the Company has experienced losses of less than one percent on its
multi-family mortgage portfolio. Mortgage loan buy-backs required by the FNMA
in 1997 and 1996 amounted to $4.1 million and $3.4 million, respectively.
During 1996, the Company entered into a credit support and collateral pledge
agreement with the Federal Home Loan Mortgage Corporation (FHLMC). Under the
agreement, the Company sold $535.3 million of multi-family loans and acquired an
equivalent amount of FHLMC securities. FHLMC is guarantying the full face value
of the bonds to the bondholders. However, the Company has agreed to absorb the
first 10.5% of original principal and interest losses (less buy-backs) for the
pool of loans involved but is not required to commit collateral to support this
loss contingency. Historically, the Company has experienced total losses of
less than one percent on its multi-family loan portfolio. At December 31, 1997,
the aggregate outstanding principal balance of the pools of loans was $500.8
million. There were no mortgage loans buy-backs in 1997 and 1996.
85
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 14--COMMITMENTS AND CONTINGENCIES--CONTINUED
The Company has a support agreement with Variable Life under which the Company
agrees to continue directly or indirectly to own all of Variable Life's common
stock and maintain Variable Life's net worth at not less than $1 million.
The Company has a support agreement with John Hancock Capital Corporation
(JHCC), a non-consolidated wholly-owned subsidiary, under which the Company
agrees to continue directly or indirectly to own all of JHCC's common stock and
maintain JHCC's net worth at not less than $1 million. JHCC's outstanding
borrowings as of December 31, 1997 were $351.1 million for short-term borrowings
and $163.2 million for notes payable.
The Company is subject to insurance guaranty fund laws in the states in which it
does business. These laws assess insurance companies amounts to be used to pay
benefits to policyholders and claimants of insolvent insurance companies. Many
states allow these assessments to be credited against future premium taxes. The
Company believes such assessments in excess of amounts accrued will not
materially affect its financial position.
In the normal course of its business operations, the Company is involved with
litigation from time to time with claimants, beneficiaries and others, and a
number of litigation matters were pending as of December 31, 1997. It is the
opinion of management, after consultation with counsel, that the ultimate
liability with respect to these claims, if any, will not materially affect the
financial position or results of operations of the Company.
During 1997, the Company entered into a court approved settlement relating to a
class action lawsuit involving certain individual life insurance policies sold
from 1979 through 1996. In entering into the settlement, the Company
specifically denied any wrongdoing. The Company has established a litigation
reserve in connection with the settlement to provide for relief to class members
and for legal and administrative costs associated with the settlement. The
reserve has been charged, net of the related tax effect, directly to
policyholders' contingency reserves of the Company. Given the uncertainties
associated with estimating the reserve, it is possible that the final cost of
the settlement could be different from the amounts presently provided for by the
Company. However, the Company does not believe that the ultimate resolution of
the settlement will have a material adverse effect on the Company's financial
position.
86
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 15--FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of the
Company's financial instruments:
<TABLE>
<CAPTION>
Year ended December 31
1997 1996
---------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
(In millions)
Assets
Bonds--Note 6 $22,986.0 $24,524.8 $22,467.0 $23,539.0
Preferred stocks--Note 6 640.6 695.8 416.2 451.0
Common stocks--Note 6 256.9 256.9 249.8 249.8
Mortgage loans on real estate--Note 6 7,851.2 8,215.9 7,964.0 8,400.2
Policy loans--Note 1 1,577.3 1,577.3 1,589.3 1,589.3
Cash and cash equivalents--Note 1 724.8 724.8 1,416.7 1,416.7
Liabilities
Guaranteed investment contracts--Note 1 11,499.4 11,516.8 11,921.6 11,943.2
Fixed rate deferred and immediate
annuities--Note 1 4,289.1 4,290.4 3,909.3 3,886.1
Supplementary contracts without
life contingencies--Note 1 40.9 42.1 45.6 46.0
Derivatives liabilities relating to:--Note 11
Interest rate swaps - 58.3 - 16.4
Currency rate swaps - 9.7 - 41.1
Interest rate caps - (0.6) - (0.6)
Interest rate floors - (0.4) - (0.1)
-
Commitments--Note 14 - 1,332.3 - 1,095.7
</TABLE>
The carrying amounts in the table are included in the statutory-basis statements
of financial position. The methods and assumptions utilized by the Company in
estimating its fair value disclosures are described in Note 1.
NOTE 16--IMPACT OF YEAR 2000 (UNAUDITED)
The Company has developed a plan to modify or replace significant portions of
its computer information and automated technologies so that its systems will
function properly with respect to the dates in the year 2000 and thereafter.
The Company presently believes that with modifications to existing systems and
conversions to new technologies, the year 2000 will not pose significant
operational problems for its computer systems. However, if certain
modifications and conversions are not made, or are not completed timely, the
year 2000 issue could have an adverse impact on the operations of the Company.
87
<PAGE>
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--CONTINUED
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE 16--IMPACT OF YEAR 2000 (UNAUDITED)--CONTINUED
The Company as early as 1994 had begun assessing, modifying and converting the
software related to its significant systems and has initiated formal
communications with its significant business partners and customers to determine
the extent to which the Company's interface systems are vulnerable to those
third parties' failure to remediate their own year 2000 issues. While the
Company is developing alternative third party processing arrangements as it
deems appropriate, there is no guarantee that the systems of other companies on
which the Company's systems rely will be converted timely or will not have an
adverse effect on the Company's systems.
The Company expects the project to be substantially complete by early 1999 and
expects the incremental cost to be between $35 million and $45 million. The
cost of the project and the date on which the Company believes it will complete
the year 2000 modifications are based on management's best estimates, which were
derived utilizing numerous assumptions of future events, including availability
of certain resources and other factors. However, there can be no guarantee that
these estimates will be achieved and actual results may differ materially from
those anticipated.
88
<PAGE>
HYPOTHETICAL ILLUSTRATIONS OF
DEATH BENEFITS AND CASH SURRENDER VALUES
The two illustrations that follow show how the Death Benefit and Cash
Surrender Value change with the investment experience of the Separate Account.
They are not projections of values; they are intended to show how a Certificate
works. They are "hypothetical" because they are based upon several assumptions,
as described below. Both illustrations assume that a Certificate with a Face
Amount of $100,000 has been bought by a 40-year old Covered Person. The
illustrations assume that a premium of $1,200 is paid at issuance and annually
on each Certificate Anniversary.
The first illustration assumes that a 2.85% charge is deducted for charges
attributable to premiums and that current cost of insurance, mortality and
expense risk charges of 0.45% per year, and maintenance charges of $2.00 will
continue for the indefinite future. It assumes that the Covered Person is in a
risk class that has current standardized cost of insurance charges equal to
rates shown on Table 1 under Section 79 of the Internal Revenue Code. It also
assumes that no surrender charge will be payable. The monthly maintenance
charge assumed applies to Certificates that do not involve any direct billing by
John Hancock. See "CHARGES DEDUCTED FROM CASH VALUE OR SUBACCOUNTS."
The second illustration is based upon the same assumptions, except it is
assumed that the maximum amount for charges attributable to premiums and for
cost of insurance, mortality and expense risk charges, and maintenance charges
permitted by this Prospectus have been deducted throughout the life of the
Certificate. It assumes that the Covered Person is in a risk class that has
maximum guaranteed cost of insurance charges equal to the maximum rates that
could be charged, which are 150% of the 1980 Commissioner's Standard Ordinary
Mortality Table (Male), Age Last Birthday (the "1980 CSO Table"). It also
assumes that a surrender charge of $25.00 will be payable.
Although John Hancock may pay Dividends under some Group Plans , neither
illustration reflects the payment of Dividends. See "DIVIDENDS."
Another assumption is that the Cash Value has been invested in equal
amounts in each of the Funds. Finally, there are three assumptions, shown
separately, about the average investment performance of the Funds. The first is
that there will be a uniform zero percent gross rate of return; that is, the
average Cash Value uniformly will be adversely affected by very unfavorable
investment performance. The other two assumptions are that investment
performance will be at a uniform gross annual rate of 6% and 12%. These are
assumptions; actual returns will fluctuate from year to year. Nevertheless,
these tables help show how the Cash Surrender Value and the Death Benefit change
with investment experience.
89
<PAGE>
The first column in the following illustrations shows the Certificate Year.
The second column, to provide context, shows what the aggregate amount would be
if the assumed premiums had been invested in a savings account paying a 6%
effective annual rate. Of course, if that were the case, there would be no life
insurance protection. The next three columns show the Death Benefit payable in
each of the years shown for the three different assumed investment returns.
Note that a gross return (as well as the net return) is shown at the top of each
column. The gross return represents the combined effect of income and capital
appreciation of the Funds before any reduction is made for investment management
fees or other Fund expenses. The net return reflects an average total annual
expense ratio of the Funds of [0.XX%], and the daily deduction from Cash Value
of 0.45% per year for the first table, which is based on current mortality and
expense risk charges, and 0.90% per year for the second table, which is based on
maximum mortality and expense risk charges. Thus, assuming maximum charges,
gross returns of 0%, 6%, and 12% are the equivalent of net returns of - [X.XX%,
X.XX%, AND X.XX%,] respectively.
The amounts shown assume that there has been no loan or withdrawal.
Upon request, John Hancock will provide comparable hypothetical illustrations
for a Certificate reflecting the proposed Covered Person's age, risk class,
proposed Face Amount of insurance, and proposed premium payments.
[HYPOTHETICAL ILLUSTRATIONS WILL GO HERE.]
90
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that Section.
REPRESENTATION OF REASONABLENESS
John Hancock Mutual Life Insurance Company represents that the fees and
charges deducted under the Policies, 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.
UNDERTAKING REGARDING INDEMNIFICATION
Pursuant to Article 9 of John Hancock's Bylaws and Section 67 of the
Massachusetts Business Corporation Law, John Hancock 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 John Hancock.
Insofar as indemnification for liability arising under the Securities Act
of 1933 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 Securities and Exchange Commission
such indemnification is against public policy as expressed in the 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 controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
Cross-Reference Table.
The prospectus consisting of 92 pages.
The undertaking to file reports.
The undertaking regarding indemnification.
The signatures.
The following exhibits:
<PAGE>
1.A.(1) John Hancock Board Resolution establishing the separate account.
(2) Not Applicable
(3) (a) Form of Distribution Agreement by and among John Hancock
Distributors, Inc., John Hancock Mutual Life Insurance Company,
and John Hancock Variable Life Insurance Company, incorporated by
reference from Pre-Effective Amendment No. 2 to Form S-6
Registration Statement of John Hancock Variable Life Account S
(File No. 333-15075) filed April 18, 1997.
(b) Specimen Variable Contracts Selling Agreement between John Hancock
Distributors, Inc., and selling broker-dealers, incorporated by
reference from Pre-Effective Amendment No. 2 to Form S-6
Registration Statement of John Hancock Variable Life Account S
(File No. 333-15075) filed April 18, 1997.
(c) Schedule of sales commissions (To be filed by amendment.)
(4) Not Applicable
(5) Form of group variable universal life insurance master policy
and certificate.
(6) Charter and By-Laws of John Hancock Mutual Life Insurance Company,
previously filed electronically on April 19, 1996.
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) Form of application for Policy. (To be filed by amendment.)
2. Included as exhibit 1.A (5) above
<PAGE>
3. Opinion and consent of counsel as to securities being registered.
4. Not Applicable
5. Not Applicable
6. Opinion and consent of actuary. (To be filed by amendment.)
7. Consent of independent auditors. (To be filed by amendment.)
8. Memorandum describing John Hancock's issuance, transfer and redemption
procedures for the policy pursuant to Rule 6e-3(T)(b)(12)(iii). (To be
filed by amendment.)
9. Power of attorney for Robert J. Tarr. Powers of attorney for Bodman,
Gifford, Boyan, Morton, Magee, Connors, Brown, Booth, Vappi, Staley,
D'Alessandro, Fast, Aborn, Bok, Feldstein, Fish, Syron and Hawley,
previously filed electronically on April 19, 1996.
10. (Not applicable.)
- -------------------------------------------
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the John
Hancock Mutual Life Insurance Company has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunder duly
authorized, and its seal to be hereunto fixed and attested, all in the City of
Boston and Commonwealth of Massachusetts on the 17th day of April, 1998.
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
(SEAL)
By STEPHEN L. BROWN
---------------------------------
Stephen L. Brown
Chairman of the Board and
Chief Executive Officer
Attest: RONALD J. BOCAGE
--------------------------
Ronald J. Bocage
Vice President and Counsel
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities with John Hancock Mutual Life Insurance Company and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
THOMAS E. MOLONEY Executive Vice President
- ----------------- and Chief Financial Officer
Thomas E. Moloney (Principal Financial Officer) April 17, 1998
JANET A. PENDLETON Vice President/Controller
- ------------------ (Principal
Janet A. Pendleton Accounting Officer) April 17, 1998
STEPHEN L. BROWN Chairman of the Board and
- ---------------- Chief Executive Officer
Stephen L. Brown (Principal Executive Officer)
for himself and as
Attorney-in-Fact April 17, 1998
</TABLE>
FOR: Foster L. Aborn Vice Chairman of the Board
William L. Boyan Vice Chairman of the Board
David F. D'Alessandro President, Chief Operating Officer & Director
Nelson S. Gifford Director E. James Morton Director
John F. Magee Director Joan T. Bok Director
John M. Connors Director Robert E. Fast Director
Robert J. Tarr, Jr. Director Samuel W. Bodman Director
C. Vincent Vappi Director Lawrence K. Fish Director
Richard F. Syron Director Kathleen F. Feldstein Director
I. MacAllister Booth Director
Michael C. Hawley Director
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, John Hancock Mutual Variable Life Insurance Account G, certifies
that it meets all of the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, and its seal to be hereunto fixed and
attested, all in the City of Boston and Commonwealth of Massachusetts on the
17th day of April, 1998.
JOHN HANCOCK MUTUAL VARIABLE LIFE INSURANCE ACCOUNT G
(Registrant)
By John Hancock Mutual Life Insurance Company
(Depositor)
(SEAL)
By STEPHEN L. BROWN
---------------------------------
Stephen L. Brown
Chairman of the Board and
Chief Executive Officer
Attest: RONALD J. BOCAGE
--------------------------
Ronald J. Bocage
Vice President and Counsel
<PAGE>
EXHIBIT 1.A.(1)
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
BOSTON, MASSACHUSETTS
VOTE OF BOARD OF DIRECTORS
Meeting of February 12, 1996
VOTED: Except as otherwise specifically provided by vote of this Board, to
authorize the Committee of Finance to establish, independent of the
Company's General Account, such pooled or non-pooled separate
investment accounts and such investment classes within such separate
investment accounts as may be necessary for the investment of funds
received under contracts with group benefit plans or under contracts
with other entities or persons which hold pools of assets.
SUPERSEDES the Vote of this Board, dated September 10, 1979, regarding the
establishment of certain separate investment accounts
/s/ Bruce E. Skrine
SECRETARY
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
MEETING OF APRIL 8, 1998
PROPOSED COMMITTEE OF FINANCE VOTE REGARDING THE
ESTABLISHMENT OF GROUP BENEFIT SEPARATE INVESTMENT
ACCOUNTS OF THE COMPANY FOR PRODUCTS OF
BUSINESS INSURANCE OPERATIONS
VOTED: In accordance with the authority delegated to this Committee by the
Board of Directors at its meeting of February 12, 1996, with respect
to separate investment accounts of the Company for group benefit plans
and other entities or persons holding pools of assets,
(1) to authorize any two of that group consisting of the Chairman of
this Committee, the heads of the Investment and Pension Sector,
Investment Strategy Management and Business Insurance Operations,
and Senior Vice President John M. DeCiccio, acting jointly
("Authorizing Officers"):
(a) to authorize the establishment pursuant to Sections 123F and
132G of Chapter 175 of the Massachusetts General Laws, as
amended, of such pooled or nonpooled separate investment
accounts and such investment classes within any separate
investment account as may be necessary for the investment of
funds and the management of assets received by the Company
under products provided by the Company under products
provided by Business Insurance Operations ("BIO Products"),
which BIO Products may provide values and/or benefits on a
guaranteed or variable basis, or both;
(b) to authorize the registration of (i) such separate accounts
and such investment classes as investment companies under
the Investment Company Act of 1940 (the "40 Act"), and (ii)
the BIO Products related to such investment companies under
the Securities Act of 1933 (the "33 Act");
(c) to approve the investment policy and guidelines for each
such separate investment account or investment class; and
(d) to approve the appointment and termination of the
appointment of one or more sub-investment managers
<PAGE>
for the Company ("Sub-Investment Managers") for any such
separate investment account or any investment class;
provided that if a Sub-Investment Manager which has been so
appointed is not an investment manager whose officers have
been previously authorized by this Committee to acquire or
dispose of investments of the Company between meetings of
this Committee, then such Sub-Investment Manager and such
officers must be so authorized by this Committee before such
Sub-Investment Manager and such officers take any action
with respect to the investments of such separate investment
account or investment class;
provided that the legal details regarding the actions described
above shall be subject to Law Sector approval.
(2) to authorize any Authorizing Officer or any Senior Vice
President, Vice President or Second Vice President of Business
Insurance Operations to execute and deliver such agreements or
other documents as may be necessary to establish any separate
investment account of the Company for the investment of funds and
the management of assets received under BIO Products and for any
registration under the 40 Act and the 33 Act, and to enter into
and to execute and deliver any other agreement or document,
including, without limitation, investment management agreements
with each Sub-Investment Manager, in furtherance thereof on
behalf of the Company and to take such other action with respect
to any such agreements or other documents (including any
amendment thereto) and with respect to any actions taken by
Authorizing Officers pursuant to the subject matter of this vote,
as such person shall determine to be in the best interests of the
Company with respect to such separate investment account or
investment class, provided that the legal details regarding the
agreements and other documents described above shall be subject
to Law Sector approval.
(3) to require that the Chairman of this Committee report to this
Committee not less frequently than quarterly:
(a) the establishment of any separate investment account or
investment class within any separate investment account
pursuant to this vote;
<PAGE>
(b) the authorization of any registration under the 40 Act and
33 Act;
(c) the approval of the investment objectives of and guidelines
for any such separate investment account or investment class
thereof and any material modifications or amendments with
respect thereto; and
(d) the appointment or termination of appointment of Company
personnel as investment manager and/or the appointment or
termination of appointment of any Sub-Investment Manager for
any such separate investment account or investment class
thereof.
<PAGE>
[LETTERHEAD OF JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY]
April 15, 1998
Memorandum to: Foster L. Aborn
Vice Chairman of the Board
Re: Separate Investment Account G
Group Variable Universal Life Insurance (GVUL)
----------------------------------------------
The purpose of this memorandum is to obtain your approval, pursuant to vote
of the Committee of Finance dated April 8, 1998, to (1) create new Separate
Investment Account G, effective April 15, 1998, and (2) adopt for such Account
Investment Objectives, Policy and Operating Guidelines attached as Exhibit A.
Separate Investment Account G is being established exclusively for assets
which will support the new group variable universal life insurance product.
Monies allocated to this Account will be further allocated to one or more
sub-accounts, each of which will correspond to one of the several investment
options offered to covered individual certificate holders under group variable
universal life insurance policies. As stated in the attached investment
guidelines, and as will be stated in the Prospectus to be filed shortly with the
Securities and Exchange Commission, monies received must be invested as directed
by such individuals. Consequently, the Account will not require an investment
manager. Initially, the only investment options offered will be in the
portfolios of the John Hancock Variable Series Trust I. In time, however, other
investment options may be added, at which time the attached investment
guidelines will be amended.
If the foregoing is acceptable to you, please sign below.
/s/ Nancy F. Bern
-----------------------------
Nancy F. Bern
Senior Vice President
Business Insurance Operations
Approved: /s/ Foster L. Aborn
--------------------------
Foster L. Aborn
Vice Chairman of the Board
<PAGE>
EXHIBIT A
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
SEPARATE INVESTMENT ACCOUNT G
(GROUP VARIABLE UNIVERSAL LIFE INSURANCE)
INVESTMENT OBJECTIVE, POLICY & OPERATING GUIDELINES
The Account shall invest all monies received under group variable universal life
insurance policies in one or more portfolios of the John Hancock Variable Series
Trust I, as directed from time to time by certificate holders under and in
accordance with the terms of such group policies, the prospectus and the
registration statement filed with the Securities and Exchange Commission.
<PAGE>
EXHIBIT 1.A.(5)
POLICIES ISSUED BY JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE, BOSTON, MASSACHUSETTS 02117
GVUL 8/98
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
BOSTON, MASSACHUSETTS 02117
(JOHN HANCOCK)
John Hancock agrees with the Policyholder to pay the benefits and provide
the other rights set forth in this policy (the Policy). Such agreement is
subject to all conditions and provisions of the Policy.
Policy Number: [55000-GRP]
Policy Effective Date: [July 1, 1998]
Policyholder: [Trustees of the Group Insurance Multiple
Employer Trust
Edwardsville, Illinois]
Jurisdiction of Issue:
This Policy is delivered in [Illinois. It is governed by the laws of that
state.]
Policy Anniversaries:
[July 1 of each year.]
Premium Due Dates:
The Policy Effective Date; and the first day of each succeeding month.
The Policy is issued in consideration of the Policyholder's application and
payment of premiums to John Hancock. It takes effect on the Policy
Effective Date.
The conditions and provisions in this and the following pages and in
amendments, riders, and exhibits included at issue or added thereafter are
a part of the Policy.
John Hancock has executed the Policy as of [July 1, 1997] at Boston,
Massachusetts. The Policy has been duly countersigned.
COUNTERSIGNED _______________________ _______________________
REGISTRAR LICENSED RESIDENT AGENT
SECRETARY PRESIDENT
GROUP VARIABLE UNIVERSAL LIFE INSURANCE POLICY
P-GVUL (98-3)
Printed in U.S.A.
1
<PAGE>
TABLE OF CONTENTS
DEFINITIONS......................................................PAGE 3
PREMIUMS.........................................................PAGE 3
Premium Payment.............................................Page 3
Premium For Changes in Insurance ...........................Page 4
Grace Period................................................Page 4
Severability of Individual Coverage ........................Page 4
Right to Change Premium Rates ..............................Page 5
Annual Surplus Distribution.................................Page 5
Premium Calculations........................................Page 5
STANDARD PROVISIONS..............................................PAGE 6
Insured's Certificate.......................................Page 6
Entire Contract.............................................Page 6
Conformity with Law.........................................Page 6
Non-Waiver of Policy Provisions.............................Page 6
Policyholder Not Agent of John Hancock......................Page 6
MISCELLANEOUS PROVISIONS ........................ ...............PAGE 7
Qualifying Groups ..........................................Page 7
Eligible Class..............................................Page 7
Insurance Records...........................................Page 7-8
Inclusion of Qualifying Groups..............................Page 8
Amendment, Renewal and Termination..........................Page 8
*Exhibits................................................Page 9
NOTICE TO HOLDER OF THIS POLICY .................................PAGE 10
*A Table of Contents is included in each attached Exhibit
P-GVUL (98-3)
Printed in U.S.A.
2
<PAGE>
DEFINITIONS
Some terms used in this Policy are defined below. Others may be explained where
used in another part of the Policy.
"Covered Person" means the person named as such on a coverage statement issued
under this Policy.
An "Employer" is one who provides for a wage, salary or pension deduction
arrangement with respect to premium contributions which is satisfactory to the
Board of Governors and to John Hancock or is other wise acceptable to the Board
of Governors and to John Hancock.
PREMIUMS
PREMIUM PAYMENT
Each premium is payable [in advance on its due date. The due date for each
Employer whose employees are insured under this policy appears in the Master
Schedule of the Exhibit that applies to that Employer.] Checks shall be made
payable only to John Hancock; they shall be sent directly to John Hancock at the
address specified in writing by John Hancock to the {Policyholder}.
No person or entity may accept any premium payment on behalf of John Hancock,
without express, specific and valid written authorization by John Hancock to do
so.
PREMIUM AMOUNTS
Each monthly premium payment shall consist of the aggregate amounts of premium
received.
[PREMIUM FOR CHANGES IN INSURANCE
Premium charges for insurance which becomes effective during an Employer Month
will begin on the first day of the Employer Month in which the insurance becomes
effective.] [The term "Employer Month," as used herein, means the period of one
month which begins with that day in each calendar month which corresponds to the
day on which premiums are due.]
P-GVUL (98-3)
Printed in U.S.A.
3
<PAGE>
PREMIUMS -- CONTINUED
GRACE PERIOD
If any premium, after the first premium, is not paid by the Policyholder on or
prior to its due date, a grace period shall be granted for the payment of that
premium. But, the grace period will not be granted if on or prior to such date
the Policyholder has given John Hancock written notice the Policy is to
terminate. The grace period begins with the premium due date. It lasts for 31
days, unless ended on an earlier date which the Policyholder may specify in a
written notice given to John Hancock during the grace period.
If the grace period lasts for 31 days it will be extended until the end of the
Month after the Month in which it began, unless ended on such earlier date as
the Policyholder or John Hancock may specify by written notice given to the
other during such extension. But, such extension will not occur at all, if
either party has given written notice to the other during the 31 day period that
the grace period is not to last more than 31 days.
If the grace period is to be ended by written notice, the date it ends will not
be earlier than the date either party receives the notice. Notice to John
Hancock must be received at its Home Office.
Premium not paid on or before the 35th day after it is due is subject to a late
charge for the time it remains unpaid after that day. Such charges shall be
determined by John Hancock.
If any premium is not paid in full by the end of the grace period, the Policy
will terminate at the end of the grace period.
[The Policyholder will be liable to John Hancock for:
(a) pro rata premium for the days the Policy is in force during the grace
period;
(b) any other premium remaining unpaid when the Policy terminates; and
(c) accrued late charges.]
SEVERABILITY OF INDIVIDUAL COVERAGE
No coverage on any insured who has been charged and has paid all insurance
charges associated with his or her coverage, may be cancelled as a result of a
failure to remit premium charges by the Employer. Upon notice by John Hancock to
the Insured, such individual shall pay all future charges directly to the
Policyholder.
P-GVUL (98-3)
Printed in U.S.A.
4
<PAGE>
PREMIUMS -- CONTINUED
RIGHT TO CHANGE PREMIUM RATES
John Hancock may change premium rates for any or all coverages [as of that day
in each month which is the same day as that on which the immediately preceding
Employer Anniversary occurred. Notice of a new premium rate will be given to
the Policyholder and the Employer by John Hancock not less than 31 days before
the date the new rate takes effect.]
ANNUAL SURPLUS DISTRIBUTION
As of each Policy Anniversary to which premiums have been paid in full there
shall be distributed heron such share, if any, of a divisible surplus as may be
apportioned hereto by John Hancock.
[PREMIUM CALCULATIONS
There will be an agreed upon payroll deduction for each employee. The
individual monthly premium contributions for each Covered Person and any
applicable additional coverage shall be as determined from the schedules set
forth in the Premium Provisions section of the Exhibits.]
P-GVUL (98-3)
Printed in U.S.A.
5
<PAGE>
STANDARD PROVISIONS
COVERED PERSON'S CERTIFICATE
John Hancock will issue, for delivery to each Covered Person, a certificate
which:
(a) describes the essential features of the insurance; and
(b) states to whom the benefits are payable.
ENTIRE CONTRACT
The entire contract consists of:
(a) the Policy;
(b) the application of the Policyholder, a copy of which is attached to
and is a part of the Policy;
(c) individual applications, if any, of Covered Persons.
All statements by the [Policyholder, or individual Covered Persons shall, in the
absence of fraud, be deemed representations and not warranties. No statement by
the Policyholder, or any Covered Persons, or on their behalf, shall be used in
defense to a claim under the Policy unless:
1) contained in a written application signed by the Covered Person; and
2) the Covered Person is or has been provided a copy of that application.
CONFORMITY WITH LAW
Any provisions of the Policy which, on its effective date, is in conflict with
the law of the Jurisdiction of Issue, is amended to conform with the minimum
requirements of such law.
If John Hancock determines that residents of any political subdivision are
precluded by the law of such subdivision from being insured for one or more
coverages in the Policy, such persons shall not be included in the class of
persons eligible for such coverages. Amounts of insurance on each person
insured under the Policy shall also be subject to any applicable statutory
limits.
NON-WAIVER OF POLICY PROVISIONS
Failure of John Hancock to insist on compliance with any provisions of the
Policy at any time or under any circumstances shall not as to any other time or
occurrence, whether or not involving the same circumstances:
(a) waive or modify such provision; or
(b) in any way render it unenforceable.
POLICYHOLDER NOT AGENT OF JOHN HANCOCK
Neither the Policyholder not the Employer shall be deemed the agent of John
Hancock for any purpose under the Policy.
P-GVUL (98-3)
Printed in U.S.A.
6
<PAGE>
MISCELLANEOUS PROVISIONS
[ELIGIBLE GROUPS
A GROUP SHALL BE DEEMED AN ELIGIBLE GROUP ONLY IF IT IS:
(a) composed of:
1) active employees and directors of an Employer,
2) the eligible dependents of such active employees and directors,
3) retirees of an Employer and their eligible dependents;
4) former eligible dependent children who have reached the age limit
for dependent child coverage;
5) former employees who were covered under this Policy or a Policy
that this Policy replaces; and
6) partners and their eligible dependents.
(b) acceptable to the Board of Governors and to John Hancock; and;
(c) identified in the records of the Trustee as being a qualifying group.
An eligible dependent means the spouse or dependent child of an employee,
director or retiree.
The term "Group Insurance Multiple Employer Trust" means the trust fund created
by the Declaration of Trust made by and between the Board of Governors and the
Trustee. Such Declaration shall be as it stands on the Policy Effective Date
and, with the consent of John Hancock, as amended thereafter.
The term "Board of Governors" means only the Board of Governors of the Group
Insurance Multiple Employer Trust.
The term "Trustee" means the Trustee of the Group Insurance Multiple Employer
Trust].
ELIGIBLE CLASS
The class of persons who may be insured under the Policy is set forth in the
Master Schedule section of the Exhibits.
[INSURANCE RECORDS
The Policyholder shall:
(a) maintain records with respect to insurance under the Policy; and
(b) furnish John Hancock such information as it may require to administer
the insurance.]
P-GVUL (98-3)
Printed in U.S.A.
7
<PAGE>
MISCELLANEOUS PROVISIONS -- CONTINUED
[INSURANCE RECORDS CONTINUED
There shall be open for inspection by John Hancock at all reasonable times all
records which have a bearing on:
1) the Policy; or
2) any insurance under the Policy.
Clerical errors shall not prejudice the right of John Hancock or, except as
otherwise provided in the Policy, of any person with a beneficial interest in
insurance under the Policy.]
[INCLUSION OF ELIGIBLE GROUPS
An Eligible Group may qualify for inclusion in the Policy only by being approved
in writing by John Hancock and the Policyholder.
AMENDMENT, RENEWAL, AND TERMINATION
The Policy may be amended or terminated at any time by written agreement between
John Hancock and the Policyholder.
The Policyholder may terminate the Policy by written notice to John Hancock at
its Home Office. If such notice is given, the date the Policy terminates shall
not be less than 31 days after John Hancock receives such notice. But, John
Hancock and the Policyholder may agree to an earlier date.
The Policy shall renew for a further term of one policy year as of each Policy
Anniversary on which premiums have been paid in full. But, if either the
Policyholder or John Hancock has given written notice to the other, as provided
above, that the Policy is to terminate, the Policy will not renew after its
termination date.
No amendment, renewal, or termination of the Policy shall require the consent of
any Covered Person or other person having beneficial interest herein.
Only the following persons have power on behalf of John Hancock to terminate or
change the Policy or waive any of its provisions:
* the President;
* a Vice President;
* the Secretary, or an Assistant Secretary.
No agent has authority to change the Policy or waive any of its provisions.
P-GVUL (98-3)
Printed in U.S.A.
8
<PAGE>
MISCELLANEOUS PROVISIONS -- CONTINUED
EXHIBITS
Set forth below is a Table of the Exhibits which are a part of the Policy.
TABLE OF EXHIBITS:
EXHIBIT NO. APPLIES TO: INCLUDES RIDERS AND AMENDMENT NO.
1 CERTAIN INSURED OF:
P-GVUL (98-3)
Printed in U.S.A.
9
<PAGE>
NOTICE TO THE HOLDER OF THIS POLICY
As a holder of this Policy, you are a member of the John Hancock Mutual Life
Insurance Company. You are entitled to vote either in person or by proxy at all
meetings of such Company. The annual meetings are held at the Home Office of
John Hancock at twelve o'clock noon on the second Monday of April each year.
P-GVUL (98-3)
Printed in U.S.A.
Document Flesch Score 50.4
10
<PAGE>
{EXHIBIT NUMBER {1}}
MASTER SCHEDULE
[Employer: {John Doe Manufacturing Company}
Group Number: {12345}
Employer Participation Date: {January 1, 1998}
Eligible Persons: Employees, Spouses and Dependent Children
Employer Anniversary Date: {January 1}
Premium Due Date: The Employer Participation Date and the same
day of each succeeding month.
The term "Employer" includes each of its subsidiaries and affiliates
listed below:
{John Doe Mining Company}
{John Doe Corrugated Box Company}
- --------------------------------------------------------------------------------
Additional Coverage through Riders
<TABLE>
<CAPTION>
RIDER RIDER APPLIES EFFECTIVE DATE
- ----------------------------------------------------- ---------------------------- ----------------------------
<S> <C> <C>
Accelerated Death Benefit Option {YES {January 1, 1998
Accidental Death And Dismemberment Benefit {YES {January 1, 1998
Waiver of Premium {YES {January 1, 1998
Dependent Term Life Insurance Rider {YES {January 1, 1998}]
</TABLE>
GPG-VEXH-0001 [1 VEXH]
Ed 98-3
Printed in U.S.A.
1
<PAGE>
{EXHIBIT NUMBER {1}}
MASTER SCHEDULE
ELIGIBLE CLASS: {All Full-time Employees}
WAITING PERIOD: {None
[AGE LIMIT FOR DEPENDENT CHILDREN: {{15} days or over up to {19th} birthday,
{25th} birthday if full-time student]
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
FACE AMOUNT OF INSURANCE
------------------------
{ALL EMPLOYEES} Up to 6 times {Earnings}, subject to a
maximum of {$1,000,000.
[SPOUSES OF EMPLOYEES Any multiple of $10,000 subject to the
lesser of:
(a) 50% of the Employee's Face Amount; or
(b) {$100,000}.]
Amounts of insurance will be rounded to the next higher multiple of $1,000 if
not already a multiple of $1,000.
[EARNINGS means the Employee's annual, monthly or weekly pay based on a work
week of not more than forty (40) hours. The Earnings amount used must be
verified by Us before use in calculating benefits. Commissions, bonuses,
overtime and other special pay are not included. Earnings from sources other
than the Employer are not included in determining benefits.]
GUARANTEE ISSUE LIMITS
For Employees who enroll during the The lesser of:
initial enrollment period and new (a) {two (2)} times Earnings; or
Employees enrolling within 31 days (b) {$200,000}
of eligibility
[For Spouses of Employees {$20,000}]
Evidence of Good Health will be required for all amounts of insurance in excess
of the applicable Guarantee Issue Limit shown above. Such evidence must be
provided at no expense to John Hancock.
Evidence of Good Health is required for any person enrolling after 31 days of
eligibility, regardless of the amount elected
RIDER BENEFITS
MAXIMUM
--------------------------------------
[Accidental Death Benefit Equal to Face Amount of Life Insurance]
[Dependent Children's Insurance Option I - {$2,500}
Option II - {$5,000}
Option III - {$10,000}]
[Accelerated Death Benefit 50% to a maximum of {$250,000}]
GPG-VEXH-0001 [2 VEXH]
Ed 98-3
Printed in U.S.A.
2
<PAGE>
{EXHIBIT NUMBER {1}}
MASTER SCHEDULE
ELIGIBLE CLASS: {All dependent children of Full-time
Employees at the age limit}
WAITING PERIOD: {None}
[AGE LIMIT FOR DEPENDENT CHILDREN: {19th} birthday, {25th} birthday if
full-time student]
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
FACE AMOUNT OF INSURANCE
----------------------------------------
{DEPENDENT CHILDREN {5} times the amount of coverage under the
child rider, subject to a maximum of $50,000.
Amounts of insurance will be rounded to the next higher multiple of $1,000 if
not already a multiple of $1,000.
GUARANTEE ISSUE LIMITS
{DEPENDENT CHILDREN} $10,000
Evidence of Good Health will be required for all amounts of insurance in excess
of the applicable Guarantee Issue Limit shown above. Such evidence must be
provided at no expense to John Hancock.
GPG-VEXH-0001 [3 VEXH]
Ed 98-3
Printed in U.S.A.
3
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
(BOSTON, MASSACHUSETTS)
EMPLOYEE CERTIFICATE
Employer: {ABC COMPANY}
Employer Group Number: {98765-123}
Employer Participation Date: {JANUARY 1, 1998}
Employer Anniversary Date: {JANUARY 1} EACH YEAR
We certify that the person named as the Covered Person on the Coverage Statement
is insured for the group variable universal life insurance benefits provided by
the Policy. This certificate does not apply to You unless a Coverage Statement
showing Your name and the certificate effective date is attached.
{This certificate replaces all certificates previously issued to You under the
Policy.} This certificate includes the Coverage Statement and all riders that
may be attached.
The shell introduction defines the Policy as "the Policy". Ron wouldn't have
known that since when we worked on this as a team we were planning a new
approach. All these pages that are Dual, must use the defined term.
The Policy and this certificate describe all of the benefits, limitations and
provisions that apply to You.
This certificate includes flexible premiums, adjustable benefits, group life
insurance and a paid-up benefit option available at any time.
THE CASH VALUE IN THE FIXED ACCOUNT WILL BE CREDITED WITH INTEREST AT A
GUARANTEED RATE SHOWN ON PAGE {2}. WE MAY CREDIT ADDITIONAL INTEREST IN EXCESS
OF THE GUARANTEED RATE. SEE THE FIXED ACCOUNT PROVISION ON PAGE {13}.
THE CASH VALUE IN EACH INVESTMENT OPTION OF THE SEPARATE ACCOUNT IS BASED ON THE
INVESTMENT EXPERIENCE OF THAT INVESTMENT OPTION AND MAY INCREASE OR DECREASE
DAILY. IT IS NOT GUARANTEED AS TO DOLLAR AMOUNT. SEE THE SEPARATE ACCOUNT
PROVISION ON PAGE {14}.
Right to Examine Certificate -- Please read this certificate. This certificate
may be returned to Us within 30 days from the date of receipt. If We receive the
certificate within the 30 day period, this coverage will be void from the
beginning. We will refund any premiums paid. During that period all payments
will be invested in the {Money Market} Investment Option.
GCG-VCOV-0001 [1-VCOV]
Ed 98-3
Printed in U.S.A.
1
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE COVERAGE STATEMENT
Employer: {ABC Company} Employer Participation Date:
{January 1, 1998}
Employer Group Number: {98765-123} Employer Anniversary Date:
{January 1}
Owner: {John Doe Certificate Number: {00001}
123 Any Street
Anytown, USA 53478} Owner Number: {123456789}
Effective Date of Certificate: {01/01/98} Coverage Statement as of {02/01/98
Covered Person: {John Doe} Date of Birth: {02/18/45}
Face Amount: {$300,000}
Initial Regular Monthly Payment: {$50}
Limiting Age: Certificate Anniversary that follows the Covered Person's
95th birthday.
GUARANTEED INTEREST RATE FOR FIXED ACCOUNT {4%} PER YEAR
INITIAL ALLOCATION OF NET PREMIUM
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Fixed Account % {Money Market} % {Diversified Mid-Cap Growth} %
{Growth & Income % {Managed} % {Short Term Bond} %
{Large Cap Growth % {Real Estate Equity} % {Mid Cap Growth} %
{Sovereign Bond % {Strategic Bond} % {Mid Cap Value} %
{Equity Index % {Large Cap Value} % {Small Cap Growth} %
{Small Cap Value % {International Balanced} % {International Opportunities} %
</TABLE>
ADDITIONAL COVERAGE
<TABLE>
<CAPTION>
Rider RIDER APPLIES EFFECTIVE DATE
- ----------------------------------------------------- ---------------------------- ----------------------------
<S> <C> <C>
Accelerated Death Benefit Option {YES} {January 1, 1998}
Accidental Death And Dismemberment Benefit {YES} {January 1, 1998}
Waiver of Premium {NO} {January 1, 1998}
Dependent Term Life Insurance Rider {YES} {January 1, 1998}
Dependent Child Term Life Amount {$2,500}
</TABLE>
This Coverage Statement is to be attached to Your certificate. It replaces any
prior Coverage Statement page that has been delivered to You under the Policy
and such prior Coverage Statement is void.
GCG-VCCH-0001 [1-VSCH]
Ed 98-3
Printed in U.S.A.
2
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
INVESTMENT OPTIONS
The following Investment Options are available to the Owner. A very brief
description of the investment objectives of each is set forth here.
[GROWTH & INCOME PORTFOLIO: The investment objective of this Portfolio is to
achieve intermediate and long-term growth of capital, with income as a secondary
consideration. This objective will be pursued by investments principally in
common stocks (and securities convertible into or with rights to purchase common
stocks) of companies believed to offer growth potential over both the
intermediate and long-term.]
[LARGE CAP GROWTH PORTFOLIO: The investment objective of this Portfolio is to
achieve above-average capital appreciation through the ownership of common
stocks (and securities convertible into or with rights to purchase common
stocks) of companies believed to offer above average capital appreciation
opportunities. Current income is not an objective of the Portfolio.]
[SOVEREIGN BOND PORTFOLIO: The investment objective of this Portfolio is to
provide as high a level of long-term total rate of return as is consistent with
prudent investment risk, through investment primarily in a diversified portfolio
of freely marketable debt securities. Total rate of return consists of current
income, including interest and discount accruals, and capital appreciation.]
[MONEY MARKET PORTFOLIO: The investment objective of this Portfolio is to
provide maximum current income consistent with capital preservation and
liquidity. It seeks to achieve this objective by investing in a managed
portfolio of high quality money market instruments.]
[MANAGED PORTFOLIO: The investment objective of this Portfolio is to achieve
maximum long-term total return consistent with prudent investment risk.
Investments will be made in common stocks, convertibles, and other equity
instruments, in bonds and other fixed income securities and in money market
instruments.]
[REAL ESTATE EQUITY PORTFOLIO: The investment objective of this Portfolio is to
provide above-average income and long-term growth of capital by investment
principally in equity securities of companies in the real estate and related
industries.]
[DIVERSIFIED MID CAP GROWTH PORTFOLIO: The investment objective of this
Portfolio is to provide long-term growth of capital through a diversified
portfolio investing primarily in common stocks of medium capitalization growth
companies.]
[SHORT TERM BOND PORTFOLIO: The investment objective of this Portfolio is to
provide a high level of current income consistent with a low degree of share
price fluctuation through investment primarily in a diversified portfolio of
short- and intermediate-term investment grade debt obligations.]
[EQUITY INDEX PORTFOLIO: The investment objective of this Portfolio is to
provide investment results that correspond to the total return of the U.S.
market as represented by the S&P 500 utilizing common stocks that are publicly
traded in the United States.]
[LARGE CAP VALUE PORTFOLIO: The investment objective of this Portfolio is to
provide substantial dividend income, as well as long-term capital appreciation,
through investment in the common stocks of established companies believed to
offer favorable prospects for increasing dividends and capital appreciation.]
[MID CAP GROWTH PORTFOLIO: The investment objective of this Portfolio is to
provide long-term growth of capital through a non-diversified portfolio
investing largely in common stocks of medium capitalization companies.]
GCG-VOPT-0001 [1-VOPT]
Ed 98-3
Printed in U.S.A.
3
<PAGE>
[MID CAP VALUE PORTFOLIO: The investment objective of this Portfolio is to
provide long-term growth of capital primarily through investment in common
stocks of medium capitalization companies believed to sell at a discount to
their intrinsic value.]
[SMALL CAP GROWTH PORTFOLIO: The investment objective of this Portfolio is to
provide long-term growth of capital through a diversified portfolio investing
primarily in common stocks of small capitalization emerging growth companies.]
[SMALL CAP VALUE PORTFOLIO: The investment objective of this Portfolio is to
provide long-term growth of capital by investing in a well diversified portfolio
of equity securities of small capitalization companies exhibiting value
characteristics.]
[STRATEGIC BOND PORTFOLIO: The investment objective of this Portfolio is to
provide a high total return consistent with moderate risk of capital and
maintenance of liquidity, from a portfolio of domestic and international fixed
income securities.]
[INTERNATIONAL OPPORTUNITIES PORTFOLIO: The investment objective of this
Portfolio is to provide capital appreciation through investment in common stocks
of primarily well-established, non-United States companies.]
[INTERNATIONAL BALANCED PORTFOLIO: The investment objective of this Portfolio
is to maximize total U.S. dollar return, consisting of capital appreciation and
current income, through investment in non-U.S. equity and fixed income
securities.]
GCG-VOPT-0002 [2-VOPT]
Ed 98-3
Printed in U.S.A.
4
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
DEFINITIONS 1-4
GENERAL PROVISIONS
When You are Eligible For Employee Insurance 5
Changing Classes 5
When You Become Insured 5
[Guarantee Issue Limit] 5
[Employee Deferral Rule] 6
Reinstatement 6
[Changes in Amounts of Insurance] 7
Proof of Good Health 7
Deferral Rule for Increases 7
[When Your Dependents Are Eligible] 8
[When Dependent Coverage Becomes Effective] 8
LIFE INSURANCE BENEFIT
What We Pay 9
Minimum Death Benefit 9
[Age and Retirement Reductions] 10
Beneficiary 10
Change in Beneficiary 10
Payment to Beneficiary 10
Facility of Payment 10
Simultaneous Death Provision 11
Owner 11
[Assignment] 11
[Suicide Exclusion] 11
Cash Value 12
Fixed Account 13
Separate Account 14
Right to Change Allocation of Payments 15
PAYMENTS DURING YOUR LIFETIME
[Loans] 16
[Published Monthly Average] 16
[Loan Repayment] 16
[Effect of Loan on Cash Value] 17
[Effect of Loan on Death Benefit] 17
Withdrawals 17
Surrenders 17
[Paid-up Insurance] 18
Deferment 18
</TABLE>
GCG-VTOC-0001 [1-VTOC]
Ed 98-3
Printed in U.S.A.
5
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
TABLE OF CONTENTS -- CONTINUED
<TABLE>
<CAPTION>
Page
----
<S> <C>
PREMIUM
Regular Monthly Payments 19
Date of Premium Receipt 19
Other Payments 19
Limits 19
Rate Basis 20
Monthly Deductions 20
Grace Period 20
Table of Guaranteed Rates 21
TERMINATION PROVISIONS
When Your Death Benefit Ends 22
Cancellation of Participation by Employer 22
[INSURANCE PORTABILITY
Your Eligibility under the Group Plan Ends 22
Your Employer's Participation Under the Policy Ends 22
Successor Plan 22
No Successor Plan] 23
Conversion Rights When You Cease to be Eligible 23
Conversion Rights on Benefit Termination 23
Death During Conversion Period 23
MISCELLANEOUS PROVISIONS
Misstatements 24
Incontestability 24
Account Statement 24
Legal Action 24
Recovery of Payment 24
Examinations and Autopsy 24
Change in Certificate 24
NOTICE 25
</TABLE>
GDG-VTOC-0002 [2-VTOC]
Ed 98-3
Printed in U.S.A.
6
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
DEFINITIONS
Here are some of the terms used in the Policy. Other terms are defined where
used in the Policy. All defined terms are important in describing rights under
the Policy. Please refer back to these meanings as You read. Defined terms are
presented with capital letters to help identify them as such.
[ACTIVELY AT WORK OR ACTIVE WORK means that You
1. are present at the Employer's place of business or another work site
designated by the Employer; and
2. are performing the duties of Your job; and
3. are producing the work product required by Your job.
On any day that is not a regularly scheduled work day (i.e., vacation, holiday
or weekend), You are considered Actively At Work if You:
a) are not hospital confined; and
b) are not disabled due to Injury or Sickness; and
c) were Actively At Work on Your last scheduled workday.
Employees who usually perform the regular duties of their jobs at their homes
are considered Actively At Work if they:
a) are not hospital confined; and
b) are not disabled due to Injury or Sickness; and
c) perform all the regular duties of their jobs for a full workday and could
do so at the Employer's usual place of business if required to do so.
ATTAINED AGE has a meaning particular to a given situation:
For Active Employees, it means age on {the Employer Anniversary}.
For Covered Persons who have continued their insurance under the INSURANCE
PORTABILITY provision, it means age on {December 31 of each calendar year}.
For the purpose of buying conversion or Paid Up policies, it means age on
nearest birthday.
BILLING MONTH means (i) the period of time that begins on the Employer
Participation Date and extends to the corresponding date in the next calendar
month and (ii) each succeeding one month period beginning on such corresponding
date of the month. If You continue Your insurance under the INSURANCE
PORTABILITY provision, the Billing Month will be the calendar month.
CASH VALUE means the sum of:
1. the value of the Fixed Account;
2. the value of each Investment Option in the Separate Account; and
3. the value in the Loan Account.
CASH SURRENDER VALUE means the Cash Value less:
1. any Certificate Debt; and
2. any applicable Surrender Charge; and
3. any outstanding charges.
CERTIFICATE DEBT means the principal amount of any outstanding loans to the
Participant under his or her Certificate adjusted for any accrued interest on
the loan. This is the amount the Participant would have to pay to eliminate the
loan.
CHILD means Your natural born or legally adopted child. The term also includes a
stepchild or other child who lives with You in a normal parent-child
relationship or for whom You are the legal guardian. A child must depend upon
You for support.
DEATH BENEFIT means the amount We pay to the Beneficiary upon Your death as
described in WHAT WE PAY.
DEPENDENT means Your legal Spouse and Your unmarried child who is at least {15}
days of age but less than 19 years of age. A Child who is at least age 19 but
who is less than {23} years of age is also a Dependent if the Child is enrolled
in school on a full-time basis. After initial enrollment, a divorce or legal
separation will not preclude the Spouse from continued eligibility. For the
purpose of determining dependency, a person reaches a particular age on his or
her birthday.
GDG-GVUL-0001 [1-GVUL]
Ed 98-3
Printed in U.S.A.
7
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
DEFINITIONS -- CONTINUED
DOCTOR means a person who:
1. is licensed to practice the healing arts;
2. is licensed by the state where he or she is practicing; and
3. is practicing within the scope of his or her license.
This person must not be related to You by blood or marriage.
EMPLOYEE means any person who works Full-time for the Employer. An Employee
must be paid by the Employer for work done at the Employer's usual place of
business or some other location that is usual for the Employee's particular
duties. After the Employer Participation Date, the term also includes a person
who is no longer employed but who remains eligible for benefits under the
Employer's plan. This includes, but is not limited to, retirees and disabled
employees. For those individuals to remain eligible, We must agree to it prior
to the Employer Participation Date, or some later date based upon the Employer's
written request.
EMPLOYER means the legal entity that has signed a Payroll Deduction agreement to
permit Employees to participate under the Policy. The term also includes
affiliates or subsidiaries of the Employer if We have agreed to accept them. It
includes an Employer who applies for participation, is accepted for
participation and meets and continues to meet all requirements for participation
in the John Hancock Group Insurance Multiple Employer Trust as may be
established by the Trustee or the John Hancock. We issue each Employer a
participation certificate.
EMPLOYER ANNIVERSARY DATE means the date one year after the Employer
Participation Date and the same date in each succeeding year. The date is shown
on Your Coverage Statement.
EMPLOYER PARTICIPATION DATE means the effective date of Your Employer's
participation under the Policy. The date is shown on Your Coverage Statement.
FACE AMOUNT means the amount of life insurance in force for You or a Dependent.
FIXED ACCOUNT means a non-variable funding option that guarantees a minimum
interest rate of {4%} per year. The Fixed Account is part of Our General
Account.
FULL-TIME means that You are working the minimum number of hours defined by Your
Employer as Full-time.
FUNDS means the Series Trust Portfolios and other mutual funds in which the
Separate Account invests.
GENERAL ACCOUNT means Our general investment account that contains assets of the
John Hancock. The General Account does not include the Sub-Accounts or other
segregated asset accounts.
GROUP PLAN means the group variable universal life insurance plan of benefits
provided by the Policy for Employees of Your Employer.
GROUP POLICYHOLDER means {Trustees of the Group Insurance Multiple Employer
Trust}.
GUARANTEE ISSUE LIMIT means the most insurance for which You may become insured
without the need to give Us Your Proof of Good Health. The Guarantee Issue
Limit is shown on the Master Schedule that applies to You.
1. You may be eligible for more than this amount initially; or
2. the amount of existing insurance may be increased to an amount in excess of
any Guarantee Issue Limit; or
3. the amount of insurance currently in excess of the Guarantee Issue Limit may
be further increased.
In any of these situations, You must send Us Proof of Good Health
GDG-GVUL-0002 [2-GVUL]
Ed 98-3
Printed in U.S.A.
8
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
DEFINITIONS -- CONTINUED
If You were insured under the Prior Plan on the day before the Employer
Participation Date for an amount over the Guarantee Issue Limit, the Proof of
Good Health requirement may be waived for such amount.
HOSPITALIZED means confinement for short term, intermediate or long term care on
an inpatient basis in:
1. a hospital;
2. a convalescent facility;
3. a hospice;
4. a skilled nursing facility; or
5. a psychiatric, alcohol or drug treatment facility.
INITIAL REGULAR MONTHLY PAYMENT means the premium the Owner has chosen to pay
each month. The Initial Regular Monthly Payment for this certificate is shown
on Your Coverage Statement
INVESTMENT OPTION means the Fixed Account or a sub-account of the Separate
Account where assets are invested.
INVESTMENT START DATE means the later of:
1. the Effective Date of the Certificate as shown on Your Coverage Statement;
or
2. the date We receive the first Net Premium.
JOHN HANCOCK CUSTOMER SERVICING OFFICE means {J&H/KVI, Inc. 1776 West Lakes
Pkwy, West Des Moines, Iowa 50398.
LIMITING AGE means the Certificate Anniversary that follows the Covered Person's
95th birthday. The Face Amount of Insurance ends at this point. The Cash Value
and associated rights remain. No further premium payments are permitted beyond
this date. However, loan repayments are allowed.
LOAN ACCOUNT refers to the account to which We transfer the amount of any loan
from the Fixed and Sub-Accounts. Interest is credited to this account. See
LOANS.
MONTHLY DEDUCTION means the amount each month equal to the sum of:
1. the insurance charge - the cost each month to provide life insurance under
this Certificate. This is equal to the life insurance rate We charge times
each $1,000 of Face Amount;
2. the additional insurance charges - the cost each month to provide the
insurance or benefits that are described in all riders; and
3. the maintenance charge - the monthly administration charge We set.
The Monthly Deduction will be charged on a pro-rata basis to the Fixed Account
and each Investment Option of the Separate Account and is due on the first day
of each Billing Month.
NET PREMIUM means each premium paid minus the applicable premium expense charge.
We set the expense charge and may change it from time to time. Net Premium is
the amount available for allocation to Investment Options.
OWNER means the person or entity with ownership rights to this Certificate. In
the absence of assigning these rights, You are the Owner. The Owner is shown on
the Coverage Statement.
POLICY means the contract issued to the Policyholder to provide group {variable}
{universal} life insurance to Employees of Employers who have agreed to payroll
deductions for the Plan. The Policy is composed of the master policy,
amendments, riders, {exhibits} and applications.
PREMIUM DUE DATE means the first day of each Billing Month.
PRIOR PLAN means the life insurance plan in effect on the day before Your
Employer's Participation Date shown on the Coverage Statement.
PROOF OF GOOD HEALTH means written proof that the person for whom the proof was
submitted is insurable. We have the sole right to make this determination.
This proof must be based on medical information and must be acceptable to Us.
We have the right to ask the person for whom proof is submitted to have a
medical exam or other tests.
GDG-GVUL-0003 [3-GVUL]
Ed 98-3
Printed in U.S.A.
9
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
DEFINITIONS -- CONTINUED
SPECIAL CARE means the following care or treatment:
1. chemotherapy;
2. radiation therapy; or
3. dialysis treatment.
SUCCESSOR PLAN means a life insurance plan allowed or sponsored by the Employer
that replaces some or all of an Employer's insurance provided by the Policy. It
includes but is not limited to group, individual, blanket or franchise
insurance, and it may be provided by any form of term or permanent insurance.
TRANSACTION CHARGE means a fee or other charge made by Us to make a withdrawal
or to surrender the certificate.
VALUATION DATE means each day on which the New York Stock Exchange (NYSE) is
open for business and the Fund values its shares.
VALUATION PERIOD means the period of time from the beginning of the day
following a Valuation Date to the end of the next following Valuation Date.
WE, US OR OUR means the John Hancock Mutual Life Insurance Company. If We
choose, We may designate a person or legal entity to act on Our behalf.
YOU OR YOUR means the Employee named on the Coverage Statement.]
GDG-GVUL-0004 [4-GVUL]
Ed 98-3
Printed in U.S.A.
10
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
GENERAL PROVISIONS
WHEN YOU ARE ELIGIBLE FOR EMPLOYEE INSURANCE
Employees are eligible for insurance if they are members of an eligible class
determined by Your Employer. You must be scheduled to work Full time and You
must not be a temporary or seasonal employee. You may be insured under this
Policy as an employee of only one Employer. We consider You to be employed by
the Employer that has the greater level of life insurance benefits. If
insurance, or any part of it, is based on earnings, We consider Your Earnings
from all included Employers when We determine the maximum amount of coverage for
which You are eligible.
You are eligible on the date You meet the waiting period for benefits, if any,
determined by Your Employer, but not before the Employer Participation Date.
CHANGING CLASSES
If an employee was not in a class of eligible Employees, but later transfers to
an eligible class, he or she must meet the waiting period for benefits, if any.
We use all past periods of {Full-time} work for the {Employer} to determine the
Employee's eligibility date. [Any period of part-time work does {not} count.]
An employee cannot become eligible for insurance before becoming a member of an
eligible class.
WHEN YOU BECOME INSURED
To become insured, You must elect insurance, sign an enrollment form that is
approved by Us and the Owner must agree to make the required premium payments.
[If You do this prior to or within 31 days of the date You are first eligible,
You will become insured for the benefits provided by the Policy on the latest of
these dates:
1. the Employer Participation Date;
2. the first day of the Billing Month after the date You elect insurance; or
3. the first day of the Billing Month for which You have authorized a payroll
deduction to be made from Your pay for the cost of Your insurance.
If You elect insurance more than thirty-one (31) days after the date You are
first eligible, You must give Us [at Your own expense,] Your Proof of Good
Health. If this happens, Your insurance will not become effective until the
later of these dates:
1. the first day of the Billing Month after the date We approve Your insurance
based upon the Proof of Good Health that has been given to Us; or
2. the first day of the Billing Month for which You have authorized a payroll
deduction to be made from Your pay for the cost of Your insurance.]
[GUARANTEE ISSUE LIMIT
When You first enroll under the Plan, the Face Amount that You elect may exceed
the Guarantee Issue Limit.
If this happens, You must give Us, [at Your Own expense,] Your Proof of Good
Health for the Face Amount in excess of the limit. The Face Amount above the
limit will not become effective until the later of these dates:
1. the first day of the Billing Month after the date We approve the excess
amount based upon Your Proof of Good Health; or
2. the date Your insurance would otherwise be effective.
If We do not approve the excess amount based upon Your Proof of Good Health,
Your insurance will be limited to the Guarantee Issue Limit.]
[If You were insured under the Prior Plan on the day before the Employer
Participation Date for an amount over the Guarantee Issue Limit, the Proof of
Good Health requirement may be waived for the amount of benefit provided by the
Prior Plan.]
GDG-GVUL-0005 [5-GVUL]
Ed 98-3
Printed in U.S.A.
11
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
GENERAL PROVISIONS -- CONTINUED
[{EMPLOYEE} DEFERRAL RULE
The effective date of Your insurance may be delayed if, in the {90} day time
period prior to the date Your insurance is to become effective, You:
1. had been Hospitalized; or
2. had, or been advised to have, Special Care.
If either 1 or 2 above apply to You, Your insurance will not become effective
until the earlier of these dates:
1. the first day of the Billing Month after the date You have gone {90} days
without being Hospitalized or without having Special Care; or
2. if You choose to give Us Proof of Good Health, the first day of the Billing
Month after the date We approve Your insurance based upon that Proof of Good
Health.]
In addition, You must be Actively At Work on the date Your insurance goes into
effect. If You are not Actively At Work, insurance does not become effective
until return to Full-time work.
If You do not return to work on a Full-time basis within 31 days of the date
Your insurance is to become effective, You must first give Us Proof of Good
Health. If this happens, Your insurance will not become effective until the
later of these dates:
1. the first day of the Billing Month after the date We approve Your insurance
based upon the Proof of Good Health; or
2. the date You return to work on a Full-time basis.]
REINSTATEMENT
If Your certificate has lapsed, You may apply to reinstate it at any time prior
to {3 years} from the date it lapsed. You must:
1. give Us a written request for reinstatement and a new enrollment form;
2. give Us Your Proof Good Health; and
3. give Us a premium payment that is at least equal to all unpaid Monthly
Deductions through the date of lapse plus the Monthly Deduction for two (2)
Billing Months commencing with the reinstatement.
Your coverage will be reinstated on the first day of the Billing Month after the
date We approve Your reinstatement request based upon Your Proof of Good Health.
You may not reinstate a loan that was outstanding on the date Your certificate
lapsed. You may not reinstate if Your Employer is no longer participating
through payroll deduction.
The Face Amount of the reinstated Certificate will be the same as the Face
Amount You would have been eligible for on the date of reinstatement had the
Certificate not lapsed.
GDG-GVUL-0006 [6-GVUL]
Ed 98-3
Printed in U.S.A.
12
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
GENERAL PROVISIONS -- CONTINUED
[CHANGES IN AMOUNTS OF INSURANCE
Your insurance may change from time to time. These changes will become
effective based upon the provisions below.
DECREASE IN INSURANCE
- ---------------------
At any time the Owner may make a request in writing to decrease Your Face
Amount. This must be done on a form approved by Us. A decrease in Your Face
Amount is effective on the first day of the Billing Month after the date We
receive the request. If the Owner elects to decrease Your Face Amount, Your
next increase in Face Amount will require Proof of Good Health. In no event,
however, may the Face Amount be decreased below {$5,000} or below the minimum
amount required to maintain the insurance's status as life insurance under
Federal Tax laws.
We will not require a decrease in the Face Amount if there is a decrease in Your
earnings.
INCREASES IN INSURANCE
- ----------------------
An increase in Your earnings may change Your Face Amount. This change will
become effective on the Employer Anniversary Date that coincides with or next
follows the date Your pay is increased. Proof of Good Health will not be needed
unless Your earnings are increased by 25% or more. The Owner may refuse an
earnings related increase in Face Amount. If this occurs, the next increase in
Your Face Amount will require Proof of Good Health.
A request to increase Your current Face Amount may only be made during the
annual enrollment period held by Your Employer.
If the Owner elects to increase:
1. Your current Face Amount other than as a result of an increase in earnings;
or
2. Your current multiple of pay;
You must first give Us Your Proof of Good Health.
PROOF OF GOOD HEALTH
If Proof of Good Health must be given and We approve the increase in Your Face
Amount, the increase in Your Face Amount will become effective on the later of
these dates:
1. the first day of the Billing Month after the date We approve the increased
Face Amount based upon the Proof of Good Health; or
2. Your Employer Participation Date.
If We do not approve the increased Face Amount based upon the Proof of Good
Health, Your Face Amount will be limited to Your then current Face Amount.
DEFERRAL RULE FOR INCREASES
You must be Actively At Work on the date a change in the amount of insurance
becomes effective. If You are not Actively At Work, a change does not become
effective until return to Full-time work.
If You do not return to work on a Full-time basis within 31 days of the date
Your increased Face Amount is to become effective, You must first give Us Your
Proof of Good Health. If this happens, Your increased Face Amount will not
become effective until the later of these dates:
1. the first day of the Billing Month after the date We approve the increased
Face Amount based upon Your Proof of Good Health; or
2. the date You return to work on a Full-time basis.]
GDG-GVUL-0007 [7-GVUL]
Ed 98-3
Printed in U.S.A.
13
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
GENERAL PROVISIONS -- CONTINUED
[WHEN YOUR DEPENDENTS ARE ELIGIBLE
You do not have to be insured in order to insure Your Dependent Spouse. You or
Your Spouse must be insured in order to insure a Dependent Child.
A Dependent Child is not eligible to be insured by both You and Your Spouse.
To insure a Dependent Spouse, You must elect such insurance, sign an enrollment
form that is approved by Us and agree to make the required premium payments.
SEPARATE ELECTIONS
You must make a separate election for Your Spouse and Child insurance. Once
insurance is effective, We will issue the following:
1. We will issue a separate certificate for Your Spouse insurance. That
certificate will describe all of the provisions that apply to the Spouse.
2. We will issue a rider for Your Dependent Child's insurance. The rider will
describe all of the provisions that apply to the Dependent Child.
WHEN DEPENDENT COVERAGE BECOMES EFFECTIVE
If You want to obtain insurance for a Dependent or add an additional Dependent,
a written request for insurance must be made for the Dependent. Insurance for
the Dependent becomes effective as shown below:
1 If the request is made on or before the date the Dependent is acquired,
insurance will be effective on the date You acquire the Dependent.
2 If the request is made within thirty-one (31) days after the date You are
first eligible to add the Dependent, insurance will be effective on the date
of the request.
3 if the request is made more than thirty-one (31) days after You are first
eligible to add the Dependent, You must send Us, at Your Own expense, Proof
of Good Health for the Dependent. If We approve the request based upon Proof
of Good Health, the life insurance for the Dependent will become effective on
the first day of the Billing Month after the date of Our approval.]
GDG-GVUL-0008 [8-GVUL]
Ed 98-3
Printed in U.S.A.
14
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
LIFE INSURANCE BENEFIT
WHAT WE PAY
If You die while insured, We will pay the Death Benefit in effect as of the date
of Your death.
The amount of the Death Benefit will be calculated as of the date of Your death
and will be the greater of () the sum of:
1. Your Face Amount; plus
2. The Cash Value; minus
3. Any Certificate Debt; minus
4. Any outstanding charges; [minus
5. All amounts claimed under an Accelerated Death Benefit provision]
and (ii) the Minimum Death Benefit described below. After We have received and
approved due proof of Your death, We will pay the Death Benefit to the
Beneficiary the Owner has named. If required by law, We will add interest, at a
rate and for the time period required by law, to a Death Benefit that is paid in
one sum.
[We will pay the Death Benefit through an interest bearing account that gives
the Beneficiary immediate access to the full amount paid. This account will be
established as of the date We would otherwise make the Death Benefit payment.
The Owner has the right to request the Death Benefit be paid:
1. in a lump sum; or
2. through any other option that is approved by Us.]
MINIMUM DEATH BENEFIT
The minimum death benefit is based upon Your age at the date of death and Your
Cash Value. The Table shown below is used, and the minimum death benefit will
decrease uniformly with the age ranges shown.
<TABLE>
<CAPTION>
Minimum Death Benefit as a
YOUR AGE ON THE DATE OF DEATH Percentage of the Cash Value
- ----------------------------- --------------------------------
From: To:
<S> <C> <C>
Less than age 40 250 250
40 but less than 45 250 215
45 but less than 50 215 185
50 but less than 55 185 150
55 but less than 60 150 130
60 but less than 65 130 120
65 but less than 70 120 115
70 but less than 75 115 105
75 but less than 90 105 105
90 but less than 95 105 100
</TABLE>
GDG-GVUL-0009 [9-GVUL]
Ed 98-3
Printed in U.S.A.
15
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
LIFE INSURANCE BENEFIT -- CONTINUED
[Age and Retirement Reductions
Your Face Amount will be reduced on the latest of these dates:
1. the date You attain age 70;
2. the date You retire; or
3. if You first became insured at age 60 or older, the 10th anniversary of Your
Certificate Effective Date.
When one of these dates applies to You, Your Face Amount will be reduced as
follows:
1. We will determine Your Cash Value less Certificate Debt and outstanding
charges on the date this rule applies and will round it to the nearest whole
dollar; and
2. We will multiply this amount by five (5).
This total will then be rounded to the next higher multiple of {$5,000} if it is
not already a multiple of that amount. This becomes Your new Face Amount
unless one of these apply:
1. Your new Face Amount cannot be more than the Face Amount that was in force
for You on the day before the date this reduction rule applies to You; and
2. Your new Face Amount cannot be less than {$5,000}. If it is, it will be
increased to that amount.]
BENEFICIARY
The BENEFICIARY is the person the Owner names to receive Your Death Benefit.
The Owner must name the Beneficiary in writing on a form approved by Us. The
Owner must sign and date the designation. This Beneficiary designation is kept
by Us. After We make the Death Benefit payment, We have no further liability.
CHANGE IN BENEFICIARY
The Owner has the right to change the Beneficiary at any time. The change must
be made in writing on a form satisfactory to Us and must state the date the
change is to take effect. The form must be delivered to Us during Your lifetime.
If the present beneficiary designation is irrevocable, such present beneficiary
must consent in writing to the change. No change will take effect if it is
received after the date We make a Death Benefit payment, and We will not be
liable for any payment made before We receive the change.
PAYMENT TO BENEFICIARY
More than one named Beneficiary will share equally unless the Owner clearly
designates the order of rights. The share of a Beneficiary who dies before You
will pass to any surviving Beneficiaries in the order the Owner designated.
FACILITY OF PAYMENT
If the Beneficiary is a minor or otherwise incapable of giving a valid release,
the John Hancock may, at its option and until claim is made by the duly
appointed guardian of the Beneficiary, make such payment to:
1. any relative of the beneficiary by blood or marriage; or
2. any other person or institution that appears to Us to have assumed
custody and principal support of the Beneficiary.
Payment under these circumstances may not exceed {$50} per month. Such payments
will be made for the sole benefit of the Beneficiary.]
If You have no surviving Beneficiary, We have the right to make the payment to
any one of the classes listed below:
1. Your Spouse.
2. Your children.
3. Your parents.
4. Your brothers and sisters.
5. The executor or administrator of Your Estate.
GDG-GVUL-0010 [10-GVUL]
Ed 98-3
Printed in U.S.A.
16
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
LIFE INSURANCE BENEFIT -- CONTINUED
At Our judgment, a part of Your Death Benefit may be paid to any person who has
incurred expenses in connection:
1. with Your burial; or
2. with the Injury or Sickness that caused Your death.
However, the maximum amount payable to that person is {five hundred dollars
($500)} or the amount established by state law.
SIMULTANEOUS DEATH PROVISION
If a Beneficiary dies:
1. on the same day You die; or
2. within fifteen (15) days thereafter;
benefits will be paid as if that Beneficiary had died before You. If proof of
loss with respect to Your death was delivered to Us before the date of the
Beneficiary's death, this provision will not apply.
OWNER
You are the Owner of Your certificate and of any Dependent coverage You elect.
If You assign Your insurance, the person to whom it is assigned will be the
Owner.
[ASSIGNMENT
The Owner may assign the rights, title and interest of Your insurance. The
Owner must assign the entire benefit. An assignment must be in writing on a form
approved by Us, must be signed by the Owner and must be consented to in writing
by any beneficiary who has been designated as irrevocable.
If We make payment or take any other action that We are permitted to do before a
duplicate of the assignment is received and recorded by Us, the assignment will
have no effect on the payment made or the action taken. We are not responsible
for the validity or sufficiency of an assignment.]
[SUICIDE EXCLUSION
If You commit suicide, while sane or insane, within 2 years of the Certificate
Effective Date, the Death Benefit We pay will be limited to a refund of premium
paid, less:
1. any Certificate Debt; and
2. the amount of any withdrawals.
If You commit suicide, while sane or insane, within 2 years of an increase in
Your Face Amount, such increase will not be reflected in the Death Benefit.
However, the Death Benefit otherwise payable will be increased by that portion
of the Monthly Deduction attributable to such increase.]
GDG-GVUL-0011 [11-GVUL]
Ed 98-3
Printed in U.S.A.
17
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
LIFE INSURANCE BENEFIT -- CONTINUED
CASH VALUE
The life insurance benefit under this variable life certificate can be funded,
at the discretion of the Owner, by a Fixed Account and/or the Investment Options
available to the Owner under the Separate Account. The Separate Account assets
are divided into sub-accounts. The Separate Account Investment Options
available on the Certificate Effective Date are described on the page following
Your Coverage Statement. Those the Owner selected in the enrollment form are
shown on the Coverage Statement with the percentage of Net Premium to be
allocated to each.
The Death Benefit and Cash Value under the Policy may increase or decrease daily
to the extent the Cash Value is invested in the variable Investment Option of
the Separate Account. The Policy provides lifetime protection against economic
loss resulting from the death of the insureds. The certificates provide mainly
insurance and not investments.
A premium payment is periodically made to Us. We may take from each premium a
charge. We then place the Net Premium into the Investment Options as directed
by the Certificate Owner. The assets allocated to each variable Investment
Option are invested in shares of the corresponding portfolio of the Funds. The
assets allocated to the Fixed Account are invested in the General Account of the
John Hancock. During the year, We take charges from each Investment Option and
credit or charge each Investment Option with its respective investment
performance. The insurance charge that is deducted from the invested assets
attributable to each certificate varies with the attained age of the insured {at
the Employer Anniversary} and with the amount of insurance provided at the start
of each Billing Month.
The Policy provides for payment of Death Benefit proceeds when You die. The
Death Benefit proceeds ordinarily will equal the Face Amount plus the Cash Value
minus any Certificate Debt and any outstanding charges. Under certain
circumstances, the Death Benefit will be increased to assure that the
certificate continues to meet the definition of "life insurance" under the
Internal Revenue Code.
By making premium payments in amounts sufficient only to cover the Monthly
Deduction, the Owner can use the Plan as a way to obtain life insurance
coverage, with little or no accumulation of Cash Value. The Owner will retain
the option to build Cash Surrender Value by paying larger premium and applying
the excess to the variable Investment Options or the Fixed Account.
GDG-GVUL-0012 [12-GVUL]
Ed 98-3
Printed in U.S.A.
18
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
LIFE INSURANCE BENEFIT -- CONTINUED
FIXED ACCOUNT
The Fixed Account is a non-variable Investment Option that guarantees a minimum
effective interest rate of {4%} per year. We may at any time declare rates of
interest in excess of the {4%} guaranteed rate on amounts in the Fixed Account.
That interest rate will be guaranteed for a period of not less than one year for
deposits made on the first day of the period to which the guarantee applies.
Transfers into the Fixed Account will be treated as new premiums for these
purposes.
The Owner may allocate premiums to the Fixed Account or transfer all or part of
the value in the Separate Account to the Fixed Account. The amount so allocated
or transferred will become part of Our General Account assets. Subject to
applicable law, We have sole discretion over the investment of General Account
assets and Owners do not share in the investment experience of those assets.
Transfers from the Fixed Account are subject to certain limitations. See RIGHT
TO CHANGE ALLOCATION provision.
ACCOUNT VALUE
On the Investment Start Date, the value in the Fixed Account is the portion of
the initial Net Premium paid and allocated to the Fixed Account less the portion
of the first Monthly Deduction charged to the Fixed Account.
On any day after the Investment Start Date, the value of the Fixed Account is
the sum of items in column A minus the sum of items in Column B:
<TABLE>
<CAPTION>
COLUMN A COLUMN B
- -------------------------------------------------- ----------------------------------------------------
<S> <C>
The balance at the end of the preceding Any amount transferred from the Fixed Account to
Valuation Date, with interest on that value at the Separate Account during the current Valuation
the currently applicable rates Period.
- --------------------------------------------------------------------------------------------------------
Any portion of Net Premium paid and allocated to The portion of any withdrawal made from the Fixed
the Fixed Account during the current Valuation Account during the current Valuation Period.
Period.
- --------------------------------------------------------------------------------------------------------
Any amount transferred to the Fixed Account Any amount transferred from the Fixed Account to
during the current Valuation Period. the Loan Account during the current Valuation
Period.
- --------------------------------------------------------------------------------------------------------
Any loan repayments allocated to the Fixed [The portion of any transaction charge allocated to
Account during the current Valuation Period. the Fixed Account during the current Valuation
Period.]
- --------------------------------------------------------------------------------------------------------
If the Valuation Date is the Employer Anniversary If the Monthly Deduction is being charged on this
Date that portion of the amounts transferred Valuation Date, the portion of the Monthly
from the Loan Account that is allocated to the Deduction that is charged to the Fixed Account.
Fixed Account.
- --------------------------------------------------------------------------------------------------------
</TABLE>
GDG-GVUL-0013 [13-GVUL]
Ed 98-3
Printed in U.S.A.
19
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
LIFE INSURANCE BENEFIT -- CONTINUED
SEPARATE ACCOUNT
Separate Account G consists of assets set aside by the John Hancock that are
kept separate from that of the general assets and all other separate account
assets. We own the assets in the Separate Account. That portion of the assets
of the Separate Account equal to reserves and other liabilities for Group
Variable Universal Life insurance will not be charged with liabilities arising
out of any other business We may conduct.
The Separate Account will be valued at the end of each Valuation Period.
We reserve the right to make certain changes if, in Our judgment, they would
best serve the interests of Owners of certificates such as this one. Any
changes will be made only to the extent and in the manner permitted by
applicable laws. When required by law, We will obtain Your approval of the
changes as well as the approval of any appropriate regulatory authority.
The following is a list of examples of changes We may make:
o Operating the Separate Account in any form permitted under the Investment
Company Act of 1940, or in any other form permitted by law.
o Taking any action necessary to comply with or obtain and continue any
exemptions from the Investment Company Act of 1940.
o Transferring assets in an Investment Option to another Investment Option,
or to add, combine, or remove Investment Options in the Separate Account.
o Substituting for the investment company shares held in any Investment
Option the shares of another class of the investment company or shares of
another investment company or any other investment permitted by law.
o Making any necessary technical changes in the Policy in order to conform
with any action this provision permits Us to take.
If any of these changes results in a material change in the underlying
investments of an Investment Option in the Separate Account, We will notify You
of such change. If You have Cash Value in that sub-account, You may then make a
new choice of Investment Options.
ACCOUNT VALUATION
The value in the Separate Account is the sum of the values in each of the
variable Investment Options. The account value increases or decreases daily
depending on the investment experience of the Investment Options to which the
amounts are allocated at the direction of the Owner. No minimum amount of
account value is guaranteed. The Owner bears the investment risk for the
portion of the Cash Value allocated to the Separate Account.
An experience factor for each variable Investment Option is determined using the
net gain or loss per share, any charges for Our taxes or reserves on taxes, and
any Mortality and Expense charge. The Mortality and Expense charge is
determined daily from the value of the variable Investment Option {and the Fixed
Account} and will not exceed .90% on an annual basis.
On the Investment Start Date, the value in each variable Investment Option is
the portion of the initial Net Premium paid and allocated to the Investment
Option less the portion of the first Monthly Deduction charged to the Investment
Option.
GDG-GVUL-0014 [14-GVUL]
Ed 98-3
Printed in U.S.A.
20
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
LIFE INSURANCE BENEFIT -- CONTINUED
On any Valuation Date after the Investment Start Date, the value of each
variable Investment Option is the sum of items in column A minus the sum of
items in Column B:
<TABLE>
<CAPTION>
COLUMN A COLUMN B
- -------------------------------------------------- ----------------------------------------------------
<S> <C>
The balance at the end of the preceding Valuation Any amount transferred from the Investment Option
Date multiplied by the experience factor for the to another variable Investment Option or the Fixed
current Valuation Period. Account during the current Valuation Period.
- --------------------------------------------------------------------------------------------------------
Any portion of Net Premium paid and allocated to The portion of any withdrawal made from the
the Investment Option during the current Investment Option during the current Valuation
Valuation Period. Period.
- --------------------------------------------------------------------------------------------------------
Any amount transferred to the Investment Option Any amount transferred from the Investment Option
during the current Valuation Period. to the Loan Account during the current Valuation
Period.
- --------------------------------------------------------------------------------------------------------
Any loan repayments allocated to the Investment [The portion of any transaction charge allocated to
Option during the current Valuation Period. the Investment Option during the current Valuation
Period.]
- --------------------------------------------------------------------------------------------------------
If the Valuation Date is the Employer Anniversary If the Monthly Deduction is being applied on this
Date, that portion of the amounts transferred Valuation Date, the portion of the Monthly
from the Loan Account that is allocated to the Deduction that is charged to the variable
variable Investment Option. Investment Option.
- --------------------------------------------------------------------------------------------------------
</TABLE>
The value in the Separate Account is the sum of the values in each variable
Investment Option.
RIGHT TO CHANGE ALLOCATION OF PAYMENTS
FUTURE PREMIUMS
The Owner can change the allocation of future Net Premiums among the Fixed
Account and/or the variable Investment Options of the Separate Account. The
Owner must allocate at least {5%} of Net Premiums to each alternative the Owner
chooses. Allocations must be in whole numbers and the total allocated must
equal 100%. The change in allocation will be effective as to any Net Premiums
and credits applied after receipt of notice satisfactory to Us.
ACCUMULATED VALUE
The Owner may reallocate the amounts held for the Owner in the Fixed Account and
variable Investment Options with no charge at any time. Transfers from the
Fixed Account are limited to 25% of the Fixed Account once each calendar year.
In addition, no transfer from the Fixed Account may be made within 180 days of
the last such transfer.
The minimum transfer amount is the lesser of {$50} or the total amount in the
variable Investment Option.
GDG-GVUL-0015 [15-GVUL]
Ed 98-3
Printed in U.S.A.
21
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
PAYMENTS DURING YOUR LIFETIME
[LOANS
After the RIGHT TO EXAMINE CERTIFICATE (See Cover page) period has ended, the
Owner may request a loan. The Owner is permitted to request a loan if there is
not already an active loan in force on this certificate. If requested, We will
grant the Owner a loan, up to the amount of the Cash Value less all outstanding
charges and the next month's Monthly Deduction as of the date We receive the
loan request. {Interest is payable in advance. For the first year of the loan,
interest is due and payable immediately for the period from the date of the loan
to the Employer Anniversary Date. Loans initiated in the Billing Month prior to
the Employer Anniversary Date will have interest taken to the second following
Employer Anniversary Date.} Interest is due and payable on the Employer
Anniversary Date for each {following} twelve (12) month period. {The first
interest payment will be deducted from the loan amount We pay to the Owner, but
that does not reduce the loan amount.} If interest is not paid within 31 days
after it is due, it will be added to the amount of the loan and will be charged
interest at the same rate We charge on the loan.
The Owner must sign a loan agreement with Us {Only one loan can be in effect at
any time.} The loan must be at least {$200}. We may delay making loans
attributable to the Fixed Account for up to six (6) months.
We will charge loan interest at the rate We set from time to time. The rate We
set will not be more than maximum rate that is permitted by state law where the
Owner lives. {After inception, We will not change the interest rate more than
once a year. A change in the rate that is charged will be made on the Employer
Anniversary Date under the Policy.
That Anniversary rate of interest that We will set will not be more than the
higher of:
1. the Published Monthly Average for the calendar month that ends two (2) months
prior to the Employer Anniversary Date; or
2. the Guaranteed Interest Rate for the Fixed Account plus {1%}.
PUBLISHED MONTHLY AVERAGE means:
1. Moody's Corporate Bond Yield Average - Monthly Average Components, as
published by Moody's Investors Service, Inc., or by a successor to that
service; or
2. if that average is no longer published, an average that is substantially
similar, as chosen by Us.
When a loan is made, We will give the Owner notice of the interest rate that
will be charged. We will also give the Owner written notice if there is to be a
change in the interest rate for an existing loan.]
[LOAN REPAYMENT
The Owner may repay all or part of the loan at any time while Your coverage is
in force. All loan repayments must be made in a lump sum and the Owner should
tell Us it is a loan repayment when it is made. {When the loan is repaid, We
will return all unearned interest.} Upon each loan repayment, the same
proportionate amount of the entire loan as was borrowed from the Fixed Account
will be repaid to the Fixed Account. The remainder of the loan repayment will
be allocated among the variable Investment Options in the same manner as Net
Premiums. For example, if the entire loan outstanding is $3,000 of which $1,000
was borrowed from the Fixed Account, then upon a repayment of $1,500, $500 would
be allocated to the Fixed Account and the remaining $1,000 would be allocated to
the appropriate variable Investment Options in the same manner as Net Premiums.
If the loan or loan interest is not repaid, Your coverage will not end unless
Your Cash Surrender Value is less than the amount needed to pay the Monthly
Deduction on a Premium Due Date. In this case, the grace period provision will
apply.]
GDG-GVUL-0016 [16-GVUL]
Ed 98-3
Printed in U.S.A.
22
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
PAYMENTS DURING YOUR LIFETIME -- CONTINUED
[EFFECT OF A LOAN ON CASH VALUE
When a loan is made, the values allocated among the Fixed and Separate Account
Options will be transferred to a Loan Account within the General Account as
collateral for the loan.
Loan interest is charged and due on the Employer Anniversary Date. Interest not
paid within thirty-one (31) days after it is due will be added to the loan
principal. It will be added as of the due date and as of the next Employer
Anniversary Date will bear interest at the same rate as the rest of the loan.
{At the end of the 31 day period the amount of the unpaid interest will be
deducted on a pro-rata basis from the value of the Fixed Account and each
Investment Option of the Separate Account and will be transferred to the Loan
Account.} The amount transferred will be treated as an increased loan.
Interest credited to amounts in the Loan Account will be removed from the Loan
Account and will be allocated on the Employer Anniversary Date among the Fixed
and Investment Options of the Separate Account in the same proportions as Net
Premiums are then being allocated.]
[EFFECT OF LOAN ON DEATH BENEFIT
If You die while a loan is outstanding, We will deduct the loan {and any
outstanding interest} from the Death Benefit We pay. {If interest has been paid
in advance, We will add the unearned interest to the Death Benefit We pay.
While a loan is outstanding, the interest We credit to the Loan Account will be
at a rate equal to {2%} less than the loan interest charge rate but not less
than the greater of the crediting rate required by law and {4%}.]
WITHDRAWALS
At any time after the RIGHT TO EXAMINE CERTIFICATE (See Cover page) period has
ended, the Owner may request a withdrawal. [If a withdrawal charge is
applicable, it will be deducted from the amount We pay the Owner.] The minimum
withdrawal is {$200}. [The withdrawal will be allocated on a pro-rata basis
among the Fixed Account and the variable Investment Options according to the
assets in each at the time, unless otherwise indicated in the withdrawal
request.]
If on the date We receive the request Your Cash Value less Certificate Debt and
outstanding charges is less than the amount of the withdrawal requested, the
most We will pay is the Cash Surrender Value as of that date. If this happens
We will reduce Your Cash Surrender Value to zero.
SURRENDERS
The Owner may surrender Your Certificate at any time. We must receive the
Owner's written request and You must send Us Your Certificate. Your insurance
will cease on the date We receive the request unless a later date had been
specified.
After We receive the request, We will pay the Owner the Cash Surrender Value.
Upon surrender, Your certificate and all rights and benefits under the Policy
will end.
GDG-GVUL-0017 [17-GVUL]
Ed 98-3
Printed in U.S.A.
23
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
PAYMENTS DURING YOUR LIFETIME -- CONTINUED
[PAID-UP INSURANCE
At any time, the Owner may elect to terminate Your insurance and to use the Cash
Surrender Value to purchase paid-up insurance. [If the Owner elects to do this,
all other benefits and insurance under the Policy will end.] However, the paid-
up insurance will stay in force until the date of Your death, unless the
certificate has been surrendered.
The paid-up insurance will have a maximum premium. This maximum will be the Net
Single Premium based upon {{150%} of the 1980 Commissioners Standard Ordinary
Table - Males - ALB} and an effective interest rate of {4%} per year.
The minimum amount of Cash Surrender Value that may be used to purchase paid-up
insurance is {$1,000.
The most paid-up insurance that can be purchased is an amount equal to Your
Death Benefit as of the date the paid-up option was elected. We will refund all
unused Cash Surrender Value after deducting the cost of the paid-up insurance.
The paid-up insurance will have cash value while You remain alive. The Owner
has the right to request a surrender for the paid-up cash value at any time.
This amount will never be less than the purchase price of the paid-up
insurance.]
DEFERMENT
Under certain circumstances, We reserve the right to defer calculation and
payment of benefits.
1. If Your certificate is in force with value in the Fixed Account, We may
defer paying a withdrawal amount, a surrender amount or a loan amount from
that account for up to {6 months} from the date the Owner requests the
withdrawal, surrender or loan.
2. If Your certificate is in force with a value in the Separate Account, it
will generally not be practical for Us to determine the investment experience
of the Separate Account during any period when the New York Stock Exchange is
closed for trading or when the Securities and Exchange Commission restricts
trading or determines an emergency exists. In such a case and with respect to
the Separate Account, We reserve the right to defer:
a) determination, application, or payment of a withdrawal;
b) determination and application of Cash Surrender Value;
c) determination of loans except for a loan to pay premium to Us;
d) a change in the allocation among the Investment Options of the Separate
Account; and
e) payment of the Death Benefit until the next Valuation Date.
GDG-GVUL-0018 [18-GVUL]
Ed 98-3
Printed in U.S.A.
24
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
PREMIUM
REGULAR MONTHLY PAYMENTS
Regular Monthly Payments will be payable each month under the payroll deduction
plan. Premiums will be sent to Us monthly by the Employer. The payments are
made with deductions from Your salary. {However, if You are a Retired Employee,
You are considered to be on the payroll deduction plan only under procedures
that are agreed upon by Us and Your Employer.
The payroll deduction plan will end for You if:
a) Your employment ends; or
b) The Employer sends Us a written request to end this procedure for You.
[If this procedure ends for You while Your insurance is in force, further
Regular Monthly Payments will be payable directly to Us based on Your new
classification and according to the mode of premium payments selected by the
Owner.]
All premium is due on the first day of each Billing Month. The amount that is
due each month is the minimum amount that is needed to keep Your certificate and
all riders in force. Normally, when We receive Your premium, We will deposit
the Net Premium in the variable Investment Option and the Fixed Account as the
Owner specifies.
DATE OF PREMIUM RECEIPT
All premium payments not made through payroll deduction, whether periodic or on
a lump sum basis, will be deemed received when actually received by John Hancock
at the John Hancock Servicing Office. A premium payment made by payroll
deduction will be deemed received on the later of (i) the date of receipt of the
premium payment at the John Hancock Servicing Office or (ii) the business day
following receipt of a reconciliation statement with respect to such premium
payment that properly identifies the Employer, the Certificate Owners, the
Certificate numbers, and the amount of premium received for each Certificate.
However, if payroll deduction premium payments are made by wire transfer, such
premium payments will not be deemed received until John Hancock has confirmed
receipt of the wire transfer into a bank account maintained by John Hancock for
receipt of premium from Employers.
OTHER PAYMENTS
In addition to Regular Monthly Payments, the Owner may make lump sum payments
from time to time. All lump sum payments must be at least {$50}. If the Owner
has a loan in effect, any payment other than a Regular Monthly Payment will be
treated as a loan repayment unless the Owner designates other handling. {If
You are not on the payroll plan procedure, the Owner should designate the
handling of all Your payments if a loan is in effect.
We may change any of the charges assessed under the Certificate from time to
time but will give You at least 31 days prior written notice of the change. Any
such changes will be made only if they apply to all certificates in Your
underwriting or risk classification.
[If You are not paying under the payroll deduction arrangement and if the Owner
requests in writing, We will send You premium notices.]
LIMITS
[Your first premium must not be less than the Initial Regular Monthly Payment
shown on Your Coverage Statement.]
Each premium payment other than the Regular Payment must be at least $50. [We
may change this minimum payment limit. No change will take effect until 90 days
after notice is sent.]
GDG-GVUL-0019 [19-GVUL]
Ed 98-3
Printed in U.S.A.
25
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
PREMIUM -- CONTINUED
We have the right to limit the amount of premium the Owner can pay in order to
preserve the qualification of this insurance as life insurance under the
Internal Revenue Code or any successor law. We will return all premium that
exceeds the limit We set.
No further premium payments are permitted beyond the Limiting Age. However,
loan repayments are allowed.
RATE BASIS
We guarantee that the insurance charge rates applicable to the Face Amount will
be no more than the rates shown in the TABLE OF GUARANTEED MAXIMUM MONTHLY LIFE
INSURANCE RATES.
MONTHLY DEDUCTIONS
Each month We will make a deduction from the Cash Value equal to the Monthly
Deduction. If the Cash Value minus any Certificate Debt and outstanding charges
is less than the Monthly Deduction on any Premium Due Date, the grace period
provision will apply.
GRACE PERIOD
If You are paying under the payroll deduction arrangement and if the Cash Value
minus any Certificate Debt and outstanding charges plus the Regular Monthly
Payment for the Billing Month is less than the Monthly Deduction for that
Billing Month, there will be a grace period equal to 61 days after the first day
of the Billing Month.
We will send You a notice of the grace period. [We will also send a notice to
any assignee on our records.]
If the amount needed to pay the due and unpaid Monthly Deduction is not paid by
the end of the grace period, Your certificate and all riders that are attached
will lapse without value at the end of the grace period.
We will provide the grace period notices as required by law. We will tell You
the amount that is needed to keep all of Your insurance in force.
If You die during the grace period, We will pay the Death Benefit.
GDG-GVUL-0020 [20-GVUL]
Ed 98-3
Printed in U.S.A.
26
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
PREMIUM -- CONTINUED
TABLE OF GUARANTEED MAXIMUM MONTHLY LIFE INSURANCE RATES
RATE PER $ 1,000 OF LIFE INSURANCE
<TABLE>
<CAPTION>
Age RATE AGE RATE AGE RATE
- ----------------- ------------------ ------------------ ------------------ ------------------ -------------------
<S> <C> <C> <C> <C> <C>
{16 $0.1330 44 $0.3650 72 $ 4.2720
17 0.1430 45 0.3950 73 4.7330
18 0.1520 46 0.4280 74 5.2400
19 0.1570 47 0.4620 75 5.7850
20 0.1580 48 0.4990 76 6.3590
21 0.1580 49 0.5400 77 6.9580
22 0.1570 50 0.5850 78 7.5850
23 0.1530 51 0.6380 79 8.2620
24 0.1500 52 0.6970 80 9.0120
25 0.1460 53 0.7640 81 9.8580
26 0.1430 54 0.8380 82 10.8220
27 0.1430 55 0.9180 83 11.9020
28 0.1420 56 1.0030 84 13.0770
29 0.1430 57 1.0930 85 14.3250
30 0.1460 58 1.1890 86 15.6260
31 0.1500 59 1.2940 87 16.9760
32 0.1560 60 1.4110 88 18.3750
33 0.1630 61 1.5430 89 19.8340
34 0.1710 62 1.6920 90 21.3790
35 0.1810 63 1.8600 91 23.0520
36 0.1940 64 2.0450 92 24.9370
37 0.2080 65 2.2460 93 27.2440
38 0.2240 66 2.4610 94 30.4450
39 0.2420 67 2.6890 95 35.4920
40 0.2630 68 2.9340 96 44.5150
41 0.2850 69 3.2070 97 62.8310
42 0.3100 70 3.5150 98 107.6740
43 0.3360 71 3.8670 99 1,000.0000
</TABLE>
GDG-GVUL-0021 [21-GVUL]
Ed 98-3
Printed in U.S.A.
27
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
TERMINATION PROVISIONS
WHEN YOUR DEATH BENEFIT ENDS
Your coverage, including all attached riders and benefits, will end on the
earliest of the following:
1. the date the Owner surrenders Your certificate and We pay the Cash
Surrender Value;
2. the date of Your death;
3. the date the grace period has ended without receipt of the required payment.
[Except as may be provided by the INSURANCE PORTABILITY provision below,] Your
insurance will also end on the earliest of the following:
1. [the date the employer terminates its participation under the Policy;]
2. [the date You no longer work in an eligible class of employees;]
3. [the date You cease active work for the Employer, except through
retirement;] and
4. [the date John Hancock terminates the Employer's participation under the
Policy.
We reserve the right to terminate the Employers' participation under the Policy
at any time.
In the event We decide to terminate the Employer's participation under the
Policy, We will provide {sixty (60)} days notice to the Employer and the Owner.]
CANCELLATION OF PARTICIPATION BY EMPLOYER
The Employer may, by giving Us at least {60 days} prior written notice:
1. cancel its participation under the Policy; or
2. cancel inclusion under the Policy for one or more affiliates or subsidiaries.
[Insurance Portability
YOUR ELIGIBILITY UNDER THE GROUP PLAN ENDS
[{If You have been a participant in the Group Plan for {2} year{s}} the date You
cease to be a member of an eligible class, You may continue coverage under the
Policy, making premium payments directly to Us. We will automatically continue
Your insurance on the terms and conditions described in this Certificate.
Monthly Deductions will be made from the Cash Value to prevent lapse, unless We
are notified by the Owner to terminate the coverage. The charges applicable to
continued coverage may be different due to a change in risk classification.]
[YOUR EMPLOYER'S PARTICIPATION UNDER THE POLICY ENDS
If You are already in a class of persons for whom coverage is continued on the
date Your Employer's participation ends, the Employer's cancellation will not
affect Your insurance under the Policy.}]
[SUCCESSOR PLAN
If the Group Plan ends for any reason [and there is a Successor Plan], Your
insurance coverage will end [if You are then participating in the payroll
deduction plan]:
1. If You are eligible for coverage under the Successor Plan on the date Your
Employer's participation under the Policy ends, We will transfer Your Cash
Surrender Value to the Successor Plan and You will have no further rights
under the Policy.
We may defer transfer of the Cash Surrender Value to the insurer for the
successor plan for the period permitted by law but not more than {60} months
from the date participation under the Policy ends. We will credit interest to
amounts in Your Fixed Account at the effective rate of no less than {3%} per
year during the period that payment is deferred. Deferred amounts of Separate
Account values will remain in the Investment Options.
2. If You are not eligible for insurance under the Successor Plan, the Owner
may convert Your insurance as described under the CONVERSION PRIVILEGES
provision that applies on benefit termination. Unless the conversion policy
can accept your full cash value as a side fund, We will pay the Cash
Surrender Value remaining.]
GDG-GVUL-0022 [22-GVUL]
Ed 98-3
Printed in U.S.A.
28
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
TERMINATION PROVISIONS -- CONTINUED
[NO SUCCESSOR PLAN
If the Policy is not replaced by a Successor Plan on the date Your Employer's
participation under the Policy ends, the Owner may be able to continue Your
insurance under the Policy as described in YOUR ELIGIBILITY UNDER THE GROUP PLAN
ENDS, above.]
CONVERSION RIGHTS WHEN YOU CEASE TO BE ELIGIBLE
Except as described below,} the Owner may convert all {or any part} of Your
insurance that ends.
The Owner may not convert Your insurance if {You are eligible to continue
insurance under the INSURANCE PORTABILITY provision or if } the Owner has
surrendered Your certificate.
To convert, the Owner must make application and pay the first premium to Us
within thirty-one (31) days of the date Your insurance ends. The Owner may
convert to any form of individual policy of life insurance (except term
insurance) that We normally make available to persons who are the same age and
requesting the same amount of insurance. The conversion policy will not have
disability or accidental death benefits. The rates used will be those
applicable to conversion policies.
The conversion policy will take effect at the end of the thirty-one (31) day
period the Owner has to convert. We will not require Proof of Good Health.
The most the Owner may convert is the Face Amount in force for You on the date
Your insurance ends.
CONVERSION RIGHTS ON BENEFIT TERMINATION
Your conversion rights are limited if:
[1. the Policy ends;
2. Your employer ends the payroll deduction arrangement;
3. one or more affiliates or subsidiaries of an employer ends its payroll
deduction arrangement {and You are not eligible to continue coverage under
the INSURANCE PORTABILITY provision,} or
4. the Group Plan is replaced by a Successor Plan and You are not eligible for
insurance under that Successor Plan].
If this provision applies to You, You must follow all of the rules described
under CONVERSION RIGHTS WHEN YOU CEASE TO BE ELIGIBLE. In addition, You must
have been insured under this Policy or any other John Hancock rider or group
policy replaced by the Policy for at least 5 years. The most You may convert is
the lesser of:
1. the Face Amount in force for You on the date Your insurance ends less any
amount of group life insurance the Covered Person becomes eligible for in
the next 45 days; [or
2. {$10,000}.
DEATH DURING CONVERSION PERIOD
If You die during the thirty-one (31) day period following the date your
insurance ends, the Death Benefit will be based upon the maximum Face Amount you
could have purchased upon conversion, whether or not You had applied for a
converted policy.
GDG-GVUL-0023 [23-GVUL]
Ed 98-3
Printed in U.S.A.
29
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
MISCELLANEOUS PROVISIONS
MISSTATEMENTS
[If We find that Your stated age is incorrect when a claim is made, We will
adjust the amount of Your Face Amount. The Face Amount We pay will reflect the
benefit that Your premiums would have provided at the correct age.
If any important facts about individuals in relation to their insurance are
found during Your lifetime to be misstated, We will adjust the insurance charges
to the correct amount. If the misstatement affects the amount of insurance, the
true facts are used to determine the correct amount of insurance.]
INCONTESTABILITY
A statement You make concerning Your good health [or that of Your Dependent
Child,] will not be used to contest insurance after it has been in force for 2
years during your lifetime {or, if applicable, during the lifetime of your
Dependent Child}. If the Owner increases Your Face Amount, [or that of Your
Dependent Child,] We will not contest the increase after it has been in force
for 2 years during your lifetime {or, if applicable, during the lifetime of your
Dependent Child}. We will not contest any statement made unless it is in a
signed, written instrument, and a copy of it has been given to the Owner, You or
Your Beneficiary.
ACCOUNT STATEMENT
[We will send an account statement on a periodic basis to the Owner of the
certificate. This statement will show the Face Amount and the Cash Value. It
will also show all credits to the Cash Value and deductions that were made from
the Cash Value since the last such statement. Additionally, the report will
give all other information that We are required to provide by the laws or rules
of the state where the certificate is issued.]
LEGAL ACTION
Action at law or in equity to recover on the Policy may be brought against Us
only during a certain period. This period begins 60 days after the date of
proof of claim was filed and ends 3 years after the end of such 60 day period.
RECOVERY OF PAYMENT
We have the right, at all times, to recover an overpayment We made, or a payment
that was made to a wrong payee, from the person to whom it was made.
EXAMINATIONS AND AUTOPSY
We may require, at Our expense, that You have a medical exam. We may also
require an autopsy in case of death, except where it is prohibited by law.
CHANGE IN CERTIFICATE
We have the right to make a change in the certificate, or in a rider attached to
a certificate, in order to continue to qualify this plan as life insurance under
the Internal Revenue Code or any successor law. Any such change that We make
will apply to all certificates and riders under the Group Plan. We will give
You notice of any such change We make.
GDG-GVUL-0024 [24-GVUL]
Ed 98-3
Printed in U.S.A.
30
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE
NOTICE
This notice is to advise You that should any complaints arise regarding this
insurance, You may contact the following:
Illinois Department of Insurance
Consumer Division of Public Services Section
Springfield, Illinois 62767
or
John Hancock Mutual Life Insurance Company
200 Clarendon Street
Post Office Box 111
Boston, Massachusetts 02117
Attn: Vice President of Group Life Products
GDG-GVUL-0025 [25-GVUL]
Ed 98-3
Printed in U.S.A.
31
<PAGE>
John Hancock Mutual Life Insurance Company
GDG-VBCK-0001 [1-VBCK]
Ed 98-3
Printed in U.S.A.
32
<PAGE>
EXHIBIT 3
[LETTERHEAD OF JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY APPEARS HERE]
April 13, 1998
Board of Directors
John Hancock Mutual Life Insurance Company
Members of the Board:
In my capacity as Counsel to John Hancock Mutual Life Insurance Company,
I have supervised the establishment of John Hancock Mutual Variable Life
Insurance Account G (the "Account") on April 7, 1998 by the Board of Directors
of John Hancock Mutual Life Insurance Company (the "Company") as a separate
account for assets applicable to variable life insurance policies, pursuant to
the provisions of Section 132G of Chapter 175 of the General Laws of the
Commonwealth of Massachusetts. Moreover, I have participated in the preparation
of this Registration Statement on Form S-6 (the "Registration Statement"), to be
filed with the Securities and Exchange Commission under the Securities Act of
1933 for the registration of variable life insurance policies to be issued with
respect to the Account.
I am of the following opinion:
(1) The Company is a corporation duly organized and validly existing under
the laws of the Commonwealth of Massachusetts.
(2) The Account is duly created and validly existing as a separate account
pursuant to the aforesaid provisions of Massachusetts law.
(3) The variable life insurance policies, when issued as contemplated by
the Registration Statement, will be legal and binding obligations of the Company
in accordance with their terms.
(4) The portion of the assets to be held in the Account equal to the
reserves and other liabilities under the variable life insurance policies is not
chargeable with liabilities arising out of any other business the Company may
conduct.
In arriving at the foregoing opinion, I have made such examination of law
and examined such records and other documents as in my judgement are necessary
or appropriate.
<PAGE>
I consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of my name under the caption "Legal Matters" in the
Prospectus contained in the Registration Statement.
Very truly yours,
Ronald J. Bocage, Esq.
----------------------
Vice President and Counsel
