HANCOCK JOHN VARIABLE LIFE ACCOUNT U, 485BPOS, 1998-05-01

HANCOCK JOHN VARIABLE LIFE ACCOUNT U
485BPOS, 1998-05-01

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<PAGE>

As filed with the Securities and Exchange Commission on April 30, 1998
Registration No. 33-76660
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

FORM S-6
Post-Effective Amendment No. 5 to
Registration Statement Under
THE SECURITIES ACT OF 1933

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

JOHN HANCOCK VARIABLE LIFE ACCOUNT U
(Exact name of trust)

JOHN HANCOCK VARIABLE 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

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

It is proposed that this filing become effective(check appropriate box)

/ /immediately upon filing pursuant to paragraph (b) of Rule 485
--

/X/on May 1, 1998 pursuant to paragraph (b) of Rule 485
--
/ /60 days after filing pursuant to paragraph (a)(1) of Rule 485
--
/ /on (date) pursuant to paragraph (a)(1) of Rule 485
--

If appropriate check the following box

/ /this post-effective amendment designates a new effective date for a
-
previously filed amendment

Pursuant to the provisions of Rule 24f-2, Registrant has registered an
indefinite amount of the securities being offered and filed its Notice for
fiscal year 1997 pursuant to Rule 24f-2 on February 26, 1998.

<PAGE>

CROSS-REFERENCE TABLE

Form N-8B-2 Item Caption in Prospectus
- ---------------- ---------------------

1, 2 Cover, The Account and The Series
Fund or Funds, JHVLICO and John
Hancock

3 Inapplicable

4 Cover, Distribution of Policies

5,6 The Account and The Series Fund or
Funds, State Regulation

7, 8, 9 Inapplicable

10(a),(b),(c),(d),(e) Policy Provisions and Benefits

10(f) Voting Privileges

10(g),(h) Changes that JHVLICO
Can Make

10(i) Appendix--Other Policy
Provisions, The Account and The
Series Fund or Funds

11, 12 Summary, The Account and The Series
Fund or Funds, Distribution of
Policies

13 Charges and expenses,Appendix-
Illustration of Death Benefits,
Account Values, Surrender Values and
Accumulated Premiums

14, 15 Summary, Distribution of
Policies, Premiums

16 The Account and The Series Fund or
Funds

17 Summary, Policy Provisions
and Benefits

18 The Account and The Series Fund or
Funds, Tax Considerations

19 Reports

20 Changes that JHVLICO
Can Make

21, 22 Policy Provisions and Benefits
<PAGE>

23 Distribution of Policies

24 Not Applicable

25 JHVLICO and John Hancock

26 Not Applicable

27,28,29,30 JHVLICO and John Hancock, Board
of Directors and Executive
Officers of JHVLICO

31,32,33,34 Not Applicable

35 JHVLICO and John Hancock

37 Not Applicable

38,39,40,41(a) Distribution of Policies,
JHVLICO and John Hancock,
Charges and Expenses

42, 43 Not Applicable

44 The Account and The Series Fund or
Funds,Policy Provisions,
Appendix--Illustration of Death
Benefits, Account Values,
Surrender Values and
Accumulated Premiums

45 Not Applicable

46 The Account and The Series Fund or
Funds, Policy Provisions,
Appendix--Illustration of Death
Benefits, Account Values,
Surrender Values and
Accumulated Premiums

47 Not Applicable

48,49,50 Not Applicable

51 Policy Provisions and Benefits,
Appendix--Other Policy
Provisions

52 The Account and The Series Fund or
Funds, Changes that JHVLICO Can Make

53,54,55 Not Applicable

56,57,58,59 Not Applicable

<PAGE>

[LOGO OF JOHN HANCOCK APPEARS HERE]

John Hancock Variable Life
Insurance Company
(JHVLICO)

FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
JOHN HANCOCK VARIABLE LIFE ACCOUNT U

John Hancock Place
Boston, Massachusetts 02117

JOHN HANCOCK SERVICING OFFICE:
P.O. Box 111
Boston, Massachusetts 02117

TELEPHONE 1-800-REAL LIFE (1-800-732-5543)
FAX 617-572-5410

PROSPECTUS MAY 1, 1998

The prospectuses for the Funds, which are attached to this Prospectus,
describe the investment objectives, policies and risks of investing in the
Portfolios of the Funds: Managed, Growth & Income, Equity Index, Large Cap
Value, Large Cap Growth, Mid Cap Value, Mid Cap Growth, Diversified Mid Cap
Growth (formerly, Special Opportunities), Real Estate Equity, Small/Mid Cap
CORE, Small Cap Value, Small Cap Growth, Global Equity, International Balanced,
International Equity Index (formerly, International Equities), International
Opportunities, Emerging Markets Equity, Short-Term Bond (formerly, Short-Term
U.S. Government), Bond Index, Sovereign Bond, Strategic Bond, High Yield Bond,
Money Market, Edinburgh Overseas Equity, Turner Core Growth, Frontier Capital
Appreciation, and Enhanced U.S. Equity. (The Small/Mid Cap CORE, Global Equity,
Emerging Markets Equity, Bond Index, High Yield Bond, and Enhanced U.S. Equity
Portfolios are not currently available to Owners but are expected to be made
available later in 1998.) Other variable Subaccounts and Portfolios may be added
in the future.

Replacing existing insurance with a Policy described in this Prospectus may
not be to your advantage.

THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. IT IS NOT
VALID UNLESS ATTACHED TO A CURRENT PROSPECTUS FOR THE FUND.

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.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
JHVLICO and JOHN HANCOCK . . . . . . . . . . . . . . . . . . . . . . . 7
THE ACCOUNT AND THE SERIES FUNDS . . . . . . . . . . . . . . . . . . . 7
THE FIXED ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . 10
POLICY PROVISIONS AND BENEFITS . . . . . . . . . . . . . . . . . . . . 11
Requirements for Issuance of Policy . . . . . . . . . . . . . . . . 11
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Account Value and Surrender Value . . . . . . . . . . . . . . . . . 13
Death Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Transfers Among Subaccounts . . . . . . . . . . . . . . . . . . . . 16
Loan Provisions and Indebtedness . . . . . . . . . . . . . . . . . . 17
Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Exchange Privilege . . . . . . . . . . . . . . . . . . . . . . . . . 19
CHARGES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . 19
Charges Deducted from Premiums . . . . . . . . . . . . . . . . . . . 19
Sales Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Administrative Surrender Charge . . . . . . . . . . . . . . . . . . 22
Reduced Charges for Eligible Groups . . . . . . . . . . . . . . . . 22
Charges Deducted from Account Value or Assets . . . . . . . . . . . 22
Guarantee of Premiums and Certain Charges . . . . . . . . . . . . . 24
DISTRIBUTION OF POLICIES . . . . . . . . . . . . . . . . . . . . . . . 24
TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Policy Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Charge for JHVLICO's Taxes . . . . . . . . . . . . . . . . . . . . . 26
Corporate and H.R. 10 Plans . . . . . . . . . . . . . . . . . . . . 26
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF JHVLICO . . . . . . . . . 27
REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
VOTING PRIVILEGES . . . . . . . . . . . . . . . . . . . . . . . . . . 28
CHANGES THAT JHVLICO CAN MAKE . . . . . . . . . . . . . . . . . . . . 28
STATE REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . 29
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 29
APPENDIX--OTHER POLICY PROVISIONS . . . . . . . . . . . . . . . . . . 60
APPENDIX--IMPACT OF YEAR 2000. . . . . . . . . . . . . . . . . . . . . 62
APPENDIX--ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER
VALUES AND ACCUMULATED PREMIUMS . . . . . . . . . . . . . . . . . . . 63
</TABLE>

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
<PAGE>

INDEX OF DEFINED WORDS AND PHRASES

Below are listed certain words and phrases used in this Prospectus, together
with identification of the page on which each is defined or explained:

<TABLE>
<CAPTION>
Page
<S> <C>
Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Account Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Age. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Base Policy Target Premium . . . . . . . . . . . . . . . . . . . . . 19
DAC Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Death Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Fixed Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Front Cover
Guaranteed Death Benefit . . . . . . . . . . . . . . . . . . . . . . 12
Guaranteed Death Benefit Grace Period. . . . . . . . . . . . . . . . 12
Guaranteed Death Benefit Premium . . . . . . . . . . . . . . . . . . 12
Servicing Office . . . . . . . . . . . . . . . . . . . . . . . .
Front Cover
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Investment Rule. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Loan Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Minimum First Premium. . . . . . . . . . . . . . . . . . . . . . . . 11
Modal Processing Date. . . . . . . . . . . . . . . . . . . . . . . . 12
Planned Premium. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Policy Grace Period. . . . . . . . . . . . . . . . . . . . . . . . . 12
Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Front Cover
Subaccount . . . . . . . . . . . . . . . . . . . . . . . . . . .
Front Cover
Sum Insured. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Surrender Value. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Target Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Valuation Period . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Variable Subaccounts . . . . . . . . . . . . . . . . . . . . . . . . 10
7-Pay Premium Limit. . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
<PAGE>

SUMMARY

WHAT IS THE VARIABLE LIFE POLICY BEING OFFERED?

JHVLICO issues variable life insurance policies. The Policies described in
this Prospectus are flexible premium policies. JHVLICO issues other variable
life insurance policies. These other policies are offered by means of other
Prospectuses.

As explained below, the death benefit and Surrender Value under the Policy may
increase or decrease daily. The Policies differ from ordinary fixed-benefit life
insurance in the way they work. However, the Policies are like fixed-benefit
life insurance in providing lifetime protection against economic loss resulting
from the death of the insured. The Policies are primarily insurance and not
investments.

The Policies work generally as follows: A premium payment is periodically made
to JHVLICO. JHVLICO takes from each premium an amount for taxes and, from
certain premiums, sales expenses. JHVLICO then places the rest of the premium
into as many as ten Subaccounts as directed by the owner of the Policy (the
"Owner"). The assets allocated to each variable Subaccount are invested in
shares of the corresponding Portfolio of the Funds. The currently available
Portfolios are identified on the cover of this Prospectus. The assets allocated
to the Fixed Account are invested in the general account of JHVLICO. During the
year, JHVLICO takes charges from each Subaccount and credits or charges each
Subaccount with its respective investment performance. The insurance charge,
which is deducted from the invested assets attributable to each Policy ("Account
Value"), varies monthly with the then attained age of the insured and with the
amount of insurance provided at the start of each month.

The Policy provides for payment of death benefit proceeds when the insured
dies. The death benefit proceeds will equal the death benefit, plus any
additional benefit included by rider and then due, minus any Indebtedness. The
death benefit may be either level or variable as elected by the Owner. The level
death benefit provides a death benefit that generally remains fixed in amount
and an Account Value that varies daily. Two versions of the level death benefit
are available. The variable death benefit provides for a death benefit and
Account Value that may vary daily. The Policy also increases the death benefit
if necessary to ensure that the Policy will continue to qualify as life
insurance under the Federal tax laws.

The initial Account Value is the amount of the premium that JHVLICO credits to
the Policy, after deduction of the initial charges. The Account Value increases
or decreases daily depending on the investment experience of the Subaccounts to
which the amounts are allocated at the direction of the Owner. JHVLICO does not
guarantee a minimum amount of Account Value. The Owner bears the investment risk
for that portion of the Account Value allocated to the variable Subaccounts. The
Owner may surrender a Policy at any time while the insured is living. The
Surrender Value is the Account Value less the sum of any Administrative
Surrender Charge, any Contingent Deferred Sales Charge and any Indebtedness. The
Owner may also make partial withdrawals from a Policy, subject to certain
restrictions and an administrative charge. If the Owner surrenders in the early
Policy years, the amount of Surrender Value would be low (as compared with other
investments without sales charges) and, consequently, the insurance protection
provided prior to surrender would be costly.

The minimum Sum Insured at issue is $100,000. All persons insured must be
between ages 20 and 75 years at issue and meet certain health and other criteria
called "underwriting standards." An insured may be eligible for the "preferred"
class, which has the lowest insurance charges. The smoking status of the insured
is generally reflected in the insurance charges made. Policies issued in certain
jurisdictions or in connection with certain employee plans will not directly
reflect the sex of the insured in either the premium rates or the charges and
values under the Policy.

1
<PAGE>

The Owner of a Policy issued on a standard or preferred underwriting basis may
be eligible for the Guaranteed Death Benefit feature if he or she satisfies
certain other underwriting standards relating to health and occupation. This
provision is applicable at no additional cost only in the first five Policy
years and cannot be extended. Under this provision, the Policy will be
guaranteed not to lapse during the first five Policy years, regardless of
adverse investment performance, if the Owner pays the Guaranteed Death Benefit
Premiums on a cumulative basis over that period.

WHAT IS THE AMOUNT OF THE PREMIUMS?

Premiums are flexible and the Owner may choose the amount and frequency of
premium payments.

The minimum amount of premium required at the time of Policy issue is three
months of Guaranteed Death Benefit Premium. One year's Guaranteed Death Benefit
Premium equals the "Target Premium" of a Policy. Unless the Guaranteed Death
Benefit is in effect, if the Policy Account Value at the beginning of any Policy
month is insufficient to pay the monthly Policy charges then due, JHVLICO will
estimate the amount of additional premiums necessary to keep the Policy in force
for three months. The Owner will have a 61 day grace period to pay at least that
amount or the Policy will lapse.

The Target Premium is equal to the annual Guaranteed Death Benefit Premium.
The Target Premium is the sum of Base Policy Target Premium, an amount set forth
in the Policy at issue, plus any rider premium.

At the time of Policy issue, the Owner may designate the amount and frequency
of Planned Premium payments. The Owner may pay premiums other than the Planned
Premium payments, subject to certain limitations.

WHAT IS JOHN HANCOCK VARIABLE LIFE ACCOUNT U?

The Account is a separate investment account of JHVLICO, operated as a unit
investment trust, which supports benefits payable under the Policies. The
Account is subdivided into a number of variable Subaccounts each of which
corresponds to one of the Portfolios of the Funds. The assets of each variable
Subaccount within the Account is invested in a corresponding Portfolio of the
Funds. The current Portfolios of the Funds are: Managed, Growth & Income, Equity
Index, Large Cap Value, Large Cap Growth, Mid Cap Value, Mid Cap Growth,
Diversified Mid Cap Growth, Real Estate Equity, Small/Mid Cap CORE, Small Cap
Value, Small Cap Growth, Global Equity, International Balanced, International
Equity Index, International Opportunities, Emerging Markets Equity, Short-Term
Bond, Bond Index, Sovereign Bond, Strategic Bond, High Yield Bond, Money Market,
Edinburgh Overseas Equity, Turner Core Growth, Frontier Capital Appreciation,
and Enhanced U.S. Equity.

The figures in the following chart are expressed as a percentage of each
Portfolio's average daily net assets. The figures reflect the investment
management fees currently payable and the 1997 other fund expenses allocated to
John Hancock Variable Series Trust I (except that other fund expenses for the
Small/Mid Cap CORE, Global Equity, Emerging Markets Equity, Bond Index, and High
Yield Bond Portfolios are based upon estimates for the current fiscal year).

2
<PAGE>

<TABLE>
<CAPTION>
Other
Fund
Other Fund Total Expenses
Expenses Fund Absent
Management After Expense Operating Expense
Fund Name Fee Reimbursement Expenses Reimbursement/*/
--------- ---------- ------------- --------- ----------------
<S> <C> <C> <C> <C>
Managed . . . . . . . 0.33% 0.04 % 0.37% N/A
Growth & Income . . . 0.25% 0.03 % 0.28% N/A
Equity Index. . . . . 0.15% 0.25 % 0.40% 0.40%
Large Cap Value . . . 0.75% 0.25 % 1.00% 0.31%
Large Cap Growth. . . 0.39% 0.05 % 0.44% N/A
Mid Cap Value . . . . 0.80% 0.25 % 1.05% 0.34%
Mid Cap Growth. . . . 0.85% 0.25 % 1.10% 0.57%
Diversified Mid Cap
Growth . . . . . . . 0.75% 0.10% 0.85% N/A
Real Estate Equity. . 0.60% 0.09 % 0.69% N/A
Small/Mid Cap CORE. .
Small Cap Value . . . 0.80% 0.25 % 1.05% 0.50%
Small Cap Growth. . . 0.75% 0.25 % 1.00% 0.37%
Global Equity . . . .
International Balanced 0.85% 0.25 % 1.10% 0.71%
International Equity
Index. . . . . . . . 0.18% 0.19 % 0.37% N/A
International
Opportunities. . . . 0.97% 0.25 % 1.22% 0.60%
Emerging Markets
Equity . . . . . . .
Short-Term Bond . . . 0.30% 0.21% 0.51%
Bond Index. . . . . .
Sovereign Bond. . . . 0.25% 0.06 % 0.31% N/A
Strategic Bond. . . . 0.75% 0.25 % 1.00% 0.57%
High Yield Bond . . .
Money Market. . . . . 0.25% 0.08 % 0.33% N/A
</TABLE>

/1/

*John Hancock reimburses a Portfolio when the Portfolio's other fund expenses
exceed 0.25% of the Portfolio's average daily net assets.

M Fund, Inc., pays M Financial Investment Advisers, Inc., ("M Financial") a
fee for providing investment management services to each of its Portfolios. M
Fund, Inc., also pays for certain other fund expenses. The figures in the
following chart are expressed as a percentage of each Portfolio's average daily
net assets. The figures reflect the investment management fees currently payable
and the 1997 other fund expenses allocated to the Fund.

<TABLE>
<CAPTION>
Total Fund
Investment Other Operating Other Fund Expenses
Portfolio Management Fee Fund Expenses Expenses Absent Reimbursement*
- --------- -------------- ------------- ---------- -----------------------
<S> <C> <C> <C> <C>
Edinburgh Overseas
Equity . . . . . . . 1.05% 0.25% 1.30% 3.89%
Turner Core Growth . 0.45% 0.25% 0.70% 5.72%
Frontier Capital
Appreciation . . . . 0.90% 0.25% 1.15% 1.96%
Enhanced U.S. Equity. 0.55% 0.25% 0.80% 4.87%
</TABLE>

- ---------

*M Financial reimburses a Portfolio when the Portfolio's other fund expenses
exceed 0.25% of the Portfolio's average daily net assets.

For a full description of the Funds, see the Prospectuses for the Funds
attached to this Prospectus.

3
<PAGE>

WHAT ARE THE CHARGES MADE BY JHVLICO?

State Premium Tax Charge and Federal DAC Tax Charge. Charges deducted from
each premium payment, currently 2.35% for state premium taxes and 1.25% as a
Federal deferred acquisition cost or "DAC Tax" charge.

Sales Charge Deduction from Premium. A charge deducted from premium payments
equal to no more than 4% of the Target Premium received in any Policy year.
JHVLICO currently intends to waive this deduction from premiums received after
the first 10 Policy years.

Contingent Deferred Sales Charge. A charge deducted from Account Value if the
Policy lapses or is surrendered during the first 12 Policy years. The amount of
the charge depends upon the Policy year in which lapse or surrender occurs. The
charge will never be higher than 26% of Base Policy Target Premiums paid to
date. The total charges for sales expenses over the lesser of 20 years or the
life expectancy of the insured will not exceed 9% of the Target Premium payments
under the Policy, assuming all Target Premiums are paid.

Administrative Surrender Charge. A charge deducted from Account Value if the
Policy lapses or is surrendered in the first 9 Policy years. The amount of the
charge depends upon the Policy year in which lapse or surrender occurs and the
Policy's Sum Insured at that time. The maximum charge is $5 per $1,000 of
current Sum Insured.

Issue Charge. A charge deducted monthly from Account Value at the rate of $20
per month for the first 12 Policy months.

Maintenance Charge. A charge deducted monthly from Account Value in an amount
equal to no more than $8 (currently $6) for all Policy years.

Insurance Charge. A charge based upon the amount for which JHVLICO is at risk,
considering the attained age and risk classification of the insured and
JHVLICO's then current monthly insurance rates (never to exceed rates set forth
in the Policy) deducted monthly from Account Value. JHVLICO currently intends to
reduce this charge beginning the tenth Policy year.

Charge for Mortality and Expense Risks. A charge deducted daily from the
variable Subaccounts at a maximum effective annual rate of .90% (currently .60%)
of the assets of each variable Subaccount.

Charge for Extra Mortality Risks. An additional charge, depending upon the age
of the insured and the degree of additional mortality risk, required if the
insured does not qualify for the standard or preferred underwriting class. This
additional charge is deducted monthly from Account Value.

Charge for Optional Rider Benefits. An additional charge required if the Owner
elects to purchase any optional insurance benefits by rider. Any such additional
charge is deducted monthly from Account Value.

Charge for Partial Withdrawal. A charge of $20 deducted from Account Value at
the time of withdrawal.

See "Charges and Expenses", for a fuller description of the charges under the
Policy.

IS THERE A CHARGE AGAINST THE ACCOUNT FOR FEDERAL INCOME TAX?

4
<PAGE>

right to make a charge. JHVLICO expects that it will continue to be taxed as a
life insurance company. See "Charge for JHVLICO's Taxes".

WHAT IS THE RELATIONSHIP BETWEEN THE PREMIUM AND THE AMOUNT ALLOCATED TO THE
SUBACCOUNTS?

The initial net premium is allocated by JHVLICO from its general account to
one or more of its Subaccounts on the date of issue of the Policy. The initial
net premium is the gross premium less the sales charge deducted from certain
premium payments and less the charges deducted from all premiums for state
premium taxes and the Federal DAC Tax charge. These charges also apply to
subsequent premium payments. Net premiums derived from payments received after
the issue date are allocated, generally on the date of receipt, to one or more
of the Subaccounts as elected by the Owner.

HOW ARE AMOUNTS ALLOCATED TO EACH SUBACCOUNT?

At issue and subsequently thereafter, the Owner will provide us with the rule
("Investment Rule") we will follow to invest net premiums or other amounts in
any one but not more than ten of the Subaccounts. The Owner may change the
Investment Rule under which JHVLICO will allocate amounts to Subaccounts.

WHAT COMMISSIONS ARE PAID TO AGENTS?

The Policies are sold through agents who are licensed by state authorities to
sell JHVLICO's insurance policies. Commissions payable to agents are described
under "Distribution of Policies". Sales expenses in any year are not equal to
the deduction for sales expenses in that year. Rather, total sales expenses
under the Policies are intended to be recovered over the lifetimes of the
insureds covered by the Policies.

WHAT IS THE DEATH BENEFIT?

Three death benefit options are available at the time of application for a
Policy.

Option 1: Level Death Benefit. A level death benefit equal to the Sum Insured
or, if greater, the Account Value multiplied by the applicable Corridor Factor.

Option 2: Variable Death Benefit. A variable death benefit equal to the Sum
Insured plus any Account Value, or, if greater, the Account Value multiplied by
the applicable Corridor Factor.

Option 3: Level Death Benefit With Greater Funding. A level death benefit
equal to the Sum Insured, or, if greater, the Account Value multiplied by the
applicable Death Benefit Factor. It differs from the level death benefit option
described above in that a greater amount of premium payments can generally be
made by the Owner.

Under each of the Options, an alternative death benefit is computed that is
equal to the Account Value multiplied by a Corridor Factor or a Death Benefit
Factor to increase the death benefit if necessary to ensure that the Policy will
continue to qualify as life insurance under the Federal tax law. See "Death
Benefits"; "Definition of Life Insurance" and "Tax Considerations".

Under the Guaranteed Death Benefit provision, the Policy is guaranteed not to
lapse during the first 5 Policy years, provided that, on each Modal Processing
Date, the amount of cumulative premiums paid, minus any withdrawals, is at least
equal to the cumulative amount of Guaranteed Death Benefit Premiums due to date.
This provision applies only if the insured is in the preferred or standard
underwriting risk class and satisfies certain other underwriting standards
relating to health and occupation.

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<PAGE>

HOW DOES THE ACCOUNT VALUE OF A POLICY VARY IN RELATION TO THE SUBACCOUNTS'
INVESTMENT EXPERIENCE?

In general, the Account Value for any day equals the Account Value for the
previous day, increased by any net premium placed in the Subaccounts for the
Policy, decreased by any charges made against the Account Value and by any
partial withdrawal, and increased or decreased by the investment experience of
the Subaccounts. No minimum Account Value for the Policy is guaranteed.

WHAT IS THE LOAN PROVISION AND HOW DOES A LOAN AFFECT THE DEATH BENEFIT, ACCOUNT
VALUE AND SURRENDER VALUE?

After the first Policy year the Owner may obtain a Policy loan. Assuming no
Indebtedness (see below), the maximum amount of any loan in Policy years two and
three is 75% of that portion of the Surrender Value attributable to variable
Subaccount investments, plus 100% of that portion of the Surrender Value
attributable to Fixed Account investments; thereafter the maximum is 90% of that
portion of Surrender Value attributable to variable Subaccount investments, plus
100% of that portion of the Surrender Value attributable to Fixed Account
investments. Interest charged on any loan will accrue and compound daily at an
effective annual rate of 5.0% in the first 20 Policy years and 4.50% thereafter.
A loan plus accrued interest ("Indebtedness") may be repaid at the discretion of
the Owner in whole or in part in accordance with the terms of the Policy.

While a loan is outstanding, the rate of interest credited to the Account
Value because of the loan will usually be different than the net investment
experience of the Subaccounts. Therefore, the Account Value, the Surrender Value
and any death benefit above the current Sum Insured are permanently affected by
any loan.

IS THERE A SHORT-TERM CANCELLATION RIGHT?

The Owner may surrender a Policy by delivering or mailing it within 45 days
after the date Part A of the application has been completed or within 10 days
after receipt of the Policy by the Owner, or within 10 days after mailing by
JHVLICO of a Notice of Withdrawal Right, whichever is latest, to JHVLICO's
Servicing Office, or to the agent or agency office through which it was
delivered. Coverage under the Policy will be cancelled immediately as of the
date of such mailing or delivery. Any premium paid on it will be refunded. If
required by state law, the refund will equal the Account Value at the end of the
Valuation Period in which the Policy is received plus all charges or deductions
made against premiums plus an amount reflecting charges against the Subaccounts
and the investment management fee of the Funds.

WHAT INVESTMENT TRANSFERS ARE ALLOWED AN OWNER?

The Owner may transfer the Account Value among the variable Subaccounts or
into the Fixed Account at any time. Transfers out of the Fixed Account, however,
are subject to restrictions.

ARE THE BENEFITS UNDER A POLICY SUBJECT TO FEDERAL INCOME TAX?

The benefits under Policies described in this Prospectus are expected to
receive the same tax treatment under the Internal Revenue Code of 1986 as
benefits under traditional fixed-benefit life insurance policies. Thus, death
benefits payable under the Policies will not be included in the beneficiary's
gross income. Also, the Owner is not taxed on interest and gains under the
Policy unless and until values are actually received through withdrawal,
surrender, or other distributions.

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<PAGE>

Under Federal tax law, distributions from Policies 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 "Premiums--7-Pay Premium Limit" and "Policy
Proceeds" for a discussion of how the "7-pay" premium limit may be exceeded
under a Policy. A distribution on such a Policy (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.

JHVLICO AND JOHN HANCOCK

JHVLICO, a stock life insurance company chartered in 1979 under Massachusetts
law, is authorized to transact a life insurance and annuity business in
Massachusetts and all states other than New York. JHVLICO began selling variable
life insurance policies in 1980.

JHVLICO is a wholly-owned subsidiary of John Hancock, a company chartered in
Massachusetts in 1862. Its Home Office is at John Hancock Place, Boston,
Massachusetts 02117. John Hancock's assets are approximately $59 billion and it
has invested over $380 million in JHVLICO in connection with JHVLICO's
organization and operations. It is anticipated that John Hancock will from time
to time make additional capital contributions to JHVLICO to enable it to meet
its reserve requirements and expenses in connection with its business, and John
Hancock is committed to make additional capital contributions if necessary to
ensure that JHVLICO maintains a positive net worth.

THE ACCOUNT AND THE SERIES FUNDS

THE ACCOUNT

The 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 Account's assets are the property of JHVLICO. Each Policy provides that
the portion of the Account's assets equal to the reserves and other liabilities
under the Policy shall not be chargeable with liabilities arising out of any
other business JHVLICO may conduct. In addition to the assets attributable to
variable life policies, the Account's assets include assets derived from charges
made by JHVLICO. From time to time these additional assets may be transferred in
cash by JHVLICO to its general account. Before making any such transfer, JHVLICO
will consider any possible adverse impact the transfer might have on any
Subaccount.

The 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 Account, JHVLICO or John
Hancock.

The assets in each variable Subaccount are invested in the corresponding
Portfolio of the Funds, but the assets of one variable Subaccount are not
necessarily legally insulated from liabilities associated with another variable
Subaccount. New variable Subaccounts may be added or existing variable
Subaccounts may be deleted as new Portfolios are added to or deleted from the
Funds and made available to Owners.

THE SERIES FUNDS

Each Fund is a "series" type of mutual fund registered with the Commission
under the 1940 Act as an open-end diversified management investment company.
Each Fund serves as the investment medium for the Account and

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<PAGE>

other unit investment trust separate accounts established for other variable
life insurance policies and variable annuity contracts. (See the attached Fund
Prospectuses for a description of a need to monitor for possible conflicts and
other consequences.) A very brief summary of the investment objectives of each
Portfolio is set forth below.
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.

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 the
long term.

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 investments in the
common stocks of established companies believed to offer favorable prospects for
increasing dividends and capital appreciation.

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 with rights to purchase common stocks) of companies believed to offer
above-average capital appreciation opportunities. Current income is not an
objective of the Portfolio.

Mid Cap Value Portfolio

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.

Mid Cap Growth Portfolio

The investment objective of this Portfolio is to provide long-term growth of
capital through a non-diversified portfolio investing primarily in common stocks
of medium capitalization companies.

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.

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<PAGE>

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.

Small/Mid Cap CORE Portfolio

The investment 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.

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 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.

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 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.

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.

International Opportunities Portfolio

The investment objective of this Portfolio is to provide capital appreciation
through investments in common stocks of primarily well-established, non-United
States companies.

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.

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.

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<PAGE>

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.

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.

Strategic Bond Portfolio

The investment objective of this Portfolio is to provide total return
consistent with moderate risk of capital and maintenance of liquidity, through a
portfolio of domestic and international fixed income securities.

High Yield Bond Portfolio

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.

Money Market Portfolio

The investment objective of this Portfolio is to provide maximum current
income consistent with capital preservation and liquidity, through investment in
high quality money market instruments.

John Hancock acts as the investment manager for the Portfolios described
above, and 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 Managed,
Growth & Income, Large Cap Growth, Real Estate Equity and Short-Term Bond
Portfolios. Independence International Associates, Inc., a subsidiary of IIA
located at the same address as IIA, is a sub-investment adviser to the
International Equity Index Portfolio.

Another indirectly owned subsidiary of John Hancock, John Hancock Advisers,
Inc., located at 101 Huntington Avenue, Boston, MA 02199, provides
sub-investment advice with respect to the Sovereign Bond, Diversified Mid Cap
Growth, and Small 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 02100,
is sub-investment adviser to the Equity Index Portfolio. INVESCO 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

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<PAGE>

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.

Edinburgh Overseas Equity Portfolio. The investment objective of this
Portfolio is to provide long-term capital appreciation with reasonable
investment risk through active management and investment in common stock and
common stock equivalents of foreign issuers. Current income, if any, is
incidental.

Turner Core Growth Portfolio. The investment objective of this Portfolio is to
seek long-term capital appreciation through a diversified portfolio of common
stocks that show strong earnings potential with reasonable market prices.

Frontier Capital Appreciation Portfolio. The investment objective of this
Portfolio is to seek maximum capital appreciation through investment in common
stock of companies of all sizes, with emphasis on stocks of small- to
medium-capitalization companies. Importance is placed on growth and price
appreciation, rather than income.

Enhanced U.S. Equity Portfolio. The investment objective of this Portfolio is
to provide above market total return through investment in common stock of
companies perceived to provide a return higher than that of the S&P 500 at
approximately the same level of investment risk as the S&P 500.

M Financial Investment Advisers, Inc., acts as the investment manager for the
four Portfolios described above. Edinburgh Fund Managers PLC, provides
sub-investment advise to the Edinburgh Overseas Equity Portfolio; Turner
Investment Partners, Inc. provides sub-investment advise to the Turner Core
Growth Portfolio; Frontier Capital Management Company, Inc., provides
sub-investment advice to the Frontier Capital Appreciation Portfolio; and
Franklin Portfolio Associates Trust provides sub-investment advice to the
Enhanced U.S. Equity Portfolio.

JHVLICO will purchase and redeem Fund shares for the Account at their net
asset value without any sales or redemption charges. Shares of the Fund
represent an interest in one of the Portfolios of the Fund which corresponds to
a variable Subaccount of the Account. Any dividend or capital gains
distributions received by the Account will be reinvested in Fund shares at their
net asset value as of the dates paid.

On each Valuation Date, shares of each Portfolio are purchased or redeemed by
JHVLICO for each variable Subaccount based on, among other things, the amount of
net premiums allocated to the variable Subaccount, distributions reinvested,
transfers to, from and among variable 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 Portfolio 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.

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<PAGE>

A full description of each Fund, its investment objectives, policies and
restrictions, its charges, expenses and all other aspects of its operation is
contained in the attached Prospectuses and the statement of additional
information referred to therein, which should be read together with this
Prospectus.

THE FIXED ACCOUNT

An Owner may allocate premiums to the Fixed Account or transfer all or a part
of the Account Value under a Policy to the Fixed Account. The amount so
allocated or transferred will become a part of JHVLICO's general account assets.
JHVLICO's general account consists of assets owned by JHVLICO other than those
in the Account and in other separate accounts that have been or may be
established by JHVLICO. Subject to applicable law, JHVLICO has sole discretion
over the investment of assets of the general account and Owners do not share in
the investment experience of those assets. Instead, JHVLICO guarantees that the
Account Value allocated to the Fixed Account will accrue interest daily at an
effective annual rate of at least 4% without regard to the actual investment
experience of the general account. Consequently, if an Owner pays the Required
Premiums, allocates all net premiums only to the Fixed Account, and makes no
transfers, partial withdrawals, or policy loans, the minimum amount and duration
of the death benefit will be determinable and guaranteed. Transfers from the
Fixed Account are subject to certain limitations (see "Transfers Among
Subaccounts"), and charges will vary somewhat for Account Value allocated to the
Fixed Account. See "Charges Deducted From Account Value".

The Account Value in the Fixed Account is equal to the portion of the net
premiums allocated to it, plus any amounts transferred to it and interest
credited to it, minus any charges deducted from it or partial withdrawals or
amounts transferred from it. JHVLICO guarantees that interest credited to the
Account Value in the Fixed Account will not be less than an effective annual
rate of 4%. JHVLICO may, in its sole discretion, credit higher rates although it
is not obligated to do so. The Owner assumes the risk that interest credited
will not exceed 4% per year. Upon request and in the annual statement, JHVLICO
will inform Owners of the then-applicable rates.

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

POLICY PROVISIONS AND BENEFITS

REQUIREMENTS FOR ISSUANCE OF POLICY

The Policy is generally available with a minimum Sum Insured at issue of
$100,000. At the time of issue, the insured must be age 20 through 75. All
persons insured must meet certain health and other criteria called "underwriting
standards". The smoking status of each insured is reflected in the insurance
charges made.

Policies issued in certain jurisdictions or in connection with certain
employee plans will not directly reflect the sex of the insured in either the
premium rates or the charges or values under the Policy. The illustrations set
forth in this Prospectus are sex-distinct and, therefore, do not reflect the
sex-neutral rates, charges, or values that would apply to such Policies.

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<PAGE>

PREMIUMS

Payment Flexibility. Premiums are flexible. The Owner may choose the amount
and frequency of premium payments, so long as each premium payment meets the
requirements described below.

Minimum First Premium. The amount of premium required at the time of issue is
determined by JHVLICO, and depends on the age, sex, smoking status, and
underwriting class of the insured at issue, the Policy's Sum Insured at issue,
and any additional benefits selected. The Minimum First Premium must be received
by JHVLICO at its Servicing Office in order for the Policy to be in full force
and effect. See "Death Benefits". There is no grace period for the payment of
the Minimum First Premium. The minimum amount of premium required at the time of
Policy issue is three months of Guaranteed Death Benefit Premium. However, an
automatic check writing program ("premiumatic") may be available to an Owner
interested in making monthly premium payments and, if utilized by an Owner, only
one month of Guaranteed Death Benefit Premium need be paid to satisfy the
minimum amount.

Minimum Premiums. If the Policy's Surrender Value at the beginning of any
Policy month is insufficient to pay the monthly Policy charges then due, JHVLICO
will notify the Owner and the Policy will enter a Policy grace period, unless
the Guaranteed Death Benefit is in effect. If premiums sufficient to pay at
least three months' estimated charges are not paid by the end of the grace
period, the Policy will lapse. The estimated charges will equal three times the
monthly Policy charges then due. See "Default".

Planned Premium Schedule. At the time of issue, the Owner may designate a
Planned Premium schedule for the amount and frequency of premium payments.
JHVLICO will send billing statements for the amount chosen at the frequency
chosen, whether quarterly, monthly, semi-annually or annually. The Owner may
change the Planned Premium after issue. The Owner may also pay a premium in
excess of the Planned Premium, subject to the limitations described below. At
the time of Policy issuance, JHVLICO will determine whether the Planned Premium
schedule will exceed the 7-Pay limit discussed below. If so, JHVLICO's standard
procedures prohibit issuance of the Policy unless the Owner signs a form
acknowledging that fact.

Other Premium Limitations. Federal tax law requires a minimum death benefit in
relation to Account Value. See "Death Benefits--Definition of Life Insurance".
The death benefit of the Policy will be increased if necessary to ensure that
the Policy will continue to satisfy this requirement. If the payment of a given
premium will cause the Account Value to increase to such an extent that an
increase in death benefit is necessary to satisfy Federal tax law requirements,
JHVLICO has the right to not accept the excess portion of that premium payment,
or to require evidence of insurability before that portion is accepted. In no
event, however, will JHVLICO refuse to accept any premium necessary to prevent
the Policy from lapsing. Also, if an Owner has elected to use the "guideline
premium and cash value corridor" test for Federal income tax purposes, JHVLICO
will not accept the portion of any premium that exceeds the maximum amount
prescribed under that test.

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<PAGE>

grace period will commence as of that anniversary. The Guaranteed Death Benefit
grace period will end on the second monthly processing date after the
determination of the shortfall. This notice will be mailed to the Owner's
last-known address at least 31 days prior to the end of the Guaranteed Death
Benefit grace period. If JHVLICO does not receive payment for the amount of the
deficiency by the end of the Guaranteed Death Benefit grace period, the
Guaranteed Death Benefit feature will permanently lapse with no possibility of
restoration. The Guaranteed Death Benefit is only available if the insured's
underwriting class is standard or preferred and the insured meets certain other
underwriting standards relating to health and occupation.

Billing, Allocation of Premium Payments (Investment Rule). The Owner may at
any time elect to be billed by JHVLICO for a Planned Premium other than the
Guaranteed Death Benefit Premium. The Owner may also elect to be billed for
premiums on an annual, semi-annual, quarterly or monthly basis. An automatic
check-writing program ("premiumatic") may be available to an Owner interested in
making monthly premium payments. All premiums are payable at JHVLICO's Servicing
Office.

Any premium payment will be processed by JHVLICO as of the end of the
Valuation Period in which it is received, unless one of the three exceptions
noted below is applicable. Each premium payment will be reduced by the state
premium tax charge, any sales charge, and the Federal DAC Tax charge. See
"Charges and Expenses". The remainder is the net premium.

The Owner at the time of application must elect an Investment Rule which will
allocate net premiums and any credits to as many as ten of the Subaccounts. The
Owner must select allocation percentages in whole numbers, and the total
allocated must equal 100%. The Owner may thereafter change the Investment Rule
prospectively at any time. The change will be effective as to any net premiums
and credits applied after receipt at JHVLICO's Servicing Office of notice
satisfactory to JHVLICO.

There are three exceptions to the normal practice of processing a premium
payment as of the end of the Valuation Period in which it is received:

(1)A payment received prior to a Policy's date of issue will be processed
as if received on the Valuation Date immediately preceding the date of
issue.

(2)If the Minimum First Premium is not received prior to the date of
issue, each payment received thereafter will be processed as if received
on the Valuation Date immediately preceding the date of issue until all
of the Minimum First Premium is received.

(3)That portion of any premium that we delay accepting as described under
"Other Premium Limitations" above, or "7-Pay Premium Limit" below, will
be processed as of the end of the Valuation Period in which we accept
that amount.

7-Pay Premium Limit. Federal tax law modifies the tax treatment of certain
Policy distributions such as loans, surrenders, partial surrenders, and
withdrawals. The application of this modified treatment to any Owner depends
upon whether premiums have been paid at any time during the first 7 Policy years
that exceed a "7-pay" premium limit as defined in the law. The 7-pay limit is
the total of net level premiums that would have been payable at any time for the
Policy to be fully paid-up after the payment of 7 level annual premiums. If the
total premiums paid exceed the 7-pay limit, the Policy will be treated as a
"modified endowment", which means that the Owner will be subject to tax to the
extent of any income (gain) on any distributions made from the Policy. A
material change in the Policy will result in a new 7-pay limit and test period.
A reduction in the Policy's benefits within the 7-year period following issuance
of, or reinstatement or other material change in, the Policy may also result in
the application of the modified endowment treatment. See "Policy Proceeds" under
"Tax Considerations". If JHVLICO receives any premium payment that will cause a
Policy to become a modified endowment, the excess portion of that

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<PAGE>

premium payment will not be accepted unless the Owner signs an acknowledgment of
that fact. When it identifies such an excess premium, JHVLICO sends the Owner
immediate notice and refunds the excess premium if it has not received notice of
the acknowledgement by the time the premium payment check has had a reasonable
time to clear the banking system, but in no case longer than two weeks.

ACCOUNT VALUE AND SURRENDER VALUE

Amount of Account Value. The Account Value increases or decreases depending
upon a number of factors, such as the applicable Subaccount's investment
experience, the proportion of the Account Value invested in each Subaccount and
the interest credited to any Loan Account established upon the making of a
Policy loan. In general the Account Value for any day equals the Account Value
for the previous day, decreased by charges against the Account Value and by any
partial withdrawal, increased or decreased by the investment experience of the
Subaccounts and increased by net premiums received. No minimum amount of Account
Value is guaranteed.

A Policy loan will not affect the total amount of Account Value at the time
the loan is made but will result in a different rate of return being credited to
the Loan Account portion of the Account Value.

Amount of Surrender Value. The Surrender Value will be the Account Value less
the sum of any Administrative Surrender Charge, any Contingent Deferred Sales
Charge, and any Indebtedness.

When Policy May Be Surrendered. A Policy may be surrendered for its Surrender
Value at any time while the insured is living and the Policy is not in a Policy
grace period. Surrender takes effect and the Surrender Value is determined as of
the end of the Valuation Period in which occurs the later of receipt at
JHVLICO's Servicing Office of a signed request and the surrendered Policy.

A portion of the Contingent Deferred Sales Charge, equal to 20% of premiums
paid in the second Policy year up to one Base Policy Target Premium, will be
waived in calculating the second Policy year's Surrender Value.

Partial Withdrawal of Surrender Value. The Owner may request withdrawal of
part of the Surrender Value in accordance with JHVLICO's rules then in effect.
Any withdrawal must be at least $1,000 and is subject to an administrative
charge of $20.

An Owner may request a partial withdrawal of Surrender Value at any time
provided that the Policy is not in a Policy grace period. This privilege, which
reduces the Account Value by the amount of the withdrawal and the associated
charge, may not be used to reduce the Account Value below the amount JHVLICO
estimates will be required to pay three months' charges under the Policy as they
fall due. The withdrawal will be effective as of the end of the Valuation Period
in which JHVLICO receives written notice satisfactory to it at its Servicing
Office.

An amount equal to the Account Value withdrawn will be removed from each
Subaccount in the same proportion as the Account Value is then allocated among
the Subaccounts. A withdrawal is not a loan and, once made, cannot be repaid.

The effect of a withdrawal, including its associated charge, upon the death
benefit depends upon the death benefit option in effect.

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<PAGE>

multiplied by the appropriate Corridor Factor does not exceed the Sum Insured at
the time of the withdrawal, the withdrawal will reduce both the Sum Insured and
the Account Value.

Option 2. Variable Death Benefit. Any withdrawal will be deducted from Account
Value and will not affect the Sum Insured. Nonetheless, because Account Value
will be reduced, the death benefit under this option also will be reduced.

Option 3. Level Death Benefit with Greater Funding. Any withdrawal will first
be deducted from Account Value until the Account Value, multiplied by the
appropriate Death Benefit Factor, is no higher than the Sum Insured. Thereafter,
both the Sum Insured and the Account Value will be reduced by any remaining
amount of the withdrawal. If the Account Value multiplied by the appropriate
Death Benefit Factor does not exceed the Sum Insured at the time of the
withdrawal, the withdrawal will reduce both the Sum Insured and the Account
Value.

A surrender or withdrawal may have significant tax consequences. See "Tax
Considerations".

JHVLICO reserves the right to refuse any withdrawal request that would cause
the Policy's Sum Insured to fall below $100,000.

DEATH BENEFITS

The death benefit proceeds will equal the death benefit of the Policy, plus
any additional rider benefits then due, minus any Indebtedness. If the insured
dies during a Policy grace period, JHVLICO will also deduct any overdue monthly
deductions.

The death benefit payable depends on the current Sum Insured and the death
benefit option selected by the Owner. At the time of application for a Policy,
the Owner must select from among three death benefit options. After issue of the
Policy the Owner may change the selection from Option 1 to Option 2 or vice
versa, subject to such evidence of insurability as JHVLICO may require. The
three options are:

Option 1: Level Death Benefit: Under this option, the death benefit will equal
the Sum Insured, unless the Account Value multiplied by the Corridor Factor
produces a higher death benefit. The Corridor Factor depends upon the attained
age of the insured. The Corridor Factor decreases slightly (or remains the same
at older and younger ages) from year to year as the attained age of the insured
increases. A complete list of Corridor Factors is set forth in the Policy. The
Policy will be subject under this option to the "guideline premium and cash
value corridor" test as defined by Internal Revenue Code ("Code") Section 7702.
This option will offer the best opportunity for the Account Value under a Policy
to increase without increasing the death benefit as quickly as it might under
the other options. When the Account Value multiplied by the Corridor Factor
exceeds the Sum Insured, the death benefit will increase whenever there is an
increase in the Account Value and will decrease whenever there is a decrease in
the Account Value, but never below the Sum Insured.

Option 2: Variable Death Benefit: Under this option, the death benefit will
equal the Sum Insured plus any Account Value, unless the Account Value
multiplied by the Corridor Factor produces a higher death benefit. The Corridor
Factor depends upon the then attained age of the insured. The Corridor Factor
decreases slightly (or remains the same at older and younger ages) from year to
year as the attained age of the insured increases. A complete list of Corridor
Factors is set forth in the Policy. Under this option the Policy will be subject
to the "guideline premium and cash value corridor" test as defined by Code
Section 7702. This option will offer the best opportunity for the Owner who
would like to have an increasing death benefit as early as possible. The death
benefit

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<PAGE>

will increase whenever there is an increase in the Account Value and will
decrease whenever there is a decrease in the Account Value, but never below the
Sum Insured.

Option 3: Level Death Benefit With Greater Funding: Under this option, the
death benefit will equal the Sum Insured, unless the Account Value, multiplied
by the Death Benefit Factor, gives a higher death benefit. The Death Benefit
Factor depends upon the sex, smoking status and then attained age of the
insured. The Death Benefit Factor decreases slightly from year to year as the
attained age of the insured increases. A complete list of Death Benefit Factors
is set forth in the Policy. Under this option, the death benefit will be subject
to the "cash value accumulation" test as defined by Code Section 7702. This
option will offer the best opportunity for the Owner who is looking for an
increasing death benefit in later Policy years and/or would like to fund the
policy at the "7-pay" limit for the full 7 years. When the Account Value
multiplied by the Death Benefit Factor exceeds the Sum Insured, the death
benefit will increase whenever there is an increase in the Account Value and
will decrease whenever there is a decrease in the Account Value, but never below
the Sum Insured.

Definition of Life Insurance. Federal tax law requires a minimum death benefit
in relation to cash value for a Policy to qualify as life insurance. The death
benefit of a Policy will be increased if necessary to ensure that the Policy
will continue to qualify as life insurance. One of two tests under current
Federal tax law can be used to determine if a Policy complies with the
definition of life insurance in Section 7702 of the Code.

The "guideline premium and cash value corridor" test limits the amount of
premiums payable under a Policy to a certain amount for an insured of a
particular age and sex. The test also applies a prescribed "Corridor Factor" to
determine a minimum ratio of death benefit to Account Value.

The "cash value accumulation test" also limits the amount of premiums payable
under a Policy to a prescribed amount, using a minimum ratio of death benefit to
Account Value, but employs as a standard a "net single premium" computed in
compliance with the Code. If the Account Value under a Policy is at any time
greater than the net single premium at the insured's age and sex for the
proposed death benefit, the death benefit will be increased automatically by
multiplying the Account Value by a "Death Benefit Factor" computed in compliance
with the Code.

Guaranteed Death Benefit. During the first 5 Policy years the Policy is
guaranteed not to lapse, provided that (1) the amount of premiums paid through
each Modal Processing Date minus any withdrawals is at least equal to the sum of
the cumulative Guaranteed Death Benefit Premiums due to date and (2) the insured
is in the standard or preferred underwriting class and satisfies certain other
underwriting standards relating to health and occupation. At any time when this
feature is not in force, the death benefit of the Policy is not guaranteed and
the Policy may lapse if the Account Value falls to a low level.

TRANSFERS AMONG SUBACCOUNTS

The Owner may reallocate the amounts held for the Policy in the Subaccounts
with no charge at any time, except as noted below. The Owner may either (1) use
percentages (in whole numbers) to be transferred among Subaccounts or (2)
designate the dollar amount of funds to be transferred among Subaccounts. The
reallocation must be such that the total in the Subaccounts after reallocation
equals 100% of Account Value. Transfers out of a variable Subaccount will be
effective at the end of the Valuation Period in which JHVLICO receives at its
Servicing Office notice satisfactory to JHVLICO.

17
<PAGE>

requested from 60 days before to 30 days after the Policy anniversary. If
received on or before the Policy anniversary, requests for transfer out of the
Fixed Account will be processed on the Policy anniversary (or the next Valuation
Date if the Policy anniversary does not occur on a Valuation Date); if received
after the Policy anniversary, they will be processed at the end of the Valuation
Period in which JHVLICO receives the request at its Servicing Office. (JHVLICO
reserves the right to defer such Fixed Account transfers for six months.) If an
Owner requests a transfer out of the Fixed Account 61 days or more prior to the
Policy anniversary, that portion of the reallocation will not be processed and
the Owner's confirmation statement will not reflect a transfer out of the Fixed
Account as to such request. Transfers among variable Subaccounts and transfers
into the Fixed Account may be requested at any time. A maximum of 20% of Fixed
Account assets or, if greater, $500 may be transferred out of the Fixed Account
in any Policy year. Currently, there is no minimum amount limit on transfers out
of the Fixed Account, but JHVLICO reserves the right to impose such a limit in
the future. No transfers among Subaccounts may be made while the Policy is in a
grace period.

If the Owner requests a reallocation which would result in amounts being held
in more than ten Subaccounts, such reallocation will not be effective and a
revised reallocation may be chosen in order that amounts will be reallocated to
no more than ten Subaccounts.

Dollar Cost Averaging. A scheduled monthly transfer option is available to
Owners seeking to take advantage of "dollar cost averaging". This option
provides for the automatic transfer on a monthly basis of a dollar amount chosen
by the Owner from the Money Market Subaccount to any of the other variable
Subaccounts.

Eligibility for this option is limited to an Owner who has $2,500 or more in
the Money Market Subaccount on the day the transfer is scheduled to begin.
Scheduled transfers may be made to any one or more but not more than nine of any
other variable Subaccounts but the amount to be transferred monthly to any
Subaccount must be $100 or more.

Once the election is received in form satisfactory to JHVLICO at its Servicing
Office, transfers will begin on the second monthly processing date following its
receipt. To make an election or if you have any questions with respect to this
provision, call 1-800-732-5543.

Once elected, the scheduled monthly transfer option will remain in effect
until the receipt of written notice from the Owner by JHVLICO at its Servicing
Office of cancellation of the option or receipt of notice of the death of the
insured, whichever first occurs.

Telephone Transfers and Policy Loans. Once a written authorization is
completed by the Owner, the Owner may request a transfer or policy loan by
telephoning 1-800-732-5543 or by sending a written request via fax to
1-800-621-0448. Any fax request should include the Owner's name, daytime
telephone number, Policy number and, in the case of transfers, the names of the
Subaccounts from which and to which money will be transferred. The right to
discontinue telephone transactions at any time without notice to Owners is
specifically reserved. If the fax request option becomes unavailable, another
means of telecommunication will be substituted.

An Owner who authorizes telephone transactions will be liable for any loss,
expense or cost arising out of any unauthorized or fraudulent telephone
instructions which JHVLICO reasonably believes to be genuine, unless such loss,
expense or cost is the result of JHVLICO's mistake or negligence. JHVLICO
employs procedures which provide safeguards against the execution of
unauthorized transactions, and which are reasonably designed to confirm that
instructions received by telephone are genuine. These procedures include
requiring personal identification, tape recording calls, and providing written
confirmation to the Owner. If JHVLICO does not employ

18
<PAGE>

reasonable procedures to confirm that instructions communicated by telephone are
genuine, it may be liable for any loss due to unauthorized or fraudulent
instructions.

LOAN PROVISIONS AND INDEBTEDNESS

Loan Provision. Loans may be made at any time a Loan Value is available after
the first Policy year. The Owner may borrow money, assigning the Policy as the
only security for the loan, by completion of a form satisfactory to JHVLICO or,
if the telephone transaction authorization form has been completed, by
telephone. Unless otherwise provided by state law and assuming no outstanding
Indebtedness, in Policy years two and three the Loan Value will be 75% of that
portion of the Surrender Value attributable to the variable Subaccount
investments, plus 100% of that portion of the Surrender Value attributable to
Fixed Account investments and, in later Policy years, 90% of that portion of the
Surrender Value attributable to variable Subaccount investments, plus 100% of
that portion of the Surrender Value attributable to Fixed Account investments.
Interest charged on any loan will accrue and compound daily at an effective
annual rate of 5.0% in the first 20 Policy years, and 4.50% thereafter.

The amount of any outstanding loan plus accrued interest is called the
"Indebtedness". A loan will not be permitted unless it is at least $300. The
Owner may repay all or a portion of any Indebtedness while the insured is living
and the Policy is not in a grace period. When a loan is made, an amount equal to
the loan proceeds will be transferred out of the Account and the Fixed Account,
as applicable. This amount is allocated to a portion of JHVLICO's general
account called "Loan Assets". Each Subaccount will be reduced in the same
proportion as the Account Value is then allocated among the Subaccounts. 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 an Owner wishes any payment
to constitute a loan repayment (rather than a premium payment), the Owner must
so specify.

Effect of Loan and Indebtedness. While the Indebtedness is outstanding, that
portion of the Account Value that is in Loan Assets is credited interest at a
rate that is 1% less than the loan interest rate for the first 20 Policy years
and, thereafter, .5% less than the loan interest rate. This rate will usually be
different than the net return for the Subaccounts. Since the Loan Account and
the remaining portion of the Account Value will generally have different rates
of investment return, the Account Value, the Surrender Value, and any death
benefit above the Sum Insured are permanently affected by any Indebtedness,
whether or not it is repaid in whole or in part. The amount of any Indebtedness
is subtracted from the amount otherwise payable when the Policy proceeds become
payable.

Whenever the Indebtedness equals or exceeds the Surrender Value, the Policy
terminates 31 days after notice has been mailed by JHVLICO to the Owner and any
assignee of record at their last known addresses, unless a repayment of the
excess Indebtedness is made within that period.

If a Policy is a modified endowment at the time a loan is made, that loan may
have significant tax consequences. See "Tax Considerations".

DEFAULT

19
<PAGE>

pay all monthly charges then due under the Policy. If not, the Policy is in
default and JHVLICO will notify the Owner of the amount estimated to be
necessary to pay three months' deductions, and a Policy grace period will be in
effect until 61 days after the date the notice was mailed. If JHVLICO does not
receive payment of at least this amount by the end of the Policy grace period,
the Policy will lapse, and any remaining amount owed to the Owner as of the date
of lapse will be paid to the Owner.

Lapse can have significant tax consequences. See "Tax Considerations--Policy
Proceeds". If the Guaranteed Death Benefit has been in effect and lapses at the
end of a Guaranteed Death Benefit grace period (as described in
"Premiums--Guaranteed Death Benefit Premiums"), the usual default, Policy grace
period and lapse procedures described in the preceding paragraph will be applied
commencing with the first day of the Policy month in which the lapse of the
Guaranteed Death Benefit occurs.

The insurance under the Policy continues in full force during any grace period
but, if the insured dies during the Policy grace period, the amount in default
is deducted from the death benefit otherwise payable.

Written notice will be furnished to the Owner at his or her last known
address, at least 31 days prior to the end of any grace period. If in the Policy
grace period, the notice will specify the minimum amount which must be paid to
continue the Policy in force on a premium paying basis after the end of the
Policy grace period. If in the Guaranteed Death Benefit grace period, the notice
will specify the amount which must be paid to continue the Guaranteed Death
Benefit feature in force.

Reinstatement. A lapsed Policy may be reinstated in accordance with the
Policy's terms. Evidence of insurability satisfactory to JHVLICO will be
required and payment of the required premium and charges. The request must be
received at JHVLICO's Servicing Office within 1 year after the beginning of the
applicable grace period. A reinstatement of the Policy may be treated as a
material change for Federal income tax purposes. See "Premiums--7-Pay Premium
Limit" and "Tax Considerations".

EXCHANGE PRIVILEGE

The Owner may transfer the entire Account Value under the Policy to the Fixed
Account at any time, creating a non-variable policy. The exchange will be
effective at the end of the Valuation Period in which JHVLICO receives at its
Servicing Office notice of the transfer satisfactory to JHVLICO.

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

The foregoing description of Policy provisions is qualified by reference to
the specimen Policy which has been filed as an exhibit to the Registration
Statement and to any variations in Policy provisions required by the regulatory
authorities of the state that has approved the Policy for issue.

CHARGES AND EXPENSES

CHARGES DEDUCTED FROM PREMIUMS

In addition to part of the sales charges (see "Sales Charges" below), the
following charges are deducted from premiums:

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<PAGE>

increase this charge under outstanding Policies, but reserves the right to
change this charge for Policies not yet issued in order to correspond with
changes in the state premium tax levels.

Federal DAC Tax Charge. A charge currently equal to 1.25% of each premium
payment will be deducted from each premium payment to cover the estimated cost
to JHVLICO of the Federal income tax treatment of the Policies' deferred
acquisition costs--commonly referred to as the "DAC Tax". JHVLICO has determined
that this charge is reasonable in relation to JHVLICO's increased Federal income
tax burden under the Internal Revenue Code resulting from the receipt of
premiums. JHVLICO will not increase this charge under outstanding Policies, but
reserves the right, subject to any required regulatory approval, to change this
charge for Policies not yet issued in order to correspond with changes in the
Federal income tax treatment of the Policies' deferred acquisition costs.

SALES CHARGES

Charges are made to compensate JHVLICO for the cost of selling the Policy.
This cost includes agents' commissions, commission overrides, advertising, and
the printing of Prospectuses and sales literature. The amount of the charge in
any Policy year cannot be specifically related to sales expenses for that year.
JHVLICO expects to recover its total sales expenses over the period the Policies
are in effect. To the extent that sales charges are insufficient to cover total
sales expenses, the sales expenses may be recovered from other sources,
including gains from the charge for mortality and expense risks and other gains
with respect to the Policies, or from JHVLICO's general assets. See
"Distribution of Policies".

From Premiums. Part of the sales charge is deducted from premiums received.
The amount is 4% of the premiums received in any Policy year that do not exceed
that year's total Target Premium. The Target Premium is established at issue and
is the sum of Base Policy Target Premium and any rider premium. The Base Policy
Target Premium is set forth in the Policy. Target Premiums will vary based on
the issue age, sex, smoking status and underwriting class of the insured.
JHVLICO currently intends to make this deduction only in the first 10 Policy
years, but this is not contractually guaranteed and the right is reserved to
continue deductions over a longer period. Because the Policies were first
offered for sale in 1994, no Policies have yet been outstanding for more than 10
years.

JHVLICO will waive a portion of the sales charge (it is currently waiving a
portion equal to 2% of all premiums from which sales charges are deducted)
otherwise to be deducted from premiums under a Policy with a current Sum Insured
of $250,000 or higher. The continuation of this waiver is not contractually
guaranteed and the waiver may be withdrawn or modified by JHVLICO in the future.

No sales charge is deducted from a premium payment received in excess of one
Target Premium in any Policy year.

Contingent Deferred Sales Charge. The remainder of the sales charge will be
deducted only if the Policy is surrendered or stays in default past its grace
period. This second part is the Contingent Deferred Sales Charge. The Contingent
Deferred Sales Charge, however, will not be deducted for a Policy that lapses or
is surrendered on or after the Policy's twelfth anniversary, and it will be
reduced for a Policy that lapses or is surrendered between the end of the
seventh Policy year and the end of the twelfth Policy year.

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<PAGE>

The Contingent Deferred Sales Charge is computed as a percentage of Base
Policy Target Premiums paid in accordance with the following schedule:

<TABLE>
<CAPTION>
For Surrenders or Lapses Effective Maximum Contingent
During:--------------------------- Deferred Sales Charge
------- ---------------------
<S> <C>
Policy Year 1 26% of premiums received in
Policy Year 1 up to 1 Base
Policy Target Premium*
Policy Year 2 26% of premiums received in
Policy Years 1 and 2 up to 1
Base Policy Target Premium in
each year
Policy Years 3-7 26% of premiums received in
Policy Years 1, 2 and 3 up to 1
Base Policy Target Premium in
each year
Policy Year 8 83.33% of the Maximum Contingent
Deferred Sales Charge for
Policy Year 7
Policy Year 9 66.67% of the Maximum Contingent
Deferred Sales Charge for
Policy Year 7
Policy Year 10 50% of the Maximum Contingent
Deferred Sales Charge for
Policy Year 7
Policy Year 11 33.33% of the Maximum Contingent
Deferred Sales Charge for
Policy Year 7
Policy Year 12 16.67% of the Maximum Contingent
Deferred Sales Charge for
Policy Year 7
Policy Year 13 and later 0
</TABLE>

- ---------
*The amount of the Contingent Deferred Sales Charge is calculated on the basis
of the Base Policy Target Premium for the age of the insured at the time of
issue of the Policy.

The Contingent Deferred Sales Charge reaches its maximum at the end of the
third Policy year, stays level through the seventh Policy year, and is reduced
by an equal amount at the beginning of each Policy year thereafter until it
reaches zero in Policy year 13. At issue ages higher than age 54, the maximum is
reached at an earlier Policy year, and may be reduced to zero over a shorter
number of years.

Effect of Premium Payment Pattern. An Owner may structure the timing and
amount of premium payments to minimize the sales charges, although doing so
involves certain risks. Paying less than one Target Premium in the first Policy
year or paying more than one Target Premium in any Policy year could reduce the
Owner's total sales charges over time. For example, an Owner, paying ten Target
Premiums of $1,000 each would pay total premium sales charges of $400 and be
subject to a maximum Contingent Deferred Sales Charge of $780 if he paid $1,000
in each of the first ten Policy years, but would pay only a $200 premium sales
charge and $520 Contingent Deferred Sales Charge if he paid $2,000 (i.e., two
times the Target Premium amount) in every other Policy year up to the tenth
Policy year. However, delaying the payment of Target Premiums to later Policy
years could increase the risk that the Account Value will be insufficient to pay
monthly Policy charges as they come due and that, as a result, the Policy will
lapse and eventually terminate. See "Default". Conversely, accelerating the
payment of Target

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<PAGE>

Premiums to earlier Policy years could cause aggregate premiums paid to exceed
the Policy's 7-pay premium limit and, as a result, cause the Policy to become a
modified endowment, with adverse tax consequences to the Owner upon receipt of
Policy distributions. See "Premiums--7-Pay Premium Limit".

ADMINISTRATIVE SURRENDER CHARGE

A charge is made if the Policy is surrendered or lapses in the first nine
Policy years to recover administrative expenses relating to the Policy which
would not otherwise be recouped. The maximum charge in Policy years 1 through 7
is $5 per $1,000 of current Sum Insured, in Policy year 8 is $4 per $1,000 of
current Sum Insured and in Policy year 9 is $3 per $1,000 of current Sum
Insured.

This charge is made to compensate JHVLICO for expenses incurred in connection
with the underwriting, issuance and maintenance of the Policy which may not be
recovered upon the early surrender or lapse of the Policy.

REDUCED CHARGES FOR ELIGIBLE GROUPS

The sales charges, Administrative Surrender Charge and Issue Charge (described
below) otherwise applicable may be reduced with respect to Policies issued to a
class of associated individuals or to a trustee, employer or similar entity
where JHVLICO anticipates that the sales to the members of the class will result
in lower than normal sales or administrative expenses. These reductions will be
made in accordance with JHVLICO's rules in effect at the time of the application
for a Policy. The factors considered by JHVLICO in determining the eligibility
of a particular group for reduced charges, and the level of the reduction, are
as follows: the nature of the association and its organizational framework; the
method by which sales will be made to the members of the class; the facility
with which premiums will be collected from the associated individuals and the
association's capabilities with respect to administrative tasks; the anticipated
persistency of the Policies; the size of the class of associated individuals and
the number of years it has been in existence; and any other such circumstances
which justify a reduction in sales or administrative expenses. Any reduction
will be reasonable and will apply uniformly to all prospective Policy purchasers
in the class and will not be unfairly discriminatory to the interests of any
owner.

CHARGES DEDUCTED FROM ACCOUNT VALUE OR ASSETS

The following charges are deducted from Account Value or assets:

Issue Charge. JHVLICO will deduct monthly from Account Value an Issue Charge
equal to $20 per month for the first 12 Policy months to compensate JHVLICO for
expenses incurred in connection with the issuance of the Policy, other than
sales expenses. Such expenses include medical examinations, insurance
underwriting costs and costs incurred in processing applications and
establishing permanent Policy records.

Maintenance charge. JHVLICO will deduct from the Account Value a monthly
charge not to exceed $8 for all Policy years. The current monthly charge is $6.

This charge is to compensate JHVLICO for administrative expenses, including
recordkeeping, processing death claims and surrenders, making Policy changes,
reporting and other communications to Owners and other similar expense and
overhead costs.

Insurance Charge. The insurance charge deducted monthly from Account Value is
based on the attained age of the insured and the amount at risk. The amount at
risk is the difference between the current death benefit and the Account Value.
The amount of the insurance charge is determined by multiplying JHVLICO's then
current monthly rate for insurance by the amount at risk.

23
<PAGE>

Current monthly rates for insurance are based on the sex, age, smoking status
and underwriting class of the insured and the length of time the Policy has been
in effect. JHVLICO will review these rates at least every 5 years, and may
change these rates from time to time based on JHVLICO's expectations of future
experience. However, these rates will never be more than the guaranteed maximum
rates based on the 1980 Commissioners' Standard Ordinary Mortality Tables set
forth in the Policy.

A reduction in the insurance charge may be made to a Policy beginning on the
first day of the first month in the tenth Policy year. This reduction is not
guaranteed but it is JHVLICO's present intention to effect this reduction in the
tenth and following Policy years as long as the Policy is in force.

The amount of the reduction will depend upon the length of time the Policy has
been in force. In the tenth Policy year the monthly insurance charge will be
reduced by an amount equal to a percentage of the then Account Value. This
percentage will begin at an effective annual rate of .20% in the tenth Policy
year and increase annually by .01% through and including the thirtieth Policy
year. Thereafter the percentage reduction each year the Policy remains in force
will be at an effective annual rate of .40%.

For example, it is expected that the reduction percentage in Policy year 11
would be at an effective annual rate of .21%, in Policy year 20 would be .30%
and in Policy year 30 would be .40%.

JHVLICO reserves the right to modify or discontinue this reduction. Because
the Policies were first offered for sale in 1994, no reductions have yet been
made.

Lower current insurance rates are offered at most ages for insureds who are
eligible for the preferred underwriting class of the Policy.

JHVLICO also charges lower current insurance rates under a Policy with a
current Sum Insured of $250,000 or higher, but these lower rates are not
contractually guaranteed and may be withdrawn at some future date.

Charge for Mortality and Expense Risks. A daily charge is deducted from the
variable Subaccounts for mortality and expense risks assumed by JHVLICO at a
maximum effective annual rate of .90% of the value of the assets of each
variable Subaccount attributable to the Policy. The current charge is at an
effective annual rate of .60%. This charge begins when amounts under a Policy
are first allocated to the Account. The mortality risk assumed is that insureds
may live for a shorter period 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 Policies will be greater than estimated. JHVLICO
will realize a gain from this charge to the extent it is not needed to provide
for benefits and expenses under the Policies.

Charges for Extra Mortality Risks. An insured who does not qualify for the
standard or preferred underwriting class must pay an additional charge because
of the extra mortality risk. The level of the charge depends upon the age of the
insured and the degree of extra mortality risk. This additional charge is
deducted monthly from Account Value. Alternatively, the charge may take the form
of an additional insurance charge as described above.

Charges for Optional Rider Benefits. An additional charge must be paid if the
Owner elects to purchase any optional insurance benefit by Policy rider. Any
such additional charge is deducted monthly from Account Value.

Charges for Taxes. Currently no charge is made against Account Value for
JHVLICO's Federal income taxes but if JHVLICO incurs, or expects to incur,
income taxes attributable to the Account or this class of Policies

24
<PAGE>

in future years, it reserves the right to make a charge, and any charge would
affect what the Subaccounts earn. Charges for other taxes, if any, attributable
to the Subaccounts may also be made.

Charge for Partial Withdrawal. JHVLICO will deduct a charge in the amount of
$20 on a partial withdrawal of Surrender Value, as described under "Account
Value and Surrender Value". The charge will be deducted from Account Value. The
charge is to compensate JHVLICO for the administrative expenses of effecting the
withdrawal.

Fund Investment Management Fees and Other Fund Expenses. The Account purchases
shares of the Funds at net asset value, a value which reflects the deduction
from the assets of each Fund of its investment management fees and certain
non-advisory Fund operating expenses, which are described briefly in the Summary
of this Prospectus. For a full description of these deductions, see the attached
Prospectuses for the Funds.

The monthly deductions from Account Value described above are deducted on the
date of issue and on each monthly processing date thereafter. These deductions
are made from the Subaccounts in proportion to the amount of Account Value in
each. For each month that JHVLICO is unable to deduct any charge because there
is insufficient Account Value, the uncollected charges will accumulate and be
deducted when and if sufficient Account Value is available.

GUARANTEE OF PREMIUMS AND CERTAIN CHARGES

The Policy's Guaranteed Death Benefit Premium is guaranteed not to increase.
The state premium tax charge, the Federal DAC Tax charge, the Administrative
Surrender Charge, the Issue Charge and the charge for partial withdrawals are
guaranteed not to increase over the life of the Policy. The maintenance charge,
the sales charges, the mortality and expense risk charge, and the insurance
charge are guaranteed not to exceed the maximums set forth in the Policy.

DISTRIBUTION OF POLICIES

Applications are solicited by agents who are licensed by state insurance
authorities to sell JHVLICO's Policies and who are also registered
representatives ("representatives") of John Hancock Distributors, Inc.
("Distributors"), an indirect wholly-owned subsidiary of John Hancock located at
197 Clarendon Street, Boston, MA 02117, or other broker-dealer firms, as
discussed below. John Hancock performs insurance underwriting and determines
whether to accept or reject the application for a Policy and each insured's risk
classification. Pursuant to a sales agreement among John Hancock, Distributors,
JHVLICO, and the Account, Distributors acts as the principal underwriter of the
Policies. The sales agreement will remain in effect until terminated upon sixty
days' written notice by any party. JHVLICO will make the appropriate refund if a
Policy ultimately is not issued or is returned under the short-term cancellation
provision. Officers and employees of John Hancock and JHVLICO are covered by a
blanket bond by a commercial carrier in the amount of $25 million.

Distributors' representatives are compensated for sales of the Policies on a
commission and service fee basis by Distributors, and JHVLICO reimburses
Distributors for such compensation and for other direct and indirect expenses
(including agency expense allowances, general agent, district manager and
supervisor's compensation, agent's training allowances, deferred compensation
and insurance benefits of agents, general agents, district managers and
supervisors, agency office clerical expenses and advertising) actually incurred
in connection with the marketing and sale of the Policies.

The maximum commission payable to a John Hancock representative for selling a
Policy is 45% of the Target Premium paid in the first Policy year, 7.5% of the
Target Premium paid in the second Policy year, and 5% of the

25
<PAGE>

Target Premium paid in each year thereafter. The maximum commission on any
premium paid in any year in excess of the Target Premium is 3%.

Representatives with less than four years of service with Distributors and
those compensated on salary plus bonus or level commission programs may be paid
on a different basis. Representatives who meet certain productivity and
persistency standards with respect to the sale of policies issued by JHVLICO and
John Hancock will be eligible for additional compensation.

Distributors is registered with the Commission under the Securities Exchange
Act of 1934 as a broker-dealer, is a member of the National Association of
Securities Dealers, Inc., and is a member of the Securities Investor Protection
Corporation. The Policies are also sold through other registered broker-dealers
that have entered into selling agreements with Distributors and whose
representatives are authorized by applicable law to sell variable life insurance
policies. The commissions which will be paid by such broker-dealers to their
representatives will be in accordance with their established rules. The
commission rates may be more or less than those set forth above for
Distributors' representatives. In addition, their qualified registered
representatives may be reimbursed by the broker-dealers under expense
reimbursement allowance programs in any year for approved voucherable expenses
incurred. Distributors will compensate the broker-dealers as provided in the
selling agreements, and JHVLICO will reimburse Distributors for such amounts and
for certain other direct expenses in connection with marketing the Policies
through other broker-dealers. In addition, these representatives may earn
"credits" toward qualification for attendance at certain business meetings
sponsored by John Hancock.

Distributors serves as principal underwriter for other separate accounts
registered under the 1940 Act: John Hancock Variable Annuity Accounts U, I and
V, John Hancock Mutual Variable Life Insurance Account UV and John Hancock
Variable Life Accounts V and S. Distributors is also the principal underwriter
for John Hancock Variable Series Trust I.

TAX CONSIDERATIONS

The below description of Federal income tax consequences is only a brief
summary and is not intended as tax advice. For further information consult a
qualified tax advisor. Federal, state and local tax laws can change from time to
time and, as a result, the tax consequences to the Owner and beneficiary may be
altered.

POLICY PROCEEDS

Although the Policy contains provisions not found in fixed benefit life
insurance policies, JHVLICO believes the Policy will receive the same Federal
income and estate tax treatment. Section 7702 of the Internal Revenue Code
("Code") defines life insurance for Federal tax purposes. See "Death
Benefits--Definition of Life Insurance". If certain standards are met at issue
and over the life of the Policy, the Policy will come within that definition.
JHVLICO will monitor compliance with these standards. Furthermore, JHVLICO
reserves the right to make any changes in the Policy necessary to ensure the
Policy is within the definition of life insurance.

If the Policy complies with the definition of life insurance, JHVLICO believes
the death benefit under the Policy will be excludable from the beneficiary's
gross income under Section 101 of the Code. In addition, increases in Account
Value as a result of interest or investment experience will not be subject to
Federal income tax unless and until values are actually received through
withdrawal, surrender or other distributions.

26
<PAGE>

paid for riders. But under certain circumstances within the first 15 Policy
years, the Owner may be taxed on a withdrawal of Policy values even if total
withdrawals do not exceed total premiums paid.

JHVLICO also believes that, except as noted below, loans received under the
Policy will be treated as indebtedness of an Owner and that no part of any loan
will constitute income to the Owner. However, the amount of any loan outstanding
will be taxed to the Owner if the Policy lapses.

Distributions under Policies on which premiums greater than the "7-pay" limit
(see "Premiums--7-Pay Premium Limit") have been paid will be treated as
distributions from a "modified endowment," which are subject to special taxation
based on Federal tax law. The Owner of such a Policy will be taxed on
distributions such as loans, surrenders and partial withdrawals to the extent of
any income (gain) to the Owner (income-first basis). The distributions affected
will be those made on or after, and within the two year period prior to, the
time the Policy becomes a modified endowment. Additionally, a 10% penalty tax
may be imposed on affected income distributed before the Owner attains age59
1/2.

Furthermore, any time there is a "material change" in a Policy (such as the
addition of certain other Policy benefits after issue, or reinstatement of a
lapsed Policy), the Policy will be subject to a new "7-pay" test, with the
possibility of a tax on distributions if it were subsequently to become a
modified endowment. Moreover, if benefits under a Policy are reduced (such as a
reduction in the Sum Insured or death benefit or the reduction or cancellation
of certain rider benefits, or Policy termination) during the 7 years in which
the 7-pay test is being applied, the 7-pay limit will be recalculated based on
the reduced benefits. If the premiums paid to date are greater than the
recalculated 7-pay limit, the Policy will become a modified endowment.

All modified endowments issued by the same insurer (or affiliates) to the
Owner during any calendar year generally will be treated as one contract for the
purpose of applying the modified endowment rules. Your tax advisor should be
consulted if you have questions regarding the possible impact of the 7-pay limit
on your Policy.

Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Owner or beneficiary.

CHARGE FOR JHVLICO'S TAXES

Except for the DAC Tax charge, JHVLICO currently makes no charge for Federal
income taxes that may be attributable to this class of Policies. If JHVLICO
incurs, or expects to incur, income taxes attributable to this class of Policies
or any Subaccount in the future, it reserves the right to make a charge for
those taxes.

Under current laws, JHVLICO may incur state and local taxes (in addition to
premium taxes) in several states. At present, these taxes are not significant.
If there is a material change in applicable state or local tax laws, charges for
such taxes may be made.

CORPORATE AND H.R. 10 PLANS

The Policy may be acquired in connection with the funding of retirement plans
satisfying the qualification requirements of Section 401 of the Code. If so, the
Code provisions relating to such plans and life insurance benefits thereunder
should be carefully scrutinized.

27
<PAGE>

BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF JHVLICO

The Directors and Executive Officers of JHVLICO and their principal
occupations during the past five years are as follows:

<TABLE>
<CAPTION>
Directors Principal Occupations
--------- ---------------------
<S> <C>
David F. D'Alessandro Chairman of the Board and Chief
Executive Officer of JHVLICO; President and Chief
Operating Officer, John Hancock Mutual Life Insurance
Company.
Henry D. Shaw Vice Chairman of the Board and President of JHVLICO;
Senior Vice President, John Hancock Mutual Life
Insurance Company.
Thomas J. Lee Director of JHVLICO; Vice President, John Hancock
Mutual Life Insurance Company.
Michele G. Van Leer Director of JHVLICO; Senior Vice President, John
Hancock Mutual Life Insurance Company.
Ronald J. Bocage Director, Vice President and Counsel of JHVLICO; Vice
President and Counsel, John Hancock Mutual Life
Insurance Company.
Joseph A. Tomlinson Director and Vice President of JHVLICO; Vice
President, John Hancock Mutual Life Insurance
Company.
Robert R. Reitano Director of JHVLICO; Vice President, John Hancock
Mutual Life Insurance Company.
Robert S. Paster Director of JHVLICO; Second Vice President, John
Hancock Mutual Life Insurance Company.
Barbara L. Luddy Director and Actuary of JHVLICO; Second Vice
President, John Hancock Mutual Life Insurance
Company.
Daniel L. Ouellette Vice President, Marketing, of JHVLICO; Vice
President, John Hancock Mutual Life Insurance
Company.
Patrick F. Smith Controller of JHVLICO; Assistant Controller, John
Hancock Mutual Life Insurance Company.
</TABLE>

The business address of all Directors and officers of JHVLICO is John Hancock
Place, Boston, Massachusetts 02117.

REPORTS

At least once each Policy year a statement will be sent to the Owner setting
forth the amount of the death benefit, Account Value, the portion of the Account
Value in each Subaccount, Surrender Value, premiums received and charges
deducted from premiums since the last report, and any outstanding Policy loan
(and interest charged for the preceding Policy year) as of the last day of such
year. Moreover, confirmations will be furnished to Owners of premium payments,
transfers among Subaccounts, Policy loans, partial withdrawals and certain other
Policy transactions.

Owners will be sent semiannually a report containing the financial statements
of the Funds, including a list of securities held in each Portfolio.

28
<PAGE>

VOTING PRIVILEGES

All of the assets in the variable Subaccounts of the Account are invested in
shares of the corresponding Portfolios of the Funds. JHVLICO will vote the
shares of each of the Portfolios of the Funds which are deemed attributable to
qualifying variable life insurance policies and variable annuity contracts at
regular and special meetings of the Funds' shareholders in accordance with
instructions received from owners of such policies or contracts. Shares of the
Funds held in the Account which are not attributable to such policies or
contracts and shares for which instructions from owners are not received will be
represented by JHVLICO at the meeting and will be voted for and against each
matter in the same proportions as the votes based upon the instructions received
from the owners of all such policies and contracts.

The number of Fund shares held in each variable Subaccount deemed attributable
to each owner is determined by dividing the amount of a Policy's Account Value
held in the variable Subaccount by the net asset value of one share in the
corresponding Fund Portfolio in which the assets of that variable Subaccount are
invested. Fractional votes will be counted. The number of shares as to which the
owner may give instructions will be determined as of the record date for the
Funds' meetings.

Owners of Policies may give instructions regarding the election of the Board
of Trustees of each Fund, ratification of the selection of independent auditors,
approval of Fund investment advisory agreements and other matters requiring a
vote under the 1940 Act. Owners will be furnished information and forms by
JHVLICO in order that voting instructions may be given.

JHVLICO may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that the shares be
voted so as to change the investment objectives of the Portfolios or to approve
or disapprove an investment advisory or underwriting contract for a Fund.
JHVLICO also may disregard voting instructions in favor of changes initiated by
an owner or a Fund's Board of Trustees in an investment policy, investment
adviser or principal underwriter of the Fund, if JHVLICO (i) reasonably
disapproves of such changes and (ii) in the case of a change of investment
policy or investment adviser, makes a good-faith determination that the proposed
change is contrary to state law or prohibited by state regulatory authorities or
that the change would be inconsistent with a variable Subaccount's investment
objectives or would result in the purchase of securities which vary from the
general quality and nature of investments and investment techniques utilized by
other separate accounts of JHVLICO or of an affiliated life insurance company,
which separate accounts have investment objectives similar to those of the
variable Subaccount. In the event JHVLICO does disregard voting instructions, a
summary of that action and the reasons for such action will be included in the
next semi-annual report to owners.

CHANGES THAT JHVLICO CAN MAKE

The voting privileges described in this Prospectus are afforded based on
JHVLICO'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, JHVLICO reserves the
right to proceed in accordance with any such revised requirements. JHVLICO also
reserves the right, subject to compliance with applicable law, including
approval of owners if so required, (1) to transfer assets determined by JHVLICO
to be associated with the class of policies to which the Policies belong from
the Account to another separate account or variable Subaccount by withdrawing
the same percentage of each investment in the Account with appropriate
adjustments to avoid odd lots and fractions, (2) to operate the 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 JHVLICO, an affiliate
or John Hancock, (3) to deregister the Account under the 1940 Act, (4) to
substitute for the

29
<PAGE>

Portfolio 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. JHVLICO would notify owners of any of the foregoing changes and,
to the extent legally required, obtain approval of owners and any regulatory
body prior thereto. Such notice and approval, however, may not be legally
required in all cases.

STATE REGULATION

JHVLICO is subject to regulation and supervision by the Massachusetts
Commissioner of Insurance who periodically examines its affairs. It also is
subject to the applicable insurance laws and regulations of all jurisdictions in
which it is authorized to do business.

JHVLICO 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 for purposes of determining solvency and compliance
with local insurance laws and regulations.

LEGAL MATTERS

The legal validity of the Policies described in this Prospectus has been
passed on by Ronald J. Bocage, Vice President and Counsel for JHVLICO. Messrs.
Freedman, Levy, Kroll & Simonds, Washington, D.C., have advised JHVLICO on
certain Federal securities law matters in connection with the Policies.

REGISTRATION STATEMENT

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

EXPERTS

The financial statements of JHVLICO and the 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 Deborah A.
Poppel, F.S.A., an Actuary of JHVLICO.

FINANCIAL STATEMENTS

The financial statements of JHVLICO included herein should be distinguished
from the financial statements of the Account and should be considered only as
bearing upon the ability of JHVLICO to meet its obligations under the Policies.

30
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

STATEMENT OF ASSETS AND LIABILITIES

DECEMBER 31, 1997

<TABLE>
<CAPTION>
Large Cap Sovereign International Small Cap International Mid Cap Large Cap
Growth Bond Equities Growth Balanced Growth Value
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
----------- ------------ ------------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in shares of
portfolios of John Hancock
Variable Series Trust I, at
value . . . . . . . . . . . $84,901,398 $232,146,861 $17,097,290 $2,734,209 $714,519 $1,498,159 $6,514,000
Investments in shares of
portfolios of M Fund Inc.,
at value . . . . . . . . . -- -- -- -- -- -- --
Policy loans and accrued
interest receivable . . . . 13,525,608 54,013,020 2,312,736 -- -- -- --
Receivable from:
John Hancock Variable Series
Trust I . . . . . . . . . 20,774 95,821 6,020 6,107 2,687 298 8,354
M Fund Inc. . . . . . . . . -- -- -- -- -- -- --
----------- ------------ ----------- ---------- -------- ---------- ----------
TOTAL ASSETS . . . . . . . . 98,447,780 286,255,702 19,416,046 2,740,316 717,206 1,498,457 6,522,354
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company . . . . . . . . . . 19,311 91,508 5,722 6,063 2,675 274 8,247
Asset charges payable . . . 1,463 4,313 298 44 12 24 107
----------- ------------ ----------- ---------- -------- ---------- ----------
TOTAL LIABILITIES . . . . . 20,774 95,821 6,020 6,107 2,687 298 8,354
----------- ------------ ----------- ---------- -------- ---------- ----------
NET ASSETS . . . . . . . . . $98,427,006 $286,159,881 $19,410,026 $2,734,209 $714,519 $1,498,159 $6,514,000
=========== ============ =========== ========== ======== ========== ==========
<CAPTION>
Money Mid Cap Special Real Estate
Market Value Opportunities Equity
Subaccount Subaccount Subaccount Subaccount
----------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Investments in shares of $52,325,203 $2,446,822 $10,287,366 $14,180,979
portfolios of John Hancock
Variable Series Trust I, at
value . . . . . . . . . . .
Investments in shares of -- -- -- --
portfolios of M Fund Inc.,
at value . . . . . . . . .
Policy loans and accrued 13,282,628 -- -- 2,061,136
interest receivable . . . .
Receivable from:
John Hancock Variable Series 51,609 24,870 168 23,348
Trust I . . . . . . . . .
M Fund Inc. . . . . . . . . -- -- -- --
----------- ---------- ----------- -----------
TOTAL ASSETS . . . . . . . . 65,659,440 2,471,692 10,287,534 16,266,463
LIABILITIES
Payable to John Hancock 50,609 24,831 -- 24,099
Variable Life Insurance
Company . . . . . . . . . .
Asset charges payable . . . 1,000 39 168 249
----------- ---------- ----------- -----------
TOTAL LIABILITIES . . . . . 51,609 24,870 168 24,348
----------- ---------- ----------- -----------
NET ASSETS . . . . . . . . . $65,607,831 $2,446,822 $10,287,366 $16,242,115
=========== ========== =========== ===========
</TABLE>

- ---------
See accompanying notes.

31
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)

DECEMBER 31, 1997

<TABLE>
<CAPTION>
Short-Term
Growth & U.S. Small Cap International Equity
Income Managed Government Value Opportunities Index
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
------------ ------------ ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in shares of portfolios of John
Hancock Variable Series Trust I, at value . $783,532,141 $343,560,761 $409,571 $3,342,888 $2,526,943 $7,576,153
Investments in shares of portfolios of M Fund
Inc., at value . . . . . . . . . . . . . . . -- -- -- -- -- --
Policy loans and accrued interest receivable 151,132,735 67,266,604 -- -- -- --
Receivable from:
John Hancock Variable Series Trust I . . . . 277,023 36,784 24 5,067 20,678 19,319
M Fund Inc. . . . . . . . . . . . . . . . . -- -- -- -- -- --
------------ ------------ -------- ---------- ---------- ----------
TOTAL ASSETS . . . . . . . . . . . . . . . . 934,941,899 410,864,149 409,595 3,347,955 2,547,621 7,595,472
LIABILITIES
Payable to John Hancock Variable Life
Insurance Company . . . . . . . . . . . . . 263,118 30,659 17 5,013 20,636 19,195
Asset charges payable . . . . . . . . . . . . 13,905 6,125 7 54 40 124
------------ ------------ -------- ---------- ---------- ----------
TOTAL LIABILITIES . . . . . . . . . . . . . . 277,023 36,784 24 5,067 20,678 19,319
------------ ------------ -------- ---------- ---------- ----------
NET ASSETS . . . . . . . . . . . . . . . . . $934,664,876 $410,827,365 $409,571 $3,342,888 $2,526,943 $7,576,153
============ ============ ======== ========== ========== ==========
<CAPTION>
Turner Edinburgh Frontier
Strategic Core International Capital
Bond Growth Equity Appreciation
Subaccount Subaccount Subaccount Subaccount
---------- ---------- ------------- --------------
<S> <C> <C> <C> <C>
ASSETS
Investments in shares of portfolios of John $1,365,657 $ -- $ -- $ --
Hancock Variable Series Trust I, at value .
Investments in shares of portfolios of M Fund -- 120,173 160,606 380,816
Inc., at value . . . . . . . . . . . . . . .
Policy loans and accrued interest receivable -- -- -- --
Receivable from:
John Hancock Variable Series Trust I . . . . 3,139 -- -- --
M Fund Inc. . . . . . . . . . . . . . . . . -- 2 3 6
---------- -------- -------- --------
TOTAL ASSETS . . . . . . . . . . . . . . . . 1,368,796 120,175 160,609 380,822
LIABILITIES
Payable to John Hancock Variable Life 3,117 -- -- --
Insurance Company . . . . . . . . . . . . .
Asset charges payable . . . . . . . . . . . . 22 2 3 6
---------- -------- -------- --------
TOTAL LIABILITIES . . . . . . . . . . . . . . 3,139 2 3 6
---------- -------- -------- --------
NET ASSETS . . . . . . . . . . . . . . . . . $1,365,657 $120,173 $160,606 $380,816
========== ======== ======== ========
</TABLE>

- ---------
See accompanying notes.

32
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

STATEMENTS OF OPERATIONS

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

Large Cap Growth Subaccount Sovereign Bond Subaccount
-------------------------------------- --------------------------------------
1997 1996 1995 1997 1996 1995
----------- ------------ ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I . . . . . . . . . . . $ 7,675,850 $ 9,763,606 $ 3,899,925 $17,409,990 $15,986,241 $16,214,565
M Fund Inc. . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans 875,892 881,144 755,070 3,926,698 3,908,756 3,820,851
----------- ----------- ----------- ----------- ----------- -----------
Total investment income . . . . 8,551,742 10,644,750 4,654,995 21,336,688 19,894,997 20,035,416
Expenses:
Mortality and expense
risks . . . . . . . . . . . . 480,057 381,331 278,461 1,514,127 1,444,137 1,372,266
----------- ----------- ----------- ----------- ----------- -----------
Net investment income
(loss) . . . . . . . . . . . . 8,071,685 10,263,419 4,376,534 19,822,561 18,450,860 18,663,150
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) . . . 4,216,904 840,044 465,096 1,088,488 690,912 331,252
Net unrealized appreciation
(depreciation) during the
period . . . . . . . . . . . . 7,920,403 (889,487) 6,578,435 2,987,952 (8,059,332) 18,687,187
----------- ----------- ----------- ----------- ----------- -----------
Net realized and unrealized gain
(loss) on investments . . . . . 12,137,307 (49,443) 7,043,531 4,076,440 (7,368,420) 19,018,439
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net
assets resulting from operations $20,208,992 $10,213,976 $11,420,065 $23,899,001 $11,082,440 $37,681,589
=========== =========== =========== =========== =========== ===========
<CAPTION>
Small Cap
International Equities Growth International Balanced
Subaccount Subaccount Subaccount
---------------------------------- ------------------- -----------------------
1997 1996 1995 1997 1996* 1997 1996*
------------ ---------- -------- --------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series $ 840,616 $ 166,193 $114,316 $ 976 $ 1,207 $ 30,867 $2,850
Trust I . . . . . . . . . . .
M Fund Inc. . . . . . . . . . -- -- -- -- -- -- --
Interest income on policy loans 170,905 161,938 146,076 -- -- -- --
----------- ---------- -------- -------- -------- -------- ------
Total investment income . . . . 1,011,521 328,131 260,392 976 1,207 30,867 2,850
Expenses:
Mortality and expense
risks . . . . . . . . . . . . 107,415 85,694 65,044 11,175 2,956 2,758 301
----------- ---------- -------- -------- -------- -------- ------
Net investment income 904,106 242,437 195,348 (10,199) (1,749) 28,109 2,549
(loss) . . . . . . . . . . . .
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) . . . 209,781 254,188 294,206 34,153 (2,047) 12,000 65
Net unrealized appreciation
(depreciation) during the (2,036,425)
period . . . . . . . . . . . . ----------- 676,006 353,155 226,085 (24,023) (41,999) 3,632
---------- -------- -------- -------- -------- ------
Net realized and unrealized gain
(loss) on investments . . . . . (1,826,644) 930,194 647,361 260,238 (26,070) (29,999) 3,697
----------- ---------- -------- -------- -------- -------- ------
Net increase (decrease) in net
assets resulting from operations $ (922,538) $1,172,631 $842,709 $250,039 $(27,819) $ (1,890) $6,246
=========== ========== ======== ======== ======== ======== ======
</TABLE>

- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

33
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
Mid Cap Growth Large Cap Value
Subaccount Subaccount Money Market Subaccount
------------------ ------------------ ----------------------------------
1997 1996* 1997 1996* 1997 1996 1995
--------- -------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I . . . . . . . . . . . . . . . . $ -- $ 1,635 $266,440 $ 72,511 $2,746,662 $2,527,378 $2,690,892
M Fund Inc. . . . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans . . . . . -- -- -- -- 957,390 929,499 952,455
-------- ------- -------- -------- ---------- ---------- ----------
Total investment income . . . . . . . . . -- 1,635 266,440 72,511 3,704,052 3,456,877 3,643,347
Expenses:
Mortality and expense risks . . . . . . . 5,801 814 25,295 8,169 361,409 342,603 340,195
-------- ------- -------- -------- ---------- ---------- ----------
Net investment income (loss) . . . . . . . (5,801) 821 241,145 64,342 3,342,641 3,114,274 3,303,152
Net realized and unrealized gain (loss) on
investments:
Net realized gain . . . . . . . . . . . . 394 1,295 217,073 11,265 -- -- --
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . 199,441 (3,899) 532,936 197,424 -- -- --
-------- ------- -------- -------- ---------- ---------- ----------
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . 199,835 (2,604) 750,009 208,689 -- -- --
-------- ------- -------- -------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . $194,034 $(1,783) $991,154 $273,031 $3,342,641 $3,114,274 $3,303,152
======== ======= ======== ======== ========== ========== ==========
<CAPTION>
Mid Cap Value
Subaccount Special Opportunities Subaccount
------------------ ----------------------------------
1997 1996* 1997 1996 1995
--------- ------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series $178,590 $ 7,418 $ 1,022,881 $265,602 $ 39,684
Trust I . . . . . . . . . . . . . . . .
M Fund Inc. . . . . . . . . . . . . . . -- -- -- -- --
Interest income on policy loans . . . . . -- -- -- -- --
-------- ------- ----------- -------- --------
Total investment income . . . . . . . . . 178,590 7,418 1,022,881 265,602 39,684
Expenses:
Mortality and expense risks . . . . . . . 6,329 580 54,469 23,603 3,373
-------- ------- ----------- -------- --------
Net investment income (loss) . . . . . . . 172,261 6,838 968,412 241,999 36,311
Net realized and unrealized gain (loss) on
investments:
Net realized gain . . . . . . . . . . . . 121,152 1,099 533,297 125,955 11,582
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . (86,033) 23,234 (1,073,252) 615,079 124,460
-------- ------- ----------- -------- --------
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . 35,119 24,333 (539,955) 741,034 136,042
-------- ------- ----------- -------- --------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . $207,380 $31,171 $ 428,457 $983,033 $172,353
======== ======= =========== ======== ========
</TABLE>

- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

34
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

Real Estate Equity Subaccount Growth & Income Subaccount
-------------------------------- ----------------------------------------
1997 1996 1995 1997 1996 1995
---------- ---------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust
I . . . . . . . . . . . . . . . . $ 957,079 $ 477,763 $409,525 $ 99,799,718 $ 78,415,408 $ 51,822,706
M Fund Inc. . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy
loans . . . . . . . . . . . . . . 140,515 117,955 121,494 10,448,315 9,420,070 8,594,774
---------- ---------- -------- ------------ ------------ ------------
Total investment income . . . . . . 1,097,596 595,718 531,019 110,248,033 87,835,478 60,417,480
Expenses:
Mortality and expense risks . . . . 76,454 50,069 41,982 4,658,703 3,854,562 3,246,229
---------- ---------- -------- ------------ ------------ ------------
Net investment income . . . . . . . 1,021,142 545,649 489,037 105,589,330 83,980,916 57,171,251
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) . . . . . 551,925 9,177 97,602 16,543,458 15,416,898 6,161,063
Net unrealized appreciation
(depreciation) during the period . 447,661 1,862,071 184,090 67,250,127 12,987,718 81,121,360
---------- ---------- -------- ------------ ------------ ------------
Net realized and unrealized gain
(loss) on investments . . . . . . . 999,586 1,871,248 281,692 83,793,585 28,404,616 87,282,423
---------- ---------- -------- ------------ ------------ ------------
Net increase in net assets resulting
from operations . . . . . . . . . . $2,020,728 $2,416,897 $770,729 $189,382,915 $112,385,532 $144,453,674
========== ========== ======== ============ ============ ============
<CAPTION>
Short-Term U.S.
Managed Subaccount Government Subaccount
--------------------------------------- -------------------------
1997 1996 1995 1997 1996 1995
----------- ------------- ----------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust $32,757,460 $ 37,103,617 $26,974,536 $22,079 $11,196 $2,910
I . . . . . . . . . . . . . . . .
M Fund Inc. . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy
loans . . . . . . . . . . . . . . 4,669,363 4,337,281 3,999,425 -- -- --
----------- ------------ ----------- ------- ------- ------
Total investment income . . . . . . 37,426,823 41,440,898 30,973,961 22,079 11,196 2,910
Expenses:
Mortality and expense risks . . . . 2,111,314 1,886,000 1,677,243 2,202 1,201 312
----------- ------------ ----------- ------- ------- ------
Net investment income . . . . . . . 35,315,509 39,554,898 29,296,718 19,877 9,995 2,598
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) . . . . . 5,663,060 3,870,923 2,658,955 235 (922) 945
Net unrealized appreciation
(depreciation) during the period . 16,843,903 (11,548,110) 30,787,175 1,405 (1,542) 1,166
----------- ------------ ----------- ------- ------- ------
Net realized and unrealized gain
(loss) on investments . . . . . . . 22,506,963 (7,677,187) 33,446,130 1,640 (2,464) 2,111
----------- ------------ ----------- ------- ------- ------
Net increase in net assets resulting
from operations . . . . . . . . . . $57,822,472 $ 31,877,711 $62,742,848 $21,517 $ 7,531 $4,709
=========== ============ =========== ======= ======= ======
</TABLE>

- ---------
See accompanying notes.

35
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
Small Cap
Value International Opportunities Equity Index Strategic Bond
Subaccount Subaccount Subaccount Subaccount
------------------ ---------------------------- ------------------- -----------------
1997 1996* 1997 1996* 1997 1996* 1997 1996*
--------- ------- --------------- ------------ ---------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I . . . . . . . . . . . $256,363 $23,766 $ 35,111 $ 5,965 $ 220,686 $ 7,847 $84,597 $29,029
M Fund Inc. . . . . . . . . . -- -- -- -- -- -- -- --
Interest income on policy
loans . . . . . . . . . . . . -- -- -- -- -- -- -- --
-------- ------- --------- ------- ---------- ------- ------- -------
Total investment income . . . . 256,363 23,766 35,111 5,965 220,686 7,847 84,597 29,029
Expenses:
Mortality and expense risks . . 10,530 2,451 11,575 3,038 28,637 575 5,827 1,782
-------- ------- --------- ------- ---------- ------- ------- -------
Net investment income (loss) . . 245,833 21,315 23,536 2,927 192,049 7,272 78,770 27,247
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) . . . 129,604 891 78,058 304 38,987 3,982 5,891 1,518
Net unrealized appreciation
(depreciation) during the
period . . . . . . . . . . . . (32,439) 49,892 (141,034) 57,387 1,193,531 13,544 (3,195) 6,688
-------- ------- --------- ------- ---------- ------- ------- -------
Net realized and unrealized gain
(loss) on investments . . . . . 97,165 50,783 (62,976) 57,691 1,232,518 17,526 2,696 8,206
-------- ------- --------- ------- ---------- ------- ------- -------
Net increase (decrease) in net
assets resulting from operations $342,998 $72,098 $ (39,440) $60,618 $1,424,567 $24,798 $81,466 $35,453
======== ======= ========= ======= ========== ======= ======= =======
<CAPTION>
Edinburgh Frontier
Turner Core Growth International Equity Capital Appreciation
Subaccount Subaccount Subaccount
------------------- --------------------- ---------------------
1997 1996* 1997 1996* 1997 1996*
--------- -------- --------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series $11,090 $ -- $ -- $ -- $ -- $ --
Trust I . . . . . . . . . . .
M Fund Inc. . . . . . . . . . -- 415 2,278 255 8,986 --
Interest income on policy
loans . . . . . . . . . . . . -- -- -- -- --
------- ----- ------ ------- ------- -------
Total investment income . . . . 11,090 415 2,278 255 8,986
Expenses:
Mortality and expense risks . . 505 31 746 122 1,464 112
------- ----- ------ ------- ------- -------
Net investment income (loss) . . 10,585 384 1,532 133 7,522 (112)
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) . . . 3,166 (238) 133 (1,091) 9,048 (1,199)
Net unrealized appreciation
(depreciation) during the 12,370
period . . . . . . . . . . . . ------- 456 2,674 (345) 40,541 2,105
----- ------ ------- ------- -------
Net realized and unrealized gain
(loss) on investments . . . . . 15,536 218 2,807 (1,436) 49,589 906
------- ----- ------ ------- ------- -------
Net increase (decrease) in net
assets resulting from operations $26,121 $ 602 $4,339 $(1,303) $57,111 $ 794
======= ===== ====== ======= ======= =======
</TABLE>

- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

36
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

STATEMENTS OF CHANGES IN NET ASSETS

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

Large Cap Growth Subaccount Sovereign Bond Subaccount
----------------------------------------- ------------------------------------------
1997 1996 1995 1997 1996 1995
------------- ------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income (loss) $ 8,071,685 $ 10,263,419 $ 4,376,534 $ 19,822,561 $ 18,450,860 $ 18,663,150
Net realized gains
(losses) . . . . . . . . . . 4,216,904 840,044 465,096 1,088,488 690,912 331,252
Net unrealized appreciation
(depreciation) during the
period . . . . . . . . . . . 7,920,403 (889,487) 6,578,435 2,987,952 (8,059,332) 18,687,187
------------ ------------ ----------- ------------ ------------ ------------
Net increase (decrease) in net
assets resulting from
operations. . . . . . . . . . 20,208,992 10,213,976 11,420,065 23,899,001 11,082,440 37,681,589
From policyholder transactions:
Net premiums from
policyholders. . . . . . . . 18,819,133 20,123,261 12,618,748 31,136,450 34,090,208 31,560,554
Net benefits to policyholders (19,915,971) (11,910,005) (9,566,825) (39,506,771) (40,719,213) (39,010,974)
Net increase (decrease) in
policy loans . . . . . . . . (41,068) 2,044,193 1,614,283 1,612,490 897,069 2,053,700
------------ ------------ ----------- ------------ ------------ ------------
Net increase (decrease) in net
assets resulting from
policyholder
transactions . . . . . . . . (1,137,906) 10,257,449 4,666,206 (6,757,831) (5,731,936) (5,396,720)
------------ ------------ ----------- ------------ ------------ ------------
Net increase in net assets . . 19,071,086 20,471,425 16,086,271 17,141,170 5,350,504 32,284,869
Net assets at beginning of
period. . . . . . . . . . . . 79,355,920 58,884,495 42,798,224 269,018,711 263,668,207 231,383,338
------------ ------------ ----------- ------------ ------------ ------------
Net assets at end of
period . . . . . . . . . . . $ 98,427,006 $ 79,355,920 $58,884,495 $286,159,881 $269,018,711 $263,668,207
============ ============ =========== ============ ============ ============
<CAPTION>
Small Cap
Growth International Balanced
International Equities Subaccount Subaccount Subaccount
--------------------------------------- ----------------------- -----------------------
1997 1996 1995 1997 1996* 1997 1996*
------------ ------------ ------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income (loss) $ 904,106 $ 242,437 $ 195,348 $ (10,199) $ (1,749) $ 28,109 $ 2,549
Net realized gains 209,781 254,188 294,206 34,153 (2,047) 12,000 65
(losses) . . . . . . . . . .
Net unrealized appreciation
(depreciation) during the (2,036,425)
period . . . . . . . . . . . ----------- 676,006 353,155 226,085 (24,023) (41,999) 3,632
----------- ----------- ---------- ---------- --------- --------
Net increase (decrease) in net (922,538) 1,172,631 842,709 250,039 (27,819) (1,890) 6,246
assets resulting from
operations. . . . . . . . . .
From policyholder transactions:
Net premiums from 6,398,146 8,485,184 4,546,347 1,906,439 1,361,402 602,033 216,486
policyholders. . . . . . . .
Net benefits to policyholders (4,052,306) (4,391,767) (4,766,724) (626,114) (129,738) (102,953) (5,403)
Net increase (decrease) in
policy loans . . . . . . . . 41,466 287,879 192,805 -- -- -- --
----------- ----------- ----------- ---------- ---------- --------- --------
Net increase (decrease) in net
assets resulting from 2,387,306 4,381,296 (27,572) 1,280,325 1,231,664 499,080 211,083
policyholder ----------- ----------- ----------- ---------- ---------- --------- --------
transactions . . . . . . . .
Net increase in net assets . . 1,464,768 5,553,927 815,137 1,530,364 1,203,845 497,190 217,329
Net assets at beginning of
period. . . . . . . . . . . . 17,945,258 12,391,331 11,576,194 1,203,845 -- 217,329 --
----------- ----------- ----------- ---------- ---------- --------- --------
Net assets at end of
period . . . . . . . . . . . $19,410,026 $17,945,258 $12,391,331 $2,734,209 $1,203,845 $ 714,519 $217,329
=========== =========== =========== ========== ========== ========= ========
</TABLE>

- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

37
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
Mid Cap Growth Large Cap Value
Subaccount Subaccount Money Market Subaccount
--------------------- ------------------------ ------------------------------------------
1997 1996* 1997 1996* 1997 1996 1995
----------- --------- ------------ ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income
(loss). . . . . . . . . . $ (5,801) $ 821 $ 241,145 $ 64,342 $ 3,342,641 $ 3,114,274 $ 3,303,152
Net realized gains . . . . 394 1,295 217,073 11,265 -- -- --
Net unrealized appreciation
(depreciation) during the
period. . . . . . . . . . 199,441 (3,899) 532,936 197,424 -- -- --
---------- -------- ----------- ---------- ------------ ------------ ------------
Net increase (decrease) in
net assets resulting from
operations . . . . . . . . 194,034 (1,783) 991,154 273,031 3,342,641 3,114,274 3,303,152
From policyholder
transactions:
Net premiums from
policyholders . . . . . . 1,031,218 599,576 3,739,319 2,999,086 19,023,054 15,561,906 11,104,365
Net benefits to
policyholders . . . . . . (294,344) (30,542) (1,140,574) (348,016) (20,817,572) (16,132,881) (12,775,695)
Net increase (decrease) in
policy loans . . . . . . -- -- -- -- 390,775 (260,051) (323,666)
---------- -------- ----------- ---------- ------------ ------------ ------------
Net increase (decrease) in
net assets resulting from
policyholder
transactions . . . . . . . 736,874 569,034 2,598,745 2,651,070 (1,403,743) (831,026) (1,994,996)
---------- -------- ----------- ---------- ------------ ------------ ------------
Net increase in net assets 930,908 567,251 3,589,899 2,924,101 1,938,898 2,283,248 1,308,156
Net assets at beginning of
period . . . . . . . . . . 567,251 -- 2,924,101 -- 63,668,933 61,385,685 60,077,529
---------- -------- ----------- ---------- ------------ ------------ ------------
Net assets at end of
period . . . . . . . . . . $1,498,159 $567,251 $ 6,514,000 $2,924,101 $ 65,607,831 $ 63,668,933 $ 61,385,685
========== ======== =========== ========== ============ ============ ============
<CAPTION>
Mid Cap Value
Subaccount Special Opportunities Subaccount
--------------------- --------------------------------------
1997 1996* 1997 1996 1995
----------- --------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income $ 172,261 $ 6,838 $ 968,412 $ 241,999 $ 36,311
(loss). . . . . . . . . .
Net realized gains . . . . 121,152 1,099 533,297 125,955 11,582
Net unrealized appreciation
(depreciation) during the (86,033)
period. . . . . . . . . . ---------- 23,234 (1,073,252) 615,079 124,460
-------- ----------- ----------- ----------
Net increase (decrease) in 207,380 31,171 428,457 983,033 172,353
net assets resulting from
operations . . . . . . . .
From policyholder
transactions:
Net premiums from 2,070,644 337,092 6,338,416 5,492,467 1,682,424
policyholders . . . . . .
Net benefits to (190,430) (9,035) (3,379,629) (1,284,991) (182,908)
policyholders . . . . . .
Net increase (decrease) in
policy loans . . . . . . -- -- -- -- --
---------- -------- ----------- ----------- ----------
Net increase (decrease) in
net assets resulting from 1,880,214 328,057 2,958,787 4,207,476 1,499,516
policyholder ---------- -------- ----------- ----------- ----------
transactions . . . . . . .
Net increase in net assets 2,087,594 359,228 3,387,244 5,190,509 1,671,869
Net assets at beginning of
period . . . . . . . . . . 359,228 -- 6,900,122 1,709,613 37,744
---------- -------- ----------- ----------- ----------
Net assets at end of
period . . . . . . . . . . $2,446,822 $359,228 $10,287,366 $ 6,900,122 $1,709,613
========== ======== =========== =========== ==========
</TABLE>

- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

38
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

Real Estate Equity Subaccount Growth & Income Subaccount
--------------------------------------- --------------------------------------------
1997 1996 1995 1997 1996 1995
------------ ------------ ------------ -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase in net assets from
operations:
Net investment income . . . . . . . $ 1,021,142 $ 545,649 $ 489,037 $ 105,589,330 $ 83,980,916 $ 57,171,251
Net realized gains
(losses) . . . . . . . . . . . . . 551,925 9,177 97,602 16,543,458 15,416,898 6,161,063
Net unrealized appreciation
(depreciation) during the period . 447,661 1,862,071 184,090 67,250,127 12,987,718 81,121,360
----------- ----------- ----------- ------------- ------------- ------------
Net increase in net assets resulting
from operations . . . . . . . . . . 2,020,728 2,416,897 770,729 189,382,915 112,385,532 144,453,674
From policyholder transactions:
Net premiums from policyholders . . 7,786,904 3,620,035 2,176,970 86,308,294 76,046,396 73,672,198
Net benefits to
policyholders . . . . . . . . . . . (5,481,110) (2,413,828) (2,711,578) (115,839,460) (102,757,132) (90,829,678)
Net increase in policy
loans . . . . . . . . . . . . . . . 265,517 156,802 30,224 18,568,293 11,816,577 10,173,483
----------- ----------- ----------- ------------- ------------- ------------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . . . . . . . . . . 2,571,311 1,363,009 (504,384) (10,962,873) (14,894,159) (6,983,997)
----------- ----------- ----------- ------------- ------------- ------------
Net increase in net assets . . . . . 4,592,039 3,779,906 266,345 178,420,042 97,491,373 137,469,677
Net assets at beginning of
period . . . . . . . . . . . . . . 11,650,076 7,870,170 7,603,825 756,244,834 658,753,461 521,283,784
----------- ----------- ----------- ------------- ------------- ------------
Net assets at end of period . . . . $16,242,115 $11,650,076 $ 7,870,170 $ 934,664,876 $ 756,244,834 $658,753,461
=========== =========== =========== ============= ============= ============
<CAPTION>
Short-Term U.S.
Managed Subaccount Government Subaccount
------------------------------------------ -------------------------------
1997 1996 1995 1997 1996 1995
------------- ------------- ------------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase in net assets from
operations:
Net investment income . . . . . . . $ 35,315,509 $ 39,554,898 $ 29,296,718 $ 19,877 $ 9,995 $ 2,598
Net realized gains 5,663,060 3,870,923 2,658,955 235 (922) 945
(losses) . . . . . . . . . . . . .
Net unrealized appreciation
(depreciation) during the period . 16,843,903 (11,548,110) 30,787,175 1,405 (1,542) 1,166
------------ ------------ ------------ --------- -------- --------
Net increase in net assets resulting 57,822,472 31,877,711 62,742,848 21,517 7,531 4,709
from operations . . . . . . . . . .
From policyholder transactions:
Net premiums from policyholders . . 40,318,523 40,512,423 38,619,260 278,114 328,192 94,623
Net benefits to (54,498,285) (52,043,620) (47,824,820) (218,771) (90,988) (21,753)
policyholders . . . . . . . . . . .
Net increase in policy
loans . . . . . . . . . . . . . . . 4,761,829 4,766,548 5,387,424 -- -- --
------------ ------------ ------------ --------- -------- --------
Net increase (decrease) in net assets
resulting from policyholder (9,417,933)
transactions. . . . . . . . . . . . ------------ (6,764,649) (3,818,136) 59,343 237,204 72,870
------------ ------------ --------- -------- --------
Net increase in net assets . . . . . 48,404,539 25,113,062 58,924,712 80,860 244,735 77,579
Net assets at beginning of
period . . . . . . . . . . . . . . 362,422,826 337,309,764 278,385,052 328,711 83,976 6,397
------------ ------------ ------------ --------- -------- --------
Net assets at end of period . . . . $410,827,365 $362,422,826 $337,309,764 $ 409,571 $328,711 $ 83,976
============ ============ ============ ========= ======== ========
</TABLE>

- ---------

See accompanying notes.

39
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

Small Cap
Value International Opportunities Equity Index
Subaccount Subaccount Subaccount
---------------------- ---------------------------- ---------------------
1997 1996* 1997 1996* 1997 1996*
----------- ---------- ------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income
(loss) . . . . . . . . . $ 245,833 $ 21,315 $ 23,536 $ 2,927 $ 192,049 $ 7,272
Net realized gains
(losses) . . . . . . . . 129,604 891 78,058 304 38,987 3,982
Net unrealized
appreciation
(depreciation) during the
period . . . . . . . . . (32,439) 49,892 (141,034) 57,387 1,193,531 13,544
---------- --------- ---------- ---------- ---------- --------
Net increase (decrease) in
net assets resulting from
operations. . . . . . . . 342,998 72,098 (39,440) 60,618 1,424,567 24,798
From policyholder
transactions:
Net premiums from
policyholders. . . . . . 2,466,836 925,601 1,969,364 1,364,628 6,068,371 350,310
Net benefits to
policyholders. . . . . . (358,679) (105,966) (709,490) (118,737) (260,531) (31,362)
Net increase in policy
loans. . . . . . . . . . -- -- -- -- -- --
---------- --------- ---------- ---------- ---------- --------
Net increase in net assets
resulting from
policyholder transactions 2,108,157 819,635 1,259,874 1,245,891 5,807,840 318,948
---------- --------- ---------- ---------- ---------- --------
Net increase in net assets 2,451,155 891,733 1,220,434 1,306,509 7,232,407 343,746
Net assets at beginning of
period. . . . . . . . . . 891,733 -- 1,306,509 -- 343,746 --
---------- --------- ---------- ---------- ---------- --------
Net assets at end of
period . . . . . . . . . $3,342,888 $ 891,733 $2,526,943 $1,306,509 $7,576,153 $343,746
========== ========= ========== ========== ========== ========
<CAPTION>
Frontier
Turner Core Edinburgh Capital
Strategic Bond Growth International Appreciation
Subaccount Subaccount Equity Subaccount Subaccount
--------------------- ------------------- ------------------- -------------------
1997 1996* 1997 1996* 1997 1996* 1997 1996*
----------- --------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income $ 78,770 $ 27,247 $ 10,585 $ 384 $ 1,532 $ 133 $ 7,522 $ (112)
(loss) . . . . . . . . .
Net realized gains 5,891 1,518 3,166 (238) 133 (1,091) 9,048 (1,199)
(losses) . . . . . . . .
Net unrealized
appreciation (3,195) 6,688 12,370 456 2,674 (345) 40,541 2,105
(depreciation) during the ---------- -------- -------- -------- -------- -------- -------- --------
period . . . . . . . . .
Net increase (decrease) in 81,466 35,453 26,121 602 4,339 (1,303) 57,111 794
net assets resulting from
operations. . . . . . . .
From policyholder
transactions:
Net premiums from 807,985 718,958 91,440 26,825 146,796 68,170 327,804 58,477
policyholders. . . . . .
Net benefits to (201,240) (76,965) (9,878) (14,937) (34,985) (22,411) (47,276) (16,094)
policyholders. . . . . .
Net increase in policy
loans. . . . . . . . . . -- -- -- -- -- -- -- --
---------- -------- -------- -------- -------- -------- -------- --------
Net increase in net assets
resulting from 606,745
policyholder transactions ---------- 641,993 81,562 11,888 111,811 45,759 280,528 42,383
-------- -------- -------- -------- -------- -------- --------
Net increase in net assets 688,211 677,446 107,683 12,490 116,150 44,456 337,639 43,177
Net assets at beginning of
period. . . . . . . . . . 677,446 -- 12,490 -- 44,456 -- 43,177 --
---------- -------- -------- -------- -------- -------- -------- --------
Net assets at end of
period . . . . . . . . . $1,365,657 $677,446 $120,173 $ 12,490 $160,606 $ 44,456 $380,816 $ 43,177
========== ======== ======== ======== ======== ======== ======== ========
</TABLE>

- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

40
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1997

1. ORGANIZATION

John Hancock Variable Life Account U (the Account) is a separate investment
account of John Hancock Variable Life Insurance Company (JHVLICO), a
wholly-owned subsidiary of John Hancock Mutual Life Insurance Company (John
Hancock). The Account was formed to fund variable life insurance policies
(Policies) issued by JHVLICO. The Account is operated as a unit investment trust
registered under the Investment Company Act of 1940, as amended, and currently
consists of twenty-one subaccounts. The assets of each subaccount are invested
exclusively in shares of a corresponding Portfolio of John Hancock Variable
Series Trust I (the Fund) or of M Fund Inc. (M Fund). New subaccounts may be
added as new Portfolios are added to the Fund or to M Fund, or as other
investment options are developed and made available to policyholders. The
twenty-one Portfolios of the Fund and M Fund which are currently available are
the Large Cap Growth, Sovereign Bond, International Equities, Small Cap Growth,
International Balanced, Mid Cap Growth, Large Cap Value, Money Market, Mid Cap
Value, Special Opportunities, Real Estate Equity, Growth & Income, Managed,
Short-Term U.S. Government, Small Cap Value, International Opportunities, Equity
Index, Strategic Bond, Turner Core Growth, Edinburgh International Equity and
Frontier Capital Appreciation Portfolios. Each Portfolio has a different
investment objective.

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

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

2. SIGNIFICANT ACCOUNTING POLICIES

ESTIMATES

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

VALUATION OF INVESTMENTS

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

FEDERAL INCOME TAXES

The operations of the Account are included in the federal income tax return of
JHVLICO, which is taxed as a life insurance company under the Internal Revenue
Code. JHVLICO has the right to charge the Account any federal

41
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

NOTES TO FINANCIAL STATEMENTS--CONTINUED

2. SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
income taxes, or provision for federal income taxes, attributable to the
operations of the Account or to the policies funded in the Account. Currently,
JHVLICO does not make a charge for income or other taxes. Charges for state and
local taxes, if any, attributable to the Account may also be made.

EXPENSES

JHVLICO assumes mortality and expense risks of the variable life insurance
policies for which asset charges are deducted at an annual rate of .50% of net
assets (excluding policy loans) of the Account. Additionally, a monthly charge
at varying levels for the cost of extra insurance is deducted from the net
assets of the Account.

JHVLICO makes certain deductions for administrative expenses and state premium
taxes from premium payments before amounts are transferred to the Account. With
respect to the single premium policy, during the first nine years after policy
issue, JHVLICO assesses a contingent deferred sales charge at varying levels in
the event of early surrender of the variable life insurance policy.

POLICY LOANS

Policy loans represent outstanding loans plus accrued interest. Interest is
accrued (net of a charge for policy loan administration determined at an annual
rate of .75% of the aggregate amount of policyowner indebtedness) and compounded
daily.

3. TRANSACTIONS WITH AFFILIATES

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

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

42
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

NOTES TO FINANCIAL STATEMENTS--CONTINUED
4. DETAILS OF INVESTMENTS

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

<TABLE>
<CAPTION>
Subaccount Shares Owned Cost Value
- ---------- ------------ ---- -----
<S> <C> <C> <C>
Large Cap Growth . . . . . . . . . 4,078,092 $ 68,916,212 $ 84,901,398
Sovereign Bond . . . . . . . . . . 23,333,736 223,991,303 232,146,861
International Equities . . . . . . 1,124,834 18,037,326 17,097,290
Small Cap Growth . . . . . . . . . 241,028 2,532,147 2,734,209
International Balanced . . . . . . 70,673 752,885 714,519
Mid Cap Growth . . . . . . . . . . 125,626 1,302,617 1,498,159
Large Cap Value . . . . . . . . . 480,042 5,783,639 6,514,000
Money Market . . . . . . . . . . . 5,232,520 52,325,203 52,325,203
Mid Cap Value . . . . . . . . . . 176,461 2,509,621 2,446,822
Special Opportunities . . . . . . 668,657 10,620,059 10,287,366
Real Estate Equity . . . . . . . . 891,297 11,860,098 14,180,979
Growth & Income . . . . . . . . . 47,185,076 609,098,074 783,532,141
Managed . . . . . . . . . . . . . 23,942,536 299,610,112 343,560,761
Short-Term U.S. Government . . . . 40,619 408,569 409,571
Small Cap Value . . . . . . . . . 269,559 3,325,435 3,342,888
International Opportunities . . . 237,781 2,610,591 2,526,943
Equity Index . . . . . . . . . . . 533,037 6,369,079 7,576,153
Strategic Bond . . . . . . . . . . 133,330 1,362,164 1,365,657
Turner Core Growth . . . . . . . . 8,902 107,347 120,173
Edinburgh International Equity . . 16,125 157,586 160,606
Frontier Capital Appreciation . . 25,524 336,170 380,816
</TABLE>

43
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

NOTES TO FINANCIAL STATEMENTS--CONTINUED
4. DETAILS OF INVESTMENTS--CONTINUED

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

<TABLE>
<CAPTION>
Subaccount Purchases Sales
- ---------- --------- -----
<S> <C> <C>
Large Cap Growth . . . . . . . . . . . . . . . . $ 18,054,626 $11,117,321
Sovereign Bond . . . . . . . . . . . . . . . . . 28,657,743 17,278,420
International Equities . . . . . . . . . . . . . 4,819,486 1,572,432
Small Cap Growth . . . . . . . . . . . . . . . . 1,734,388 464,262
International Balanced . . . . . . . . . . . . . 887,438 360,250
Mid Cap Growth . . . . . . . . . . . . . . . . . 975,209 244,136
Large Cap Value . . . . . . . . . . . . . . . . 4,063,067 1,223,177
Money Market . . . . . . . . . . . . . . . . . . 12,878,282 11,354,625
Mid Cap Value . . . . . . . . . . . . . . . . . 2,488,102 435,629
Special Opportunities . . . . . . . . . . . . . 6,380,222 2,453,024
Real Estate Equity . . . . . . . . . . . . . . . 5,670,281 2,350,798
Growth & Income . . . . . . . . . . . . . . . . 114,856,520 39,532,209
Managed . . . . . . . . . . . . . . . . . . . . 44,219,932 23,325,445
Short-Term U.S. Government . . . . . . . . . . . 258,130 178,910
Small Cap Value . . . . . . . . . . . . . . . . 2,975,644 621,653
International Opportunities . . . . . . . . . . 2,281,891 498,481
Equity Index . . . . . . . . . . . . . . . . . . 6,236,380 236,490
Strategic Bond . . . . . . . . . . . . . . . . . 916,713 231,199
Turner Core Growth . . . . . . . . . . . . . . . 107,920 15,771
Edinburgh International Equity . . . . . . . . . 153,964 41,308
Frontier Capital Appreciation . . . . . . . . . 340,664 52,575
</TABLE>

5. IMPACT OF YEAR 2000 (UNAUDITED)

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

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

44
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

NOTES TO FINANCIAL STATEMENTS--CONTINUED
5. IMPACT OF YEAR 2000 (UNAUDITED)--CONTINUED

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

45
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Policyholders
John Hancock Variable Life Account U of John Hancock Variable Life Insurance
Company

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

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

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

Ernst & Young LLP

Boston, Massachusetts
February 6, 1998

46
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

To the Directors and Policyholders
John Hancock Variable Life Insurance Company

We have audited the accompanying statutory-basis statements of financial
position of John Hancock Variable Life Insurance Company as of December 31, 1997
and 1996, and the related statutory-basis statements of operations and
unassigned deficit 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.

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 Variable Life Insurance Company at December 31, 1997 and 1996,
or the results of its operations or its cash flows for the year ended December
31, 1997.

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

Ernst & Young LLP

Boston, Massachusetts
February 18, 1998

<PAGE>

STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

<TABLE>
<CAPTION>
December 31
-------------------
1997 1996
---- ----
(In millions)
<S> <C> <C>
ASSETS
Bonds--Note 6 . . . . . . . . . . . . . . . . . . . . $1,092.7 $ 753.5
Preferred stocks . . . . . . . . . . . . . . . . . . . 17.2 9.6
Common stocks . . . . . . . . . . . . . . . . . . . . 2.3 1.4
Investment in affiliates . . . . . . . . . . . . . . . 79.1 72.0
Mortgage loans on real estate--Note 6 . . . . . . . . 273.9 212.1
Real estate . . . . . . . . . . . . . . . . . . . . . 39.9 38.8
Policy loans . . . . . . . . . . . . . . . . . . . . . 106.8 80.8
Cash items:
Cash in banks . . . . . . . . . . . . . . . . . . . 83.1 26.7
Temporary cash investments . . . . . . . . . . . . . 60.1 5.2
-------- --------
143.2 31.9
Premiums due and deferred . . . . . . . . . . . . . . 33.8 36.8
Investment income due and accrued . . . . . . . . . . 24.7 22.6
Other general account assets . . . . . . . . . . . . . 16.8 17.8
Assets held in separate accounts . . . . . . . . . . . 4,691.1 3,290.5
-------- --------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . $6,521.5 $4,567.8
======== ========
OBLIGATIONS AND STOCKHOLDER'S EQUITY
OBLIGATIONS
Policy reserves . . . . . . . . . . . . . . . . . . $1,124.3 $ 877.8
Federal income and other taxes payable--Note 1 . . . 36.1 29.4
Other accrued expenses . . . . . . . . . . . . . . . 335.1 75.1
Asset valuation reserve--Note 1 . . . . . . . . . . 18.6 16.6
Obligations related to separate accounts . . . . . . 4,685.7 3,285.8
-------- --------
TOTAL OBLIGATIONS . . . . . . . . . . . . . . . . . . 6,199.8 4,284.7
STOCKHOLDER'S EQUITY
Common Stock, $50 par value; authorized 50,000
shares;
issued and outstanding 50,000 shares . . . . . . . 2.5 2.5
Paid-in capital . . . . . . . . . . . . . . . . . . 377.5 377.5
Unassigned deficit . . . . . . . . . . . . . . . . . . (58.3) (96.9)
-------- --------
TOTAL STOCKHOLDER'S EQUITY . . . . . . . . . . . . . . 321.7 283.1
-------- --------
TOTAL OBLIGATIONS AND STOCKHOLDER'S EQUITY . . . . . . $6,521.5 $4,567.8
======== ========
</TABLE>

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

48
<PAGE>

STATUTORY-BASIS STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

<TABLE>
<CAPTION>
Year ended December 31
-----------------------
1997 1996
---- ----
(In millions)
<S> <C> <C>
INCOME
Premiums . . . . . . . . . . . . . . . . . . . . $ 872.7 $ 820.6
Net investment income--Note 3 . . . . . . . . . 89.7 76.1
Other, net . . . . . . . . . . . . . . . . . . . 420.1 406.0
-------- --------
1,382.5 1,302.7
BENEFITS AND EXPENSES
Payments to policyholders and beneficiaries . . 264.0 236.1
Additions to reserves to provide for future
payments to policyholders and beneficiaries . 814.2 790.1
Expenses of providing service to policyholders
and obtaining new insurance--
Note 5 . . . . . . . . . . . . . . . . . . . . 216.2 183.8
State and miscellaneous taxes . . . . . . . . . 19.1 17.3
-------- --------
1,313.5 1,227.3
-------- --------
GAIN FROM OPERATIONS BEFORE FEDERAL INCOME
TAXES AND NET REALIZED CAPITAL LOSSES . . . 69.0 75.4
Federal income taxes--Note 1 38.5 38.6
-------- --------
GAIN FROM OPERATIONS BEFORE NET REALIZED
CAPITAL LOSSES . . . . . . . . . . . . . . . 30.5 36.8
Net realized capital losses--Note 4 . . . . . . . (3.0) (1.5)
-------- --------
NET INCOME . . . . . . . . . . . . . . . . . 27.5 35.3
Unassigned deficit at beginning of year . . . . . (96.9) (131.3)
Net unrealized capital gains and other
adjustments--Note 4 . . . . . . . . . . . . . . . 5.0 2.5
Other reserves and adjustments . . . . . . . . . . 6.1 (3.4)
-------- --------
UNASSIGNED DEFICIT AT END OF YEAR . . . . . . $ (58.3) $ (96.9)
======== ========
</TABLE>

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

49
<PAGE>

STATUTORY-BASIS STATEMENTS OF CASH FLOWS

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

<TABLE>
<CAPTION>
Year ended December 31
-----------------------
1997 1996
---- ----
(In millions)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Insurance premiums . . . . . . . . . . . . . . . $ 877.0 $ 824.2
Net investment income . . . . . . . . . . . . . 89.9 73.4
Benefits to policyholders and beneficiaries . . (245.2) (212.7)
Dividends paid to policyholders . . . . . . . . (18.7) (15.7)
Insurance expenses and taxes . . . . . . . . . . (250.2) (196.6)
Net transfers to separate accounts . . . . . . . (703.2) (524.2)
Other, net . . . . . . . . . . . . . . . . . . . 379.9 386.7
------- -------
NET CASH PROVIDED FROM OPERATIONS . . . . . . 129.5 335.1
------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Bond purchases . . . . . . . . . . . . . . . . . (621.6) (489.9)
Bond sales . . . . . . . . . . . . . . . . . . . 197.3 228.3
Bond maturities and scheduled redemptions . . . 34.1 27.8
Bond prepayments . . . . . . . . . . . . . . . . 51.6 31.9
Stock purchases . . . . . . . . . . . . . . . . (15.7) (6.5)
Proceeds from stock sales . . . . . . . . . . . 6.7 0.4
Real estate purchases . . . . . . . . . . . . . (1.3) (10.5)
Real estate sales . . . . . . . . . . . . . . . 0.4 8.5
Other invested assets purchases . . . . . . . . (1.0) 0.0
Proceeds from the sale of other invested assets 0.3 1.5
Mortgage loans issued . . . . . . . . . . . . . (94.5) (84.4)
Mortgage loan repayments . . . . . . . . . . . . 32.4 17.7
Other, net . . . . . . . . . . . . . . . . . . . 393.1 (104.6)
------- -------
NET CASH USED IN INVESTING ACTIVITIES . . . . (18.2) (379.8)
------- -------
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH
INVESTMENTS . . . . . . . . . . . . . . . . . . . 111.3 (44.7)
Cash and temporary cash investments at beginning of
year. . . . . . . . . . . . . . . . . . . . . . . 31.9 76.6
------- -------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR $ 143.2 $ 31.9
======= =======
</TABLE>

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

50
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES John Hancock
Variable Life Insurance Company (the Company) is a wholly-owned subsidiary of
John Hancock Mutual Life Insurance Company (John Hancock). The Company,
domiciled in the Commonwealth of Massachusetts, principally writes variable and
universal life insurance policies. Those policies primarily are marketed through
John Hancock's sales organization, which includes a career agency system
composed of company-owned, unionized branch offices and independent general
agencies. Policies also are sold through various unaffiliated securities
broker-dealers and certain other financial institutions. Currently, the Company
writes business in all states except New York.

The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
accompanying notes. Such estimates and assumptions could change in the future as
more information becomes known, which could impact the amounts reported and
disclosed herein.

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

The significant differences from GAAP include: (1) policy acquisition costs are
charged to expense as incurred rather than deferred and amortized over the
related premium-paying period; (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 unassigned deficit 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; and (9)
certain items, including modifications to required policy reserves resulting
from changes in actuarial assumptions or increased benefits, are recorded
directly to unassigned deficit rather than being reflected in income. 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 unassigned deficit is not expected to be material.

51
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
Revenues and Expenses: Premium revenues are recognized over the premium-paying
period of the policies whereas expenses, including the acquisition costs of new
business, are charged to operations as incurred and policyholder dividends are
provided as paid or accrued.

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

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

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

Investments in affiliates are included on the statutory equity method.

Goodwill is amortized on a straight-line basis over a ten year period.

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

Investment real estate is carried at depreciated cost, less encumbrances.
Depreciation on investment real estate is recorded on a straight-line basis.
Accumulated depreciation amounted to $2.1 million in 1997 and $1.2 million in
1996.

Real estate acquired in satisfaction of debt and held for sale is carried at
the lower of cost or market as of the date of foreclosure.

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

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. Changes to the AVR are
charged or credited directly to the unassigned deficit.

The Company also records the NAIC prescribed Interest Maintenance Reserve (IMR)
that represents that portion of the after tax net accumulated unamortized
realized capital gains and losses on sales of fixed income securities,
principally bonds and mortgage loans, attributable to changes in the general
level of interest rates. Such gains and losses are deferred and amortized into
income over the remaining expected lives of the investments sold. At December
31, 1997, the IMR, net of 1997 amortization of $1.2 million, amounted to $7.8
million, which is included in policy reserves. The corresponding 1996 amounts
were $1.2 million and $5.9 million, respectively.

Goodwill: The excess of cost over the statutory book value of the net assets of
life insurance business acquired was $13.1 million and $15.1 million at December
31, 1997 and 1996, respectively, and generally is amortized over a ten-year
period using a straight-line method.

Accumulated amortization was $8.8 million and $6.7 million at December 31, 1997
and 1996, respectively.

52
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
Separate Accounts: Separate account assets and liabilities reported in the
accompanying statements of financial position represent funds that are
separately administered, principally for 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 11.

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 its subsidiary
investments, which are carried at equity values, are based on quoted market
prices.

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 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 amount in the statement of financial position for policy loans
approximates their fair value.

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.

53
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
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 gain or loss.
Unrealized gains and losses, which consist of market value and book value
adjustments, are shown as adjustments to the unassigned deficit.

Policy Reserves: Life 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 variable life insurance policies are maintained principally on the
modified preliminary term method using the 1958 and 1980 Commissioner's Standard
Ordinary (CSO) mortality tables, with an assumed interest rate of 4% for
policies issued prior to May 1, 1983 and 41/2% for policies issued on or
thereafter. Reserves for single premium policies are determined by the net
single premium method using the 1958 CSO mortality table, with an assumed
interest rate of 4%. Reserves for universal life policies issued prior to 1985
are equal to the gross account value which at all times exceeds minimum
statutory requirements. Reserves for universal life policies issued from 1985
through 1988 are maintained at the greater of the Commissioner's Reserve
Valuation Method (CRVM) using the 1958 CSO mortality table, with 41/2% interest
or the cash surrender value. Reserves for universal life policies issued after
1988 and for flexible variable policies are maintained using the greater of the
cash surrender value or the CRVM method with the 1980 CSO mortality table and
51/2% interest for policies issued from 1988 through 1992; 5% interest for
policies issued in 1993 and 1994; and 41/2% interest for policies issued in 1995
through 1997.

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 are
consolidated with John Hancock in filing a consolidated federal income tax
return for the affiliated group. The federal income taxes of the Company are
allocated on a separate return basis with certain adjustments. The Company made
payments of $29.6 million in 1997 and $33.5 million in 1996.

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

Adjustments to Policy Reserves: 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 stockholder's equity. During
1997, the Company refined certain assumptions inherent in the calculation of
reserves related to AIDS claims under individual life policies resulting in a
$6.4 million increase in stockholder's equity at December 31, 1997.

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

54
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

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

NOTE 2--ACQUISITION

On June 23, 1993, the Company acquired all of the outstanding shares of stock of
Colonial Penn Annuity and Life Insurance Company (CPAL) from Colonial Penn Life
Insurance Company for an aggregate purchase price of approximately $42.5
million. At the date of acquisition, assets of CPAL were approximately $648.5
million, consisting principally of cash and temporary cash investments and
liabilities were approximately $635.2 million, consisting principally of
reserves related to a block of interest sensitive single-premium whole life
insurance business assumed by CPAL from Charter National Life Insurance Company
(Charter). The purchase price includes contingent payments of up to
approximately $7.3 million payable between 1994 and 1998 based on the actual
lapse experience of the business in force on June 23, 1993. The Company made
contingent payments to CPAL of $1.5 million during each of 1997 and 1996.
Unamortized goodwill at December 31, 1997 was $13.1 million and is being
amortized over ten years on a straight-line basis.

On June 24, 1993, the Company contributed $24.6 million in additional capital to
CPAL. CPAL was renamed John Hancock Life Insurance Company of America (JHLICOA)
on July 7, 1993. JHLICOA manages the business assumed from Charter and does not
currently issue new business.

NOTE 3--NET INVESTMENT INCOME

Investment income has been reduced by the following amounts:

<TABLE>
<CAPTION>
1997 1996
---- ----
(In millions)
<S> <C> <C>
Investment expenses . . . . . . . . . . . . . . . . . $ 5.0 $7.0
Interest expense . . . . . . . . . . . . . . . . . . . 0.7 0.0
Depreciation expense . . . . . . . . . . . . . . . . . 1.1 0.9
Investment taxes . . . . . . . . . . . . . . . . . . . 0.4 0.5
-------------- ----
$ 7.2 $8.4
============== ====
</TABLE>

NOTE 4--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 (losses) from asset sales . . . . . . . . $ 0.8 $(0.2)
Capital gains tax . . . . . . . . . . . . . . . . . (0.7) (1.0)
Net capital gains transferred to IMR . . . . . . . (3.1) (0.3)
-------------- -----
Realized Capital Losses . . . . . . . . . . . . . . $ (3.0) $(1.5)
============== =====
</TABLE>

55
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTE 4--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS--CONTINUED 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 . . . . . . . . . . . . . . . . $ 7.0 $ 3.7
Increase in asset valuation reserve . . . . . . . . (2.0) (1.2)
-------------- -----
Net Unrealized Capital Gains and Other Adjustments $ 5.0 $ 2.5
============== =====
</TABLE>

NOTE 5--TRANSACTIONS WITH PARENT

The Company's Parent provides the Company with personnel, property and
facilities in carrying out certain of its corporate functions. The Parent
annually determines a fee for these services and facilities based on a number of
criteria which were revised in 1997 and 1996 to reflect continuing changes in
the Company's operations. The amount of the service fee charged to the Company
was $123.6 million and $111.7 million in 1997 and 1996, respectively, which has
been included in insurance and investment expenses. The Parent has guaranteed
that, if necessary, it will make additional capital contributions to prevent the
Company's stockholder's equity from declining below $1.0 million.

The service fee charged to the Company by the Parent includes $0.9 million and
$1.6 million in 1997 and 1996, respectively, representing the portion of the
provision for retiree benefit plans determined under the accrual method,
including a provision for the 1993 transition liability which is being amortized
over twenty years, that was allocated to the Company.

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

The Company has a modified coinsurance agreement with John Hancock to reinsure
50% of 1995 through 1997 issues of certain retail annuity contracts
(Independence Preferred and Declaration). In connection with this agreement, the
Company made a net cash payment of $1.1 million and received a net cash payment
of $35.0 million for surrender benefits, tax, reserve increase, commission,
expense allowances and premium. This agreement increased the Company's net gain
from operations by $9.8 million and $15.1 million and in 1997 and 1996,
respectively.

Effective January 1, 1997, the Company entered into a stop-loss agreement with
John Hancock 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, John Hancock transferred
$2.4 million of cash for mortality claims to the Company, which increased the
Company's net gain from operations by $1.3 million.

56
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTE 6--INVESTMENTS

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

<TABLE>
<CAPTION>
Gross Gross
Statement Unrealized Unrealized Fair
Year ended December 31, 1997 Value Gains Losses Value
- ---------------------------- --------- ---------- ---------- -----
(In millions)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies . . $ 254.5 $ 0.2 $0.1 $ 254.6
Obligations of states and
political subdivisions . . . . 12.1 1.0 0.0 13.1
Debt securities issued by
foreign governments . . . . . 0.2 0.0 0.0 0.2
Corporate securities . . . . . 712.7 43.9 2.7 753.9
Mortgage-backed securities . . 113.2 3.5 0.0 116.7
-------- ----- ---- --------
Total bonds . . . . . . . . . . $1,092.7 $48.6 $2.8 $1,138.5
======== ===== ==== ========
</TABLE>

<TABLE>
<CAPTION>
Gross Gross
Statement Unrealized Unrealized Fair
Year ended December 31, 1996 Value Gains Losses Value
- ---------------------------- --------- ---------- ---------- -----
(In millions)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S.
government corporations and
agencies. . . . . . . . . . $ 44.4 $ 0.2 $0.2 $ 44.4
Obligations of states and
political subdivisions . . 12.6 0.4 0.0 13.0
Debt securities issued by
foreign governments . . . . 0.8 0.1 0.0 0.9
Corporate securities . . . . 623.2 29.8 3.4 649.6
Mortgage-backed securities . 72.5 10.2 0.1 82.6
-------------- ----- ---- ------
Total bonds . . . . . . . . $ 753.5 $40.7 $3.7 $790.5
============== ===== ==== ======
</TABLE>

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 . . . . . . . . . . . . . . . . $ 89.1 $ 90.7
Due after one year through five years . . . . . . . . . 466.8 477.0
Due after five years through ten years . . . . . . . . 284.2 299.2
Due after ten years . . . . . . . . . . . . . . . . . . 139.4 154.9
-------- --------
979.5 1,021.8
Mortgage-backed securities . . . . . . . . . . . . . . 113.2 116.7
-------- --------
$1,092.7 $1,138.5
======== ========
</TABLE>

Gross gains of $1.1 million in 1997 and $1.3 million in 1996 and gross losses of
$4.5 million in 1997 and $2.1 million in 1996 were realized from the sale of
bonds.

57
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTE 6--INVESTMENTS--CONTINUED
At December 31, 1997, bonds with an admitted asset value of $3.6 million were on
deposit with state insurance departments to satisfy regulatory requirements.

The cost of common stocks was $0.0 million at December 31, 1997 and 1996,
respectively. Gross unrealized appreciation on common stocks totaled $2.3
million, and gross unrealized depreciation totaled $0.0 million at December 31,
1997. The fair value of preferred stock totaled $17.2 million at December 31,
1997 and $9.6 million at December 31, 1996.

Bonds with amortized cost of $2.0 million were nonincome producing for the
twelve months ended December 31, 1997.

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 Geographic Statement
Property Type Value Concentration Value
------------- --------- ------------- ---------
(In millions) (In millions)
<S> <C> <C> <C>
Apartments. . . . . . $104.1 East North Central . . $ 32.7
Hotels. . . . . . . . 3.8 Middle Atlantic . . . 11.3
Industrial. . . . . . 51.3 Mountain . . . . . . . 17.9
Office buildings . . 32.2 New England . . . . . 35.8
Retail. . . . . . . . 33.2 Pacific . . . . . . . 64.2
Agricultural. . . . . 38.8 South Atlantic . . . . 67.9
Other . . . . . . . . 10.5 West North Central . . 2.5
West South Central . . 41.6
------ ------
$273.9 $273.9
====== ======
</TABLE>

At December 31, 1997, the fair values of the commercial and agricultural
mortgage loans portfolios were $243.8 million and $42.0 million, respectively.
The corresponding amounts as of December 31, 1996 were approximately $189.0
million and $30.4 million, respectively.

The maximum and minimum lending rates for mortgage loans during 1997 were 10.49%
and 8.14% for agricultural loans and 8.53% and 7.42% for other properties.
Generally, the maximum percentage of any loan to the value of security at the
time of the loan, exclusive of insured, guaranteed or purchase money mortgages,
is 75%. For city mortgages, fire insurance is carried on all commercial and
residential properties at least equal to the excess of the loan over the maximum
loan which would be permitted by law on the land without the building, except as
permitted by regulations of the Federal Housing Commission on loans fully
insured under the provisions of the National Housing Act. For agricultural
mortgage loans, fire insurance is not normally required on land based loans
except in those instances where a building is critical to the farming operation.
Fire insurance is required on all agri-business facilities in an aggregate
amount equal to the loan balance.

58
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTE 7--REINSURANCE

The Company cedes business to reinsurers to share risks under variable life,
universal life and flexible variable life insurance policies for the purpose of
reducing exposure to large losses. Premiums, benefits and reserves ceded to
reinsurers in 1997 were $427.4 million, $18.3 million, and $10.1 million,
respectively. The corresponding amounts in 1996 were $384.3 million, $9.9
million, and $12.1 million, respectively.

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 reinsurer.

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--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, 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 through 2011. These swaps involve, to varying degrees,
interest rate risk in excess of amounts recognized in the statement of financial
position.

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

59
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTE 8--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK--CONTINUED but not in
the future cash requirements, as the Company intends to close the open positions
prior to settlement. Net deferred losses on financial contracts were $2.8
million and $0.0 million at December 31, 1997 and 1996, respectively.

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

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

<TABLE>
<CAPTION>
December 31
----------------------
1997 1996
---- ----
(In millions)
<S> <C> <C>
Futures contracts to sell securities . . . . . . . . $ 40.8 $ 73.0
============== ======
Notional amount of interest rate swaps, currency rate swaps, and interest rate
caps to:
Receive variable rates . . . . . . . . . . . . . . $ 323.7 $215.9
============== ======
Receive fixed rates . . . . . . . . . . . . . . . $ 25.0 $ 26.6
============== ======
</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 the market rates in effect at December 31, 1997, the Company's interest
rate swaps, currency rate swaps and interest rate caps represented (assets)
liabilities to the Company with fair values of $7.8 million, $2.1 million and
$(1.4) million, respectively. The corresponding amounts as of December 31, 1996
were $2.3 million, $(8.2) million, and $(2.0) million, respectively. The fair
values of the swap agreements are not recognized in the financial statements.

60
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTE 9--POLICY RESERVES, POLICYHOLDERS' AND BENEFICIARIES' FUNDS AND OBLIGATIONS
RELATED TO SEPARATE ACCOUNTS

The Company's annuity reserves and deposit fund liabilities that are subject to
discretionary withdrawal, with and without adjustment, are summarized as
follows:

<TABLE>
<CAPTION>
December 31, 1997 Percent
----------------- -------
(In millions)
<S> <C> <C>
Subject to discretionary withdrawal (with
adjustment)
With market value adjustment . . . . . . . . . . $ 0.4 0.0%
At book value less surrender charge . . . . . . 970.3 88.7
-------- -----
Total with adjustment . . . . . . . . . . . . . 970.7 88.7
Subject to discretionary withdrawal at book value
(without adjustment) . . . . . . . . . . . . . 118.9 10.9
Not subject to discretionary withdrawal--general
account . . . . . . . . . . . . . . . . . . . . 4.1 0.4
-------- -----
Total annuity reserves and deposit liabilities . $1,093.7 100.0%
======== =====
</TABLE>

NOTE 10--COMMITMENTS AND CONTINGENCIES

The Company has extended commitments to purchase long-term bonds and issue real
estate mortgages totalling $168.6 million and $28.3 million, respectively, at
December 31, 1997. The Company monitors the creditworthiness of borrowers under
long-term bond commitments and requires collateral as deemed necessary. If
funded, loans related to real estate mortgages would be fully collateralized by
the related properties. The estimated fair value of the commitments described
above is $194.5 million at December 31, 1997. The majority of these commitments
expire in 1998.

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.

61
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTE 11--FAIR VALUE OF FINANCIAL INSTRUMENTS

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

<TABLE>
<CAPTION>
Year ended December 31
-----------------------------------------
1997 1996
----------------------- ----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -----
(In millions)
<S> <C> <C> <C> <C>
Assets
Bonds--Note 6 . . . . . . . . $1,092.7 $1,138.5 $753.5 $790.5
Preferred stocks--Note 6 . . . 17.2 17.2 9.6 9.6
Common stocks--Note 6 . . . . 2.3 2.3 1.4 1.4
Mortgage loans on real
estate--Note 6 . . . . . . . 273.9 285.8 212.1 219.4
Policy loans--Note 1 . . . . . 106.8 106.8 80.8 80.8
Cash and cash equivalents--Note
1. . . . . . . . . . . . . . 143.2 143.2 31.9 31.9
Derivatives liabilities relating
to:--Note 8
Interest rate swaps . . . . . -- 7.8 -- 2.3
Currency rate swaps . . . . . -- 2.1 -- (8.2)
Interest rate caps . . . . . . -- (1.4) -- (2.0)
Liabilities
Commitments--Note 10 . . . . . -- 194.5 -- 76.2
</TABLE>

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

NOTE 12--IMPACT OF YEAR 2000 (UNAUDITED)

The Company relies on John Hancock, its parent company, for information
processing services. John Hancock has developed a plan to modify or replace
significant portions of its computer information and automated technologies so
that its systems, including those relied upon by the Company, will function
properly with respect to the dates in the year 2000 and thereafter. The Company,
along with John Hancock, presently believes that with modifications to existing
systems and conversions to new technologies, the year 2000 will not pose
significant operational problems for the computer systems upon which the Company
relies. 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.

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

62
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTE 12--IMPACT OF YEAR 2000 (UNAUDITED)--CONTINUED

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

63
<PAGE>

APPENDIX--OTHER POLICY PROVISIONS

SETTLEMENT PROVISIONS

In place of a single payment, an amount of $1,000 or more payable under the
Policy as a benefit or as the Surrender Value, if any, may be left with JHVLICO
under the terms of a supplementary agreement. The agreement will be issued when
the proceeds are applied through the election of any one of the options below.

The following options are subject to the restrictions and limitations stated
in the Policy.

Option 1--Interest Income at the declared rate but not less than3 1/2% a
year on proceeds held on deposit.

Option 2A--Income of a Specified Amount, with payments each year totaling
at least 1/12th of the proceeds, until the proceeds, with interest credited at
the declared rate but not less than3 1/2% a year on unpaid balances, are fully
paid.

Option 2B--Income for a Fixed Period, with each payment as declared.

Option 3--Life Income with Payments for a Guaranteed Period.

Option 4--Life Income without Refund at the death of the Payee of any part
of the proceeds applied. Only one payment is made if the Payee dies before the
second payment is due.

Option 5--Life Income with Cash Refund at the death of the Payee of the
amount, if any, equal to the proceeds applied less the sum of all income
payments made.

No election of an option may provide for income payments of less than $50.

Other options may be arranged with JHVLICO's approval including optional
methods of settlement available from John Hancock.

ADDITIONAL INSURANCE BENEFITS

On payment of an additional charge and subject to certain age and insurance
underwriting requirements, certain additional provisions, such as an Accidental
Death Benefit, which are subject to the restrictions and limitations set forth
therein, may be included in a Policy by rider.

GENERAL PROVISIONS

BENEFICIARY. The Beneficiary will be as shown in the application for the
Policy, unless thereafter changed by the Owner in accordance with the terms of
the Policy. In general, if the insured dies and there is no surviving
Beneficiary, the Owner will be the Beneficiary, but if the insured was the
Owner, the Owner's estate will be the Beneficiary.

OWNER AND ASSIGNMENT. The Owner's interest in the Policy may be assigned
without the consent of any revocable Beneficiary. JHVLICO will not be on notice
of any assignment unless it is in writing and until a duplicate of the original
assignment has been filed at JHVLICO's Home Office. JHVLICO assumes no
responsibility for the validity or sufficiency of any assignment.

MISSTATEMENT OF AGE OR SEX. If the age or sex of the insured has been
misstated, JHVLICO will adjust the benefits payable to those which would have
been purchased at the correct age or sex by the most recent insurance charge
deducted from Account Value.

64
<PAGE>

SUICIDE. If the insured commits suicide within 2 years (except where state law
requires a shorter period) from the date of issue shown in the Policy, the
Policy will terminate and JHVLICO will pay in place of all other benefits an
amount equal to the premium paid less any Indebtedness on the date of death and
less any withdrawals. If the suicide is within 2 years (except where state law
requires a shorter period) from the date of any Policy change that increases the
death benefit, or the payment of any premium requiring evidence of insurability,
the death benefit will not include the increased benefit but will include the
excess premium.

AGE, POLICY ANNIVERSARIES AND MONTHLY PROCESSING DATE. For purpose of the
Policy, an insured's "age" is his or her age on his or her nearest birthday.
Policy months, Policy years and Policy anniversaries are calculated from the
date of issue. The monthly processing date is on or about the first Valuation
Date in each Policy month.

AVIATION ACTIVITY EXCLUSION. If the insured dies in an aviation accident while
a crew member on other than a commercial aircraft and the Policy provides at the
request of the Owner for a limited benefit in such situation, JHVLICO will pay
in place of all other benefits an amount equal to the greater of the premium
paid or the Surrender Value, less any Indebtedness.

INCONTESTABILITY. The Policy shall be incontestable, other than for nonpayment
of premiums, after it has been in force during the lifetime of an insured for 2
years from its issue date. If, however, evidence of insurability is required
with respect to any increase in death benefit, such increase shall be
incontestable after the increase has been in force during the lifetime of the
insured for 2 years from the increase date.

DEFERRAL OF DETERMINATIONS AND PAYMENTS. Payment of any death, surrender,
partial withdrawal or loan proceeds will ordinarily be made within seven days
after receipt at JHVLICO's Home Office of all documents required for any such
payment. Approximately two-thirds of the claims for death proceeds which are
made within two years after the date of issue of the Policy will be investigated
to determine whether the claim should be contested and payment of these claims
will therefore be delayed.

JHVLICO may defer any transaction requiring a determination of Account Value
in any variable Subaccount for any period during which: (1) the disposal or
valuation of the Account's assets is not reasonably practicable because the New
York Stock Exchange is closed or conditions are such that, under the
Commission's rules and regulations, trading is restricted or an emergency is
deemed to exist or (2) the Commission by order permits postponement of such
actions for the protection of Owners.
The foregoing description of Policy provisions is qualified by reference to
the specimen Policy which has been filed as an exhibit to the Registration
Statement and to any variations in Policy provisions required by the regulatory
authorities of the state that has approved the Policy for issue.

65
<PAGE>

APPENDIX--IMPACT OF YEAR 2000

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

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

66
<PAGE>

APPENDIX--ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES AND
ACCUMULATED PREMIUMS

The following tables illustrate the changes in death benefit, Account Value
and Surrender Value of the Policy, disregarding any Policy loans. Each table
separately illustrates the operation of a Policy for an identified issue age,
Planned Premium schedule and Sum Insured and shows how the death benefit,
Account Value and Surrender Value may vary over an extended period of time
assuming hypothetical rates of investment return (i.e., investment income and
capital gains and losses, realized or unrealized) equivalent to constant gross
annual rates of 0%, 6% and 12%. The tables are based on given annual Planned
Premiums paid at the beginning of each Policy year and will assist in a
comparison of the values set forth in the tables with those under other variable
life insurance policies which may be issued by JHVLICO or other companies.
Tables are provided for each of the three available death benefit options. The
values for a Policy would be different from those shown if premiums are paid in
different amounts or at different times or if the actual gross rates of
investment return average 0%, 6% or 12% over a period of years, but nevertheless
fluctuate above or below the average for individual Policy years, or if the
Policy were issued under circumstances in which no distinctions are made based
on the gender of the insureds.

The amounts shown for the death benefit, Account Value and Surrender Value are
as of the end of each Policy year. The tables headed "Using Current Charges"
assume that the current rates for insurance, sales, risk, and expense charges
(including JHVLICO's intended waiver after ten Policy years of the sales charges
deducted from certain premiums and its intended reduction in the tenth Policy
year in the insurance charge deducted monthly from Account Value) will apply in
each year illustrated. The tables headed "Using Maximum Charges" assumes that
the maximum (guaranteed) insurance, sales, risk, and expense charges will be
made in each year illustrated. The amounts shown in all tables reflect an
average asset charge for the daily investment advisory expense charges to the
Portfolios of the Fund (equivalent to an effective annual rate of .61%) and an
assumed average asset charge for the annual nonadvisory operating expenses of
each Portfolio of the Fund (equivalent to an effective annual rate of .19%). For
a description of expenses charged to the Portfolios, including the reimbursement
of any Portfolio for annual non-advisory operating expenses in excess of an
effective annual rate of .25%, a continuing obligation of the Fund's investment
adviser, see the attached Prospectus for the Fund. The charges for the daily
investment management fee and the annual non-advisory operating expenses are
based on the hypothetical assumption that Policy values are allocated equally
among the variable Subaccounts. The actual Portfolio charges and expenses
associated with any Policy will vary depending upon the actual allocation of
Policy values among Subaccounts.

The tables reflect that no charge is currently made to the Account for Federal
income taxes. However, JHVLICO reserves the right to make such a charge in the
future and any charge would require higher rates of investment return in order
to produce the same Policy values. All of the tables do, however, reflect the
imposition of a Federal DAC Tax charge in the amount of 1.25% of all premiums
paid and a premium tax charge in the amount of 2.35% of all premiums paid.

The tables assume that the Guaranteed Death Benefit feature was in effect the
first 5 Policy years.

The second column of each table shows the amount to which the total premiums
paid to the end of a Policy year during the premium paying period would
accumulate if an amount equal to those premiums were invested to earn interest,
after taxes, at 5% compounded annually.

JHVLICO will furnish upon request a comparable illustration reflecting the
proposed insureds' ages, sexes, underwriting risk classifications and the Sum
Insured at issue and Planned Premium amount requested, and assuming annual
Planned Premiums.

67
<PAGE>

DEATH BENEFIT OPTION 1: LEVEL DEATH BENEFIT ILLUSTRATION ASSUMES CURRENT CHARGES

MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE:
$100,000 $760 BASE POLICY TARGET PREMIUM*

<TABLE>
<CAPTION>
Death Benefit Account Value Surrender Value
------------------------------ ----------------------------- -----------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest ------------------------------ ----------------------------- -----------------------------
Year Per Year 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------- -------------- -------- --------- --------- -------- -------- --------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 798 100,000 100,000 100,000 217 244 270 0 0 0
2 1,636 100,000 100,000 100,000 662 736 814 0 0 71
3 2,516 100,000 100,000 100,000 1,091 1,241 1,404 0 148 311
4 3,439 100,000 100,000 100,000 1,502 1,757 2,044 410 664 951
5 4,409 100,000 100,000 100,000 1,895 2,283 2,738 802 1,190 1,645
6 5,428 100,000 100,000 100,000 2,269 2,820 3,491 1,176 1,727 2,398
7 6,497 100,000 100,000 100,000 2,622 3,365 4,306 1,529 2,272 3,214
8 7,620 100,000 100,000 100,000 2,953 3,917 5,191 2,059 3,023 4,297
9 8,799 100,000 100,000 100,000 3,260 4,477 6,150 2,565 3,781 5,455
10 10,037 100,000 100,000 100,000 3,551 5,052 7,205 3,255 4,756 6,909
11 11,337 100,000 100,000 100,000 3,846 5,665 8,387 3,649 5,467 8,189
12 12,702 100,000 100,000 100,000 4,119 6,289 9,679 4,020 6,190 9,580
13 14,135 100,000 100,000 100,000 4,365 6,921 11,092 4,365 6,921 11,092
14 15,640 100,000 100,000 100,000 4,584 7,560 12,636 4,584 7,560 12,636
15 17,220 100,000 100,000 100,000 4,774 8,205 14,327 4,774 8,205 14,327
16 18,879 100,000 100,000 100,000 4,934 8,856 16,181 4,934 8,856 16,181
17 20,621 100,000 100,000 100,000 5,053 9,503 18,209 5,053 9,503 18,209
18 22,450 100,000 100,000 100,000 5,126 10,140 20,425 5,126 10,140 20,425
19 24,370 100,000 100,000 100,000 5,147 10,762 22,849 5,147 10,762 22,849
20 26,387 100,000 100,000 100,000 5,110 11,362 25,504 5,110 11,362 25,504
25 38,086 100,000 100,000 100,000 3,818 13,789 43,255 3,818 13,789 43,255
30 53,018 ** 100,000 100,000 ** 14,215 72,810 ** 14,215 72,810
35 72,076 ** 100,000 142,014 ** 9,692 123,490 ** 9,692 123,490
40 96,398 ** ** 217,249 ** ** 206,904 ** ** 206,904
45 127,441 ** ** 362,450 ** ** 345,190 ** ** 345,190
</TABLE>

- ---------
*If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.

IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING INVESTMENT ALLOCATIONS MADE BY THE OWNER. THE
DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF INVESTMENT RETURN AVERAGE 0%, 6%
OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THE AVERAGE
FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE
HYPOTHETICAL INVESTMENT RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.

68
<PAGE>

DEATH BENEFIT OPTION 1: LEVEL DEATH BENEFIT ILLUSTRATION ASSUMES MAXIMUM CHARGES

MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE:
$100,000 $760 BASE POLICY TARGET PREMIUM*

<TABLE>
<CAPTION>
Death Benefit Account Value Surrender Value
------------------------------ ----------------------------- -----------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest ------------------------------ ----------------------------- -----------------------------
Year Per Year 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------- -------------- -------- --------- --------- -------- -------- --------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 798 100,000 100,000 100,000 191 216 242 0 0 0
2 1,636 100,000 100,000 100,000 609 679 753 0 0 10
3 2,516 100,000 100,000 100,000 1,010 1,152 1,306 0 59 213
4 3,439 100,000 100,000 100,000 1,393 1,633 1,903 300 540 810
5 4,409 100,000 100,000 100,000 1,756 2,121 2,547 663 1,028 1,454
6 5,428 100,000 100,000 100,000 2,100 2,616 3,243 1,007 1,523 2,150
7 6,497 100,000 100,000 100,000 2,421 3,115 3,992 1,328 2,022 2,899
8 7,620 100,000 100,000 100,000 2,721 3,619 4,801 1,827 2,725 3,907
9 8,799 100,000 100,000 100,000 2,995 4,124 5,672 2,300 3,429 4,977
10 10,037 100,000 100,000 100,000 3,246 4,632 6,614 2,950 4,335 6,317
11 11,337 100,000 100,000 100,000 3,470 5,138 7,629 3,272 4,941 7,432
12 12,702 100,000 100,000 100,000 3,664 5,641 8,724 3,565 5,542 8,625
13 14,135 100,000 100,000 100,000 3,828 6,139 9,906 3,828 6,139 9,906
14 15,640 100,000 100,000 100,000 3,961 6,631 11,183 3,961 6,631 11,183
15 17,220 100,000 100,000 100,000 4,059 7,112 12,563 4,059 7,112 12,563
16 18,879 100,000 100,000 100,000 4,120 7,581 14,055 4,120 7,581 14,055
17 20,621 100,000 100,000 100,000 4,139 8,030 15,665 4,139 8,030 15,665
18 22,450 100,000 100,000 100,000 4,108 8,452 17,403 4,108 8,452 17,403
19 24,370 100,000 100,000 100,000 4,025 8,842 19,278 4,025 8,842 19,278
20 26,387 100,000 100,000 100,000 3,879 9,188 21,299 3,879 9,188 21,299
25 38,086 100,000 100,000 100,000 1,987 9,975 34,148 1,987 9,975 34,148
30 53,018 ** 100,000 100,000 ** 7,866 53,706 ** 7,866 53,706
35 72,076 ** ** 100,000 ** ** 85,684 ** ** 85,684
40 96,398 ** ** 146,314 ** ** 139,346 ** ** 139,346
45 127,441 ** ** 236,395 ** ** 225,138 ** ** 225,138
</TABLE>

- ---------
*If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.

MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE:
$100,000 $760 BASE POLICY TARGET PREMIUM*

<TABLE>
<CAPTION>
Death Benefit Account Value Surrender Value
------------------------------ ----------------------------- -----------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest ------------------------------ ----------------------------- -----------------------------
Year Per Year 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------- -------------- -------- --------- --------- -------- -------- --------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 798 100,217 100,243 100,269 217 243 269 0 0 0
2 1,636 100,660 100,734 100,811 660 734 811 0 0 68
3 2,516 101,086 101,236 101,398 1,086 1,236 1,398 0 143 305
4 3,439 101,495 101,748 102,034 1,495 1,748 2,034 402 655 941
5 4,409 101,883 102,269 102,720 1,883 2,269 2,720 791 1,176 1,628
6 5,428 102,252 102,798 103,463 2,252 2,798 3,463 1,159 1,705 2,371
7 6,497 102,598 103,333 104,265 2,598 3,333 4,265 1,505 2,240 3,172
8 7,620 102,921 103,874 105,131 2,921 3,874 5,131 2,027 2,980 4,237
9 8,799 103,220 104,418 106,066 3,220 4,418 6,066 2,524 3,723 5,370
10 10,037 103,500 104,975 107,090 3,500 4,975 7,090 3,203 4,678 6,793
11 11,337 103,782 105,564 108,231 3,782 5,564 8,231 3,584 5,367 8,033
12 12,702 104,040 106,161 109,471 4,040 6,161 9,471 3,941 6,062 9,373
13 14,135 104,270 106,760 110,819 4,270 6,760 10,819 4,270 6,760 10,819
14 15,640 104,471 107,360 112,283 4,471 7,360 12,283 4,471 7,360 12,283
15 17,220 104,640 107,959 113,872 4,640 7,959 13,872 4,640 7,959 13,872
16 18,879 104,777 108,555 115,601 4,777 8,555 15,601 4,777 8,555 15,601
17 20,621 104,871 109,138 117,472 4,871 9,138 17,472 4,871 9,138 17,472
18 22,450 104,916 109,700 119,494 4,916 9,700 19,494 4,916 9,700 19,494
19 24,370 104,907 110,233 121,677 4,907 10,233 21,677 4,907 10,233 21,677
20 26,387 104,836 110,729 124,031 4,836 10,729 24,031 4,836 10,729 24,031
25 38,086 103,340 112,321 138,812 3,340 12,321 38,812 3,340 12,321 38,812
30 53,018 ** 111,132 159,923 ** 11,132 59,923 ** 11,132 59,923
35 72,076 ** 103,989 188,856 ** 3,989 88,856 ** 3,989 88,856
40 96,398 ** ** 227,346 ** ** 127,346 ** ** 127,346
45 127,441 ** ** 274,525 ** ** 174,525 ** ** 174,525
</TABLE>

- ---------
*If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.

70
<PAGE>

DEATH BENEFIT OPTION 2: VARIABLE DEATH BENEFIT ILLUSTRATION ASSUMES MAXIMUM
CHARGES

MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE:
$100,000 $760 BASE POLICY TARGET PREMIUM*

<TABLE>
<CAPTION>
Death Benefit Account Value Surrender Value
------------------------------ ----------------------------- -----------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest ------------------------------ ----------------------------- -----------------------------
Year Per Year 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------- -------------- -------- --------- --------- -------- -------- --------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 798 100,190 100,216 100,241 190 216 241 0 0 0
2 1,636 100,607 100,677 100,751 607 677 751 0 0 8
3 2,516 101,006 101,147 101,301 1,006 1,147 1,301 0 54 208
4 3,439 101,386 101,624 101,893 1,386 1,624 1,893 293 532 800
5 4,409 101,745 102,107 102,530 1,745 2,107 2,530 652 1,014 1,437
6 5,428 102,084 102,595 103,216 2,084 2,595 3,216 991 1,502 2,123
7 6,497 102,399 103,085 103,953 2,399 3,085 3,953 1,306 1,993 2,860
8 7,620 102,691 103,578 104,744 2,691 3,578 4,744 1,797 2,684 3,850
9 8,799 102,957 104,069 105,593 2,957 4,069 5,593 2,262 3,374 4,898
10 10,037 103,198 104,560 106,506 3,198 4,560 6,506 2,902 4,264 6,210
11 11,337 103,411 105,046 107,485 3,411 5,046 7,485 3,213 4,848 7,287
12 12,702 103,592 105,524 108,533 3,592 5,524 8,533 3,493 5,425 8,434
13 14,135 103,742 105,992 109,656 3,742 5,992 9,656 3,742 5,992 9,656
14 15,640 103,858 106,449 110,861 3,858 6,449 10,861 3,858 6,449 10,861
15 17,220 103,938 106,889 112,149 3,938 6,889 12,149 3,938 6,889 12,149
16 18,879 103,980 107,310 113,529 3,980 7,310 13,529 3,980 7,310 13,529
17 20,621 103,977 107,703 115,001 3,977 7,703 15,001 3,977 7,703 15,001
18 22,450 103,924 108,060 116,568 3,924 8,060 16,568 3,924 8,060 16,568
19 24,370 103,816 108,374 118,233 3,816 8,374 18,233 3,816 8,374 18,233
20 26,387 103,643 108,633 119,995 3,643 8,633 19,995 3,643 8,633 19,995
25 38,086 101,617 108,761 130,368 1,617 8,761 30,368 1,617 8,761 30,368
30 53,018 ** 105,552 143,283 ** 5,552 43,283 ** 5,552 43,283
35 72,076 ** ** 157,451 ** ** 57,451 ** ** 57,451
40 96,398 ** ** 169,159 ** ** 69,159 ** ** 69,159
45 127,441 ** ** 168,948 ** ** 68,948 ** ** 68,948
</TABLE>

- ---------
*If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.

71
<PAGE>

DEATH BENEFIT OPTION 3: LEVEL DEATH BENEFIT WITH GREATER FUNDING ILLUSTRATION
ASSUMES CURRENT CHARGES

MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE:
$100,000 $760 BASE POLICY TARGET PREMIUM*

<TABLE>
<CAPTION>
Death Benefit Account Value Surrender Value
------------------------------ ----------------------------- -----------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest ------------------------------ ----------------------------- -----------------------------
Year Per Year 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------- -------------- -------- --------- --------- -------- -------- --------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 798 100,000 100,000 100,000 217 244 270 0 0 0
2 1,636 100,000 100,000 100,000 662 736 814 0 0 71
3 2,516 100,000 100,000 100,000 1,091 1,241 1,404 0 148 311
4 3,439 100,000 100,000 100,000 1,502 1,757 2,044 410 664 951
5 4,409 100,000 100,000 100,000 1,895 2,283 2,738 802 1,190 1,645
6 5,428 100,000 100,000 100,000 2,269 2,820 3,491 1,176 1,727 2,398
7 6,497 100,000 100,000 100,000 2,622 3,365 4,306 1,529 2,272 3,214
8 7,620 100,000 100,000 100,000 2,953 3,917 5,191 2,059 3,023 4,297
9 8,799 100,000 100,000 100,000 3,260 4,477 6,150 2,565 3,781 5,455
10 10,037 100,000 100,000 100,000 3,551 5,052 7,205 3,255 4,756 6,909
11 11,337 100,000 100,000 100,000 3,846 5,665 8,387 3,649 5,467 8,189
12 12,702 100,000 100,000 100,000 4,119 6,289 9,679 4,020 6,190 9,580
13 14,135 100,000 100,000 100,000 4,365 6,921 11,092 4,365 6,921 11,092
14 15,640 100,000 100,000 100,000 4,584 7,560 12,636 4,584 7,560 12,636
15 17,220 100,000 100,000 100,000 4,774 8,205 14,327 4,774 8,205 14,327
16 18,879 100,000 100,000 100,000 4,934 8,856 16,181 4,934 8,856 16,181
17 20,621 100,000 100,000 100,000 5,053 9,503 18,209 5,053 9,503 18,209
18 22,450 100,000 100,000 100,000 5,126 10,140 20,425 5,126 10,140 20,425
19 24,370 100,000 100,000 100,000 5,147 10,762 22,849 5,147 10,762 22,849
20 26,387 100,000 100,000 100,000 5,110 11,362 25,504 5,110 11,362 25,504
25 38,086 100,000 100,000 100,000 3,818 13,789 43,255 3,818 13,789 43,255
30 53,018 ** 100,000 122,741 ** 14,215 72,116 ** 14,215 72,116
35 72,076 ** 100,000 175,818 ** 9,692 116,159 ** 9,692 116,159
40 96,398 ** ** 249,124 ** ** 182,002 ** ** 182,002
45 127,441 ** ** 350,860 ** ** 277,887 ** ** 277,887
</TABLE>

- ---------
*If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.

72
<PAGE>

DEATH BENEFIT OPTION 3: LEVEL DEATH BENEFIT WITH GREATER FUNDING ILLUSTRATION
ASSUMES MAXIMUM CHARGES

MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE:
$100,000 $760 BASE POLICY TARGET PREMIUM*

<TABLE>
<CAPTION>
Death Benefit Account Value Surrender Value
------------------------------ ----------------------------- -----------------------------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest ------------------------------ ----------------------------- -----------------------------
Year Per Year 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------- -------------- -------- --------- --------- -------- -------- --------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 798 100,000 100,000 100,000 191 216 242 0 0 0
2 1,636 100,000 100,000 100,000 609 679 753 0 0 10
3 2,516 100,000 100,000 100,000 1,010 1,152 1,306 0 59 213
4 3,439 100,000 100,000 100,000 1,393 1,633 1,903 300 540 810
5 4,409 100,000 100,000 100,000 1,756 2,121 2,547 663 1,028 1,454
6 5,428 100,000 100,000 100,000 2,100 2,616 3,243 1,007 1,523 2,150
7 6,497 100,000 100,000 100,000 2,421 3,115 3,992 1,328 2,022 2,899
8 7,620 100,000 100,000 100,000 2,721 3,619 4,801 1,827 2,725 3,907
9 8,799 100,000 100,000 100,000 2,995 4,124 5,672 2,300 3,429 4,977
10 10,037 100,000 100,000 100,000 3,246 4,632 6,614 2,950 4,335 6,317
11 11,337 100,000 100,000 100,000 3,470 5,138 7,629 3,272 4,941 7,432
12 12,702 100,000 100,000 100,000 3,664 5,641 8,724 3,565 5,542 8,625
13 14,135 100,000 100,000 100,000 3,828 6,139 9,906 3,828 6,139 9,906
14 15,640 100,000 100,000 100,000 3,961 6,631 11,183 3,961 6,631 11,183
15 17,220 100,000 100,000 100,000 4,059 7,112 12,563 4,059 7,112 12,563
16 18,879 100,000 100,000 100,000 4,120 7,581 14,055 4,120 7,581 14,055
17 20,621 100,000 100,000 100,000 4,139 8,030 15,665 4,139 8,030 15,665
18 22,450 100,000 100,000 100,000 4,108 8,452 17,403 4,108 8,452 17,403
19 24,370 100,000 100,000 100,000 4,025 8,842 19,278 4,025 8,842 19,278
20 26,387 100,000 100,000 100,000 3,879 9,188 21,299 3,879 9,188 21,299
25 38,086 100,000 100,000 100,000 1,987 9,975 34,148 1,987 9,975 34,148
30 53,018 ** 100,000 100,000 ** 7,866 53,706 ** 7,866 53,706
35 72,076 ** ** 126,866 ** ** 83,817 ** ** 83,817
40 96,398 ** ** 173,323 ** ** 126,624 ** ** 126,624
45 127,441 ** ** 234,249 ** ** 185,529 ** ** 185,529
</TABLE>

- ---------
*If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.

73
<PAGE>

[LOGO OF JOHN HANCOCK APPEARS HERE]

POLICIES ISSUED BY JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY JOHN HANCOCK
PLACE, BOSTON, MASSACHUSETTS 02117

S8148-M 5/98

74
<PAGE>

[LOGO OF JOHN HANCOCK APPEARS HERE]

John Hancock Variable Life
Insurance Company
(JHVLICO)

FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
JOHN HANCOCK VARIABLE LIFE ACCOUNT U

John Hancock Place
Boston, Massachusetts 02117

JOHN HANCOCK SERVICING OFFICE:
P.O. Box 111
Boston, Massachusetts 02117

TELEPHONE 1-800-REAL LIFE (1-800-732-5543)
FAX 617-572-5410

PROSPECTUS MAY 1, 1998

The flexible premium variable life policy ("Policy") described in this
Prospectus can be funded, at the discretion of the Owner, by up to ten of the
variable subaccounts of John Hancock Variable Life Account U (the "Account"), by
a fixed subaccount (the "Fixed Account"), or by any combination of the Fixed
Account and up to nine of the variable subaccounts (collectively, the
"Subaccounts"). The assets of each variable Subaccount will be invested in a
corresponding investment portfolio ("Portfolio") of John Hancock Variable Series
Trust I, (the "Fund") a "series" type mutual fund advised by John Hancock Mutual
Life Insurance Company ("John Hancock"). The assets of the Fixed Account will be
invested in the general account of John Hancock Variable Life Insurance Company
("JHVLICO").
The prospectus for the Fund, which is attached to this Prospectus, describes
the investment objectives, policies and risks of investing in the Portfolios of
Variable Series Trust I: Managed, Growth & Income, Equity Index, Large Cap
Value, Large Cap Growth, Mid Cap Value, Mid Cap Growth, Diversified Mid Cap
Growth (formerly, Special Opportunities), Real Estate Equity, Small/Mid Cap
CORE, Small Cap Value, Small Cap Growth, Global Equity, International Balanced,
International Equity Index (formerly, International Equities), International
Opportunities, Emerging Markets Equity, Short-Term Bond (formerly, Short-Term
U.S. Government), Bond Index, Sovereign Bond, Strategic Bond, High Yield Bond,
and Money Market. (The Small/Mid Cap CORE, Global Equity, Emerging Markets
Equity, Bond Index, and High Yield Bond Portfolios are not currently available
to Owners but are expected to be made available later in 1998.) Other variable
Subaccounts and Portfolios may be added in the future.

Replacing existing insurance with a Policy described in this Prospectus may
not be to your advantage.

THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. IT IS NOT
VALID UNLESS ATTACHED TO A CURRENT PROSPECTUS FOR THE FUND.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
JHVLICO and JOHN HANCOCK . . . . . . . . . . . . . . . . . . . . . . . 7
THE ACCOUNT AND THE SERIES FUND . . . . . . . . . . . . . . . . . . . 7
THE FIXED ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . 10
POLICY PROVISIONS AND BENEFITS . . . . . . . . . . . . . . . . . . . . 11
Requirements for Issuance of Policy . . . . . . . . . . . . . . . . 11
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Account Value and Surrender Value . . . . . . . . . . . . . . . . . 13
Death Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Transfers Among Subaccounts . . . . . . . . . . . . . . . . . . . . 15
Loan Provisions and Indebtedness . . . . . . . . . . . . . . . . . . 17
Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Exchange Privilege . . . . . . . . . . . . . . . . . . . . . . . . . 18
CHARGES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . 19
Charges Deducted from Premiums . . . . . . . . . . . . . . . . . . . 19
Sales Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Administrative Surrender Charge . . . . . . . . . . . . . . . . . . 21
Reduced Charges for Eligible Groups . . . . . . . . . . . . . . . . 21
Charges Deducted from Account Value or Assets . . . . . . . . . . . 21
Guarantee of Premiums and Certain Charges . . . . . . . . . . . . . 23
DISTRIBUTION OF POLICIES . . . . . . . . . . . . . . . . . . . . . . . 23
TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Policy Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Charge for JHVLICO's Taxes . . . . . . . . . . . . . . . . . . . . . 25
Corporate and H.R. 10 Plans . . . . . . . . . . . . . . . . . . . . 25
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF JHVLICO . . . . . . . . . 26
REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
VOTING PRIVILEGES . . . . . . . . . . . . . . . . . . . . . . . . . . 27
CHANGES THAT JHVLICO CAN MAKE . . . . . . . . . . . . . . . . . . . . 27
STATE REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . 28
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 28
APPENDIX--OTHER POLICY PROVISIONS . . . . . . . . . . . . . . . . . . 59
APPENDIX--IMPACT OF YEAR 2000. . . . . . . . . . . . . . . . . . . . .
APPENDIX--ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER
VALUES AND ACCUMULATED PREMIUMS . . . . . . . . . . . . . . . . . . . 62
</TABLE>

SUMMARY

WHAT IS THE VARIABLE LIFE POLICY BEING OFFERED?

The Policies work generally as follows: A premium payment is periodically made
to JHVLICO. JHVLICO takes from each premium an amount for taxes and, from
certain premiums, sales expenses. JHVLICO then places the rest of the premium
into as many as ten Subaccounts as directed by the owner of the Policy (the
"Owner"). The assets allocated to each variable Subaccount are invested in
shares of the corresponding Portfolio of the Fund. The currently available
Portfolios are identified on the cover of this Prospectus. The assets allocated
to the Fixed Account are invested in the general account of JHVLICO. During the
year, JHVLICO takes charges from each Subaccount and credits or charges each
Subaccount with its respective investment performance. The insurance charge,
which is deducted from the invested assets attributable to each Policy ("Account
Value"), varies monthly with the then attained age of the insured and with the
amount of insurance provided at the start of each month.

1
<PAGE>

WHAT IS THE AMOUNT OF THE PREMIUMS?

Premiums are flexible and the Owner may choose the amount and frequency of
premium payments.

The minimum amount of premium required at the time of Policy issue is three
months of Guaranteed Death Benefit Premium. One year's Guaranteed Death Benefit
Premium equals the "Target Premium" of a Policy. Unless the Guaranteed Death
Benefit is in effect, if the Account Value at the beginning of any Policy month
is insufficient to pay the monthly Policy charges then due, JHVLICO will
estimate the amount of additional premiums necessary to keep the Policy in force
for three months. The Owner will have a 61 day grace period to pay at least that
amount or the Policy will lapse.

WHAT IS JOHN HANCOCK VARIABLE LIFE ACCOUNT U?

The Account is a separate investment account of JHVLICO, operated as a unit
investment trust, which supports benefits payable under the Policies. The
Account is subdivided into a number of variable Subaccounts each of which
corresponds to one of the Portfolios of the Fund. The assets of each variable
Subaccount within the Account is invested in a corresponding Portfolio of the
Fund. The current Portfolios of the Funds are: Managed, Growth & Income, Equity
Index, Large Cap Value, Large Cap Growth, Mid Cap Value, Mid Cap Growth,
Diversified Mid Cap Growth, Real Estate Equity, Small/Mid Cap CORE, Small Cap
Value, Small Cap Growth, Global Equity, International Balanced, International
Equity Index, International Opportunities, Emerging Markets Equity, Short-Term
Bond, Bond Index, Sovereign Bond, Strategic Bond, High Yield Bond, and Money
Market.

2
<PAGE>

/1/

*John Hancock reimburses a Portfolio when the Portfolio's other fund expenses
exceed 0.25% of the Portfolio's average daily net assets.

For a full description of the Fund, see the Prospectus for the Fund attached
to this Prospectus.

WHAT ARE THE CHARGES MADE BY JHVLICO?

3
<PAGE>

Issue Charge. A charge deducted monthly from Account Value at the rate of $20
per month for the first 12 Policy months.

Maintenance Charge. A charge deducted monthly from Account Value in an amount
equal to no more than $8 (currently $6) for all Policy years.

Charge for Mortality and Expense Risks. A charge deducted daily from the
variable Subaccounts at a maximum effective annual rate of .90% (currently .60%)
of the assets of each variable Subaccount.

Charge for Partial Withdrawal. A charge of $20 deducted from Account Value at
the time of withdrawal.

See "Charges and Expenses", for a fuller description of the charges under the
Policy.

IS THERE A CHARGE AGAINST THE ACCOUNT FOR FEDERAL INCOME TAX?

Currently no charge is made against any Subaccount for Federal income taxes,
but if JHVLICO incurs, or expects to incur, income taxes attributable to any
Subaccount or this class of Policies in future years, it reserves the right to
make a charge. JHVLICO expects that it will continue to be taxed as a life
insurance company. See "Charge for JHVLICO's Taxes".

WHAT IS THE RELATIONSHIP BETWEEN THE PREMIUM AND THE AMOUNT ALLOCATED TO THE
SUBACCOUNTS?

4
<PAGE>

HOW ARE AMOUNTS ALLOCATED TO EACH SUBACCOUNT?

WHAT COMMISSIONS ARE PAID TO AGENTS?

WHAT IS THE DEATH BENEFIT?

Three death benefit options are available at the time of application for a
Policy.

Option 1: Level Death Benefit. A level death benefit equal to the Sum Insured
or, if greater, the Account Value multiplied by the applicable Corridor Factor.

Option 2: Variable Death Benefit. A variable death benefit equal to the Sum
Insured plus any Account Value, or, if greater, the Account Value multiplied by
the applicable Corridor Factor.

HOW DOES THE ACCOUNT VALUE OF A POLICY VARY IN RELATION TO THE SUBACCOUNTS'
INVESTMENT EXPERIENCE?

5
<PAGE>

WHAT IS THE LOAN PROVISION AND HOW DOES A LOAN AFFECT THE DEATH BENEFIT, ACCOUNT
VALUE AND SURRENDER VALUE?

IS THERE A SHORT-TERM CANCELLATION RIGHT?

WHAT INVESTMENT TRANSFERS ARE ALLOWED AN OWNER?

The Owner may transfer the Account Value among the variable Subaccounts or
into the Fixed Account at any time. Transfers out of the Fixed Account, however,
are subject to restrictions.

ARE THE BENEFITS UNDER A POLICY SUBJECT TO FEDERAL INCOME TAX?

6
<PAGE>

JHVLICO AND JOHN HANCOCK

THE ACCOUNT AND THE SERIES FUND

THE ACCOUNT

The assets in each variable Subaccount are invested in the corresponding
Portfolio of the Fund, but the assets of one variable Subaccount are not
necessarily legally insulated from liabilities associated with another variable
Subaccount. New variable Subaccounts may be added or existing variable
Subaccounts may be deleted as new Portfolios are added to or deleted from the
Fund and made available to Owners.

THE SERIES FUND

The Fund is a "series" type of mutual fund registered with the Commission
under the 1940 Act as an open-end diversified management investment company. The
Fund serves as the investment medium for the Account and other unit investment
trust separate accounts established for other variable life insurance policies
and variable annuity contracts. (See the attached Fund Prospectus for a
description of a need to monitor for possible conflicts and other consequences.)
A very brief summary of the investment objectives of each Portfolio is set forth
below.

7
<PAGE>

Managed Portfolio

Growth & Income Portfolio

Equity Index Portfolio

Large Cap Value Portfolio

Large Cap Growth Portfolio

Mid Cap Value Portfolio

Mid Cap Growth Portfolio

The investment objective of this Portfolio is to provide long-term growth of
capital through a non-diversified portfolio investing primarily in common stocks
of medium capitalization companies.

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.

Real Estate Equity Portfolio

8
<PAGE>

Small/Mid Cap CORE Portfolio

Small Cap Value Portfolio

Small Cap Growth Portfolio

Global Equity Portfolio

International Balanced Portfolio

International Equity Index Portfolio

International Opportunities Portfolio

The investment objective of this Portfolio is to provide capital appreciation
through investments in common stocks of primarily well-established, non-United
States companies.

Emerging Markets Equity Portfolio

Short-Term Bond Portfolio

9
<PAGE>

Bond Index Portfolio

Sovereign Bond Portfolio

Strategic Bond Portfolio

High Yield Bond Portfolio

Money Market Portfolio

The investment objective of this Portfolio is to provide maximum current
income consistent with capital preservation and liquidity, through investment in
high quality money market instruments.

State Street Bank & Trust, N.A., at Two International Place, Boston, MA 02110,
is sub-investment adviser to the Equity Index Portfolio. INVESCO 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

10
<PAGE>

Partners, Inc., of 209 S. LaSalle Street, Chicago, IL 60604, does likewise with
respect to the International Balanced Portfolio.

A full description of the Fund, its investment objectives, policies and
restrictions, its charges, expenses and all other aspects of its operation is
contained in the attached Prospectus and the statement of additional information
referred to therein, which should be read together with this Prospectus.

THE FIXED ACCOUNT

11
<PAGE>

will not be less than an effective annual rate of 4%. JHVLICO may, in its sole
discretion, credit higher rates although it is not obligated to do so. The Owner
assumes the risk that interest credited will not exceed 4% per year. Upon
request and in the annual statement, JHVLICO will inform Owners of the
then-applicable rates.

POLICY PROVISIONS AND BENEFITS

REQUIREMENTS FOR ISSUANCE OF POLICY

PREMIUMS

Payment Flexibility. Premiums are flexible. The Owner may choose the amount
and frequency of premium payments, so long as each premium payment meets the
requirements described below.

12
<PAGE>

limitations described below. At the time of Policy issuance, JHVLICO will
determine whether the Planned Premium schedule will exceed the 7-Pay limit
discussed below. If so, JHVLICO's standard procedures prohibit issuance of the
Policy unless the Owner signs a form acknowledging that fact.

Guaranteed Death Benefit Premiums. A Guaranteed Death Benefit feature may
apply during the first five Policy years. See "Death Benefits". The Guaranteed
Death Benefit Premiums required to maintain this benefit in force depend on the
issue age, sex, smoking status, and underwriting class of the insured at issue,
the Sum Insured at issue and any additional benefits selected. This premium will
equal 1/12th of the Target Premium for Owners electing a monthly premium payment
mode; 1/4 of the Target Premium for Owners electing the quarterly mode; 1/2 of
the Target Premium for owners electing the semi-annual mode; and the Target
Premium for Owners electing the annual mode. The due date for each premium is
referred to as the Modal processing date. To keep the Guaranteed Death Benefit
in effect, the amount of actual premiums paid minus any withdrawals must at each
Modal processing date be at least equal to the Guaranteed Death Benefit Premiums
due to date. If this test is not satisfied on any Modal processing date, JHVLICO
will notify the Owner of the shortfall immediately and a Guaranteed Death
Benefit grace period will commence as of that anniversary. The Guaranteed Death
Benefit grace period will end on the second monthly processing date after the
determination of the shortfall. This notice will be mailed to the Owner's
last-known address at least 31 days prior to the end of the Guaranteed Death
Benefit grace period. If JHVLICO does not receive payment for the amount of the
deficiency by the end of the Guaranteed Death Benefit grace period, the
Guaranteed Death Benefit feature will permanently lapse with no possibility of
restoration. The Guaranteed Death Benefit is only available if the insured's
underwriting class is standard or preferred and the insured meets certain other
underwriting standards relating to health and occupation.

13
<PAGE>

There are three exceptions to the normal practice of processing a premium
payment as of the end of the Valuation Period in which it is received:

(1)A payment received prior to a Policy's date of issue will be processed
as if received on the Valuation Date immediately preceding the date of
issue.

ACCOUNT VALUE AND SURRENDER VALUE

Amount of Surrender Value. The Surrender Value will be the Account Value less
the sum of any Administrative Surrender Charge, any Contingent Deferred Sales
Charge, and any Indebtedness.

14
<PAGE>

The effect of a withdrawal, including its associated charge, upon the death
benefit depends upon the death benefit option in effect.

Option 1. Level Death Benefit. Any withdrawal will first be deducted from
Account Value until the Account Value, multiplied by the appropriate Corridor
Factor, is no higher than the Sum Insured. Thereafter, both the Sum Insured and
the Account Value will be reduced by the remaining amount of the withdrawal. If
the Account Value multiplied by the appropriate Corridor Factor does not exceed
the Sum Insured at the time of the withdrawal, the withdrawal will reduce both
the Sum Insured and the Account Value.

A surrender or withdrawal may have significant tax consequences. See "Tax
Considerations".

JHVLICO reserves the right to refuse any withdrawal request that would cause
the Policy's Sum Insured to fall below $100,000.

DEATH BENEFITS

15
<PAGE>

issue of the Policy the Owner may change the selection from Option 1 to Option 2
or vice versa, subject to such evidence of insurability as JHVLICO may require.
The three options are:

The "cash value accumulation test" also limits the amount of premiums payable
under a Policy to a prescribed amount, using a minimum ratio of death benefit to
a Account Value, but employs as a standard a "net single premium" computed in
compliance with the Code. If the Account Value under a Policy is at any time
greater than the net single premium at the insured's age and sex for the
proposed death benefit, the death benefit will be

16
<PAGE>

increased automatically by multiplying the Account Value by a "Death Benefit
Factor" computed in compliance with the Code.

TRANSFERS AMONG SUBACCOUNTS

Transfers out of the Fixed Account to the variable Subaccounts are permitted
only once each Policy year and only during the 31-day period beginning on the
Policy anniversary. Transfers out of the Fixed Account may be requested from 60
days before to 30 days after the Policy anniversary. If received on or before
the Policy anniversary, requests for transfer out of the Fixed Account will be
processed on the Policy anniversary (or the next Valuation Date if the Policy
anniversary does not occur on a Valuation Date); if received after the Policy
anniversary, they will be processed at the end of the Valuation Period in which
JHVLICO receives the request at its Servicing Office. (JHVLICO reserves the
right to defer such Fixed Account transfers for six months.) If an Owner
requests a transfer out of the Fixed Account 61 days or more prior to the Policy
anniversary, that portion of the reallocation will not be processed and the
Owner's confirmation statement will not reflect a transfer out of the Fixed
Account as to such request. Transfers among variable Subaccounts and transfers
into the Fixed Account may be requested at any time. A maximum of 20% of Fixed
Account assets or, if greater, $500 may be transferred out of the Fixed Account
in any Policy year. Currently, there is no minimum amount limit on transfers out
of the Fixed Account, but JHVLICO reserves the right to impose such a limit in
the future. No transfers among Subaccounts may be made while the Policy is in a
grace period.

17
<PAGE>

LOAN PROVISIONS AND INDEBTEDNESS

18
<PAGE>

Owner wishes any payment to constitute a loan repayment (rather than a premium
payment), the Owner must so specify.

If a Policy is a modified endowment at the time a loan is made, that loan may
have significant tax consequences. See "Tax Considerations".

DEFAULT

Grace Period, Default and Lapse. Unless the 5 Year Guaranteed Death Benefit is
in force, at the beginning of each Policy month JHVLICO determines whether the
Account Value, net of any Indebtedness, is sufficient to pay all monthly charges
then due under the Policy. If not, the Policy is in default and JHVLICO will
notify the Owner of the amount estimated to be necessary to pay three months'
deductions, and a Policy grace period will be in effect until 61 days after the
date the notice was mailed. If JHVLICO does not receive payment of at least this
amount by the end of the Policy grace period, the Policy will lapse, and any
remaining amount owed to the Owner as of the date of lapse will be paid to the
Owner.

19
<PAGE>

EXCHANGE PRIVILEGE

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

CHARGES AND EXPENSES

CHARGES DEDUCTED FROM PREMIUMS

In addition to part of the sales charges (see "Sales Charges" below), the
following charges are deducted from premiums:

State Premium Tax Charge. A charge currently equal to 2.35% of each premium
payment will be deducted from each premium payment. The 2.35% rate is the
average state premium tax rate currently expected to be paid on premiums
received in all states over the lifetimes of the insureds covered by the
Policies. JHVLICO will not increase this charge under outstanding Policies, but
reserves the right to change this charge for Policies not yet issued in order to
correspond with changes in the state premium tax levels.

SALES CHARGES

20
<PAGE>

Because the Policies were first offered for sale in 1994, no Policies have yet
been outstanding for more than 10 years.

No sales charge is deducted from a premium payment received in excess of one
Target Premium in any Policy year.

The Contingent Deferred Sales Charge is computed as a percentage of Base
Policy Target Premiums paid in accordance with the following schedule:

<TABLE>
<CAPTION>
For Surrenders or Lapses Effective Maximum Contingent
During:--------------------------- Deferred Sales Charge
------- ---------------------
<S> <C>
Policy Year 1 26% of premiums received in
Policy Year 1 up to 1 Base
Policy Target Premium*
Policy Year 2 26% of premiums received in
Policy Years 1 and 2 up to 1
Base Policy Target Premium in
each year
Policy Years 3-7 26% of premiums received in
Policy Years 1, 2 and 3 up to 1
Base Policy Target Premium in
each year
Policy Year 8 83.33% of the Maximum
Contingent Deferred Sales
Charge for Policy Year 7
Policy Year 9 66.67% of the Maximum
Contingent Deferred Sales
Charge for Policy Year 7
Policy Year 10 50% of the Maximum Contingent
Deferred Sales Charge for
Policy Year 7
Policy Year 11 33.33% of the Maximum
Contingent Deferred Sales
Charge for Policy Year 7
Policy Year 12 16.67% of the Maximum
Contingent Deferred Sales
Charge for Policy Year 7
Policy Year 13 and later 0
</TABLE>

- ---------
*The amount of the Contingent Deferred Sales Charge is calculated on the basis
of the Base Policy Target Premium for the age of the insured at the time of
issue of the Policy.

21
<PAGE>

until it reaches zero in Policy year 13. At issue ages higher than age 54, the
maximum is reached at an earlier Policy year, and may be reduced to zero over a
shorter number of years.

ADMINISTRATIVE SURRENDER CHARGE

REDUCED CHARGES FOR ELIGIBLE GROUPS

CHARGES DEDUCTED FROM ACCOUNT VALUE OR ASSETS

The following charges are deducted from Account Value or assets:

22
<PAGE>

the Policy, other than sales expenses. Such expenses include medical
examinations, insurance underwriting costs and costs incurred in processing
applications and establishing permanent Policy records.

Maintenance charge. JHVLICO will deduct from the Account Value a monthly
charge not to exceed $8 for all Policy years. The current monthly charge is $6.

For example, it is expected that the reduction percentage in Policy year 11
would be at an effective annual rate of .21%, in Policy year 20 would be .30%
and in Policy year 30 would be .40%.

JHVLICO reserves the right to modify or discontinue this reduction. Because
the Policies were first offered for sale in 1994, no reductions have yet been
made.

Lower current insurance rates are offered at most ages for insureds who are
eligible for the preferred underwriting class of the Policy.

23
<PAGE>

JHVLICO will realize a gain from this charge to the extent it is not needed to
provide for benefits and expenses under the Policies.

Charges for Taxes. Currently no charge is made against Account Value for
JHVLICO's Federal income taxes, but if JHVLICO incurs, or expects to incur,
income taxes attributable to the Account or this class of Policies in future
years, it reserves the right to make a charge, and any charge would affect what
the Subaccounts earn. Charges for other taxes, if any, attributable to the
Subaccounts may also be made.

Fund Investment Management Fees and Other Fund Expenses. The Account purchases
shares of the Fund at net asset value, a value which reflects the deduction from
the assets of the Fund of its investment management fees and certain
non-advisory Fund operating expenses, which are described briefly in the Summary
of this Prospectus. For a full description of these deductions, see the attached
Prospectus for the Fund.

GUARANTEE OF PREMIUMS AND CERTAIN CHARGES

DISTRIBUTION OF POLICIES

24
<PAGE>

cancellation provision. Officers and employees of John Hancock and JHVLICO are
covered by a blanket bond by a commercial carrier in the amount of $25 million.

The maximum commission payable to a John Hancock representative for selling a
Policy is 50% of the Target Premium paid in the first Policy year, 6% of the
Target Premium paid in the second through fourth Policy years, and 3% of the
Target Premium paid in each year thereafter. The maximum commission on any
premium paid in any year in excess of the Target Premium is 3%.

Distributors is registered with the Commission under the Securities Exchange
Act of 1934 as a broker-dealer, is a member of the National Association of
Securities Dealers, Inc., and is a member of the Securities Investor Protection
Corporation. The Policies are also sold through other registered broker-dealers
that have entered into selling agreements with Distributors and whose
representatives are authorized by applicable law to sell variable life insurance
policies. The commissions which will be paid by such broker-dealers to their
representatives will be in accordance with their established rules. The
commission rates may be more or less than those set forth above for
Distributors' representatives. In addition, their qualified registered
representatives may be reimbursed by the broker-dealers under expense
reimbursement allowance programs in any year for approved voucherable expenses
incurred. Distributors will compensate the broker-dealers as provided in the
selling agreements, and JHVLICO will reimburse Distributors for such amounts
and for certain other direct expenses in connection with marketing the Policies
through other broker-dealers. In addition, these representatives may earn
"credits" toward qualification for attendance at certain business meetings
sponsored by John Hancock.

TAX CONSIDERATIONS

POLICY PROCEEDS

25
<PAGE>

("Code") defines life insurance for Federal tax purposes. See "Death
Benefits--Definition of Life Insurance". If certain standards are met at issue
and over the life of the Policy, the Policy will come within that definition.
JHVLICO will monitor compliance with these standards. Furthermore, JHVLICO
reserves the right to make any changes in the Policy necessary to ensure the
Policy is within the definition of life insurance.

A surrender, lapse or partial withdrawal may have tax consequences. For
example, the Owner will be taxed on a surrender to the extent that the Account
Value exceeds the premiums paid under the Policy, ignoring premiums paid for
riders. But under certain circumstances within the first 15 Policy years, the
Owner may be taxed on a withdrawal of Policy values even if total withdrawals do
not exceed total premiums paid.

Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Owner or beneficiary.

CHARGE FOR JHVLICO'S TAXES

26
<PAGE>

CORPORATE AND H.R. 10 PLANS

BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF JHVLICO

The Directors and Executive Officers of JHVLICO and their principal
occupations during the past five years are as follows:

<TABLE>
<CAPTION>
Directors Principal Occupations
--------- ---------------------
<S> <C>
David F. D'Alessandro Chairman of the Board and Chief
Executive Officer of JHVLICO; President and Chief
Operating Officer, John Hancock Mutual Life Insurance
Company.
Henry D. Shaw Vice Chairman of the Board and President of JHVLICO;
Senior Vice President, John Hancock Mutual Life
Insurance Company.
Thomas J. Lee Director of JHVLICO; Vice President, John Hancock
Mutual Life Insurance Company.
Michele G. Van Leer Director of JHVLICO; Senior Vice President, John
Hancock Mutual Life Insurance Company.
Ronald J. Bocage Director, Vice President and Counsel of JHVLICO;
Vice President and Counsel, John Hancock Mutual Life
Insurance Company.
Joseph A. Tomlinson Director and Vice President of JHVLICO; Vice
President, John Hancock Mutual Life Insurance
Company.
Robert R. Reitano Director of JHVLICO; Vice President, John Hancock
Mutual Life Insurance Company.
Robert S. Paster Director of JHVLICO; Second Vice President, John
Hancock Mutual Life Insurance Company.
Barbara L. Luddy Director and Actuary of JHVLICO; Second Vice
President, John Hancock Mutual Life Insurance
Company.
Daniel L. Ouellette Vice President, Marketing, of JHVLICO; Vice
President, John Hancock Mutual Life Insurance
Company.
Patrick F. Smith Controller of JHVLICO; Assistant Controller, John
Hancock Mutual Life Insurance Company.
</TABLE>

The business address of all Directors and officers of JHVLICO is John Hancock
Place, Boston, Massachusetts 02117.

27
<PAGE>

REPORTS

Owners will be sent semiannually a report containing the financial statements
of the Funds, including a list of securities held in each Portfolio.

VOTING PRIVILEGES

All of the assets in the variable Subaccounts of the Account are invested in
shares of the corresponding Portfolios of the Fund. JHVLICO will vote the shares
of each of the Portfolios of the Fund which are deemed attributable to
qualifying variable life insurance policies and variable annuity contracts at
regular and special meetings of the Fund's shareholders in accordance with
instructions received from owners of such policies or contracts. Shares of the
Fund held in the Account which are not attributable to such policies or
contracts and shares for which instructions from owners are not received will be
represented by JHVLICO at the meeting and will be voted for and against each
matter in the same proportions as the votes based upon the instructions received
from the owners of all such policies and contracts.

Owners of Policies may give instructions regarding the election of the Board
of Trustees of the Fund, ratification of the selection of independent auditors,
approval of Fund investment advisory agreements and other matters requiring a
vote under the 1940 Act. Owners will be furnished information and forms by
JHVLICO in order that voting instructions may be given.

JHVLICO may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that the shares be
voted so as to change the investment objectives of the Portfolios or to approve
or disapprove an investment advisory or underwriting contract for the Fund.
JHVLICO also may disregard voting instructions in favor of changes initiated by
an owner or the Fund's Board of Trustees in an investment policy, investment
adviser or principal underwriter of the Fund, if JHVLICO (i) reasonably
disapproves of such changes and (ii) in the case of a change of investment
policy or investment adviser, makes a good-faith determination that the proposed
change is contrary to state law or prohibited by state regulatory authorities or
that the change would be inconsistent with a variable Subaccount's investment
objectives or would result in the purchase of securities which vary from the
general quality and nature of investments and investment techniques utilized by
other separate accounts of JHVLICO or of an affiliated life insurance company,
which separate accounts have investment objectives similar to those of the
variable Subaccount. In the event JHVLICO does disregard voting instructions, a
summary of that action and the reasons for such action will be included in the
next semi-annual report to owners.

28
<PAGE>

CHANGES THAT JHVLICO CAN MAKE

STATE REGULATION

LEGAL MATTERS

REGISTRATION STATEMENT

EXPERTS

29
<PAGE>

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 Malcolm
Cheung, F.S.A., an Actuary of JHVLICO.

FINANCIAL STATEMENTS

30
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

STATEMENT OF ASSETS AND LIABILITIES

DECEMBER 31, 1997

- ---------
See accompanying notes.

31
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)

DECEMBER 31, 1997

- ---------
See accompanying notes.

32
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

STATEMENTS OF OPERATIONS

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

33
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

34
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

- ---------
See accompanying notes.

35
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

36
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

STATEMENTS OF CHANGES IN NET ASSETS

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

37
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
Mid Cap Growth Large Cap Value
Subaccount Subaccount Money Market Subaccount
--------------------- ------------------------ ------------------------------------------
1997 1996* 1997 1996* 1997 1996 1995
----------- --------- ------------ ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income
(loss). . . . . . . . . . $ (5,801) $ 821 $ 241,145 $ 64,342 $ 3,342,641 $ 3,114,274 $ 3,303,152
Net realized gains . . . . 394 1,295 217,073 11,265 -- -- --
Net unrealized appreciation
(depreciation) during the
period. . . . . . . . . . 199,441 (3,899) 532,936 197,424 -- -- --
---------- -------- ----------- ---------- ------------ ------------ ------------
Net increase (decrease) in
net assets resulting from
operations . . . . . . . . 194,034 (1,783) 991,154 273,031 3,342,641 3,114,274 3,303,152
From policyholder
transactions:
Net premiums from
policyholders . . . . . . 1,031,218 599,576 3,739,319 2,999,086 19,023,054 15,561,906 11,104,365
Net benefits to
policyholders . . . . . . (294,344) (30,542) (1,140,574) (348,016) (20,817,572) (16,132,881) (12,775,695)
Net increase (decrease) in
policy loans . . . . . . -- -- -- -- 390,775 (260,051) (323,666)
---------- -------- ----------- ---------- ------------ ------------ ------------
Net increase (decrease) in
net assets resulting from
policyholder
transactions . . . . . . . 736,874 569,034 2,598,745 2,651,070 (1,403,743) (831,026) (1,994,996)
---------- -------- ----------- ---------- ------------ ------------ ------------
Net increase in net assets 930,908 567,251 3,589,899 2,924,101 1,938,898 2,283,248 1,308,156
Net assets at beginning of
period . . . . . . . . . . 567,251 -- 2,924,101 -- 63,668,933 61,385,685 60,077,529
---------- -------- ----------- ---------- ------------ ------------ ------------
Net assets at end of
period . . . . . . . . . . $1,498,159 $567,251 $ 6,514,000 $2,924,101 $ 65,607,831 $ 63,668,933 $ 61,385,685
========== ======== =========== ========== ============ ============ ============
<CAPTION>
Mid Cap Value
Subaccount Special Opportunities Subaccount
--------------------- --------------------------------------
1997 1996* 1997 1996 1995
----------- --------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income $ 172,261 $ 6,838 $ 968,412 $ 241,999 $ 36,311
(loss). . . . . . . . . .
Net realized gains . . . . 121,152 1,099 533,297 125,955 11,582
Net unrealized appreciation
(depreciation) during the (86,033)
period. . . . . . . . . . ---------- 23,234 (1,073,252) 615,079 124,460
-------- ----------- ----------- ----------
Net increase (decrease) in 207,380 31,171 428,457 983,033 172,353
net assets resulting from
operations . . . . . . . .
From policyholder
transactions:
Net premiums from 2,070,644 337,092 6,338,416 5,492,467 1,682,424
policyholders . . . . . .
Net benefits to (190,430) (9,035) (3,379,629) (1,284,991) (182,908)
policyholders . . . . . .
Net increase (decrease) in
policy loans . . . . . . -- -- -- -- --
---------- -------- ----------- ----------- ----------
Net increase (decrease) in
net assets resulting from 1,880,214 328,057 2,958,787 4,207,476 1,499,516
policyholder ---------- -------- ----------- ----------- ----------
transactions . . . . . . .
Net increase in net assets 2,087,594 359,228 3,387,244 5,190,509 1,671,869
Net assets at beginning of
period . . . . . . . . . . 359,228 -- 6,900,122 1,709,613 37,744
---------- -------- ----------- ----------- ----------
Net assets at end of
period . . . . . . . . . . $2,446,822 $359,228 $10,287,366 $ 6,900,122 $1,709,613
========== ======== =========== =========== ==========
</TABLE>

- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

38
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

- ---------

See accompanying notes.

39
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

FOR THE YEARS AND PERIODS ENDED DECEMBER 31,

- ---------
* From May 1, 1996 (commencement of operations).

See accompanying notes.

40
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1997

1. ORGANIZATION

2. SIGNIFICANT ACCOUNTING POLICIES

ESTIMATES

VALUATION OF INVESTMENTS

FEDERAL INCOME TAXES

41
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

NOTES TO FINANCIAL STATEMENTS--CONTINUED

EXPENSES

POLICY LOANS

3. TRANSACTIONS WITH AFFILIATES

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

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

42
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

NOTES TO FINANCIAL STATEMENTS--CONTINUED
4. DETAILS OF INVESTMENTS

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

43
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

NOTES TO FINANCIAL STATEMENTS--CONTINUED
4. DETAILS OF INVESTMENTS--CONTINUED

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

5. IMPACT OF YEAR 2000 (UNAUDITED)

44
<PAGE>

JOHN HANCOCK VARIABLE LIFE ACCOUNT U

NOTES TO FINANCIAL STATEMENTS--CONTINUED
5. IMPACT OF YEAR 2000 (UNAUDITED)--CONTINUED

45
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Policyholders
John Hancock Variable Life Account U of John Hancock Variable Life Insurance
Company

Boston, Massachusetts
February 6, 1998 Ernst & Young LLP

46
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

To the Directors and Policyholders
John Hancock Variable Life Insurance Company

Boston, Massachusetts
February 18, 1998 Ernst & Young LLP

47
<PAGE>

STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

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

48
<PAGE>

STATUTORY-BASIS STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

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

49
<PAGE>

STATUTORY-BASIS STATEMENTS OF CASH FLOWS

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

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

50
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

The significant accounting practices of the Company are as follows:

51
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

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

Investments in affiliates are included on the statutory equity method.

Goodwill is amortized on a straight-line basis over a ten year period.

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

Real estate acquired in satisfaction of debt and held for sale is carried at
the lower of cost or market as of the date of foreclosure.

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

Accumulated amortization was $8.8 million and $6.7 million at December 31, 1997
and 1996, respectively.

52
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

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.

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

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

53
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

54
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTE 2--ACQUISITION

NOTE 3--NET INVESTMENT INCOME

Investment income has been reduced by the following amounts:

NOTE 4--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS

Net realized capital losses consist of the following items:

55
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTE 4--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS--CONTINUED Net
unrealized capital gains and other adjustments consist of the following items:

NOTE 5--TRANSACTIONS WITH PARENT

56
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 5--TRANSACTIONS WITH PARENT--CONTINUED

NOTE 6--INVESTMENTS

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

57
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTE 6--INVESTMENTS--CONTINUED
Gross gains of $1.1 million in 1997 and $1.3 million in 1996 and gross losses of
$4.5 million in 1997 and $2.1 million in 1996 were realized from the sale of
bonds.

At December 31, 1997, bonds with an admitted asset value of $3.6 million were on
deposit with state insurance departments to satisfy regulatory requirements.

Bonds with amortized cost of $2.0 million were nonincome producing for the
twelve months ended December 31, 1997.

58
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTE 6--INVESTMENTS--CONTINUED
The maximum and minimum lending rates for mortgage loans during 1997 were 10.49%
and 8.14% for agricultural loans and 8.53% and 7.42% for other properties.
Generally, the maximum percentage of any loan to the value of security at the
time of the loan, exclusive of insured, guaranteed or purchase money mortgages,
is 75%. For city mortgages, fire insurance is carried on all commercial and
residential properties at least equal to the excess of the loan over the maximum
loan which would be permitted by law on the land without the building, except as
permitted by regulations of the Federal Housing Commission on loans fully
insured under the provisions of the National Housing Act. For agricultural
mortgage loans, fire insurance is not normally required on land based loans
except in those instances where a building is critical to the farming operation.
Fire insurance is required on all agri-business facilities in an aggregate
amount equal to the loan balance.

NOTE 7--REINSURANCE

NOTE 8--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

59
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 8--FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK--CONTINUED

The Company enters into interest rate cap 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 public bonds intended
for future sale in order to lock in the market value at the date of contract.
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
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 in the
future cash requirements, as the Company intends to close the open positions
prior to settlement. Net deferred losses on financial contracts were $2.8
million and $0.0 million at December 31, 1997 and 1996, respectively.

60
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTE 8--FINANCIAL INSTRUMENTS WITH OFF-BALNCE SHEET RISK--CONTINUED

million, and $(2.0) million, respectively. The fair values of the swap
agreements are not recognized in the financial statements.

NOTE 9--POLICY RESERVES, POLICYHOLDERS' AND BENEFICIARIES' FUNDS AND OBLIGATIONS
RELATED TO SEPARATE ACCOUNTS

The Company's annuity reserves and deposit fund liabilities that are subject to
discretionary withdrawal, with and without adjustment, are summarized as
follows:

NOTE 10--COMMITMENTS AND CONTINGENCIES

61
<PAGE>

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTE 11--FAIR VALUE OF FINANCIAL INSTRUMENTS

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

NOTE 12--IMPACT OF YEAR 2000 (UNAUDITED)

62
<PAGE>

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--CONTINUED

NOTE 12--IMPACT OF YEAR 2000 (UNAUDITED)--CONTINUED