<PAGE>
As filed with the Securities and Exchange Commission on November 1, 2000
Registration No. 33-76660
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-6
Post-Effective Amendment No. 9 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 LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE, BOSTON, 02117
(Name and complete address of agent for service)
--------------------
Copy to:
THOMAS C. LAUERMAN, 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 November 1, 2000 pursuant to paragraph (b) of Rule 485
--
/ /60 days after filing pursuant to paragraph (a)(1) of Rule 485
--
/ /on (date) pursuant to paragraph (a)(1) of Rule 485
--
If appropriate check the following box
/ /this post-effective amendment designates a new effective date for a
-
previously filed 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 1999 pursuant to Rule 24f-2 on March 30, 2000.
<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>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that Section.
REPRESENTATION OF REASONABLENESS
John Hancock Variable Life Insurance Company represents that the fees and
charges deducted under the Policies, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by the insurance company.
UNDERTAKING REGARDING INDEMNIFICATION
Pursuant to Section X of JHVLICO's Bylaws and Section 67 of the
Massachusetts Business Corporation Law, JHVLICO indemnifies each director,
former director, officer, and former officer, and his heirs and legal
representatives from liability incurred or imposed in connection with any legal
action in which he may be involved by reason of any alleged act or omission as
an officer or a director of JHVLICO.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
Cross-Reference Table.
The prospectuses containing the information specified in the instructions
in Form S-6 under the Securities Act of 1933.
The undertaking regarding indemnification.
The undertaking to file reports.
The signatures.
<PAGE>
The following exhibits:
1.A. (1) JHVLICO Board Resolution establishing the separate account included in
Post-Effective Amendment No. 2 to this Form S-6 Registration
Statement, filed March 5, 1996.
(2) Not Applicable.
(3) (a) Form of Distribution Agreement by and among John Hancock
Distributors, Inc., John Hancock Mutual Life Insurance Company,
and John Hancock Variable Life Insurance Company, incorporated by
reference from Pre-Effective Amendment No. 2 to Form S-6
Registration Statement of John Hancock Variable Life Account S
(File No. 333-15075) filed April 18, 1997.
(b) Specimen Variable Contracts Selling Agreement between John Hancock
Distributors, Inc., and selling broker-dealers, incorporated by
reference from Pre-Effective Amendment No. 2 to Form S-6
Registration Statement of John Hancock Variable Life Account S
(File No. 333-15075) filed April 18, 1997.
(c) Schedule of Sales Commissions included in I. A. (3)(a) above.
(4) Not Applicable.
(5) Form of flexible premium variable insurance policy included in the
initial registration statement on Form S-6 of this account for
flexible premium policies, filed March 18, 1994 (File No. 33-76660).
(6) Certificate of Incorporation and By-Laws of John Hancock Variable Life
Insurance Company included in Post-Effective Amendment No. 2 to this
Form S-6 Registration Statement, filed March 5, 1996.
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) Form of application for Policy included in Post-Effective Amendment
No. 2 to this Form S-6 Registration Statement, filed March 5, 1996.
(11) Not Applicable. The Registrant invests only in shares of open-end
Funds.
<PAGE>
2. Included as exhibit 1.A (5) above.
3. Opinion and consent of counsel as to securities being registered, included in
Pre-Effective Amendment No. 1 to this Form S-6 Registration Statement filed
August 30, 1994.
4. Not Applicable.
5. Not Applicable.
6. Opinion and consent of actuary (Filed herewith).
7. Consent of independent auditors (Filed herewith).
8. Memorandum describing John Hancock's issuance, transfer and redemption
procedures for flexible premium policies pursuant to Rule
6e-3(T)(b)(12)(iii), included in Post-Effective Amendment No. 2 to this
Form S-6 Registration Statement, filed March 5, 1996.
9. Powers of Attorney for Bruce M. Jones and Paul Strong, incorporated by
reference from Post-Effective Amendment No. 2 to File No. 333-81127, filed
on May 4, 2000. Power of Attorney for Ronald J. Bocage, incorporated by
reference from Form 10-K annual report of John Hancock Variable Life
Insurance Company (File No. 33-62895) filed March 28,1997. Powers of attorney
for Tomlinson, D'Alessandro, Shaw, Luddy, Lee, Reitano, Van Leer and Paster
included in Post-Effective Amendment No. 2 to this Form S-6 Registration
Statement, filed March 5, 1996.
10. Representations, Description and Undertaking pursuant to Rule
6e-3(T)(b)(13)(iii)(F) under the Investment Company Act of 1940 included in
Post-Effective Amendment No. 2 to this Form S-6 Registration Statement,
filed March 5, 1996.
11. Opinion of counsel as to eligibility of this Post-Effective Amendment for
Filing pursuant to Rule 485(b).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the John
Hancock Variable Life Insurance Company has duly caused this amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunder
duly authorized, and its seal to be hereunto fixed and attested, all in the City
of Boston and Commonwealth of Massachusetts on the 1st day of November, 2000.
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
(SEAL)
By /s/ MICHELE G. VAN LEER
-----------------------
Michele G. Van Leer
Vice Chairman and President
Attest: /s/ PETER SCAVONGELLI
---------------------
Peter Scavongelli
Assistant Secretary
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities with John Hancock Variable Life Insurance
Company and on the dates indicated.
Signatures Title Date
---------- ----- ----
/s/ PATRICK J. GILL
-------------------
Patrick J. Gill Controller (Principal Accounting November 1, 2000
Officer and Acting Principal
Financial Officer)
/s/ MICHELE G. VAN LEER
-----------------------
Michele G. Van Leer Vice Chairman of the Board November 1, 2000
for herself and as and President(Acting Principal
Attorney-in-Fact Executive Officer)
For: David F. D'Alessandro Chairman of the Board
Robert S. Paster Director
Thomas J. Lee Director
Bruce M. Jones Director
Paul Strong Director
Barbara L. Luddy Director
Ronald J. Bocage Director
Robert R. Reitano Director
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, certifies that it meets all of the requirements for effectiveness of
this Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, and its seal to be hereunto fixed and attested, all in the City of
Boston and Commonwealth of Massachusetts on the 1st day of November, 2000.
On behalf of the Registrant
By John Hancock Variable Life Insurance Company
(Depositor)
(SEAL)
By /s/ Michele G. Van Leer
-----------------------
Michele G. Van Leer
Vice Chairman and President
Attest /s/ PETER SCAVONGELLI
---------------------
Peter Scavongelli
Secretary
<PAGE>
PROSPECTUS DATED NOVEMBER 1, 2000
MEDALLION VARIABLE LIFE
a flexible premium variable life insurance policy
issued by
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY ("JHVLICO")
JHVLICO LIFE SERVICING OFFICE
-----------------------------
EXPRESS DELIVERY
----------------
529 Main Street (X-4)
Charlestown, MA 02129
U.S. MAIL
---------
P.O. Box 111
Boston, MA 02117
PHONE: 1-800-732-5543 / FAX: 1-617-886-3048
The policy provides an investment option with fixed rates of return declared
by JHVLICO and the following variable investment options:
<TABLE>
<CAPTION>
VARIABLE INVESTMENT OPTION MANAGED BY
-------------------------- ----------
------------------------------------------------------------------------------------------------------------
<S> <C>
Managed ............................................. Independence Investment Associates, Inc. and
Capital Guardian Trust Company
Growth & Income ..................................... Independence Investment Associates, Inc. and Putnam
Investment Management, Inc.
Equity Index ........................................ State Street Global Advisors
Large Cap Value ..................................... T. Rowe Price Associates, Inc.
Large Cap Growth .................................... Independence Investment Associates, Inc.
Mid Cap Value ....................................... Neuberger Berman, LLC
Mid Cap Growth ...................................... Janus Capital Corporation
Real Estate Equity .................................. Independence Investment Associates, Inc. and Morgan
Stanley Dean Witter Investment Management Inc.
Small/Mid Cap CORE /SM/ ............................. Goldman Sachs Asset Management
Small/Mid Cap Growth ................................ Wellington Management Company, LLP
Small Cap Equity .................................... Capital Guardian Trust Company
Small Cap Growth .................................... John Hancock Advisers, Inc.
Global Balanced ..................................... Capital Guardian Trust Company
International Equity Index........................... Independence International Associates, Inc.
International Opportunities.......................... T. Rowe Price International, Inc.
Emerging Markets Equity.............................. Morgan Stanley Dean Witter Investment Management
Inc.
Short-Term Bond ..................................... Independence Investment Associates, Inc.
Bond Index .......................................... Mellon Bond Associates, LLP
Active Bond.......................................... John Hancock Advisers, Inc.
Global Bond.......................................... Capital Guardian Trust Company
High Yield Bond...................................... Wellington Management Company, LLP
Money Market......................................... John Hancock Life Insurance Company
------------------------------------------------------------------------------------------------------------
</TABLE>
We may add, modify or delete variable investment options in the future.
<PAGE>
When you select one or more of these variable investment options, we invest
your money in the corresponding investment option(s) of the John Hancock
Variable Series Trust I (the "Trust"). The Trust is a mutual fund that offers a
number of different investment options (which are called "funds"). The
investment results of each variable investment option you select will depend on
those of the corresponding fund of the Trust. Attached to this prospectus is a
prospectus for the Trust that contains detailed information about each fund
offered under the policy. Be sure to read the prospectus for the Trust before
selecting any of the variable investment options shown on page 1.
GUIDE TO THIS PROSPECTUS
This prospectus contains information that you should know before you buy a
policy or exercise any of your rights under the policy. However, please keep in
mind that this is a prospectus - - it is not the policy. The prospectus
---
simplifies many policy provisions to better communicate the policy's essential
features. Your rights and obligations under the policy will be determined by the
language of the policy itself. When you receive your policy, read it carefully.
This prospectus is arranged in the following way:
. The section which follows is called "Basic Information". It is in a
question and answer format. We suggest you read the Basic Information
section before reading any other section of the prospectus.
. Behind the Basic Information section are illustrations of
hypothetical policy benefits that help clarify how the policy works.
These start on page 19.
. Behind the illustrations is a section called "Additional Information"
that gives more details about the policy. It generally does not
---
repeat information that is in the Basic Information section. A table
of contents for the Additional Information section appears on page
26.
. Behind the Additional Information section are the financial
statements for JHVLICO and Separate Account U. These start on page
40.
. Finally, there is an Alphabetical Index of Key Words and Phrases at
the back of the prospectus on page 111.
After the Alphabetical Index of Key Words and Phrases, this prospectus ends and
the Trust prospectus begins.
**********
Please note that the Securities and Exchange Commission ("SEC") has not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
2
<PAGE>
BASIC INFORMATION
This part of the prospectus provides answers to commonly asked questions about
the policy.
<TABLE>
<CAPTION>
<S> <C>
Question Beginning on page
--------
.What is the policy?. . . . . . . . . . . . . . . . . . . . . . . 4
.Who owns the policy? . . . . . . . . . . . . . . . . . . . . . . 4
.How can I invest money in the policy?. . . . . . . . . . . . . . 4
.Is there a minimum amount I must invest? . . . . . . . . . . . . 5
.How will the value of my investment in the policy change
over time?. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
.What charges will JHVLICO deduct from my investment in
the policy? . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
.What charges will the Trust deduct from my investment in
the policy? . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
.What other charges could JHVLICO impose in the future? . . . . . 10
.How can I change my policy's investment allocations? . . . . . . 11
.How can I access my investment in the policy?. . . . . . . . . . 12
.How much will JHVLICO pay when the insured person dies?. . . . . 13
.How can I change my policy's insurance coverage? . . . . . . . . 14
.Can I cancel my policy after it's issued?. . . . . . . . . . . . 15
.Can I choose the form in which JHVLICO pays out policy
proceeds? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
.To what extent can JHVLICO vary the terms and conditions
of its policies in particular cases? . . . . . . . . . . . . . . 16
.How will my policy be treated for income tax purposes? . . . . . 16
.How do I communicate with JHVLICO? . . . . . . . . . . . . . . . 17
</TABLE>
Here are the page numbers where the questions and answers appear:
3
<PAGE>
WHAT IS THE POLICY?
The policy's primary purpose is to provide lifetime protection against
economic loss due to the death of the insured person. The value of the amount
you have invested under the policy may increase or decrease daily based upon the
investment results of the variable investment options that you choose. The
amount we pay to the policy's beneficiary if the insured person dies (we call
this the "death benefit") may be similarly affected.
While the insured person is alive, you will have a number of options under the
policy. Here are some major ones:
. Determine when and how much you invest in the various investment
options
. Borrow or withdraw amounts you have in the investment options
. Change the beneficiary who will receive the death benefit
. Change the amount of insurance
. Turn in (i.e., "surrender") the policy for the full amount of its
surrender value
. Choose the form in which we will pay out the death benefit or other
proceeds
Most of these options are subject to limits that are explained later in this
prospectus.
WHO OWNS THE POLICY?
That's up to the person who applies for the policy. The owner of the policy is
the person who can exercise most of the rights under the policy, such as the
right to choose the investment options or the right to surrender the policy. In
many cases, the person buying the policy is also the person who will be the
owner. However, the application for a policy can name another person or entity
(such as a trust) as owner. Whenever we've used the term "you" in this
prospectus, we've assumed that the reader is the person who has whatever right
or privilege is being discussed. There may be tax consequences if the owner and
the insured person are different, so you should discuss this issue with your tax
adviser.
HOW CAN I INVEST MONEY IN THE POLICY?
Premium Payments
We call the investments you make in the policy "premiums" or "premium
payments". The amount we require as your first premium depends upon the
-----
specifics of your policy and the insured person. Except as noted below, you can
make any other premium payments you wish at any time. That's why the policy is
called a "flexible premium" policy.
4
<PAGE>
Maximum premium payments
Federal tax law limits the amount of premium payments you can make relative to
the amount of your policy's insurance coverage. We will not knowingly accept any
amount by which a premium payment exceeds the maximum. If you exceed certain
other limits, the law may impose a penalty on amounts you take out of your
policy. We'll monitor your premium payments and let you know if you're about to
exceed this limit. More discussion of these tax law requirements begins on page
33. Also, we may refuse to accept any amount of an additional premium if:
. that amount of premium would increase our insurance risk exposure,
and
. the insured person doesn't provide us with adequate evidence that he
or she continues to meet our requirements for issuing insurance.
In no event, however, will we refuse to accept any premium necessary to prevent
the policy from terminating.
Ways to pay premiums
If you pay premiums by check or money order, they must be drawn on a U.S. bank
in U.S. dollars and made payable to "John Hancock Variable Life Insurance
Company." Premiums after the first must be sent to the JHVLICO Life Servicing
Office at the appropriate address shown on page 1 of this prospectus.
We will also accept premiums:
. by wire or by exchange from another insurance company,
. via an electronic funds transfer program (any owner interested in
making monthly premium payments must use this method), or
-------
. if we agree to it, through a salary deduction plan with your
employer.
You can obtain information on these other methods of premium payment by
contacting your JHVLICO representative or by contacting the JHVLICO Life
Servicing Office.
IS THERE A MINIMUM AMOUNT I MUST INVEST?
Planned Premiums
The Policy Specifications page of your policy will show the "Planned Premium"
for the policy. You choose this amount in the policy application. The premium
reminder notice we send you is based on this amount. You will also choose how
often to pay premiums-- annually, semi-annually, quarterly or monthly. The date
on which such a payment is "due" is referred to in the policy as a "modal
processing date." However, payment of Planned Premiums is not necessarily
required. You need only invest enough to keep the policy in force (see "Lapse
and reinstatement" and "Guaranteed death benefit feature" below).
5
<PAGE>
Lapse and reinstatement
If the policy's surrender value is not sufficient to pay the charges and the
guaranteed death benefit feature is not in effect, we will notify you of how
much you will need to pay to keep the policy in force. You will have a 61 day
"grace period" to make that payment. If you don't pay at least the required
amount by the end of the grace period, your policy will terminate (i.e., lapse).
All coverage under the policy will then cease. Even if the policy terminates in
this way, you can still reactivate (i.e., "reinstate") it within 1 year from the
beginning of the grace period. You will have to provide evidence that the
insured person still meets our requirements for issuing coverage. You will also
have to pay a minimum amount of premium and be subject to the other terms and
conditions applicable to reinstatements, as specified in the policy. If the
insured person dies during the grace period, we will deduct any unpaid monthly
charges from the death benefit. During the grace period, you cannot make
transfers among investment options or make a partial withdrawal or policy loan.
Guaranteed death benefit feature
This feature is available only if the insured person meets certain
underwriting requirements. The feature guarantees that your policy will not
lapse during the first 5 policy years, regardless of adverse investment
performance, if on each modal processing date during that 5 year period the
amount of cumulative premiums you have paid (less all withdrawals from the
policy) equals or exceeds the sum of all Guaranteed Death Benefit Premiums due
to date. The Guaranteed Death Benefit Premium (or "GDB Premium) is defined in
the policy and is "due" on each modal processing date. (The term "modal
processing date" is defined under "Planned Premiums" on page 5.)
No GDB Premium will ever be greater than the so-called "guideline premium" for
the policy as defined in Section 7702 of the Internal Revenue Code. Also, the
GDB Premiums may change in the event of any change in the face amount of the
policy or any change in the death benefit option (see "How much will JHVLICO pay
when the insured person dies?" on page 13).
If the Guaranteed Death Benefit test is not satisfied on any modal processing
date, we will notify you immediately and tell you how much you will need to pay
to keep the feature in effect. You will have until the second monthly deduction
date after default to make that payment. If you don't pay at least the required
amount by the end of that period, the feature will permanently lapse. You cannot
restore the feature once it has lapsed.
If there are monthly charges that remain unpaid because of this feature, we
will deduct such charges when there is sufficient surrender value to pay them.
HOW WILL THE VALUE OF MY INVESTMENT IN THE POLICY CHANGE OVER TIME?
From each premium payment you make, we deduct the charges described under
"Deductions from premium payments" below. We invest the rest in the investment
options you've elected.
6
<PAGE>
Over time, the amount you've invested in any variable investment option will
increase or decrease the same as if you had invested the same amount directly in
the corresponding fund of the Trust and had reinvested all fund dividends and
distributions in additional fund shares; except that we will deduct certain
additional charges which will reduce your account value. We describe these
charges under "What charges will JHVLICO deduct from my investment in the
policy?" below.
The amount you've invested in the fixed investment option will earn interest
at a rate we declare from time to time. We guarantee that this rate will be at
least 4%. If you want to know what the current declared rate is, just call or
write to us. The current declared rate will also appear in the annual statement
we will send you. Amounts you invest in the fixed investment option will not be
---
subject to the mortality and expense risk charge described on page 8. Otherwise,
the charges applicable to the fixed investment option are the same as those
applicable to the variable investment options.
At any time, the "account value" of your policy is equal to:
. the amount you invested,
. plus or minus the investment experience of the investment options
you've chosen,
. minus all charges we deduct, and
. minus all withdrawals you have made.
If you take a loan on the policy, however, your account value will be computed
somewhat differently. This is discussed beginning on page 12.
WHAT CHARGES WILL JHVLICO DEDUCT FROM MY INVESTMENT IN THE POLICY?
Deductions from premium payments
. Premium tax charge - A charge to cover state premium taxes we currently
--------------------
expect to pay, on average. This charge is currently 2.35% of each premium.
. DAC tax charge - A charge to cover the increased Federal income tax
----------------
burden that we currently expect will result from receipt of premiums. This
charge is currently 1.25% of each premium.
. Premium sales charge - A charge to help defray our sales costs. The
----------------------
charge is 4% of a certain portion of the premium you pay. The portion of
each year's premium that is subject to the charge is called the "Target
Premium". It's determined at the time the policy is issued and will appear
in the "Policy Specifications" section of the policy. We currently waive
one half of this charge for policies with a face amount of $250,000 or
higher, but continuation of that waiver is not guaranteed. Also, we
currently intend to stop making this charge on premiums received after the
10th policy year, but this is not guaranteed either. Because policies of
this type were first offered for sale in 1994, no termination of this
charge has yet occurred.
7
<PAGE>
Deductions from account value
. Issue charge - A monthly charge to help defray our administrative costs.
--------------
This is a flat dollar charge of $20 and is deducted only during the first
policy year.
. Maintenance charge - A monthly charge to help defray our administrative
--------------------
costs. This is a flat dollar charge of up to $8 (currently $6).
. Insurance charge - A monthly charge for the cost of insurance. To
------------------
determine the charge, we multiply the amount of insurance for which we are
at risk by a cost of insurance rate. The rate is derived from an actuarial
table. The table in your policy will show the maximum cost of insurance
-------
rates. The cost of insurance rates that we currently apply are generally
less than the maximum rates. We will review the cost of insurance rates at
least every 5 years and may change them from time to time. However, those
rates will never be more than the maximum rates shown in the policy. The
table of rates we use will depend on the insurance risk characteristics
and (usually) gender of the insured person, the face amount of insurance
and the length of time the policy has been in effect. Regardless of the
table used, cost of insurance rates generally increase each year that you
own your policy, as the insured person's attained age increases. (The
insured person's "attained age" on any date is his or her age on the
birthday nearest that date.) We currently apply a lower insurance charge
for policies with a face amount of $250,000 or higher, but continuation of
that practice is not guaranteed. Also, it is our current intention to
reduce the insurance charge in the 10th policy year and thereafter, but
such a reduction is not guaranteed either. Because policies of this type
were first offered for sale in 1994, no reductions have yet been made.
. Extra mortality charge - A monthly charge specified in your policy for
------------------------
additional mortality risk if the insured person is subject to certain
types of special insurance risk.
. M & E charge - A daily charge for mortality and expense risks we assume.
-------------
This charge is deducted from the variable investment options. It does not
apply to the fixed investment option. The current charge is at an
effective annual rate of .60% of the value of the assets in each variable
investment option. We guarantee that this charge will never exceed an
effective annual rate of .90%.
. Optional benefits charge - Monthly charges for any optional insurance
--------------------------
benefits added to the policy by means of a rider. We currently offer a
number of optional riders, such as the accidental death benefit rider.
. Administrative surrender charge - A charge we deduct if the policy lapses
---------------------------------
or is surrendered in the first 9 policy years. We deduct this charge to
compensate us for administrative expenses that we would otherwise not
recover in the event of early lapse or surrender. The amount of the charge
depends upon the policy year in which lapse or surrender occurs and the
policy's face amount at that time. The maximum charge is $5 per $1,000 of
face amount in policy years 1 through 7, $4 per $1,000 in policy year 8
and $3 per $1,000 in policy year 9.
8
<PAGE>
. Contingent deferred sales charge ("CDSC") - A charge we deduct if the
-------------------------------------------
policy lapses or is surrendered within the first 12 policy years. We
deduct this charge to compensate us for sales expenses that we would
otherwise not recover in the event of early lapse or surrender. The charge
is a percentage of premiums received that do not exceed the Target
Premium. ("Target Premium" is described above under "Deductions from
premium payments.") In policy years 1 through 3, the charge is a
percentage of premiums received prior to the end of the policy year in
question. Thereafter, it's a percentage of only those premiums received in
policy years 1 through 3. The 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. This is shown in the following table (where the
percentages are rounded to one decimal place):
FOR SURRENDERS OR LAPSES DURING PERCENTAGE
------------------------------------------
Policy years 1-7 26.0%
Policy year 8 21.7%
Policy year 9 17.3%
Policy year 10 13.0%
Policy year 11 8.7%
Policy year 12 4.3%
Policy year 13 and later 0.0%
The above table applies only if the insured person is less than attained
age 55 at issue. For older issue ages, the maximum is reached earlier and
the percentage may decrease to zero in fewer than 12 policy years.
Regardless of issue age, there is a further limitation on the CDSC that
can be charged if surrender or lapse occurs in the second policy year. The
CDSC cannot exceed 32% of one year's Target Premium.
----------
. Partial withdrawal charge - A charge for each partial withdrawal of
---------------------------
account value to compensate us for the administrative expenses of
processing the withdrawal. The charge is equal to the lesser of $20 or 2%
of the withdrawal amount.
WHAT CHARGES WILL THE TRUST DEDUCT FROM MY INVESTMENT IN THE POLICY?
The Trust must pay investment management fees and other operating expenses.
These fees and expenses are different for each fund of the Trust and reduce the
investment return of each fund. Therefore, they also indirectly reduce the
return you will earn on any variable investment options you select. The figures
in the following chart are expressed as percentages of each fund's average daily
net assets for 1999 (rounded to two decimal places).
9
<PAGE>
<TABLE>
<CAPTION>
Investment Other Operating Total Fund Other Operating
Management Expenses* With Operating Expenses Absent
Fund Name Fee* Reimbursement Expenses Reimbursement
--------- ---------- --------------- ---------- ----------------
<S> <C> <C> <C> <C>
Managed................ 0.67% 0.03% 0.70% 0.03%
Growth & Income........ 0.67% 0.03% 0.70% 0.03%
Equity Index........... 0.14% 0.00% 0.14% 0.08%
Large Cap Value........ 0.74% 0.10% 0.84% 0.11%
Large Cap Growth....... 0.36% 0.03% 0.39% 0.03%
Mid Cap Value.......... 0.80% 0.10% 0.90% 0.12%
Mid Cap Growth......... 0.82% 0.10% 0.92% 0.11%
Real Estate Equity..... 1.01% 0.10% 1.11% 0.10%
Small/Mid Cap CORE/
SM/................... 0.80% 0.10% 0.90% 0.66%
Small/Mid Cap Growth... 0.75% 0.10% 0.85% 0.10%
Small Cap Equity*...... 0.90% 0.10% 1.00% 0.16%
Small Cap Growth....... 0.75% 0.10% 0.85% 0.14%
Global Balanced*....... 1.05% 0.10% 1.15% 0.46%
International Equity
Index................. 0.16% 0.10% 0.26% 0.22%
International
Opportunities......... 0.87% 0.10% 0.97% 0.29%
Emerging Markets
Equity................ 1.27% 0.10% 1.37% 2.17%
Short-Term Bond........ 0.30% 0.10% 0.40% 0.13%
Bond Index............. 0.15% 0.10% 0.25% 0.20%
Active Bond*........... 0.61% 0.03% 0.64% 0.03%
Global Bond............ 0.85% 0.10% 0.95% 0.15%
High Yield Bond........ 0.65% 0.10% 0.75% 0.39%
Money Market........... 0.25% 0.06% 0.31% 0.06%
</TABLE>
* John Hancock Variable Series Trust I funds' percentages for "other fund
expenses" are based on the allocation methodology and expense
reimbursement policy adopted April 23, 1999, and are calculated as if that
allocation methodology and expense reimbursement policy had been in effect
for all of 1999. Under the expense reimbursement policy, John Hancock
Life Insurance Company voluntarily reimburses a fund when the fund's
"other fund expenses" exceed 0.10% of the fund's average daily net assets
(0.00% for Equity Index). Shareholders of the Managed, Growth & Income,
Real Estate Equity, Small Cap Equity, Global Balanced, Active Bond, and
Global Bond funds have approved new management fee schedules, which apply
to these funds effective November 1, 2000. The investment management fee
percentages for each of these funds are calculated as if those new fee
schedules had been in effect for all of 1999. The investment management
fee percentages for all other funds reflect the investment management fees
that were actually payable for 1999.
** Small Cap Equity was formerly "Small Cap Value", Global Balanced was
formerly "International Balanced" and Active Bond was formerly "Sovereign
Bond".
"CORE /SM"/ IS A SERVICE MARK OF GOLDMAN, SACHS & CO.
WHAT OTHER CHARGES COULD JHVLICO IMPOSE IN THE FUTURE?
Except for the DAC tax charge, we currently make no charge for our Federal
income taxes. However, if we incur, or expect to incur, additional income taxes
attributable to any subaccount of the Account or this class of policies in
future years, we reserve the right to make a charge for such taxes. Any such
charge would reduce what you earn on any affected investment options. However,
we expect that no such charge will be necessary.
10
<PAGE>
We also reserve the right to increase the premium tax charge and the DAC tax
charge in order to correspond, respectively, with changes in the state premium
tax levels and with changes in the Federal income tax treatment of the deferred
acquisition costs for this type of policy.
Under current laws, we 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, we may make charges
for such taxes.
HOW CAN I CHANGE MY POLICY'S INVESTMENT ALLOCATIONS?
Future premium payments
At any time, you may change the investment options in which future premium
payments will be invested. You make the original allocation in the application
for the policy. The percentages you select must be in whole numbers and must
total 100%.
Transfers of existing account value
You may also transfer your existing account value from one investment option
to another. To do so, you must tell us how much to transfer, either as a whole
number percentage or as a specific dollar amount.
Under our current rules, you can make transfers out of any variable investment
option anytime you wish. However, transfers out of the fixed investment option
are currently subject to the following restrictions:
. You can only make such a transfer once a year and only during the 31 day
period following your policy anniversary.
. We must receive the request for such a transfer during the period
beginning 60 days prior to the policy anniversary and ending 30 days after
it.
. The most you can transfer at any one time is the greater of $500 or 20%
of the assets in your fixed investment option.
We reserve the right to impose a minimum amount limit on transfers out of the
fixed investment option. We also reserve the right to impose limits on the
number and frequency of transfers out of the variable investment options.
Limitation on number of investment options
Whether through the allocation of premium or through the transfer of existing
account value, you can never be invested in more than ten investment options at
any one time.
Dollar cost averaging
This is a program of automatic monthly transfers out of the Money Market
investment option into one or more of the other variable investment options. You
choose the investment options and the dollar amount and timing of the transfers.
The program is designed to reduce the risks that result from market
fluctuations. It does this by spreading out the allocation of your
11
<PAGE>
money to investment options over a longer period of time. This allows you to
reduce the risk of investing most of your money at a time when market prices are
high. Obviously, the success of this strategy depends on market trends and is
not guaranteed.
HOW CAN I ACCESS MY INVESTMENT IN THE POLICY?
Full surrender
You may surrender your policy in full at any time. If you do, we will pay you
the account value, less any policy loans and less any CDSC and administrative
surrender charge that then applies. This is called your "surrender value." You
must return your policy when you request a full surrender.
Partial withdrawals
You may make a partial withdrawal of your surrender value at any time. Each
partial withdrawal must be at least $1,000. There is a charge (usually $20) for
each partial withdrawal. We will automatically reduce the account value of your
policy by the amount of the withdrawal and the related charge. Each investment
option will be reduced in the same proportion as the account value is then
allocated among them. We will not permit a partial withdrawal if it would cause
your surrender value to fall below 3 months' worth of monthly charges (see
"Deductions from account value" on page 8). We also reserve the right to refuse
any partial withdrawal that would cause the policy's face amount to fall below
$100,000. Under the Option 1 or Option 3 death benefit, the reduction of your
account value occasioned by a partial withdrawal could cause the minimum
insurance amount to become less than your face amount of insurance (see "How
much will JHVLICO pay when the insured person dies?" on page 13). If that
happens, we will automatically reduce your face amount of insurance. The
calculation of that reduction is explained in the policy. If such a face amount
reduction would cause your policy to fail the Code's definition of life
insurance, we will not permit the partial withdrawal.
Policy loans
You may borrow from your policy at any time after it has been in effect for 1
year by completing a form satisfactory to us or, if the telephone transaction
authorization form has been completed, by telephone. The maximum amount you can
borrow is equal to 100% of your account value that is in the fixed investment
option plus one of the following:
. In policy years 2 and 3 - - 75% of your account value that is in the
variable investment options
. In all later policy years - - 90% of your account value that is in
the variable investment options
The minimum amount of each loan is $300. The interest charged on any loan is
an effective annual rate of 5.0% in the first 20 policy years and 4.50%
thereafter. Accrued interest will be added to the loan daily and will bear
interest at the same rate as the original loan amount. The amount of the loan is
deducted from the investment options in the same proportion as the account
12
<PAGE>
value is then allocated among them and is placed in a special loan account. This
special loan account will earn interest at an effective annual rate of 4.0%.
However, if we determine that a loan will be treated as a taxable distribution
because of the differential between the loan interest rate and the rate being
credited on the special loan account, we reserve the right to decrease the rate
credited on the special loan account to a rate that would, in our reasonable
judgement, result in the transaction being treated as a loan under Federal tax
law.
You can repay all or part of a loan at any time. Each repayment will be
allocated among the investment options as follows:
. The same proportionate part of the loan as was borrowed from the
fixed investment option will be repaid to the fixed investment
option.
. The remainder of the repayment will be allocated among the investment
options in the same way a new premium payment would be allocated.
If you want a payment to be used as a loan repayment, you must include
instructions to that effect. Otherwise, all payments will be assumed to be
premium payments.
HOW MUCH WILL JHVLICO PAY WHEN THE INSURED PERSON DIES?
In your application for the policy, you will tell us how much life insurance
coverage you want on the life of the insured person. This is called the "face
amount" of insurance. In the policy, this may also be referred to as the "Sum
Insured."
When the insured person dies, we will pay the death benefit minus any
outstanding loans. There are 3 ways of calculating the death benefit. You choose
which one you want in the application. The three death benefit options are:
. Option 1 - The death benefit will equal the greater of (1) the face
amount or (2) the minimum insurance amount under the "guideline
premium and cash value corridor test" (as described below).
. Option 2 - The death benefit will equal the greater of (1) the face
amount plus your policy's account value on the date of death, or (2)
the minimum insurance amount under the "guideline premium and cash
value corridor test".
. Option 3 - The death benefit will equal the greater of (1) the face
amount or (2) the minimum insurance amount under the "cash value
accumulation test" (as described below)
For the same premium payments, the death benefit under Option 2 will tend to
be higher than the death benefit under Options 1 or 3. On the other hand, the
monthly insurance charge will be higher under Option 2 to compensate us for the
additional insurance risk. Because of that, the account value will tend to be
higher under Options 1 or 3 than under Option 2 for the same premium payments.
13
<PAGE>
In order for a policy to qualify as life insurance under Federal tax law,
there has to be a minimum amount of insurance in relation to account value.
There are two tests that can be applied under Federal tax law. Death benefit
Options 1 and 2 use the "guideline premium and cash value corridor test" while
Option 3 uses the "cash value accumulation test." For Options 1 and 2, we
compute the minimum insurance amount each business day by multiplying the
account value on that date by the so-called "corridor factor" applicable on that
date. The corridor factors are derived by applying the "guideline premium and
cash value corridor test." The corridor factor starts out at 2.50 for ages at or
below 40 and decreases as attained age increases, reaching a low of 1.0 at age
95. A table showing the factor for each age will appear in the policy. For
Option 3, we compute the minimum insurance amount each business day by
multiplying the account value on that date by the so-called "death benefit
factor" applicable on that date. The death benefit factors are derived by
applying the "cash value accumulation test." The death benefit factor decreases
as attained age increases. A table showing the factor for each age will appear
in the policy.
HOW CAN I CHANGE MY POLICY'S INSURANCE COVERAGE?
Increase in coverage
Increases in the face amount of insurance coverage are generally not permitted
under our current administrative rules. We expect to be able to allow such
increases in the future, but that is not guaranteed.
Decrease in coverage
After the first policy year, you may request a reduction in the face amount of
insurance coverage, but only if:
. the remaining face amount will be at least $100,000, and
. the remaining face amount will at least equal the minimum required by
the tax laws to maintain the policy's life insurance status.
As to when an approved decrease would take effect, see "Effective date of
other policy transactions" on page 31.
Change of death benefit option
You may request to change your coverage from death benefit Option 1 to Option
2 or vice-versa. If you request a change from Option 1 to Option 2, we will
require evidence that the insured person still meets our requirements for
issuing coverage. This is because such a change increases our insurance risk
exposure. If you have chosen death benefit Option 3, you can never change to
either Option 1 or Option 2.
14
<PAGE>
Tax consequences
Please read "Tax considerations" starting on page 33 to learn about possible
tax consequences of changing your insurance coverage under the policy.
CAN I CANCEL MY POLICY AFTER IT'S ISSUED?
You have the right to cancel your policy within the latest of the following
periods:
. 10 days after you receive it (this period may be longer in some
states);
. 10 days after mailing by JHVLICO of the Notice of Withdrawal Right;
or
. 45 days after the date Part A of the application has been completed.
This is often referred to as the "free look" period. To cancel your policy,
simply deliver or mail the policy to JHVLICO at one of the addresses shown on
page 1, or to the JHVLICO representative who delivered the policy to you.
In most states, you will receive a refund of any premiums you've paid. In some
states, the refund will be your account value on the date of cancellation plus
all charges deducted by JHVLICO or the Trust prior to that date. The date of
cancellation will be the date of such mailing or delivery.
CAN I CHOOSE THE FORM IN WHICH JHVLICO PAYS OUT POLICY PROCEEDS?
Choosing a payment option
You may choose to receive proceeds from the policy as a single sum. This
includes proceeds that become payable because of death or full surrender.
Alternatively, you can elect to have proceeds of $1,000 or more applied to any
of a number of other payment options, including the following:
. Option 1 - Proceeds left with us to accumulate with interest
. Option 2A - Equal monthly payments of a specified amount until all
proceeds are paid out
. Option 2B - Equal monthly payments for a specified period of time
. Option 3 - Equal monthly payments for life, but with payments
guaranteed for a specific number of years
. Option 4 - Equal monthly payments for life with no refund
. Option 5 - Equal monthly payments for life with a refund if all of
the proceeds haven't been paid out
15
<PAGE>
You cannot choose an option if the monthly payments under the option would be
less than $50. We will issue a supplementary agreement when the proceeds are
applied to any alternative payment option. That agreement will spell out the
terms of the option in full. We will credit interest on each of the above
options. For Options 1 and 2A, the interest will be at least an effective annual
rate of 3 1/2%.
Changing a payment option
You can change the payment option at any time before the proceeds are payable.
If you haven't made a choice, the payee of the proceeds has a prescribed period
in which he or she can make that choice.
Tax impact
There may be tax consequences to you or your beneficiary depending upon which
payment option is chosen. You should consult with a qualified tax adviser before
making that choice.
TO WHAT EXTENT CAN JHVLICO VARY THE TERMS AND CONDITIONS OF ITS POLICIES IN
PARTICULAR CASES?
Listed below are some variations we can make in the terms of our policies. Any
variation will be made only in accordance with uniform rules that we apply
fairly to all of our customers.
State law insurance requirements
Insurance laws and regulations apply to JHVLICO in every state in which its
policies are sold. As a result, various terms and conditions of your insurance
coverage may vary from the terms and conditions described in this prospectus,
depending upon where you reside. These variations will be reflected in your
policy or in endorsements attached to your policy.
Variations in expenses or risks
We may vary the charges and other terms of our policies where special
circumstances result in sales or administrative expenses, mortality risks or
other risks that are different from those normally associated with the policies.
These include the type of variations discussed under "Reduced charges for
eligible classes" on page 32. No variation in any charge will exceed any maximum
stated in this prospectus with respect to that charge.
HOW WILL MY POLICY BE TREATED FOR INCOME TAX PURPOSES?
Generally, death benefits paid under policies such as yours are not subject to
income tax. Earnings on your account value are not subject to income tax as long
as we don't pay them out to you. If we do pay out any amount of your account
value upon surrender or partial withdrawal, all or part of that distribution
should generally be treated as a return of the premiums you've paid and should
not be subject to income tax. Amounts you borrow are generally not taxable to
you.
However, some of the tax rules change if your policy is found to be a
"modified endowment contract." This can happen if you've paid more than a
certain amount of premiums that is
16
<PAGE>
prescribed by the tax laws. Additional taxes and penalties may be payable for
policy distributions of any kind.
For further information about the tax consequences of owning a policy, please
read "Tax considerations" beginning on page 33.
HOW DO I COMMUNICATE WITH JHVLICO?
General Rules
You should mail or express all checks and money orders for premium payments
and loan repayments to the JHVLICO Life Servicing Office at the appropriate
address shown on page 1.
Certain requests must be made in writing and be signed and dated by you. They
include the following:
. loans, surrenders or partial withdrawals
. transfers of account value among investment options
. change of allocation among investment options for new premium
payments
. change of death benefit option
. increase or decrease in face amount
. change of beneficiary
. election of payment option for policy proceeds
. tax withholding elections
. election of telephone transaction privilege
You should mail or express these requests to the JHVLICO Life Servicing Office
at the appropriate address shown on page 1. You should also send notice of the
insured person's death and related documentation to the JHVLICO Life Servicing
Office. We don't consider that we've "received" any communication until such
time as it has arrived at the proper place and in the proper and complete form.
We have special forms that should be used for a number of the requests
mentioned above. You can obtain these forms from the JHVLICO Life Servicing
Office or your JHVLICO representative. Each communication to us must include
your name, your policy number and the name of the insured person. We cannot
process any request that doesn't include this required information. Any
communication that arrives after the close of our business day, or on a day that
is not a business day, will be considered "received" by us on the next following
business day.
17
<PAGE>
Our business day currently closes at 4:00 p.m. Eastern Standard Time, but
special circumstances (such as suspension of trading on a major exchange) may
dictate an earlier closing time.
Telephone Transactions
If you complete a special authorization form, you can request loans, transfers
among investment options and changes of allocation among investment options
simply by telephoning us at 1-800-732-5543 or by faxing us at 1-617-886-3048.
Any fax request should include your name, daytime telephone number, policy
number and, in the case of transfers and changes of allocation, the names of the
investment options involved. We will honor telephone instructions from anyone
who provides the correct identifying information, so there is a risk of loss to
you if this service is used by an unauthorized person. However, you will receive
written confirmation of all telephone transactions. There is also a risk that
you will be unable to place your request due to equipment malfunction or heavy
phone line usage. If this occurs, you should submit your request in writing.
The policies are not designed for professional market timing organizations or
other persons or entities that use programmed or frequent transfers among
investment options. For reasons such as that, we reserve the right to change our
telephone transaction policies or procedures at any time. We also reserve the
right to suspend or terminate the privilege altogether.
18
<PAGE>
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 under certain hypothetical circumstances that
we assume solely for this purpose. Each table separately illustrates the
operation of a policy for a specified issue age, premium payment schedule and
face amount. The amounts shown are for the end of each policy year and assume
that all of the account value is invested in funds that achieve investment
returns at constant annual rates of 0%, 6% and 12% (i.e., before any fees or
expenses deducted from Trust assets). After the deduction of average fees and
expenses at the Trust level (as described below) the corresponding net annual
rates of return would be -0.74%, 5.22% and 11.17%. Investment return reflects
investment income and all realized and unrealized capital gains and losses. The
tables assume annual Planned Premiums that are paid at the beginning of each
policy year for an insured person who is a 35 year old male standard non-smoker
underwriting risk when the policy is issued.
Tables are provided for each of the two death benefit options. The tables
headed "Current Charges" assume that the current rates for all charges deducted
by JHVLICO will apply in each year illustrated, including the intended waiver of
the premium sales charge after the tenth policy year and the intended reduction
in the insurance charge after the tenth policy year. The tables headed "Maximum
Charges" are the same, except that the maximum permitted rates for all years are
used for all charges. The tables do not reflect any charge that we reserve the
right to make but are not currently making.
With respect to fees and expenses deducted from Trust assets, the amounts
shown in all tables reflect (1) investment management fees equivalent to an
effective annual rate of .66%, and (2) an assumed average asset charge for all
other Trust operating expenses equivalent to an effective annual rate of .08%.
These rates are the arithmetic average for all funds of the Trust. In other
words, they are based on the hypothetical assumption that policy account values
are allocated equally among the variable investment options. The actual rates
associated with any policy will vary depending upon the actual allocation of
policy values among the investment options. The charge shown above for all other
Trust operating expenses reflects reimbursements to certain funds as described
in the footnote to the table on page 10. We currently expect those reimbursement
arrangements to continue indefinitely, but that is not guaranteed.
The second column of each table shows the amount you would have at the end of
each policy year if an amount equal to the assumed Planned Premiums were
invested to earn interest, after taxes, at 5% compounded annually. This is not a
policy value. It is included for comparison purposes only.
Because your circumstances will no doubt differ from those in the
illustrations that follow, values under your policy will differ, in most cases
substantially. Upon request, we will furnish you with a comparable illustration
reflecting your proposed insured person's issue age, sex and underwriting risk
classification, and the face amount and annual Planned Premium amount requested.
19
<PAGE>
DEATH BENEFIT OPTION 1: LEVEL DEATH BENEFIT
ILLUSTRATION ASSUMES CURRENT CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,000 100,000 100,000 218 244 270 0 0 0
2 1,636 100,000 100,000 100,000 663 737 815 0 0 72
3 2,516 100,000 100,000 100,000 1,093 1,243 1,406 0 150 313
4 3,439 100,000 100,000 100,000 1,506 1,761 2,048 413 668 956
5 4,409 100,000 100,000 100,000 1,900 2,289 2,745 807 1,196 1,652
6 5,428 100,000 100,000 100,000 2,276 2,828 3,501 1,183 1,736 2,408
7 6,497 100,000 100,000 100,000 2,631 3,376 4,321 1,538 2,283 3,228
8 7,620 100,000 100,000 100,000 2,964 3,932 5,211 2,070 3,038 4,317
9 8,799 100,000 100,000 100,000 3,274 4,496 6,176 2,579 3,801 5,481
10 10,037 100,000 100,000 100,000 3,568 5,076 7,240 3,272 4,780 6,944
11 11,337 100,000 100,000 100,000 3,866 5,695 8,432 3,669 5,497 8,234
12 12,702 100,000 100,000 100,000 4,142 6,325 9,736 4,043 6,226 9,637
13 14,135 100,000 100,000 100,000 4,392 6,965 11,163 4,392 6,965 11,163
14 15,640 100,000 100,000 100,000 4,615 7,612 12,725 4,615 7,612 12,725
15 17,220 100,000 100,000 100,000 4,809 8,267 14,437 4,809 8,267 14,437
16 18,879 100,000 100,000 100,000 4,972 8,928 16,315 4,972 8,928 16,315
17 20,621 100,000 100,000 100,000 5,105 9,595 18,379 5,105 9,595 18,379
18 22,450 100,000 100,000 100,000 5,197 10,260 20,644 5,197 10,260 20,644
19 24,370 100,000 100,000 100,000 5,247 10,920 23,132 5,247 10,920 23,132
20 26,387 100,000 100,000 100,000 5,258 11,581 25,875 5,258 11,581 25,875
25 38,086 100,000 100,000 100,000 4,777 14,946 44,737 4,777 14,946 44,737
30 53,018 100,000 100,000 100,000 3,271 18,411 77,172 3,271 18,411 77,172
35 72,076 ** 100,000 152,466 ** 21,031 132,579 ** 21,031 132,579
40 96,398 ** 100,000 236,015 ** 21,024 224,777 ** 21,024 224,777
45 127,441 ** 100,000 398,132 ** 15,461 379,174 ** 15,461 379,174
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
20
<PAGE>
DEATH BENEFIT OPTION 1: LEVEL DEATH BENEFIT
ILLUSTRATION ASSUMES MAXIMUM CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,000 100,000 100,000 191 217 242 0 0 0
2 1,636 100,000 100,000 100,000 610 680 754 0 0 11
3 2,516 100,000 100,000 100,000 1,011 1,154 1,308 0 61 216
4 3,439 100,000 100,000 100,000 1,396 1,636 1,907 303 543 815
5 4,409 100,000 100,000 100,000 1,760 2,126 2,554 668 1,033 1,461
6 5,428 100,000 100,000 100,000 2,106 2,623 3,253 1,013 1,531 2,160
7 6,497 100,000 100,000 100,000 2,430 3,126 4,007 1,337 2,033 2,914
8 7,620 100,000 100,000 100,000 2,731 3,633 4,821 1,837 2,739 3,927
9 8,799 100,000 100,000 100,000 3,008 4,142 5,700 2,313 3,447 5,004
10 10,037 100,000 100,000 100,000 3,262 4,654 6,650 2,966 4,358 6,353
11 11,337 100,000 100,000 100,000 3,488 5,166 7,675 3,291 4,968 7,478
12 12,702 100,000 100,000 100,000 3,685 5,675 8,783 3,587 5,576 8,684
13 14,135 100,000 100,000 100,000 3,853 6,179 9,979 3,853 6,179 9,979
14 15,640 100,000 100,000 100,000 3,988 6,678 11,274 3,988 6,678 11,274
15 17,220 100,000 100,000 100,000 4,089 7,167 12,673 4,089 7,167 12,673
16 18,879 100,000 100,000 100,000 4,154 7,644 14,189 4,154 7,644 14,189
17 20,621 100,000 100,000 100,000 4,176 8,103 15,827 4,176 8,103 15,827
18 22,450 100,000 100,000 100,000 4,149 8,535 17,596 4,149 8,535 17,596
19 24,370 100,000 100,000 100,000 4,068 8,936 19,508 4,068 8,936 19,508
20 26,387 100,000 100,000 100,000 3,925 9,295 21,573 3,925 9,295 21,573
25 38,086 100,000 100,000 100,000 2,046 10,156 34,760 2,046 10,156 34,760
30 53,018 ** 100,000 100,000 ** 8,151 55,014 ** 8,151 55,014
35 72,076 ** ** 101,747 ** ** 88,476 ** ** 88,476
40 96,398 ** ** 151,557 ** ** 144,340 ** ** 144,340
45 127,441 ** ** 245,710 ** ** 234,009 ** ** 234,009
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
21
<PAGE>
DEATH BENEFIT OPTION 2: VARIABLE DEATH BENEFIT
ILLUSTRATION ASSUMES CURRENT CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,217 100,243 100,270 217 243 270 0 0 0
2 1,636 100,661 100,735 100,812 661 735 812 0 0 69
3 2,516 101,088 101,238 101,401 1,088 1,238 1,401 0 145 308
4 3,439 101,498 101,752 102,038 1,498 1,752 2,038 405 659 945
5 4,409 101,888 102,274 102,727 1,888 2,274 2,727 795 1,182 1,634
6 5,428 102,259 102,806 103,473 2,259 2,806 3,473 1,166 1,714 2,380
7 6,497 102,607 103,344 104,279 2,607 3,344 4,279 1,514 2,252 3,186
8 7,620 102,932 103,888 105,150 2,932 3,888 5,150 2,038 2,994 4,256
9 8,799 103,233 104,437 106,092 3,233 4,437 6,092 2,538 3,742 5,396
10 10,037 103,516 104,998 107,124 3,516 4,998 7,124 3,220 4,702 6,827
11 11,337 103,802 105,594 108,274 3,802 5,594 8,274 3,604 5,396 8,077
12 12,702 104,063 106,196 109,527 4,063 6,196 9,527 3,964 6,097 9,428
13 14,135 104,297 106,802 110,888 4,297 6,802 10,888 4,297 6,802 10,888
14 15,640 104,501 107,411 112,368 4,501 7,411 12,368 4,501 7,411 12,368
15 17,220 104,674 108,018 113,978 4,674 8,018 13,978 4,674 8,018 13,978
16 18,879 104,814 108,624 115,729 4,814 8,624 15,729 4,814 8,624 15,729
17 20,621 104,922 109,228 117,637 4,922 9,228 17,637 4,922 9,228 17,637
18 22,450 104,987 109,818 119,709 4,987 9,818 19,709 4,987 9,818 19,709
19 24,370 105,006 110,391 121,958 5,006 10,391 21,958 5,006 10,391 21,958
20 26,387 104,985 110,951 124,409 4,985 10,951 24,409 4,985 10,951 24,409
25 38,086 104,321 113,575 140,622 4,321 13,575 40,622 4,321 13,575 40,622
30 53,018 102,626 115,737 166,563 2,626 15,737 66,563 2,626 15,737 66,563
35 72,076 ** 116,022 207,355 ** 16,022 107,355 ** 16,022 107,355
40 96,398 ** 111,961 270,843 ** 11,961 170,843 ** 11,961 170,843
45 127,441 ** 100,300 370,102 ** 300 270,102 ** 300 270,102
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
22
<PAGE>
DEATH BENEFIT OPTION 2: VARIABLE DEATH BENEFIT
ILLUSTRATION ASSUMES MAXIMUM CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,191 100,216 100,242 191 216 242 0 0 0
2 1,636 100,608 100,678 100,752 608 678 752 0 0 9
3 2,516 101,007 101,149 101,303 1,007 1,149 1,303 0 56 210
4 3,439 101,389 101,628 101,897 1,389 1,628 1,897 296 535 805
5 4,409 101,749 102,112 102,537 1,749 2,112 2,537 657 1,019 1,444
6 5,428 102,090 102,603 103,227 2,090 2,603 3,227 997 1,510 2,134
7 6,497 102,407 103,096 103,968 2,407 3,096 3,968 1,315 2,003 2,875
8 7,620 102,702 103,592 104,765 2,702 3,592 4,765 1,808 2,698 3,871
9 8,799 102,970 104,087 105,620 2,970 4,087 5,620 2,275 3,392 4,925
10 10,037 103,214 104,582 106,542 3,214 4,582 6,542 2,917 4,286 6,245
11 11,337 103,429 105,073 107,530 3,429 5,073 7,530 3,231 4,875 7,332
12 12,702 103,613 105,556 108,590 3,613 5,556 8,590 3,514 5,457 8,491
13 14,135 103,766 106,031 109,728 3,765 6,031 9,728 3,765 6,031 9,728
14 15,640 103,885 106,494 110,948 3,885 6,494 10,948 3,885 6,494 10,948
15 17,220 103,968 106,942 112,256 3,968 6,942 12,256 3,968 6,942 12,256
16 18,879 104,013 107,371 113,658 4,013 7,371 13,658 4,013 7,371 13,658
17 20,621 104,013 107,773 115,155 4,013 7,773 15,155 4,013 7,773 15,155
18 22,450 103,962 108,139 116,751 3,962 8,139 16,751 3,962 8,139 16,751
19 24,370 103,857 108,463 118,450 3,857 8,463 18,450 3,857 8,463 18,450
20 26,387 103,687 108,733 120,251 3,687 8,733 20,251 3,687 8,733 20,251
25 38,086 101,669 108,923 130,915 1,669 8,923 30,915 1,669 8,923 30,915
30 53,018 ** 105,786 144,362 ** 5,786 44,362 ** 5,786 44,362
35 72,076 ** ** 159,465 ** ** 59,465 ** ** 59,465
40 96,398 ** ** 172,761 ** ** 72,761 ** ** 72,761
45 127,441 ** ** 175,164 ** ** 75,164 ** ** 75,164
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
23
<PAGE>
DEATH BENEFIT OPTION 3: LEVEL DEATH BENEFIT WITH GREATER FUNDING
ILLUSTRATION ASSUMES CURRENT CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,000 100,000 100,000 218 244 270 0 0 0
2 1,636 100,000 100,000 100,000 663 737 815 0 0 72
3 2,516 100,000 100,000 100,000 1,093 1,243 1,406 0 150 313
4 3,439 100,000 100,000 100,000 1,506 1,761 2,048 413 668 956
5 4,409 100,000 100,000 100,000 1,900 2,289 2,745 807 1,196 1,652
6 5,428 100,000 100,000 100,000 2,276 2,828 3,501 1,183 1,736 2,408
7 6,497 100,000 100,000 100,000 2,631 3,376 4,321 1,538 2,283 3,228
8 7,620 100,000 100,000 100,000 2,964 3,932 5,211 2,070 3,038 4,317
9 8,799 100,000 100,000 100,000 3,274 4,496 6,176 2,579 3,801 5,481
10 10,037 100,000 100,000 100,000 3,568 5,076 7,240 3,272 4,780 6,944
11 11,337 100,000 100,000 100,000 3,866 5,695 8,432 3,669 5,497 8,234
12 12,702 100,000 100,000 100,000 4,142 6,325 9,736 4,043 6,226 9,637
13 14,135 100,000 100,000 100,000 4,392 6,965 11,163 4,392 6,965 11,163
14 15,640 100,000 100,000 100,000 4,615 7,612 12,725 4,615 7,612 12,725
15 17,220 100,000 100,000 100,000 4,809 8,267 14,437 4,809 8,267 14,437
16 18,879 100,000 100,000 100,000 4,972 8,928 16,315 4,972 8,928 16,315
17 20,621 100,000 100,000 100,000 5,105 9,595 18,379 5,105 9,595 18,379
18 22,450 100,000 100,000 100,000 5,197 10,260 20,644 5,197 10,260 20,644
19 24,370 100,000 100,000 100,000 5,247 10,920 23,132 5,247 10,920 23,132
20 26,387 100,000 100,000 100,000 5,258 11,581 25,875 5,258 11,581 25,875
25 38,086 100,000 100,000 100,000 4,777 14,946 44,737 4,777 14,946 44,737
30 53,018 100,000 100,000 130,207 3,271 18,411 76,502 3,271 18,411 76,502
35 72,076 ** 100,000 193,078 ** 21,031 127,562 ** 21,031 127,562
40 96,398 ** 100,000 285,457 ** 21,024 208,545 ** 21,024 208,545
45 127,441 ** 100,000 425,000 ** 15,461 336,607 ** 15,461 336,607
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
24
<PAGE>
DEATH BENEFIT OPTION 3: LEVEL DEATH BENEFIT WITH GREATER FUNDING
ILLUSTRATION ASSUMES MAXIMUM CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,000 100,000 100,000 191 217 242 0 0 0
2 1,636 100,000 100,000 100,000 610 680 754 0 0 11
3 2,516 100,000 100,000 100,000 1,011 1,154 1,308 0 61 216
4 3,439 100,000 100,000 100,000 1,396 1,636 1,907 303 543 815
5 4,409 100,000 100,000 100,000 1,760 2,126 2,554 668 1,033 1,461
6 5,428 100,000 100,000 100,000 2,106 2,623 3,253 1,013 1,531 2,160
7 6,497 100,000 100,000 100,000 2,430 3,126 4,007 1,337 2,033 2,914
8 7,620 100,000 100,000 100,000 2,731 3,633 4,821 1,837 2,739 3,927
9 8,799 100,000 100,000 100,000 3,008 4,142 5,700 2,313 3,447 5,004
10 10,037 100,000 100,000 100,000 3,262 4,654 6,650 2,966 4,358 6,353
11 11,337 100,000 100,000 100,000 3,488 5,166 7,675 3,291 4,968 7,478
12 12,702 100,000 100,000 100,000 3,685 5,675 8,783 3,587 5,576 8,684
13 14,135 100,000 100,000 100,000 3,853 6,179 9,979 3,853 6,179 9,979
14 15,640 100,000 100,000 100,000 3,988 6,678 11,274 3,988 6,678 11,274
15 17,220 100,000 100,000 100,000 4,089 7,167 12,673 4,089 7,167 12,673
16 18,879 100,000 100,000 100,000 4,154 7,644 14,189 4,154 7,644 14,189
17 20,621 100,000 100,000 100,000 4,176 8,103 15,827 4,176 8,103 15,827
18 22,450 100,000 100,000 100,000 4,149 8,535 17,596 4,149 8,535 17,596
19 24,370 100,000 100,000 100,000 4,068 8,936 19,508 4,068 8,936 19,508
20 26,387 100,000 100,000 100,000 3,925 9,295 21,573 3,925 9,295 21,573
25 38,086 100,000 100,000 100,000 2,046 10,156 34,760 2,046 10,156 34,760
30 53,018 ** 100,000 100,000 ** 8,151 55,014 ** 8,151 55,014
35 72,076 ** ** 130,440 ** ** 86,179 ** ** 86,179
40 96,398 ** ** 178,779 ** ** 130,610 ** ** 130,610
45 127,441 ** ** 242,454 ** ** 192,027 ** ** 192,027
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
25
<PAGE>
ADDITIONAL INFORMATION
This section of the prospectus provides additional detailed information that
is not contained in the Basic Information section on pages 3 through 18.
<TABLE>
<CAPTION>
CONTENTS OF THIS SECTION BEGINNING ON PAGE
------------------------ -----------------
<S> <C>
Description of JHVLICO ........................................... 27
How we support the policy and investment options.................. 27
Procedures for issuance of a policy............................... 28
Commencement of investment performance............................ 29
How we process certain policy transactions........................ 29
Effects of policy loans........................................... 31
Additional information about how certain policy charges
work.............................................................. 31
How we market the policies........................................ 32
Tax considerations................................................ 33
Reports that you will receive..................................... 35
Voting privileges that you will have.............................. 35
Changes that JHVLICO can make as to your policy................... 36
Adjustments we make to death benefits............................. 36
When we pay policy proceeds....................................... 36
Other details about exercising rights and paying benefits......... 37
Legal matters..................................................... 37
Registration statement filed with the SEC......................... 37
Accounting and actuarial experts.................................. 38
Financial statements of JHVLICO and the Account................... 38
List of Directors and Executive Officers of JHVLICO............... 39
</TABLE>
26
<PAGE>
DESCRIPTION OF JHVLICO
We are JHVLICO, a stock life insurance company chartered in 1979 under
Massachusetts law. We are authorized to transact a life insurance and annuity
business in all states other than New York and in the District of Columbia. We
began selling variable life insurance policies in 1980.
We are regulated and supervised by the Massachusetts Commissioner of
Insurance, who periodically examines our affairs. We also are subject to the
applicable insurance laws and regulations of all jurisdictions in which we are
authorized to do business. We are required to submit annual statements of our
operations, including financial statements, to the insurance departments of the
various jurisdictions in which we do business for purposes of determining
solvency and compliance with local insurance laws and regulations. The
regulation to which we are subject, however, does not provide a guarantee as to
such matters.
We are a wholly-owned subsidiary of John Hancock Life Insurance Company ("John
Hancock"), a Massachusetts stock life insurance company. On February 1, 2000,
John Hancock Mutual Life Insurance Company (which was chartered in Massachusetts
in 1862) converted to a stock company by "demutualizing" and changed its name to
John Hancock Life Insurance Company. As part of the demutualization process,
John Hancock became a subsidiary of John Hancock Financial Services, Inc., a
newly formed publicly-traded corporation. John Hancock's home office is at John
Hancock Place, Boston, Massachusetts 02117. As of December 31, 1999, John
Hancock's assets were approximately $71 billion and it had invested
approximately $575 million in JHVLICO in connection with JHVLICO's organization
and operation. It is anticipated that John Hancock will from time to time make
additional capital contributions to JHVLICO to enable us to meet our reserve
requirements and expenses in connection with our business. John Hancock is
committed to make additional capital contributions if necessary to ensure that
we maintain a positive net worth.
HOW WE SUPPORT THE POLICY AND INVESTMENT OPTIONS
Separate Account U
The variable investment options shown on page 1 are in fact subaccounts of
Separate Account U (the "Account"), a separate account established by us under
Massachusetts law. The Account 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"). Such registration does not
involve supervision by the SEC of the management of the Account or JHVLICO.
The Account's assets are the property of JHVLICO. Each policy provides that
amounts we hold in the Account pursuant to the policies cannot be reached by any
other persons who may have claims against us.
The assets in each subaccount are invested in the corresponding fund of the
Trust. New subaccounts may be added as new funds are added to the Trust and made
available to policy owners. Existing subaccounts may be deleted if existing
funds are deleted from the Trust.
We will purchase and redeem Trust shares for the Account at their net asset
value without any sales or redemption charges. Shares of the Trust represent an
interest in one of the funds of the Trust which corresponds to a subaccount of
the Account. Any dividend or capital gains distributions received by the Account
will be reinvested in shares of that same fund at their net asset value as of
the dates paid.
On each business day, shares of each fund are purchased or redeemed by us for
each subaccount based on, among other things, the amount of net premiums
allocated to the subaccount, distributions reinvested, and transfers to, from
and among subaccounts, all to be effected as of that date. Such
27
<PAGE>
purchases and redemptions are effected at each fund's net asset value per share
determined for that same date. A "business day" is any date on which the New
York Stock Exchange is open for trading. We compute policy values for each
business day as of the close of that day (usually 4:00 p.m. Eastern Standard
Time).
Our general account
Our obligations under the policy's fixed investment option are backed by our
general account assets. Our general account consists of assets owned by us other
than those in the Account and in other separate accounts that we may establish.
Subject to applicable law, we have sole discretion over the investment of assets
of the general account and policy owners do not share in the investment
experience of, or have any preferential claim on, those assets. Instead, we
guarantee that the account value allocated to the fixed investment option will
accrue interest daily at an effective annual rate of at least 4% without regard
to the actual investment experience of the general account.
Because of exemptive and exclusionary provisions, interests in our fixed
investment option have not been registered under the Securities Act of 1933 and
our 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 we have been advised that the staff
of the SEC has not reviewed the disclosure in this prospectus relating to the
fixed investment option. Disclosure regarding the fixed investment option may,
however, be subject to certain generally-applicable provisions of the Federal
securities laws relating to accuracy and completeness of statements made in
prospectuses.
PROCEDURES FOR ISSUANCE OF A POLICY
Generally, the policy is available with a minimum face amount at issue of
$100,000. At the time of issue, the insured person must have an attained age of
at least 20 and no more than 75. All insured persons must meet certain health
and other insurance risk criteria called "underwriting standards".
Policies issued in Montana or in connection with certain employee plans will
not directly reflect the sex of the insured person 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, may not reflect the rates, charges,
or values that would apply to such policies.
Minimum Initial Premium
The Minimum Initial Premium must be received by us at our Life Servicing
Office in order for the policy to be in full force and effect. There is no grace
period for the payment of the Minimum Initial Premium. The minimum amount of
premium required at the time of policy issue is equal to three monthly
Guaranteed Death Benefit Premiums (see "Guaranteed death benefit feature" in the
Basic Information section of this prospectus). However, if an owner has chosen
to pay premiums on a monthly basis, the minimum amount required is only equal to
one monthly Guaranteed Death Benefit Premium.
Commencement of insurance coverage
After you apply for a policy, it can sometimes take up to several weeks for us
to gather and evaluate all the information we need to decide whether to issue a
policy to you and, if so, what the insured person's rate class should be. After
we approve an application for a policy and assign an appropriate insurance rate
class, we will prepare the policy for delivery. We will not pay a death benefit
under a policy unless the policy is in effect when the insured person dies
(except for the circumstances described under "Temporary insurance coverage
prior to policy delivery" on page 29).
The policy will take effect only if all of the following conditions are
satisfied:
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. The policy is delivered to and received by the applicant.
. The Minimum Initial Premium is received by us.
. Each insured person is living and still meets our health criteria for
issuing insurance.
If all of the above conditions are satisfied, the policy will take effect on
the date shown in the policy as the "date of issue." That is the date on which
we begin to deduct monthly charges. Policy months, policy years and policy
anniversaries are all measured from the date of issue.
Backdating
In order to preserve a younger age at issue for the insured person, we can
designate a date of issue that is up to 60 days earlier than the date that would
otherwise apply. This is referred to as "backdating" and is allowed under state
insurance laws. Backdating can also be used in certain corporate-owned life
insurance cases involving multiple policies to retain a common monthly deduction
date.
The conditions for coverage described above under "Commencement of insurance
coverage" must still be satisfied, but in a backdating situation the policy
always takes effect retroactively. Backdating results in a lower insurance
charge (because of the insured person's younger age at issue), but monthly
charges begin earlier than would otherwise be the case. Those monthly charges
will be deducted as soon as we receive premiums sufficient to pay them.
Temporary coverage prior to policy delivery
If a specified amount of premium is paid with the application for a policy and
other conditions are met, we will provide temporary term life insurance coverage
on the insured person for a period prior to the time coverage under the policy
takes effect. Such temporary term coverage will be subject to the terms and
conditions described in the application for the policy, including limits on
amount and duration of coverage.
Monthly deduction dates
Each charge that we deduct monthly is assessed against your account value or
the subaccounts at the close of business on the date of issue and at the close
of the first business day in each subsequent policy month.
COMMENCEMENT OF INVESTMENT PERFORMANCE
All premium payments will be allocated among the investment options you have
chosen as soon as they are processed.
HOW WE PROCESS CERTAIN POLICY TRANSACTIONS
Premium payments
We will process any premium payment as of the day we receive it, unless one of
the following exceptions applies:
(1) We will process a payment received prior to a policy's date of issue as if
received on the date of issue.
(2) If the Minimum Initial Premium is not received prior to the date of issue,
we will process each premium payment received thereafter as if received on the
business day immediately preceding the date of issue until all of the Minimum
Initial Premium is received.
(3) We will process the portion of any premium payment for which we require
evidence of the insured person's continued insurability only after we have
received such evidence and found it satisfactory to us.
(4) If we receive any premium payment that we think will cause a policy to
become a modified endowment or will cause a policy to lose its status as life
insurance under the tax laws, we will not accept the excess portion of that
premium payment and will immediately notify the owner. We will refund the excess
premium when the premium payment check has had time to clear the banking system
(but in no
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case more than two weeks after receipt), except in the following circumstances:
. The tax problem resolves itself prior to the date the refund is to be
made; or
. The tax problem relates to modified endowment status and we receive a
signed acknowledgment from the owner prior to the refund date instructing
us to process the premium notwithstanding the tax issues involved.
In the above cases, we will treat the excess premium as having been received on
the date the tax problem resolves itself or the date we receive the signed
acknowledgment. We will then process it accordingly.
(5) If a premium payment is received or is otherwise scheduled to be processed
(as specified above) on a date that is not a business day, the premium payment
will be processed on the business day next following that date.
Transfers among investment options
Any reallocation among investment options must be such that the total in all
investment options after reallocation equals 100% of account value. Transfers
out of a variable investment option will be effective at the end of the business
day in which we receive at our Life Servicing Office notice satisfactory to us.
If received on or before the policy anniversary, requests for transfer out of
the fixed investment option will be processed on the policy anniversary (or the
next business day if the policy anniversary does not occur on a business day).
If received after the policy anniversary, such a request will be processed at
the end of the business day in which we receive the request at our Life
Servicing Office. If you request a transfer out of the fixed investment option
61 days or more prior to the policy anniversary, we will not process that
portion of the reallocation, and your confirmation statement will not reflect a
transfer out of the fixed investment option as to such request. Currently, there
is no minimum amount limit on transfers into the fixed investment option, but we
reserve the right to impose such a limit in the future. We have the right to
defer transfers of amounts out of the fixed investment option for up to six
months.
Dollar cost averaging
Scheduled transfers under this option may be made from the Money Market
investment option to not more than nine other variable investment options.
However, the amount transferred to any one investment option must be at least
$100.
Once we receive the election in form satisfactory to us at our Life Servicing
Office, transfers will begin on the second monthly deduction date following its
receipt. 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 for
so long as you have at least $2,500 of your account value in the Money Market
investment option, or until we receive written notice from you of cancellation
of the option or notice of the death of the insured person. We reserve the right
to modify, terminate or suspend the dollar cost averaging program at any time.
Telephone transfers and policy loans
Once you have completed a written authorization, you may request a transfer or
policy loan by telephone or by fax. If the fax request option becomes
unavailable, another means of telecommunication will be substituted.
If you authorize telephone transactions, you will be liable for any loss,
expense or cost arising out of any unauthorized or fraudulent telephone
instructions which we reasonably believe to be genuine, unless such loss,
expense or cost is the result of our mistake or negligence. We employ procedures
which provide safeguards against the execution of unauthorized transactions, and
which are reasonably designed to confirm that instructions received by telephone
are genuine. These procedures include requiring personal identification, tape
recording calls, and providing
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confirm that instructions communicated by telephone are genuine, we may be
liable for any loss due to unauthorized or fraudulent instructions.
Effective date of other policy transactions
The following transactions take effect on the policy anniversary on or next
following the date we approve your request:
. Face amount increases, when and if permitted by our administrative rules
. Change of death benefit option
Face amount decreases or reinstatements of lapsed policies take effect on the
monthly deduction date on or next following the date we approve the request for
decrease or reinstatement.
We process loans, surrenders, partial withdrawals and loan repayments as of
the day we receive such request or repayment.
EFFECTS OF POLICY LOANS
The account value, the surrender value, and any death benefit above the face
amount are permanently affected by any loan, whether or not it is repaid in
whole or in part. This is because the amount of the loan is deducted from the
investment options and placed in a special loan account. The investment options
and the special loan account will generally have different rates of investment
return.
The amount of the outstanding loan (which includes accrued and unpaid
interest) is subtracted from the amount otherwise payable when the policy
proceeds become payable.
Whenever the outstanding loan equals or exceeds the surrender value, the
policy will terminate 31 days after we have mailed notice of termination to you
(and to any assignee of record at such assignee's last known address) specifying
the minimum amount that must be paid to avoid termination, unless a repayment of
at least the amount specified is made within that period.
ADDITIONAL INFORMATION ABOUT HOW CERTAIN POLICY CHARGES WORK
Sales expenses and related charges
The sales charges (i.e., the premium sales charge and the CDSC) help to
compensate us for the cost of selling our policies. (See "What charges will
JHVLICO deduct from my investment in the policy?" in the Basic Information
section of this prospectus.) The amount of the charges in any policy year does
not specifically correspond to sales expenses for that year. We expect to
recover our total sales expenses over the life of the policies. To the extent
that the sales charges do not 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 our
general assets. (See "How we market the policies" on page 32.)
Effect of premium payment pattern
You 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 your total sales charges over time. For example,
if the Target Premium was $1,000 and you paid a premium of $1,000 in each of the
first ten policy years, you would pay total premium sales charges of $400 and be
subject to a maximum CDSC of $780. If you paid $2,000 (i.e., two times the
Target Premium amount) in every other policy year up to the tenth policy year,
you would pay total premium sales charges of only $200 and be subject to a
maximum CDSC of only $520. 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. Conversely, accelerating
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the payment of Target 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 you
upon receipt of policy distributions. (See "Tax considerations" beginning on
page 33.)
Monthly charges
We deduct the monthly charges described in the Basic Information section from
your policy's investment options in proportion to the amount of account value
you have in each. For each month that we cannot deduct any charge because of
insufficient account value, the uncollected charges will accumulate and be
deducted when and if sufficient account value becomes available.
The insurance under the policy continues in full force during any grace period
but, if the insured person dies during the policy grace period, the amount of
unpaid monthly charges is deducted from the death benefit otherwise payable.
Reduced charges for eligible classes
The charges 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 we anticipate that the sales to the members of the class will
result in lower than normal sales or administrative expenses, lower taxes or
lower risks to us. We will make these reductions in accordance with our rules in
effect at the time of the application for a policy. The factors we consider 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 lapse and surrender rates 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 result in a reduction
in sales or administrative expenses, lower taxes or lower risks. Any reduction
in charges will be reasonable and will apply uniformly to all prospective policy
purchasers in the class and will not unfairly discriminate against any owner.
HOW WE MARKET THE POLICIES
Signator Investors, Inc. ("Signator"), an indirect wholly-owned subsidiary of
John Hancock located at 197 Clarendon Street, Boston, MA 02117, is registered as
a broker-dealer under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. and the Securities Investor
Protection Corporation. Signator acts as principal underwriter and principal
distributor of the policies pursuant to a sales agreement among John Hancock,
Signator, JHVLICO, and the Account. Signator also serves as principal
underwriter for 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, all of which are registered under the 1940 Act. Signator is
also the principal underwriter for John Hancock Variable Series Trust I.
Applications for policies are solicited by agents who are licensed by state
insurance authorities to sell JHVLICO's policies and who are also registered
representatives ("representatives") of Signator or other broker-dealer firms, as
discussed below. John Hancock (on behalf of JHVLICO) performs insurance
underwriting and determines whether to accept or reject the application for a
policy and each insured person's risk classification. JHVLICO will make the
appropriate refund if a policy ultimately is not issued or is returned under the
"free look" 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.
Signator's representatives are compensated for sales of the policies on a
commission and service fee
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basis by Signator, and JHVLICO reimburses Signator 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 Signator 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 policy year thereafter. The maximum commission on
any premium paid in any policy year in excess of the Target Premium is 3%.
Representatives with less than four years of service with Signator 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.
The policies are also sold through other registered broker-dealers that have
entered into selling agreements with Signator 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 Signator's 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. Signator will compensate the
broker-dealers as provided in the selling agreements, and JHVLICO will reimburse
Signator for such amounts and for certain other direct expenses in connection
with marketing the policies through other broker-dealers.
Representatives of Signator and the other broker-dealers mentioned above may
also earn "credits" toward qualification for attendance at certain business
meetings sponsored by John Hancock.
The offering of the policies is intended to be continuous, but neither JHVLICO
nor Signator is obligated to sell any particular amount of policies.
TAX CONSIDERATIONS
This description of federal income tax consequences is only a brief summary
and is not intended as tax advice. Tax consequences will vary based on your own
particular circumstances, and for further information you should consult a
qualified tax advisor. Federal, state and local tax laws, regulations and
interpretations can change from time to time. As a result, the tax consequences
to you and the beneficiary may be altered, in some cases retroactively.
Policy proceeds
We believe the policy will receive the same federal income and estate tax
treatment as fixed benefit life insurance policies. Section 7702 of the Internal
Revenue Code (the "Code") defines life insurance for federal tax purposes. If
certain standards are met at issue and over the life of the policy, the policy
will satisfy that definition. We will monitor compliance with these standards.
If the policy complies with the definition of life insurance, we believe the
death benefit under the policy will be excludable from the beneficiary's gross
income under 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 distributions.
Distributions for tax purposes can include amounts received upon surrender or
partial withdrawals. You may also be deemed to have received a distribution for
tax purposes if you assign
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all or part of your policy rights or change your policy's ownership.
In general, the owner will be taxed on the amount of distributions that exceed
the premiums paid under the policy. But under certain circumstances within the
first 15 policy years, the owner may be taxed on a distribution even if total
withdrawals do not exceed total premiums paid. Any taxable distribution will be
ordinary income to the owner (rather than capital gains).
We also believe 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 outstanding loan that
was not previously considered income (as discussed below) will be treated as if
it had been distributed to the owner if the policy terminates for any reason.
It is possible that, despite our monitoring, a policy might fail to qualify as
life insurance under Section 7702 of the Code. This could happen, for example,
if we inadvertently failed to return to you any premium payments that were in
excess of permitted amounts, or if the Trust failed to meet certain investment
diversification or other requirements of the Code. If this were to occur, you
would be subject to income tax on the income and gains under the policy for the
period of the disqualification and for subsequent periods.
In the past, the United States Treasury Department has stated that it
anticipated issuing guidelines prescribing circumstances in which the ability of
a policy owner to direct his or her investment to particular funds may cause the
policy owner, rather than the insurance company, to be treated as the owner of
the shares of those funds. In that case, any income and gains attributable to
those shares would be included in your current gross income for federal income
tax purposes. Under current law, however, we believe that we, and not the owner
of a policy, would be considered the owner of the fund's shares for tax
purposes.
Tax consequences of ownership or receipt of policy proceeds under federal,
state and local estate, inheritance, gift and other tax laws depend on the
circumstances of each owner or beneficiary.
Because there may be unfavorable tax consequences (including recognition of
taxable income and the loss of income tax-free treatment for any death benefit
payable to the beneficiary), you should consult a qualified tax adviser prior to
changing the policy's ownership or making any assignment of ownership interests.
7-pay premium limit
At the time of policy issuance, we will determine whether the Planned Premium
schedule will exceed the 7-pay limit discussed below. If so, our standard
procedures prohibit issuance of the policy unless you sign a form acknowledging
that fact.
The 7-pay limit is the total of net level premiums that would have been
payable at any time for a comparable fixed policy to be fully "paid-up" after
the payment of 7 equal annual premiums. "Paid-up" means that no further premiums
would be required to continue the coverage in force until maturity, based on
certain prescribed assumptions. If the total premiums paid at any time during
the first 7 policy years exceed the 7-pay limit, the policy will be treated as a
"modified endowment", which can have adverse tax consequences.
The owner will be taxed on distributions and loans from a "modified endowment"
to the extent of any income (gain) to the owner (on an income-first basis). The
distributions and loans 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 taxable portions of such
distributions or loans that are made before the owner attains age 591/2.
Furthermore, any time there is a "material change" in a policy (such as a face
amount increase, the addition of certain other policy benefits after
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issue, a change in death benefit option, or reinstatement of a lapsed policy),
the policy will have a new 7-pay limit as if it were a newly-issued policy. If a
prescribed portion of the policy's then account value, plus all other premiums
paid within 7 years after the material change, at any time exceed the new 7-pay
limit, the policy will become a modified endowment.
Moreover, if benefits under a policy are reduced (such as a reduction in the
face amount or death benefit or the reduction or cancellation of certain rider
benefits) during the 7 years in which a 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 its affiliates) to the
owner during any calendar year generally will be treated as one contract for the
purpose of applying the modified endowment rules. A policy received in exchange
for a modified endowment will itself also be a modified endowment. You should
consult your tax advisor if you have questions regarding the possible impact of
the 7-pay limit on your policy.
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. We are not responsible for compliance with the
terms of any such plan or with the requirements of applicable provisions of the
Code.
REPORTS THAT YOU WILL RECEIVE
At least annually, we will send you a statement setting forth the following
information as of the end of the most recent reporting period: the amount of the
death benefit and account value, the portion of the account value in each
investment option, the 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). Moreover, you also will receive
confirmations of premium payments, transfers among investment options, policy
loans, partial withdrawals and certain other policy transactions.
Semiannually we will send you a report containing the financial statements of
the Trust, including a list of securities held in each fund.
VOTING PRIVILEGES THAT YOU WILL HAVE
All of the assets in the subaccounts of the Account are invested in shares of
the corresponding funds of the Trust. We will vote the shares of each of the
funds of the Trust which are deemed attributable to variable life insurance
policies at regular and special meetings of the Trust's shareholders in
accordance with instructions received from owners of such policies. Shares of
the Trust held in the Account which are not attributable to such policies, as
well as shares for which instructions from owners are not received, will be
represented by us at the meeting. We will vote such shares for and against each
matter in the same proportions as the votes based upon the instructions received
from the owners of such policies.
We determine the number of a fund's shares held in a subaccount attributable
to each owner by dividing the amount of a policy's account value held in the
subaccount by the net asset value of one share in the fund. Fractional votes
will be counted. We determine the number of shares as to which the owner may
give instructions as of the record date for the Trust's meeting. Owners of
policies may give instructions regarding the election of the Board of Trustees
of the Trust, ratification of the selection of independent auditors, approval of
Trust investment advisory agreements and other matters requiring a shareholder
vote. We will furnish owners with
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information and forms to enable owners to give voting instructions.
However, we may, in certain limited circumstances permitted by the SEC's
rules, disregard voting instructions. If we do disregard voting instructions,
you will receive a summary of that action and the reasons for it in the next
semi-annual report to owners.
CHANGES THAT JHVLICO CAN MAKE AS TO YOUR POLICY
Changes relating to the Trust or the Account
The voting privileges described in this prospectus reflect our 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, we reserve the right to proceed in accordance with any
such revised requirements. We also reserve 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 your policy belongs from the Account to another separate account or
subaccount, (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, John Hancock or an affiliate of either, (3)
to deregister the Account under the 1940 Act, (4) to substitute for the fund
shares held by a subaccount any other investment permitted by law, and (5) to
take any action necessary to comply with or obtain any exemptions from the 1940
Act. We 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.
Other permissible changes
We reserve the right to make any changes in the policy necessary to ensure the
policy is within the definition of life insurance under the Federal tax laws and
is in compliance with any changes in Federal or state tax laws.
In our policies, we reserve the right to make certain changes if they would
serve the best interests of policy owners or would be appropriate in carrying
out the purposes of the policies. Such changes include the following:
. Changes necessary to comply with or obtain or continue exemptions under
the federal securities laws
. Combining or removing investment options
. Changes in the form of organization of any separate account
Any such changes will be made only to the extent permitted by applicable laws
and only in the manner permitted by such laws. When required by law, we will
obtain your approval of the changes and the approval of any appropriate
regulatory authority.
ADJUSTMENTS WE MAKE TO DEATH BENEFITS
If the insured person commits suicide within certain time periods, the amount
of death benefit we pay will be limited as described in the policy. Also, if an
application misstated the age or gender of the insured person, we will adjust
the amount of any death benefit as described in the policy.
WHEN WE PAY POLICY PROCEEDS
General
We will pay any death benefit, withdrawal, surrender value or loan within 7
days after we receive the last required form or request (and, with respect to
the death benefit, any other documentation that may be required). If we don't
have information about the desired manner of payment within 7 days after the
date we receive notification of the insured person's
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death, we will pay the proceeds as a single sum, normally within 7 days
thereafter.
Delay to challenge coverage
We may challenge the validity of your insurance policy based on any material
misstatements made to us in the application for the policy. We cannot make such
a challenge, however, beyond certain time limits that are specified in the
policy.
Delay for check clearance
We reserve the right to defer payment of that portion of your account value
that is attributable to a premium payment made by check for a reasonable period
of time (not to exceed 15 days) to allow the check to clear the banking system.
Delay of separate account proceeds
We reserve the right to defer payment of any death benefit, loan or other
distribution that is derived from a variable investment option if (a) the New
York Stock Exchange is closed (other than customary weekend and holiday
closings) or trading on the New York Stock Exchange is restricted; (b) an
emergency exists, as a result of which disposal of securities is not reasonably
practicable or it is not reasonably practicable to fairly determine the account
value; or (c) the SEC by order permits the delay for the protection of owners.
Transfers and allocations of account value among the investment options may also
be postponed under these circumstances. If we need to defer calculation of
separate account values for any of the foregoing reasons, all delayed
transactions will be processed at the next values that we do compute.
OTHER DETAILS ABOUT EXERCISING RIGHTS AND PAYING BENEFITS
Joint ownership
If more than one person owns a policy, all owners must join in most requests
to exercise rights under the policy.
Assigning your policy
You may assign your rights in the policy to someone else as collateral for a
loan or for some other reason. Assignments do not require the consent of any
revocable beneficiary. A copy of the assignment must be forwarded to us. We are
not responsible for any payment we make or any action we take before we receive
notice of the assignment in good order. Nor are we responsible for the validity
of the assignment. An absolute assignment is a change of ownership. All
collateral assignees of record must consent to any full surrender, partial
withdrawal or loan from the policy.
Your beneficiary
You name your beneficiary when you apply for the policy. The beneficiary is
entitled to the proceeds we pay following the insured person's death. You may
change the beneficiary during the insured person's lifetime. Such a change
requires the consent of any irrevocable named beneficiary. A new beneficiary
designation is effective as of the date you sign it, but will not affect any
payments we make before we receive it. If no beneficiary is living when the
insured person dies, we will pay the insurance proceeds to the owner or the
owner's estate.
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 us on certain
Federal securities law matters in connection with the policies.
REGISTRATION STATEMENT FILED WITH THE SEC
This prospectus omits certain information contained in the Registration
Statement which has been filed with the SEC. More details may be obtained from
the SEC upon payment of the prescribed fee.
37
<PAGE>
ACCOUNTING AND ACTUARIAL EXPERTS
Certain of 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 Todd G. Engelsen, F.S.A., an Actuary of JHVLICO
and Second Vice President of John Hancock.
FINANCIAL STATEMENTS OF JHVLICO AND THE ACCOUNT
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.
In addition to those financial statements of JHVLICO and the Account included
herein that have been audited by Ernst & Young LLP, this prospectus also
contains unaudited financial statements of both JHVLICO and the Account for a
period subsequent to the audited financial statements.
38
<PAGE>
LIST 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 and Executive Principal Occupations
----------------------- ---------------------
Officers
--------
<S> <C>
David F. D'Alessandro......... Chairman of the Board and Chief Executive
Officer of JHVLICO; President and Chief
Executive Officer, John Hancock Life Insurance
Company.
Michele G. Van Leer........... Vice Chairman of the Board and President of
JHVLICO; Senior Vice President, John Hancock
Life Insurance Company.
Ronald J. Bocage.............. Director, Vice President and Counsel of JHVLICO;
Vice President and Counsel, John Hancock Life
Insurance Company.
Bruce M. Jones................ Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Thomas J. Lee................. Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Barbara L. Luddy.............. Director, Vice President and Actuary of JHVLICO;
Senior Vice President, John Hancock Life
Insurance Company.
Robert S. Paster.............. Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Robert R. Reitano............. Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Paul Strong................... Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Daniel L. Ouellette........... Vice President, Marketing, of JHVLICO; Senior
Vice President, John Hancock Life Insurance
Company.
Edward P. Dowd................ Vice President, Investments, of JHVLICO; Senior
Vice President, John Hancock Life Insurance
Company
Roger G. Nastou............... Vice President, Investments, of JHVLICO; Vice
President, John Hancock Life Insurance Company
Todd G. Engelsen.............. Vice President and Illustration Actuary of
JHVLICO; Second Vice President, John Hancock
Life Insurance Company
Julie H. Indge................ Treasurer of JHVLICO; Financial Officer, John
Hancock Life Insurance Company
Patrick J. Gill............... Controller of JHVLICO; Senior Associate
Controller, John Hancock Life Insurance Company.
Peter Scavongelli............. Secretary of JHVLICO; State Compliance Officer,
John Hancock Life Insurance Company
</TABLE>
The business address of all Directors and officers of JHVLICO is John Hancock
Place, Boston, Massachusetts 02117.
39
<PAGE>
UNAUDITED FINANCIAL STATEMENTS
FOR
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
SECOND QUARTER 2000
40
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
2000 1999
-------- ------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Bonds.................................. $ 1,344.7 $ 1,216.3
Preferred stocks....................... 36.9 35.9
Common stocks.......................... 2.0 3.2
Investment in affiliates............... 80.5 80.7
Mortgage loans on real estate.......... 468.2 433.1
Real estate............................ 24.7 25.0
Policy loans........................... 195.5 172.1
Cash Items:
Cash in banks......................... (3.0) 27.2
Temporary cash investments............ 284.6 222.9
--------- ---------
281.6 250.1
Premiums due and deferred.............. 28.9 29.9
Investment income due and accrued...... 40.9 33.2
Other general account assets........... 43.7 65.3
Assets held in separate accounts....... 8,569.0 8,268.2
--------- ---------
Total assets......................... $11,116.6 $10,613.0
========= =========
OBLIGATIONS AND STOCKHOLDER'S EQUITY
Obligations
Policy reserves....................... $ 2,048.1 $ 1,866.6
Federal income and other taxes
payable.............................. 97.8 67.3
Other general account obligations..... 207.4 219.0
Transfers from separate account, net.. (229.6) (221.6)
Asset valuation reserve............... 19.3 23.1
Obligations related to separate
accounts............................. 8,562.1 8,261.6
--------- ---------
Total obligations.................... 10,705.1 10,216.0
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....................... 572.4 572.4
Unassigned deficit.................... (163.4) (177.9)
--------- ---------
Total stockholder's equity............ 411.5 397.0
--------- ---------
Total obligations and stockholder's
equity.............................. $11,116.6 $10,613.0
========= =========
See condensed notes to the financial
statements (unaudited)
</TABLE>
41
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -----------------
2000 1999 2000 1999
------- ------- ------- ------
(IN MILLIONS)
<S> <C> <C> <C> <C>
INCOME
Premiums.............................. $ 255.7 $228.6 $ 487.0 $452.2
Net investment income................. 43.4 31.9 83.0 64.4
Other, net............................ 110.1 116.6 242.5 261.9
------- ------ ------- ------
409.2 377.1 812.5 778.5
BENEFITS AND EXPENSES
Payments to policyholders and
beneficiaries........................ 93.2 94.1 182.4 174.4
Additions to reserves to provide for
future payments to policyholders and
beneficiaries........................ 213.4 198.6 429.7 436.8
Expenses of providing service to
policyholders and obtaining new
insurance............................ 80.4 77.8 153.9 153.5
State and miscellaneous taxes......... 5.7 8.1 13.3 10.9
------- ------ ------- ------
392.7 378.6 779.3 775.6
------- ------ ------- ------
Gain from operations before federal
income taxes and net realized
capital gains (losses).............. 16.5 (1.5) 33.2 2.9
Federal income taxes.................. 12.2 (1.4) 16.9 (0.4)
------- ------ ------- ------
Gain from operations before net
realized capital gains (losses)..... 4.3 (0.1) 16.3 3.3
Net realized capital gains (losses)... 0.1 0.5 0.5 (1.0)
------- ------ ------- ------
Net income.......................... 4.4 0.4 16.8 2.3
Unassigned deficit at beginning of
period............................... (164.5) (51.2) (177.9) (49.2)
Net unrealized capital gains (losses)
and other adjustments................ (3.1) (3.4) (2.0) (3.1)
Other reserves and adjustments........ (0.2) 2.0 (0.3) (2.2)
------- ------ ------- ------
Unassigned deficit at end of period. $(163.4) $(52.2) $(163.4) $(52.2)
======= ====== ======= ======
See condensed notes to the financial
statements (unaudited)
</TABLE>
42
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
-----------------
2000 1999
-------- -------
(IN MILLIONS)
<S> <C> <C>
Cash flows from operating activities:
Insurance premiums...................................... $ 495.7 $ 452.0
Net investment income................................... 75.2 60.5
Benefits to policyholders and beneficiaries............. (167.9) (274.6)
Dividends paid to policyholders.......................... (13.0) (12.6)
Insurance expenses and taxes............................. (174.4) (195.0)
Net transfers to separate accounts....................... (254.7) (343.7)
Other, net.............................................. 257.1 289.9
------- -------
Net cash provided from operations...................... 218.0 (23.5)
------- -------
Cash flows used in investing activities:
Bond purchases.......................................... (305.5) (143.7)
Bond sales.............................................. 128.1 41.3
Bond maturities and scheduled redemptions............... 36.6 38.9
Bond prepayments........................................ 7.9 8.0
Stock purchases......................................... (1.9) (0.2)
Proceeds from stock sales............................... 1.4 3.6
Real estate purchases................................... (0.1) (1.5)
Real estate sales....................................... 0.0 17.9
Other invested assets purchases......................... (2.0) (4.5)
Proceeds from the sale of other invested assets......... 0.0 0.0
Mortgage loans issued................................... (49.7) (39.4)
Mortgage loan repayments................................ 14.5 11.4
Other, net.............................................. (15.8) 75.1
------- -------
Net cash used in investing activities.................. (186.5) 6.9
------- -------
Cash flows from financing activities:
Net increase (decrease) in short-term note payable...... (0.0) (10.7)
------- -------
Net cash provided from financing activities............ (0.0) (10.7)
------- -------
Increase (decrease) in cash and temporary cash
investments........................................... 31.5 (27.3)
Cash and temporary cash investments at beginning of year. 250.1 19.9
------- -------
Cash and temporary cash investments at the end of
period................................................ $ 281.6 $ (7.4)
======= =======
See condensed notes to the financial statements
(unaudited)
</TABLE>
43
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON PAID-IN UNASSIGNED
STOCK CAPITAL DEFICIT TOTAL
------ ------- ---------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C>
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
Balance at January 1, 1999.............. $2.5 $377.5 $ (49.2) $330.8
1999 Transactions:
Capital contribution
Net gain............................... 2.3 2.3
Net unrealized capital gains and other
adjustments........................... (3.1) (3.1)
Other reserves and adjustments......... (2.2) (2.2)
------- ------
Balance at June 30, 1999................ $2.5 $377.5 $ (52.2) $327.8
==== ====== ======= ======
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
Balance at January 1, 2000.............. $2.5 $572.4 $(177.9) $397.0
2000 Transactions:
Capital contribution
Net gain............................... 16.8 16.8
Net unrealized capital gains and other
adjustments........................... (2.0) (2.0)
Other reserves and adjustments......... (0.3) (0.3)
------- ------
Balance at June 30, 2000................ $2.5 $572.4 $(163.4) $411.5
==== ====== ======= ======
See condensed notes to the financial
statements (unaudited)
</TABLE>
44
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited interim financial statements have been prepared on
the basis of 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, which practices differ from
generally accepted accounting principles (GAAP). Pursuant to Financial
Accounting Standard Board Interpretation 40, "Applicability of General Accepted
Accounting Principles to Mutual Life Insurance and Other Enterprises" (FIN 40),
as amended which was effective for 1996 financial statements, financial
statements based on statutory accounting practices can no longer be described as
prepared in conformity with GAAP.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six-month period ending June 30, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000.
45
<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, 1999
and 1998, 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.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Commonwealth of Massachusetts Division of Insurance, which
practices differ from accounting principles generally accepted in the United
States. The variances between such practices and accounting principles generally
accepted in the United States also are described in Note 1. The effects on the
financial statements of these variances are not reasonably determinable but are
presumed to be material.
In our opinion, because of the effects of the matter described in the
preceding paragraph, the financial statements referred to above do not present
fairly, in conformity with accounting principles generally accepted in the
United States, the financial position of John Hancock Variable Life Insurance
Company at December 31, 1999 and 1998, or the results of its operations or its
cash flows for the years then ended.
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of John Hancock
Variable Life Insurance Company at December 31, 1999 and 1998, and the results
of its operations and its cash flows for the years then ended in conformity with
accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance.
ERNST & YOUNG LLP
Boston, Massachusetts
March 10, 2000
46
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1999 1998
---------- -----------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Bonds--Note 6........................................ $ 1,216.3 $1,185.8
Preferred stocks..................................... 35.9 36.5
Common stocks........................................ 3.2 3.1
Investment in affiliates............................. 80.7 81.7
Mortgage loans on real estate--Note 6................ 433.1 388.1
Real estate.......................................... 25.0 41.0
Policy loans......................................... 172.1 137.7
Cash items:
Cash in banks..................................... 27.2 11.4
Temporary cash investments........................ 222.9 8.5
--------- --------
250.1 19.9
Premiums due and deferred............................ 29.9 32.7
Investment income due and accrued.................... 33.2 29.8
Other general account assets......................... 65.3 47.5
Assets held in separate accounts..................... 8,268.2 6,595.2
--------- --------
TOTAL ASSETS........................................ $10,613.0 $8,599.0
========= ========
OBLIGATIONS AND STOCKHOLDER'S EQUITY
OBLIGATIONS
Policy reserves.................................... $ 1,866.6 $1,652.0
Federal income and other taxes payable--Note 1..... 67.3 44.3
Other general account obligations.................. 219.0 150.9
Transfers from separate accounts, net.............. (221.6) (190.3)
Asset valuation reserve--Note 1.................... 23.1 21.9
Obligations related to separate accounts........... 8,261.6 6,589.4
--------- --------
TOTAL OBLIGATIONS...................................
10,216.0 8,268.2
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.................................... 572.4 377.5
Unassigned deficit--Note 10........................ (177.9) (49.2)
--------- --------
TOTAL STOCKHOLDER'S EQUITY......................... 397.0 330.8
--------- --------
TOTAL OBLIGATIONS AND STOCKHOLDER'S EQUITY.......... $10,613.0 $8,599.0
========= ========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
47
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998
--------- ---------
(IN MILLIONS)
<S> <C> <C>
INCOME
Premiums.................................................... $1,272.3
Net investment income--Note 3............................... 136.0 122.8
Other, net.................................................. 605.4 618.1
--------- --------
1,692.2 2,013.2
BENEFITS AND EXPENSES
Payments to policyholders and beneficiaries................. 349.9 301.4
Additions to reserves to provide for future payments to
policyholders and beneficiaries.......................... 888.8 1,360.2
Expenses of providing service to policyholders and
obtaining new insurance--Note 5............................ 314.4 274.2
State and miscellaneous taxes............................... 20.5 28.1
--------- --------
1,573.6 1,963.9
--------- --------
Gain from operations before federal income
taxes and net realized capital losses...................... 118.6 49.3
Federal income taxes--Note 1................................ 42.9 33.1
--------- --------
GAIN FROM OPERATIONS BEFORE NET REALIZED CAPITAL LOSSES.... 75.7 16.2
Net realized capital losses--Note 4......................... (1.7) (0.6)
--------- --------
NET INCOME................................................ 74.0 15.6
Unassigned deficit at beginning of year..................... (49.2) (58.3)
Net unrealized capital losses and other adjustments--Note 4. (3.8) (6.0)
Other reserves and adjustments--Note 10..................... (198.9) (0.5)
--------- --------
UNASSIGNED DEFICIT AT END OF YEAR....................... $ (177.9) $ (49.2)
========= ========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
48
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1999 1998
-------- --------
(IN MILLIONS)
<S> <C> <C>
Cash flows from operating activities:
Insurance premiums............................
Net investment income......................... 134.2 118.2
Benefits to policyholders and beneficiaries... (321.6) (275.5)
Dividends paid to policyholders.................. (25.6) (22.3)
Insurance expenses and taxes..................... (344.8) (296.9)
Net transfers to separate accounts............... (705.3) (874.4)
Other, net.................................... 540.6 551.3
------- -------
NET CASH PROVIDED FROM OPERATIONS.............. 236.0 475.7
------- -------
Cash flows used in investing activities:
Bond purchases................................ (240.7) (618.8)
Bond sales.................................... 108.3 340.7
Bond maturities and scheduled redemptions..... 78.4 111.8
Bond prepayments.............................. 18.7 76.5
Stock purchases............................... (3.9) (23.4)
Proceeds from stock sales..................... 3.6 1.9
Real estate purchases......................... (2.2) (4.2)
Real estate sales............................. 17.8 2.1
Other invested assets purchases............... (4.5) 0.0
Mortgage loans issued......................... (70.7) (145.5)
Mortgage loan repayments...................... 25.3 33.2
Other, net.................................... (68.9) (435.2)
------- -------
NET CASH USED IN INVESTING ACTIVITIES........... (138.8) (660.9)
------- -------
Cash flows from financing activities:
Capital contribution.......................... 194.9
Net (decrease) increase in short-term note
payable...................................... (61.9) 61.9
------- -------
NET CASH PROVIDED FROM FINANCING ACTIVITIES..... 133.0 61.9
------- -------
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH
INVESTMENTS...................................... 230.2
Cash and temporary cash investments at beginning
of year......................................... 19.9 143.2
------- -------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF
YEAR............................................ 250.1 $ 19.9
======= =======
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
49
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES
John Hancock Variable Life Insurance Company (the Company) is a wholly-owned
subsidiary of John Hancock Life Insurance Company (formerly 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, Signator Insurance Agency, which includes a career
agency system composed of Company-supported independent general agencies and a
direct brokerage system that markets directly to external independent brokers.
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 in
relation to future estimated gross profits; (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, 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
During March 1998, the NAIC adopted codified statutory accounting principles
("Codification") effective January 1, 2001. Codification will likely change, to
some extent, prescribed statutory accounting practices and may result in changes
to the accounting practices that the Company uses to prepare its statutory-basis
financial statements. Codification will require adoption by the various states
before it becomes the prescribed statutory basis of accounting for insurance
companies domesticated within those states. Accordingly, before Codification
becomes effective for the Company, the Commonwealth of Massachusetts must adopt
Codification as the prescribed basis of accounting on which domestic insurers
must report their statutory-basis results to the Division
50
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
of Insurance. At this time, it is anticipated that the Commonwealth of
Massachusetts will adopt Codification effective January 1, 2001. The impact of
any such changes on the Company's unassigned deficit is not expected to be
material.
Revenues and Expenses
Premium revenues are recognized over the premium-paying period of the policies
whereas expenses, including the acquisition costs of new business, are charged
to operations as incurred and policyholder dividends are provided as paid or
accrued.
Cash and Temporary Cash Investments
Cash includes currency on hand and demand deposits with financial
institutions. Temporary cash investments are short-term, highly-liquid
investments both readily convertible to known amounts of cash and so near
maturity that there is insignificant risk of changes in value because of changes
in interest rates.
Valuation of Assets
General account investments are carried at amounts determined on the following
bases:
Bond and stock values are carried as prescribed by the NAIC; bonds generally
at amortized amounts or cost, preferred stocks generally at cost and common
stocks at fair value. The discount or premium on bonds is amortized using the
interest method.
Investments in affiliates are included on the statutory equity method.
Loan-backed bonds and structured securities are valued at amortized cost using
the interest method including anticipated prepayments. Prepayment assumptions
are obtained from broker dealer surveys or internal estimates and are based on
the current interest rate and economic environment. The retrospective
adjustment method is used to value all such securities except for interest-only
securities, which are valued using the prospective method.
The net interest effect of interest rate and currency rate swap transactions
is recorded as an adjustment of interest income as incurred. The initial cost
of interest rate cap agreements is amortized to net investment income over the
life of the related agreement. Gains and losses on financial futures contracts
used as hedges against interest rate fluctuations are deferred and recognized in
income over the period being hedged.
Mortgage loans are carried at outstanding principal balance or amortized cost.
Investment 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 $1.9 million in 1999 and $3.0 million in
1998.
Real estate acquired in satisfaction of debt and real estate held for sale are
carried at the lower of cost or fair value.
Policy loans are carried at outstanding principal balance, not in excess of
policy cash surrender value.
51
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
Asset Valuation and Interest Maintenance Reserves
The Asset Valuation Reserve (AVR) is computed in accordance with the
prescribed NAIC formula and represents a provision for possible fluctuations in
the value of bonds, equity securities, mortgage loans, real estate and other
invested assets. 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, 1999, the IMR, net of 1999 amortization of $2.3 million, amounted to $7.4
million, which is included in policy reserves. The corresponding 1998 amounts
were $2.4 million and $10.7 million, respectively.
Goodwill
The excess of cost over the statutory book value of the net assets of life
insurance business acquired was $8.9 million and $11.4 million at December 31,
1999 and 1998, respectively, and generally is amortized over a ten-year period
using a straight-line method.
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
52
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
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.
Fair values for futures contracts are based on quoted market prices. Fair
values for interest rate swap, cap agreements, and currency swap agreements are
based on current settlement values. The current settlement values are based on
brokerage quotes that utilize pricing models or formulas using current
assumptions.
The fair value for mortgage loan 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 engaged 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, 1999.
Capital Gains and Losses
Realized capital gains and losses are determined using the specific
identification method. Realized capital gains and losses, net of taxes and
amounts transferred to the IMR, are included in net 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 4 1/2% 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 4 1/2% 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 5 1/2% interest for policies issued from 1988
through 1992; 5% interest for policies issued in 1993 and 1994; and 4 1/2%
interest for policies issued in 1995 through 1999.
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 basis for the affiliated group.
The federal income
53
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
taxes of the Company are allocated on a separate return basis with certain
adjustments. The Company made federal income tax payments of $10.6 million in
1999 and $38.2 million in 1998.
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.
Amounts for disputed tax issues relating to the prior years are charged or
credited directly to policyholders' contingency reserve.
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. Reserve
modifications resulting from such determinations are recorded directly to
stockholder's equity. No such refinements were made during 1999 or 1998.
Reinsurance
Premiums, commissions, expense reimbursements, benefits and reserves related
to reinsured business are accounted for on bases consistent with those used in
accounting for the original policies issued and the terms of the reinsurance
contracts. Premiums ceded to other companies have been reported as a reduction
of premium income. Amounts applicable to reinsurance ceded for future policy
benefits, unearned premium reserves and claim liabilities have been reported as
reductions of these items.
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 the
final contingent payment to CPAL of $1.5 million during 1998.
54
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
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 was subsequently renamed Investors Partner
Life Insurance Company (IPL) on March 5, 1998. IPL manages the business assumed
from Charter and began marketing term life and variable universal life products
through brokers in 1999. Summarized financial information for IPL for 1999 and
1998 is as follows:
<TABLE>
<CAPTION>
1999 1998
------- -------
(IN MILLIONS)
<S> <C> <C>
Total assets................................ 570.7 587.8
Total liabilities........................... 498.9 517.5
Total revenue............................... 35.6 38.8
Net income.................................. 3.5 3.8
</TABLE>
3. NET INVESTMENT INCOME
Investment income has been reduced by the following amounts:
<TABLE>
<CAPTION>
1999 1998
------ ------
(IN MILLIONS)
<S> <C> <C>
Investment expenses.......................... $ 9.5 $ 8.3
Interest expense............................. 1.7 2.4
Depreciation expense......................... 0.6 0.8
Investment taxes............................. 0.3 0.7
------ ------
$ 12.1 $ 12.2
====== ======
</TABLE>
55
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
4. NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS
Net realized capital gains (losses) consist of the following items:
<TABLE>
<CAPTION>
1999 1998
------ ------
(IN MILLIONS)
<S> <C> <C>
Net gains from asset sales....................... (2.8) 7.6
Capital gains tax................................ 0.2 (2.9)
Net capital gains transferred to IMR............. 0.9 (5.3)
------ ------
Net REALIZED CAPITAL LOSSES...................... (1.7) (0.6)
====== ======
</TABLE>
Net unrealized capital gains (losses) and other adjustments consist of the
following items:
<TABLE>
<CAPTION>
1999 1998
------ ------
(IN MILLIONS)
<S> <C> <C>
Net losses from changes in security values and book
value adjustments............................. (2.6) (2.7)
Increase in asset valuation reserve................ (1.2) (3.3)
------ ------
Net UNREALIZED CAPITAL LOSSES AND OTHER ADJUSTMENTS (3.8) (6.0)
====== ======
</TABLE>
56
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
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 1999 and 1998 to reflect continuing changes in
the Company's operations. The amount of the service fee charged to the Company
was $188.3 million and $157.5 million in 1999 and 1998, 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 $0.2 million and
$0.7 million in 1999 and 1998, 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 1999 issues of flexible premium variable life insurance and
scheduled premium variable life insurance policies. In connection with this
agreement, John Hancock transferred $44.5 million and $4.9 million of cash for
tax, commission, and expense allowances to the Company, which increased the
Company's net gain from operations by $20.6 million and $22.2 million in 1999
and 1998, respectively.
Effective January 1, 1996, the Company entered into a modified coinsurance
agreement with John Hancock to reinsure 50% of the 1995 inforce block and 50% of
1996 and all future issue years of certain variable annuity contracts
(Independence Preferred, Declaration, Independence 2000, MarketPlace, and
Revolution). In connection with this agreement, the Company received a net cash
payment of $40.0 million and $12.7 million in 1999 and 1998, respectively, for
surrender benefits, tax, reserve increase, commission, expense allowances and
premium, This agreement increased the Company's net gain from operations by
$26.9 million and $8.4 million in 1999 and 1998, 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 1999 and 1998 for all policies that are not reinsured under
any other indemnity agreement. In connection with the agreement, John Hancock
received $0.8 million and 1.0 million in 1999 and 1998, respectively, for
mortality claims to the Company. This agreement decreased the Company's net
gain from operations in both 1999 and 1998 by $0.5 million.
At December 31, 1998 the Company had outstanding a short-term note of $61.9
million payable to an affiliate at a variable rate of interest. The note was
part of a revolving line of credit and was repaid in 1999. Interest paid in
1999 and 1998 was $1.7 million and $2.9 million, respectively. The note is
included in other general account obligations at December 31, 1998.
57
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
6. INVESTMENTS
The statement value and fair value of bonds are shown below:
<TABLE>
<CAPTION>
-------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
December 31, 1999....
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies............ 5.9 0.0 0.1 5.8
Obligations of states
and political subdivisions........... 2.2 0.1 0.1 2.2
Debit securities issued by foreign
governments.......................... 13.9 0.8 0.1 14.6
Corporate securities.................. 964.9 13.0 59.4 918.5
Mortgage-backed securities............ 229.4 0.5 7.8 222.1
-------- ----- ------ --------
Total bonds........................... 15.1
======== ===== ====== ========
December 31, 1998
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies............ 5.1 0.1 0.0 5.2
Obligations of states
and political subdivisions........... 3.2 0.3 0.0 3.5
Corporate securities.................. 925.2 50.4 15.0 960.6
Mortgage-backed securities............ 252.3 10.0 0.1 262.2
-------- ----- ------ --------
Total bonds........................... 15.1
======== ===== ====== ========
</TABLE>
58
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
The statement value and fair value of bonds at December 31, 1999, by
contractual maturity, are shown below. Maturities will differ from contractual
maturities because eligible borrowers may exercise their right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
FAIR
VALUE VALUE
-------- -----
(IN MILLIONS)
<S> <C> <C>
Due in one year or less........................... $ 58.5 58.2
Due after one year through five years............. 286.8 282.0
Due after five years through ten years............ 425.4 405.6
Due after ten years............................... 216.2 195.3
-------- -----
986.9 941.1
Mortgage-backed securities........................ 229.4 222.1
-------- -----
$1,216.3
======== =====
</TABLE>
Gross gains of $0.3 million in 1999 and $3.4 million in 1998 and gross losses
of $4.0 million in 1999 and $0.7 million in 1998 were realized from the sale of
bonds.
At December 31, 1999, bonds with an admitted asset value of $9.1 million were
on deposit with state insurance departments to satisfy regulatory requirements.
The cost of common stocks was $3.1 million and $2.1 million at December 31,
1999 and 1998, respectively. At December 31, 1999, gross unrealized
appreciation on common stocks totaled $1.2 million, and gross unrealized
depreciation totaled $1.1 million. The fair value of preferred stock totaled
$35.9 million at December 31, 1999 and $36.5 million at December 31, 1998.
Bonds with amortized cost of $0.4 million were non-income producing for the
twelve months ended December 31, 1999.
At December 31, 1999, the mortgage loan portfolio was diversified by
geographic region and specific collateral property type as displayed below. The
Company controls credit risk through credit approvals, limits and monitoring
procedures.
59
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GEOGRAPHIC
PROPERTY TYPE CONCENTRATION
Apartments............... $112.1 East North Central $ 71.3
Hotels................... 11.3 East South Central 7.4
Industrial............... 66.0 Middle Atlantic 28.5
Office buildings......... 86.4 Mountain 21.0
Retail................... 25.5 New England 37.5
Agricultural............. 99.6 Pacific 111.1
Other.................... 32.2 South Atlantic 87.6
West North Central 16.6
West South Central 48.6
Other 3.5
------ ------
$433.1 $433.1
====== ======
</TABLE>
At December 31, 1999, the fair values of the commercial and agricultural
mortgage loans portfolios were $323.5 million and $98.2 million, respectively.
The corresponding amounts as of December 31, 1998 were approximately $331.3
million and $70.0 million, respectively.
The maximum and minimum lending rates for mortgage loans during 1999 were
14.24% and 6.84% for agricultural loans, 7.45% and 7.00% 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.
60
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
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 1999 were $594.9 million, $132.8 million, and $13.6 million,
respectively. The corresponding amounts in 1998 were $590.2 million, $63.2
million, and $8.2 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 agreement in which the
reinsurer may unilaterally cancel any reinsurance for reasons other than
nonpayment of premiums or other similar credits. The Company does not have any
reinsurance agreements in effect in which the amount of losses paid or accrued
through December 31, 1999 would result in a payment to the reinsurer of amounts
which, in the aggregate and allowing for offset of mutual credits from other
reinsurance agreements with the same reinsurer, exceed the total direct premiums
collected under the reinsured policies.
8. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The notional amounts, carrying values and estimated fail values of the
Company's derivative instruments were as follows at December 31:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
NUMBER OF CONTRACTS/ ASSETS (LIABILITIES)
------------------
NOTIONAL AMOUNTS 1999 1998
FAIR VALUE
---------
------- ------- --------- --------- ---------
(IN MILLIONS)
Futures contracts to
sell securities...... $362.0 $947.0 $0.6 $0.6 $(0.5) $ (0.5)
Interest rate swap (17.7)
agreements........... 965.0 365.0 -- 11.5 --
Interest rate cap
agreements........... 239.4 89.4 5.6 5.6 3.1
Currency rate swap
agreements........... 15.8 15.8 -- (1.6) -- (3.3)
</TABLE>
61
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
The Company uses futures contracts, interest rate swap, cap agreements, and
currency rate swap agreements for other than trading purposes to hedge and
manage its exposure to changes in interest rate levels, foreign exchange rate
fluctuations and to manage duration mismatch of assets and liabilities.
The futures contracts expire in 2000. The interest rate swap agreements
expire in 2000 to 2011. The interest rate cap agreements expire in 2006 to
2008. The currency rate swap agreements expire in 2006 to 2009.
The Company's exposure to credit risk is the risk of loss from a counterparty
failing to perform to the terms of the contract. The Company continually
monitors its position and the credit ratings of the counterparties to these
derivative instruments. To limit exposure associated with counterparty
nonperformance on interest rate and currency swap agreements, the Company enters
into master netting agreements with its counterparties. The Company believes the
risk of incurring losses due to nonperformance by its counterparties is remote
and that such losses, if any, would be immaterial. Futures contracts trade on
organized exchanges and, therefore, have minimal credit risk.
9. POLICY RESERVES POLICYHOLDERS' AND BENEFICIARIES' FUNDS AND OBLIGATIONS
RELATED TO SEPARATE ACCOUNTS
The Company' annuity reserves and deposit fund liabilities that are subject to
discretionary withdrawal, with and without adjustment, are summarized as
follows.
DECEMBER 31, 1999 PERCENT
----------------- -------
(IN MILLIONS)
Subject to discretionary withdrawal (with
adjustment)
With market value adjustment.................... $ 3.8 0.1%
At book value less surrender charge............. 40.5 1.5
At market value................................. 2,326.6 87.1
-------- ------
Total with adjustment...................... 2,370.9 88.7
Subject to discretionary withdrawal
at book value (without adjustment)........... 287.1 10.7
Not subject to discretionary withdrawal--general
account........................................ 15.4 0.6
-------- ------
Total annuity reserves and deposit liabilities.. $2,673.4 100.0%
======== ======
62
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
10. COMMITMENTS AND CONTINGENCIES
The Company has extended commitments to purchase long-term bonds and issue
real estate mortgages totaling $15.4 million and $3.5 million, respectively, at
December 31, 1999. The Company monitors the creditworthiness of borrowers under
long-term bonds 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 $19.4 million at December 31, 1999. The majority of these commitments
expire in 2000.
In the normal course of its business operations, the Company is involved with
litigation from time to time with claimants, beneficiaries and others, and a
number of litigation matters were pending as of December 31, 1999. It is the
opinion of management, after consultation with counsel, that the ultimate
liability with respect to these claims, if any, will not materially affect the
financial position or results of operations of the Company.
During 1997, John Hancock entered into a court-approved settlement relating to
a class action lawsuit involving certain individual life insurance policies sold
from 1979 through 1996. In entering into the settlement, John Hancock
specifically denied any wrongdoing. During 1999, the Company recorded a $194.9
million reserve, through a direct charge to its unassigned deficit, representing
the Company's share of the settlement and John Hancock contributed $194.9
million of capital to the Company. The reserve held at December 31, 1999
amounted to $136.5 million and is based on a number of factors, including the
estimated number of claims, the expected type of relief to be sought by class
members (general relief or alternative dispute resolution), the estimated cost
per claim and the estimated costs to administer the claims.
Given the uncertainties associated with estimating the reserve, it is
reasonably possible that the final cost of the settlement could differ
materially from the amounts presently provided for by the Company. John Hancock
and the Company will continue to update their estimate of the final cost of the
settlement as claims are processed and more specific information is developed,
particularly as the actual cost of the claims subject to alternative dispute
resolution becomes available. However, based on information available at this
time, and the uncertainties associated with the final claim processing and
alternative dispute resolution, the range of any additional costs related to the
settlement cannot be reasonably estimated. If the Company's share of the
settlement increases, John Hancock will contribute additional capital to the
Company so that the Company's total stockholder's equity would not be impacted.
63
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of the
Company's financial instruments:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
---------------- ----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- ------- -----
(IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS
Bonds--Note 6
Preferred stocks--Note 6.......................... 35.9 35.9 36.5 36.5
Common stocks--Note 6............................. 3.2 3.2 3.1 3.1
Mortgage loans on real estate--Note 6............. 433.1 421.7 388.1 401.3
Policy loans--Note 1.............................. 172.1 172.1 137.7 137.7
Cash items--Note 1................................ 250.1 250.1 19.9 19.9
Derivatives assets
(liabilities) relating to: --Note 8
Futures contracts................................. 0.6 0.6 (0.5) (0.5)
Interest rate swaps............................... -- 11.5 -- (17.7)
Currency rate swaps............................... -- (1.6) -- (3.3)
Interest rate caps................................ 5.6 5.6 3.1 3.1
LIABILITIES
Commitments--Note 10.............................. -- 19.4 -- 32.1
</TABLE>
The carrying 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.
12. SUBSEQUENT EVENTS
REORGANIZATION AND INITIAL PUBLIC OFFERING
Pursuant to a Plan of Reorganization approved by the policyholders of John
Hancock and the Commonwealth of Massachusetts Division of Insurance, effective
February 1, 2000, John Hancock converted from a mutual life insurance company to
a stock life insurance company (i.e., demutualized) and became a wholly owned
subsidiary of John Hancock Financial Services, Inc., which is a holding company.
In connection with the reorganization, John Hancock changed its name to John
Hancock Life Insurance Company. In addition, on February 1, 2000, John Hancock
Financial Services, Inc. completed its initial public offering and 102 million
shares of common stock were issued at an initial public offering price of $17
per share.
64
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--(CONTINUED)
13. IMPACT OF YEAR 2000 (UNAUDITED)
The Company participated in the Year 2000 remediation project of its parent,
John Hancock. By late 1999, John Hancock and the Company completed their Year
2000 readiness plan to address issues that could result from computer programs
written using two digits to define the applicable year rather than four to
define the applicable year and century. As a result, John Hancock and the
Company were prepared for the transition to the Year 2000 and did not experience
any significant Year 2000 problems with respect to mission critical information
technology ("IT") or non-IT systems, applications or infrastructure. During the
date rollover to the year 2000, John Hancock and the Company implemented and
monitored their millennium rollover plan and conducted business as usual on
Monday, January 3, 2000.
Since January 3, 2000, the information systems, including mission critical
systems, which in the event of a Year 2000 failure would have the greatest
impact on operations, have functioned properly. In addition, neither John
Hancock nor the Company have experienced any significant Year 2000 issues
related to interactions with material business partners. No disruptions have
occurred which impact John Hancock or the Company's ability to process claims,
update customer accounts, process financial transactions, or report accurate
data to management and no business interruptions due to Year 2000 issues have
been experienced. While John Hancock and the Company continue to monitor their
systems, and those of material business partners, closely to ensure that no
unexpected Year 2000 issues develop, neither John Hancock nor the Company have
reason to expect any such issues.
The costs of the Year 2000 project consist of internal IT personnel and
external costs such as consultants, programmers, replacement software, and
hardware. The costs of the Year 2000 project are expensed as incurred. The
project is funded partially through a reallocation of resources from
discretionary projects. Through December 31, 1999, John Hancock has incurred
and expensed approximately $20.8 million in related payroll costs for internal
IT personnel on the project. The estimated remaining IT personnel costs of the
project are approximately $1.0 million. Through December 31, 1999, John Hancock
has incurred and expensed approximately $47.0 million in external costs for the
project. John Hancock's estimated remaining external cost of the project is
approximately $2.0 million. The total costs of the Year 2000 project to John
Hancock, based on management's best estimates, include approximately $21.7
million in internal IT personnel, $14.6 million in the external modification of
software, $18.3 million for external solution providers, $9.1 million in
replacement costs of non-compliant IT systems and $6.9 million in oversight,
test facilities and other expenses. Accordingly, the estimated range of total
costs of the Year 2000 project to John Hancock, internal and external, is
approximately $70 to $72.5 million. John Hancock's total Year 2000 project
costs include the estimated impact of external solution providers based on
presently available information.
65
<PAGE>
UNAUDITED FINANCIAL STATEMENTS
FOR
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
SECOND QUARTER 2000
66
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 2000
<TABLE>
<CAPTION>
INTERNATIONAL
LARGE CAP ACTIVE EQUITY SMALL CAP
GROWTH BOND INDEX GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash................... $ -- $ -- $ -- $ --
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value................. 176,581,445 234,710,166 30,279,715 15,146,841
Policy loans and
accrued interest
receivable............ 23,134,622 58,001,138 3,128,604 --
Receivable from:
John Hancock Variable
Series Trust I....... 10,411 1,388,616 55,752 --
M Fund Inc............ -- -- -- --
------------ ------------ ----------- -----------
Total assets........... 199,726,478 294,099,920 33,464,071 15,146,841
LIABILITIES
Payable to John
Hancock Variable Life
Insurance Company..... 2,452 3,267 447 245
Asset charges payable.. 474 1,189 -- --
------------ ------------ ----------- -----------
Total liabilities...... 2,926 4,456 447 245
------------ ------------ ----------- -----------
Net assets............. $199,723,552 $294,095,464 $33,463,624 $16,146,596
============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
GLOBAL MID CAP LARGE CAP MONEY
BALANCED GROWTH VALUE MARKET
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash...................... $ -- $ -- $ -- $ --
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value........ 1,009,123 26,659,950 10,182,562 62,828,554
Policy loans and accrued
interest receivable...... -- -- -- 13,821,060
Receivable from:
John Hancock Variable
Series Trust I.......... 2,217 -- 13,241 32,906
M Fund Inc............... -- -- -- --
---------- ----------- ----------- -----------
Total assets.............. 1,011,340 26,659,950 10,195,803 76,682,520
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company.................. 17 429 169 2,664
Asset charges payable..... -- -- -- 850
---------- ----------- ----------- -----------
Total liabilities......... 17 429 169 3,514
---------- ----------- ----------- -----------
Net assets................ $1,011,323 $26,659,521 $10,195,634 $76,679,006
========== =========== =========== ===========
</TABLE>
See accompanying notes.
67
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SMALL/MID
MID CAP CAP REAL ESTATE GROWTH &
VALUE GROWTH EQUITY INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash................... $ -- $ -- $ -- $ --
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value................. 5,655,397 12,697,945 12,765,326 1,054,098,419
Policy loans and
accrued interest
receivable............ -- -- 2,042,422 192,979,449
Receivable from:
John Hancock Variable
Series Trust I....... 4,035 -- -- 712,339
M Fund Inc............ -- -- -- --
------------ ----------- ----------- --------------
Total assets........... 5,659,432 12,697,945 14,807,748 1,247,790,207
LIABILITIES
Payable to John
Hancock Variable Life
Insurance Company..... 93 208 194 14,546
Asset charges payable.. -- -- 42 3,955
------------ ----------- ----------- --------------
Total liabilities...... 93 208 236 18,501
------------ ----------- ----------- --------------
Net assets............. $ 5,659,339 $12,697,737 $14,807,512 $1,247,771,706
============ =========== =========== ==============
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM SMALL CAP INTERNATIONAL
MANAGED BOND VALUE OPPORTUNITIES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash.................... $ -- $ -- $ -- $ --
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value.................. 412,811,976 1,051,732 4,409,122 6,171,237
Policy loans and
accrued interest
receivable............. 79,675,824 -- -- --
Receivable from:
John Hancock Variable
Series Trust I........ 979,880 5,435 5,593 4,951
M Fund Inc............. -- -- -- --
------------ ---------- ---------- ----------
Total assets............ 493,467,680 1,057,167 4,414,715 6,176,188
LIABILITIES
Payable to John Hancock
Variable Life
Insurance Company...... 5,741 17 74 100
Asset charges payable... 1,633 -- -- --
------------ ---------- ---------- ----------
Total liabilities....... 7,374 17 74 100
------------ ---------- ---------- ----------
Net assets.............. $493,460,306 $1,057,150 $4,414,641 $6,176,088
============ ========== ========== ==========
</TABLE>
See accompanying notes.
68
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
TURNER BRANDES
EQUITY GLOBAL CORE INTERNATIONAL
INDEX BOND GROWTH EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash...................... $ -- $ -- $ -- $ --
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value........ 25,463,881 1,610,930 450,305 655,428
Policy loans and accrued
interest receivable...... -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I.......... 16,079 6,956 -- --
M Fund Inc............... -- -- -- --
----------- ---------- -------- --------
Total assets.............. 25,479,960 1,617,886 450,305 655,428
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company.................. 414 27 7 11
Asset charges payable..... -- -- -- --
----------- ---------- -------- --------
Total liabilities......... 414 27 7 11
----------- ---------- -------- --------
Net assets................ $25,479,546 $1,617,859 $450,298 $655,417
=========== ========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
FRONTIER EMERGING INTERNATIONAL
CAPITAL MARKETS OPPORTUNITIES
APPRECIATION EQUITY II BOND INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ---------- ------------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash..................... $ -- $ -- $ -- $ --
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value....... 897,620 1,185,730 273,330 749,101
Policy loans and accrued
interest receivable..... -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I......... -- -- 190 4,094
M Fund Inc.............. -- -- -- --
-------- ---------- -------- --------
Total assets............. 897,620 1,185,730 273,520 753,195
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company................. 15 19 4 12
Asset charges payable.... -- -- -- --
-------- ---------- -------- --------
Total liabilities........ 15 19 4 12
-------- ---------- -------- --------
Net assets............... $897,605 $1,185,711 $273,516 $753,183
======== ========== ======== ========
</TABLE>
See accompanying notes.
69
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
CLIFTON
SMALL/MID HIGH YIELD ENHANCED
CAP CORE BOND U.S. EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- -----------
<S> <C> <C> <C>
ASSETS
Cash..................................... $ -- $ -- $ --
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value................................ 188,808 295,903 18,155
Policy loans and accrued interest
receivable.............................. -- -- --
Receivable from:
John Hancock Variable Series Trust I.... 285 2,023 --
M Fund Inc.............................. -- -- --
-------- -------- -------
Total assets............................. 189,093 297,926 18,155
LIABILITIES
Payable to John Hancock Variable Life
Insurance Company....................... 3 5 --
Asset charges payable.................... -- -- --
-------- -------- -------
Total liabilities........................ 3 5 --
-------- -------- -------
Net assets............................... $189,090 $297,921 $18,155
======== ======== =======
</TABLE>
See accompanying notes.
70
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT ACTIVE BOND SUBACCOUNT
------------------------------------- ------------------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I....... $ 193,334 $24,007,195 $11,641,271 $7,284,647 $ 17,792,726 $19,685,096
M Fund Inc................................. -- -- -- -- -- --
Interest income on policy loans............. 744,736 1,211,333 1,008,607 2,113,683 4,084,783 4,027,376
----------- ----------- ----------- ---------- ------------ -----------
Total investment income..................... 938,070 25,218,528 12,649,878 9,398,330 21,877,509 23,712,472
Expenses:
Mortality and expense risks................ 504,066 828,714 624,665 805,912 1,643,861 1,624,615
----------- ----------- ----------- ---------- ------------ -----------
Net investment income....................... 434,004 24,389,814 12,025,213 8,592,418 20,233,648 22,087,857
Net realized and unrealized gain (loss) on
investments:
Net realized gain.......................... 2,032,851 4,239,424 3,520,199 (29,483) 192,098 1,600,539
Net unrealized appreciation (depreciation)
during the period......................... 7,172,532 1,727,703 18,509,310 505,228 (20,304,536) (2,317,324)
----------- ----------- ----------- ---------- ------------ -----------
Net realized and unrealized gain (loss) on
investments................................ 9,205,383 5,967,127 22,029,509 475,745 (20,112,438) (716,785)
----------- ----------- ----------- ---------- ------------ -----------
Net increase in net assets resulting from
operations................................. $ 9,639,387 $30,356,941 $34,054,722 $9,068,163 $ 121,210 $21,371,072
=========== =========== =========== ========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX SUBACCOUNT
-------------------------------------
2000 1999 1998
----------- ---------- ----------
<S> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I....... $ 260,035 $ 917,904 $3,394,842
M Fund Inc................................. -- -- --
Interest income on policy loans............. 106,675 179,345 170,285
----------- ---------- ----------
Total investment income..................... 366,710 1,097,249 3,565,127
Expenses:
Mortality and expense risks................ 91,898 147,126 124,891
----------- ---------- ----------
Net investment income (loss)................ 274,812 950,123 3,440,236
Net realized and unrealized gain (loss) on
investments:
Net realized gain.......................... 816,122 168,248 148,419
Net unrealized appreciation (depreciation)
during the period......................... (2,574,516) 5,712,567 105,161
----------- ---------- ----------
Net realized and unrealized gain
(loss) on investments...................... (1,758,394) 5,880,815 253,580
----------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations.................. $(1,483,582) $6,830,938 $3,693,816
=========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP GROWTH SUBACCOUNT
---------------------------------------
2000 1999 1998
----------- ---------- ----------
<S> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I............................ $ -- $1,272,230 $ --
M Fund Inc...................................................... -- -- --
Interest income on policy loans.................................. -- -- --
----------- ---------- ----------
Total investment income.......................................... -- 1,272,230 --
Expenses:
Mortality and expense risks..................................... 40,116 37,386 20,335
----------- ---------- ----------
Net investment income (loss)..................................... (40,116) 1,234,844 (20,335)
Net realized and unrealized gain (loss) on
investments:
Net realized gain............................................... 1,170,187 491,241 55,393
Net unrealized appreciation (depreciation) during the period.... (647,342) 2,317,857 518,731
----------- ---------- ----------
Net realized and unrealized gain (loss) on investments........... 522,845 2,809,098 574,124
----------- ---------- ----------
Net increase (decrease) in net
assets resulting from operations................................ $ 482,729 $4,043,942 $ 553,789
========== ========== ==========
</TABLE>
See accompanying notes.
71
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
GLOBAL BALANCED SUBACCOUNT MID CAP GROWTH SUBACCOUNT
---------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I..... $ 13,766 $ 99,184 $ 57,587 $ -- $2,117,559 $ 461,919
M Fund Inc............................... -- -- -- -- -- --
Interest income on policy loans........... -- -- -- -- -- --
--------- --------- --------- ----------- ---------- ----------
Total investment income................... 13,766 99,184 57,587 -- 2,117,559 461,919
Expenses:
Mortality and expense risks.............. 2,953 6,368 4,696 74,097 58,898 16,758
--------- --------- --------- ----------- ---------- ----------
Net investment income (loss).............. 10,813 92,816 52,891 (74,097) 2,058,661 445,161
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss)................. (8,124) 4,711 (4,506) 1,167,801 773,222 73,958
Net unrealized appreciation
(depreciation) during the period........ (52,902) (38,997) 78,455 (2,810,779) 6,801,000 647,137
--------- --------- --------- ----------- ---------- ----------
Net realized and unrealized gain (loss)
on investments.......................... (61,026) (34,286) 73,949 (1,642,978) 7,574,222 721,095
--------- --------- --------- ----------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations............... $ (50,213) $ 58,530 $ 126,840 $(1,717,075) $9,632,883 $1,166,256
========= ========= ========= =========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE SUBACCOUNT MONEY MARKET SUBACCOUNT
--------------------------------- -----------------------------------
2000 1999 1998 2000 1999 1998
--------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I....... $ 110,055 $ 648,532 $ 433,626 $1,779,484 $2,943,852 $2,888,490
M Fund Inc................................. -- -- -- -- -- --
Interest income on policy loans............. -- -- -- 497,245 985,509 973,241
--------- --------- --------- ---------- ---------- ----------
Total investment income..................... 110,055 648,532 433,626 2,276,729 3,929,361 3,861,731
Expenses:
Mortality and expense risks................ 29,450 54,610 44,753 209,439 411,487 380,002
--------- --------- --------- ---------- ---------- ----------
Net investment income....................... 80,605 593,922 388,873 2,067,290 3,517,874 3,481,729
Net realized and unrealized gain (loss)
on investments:
Net realized gain (loss)................... (1,671) 165,556 673,582 -- -- --
Net unrealized appreciation (depreciation)
during the period......................... (324,239) (569,216) (479,093) -- -- --
--------- --------- --------- ---------- ---------- ----------
Net realized and unrealized gain (loss)
on investments............................ (325,910) (403,660) 194,489 -- -- --
--------- --------- --------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations................. $(245,305) $ 190,262 $ 583,362 $2,067,290 $3,517,874 $3,481,729
========= ========= ========= ========== ========== ==========
</TABLE>
See accompanying notes.
72
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
MID CAP VALUE SUBACCOUNT SMALL/MID CAP GROWTH SUBACCOUNT
--------------------------------------- ----------------------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I.... $ 12,329 $ 31,306 $ 40,338 $ -- $ 1,903,687 $ 217,686
M Fund Inc.............................. -- -- -- -- -- --
Interest income on policy loans.......... -- -- -- -- -- --
---------- ---------- ------------ ------------- ------------- -------------
Total investment income.................. 12,239 31,306 40,338 -- 1,903,687 217,686
Expenses:
Mortality and expense risks............. 16,367 29,798 23,760 36,428 69,847 63,334
---------- ---------- ------------ ------------- ------------- -------------
Net investment income (loss)............. (4,038) 1,508 16,578 (36,428) 1,833,840 154,352
Net realized and unrealized gain (loss)
on investments:
Net realized gain (loss)................ (35,806) (241,740) (422,902) (331,677) (13,020) 56,968
Net unrealized appreciation
(depreciation) during the period....... 329,004 469,537 (260,362) 1,329,781 (1,274,161) 334,213
---------- ---------- ------------ ------------- ------------- -------------
Net realized and unrealized gain (loss)
on investments.......................... 293,198 227,797 (683,264) 998,104 (1,287,181) 391,181
---------- ---------- ------------ ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations............... $ 289,160 $ 229,305 $ (666,686) $ 961,676 $ 546,659 $ 545,533
========== ========== ============ ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY SUBACCOUNT GROWTH & INCOME SUBACCOUNT
--------------------------------------- ------------------------------------------
2000 1999 1998 2000 1999 1998
----------- ------------ ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I........ $ 331,794 $ 771,050 $ 817,633 $ 5,332,033 $124,750,392 $ 96,326,313
M Fund Inc.................................. -- -- -- -- -- --
Interest income on policy loans.............. 67,503 131,461 145,212 6,953,633 12,877,539 11,727,553
---------- ----------- ----------- ------------ ------------ ------------
Total investment income...................... 399,297 902,511 962,845 12,285,666 137,627,931 108,053,866
Expenses:
Mortality and expense risks................. 39,508 78,893 86,610 3,349,588 6,531,512 5,589,689
---------- ----------- ----------- ------------ ------------ ------------
Net investment income........................ 359,789 823,618 876,235 8,936,078 131,096,419 102,464,177
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss).................... (225,511) 123,591 442,876 16,053,184 22,802,197 22,835,488
Net unrealized appreciation (depreciation)
during the period.......................... 1,416,393 (1,106,755) (3,720,942) (26,767,597) 7,687,109 112,457,395
---------- ----------- ----------- ------------ ------------ ------------
Net realized and unrealized gain (loss) on
investments................................. 1,190,882 (983,164) (3,278,066) (10,714,413) 30,489,306 135,292,883
---------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations................... $1,550,671 $ (159,546) $(2,401,831) $ (1,778,335) $161,585,725 $237,757,060
========== =========== =========== ============ ============ ============
</TABLE>
See accompanying notes.
73
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
MANAGED SUBACCOUNT SHORT-TERM BOND SUBACCOUNT
--------------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I....... $ 6,314,681 $39,951,885 $37,907,821 $ 31,666 $ 53,689 $ 31,261
M Fund Inc............ -- -- -- -- -- --
Interest income on
policy loans.......... 2,787,957 5,217,121 4,949,021 -- -- --
----------- ----------- ----------- ---------- ---------- --------
Total investment
income................ 9,102,638 45,169,006 42,856,842 31,666 53,689 31,261
Expenses:
Mortality and expense
risks................ 1,333,143 2,636,085 2,381,406 3,022 5,065 3,052
----------- ----------- ----------- ---------- ---------- --------
Net investment income.. 7,769,495 42,532,921 40,475,436 28,644 48,624 28,209
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss)............... 3,653,026 5,060,826 5,853,076 (12,368) (3,107) 2,008
Net unrealized
appreciation
(depreciation)
during the period.... (5,191,852) (9,288,287) 24,834,482 10,583 (23,648) (5,287)
----------- ----------- ----------- ---------- ---------- --------
Net realized and
unrealized gain
(loss) on investments. (1,538,826) (4,227,461) 30,687,558 (1,785) (26,755) (3,279)
----------- ----------- ----------- ---------- ---------- --------
Net increase in net
assets resulting from
operations............ $ 6,230,669 $38,305,460 $71,162,994 $ 26,859 $ 21,869 $ 24,930
=========== =========== =========== ========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE SUBACCOUNT INTERNATIONAL OPPORTUNITIES SUBACCOUNT
--------------------------------- ------------------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I....... $ 37,168 $ 97,290 $ 24,781 $ 21,730 $ 354,646 $ 27,799
M Fund Inc............ -- -- -- -- -- --
Interest income on
policy loans.......... -- -- -- -- -- --
--------- --------- --------- ----------- ---------- --------
Total investment
income................ 37,168 97,290 24,781 21,730 354,646 27,799
Expenses:
Mortality and expense
risks................ 12,591 24,661 23,711 16,957 24,257 19,481
--------- --------- --------- ----------- ---------- --------
Net investment income.. 24,577 72,629 1,070 4,773 330,389 8,318
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss)............... (147,622) (217,582) 61,917 703,918 123,861 64,757
Net unrealized
appreciation
(depreciation)
during the period.... 160,413 (40,472) (364,339) (929,318) 839,140 339,709
--------- --------- --------- ----------- ---------- --------
Net realized and
unrealized gain
(loss) on investments. 12,791 (258,054) (302,422) (225,400) 963,001 404,466
--------- --------- --------- ----------- ---------- --------
Net increase
(decrease) in net
assets resulting from
operations............ $ 37,368 $(185,425) $(301,352) $ (220,627) $1,293,390 $412,784
========= ========= ========= =========== ========== ========
</TABLE>
See accompanying notes.
74
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
EQUITY INDEX SUBACCOUNT GLOBAL BOND SUBACCOUNT
------------------------------------ --------------------------------
2000 1999 1998 2000 1999 1998
------------ ---------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I....... $ 132,815 $ 921,698 $ 367,284 $ 25,777 $ 91,316 $62,244
M Fund Inc............ -- -- -- -- -- --
Interest income on
policy loans.......... -- -- -- -- -- --
----------- ---------- ---------- -------- --------- -------
Total investment
income................ 132,815 921,698 367,284 25,777 91,316 62,244
Expenses:
Mortality and expense
risks................ 70,140 103,983 60,274 4,763 9,736 7,516
----------- ---------- ---------- -------- --------- -------
Net investment income.. 62,675 817,715 307,010 21,014 81,580 54,728
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss)............... 339,524 471,802 132,619 (37,534) (1,996) 32,917
Net unrealized
appreciation
(depreciation)
during the period.... (498,165) 2,019,913 2,082,107 58,703 (126,001) 11,342
----------- ---------- ---------- -------- --------- -------
Net realized and
unrealized gain
(loss) on investments. (156,641) 2,491,715 2,214,726 21,169 (127,997) 44,259
----------- ---------- ---------- -------- --------- -------
Net increase
(decrease) in net
assets resulting
from operations....... $ 95,966 $3,309,430 $2,521,736 $ 42,183 $ (46,417) $98,987
=========== ========== ========== ======== ========= =======
</TABLE>
<TABLE>
<CAPTION>
BRANDES INTERNATIONAL EQUITY
TURNER CORE GROWTH SUBACCOUNT SUBACCOUNT
------------------------------- ----------------------------------
2000 1999 1998 2000 1999 1998
---------- --------- -------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I....... $ 5,157 $ -- $ -- $ 8,114 $ -- $ --
M Fund Inc............ -- 38,038 5,535 -- 18,453 13,237
Interest income on
policy loans.......... -- -- -- -- -- --
-------- -------- ------- ------- -------- -------
Total investment
income................ 5,157 38,038 5,535 8,114 18,453 13,237
Expenses:
Mortality and expense
risks................ 1,625 2,102 1,022 1,740 1,904 1,143
-------- -------- ------- ------- -------- -------
Net investment income.. 3,532 35,936 4,513 6,374 16,549 12,094
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain..... 101,050 44,245 14,364 6,519 7,704 1,184
Net unrealized
appreciation
(depreciation)
during the period.... (85,212) 37,727 49,605 13,873 119,400 15,813
-------- -------- ------- ------- -------- -------
Net realized and
unrealized gain on
investments........... 15,838 81,972 63,969 20,392 127,104 16,997
-------- -------- ------- ------- -------- -------
Net increase in net
assets resulting from
operations............ $ 19,370 $117,908 $68,482 $26,766 $143,653 $29,091
======== ======== ======= ======= ======== =======
</TABLE>
See accompanying notes.
75
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
FRONTIER CAPITAL APPRECIATION EMERGING MARKETS EQUITY
SUBACCOUNT SUBACCOUNT
------------------------------ ----------------------------
2000 1999 1998 2000 1999 1998
--------- -------- --------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I........$ 24,107 $ -- $ -- $ -- $ 13,510 $ 1
M Fund Inc............. -- 20,787 1,888 -- -- --
Interest income on
policy loans........... -- -- -- -- -- --
-------- -------- -------- -------- -------- -----
Total investment
income................. 24,107 20,787 1,888 -- 13,510 1
Expenses:
Mortality and expense
risks................. 2,641 3,019 2,096 2,736 720 --
-------- -------- -------- -------- -------- -----
Net investment income
(loss)................. 21,466 17,768 (208) (2,736) 12,790 1
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss)................ 82,236 22,678 12,123 (12,180) 5,339 --
Net unrealized
appreciation
(depreciation)
during the period..... (12,210) 164,599 (17,930) (76,126) 86,570 10
-------- -------- -------- -------- -------- -----
Net realized and
unrealized gain
(loss) on investments.. 70,026 187,277 (5,807) (88,306) 91,909 10
-------- -------- -------- -------- -------- -----
Net increase
(decrease) in net
assets resulting from
operations.............$ 91,492 $205,045 $ (6,015) $(91,042) $104,699 $ 11
======== ======== ======== ======== ======== =====
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL OPPORTUNITIES II BOND INDEX
SUBACCOUNT SUBACCOUNT
------------------------------- -----------------------------
2000 1999 1998* 2000 1999 1998*
----------- --------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I....... $ 2,705 $ 508 $ 1 $24,785 $ 17,417 $ 149
M Fund Inc............ -- -- -- -- -- --
Interest income on
policy loans.......... -- -- -- -- -- --
-------- ------- --- ------- -------- -----
Total investment
income................ 2,705 508 1 24,785 17,417 149
Expenses:
Mortality and expense
risks................ 588 267 -- 2,044 1,565 3
-------- ------- --- ------- -------- -----
Net investment income.. 2,117 241 1 22,741 15,852 146
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss)............... 13,157 602 1 (2,201) (1,422) (1)
Net unrealized
appreciation
(depreciation)
during the period.... (13,987) 13,424 45 7,287 (22,820) (196)
-------- ------- --- ------- -------- -----
Net realized and
unrealized gain
(loss) on investments. (830) 14,026 46 5,086 (24,242) (197)
-------- ------- --- ------- -------- -----
Net increase
(decrease) in net
assets resulting from
operations............ $ 1,287 $14,267 $47 $27,827 $ (8,390) $ (51)
======== ======= === ======= ======== =====
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
See accompanying notes.
76
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
SMALL/MID CAP HIGH YIELD
CORE SUBACCOUNT BOND SUBACCOUNT
----------------------- ---------------------------
2000 1999 1998* 2000 1999 1998*
-------- ------ ----- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I.......... $ 298 $6,810 $ -- $ 9,291 $2,748 $ 19
M Fund Inc............... -- -- -- -- -- --
Interest income on policy
loans.................... -- -- -- -- -- --
------- ------ ---- -------- ------ ----
Total investment income... 298 6,810 -- 9,291 2,748 19
Expenses:
Mortality and expense
risks................... 440 178 -- 667 206 1
------- ------ ---- -------- ------ ----
Net investment income
(loss)................... (142) 6,632 -- 8,624 2,542 18
Net realized and
unrealized gain (loss)
on investments:
Net realized gain (loss). 10,745 252 -- (8,649) (186) --
Net unrealized
appreciation
(depreciation) during
the period.............. (5,954) 3,005 6 (2,045) (511) (26)
------- ------ ---- -------- ------ ----
Net realized and
unrealized gain (loss)
on investments........... 4,791 3,257 6 (10,694) (697) (26)
------- ------ ---- -------- ------ ----
Net increase (decrease)
in net assets resulting
from operations.......... $ 4,649 $9,889 $ 6 $ (2,070) $1,845 $ (8)
======= ====== ==== ======== ====== ====
</TABLE>
<TABLE>
<CAPTION>
CLIFTON
ENHANCED
U.S. EQUITY
SUBACCOUNT
------------------
2000 1999**
------- ---------
<S> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I...................... $ 475 $1,117
M Fund Inc................................................ -- --
Interest income on policy loans............................ -- --
------ ------
Total investment income.................................... 475 1,117
Expenses:
Mortality and expense risks............................... 50 4
------ ------
Net investment income...................................... 425 1,113
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss).................................. (33) 91
Net unrealized appreciation (depreciation) during the
period................................................... 2,292 (879)
------ ------
Net realized and unrealized gain (loss) on investments..... 2,259 (788)
------ ------
Net increase in net assets resulting from operations....... $2,684 $ 325
====== ======
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
** From March 9, 1999 (commencement of operations).
See accompanying notes.
77
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT ACTIVE BOND SUBACCOUNT
------------------------------------------- ---------------------------------------------
2000 1999 1998 2000 1999 1998
------------- ------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income................. $ 434,004 $ 24,389,814 $ 12,025,213 $ 8,592,418 $ 20,233,648 $ 22,087,857
Net realized gains (losses)........... 2,032,851 4,239,424 3,520,199 (29,483) 192,098 1,600,539
Net unrealized appreciation
(depreciation) during the period..... 7,172,532 1,727,703 18,509,310 505,228 (20,304,536) (2,317,324)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations....................... 9,639,387 30,356,941 34,054,722 9,068,163 121,210 21,371,072
From policyholder transactions:
Net premiums from
policyholders........................ 31,919,256 37,307,814 21,681,632 11,475,576 26,114,799 32,901,747
Net benefits to policyholders......... (21,738,362) (25,817,420) (21,510,240) (20,536,374) (35,577,616) (39,577,750)
Net increase in policy loans.......... 2,840,939 -- 2,561,877 967,300 -- 1,607,456
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder
transactions.......................... 13,021,833 11,490,394 2,733,269 (8,093,498) (9,462,817) (5,068,547)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets.. 22,661,220 41,847,335 36,787,991 974,665 (9,341,607) 16,302,525
Net assets at beginning of period...... 177,062,332 135,214,997 98,427,006 293,120,799 302,462,406 286,159,881
------------ ------------ ------------ ------------ ------------ ------------
Net assets at end of period............ $199,723,552 $177,062,332 $135,214,997 $294,095,464 $293,120,799 $302,462,406
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX SUBACCOUNT SMALL CAP GROWTH SUBACCOUNT
---------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)........... $ 274,812 $ 950,123 $ 3,440,236 $ (40,116) $ 1,234,844 $ (20,335)
Net realized gains..................... 816,122 168,248 148,419 1,170,187 491,241 55,393
Net unrealized appreciation
(depreciation) during the period...... (2,574,516) 5,712,567 105,161 (647,342) 2,317,857 518,731
----------- ----------- ----------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations.............. (1,483,582) 6,830,938 3,693,816 482,729 4,043,942 553,789
From policyholder transactions:
Net premiums from policyholders........ 11,571,448 7,373,967 6,549,988 8,820,091 4,316,218 2,382,203
Net benefits to policyholders.......... (8,784,406) (6,834,914) (5,210,982) (4,981,803) (2,206,402) (998,381)
Net increase in policy loans........... 261,125 -- 86,200 -- -- --
----------- ----------- ----------- ----------- ----------- ----------
Net increase in net assets resulting
from policyholder transactions......... 3,048,167 539,053 1,425,206 3,838,288 2,109,816 1,383,822
----------- ----------- ----------- ----------- ----------- ----------
Net increase (decrease) in net assets... 1,564,585 7,369,991 5,119,022 4,321,017 6,153,758 1,937,611
Net assets at beginning of period....... 31,899,039 24,529,048 19,410,026 10,825,578 4,671,820 2,734,209
----------- ----------- ----------- ----------- ----------- ----------
Net assets at end of period............. $33,463,624 $31,899,039 $24,529,048 $15,146,595 $10,825,578 $4,671,820
=========== =========== =========== =========== =========== ==========
</TABLE>
See accompanying notes.
78
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
GLOBAL BALANCED SUBACCOUNT MID CAP GROWTH SUBACCOUNT
---------------------------------------------- -------------------------------------------------
2000 1999 1998 2000 1999 1998
------------ -------------- ---------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income (loss).... $ 10,813 $ 92,816 $ 52,891 $ (74,097) $ 2,058,661 $ 445,161
Net realized gains (losses)..... (8,124) 4,711 (4,506) 1,167,801 773,222 73,958
Net unrealized appreciation
(depreciation) during the
period......................... (52,902) (38,997) 78,455 (2,810,779) 6,801,000 647,137
----------- ------------- --------------- ------------- -------------- -------------
Net increase (decrease) in net
assets resulting from
operations...................... (50,213) 58,530 126,840 (1,717,075) 9,632,883 1,166,256
From policyholder transactions:
Net premiums from policyholders. 182,567 377,958 341,482 12,180,008 8,941,124 3,164,065
Net benefits to policyholders... (298,263) (131,331) (310,766) (4,655,667) (2,937,257) (612,975)
Net increase in policy loans.... -- -- -- -- -- --
----------- ------------- --------------- ------------- -------------- -------------
Net increase (decrease) in net
assets resulting from
policyholder transactions....... (115,696) 246,627 30,716 7,524,341 6,003,867 2,551,090
----------- ------------- --------------- ------------- -------------- -------------
Net increase (decrease) in net
assets.......................... (165,909) 305,157 157,556 5,807,266 15,636,750 3,717,346
Net assets at beginning of
period.......................... 1,177,232 872,075 714,519 20,852,255 5,215,505 1,498,159
----------- ------------- --------------- ------------- -------------- -------------
Net assets at end of period...... $ 1,011,323 $ 1,177,232 $ 872,075 $ 26,659,521 $ 20,852,255 $ 5,215,505
=========== ============= =============== ============= ============== =============
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE SUBACCOUNT MONEY MARKET SUBACCOUNT
----------------------------------------- ---------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income.................... $ 80,605 $ 593,922 $ 388,873 $ 2,067,290 $ 3,517,874 $ 3,481,729
Net realized gains (losses).............. (1,671) 165,556 673,582 -- -- --
Net unrealized appreciation
(depreciation) during the period........ (324,239) (569,216) (479,093) -- -- --
----------- ----------- ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations................ (245,305) 190,262 583,362 2,067,290 3,517,874 3,481,729
From policyholder transactions:
Net premiums from policyholders.......... 2,039,750 3,166,658 4,214,076 31,101,772 33,694,123 24,612,731
Net benefits to policyholders............ (1,152,104) (1,903,017) (3,212,048) (32,846,241) (30,672,090) (24,024,723)
Net increase (decrease) in policy loans.. -- -- -- (282,456) -- 421,166
----------- ----------- ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder transactions. 887,646 1,263,641 1,002,028 (2,026,925) 3,022,033 1,009,174
----------- ----------- ------------ ------------ ------------ ------------
Net increase in net assets................ 642,341 1,453,903 1,585,390 40,365 6,539,907 4,490,903
Net assets at beginning of period......... 9,553,293 8,099,390 6,514,000 76,638,641 70,098,734 65,607,831
----------- ----------- ------------ ------------ ------------ ------------
Net assets at end of period............... $10,195,634 $ 9,553,293 $ 8,099,390 $ 76,679,006 $ 76,638,641 $ 70,098,734
=========== =========== ============ ============ ============ ============
</TABLE>
See accompanying notes.
79
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
MID CAP VALUE SUBACCOUNT SMALL/MID CAP GROWTH SUBACCOUNT
----------------------------------------- ------------------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------- ---------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income (loss).... $ (4,038) $ 1,508 $ 16,578 $ (36,428) $ 1,833,840 $ 154,352
Net realized gains (losses)..... (35,806) (241,740) (422,902) (331,677) (13,020) 56,968
Net unrealized appreciation
(depreciation) during the
period......................... 329,004 469,537 (260,362) 1,329,781 (1,274,161) 334,213
----------- ----------- ------------ --------------- --------------- ---------------
Net increase (decrease) in net
assets resulting from
operations...................... 289,160 229,305 (666,686) 961,676 546,659 545,533
From policyholder transactions:
Net premiums from policyholders. 1,222,805 1,886,594 5,997,691 2,015,926 3,493,643 3,953,326
Net benefits to policyholders... (1,089,206) (1,745,112) (2,912,034) (9,689,438) (3,105,108) (3,311,846)
Net increase in policy loans.... -- -- -- -- -- --
----------- ----------- ------------ --------------- --------------- ---------------
Net increase (decrease) in net
assets resulting from
policyholder transactions....... 133,599 141,482 3,085,657 (673,512) 388,535 641,480
----------- ----------- ------------ --------------- --------------- ---------------
Net increase in net assets....... 422,759 370,787 2,418,971 288,164 935,194 1,187,013
Net assets at beginning of
period.......................... 5,236,580 4,865,793 2,446,822 12,409,573 11,474,379 10,287,366
----------- ----------- ------------ --------------- --------------- ---------------
Net assets at end of period...... $ 5,659,339 $ 5,236,580 $ 4,865,793 $ 12,697,737 $ 12,409,573 $ 11,474,379
=========== =========== ============ =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY SUBACCOUNT GROWTH & INCOME SUBACCOUNT
---------------------------------------- ---------------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ --------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income............... $ 359,789 $ 823,618 $ 876,235 $ 8,936,078 $ 131,096,419 $ 102,464,177
Net realized gains (losses)......... (225,511) 123,591 442,876 16,053,184 22,802,197 22,835,488
Net unrealized appreciation
(depreciation) during the period... 1,416,393 (1,106,755) (3,720,942) (26,767,597) 7,687,109 112,457,395
----------- ----------- ----------- -------------- -------------- --------------
Net increase (decrease) in net
assets resulting from operations.... 1,550,671 (159,546) (2,401,831) (1,778,335) 161,585,725 237,757,060
From policyholder transactions:
Net premiums from policyholders..... 3,954,225 2,304,591 6,295,255 47,243,335 101,973,160 92,955,980
Net benefits to policyholders....... (4,217,423) (3,311,591) (5,507,305) (81,355,661) (133,701,210) (134,661,151)
Net increase (decrease) in policy
loans.............................. 141,567 -- (83,216) 4,922,813 -- 18,165,114
----------- ----------- ----------- -------------- -------------- --------------
Net increase (decrease) in net
assets resulting from policyholder
transactions........................ (121,631) (1,007,000) 704,734 (29,189,513) (31,728,050) (23,540,057)
Net increase (decrease) in net
assets.............................. 1,429,040 (1,166,546) (1,697,097) (30,967,848) 129,857,675 214,217,003
Net assets at beginning of period.... 13,378,472 14,545,018 16,242,115 1,278,739,554 1,148,881,879 934,664,876
Net assets at end of period.......... $14,807,512 $13,378,472 $14,545,018 $1,247,771,706 $1,278,739,554 $1,148,881,879
=========== =========== =========== ============== ============== ==============
</TABLE>
See accompanying notes.
80
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
MANAGED SUBACCOUNT SHORT-TERM BOND SUBACCOUNT
------------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
------------- ------------- ------------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income.................... $ 7,769,495 $ 42,532,921 $ 40,475,436 $ 28,644 $ 48,624 $ 28,209
Net realized gains (losses).............. 3,653,026 5,060,826 5,853,076 (12,368) (3,107) 2,008
Net unrealized appreciation
(depreciation) during the period........ (5,191,852) (9,288,287) 24,834,482 10,583 (23,648) (5,287)
------------ ------------ ------------ ---------- ----------- -----------
Net increase in net assets resulting from
operations............................... 6,230,669 38,305,460 71,162,994 26,859 21,869 24,930
From policyholder transactions:
Net premiums from policyholders.......... 20,445,777 44,546,082 40,631,684 241,196 690,849 435,150
Net benefits to policyholders............ (35,113,472) (55,332,758) (55,447,667) (340,388) (178,124) (274,762)
Net increase in policy loans............. 1,824,582 -- 5,379,590 -- -- --
------------ ------------ ------------ ---------- ----------- -----------
Net increase (decrease) in net assets
resulting from policyholder
transactions............................. (12,843,113) (10,786,676) (9,436,393) (99,192) 512,725 160,388
------------ ------------ ------------ ---------- ----------- -----------
Net increase (decrease) in net assets..... (6,612,444) 27,518,784 61,726,601 (72,333) 534,594 185,318
Net assets at beginning of period......... 500,072,750 472,553,966 410,827,365 1,129,483 594,889 409,571
------------ ------------ ------------ ---------- ----------- -----------
Net assets at end of period............... $493,460,306 $500,072,750 $472,553,966 $1,057,150 $ 1,129,483 $ 594,889
============ ============ ============ ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE SUBACCOUNT INTERNATIONAL OPPORTUNITIES SUBACCOUNT
--------------------------------------- -------------------------------------------
2000 1999 1998 2000 1999 1998
----------- ------------ ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income.................. $ 24,577 $ 72,629 $ 1,070 $ 4,773 $ 330,389 $ 8,318
Net realized gains (losses)............ (147,622) (217,582) 61,917 703,918 123,861 64,757
Net unrealized appreciation
(depreciation) during the period...... 160,413 (40,472) (364,359) (929,318) 839,140 339,709
---------- ----------- ----------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations.............. 37,368 (185,425) (301,372) (220,627) 1,293,390 412,784
From policyholder transactions:
Net premiums from policyholders........ 1,159,319 1,446,109 2,644,808 5,362,651 1,632,955 2,203,753
Net benefits to policyholders.......... (893,462) (1,547,128) (1,288,464) (4,276,522) (1,315,539) (1,443,700)
Net increase in policy loans........... -- -- -- -- -- --
---------- ----------- ----------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from policyholder
transactions........................... 265,857 (101,019) 1,356,344 1,086,129 317,416 760,053
---------- ----------- ----------- ------------ ----------- -----------
Net increase (decrease) in net assets... 303,225 (286,444) 1,054,972 865,502 1,610,806 1,172,837
Net assets at beginning of period....... 4,111,416 4,397,860 3,342,888 5,310,586 3,699,780 2,526,943
---------- ----------- ----------- ------------ ----------- -----------
Net assets at end of period............. $4,414,641 $ 4,111,416 $ 4,397,860 $ 6,176,088 $ 5,310,586 $ 3,699,780
========== =========== =========== ============ =========== ===========
</TABLE>
See accompanying notes.
81
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
EQUITY INDEX SUBACCOUNT
----------------------------------------
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income........................... $ 62,675 $ 817,715 $ 307,010
Net realized gains (losses)..................... 339,524 471,802 132,619
Net unrealized appreciation (depreciation)
during the period.............................. (498,165) 2,019,913 2,082,107
----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations................................. (95,966) 3,309,430 2,521,736
From policyholder transactions:
Net premiums from policyholders................. 5,398,036 7,762,529 4,632,113
Net benefits to policyholders................... (1,940,148) (2,563,485) (1,120,852)
Net increase in policy loans.................... -- -- --
----------- ----------- -----------
Net increase (decrease) in net assets resulting
from policyholder transactions.................. 3,361,922 5,199,044 3,511,261
----------- ----------- -----------
Net increase (decrease) in net assets............ 22,117,624 8,508,474 6,032,997
Net assets at beginning of period................ 22,117,624 13,609,150 7,576,153
----------- ----------- -----------
Net assets at end of period...................... $25,479,546 $22,117,624 $13,609,150
=========== =========== ===========
<CAPTION>
GLOBAL BOND SUBACCOUNT
----------------------------------------
2000 1999 1998
----------- ----------- --------------
<S>.............................................. <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income........................... $ 21,014 $ 81,580 $ 54,728
Net realized gains (losses)..................... (37,534) (1,996) 32,917
Net unrealized appreciation (depreciation)
during the period.............................. 58,703 (126,001) 11,342
---------- ---------- -----------
Net increase (decrease) in net assets resulting
from operations................................. 42,183 (46,417) 98,987
From policyholder transactions:
Net premiums from policyholders................. 378,645 1,115,699 798,933
Net benefits to policyholders................... (685,644) (292,075) (1,158,109)
Net increase in policy loans.................... -- -- --
---------- ---------- -----------
Net increase (decrease) in net assets resulting
from policyholder transactions.................. (306,999) 823,624 (359,176)
---------- ---------- -----------
Net increase (decrease) in net assets............ (264,816) 777,207 (260,189)
Net assets at beginning of period................ 1,882,675 1,105,468 1,365,657
---------- ---------- -----------
Net assets at end of period...................... $1,617,859 $1,882,675 $ 1,105,468
========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
TURNER CORE GROWTH SUBACCOUNT BRANDES INTERNATIONAL EQUITY SUBACCOUNT
--------------------------------- ------------------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- --------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income. $ 3,532 $ 35,936 $ 4,513 $ 6,374 $ 16,549 $ 12,094
Net realized gains.... 101,050 44,245 14,364 6,519 7,704 1,184
Net unrealized
appreciation
(depreciation)
during the period.... (85,212) 37,727 49,605 13,873 119,400 15,813
--------- --------- -------- -------- -------- --------
Net increase in net
assets resulting from
operations............ 19,370 117,908 68,482 26,766 143,653 29,091
From policyholder
transactions:
Net premiums from
policyholders........ 265,836 240,351 203,590 59,497 239,618 55,021
Net benefits to
policyholders........ (371,100) (136,661) (77,651) (18,974) (29,520) (10,341)
Net increase in
policy loans......... -- -- -- -- -- --
--------- --------- -------- -------- -------- --------
Net increase
(decrease) in net
assets resulting from
policyholder
transactions.......... (105,264) 103,690 125,939 40,523 210,098 44,680
--------- --------- -------- -------- -------- --------
Net increase
(decrease) in net
assets................ (85,894) 221,598 194,421 67,289 353,751 73,771
Net assets at
beginning of period... 536,192 314,594 120,173 588,128 234,377 160,606
--------- --------- -------- -------- -------- --------
Net assets at end of
period................ $ 450,298 $ 536,192 $314,594 $655,417 $588,128 $234,377
========= ========= ======== ======== ======== ========
</TABLE>
See accompanying notes.
82
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
FRONTIER CAPITAL EMERGING MARKETS
APPRECIATION SUBACCOUNT EQUITY SUBACCOUNT
--------------------------------- -----------------------------------
2000 1999 1998 2000 1999 1998
---------- --------- ---------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income
(loss)............... $ 21,466 $ 17,768 $ (208) $ (2,736) $ 12,790 $ 1
Net realized gains
(losses)............. 82,236 22,678 12,123 (12,180) 5,339 --
Net unrealized
appreciation
(depreciation)
during the period.... (12,210) 164,599 (17,930) (76,126) 86,570 10
--------- -------- --------- ----------- --------- -------
Net increase
(decrease) in net
assets resulting from
operations............ 91,492 205,045 (6,015) (91,042) 104,699 11
From policyholder
transactions:
Net premiums from
policyholders........ 297,090 255,268 128,779 3,936,569 433,406 2,018
Net benefits to
policyholders........ (219,651) (89,136) (146,083) (3,055,550) (144,400) --
Net increase in
policy loans......... -- -- -- -- -- --
--------- -------- --------- ----------- --------- -------
Net increase
(decrease) in net
assets resulting from
policyholder
transactions.......... 77,439 166,132 (17,304) 881,019 289,006 2,018
--------- -------- --------- ----------- --------- -------
Net increase
(decrease) in net
assets................ 168,931 371,177 (23,319) 789,977 393,705 2,029
Net assets at
beginning of period... 728,674 357,497 380,816 395,734 2,029 --
--------- -------- --------- ----------- --------- -------
Net assets at end of
period................ $ 897,605 $728,674 $ 357,497 $ 1,185,711 $ 395,734 $ 2,029
========= ======== ========= =========== ========= =======
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL OPPORTUNITIES II BOND INDEX
SUBACCOUNT SUBACCOUNT
--------------------------------- --------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income. $ 2,117 $ 241 $ 1 $ 22,741 $ 15,852 $ 146
Net realized gains
(losses)............. 13,157 602 1 (2,201) (1,422) (1)
Net unrealized
appreciation
(depreciation)
during the period.... (13,987) 13,424 45 7,287 (22,820) (196)
-------- -------- ---- -------- -------- -------
Net increase
(decrease) in net
assets resulting from
operations............ 1,287 14,267 47 27,827 (8,390) (51)
From policyholder
transactions:
Net premiums from
policyholders........ 214,628 108,420 915 362,018 412,326 10,254
Net benefits to
policyholders........ (54,971) (11,064) (13) (24,425) (26,307) (69)
Net increase in
policy loans......... -- -- -- -- -- --
-------- -------- ---- -------- -------- -------
Net increase in net
assets resulting from
policyholder
transactions.......... 159,657 97,356 902 337,593 386,019 10,185
-------- -------- ---- -------- -------- -------
Net increase in net
assets................ 160,944 111,623 949 365,420 377,629 10,134
Net assets at
beginning of period... 112,572 949 -- 387,763 10,134 --
-------- -------- ---- -------- -------- -------
Net assets at end of
period................ $273,516 $112,572 $949 $753,183 $387,763 $10,134
======== ======== ==== ======== ======== =======
</TABLE>
See accompanying notes.
83
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
SMALL/MIDCAP HIGH YIELD
CORE SUBACCOUNT BOND SUBACCOUNT
--------------------------- ----------------------------------
2000 1999 1998* 2000 1999 1998*
---------- -------- ----- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income
(loss)............... $ (142) $ 6,632 $ -- $ 8,624 $ 2,542 $ 19
Net realized gains
(losses)............. 10,745 252 -- (8,649) (186) --
Net unrealized
appreciation
(depreciation)
during the period.... (5,954) 3,005 6 (2,045) (511) (26)
--------- ------- ---- ----------- -------- ------
Net increase
(decrease) in net
assets resulting from
operations............ 4,649 9,889 6 (2,070) 1,845 (8)
From policyholder
transactions:
Net premiums from
policyholders........ 414,076 97,385 104 1,249,658 98,955 2,887
Net benefits to
policyholders........ (329,116) (7,901) (2) (1,040,268) (13,078) --
Net increase in
policy loans......... 0 -- -- 0 -- --
--------- ------- ---- ----------- -------- ------
Net increase in net
assets resulting from
policyholder
transactions.......... 84,960 89,484 102 209,390 85,877 2,887
--------- ------- ---- ----------- -------- ------
Net increase in net
assets................ 89,609 99,373 108 207,320 87,722 2,887
Net assets at
beginning of period... 99,481 108 -- 90,601 2,879 --
--------- ------- ---- ----------- -------- ------
Net assets at end of
period................ $ 189,090 $99,481 $108 $ 297,921 $ 90,601 $2,879
========= ======= ==== =========== ======== ======
</TABLE>
<TABLE>
<CAPTION>
CLIFTON
ENHANCED U.S.
EQUITY SUBACCOUNT
--------------------
2000 1999**
-------- ----------
<S> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss)............................ $ 425 $ 1,113
Net realized gains (losses)............................. (33) 91
Net unrealized appreciation (depreciation) during the
period................................................. (534) (879)
------- -------
Net increase (decrease) in net assets resulting from
operations.............................................. (142) 325
From policyholder transactions:
Net premiums from policyholders......................... 4,452 13,814
Net benefits to policyholders........................... (294) --
Net increase in policy loans............................ 0 --
------- -------
Net increase in net assets resulting from policyholder
transactions............................................ 4,158 13,814
------- -------
Net increase in net assets............................... 4,016 14,139
Net assets at beginning of period........................ 14,139 --
------- -------
Net assets at end of period.............................. $18,155 $14,139
======= =======
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
** From March 9, 1999 (commencement of operations).
See accompanying notes.
84
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
YEARS AND PERIODS ENDED JUNE 30, 2000
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 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-seven 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-seven Portfolios
of the Fund and M Fund which are currently available are the Large Cap Growth,
Active Bond (formerly, Sovereign Bond), International Equity Index, Small Cap
Growth, Global Balanced (formerly, International Balanced), Mid Cap Growth,
Large Cap Value, Money Market, Mid Cap Value, Small/Mid Cap Growth (formerly,
Diversified Mid Cap Growth), Real Estate Equity, Growth & Income, Managed,
Short-Term Bond, Small Cap Value, International Opportunities, Equity Index,
Global Bond (formerly, Strategic Bond), Turner Core Growth, Brandes
International Equity, Frontier Capital Appreciation, Emerging Markets Equity,
International Opportunities II (formerly, Global Equity), Bond Index, Small/Mid
Cap CORE, High Yield Bond and Clifton Enhanced U.S. Equity Portfolios (formerly,
Enhanced U.S. Equity). 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 underlying portfolio 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 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.
85
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
86
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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 June 30, 2000 are as follows:
<TABLE>
<CAPTION>
PORTFOLIO SHARES OWNED COST VALUE
--------- ------------ ------------ ----------------
<S> <C> <C> <C>
Large Cap Growth........... 6,118,549 $133,197,126 $ 176,581,445
Active Bond................ 25,676,557 250,059,856 234,710,166
International Equity Index 1,637,313 28,032,291 30,279,715
Small Cap Growth........... 751,112 12,755,532 15,146,841
Global Balanced............ 99,987 1,063,151 1,009,123
Mid Cap Growth............. 951,564 21,827,050 26,659,950
Large Cap Value............ 781,363 10,837,990 10,182,562
Money Market............... 6,282,855 62,861,460 62,828,554
Mid Cap Value.............. 419,590 5,184,053 5,655,397
Small/Mid Cap Growth....... 833,429 12,640,806 12,697,945
Real Estate Equity......... 1,006,818 13,855,749 12,765,326
Growth & Income............ 53,177,519 786,999,791 1,054,098,419
Managed.................... 26,812,598 359,486,863 412,811,976
Short-Term Bond............ 108,407 1,074,517 1,051,732
Small Cap Value............ 402,638 4,641,679 4,409,122
International
Opportunities............. 424,604 6,010,304 6,171,237
Equity Index............... 1,257,997 20,669,031 25,463,881
Global Bond................ 161,599 1,670,350 1,610,930
Turner Core Growth......... 18,889 537,085 450,305
Brandes International
Equity.................... 41,067 456,415 655,428
Frontier Capital
Appreciation.............. 37,890 1,499,897 897,620
Emerging Markets Equity.... 103,852 296,973 1,185,730
International
Opportunities II....... 22,760 274,038 273,330
Bond Index................. 80,112 768,927 749,101
Small/Mid Cap Core......... 18,350 192,035 188,808
High Yield Bond............ 35,025 300,508 295,903
Clifton Enhanced US Equity
Fund...................... 912 14,986 18,155
</TABLE>
87
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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 2000,
were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
--------- ----------- -------------
<S> <C> <C>
Large Cap Growth..................... $14,526,753 $ 4,071,523
Active Bond.......................... 12,595,440 13,172,460
International Equity Index........... 8,546,295 5,508,370
Small Cap Growth..................... 6,763,851 2,965,434
Global Balanced...................... 170,170 275,036
Mid Cap Growth....................... 9,665,686 2,215,013
Large Cap Value...................... 1,684,020 715,601
Money Market......................... 20,068,019 19,726,545
Mid Cap Value........................ 831,482 701,828
Small/Mid Cap Growth................. 1,420,670 2,130,402
Real Estate Equity................... 3,756,641 3,664,903
Growth & Income...................... 10,140,753 35,665,986
Managed.............................. 9,078,644 16,420,432
Short-Term Bond...................... 223,617 294,148
Small Cap Value...................... 918,362 627,855
International Opportunities.......... 4,740,829 3,649,827
Equity Index......................... 4,320,990 800,013
Global Bond.......................... 324,904 610,861
Turner Core Growth................... 0 0
Brandes International Equity......... 0 0
Frontier Capital Appreciation........ 3,318,819 2,440,517
Emerging Markets Equity.............. 0 0
International Opportunities II....... 322,785 161,007
Bond Index........................... 392,051 31,702
Small/Mid Cap Core................... 408,308 323,488
High Yield Bond...................... 1,251,885 1,033,876
Clifton Enhanced US Equity Fund...... 0 0
</TABLE>
88
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
5. NET ASSETS
Accumulation shares attributable to net assets of contractowners and
accumulation share values for each Portfolio at June 30, 2000 were as follows:
<TABLE>
<CAPTION>
ACCUMULATION SHARE
PORTFOLIO SHARES VALUES
--------- ------------ --------
<S> <C> <C>
Large Cap Growth.......................... 559,086 83.98
Active Bond............................... 690,050 24.41
International Equity Index................ 487,610 26.08
Small Cap Growth.......................... 663,124 22.82
Global Balanced........................... 79,825 12.67
Mid Cap Growth............................ 783,262 34.02
Large Cap Value........................... 646,321 15.74
Money Market.............................. 644,839 18.58
Mid Cap Value............................. 381,056 14.82
Small/Mid Cap Growth...................... 592,151 21.43
Real Estate Equity........................ 203,675 25.09
Growth & Income........................... 1,238,691 67.63
Managed................................... 1,030,002 40.02
Short-Term Bond........................... 79,247 13.34
Small Cap Value........................... 354,503 12.43
International Opportunities............... 389,613 15.85
Equity Index.............................. 1,112,540 22.90
Global Bond............................... 129,203 12.51
Turner Core Growth........................ 16,303 27.61
Brandes International Equity.............. 36,840 17.80
Frontier Capital Appreciation............. 36,994 24.26
Emerging Markets Equity................... 99,862 11.88
International Opportunities II............ 22,407 12.21
Bond Index................................ 69,381 10.72
Small/Mid Cap CORE........................ 16,782 11.27
High Yield Bond........................... 30,156 9.88
Clifton Enhanced US Equity................ 1,411 12.87
</TABLE>
89
<PAGE>
REPORT ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Policyholders of
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 Equity Index, Small Cap Growth,
International Balanced, Mid Cap Growth, Large Cap Value, Money Market, Mid Cap
Value, Small/Mid Cap Growth (formerly, Diversified Mid Cap Growth), Real Estate
Equity, Growth & Income, Managed, Short-Term Bond, Small Cap Value,
International Opportunities, Equity Index, Global Bond (formerly, Strategic
Bond), Turner Core Growth, Brandes International Equity, Frontier Capital
Appreciation, Emerging Markets Equity, Global Equity, Bond Index, Small/Mid Cap
CORE, High Yield Bond and Enhanced U.S. Equity Subaccounts) as of December 31,
1999, and the related statements of operations and changes in net assets for
each of the periods indicated therein. These financial statements are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
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,
1999, the results of their operations and the changes in their net assets for
each of the periods indicated, in conformity with accounting principles
generally accepted in the United States.
ERNST & YOUNG LLP
Boston, Massachusetts
February 11, 2000
90
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTERNATIONAL
LARGE CAP SOVEREIGN EQUITY SMALL CAP
GROWTH BOND INDEX GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash.................... $ 18,374 $ 31,159 $ 3,363 $ 1,196
Investments in shares
of portfolios of
John Hancock
Variable Series Trust
I, at value............ 156,931,243 236,200,057 29,055,936 10,825,578
Policy loans and
accrued interest
receivable............. 20,131,090 56,920,743 2,843,104 --
Receivable from:
John Hancock Variable
Series Trust I........ 166,807 45,107 32,276 20,662
M Fund Inc............. -- -- -- --
------------ ------------ ----------- -----------
Total assets............ 177,247,514 293,197,066 31,934,679 10,847,436
LIABILITIES
Payable to John
Hancock Variable Life
Insurance Company...... 164,174 40,650 31,788 20,488
Asset charges payable... 21,008 35,617 3,852 1,370
------------ ------------ ----------- -----------
185,182 76,267 35,640 21,858
------------ ------------ ----------- -----------
Net assets.............. $177,062,332 $293,120,799 $31,899,039 $10,825,578
============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL MID CAP LARGE CAP MONEY
BALANCED GROWTH VALUE MARKET
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash.................... $ 133 $ 2,329 $ 1,091 $ 4,680
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value...... 1,177,232 20,852,255 9,553,293 62,519,986
Policy loans and accrued
interest receivable.... -- -- -- 14,118,655
Receivable from:
John Hancock Variable
Series Trust I........ 970 103,804 6,237 159,443
M Fund Inc............. -- -- -- --
----------- ----------- ---------- -----------
Total assets............ 1,178,335 20,958,388 9,560,621 76,802,764
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company................ 950 103,466 6,081 158,266
Asset charges payable... 153 2,667 1,247 5,857
----------- ----------- ---------- -----------
1,103 106,133 7,328 164,123
----------- ----------- ---------- -----------
Net assets.............. $ 1,177,232 $20,852,255 $9,553,293 $76,638,641
=========== =========== ========== ===========
</TABLE>
See accompanying notes.
91
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SMALL/MID
MID CAP CAP REAL ESTATE GROWTH &
VALUE GROWTH EQUITY INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ----------- ----------- ----------------
<S> <C> <C> <C> <C>
ASSETS
Cash.................... $ 589 $ 1,386 $ 1,428 $ 132,575
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value.................. 5,236,581 12,409,573 11,482,706 1,091,050,404
Policy loans and
accrued interest
receivable............. -- -- 1,895,766 187,689,150
Receivable from:
John Hancock Variable
Series Trust I........ 27,820 34,285 1,966 333,111
M Fund Inc............. -- -- -- --
------------ ----------- ----------- --------------
Total assets............ 5,264,990 12,445,244 13,381,866 1,279,205,240
LIABILITIES
Payable to John
Hancock Variable Life
Insurance Company...... 27,735 34,083 1,758 314,139
Asset charges payable... 675 1,588 1,636 151,547
------------ ----------- ----------- --------------
Total liabilities....... 28,410 35,671 3,394 465,686
------------ ----------- ----------- --------------
Net assets.............. $ 5,236,580 $12,409,573 $13,378,472 $1,278,739,554
============ =========== =========== ==============
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM SMALL CAP INTERNATIONAL
MANAGED BOND VALUE OPPORTUNITIES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Cash.................... $ 52,222 $ 129 $ 460 $ 593
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value...... 422,672,470 1,129,483 4,111,416 5,310,586
Policy loans and accrued
interest receivable.... 77,400,280 -- -- --
Receivable from:
John Hancock Variable
Series Trust I........ 123,268 218 2,954 5,072
M Fund Inc............. -- -- -- --
------------ ---------- ---------- ----------
Total assets............ 500,248,240 1,129,830 4,114,830 5,316,251
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company................ 115,790 199 2,887 4,985
Asset charges payable... 59,700 148 527 680
------------ ---------- ---------- ----------
Total liabilities....... 175,490 347 3,414 5,665
------------ ---------- ---------- ----------
Net assets.............. $500,072,750 $1,129,483 $4,111,416 $5,310,586
============ ========== ========== ==========
</TABLE>
See accompanying notes.
92
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
TURNER BRANDES
EQUITY GLOBAL CORE INTERNATIONAL
INDEX BOND GROWTH EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Cash.................... $ 2,517 $ 216 $ 60 $ 65
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value...... 22,117,624 1,882,675 -- --
Investments in shares of
portfolios of M Fund
Inc., at value......... -- -- 536,192 588,128
Policy loans and accrued
interest receivable.... -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I........ 19,259 31 -- --
M Fund Inc............. -- -- 9 10
----------- ---------- -------- --------
Total assets............ 22,139,400 1,882,922 536,261 588,203
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company................ 18,897 -- -- --
Asset charges payable... 2,879 247 69 75
----------- ---------- -------- --------
Total liabilities....... 21,776 247 69 75
----------- ---------- -------- --------
Net assets.............. $22,117,624 $1,882,675 $536,192 $588,128
=========== ========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
FRONTIER EMERGING
CAPITAL MARKETS GLOBAL
APPRECIATION EQUITY EQUITY BOND INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash...................... $ 80 $ 43 $ 12 $ 45
Investments in shares of
portfolios of John Hancock
Variable Series Trust I,
at value................. -- 395,733 112,572 387,762
Investments in shares of
portfolios of M Fund Inc.,
at value................. 728,674 -- -- --
Policy loans and accrued
interest receivable....... -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I.......... -- 2,536 2 1,123
M Fund Inc............... 12 -- -- --
-------- -------- -------- --------
Total assets.............. 728,766 398,312 112,586 388,930
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company.................. -- 2,529 -- 1,116
Asset charges payable..... 92 49 14 51
-------- -------- -------- --------
Total liabilities......... 92 2,578 14 1,167
-------- -------- -------- --------
Net assets................ $728,674 $395,734 $112,572 $387,763
======== ======== ======== ========
</TABLE>
See accompanying notes.
93
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SMALL/MID HIGH YIELD ENHANCED
CAP CORE BOND U.S. EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- -------------
<S> <C> <C> <C>
ASSETS
Cash..................................... $ 9 $ -- $ 1
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value................................ 99,481 90,611 --
Investments in shares of portfolios of M
Fund Inc., at value..................... -- -- 14,140
Policy loans and accrued interest
receivable.............................. -- -- --
Receivable from:
John Hancock Variable Series Trust I.... 16,714 1,478 --
M Fund Inc.............................. -- -- --
-------- ------- -------
Total assets............................. 116,204 92,089 14,141
LIABILITIES
Payable to John Hancock Variable Life
Insurance Company....................... 16,712 1,477 --
Asset charges payable.................... 11 11 2
-------- ------- -------
Total liabilities........................ 16,723 1,488 2
-------- ------- -------
Net assets............................... $ 99,481 $90,601 $14,139
======== ======= =======
</TABLE>
See accompanying notes.
94
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT SOVEREIGN BOND SUBACCOUNT
------------------------------------- ------------------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I.................................. $24,007,195 $11,641,271 $ 7,675,850 $ 17,792,726 $19,685,096 $17,409,990
M Fund Inc................................ -- -- -- -- -- --
Interest income on policy loans............ 1,211,333 1,008,607 875,892 4,084,783 4,027,376 3,926,698
----------- ----------- ----------- ------------ ----------- -----------
Total investment income.................... 25,218,528 12,649,878 8,551,742 21,877,509 23,712,472 21,336,688
Expenses:
Mortality and expense risks............... 828,714 624,665 480,057 1,643,861 1,624,615 1,514,127
----------- ----------- ----------- ------------ ----------- -----------
Net investment income...................... 24,389,814 12,025,213 8,071,685 20,233,648 22,087,857 19,822,561
Net realized and unrealized gain (loss) on
investments:
Net realized gain......................... 4,239,424 3,520,199 4,216,904 192,098 1,600,539 1,088,488
Net unrealized appreciation (depreciation)
during the period........................ 1,727,703 18,509,310 7,920,403 (20,304,536) (2,317,324) 2,987,952
----------- ----------- ----------- ------------ ----------- -----------
Net realized and unrealized gain (loss) on
investments............................... 5,967,127 22,029,509 12,137,307 (20,112,438) (716,785) 4,076,440
----------- ----------- ----------- ------------ ----------- -----------
Net increase in net assets resulting from
operations................................ $30,356,941 $34,054,722 $20,208,992 $ 121,210 $21,371,072 $23,899,001
=========== =========== =========== ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX SUBACCOUNT SMALL CAP GROWTH SUBACCOUNT
--------------------------------------- ----------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ------------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I...... $ 917,904 $3,394,842 $ 840,616 $1,272,230 $ -- $ 976
M Fund Inc................................ -- -- -- -- -- --
Interest income on policy loans............ 179,345 170,285 170,905 -- -- --
---------- ---------- ----------- ---------- -------- --------
Total investment income.................... 1,097,249 3,565,127 1,011,521 1,272,230 -- 976
Expenses:
Mortality and expense risks............... 147,126 124,891 107,415 37,386 20,335 11,175
---------- ---------- ----------- ---------- -------- --------
Net investment income (loss)............... 950,123 3,440,236 904,106 1,234,844 (20,335) (10,199)
Net realized and unrealized gain (loss)
on investments:
Net realized gain......................... 168,248 148,419 209,781 491,241 55,393 34,153
Net unrealized appreciation (depreciation)
during the period........................ 5,712,567 105,161 (2,036,425) 2,317,857 518,731 226,085
---------- ---------- ----------- ---------- -------- --------
Net realized and unrealized gain (loss)
on investments........................... 5,880,815 253,580 (1,826,644) 2,809,098 574,124 260,238
---------- ---------- ----------- ---------- -------- --------
Net increase (decrease) in net assets
resulting from operations................ $6,830,938 $3,693,816 $ (922,538) $4,043,942 $553,789 $250,039
========== ========== =========== ========== ======== ========
</TABLE>
See accompanying notes.
95
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INTERNATIONAL BALANCED SUBACCOUNT MID CAP GROWTH SUBACCOUNT
------------------------------------ -------------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I......... $ 99,184 $ 57,587 $ 30,867 $2,117,559 $ 461,919 $ --
M Fund Inc................................... -- -- -- -- -- --
Interest income on policy loans............... -- -- -- -- -- --
--------- --------- -------- ---------- ---------- ----------
Total investment income....................... 99,184 57,587 30,867 2,117,559 461,919 --
Expenses:
Mortality and expense risks.................. 6,368 4,696 2,758 58,898 16,758 5,801
--------- --------- -------- ---------- ---------- ----------
Net investment income (loss).................. 92,816 52,891 28,109 2,058,661 445,161 (5,801)
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)..................... 4,711 (4,506) 12,000 773,222 73,958 394
Net unrealized appreciation (depreciation)
during the period........................... (38,997) 78,455 (41,999) 6,801,000 647,137 199,441
--------- --------- -------- ---------- ---------- ----------
Net realized and unrealized gain (loss) on
investments.................................. (34,286) 73,949 (29,999) 7,574,222 721,095 199,835
--------- --------- -------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations................... $ 58,530 $ 126,840 $ (1,890) $9,632,883 $1,166,256 $ 194,034
========= ========= ======== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE SUBACCOUNT MONEY MARKET SUBACCOUNT
-------------------------------- ------------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I... $ 648,532 $ 433,626 $266,440 $2,943,852 $2,888,490 $2,746,662
M Fund Inc............................. -- -- -- -- -- --
Interest income on policy loans......... -- -- -- 985,509 973,241 957,390
--------- --------- -------- ---------- ---------- ----------
Total investment income................. 648,532 433,626 266,440 3,929,361 3,861,731 3,704,052
Expenses:
Mortality and expense risks............ 54,610 44,753 25,295 411,487 380,002 361,409
--------- --------- -------- ---------- ---------- ----------
Net investment income................... 593,922 388,873 241,145 3,517,874 3,481,729 3,342,643
Net realized and unrealized gain (loss)
on investments:
Net realized gain...................... 165,556 673,582 217,073 -- -- --
Net unrealized appreciation
(depreciation) during the period...... (569,216) (479,093) 532,936 -- -- --
--------- --------- -------- ---------- ---------- ----------
Net realized and unrealized gain
(loss) on investments.................. (403,660) 194,489 750,009 -- -- --
--------- --------- -------- ---------- ---------- ----------
Net increase in net assets resulting
from operations....................... $ 190,262 $ 583,362 $991,154 $3,517,874 $3,481,729 $3,342,643
========= ========= ======== ========== ========== ==========
</TABLE>
See accompanying notes.
96
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MID CAP VALUE SUBACCOUNT SMALL/MID CAP GROWTH SUBACCOUNT
---------------------------------------- --------------------------------------------
1999 1998 1997 1999 1998 1997
----------- -------------- ----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I.................................. $ 31,306 $ 40,338 $ 178,590 $ 1,903,687 $ 217,686 $ 1,022,881
M Fund Inc................................ -- -- -- -- -- --
Interest income on policy loans............ -- -- -- -- -- --
---------- ------------- ---------- ------------ ------------ ------------
Total investment income.................... 31,306 40,338 178,590 1,903,687 217,686 1,022,881
Expenses:
Mortality and expense risks............... 29,798 23,760 6,329 69,847 63,334 54,469
---------- ------------- ---------- ------------ ------------ ------------
Net investment income...................... 1,508 16,578 172,261 1,833,840 154,352 968,412
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss).................. (241,740) (422,902) 121,152 (13,020) 56,968 533,297
Net unrealized appreciation (depreciation)
during the period........................ 469,537 (260,362) (86,033) (1,274,161) 334,213 (1,073,252)
---------- ------------- ---------- ------------ ------------ ------------
Net realized and unrealized gain (loss) on
investments............................... 227,797 (683,264) 35,119 (1,287,181) 391,181 (539,955)
---------- ------------- ---------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations................. $ 229,305 $ (666,686) $ 207,380 $ 546,659 $ 545,533 $ 428,457
========== ============= ========== ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY SUBACCOUNT GROWTH & INCOME SUBACCOUNT
-------------------------------------- ------------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ---------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I.................................. $ 771,050 $ 817,633 $ 957,079 $124,750,392 $ 96,326,313 $ 99,799,718
M Fund Inc................................ -- -- -- -- -- --
Interest income on policy loans............ 131,461 145,212 140,517 12,877,539 11,727,553 10,448,315
----------- ----------- ---------- ------------ ------------ ------------
Total investment income.................... 902,511 962,845 1,097,596 137,627,931 108,053,866 110,248,033
Expenses:
Mortality and expense risks............... 78,893 86,610 76,454 6,531,512 5,589,689 4,658,703
----------- ----------- ---------- ------------ ------------ ------------
Net investment income...................... 823,618 876,235 1,021,142 131,096,419 102,464,177 105,589,330
Net realized and unrealized gain (loss) on
investments:
Net realized gain......................... 123,591 442,876 551,925 22,802,197 22,835,488 16,543,458
Net unrealized appreciation (depreciation)
during the period........................ (1,106,755) (3,720,942) 447,661 7,687,109 112,457,395 67,250,127
----------- ----------- ---------- ------------ ------------ ------------
Net realized and unrealized gain (loss) on
investments............................... (983,164) (3,278,066) 999,586 30,489,306 135,292,883 83,793,585
----------- ----------- ---------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations................. $ (159,546) $(2,401,831) $2,020,728 $161,585,725 $237,757,060 $189,382,915
=========== =========== ========== ============ ============ ============
</TABLE>
See accompanying notes.
97
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MANAGED SUBACCOUNT SHORT-TERM BOND SUBACCOUNT
-------------------------------------- -----------------------------------
1999 1998 1997 1999 1998 1997
------------ ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable Series Trust I.. $39,951,885 $37,907,821 $32,757,460 $ 53,689 $ 31,261 $ 22,079
M Fund Inc............................ -- -- -- -- -- --
Interest income on policy loans........ 5,217,121 4,949,021 4,669,363 -- -- --
----------- ----------- ----------- ---------- -------- ---------
Total investment income................ 45,169,006 42,856,842 37,426,823 53,689 31,261 22,079
Expenses:
Mortality and expense risks........... 2,636,085 2,381,406 2,111,314 5,065 3,052 2,202
----------- ----------- ----------- ---------- -------- ---------
Net investment income.................. 42,532,921 40,475,436 35,315,509 48,624 28,209 19,877
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss).............. 5,060,826 5,853,076 5,663,060 (3,107) 2,008 235
Net unrealized appreciation
(depreciation) during the period..... (9,288,287) 24,834,482 16,843,903 (23,648) (5,287) 1,405
----------- ----------- ----------- ---------- -------- ---------
Net realized and unrealized gain
(loss) on investments................. (4,227,461) 30,687,558 22,506,963 (26,755) (3,279) 1,640
----------- ----------- ----------- ---------- -------- ---------
Net increase in net assets
resulting from operations............ $38,305,460 $71,162,994 $57,822,472 $ 21,869 $ 24,930 $ 21,517
=========== =========== =========== ========== ======== =========
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE SUBACCOUNT INTERNATIONAL OPPORTUNITIES SUBACCOUNT
--------------------------------- ---------------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- --------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I........ $ 97,290 $ 24,781 $256,363 $ 354,646 $ 27,799 $ 35,111
M Fund Inc.................................. -- -- -- -- -- --
Interest income on policy loans.............. -- -- -- -- -- --
--------- --------- -------- ---------- -------- ---------
Total investment income...................... 97,290 24,781 256,363 354,646 27,799 35,111
Expenses:
Mortality and expense risks................. 24,661 23,711 10,530 24,257 19,481 11,575
--------- --------- -------- ---------- -------- ---------
Net investment income........................ 72,629 1,070 245,833 330,389 8,318 23,536
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss).................... (217,582) 61,917 129,604 123,861 64,757 78,058
Net unrealized appreciation
(depreciation) during the period........... (40,472) (364,339) (32,439) 839,140 339,709 (141,034)
--------- --------- -------- ---------- -------- ---------
Net realized and unrealized gain
(loss) on investments....................... (258,054) (302,422) 97,165 963,001 404,466 (62,976)
--------- --------- -------- ---------- -------- ---------
Net increase (decrease) in net
assets resulting from operations............ $(185,425) $(301,352) $342,998 $1,293,390 $412,784 $ (39,440)
========= ========= ======== ========== ======== =========
</TABLE>
See accompanying notes.
98
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EQUITY INDEX SUBACCOUNT GLOBAL BOND SUBACCOUNT
---------------------------------- -----------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I........ $ 921,698 $ 367,284 $ 220,686 $ 91,316 $62,244 $84,597
M Fund Inc.................................. -- -- -- -- -- --
Interest income on policy loans.............. -- -- -- -- -- --
---------- ---------- ---------- --------- ------- -------
Total investment income...................... 921,698 367,284 220,686 91,316 62,244 84,597
Expenses:
Mortality and expense risks................. 103,983 60,274 28,637 9,736 7,516 5,827
---------- ---------- ---------- --------- ------- -------
Net investment income........................ 817,715 307,010 192,049 81,580 54,728 78,770
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss).................... 471,802 132,619 38,987 (1,996) 32,917 5,891
Net unrealized appreciation
(depreciation) during the period........... 2,019,913 2,082,107 1,193,531 (126,001) 11,342 (3,195)
---------- ---------- ---------- --------- ------- -------
Net realized and unrealized gain
(loss) on investments....................... 2,491,715 2,214,726 1,232,518 (127,997) 44,259 2,696
---------- ---------- ---------- --------- ------- -------
Net increase (decrease) in net
assets resulting from operations............ $3,309,430 $2,521,736 $1,424,567 $ (46,417) $98,987 $81,466
========== ========== ========== ========= ======= =======
</TABLE>
<TABLE>
<CAPTION>
TURNER CORE GROWTH SUBACCOUNT BRANDES INTERNATIONAL EQUITY SUBACCOUNT
-------------------------------- ---------------------------------------
1999 1998 1997 1999 1998 1997
---------- --------- --------- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I.. $ -- $ -- $ -- $ -- $ -- $ --
M Fund Inc............................ 38,038 5,535 11,090 18,453 13,237 2,278
Interest income on policy loans........ -- -- -- -- -- --
-------- ------- ------- -------- ------- ------
Total investment income................ 38,038 5,535 11,090 18,453 13,237 2,278
Expenses:
Mortality and expense risks........... 2,102 1,022 505 1,904 1,143 746
-------- ------- ------- -------- ------- ------
Net investment income.................. 35,936 4,513 10,585 16,549 12,094 1,532
Net realized and unrealized gain
(loss) on investments:
Net realized gain..................... 44,245 14,364 3,166 7,704 1,184 133
Net unrealized appreciation during
the period........................... 37,727 49,605 12,370 119,400 15,813 2,674
-------- ------- ------- -------- ------- ------
Net realized and unrealized gain on
investments........................... 81,972 63,969 15,536 127,104 16,997 2,807
-------- ------- ------- -------- ------- ------
Net increase in net assets resulting
from operations...................... $117,908 $68,482 $26,121 $143,653 $29,091 $4,339
======== ======= ======= ======== ======= ======
</TABLE>
See accompanying notes.
99
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
FRONTIER CAPITAL APPRECIATION EMERGING MARKETS EQUITY GLOBAL
SUBACCOUNT SUBACCOUNT EQUITY SUBACCOUNT
------------------------------- ------------------------- --------------------
1999 1998 1997 1999 1998* 1999 1998*
--------- ---------- -------- ------------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I............ $ -- $ -- $ -- $ 13,510 $ 1 $ 508 $ 1
M Fund Inc...................................... 20,787 1,888 8,986 -- -- -- --
Interest income on policy loans.................. -- -- -- -- -- -- --
-------- -------- ------- -------- ----- ------- -------
Total investment income.......................... 20,787 1,888 8,986 13,510 1 508 1
Expenses:
Mortality and expense risks..................... 3,019 2,096 1,464 720 -- 267 --
-------- -------- ------- -------- ----- ------- -------
Net investment income (loss)..................... 17,768 (208) 7,522 12,790 1 241 1
Net realized and unrealized gain on investments:
Net realized gain............................... 22,678 12,123 9,048 5,339 -- 602 1
Net unrealized appreciation (depreciation)
during the period.............................. 164,599 (17,930) 40,541 86,570 10 13,424 45
-------- -------- ------- -------- ----- ------- -------
Net realized and unrealized gain (loss) on
investments..................................... 187,277 (5,807) 49,589 91,909 10 14,026 46
-------- -------- ------- -------- ----- ------- -------
Net increase (decrease) in net assets resulting
from operations................................. $205,045 $ (6,015) $57,111 $104,699 $ 11 $14,267 $ 47
======== ======== ======= ======== ===== ======= =======
</TABLE>
<TABLE>
<CAPTION>
SMALL/MID ENHANCED
CAP CORE HIGH YIELD U.S. EQUITY
BOND INDEX SUBACCOUNT SUBACCOUNT BOND SUBACCOUNT SUBACCOUNT
----------------------- --------------- ---------------- --------------
1999 1998* 1999 1998* 1999 1998* 1999**
------------ --------- ------ ------- -------- ------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I........ $ 17,417 $ 149 $6,810 $-- $2,748 $ 19 $ --
M Fund Inc.................................. -- -- -- -- -- -- 1,117
Interest income on policy loans.............. -- -- -- -- -- -- --
-------- ----- ------ -- ------ ---- ------
Total investment income...................... 17,417 149 6,810 2,748 19 1,117
Expenses:
Mortality and expense risks................. 1,565 3 178 -- 206 1 4
-------- ----- ------ -- ------ ---- ------
Net investment income........................ 15,852 146 6,632 -- 2,542 18 1,113
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss).................... (1,422) (1) 252 -- (186) -- 91
Net unrealized appreciation
(depreciation) during the period........... (22,820) (196) 3,005 6 (511) (26) (879)
-------- ----- ------ -- ------ ---- ------
Net realized and unrealized gain
(loss) on investments....................... (24,242) (197) 3,257 6 (697) (26) (788)
-------- ----- ------ -- ------ ---- ------
Net increase (decrease) in net
assets resulting from operations............ $ (8,390) $ (51) $9,889 $6 $1,845 $ (8) $ 325
======== ===== ====== == ====== ==== ======
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
** From March 9, 1999 (commencement of operations).
See accompanying notes.
100
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT SOVEREIGN BOND SUBACCOUNT
------------------------------------------- ---------------------------------------------
1999 1998 1997 1999 1998 1997
------------- ------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income................. $ 24,389,814 $ 12,025,213 $ 8,071,685 $ 20,233,648 $ 22,087,857 $ 19,822,561
Net realized gains.................... 4,239,424 3,520,199 4,216,904 192,098 1,600,539 1,088,488
Net unrealized appreciation
(depreciation) during the period..... 1,727,703 18,509,310 7,920,403 (20,304,536) (2,317,324) 2,987,952
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations....................... 30,356,941 34,054,722 20,208,992 121,210 21,371,072 23,899,001
From policyholder transactions:
Net premiums from policyholders....... 37,307,814 21,681,632 18,819,133 26,114,799 32,901,747 31,136,450
Net benefits to policyholders......... (25,817,420) (21,510,240) (19,915,971) (35,577,616) (39,577,750) (39,506,771)
Net increase (decrease) in policy
loans................................ -- 2,561,877 (41,068) -- 1,607,456 1,612,490
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder
transactions.......................... 11,490,394 2,733,269 (1,137,906) (9,462,817) (5,068,547) (6,757,831)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets.. 41,847,335 36,787,991 19,071,086 (9,341,607) 16,302,525 17,141,170
Net assets at beginning of period...... 135,214,997 98,427,006 79,355,920 302,462,406 286,159,881 269,018,711
------------ ------------ ------------ ------------ ------------ ------------
Net assets at end of period............ $177,062,332 $135,214,997 $ 98,427,006 $293,120,799 $302,462,406 $286,159,881
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX SUBACCOUNT SMALL CAP GROWTH SUBACCOUNT
---------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss).......... $ 950,123 $ 3,440,236 $ 904,106 $ 1,234,844 $ (20,335) $ (10,199)
Net realized gains.................... 168,248 148,419 209,781 491,241 55,393 34,153
Net unrealized appreciation
(depreciation) during the period..... 5,712,567 105,161 (2,036,425) 2,317,857 518,731 226,085
----------- ----------- ----------- ----------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations............. 6,830,938 3,693,816 (922,538) 4,043,942 553,789 250,039
From policyholder transactions:
Net premiums from policyholders....... 7,373,967 6,549,988 6,398,146 4,316,218 2,382,203 1,906,439
Net benefits to policyholders......... (6,834,914) (5,210,982) (4,052,306) (2,206,402) (998,381) (626,114)
Net increase in policy loans.......... -- 86,200 41,466 -- -- --
----------- ----------- ----------- ----------- ---------- ----------
Net increase in net assets resulting
from policyholder transactions........ 539,053 1,425,206 2,387,306 2,109,816 1,383,822 1,280,325
----------- ----------- ----------- ----------- ---------- ----------
Net increase in net assets............. 7,369,991 5,119,022 1,464,768 6,153,758 1,937,611 1,530,364
Net assets at beginning of period...... 24,529,048 19,410,026 17,945,258 4,671,820 2,734,209 1,203,845
----------- ----------- ----------- ----------- ---------- ----------
Net assets at end of period............ $31,899,039 $24,529,048 $19,410,026 $10,825,578 $4,671,820 $2,734,209
=========== =========== =========== =========== ========== ==========
</TABLE>
See accompanying notes.
101
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INTERNATIONAL BALANCED SUBACCOUNT MID CAP GROWTH SUBACCOUNT
---------------------------------------- ---------------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss)............. $ 92,816 $ 52,891 $ 28,109 $ 2,058,661 $ 445,161 $ (5,801)
Net realized gains (losses).............. 4,711 (4,506) 12,000 773,222 73,958 394
Net unrealized appreciation
(depreciation) during the period........ (38,997) 78,455 (41,999) 6,801,000 647,137 199,441
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations................ 58,530 126,840 (1,890) 9,632,883 1,166,256 194,034
From policyholder transactions:
Net premiums from policyholders.......... 377,958 341,482 602,033 8,941,124 3,164,065 1,031,218
Net benefits to policyholders............ (131,331) (310,766) (102,953) (2,937,257) (612,975) (294,344)
Net increase in policy loans............. -- -- -- -- -- --
----------- ----------- ----------- ------------ ------------ ------------
Net increase in net assets resulting from
policyholder transactions................ 246,627 30,716 499,080 6,003,867 2,551,090 736,874
----------- ----------- ----------- ------------ ------------ ------------
Net increase in net assets................ 305,157 157,556 497,190 15,636,750 3,717,346 930,908
Net assets at beginning of period......... 872,075 714,519 217,329 5,215,505 1,498,159 567,251
----------- ----------- ----------- ------------ ------------ ------------
Net assets at end of period............... $ 1,177,232 $ 872,075 $ 714,519 $ 20,852,255 $ 5,215,505 $ 1,498,159
=========== =========== =========== ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE SUBACCOUNT MONEY MARKET SUBACCOUNT
---------------------------------------- ---------------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income.................... $ 593,922 $ 388,873 $ 241,145 $ 3,517,874 $ 3,481,729 $ 3,342,641
Net realized gains....................... 165,556 673,582 217,073 -- -- --
Net unrealized appreciation
(depreciation) during the period........ (569,216) (479,093) 532,936 -- -- --
----------- ----------- ----------- ------------ ------------ ------------
Net increase in net assets resulting from
operations............................... 190,262 583,362 991,154 3,517,874 3,481,729 3,342,641
From policyholder transactions:
Net premiums from policyholders.......... 3,166,658 4,214,076 3,739,319 33,694,123 24,612,731 19,023,054
Net benefits to policyholders............ (1,903,017) (3,212,048) (1,140,574) (30,672,090) (24,024,723) (20,817,572)
Net increase in policy loans............. -- -- -- -- 421,166 390,775
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder
transactions............................. 1,263,641 1,002,028 2,598,745 3,022,033 1,009,174 (1,403,743)
----------- ----------- ----------- ------------ ------------ ------------
Net increase in net assets................ 1,453,903 1,585,390 3,589,899 6,539,907 4,490,903 1,938,898
Net assets at beginning of period......... 8,099,390 6,514,000 2,924,101 70,098,734 65,607,831 63,668,933
----------- ----------- ----------- ------------ ------------ ------------
Net assets at end of period............... $ 9,553,293 $ 8,099,390 $ 6,514,000 $ 76,638,641 $ 70,098,734 $ 65,607,831
=========== =========== =========== ============ ============ ============
</TABLE>
See accompanying notes.
102
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MID CAP VALUE SUBACCOUNT SMALL/MID CAP GROWTH SUBACCOUNT
---------------------------------------- ------------------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income................. $ 1,508 $ 16,578 $ 172,261 $ 1,833,840 $ 154,352 $ 968,412
Net realized gains (losses)........... (241,740) (422,902) 121,152 (13,020) 56,968 533,297
Net unrealized appreciation
(depreciation) during the period..... 469,537 (260,362) (86,033) (1,274,161) 334,213 (1,073,252)
----------- ----------- ----------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations............. 229,305 (666,686) 207,380 546,659 545,533 428,457
From policyholder transactions:
Net premiums from policyholders....... 1,886,594 5,997,691 2,070,644 3,493,643 3,953,326 6,338,416
Net benefits to policyholders......... (1,745,112) (2,912,034) (190,430) (3,105,108) (3,311,846) (3,379,629)
Net increase in policy loans.......... -- -- -- -- -- --
----------- ----------- ----------- ------------- ------------- -------------
Net increase in net assets resulting
from policyholder transactions........ 141,482 3,085,657 1,880,214 388,535 641,480 2,958,787
----------- ----------- ----------- ------------- ------------- -------------
Net increase in net assets............. 370,787 2,418,971 2,087,594 935,194 1,187,013 3,387,244
Net assets at beginning of period...... 4,865,793 2,446,822 359,228 11,474,379 10,287,366 6,900,122
----------- ----------- ----------- ------------- ------------- -------------
Net assets at end of period............ $ 5,236,580 $ 4,865,793 $ 2,446,822 $ 12,409,573 $ 11,474,379 $ 10,287,366
=========== =========== =========== ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY SUBACCOUNT GROWTH & INCOME SUBACCOUNT
---------------------------------------- --------------------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income............... $ 823,618 $ 876,235 $ 1,021,142 $ 131,096,419 $ 102,464,177 $ 105,589,330
Net realized gains.................. 123,591 442,876 551,925 22,802,197 22,835,488 16,543,458
Net unrealized appreciation
(depreciation) during the period... (1,106,755) (3,720,942) 447,661 7,687,109 112,457,395 67,250,127
----------- ----------- ----------- -------------- -------------- -------------
Net increase (decrease) in net assets
resulting from operations........... (159,546) (2,401,831) 2,020,728 161,585,725 237,757,060 189,382,915
From policyholder transactions:
Net premiums from policyholders..... 2,304,591 6,295,255 7,786,904 101,973,160 92,955,980 86,308,294
Net benefits to policyholders....... (3,311,591) (5,507,305) (5,481,110) (133,701,210) (134,661,151) (115,839,460)
Net increase (decrease) in policy
loans.............................. -- (83,216) 265,517 -- 18,165,114 18,568,293
----------- ----------- ----------- -------------- -------------- -------------
Net increase (decrease) in net assets
resulting from policyholder
transactions........................ (1,007,000) 704,734 2,571,311 (31,728,050) (23,540,057) (10,962,873)
----------- ----------- ----------- -------------- -------------- -------------
Net increase (decrease) in net assets (1,166,546) (1,697,097) 4,592,039 129,857,675 214,217,003 178,420,042
Net assets at beginning of period.... 14,545,018 16,242,115 11,650,076 1,148,881,879 934,664,876 756,244,834
----------- ----------- ----------- -------------- -------------- -------------
Net assets at end of period.......... $13,378,472 $14,545,018 $16,242,115 $1,278,739,554 $1,148,881,879 $ 934,664,876
=========== =========== =========== ============== ============== =============
</TABLE>
See accompanying notes.
103
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MANAGED SUBACCOUNT SHORT-TERM BOND SUBACCOUNT
------------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
------------- ------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income................. $ 42,532,921 $ 40,475,436 $ 35,315,509 $ 48,624 $ 28,209 $ 19,877
Net realized gains (losses)........... 5,060,826 5,853,076 5,663,060 (3,107) 2,008 235
Net unrealized appreciation
(depreciation) during the period..... (9,288,287) 24,834,482 16,843,903 (23,648) (5,287) 1,405
------------ ------------ ------------ ----------- ----------- ---------
Net increase (decrease) in net assets
resulting from operations............. 38,305,460 71,162,994 57,822,472 21,869 24,930 21,517
From policyholder transactions:
Net premiums from policyholders....... 44,546,082 40,631,684 40,318,523 690,849 435,150 278,114
Net benefits to policyholders......... (55,332,758) (55,447,667) (54,498,285) (178,124) (274,762) (218,771)
Net increase in policy loans.......... -- 5,379,590 4,761,829 -- -- --
------------ ------------ ------------ ----------- ----------- ---------
Net increase (decrease) in net assets
resulting from policyholder
transactions.......................... (10,786,676) (9,436,393) (9,417,933) 512,725 160,388 59,343
------------ ------------ ------------ ----------- ----------- ---------
Net increase in net assets............. 27,518,784 61,726,601 48,404,539 534,594 185,318 80,860
Net assets at beginning of period...... 472,553,966 410,827,365 362,422,826 594,889 409,571 328,711
------------ ------------ ------------ ----------- ----------- ---------
Net assets at end of period............ $500,072,750 $472,553,966 $410,827,365 $ 1,129,483 $ 594,889 $ 409,571
============ ============ ============ =========== =========== =========
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE SUBACCOUNT INTERNATIONAL OPPORTUNITIES SUBACCOUNT
--------------------------------------- -----------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income................. $ 72,629 $ 1,070 $ 245,833 $ 330,389 $ 8,318 $ 23,536
Net realized gains (losses)........... (217,582) 61,917 129,604 123,861 64,757 78,058
Net unrealized appreciation
(depreciation) during the period..... (40,472) (364,359) (32,439) 839,140 339,709 (141,034)
----------- ----------- ---------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations............. (185,425) (301,372) 342,998 1,293,390 412,784 (39,440)
From policyholder transactions:
Net premiums from policyholders....... 1,446,109 2,644,808 2,466,836 1,632,955 2,203,753 1,969,364
Net benefits to policyholders......... (1,547,128) (1,288,464) (358,679) (1,315,539) (1,443,700) (709,490)
Net increase in policy loans.......... -- -- -- -- -- --
----------- ----------- ---------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from policyholder
transactions.......................... (101,019) 1,356,344 2,108,157 317,416 760,053 1,259,874
----------- ----------- ---------- ----------- ----------- ----------
Net increase (decrease) in net assets.. (286,444) 1,054,972 2,451,155 1,610,806 1,172,837 1,220,434
Net assets at beginning of period...... 4,397,860 3,342,888 891,733 3,699,780 2,526,943 1,306,509
----------- ----------- ---------- ----------- ----------- ----------
Net assets at end of period............ $ 4,111,416 $ 4,397,860 $3,342,888 $ 5,310,586 $ 3,699,780 $2,526,943
=========== =========== ========== =========== =========== ==========
</TABLE>
See accompanying notes.
104
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EQUITY INDEX SUBACCOUNT GLOBAL BOND SUBACCOUNT
--------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income......................... $ 817,715 $ 307,010 $ 192,049 $ 81,580 $ 54,728 $ 78,770
Net realized gains (losses)................... 471,802 132,619 38,987 (1,996) 32,917 5,891
Net unrealized appreciation (depreciation)
during the period............................ 2,019,913 2,082,107 1,193,531 (126,001) 11,342 (3,195)
----------- ----------- ---------- ---------- ----------- ----------
Net increase (decrease) in net assets resulting
from operations............................... 3,309,430 2,521,736 1,424,567 (46,417) 98,987 81,466
From policyholder transactions:
Net premiums from policyholders............... 7,762,529 4,632,113 6,068,371 1,115,699 798,933 807,985
Net benefits to policyholders................. (2,563,485) (1,120,852) (260,531) (292,075) (1,158,109) (201,240)
Net increase in policy loans.................. -- -- -- -- -- --
----------- ----------- ---------- ---------- ----------- ----------
Net increase (decrease) in net assets resulting
from policyholder transactions................ 5,199,044 3,511,261 5,807,840 823,624 (359,176) 606,745
----------- ----------- ---------- ---------- ----------- ----------
Net increase (decrease) in net assets.......... 8,508,474 6,032,997 7,232,407 777,207 (260,189) 688,211
Net assets at beginning of period.............. 13,609,150 7,576,153 343,746 1,105,468 1,365,657 677,446
----------- ----------- ---------- ---------- ----------- ----------
Net assets at end of period.................... $22,117,624 $13,609,150 $7,576,153 $1,882,675 $ 1,105,468 $1,365,657
=========== =========== ========== ========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
TURNER CORE GROWTH SUBACCOUNT BRANDES INTERNATIONAL EQUITY SUBACCOUNT
--------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income......................... $ 35,936 $ 4,513 $ 10,585 $ 16,549 $ 12,094 $ 1,532
Net realized gains............................ 44,245 14,364 3,166 7,704 1,184 133
Net unrealized appreciation during
the period................................... 37,727 49,605 12,370 119,400 15,813 2,674
----------- ----------- ---------- ---------- ----------- ----------
Net increase in net assets resulting from
operations.................................... 117,908 68,482 26,121 143,653 29,091 4,339
From policyholder transactions:
Net premiums from policyholders............... 240,351 203,590 91,440 239,618 55,021 146,796
Net benefits to policyholders................. (136,661) (77,651) (9,878) (29,520) (10,341) (34,985)
Net increase in policy loans.................. -- -- -- -- -- --
----------- ----------- ---------- ---------- ----------- ----------
Net increase in net assets resulting from
policyholder transactions..................... 103,690 125,939 81,562 210,098 44,680 111,811
----------- ----------- ---------- ---------- ----------- ----------
Net increase in net assets..................... 221,598 194,421 107,683 353,751 73,771 116,150
Net assets at beginning of period.............. 314,594 120,173 12,490 234,377 160,606 44,456
----------- ----------- ---------- ---------- ----------- ----------
Net assets at end of period.................... $ 536,192 $ 314,594 $ 120,173 $ 588,128 $ 234,377 $ 160,606
=========== =========== ========== ========== =========== ==========
</TABLE>
See accompanying notes.
105
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
FRONTIER CAPITAL EMERGING MARKETS EQUITY GLOBAL
APPRECIATION SUBACCOUNT SUBACCOUNT EQUITY SUBACCOUNT
-------------------------------- ------------------------ ---------------------
1999 1998 1997 1999 1998* 1999 1998*
--------- ---------- --------- ------------ ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss).......... $ 17,768 $ (208) $ 7,522 $ 12,790 $ 1 $ 241 $ 1
Net realized gains.................... 22,678 12,123 9,048 5,339 -- 602 1
Net unrealized appreciation
(depreciation) during the period..... 164,599 (17,930) 40,541 86,570 10 13,424 45
-------- --------- -------- --------- -------- -------- -------
Net increase (decrease) in net assets
resulting from operations............. 205,045 (6,015) 57,111 104,699 11 14,267 47
From policyholder transactions:
Net premiums from policyholders....... 255,268 128,779 327,804 433,406 2,018 108,420 915
Net benefits to policyholders......... (89,136) (146,083) (47,276) (144,400) -- (11,064) (13)
Net increase in policy loans.......... -- -- -- -- -- -- --
-------- --------- -------- --------- -------- -------- -------
Net increase (decrease) in net assets
resulting from policyholder
transactions.......................... 166,132 (17,304) 280,528 289,006 2,018 97,356 902
-------- --------- -------- --------- -------- -------- -------
Net increase (decrease) in net assets.. 371,177 (23,319) 337,639 393,705 2,029 111,623 949
Net assets at beginning of period...... 357,497 380,816 43,177 2,029 0 949 0
-------- --------- -------- --------- -------- -------- -------
Net assets at end of period............ $728,674 $ 357,497 $380,816 $ 395,734 $ 2,029 $112,572 $ 949
======== ========= ======== ========= ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
ENHANCED U.S.
SMALL/MID HIGH YIELD EQUITY
BOND INDEX SUBACCOUNT CAP CORE SUBACCOUNT BOND SUBACCOUNT SUBACCOUNT
----------------------- --------------------- ------------------ ---------------
1999 1998* 1999 1998* 1999 1998* 1999**
----------- ---------- ---------- --------- --------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss).......... $ 15,852 $ 146 $ 6,632 $ -- $ 2,542 $ 18 $ 1,113
Net realized gains (losses)........... (1,422) (1) 252 -- (186) -- 91
Net unrealized appreciation
(depreciation) during the period..... (22,820) (196) 3,005 6 (511) (26) (879)
-------- ------- ------- ---- -------- ------ -------
Net increase (decrease) in net assets
resulting from operations............. (8,390) (51) 9,889 6 1,845 (8) 325
From policyholder transactions:
Net premiums from policyholders....... 412,326 10,254 97,385 104 98,955 2,887 13,814
Net benefits to policyholders......... (26,307) (69) (7,901) (2) (13,078) -- --
Net increase in policy loans.......... -- -- -- -- -- -- --
-------- ------- ------- ---- -------- ------ -------
Net increase in net assets resulting
from policyholder transactions........ 386,019 10,185 89,484 102 85,877 2,887 13,814
-------- ------- ------- ---- -------- ------ -------
Net increase in net assets............. 377,629 10,134 99,373 108 87,722 2,879 14,139
Net assets at beginning of period...... 10,134 0 108 0 2,879 0 0
-------- ------- ------- ---- -------- ------ -------
Net assets at end of period............ $387,763 $10,134 $99,481 $108 $ 90,601 $2,879 $14,139
======== ======= ======= ==== ======== ====== =======
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
** From March 9, 1999 (commencement of operations).
See accompanying notes.
106
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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-seven 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-seven Portfolios of the Fund and M Fund which are currently available are
the Large Cap Growth, Sovereign Bond, International Equity Index, Small Cap
Growth, International Balanced, Mid Cap Growth, Large Cap Value, Money Market,
Mid Cap Value, Small/Mid Cap Growth (formerly, Diversified Mid Cap Growth), Real
Estate Equity, Growth & Income, Managed, Short-Term Bond, Small Cap Value,
International Opportunities, Equity Index, Global Bond (formerly, Strategic
Bond), Turner Core Growth, Brandes International Equity, Frontier Capital
Appreciation, Emerging Markets Equity, Global Equity, Bond Index, Small/Mid Cap
CORE, High Yield Bond, and Enhanced U.S. Equity 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 underlying portfolio 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 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.
107
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
108
<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, 1999 are as follows:
<TABLE>
<CAPTION>
PORTFOLIO SHARES OWNED COST VALUE
--------- ------------ ------------ ----------------
<S> <C> <C> <C>
Large Cap Growth............. 5,741,593 $120,709,045 $ 156,931,243
Sovereign Bond............... 25,890,030 250,666,359 236,200,057
International Equity Index... 1,479,056 24,178,244 29,055,936
Small Cap Growth............. 566,326 7,786,928 10,825,578
International Balanced....... 109,967 1,176,141 1,177,232
Mid Cap Growth............... 713,403 13,208,576 20,852,255
Large Cap Value.............. 708,140 9,871,242 9,553,293
Money Market................. 6,251,999 62,519,986 62,519,986
Mid Cap Value................ 409,851 5,090,205 5,236,581
Small/Mid Cap Growth......... 884,190 13,682,215 12,409,573
Real Estate Equity........... 1,000,760 13,989,522 11,482,706
Growth & Income.............. 54,521,668 796,471,840 1,091,050,404
Managed...................... 27,360,590 363,175,625 422,672,470
Short-Term Bond.............. 116,179 1,157,416 1,129,483
Small Cap Value.............. 376,603 4,498,794 4,111,416
International Opportunities.. 350,017 4,215,384 5,310,586
Equity Index................. 1,081,124 16,808,530 22,117,624
Global Bond.................. 191,740 1,993,841 1,882,675
Turner Core Growth........... 23,384 436,035 536,192
Brandes International Equity. 37,895 449,896 588,128
Frontier Capital Appreciation 34,502 539,359 728,674
Emerging Markets Equity...... 32,273 309,153 395,733
Global Equity................ 9,277 99,103 112,572
Bond Index................... 41,614 410,779 387,762
Small/Mid Cap CORE........... 10,135 96,470 99,481
High Yield Bond.............. 10,083 91,148 90,611
Enhanced U.S. Equity......... 674 15,019 14,140
</TABLE>
109
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS--(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 1999,
were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
--------- ------------ -------------
<S> <C> <C>
Large Cap Growth................... $ 40,147,156 $ 8,250,657
Sovereign Bond..................... 27,217,744 17,748,511
International Equity Index......... 4,421,148 3,377,977
Small Cap Growth................... 4,824,260 1,479,601
International Balanced............. 640,162 300,719
Mid Cap Growth..................... 9,490,182 1,427,655
Large Cap Value.................... 2,984,422 1,126,859
Money Market....................... 21,519,371 15,378,894
Mid Cap Value...................... 1,426,492 1,283,502
Small/Mid Cap Growth............... 3,998,048 1,775,674
Real Estate Equity................. 1,670,570 1,772,028
Growth & Income.................... 133,888,047 52,458,290
Managed............................ 46,301,140 19,231,354
Short-Term Bond.................... 682,313 120,964
Small Cap Value.................... 1,054,005 1,082,396
International Opportunities........ 1,758,914 1,111,110
Equity Index....................... 7,177,051 1,160,291
Global Bond........................ 1,188,656 283,452
Turner Core Growth................. 279,803 140,177
Brandes International Equity....... 255,671 29,025
Frontier Capital Appreciation...... 401,413 217,513
Emerging Markets Equity............ 454,479 152,683
Global Equity...................... 107,485 9,888
Bond Index......................... 429,057 27,186
Small/Mid Cap CORE................. 106,540 10,425
High Yield Bond.................... 99,666 11,238
Enhanced U.S. Equity............... 26,361 11,432
</TABLE>
110
<PAGE>
ALPHABETICAL INDEX OF KEY WORDS AND PHRASES
This index should help you locate more information about many of the important
concepts in this prospectus.
<TABLE>
<CAPTION>
KEY WORD OR PHRASE PAGE KEY WORD OR PHRASE PAGE
<S> <C> <C> <C>
Account................. 27 29
account value........... 7 8
attained age............ 8 13
beneficiary............. 37 8
business day............ 28 4
changing Option 1or 2... 14 12
changing the face
amount................. 14 9
charges................. 7 15
Code.................... 33 5
cost of insurance rates. 8 29
date of issue........... 29 29
death benefit........... 4 4
deductions.............. 7 2
dollar cost averaging... 11 17
expenses of the Series
Funds.................. 9 6
face amount............. 13 7
fixed investment option. 28 2
full surrender.......... 12 27
fund.................... 2 1
grace period............ 6 13
guaranteed death
benefit feature........ 6 27
Guaranteed Death
Benefit Premium........ 6 12
insurance charge........ 8 9
insured person.......... 4 12
investment options...... 1 7
JHVLICO................. 27 33
John Hancock Variable
Series Trust........... 2 18
lapse................... 6 11
loan.................... 12 1
loan interest........... 12 27
maximum premiums........ 5 12
Minimum Initial Premium. 28 9
minimum insurance
amount................. 13 4
modified endowment
contract............... 34
</TABLE>
111
<PAGE>
PROSPECTUS DATED NOVEMBER 1, 2000
MEDALLION VARIABLE LIFE
a flexible premium variable life insurance policy
issued by
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY ("JHVLICO")
JHVLICO LIFE SERVICING OFFICE
-----------------------------
EXPRESS DELIVERY
----------------
529 Main Street (X-4)
Charlestown, MA 02129
U.S. MAIL
---------
P.O. Box 111
Boston, MA 02117
PHONE: 1-800-732-5543 / FAX: 1-617-886-3048
The policy provides an investment option with fixed rates of return declared
by JHVLICO and the following variable investment options:
<TABLE>
<CAPTION>
VARIABLE INVESTMENT OPTION MANAGED BY
-------------------------- ----------
------------------------------------------------------------------------------------------------------------
<S> <C>
Managed. . . . . . . . . . . . . . . . . . . . . . . Independence Investment Associates, Inc. and
Capital Guardian Trust Company
Growth & Income . . . . . Independence Investment Associates, Inc. and Putnam
Investment Management, Inc.
Equity Index . . . . . . . State Street Global Advisors
Large Cap Value . . . . . T. Rowe Price Associates, Inc.
Large Cap Growth . . . . . Independence Investment Associates, Inc.
Mid Cap Value . . . . . . Neuberger Berman, LLC
Mid Cap Growth . . . . . . Janus Capital Corporation
Real Estate Equity . . . . Independence Investment Associates, Inc. and Morgan
Stanley Dean Witter Investment Management Inc.
Small/Mid Cap CORE /SM/ . Goldman Sachs Asset Management
Small/Mid Cap Growth. . . Wellington Management Company, LLP
Small Cap Equity . . . . . Capital Guardian Trust Company
Small Cap Growth . . . . John Hancock Advisers, Inc.
Global Balanced . . . . . Capital Guardian Trust Company
International Equity Index . . . . . . . . . . . . . Independence International Associates, Inc.
International Opportunities . . . . . . . . . . . . . T. Rowe Price International, Inc.
Morgan Stanley Dean Witter Investment Management
Emerging Markets Equity . . . . . . . . . . . . . . Inc.
Short-Term Bond . . . . . Independence Investment Associates, Inc.
Bond Index . . . . . . . . Mellon Bond Associates, LLP
Active Bond . . . . . . . . . . . . . . . . . . . . John Hancock Advisers, Inc.
Global Bond . . . . . . . . . . . . . . . . . . . . Capital Guardian Trust Company
High Yield Bond . . . . . Wellington Management Company, LLP
Money Market . . . . . . . John Hancock Life Insurance Company
------------------------------------------------------------------------------------------------------------
</TABLE>
We may add, modify or delete variable investment options in the future.
<PAGE>
When you select one or more of these variable investment options, we invest
your money in the corresponding investment option(s) of the John Hancock
Variable Series Trust I (the "Trust"). The Trust is a mutual fund that offers a
number of different investment options (which are called "funds"). The
investment results of each variable investment option you select will depend on
those of the corresponding fund of the Trust. Attached to this prospectus is a
prospectus for the Trust that contains detailed information about each fund
offered under the policy. Be sure to read the prospectus for the Trust before
selecting any of the variable investment options shown on page 1.
GUIDE TO THIS PROSPECTUS
This prospectus contains information that you should know before you buy a
policy or exercise any of your rights under the policy. However, please keep in
mind that this is a prospectus - - it is not the policy. The prospectus
---
simplifies many policy provisions to better communicate the policy's essential
features. Your rights and obligations under the policy will be determined by the
language of the policy itself. When you receive your policy, read it carefully.
This prospectus is arranged in the following way:
. The section which follows is called "Basic Information". It is in a
question and answer format. We suggest you read the Basic Information
section before reading any other section of the prospectus.
. Behind the Basic Information section are illustrations of
hypothetical policy benefits that help clarify how the policy works.
These start on page 19.
. Behind the illustrations is a section called "Additional Information"
that gives more details about the policy. It generally does not
---
repeat information that is in the Basic Information section. A table
of contents for the Additional Information section appears on page
26.
. Behind the Additional Information section are the financial
statements for JHVLICO and Separate Account U. These start on page
39.
. Finally, there is an Alphabetical Index of Key Words and Phrases at
the back of the prospectus on page 110.
After the Alphabetical Index of Key Words and Phrases, this prospectus ends and
the Trust prospectus begins.
**********
Please note that the Securities and Exchange Commission ("SEC") has not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
2
<PAGE>
BASIC INFORMATION
This part of the prospectus provides answers to commonly asked questions about
the policy.
<TABLE>
<CAPTION>
<S> <C>
Question Beginning on page
--------
.What is the policy?. . . . . . . . . . . . . . . 4
.Who owns the policy?. . . . . . . . . . . . . . 4
.How can I invest money in the policy?. . . . . . 4
.Is there a minimum amount I must invest?. . . . 5
.How will the value of my investment in the policy change 6
over time?. . . . . . . . . . . . . . . . . . . .
.What charges will JHVLICO deduct from my investment in 7
the policy?. . . . . . . . . . . . . . . . . . .
.What charges will the Trust deduct from my investment in 9
the policy?. . . . . . . . . . . . . . . . . . .
.What other charges could JHVLICO impose in the future? 10
.How can I change my policy's investment allocations? 11
.How can I access my investment in the policy?. . 12
.How much will JHVLICO pay when the insured person dies? 13
.How can I change my policy's insurance coverage? 14
.Can I cancel my policy after it's issued?. . . . 15
.Can I choose the form in which JHVLICO pays out policy 15
proceeds?. . . . . . . . . . . . . . . . . . . .
.To what extent can JHVLICO vary the terms and conditions
of its policies in particular cases?. . . . . . 16
.How will my policy be treated for income tax purposes? 16
.How do I communicate with JHVLICO?. . . . . . . 17
</TABLE>
Here are the page numbers where the questions and answers appear:
3
<PAGE>
WHAT IS THE POLICY?
The policy's primary purpose is to provide lifetime protection against
economic loss due to the death of the insured person. The value of the amount
you have invested under the policy may increase or decrease daily based upon the
investment results of the variable investment options that you choose. The
amount we pay to the policy's beneficiary if the insured person dies (we call
this the "death benefit") may be similarly affected.
While the insured person is alive, you will have a number of options under the
policy. Here are some major ones:
. Determine when and how much you invest in the various investment
options
. Borrow or withdraw amounts you have in the investment options
. Change the beneficiary who will receive the death benefit
. Change the amount of insurance
. Turn in (i.e., "surrender") the policy for the full amount of its
surrender value
. Choose the form in which we will pay out the death benefit or other
proceeds
Most of these options are subject to limits that are explained later in this
prospectus.
WHO OWNS THE POLICY?
That's up to the person who applies for the policy. The owner of the policy is
the person who can exercise most of the rights under the policy, such as the
right to choose the investment options or the right to surrender the policy. In
many cases, the person buying the policy is also the person who will be the
owner. However, the application for a policy can name another person or entity
(such as a trust) as owner. Whenever we've used the term "you" in this
prospectus, we've assumed that the reader is the person who has whatever right
or privilege is being discussed. There may be tax consequences if the owner and
the insured person are different, so you should discuss this issue with your tax
adviser.
HOW CAN I INVEST MONEY IN THE POLICY?
Premium Payments
We call the investments you make in the policy "premiums" or "premium
payments". The amount we require as your first premium depends upon the
-----
specifics of your policy and the insured person. Except as noted below, you can
make any other premium payments you wish at any time. That's why the policy is
called a "flexible premium" policy.
4
<PAGE>
Maximum premium payments
Federal tax law limits the amount of premium payments you can make relative to
the amount of your policy's insurance coverage. We will not knowingly accept any
amount by which a premium payment exceeds the maximum. If you exceed certain
other limits, the law may impose a penalty on amounts you take out of your
policy. We'll monitor your premium payments and let you know if you're about to
exceed this limit. More discussion of these tax law requirements begins on page
33. Also, we may refuse to accept any amount of an additional premium if:
. that amount of premium would increase our insurance risk exposure,
and
. the insured person doesn't provide us with adequate evidence that he
or she continues to meet our requirements for issuing insurance.
In no event, however, will we refuse to accept any premium necessary to prevent
the policy from terminating.
Ways to pay premiums
If you pay premiums by check or money order, they must be drawn on a U.S. bank
in U.S. dollars and made payable to "John Hancock Variable Life Insurance
Company." Premiums after the first must be sent to the JHVLICO Life Servicing
Office at the appropriate address shown on page 1 of this prospectus.
We will also accept premiums:
. by wire or by exchange from another insurance company,
. via an electronic funds transfer program (any owner interested in
making monthly premium payments must use this method), or
-------
. if we agree to it, through a salary deduction plan with your
employer.
You can obtain information on these other methods of premium payment by
contacting your JHVLICO representative or by contacting the JHVLICO Life
Servicing Office.
IS THERE A MINIMUM AMOUNT I MUST INVEST?
Planned Premiums
The Policy Specifications page of your policy will show the "Planned Premium"
for the policy. You choose this amount in the policy application. The premium
reminder notice we send you is based on this amount. You will also choose how
often to pay premiums-- annually, semi-annually, quarterly or monthly. The date
on which such a payment is "due" is referred to in the policy as a "modal
processing date." However, payment of Planned Premiums is not necessarily
required. You need only invest enough to keep the policy in force (see "Lapse
and reinstatement" and "Guaranteed death benefit feature" below).
5
<PAGE>
Lapse and reinstatement
If the policy's surrender value is not sufficient to pay the charges and the
guaranteed death benefit feature is not in effect, we will notify you of how
much you will need to pay to keep the policy in force. You will have a 61 day
"grace period" to make that payment. If you don't pay at least the required
amount by the end of the grace period, your policy will terminate (i.e., lapse).
All coverage under the policy will then cease. Even if the policy terminates in
this way, you can still reactivate (i.e., "reinstate") it within 1 year from the
beginning of the grace period. You will have to provide evidence that the
insured person still meets our requirements for issuing coverage. You will also
have to pay a minimum amount of premium and be subject to the other terms and
conditions applicable to reinstatements, as specified in the policy. If the
insured person dies during the grace period, we will deduct any unpaid monthly
charges from the death benefit. During the grace period, you cannot make
transfers among investment options or make a partial withdrawal or policy loan.
Guaranteed death benefit feature
This feature is available only if the insured person meets certain
underwriting requirements. The feature guarantees that your policy will not
lapse during the first 5 policy years, regardless of adverse investment
performance, if on each modal processing date during that 5 year period the
amount of cumulative premiums you have paid (less all withdrawals from the
policy) equals or exceeds the sum of all Guaranteed Death Benefit Premiums due
to date. The Guaranteed Death Benefit Premium (or "GDB Premium) is defined in
the policy and is "due" on each modal processing date. (The term "modal
processing date" is defined under "Planned Premiums" on page 5.)
No GDB Premium will ever be greater than the so-called "guideline premium" for
the policy as defined in Section 7702 of the Internal Revenue Code. Also, the
GDB Premiums may change in the event of any change in the face amount of the
policy or any change in the death benefit option (see "How much will JHVLICO pay
when the insured person dies?" on page 13).
If the Guaranteed Death Benefit test is not satisfied on any modal processing
date, we will notify you immediately and tell you how much you will need to pay
to keep the feature in effect. You will have until the second monthly deduction
date after default to make that payment. If you don't pay at least the required
amount by the end of that period, the feature will permanently lapse. You cannot
restore the feature once it has lapsed.
If there are monthly charges that remain unpaid because of this feature, we
will deduct such charges when there is sufficient surrender value to pay them.
HOW WILL THE VALUE OF MY INVESTMENT IN THE POLICY CHANGE OVER TIME?
From each premium payment you make, we deduct the charges described under
"Deductions from premium payments" below. We invest the rest in the investment
options you've elected.
6
<PAGE>
Over time, the amount you've invested in any variable investment option will
increase or decrease the same as if you had invested the same amount directly in
the corresponding fund of the Trust and had reinvested all fund dividends and
distributions in additional fund shares; except that we will deduct certain
additional charges which will reduce your account value. We describe these
charges under "What charges will JHVLICO deduct from my investment in the
policy?" below.
The amount you've invested in the fixed investment option will earn interest
at a rate we declare from time to time. We guarantee that this rate will be at
least 4%. If you want to know what the current declared rate is, just call or
write to us. The current declared rate will also appear in the annual statement
we will send you. Amounts you invest in the fixed investment option will not be
---
subject to the mortality and expense risk charge described on page 8. Otherwise,
the charges applicable to the fixed investment option are the same as those
applicable to the variable investment options.
At any time, the "account value" of your policy is equal to:
. the amount you invested,
. plus or minus the investment experience of the investment options
you've chosen,
. minus all charges we deduct, and
. minus all withdrawals you have made.
If you take a loan on the policy, however, your account value will be computed
somewhat differently. This is discussed beginning on page 12.
WHAT CHARGES WILL JHVLICO DEDUCT FROM MY INVESTMENT IN THE POLICY?
Deductions from premium payments
. Premium tax charge - A charge to cover state premium taxes we currently
--------------------
expect to pay, on average. This charge is currently 2.35% of each premium.
. DAC tax charge - A charge to cover the increased Federal income tax
----------------
burden that we currently expect will result from receipt of premiums. This
charge is currently 1.25% of each premium.
. Premium sales charge - A charge to help defray our sales costs. The
----------------------
charge is 4% of a certain portion of the premium you pay. The portion of
each year's premium that is subject to the charge is called the "Target
Premium". It's determined at the time the policy is issued and will appear
in the "Policy Specifications" section of the policy. We currently waive
one half of this charge for policies with a face amount of $250,000 or
higher, but continuation of that waiver is not guaranteed. Also, we
currently intend to stop making this charge on premiums received after the
10th policy year, but this is not guaranteed either. Because policies of
this type were first offered for sale in 1994, no termination of this
charge has yet occurred.
7
<PAGE>
Deductions from account value
. Issue charge - A monthly charge to help defray our administrative costs.
--------------
This is a flat dollar charge of $20 and is deducted only during the first
policy year.
. Maintenance charge - A monthly charge to help defray our administrative
--------------------
costs. This is a flat dollar charge of up to $8 (currently $6).
. Insurance charge - A monthly charge for the cost of insurance. To
------------------
determine the charge, we multiply the amount of insurance for which we are
at risk by a cost of insurance rate. The rate is derived from an actuarial
table. The table in your policy will show the maximum cost of insurance
-------
rates. The cost of insurance rates that we currently apply are generally
less than the maximum rates. We will review the cost of insurance rates at
least every 5 years and may change them from time to time. However, those
rates will never be more than the maximum rates shown in the policy. The
table of rates we use will depend on the insurance risk characteristics
and (usually) gender of the insured person, the face amount of insurance
and the length of time the policy has been in effect. Regardless of the
table used, cost of insurance rates generally increase each year that you
own your policy, as the insured person's attained age increases. (The
insured person's "attained age" on any date is his or her age on the
birthday nearest that date.) We currently apply a lower insurance charge
for policies with a face amount of $250,000 or higher, but continuation of
that practice is not guaranteed. Also, it is our current intention to
reduce the insurance charge in the 10th policy year and thereafter, but
such a reduction is not guaranteed either. Because policies of this type
were first offered for sale in 1994, no reductions have yet been made.
. Extra mortality charge - A monthly charge specified in your policy for
------------------------
additional mortality risk if the insured person is subject to certain
types of special insurance risk.
. M &E charge - A daily charge for mortality and expense risks we assume.
-------------
This charge is deducted from the variable investment options. It does not
apply to the fixed investment option. The current charge is at an
effective annual rate of .60% of the value of the assets in each variable
investment option. We guarantee that this charge will never exceed an
effective annual rate of .90%.
. Optional benefits charge - Monthly charges for any optional insurance
--------------------------
benefits added to the policy by means of a rider. We currently offer a
number of optional riders, such as the accidental death benefit rider.
. Administrative surrender charge - A charge we deduct if the policy lapses
---------------------------------
or is surrendered in the first 9 policy years. We deduct this charge to
compensate us for administrative expenses that we would otherwise not
recover in the event of early lapse or surrender. The amount of the charge
depends upon the policy year in which lapse or surrender occurs and the
policy's face amount at that time. The maximum charge is $5 per $1,000 of
face amount in policy years 1 through 7, $4 per $1,000 in policy year 8
and $3 per $1,000 in policy year 9.
8
<PAGE>
. Contingent deferred sales charge ("CDSC") - A charge we deduct if the
-------------------------------------------
policy lapses or is surrendered within the first 12 policy years. We
deduct this charge to compensate us for sales expenses that we would
otherwise not recover in the event of early lapse or surrender. The charge
is a percentage of premiums received that do not exceed the Target
Premium. ("Target Premium" is described above under "Deductions from
premium payments.") In policy years 1 through 3, the charge is a
percentage of premiums received prior to the end of the policy year in
question. Thereafter, it's a percentage of only those premiums received in
policy years 1 through 3. The 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. This is shown in the following table (where the
percentages are rounded to one decimal place):
FOR SURRENDERS OR LAPSES DURING PERCENTAGE
------------------------------------------
Policy years 1-7 26.0%
Policy year 8 21.7%
Policy year 9 17.3%
Policy year 10 13.0%
Policy year 11 8.7%
Policy year 12 4.3%
Policy year 13 and later 0.0%
The above table applies only if the insured person is less than attained
age 55 at issue. For older issue ages, the maximum is reached earlier and
the percentage may decrease to zero in fewer than 12 policy years.
Regardless of issue age, there is a further limitation on the CDSC that
can be charged if surrender or lapse occurs in the second policy year. The
CDSC cannot exceed 32% of one year's Target Premium.
----------
. Partial withdrawal charge - A charge for each partial withdrawal of
---------------------------
account value to compensate us for the administrative expenses of
processing the withdrawal. The charge is equal to the lesser of $20 or 2%
of the withdrawal amount.
WHAT CHARGES WILL THE TRUST DEDUCT FROM MY INVESTMENT IN THE POLICY?
The Trust must pay investment management fees and other operating expenses.
These fees and expenses are different for each fund of the Trust and reduce the
investment return of each fund. Therefore, they also indirectly reduce the
return you will earn on any variable investment options you select. The figures
in the following chart are expressed as percentages of each fund's average daily
net assets for 1999 (rounded to two decimal places).
9
<PAGE>
<TABLE>
<CAPTION>
Investment Other Operating Total Fund Other Operating
Management Expenses* With Operating Expenses Absent
Fund Name Fee* Reimbursement Expenses Reimbursement
--------- ---------- --------------- ---------- ----------------
<S> <C> <C> <C> <C>
Managed. . . . . . . 0.67% 0.03% 0.70% 0.03%
Growth & Income . . . 0.67% 0.03% 0.70% 0.03%
Equity Index . . . . . 0.14% 0.00% 0.14% 0.08%
Large Cap Value . . . 0.74% 0.10% 0.84% 0.11%
Large Cap Growth . . . 0.36% 0.03% 0.39% 0.03%
Mid Cap Value . . . . 0.80% 0.10% 0.90% 0.12%
Mid Cap Growth . . . . 0.82% 0.10% 0.92% 0.11%
Real Estate Equity . . 1.01% 0.10% 1.11% 0.10%
Small/Mid Cap CORE/
SM/ . . . . . . . . . 0.80% 0.10% 0.90% 0.66%
Small/Mid Cap Growth . 0.75% 0.10% 0.85% 0.10%
Small Cap Equity * . . 0.90% 0.10% 1.00% 0.16%
Small Cap Growth . . . 0.75% 0.10% 0.85% 0.14%
Global Balanced * . . 1.05% 0.10% 1.15% 0.46%
International Equity
Index . . . . . . . . 0.16% 0.10% 0.26% 0.22%
International
Opportunities . . . . 0.87% 0.10% 0.97% 0.29%
Emerging Markets
Equity . . . . . . . 1.27% 0.10% 1.37% 2.17%
Short-Term Bond . . . 0.30% 0.10% 0.40% 0.13%
Bond Index . . . . . . 0.15% 0.10% 0.25% 0.20%
Active Bond * . . . . 0.61% 0.03% 0.64% 0.03%
Global Bond . . . . . 0.85% 0.10% 0.95% 0.15%
High Yield Bond . . . 0.65% 0.10% 0.75% 0.39%
Money Market . . . . . 0.25% 0.06% 0.31% 0.06%
</TABLE>
* John Hancock Variable Series Trust I funds' percentages for "other fund
expenses" are based on the allocation methodology and expense
reimbursement policy adopted April 23, 1999, and are calculated as if that
allocation methodology and expense reimbursement policy had been in effect
for all of 1999. Under the expense reimbursement policy, John Hancock
Life Insurance Company voluntarily reimburses a fund when the fund's
"other fund expenses" exceed 0.10% of the fund's average daily net assets
(0.00% for Equity Index). Shareholders of the Managed, Growth & Income,
Real Estate Equity, Small Cap Equity, Global Balanced, Active Bond, and
Global Bond funds have approved new management fee schedules, which apply
to these funds effective November 1, 2000. The investment management fee
percentages for each of these funds are calculated as if those new fee
schedules had been in effect for all of 1999. The investment management
fee percentages for all other funds reflect the investment management fees
that were actually payable for 1999.
** Small Cap Equity was formerly "Small Cap Value", Global Balanced was
formerly "International Balanced" and Active Bond was formerly "Sovereign
Bond".
"CORE /SM"/ IS A SERVICE MARK OF GOLDMAN, SACHS & CO.
WHAT OTHER CHARGES COULD JHVLICO IMPOSE IN THE FUTURE?
Except for the DAC tax charge, we currently make no charge for our Federal
income taxes. However, if we incur, or expect to incur, additional income taxes
attributable to any subaccount of the Account or this class of policies in
future years, we reserve the right to make a charge for such taxes. Any such
charge would reduce what you earn on any affected investment options. However,
we expect that no such charge will be necessary.
10
<PAGE>
We also reserve the right to increase the premium tax charge and the DAC tax
charge in order to correspond, respectively, with changes in the state premium
tax levels and with changes in the Federal income tax treatment of the deferred
acquisition costs for this type of policy.
Under current laws, we 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, we may make charges
for such taxes.
HOW CAN I CHANGE MY POLICY'S INVESTMENT ALLOCATIONS?
Future premium payments
At any time, you may change the investment options in which future premium
payments will be invested. You make the original allocation in the application
for the policy. The percentages you select must be in whole numbers and must
total 100%.
Transfers of existing account value
You may also transfer your existing account value from one investment option
to another. To do so, you must tell us how much to transfer, either as a whole
number percentage or as a specific dollar amount.
Under our current rules, you can make transfers out of any variable investment
option anytime you wish. However, transfers out of the fixed investment option
are currently subject to the following restrictions:
. You can only make such a transfer once a year and only during the 31 day
period following your policy anniversary.
. We must receive the request for such a transfer during the period
beginning 60 days prior to the policy anniversary and ending 30 days after
it.
. The most you can transfer at any one time is the greater of $500 or 20%
of the assets in your fixed investment option.
We reserve the right to impose a minimum amount limit on transfers out of the
fixed investment option. We also reserve the right to impose limits on the
number and frequency of transfers out of the variable investment options.
Limitation on number of investment options
Whether through the allocation of premium or through the transfer of existing
account value, you can never be invested in more than ten investment options at
any one time.
Dollar cost averaging
This is a program of automatic monthly transfers out of the Money Market
investment option into one or more of the other variable investment options. You
choose the investment options and the dollar amount and timing of the transfers.
The program is designed to reduce the risks that result from market
fluctuations. It does this by spreading out the allocation of your
11
<PAGE>
money to investment options over a longer period of time. This allows you to
reduce the risk of investing most of your money at a time when market prices are
high. Obviously, the success of this strategy depends on market trends and is
not guaranteed.
HOW CAN I ACCESS MY INVESTMENT IN THE POLICY?
Full surrender
You may surrender your policy in full at any time. If you do, we will pay you
the account value, less any policy loans and less any CDSC and administrative
surrender charge that then applies. This is called your "surrender value." You
must return your policy when you request a full surrender.
Partial withdrawals
You may make a partial withdrawal of your surrender value at any time. Each
partial withdrawal must be at least $1,000. There is a charge (usually $20) for
each partial withdrawal. We will automatically reduce the account value of your
policy by the amount of the withdrawal and the related charge. Each investment
option will be reduced in the same proportion as the account value is then
allocated among them. We will not permit a partial withdrawal if it would cause
your surrender value to fall below 3 months' worth of monthly charges (see
"Deductions from account value" on page 8). We also reserve the right to refuse
any partial withdrawal that would cause the policy's face amount to fall below
$100,000. Under the Option 1 or Option 3 death benefit, the reduction of your
account value occasioned by a partial withdrawal could cause the minimum
insurance amount to become less than your face amount of insurance (see "How
much will JHVLICO pay when the insured person dies?" on page 13). If that
happens, we will automatically reduce your face amount of insurance. The
calculation of that reduction is explained in the policy. If such a face amount
reduction would cause your policy to fail the Code's definition of life
insurance, we will not permit the partial withdrawal.
Policy loans
You may borrow from your policy at any time after it has been in effect for 1
year by completing a form satisfactory to us or, if the telephone transaction
authorization form has been completed, by telephone. The maximum amount you can
borrow is equal to 100% of your account value that is in the fixed investment
option plus one of the following:
. In policy years 2 and 3 - - 75% of your account value that is in the
variable investment options
. In all later policy years - - 90% of your account value that is in
the variable investment options
The minimum amount of each loan is $300. The interest charged on any loan is
an effective annual rate of 5.0% in the first 20 policy years and 4.50%
thereafter. Accrued interest will be added to the loan daily and will bear
interest at the same rate as the original loan amount. The amount of the loan is
deducted from the investment options in the same proportion as the account
12
<PAGE>
value is then allocated among them and is placed in a special loan account. This
special loan account will earn interest at an effective annual rate of 4.0%.
However, if we determine that a loan will be treated as a taxable distribution
because of the differential between the loan interest rate and the rate being
credited on the special loan account, we reserve the right to decrease the rate
credited on the special loan account to a rate that would, in our reasonable
judgement, result in the transaction being treated as a loan under Federal tax
law.
You can repay all or part of a loan at any time. Each repayment will be
allocated among the investment options as follows:
. The same proportionate part of the loan as was borrowed from the
fixed investment option will be repaid to the fixed investment
option.
. The remainder of the repayment will be allocated among the investment
options in the same way a new premium payment would be allocated.
If you want a payment to be used as a loan repayment, you must include
instructions to that effect. Otherwise, all payments will be assumed to be
premium payments.
HOW MUCH WILL JHVLICO PAY WHEN THE INSURED PERSON DIES?
In your application for the policy, you will tell us how much life insurance
coverage you want on the life of the insured person. This is called the "face
amount" of insurance. In the policy, this may also be referred to as the "Sum
Insured."
When the insured person dies, we will pay the death benefit minus any
outstanding loans. There are 3 ways of calculating the death benefit. You choose
which one you want in the application. The three death benefit options are:
. Option 1 - The death benefit will equal the greater of (1) the face
amount or (2) the minimum insurance amount under the "guideline
premium and cash value corridor test" (as described below).
. Option 2 - The death benefit will equal the greater of (1) the face
amount plus your policy's account value on the date of death, or (2)
the minimum insurance amount under the "guideline premium and cash
value corridor test".
. Option 3 - The death benefit will equal the greater of (1) the face
amount or (2) the minimum insurance amount under the "cash value
accumulation test" (as described below)
For the same premium payments, the death benefit under Option 2 will tend to
be higher than the death benefit under Options 1 or 3. On the other hand, the
monthly insurance charge will be higher under Option 2 to compensate us for the
additional insurance risk. Because of that, the account value will tend to be
higher under Options 1 or 3 than under Option 2 for the same premium payments.
13
<PAGE>
The minimum insurance amount
In order for a policy to qualify as life insurance under Federal tax law,
there has to be a minimum amount of insurance in relation to account value.
There are two tests that can be applied under Federal tax law. Death benefit
Options 1 and 2 use the "guideline premium and cash value corridor test" while
Option 3 uses the "cash value accumulation test." For Options 1 and 2, we
compute the minimum insurance amount each business day by multiplying the
account value on that date by the so-called "corridor factor" applicable on that
date. The corridor factors are derived by applying the "guideline premium and
cash value corridor test." The corridor factor starts out at 2.50 for ages at or
below 40 and decreases as attained age increases, reaching a low of 1.0 at age
95. A table showing the factor for each age will appear in the policy. For
Option 3, we compute the minimum insurance amount each business day by
multiplying the account value on that date by the so-called "death benefit
factor" applicable on that date. The death benefit factors are derived by
applying the "cash value accumulation test." The death benefit factor decreases
as attained age increases. A table showing the factor for each age will appear
in the policy.
HOW CAN I CHANGE MY POLICY'S INSURANCE COVERAGE?
Increase in coverage
Increases in the face amount of insurance coverage are generally not permitted
under our current administrative rules. We expect to be able to allow such
increases in the future, but that is not guaranteed.
Decrease in coverage
After the first policy year, you may request a reduction in the face amount of
insurance coverage, but only if:
. the remaining face amount will be at least $100,000, and
. the remaining face amount will at least equal the minimum required by
the tax laws to maintain the policy's life insurance status.
As to when an approved decrease would take effect, see "Effective date of
other policy transactions" on page 31.
Change of death benefit option
You may request to change your coverage from death benefit Option 1 to Option
2 or vice-versa. If you request a change from Option 1 to Option 2, we will
require evidence that the insured person still meets our requirements for
issuing coverage. This is because such a change increases our insurance risk
exposure. If you have chosen death benefit Option 3, you can never change to
either Option 1 or Option 2.
14
<PAGE>
Tax consequences
Please read "Tax considerations" starting on page 33 to learn about possible
tax consequences of changing your insurance coverage under the policy.
CAN I CANCEL MY POLICY AFTER IT'S ISSUED?
You have the right to cancel your policy within the latest of the following
periods:
. 10 days after you receive it (this period may be longer in some
states);
. 10 days after mailing by JHVLICO of the Notice of Withdrawal Right;
or
. 45 days after the date Part A of the application has been completed.
This is often referred to as the "free look" period. To cancel your policy,
simply deliver or mail the policy to JHVLICO at one of the addresses shown on
page 1, or to the JHVLICO representative who delivered the policy to you.
In most states, you will receive a refund of any premiums you've paid. In some
states, the refund will be your account value on the date of cancellation plus
all charges deducted by JHVLICO or the Trust prior to that date. The date of
cancellation will be the date of such mailing or delivery.
CAN I CHOOSE THE FORM IN WHICH JHVLICO PAYS OUT POLICY PROCEEDS?
Choosing a payment option
You may choose to receive proceeds from the policy as a single sum. This
includes proceeds that become payable because of death or full surrender.
Alternatively, you can elect to have proceeds of $1,000 or more applied to any
of a number of other payment options, including the following:
. Option 1 - Proceeds left with us to accumulate with interest
. Option 2A - Equal monthly payments of a specified amount until all
proceeds are paid out
. Option 2B - Equal monthly payments for a specified period of time
. Option 3 - Equal monthly payments for life, but with payments
guaranteed for a specific number of years
. Option 4 - Equal monthly payments for life with no refund
. Option 5 - Equal monthly payments for life with a refund if all of
the proceeds haven't been paid out
15
<PAGE>
You cannot choose an option if the monthly payments under the option would be
less than $50. We will issue a supplementary agreement when the proceeds are
applied to any alternative payment option. That agreement will spell out the
terms of the option in full. We will credit interest on each of the above
options. For Options 1 and 2A, the interest will be at least an effective annual
rate of 3 1/2%.
Changing a payment option
You can change the payment option at any time before the proceeds are payable.
If you haven't made a choice, the payee of the proceeds has a prescribed period
in which he or she can make that choice.
Tax impact
There may be tax consequences to you or your beneficiary depending upon which
payment option is chosen. You should consult with a qualified tax adviser before
making that choice.
TO WHAT EXTENT CAN JHVLICO VARY THE TERMS AND CONDITIONS OF ITS POLICIES IN
PARTICULAR CASES?
Listed below are some variations we can make in the terms of our policies. Any
variation will be made only in accordance with uniform rules that we apply
fairly to all of our customers.
State law insurance requirements
Insurance laws and regulations apply to JHVLICO in every state in which its
policies are sold. As a result, various terms and conditions of your insurance
coverage may vary from the terms and conditions described in this prospectus,
depending upon where you reside. These variations will be reflected in your
policy or in endorsements attached to your policy.
Variations in expenses or risks
We may vary the charges and other terms of our policies where special
circumstances result in sales or administrative expenses, mortality risks or
other risks that are different from those normally associated with the policies.
These include the type of variations discussed under "Reduced charges for
eligible classes" on page 32. No variation in any charge will exceed any maximum
stated in this prospectus with respect to that charge.
HOW WILL MY POLICY BE TREATED FOR INCOME TAX PURPOSES?
Generally, death benefits paid under policies such as yours are not subject to
income tax. Earnings on your account value are not subject to income tax as long
as we don't pay them out to you. If we do pay out any amount of your account
value upon surrender or partial withdrawal, all or part of that distribution
should generally be treated as a return of the premiums you've paid and should
not be subject to income tax. Amounts you borrow are generally not taxable to
you.
However, some of the tax rules change if your policy is found to be a
"modified endowment contract." This can happen if you've paid more than a
certain amount of premiums that is
16
<PAGE>
prescribed by the tax laws. Additional taxes and penalties may be payable for
policy distributions of any kind.
For further information about the tax consequences of owning a policy, please
read "Tax considerations" beginning on page 33.
HOW DO I COMMUNICATE WITH JHVLICO?
General Rules
You should mail or express all checks and money orders for premium payments
and loan repayments to the JHVLICO Life Servicing Office at the appropriate
address shown on page 1.
Certain requests must be made in writing and be signed and dated by you. They
include the following:
. loans, surrenders or partial withdrawals
. transfers of account value among investment options
. change of allocation among investment options for new premium
payments
. change of death benefit option
. increase or decrease in face amount
. change of beneficiary
. election of payment option for policy proceeds
. tax withholding elections
. election of telephone transaction privilege
You should mail or express these requests to the JHVLICO Life Servicing Office
at the appropriate address shown on page 1. You should also send notice of the
insured person's death and related documentation to the JHVLICO Life Servicing
Office. We don't consider that we've "received" any communication until such
time as it has arrived at the proper place and in the proper and complete form.
We have special forms that should be used for a number of the requests
mentioned above. You can obtain these forms from the JHVLICO Life Servicing
Office or your JHVLICO representative. Each communication to us must include
your name, your policy number and the name of the insured person. We cannot
process any request that doesn't include this required information. Any
communication that arrives after the close of our business day, or on a day that
is not a business day, will be considered "received" by us on the next following
business day.
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<PAGE>
Our business day currently closes at 4:00 p.m. Eastern Standard Time, but
special circumstances (such as suspension of trading on a major exchange) may
dictate an earlier closing time.
Telephone Transactions
If you complete a special authorization form, you can request loans, transfers
among investment options and changes of allocation among investment options
simply by telephoning us at 1-800-732-5543 or by faxing us at 1-617-886-3048.
Any fax request should include your name, daytime telephone number, policy
number and, in the case of transfers and changes of allocation, the names of the
investment options involved. We will honor telephone instructions from anyone
who provides the correct identifying information, so there is a risk of loss to
you if this service is used by an unauthorized person. However, you will receive
written confirmation of all telephone transactions. There is also a risk that
you will be unable to place your request due to equipment malfunction or heavy
phone line usage. If this occurs, you should submit your request in writing.
The policies are not designed for professional market timing organizations or
other persons or entities that use programmed or frequent transfers among
investment options. For reasons such as that, we reserve the right to change our
telephone transaction policies or procedures at any time. We also reserve the
right to suspend or terminate the privilege altogether.
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<PAGE>
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 under certain hypothetical circumstances that
we assume solely for this purpose. Each table separately illustrates the
operation of a policy for a specified issue age, premium payment schedule and
face amount. The amounts shown are for the end of each policy year and assume
that all of the account value is invested in funds that achieve investment
returns at constant annual rates of 0%, 6% and 12% (i.e., before any fees or
expenses deducted from Trust assets). After the deduction of average fees and
expenses at the Trust level (as described below) the corresponding net annual
rates of return would be -0.74%, 5.22% and 11.17%. Investment return reflects
investment income and all realized and unrealized capital gains and losses. The
tables assume annual Planned Premiums that are paid at the beginning of each
policy year for an insured person who is a 35 year old male standard non-smoker
underwriting risk when the policy is issued.
Tables are provided for each of the two death benefit options. The tables
headed "Current Charges" assume that the current rates for all charges deducted
by JHVLICO will apply in each year illustrated, including the intended waiver of
the premium sales charge after the tenth policy year and the intended reduction
in the insurance charge after the tenth policy year. The tables headed "Maximum
Charges" are the same, except that the maximum permitted rates for all years are
used for all charges. The tables do not reflect any charge that we reserve the
right to make but are not currently making.
With respect to fees and expenses deducted from Trust assets, the amounts
shown in all tables reflect (1) investment management fees equivalent to an
effective annual rate of .66%, and (2) an assumed average asset charge for all
other Trust operating expenses equivalent to an effective annual rate of .08%.
These rates are the arithmetic average for all funds of the Trust. In other
words, they are based on the hypothetical assumption that policy account values
are allocated equally among the variable investment options. The actual rates
associated with any policy will vary depending upon the actual allocation of
policy values among the investment options. The charge shown above for all other
Trust operating expenses reflects reimbursements to certain funds as described
in the footnote to the table on page 10. We currently expect those reimbursement
arrangements to continue indefinitely, but that is not guaranteed.
The second column of each table shows the amount you would have at the end of
each policy year if an amount equal to the assumed Planned Premiums were
invested to earn interest, after taxes, at 5% compounded annually. This is not a
policy value. It is included for comparison purposes only.
Because your circumstances will no doubt differ from those in the
illustrations that follow, values under your policy will differ, in most cases
substantially. Upon request, we will furnish you with a comparable illustration
reflecting your proposed insured person's issue age, sex and underwriting risk
classification, and the face amount and annual Planned Premium amount requested.
19
<PAGE>
DEATH BENEFIT OPTION 1: LEVEL DEATH BENEFIT
ILLUSTRATION ASSUMES CURRENT CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,000 100,000 100,000 218 244 270 0 0 0
2 1,636 100,000 100,000 100,000 663 737 815 0 0 72
3 2,516 100,000 100,000 100,000 1,093 1,243 1,406 0 150 313
4 3,439 100,000 100,000 100,000 1,506 1,761 2,048 413 668 956
5 4,409 100,000 100,000 100,000 1,900 2,289 2,745 807 1,196 1,652
6 5,428 100,000 100,000 100,000 2,276 2,828 3,501 1,183 1,736 2,408
7 6,497 100,000 100,000 100,000 2,631 3,376 4,321 1,538 2,283 3,228
8 7,620 100,000 100,000 100,000 2,964 3,932 5,211 2,070 3,038 4,317
9 8,799 100,000 100,000 100,000 3,274 4,496 6,176 2,579 3,801 5,481
10 10,037 100,000 100,000 100,000 3,568 5,076 7,240 3,272 4,780 6,944
11 11,337 100,000 100,000 100,000 3,866 5,695 8,432 3,669 5,497 8,234
12 12,702 100,000 100,000 100,000 4,142 6,325 9,736 4,043 6,226 9,637
13 14,135 100,000 100,000 100,000 4,392 6,965 11,163 4,392 6,965 11,163
14 15,640 100,000 100,000 100,000 4,615 7,612 12,725 4,615 7,612 12,725
15 17,220 100,000 100,000 100,000 4,809 8,267 14,437 4,809 8,267 14,437
16 18,879 100,000 100,000 100,000 4,972 8,928 16,315 4,972 8,928 16,315
17 20,621 100,000 100,000 100,000 5,105 9,595 18,379 5,105 9,595 18,379
18 22,450 100,000 100,000 100,000 5,197 10,260 20,644 5,197 10,260 20,644
19 24,370 100,000 100,000 100,000 5,247 10,920 23,132 5,247 10,920 23,132
20 26,387 100,000 100,000 100,000 5,258 11,581 25,875 5,258 11,581 25,875
25 38,086 100,000 100,000 100,000 4,777 14,946 44,737 4,777 14,946 44,737
30 53,018 100,000 100,000 100,000 3,271 18,411 77,172 3,271 18,411 77,172
35 72,076 ** 100,000 152,466 ** 21,031 132,579 ** 21,031 132,579
40 96,398 ** 100,000 236,015 ** 21,024 224,777 ** 21,024 224,777
45 127,441 ** 100,000 398,132 ** 15,461 379,174 ** 15,461 379,174
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
20
<PAGE>
DEATH BENEFIT OPTION 1: LEVEL DEATH BENEFIT
ILLUSTRATION ASSUMES MAXIMUM CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,000 100,000 100,000 191 217 242 0 0 0
2 1,636 100,000 100,000 100,000 610 680 754 0 0 11
3 2,516 100,000 100,000 100,000 1,011 1,154 1,308 0 61 216
4 3,439 100,000 100,000 100,000 1,396 1,636 1,907 303 543 815
5 4,409 100,000 100,000 100,000 1,760 2,126 2,554 668 1,033 1,461
6 5,428 100,000 100,000 100,000 2,106 2,623 3,253 1,013 1,531 2,160
7 6,497 100,000 100,000 100,000 2,430 3,126 4,007 1,337 2,033 2,914
8 7,620 100,000 100,000 100,000 2,731 3,633 4,821 1,837 2,739 3,927
9 8,799 100,000 100,000 100,000 3,008 4,142 5,700 2,313 3,447 5,004
10 10,037 100,000 100,000 100,000 3,262 4,654 6,650 2,966 4,358 6,353
11 11,337 100,000 100,000 100,000 3,488 5,166 7,675 3,291 4,968 7,478
12 12,702 100,000 100,000 100,000 3,685 5,675 8,783 3,587 5,576 8,684
13 14,135 100,000 100,000 100,000 3,853 6,179 9,979 3,853 6,179 9,979
14 15,640 100,000 100,000 100,000 3,988 6,678 11,274 3,988 6,678 11,274
15 17,220 100,000 100,000 100,000 4,089 7,167 12,673 4,089 7,167 12,673
16 18,879 100,000 100,000 100,000 4,154 7,644 14,189 4,154 7,644 14,189
17 20,621 100,000 100,000 100,000 4,176 8,103 15,827 4,176 8,103 15,827
18 22,450 100,000 100,000 100,000 4,149 8,535 17,596 4,149 8,535 17,596
19 24,370 100,000 100,000 100,000 4,068 8,936 19,508 4,068 8,936 19,508
20 26,387 100,000 100,000 100,000 3,925 9,295 21,573 3,925 9,295 21,573
25 38,086 100,000 100,000 100,000 2,046 10,156 34,760 2,046 10,156 34,760
30 53,018 ** 100,000 100,000 ** 8,151 55,014 ** 8,151 55,014
35 72,076 ** ** 101,747 ** ** 88,476 ** ** 88,476
40 96,398 ** ** 151,557 ** ** 144,340 ** ** 144,340
45 127,441 ** ** 245,710 ** ** 234,009 ** ** 234,009
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
21
<PAGE>
DEATH BENEFIT OPTION 2: VARIABLE DEATH BENEFIT
ILLUSTRATION ASSUMES CURRENT CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,217 100,243 100,270 217 243 270 0 0 0
2 1,636 100,661 100,735 100,812 661 735 812 0 0 69
3 2,516 101,088 101,238 101,401 1,088 1,238 1,401 0 145 308
4 3,439 101,498 101,752 102,038 1,498 1,752 2,038 405 659 945
5 4,409 101,888 102,274 102,727 1,888 2,274 2,727 795 1,182 1,634
6 5,428 102,259 102,806 103,473 2,259 2,806 3,473 1,166 1,714 2,380
7 6,497 102,607 103,344 104,279 2,607 3,344 4,279 1,514 2,252 3,186
8 7,620 102,932 103,888 105,150 2,932 3,888 5,150 2,038 2,994 4,256
9 8,799 103,233 104,437 106,092 3,233 4,437 6,092 2,538 3,742 5,396
10 10,037 103,516 104,998 107,124 3,516 4,998 7,124 3,220 4,702 6,827
11 11,337 103,802 105,594 108,274 3,802 5,594 8,274 3,604 5,396 8,077
12 12,702 104,063 106,196 109,527 4,063 6,196 9,527 3,964 6,097 9,428
13 14,135 104,297 106,802 110,888 4,297 6,802 10,888 4,297 6,802 10,888
14 15,640 104,501 107,411 112,368 4,501 7,411 12,368 4,501 7,411 12,368
15 17,220 104,674 108,018 113,978 4,674 8,018 13,978 4,674 8,018 13,978
16 18,879 104,814 108,624 115,729 4,814 8,624 15,729 4,814 8,624 15,729
17 20,621 104,922 109,228 117,637 4,922 9,228 17,637 4,922 9,228 17,637
18 22,450 104,987 109,818 119,709 4,987 9,818 19,709 4,987 9,818 19,709
19 24,370 105,006 110,391 121,958 5,006 10,391 21,958 5,006 10,391 21,958
20 26,387 104,985 110,951 124,409 4,985 10,951 24,409 4,985 10,951 24,409
25 38,086 104,321 113,575 140,622 4,321 13,575 40,622 4,321 13,575 40,622
30 53,018 102,626 115,737 166,563 2,626 15,737 66,563 2,626 15,737 66,563
35 72,076 ** 116,022 207,355 ** 16,022 107,355 ** 16,022 107,355
40 96,398 ** 111,961 270,843 ** 11,961 170,843 ** 11,961 170,843
45 127,441 ** 100,300 370,102 ** 300 270,102 ** 300 270,102
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
22
<PAGE>
DEATH BENEFIT OPTION 2: VARIABLE DEATH BENEFIT
ILLUSTRATION ASSUMES MAXIMUM CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,191 100,216 100,242 191 216 242 0 0 0
2 1,636 100,608 100,678 100,752 608 678 752 0 0 9
3 2,516 101,007 101,149 101,303 1,007 1,149 1,303 0 56 210
4 3,439 101,389 101,628 101,897 1,389 1,628 1,897 296 535 805
5 4,409 101,749 102,112 102,537 1,749 2,112 2,537 657 1,019 1,444
6 5,428 102,090 102,603 103,227 2,090 2,603 3,227 997 1,510 2,134
7 6,497 102,407 103,096 103,968 2,407 3,096 3,968 1,315 2,003 2,875
8 7,620 102,702 103,592 104,765 2,702 3,592 4,765 1,808 2,698 3,871
9 8,799 102,970 104,087 105,620 2,970 4,087 5,620 2,275 3,392 4,925
10 10,037 103,214 104,582 106,542 3,214 4,582 6,542 2,917 4,286 6,245
11 11,337 103,429 105,073 107,530 3,429 5,073 7,530 3,231 4,875 7,332
12 12,702 103,613 105,556 108,590 3,613 5,556 8,590 3,514 5,457 8,491
13 14,135 103,766 106,031 109,728 3,765 6,031 9,728 3,765 6,031 9,728
14 15,640 103,885 106,494 110,948 3,885 6,494 10,948 3,885 6,494 10,948
15 17,220 103,968 106,942 112,256 3,968 6,942 12,256 3,968 6,942 12,256
16 18,879 104,013 107,371 113,658 4,013 7,371 13,658 4,013 7,371 13,658
17 20,621 104,013 107,773 115,155 4,013 7,773 15,155 4,013 7,773 15,155
18 22,450 103,962 108,139 116,751 3,962 8,139 16,751 3,962 8,139 16,751
19 24,370 103,857 108,463 118,450 3,857 8,463 18,450 3,857 8,463 18,450
20 26,387 103,687 108,733 120,251 3,687 8,733 20,251 3,687 8,733 20,251
25 38,086 101,669 108,923 130,915 1,669 8,923 30,915 1,669 8,923 30,915
30 53,018 ** 105,786 144,362 ** 5,786 44,362 ** 5,786 44,362
35 72,076 ** ** 159,465 ** ** 59,465 ** ** 59,465
40 96,398 ** ** 172,761 ** ** 72,761 ** ** 72,761
45 127,441 ** ** 175,164 ** ** 75,164 ** ** 75,164
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
23
<PAGE>
DEATH BENEFIT OPTION 3: LEVEL DEATH BENEFIT WITH GREATER FUNDING
ILLUSTRATION ASSUMES CURRENT CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED PREMIUM*
<TABLE>
<CAPTION>
Death Benefit Account Value Surrender Value
----------------------------- ----------------------------- -----------------------------
Premiums Assuming Hypothetical Gross Assuming HypotheticalGross 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>
1 798 100,000 100,000 100,000 218 244 270 0 0 0
2 1,636 100,000 100,000 100,000 663 737 815 0 0 72
3 2,516 100,000 100,000 100,000 1,093 1,243 1,406 0 150 313
4 3,439 100,000 100,000 100,000 1,506 1,761 2,048 413 668 956
5 4,409 100,000 100,000 100,000 1,900 2,289 2,745 807 1,196 1,652
6 5,428 100,000 100,000 100,000 2,276 2,828 3,501 1,183 1,736 2,408
7 6,497 100,000 100,000 100,000 2,631 3,376 4,321 1,538 2,283 3,228
8 7,620 100,000 100,000 100,000 2,964 3,932 5,211 2,070 3,038 4,317
9 8,799 100,000 100,000 100,000 3,274 4,496 6,176 2,579 3,801 5,481
10 10,037 100,000 100,000 100,000 3,568 5,076 7,240 3,272 4,780 6,944
11 11,337 100,000 100,000 100,000 3,866 5,695 8,432 3,669 5,497 8,234
12 12,702 100,000 100,000 100,000 4,142 6,325 9,736 4,043 6,226 9,637
13 14,135 100,000 100,000 100,000 4,392 6,965 11,163 4,392 6,965 11,163
14 15,640 100,000 100,000 100,000 4,615 7,612 12,725 4,615 7,612 12,725
15 17,220 100,000 100,000 100,000 4,809 8,267 14,437 4,809 8,267 14,437
16 18,879 100,000 100,000 100,000 4,972 8,928 16,315 4,972 8,928 16,315
17 20,621 100,000 100,000 100,000 5,105 9,595 18,379 5,105 9,595 18,379
18 22,450 100,000 100,000 100,000 5,197 10,260 20,644 5,197 10,260 20,644
19 24,370 100,000 100,000 100,000 5,247 10,920 23,132 5,247 10,920 23,132
20 26,387 100,000 100,000 100,000 5,258 11,581 25,875 5,258 11,581 25,875
25 38,086 100,000 100,000 100,000 4,777 14,946 44,737 4,777 14,946 44,737
30 53,018 100,000 100,000 130,207 3,271 18,411 76,502 3,271 18,411 76,502
35 72,076 ** 100,000 193,078 ** 21,031 127,562 ** 21,031 127,562
40 96,398 ** 100,000 285,457 ** 21,024 208,545 ** 21,024 208,545
45 127,441 ** 100,000 425,000 ** 15,461 336,607 ** 15,461 336,607
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
24
<PAGE>
DEATH BENEFIT OPTION 3: LEVEL DEATH BENEFIT WITH GREATER FUNDING
ILLUSTRATION ASSUMES MAXIMUM CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,000 100,000 100,000 191 217 242 0 0 0
2 1,636 100,000 100,000 100,000 610 680 754 0 0 11
3 2,516 100,000 100,000 100,000 1,011 1,154 1,308 0 61 216
4 3,439 100,000 100,000 100,000 1,396 1,636 1,907 303 543 815
5 4,409 100,000 100,000 100,000 1,760 2,126 2,554 668 1,033 1,461
6 5,428 100,000 100,000 100,000 2,106 2,623 3,253 1,013 1,531 2,160
7 6,497 100,000 100,000 100,000 2,430 3,126 4,007 1,337 2,033 2,914
8 7,620 100,000 100,000 100,000 2,731 3,633 4,821 1,837 2,739 3,927
9 8,799 100,000 100,000 100,000 3,008 4,142 5,700 2,313 3,447 5,004
10 10,037 100,000 100,000 100,000 3,262 4,654 6,650 2,966 4,358 6,353
11 11,337 100,000 100,000 100,000 3,488 5,166 7,675 3,291 4,968 7,478
12 12,702 100,000 100,000 100,000 3,685 5,675 8,783 3,587 5,576 8,684
13 14,135 100,000 100,000 100,000 3,853 6,179 9,979 3,853 6,179 9,979
14 15,640 100,000 100,000 100,000 3,988 6,678 11,274 3,988 6,678 11,274
15 17,220 100,000 100,000 100,000 4,089 7,167 12,673 4,089 7,167 12,673
16 18,879 100,000 100,000 100,000 4,154 7,644 14,189 4,154 7,644 14,189
17 20,621 100,000 100,000 100,000 4,176 8,103 15,827 4,176 8,103 15,827
18 22,450 100,000 100,000 100,000 4,149 8,535 17,596 4,149 8,535 17,596
19 24,370 100,000 100,000 100,000 4,068 8,936 19,508 4,068 8,936 19,508
20 26,387 100,000 100,000 100,000 3,925 9,295 21,573 3,925 9,295 21,573
25 38,086 100,000 100,000 100,000 2,046 10,156 34,760 2,046 10,156 34,760
30 53,018 ** 100,000 100,000 ** 8,151 55,014 ** 8,151 55,014
35 72,076 ** ** 130,440 ** ** 86,179 ** ** 86,179
40 96,398 ** ** 178,779 ** ** 130,610 ** ** 130,610
45 127,441 ** ** 242,454 ** ** 192,027 ** ** 192,027
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
25
<PAGE>
ADDITIONAL INFORMATION
This section of the prospectus provides additional detailed information that
is not contained in the Basic Information section on pages 3 through 18.
<TABLE>
<CAPTION>
CONTENTS OF THIS SECTION BEGINNING ON PAGE
------------------------ -----------------
<S> <C>
Description of JHVLICO ...................... 27
How we support the policy and investment options 27
Procedures for issuance of a policy......... 28
Commencement of investment performance...... 29
How we process certain policy transactions.. 29
Effects of policy loans..................... 31
Additional information about how certain policy charges 31
work........................................
How we market the policies.................. 32
Tax considerations.......................... 33
Reports that you will receive............... 34
Voting privileges that you will have........ 35
Changes that JHVLICO can make as to your policy 3
5
Adjustments we make to death benefits....... 36
When we pay policy proceeds................. 36
Other details about exercising rights and paying benefits 3
6
Legal matters............................... 37
Registration statement filed with the SEC... 37
Accounting and actuarial experts............ 3
7
Financial statements of JHVLICO and the Account 3
7
List of Directors and Executive Officers of JHVLICO 3
8
</TABLE>
26
<PAGE>
DESCRIPTION OF JHVLICO
We are JHVLICO, a stock life insurance company chartered in 1979 under
Massachusetts law. We are authorized to transact a life insurance and annuity
business in all states other than New York and in the District of Columbia. We
began selling variable life insurance policies in 1980.
We are regulated and supervised by the Massachusetts Commissioner of
Insurance, who periodically examines our affairs. We also are subject to the
applicable insurance laws and regulations of all jurisdictions in which we are
authorized to do business. We are required to submit annual statements of our
operations, including financial statements, to the insurance departments of the
various jurisdictions in which we do business for purposes of determining
solvency and compliance with local insurance laws and regulations. The
regulation to which we are subject, however, does not provide a guarantee as to
such matters.
We are a wholly-owned subsidiary of John Hancock Life Insurance Company ("John
Hancock"), a Massachusetts stock life insurance company. On February 1, 2000,
John Hancock Mutual Life Insurance Company (which was chartered in Massachusetts
in 1862) converted to a stock company by "demutualizing" and changed its name to
John Hancock Life Insurance Company. As part of the demutualization process,
John Hancock became a subsidiary of John Hancock Financial Services, Inc., a
newly formed publicly-traded corporation. John Hancock's home office is at John
Hancock Place, Boston, Massachusetts 02117. As of December 31, 1999, John
Hancock's assets were approximately $71 billion and it had invested
approximately $575 million in JHVLICO in connection with JHVLICO's organization
and operation. It is anticipated that John Hancock will from time to time make
additional capital contributions to JHVLICO to enable us to meet our reserve
requirements and expenses in connection with our business. John Hancock is
committed to make additional capital contributions if necessary to ensure that
we maintain a positive net worth.
HOW WE SUPPORT THE POLICY AND INVESTMENT OPTIONS
Separate Account U
The variable investment options shown on page 1 are in fact subaccounts of
Separate Account U (the "Account"), a separate account established by us under
Massachusetts law. The Account 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"). Such registration does not
involve supervision by the SEC of the management of the Account or JHVLICO.
The Account's assets are the property of JHVLICO. Each policy provides that
amounts we hold in the Account pursuant to the policies cannot be reached by any
other persons who may have claims against us.
The assets in each subaccount are invested in the corresponding fund of the
Trust. New subaccounts may be added as new funds are added to the Trust and made
available to policy owners. Existing subaccounts may be deleted if existing
funds are deleted from the Trust.
We will purchase and redeem Trust shares for the Account at their net asset
value without any sales or redemption charges. Shares of the Trust represent an
interest in one of the funds of the Trust which corresponds to a subaccount of
the Account. Any dividend or capital gains distributions received by the Account
will be reinvested in shares of that same fund at their net asset value as of
the dates paid.
On each business day, shares of each fund are purchased or redeemed by us for
each subaccount based on, among other things, the amount of net premiums
allocated to the subaccount, distributions reinvested, and transfers to, from
and among subaccounts, all to be effected as of that date. Such
27
<PAGE>
purchases and redemptions are effected at each fund's net asset value per share
determined for that same date. A "business day" is any date on which the New
York Stock Exchange is open for trading. We compute policy values for each
business day as of the close of that day (usually 4:00 p.m. Eastern Standard
Time).
Our general account
Our obligations under the policy's fixed investment option are backed by our
general account assets. Our general account consists of assets owned by us other
than those in the Account and in other separate accounts that we may establish.
Subject to applicable law, we have sole discretion over the investment of assets
of the general account and policy owners do not share in the investment
experience of, or have any preferential claim on, those assets. Instead, we
guarantee that the account value allocated to the fixed investment option will
accrue interest daily at an effective annual rate of at least 4% without regard
to the actual investment experience of the general account.
Because of exemptive and exclusionary provisions, interests in our fixed
investment option have not been registered under the Securities Act of 1933 and
our 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 we have been advised that the staff
of the SEC has not reviewed the disclosure in this prospectus relating to the
fixed investment option. Disclosure regarding the fixed investment option may,
however, be subject to certain generally-applicable provisions of the Federal
securities laws relating to accuracy and completeness of statements made in
prospectuses.
PROCEDURES FOR ISSUANCE OF A POLICY
Generally, the policy is available with a minimum face amount at issue of
$100,000. At the time of issue, the insured person must have an attained age of
at least 20 and no more than 75. All insured persons must meet certain health
and other insurance risk criteria called "underwriting standards".
Policies issued in Montana or in connection with certain employee plans will
not directly reflect the sex of the insured person 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, may not reflect the rates, charges,
or values that would apply to such policies.
Minimum Initial Premium
The Minimum Initial Premium must be received by us at our Life Servicing
Office in order for the policy to be in full force and effect. There is no grace
period for the payment of the Minimum Initial Premium. The minimum amount of
premium required at the time of policy issue is equal to three monthly
Guaranteed Death Benefit Premiums (see "Guaranteed death benefit feature" in the
Basic Information section of this prospectus). However, if an owner has chosen
to pay premiums on a monthly basis, the minimum amount required is only equal to
one monthly Guaranteed Death Benefit Premium.
Commencement of insurance coverage
After you apply for a policy, it can sometimes take up to several weeks for us
to gather and evaluate all the information we need to decide whether to issue a
policy to you and, if so, what the insured person's rate class should be. After
we approve an application for a policy and assign an appropriate insurance rate
class, we will prepare the policy for delivery. We will not pay a death benefit
under a policy unless the policy is in effect when the insured person dies
(except for the circumstances described under "Temporary insurance coverage
prior to policy delivery" on page 29).
The policy will take effect only if all of the following conditions are
satisfied:
28
<PAGE>
. The policy is delivered to and received by the applicant.
. The Minimum Initial Premium is received by us.
. Each insured person is living and still meets our health criteria for
issuing insurance.
If all of the above conditions are satisfied, the policy will take effect on
the date shown in the policy as the "date of issue." That is the date on which
we begin to deduct monthly charges. Policy months, policy years and policy
anniversaries are all measured from the date of issue.
Backdating
In order to preserve a younger age at issue for the insured person, we can
designate a date of issue that is up to 60 days earlier than the date that would
otherwise apply. This is referred to as "backdating" and is allowed under state
insurance laws. Backdating can also be used in certain corporate-owned life
insurance cases involving multiple policies to retain a common monthly deduction
date.
The conditions for coverage described above under "Commencement of insurance
coverage" must still be satisfied, but in a backdating situation the policy
always takes effect retroactively. Backdating results in a lower insurance
charge (because of the insured person's younger age at issue), but monthly
charges begin earlier than would otherwise be the case. Those monthly charges
will be deducted as soon as we receive premiums sufficient to pay them.
Temporary coverage prior to policy delivery
If a specified amount of premium is paid with the application for a policy and
other conditions are met, we will provide temporary term life insurance coverage
on the insured person for a period prior to the time coverage under the policy
takes effect. Such temporary term coverage will be subject to the terms and
conditions described in the application for the policy, including limits on
amount and duration of coverage.
Monthly deduction dates
Each charge that we deduct monthly is assessed against your account value or
the subaccounts at the close of business on the date of issue and at the close
of the first business day in each subsequent policy month.
COMMENCEMENT OF INVESTMENT PERFORMANCE
All premium payments will be allocated among the investment options you have
chosen as soon as they are processed.
HOW WE PROCESS CERTAIN POLICY TRANSACTIONS
Premium payments
We will process any premium payment as of the day we receive it, unless one of
the following exceptions applies:
(1) We will process a payment received prior to a policy's date of issue as if
received on the date of issue.
(2) If the Minimum Initial Premium is not received prior to the date of issue,
we will process each premium payment received thereafter as if received on the
business day immediately preceding the date of issue until all of the Minimum
Initial Premium is received.
(3) We will process the portion of any premium payment for which we require
evidence of the insured person's continued insurability only after we have
received such evidence and found it satisfactory to us.
(4) If we receive any premium payment that we think will cause a policy to
become a modified endowment or will cause a policy to lose its status as life
insurance under the tax laws, we will not accept the excess portion of that
premium payment and will immediately notify the owner. We will refund the excess
premium when the premium payment check has had time to clear the banking system
(but in no
29
<PAGE>
case more than two weeks after receipt), except in the following circumstances:
. The tax problem resolves itself prior to the date the refund is to be
made; or
. The tax problem relates to modified endowment status and we receive a
signed acknowledgment from the owner prior to the refund date instructing
us to process the premium notwithstanding the tax issues involved.
In the above cases, we will treat the excess premium as having been received on
the date the tax problem resolves itself or the date we receive the signed
acknowledgment. We will then process it accordingly.
(5) If a premium payment is received or is otherwise scheduled to be processed
(as specified above) on a date that is not a business day, the premium payment
will be processed on the business day next following that date.
Transfers among investment options
Any reallocation among investment options must be such that the total in all
investment options after reallocation equals 100% of account value. Transfers
out of a variable investment option will be effective at the end of the business
day in which we receive at our Life Servicing Office notice satisfactory to us.
If received on or before the policy anniversary, requests for transfer out of
the fixed investment option will be processed on the policy anniversary (or the
next business day if the policy anniversary does not occur on a business day).
If received after the policy anniversary, such a request will be processed at
the end of the business day in which we receive the request at our Life
Servicing Office. If you request a transfer out of the fixed investment option
61 days or more prior to the policy anniversary, we will not process that
portion of the reallocation, and your confirmation statement will not reflect a
transfer out of the fixed investment option as to such request. Currently, there
is no minimum amount limit on transfers into the fixed investment option, but we
reserve the right to impose such a limit in the future. We have the right to
defer transfers of amounts out of the fixed investment option for up to six
months.
Dollar cost averaging
Scheduled transfers under this option may be made from the Money Market
investment option to not more than nine other variable investment options.
However, the amount transferred to any one investment option must be at least
$100.
Once we receive the election in form satisfactory to us at our Life Servicing
Office, transfers will begin on the second monthly deduction date following its
receipt. 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 for
so long as you have at least $2,500 of your account value in the Money Market
investment option, or until we receive written notice from you of cancellation
of the option or notice of the death of the insured person. We reserve the right
to modify, terminate or suspend the dollar cost averaging program at any time.
Telephone transfers and policy loans
Once you have completed a written authorization, you may request a transfer or
policy loan by telephone or by fax. If the fax request option becomes
unavailable, another means of telecommunication will be substituted.
If you authorize telephone transactions, you will be liable for any loss,
expense or cost arising out of any unauthorized or fraudulent telephone
instructions which we reasonably believe to be genuine, unless such loss,
expense or cost is the result of our mistake or negligence. We employ procedures
which provide safeguards against the execution of unauthorized transactions, and
which are reasonably designed to confirm that instructions received by telephone
are genuine. These procedures include requiring personal identification, tape
recording calls, and providing
30
<PAGE>
written confirmation to the owner. If we do not employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, we may be
liable for any loss due to unauthorized or fraudulent instructions.
Effective date of other policy transactions
The following transactions take effect on the policy anniversary on or next
following the date we approve your request:
. Face amount increases, when and if permitted by our administrative rules
. Change of death benefit option
Face amount decreases or reinstatements of lapsed policies take effect on the
monthly deduction date on or next following the date we approve the request for
decrease or reinstatement.
We process loans, surrenders, partial withdrawals and loan repayments as of
the day we receive such request or repayment.
EFFECTS OF POLICY LOANS
The account value, the surrender value, and any death benefit above the face
amount are permanently affected by any loan, whether or not it is repaid in
whole or in part. This is because the amount of the loan is deducted from the
investment options and placed in a special loan account. The investment options
and the special loan account will generally have different rates of investment
return.
The amount of the outstanding loan (which includes accrued and unpaid
interest) is subtracted from the amount otherwise payable when the policy
proceeds become payable.
Whenever the outstanding loan equals or exceeds the surrender value, the
policy will terminate 31 days after we have mailed notice of termination to you
(and to any assignee of record at such assignee's last known address) specifying
the minimum amount that must be paid to avoid termination, unless a repayment of
at least the amount specified is made within that period.
ADDITIONAL INFORMATION ABOUT HOW CERTAIN POLICY CHARGES WORK
Sales expenses and related charges
The sales charges (i.e., the premium sales charge and the CDSC) help to
compensate us for the cost of selling our policies. (See "What charges will
JHVLICO deduct from my investment in the policy?" in the Basic Information
section of this prospectus.) The amount of the charges in any policy year does
not specifically correspond to sales expenses for that year. We expect to
recover our total sales expenses over the life of the policies. To the extent
that the sales charges do not 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 our
general assets. (See "How we market the policies" on page 32.)
Effect of premium payment pattern
You 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 your total sales charges over time. For example,
if the Target Premium was $1,000 and you paid a premium of $1,000 in each of the
first ten policy years, you would pay total premium sales charges of $400 and be
subject to a maximum CDSC of $780. If you paid $2,000 (i.e., two times the
Target Premium amount) in every other policy year up to the tenth policy year,
you would pay total premium sales charges of only $200 and be subject to a
maximum CDSC of only $520. 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. Conversely, accelerating
31
<PAGE>
the payment of Target 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 you
upon receipt of policy distributions. (See "Tax considerations" beginning on
page 33.)
Monthly charges
We deduct the monthly charges described in the Basic Information section from
your policy's investment options in proportion to the amount of account value
you have in each. For each month that we cannot deduct any charge because of
insufficient account value, the uncollected charges will accumulate and be
deducted when and if sufficient account value becomes available.
The insurance under the policy continues in full force during any grace period
but, if the insured person dies during the policy grace period, the amount of
unpaid monthly charges is deducted from the death benefit otherwise payable.
Reduced charges for eligible classes
The charges 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 we anticipate that the sales to the members of the class will
result in lower than normal sales or administrative expenses, lower taxes or
lower risks to us. We will make these reductions in accordance with our rules in
effect at the time of the application for a policy. The factors we consider 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 lapse and surrender rates 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 result in a reduction
in sales or administrative expenses, lower taxes or lower risks. Any reduction
in charges will be reasonable and will apply uniformly to all prospective policy
purchasers in the class and will not unfairly discriminate against any owner.
HOW WE MARKET THE POLICIES
John Hancock Funds, Inc. ("JHFI"), an indirect wholly-owned subsidiary of John
Hancock located at 101 Huntington Avenue, Boston, MA 02199, is registered as a
broker-dealer under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. JHFI acts as principal
underwriter and principal distributor of the policies sold through the use of
this prospectus. JHFI also serves as principal underwriter for John Hancock
Variable Annuity Accounts H and JF, John Hancock Mutual Variable Life Insurance
Account UV, John Hancock Variable Life Account S, and Investors Partner Life
Account L, all of which are registered under the 1940 Act.
The policies may be purchased through broker-dealers and certain financial
institutions who have entered into selling agreements with JHFI and JHVLICO, and
whose representatives are authorized by applicable law to sell variable life
insurance policies.Gross first year commissions plus any expense allowance
payments paid to such broker-dealers and financial institutions is not expected
to exceed 80% of premiums paid up to the Target Premium plus 3% of any excess
premium payments. Gross renewal commissions (i.e., after the first year) are not
expected to exceed 3% of total premiums paid in policy years 2 through 5 plus
0.15% of account value less loans in policy years 2 and thereafter. In some
situations where the broker dealer provides some or all of the marketing
services required, we may pay an additional gross first year commission of up to
20% of premiums paid up to the Target Premium. In such instances, we may also
pay an additional gross renewal commission. The additional gross renewal
commission would not be expected to
32
<PAGE>
exceed 0.10% of account value less loans in policy years 2 and thereafter.
We reimburse JHFI for direct and indirect expenses actually incurred in
connection with the marketing and sale of the policies.
The offering of the policies is intended to be continuous, but neither JHVLICO
nor JHFI is obligated to sell any particular amount of policies.
TAX CONSIDERATIONS
This description of federal income tax consequences is only a brief summary
and is not intended as tax advice. Tax consequences will vary based on your own
particular circumstances, and for further information you should consult a
qualified tax advisor. Federal, state and local tax laws, regulations and
interpretations can change from time to time. As a result, the tax consequences
to you and the beneficiary may be altered, in some cases retroactively.
Policy proceeds
We believe the policy will receive the same federal income and estate tax
treatment as fixed benefit life insurance policies. Section 7702 of the Internal
Revenue Code (the "Code") defines life insurance for federal tax purposes. If
certain standards are met at issue and over the life of the policy, the policy
will satisfy that definition. We will monitor compliance with these standards.
If the policy complies with the definition of life insurance, we believe the
death benefit under the policy will be excludable from the beneficiary's gross
income under 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 distributions.
Distributions for tax purposes can include amounts received upon surrender or
partial withdrawals. You may also be deemed to have received a distribution for
tax purposes if you assign all or part of your policy rights or change your
policy's ownership.
In general, the owner will be taxed on the amount of distributions that exceed
the premiums paid under the policy. But under certain circumstances within the
first 15 policy years, the owner may be taxed on a distribution even if total
withdrawals do not exceed total premiums paid. Any taxable distribution will be
ordinary income to the owner (rather than capital gains).
We also believe 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 outstanding loan that
was not previously considered income (as discussed below) will be treated as if
it had been distributed to the owner if the policy terminates for any reason.
It is possible that, despite our monitoring, a policy might fail to qualify as
life insurance under Section 7702 of the Code. This could happen, for example,
if we inadvertently failed to return to you any premium payments that were in
excess of permitted amounts, or if the Trust failed to meet certain investment
diversification or other requirements of the Code. If this were to occur, you
would be subject to income tax on the income and gains under the policy for the
period of the disqualification and for subsequent periods.
In the past, the United States Treasury Department has stated that it
anticipated issuing guidelines prescribing circumstances in which the ability of
a policy owner to direct his or her investment to particular funds may cause the
policy owner, rather than the insurance company, to be treated as the owner of
the shares of those funds. In that case, any income and gains attributable to
those shares would be included in your current gross income for federal income
tax purposes. Under current law, however, we believe that we, and not the owner
of a policy, would be considered the owner of the fund's shares for tax
purposes.
33
<PAGE>
Tax consequences of ownership or receipt of policy proceeds under federal,
state and local estate, inheritance, gift and other tax laws depend on the
circumstances of each owner or beneficiary.
Because there may be unfavorable tax consequences (including recognition of
taxable income and the loss of income tax-free treatment for any death benefit
payable to the beneficiary), you should consult a qualified tax adviser prior to
changing the policy's ownership or making any assignment of ownership interests.
7-pay premium limit
At the time of policy issuance, we will determine whether the Planned Premium
schedule will exceed the 7-pay limit discussed below. If so, our standard
procedures prohibit issuance of the policy unless you sign a form acknowledging
that fact.
The 7-pay limit is the total of net level premiums that would have been
payable at any time for a comparable fixed policy to be fully "paid-up" after
the payment of 7 equal annual premiums. "Paid-up" means that no further premiums
would be required to continue the coverage in force until maturity, based on
certain prescribed assumptions. If the total premiums paid at any time during
the first 7 policy years exceed the 7-pay limit, the policy will be treated as a
"modified endowment", which can have adverse tax consequences.
The owner will be taxed on distributions and loans from a "modified endowment"
to the extent of any income (gain) to the owner (on an income-first basis). The
distributions and loans 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 taxable portions of such
distributions or loans that are made before the owner attains age 591/2.
Furthermore, any time there is a "material change" in a policy (such as a face
amount increase, the addition of certain other policy benefits after issue, a
change in death benefit option, or reinstatement of a lapsed policy), the policy
will have a new 7-pay limit as if it were a newly-issued policy. If a prescribed
portion of the policy's then account value, plus all other premiums paid within
7 years after the material change, at any time exceed the new 7-pay limit, the
policy will become a modified endowment.
Moreover, if benefits under a policy are reduced (such as a reduction in the
face amount or death benefit or the reduction or cancellation of certain rider
benefits) during the 7 years in which a 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 its affiliates) to the
owner during any calendar year generally will be treated as one contract for the
purpose of applying the modified endowment rules. A policy received in exchange
for a modified endowment will itself also be a modified endowment. You should
consult your tax advisor if you have questions regarding the possible impact of
the 7-pay limit on your policy.
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. We are not responsible for compliance with the
terms of any such plan or with the requirements of applicable provisions of the
Code.
REPORTS THAT YOU WILL RECEIVE
At least annually, we will send you a statement setting forth the following
information as of the end of the most recent reporting period: the amount of the
death benefit and account value, the portion of the
34
<PAGE>
account value in each investment option, the 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). Moreover, you
also will receive confirmations of premium payments, transfers among investment
options, policy loans, partial withdrawals and certain other policy
transactions.
Semiannually we will send you a report containing the financial statements of
the Trust, including a list of securities held in each fund.
VOTING PRIVILEGES THAT YOU WILL HAVE
All of the assets in the subaccounts of the Account are invested in shares of
the corresponding funds of the Trust. We will vote the shares of each of the
funds of the Trust which are deemed attributable to variable life insurance
policies at regular and special meetings of the Trust's shareholders in
accordance with instructions received from owners of such policies. Shares of
the Trust held in the Account which are not attributable to such policies, as
well as shares for which instructions from owners are not received, will be
represented by us at the meeting. We will vote such shares for and against each
matter in the same proportions as the votes based upon the instructions received
from the owners of such policies.
We determine the number of a fund's shares held in a subaccount attributable
to each owner by dividing the amount of a policy's account value held in the
subaccount by the net asset value of one share in the fund. Fractional votes
will be counted. We determine the number of shares as to which the owner may
give instructions as of the record date for the Trust's meeting. Owners of
policies may give instructions regarding the election of the Board of Trustees
of the Trust, ratification of the selection of independent auditors, approval of
Trust investment advisory agreements and other matters requiring a shareholder
vote. We will furnish owners with information and forms to enable owners to give
voting instructions.
However, we may, in certain limited circumstances permitted by the SEC's
rules, disregard voting instructions. If we do disregard voting instructions,
you will receive a summary of that action and the reasons for it in the next
semi-annual report to owners.
CHANGES THAT JHVLICO CAN MAKE AS TO YOUR POLICY
Changes relating to the Trust or the Account
The voting privileges described in this prospectus reflect our 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, we reserve the right to proceed in accordance with any
such revised requirements. We also reserve 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 your policy belongs from the Account to another separate account or
subaccount, (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, John Hancock or an affiliate of either, (3)
to deregister the Account under the 1940 Act, (4) to substitute for the fund
shares held by a subaccount any other investment permitted by law, and (5) to
take any action necessary to comply with or obtain any exemptions from the 1940
Act. We 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.
35
<PAGE>
Other permissible changes
We reserve the right to make any changes in the policy necessary to ensure the
policy is within the definition of life insurance under the Federal tax laws and
is in compliance with any changes in Federal or state tax laws.
In our policies, we reserve the right to make certain changes if they would
serve the best interests of policy owners or would be appropriate in carrying
out the purposes of the policies. Such changes include the following:
. Changes necessary to comply with or obtain or continue exemptions under
the federal securities laws
. Combining or removing investment options
. Changes in the form of organization of any separate account
Any such changes will be made only to the extent permitted by applicable laws
and only in the manner permitted by such laws. When required by law, we will
obtain your approval of the changes and the approval of any appropriate
regulatory authority.
ADJUSTMENTS WE MAKE TO DEATH BENEFITS
If the insured person commits suicide within certain time periods, the amount
of death benefit we pay will be limited as described in the policy. Also, if an
application misstated the age or gender of the insured person, we will adjust
the amount of any death benefit as described in the policy.
WHEN WE PAY POLICY PROCEEDS
General
We will pay any death benefit, withdrawal, surrender value or loan within 7
days after we receive the last required form or request (and, with respect to
the death benefit, any other documentation that may be required). If we don't
have information about the desired manner of payment within 7 days after the
date we receive notification of the insured person's death, we will pay the
proceeds as a single sum, normally within 7 days thereafter.
Delay to challenge coverage
We may challenge the validity of your insurance policy based on any material
misstatements made to us in the application for the policy. We cannot make such
a challenge, however, beyond certain time limits that are specified in the
policy.
Delay for check clearance
We reserve the right to defer payment of that portion of your account value
that is attributable to a premium payment made by check for a reasonable period
of time (not to exceed 15 days) to allow the check to clear the banking system.
Delay of separate account proceeds
We reserve the right to defer payment of any death benefit, loan or other
distribution that is derived from a variable investment option if (a) the New
York Stock Exchange is closed (other than customary weekend and holiday
closings) or trading on the New York Stock Exchange is restricted; (b) an
emergency exists, as a result of which disposal of securities is not reasonably
practicable or it is not reasonably practicable to fairly determine the account
value; or (c) the SEC by order permits the delay for the protection of owners.
Transfers and allocations of account value among the investment options may also
be postponed under these circumstances. If we need to defer calculation of
separate account values for any of the foregoing reasons, all delayed
transactions will be processed at the next values that we do compute.
OTHER DETAILS ABOUT EXERCISING RIGHTS AND PAYING BENEFITS
Joint ownership
If more than one person owns a policy, all owners must join in most requests
to exercise rights under the policy.
36
<PAGE>
Assigning your policy
You may assign your rights in the policy to someone else as collateral for a
loan or for some other reason. Assignments do not require the consent of any
revocable beneficiary. A copy of the assignment must be forwarded to us. We are
not responsible for any payment we make or any action we take before we receive
notice of the assignment in good order. Nor are we responsible for the validity
of the assignment. An absolute assignment is a change of ownership. All
collateral assignees of record must consent to any full surrender, partial
withdrawal or loan from the policy.
Your beneficiary
You name your beneficiary when you apply for the policy. The beneficiary is
entitled to the proceeds we pay following the insured person's death. You may
change the beneficiary during the insured person's lifetime. Such a change
requires the consent of any irrevocable named beneficiary. A new beneficiary
designation is effective as of the date you sign it, but will not affect any
payments we make before we receive it. If no beneficiary is living when the
insured person dies, we will pay the insurance proceeds to the owner or the
owner's estate.
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 us on certain
Federal securities law matters in connection with the policies.
REGISTRATION STATEMENT FILED WITH THE SEC
This prospectus omits certain information contained in the Registration
Statement which has been filed with the SEC. More details may be obtained from
the SEC upon payment of the prescribed fee.
ACCOUNTING AND ACTUARIAL EXPERTS
Certain of 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 Todd G. Engelsen, F.S.A., an Actuary of JHVLICO
and Second Vice President of John Hancock.
FINANCIAL STATEMENTS OF JHVLICO AND THE ACCOUNT
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.
In addition to those financial statements of JHVLICO and the Account included
herein that have been audited by Ernst & Young LLP, this prospectus also
contains unaudited financial statements of both JHVLICO and the Account for a
period subsequent to the audited financial statements.
37
<PAGE>
LIST 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 and Executive Principal Occupations
----------------------- ---------------------
Officers
--------
<S> <C>
David F. D'Alessandro Chairman of the Board and Chief Executive
Officer of JHVLICO; President and Chief
Executive Officer, John Hancock Life Insurance
Company.
Michele G. Van Leer. Vice Chairman of the Board and President of
JHVLICO; Senior Vice President, John Hancock
Life Insurance Company.
Ronald J. Bocage . . . Director, Vice President and Counsel of JHVLICO;
Vice President and Counsel, John Hancock Life
Insurance Company.
Bruce M. Jones. . . . Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Thomas J. Lee. . . . Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Barbara L. Luddy. . . Director, Vice President and Actuary of JHVLICO;
Senior Vice President, John Hancock Life
Insurance Company.
Robert S. Paster. . . Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Robert R. Reitano. . Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Paul Strong . . . . . Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Daniel L. Ouellette. Vice President, Marketing, of JHVLICO; Senior
Vice President, John Hancock Life Insurance
Company.
Edward P. Dowd. . . . Vice President, Investments, of JHVLICO; Senior
Vice President, John Hancock Life Insurance
Company
Roger G. Nastou. . . Vice President, Investments, of JHVLICO; Vice
President, John Hancock Life Insurance Company
Todd G. Engelsen. . . Vice President and Illustration Actuary of
JHVLICO; Second Vice President, John Hancock
Life Insurance Company
Julie H. Indge. . . . Treasurer of JHVLICO; Financial Officer, John
Hancock Life Insurance Company
Patrick J. Gill. . . Controller of JHVLICO; Senior Associate
Controller, John Hancock Life Insurance Company.
Peter Scavongelli. . Secretary of JHVLICO; State Compliance Officer,
John Hancock Life Insurance Company
</TABLE>
The business address of all Directors and officers of JHVLICO is John Hancock
Place, Boston, Massachusetts 02117.
38
<PAGE>
UNAUDITED FINANCIAL STATEMENTS
FOR
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
SECOND QUARTER 2000
39
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
2000 1999
----------------------- --------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Bonds . . . . . . . . . . . . . . . . $ 1,344.7 $ 1,216.3
Preferred stocks . . . . . . . . . . 36.9 35.9
Common stocks . . . . . . . . . . . . 2.0 3.2
Investment in affiliates . . . . . . 80.5 80.7
Mortgage loans on real estate . . . . 468.2 433.1
Real estate . . . . . . . . . . . . . 24.7 25.0
Policy loans . . . . . . . . . . . . 195.5 172.1
Cash Items:
Cash in banks . . . . . . . . . . . (3.0) 27.2
Temporary cash investments . . . . . 284.6 222.9
---------------------- ---------
281.6 250.1
Premiums due and deferred . . . . . . 28.9 29.9
Investment income due and accrued . . 40.9 33.2
Other general account assets . . . . 43.7 65.3
Assets held in separate accounts . . 8,569.0 8,268.2
---------------------- ---------
Total assets . . . . . . . . . . . $11,116.6 $10,613.0
====================== =========
OBLIGATIONS AND STOCKHOLDER'S EQUITY
Obligations
Policy reserves . . . . . . . . . . $ 2,048.1 $ 1,866.6
Federal income and other taxes
payable . . . . . . . . . . . . . . 97.8 67.3
Other general account obligations . 207.4 219.0
Transfers from separate account, net (229.6) (221.6)
Asset valuation reserve . . . . . . 19.3 23.1
Obligations related to separate
accounts. . . . . . . . . . . . . . 8,562.1 8,261.6
---------------------- ---------
Total obligations . . . . . . . . . 10,705.1 10,216.0
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 . . . . . . . . . . 572.4 572.4
Unassigned deficit . . . . . . . . . (163.4) (177.9)
---------------------- ---------
Total stockholder's equity . . . . . 411.5 397.0
---------------------- ---------
Total obligations and stockholder's
equity . . . . . . . . . . . . . . $11,116.6 $10,613.0
====================== =========
See condensed notes to the financial
statements (unaudited).
</TABLE>
40
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -----------------
2000 1999 2000 1999
--------- -------- -------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
INCOME
Premiums . . . . . . . . . . . . . . $ 255.7 $228.6 $ 487.0 $452.2
Net investment income . . . . . . . 43.4 31.9 83.0 64.4
Other, net . . . . . . . . . . . . . 110.1 116.6 242.5 261.9
------- ------ ------- ------
409.2 377.1 812.5 778.5
BENEFITS AND EXPENSES
Payments to policyholders and
beneficiaries . . . . . . . . . . . 93.2 94.1 182.4 174.4
Additions to reserves to provide for
future payments to policyholders and
beneficiaries . . . . . . . . . . . 213.4 198.6 429.7 436.8
Expenses of providing service to
policyholders and obtaining new
insurance . . . . . . . . . . . . . 80.4 77.8 153.9 153.5
State and miscellaneous taxes . . . 5.7 8.1 13.3 10.9
------- ------ ------- ------
392.7 378.6 779.3 775.6
------- ------ ------- ------
Gain from operations before federal
income taxes and net realized
capital gains (losses) . . . . . . 16.5 (1.5) 33.2 2.9
Federal income taxes . . . . . . . . 12.2 (1.4) 16.9 (0.4)
------- ------ ------- ------
Gain from operations before net
realized capital gains (losses) . 4.3 (0.1) 16.3 3.3
Net realized capital gains (losses) 0.1 0.5 0.5 (1.0)
------- ------ ------- ------
Net income . . . . . . . . . . . . 4.4 0.4 16.8 2.3
Unassigned deficit at beginning of
period. . . . . . . . . . . . . . . (164.5) (51.2) (177.9) (49.2)
Net unrealized capital gains (losses)
and other adjustments . . . . . . . (3.1) (3.4) (2.0) (3.1)
Other reserves and adjustments . . . (0.2) 2.0 (0.3) (2.2)
------- ------ ------- ------
Unassigned deficit at end of period $(163.4) $(52.2) $(163.4) $(52.2)
======= ====== ======= ======
See condensed notes to the financial
statements (unaudited).
</TABLE>
41
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
-----------------
2000 1999
-------- ----------
(IN MILLIONS)
<S> <C> <C>
Cash flows from operating activities:
Insurance premiums . . . . . . . . . . . . . . . . . . $ 495.7 $ 452.0
Net investment income . . . . . . . . . . . . . . . . . 75.2 60.5
Benefits to policyholders and beneficiaries . . . . . . (167.9) (274.6)
Dividends paid to policyholders . . . . . . . . . . . . (13.0) (12.6)
Insurance expenses and taxes . . . . . . . . . . . . . . (174.4) (195.0)
Net transfers to separate accounts . . . . . . . . . . . (254.7) (343.7)
Other, net . . . . . . . . . . . . . . . . . . . . . . 257.1 289.9
------- -------
Net cash provided from operations . . . . . . . . . . 218.0 (23.5)
------- -------
Cash flows used in investing activities:
Bond purchases . . . . . . . . . . . . . . . . . . . . (305.5) (143.7)
Bond sales . . . . . . . . . . . . . . . . . . . . . . 128.1 41.3
Bond maturities and scheduled redemptions . . . . . . . 36.6 38.9
Bond prepayments . . . . . . . . . . . . . . . . . . . 7.9 8.0
Stock purchases . . . . . . . . . . . . . . . . . . . . (1.9) (0.2)
Proceeds from stock sales . . . . . . . . . . . . . . . 1.4 3.6
Real estate purchases . . . . . . . . . . . . . . . . . (0.1) (1.5)
Real estate sales . . . . . . . . . . . . . . . . . . . 0.0 17.9
Other invested assets purchases . . . . . . . . . . . . (2.0) (4.5)
Proceeds from the sale of other invested assets . . . . 0.0 0.0
Mortgage loans issued . . . . . . . . . . . . . . . . . (49.7) (39.4)
Mortgage loan repayments . . . . . . . . . . . . . . . 14.5 11.4
Other, net . . . . . . . . . . . . . . . . . . . . . . (15.8) 75.1
------- -------
Net cash used in investing activities . . . . . . . . (186.5) 6.9
------- -------
Cash flows from financing activities:
Net increase (decrease) in short-term note payable . . (0.0) (10.7)
------- -------
Net cash provided from financing activities . . . . . (0.0) (10.7)
------- -------
Increase (decrease) in cash and temporary cash
investments . . . . . . . . . . . . . . . . . . . . . 31.5 (27.3)
Cash and temporary cash investments at beginning of year 250.1 19.9
------- -------
Cash and temporary cash investments at the end of
period. . . . . . . . . . . . . . . . . . . . . . . . $ 281.6 $ (7.4)
======= =======
See condensed notes to the financial statements
(unaudited).
</TABLE>
42
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON PAID-IN UNASSIGNED
STOCK CAPITAL DEFICIT TOTAL
------ ------- ---------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
Balance at January 1, 1999 . . . . . . $2.5 $377.5 $ (49.2) $330.8
1999 Transactions:
Capital contribution
Net gain . . . . . . . . . . . . . . 2.3 2.3
Net unrealized capital gains and other
adjustments. . . . . . . . . . . . . (3.1) (3.1)
Other reserves and adjustments . . . (2.2) (2.2)
------- ------
Balance at June 30, 1999 . . . . . . . $2.5 $377.5 $ (52.2) $327.8
==== ====== ======= ======
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
Balance at January 1, 2000 . . . . . . $2.5 $572.4 $(177.9) $397.0
2000 Transactions:
Capital contribution
Net gain . . . . . . . . . . . . . . 16.8 16.8
Net unrealized capital gains and other
adjustments. . . . . . . . . . . . . (2.0) (2.0)
Other reserves and adjustments . . . (0.3) (0.3)
------- ------
Balance at June 30, 2000 . . . . . . . $2.5 $572.4 $(163.4) $411.5
==== ====== ======= ======
See condensed notes to the financial
statements (unaudited).
</TABLE>
43
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited interim financial statements have been prepared on
the basis of 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, which practices differ from
generally accepted accounting principles (GAAP). Pursuant to Financial
Accounting Standard Board Interpretation 40, "Applicability of General Accepted
Accounting Principles to Mutual Life Insurance and Other Enterprises" (FIN 40),
as amended which was effective for 1996 financial statements, financial
statements based on statutory accounting practices can no longer be described as
prepared in conformity with GAAP.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six-month period ending June 30, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000.
44
<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, 1999
and 1998, 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.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Commonwealth of Massachusetts Division of Insurance, which
practices differ from accounting principles generally accepted in the United
States. The variances between such practices and accounting principles generally
accepted in the United States also are described in Note 1. The effects on the
financial statements of these variances are not reasonably determinable but are
presumed to be material.
In our opinion, because of the effects of the matter described in the
preceding paragraph, the financial statements referred to above do not present
fairly, in conformity with accounting principles generally accepted in the
United States, the financial position of John Hancock Variable Life Insurance
Company at December 31, 1999 and 1998, or the results of its operations or its
cash flows for the years then ended.
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of John Hancock
Variable Life Insurance Company at December 31, 1999 and 1998, and the results
of its operations and its cash flows for the years then ended in conformity with
accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance.
ERNST & YOUNG LLP
Boston, Massachusetts
March 10, 2000
45
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1999 1998
---------- -----------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Bonds--Note 6 . . . . . . . . . . . . . . . . . . . . $ 1,216.3 $1,185.8
Preferred stocks . . . . . . . . . . . . . . . . . . 35.9 36.5
Common stocks . . . . . . . . . . . . . . . . . . . . 3.2 3.1
Investment in affiliates . . . . . . . . . . . . . . 80.7 81.7
Mortgage loans on real estate--Note 6 . . . . . . . . 433.1 388.1
Real estate . . . . . . . . . . . . . . . . . . . . . 25.0 41.0
Policy loans . . . . . . . . . . . . . . . . . . . . 172.1 137.7
Cash items:
Cash in banks . . . . . . . . . . . . . . . . . . 27.2 11.4
Temporary cash investments . . . . . . . . . . . . 222.9 8.5
--------- --------
250.1 19.9
Premiums due and deferred . . . . . . . . . . . . . . 29.9 32.7
Investment income due and accrued . . . . . . . . . . 33.2 29.8
Other general account assets . . . . . . . . . . . . 65.3 47.5
Assets held in separate accounts . . . . . . . . . . 8,268.2 6,595.2
--------- --------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . $10,613.0 $8,599.0
========= ========
OBLIGATIONS AND STOCKHOLDER'S EQUITY
OBLIGATIONS
Policy reserves . . . . . . . . . . . . . . . . . . $ 1,866.6 $1,652.0
Federal income and other taxes payable--Note 1 . . 67.3 44.3
Other general account obligations . . . . . . . . . 219.0 150.9
Transfers from separate accounts, net . . . . . . . (221.6) (190.3)
Asset valuation reserve--Note 1 . . . . . . . . . . 23.1 21.9
Obligations related to separate accounts . . . . . 8,261.6 6,589.4
--------- --------
TOTAL OBLIGATIONS . . . . . . . . . . . . . . . . .
10,216.0 8,268.2
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 . . . . . . . . . . . . . . . . . . 572.4 377.5
Unassigned deficit--Note 10 . . . . . . . . . . . . (177.9) (49.2)
--------- --------
TOTAL STOCKHOLDER'S EQUITY . . . . . . . . . . . . 397.0 330.8
--------- --------
TOTAL OBLIGATIONS AND STOCKHOLDER'S EQUITY . . . . . $10,613.0 $8,599.0
========= ========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
46
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998
--------- --------
(IN MILLIONS)
<S> <C> <C>
INCOME
Premiums ............................................................................... $ 1,272.3
Net investment income--Note 3 .......................................................... 136.0 122.8
Other, net ............................................................................. 605.4 618.1
--------
--------
1,692.2 2,013.2
BENEFITS AND EXPENSES
Payments to policyholders and beneficiaries ............................................ 349.9 301.4
Additions to reserves to provide for future payments to
policyholders and beneficiaries ..................................................... 888.8 1,360.2
Expenses of providing service to policyholders and
obtaining new insurance--Note 5 ....................................................... 314.4 274.2
State and miscellaneous taxes .......................................................... 20.5 28.1
-------- --------
1,573.6 1,963.9
--------
Gain from operations before federal income
taxes and net realized capital losses ................................................. 118.6 49.3
Federal income taxes--Note 1 ........................................................... 42.9 33.1
-------- --------
GAIN FROM OPERATIONS BEFORE NET REALIZED CAPITAL LOSSES ............................... 75.7 16.2
Net realized capital losses--Note 4 .................................................... (1.7) (0.6)
-------- --------
NET INCOME ........................................................................... 74.0 15.6
Unassigned deficit at beginning of year ................................................ (49.2) (58.3)
Net unrealized capital losses and other adjustments--Note 4 ............................ (3.8) (6.0)
Other reserves and adjustments--Note 10 ................................................ (198.9) (0.5)
-------- --------
UNASSIGNED DEFICIT AT END OF YEAR .................................................. $ (177.9) $ (49.2)
======== ========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
47
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------
1999 1998
------- --------
(IN MILLIONS)
<S> <C> <C>
Cash flows from operating activities:
Insurance premiums . . . . . . . . . . . . . .
Net investment income . . . . . . . . . . . 134.2 118.2
Benefits to policyholders and beneficiaries . (321.6) (275.5)
Dividends paid to policyholders . . . . . . . . . (25.6) (22.3)
Insurance expenses and taxes . . . . . . . . . (344.8) (296.9)
Net transfers to separate accounts . . . . . . . (705.3) (874.4)
Other, net . . . . . . . . . . . . . . . . . . 540.6 551.3
------- ---------
NET CASH PROVIDED FROM OPERATIONS . . . . . . 236.0 475.7
------- ---------
Cash flows used in investing activities:
Bond purchases . . . . . . . . . . . . . . . . (240.7) (618.8)
Bond sales . . . . . . . . . . . . . . . . . . 108.3 340.7
Bond maturities and scheduled redemptions . . 78.4 111.8
Bond prepayments . . . . . . . . . . . . . . . 18.7 76.5
Stock purchases . . . . . . . . . . . . . . . (3.9) (23.4)
Proceeds from stock sales . . . . . . . . . . 3.6 1.9
Real estate purchases . . . . . . . . . . . . (2.2) (4.2)
Real estate sales . . . . . . . . . . . . . . 17.8 2.1
Other invested assets purchases . . . . . . . (4.5) 0.0
Mortgage loans issued. . . . . . . . . . . . . (70.7) (145.5)
Mortgage loan repayments . . . . . . . . . . . 25.3 33.2
Other, net . . . . . . . . . . . . . . . . . . (68.9) (435.2)
-------- ---------
NET CASH USED IN INVESTING ACTIVITIES . . . . (138.8) (660.9)
-------- ---------
Cash flows from financing activities:
Capital contribution . . . . . . . . . . . . . 194.9
Net (decrease) increase in short-term note
payable. . . . . . . . . . . . . . . . . . . (61.9) 61.9
--------- ---------
NET CASH PROVIDED FROM FINANCING ACTIVITIES . . 133.0 61.9
--------- ----------
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH
INVESTMENTS 230.2
Cash and temporary cash investments at beginning
of year. . . . . . . . . . . . . . . . . . . . . 19.9 143.2
--------- ----------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF
YEAR. . . . . . . . . . . . . . . . . . . . . 250.1 $19.9
========= ===========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
48
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES
John Hancock Variable Life Insurance Company (the Company) is a wholly-owned
subsidiary of John Hancock Life Insurance Company (formerly 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, Signator Insurance Agency, which includes a career
agency system composed of Company-supported independent general agencies and a
direct brokerage system that markets directly to external independent brokers.
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 in
relation to future estimated gross profits; (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, 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
During March 1998, the NAIC adopted codified statutory accounting principles
("Codification") effective January 1, 2001. Codification will likely change, to
some extent, prescribed statutory accounting practices and may result in changes
to the accounting practices that the Company uses to prepare its statutory-basis
financial statements. Codification will require adoption by the various states
before it becomes the prescribed statutory basis of accounting for insurance
companies domesticated within those states. Accordingly, before Codification
becomes effective for the Company, the Commonwealth of Massachusetts must adopt
Codification as the prescribed basis of accounting on which domestic insurers
must report their statutory-basis results to the Division
49
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
of Insurance. At this time, it is anticipated that the Commonwealth of
Massachusetts will adopt Codification effective January 1, 2001. The impact of
any such changes on the Company's unassigned deficit is not expected to be
material.
Revenues and Expenses
Premium revenues are recognized over the premium-paying period of the policies
whereas expenses, including the acquisition costs of new business, are charged
to operations as incurred and policyholder dividends are provided as paid or
accrued.
Cash and Temporary Cash Investments
Cash includes currency on hand and demand deposits with financial
institutions. Temporary cash investments are short-term, highly-liquid
investments both readily convertible to known amounts of cash and so near
maturity that there is insignificant risk of changes in value because of changes
in interest rates.
Valuation of Assets
General account investments are carried at amounts determined on the following
bases:
Bond and stock values are carried as prescribed by the NAIC; bonds generally
at amortized amounts or cost, preferred stocks generally at cost and common
stocks at fair value. The discount or premium on bonds is amortized using the
interest method.
Investments in affiliates are included on the statutory equity method.
Loan-backed bonds and structured securities are valued at amortized cost using
the interest method including anticipated prepayments. Prepayment assumptions
are obtained from broker dealer surveys or internal estimates and are based on
the current interest rate and economic environment. The retrospective
adjustment method is used to value all such securities except for interest-only
securities, which are valued using the prospective method.
The net interest effect of interest rate and currency rate swap transactions
is recorded as an adjustment of interest income as incurred. The initial cost
of interest rate cap agreements is amortized to net investment income over the
life of the related agreement. Gains and losses on financial futures contracts
used as hedges against interest rate fluctuations are deferred and recognized in
income over the period being hedged.
Mortgage loans are carried at outstanding principal balance or amortized cost.
Investment 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 $1.9 million in 1999 and $3.0 million in
1998.
Real estate acquired in satisfaction of debt and real estate held for sale are
carried at the lower of cost or fair value.
Policy loans are carried at outstanding principal balance, not in excess of
policy cash surrender value.
50
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
Asset Valuation and Interest Maintenance Reserves
The Asset Valuation Reserve (AVR) is computed in accordance with the
prescribed NAIC formula and represents a provision for possible fluctuations in
the value of bonds, equity securities, mortgage loans, real estate and other
invested assets. 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, 1999, the IMR, net of 1999 amortization of $2.3 million, amounted to $7.4
million, which is included in policy reserves. The corresponding 1998 amounts
were $2.4 million and $10.7 million, respectively.
Goodwill
The excess of cost over the statutory book value of the net assets of life
insurance business acquired was $8.9 million and $11.4 million at December 31,
1999 and 1998, respectively, and generally is amortized over a ten-year period
using a straight-line method.
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
51
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
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.
Fair values for futures contracts are based on quoted market prices. Fair
values for interest rate swap, cap agreements, and currency swap agreements are
based on current settlement values. The current settlement values are based on
brokerage quotes that utilize pricing models or formulas using current
assumptions.
The fair value for mortgage loan 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 engaged 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, 1999.
Capital Gains and Losses
Realized capital gains and losses are determined using the specific
identification method. Realized capital gains and losses, net of taxes and
amounts transferred to the IMR, are included in net 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 1999.
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 basis for the affiliated group.
The federal income
52
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
taxes of the Company are allocated on a separate return basis with certain
adjustments. The Company made federal income tax payments of $10.6 million in
1999 and $38.2 million in 1998.
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.
Amounts for disputed tax issues relating to the prior years are charged or
credited directly to policyholders' contingency reserve.
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. Reserve
modifications resulting from such determinations are recorded directly to
stockholder's equity. No such refinements were made during 1999 or 1998.
Reinsurance
Premiums, commissions, expense reimbursements, benefits and reserves related
to reinsured business are accounted for on bases consistent with those used in
accounting for the original policies issued and the terms of the reinsurance
contracts. Premiums ceded to other companies have been reported as a reduction
of premium income. Amounts applicable to reinsurance ceded for future policy
benefits, unearned premium reserves and claim liabilities have been reported as
reductions of these items.
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 the
final contingent payment to CPAL of $1.5 million during 1998.
53
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
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 was subsequently renamed Investors Partner
Life Insurance Company (IPL) on March 5, 1998. IPL manages the business assumed
from Charter and began marketing term life and variable universal life products
through brokers in 1999. Summarized financial information for IPL for 1999 and
1998 is as follows:
<TABLE>
<CAPTION>
1999 1998
------- -------
(IN MILLIONS)
<S> <C> <C>
Total assets. . . . . . . . . . . . . . . . 570.7 587.8
Total liabilities. . . . . . . . . . . . . . 498.9 517.5
Total revenue. . . . . . . . . . . . . . . . 35.6 38.8
Net income. . . . . . . . . . . . . . . . . 3.5 3.8
</TABLE>
3. NET INVESTMENT INCOME
Investment income has been reduced by the following amounts:
<TABLE>
<CAPTION>
1999 1998
------ ------
(IN MILLIONS)
<S> <C> <C>
Investment expenses . . . . . . . . . . . . . $ 9.5 $ 8.3
Interest expense. . . . . . . . . . . . . . 1.7 2.4
Depreciation expense. . . . . . . . . . . . 0.6 0.8
Investment taxes. . . . . . . . . . . . . . 0.3 0.7
------ ------
$12.1 $12.2
====== ======
</TABLE>
54
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
4. NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS
Net realized capital gains (losses) consist of the following items:
<TABLE>
<CAPTION>
1999 1998
------ ------
(IN MILLIONS)
<S> <C> <C>
Net gains from asset sales . . . . . . . . . . . (2.8) 7.6
Capital gains tax . . . . . . . . . . . . . . . . 0.2 (2.9)
Net capital gains transferred to IMR . . . . . . 0.9 (5.3)
------ ------
Net REALIZED CAPITAL LOSSES . . . . . . . . . . . (1.7) (0.6)
====== ======
</TABLE>
Net unrealized capital gains (losses) and other adjustments consist of the
following items:
<TABLE>
<CAPTION>
1999 1998
------ ------
(IN MILLIONS)
<S> <C> <C>
Net losses from changes in security values and book
value adjustments. . . . . . . . . . . . . . . (2.6) (2.7)
Increase in asset valuation reserve . . . . . . . . (1.2) (3.3)
------ ------
Net UNREALIZED CAPITAL LOSSES AND OTHER ADJUSTMENTS (3.8) (6.0)
====== ======
</TABLE>
55
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
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 1999 and 1998 to reflect continuing changes in
the Company's operations. The amount of the service fee charged to the Company
was $188.3 million and $157.5 million in 1999 and 1998, 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 $0.2 million and
$0.7 million in 1999 and 1998, 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 1999 issues of flexible premium variable life insurance and
scheduled premium variable life insurance policies. In connection with this
agreement, John Hancock transferred $44.5 million and $4.9 million of cash for
tax, commission, and expense allowances to the Company, which increased the
Company's net gain from operations by $20.6 million and $22.2 million in 1999
and 1998, respectively.
Effective January 1, 1996, the Company entered into a modified coinsurance
agreement with John Hancock to reinsure 50% of the 1995 inforce block and 50% of
1996 and all future issue years of certain variable annuity contracts
(Independence Preferred, Declaration, Independence 2000, MarketPlace, and
Revolution). In connection with this agreement, the Company received a net cash
payment of $40.0 million and $12.7 million in 1999 and 1998, respectively, for
surrender benefits, tax, reserve increase, commission, expense allowances and
premium, This agreement increased the Company's net gain from operations by
$26.9 million and $8.4 million in 1999 and 1998, 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 1999 and 1998 for all policies that are not reinsured under
any other indemnity agreement. In connection with the agreement, John Hancock
received $0.8 million and 1.0 million in 1999 and 1998, respectively, for
mortality claims to the Company. This agreement decreased the Company's net
gain from operations in both 1999 and 1998 by $0.5 million.
At December 31, 1998 the Company had outstanding a short-term note of $61.9
million payable to an affiliate at a variable rate of interest. The note was
part of a revolving line of credit and was repaid in 1999. Interest paid in
1999 and 1998 was $1.7 million and $2.9 million, respectively. The note is
included in other general account obligations at December 31, 1998.
56
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
6. INVESTMENTS
The statement value and fair value of bonds are shown below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
-------------- -------------- --------------- ---------
(IN MILLIONS)
December 31, 1999 . .
U.S. Treasury
securities and
obligations of U.S.
government
corporations and
agencies . . . . . . 5.9 0.0 0.1 5.8
Obligations of states
and political
subdivisions . . . . 2.2 0.1 0.1 2.2
Debit securities
issued by foreign
governments. . . . . 13.9 0.8 0.1 14.6
Corporate securities 964.9 13.0 59.4 918.5
Mortgage-backed
securities . . . . . 229.4 0.5 7.8 222.1
-------- ----- ------ --------
Total bonds . . . . .
======== ===== ====== ========
December 31, 1998
U.S. Treasury
securities and
obligations of U.S.
government
corporations and
agencies . . . . . . 5.1 0.1 0.0 5.2
Obligations of states
and political
subdivisions . . . . 3.2 0.3 0.0 3.5
Corporate securities 925.2 50.4 15.0 960.6
Mortgage-backed
securities . . . . . 252.3 10.0 0.1 262.2
-------- ----- ------ --------
Total bonds . . . . . 15.1
======== ===== ====== ========
</TABLE>
57
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
The statement value and fair value of bonds at December 31, 1999, by
contractual maturity, are shown below. Maturities will differ from contractual
maturities because eligible borrowers may exercise their right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
FAIR
VALUE VALUE
-------- ---------
(IN MILLIONS)
<S> <C> <C>
Due in one year or less. . . . . . . . . . . . . . $ 58.5 58.2
Due after one year through five years. . . . . . . 286.8 282.0
Due after five years through ten years . . . . . . 425.4 405.6
Due after ten years. . . . . . . . . . . . . . . . 216.2 195.3
-------- ---------
986.9 941.1
Mortgage-backed securities . . . . . . . . . . . . 229.4 222.1
-------- ---------
$1,216.3
======== =========
</TABLE>
Gross gains of $0.3 million in 1999 and $3.4 million in 1998 and gross losses
of $4.0 million in 1999 and $0.7 million in 1998 were realized from the sale of
bonds.
At December 31, 1999, bonds with an admitted asset value of $9.1 million were
on deposit with state insurance departments to satisfy regulatory requirements.
The cost of common stocks was $3.1 million and $2.1 million at December 31,
1999 and 1998, respectively. At December 31, 1999, gross unrealized
appreciation on common stocks totaled $1.2 million, and gross unrealized
depreciation totaled $1.1 million. The fair value of preferred stock totaled
$35.9 million at December 31, 1999 and $36.5 million at December 31, 1998.
Bonds with amortized cost of $0.4 million were non-income producing for the
twelve months ended December 31, 1999.
At December 31, 1999, the mortgage loan portfolio was diversified by
geographic region and specific collateral property type as displayed below. The
Company controls credit risk through credit approvals, limits and monitoring
procedures.
58
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GEOGRAPHIC
PROPERTY TYPE CONCENTRATION
Apartments. . . . . . . . $112.1 East North Central $ 71.3
Hotels. . . . . . . . . . 11.3 East South Central 7.4
Industrial. . . . . . . . 66.0 Middle Atlantic 28.5
Office buildings. . . . . 86.4 Mountain 21.0
Retail. . . . . . . . . . 25.5 New England 37.5
Agricultural. . . . . . . 99.6 Pacific 111.1
Other . . . . . . . . . . 32.2 South Atlantic 87.6
West North Central 16.6
West South Central 48.6
Other 3.5
------
$433.1 $433.1
======
</TABLE>
At December 31, 1999, the fair values of the commercial and agricultural
mortgage loans portfolios were $323.5 million and $98.2 million, respectively.
The corresponding amounts as of December 31, 1998 were approximately $331.3
million and $70.0 million, respectively.
The maximum and minimum lending rates for mortgage loans during 1999 were
14.24% and 6.84% for agricultural loans, 7.45% and 7.00% 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.
59
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
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 1999 were $594.9 million, $132.8 million, and $13.6 million,
respectively. The corresponding amounts in 1998 were $590.2 million, $63.2
million, and $8.2 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 agreement in which the
reinsurer may unilaterally cancel any reinsurance for reasons other than
nonpayment of premiums or other similar credits. The Company does not have any
reinsurance agreements in effect in which the amount of losses paid or accrued
through December 31, 1999 would result in a payment to the reinsurer of amounts
which, in the aggregate and allowing for offset of mutual credits from other
reinsurance agreements with the same reinsurer, exceed the total direct premiums
collected under the reinsured policies.
8. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The notional amounts, carrying values and estimated fail values of the
Company's derivative instruments were as follows at December 31:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <S> <C>
<C>
NUMBER OF CONTRACTS/ ASSETS (LIABILITIES)
------------------
NOTIONAL AMOUNTS
FAIR VALUE 1999 1998
------- ------- --------- --------- --------- ---------
(IN MILLIONS)
Futures contracts to $ (0.5)
sell securities 362.0 947.0 $0.6 $0.6 $(0.5)
Interest rate swap (17.7)
agreements $965.0 $365.0 -- 11.5 --
Interest rate cap
agreements 239.4 89.4 5.6 5.6 3.1
Currency rate swap (3.3)
agreements 15.8 15.8 -- (1.6) --
</TABLE>
60
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
The Company uses futures contracts, interest rate swap, cap agreements, and
currency rate swap agreements for other than trading purposes to hedge and
manage its exposure to changes in interest rate levels, foreign exchange rate
fluctuations and to manage duration mismatch of assets and liabilities.
The futures contracts expire in 2000. The interest rate swap agreements
expire in 2000 to 2011. The interest rate cap agreements expire in 2006 to
2008. The currency rate swap agreements expire in 2006 to 2009.
The Company's exposure to credit risk is the risk of loss from a counterparty
failing to perform to the terms of the contract. The Company continually
monitors its position and the credit ratings of the counterparties to these
derivative instruments. To limit exposure associated with counterparty
nonperformance on interest rate and currency swap agreements, the Company enters
into master netting agreements with its counterparties. The Company believes the
risk of incurring losses due to nonperformance by its counterparties is remote
and that such losses, if any, would be immaterial. Futures contracts trade on
organized exchanges and, therefore, have minimal credit risk.
9. POLICY RESERVES POLICYHOLDERS' AND BENIFICIARIES' FUNDS AND OBLIGATIONS
RELATED TO SEPARATE ACCOUNTS
The Company' annuity reserves and deposit fund liabilities that are subject to
discretionary withdrawal, with and without adjustment, are summarized as
follows.
<TABLE>
<CAPTION>
DECEMBER 31, 1999 PERCENT
----------------- -------
(IN MILLIONS)
<S> <C> <C>
Subject to discretionary withdrawal (with
adjustment)
With market value adjustment . . . . . . . . . $3.8 0.1%
At book value less surrender charge 40.5 1.5
At market value . . . . . . . . . . . . . . . . 2,326.6 87.1
--------
Total with adjustment. . . . . . . . . . . 2,370.9 88.7
Subject to discretionary withdrawal 287.1 10.7
at book value (without adjustment) . . . . .
Not subject to discretionary withdrawal--general
account. . . . . . . . . . . . . . . . . . . . 15.4 0.6
--------
Total annuity reserves and deposit liabilities $2,673.4 100.0%
========
</TABLE>
61
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
10. COMMITMENTS AND CONTINGENCIES
The Company has extended commitments to purchase long-term bonds and issue
real estate mortgages totaling $15.4 million and $3.5 million, respectively, at
December 31, 1999. The Company monitors the creditworthiness of borrowers under
long-term bonds 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 $19.4 million at December 31, 1999. The majority of these commitments
expire in 2000.
In the normal course of its business operations, the Company is involved with
litigation from time to time with claimants, beneficiaries and others, and a
number of litigation matters were pending as of December 31, 1999. It is the
opinion of management, after consultation with counsel, that the ultimate
liability with respect to these claims, if any, will not materially affect the
financial position or results of operations of the Company.
During 1997, John Hancock entered into a court-approved settlement relating to
a class action lawsuit involving certain individual life insurance policies sold
from 1979 through 1996. In entering into the settlement, John Hancock
specifically denied any wrongdoing. During 1999, the Company recorded a $194.9
million reserve, through a direct charge to its unassigned deficit, representing
the Company's share of the settlement and John Hancock contributed $194.9
million of capital to the Company. The reserve held at December 31, 1999
amounted to $136.5 million and is based on a number of factors, including the
estimated number of claims, the expected type of relief to be sought by class
members (general relief or alternative dispute resolution), the estimated cost
per claim and the estimated costs to administer the claims.
Given the uncertainties associated with estimating the reserve, it is
reasonably possible that the final cost of the settlement could differ
materially from the amounts presently provided for by the Company. John Hancock
and the Company will continue to update their estimate of the final cost of the
settlement as claims are processed and more specific information is developed,
particularly as the actual cost of the claims subject to alternative dispute
resolution becomes available. However, based on information available at this
time, and the uncertainties associated with the final claim processing and
alternative dispute resolution, the range of any additional costs related to the
settlement cannot be reasonably estimated. If the Company's share of the
settlement increases, John Hancock will contribute additional capital to the
Company so that the Company's total stockholder's equity would not be impacted.
62
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of the
Company's financial instruments:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
--------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------
<S> <C> <C> <C> <C>
ASSETS
Bonds--Note 6. . . . .
Preferred stocks--Note
6. . . . . . . . . . . . 35.9 35.9 36.5 36.5
Common stocks--Note 6. 3.2 3.2 3.1 3.1
Mortgage loans on real
estate--Note 6. . . . . 433.1 421.7 388.1 401.3
Policy loans--Note 1. 172.1 172.1 137.7 137.7
Cash items--Note 1. . 250.1 250.1 19.9 19.9
Derivatives assets
(liabilities) relating
to: --Note 8. . . . .
Futures contracts. . . 0.6 0.6 (0.5) (0.5)
Interest rate swaps. . -- 11.5 -- (17.7)
Currency rate swaps. . -- (1.6) -- (3.3)
Interest rate caps. . 5.6 5.6 3.1 3.1
LIABILITIES
Commitments--Note 10. -- 19.4 -- 32.1
</TABLE>
The carrying 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.
12. SUBSEQUENT EVENTS
REORGANIZATION AND INITIAL PUBLIC OFFERING
Pursuant to a Plan of Reorganization approved by the policyholders of John
Hancock and the Commonwealth of Massachusetts Division of Insurance, effective
February 1, 2000, John Hancock converted from a mutual life insurance company to
a stock life insurance company (i.e., demutualized) and became a wholly owned
subsidiary of John Hancock Financial Services, Inc., which is a holding company.
In connection with the reorganization, John Hancock changed its name to John
Hancock Life Insurance Company. In addition, on February 1, 2000, John Hancock
Financial Services, Inc. completed its initial public offering and 102 million
shares of common stock were issued at an initial public offering price of $17
per share.
63
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--(CONTINUED)
13. IMPACT OF YEAR 2000 (UNAUDITED)
The Company participated in the Year 2000 remediation project of its parent,
John Hancock. By late 1999, John Hancock and the Company completed their Year
2000 readiness plan to address issues that could result from computer programs
written using two digits to define the applicable year rather than four to
define the applicable year and century. As a result, John Hancock and the
Company were prepared for the transition to the Year 2000 and did not experience
any significant Year 2000 problems with respect to mission critical information
technology ("IT") or non-IT systems, applications or infrastructure. During the
date rollover to the year 2000, John Hancock and the Company implemented and
monitored their millennium rollover plan and conducted business as usual on
Monday, January 3, 2000.
Since January 3, 2000, the information systems, including mission critical
systems, which in the event of a Year 2000 failure would have the greatest
impact on operations, have functioned properly. In addition, neither John
Hancock nor the Company have experienced any significant Year 2000 issues
related to interactions with material business partners. No disruptions have
occurred which impact John Hancock or the Company's ability to process claims,
update customer accounts, process financial transactions, or report accurate
data to management and no business interruptions due to Year 2000 issues have
been experienced. While John Hancock and the Company continue to monitor their
systems, and those of material business partners, closely to ensure that no
unexpected Year 2000 issues develop, neither John Hancock nor the Company have
reason to expect any such issues.
The costs of the Year 2000 project consist of internal IT personnel and
external costs such as consultants, programmers, replacement software, and
hardware. The costs of the Year 2000 project are expensed as incurred. The
project is funded partially through a reallocation of resources from
discretionary projects. Through December 31, 1999, John Hancock has incurred
and expensed approximately $20.8 million in related payroll costs for internal
IT personnel on the project. The estimated remaining IT personnel costs of the
project are approximately $1.0 million. Through December 31, 1999, John Hancock
has incurred and expensed approximately $47.0 million in external costs for the
project. John Hancock's estimated remaining external cost of the project is
approximately $2.0 million. The total costs of the Year 2000 project to John
Hancock, based on management's best estimates, include approximately $21.7
million in internal IT personnel, $14.6 million in the external modification of
software, $18.3 million for external solution providers, $9.1 million in
replacement costs of non-compliant IT systems and $6.9 million in oversight,
test facilities and other expenses. Accordingly, the estimated range of total
costs of the Year 2000 project to John Hancock, internal and external, is
approximately $70 to $72.5 million. John Hancock's total Year 2000 project
costs include the estimated impact of external solution providers based on
presently available information.
64
<PAGE>
UNAUDITED FINANCIAL STATEMENTS
FOR
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
SECOND QUARTER 2000
65
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 2000
<TABLE>
<CAPTION>
INTERNATIONAL
LARGE CAP ACTIVE EQUITY SMALL CAP
GROWTH BOND INDEX GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash. . . . . . . . . $ -- $ -- $ -- $ --
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value. . . . . . . . 176,581,445 234,710,166 30,279,715 15,146,841
Policy loans and
accrued interest
receivable . . . . . 23,134,622 58,001,138 3,128,604 --
Receivable from:
John Hancock Variable
Series Trust I. . . 10,411 1,388,616 55,752 --
M Fund Inc.. . . . . -- -- -- --
------------ ------------ ----------- -----------
Total assets. . . . . 199,726,478 294,099,920 33,464,071 15,146,841
LIABILITIES
Payable to John
Hancock Variable Life
Insurance Company. . 2,452 3,267 447 245
Asset charges payable 474 1,189 -- --
------------ ------------ ----------- -----------
Total liabilities . . 2,926 4,456 447 245
------------ ------------ ----------- -----------
Net assets. . . . . . $199,723,552 $294,095,464 $33,463,624 $16,146,596
============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
GLOBAL MID CAP LARGE CAP MONEY
BALANCED GROWTH VALUE MARKET
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash. . . . . . . . . . . $ -- $ -- $ -- $ --
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value. . . . 1,009,123 26,659,950 10,182,562 62,828,554
Policy loans and accrued
interest receivable. . . -- -- -- 13,821,060
Receivable from:
John Hancock Variable
Series Trust I. . . . . 2,217 -- 13,241 32,906
M Fund Inc.. . . . . . . -- -- -- --
---------- ----------- ----------- -----------
Total assets. . . . . . . 1,011,340 26,659,950 10,195,803 76,682,520
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company. . . . . . . . . 17 429 169 2,664
Asset charges payable . . -- -- -- 850
---------- ----------- ----------- -----------
Total liabilities. . . . 17 429 169 3,514
---------- ----------- ----------- -----------
Net assets. . . . . . . . $1,011,323 $26,659,521 $10,195,634 $76,679,006
========== =========== =========== ===========
</TABLE>
See accompanying notes.
66
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SMALL/MID
MID CAP CAP REAL ESTATE GROWTH &
VALUE GROWTH EQUITY INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash. . . . . . . . . $ -- $ -- $ -- $ --
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value. . . . . . . . 5,655,397 12,697,945 12,765,326 1,054,098,419
Policy loans and
accrued interest
receivable . . . . . -- -- 2,042,422 192,979,449
Receivable from:
John Hancock Variable
Series Trust I. . . 4,035 -- -- 712,339
M Fund Inc.. . . . . -- -- -- --
------------ ----------- ----------- --------------
Total assets. . . . . 5,659,432 12,697,945 14,807,748 1,247,790,207
LIABILITIES
Payable to John
Hancock Variable Life
Insurance Company. . 93 208 194 14,546
Asset charges payable -- -- 42 3,955
------------ ----------- ----------- --------------
Total liabilities . . 93 208 236 18,501
------------ ----------- ----------- --------------
Net assets. . . . . . $ 5,659,339 $12,697,737 $14,807,512 $1,247,771,706
============ =========== =========== ==============
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM SMALL CAP INTERNATIONAL
MANAGED BOND VALUE OPPORTUNITIES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash. . . . . . . . . $ -- $ -- $ -- $ --
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value. . . . . . . . 412,811,976 1,051,732 4,409,122 6,171,237
Policy loans and
accrued interest
receivable. . . . . . 79,675,824 -- -- --
Receivable from:
John Hancock Variable
Series Trust I. . . 979,880 5,435 5,593 4,951
M Fund Inc.. . . . . -- -- -- --
------------ ---------- ---------- ----------
Total assets. . . . . 493,467,680 1,057,167 4,414,715 6,176,188
LIABILITIES
Payable to John Hancock
Variable Life
Insurance Company. . 5,741 17 74 100
Asset charges payable . 1,633 -- -- --
------------ ---------- ---------- ----------
Total liabilities. . . 7,374 17 74 100
------------ ---------- ---------- ----------
Net assets. . . . . . $493,460,306 $1,057,150 $4,414,641 $6,176,088
============ ========== ========== ==========
</TABLE>
See accompanying notes.
67
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
TURNER BRANDES
EQUITY GLOBAL CORE INTERNATIONAL
INDEX BOND GROWTH EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . . . $ -- $ -- $ -- $ --
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value . . . 25,463,881 1,610,930 450,305 655,428
Policy loans and accrued
interest receivable . . -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I . . . . 16,079 6,956 -- --
M Fund Inc. . . . . . . -- -- -- --
----------- ---------- -------- --------
Total assets . . . . . . 25,479,960 1,617,886 450,305 655,428
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company . . . . . . . . 414 27 7 11
Asset charges payable . -- -- -- --
----------- ---------- -------- --------
Total liabilities. . . . 414 27 7 11
----------- ---------- -------- --------
Net assets . . . . . . . $25,479,546 $1,617,859 $450,298 $655,417
=========== ========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
FRONTIER EMERGING INTERNATIONAL
CAPITAL MARKETS OPPORTUNITIES
APPRECIATION EQUITY II BOND INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ---------- ------------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash. . . . . . . . . . $ -- $ -- $ -- $ --
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value. . . 897,620 1,185,730 273,330 749,101
Policy loans and accrued
interest receivable. . -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I. . . . -- -- 190 4,094
M Fund Inc.. . . . . . -- -- -- --
-------- ---------- -------- --------
Total assets. . . . . . 897,620 1,185,730 273,520 753,195
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company. . . . . . . . 15 19 4 12
Asset charges payable . -- -- -- --
-------- ---------- -------- --------
Total liabilities. . . 15 19 4 12
-------- ---------- -------- --------
Net assets. . . . . . . $897,605 $1,185,711 $273,516 $753,183
======== ========== ======== ========
</TABLE>
See accompanying notes.
68
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
CLIFTON
SMALL/MID HIGH YIELD ENHANCED
CAP CORE BOND U.S. EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- -----------
<S> <C> <C> <C>
ASSETS
Cash. . . . . . . . . . . . . . . . . . $ -- $ -- $ --
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value . . . . . . . . . . . . . . . 188,808 295,903 18,155
Policy loans and accrued interest
receivable . . . . . . . . . . . . . . -- -- --
Receivable from:
John Hancock Variable Series Trust I . 285 2,023 --
M Fund Inc.. . . . . . . . . . . . . . -- -- --
-------- -------- -------
Total assets. . . . . . . . . . . . . . 189,093 297,926 18,155
LIABILITIES
Payable to John Hancock Variable Life
Insurance Company. . . . . . . . . . . 3 5 --
Asset charges payable . . . . . . . . . -- -- --
-------- -------- -------
Total liabilities . . . . . . . . . . . 3 5 --
-------- -------- -------
Net assets. . . . . . . . . . . . . . . $189,090 $297,921 $18,155
======== ======== =======
</TABLE>
See accompanying notes.
69
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT ACTIVE BOND SUBACCOUNT
------------------------------------- ---------------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . . $ 193,334 $24,007,195 $11,641,271 $7,284,647 $ 17,792,726 $19,685,096
M Fund Inc.. . . . . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans . . . . . . 744,736 1,211,333 1,008,607 2,113,683 4,084,783 4,027,376
----------- ----------- ----------- ---------- ------------ -----------
Total investment income . . . . . . . . . . 938,070 25,218,528 12,649,878 9,398,330 21,877,509 23,712,472
Expenses:
Mortality and expense risks. . . . . . . . 504,066 828,714 624,665 805,912 1,643,861 1,624,615
----------- ----------- ----------- ---------- ------------ -----------
Net investment income . . . . . . . . . . . 434,004 24,389,814 12,025,213 8,592,418 20,233,648 22,087,857
Net realized and unrealized gain (loss) on
investments:
Net realized gain. . . . . . . . . . . . . 2,032,851 4,239,424 3,520,199 (29,483) 192,098 1,600,539
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . 7,172,532 1,727,703 18,509,310 505,228 (20,304,536) (2,317,324)
----------- ----------- ----------- ---------- ------------ -----------
Net realized and unrealized gain (loss) on
investments. . . . . . . . . . . . . . . . 9,205,383 5,967,127 22,029,509 475,745 (20,112,438) (716,785)
----------- ----------- ----------- ---------- ------------ -----------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . . $ 9,639,387 $30,356,941 $34,054,722 $9,068,163 $ 121,210 $21,371,072
=========== =========== =========== ========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX SUBACCOUNT
---------------------------------------------------------------
2000 1999 1998
--------------------------------------- ---------- ----------
<S> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . $ 260,035 $ 917,904 $3,394,842
M Fund Inc.. . . . -- -- --
Interest income on
policy loans. . . . 106,675 179,345 170,285
-------------------------------------- ---------- ----------
Total investment
income. . . . . . . 366,710 1,097,249 3,565,127
Expenses:
Mortality and expense
risks. . . . . . . 91,898 147,126 124,891
-------------------------------------- ---------- ----------
Net investment income
(loss). . . . . . . 274,812 950,123 3,440,236
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain. 816,122 168,248 148,419
Net unrealized
appreciation
(depreciation)
during the period. (2,574,516) 5,712,567 105,161
-------------------------------------- ---------- ----------
Net realized and
unrealized gain
(loss) on investments (1,758,394) 5,880,815 253,580
-------------------------------------- ---------- ----------
Net increase
(decrease) in net
assets resulting from
operations. . . . . $ (1,483,582) $6,830,938 $3,693,816
====================================== ========== ==========
<CAPTION>
SMALL CAP GROWTH SUBACCOUNT
----------------------------------------------------
2000 1999 1998
------------------------------ ---------- -----------
<S> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable $ -- $1,272,230 $ --
Series Trust I. .
M Fund Inc.. . . . -- -- --
Interest income on
policy loans. . . . -- -- --
---------------------------- ---------- --------
Total investment -- 1,272,230 --
income. . . . . . .
Expenses:
Mortality and expense
risks. . . . . . . 40,116 37,386 20,335
---------------------------- ---------- --------
Net investment income (40,116) 1,234,844 (20,335)
(loss). . . . . . .
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain. 1,170,187 491,241 55,393
Net unrealized
appreciation (647,342) 2,317,857 518,731
(depreciation) ---------------------------- ---------- --------
during the period.
Net realized and
unrealized gain
(loss) on investments 522,845 2,809,098 574,124
---------------------------- ---------- --------
Net increase
(decrease) in net
assets resulting from
operations. . . . . $ 482,729 $4,043,942 $553,789
============================ ========== ========
</TABLE>
See accompanying notes.
70
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
GLOBAL BALANCED SUBACCOUNT MID CAP GROWTH SUBACCOUNT
--------------------------------- ------------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 13,766 $ 99,184 $ 57,587 $ -- $2,117,559 $ 461,919
M Fund Inc.. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . . -- -- -- -- -- --
--------- --------- --------- ----------- ---------- ----------
Total investment
income . . . . . . . 13,766 99,184 57,587 -- 2,117,559 461,919
Expenses:
Mortality and expense
risks . . . . . . . 2,953 6,368 4,696 74,097 58,898 16,758
--------- --------- --------- ----------- ---------- ----------
Net investment income
(loss) . . . . . . . 10,813 92,816 52,891 (74,097) 2,058,661 445,161
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . (8,124) 4,711 (4,506) 1,167,801 773,222 73,958
Net unrealized
appreciation
(depreciation)
during the period . (52,902) (38,997) 78,455 (2,810,779) 6,801,000 647,137
--------- --------- --------- ----------- ---------- ----------
Net realized and
unrealized gain
(loss) on
investments. . . . . (61,026) (34,286) 73,949 (1,642,978) 7,574,222 721,095
--------- --------- --------- ----------- ---------- ----------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $ (50,213) $ 58,530 $ 126,840 $(1,717,075) $9,632,883 $1,166,256
========= ========= ========= =========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE SUBACCOUNT MONEY MARKET SUBACCOUNT
--------------------------------- ----------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 110,055 $ 648,532 $ 433,626 $1,779,484 $2,943,852 $2,888,490
M Fund Inc.. . . . . -- -- -- -- -- --
Interest income on
policy loans. . . . -- -- -- 497,245 985,509 973,241
--------- --------- --------- ---------- ---------- ----------
Total investment
income. . . . . . . 110,055 648,532 433,626 2,276,729 3,929,361 3,861,731
Expenses:
Mortality and expense
risks. . . . . . . 29,450 54,610 44,753 209,439 411,487 380,002
--------- --------- --------- ---------- ---------- ----------
Net investment income 80,605 593,922 388,873 2,067,290 3,517,874 3,481,729
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . (1,671) 165,556 673,582 -- -- --
Net unrealized
appreciation
(depreciation)
during the period. (324,239) (569,216) (479,093) -- -- --
--------- --------- --------- ---------- ---------- ----------
Net realized and
unrealized gain
(loss) on
investments. . . . . (325,910) (403,660) 194,489 -- -- --
--------- --------- --------- ---------- ---------- ----------
Net increase
(decrease) in net
assets resulting from
operations. . . . . $(245,305) $ 190,262 $ 583,362 $2,067,290 $3,517,874 $3,481,729
========= ========= ========= ========== ========== ==========
</TABLE>
See accompanying notes.
71
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
MID CAP VALUE SUBACCOUNT SMALL/MID CAP GROWTH SUBACCOUNT
-------------------------------------- ---------------------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . $ 12,329 $ 31,306 $ 40,338 $ -- $ 1,903,687 $ 217,686
M Fund Inc. . . . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans. . . . . -- -- -- -- -- --
---------- ---------- ------------ ------------- ------------- -------------
Total investment income. . . . . . . . . 12,239 31,306 40,338 -- 1,903,687 217,686
Expenses:
Mortality and expense risks . . . . . . 16,367 29,798 23,760 36,428 69,847 63,334
---------- ---------- ------------ ------------- ------------- -------------
Net investment income (loss) . . . . . . (4,038) 1,508 16,578 (36,428) 1,833,840 154,352
Net realized and unrealized gain (loss)
on investments:
Net realized gain (loss). . . . . . . . (35,806) (241,740) (422,902) (331,677) (13,020) 56,968
Net unrealized appreciation
(depreciation) during the period . . . 329,004 469,537 (260,362) 1,329,781 (1,274,161) 334,213
---------- ---------- ------------ ------------- ------------- -------------
Net realized and unrealized gain (loss)
on investments. . . . . . . . . . . . . 293,198 227,797 (683,264) 998,104 (1,287,181) 391,181
---------- ---------- ------------ ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations . . . . . . . $ 289,160 $ 229,305 $ (666,686) $ 961,676 $ 546,659 $ 545,533
========== ========== ============ ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY SUBACCOUNT GROWTH & INCOME SUBACCOUNT
-------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
----------- ------------ ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I $ 331,794 $ 771,050 $ 817,633 $ 5,332,033 $124,750,392 $ 96,326,313
M Fund Inc.. . . . -- -- -- -- -- --
Interest income on policy loans 67,503 131,461 145,212 6,953,633 12,877,539 11,727,553
---------- ----------- ----------- ------------ ------------ ------------
Total investment income 399,297 902,511 962,845 12,285,666 137,627,931 108,053,866
Expenses:
Mortality and expense risks 39,508 78,893 86,610 3,349,588 6,531,512 5,589,689
---------- ----------- ----------- ------------ ------------ ------------
Net investment income 359,789 823,618 876,235 8,936,078 131,096,419 102,464,177
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) (225,511) 123,591 442,876 16,053,184 22,802,197 22,835,488
Net unrealized appreciation (depreciation)
during the period. 1,416,393 (1,106,755) (3,720,942) (26,767,597) 7,687,109 112,457,395
---------- ----------- ----------- ------------ ------------ ------------
Net realized and unrealized gain (loss) on
investments. . . . 1,190,882 (983,164) (3,278,066) (10,714,413) 30,489,306 135,292,883
---------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations $1,550,671 $ (159,546) $(2,401,831) $ (1,778,335) $161,585,725 $237,757,060
========== =========== =========== ============ ============ ============
</TABLE>
See accompanying notes.
72
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
MANAGED SUBACCOUNT SHORT-TERM BOND SUBACCOUNT
--------------------------------------- ----------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 6,314,681 $39,951,885 $37,907,821 $ 31,666 $ 53,689 $ 31,261
M Fund Inc.. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . . 2,787,957 5,217,121 4,949,021 -- -- --
----------- ----------- ----------- ---------- ---------- --------
Total investment
income . . . . . . . 9,102,638 45,169,006 42,856,842 31,666 53,689 31,261
Expenses:
Mortality and expense
risks . . . . . . . 1,333,143 2,636,085 2,381,406 3,022 5,065 3,052
----------- ----------- ----------- ---------- ---------- --------
Net investment income 7,769,495 42,532,921 40,475,436 28,644 48,624 28,209
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 3,653,026 5,060,826 5,853,076 (12,368) (3,107) 2,008
Net unrealized
appreciation
(depreciation)
during the period . (5,191,852) (9,288,287) 24,834,482 10,583 (23,648) (5,287)
----------- ----------- ----------- ---------- ---------- --------
Net realized and
unrealized gain
(loss) on investments (1,538,826) (4,227,461) 30,687,558 (1,785) (26,755) (3,279)
----------- ----------- ----------- ---------- ---------- --------
Net increase in net
assets resulting from
operations . . . . . $ 6,230,669 $38,305,460 $71,162,994 $ 26,859 $ 21,869 $ 24,930
=========== =========== =========== ========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE SUBACCOUNT INTERNATIONAL OPPORTUNITIES SUBACCOUNT
--------------------------------- ---------------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 37,168 $ 97,290 $ 24,781 $ 21,730 $ 354,646 $ 27,799
M Fund Inc.. . . . . -- -- -- -- -- --
Interest income on
policy loans. . . . -- -- -- -- -- --
--------- --------- --------- ----------- ---------- --------
Total investment
income. . . . . . . 37,168 97,290 24,781 21,730 354,646 27,799
Expenses:
Mortality and expense
risks. . . . . . . 12,591 24,661 23,711 16,957 24,257 19,481
--------- --------- --------- ----------- ---------- --------
Net investment income 24,577 72,629 1,070 4,773 330,389 8,318
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . (147,622) (217,582) 61,917 703,918 123,861 64,757
Net unrealized
appreciation
(depreciation)
during the period. 160,413 (40,472) (364,339) (929,318) 839,140 339,709
--------- --------- --------- ----------- ---------- --------
Net realized and
unrealized gain
(loss) on investments 12,791 (258,054) (302,422) (225,400) 963,001 404,466
--------- --------- --------- ----------- ---------- --------
Net increase
(decrease) in net
assets resulting from
operations. . . . . $ 37,368 $(185,425) $(301,352) $ (220,627) $1,293,390 $412,784
========= ========= ========= =========== ========== ========
</TABLE>
See accompanying notes.
73
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
EQUITY INDEX SUBACCOUNT GLOBAL BOND SUBACCOUNT
------------------------------------ ------------------------------
2000 1999 1998 2000 1999 1998
------------ ---------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 132,815 $ 921,698 $ 367,284 $ 25,777 $ 91,316 $62,244
M Fund Inc.. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . . -- -- -- -- -- --
----------- ---------- ---------- -------- --------- -------
Total investment
income . . . . . . . 132,815 921,698 367,284 25,777 91,316 62,244
Expenses:
Mortality and expense
risks . . . . . . . 70,140 103,983 60,274 4,763 9,736 7,516
----------- ---------- ---------- -------- --------- -------
Net investment income 62,675 817,715 307,010 21,014 81,580 54,728
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 339,524 471,802 132,619 (37,534) (1,996) 32,917
Net unrealized
appreciation
(depreciation)
during the period . (498,165) 2,019,913 2,082,107 58,703 (126,001) 11,342
----------- ---------- ---------- -------- --------- -------
Net realized and
unrealized gain
(loss) on investments (156,641) 2,491,715 2,214,726 21,169 (127,997) 44,259
----------- ---------- ---------- -------- --------- -------
Net increase
(decrease) in net
assets resulting
from operations. . . $ 95,966 $3,309,430 $2,521,736 $ 42,183 $(46,417) $98,987
=========== ========== ========== ======== ========= =======
</TABLE>
<TABLE>
<CAPTION>
BRANDES INTERNATIONAL EQUITY
TURNER CORE GROWTH SUBACCOUNT SUBACCOUNT
------------------------------ ------------------------------
2000 1999 1998 2000 1999 1998
---------- --------- -------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 5,157 $ -- $ -- $ 8,114 $ -- $ --
M Fund Inc.. . . . . -- 38,038 5,535 -- 18,453 13,237
Interest income on
policy loans . . . . -- -- -- -- -- --
-------- -------- ------- ------- -------- -------
Total investment
income . . . . . . . 5,157 38,038 5,535 8,114 18,453 13,237
Expenses:
Mortality and expense
risks . . . . . . . 1,625 2,102 1,022 1,740 1,904 1,143
-------- -------- ------- ------- -------- -------
Net investment income 3,532 35,936 4,513 6,374 16,549 12,094
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain. . 101,050 44,245 14,364 6,519 7,704 1,184
Net unrealized
appreciation
(depreciation)
during the period . (85,212) 37,727 49,605 13,873 119,400 15,813
-------- -------- ------- ------- -------- -------
Net realized and
unrealized gain on
investments. . . . . 15,838 81,972 63,969 20,392 127,104 16,997
-------- -------- ------- ------- --------
-------
Net increase in net
assets resulting from
operations . . . . . $ 19,370 $117,908 $68,482 $26,766 $143,653 $29,091
======== ======== ======= ======= ======== =======
</TABLE>
See accompanying notes.
74
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
FRONTIER CAPITAL APPRECIATION EMERGING MARKETS EQUITY
SUBACCOUNT SUBACCOUNT
------------------------------ --------------------------
2000 1999 1998 2000 1999 1998
--------- -------- --------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 24,107 $ -- $ -- $ -- $ 13,510 $ 1
M Fund Inc.. . . . . -- 20,787 1,888 -- -- --
Interest income on
policy loans . . . . -- -- -- -- -- --
-------- -------- -------- -------- -------- -----
Total investment
income . . . . . . . 24,107 20,787 1,888 -- 13,510 1
Expenses:
Mortality and expense
risks . . . . . . . 2,641 3,019 2,096 2,736 720 --
-------- -------- -------- -------- -------- -----
Net investment income
(loss) . . . . . . . 21,466 17,768 (208) (2,736) 12,790 1
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 82,236 22,678 12,123 (12,180) 5,339 --
Net unrealized
appreciation
(depreciation)
during the period . (12,210) 164,599 (17,930) (76,126) 86,570 10
-------- -------- -------- -------- -------- -----
Net realized and
unrealized gain
(loss) on investments 70,026 187,277 (5,807) (88,306) 91,909 10
-------- -------- -------- -------- -------- -----
Net increase
(decrease) in net
assets resulting from
operations . . . . . $ 91,492 $205,045 $ (6,015) $(91,042) $104,699 $ 11
======== ======== ======== ======== ======== =====
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL OPPORTUNITIES II BOND INDEX
SUBACCOUNT SUBACCOUNT
------------------------------- --------------------------
2000 1999 1998* 2000 1999 1998*
----------- --------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 2,705 $ 508 $ 1 $24,785 $ 17,417 $149
M Fund Inc.. . . . . -- -- -- -- -- --
Interest income on
policy loans. . . . -- -- -- -- -- --
-------- ------- --- ------- -------- -----
Total investment
income. . . . . . . 2,705 508 1 24,785 17,417 149
Expenses:
Mortality and expense
risks. . . . . . . 588 267 -- 2,044 1,565 3
-------- ------- --- ------- -------- -----
Net investment income 2,117 241 1 22,741 15,852 146
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 13,157 602 1 (2,201) (1,422) (1)
Net unrealized
appreciation
(depreciation)
during the period. (13,987) 13,424 45 7,287 (22,820) (196)
-------- ------- --- ------- -------- -----
Net realized and
unrealized gain
(loss) on investments (830) 14,026 46 5,086 (24,242) (197)
-------- ------- --- ------- -------- -----
Net increase
(decrease) in net
assets resulting from
operations. . . . . $ 1,287 $14,267 $47 $27,827 $ (8,390) $(51)
======== ======= === ======= ======== =====
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
See accompanying notes.
75
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
SMALL/MID CAP HIGH YIELD
CORE SUBACCOUNT BOND SUBACCOUNT
----------------------- -------------------------
2000 1999 1998* 2000 1999 1998*
-------- ------ ----- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . . . $ 298 $6,810 $ -- $ 9,291 $2,748 $ 19
M Fund Inc. . . . . . . -- -- -- -- -- --
Interest income on policy
loans . . . . . . . . . -- -- -- -- -- --
------- ------ ---- -------- ------ ----
Total investment income. 298 6,810 -- 9,291 2,748 19
Expenses:
Mortality and expense
risks. . . . . . . . . 440 178 -- 667 206 1
------- ------ ---- -------- ------ ----
Net investment income
(loss). . . . . . . . . (142) 6,632 -- 8,624 2,542 18
Net realized and
unrealized gain (loss)
on investments:
Net realized gain (loss) 10,745 252 -- (8,649) (186) --
Net unrealized
appreciation
(depreciation) during
the period . . . . . . (5,954) 3,005 6 (2,045) (511) (26)
------- ------ ---- -------- ------ ----
Net realized and
unrealized gain (loss)
on investments. . . . . 4,791 3,257 6 (10,694) (697) (26)
------- ------ ---- -------- ------ ----
Net increase (decrease)
in net assets resulting
from operations . . . . $ 4,649 $9,889 $ 6 $ (2,070) $1,845 $ (8)
======= ====== ==== ======== ====== ====
</TABLE>
<TABLE>
<CAPTION>
CLIFTON
ENHANCED
U.S. EQUITY
SUBACCOUNT
---------------
2000 1999**
------- ---------
<S> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . . . . . . . . . . $ 475 $1,117
M Fund Inc. . . . . . . . . . . . . . . . . . . . . . . . -- --
Interest income on policy loans. . . . . . . . . . . . . . -- --
------ ------
Total investment income. . . . . . . . . . . . . . . . . . 475 1,117
Expenses:
Mortality and expense risks . . . . . . . . . . . . . . . 50 4
------ ------
Net investment income. . . . . . . . . . . . . . . . . . . 425 1,113
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss). . . . . . . . . . . . . . . . . (33) 91
Net unrealized appreciation (depreciation) during the
period . . . . . . . . . . . . . . . . . . . . . . . . . 2,292 (879)
------ ------
Net realized and unrealized gain (loss) on investments . . 2,259 (788)
------ ------
Net increase in net assets resulting from operations . . . $2,684 $ 325
====== ======
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
** From March 9, 1999 (commencement of operations).
See accompanying notes.
76
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT ACTIVE BOND SUBACCOUNT
------------------------------------------ ------------------------------------------
2000 1999 1998 2000 1999 1998
------------- ------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . $ 434,004 $ 24,389,814 $12,025,213 $ 8,592,418 $ 20,233,648 $ 22,087,857
Net realized gains (losses) . . . . . 2,032,851 4,239,424 3,520,199 (29,483) 192,098 1,600,539
Net unrealized appreciation
(depreciation) during
the period . . . . . . . . . . . . . 7,172,532 1,727,703 18,509,310 505,228 (20,304,536) (2,317,324)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations . . . . . . . . . . . 9,639,387 30,356,941 34,054,722 9,068,163 121,210 21,371,072
From policyholder transactions:
Net premiums from
policyholders. . . . . . . . . . . . 31,919,256 37,307,814 21,681,632 11,475,576 26,114,799 32,901,747
Net benefits to policyholders . . . . (21,738,362) (25,817,420) (21,510,240) (20,536,374) (35,577,616) (39,577,750)
Net increase in policy loans. . . . . 2,840,939 -- 2,561,877 967,300 -- 1,607,456
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . . . . . . . . . . . 13,021,833 11,490,394 2,733,269 (8,093,498) (9,462,817) (5,068,547)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
net assets. . . . . . . . . . . . . . 22,661,220 41,847,335 36,787,991 974,665 (9,341,607) 16,302,525
Net assets at beginning of period. . . 177,062,332 135,214,997 98,427,006 293,120,799 302,462,406 286,159,881
------------ ------------ ------------ ------------ ------------ ------------
Net assets at end of period. . . . . . $199,723,552 $177,062,332 $135,214,997 $294,095,464 $293,120,799 $302,462,406
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX SUBACCOUNT SMALL CAP GROWTH SUBACCOUNT
--------------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 274,812 $ 950,123 $ 3,440,236 $ (40,116) $ 1,234,844 $ (20,335)
Net realized gains 816,122 168,248 148,419 1,170,187 491,241 55,393
Net unrealized appreciation
(depreciation) during
the period. . (2,574,516) 5,712,567 105,161 (647,342) 2,317,857 518,731
----------- ----------- ----------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations (1,483,582) 6,830,938 3,693,816 482,729 4,043,942 553,789
From policyholder transactions:
Net premiums from
policyholders. 11,571,448 7,373,967 6,549,988 8,820,091 4,316,218 2,382,203
Net benefits to policyholders (8,784,406) (6,834,914) (5,210,982) (4,981,803) (2,206,402) (998,381)
Net increase in policy loans 261,125 -- 86,200 -- -- --
----------- ----------- ----------- ----------- ----------- ----------
Net increase in net assets resulting
from policyholder transactions 3,048,167 539,053 1,425,206 3,838,288 2,109,816 1,383,822
----------- ----------- ----------- ----------- ----------- ----------
Net increase (decrease) in
net assets. . . 1,564,585 7,369,991 5,119,022 4,321,017 6,153,758 1,937,611
Net assets at beginning of period 31,899,039 24,529,048 19,410,026 10,825,578 4,671,820 2,734,209
----------- ----------- ----------- ----------- ----------- ----------
Net assets at end of period $33,463,624 $31,899,039 $24,529,048 $15,146,595 $10,825,578 $4,671,820
=========== =========== =========== =========== =========== ==========
</TABLE>
See accompanying notes.
77
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
GLOBAL BALANCED SUBACCOUNT MID CAP GROWTH SUBACCOUNT
--------------------------------------------- ----------------------------------------------
2000 1999 1998 2000 1999 1998
------------ -------------- ---------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income (loss) . $ 10,813 $ 92,816 $ 52,891 $ (74,097) $ 2,058,661 $ 445,161
Net realized gains (losses). . (8,124) 4,711 (4,506) 1,167,801 773,222 73,958
Net unrealized appreciation
(depreciation) during the
period. . . . . . . . . . . . (52,902) (38,997) 78,455 (2,810,779) 6,801,000 647,137
----------- ------------- --------------- ------------- -------------- -------------
Net increase (decrease) in net
assets resulting from
operations . . . . . . . . . . (50,213) 58,530 126,840 (1,717,075) 9,632,883 1,166,256
From policyholder transactions:
Net premiums from policyholders 182,567 377,958 341,482 12,180,008 8,941,124 3,164,065
Net benefits to policyholders. (298,263) (131,331) (310,766) (4,655,667) (2,937,257) (612,975)
Net increase in policy loans . -- -- -- -- -- --
----------- ------------- --------------- ------------- -------------- -------------
Net increase (decrease) in net
assets resulting from
policyholder transactions. . . (115,696) 246,627 30,716 7,524,341 6,003,867 2,551,090
----------- ------------- --------------- ------------- -------------- -------------
Net increase (decrease) in net
assets . . . . . . . . . . . . (165,909) 305,157 157,556 5,807,266 15,636,750 3,717,346
Net assets at beginning of
period . . . . . . . . . . . . 1,177,232 872,075 714,519 20,852,255 5,215,505 1,498,159
----------- ------------- --------------- ------------- -------------- -------------
Net assets at end of period . . $ 1,011,323 $ 1,177,232 $ 872,075 $ 26,659,521 $ 20,852,255 $ 5,215,505
=========== ============= =============== ============= ============== =============
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE SUBACCOUNT MONEY MARKET SUBACCOUNT
---------------------------------------- ------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income $ 80,605 $ 593,922 $ 388,873 $ 2,067,290 $ 3,517,874 $ 3,481,729
Net realized gains (losses) (1,671) 165,556 673,582 -- -- --
Net unrealized appreciation
(depreciation) during the period (324,239) (569,216) (479,093) -- -- --
----------- ----------- ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations (245,305) 190,262 583,362 2,067,290 3,517,874 3,481,729
From policyholder transactions:
Net premiums from policyholders 2,039,750 3,166,658 4,214,076 31,101,772 33,694,123 24,612,731
Net benefits to policyholders (1,152,104) (1,903,017) (3,212,048) (32,846,241) (30,672,090) (24,024,723)
Net increase (decrease) in policy loans -- -- -- (282,456) -- 421,166
----------- ----------- ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder transactions 887,646 1,263,641 1,002,028 (2,026,925) 3,022,033 1,009,174
----------- ----------- ------------ ------------ ------------ ------------
Net increase in net assets 642,341 1,453,903 1,585,390 40,365 6,539,907 4,490,903
Net assets at beginning of period 9,553,293 8,099,390 6,514,000 76,638,641 70,098,734 65,607,831
----------- ----------- ------------ ------------ ------------ ------------
Net assets at end of period $10,195,634 $ 9,553,293 $ 8,099,390 $ 76,679,006 $ 76,638,641 $ 70,098,734
=========== =========== ============ ============ ============ ============
</TABLE>
See accompanying notes.
78
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
MID CAP VALUE SUBACCOUNT SMALL/MID CAP GROWTH SUBACCOUNT
---------------------------------------- ---------------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------- ---------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income (loss) . $ (4,038) $ 1,508 $ 16,578 $ (36,428) $ 1,833,840 $ 154,352
Net realized gains (losses). . (35,806) (241,740) (422,902) (331,677) (13,020) 56,968
Net unrealized appreciation
(depreciation) during the
period. . . . . . . . . . . . 329,004 469,537 (260,362) 1,329,781 (1,274,161) 334,213
----------- ----------- ------------ --------------- --------------- ---------------
Net increase (decrease) in net
assets resulting from
operations . . . . . . . . . . 289,160 229,305 (666,686) 961,676 546,659 545,533
From policyholder transactions:
Net premiums from policyholders 1,222,805 1,886,594 5,997,691 2,015,926 3,493,643 3,953,326
Net benefits to policyholders. (1,089,206) (1,745,112) (2,912,034) (9,689,438) (3,105,108) (3,311,846)
Net increase in policy loans . -- -- -- -- -- --
----------- ----------- ------------ --------------- --------------- ---------------
Net increase (decrease) in net
assets resulting from
policyholder transactions. . . 133,599 141,482 3,085,657 (673,512) 388,535 641,480
----------- ----------- ------------
--------------- --------------- ---------------
Net increase in net assets. . . 422,759 370,787 2,418,971 288,164 935,194 1,187,013
Net assets at beginning of
period . . . . . . . . . . . . 5,236,580 4,865,793 2,446,822 12,409,573 11,474,379 10,287,366
----------- ----------- ------------ --------------- --------------- ---------------
Net assets at end of period . . $ 5,659,339 $ 5,236,580 $ 4,865,793 $ 12,697,737 $ 12,409,573 $ 11,474,379
=========== =========== ============ =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY SUBACCOUNT GROWTH & INCOME SUBACCOUNT
--------------------------------------- ------------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ --------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income $ 359,789 $ 823,618 $ 876,235 $ 8,936,078 $ 131,096,419 $ 102,464,177
Net realized gains (losses) (225,511) 123,591 442,876 16,053,184 22,802,197 22,835,488
Net unrealized appreciation
(depreciation) during the period 1,416,393 (1,106,755) (3,720,942) (26,767,597) 7,687,109 112,457,395
----------- ----------- ----------- -------------- -------------- --------------
Net increase (decrease) in net
assets resulting from operations 1,550,671 (159,546) (2,401,831) (1,778,335) 161,585,725 237,757,060
From policyholder transactions:
Net premiums from policyholders 3,954,225 2,304,591 6,295,255 47,243,335 101,973,160 92,955,980
Net benefits to policyholders (4,217,423) (3,311,591) (5,507,305) (81,355,661) (133,701,210) (134,661,151)
Net increase (decrease) in policy
loans. . . . . 141,567 -- (83,216) 4,922,813 -- 18,165,114
----------- ----------- ----------- -------------- -------------- --------------
Net increase (decrease) in net
assets resulting from policyholder
transactions. . (121,631) (1,007,000) 704,734 (29,189,513) (31,728,050) (23,540,057)
Net increase (decrease) in net
assets. . . . . 1,429,040 (1,166,546) (1,697,097) (30,967,848) 129,857,675 214,217,003
Net assets at beginning of period 13,378,472 14,545,018 16,242,115 1,278,739,554 1,148,881,879 934,664,876
Net assets at end of period $14,807,512 $13,378,472 $14,545,018 $1,247,771,706 $1,278,739,554 $1,148,881,879
=========== =========== =========== ============== ============== ==============
</TABLE>
See accompanying notes.
79
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
MANAGED SUBACCOUNT SHORT-TERM BOND SUBACCOUNT
------------------------------------------ --------------------------------------
2000 1999 1998 2000 1999 1998
------------- ------------- ------------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income. . . . . . . . . . $ 7,769,495 $ 42,532,921 $40,475,436 $ 28,644 $ 48,624 $ 28,209
Net realized gains (losses). . . . . . . 3,653,026 5,060,826 5,853,076 (12,368) (3,107) 2,008
Net unrealized appreciation
(depreciation) during the period. . . . (5,191,852) (9,288,287) 24,834,482 10,583 (23,648) (5,287)
------------ ------------ ------------ ---------- ----------- -----------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . 6,230,669 38,305,460 71,162,994 26,859 21,869 24,930
From policyholder transactions:
Net premiums from policyholders. . . . . 20,445,777 44,546,082 40,631,684 241,196 690,849 435,150
Net benefits to policyholders. . . . . . (35,113,472) (55,332,758) (55,447,667) (340,388) (178,124) (274,762)
Net increase in policy loans . . . . . . 1,824,582 -- 5,379,590 -- -- --
------------ ------------ ------------ ---------- ----------- -----------
Net increase (decrease) in net assets
resulting from policyholder
transactions . . . . . . . . . . . . . . (12,843,113) (10,786,676) (9,436,393) (99,192) 512,725 160,388
------------ ------------ ------------ ---------- ----------- -----------
Net increase (decrease) in net assets . . (6,612,444) 27,518,784 61,726,601 (72,333) 534,594 185,318
Net assets at beginning of period . . . . 500,072,750 472,553,966 410,827,365 1,129,483 594,889 409,571
------------ ------------ ------------ ---------- ----------- -----------
Net assets at end of period . . . . . . . $493,460,306 $500,072,750 $472,553,966 $1,057,150 $ 1,129,483 $ 594,889
============ ============ ============ ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE SUBACCOUNT INTERNATIONAL OPPORTUNITIES SUBACCOUNT
-------------------------------------- ----------------------------------------
2000 1999 1998 2000 1999 1998
----------- ------------ ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income $ 24,577 $ 72,629 $ 1,070 $ 4,773 $ 330,389 $ 8,318
Net realized gains (losses) (147,622) (217,582) 61,917 703,918 123,861 64,757
Net unrealized appreciation
(depreciation) during the period 160,413 (40,472) (364,359) (929,318) 839,140 339,709
---------- ----------- ----------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations 37,368 (185,425) (301,372) (220,627) 1,293,390 412,784
From policyholder transactions:
Net premiums from policyholders 1,159,319 1,446,109 2,644,808 5,362,651 1,632,955 2,203,753
Net benefits to policyholders (893,462) (1,547,128) (1,288,464) (4,276,522) (1,315,539) (1,443,700)
Net increase in policy loans -- -- -- -- -- --
---------- ----------- ----------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . 265,857 (101,019) 1,356,344 1,086,129 317,416 760,053
---------- ----------- ----------- ------------ ----------- -----------
Net increase (decrease) in net assets 303,225 (286,444) 1,054,972 865,502 1,610,806 1,172,837
Net assets at beginning of period 4,111,416 4,397,860 3,342,888 5,310,586 3,699,780 2,526,943
---------- ----------- ----------- ------------ ----------- -----------
Net assets at end of period $4,414,641 $ 4,111,416 $ 4,397,860 $ 6,176,088 $ 5,310,586 $ 3,699,780
========== =========== =========== ============ =========== ===========
</TABLE>
See accompanying notes.
80
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
EQUITY INDEX
SUBACCOUNT
---------------------------------------
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income. . . . . . . . . . . . . $ 62,675 $ 817,715 $ 307,010
Net realized gains (losses). . . . . . . . . . 339,524 471,802 132,619
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . (498,165) 2,019,913 2,082,107
----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations. . . . . . . . . . . . . . . . (95,966) 3,309,430 2,521,736
From policyholder transactions:
Net premiums from policyholders. . . . . . . . 5,398,036 7,762,529 4,632,113
Net benefits to policyholders. . . . . . . . . (1,940,148) (2,563,485) (1,120,852)
Net increase in policy loans . . . . . . . . . -- -- --
----------- ----------- -----------
Net increase (decrease) in net assets resulting
from policyholder transactions . . . . . . . . 3,361,922 5,199,044 3,511,261
----------- ----------- -----------
Net increase (decrease) in net assets . . . . . 22,117,624 8,508,474 6,032,997
Net assets at beginning of period . . . . . . . 22,117,624 13,609,150 7,576,153
----------- ----------- -----------
Net assets at end of period . . . . . . . . . . $25,479,546 $22,117,624 $13,609,150
=========== =========== ===========
<CAPTION>
GLOBAL BOND SUBACCOUNT
-------------------------------------
2000 1999 1998
----------- ----------- --------------
<S> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income. . . . . . . . . . . . . $ 21,014 $ 81,580 $ 54,728
Net realized gains (losses). . . . . . . . . . (37,534) (1,996) 32,917
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . 58,703 (126,001) 11,342
---------- ---------- -----------
Net increase (decrease) in net assets resulting 42,183 (46,417) 98,987
from operations. . . . . . . . . . . . . . . .
From policyholder transactions:
Net premiums from policyholders. . . . . . . . 378,645 1,115,699 798,933
Net benefits to policyholders. . . . . . . . . (685,644) (292,075) (1,158,109)
Net increase in policy loans . . . . . . . . . -- -- --
---------- ---------- -----------
Net increase (decrease) in net assets resulting
from policyholder transactions . . . . . . . . (306,999) 823,624 (359,176)
---------- ---------- -----------
Net increase (decrease) in net assets . . . . . (264,816) 777,207 (260,189)
Net assets at beginning of period . . . . . . . 1,882,675 1,105,468 1,365,657
---------- ---------- -----------
Net assets at end of period . . . . . . . . . . $1,617,859 $1,882,675 $1,105,468
========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
TURNER CORE GROWTH SUBACCOUNT BRANDES INTERNATIONAL EQUITY SUBACCOUNT
-------------------------------- ----------------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- --------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 3,532 $ 35,936 $ 4,513 $ 6,374 $16,549 $ 12,094
Net realized gains. 101,050 44,245 14,364 6,519 7,704 1,184
Net unrealized
appreciation
(depreciation)
during the period. (85,212) 37,727 49,605 13,873 119,400 15,813
--------- --------- -------- -------- -------- --------
Net increase in net
assets resulting from
operations. . . . . 19,370 117,908 68,482 26,766 143,653 29,091
From policyholder
transactions:
Net premiums from
policyholders. . . 265,836 240,351 203,590 59,497 239,618 55,021
Net benefits to
policyholders. . . (371,100) (136,661) (77,651) (18,974) (29,520) (10,341)
Net increase in
policy loans. . . -- -- -- -- -- --
--------- --------- -------- -------- -------- --------
Net increase
(decrease) in net
assets resulting from
policyholder
transactions. . . . (105,264) 103,690 125,939 40,523 210,098 44,680
--------- --------- -------- -------- -------- --------
Net increase
(decrease) in net
assets. . . . . . . (85,894) 221,598 194,421 67,289 353,751 73,771
Net assets at
beginning of period 536,192 314,594 120,173 588,128 234,377 160,606
--------- --------- -------- -------- -------- --------
Net assets at end of
period. . . . . . . $ 450,298 $ 536,192 $314,594 $655,417 $588,128 $234,377
========= ========= ======== ======== ======== ========
</TABLE>
See accompanying notes.
81
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
FRONTIER CAPITAL EMERGING MARKETS
APPRECIATION SUBACCOUNT EQUITY SUBACCOUNT
-------------------------------- ---------------------------------
2000 1999 1998 2000 1999 1998
---------- --------- ---------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income
(loss). . . . . . . $ 21,466 $ 17,768 $ (208) $ (2,736) $ 12,790 $ 1
Net realized gains
(losses). . . . . . 82,236 22,678 12,123 (12,180) 5,339 --
Net unrealized
appreciation
(depreciation)
during the period . (12,210) 164,599 (17,930) (76,126) 86,570 10
--------- -------- --------- ----------- --------- -------
Net increase
(decrease) in net
assets resulting from
operations . . . . . 91,492 205,045 (6,015) (91,042) 104,699 11
From policyholder
transactions:
Net premiums from
policyholders . . . 297,090 255,268 128,779 3,936,569 433,406 2,018
Net benefits to
policyholders . . . (219,651) (89,136) (146,083) (3,055,550) (144,400) --
Net increase in
policy loans. . . . -- -- -- -- ---- --
--------- -------- --------- ----------- --------- -------
Net increase
(decrease) in net
assets resulting from
policyholder
transactions . . . . 77,439 166,132 (17,304) 881,019 289,006 2,018
--------- -------- --------- ----------- --------- -------
Net increase
(decrease) in net
assets . . . . . . . 168,931 371,177 (23,319) 789,977 393,705 2,029
Net assets at
beginning of period. 728,674 357,497 380,816 395,734 2,029 --
--------- -------- --------- ----------- --------- -------
Net assets at end of
period . . . . . . . $ 897,605 $728,674 $ 357,497 $ 1,185,711 $395,734 $ 2,029
========= ======== ========= =========== ========= =======
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL OPPORTUNITIES II BOND INDEX
SUBACCOUNT SUBACCOUNT
------------------------------- --------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 2,117 $ 241 $ 1 $ 22,741 $ 15,852 $ 146
Net realized gains
(losses). . . . . . 13,157 602 1 (2,201) (1,422) (1)
Net unrealized
appreciation
(depreciation)
during the period. (13,987) 13,424 45 7,287 (22,820) (196)
-------- -------- ---- -------- -------- -------
Net increase
(decrease) in net
assets resulting from
operations. . . . . 1,287 14,267 47 27,827 (8,390) (51)
From policyholder
transactions:
Net premiums from
policyholders. . . 214,628 108,420 915 362,018 412,326 10,254
Net benefits to
policyholders. . . (54,971) (11,064) (13) (24,425) (26,307) (69)
Net increase in
policy loans. . . . -- -- -- -- -- --
-------- -------- ---- -------- -------- -------
Net increase in net
assets resulting from
policyholder
transactions. . . . 159,657 97,356 902 337,593 386,019 10,185
-------- -------- ---- -------- -------- -------
Net increase in net
assets. . . . . . . 160,944 111,623 949 365,420 377,629 10,134
Net assets at
beginning of period. 112,572 949 -- 387,763 10,134 --
-------- -------- ---- -------- -------- -------
Net assets at end of
period. . . . . . . $273,516 $112,572 $949 $753,183 $387,763 $10,134
======== ======== ==== ======== ======== =======
</TABLE>
See accompanying notes.
82
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
SMALL/MIDCAP HIGH YIELD
CORE SUBACCOUNT BOND SUBACCOUNT
--------------------------- ----------------------------------
2000 1999 1998* 2000 1999 1998*
---------- -------- ----- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income
(loss). . . . . . . $ (142) $ 6,632 $ -- $ 8,624 $ 2,542 $ 19
Net realized gains
(losses). . . . . . 10,745 252 -- (8,649) (186) --
Net unrealized
appreciation
(depreciation)
during the period . (5,954) 3,005 6 (2,045) (511) (26)
--------- ------- ---- ----------- -------- ------
Net increase
(decrease) in net
assets resulting from
operations . . . . . 4,649 9,889 6 (2,070) 1,845 (8)
From policyholder
transactions:
Net premiums from
policyholders . . . 414,076 97,385 104 1,249,658 98,955 2,887
Net benefits to
policyholders . . . (329,116) (7,901) (2) (1,040,268) (13,078) --
Net increase in
policy loans. . . . 0 -- -- 0 -- --
--------- ------- ---- ----------- -------- ------
Net increase in net
assets resulting from
policyholder
transactions . . . . 84,960 89,484 102 209,390 85,877 2,887
--------- ------- ---- ----------- -------- ------
Net increase in net
assets . . . . . . . 89,609 99,373 108 207,320 87,722 2,887
Net assets at
beginning of period. 99,481 108 -- 90,601 2,879 --
--------- ------- ---- ----------- -------- ------
Net assets at end of
period . . . . . . . $ 189,090 $99,481 $108 $ 297,921 $ 90,601 $2,879
======== ====== ==== ========== ======= =====
</TABLE>
<TABLE>
<CAPTION>
CLIFTON
ENHANCED U.S.
EQUITY SUBACCOUNT
------------------
2000 1999**
-------- ----------
<S> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss). . . . . . . . . . . . . . $ 425 $ 1,113
Net realized gains (losses) . . . . . . . . . . . . . . (33) 91
Net unrealized appreciation (depreciation) during the
period . . . . . . . . . . . . . . . . . . . . . . . . (534) (879)
------- -------
Net increase (decrease) in net assets resulting from
operations. . . . . . . . . . . . . . . . . . . . . . . (142) 325
From policyholder transactions:
Net premiums from policyholders . . . . . . . . . . . . 4,452 13,814
Net benefits to policyholders . . . . . . . . . . . . . (294) --
Net increase in policy loans. . . . . . . . . . . . . . 0 --
------- -------
Net increase in net assets resulting from policyholder
transactions 4,158 13,814
------- -------
Net increase in net assets . . . . . . . . . . . . . . . 4,016 14,139
Net assets at beginning of period. . . . . . . . . . . . 14,139 --
------- -------
Net assets at end of period. . . . . . . . . . . . . . . $18,155 $14,139
======= =======
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
** From March 9, 1999 (commencement of operations).
See accompanying notes.
83
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
YEARS AND PERIODS ENDED JUNE 30, 2000
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 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-seven 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-seven Portfolios
of the Fund and M Fund which are currently available are the Large Cap Growth,
Active Bond (formerly, Sovereign Bond), International Equity Index, Small Cap
Growth, Global Balanced (formerly, International Balanced), Mid Cap Growth,
Large Cap Value, Money Market, Mid Cap Value, Small/Mid Cap Growth (formerly,
Diversified Mid Cap Growth), Real Estate Equity, Growth & Income, Managed,
Short-Term Bond, Small Cap Value, International Opportunities, Equity Index,
Global Bond (formerly, Strategic Bond), Turner Core Growth, Brandes
International Equity, Frontier Capital Appreciation, Emerging Markets Equity,
International Opportunities II (formerly, Global Equity), Bond Index, Small/Mid
Cap CORE, High Yield Bond and Clifton Enhanced U.S. Equity Portfolios (formerly,
Enhanced U.S. Equity). 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 underlying portfolio 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 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.
84
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
85
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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 June 30, 2000 are as follows:
<TABLE>
<CAPTION>
PORTFOLIO SHARES OWNED COST VALUE
--------- ------------ ------------ ----------------
<S> <C> <C> <C>
Large Cap Growth. . . . . 6,118,549 $133,197,126 $ 176,581,445
Active Bond . . . . . . . 25,676,557 250,059,856 234,710,166
International Equity Index 1,637,313 28,032,291 30,279,715
Small Cap Growth. . . . . 751,112 12,755,532 15,146,841
Global Balanced . . . . . 99,987 1,063,151 1,009,123
Mid Cap Growth. . . . . . 951,564 21,827,050 26,659,950
Large Cap Value . . . . . 781,363 10,837,990 10,182,562
Money Market. . . . . . . 6,282,855 62,861,460 62,828,554
Mid Cap Value . . . . . . 419,590 5,184,053 5,655,397
Small/Mid Cap Growth. . . 833,429 12,640,806 12,697,945
Real Estate Equity. . . . 1,006,818 13,855,749 12,765,326
Growth & Income . . . . . 53,177,519 786,999,791 1,054,098,419
Managed . . . . . . . . . 26,812,598 359,486,863 412,811,976
Short-Term Bond . . . . . 108,407 1,074,517 1,051,732
Small Cap Value . . . . . 402,638 4,641,679 4,409,122
International
Opportunities. . . . . . 424,604 6,010,304 6,171,237
Equity Index. . . . . . . 1,257,997 20,669,031 25,463,881
Global Bond . . . . . . . 161,599 1,670,350 1,610,930
Turner Core Growth. . . . 18,889 537,085 450,305
Brandes International
Equity . . . . . . . . . 41,067 456,415 655,428
Frontier Capital
Appreciation . . . . . . 37,890 1,499,897 897,620
Emerging Markets Equity . 103,852 296,973 1,185,730
International
Opportunities II. . . 22,760 274,038 273,330
Bond Index. . . . . . . . 80,112 768,927 749,101
Small/Mid Cap Core. . . . 18,350 192,035 188,808
High Yield Bond . . . . . 35,025 300,508 295,903
Clifton Enhanced US Equity
Fund . . . . . . . . . . 912 14,986 18,155
</TABLE>
86
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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 2000,
were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
--------- ----------- -------------
<S> <C> <C>
Large Cap Growth. . . . . . . . . . . $14,526,753 $ 4,071,523
Active Bond . . . . . . . . . . . . . 12,595,440 13,172,460
International Equity Index. . . . . . 8,546,295 5,508,370
Small Cap Growth. . . . . . . . . . . 6,763,851 2,965,434
Global Balanced . . . . . . . . . . . 170,170 275,036
Mid Cap Growth. . . . . . . . . . . . 9,665,686 2,215,013
Large Cap Value . . . . . . . . . . . 1,684,020 715,601
Money Market. . . . . . . . . . . . . 20,068,019 19,726,545
Mid Cap Value . . . . . . . . . . . . 831,482 701,828
Small/Mid Cap Growth. . . . . . . . . 1,420,670 2,130,402
Real Estate Equity. . . . . . . . . . 3,756,641 3,664,903
Growth & Income . . . . . . . . . . . 10,140,753 35,665,986
Managed . . . . . . . . . . . . . . . 9,078,644 16,420,432
Short-Term Bond . . . . . . . . . . . 223,617 294,148
Small Cap Value . . . . . . . . . . . 918,362 627,855
International Opportunities . . . . . 4,740,829 3,649,827
Equity Index. . . . . . . . . . . . . 4,320,990 800,013
Global Bond . . . . . . . . . . . . . 324,904 610,861
Turner Core Growth. . . . . . . . . . 0 0
Brandes International Equity. . . . . 0 0
Frontier Capital Appreciation . . . . 3,318,819 2,440,517
Emerging Markets Equity . . . . . . . 0 0
International Opportunities II. . . . 322,785 161,007
Bond Index. . . . . . . . . . . . . . 392,051 31,702
Small/Mid Cap Core. . . . . . . . . . 408,308 323,488
High Yield Bond . . . . . . . . . . . 1,251,885 1,033,876
Clifton Enhanced US Equity Fund . . . 0 0
</TABLE>
87
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
5. NET ASSETS
Accumulation shares attributable to net assets of contractowners and
accumulation share values for each Portfolio at June 30, 2000 were as follows:
<TABLE>
<CAPTION>
ACCUMULATION SHARE
PORTFOLIO SHARES VALUES
--------- ------------ --------
<S> <C> <C>
Large Cap Growth . . . . . . . . . . . . . 559,086 83.98
Active Bond. . . . . . . . . . . . . . . . 690,050 24.41
International Equity Index . . . . . . . . 487,610 26.08
Small Cap Growth . . . . . . . . . . . . . 663,124 22.82
Global Balanced. . . . . . . . . . . . . . 79,825 12.67
Mid Cap Growth . . . . . . . . . . . . . . 783,262 34.02
Large Cap Value. . . . . . . . . . . . . . 646,321 15.74
Money Market . . . . . . . . . . . . . . . 644,839 18.58
Mid Cap Value. . . . . . . . . . . . . . . 381,056 14.82
Small/Mid Cap Growth . . . . . . . . . . . 592,151 21.43
Real Estate Equity . . . . . . . . . . . . 203,675 25.09
Growth & Income. . . . . . . . . . . . . . 1,238,691 67.63
Managed. . . . . . . . . . . . . . . . . . 1,030,002 40.02
Short-Term Bond. . . . . . . . . . . . . . 79,247 13.34
Small Cap Value. . . . . . . . . . . . . . 354,503 12.43
International Opportunities. . . . . . . . 389,613 15.85
Equity Index . . . . . . . . . . . . . . . 1,112,540 22.90
Global Bond. . . . . . . . . . . . . . . . 129,203 12.51
Turner Core Growth . . . . . . . . . . . . 16,303 27.61
Brandes International Equity . . . . . . . 36,840 17.80
Frontier Capital Appreciation. . . . . . . 36,994 24.26
Emerging Markets Equity. . . . . . . . . . 99,862 11.88
International Opportunities II . . . . . . 22,407 12.21
Bond Index . . . . . . . . . . . . . . . . 69,381 10.72
Small/Mid Cap CORE . . . . . . . . . . . . 16,782 11.27
High Yield Bond. . . . . . . . . . . . . . 30,156 9.88
Clifton Enhanced US Equity . . . . . . . . 1,411 12.87
</TABLE>
88
<PAGE>
REPORT ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Policyholders of
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 Equity Index, Small Cap Growth,
International Balanced, Mid Cap Growth, Large Cap Value, Money Market, Mid Cap
Value, Small/Mid Cap Growth (formerly, Diversified Mid Cap Growth), Real Estate
Equity, Growth & Income, Managed, Short-Term Bond, Small Cap Value,
International Opportunities, Equity Index, Global Bond (formerly, Strategic
Bond), Turner Core Growth, Brandes International Equity, Frontier Capital
Appreciation, Emerging Markets Equity, Global Equity, Bond Index, Small/Mid Cap
CORE, High Yield Bond and Enhanced U.S. Equity Subaccounts) as of December 31,
1999, and the related statements of operations and changes in net assets for
each of the periods indicated therein. These financial statements are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
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,
1999, the results of their operations and the changes in their net assets for
each of the periods indicated, in conformity with accounting principles
generally accepted in the United States.
ERNST & YOUNG LLP
Boston, Massachusetts
February 11, 2000
89
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTERNATIONAL
LARGE CAP SOVEREIGN EQUITY SMALL CAP
GROWTH BOND INDEX GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . $ 18,374 $ 31,159 $ 3,363 $ 1,196
Investments in shares
of portfolios of
John Hancock
Variable Series Trust
I, at value . . . . 156,931,243 236,200,057 29,055,936 10,825,578
Policy loans and
accrued interest
receivable . . . . . 20,131,090 56,920,743 2,843,104 --
Receivable from:
John Hancock Variable
Series Trust I . . 166,807 45,107 32,276 20,662
M Fund Inc. . . . . -- -- -- --
------------ ------------ ----------- -----------
Total assets . . . . 177,247,514 293,197,066 31,934,679 10,847,436
LIABILITIES
Payable to John
Hancock Variable Life
Insurance Company . 164,174 40,650 31,788 20,488
Asset charges payable 21,008 35,617 3,852 1,370
------------ ------------ ----------- -----------
185,182 76,267 35,640 21,858
------------ ------------ ----------- -----------
Net assets . . . . . $177,062,332 $293,120,799 $31,899,039 $10,825,578
============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL MID CAP LARGE CAP MONEY
BALANCED GROWTH VALUE MARKET
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . . $ 133 $ 2,329 $ 1,091 $ 4,680
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value . . 1,177,232 20,852,255 9,553,293 62,519,986
Policy loans and accrued
interest receivable . -- -- -- 14,118,655
Receivable from:
John Hancock Variable
Series Trust I . . . 970 103,804 6,237 159,443
M Fund Inc. . . . . . -- -- -- --
----------- ----------- ---------- -----------
Total assets . . . . . 1,178,335 20,958,388 9,560,621 76,802,764
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company. . . . . . . . 950 103,466 6,081 158,266
Asset charges payable . 153 2,667 1,247 5,857
----------- ----------- ---------- -----------
1,103 106,133 7,328 164,123
----------- ----------- ---------- -----------
Net assets . . . . . . $ 1,177,232 $20,852,255 $9,553,293 $76,638,641
=========== =========== ========== ===========
</TABLE>
See accompanying notes.
90
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SMALL/MID
MID CAP CAP REAL ESTATE GROWTH &
VALUE GROWTH EQUITY INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ----------- ----------- ----------------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . $ 589 $ 1,386 $ 1,428 $ 132,575
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value. . . . . . . . 5,236,581 12,409,573 11,482,706 1,091,050,404
Policy loans and
accrued interest
receivable . . . . . -- -- 1,895,766 187,689,150
Receivable from:
John Hancock Variable
Series Trust I . . 27,820 34,285 1,966 333,111
M Fund Inc. . . . . -- -- -- --
------------ ----------- ----------- --------------
Total assets . . . . 5,264,990 12,445,244 13,381,866 1,279,205,240
LIABILITIES
Payable to John
Hancock Variable Life
Insurance Company . 27,735 34,083 1,758 314,139
Asset charges payable 675 1,588 1,636 151,547
------------ ----------- ----------- --------------
Total liabilities . . 28,410 35,671 3,394 465,686
------------ ----------- ----------- --------------
Net assets . . . . . $ 5,236,580 $12,409,573 $13,378,472 $1,278,739,554
============ =========== =========== ==============
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM SMALL CAP INTERNATIONAL
MANAGED BOND VALUE OPPORTUNITIES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . . $ 52,222 $ 129 $ 460 $ 593
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value . . 422,672,470 1,129,483 4,111,416 5,310,586
Policy loans and accrued
interest receivable . 77,400,280 -- -- --
Receivable from:
John Hancock Variable
Series Trust I . . . 123,268 218 2,954 5,072
M Fund Inc. . . . . . -- -- -- --
------------ ---------- ---------- ----------
Total assets . . . . . 500,248,240 1,129,830 4,114,830 5,316,251
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company. . . . . . . . 115,790 199 2,887 4,985
Asset charges payable . 59,700 148 527 680
------------ ---------- ---------- ----------
Total liabilities . . . 175,490 347 3,414 5,665
------------ ---------- ---------- ----------
Net assets . . . . . . $500,072,750 $1,129,483 $4,111,416 $5,310,586
============ ========== ========== ==========
</TABLE>
See accompanying notes.
91
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
TURNER BRANDES
EQUITY GLOBAL CORE INTERNATIONAL
INDEX BOND GROWTH EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . . . $ 2,517 $ 216 $ 60 $ 65
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value . . . 22,117,624 1,882,675 -- --
Investments in shares of
portfolios of M Fund
Inc., at value . . . . -- -- 536,192 588,128
Policy loans and accrued
interest receivable . . -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I . . . . 19,259 31 -- --
M Fund Inc. . . . . . . -- -- 9 10
----------- ---------- -------- --------
Total assets . . . . . . 22,139,400 1,882,922 536,261 588,203
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company . . . . . . . . 18,897 -- -- --
Asset charges payable . 2,879 247 69 75
----------- ---------- -------- --------
Total liabilities . . . 21,776 247 69 75
----------- ---------- -------- --------
Net assets . . . . . . . $22,117,624 $1,882,675 $536,192 $588,128
=========== ========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
FRONTIER EMERGING
CAPITAL MARKETS GLOBAL
APPRECIATION EQUITY EQUITY BOND INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . . . . $ 80 $ 43 $ 12 $ 45
Investments in shares of
portfolios of John Hancock
Variable Series Trust I,
at value . . . . . . . . -- 395,733 112,572 387,762
Investments in shares of
portfolios of M Fund Inc.,
at value . . . . . . . . 728,674 -- -- --
Policy loans and accrued
interest receivable . . . -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I . . . . . -- 2,536 2 1,123
M Fund Inc. . . . . . . . 12 -- -- --
-------- -------- -------- --------
Total assets . . . . . . . 728,766 398,312 112,586 388,930
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company . . . . . . . . . -- 2,529 -- 1,116
Asset charges payable . . 92 49 14 51
-------- -------- -------- --------
Total liabilities . . . . 92 2,578 14 1,167
-------- -------- -------- --------
Net assets . . . . . . . . $728,674 $395,734 $112,572 $387,763
======== ======== ======== ========
</TABLE>
See accompanying notes.
92
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SMALL/MID HIGH YIELD ENHANCED
CAP CORE BOND U.S. EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- -------------
<S> <C> <C> <C>
ASSETS
Cash . . . . . . . . . . . . . . . . . $ 9 $ -- $ 1
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value . . . . . . . . . . . . . . . 99,481 90,611 --
Investments in shares of portfolios of M
Fund Inc., at value . . . . . . . . . -- -- 14,140
Policy loans and accrued interest
receivable . . . . . . . . . . . . . . -- -- --
Receivable from:
John Hancock Variable Series Trust I . 16,714 1,478 --
M Fund Inc. . . . . . . . . . . . . . -- -- --
-------- ------- -------
Total assets . . . . . . . . . . . . . 116,204 92,089 14,141
LIABILITIES
Payable to John Hancock Variable Life
Insurance Company . . . . . . . . . . 16,712 1,477 --
Asset charges payable . . . . . . . . . 11 11 2
-------- ------- -------
Total liabilities . . . . . . . . . . . 16,723 1,488 2
-------- ------- -------
Net assets . . . . . . . . . . . . . . $ 99,481 $90,601 $14,139
======== ======= =======
</TABLE>
See accompanying notes.
93
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT SOVEREIGN BOND SUBACCOUNT
------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I . . . . . . . . . . . . . . . . $24,007,195 $11,641,271 $7,675,850 $ 17,792,726 $19,685,096 $17,409,990
M Fund Inc. . . . . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans . . . . . 1,211,333 1,008,607 875,892 4,084,783 4,027,376 3,926,698
----------- ----------- ----------- ------------ ----------- -----------
Total investment income . . . . . . . . . 25,218,528 12,649,878 8,551,742 21,877,509 23,712,472 21,336,688
Expenses:
Mortality and expense risks . . . . . . . 828,714 624,665 480,057 1,643,861 1,624,615 1,514,127
----------- ----------- ----------- ------------ ----------- -----------
Net investment income . . . . . . . . . . 24,389,814 12,025,213 8,071,685 20,233,648 22,087,857 19,822,561
Net realized and unrealized gain (loss) on
investments:
Net realized gain . . . . . . . . . . . . 4,239,424 3,520,199 4,216,904 192,098 1,600,539 1,088,488
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . 1,727,703 18,509,310 7,920,403 (20,304,536) (2,317,324) 2,987,952
----------- ----------- ----------- ------------ ----------- -----------
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . 5,967,127 22,029,509 12,137,307 (20,112,438) (716,785) 4,076,440
----------- ----------- ----------- ------------ ----------- -----------
Net increase in net assets resulting from
operations. . . . . . . . . . . . . . . . $30,356,941 $34,054,722 $20,208,992 $ 121,210 $21,371,072 $23,899,001
=========== =========== =========== ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX SUBACCOUNT SMALL CAP GROWTH SUBACCOUNT
-------------------------------------- ----------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ------------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series
Trust I . . . . . . $ 917,904 $3,394,842 $ 840,616 $1,272,230 $ -- $ 976
M Fund Inc. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . . 179,345 170,285 170,905 -- -- --
---------- ---------- ----------- ---------- -------- --------
Total investment
income . . . . . . . 1,097,249 3,565,127 1,011,521 1,272,230 -- 976
Expenses:
Mortality and expense
risks . . . . . . . 147,126 124,891 107,415 37,386 20,335 11,175
---------- ---------- ----------- ---------- -------- --------
Net investment income
(loss) . . . . . . . 950,123 3,440,236 904,106 1,234,844 (20,335) (10,199)
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain . 168,248 148,419 209,781 491,241 55,393 34,153
Net unrealized
appreciation
(depreciation)
during the period . 5,712,567 105,161 (2,036,425) 2,317,857 518,731 226,085
---------- ---------- ----------- ---------- -------- --------
Net realized and
unrealized gain
(loss) on investments 5,880,815 253,580 (1,826,644) 2,809,098 574,124 260,238
---------- ---------- ----------- ---------- -------- --------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $6,830,938 $3,693,816 $ (922,538) $4,043,942 $553,789 $250,039
========== ========== =========== ========== ======== ========
</TABLE>
See accompanying notes.
94
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INTERNATIONAL BALANCED SUBACCOUNT MID CAP GROWTH SUBACCOUNT
---------------------------------- ----------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . $ 99,184 $ 57,587 $ 30,867 $2,117,559 $ 461,919 $ --
M Fund Inc. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . . -- -- -- -- -- --
--------- --------- -------- ---------- ---------- ----------
Total investment
income . . . . . . . 99,184 57,587 30,867 2,117,559 461,919 --
Expenses:
Mortality and expense
risks . . . . . . . 6,368 4,696 2,758 58,898 16,758 5,801
--------- --------- -------- ---------- ---------- ----------
Net investment income
(loss) . . . . . . . 92,816 52,891 28,109 2,058,661 445,161 (5,801)
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 4,711 (4,506) 12,000 773,222 73,958 394
Net unrealized
appreciation
(depreciation)
during the period . (38,997) 78,455 (41,999) 6,801,000 647,137 199,441
--------- --------- -------- ---------- ---------- ----------
Net realized and
unrealized gain
(loss) on
investments . . . . (34,286) 73,949 (29,999) 7,574,222 721,095 199,835
--------- --------- -------- ---------- ---------- ----------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $ 58,530 $ 126,840 $ (1,890) $9,632,883 $1,166,256 $ 194,034
========= ========= ======== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE SUBACCOUNT MONEY MARKET SUBACCOUNT
-------------------------------- ----------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . $ 648,532 $ 433,626 $266,440 $2,943,852 $2,888,490 $2,746,662
M Fund Inc. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . . -- -- -- 985,509 973,241 957,390
--------- --------- -------- ---------- ---------- ----------
Total investment
income . . . . . . . 648,532 433,626 266,440 3,929,361 3,861,731 3,704,052
Expenses:
Mortality and expense
risks . . . . . . . 54,610 44,753 25,295 411,487 380,002 361,409
--------- --------- -------- ---------- ---------- ----------
Net investment income 593,922 388,873 241,145 3,517,874 3,481,729 3,342,643
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain . 165,556 673,582 217,073 -- -- --
Net unrealized
appreciation
(depreciation)
during the period . (569,216) (479,093) 532,936 -- -- --
--------- --------- -------- ---------- ---------- ----------
Net realized and
unrealized gain
(loss) on
investments . . . . (403,660) 194,489 750,009 -- -- --
--------- --------- -------- ---------- ---------- ----------
Net increase in net
assets resulting from
operations . . . . . $ 190,262 $ 583,362 $991,154 $3,517,874 $3,481,729 $3,342,643
========= ========= ======== ========== ========== ==========
</TABLE>
See accompanying notes.
95
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MID CAP VALUE SUBACCOUNT SMALL/MID CAP GROWTH SUBACCOUNT
--------------------------------------- --------------------------------------------
1999 1998 1997 1999 1998 1997
----------- -------------- ----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I . . . . . . . . . . . . . . . . $ 31,306 $ 40,338 $ 178,590 $ 1,903,687 $ 217,686 $ 1,022,881
M Fund Inc. . . . . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans . . . . . -- -- -- -- -- --
---------- ------------- ---------- ------------ ------------ ------------
Total investment income . . . . . . . . . 31,306 40,338 178,590 1,903,687 217,686 1,022,881
Expenses:
Mortality and expense risks . . . . . . . 29,798 23,760 6,329 69,847 63,334 54,469
---------- ------------- ---------- ------------ ------------ ------------
Net investment income . . . . . . . . . . 1,508 16,578 172,261 1,833,840 154,352 968,412
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) . . . . . . . . (241,740) (422,902) 121,152 (13,020) 56,968 533,297
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . 469,537 (260,362) (86,033) (1,274,161) 334,213 (1,073,252)
---------- ------------- ---------- ------------ ------------ ------------
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . 227,797 (683,264) 35,119 (1,287,181) 391,181 (539,955)
---------- ------------- ---------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . $ 229,305 $ (666,686) $ 207,380 $ 546,659 $ 545,533 $ 428,457
========== ============= ========== ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY SUBACCOUNT GROWTH & INCOME SUBACCOUNT
-------------------------------------- ------------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ---------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I . . . . . . . . . . . . . . . . $ 771,050 $ 817,633 $ 957,079 $124,750,392 $ 96,326,313 $ 99,799,718
M Fund Inc. . . . . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans . . . . . 131,461 145,212 140,517 12,877,539 11,727,553 10,448,315
----------- ----------- ---------- ------------ ------------ ------------
Total investment income . . . . . . . . . 902,511 962,845 1,097,596 137,627,931 108,053,866 110,248,033
Expenses:
Mortality and expense risks . . . . . . . 78,893 86,610 76,454 6,531,512 5,589,689 4,658,703
----------- ----------- ---------- ------------ ------------ ------------
Net investment income . . . . . . . . . . 823,618 876,235 1,021,142 131,096,419 102,464,177 105,589,330
Net realized and unrealized gain (loss) on
investments:
Net realized gain . . . . . . . . . . . . 123,591 442,876 551,925 22,802,197 22,835,488 16,543,458
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . (1,106,755) (3,720,942) 447,661 7,687,109 112,457,395 67,250,127
----------- ----------- ---------- ------------ ------------ ------------
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . (983,164) (3,278,066) 999,586 30,489,306 135,292,883 83,793,585
----------- ----------- ---------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . $ (159,546) $(2,401,831) $2,020,728 $161,585,725 $237,757,060 $189,382,915
=========== =========== ========== ============ ============ ============
</TABLE>
See accompanying notes.
96
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MANAGED SUBACCOUNT SHORT-TERM BOND SUBACCOUNT
-------------------------------------- ---------------------------------
1999 1998 1997 1999 1998 1997
------------ ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series
Trust I . . . . . . $39,951,885 $37,907,821 $32,757,460 $ 53,689 $31,261 $ 22,079
M Fund Inc. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . . 5,217,121 4,949,021 4,669,363 -- -- --
----------- ----------- ----------- ---------- -------- ---------
Total investment
income . . . . . . . 45,169,006 42,856,842 37,426,823 53,689 31,261 22,079
Expenses:
Mortality and expense
risks . . . . . . . 2,636,085 2,381,406 2,111,314 5,065 3,052 2,202
----------- ----------- ----------- ---------- -------- ---------
Net investment income 42,532,921 40,475,436 35,315,509 48,624 28,209 19,877
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 5,060,826 5,853,076 5,663,060 (3,107) 2,008 235
Net unrealized
appreciation
(depreciation)
during the period . (9,288,287) 24,834,482 16,843,903 (23,648) (5,287) 1,405
----------- ----------- ----------- ---------- -------- ---------
Net realized and
unrealized gain
(loss) on investments (4,227,461) 30,687,558 22,506,963 (26,755) (3,279) 1,640
----------- ----------- ----------- ---------- -------- ---------
Net increase in net
assets resulting from
operations . . . . . $38,305,460 $71,162,994 $57,822,472 $ 21,869 $24,930 $ 21,517
=========== =========== =========== ========== ======== =========
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE SUBACCOUNT INTERNATIONAL OPPORTUNITIES SUBACCOUNT
-------------------------------- -------------------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- --------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series
Trust I . . . . . . $ 97,290 $ 24,781 $256,363 $ 354,646 $27,799 $ 35,111
M Fund Inc. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . . -- -- -- -- -- --
--------- --------- -------- ---------- -------- ---------
Total investment
income . . . . . . . 97,290 24,781 256,363 354,646 27,799 35,111
Expenses:
Mortality and expense
risks . . . . . . . 24,661 23,711 10,530 24,257 19,481 11,575
--------- --------- -------- ---------- -------- ---------
Net investment income 72,629 1,070 245,833 330,389 8,318 23,536
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . (217,582) 61,917 129,604 123,861 64,757 78,058
Net unrealized
appreciation
(depreciation)
during the period . (40,472) (364,339) (32,439) 839,140 339,709 (141,034)
--------- --------- -------- ---------- -------- ---------
Net realized and
unrealized gain
(loss) on investments (258,054) (302,422) 97,165 963,001 404,466 (62,976)
--------- --------- -------- ---------- -------- ---------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $(185,425) $(301,352) $342,998 $1,293,390 $412,784 $ (39,440)
========= ========= ======== ========== ======== =========
</TABLE>
See accompanying notes.
97
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EQUITY INDEX SUBACCOUNT GLOBAL BOND SUBACCOUNT
---------------------------------- -------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series
Trust I . . . . . . $ 921,698 $ 367,284 $ 220,686 $ 91,316 $62,244 $84,597
M Fund Inc. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . . -- -- -- -- -- --
---------- ---------- ---------- --------- ------- -------
Total investment
income . . . . . . . 921,698 367,284 220,686 91,316 62,244 84,597
Expenses:
Mortality and expense
risks . . . . . . . 103,983 60,274 28,637 9,736 7,516 5,827
---------- ---------- ---------- --------- ------- -------
Net investment income 817,715 307,010 192,049 81,580 54,728 78,770
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 471,802 132,619 38,987 (1,996) 32,917 5,891
Net unrealized
appreciation
(depreciation)
during the period . 2,019,913 2,082,107 1,193,531 (126,001) 11,342 (3,195)
---------- ---------- ---------- --------- ------- -------
Net realized and
unrealized gain
(loss) on investments 2,491,715 2,214,726 1,232,518 (127,997) 44,259 2,696
---------- ---------- ---------- --------- ------- -------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $3,309,430 $2,521,736 $1,424,567 $ (46,417) $98,987 $81,466
========== ========== ========== ========= ======= =======
</TABLE>
<TABLE>
<CAPTION>
TURNER CORE GROWTH SUBACCOUNT BRANDES INTERNATIONAL EQUITY SUBACCOUNT
------------------------------ ----------------------------------------
1999 1998 1997 1999 1998 1997
---------- --------- --------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series
Trust I . . . . . . $ -- $ -- $ -- $ -- $ -- $ --
M Fund Inc. . . . . 38,038 5,535 11,090 18,453 13,237 2,278
Interest income on
policy loans . . . . -- -- -- -- -- --
-------- ------- ------- -------- ------- ------
Total investment
income . . . . . . . 38,038 5,535 11,090 18,453 13,237 2,278
Expenses:
Mortality and expense
risks . . . . . . . 2,102 1,022 505 1,904 1,143 746
-------- ------- ------- -------- ------- ------
Net investment income 35,936 4,513 10,585 16,549 12,094 1,532
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain . 44,245 14,364 3,166 7,704 1,184 133
Net unrealized
appreciation during
the period . . . . 37,727 49,605 12,370 119,400 15,813 2,674
-------- ------- ------- -------- ------- ------
Net realized and
unrealized gain on
investments . . . . 81,972 63,969 15,536 127,104 16,997 2,807
-------- ------- ------- -------- ------- ------
Net increase in net
assets resulting from
operations . . . . . $117,908 $68,482 $26,121 $143,653 $29,091 $4,339
======== ======= ======= ======== ======= ======
</TABLE>
See accompanying notes.
98
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
FRONTIER CAPITAL APPRECIATION EMERGING MARKETS EQUITY GLOBAL
SUBACCOUNT SUBACCOUNT EQUITY SUBACCOUNT
------------------------------ ------------------------ --------------------
1999 1998 1997 1999 1998* 1999 1998*
--------- ---------- -------- ------------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . . . . $ -- $^^ $ -- $ 13,510 $ 1 $ 508 $ 1
M Fund Inc. . . . . . . . . . . . . . . . . . 20,787 1,888 8,986 -- -- -- --
Interest income on policy loans . . . . . . . . -- -- -- -- -- -- --
-------- -------- ------- -------- ----- ------- -------
Total investment income . . . . . . . . . . . . 20,787 1,888 8,986 13,510 1 508 1
Expenses:
Mortality and expense risks . . . . . . . . . 3,019 2,096 1,464 720 -- 267 --
-------- -------- ------- -------- ----- ------- -------
Net investment income (loss) . . . . . . . . . 17,768 (208) 7,522 12,790 1 241 1
Net realized and unrealized gain on investments:
Net realized gain . . . . . . . . . . . . . . 22,678 12,123 9,048 5,339 -- 602 1
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . 164,599 (17,930) 40,541 86,570 10 13,424 45
-------- -------- ------- -------- ----- ------- -------
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . . . 187,277 (5,807) 49,589 91,909 10 14,026 46
-------- -------- ------- -------- ----- ------- -------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . $205,045 $ (6,015) $57,111 $104,699 $ 11 $14,267 $ 47
======== ======== ======= ======== ===== ======= =======
</TABLE>
<TABLE>
<CAPTION>
SMALL/MID ENHANCED
CAP CORE HIGH YIELD U.S. EQUITY
BOND INDEX SUBACCOUNT SUBACCOUNT BOND SUBACCOUNT SUBACCOUNT
---------------------- ------------- ---------------- --------------
1999 1998* 1999 1998* 1999 1998* 1999**
------------ --------- ------ ------- -------- ------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . $ 17,417 $ 149 $6,810 $-- $2,748 $ 19 $ --
M Fund Inc. . . . . -- -- -- -- -- -- 1,117
Interest income on
policy loans . . . . -- -- -- -- -- -- --
-------- ----- ------ -- ------ ---- ------
Total investment
income . . . . . . . 17,417 149 6,810 2,748 19 1,117
Expenses:
Mortality and expense
risks . . . . . . . 1,565 3 178 -- 206 1 4
-------- ----- ------ -- ------ ---- ------
Net investment income 15,852 146 6,632 -- 2,542 18 1,113
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . (1,422) (1) 252 -- (186) -- 91
Net unrealized
appreciation
(depreciation)
during the period . (22,820) (196) 3,005 6 (511) (26) (879)
-------- ----- ------ -- ------ ---- ------
Net realized and
unrealized gain
(loss) on
investments . . . . (24,242) (197) 3,257 6 (697) (26) (788)
-------- ----- ------ -- ------ ---- ------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $ (8,390) $ (51) $9,889 $6 $1,845 $(8) $ 325
======== ===== ====== == ====== ==== ======
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
** From March 9, 1999 (commencement of operations).
See accompanying notes.
99
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT SOVEREIGN BOND SUBACCOUNT
------------------------------------------ ------------------------------------------
1999 1998 1997 1999 1998 1997
------------- ------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . $ 24,389,814 $ 12,025,213 $ 8,071,685 $ 20,233,648 $ 22,087,857 $ 19,822,561
Net realized gains . . . . . . . . . 4,239,424 3,520,199 4,216,904 192,098 1,600,539 1,088,488
Net unrealized appreciation
(depreciation) during the period . 1,727,703 18,509,310 7,920,403 (20,304,536) (2,317,324) 2,987,952
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations . . . . . . . . . . 30,356,941 34,054,722 20,208,992 121,210 21,371,072 23,899,001
From policyholder transactions:
Net premiums from policyholders . . 37,307,814 21,681,632 18,819,133 26,114,799 32,901,747 31,136,450
Net benefits to policyholders . . . (25,817,420) (21,510,240) (19,915,971) (35,577,616) (39,577,750) (39,506,771)
Net increase (decrease) in policy
loans . . . . . . . . . . . . . . . -- 2,561,877 (41,068) -- 1,607,456 1,612,490
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder
transactions . . . . . . . . . . . . 11,490,394 2,733,269 (1,137,906) (9,462,817) (5,068,547) (6,757,831)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets 41,847,335 36,787,991 19,071,086 (9,341,607) 16,302,525 17,141,170
Net assets at beginning of
period . . . . . . . . . . . . . . . 135,214,997 98,427,006 79,355,920 302,462,406 286,159,881 269,018,711
------------ ------------ ------------ ------------ ------------ ------------
Net assets at end of period . . . . . $177,062,332 $135,214,997 $98,427,006 $293,120,799 $302,462,406 $286,159,881
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX SUBACCOUNT SMALL CAP GROWTH SUBACCOUNT
--------------------------------------- ---------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . $ 950,123 $ 3,440,236 $ 904,106 $ 1,234,844 $ (20,335) $ (10,199)
Net realized gains . . . . . . . . . 168,248 148,419 209,781 491,241 55,393 34,153
Net unrealized appreciation
(depreciation) during the period . 5,712,567 105,161 (2,036,425) 2,317,857 518,731 226,085
----------- ----------- ----------- ----------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations . . . . . 6,830,938 3,693,816 (922,538) 4,043,942 553,789 250,039
From policyholder transactions:
Net premiums from policyholders . . 7,373,967 6,549,988 6,398,146 4,316,218 2,382,203 1,906,439
Net benefits to policyholders . . . (6,834,914) (5,210,982) (4,052,306) (2,206,402) (998,381) (626,114)
Net increase in policy loans . . . . -- 86,200 41,466 -- -- --
----------- ----------- ----------- ----------- ---------- ----------
Net increase in net assets resulting
from policyholder transactions . . . 539,053 1,425,206 2,387,306 2,109,816 1,383,822 1,280,325
----------- ----------- ----------- ----------- ---------- ----------
Net increase in net assets . . . . . 7,369,991 5,119,022 1,464,768 6,153,758 1,937,611 1,530,364
Net assets at beginning of
period . . . . . . . . . . . . . . . 24,529,048 19,410,026 17,945,258 4,671,820 2,734,209 1,203,845
----------- ----------- ----------- ----------- ---------- ----------
Net assets at end of period . . . . . $31,899,039 $24,529,048 $19,410,026 $10,825,578 $4,671,820 $2,734,209
=========== =========== =========== =========== ========== ==========
</TABLE>
See accompanying notes.
100
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INTERNATIONAL BALANCED SUBACCOUNT MID CAP GROWTH SUBACCOUNT
--------------------------------------- ---------------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . . . $ 92,816 $ 52,891 $ 28,109 $ 2,058,661 $ 445,161 $ (5,801)
Net realized gains (losses) . . . . . . 4,711 (4,506) 12,000 773,222 73,958 394
Net unrealized appreciation
(depreciation) during the period . . . (38,997) 78,455 (41,999) 6,801,000 647,137 199,441
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations . . . . . . . 58,530 126,840 (1,890) 9,632,883 1,166,256 194,034
From policyholder transactions:
Net premiums from policyholders . . . . 377,958 341,482 602,033 8,941,124 3,164,065 1,031,218
Net benefits to policyholders . . . . . (131,331) (310,766) (102,953) (2,937,257) (612,975) (294,344)
Net increase in policy loans . . . . . . -- -- -- -- -- --
----------- ----------- ----------- ------------ ------------ ------------
Net increase in net assets resulting from
policyholder transactions . . . . . . . 246,627 30,716 499,080 6,003,867 2,551,090 736,874
----------- ----------- ----------- ------------ ------------ ------------
Net increase in net assets . . . . . . . 305,157 157,556 497,190 15,636,750 3,717,346 930,908
Net assets at beginning of period . . . . 872,075 714,519 217,329 5,215,505 1,498,159 567,251
----------- ----------- ----------- ------------ ------------ ------------
Net assets at end of period . . . . . . . $ 1,177,232 $ 872,075 $ 714,519 $ 20,852,255 $ 5,215,505 $ 1,498,159
=========== =========== =========== ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE SUBACCOUNT MONEY MARKET SUBACCOUNT
--------------------------------------- ---------------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . $ 593,922 $ 388,873 $ 241,145 $ 3,517,874 $ 3,481,729 $ 3,342,641
Net realized gains . . . . . . . . . . . 165,556 673,582 217,073 -- -- --
Net unrealized appreciation
(depreciation) during the period . . . (569,216) (479,093) 532,936 -- -- --
----------- ----------- ----------- ------------ ------------ ------------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . 190,262 583,362 991,154 3,517,874 3,481,729 3,342,641
From policyholder transactions:
Net premiums from policyholders . . . . 3,166,658 4,214,076 3,739,319 33,694,123 24,612,731 19,023,054
Net benefits to policyholders . . . . . (1,903,017) (3,212,048) (1,140,574) (30,672,090) (24,024,723) (20,817,572)
Net increase in policy loans . . . . . . -- -- -- -- 421,166 390,775
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder
transactions . . . . . . . . . . . . . . 1,263,641 1,002,028 2,598,745 3,022,033 1,009,174 (1,403,743)
----------- ----------- ----------- ------------ ------------ ------------
Net increase in net assets . . . . . . . 1,453,903 1,585,390 3,589,899 6,539,907 4,490,903 1,938,898
Net assets at beginning of period . . . . 8,099,390 6,514,000 2,924,101 70,098,734 65,607,831 63,668,933
----------- ----------- ----------- ------------ ------------ ------------
Net assets at end of period . . . . . . . $ 9,553,293 $ 8,099,390 $6,514,000 $ 76,638,641 $ 70,098,734 $ 65,607,831
=========== =========== =========== ============ ============ ============
</TABLE>
See accompanying notes.
101
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MID CAP VALUE SUBACCOUNT SMALL/MID CAP GROWTH SUBACCOUNT
--------------------------------------- ---------------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . $ 1,508 $ 16,578 $ 172,261 $ 1,833,840 $ 154,352 $ 968,412
Net realized gains (losses) . . . . . (241,740) (422,902) 121,152 (13,020) 56,968 533,297
Net unrealized appreciation
(depreciation) during the period . . 469,537 (260,362) (86,033) (1,274,161) 334,213 (1,073,252)
----------- ----------- ----------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations . . . . . . 229,305 (666,686) 207,380 546,659 545,533 428,457
From policyholder transactions:
Net premiums from policyholders . . . 1,886,594 5,997,691 2,070,644 3,493,643 3,953,326 6,338,416
Net benefits to policyholders . . . . (1,745,112) (2,912,034) (190,430) (3,105,108) (3,311,846) (3,379,629)
Net increase in policy loans . . . . -- -- -- -- -- --
----------- ----------- ----------- ------------- ------------- -------------
Net increase in net assets resulting
from policyholder transactions . . . 141,482 3,085,657 1,880,214 388,535 641,480 2,958,787
----------- ----------- ----------- ------------- ------------- -------------
Net increase in net assets . . . . . . 370,787 2,418,971 2,087,594 935,194 1,187,013 3,387,244
Net assets at beginning of period . . 4,865,793 2,446,822 359,228 11,474,379 10,287,366 6,900,122
----------- ----------- ----------- ------------- ------------- -------------
Net assets at end of period . . . . . $ 5,236,580 $ 4,865,793 $ 2,446,822 $ 12,409,573 $ 11,474,379 $ 10,287,366
=========== =========== =========== ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY SUBACCOUNT GROWTH & INCOME SUBACCOUNT
--------------------------------------- --------------------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income . . . . . . . $ 823,618 $ 876,235 $ 1,021,142 $ 131,096,419 $ 102,464,177 $ 105,589,330
Net realized gains . . . . . . . . 123,591 442,876 551,925 22,802,197 22,835,488 16,543,458
Net unrealized appreciation
(depreciation) during the period . (1,106,755) (3,720,942) 447,661 7,687,109 112,457,395 67,250,127
----------- ----------- ----------- -------------- -------------- -------------
Net increase (decrease) in net assets
resulting from operations . . . . . (159,546) (2,401,831) 2,020,728 161,585,725 237,757,060 189,382,915
From policyholder transactions:
Net premiums from policyholders . . 2,304,591 6,295,255 7,786,904 101,973,160 92,955,980 86,308,294
Net benefits to policyholders . . . (3,311,591) (5,507,305) (5,481,110) (133,701,210) (134,661,151) (115,839,460)
Net increase (decrease) in policy
loans. . . . . . . . . . . . . . . -- (83,216) 265,517 -- 18,165,114 18,568,293
----------- ----------- ----------- -------------- -------------- -------------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . . . . . . . . . . (1,007,000) 704,734 2,571,311 (31,728,050) (23,540,057) (10,962,873)
----------- ----------- ----------- -------------- -------------- -------------
Net increase (decrease) in net assets (1,166,546) (1,697,097) 4,592,039 129,857,675 214,217,003 178,420,042
Net assets at beginning of period . 14,545,018 16,242,115 11,650,076 1,148,881,879 934,664,876 756,244,834
----------- ----------- ----------- -------------- -------------- -------------
Net assets at end of period . . . . $13,378,472 $14,545,018 $16,242,115 $1,278,739,554 $1,148,881,879 $ 934,664,876
=========== =========== =========== ============== ============== =============
</TABLE>
See accompanying notes.
102
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MANAGED SUBACCOUNT SHORT-TERM BOND SUBACCOUNT
------------------------------------------ -------------------------------------
1999 1998 1997 1999 1998 1997
------------- ------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . $ 42,532,921 $ 40,475,436 $35,315,509 $ 48,624 $ 28,209 $ 19,877
Net realized gains (losses) . . . . . 5,060,826 5,853,076 5,663,060 (3,107) 2,008 235
Net unrealized appreciation
(depreciation) during the period . . (9,288,287) 24,834,482 16,843,903 (23,648) (5,287) 1,405
------------ ------------ ------------ ----------- ----------- ---------
Net increase (decrease) in net assets
resulting from operations . . . . . . 38,305,460 71,162,994 57,822,472 21,869 24,930 21,517
From policyholder transactions:
Net premiums from policyholders . . . 44,546,082 40,631,684 40,318,523 690,849 435,150 278,114
Net benefits to policyholders . . . . (55,332,758) (55,447,667) (54,498,285) (178,124) (274,762) (218,771)
Net increase in policy loans . . . . -- 5,379,590 4,761,829 -- -- --
------------ ------------ ------------ ----------- ----------- ---------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . . . . . . . . . . . (10,786,676) (9,436,393) (9,417,933) 512,725 160,388 59,343
------------ ------------ ------------ ----------- ----------- ---------
Net increase in net assets . . . . . . 27,518,784 61,726,601 48,404,539 534,594 185,318 80,860
Net assets at beginning of period . . 472,553,966 410,827,365 362,422,826 594,889 409,571 328,711
------------ ------------ ------------ ----------- ----------- ---------
Net assets at end of period . . . . . $500,072,750 $472,553,966 $410,827,365 $ 1,129,483 $ 594,889 $ 409,571
------------ ------------ ------------ ----------- ----------- ---------
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE SUBACCOUNT INTERNATIONAL OPPORTUNITIES SUBACCOUNT
-------------------------------------- ---------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . $ 72,629 $ 1,070 $ 245,833 $ 330,389 $ 8,318 $ 23,536
Net realized gains (losses) . . . . . (217,582) 61,917 129,604 123,861 64,757 78,058
Net unrealized appreciation
(depreciation) during the period . . (40,472) (364,359) (32,439) 839,140 339,709 (141,034)
----------- ----------- ---------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations . . . . . . (185,425) (301,372) 342,998 1,293,390 412,784 (39,440)
From policyholder transactions:
Net premiums from policyholders . . . 1,446,109 2,644,808 2,466,836 1,632,955 2,203,753 1,969,364
Net benefits to policyholders . . . . (1,547,128) (1,288,464) (358,679) (1,315,539) (1,443,700) (709,490)
Net increase in policy loans . . . . -- -- -- -- -- --
----------- ----------- ---------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . . . . . . . . . . . (101,019) 1,356,344 2,108,157 317,416 760,053 1,259,874
----------- ----------- ---------- ----------- ----------- ----------
Net increase (decrease) in net assets (286,444) 1,054,972 2,451,155 1,610,806 1,172,837 1,220,434
Net assets at beginning of period . . 4,397,860 3,342,888 891,733 3,699,780 2,526,943 1,306,509
----------- ----------- ---------- ----------- ----------- ----------
Net assets at end of period . . . . . $ 4,111,416 $ 4,397,860 $3,342,888 $ 5,310,586 $ 3,699,780 $2,526,943
=========== =========== ========== =========== =========== ==========
</TABLE>
See accompanying notes.
103
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EQUITY INDEX SUBACCOUNT GLOBAL BOND SUBACCOUNT
-------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . . . . $ 817,715 $ 307,010 $ 192,049 $ 81,580 $ 54,728 $ 78,770
Net realized gains (losses) . . . . . . . . . 471,802 132,619 38,987 (1,996) 32,917 5,891
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . 2,019,913 2,082,107 1,193,531 (126,001) 11,342 (3,195)
----------- ----------- ---------- ---------- ----------- ----------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . 3,309,430 2,521,736 1,424,567 (46,417) 98,987 81,466
From policyholder transactions:
Net premiums from policyholders . . . . . . . 7,762,529 4,632,113 6,068,371 1,115,699 798,933 807,985
Net benefits to policyholders . . . . . . . . (2,563,485) (1,120,852) (260,531) (292,075) (1,158,109) (201,240)
Net increase in policy loans . . . . . . . . . -- -- -- -- -- --
----------- ----------- ---------- ---------- ----------- ----------
Net increase (decrease) in net assets resulting
from policyholder transactions . . . . . . . . 5,199,044 3,511,261 5,807,840 823,624 (359,176) 606,745
----------- ----------- ---------- ---------- ----------- ----------
Net increase (decrease) in net assets . . . . . 8,508,474 6,032,997 7,232,407 777,207 (260,189) 688,211
Net assets at beginning of period . . . . . . . 13,609,150 7,576,153 343,746 1,105,468 1,365,657 677,446
----------- ----------- ---------- ---------- ----------- ----------
Net assets at end of period . . . . . . . . . . $22,117,624 $13,609,150 $7,576,153 $1,882,675 $ 1,105,468 $1,365,657
=========== =========== ========== ========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
TURNER CORE GROWTH SUBACCOUNT BRANDES INTERNATIONAL EQUITY SUBACCOUNT
------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
---------- --------- --------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 35,936 $ 4,513 $ 10,585 $ 16,549 $12,094 $ 1,532
Net realized gains . 44,245 14,364 3,166 7,704 1,184 133
Net unrealized
appreciation during
the period . . . . 37,727 49,605 12,370 119,400 15,813 2,674
--------- -------- -------- -------- -------- --------
Net increase in net
assets resulting from
operations . . . . . 117,908 68,482 26,121 143,653 29,091 4,339
From policyholder
transactions:
Net premiums from
policyholders . . . 240,351 203,590 91,440 239,618 55,021 146,796
Net benefits to
policyholders . . . (136,661) (77,651) (9,878) (29,520) (10,341) (34,985)
Net increase in
policy loans . . . -- -- -- -- -- --
--------- -------- -------- -------- -------- --------
Net increase in net
assets resulting from
policyholder
transactions . . . . 103,690 125,939 81,562 210,098 44,680 111,811
--------- -------- -------- -------- -------- --------
Net increase in net
assets . . . . . . . 221,598 194,421 107,683 353,751 73,771 116,150
Net assets at
beginning of period 314,594 120,173 12,490 234,377 160,606 44,456
--------- -------- -------- -------- -------- --------
Net assets at end of
period . . . . . . . $ 536,192 $314,594 $120,173 $588,128 $234,377 $160,606
========= ======== ======== ======== ======== ========
</TABLE>
See accompanying notes.
104
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
FRONTIER CAPITAL EMERGING MARKETS EQUITY GLOBAL
APPRECIATION SUBACCOUNT SUBACCOUNT EQUITY SUBACCOUNT
------------------------------- ------------------------ ---------------------
1999 1998 1997 1999 1998* 1999 1998*
--------- ---------- --------- ------------ ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . $ 17,768 $ (208) $ 7,522 $ 12,790 $ 1 $ 241 $ 1
Net realized gains . . . . . . . . . 22,678 12,123 9,048 5,339 -- 602 1
Net unrealized appreciation
(depreciation) during the
period . . . . . . . . . . . . . . . 164,599 (17,930) 40,541 86,570 10 13,424 45
-------- --------- -------- --------- -------- -------- -------
Net increase (decrease) in net assets
resulting from operations . . . . . . 205,045 (6,015) 57,111 104,699 11 14,267 47
From policyholder transactions:
Net premiums from
policyholders . . . . . . . . . . . 255,268 128,779 327,804 433,406 2,018 108,420 915
Net benefits to policyholders . . . . (89,136) (146,083) (47,276) (144,400) -- (11,064) (13)
Net increase in policy loans . . . . -- -- -- -- -- -- --
-------- --------- -------- --------- -------- -------- -------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . . . . . . . . . . . 166,132 (17,304) 280,528 289,006 2,018 97,356 902
-------- --------- -------- --------- -------- -------- -------
Net increase (decrease) in net assets 371,177 (23,319) 337,639 393,705 2,029 111,623 949
Net assets at beginning of period . . 357,497 380,816 43,177 2,029 0 949 0
-------- --------- -------- --------- -------- -------- -------
Net assets at end of period . . . . . $728,674 $ 357,497 $380,816 $395,734 $ 2,029 $112,572 $ 949
======== ========= ======== ========= ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
ENHANCED
U.S.
SMALL/MID HIGH YIELD EQUITY
BOND INDEX SUBACCOUNT CAP CORE SUBACCOUNT BOND SUBACCOUNT SUBACCOUNT
---------------------- -------------------- ----------------- ---------------
1999 1998* 1999 1998* 1999 1998* 1999**
----------- ---------- ---------- --------- --------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . $ 15,852 $ 146 $ 6,632 $ -- $ 2,542 $ 18 $ 1,113
Net realized gains (losses) . . . . . (1,422) (1) 252 -- (186) -- 91
Net unrealized appreciation
(depreciation) during the
period . . . . . . . . . . . . . . . (22,820) (196) 3,005 6 (511) (26) (879)
-------- ------- ------- ---- -------- ------ -------
Net increase (decrease) in net assets
resulting from operations . . . . . . (8,390) (51) 9,889 6 1,845 (8) 325
From policyholder transactions:
Net premiums from
policyholders . . . . . . . . . . . 412,326 10,254 97,385 104 98,955 2,887 13,814
Net benefits to policyholders . . . . (26,307) (69) (7,901) (2) (13,078) -- --
Net increase in policy loans . . . . -- -- -- -- -- -- --
-------- ------- ------- ---- -------- ------ -------
Net increase in net assets resulting
from policyholder transactions . . . 386,019 10,185 89,484 102 85,877 2,887 13,814
-------- ------- ------- ---- -------- ------ -------
Net increase in net assets . . . . . . 377,629 10,134 99,373 108 87,722 2,879 14,139
Net assets at beginning of period . . 10,134 0 108 0 2,879 0 0
-------- ------- ------- ---- -------- ------ -------
Net assets at end of period . . . . . $387,763 $10,134 $99,481 $108 $ 90,601 $2,879 $14,139
======== ======= ======= ==== ======== ====== =======
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
** From March 9, 1999 (commencement of operations).
See accompanying notes.
105
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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-seven 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-seven Portfolios of the Fund and M Fund which are currently available are
the Large Cap Growth, Sovereign Bond, International Equity Index, Small Cap
Growth, International Balanced, Mid Cap Growth, Large Cap Value, Money Market,
Mid Cap Value, Small/Mid Cap Growth (formerly, Diversified Mid Cap Growth), Real
Estate Equity, Growth & Income, Managed, Short-Term Bond, Small Cap Value,
International Opportunities, Equity Index, Global Bond (formerly, Strategic
Bond), Turner Core Growth, Brandes International Equity, Frontier Capital
Appreciation, Emerging Markets Equity, Global Equity, Bond Index, Small/Mid Cap
CORE, High Yield Bond, and Enhanced U.S. Equity 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 underlying portfolio 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 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.
106
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
107
<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, 1999 are as follows:
<TABLE>
<CAPTION>
PORTFOLIO SHARES OWNED COST VALUE
--------- ------------ ------------ ----------------
<S> <C> <C> <C>
Large Cap Growth . . . . . . 5,741,593 $120,709,045 $ 156,931,243
Sovereign Bond . . . . . . . 25,890,030 250,666,359 236,200,057
International Equity Index . 1,479,056 24,178,244 29,055,936
Small Cap Growth . . . . . . 566,326 7,786,928 10,825,578
International Balanced . . . 109,967 1,176,141 1,177,232
Mid Cap Growth . . . . . . . 713,403 13,208,576 20,852,255
Large Cap Value . . . . . . . 708,140 9,871,242 9,553,293
Money Market . . . . . . . . 6,251,999 62,519,986 62,519,986
Mid Cap Value . . . . . . . . 409,851 5,090,205 5,236,581
Small/Mid Cap Growth . . . . 884,190 13,682,215 12,409,573
Real Estate Equity . . . . . 1,000,760 13,989,522 11,482,706
Growth & Income . . . . . . . 54,521,668 796,471,840 1,091,050,404
Managed . . . . . . . . . . . 27,360,590 363,175,625 422,672,470
Short-Term Bond . . . . . . . 116,179 1,157,416 1,129,483
Small Cap Value . . . . . . . 376,603 4,498,794 4,111,416
International Opportunities . 350,017 4,215,384 5,310,586
Equity Index . . . . . . . . 1,081,124 16,808,530 22,117,624
Global Bond . . . . . . . . . 191,740 1,993,841 1,882,675
Turner Core Growth . . . . . 23,384 436,035 536,192
Brandes International Equity 37,895 449,896 588,128
Frontier Capital Appreciation 34,502 539,359 728,674
Emerging Markets Equity . . . 32,273 309,153 395,733
Global Equity . . . . . . . . 9,277 99,103 112,572
Bond Index . . . . . . . . . 41,614 410,779 387,762
Small/Mid Cap CORE . . . . . 10,135 96,470 99,481
High Yield Bond . . . . . . . 10,083 91,148 90,611
Enhanced U.S. Equity . . . . 674 15,019 14,140
</TABLE>
108
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS--(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 1999,
were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
--------- ------------ -------------
<S> <C> <C>
Large Cap Growth . . . . . . . . . $ 40,147,156 $ 8,250,657
Sovereign Bond . . . . . . . . . . 27,217,744 17,748,511
International Equity Index . . . . 4,421,148 3,377,977
Small Cap Growth . . . . . . . . . 4,824,260 1,479,601
International Balanced . . . . . . 640,162 300,719
Mid Cap Growth . . . . . . . . . . 9,490,182 1,427,655
Large Cap Value . . . . . . . . . . 2,984,422 1,126,859
Money Market . . . . . . . . . . . 21,519,371 15,378,894
Mid Cap Value . . . . . . . . . . . 1,426,492 1,283,502
Small/Mid Cap Growth . . . . . . . 3,998,048 1,775,674
Real Estate Equity . . . . . . . . 1,670,570 1,772,028
Growth & Income . . . . . . . . . . 133,888,047 52,458,290
Managed . . . . . . . . . . . . . . 46,301,140 19,231,354
Short-Term Bond . . . . . . . . . . 682,313 120,964
Small Cap Value . . . . . . . . . . 1,054,005 1,082,396
International Opportunities . . . . 1,758,914 1,111,110
Equity Index . . . . . . . . . . . 7,177,051 1,160,291
Global Bond . . . . . . . . . . . . 1,188,656 283,452
Turner Core Growth . . . . . . . . 279,803 140,177
Brandes International Equity . . . 255,671 29,025
Frontier Capital Appreciation . . . 401,413 217,513
Emerging Markets Equity . . . . . . 454,479 152,683
Global Equity . . . . . . . . . . . 107,485 9,888
Bond Index . . . . . . . . . . . . 429,057 27,186
Small/Mid Cap CORE . . . . . . . . 106,540 10,425
High Yield Bond . . . . . . . . . . 99,666 11,238
Enhanced U.S. Equity . . . . . . . 26,361 11,432
</TABLE>
109
<PAGE>
ALPHABETICAL INDEX OF KEY WORDS AND PHRASES
This index should help you locate more information about many of the important
concepts in this prospectus.
<TABLE>
<CAPTION>
KEY WORD OR PHRASE PAGE KEY WORD OR PHRASE PAGE
<S> <C> <C> <C>
Account. . . . . . . . 27 29
account value. . . . . 7 8
attained age . . . . . 8 13
beneficiary. . . . . . 37 8
business day . . . . . 28 4
changing Option 1or 2 14 12
changing the face
amount. . . . . . . . 14 9
charges. . . . . . . . 7 15
Code . . . . . . . . . 33 5
cost of insurance rates 8 29
date of issue. . . . . 29 29
death benefit. . . . . 4 4
deductions . . . . . . 7 2
dollar cost averaging. 11 17
expenses of the Series
Funds . . . . . . . . 9 6
face amount. . . . . . 13 7
fixed investment option 28 2
full surrender . . . . 12 27
fund . . . . . . . . . 2 1
grace period . . . . . 6 13
guaranteed death
benefit feature . . . 6 27
Guaranteed Death
Benefit Premium . . . 6 12
insurance charge . . . 8 8
insured person . . . . 4 12
investment options . . 1 7
JHVLICO. . . . . . . . 27 33
John Hancock Variable
Series Trust . . . . 2 18
lapse. . . . . . . . . 6 11
loan . . . . . . . . . 12 1
loan interest. . . . . 12 27
maximum premiums . . . 5 12
Minimum Initial Premium 28 9
minimum insurance
amount. . . . . . . . 13 4
modified endowment
contract. . . . . . . 34
</TABLE>
110
<PAGE>
PROSPECTUS DATED NOVEMBER 1, 2000
MEDALLION VARIABLE UNIVERSAL LIFE II
a flexible premium variable life insurance policy
issued by
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY ("JHVLICO")
The policy provides an investment option with fixed rates of return
declared by JHVLICO and the following variable investment options:
<TABLE>
<CAPTION>
VARIABLE INVESTMENT OPTION MANAGED BY
-------------------------- ----------
------------------------------------------------------------------------------------------------------------------
<S> <C>
Managed. . . . . . . . . . . . . . . . . . . . . . . . . . Independence
Investment Associates, Inc. and
Capital
Guardian Trust Company
Growth & Income . . . . . Independence
Investment Associates, Inc. and
Putnam
Investment Management, Inc.
Fidelity VIP Contrafund/(R)/ . . . . . . . . . . . . . . . Fidelity
Management and Research Company
Equity Index . . . . . . . State Street
Global Advisors
Large Cap Value . . . . . T. Rowe Price
Associates, Inc.
American Leaders Large Cap Value. . . . . . . . . . . . . Federated
Investment Management Company
Large Cap Growth . . . . . Independence
Investment Associates, Inc.
Large Cap Aggressive Growth. . . . . . . . . . . . . . . . Alliance
Capital Management L.P.
Fidelity VIP Growth. . . Fidelity
Management and Research Company
AIM V.I. Value. . . . . . A I M
Advisors, Inc.
Janus Aspen Global Technology. . . . . . . . . . . . . . . Janus Capital
Corporation
Mid Cap Value . . . . . . Neuberger
Berman, LLC
Mid Cap Growth . . . . . . Janus Capital
Corporation
Fundamental Growth. . . . Putnam
Investment Management, Inc.
Real Estate Equity . . . . Independence
Investment Associates, Inc. and
Morgan
Stanley Dean Witter Investment
Management
Inc.
Small/Mid Cap CORE /SM/ . Goldman Sachs
Asset Management
Small/Mid Cap Growth. . . Wellington
Management Company, LLP
Small Cap Equity . . . . . Capital
Guardian Trust Company
Small Cap Growth . . . . . . . . . . . . . . . . . . . . . John Hancock
Advisers, Inc.
MFS New Discovery. . . . MFS Investment
Management/(R)/
Global Balanced . . . . . Capital
Guardian Trust Company
Janus Aspen Worldwide Growth. . . . . . . . . . . . . . . Janus Capital
Corporation
Templeton International Securities. . . . . . . . . . . . Templeton
Investment Counsel, Inc.
International Equity Index . . . . . . . . . . . . . . . . Independence
International Associates, Inc.
International Opportunities . . . . . . . . . . . . . . . . T. Rowe Price
International, Inc.
Morgan Stanley
Dean Witter Investment Management
Emerging Markets Equity . . . . . . . . . . . . . . . . . Inc.
Short-Term Bond . . . . . Independence
Investment Associates, Inc.
Bond Index . . . . . . . . Mellon Bond
Associates, LLP
Active Bond . . . . . . . . . . . . . . . . . . . . . . . John Hancock
Advisers, Inc.
Core Bond. . . . . . . . Federated
Investment Management Company
Global Bond . . . . . . . . . . . . . . . . . . . . . . . Capital
Guardian Trust Company
High Yield Bond . . . . . Wellington
Management Company, LLP
Money Market . . . . . . . John Hancock
Life Insurance Company
------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The variable investment options shown on page 1 are those available as of the
date of this prospectus. We may add, modify or delete variable investment
options in the future.
When you select one or more of these variable investment options, we invest
your money in the corresponding investment option(s) of the John Hancock
Variable Series Trust I (the "Trust").
The Trust is a so-called "series" type mutual fund registered with the
Securities and Exchange Commission ("SEC"). The investment results of each
variable investment option you select will depend on those of the corresponding
fund of the Trust. Each of the funds is separately managed and has its own
investment objective and strategies. Attached at the end of this prospectus is a
prospectus for the Trust. The Trust prospectus contains detailed information
about each available fund. Be sure to read the prospectus before selecting any
of the variable investment options shown on page 1.
* * * * * * * * * * * *
Please note that the SEC has not approved or disapproved these securities, or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
* * * * * * * * * * * *
JHVLICO LIFE SERVICING OFFICE
-----------------------------
2
<PAGE>
GUIDE TO THIS PROSPECTUS
This prospectus contains information that you should know before you buy a
policy or exercise any of your rights under the policy. However, please keep in
mind that this is a prospectus - - it is not the policy. The prospectus
---
simplifies many policy provisions to better communicate the policy's essential
features. Your rights and obligations under the policy will be determined by the
language of the policy itself. When you receive your policy, read it carefully.
This prospectus is arranged in the following way:
. The section which follows is called "Basic Information". It contains
basic information about the policy in a question and answer format.
You should read the Basic Information before reading any other
section of the prospectus.
. Behind the Basic Information section are illustrations of
hypothetical policy benefits that help clarify how the policy works.
These start on page 25.
. Behind the illustrations is a section called "Additional
Information." This section gives more details about the policy. It
generally does not repeat information contained in the Basic
---
Information section. A table of contents for the Additional
Information section appears on page 32.
. Behind the Additional Information section are the financial
statements for us and for the Separate Account that we use for this
policy. These start on page 46.
. Finally, there is an Alphabetical Index of Key Words and Phrases at
the back of the prospectus on page 117.
After the Alphabetical Index of Key Words and Phrases, this prospectus ends and
the prospectus for the Trust begins.
3
<PAGE>
BASIC INFORMATION
This "Basic Information" section provides answers to commonly asked questions
about the policy. Here are the page numbers where the questions and answers
appear:
<TABLE>
<CAPTION>
<S> <C>
Question Beginning on page
--------
.What is the policy?. . . . . . . . . . . . . . . 5
.Who owns the policy?. . . . . . . . . . . . . . 5
.How can you invest money in the policy?. . . . . 5
.Is there a minimum amount you must invest?. . . 6
.How will the value of your investment in the policy 8
change over time?. . . . . . . . . . . . . . . .
.What charges will we deduct from your investment in the 9
policy?. . . . . . . . . . . . . . . . . . . . .
.What charges will the Trust deduct from your investment 11
in the policy?. . . . . . . . . . . . . . . . . .
.What other charges can we impose in the future?. 1
4
.How can you change your policy's investment allocations? 14
.How can you access your investment in the policy? 15
.How much will we pay when the insured person dies? 1
7
.Can you add additional benefit riders?. . . . . 18
.How can you change your policy's insurance coverage? 20
.Can you cancel your policy after it's issued?. . 21
.Can you choose the form in which we pay out policy 21
proceeds?. . . . . . . . . . . . . . . . . . . .
.To what extent can we vary the terms and conditions of
the policies in particular
cases?. . . . . . . . . . . . . . . . . . . . . 22
.How will your policy be treated for income tax purposes? 2
3
.How do you communicate with us?. . . . . . . . . 23
</TABLE>
4
<PAGE>
WHAT IS THE POLICY?
The policy's primary purpose is to provide lifetime protection against
economic loss due to the death of the insured person. If the life insurance
protection is provided under a master group policy, the term "policy" as used in
this prospectus refers to the certificate you will be issued and not to the
master group policy. The value of the amount you have invested under the policy
may increase or decrease daily based upon the investment results of the variable
investment options that you choose. The amount we pay to the policy's
beneficiary if the insured person dies (we call this the "death benefit") may be
similarly affected.
While the insured person is alive, you will have a number of options under the
policy. Here are some major ones:
. Determine when and how much you invest in the various investment
options
. Borrow or withdraw amounts you have in the investment options
. Change the beneficiary who will receive the death benefit
. Change the amount of insurance
. Turn in (i.e., "surrender") the policy for the full amount of its
surrender value
. Choose the form in which we will pay out the death benefit or other
proceeds
Most of these options are subject to limits that are explained later in this
prospectus.
WHO OWNS THE POLICY?
That's up to the person who applies for the policy. The owner of the policy is
the person who can exercise most of the rights under the policy, such as the
right to choose the investment options or the right to surrender the policy. In
many cases, the person buying the policy is also the person who will be the
owner. However, the application for a policy can name another person or entity
(such as a trust) as owner. Whenever we've used the term "you" in this
prospectus, we've assumed that the reader is the person who has whatever right
or privilege is being discussed. There may be tax consequences if the owner and
the insured person are different, so you should discuss this issue with your tax
adviser.
HOW CAN YOU INVEST MONEY IN THE POLICY?
Premium Payments
We call the investments you make in the policy "premiums" or "premium
payments". The amount we require as your first premium depends upon the
-----
specifics of your policy and the insured person. Except as noted below, you can
make any other premium payments you wish at any time. That's why the policy is
called a "flexible premium" policy.
5
<PAGE>
Maximum premium payments
Federal tax law limits the amount of premium payments you can make relative to
the amount of your policy's insurance coverage. We will not knowingly accept any
amount by which a premium payment exceeds the maximum. If you exceed certain
other limits, the law may impose a penalty on amounts you take out of your
policy. More discussion of these tax law requirements begins on page 40. Also,
we may refuse to accept any amount of an additional premium if:
. that amount of premium would increase our insurance risk exposure,
and
. the insured person doesn't provide us with adequate evidence that he
or she continues to meet our requirements for issuing insurance.
In no event, however, will we refuse to accept any premium necessary to prevent
the policy or the guaranteed death benefit feature from terminating.
Ways to pay premiums
If you pay premiums by check or money order, they must be drawn on a U.S. bank
in U.S. dollars and made payable to "John Hancock Variable Life Insurance
Company." Premiums after the first must be sent to the JHVLICO Life Servicing
Office at the appropriate address shown on page 2 of this prospectus.
We will also accept premiums:
. by wire or by exchange from another insurance company,
. via an electronic funds transfer program (any owner interested in
making monthly premium payments must use this method), or
-------
. if we agree to it, through a salary deduction plan with your
employer.
You can obtain information on these other methods of premium payment by
contacting your JHVLICO representative or by contacting the JHVLICO Life
Servicing Office.
IS THERE A MINIMUM AMOUNT YOU MUST INVEST?
Planned Premiums
The Policy Specifications page of your policy will show the "Planned Premium"
for the policy. You choose this amount in the policy application. You will also
choose how often to pay premiums-- annually, semi-annually, quarterly or
monthly. The premium reminder notice we send you is based on the amount and
period you choose. However, payment of Planned Premiums is not necessarily
required. You need only invest enough to keep the policy in force (see
"Guaranteed death benefit feature" on page 7 and "Lapse and reinstatement" on
page 8).
6
<PAGE>
Guaranteed death benefit feature
This feature guarantees that your Basic Sum Insured will not terminate (i.e.,
"lapse"), regardless of adverse investment performance, if on each "grace period
testing date" the amount of cumulative premiums you have paid (less all
withdrawals from the policy and all outstanding loans) equals or exceeds the sum
of all Guaranteed Death Benefit Premium ("GDB Premium") due to date. If the
Guaranteed Death Benefit test is not satisfied on any grace period testing date,
the guaranteed death benefit feature will not be "in effect" on that date. We
currently test on a quarterly basis, but reserve the right to test on each
monthly deduction date. (The term "monthly deduction date" is defined on page 34
under "Procedures for issuance of a policy".)
Your policy will show two types of GDB Premium (or such other types as
permitted by your state):
. Age 65/10 Year GDB Premium - is used on each testing date until the
policy anniversary nearest the insured person's 65th birthday (or, if
longer, until the 10th policy anniversary). The GDB premium that is
"due" during this period is equal to the Age 65/10 Year GDB Premium
times the number of elapsed policy months on a testing date.
. Age 100 GDB Premium - is used on each testing date that occurs on and
after the policy anniversary nearest the insured person's 65th
birthday (or on and after the 10th policy anniversary) until the
policy anniversary nearest the insured person's 100th birthday. The
GDB premium that is "due" during this period is equal to the number
of elapsed policy months on the testing date, measured from the Date
of Issue, times the Age 100 GDB Premium.
The Age 100 GDB Premium is higher than the Age 65/10 Year GDB Premium, but
neither will ever be greater than the so-called "guideline premium" for the
policy as defined in Section 7702 of the Internal Revenue Code.
The guaranteed death benefit feature applies only to the Basic Sum Insured in
effect when we issue the policy. It does not apply to any amount of Additional
Sum Insured and it will not be in effect if you increase the Basic Sum Insured
(see "How much will we pay when the insured person dies?" on page 17). The
amount of the Basic Sum Insured that is guaranteed will be reduced to the extent
that we pay it to you under a living care or life-time care additional benefit
rider while the insured is living (see "Can you add additional benefit riders?"
on page 18). If there are monthly charges that remain unpaid because of this
feature, we will deduct such charges when there is sufficient surrender value to
pay them.
If an insufficient amount of GDB premium has been paid on a grace period
testing date, and your policy would lapse for failure to pay charges then due,
we will provide you with a notification as descibed in the next section, "Lapse
and Reinstatement".
7
<PAGE>
Lapse and Reinstatement
Either your entire policy or the Additional Sum Insured portion of your Total
Sum Insured can lapse for failure to pay charges due under the policy. If the
guaranteed death benefit feature is in effect, the Additional Sum Insured and
any additional benefit riders (unless otherwise stated therein) will lapse if
the policy's surrender value is not sufficient to pay the charges on a grace
period testing date. If the guaranteed death benefit feature is not in effect,
the entire policy will lapse if the policy's surrender value is not sufficient
to pay the charges on a grace period testing date. In either case, we will
notify you of how much you will need to pay to keep the Additional Sum Insured
or the policy in force. You will have a 61 day "grace period" to make these
payments. If you pay these amounts during the grace period, you may also
continue the Guaranteed Death Benefit feature by paying the GDB Premium
described in your policy.
If you don't pay at least the required amount by the end of the grace period,
the Additional Sum Insured and any additional benefit riders (unless otherwise
stated therein) or your policy will lapse. If your policy lapses, all coverage
under the policy will cease. Even if the policy or the Additional Sum Insured
terminates in this way, you can still reactivate (i.e., "reinstate") it within 3
years from the beginning of the grace period. You will have to provide evidence
that the insured person still meets our requirements for issuing coverage. You
will also have to pay a minimum amount of premium and be subject to the other
terms and conditions applicable to reinstatements, as specified in the policy.
If the guaranteed death benefit is not in effect and the insured person dies
during the grace period, we will deduct any unpaid monthly charges from the
death benefit. During a grace period, you cannot make a partial withdrawal or
policy loan.
HOW WILL THE VALUE OF YOUR INVESTMENT IN THE POLICY CHANGE OVER TIME?
From each premium payment you make, we deduct the charges described under
"Deductions from premium payments" below. We invest the rest in the investment
options you've elected. Special investment rules apply to premiums processed
prior to the 20th day after your policy becomes effective. (See "Commencement of
investment performance" beginning on page 35.)
Over time, the amount you've invested in any variable investment option will
increase or decrease the same as if you had invested the same amount directly in
the corresponding fund of the Trust and had reinvested all fund dividends and
distributions in additional fund shares; except that we will deduct certain
additional charges which will reduce your account value. We describe these
charges under "What charges will we deduct from your investment in the policy?"
on page 9.
The amount you've invested in the fixed investment option will earn interest
at a rate we declare from time to time. We guarantee that this rate will be at
least 4%. If you want to know what the current declared rate is, just call or
write to us. The current declared rate will also appear in the annual statement
we will send you. Amounts you invest in the fixed investment option will not be
subject to the asset-based risk charge described on page 10. Otherwise, the
charges
8
<PAGE>
applicable to the fixed investment option are the same as those applicable to
the variable investment options.
At any time, the "account value" of your policy is equal to:
. the amount you invested,
. plus or minus the investment experience of the investment options
you've chosen,
. minus all charges we deduct, and
. minus all withdrawals you have made.
If you take a loan on the policy, however, your account value will be computed
somewhat differently. This is discussed beginning on page 37.
WHAT CHARGES WILL WE DEDUCT FROM YOUR INVESTMENT IN THE POLICY?
Deductions from premium payments
. Premium tax charge - A charge to cover state premium taxes we currently
--------------------
expect to pay, on average. This charge is currently 2.35% of each premium.
. DAC tax charge - A charge to cover the increased Federal income tax
----------------
burden that we currently expect will result from receipt of premiums. This
charge is currently 1.25% of each premium.
. Premium sales charge - A charge to help defray our sales costs. The
----------------------
charge is 4% of a certain portion of the premium you pay. The portion of
each year's premium that is subject to the charge is called the "Target
Premium". It's determined at the time the policy is issued and will appear
in the "Policy Specifications" section of the policy. We currently waive
one half of this charge for policies with a Total Sum Insured (excluding
any Premium Cost Recovery Benefit) of $250,000 or higher, but continuation
of that waiver is not guaranteed. Also, we currently intend to stop making
this charge on premiums received after the 10th policy year, but this is
not guaranteed either. Because policies of this type were first offered
for sale on May 1, 2000, no termination of this charge has yet occurred.
Deductions from account value
. Issue charge - A monthly charge to help defray our administrative costs.
--------------
This is a flat dollar charge of $20 and is deducted only during the first
policy year.
. Maintenance charge - A monthly charge to help defray our administrative
--------------------
costs. This is a flat dollar charge of up to $8 (currently $6).
. Insurance charge - A monthly charge for the cost of insurance. To
------------------
determine the charge, we multiply the amount of insurance for which we are
at risk by a cost of insurance rate. The rate is derived from an actuarial
table and the ratio of Basic Sum
9
<PAGE>
Insured to Additional Sum Insured on the date we issue your policy. The
table in your policy will show the maximum cost of insurance rates. The
-------
cost of insurance rates that we currently apply are generally less than
the maximum rates. We will review the cost of insurance rates at least
every 5 years and may change them from time to time. However, those rates
will never be more than the maximum rates shown in the policy. The table
of rates we use will depend on the insurance risk characteristics and
(usually) gender of the insured person, the Total Sum Insured and the
length of time the policy has been in effect. Regardless of the table
used, cost of insurance rates generally increase each year that you own
your policy, as the insured person's attained age increases. (The insured
person's "attained age" on any date is his or her age on the birthday
nearest that date.) We currently apply three "bands" of insurance rates,
based on a policy's Total Sum Insured (excluding any Premium Cost Recovery
Benefit) on the date of issue, but continuation of that practice is not
guaranteed. The lowest band of rates is for policies of $1 million or
more, next lower for policies between $250,000 to $999,999, and the
highest band is for policies between $100,000 to $249,999. The insurance
charge for death benefit Option B will tend to be higher than the
insurance charge for death benefit Option A (see "How much will we pay
when the insured person dies?" on page 17).
. Extra mortality charge - A monthly charge specified in your policy for
------------------------
additional mortality risk if the insured person is subject to certain
types of special insurance risk.
. Asset-based risk charge - A monthly charge for mortality and expense
-------------------------
risks we assume. The charge is a percentage of that portion of your
account value allocated to variable investment options. The current
percentages are .050% for policy years 1 - 10, .035% for policy year 11,
decreasing by .001% each year thereafter through policy year 28, and .017%
for policy year 29 and each policy year thereafter. These percentages
equate to effective annual rates of .60% for policy years 1 - 10, .40% for
policy year 11, grading down to .20% for policy years 29 and thereafter.
The reductions after policy year 10 have not occurred yet under any
policy, since no policy has been outstanding for 10 years. We guarantee
that this charge will never exceed .075% of that portion of your account
value allocated to variable investment options. This percentage equates to
an effective annual rate of .90%. This charge does not apply to the fixed
investment option.
. Optional benefits charge - Monthly charges for certain optional insurance
--------------------------
benefits added to the policy by means of a rider. Some of the riders we
currently offer are described under "Can you add additional benefit
riders?" on page 18.
. ASI reduction charge - A charge we deduct if you decrease the Additional
----------------------
Sum Insured during the first 20 policy years. A table in your policy will
state the maximum rate for the charge per $1,000 of Additional Sum Insured
surrendered, based on the insured person's issue age, insurance risk
characteristics and (usually) gender. The rates are shown in the policy
and generally range from less than $1 per $1,000 for issue age 40 or less,
and increase for issue ages thereafter, to over $10 per $1,000 for issue
ages after 70. We do not deduct this charge if the Additional Sum Insured
is reduced because of a withdrawal of surrender value or surrender of the
policy.
10
<PAGE>
. Contingent deferred sales charge ("CDSC") - A charge we deduct if the
-------------------------------------------
policy lapses or is surrendered within the first 10 policy years. We
deduct this charge to compensate us for sales expenses that we would
otherwise not recover in the event of early lapse or surrender. The charge
is a percentage of the premiums we received in the first policy year that
do not exceed the first year Target Premium, as shown in the following
table:
POLICY YEAR(S) PERCENTAGE OF FIRST YEAR TARGET PREMIUM
-------------- ---------------------------------------
1-5 100%
6 80%
7 70%
8 60%
9 40%
10 20%
11 and later 0%
The above table applies only if the insured person is less than attained age 45
at issue. For older issue ages, the maximum is reached earlier and the
percentage may decrease to zero in fewer than 10 policy years. Regardless of
issue age, there is a further limitation on the CDSC that can be charged if
surrender or lapse occurs in the second policy year.
. Partial withdrawal charge - A charge for each partial withdrawal of
---------------------------
account value to compensate us for the administrative expenses of
processing the withdrawal. The charge is equal to the lesser of $20 or 2%
of the withdrawal amount.
WHAT CHARGES WILL THE TRUST DEDUCT FROM YOUR INVESTMENT IN THE POLICY?
The Trust must pay investment management fees and other operating expenses.
These fees and expenses are different for each fund and reduce the investment
return of each fund. Therefore, they also indirectly reduce the return you will
earn on any variable investment options you select.
The following figures for the funds are based on historical fund expenses, as
a percentage (rounded to two decimal places) of each fund's average daily net
assets for 1999, except as indicated in the Notes appearing at the end of this
table. Expenses of the funds are not fixed or specified under the terms of the
policy, and those expenses may vary from year to year.
<TABLE>
<CAPTION>
Investment Distribution and Other
Operating Total Fund Other Operating
Management Service
Expenses With Operating Expenses Absent
Fund Name Fee (12b-1) Fees
Reimbursement Expenses Reimbursement
--------- ---------- ----------------
--------------- ---------- ------------------
<S> <C> <C> <C>
<C> <C>
JOHN HANCOCK VARIABLE SERIES TRUST I
(NOTE 1):
Managed . . . . . . . . . . . . . . . . 0.67% N/A
0.03% 0.70% 0.03%
Growth & Income . . . . . . . . . . . . 0.67% N/A
0.03% 0.70% 0.03%
Equity Index . . . . . . . . . . . . . 0.14% N/A
0.00% 0.14% 0.08%
American Leaders Large Cap Value. . . . 0.80% N/A
0.10% 0.90% N/A
Large Cap Growth . . . . . . . . . . . 0.36% N/A
0.03% 0.39% 0.03%
Large Cap Aggressive Growth . . . . . . 0.98% N/A
0.10% 1.08% 0.19%
Mid Cap Value . . . . . . . . . . . . . 0.80% N/A
0.10% 0.90% 0.12%
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Investment Distribution and Other
Operating Total Fund Other Operating
Management Service
Expenses With Operating Expenses Absent
Fund Name Fee (12b-1) Fees
Reimbursement Expenses Reimbursement
--------- ---------- ----------------
--------------- ---------- ------------------
<S> <C> <C> <C>
<C> <C>
Mid Cap Growth . . . . . . . . . . . . 0.82% N/A
0.10% 0.92% 0.11%
Fundamental Growth * . . . . . . . . . 0.90% N/A
0.10% 1.00% 0.24%
Real Estate Equity . . . . . . . . . . 1.01% N/A
0.10% 1.11% 0.10%
Small/Mid Cap CORE /SM/ . . . . . . . . 0.80% N/A
0.10% 0.90% 0.66%
Small/Mid Cap Growth . . . . . . . . . 0.75% N/A
0.10% 0.85% 0.10%
Small Cap Equity * . . . . . . . . . . 0.90% N/A
0.10% 1.00% 0.16%
Small Cap Growth . . . . . . . . . . . 0.75% N/A
0.10% 0.85% 0.14%
Global Balanced * . . . . . . . . . . . 1.05% N/A
0.10% 1.15% 0.46%
International Equity Index . . . . . . 0.16% N/A
0.10% 0.26% 0.22%
International Opportunities . . . . . . 0.87% N/A
0.10% 0.97% 0.29%
Emerging Markets Equity . . . . . . . . 1.27% N/A
0.10% 1.37% 2.17%
Short-Term Bond . . . . . . . . . . . . 0.30% N/A
0.10% 0.40% 0.13%
Bond Index . . . . . . . . . . . . . . 0.15% N/A
0.10% 0.25% 0.20%
Active Bond * . . . . . . . . . . . . . 0.61% N/A
0.03% 0.64% 0.03%
Core Bond . . . . . . . . . . . . . . . 0.70% N/A
0.10% 0.80% N/A
Global Bond . . . . . . . . . . . . . . 0.85% N/A
0.10% 0.95% 0.15%
High Yield Bond . . . . . . . . . . . . 0.65% N/A
0.10% 0.75% 0.39%
Money Market . . . . . . . . . . . . . 0.25% N/A
0.06% 0.31% 0.06
AIM VARIABLE INSURANCE FUNDS, INC.:
AIM V.I. Value . . . . . . . . . . . . 0.61% N/A
0.15% 0.76% 0.15%
VARIABLE INSURANCE PRODUCTS FUND -
SERVICE CLASS (NOTE 2):
Fidelity VIP Growth . . . . . . . . . . 0.58% 0.10%
0.07% 0.75% 0.09%
VARIABLE INSURANCE PRODUCTS FUND II -
SERVICE CLASS (NOTE 2):
Fidelity VIP Contrafund/(R)/ . . . . . 0.58% 0.10%
0.07% 0.75% 0.10%
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST - CLASS 2 SHARES (NOTE
3):
Templeton International Securities . . 0.69% 0.25%
0.19% 1.13% 0.19%
JANUS ASPEN SERIES - SERVICE SHARES
CLASS (NOTE 4):
Janus Aspen Global Technology . . . . . 0.65% 0.25%
0.13% 1.03% 0.13%
Janus Aspen Worldwide Growth. . . . . . 0.65% 0.25%
0.05% 0.95% 0.05%
MFS VARIABLE INSURANCE TRUST
(NOTE 5):
MFS New Discovery . . . . . . . . . . . 0.90% N/A
0.17% 1.07% 1.59%
</TABLE>
NOTES TO FUND EXPENSE TABLE
(1) John Hancock Variable Series Trust I funds' percentages for "other fund
expenses" are based on the allocation methodology and expense
reimbursement policy adopted April 23, 1999, and are calculated as if that
allocation methodology and expense reimbursement policy had been in effect
for all of 1999. Under the expense reimbursement policy, John Hancock
Life Insurance Company voluntarily reimburses a fund when the fund's
"other fund expenses" exceed 0.10% of the fund's average daily net assets
(0.00% for Equity Index). All percentages for the American Leaders Large
Cap Value Fund and the Core Bond Fund are estimates for the current fiscal
year because the funds were not in operation
12
<PAGE>
in 1999. Shareholders of the Managed, Growth & Income, Fundamental
Growth, Real Estate Equity, Small Cap Equity, Global Balanced, Active
Bond, and Global Bond funds have approved new management fee schedules,
which apply to those funds effective November 1, 2000. The investment
management fee percentages for each of those funds are calculated as if
those new fee schedules had been in effect for all of 1999. The
investment management fee percentages for all other funds reflect the
investment management fees that were actually payable for 1999 .
* Fundamental Growth was formerly "Fundamental Mid Cap Growth", Small Cap
Equity was formerly "Small Cap Value", Global Balanced was formerly
"International Balanced" and Active Bond was formerly "Sovereign Bond".
" CORE /SM"/ IS A SERVICE MARK OF GOLDMAN, SACHS & CO.
(2) A portion of the brokerage commissions that certain of the Fidelity VIP
funds pay was used to reduce fund expenses. In addition, through
arrangements with certain funds' custodian, credits realized as a result
of uninvested cash balances were used to reduce a portion of each
applicable fund's expenses. Without these reductions, the operating
expenses of the funds would have been higher, as shown in the last column
of this table.
(3) On February 8, 2000, shareholders of each fund approved a merger and
reorganization that combined the Templeton International Equity Fund with
the Templeton International Securities Fund, effective May 1, 2000.
Shareholders of the Templeton International Securities Fund had approved
new management fees, which apply to the combined funds effective May 1,
2000. The table shows restated total expenses for the fund based on the
new fees and the assets, as of December 31, 1999, of the Templeton
International Securities Fund. However, if the table reflected both the
new fees and the combined assets of the Templeton International Equity
Fund and the Templeton International Securities Fund, the estimated
expenses for the two funds combined after May 1, 2000 would be:
Management Fees 0.65%, Distribution and Service Fees 0.25%, Other Expenses
0.20%, and Total Fund Operating Expenses 1.10%.
(4) The percentages for the new Service Shares Class of the Janus Aspen
Global Technology Fund and the Janus Aspen Worldwide Growth Fund are
estimates because the Service Shares Class was not in operation in 1999.
All such estimates have been made without regard to the effect of any
expense offset arrangements.
(5) MFS Variable Insurance Trust Funds have an expense offset arrangement
which reduces each fund's custodian fee based upon the amount of cash
maintained by the fund with its custodian and dividend disbursing agent.
Each fund may enter into other such arrangements and directed brokerage
arrangements, which would also have the effect of reducing the fund's
expenses. Expenses do not take into account these expense reductions, and
are therefore higher than the actual expenses of the fund. MFS Investment
Management(R) (also doing business as Massachusetts Financial Services
Company) has contractually agreed to bear expense for the New Discovery
Fund, subject to reimbursement by the fund, such that such fund's "other
fund expenses" shall not exceed 0.15% of the average daily net assets of
the fund during the current fiscal year.
13
<PAGE>
WHAT OTHER CHARGES COULD WE IMPOSE IN THE FUTURE?
Except for the premium and DAC tax charges, we currently make no charge for
our Federal income taxes. However, if we incur, or expect to incur, income
taxes attributable to any subaccount of the Account or this class of policies in
future years, we reserve the right to make a charge for such taxes. Any such
charge would reduce what you earn on any affected investment options. However,
we expect that no such charge will be necessary.
We also reserve the right to increase the premium tax charge and the DAC tax
charge in order to correspond, respectively, with changes in the state premium
tax levels or in the Federal income tax treatment of the deferred acquisition
costs for this type of policy.
Under current laws, we 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, we may make charges
for such taxes.
HOW CAN YOU CHANGE YOUR POLICY'S INVESTMENT ALLOCATIONS?
Future premium payments
At any time, you may change the investment options in which future premium
payments will be invested. You make the original allocation in the application
for the policy. The percentages you select must be in whole numbers and must
total 100%.
Transfers of existing account value
You may also transfer your existing account value from one investment option
to another. To do so, you must tell us how much to transfer, either as a whole
number percentage or as a specific dollar amount.
Under our current rules, you can make transfers out of any variable investment
option anytime you wish. However, transfers out of the fixed investment option
are currently subject to the following restrictions:
. You can only make such a transfer once in each policy year.
. The most you can transfer at any one time is the greater of $500 or 20%
of the assets in your fixed investment option.
We reserve the right to impose limits on:
. the minimum amount of each transfer out of the fixed investment option;
. the maximum amount of any transfer into the fixed investment option after
the second policy year; and
. the number and frequency of transfers out of the variable investment
options.
14
<PAGE>
Dollar cost averaging
This is a program of automatic monthly transfers out of the Money Market
investment option into one or more of the other variable investment options. You
choose the investment options and the dollar amount and timing of the transfers.
The program is designed to reduce the risks that result from market
fluctuations. It does this by spreading out the allocation of your money to
investment options over a longer period of time. This allows you to reduce the
risk of investing most of your money at a time when market prices are high.
Obviously, the success of this strategy depends on market trends and is not
guaranteed.
Asset Rebalancing
This is a program that automatically re-sets the percentage of your account
value allocated to the variable investment options. Over time, the variations in
the investment results for each variable investment option you've elected will
shift the percentage allocations among them. The rebalancing program will
periodically transfer your account value among the variable investment options
to reestablish the preset percentages you have chosen. Rebalancing would usually
result in transferring amounts from a variable investment option with relatively
higher investment performance since the last rebalancing to one with relatively
lower investment performance. However, rebalancing can also result in
transferring amounts from a variable investment option with relatively lower
current investment performance to one with relatively higher current investment
performance. Rebalancing and dollar cost averaging cannot be in effect at the
same time.
HOW CAN YOU ACCESS YOUR INVESTMENT IN THE POLICY?
Full surrender
You may surrender your policy in full at any time. If you do, we will pay you
the account value, less any policy loans and less any CDSC charge that then
applies. This is called your "surrender value." You must return your policy when
you request a full surrender.
Partial withdrawals
You may make a partial withdrawal of your surrender value at any time after
the first policy year. Each partial withdrawal must be at least $1,000. There is
a charge (usually $20) for each partial withdrawal. We will automatically reduce
the account value of your policy by the amount of the withdrawal and the related
charge. Unless we agree otherwise, each investment option will be reduced in the
same proportion as the account value is then allocated among them. We will not
permit a partial withdrawal if it would cause your surrender value to fall below
3 months' worth of monthly charges (see "Deductions from account value" on page
9). We also reserve the right to refuse any partial withdrawal that would cause
the policy's Total Sum Insured to fall below $100,000, or the policy's Basic Sum
Insured to fall below $100,000. Under the Option A death benefit, the reduction
of your account value occasioned by a partial withdrawal could cause the minimum
insurance amount to become less than your Total Sum Insured (see "How
15
<PAGE>
much will we pay when the insured person dies?" on page 17). If that happens, we
will automatically reduce your Total Sum Insured. The calculation of that
reduction is explained in the policy, and will be implemented by first reducing
any Additional Sum Insured in effect. If the reduction in Total Sum Insured
would cause your policy to fail the Internal Revenue Code's definition of life
insurance, we will not permit the partial withdrawal.
Policy loans
You may borrow from your policy at any time by completing a form satisfactory
to us or, if the telephone transaction authorization form has been completed, by
telephone. The maximum amount you can borrow is determined as follows:
. We first determine the surrender value of your policy.
. We then subtract an amount equal to 12 times the monthly charges then
being deducted from account value.
. We then multiply the resulting amount by.75% in policy years 1
through 10, .50% in policy years 11 through 20, and .25% thereafter.
. We then subtract the third item above from the second item above.
The minimum amount of each loan is $300. The interest charged on any loan is
an effective annual rate of 4.75% in the first 10 policy years, 4.50% in policy
years 11 through 20, and 4.25% thereafter. Accrued interest will be added to the
loan daily and will bear interest at the same rate as the original loan amount.
The amount of the loan is deducted from the investment options in the same
proportion as the account value is then allocated among them and is placed in a
special loan account. This special loan account will earn interest at an
effective annual rate of 4.0%. However, if we determine that a loan will be
treated as a taxable distribution because of the differential between the loan
interest rate and the rate being credited on the special loan account, we
reserve the right to decrease the rate credited on the special loan account to a
rate that would, in our reasonable judgement, result in the transaction being
treated as a loan under Federal tax law.
You can repay all or part of a loan at any time. Unless we agree otherwise,
each repayment will be allocated among the investment options as follows:
. The same proportionate part of the loan as was borrowed from the
fixed investment option will be repaid to the fixed investment
option.
. The remainder of the repayment will be allocated among the investment
options in the same way a new premium payment would be allocated.
If you want a payment to be used as a loan repayment, you must include
instructions to that effect. Otherwise, all payments will be assumed to be
premium payments.
16
<PAGE>
HOW MUCH WILL WE PAY WHEN THE INSURED PERSON DIES?
In your application for the policy, you will tell us how much life insurance
coverage you want on the life of the insured person. This is called the "Total
Sum Insured" of insurance. Total Sum Insured is composed of the Basic Sum
Insured and any Additional Sum Insured you elect. The maximum amount of
Additional Sum Insured you can have when we issue the policy is generally
limited to 400% of the Basic Sum Insured. There are a number of factors you
should consider in determining whether to elect coverage in the form of Basic
Sum Insured or in the form of Additional Sum Insured. These factors are
discussed under "Basic Sum Insured vs. Additional Sum Insured" on page 35.
When the insured person dies, we will pay the death benefit minus any
outstanding loans. There are two ways of calculating the death benefit. You
choose which one you want in the application. The two death benefit options are:
. Option A - The death benefit will equal the greater of (1) the Total
Sum Insured or (2) the minimum insurance amount under the "guideline
premium and cash value corridor test" or under the "cash value
accumulation test" (as described below).
. Option B - The death benefit will equal the greater of (1) the Total
Sum Insured amount plus your policy's account value on the date of
death, or (2) the minimum insurance amount under the "guideline
premium and cash value corridor test".
For the same premium payments, the death benefit under Option B will tend to
be higher than the death benefit under Option A. On the other hand, the monthly
insurance charge will be higher under Option B to compensate us for the
additional insurance risk. Because of that, the account value will tend to be
higher under Option A than under Option B for the same premium payments.
The minimum insurance amount
In order for a policy to qualify as life insurance under Federal tax law,
there has to be a minimum amount of insurance in relation to account value.
There are two tests that can be applied under Federal tax law - -the "guideline
premium and cash value corridor test" and the "cash value accumulation test."
When you elect the Option A death benefit, you must elect which test you wish
to have applied. If you elect the Option B death benefit, the guideline premium
and cash value corridor test will automatically be applied. Under the guideline
premium and cash value corridor test, we compute the minimum insurance amount
each business day by multiplying the account value on that date by the so-called
"corridor factor" applicable on that date. The corridor factors are derived by
applying the "guideline premium and cash value corridor test." The corridor
factor starts out at 2.50 for ages at or below 40 and decreases as attained age
increases, reaching a low of 1.0 at age 95. A table showing the factor for each
age will appear in the policy. Under the cash value accumulation test, we
compute the minimum insurance amount each business day by multiplying the
account value on that date by
17
<PAGE>
the so-called "death benefit factor" applicable on that date. The death benefit
factors are derived by applying the "cash value accumulation test." The death
benefit factor decreases as attained age increases. A table showing the factor
for each age will appear in the policy.
As noted above, you have to elect which test will be applied if you elect the
Option A death benefit. The cash value accumulation test may be preferable if
you want an increasing death benefit in later policy years and/or want to fund
the policy at the "7 pay" limit for the full 7 years (see "Tax Considerations"
beginning on page 40). The guideline premium and cash value corridor test may be
preferable if you want the account value under the policy to increase without
increasing the death benefit as quickly as might otherwise be required.
When the insured person reaches 100
On the policy anniversary nearest the insured person's 100th birthday, the
death benefit will become equal to the account value on the date of death. Death
benefit Options A and B (as described above) will cease to apply. Also, we will
stop deducting any monthly charges (other than the asset-based risk charge) and
will stop accepting any premium payments.
In the next section, we describe an optional Age 100 Waiver of Charges Rider
that provides for continuation of the Total Sum Insured after the insured person
reaches 100.
CAN YOU ADD ADDITIONAL BENEFIT RIDERS?
When you apply for a policy, you can request any of the additional benefit
riders that we then make available. Availability and rider benefits may vary by
state. Charges for the selected rider will generally increase the monthly
deductions from your policy's account value. We may change the rates of these
charges, but not above the maximum amounts that will be stated in the Policy
Specifications page of your policy. Charges for the Long-Term Care Acceleration
Rider, as described below, may be considered a "distribution" for federal income
tax purposes (see "Tax considerations," beginning on page 40). Our rules and
procedures will govern eligibility for the riders, or any changes to these
benefits. Each rider contains specific details that you should review if you
desire to choose the additional benefit. We may add to, delete from, or modify
the following list of additional benefit riders:
. Disability Waiver of Charges Rider - Provides for the waiver of monthly
deductions if the insured person becomes totally and permanently disabled,
as defined in the rider, prior to age 60. If the insured person becomes
totally and permanently disabled after age 60, monthly deductions are only
waived until age 65. Benefits under this rider do not reduce the
Guaranteed Death Benefit Premium payment requirements described on page 7
that are necessary for the guaranteed death benefit feature to remain in
effect.
. Living Care Benefit Rider - Provides for an advance payment to you of a
portion of the death benefit if the insured person becomes terminally ill,
as defined in the rider, with death expected within 24 months. Advances
under the rider are discounted for interest at the rates specified in the
rider, and we may use a portion of any advance to repay loans under your
policy. The maximum advance is $1,000,000.
18
<PAGE>
. Age 100 Waiver of Charges Rider - Provides for the continuation of the
Total Sum Insured in force when the insured person attains age 100,
without charge, if the policy's account value at the time is greater than
the sum of 1 plus the amount of any surrender charges then existing. The
monthly charge for this rider currently begins in the 6th policy year.
. Children's Insurance Benefit Rider - Provides term insurance up through
age 21 on each covered child of the insured person. A child must be more
than 14 days old and less than 15 years old to begin coverage.
. Accidental Death Benefit Rider - Provides for an additional insurance
benefit if the insured person's death is due to accidental causes between
the policy anniversaries nearest the insured person's 5th and 70th
birthdays.
. Long-Term Care Acceleration Rider - intended only for policies where the
death benefit is determined under Option A and the "cash value
accumulation test" described on page 17. This rider provides for periodic
advance payments to you of a portion of the death benefit if the insured
person becomes "chronically ill" so that such person: (1) is unable to
perform at least 2 activities of daily living without substantial human
assistance or has a severe cognitive impairment; and (2) is receiving
certain qualified services described in the rider.
Benefits under the Long-Term Care Acceleration rider will not begin until we
receive proof that the insured person qualifies and has received 100 days of
"qualified long-term care service" as defined in the rider, while the policy was
in force. You must continue to submit evidence during the insured person's
lifetime of the insured person's eligibility for rider benefits.
We determine a maximum amount of death benefit that we will advance for each
month of qualification. This amount, called the "Maximum Monthly Benefit" is
based on the percentage of the policy's death benefit that you select when you
apply for the policy, and the death benefit amount in effect when the insured
person qualifies for benefits. The actual amount of any advance is based on the
expense incurred by the insured person, up to the Maximum Monthly Benefit, for
each day of qualified long-term care service in a calendar month. The first 100
days of qualified long-term care service, however, are excluded in any
determination of an advance. We will recalculate the Maximum Monthly Benefit
if you make a partial withdrawal of account value, and for other events
described in the rider. Each advance reduces the remaining death benefit under
your policy, and causes a proportionate reduction in your policy's account
value. If you have a policy loan, we will use a portion of each death benefit
advance to repay indebtedness.
We restrict your account value's exposure to market risk when benefits are paid
under the Long-Term Care Acceleration rider. We do this in several ways. First,
before we begin paying any Monthly Benefit or waiving monthly deductions, we
will transfer all account value from the variable investment options to the
fixed investment option. (The amount to be transferred will be determined on the
Business Day immediately following the date we approve a request for benefits
under the rider.) In addition, you will not be permitted to transfer account
value or allocate any additional premium payment to a variable investment option
while rider benefits are
19
<PAGE>
paid. Your participation in any of the automatic investment plans will also be
suspended during this period.
If the insured person no longer qualifies for rider benefits and your policy
remains in force, you will be permitted to invest new premium payments or
existing account value in the variable investment options. (The restriction on
transfers from the Fixed Account described on page 14 will continue to apply.)
Benefits under this rider do not reduce the Guaranteed Death Benefit Premium
payment requirements described on page 7 that may be necessary for the
guaranteed death benefit feature to remain in effect after a termination of
rider benefits.
In certain marketing materials, the policy and this rider may be referred to as
"Unison." If you purchase this rider:
. you and your immediate family will also have access to a national
program designed to help the elderly maintain their independent
living by providing advice about an array of elder care services
available to seniors, and
. you will have access to a list of long-term care providers in your
area who provide special discounts to persons who belong to the
national program.
HOW CAN YOU CHANGE YOUR POLICY'S INSURANCE COVERAGE?
Increase in coverage
You may request an increase in the Additional Sum Insured. As to when such an
increase would take effect, see "Effective date of other policy transactions" on
page 37). Generally, each such increase must be at least $50,000. However, you
will have to provide us with evidence that the insured person still meets our
requirements for issuing insurance coverage. Unless we consent otherwise, you
may not increase the Additional Sum Insured if the increase would cause the
entire Additional Sum Insured to equal or exceed 800% of the Basic Sum Insured.
Decrease in coverage
After the first policy year, you may request a reduction in the Total Sum
Insured at any time, but only if:
. the remaining Basic Sum Insured will be at least $100,000, and
. the remaining Additional Sum Insured will not exceed 800% of the
Basic Sum Insured, and
. the remaining Total Sum Insured will at least equal the minimum
required by the tax laws to maintain the policy's life insurance
status.
20
<PAGE>
Change of death benefit option
If the "guideline premium and cash value corridor test" applies to your
policy, you may change your coverage from death benefit Option A to Option B or
vice-versa on any policy anniversary, but only if there is no change in the
Federal tax law test used to determine the minimum insurance amount. If you
change from Option A to Option B, we will require evidence that the insured
person still meets our requirements for issuing coverage. This is because such a
change increases our insurance risk exposure.
If the "cash value accumulation test" applies to your policy, you can never
change to either Option A under the "guideline premium and cash value corridor
test" or to Option B.
Please read "the minimum insurance amount" starting on page 17 for more
information about the "guideline premium and cash value corridor test" and the
"cash value accumulation test."
Tax consequences
Please read "Tax considerations" starting on page 40 to learn about possible
tax consequences of changing your insurance coverage under the policy.
CAN YOU CANCEL YOUR POLICY AFTER IT'S ISSUED?
You have the right to cancel your policy within 10 days (or longer in some
states) after you receive it. This is often referred to as the "free look"
period. To cancel your policy, simply deliver or mail the policy to:
. JHVLICO at one of the addresses shown on page 2, or
. the JHVLICO representative who delivered the policy to you.
In most states, you will receive a refund of any premiums you've paid. In some
states, the refund will be your account value on the date of cancellation plus
all charges deducted by JHVLICO or the Trust prior to that date. The date of
cancellation will be the date of such mailing or delivery.
CAN YOU CHOOSE THE FORM IN WHICH WE PAY OUT POLICY PROCEEDS?
Choosing a payment option
You may choose to receive proceeds from the policy as a single sum. This
includes proceeds that become payable because of death or full surrender.
Alternatively, you can elect to have proceeds of $1,000 or more applied to any
of a number of other payment options, including the following:
. Option 1 - Proceeds left with us to accumulate with interest
21
<PAGE>
. Option 2A - Equal monthly payments of a specified amount until all
proceeds are paid out
. Option 2B - Equal monthly payments for a specified period of time
. Option 3 - Equal monthly payments for life, but with payments
guaranteed for a specific number of years
. Option 4 - Equal monthly payments for life with no refund
. Option 5 - Equal monthly payments for life with a refund if all of
the proceeds haven't been paid out
You cannot choose an option if the monthly payments under the option would be
less than $50. We will issue a supplementary agreement when the proceeds are
applied to any alternative payment option. That agreement will spell out the
terms of the option in full. We will credit interest on each of the above
options. For options 1 and 2A, the interest will be at least an effective annual
rate of 3 1/2%.
Changing a payment option
You can change the payment option at any time before the proceeds are payable.
If you haven't made a choice, the payee of the proceeds has a prescribed period
in which he or she can make that choice.
Tax impact
There may be tax consequences to you or your beneficiary depending upon which
payment option is chosen. You should consult with a qualified tax adviser before
making that choice.
TO WHAT EXTENT CAN WE VARY THE TERMS AND CONDITIONS OF OUR POLICIES IN
PARTICULAR CASES?
Listed below are some variations we can make in the terms of our policies. Any
variation will be made only in accordance with uniform rules that we apply
fairly to all of our customers.
State law insurance requirements
Insurance laws and regulations apply to us in every state in which its
policies are sold. As a result, various terms and conditions of your insurance
coverage may vary from the terms and conditions described in this prospectus,
depending upon where you reside. These variations will be reflected in your
policy or in endorsements attached to your policy.
Variations in expenses or risks
We may vary the charges and other terms of our policies where special
circumstances result in sales or administrative expenses, mortality risks or
other risks that are different from those normally associated with the policies.
These include the type of variations discussed under
22
<PAGE>
"Reduced charges for eligible classes" on page 38. No variation in any charge
will exceed any maximum stated in this prospectus with respect to that charge.
HOW WILL YOUR POLICY BE TREATED FOR INCOME TAX PURPOSES?
Generally, death benefits paid under policies such as yours are not subject to
income tax. Earnings on your account value are not subject to income tax as long
as we don't pay them out to you. If we do pay out any amount of your account
value upon surrender or partial withdrawal, all or part of that distribution
should generally be treated as a return of the premiums you've paid and should
not be subject to income tax. Amounts you borrow are generally not taxable to
you.
However, some of the tax rules change if your policy is found to be a
"modified endowment contract." This can happen if you've paid more than a
certain amount of premiums that is prescribed by the tax laws. Additional taxes
and penalties may be payable for policy distributions of any kind.
For further information about the tax consequences of owning a policy or
adding the Long-Term Care Acceleration Rider, please read "Tax considerations"
beginning of page 40.
HOW DO YOU COMMUNICATE WITH US?
General Rules
You should mail or express all checks and money orders for premium payments
and loan repayments to the JHVLICO Life Servicing Office at the appropriate
address shown on page 2.
Certain requests must be made in writing and be signed and dated by you. They
include the following:
. loans, surrenders or partial withdrawals
. transfers of account value among investment options
. change of allocation among investment options for new premium
payments
. change of death benefit option
. increase or decrease in Total Sum Insured
. change of beneficiary
. election of payment option for policy proceeds
. tax withholding elections
. election of telephone transaction privilege.
23
<PAGE>
You should mail or express these requests to our Life Servicing Office at the
appropriate address shown on page 2. You should also send notice of the insured
person's death and related documentation to our Life Servicing Office. We don't
consider that we've "received" any communication until such time as it has
arrived at the proper place and in the proper and complete form.
We have special forms that should be used for a number of the requests
mentioned above. You can obtain these forms from our Life Servicing Office or
your JHVLICO representative. Each communication to us must include your name,
your policy number and the name of the insured person. We cannot process any
request that doesn't include this required information. Any communication that
arrives after the close of our business day, or on a day that is not a business
day, will be considered "received" by us on the next following business day. Our
business day currently closes at 4:00 p.m. Eastern Standard Time, but special
circumstances (such as suspension of trading on a major exchange) may dictate an
earlier closing time.
Telephone Transactions
If you complete a special authorization form, you can request loans, transfers
among investment options and changes of allocation among investment options
simply by telephoning us at 1-800-732-5543 or by faxing us at 1-617-886-3048.
Any fax request should include your name, daytime telephone number, policy
number and, in the case of transfers and changes of allocation, the names of the
investment options involved. We will honor telephone instructions from anyone
who provides the correct identifying information, so there is a risk of loss to
you if this service is used by an unauthorized person. However, you will receive
written confirmation of all telephone transactions. There is also a risk that
you will be unable to place your request due to equipment malfunction or heavy
phone line usage. If this occurs, you should submit your request in writing.
The policies are not designed for professional market timing organizations or
other persons or entities that use programmed or frequent transfers among
investment options. For reasons such as that, we reserve the right to change our
telephone transaction policies or procedures at any time. We also reserve the
right to suspend or terminate the privilege altogether.
24
<PAGE>
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 under certain hypothetical circumstances that
we assume solely for this purpose. Each table separately illustrates the
operation of a policy for a specified issue age, premium payment schedule and
Total Sum Insured. The amounts shown are for the end of each policy year and
assume that all of the account value is invested in funds that achieve
investment returns at constant annual rates of 0%, 6% and 12% (i.e., before any
fees or expenses deducted from Trust assets). After the deduction of average
fees and expenses at the Trust level (as described below) the corresponding net
annual rates of return would be -0.80%, 5.15% and 11.10%. Investment
return reflects investment income and all realized and unrealized capital gains
and losses. The tables assume annual Planned Premiums that are paid at the
beginning of each policy year for an insured person who is a 35 year old male
standard non-smoker underwriting risk when the policy is issued.
Tables are provided for each of the two death benefit options. The tables
headed "Current Charges" assume that the current rates for all charges deducted
by JHVLICO will apply in each year illustrated, including the intended waiver of
the premium sales charge after the tenth policy year and the intended reduction
in the insurance charge after the twentieth policy year. The tables headed
"Maximum Charges" are the same, except that the maximum permitted rates for all
years are used for all charges. The tables do not reflect any charge that we
reserve the right to make but are not currently making. The tables assume that
no optional rider benefits and no Additional Sum Insured have been elected.
With respect to fees and expenses deducted from assets of the Trust, the
amounts shown in all tables reflect (1) investment management fees equivalent to
an effective annual rate of 0.71%, and (2) an assumed average asset charge for
all other operating expenses of the Trust equivalent to an effective annual rate
of 0.9%. These rates are the arithmetic average for all funds that are available
as investment options. In other words, they are based on the hypothetical
assumption that policy account values are allocated equally among the variable
investment options. The actual rates associated with any policy will vary
depending upon the actual allocation of policy values among the investment
options. The charge shown above for all other Trust operating expenses reflects
reimbursements to certain funds as described in the footnotes to the table
beginning on page 11. We currently expect those reimbursement arrangements to
continue indefinitely, but that is not guaranteed.
The second column of each table shows the amount you would have at the end of
each Policy year if an amount equal to the assumed Planned Premiums were
invested to earn interest, after taxes, at 5% compounded annually. This is not a
policy value. It is included for comparison purposes only.
Because your circumstances will no doubt differ from those in the
illustrations that follow, values under your policy will differ, in most cases
substantially. Upon request, we will furnish you with a comparable illustration
reflecting your proposed insured person's issue age, sex and underwriting risk
classification, and the Basic Sum Insured, Additional Sum Insured and annual
Planned Premium amount requested.
25
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $ 760 *
USING CURRENT CHARGES
<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>
1 798 100,000 100,000 100,000 217 243
270 0 0 0
2 1,636 100,000 100,000 100,000 662 736
814 0 0 54
3 2,516 100,000 100,000 100,000 1,091 1,241
1,404 331 481 644
4 3,439 100,000 100,000 100,000 1,502 1,757
2,045 742 997 1,285
5 4,409 100,000 100,000 100,000 1,895 2,284
2,739 1,135 1,524 1,979
6 5,428 100,000 100,000 100,000 2,270 2,821
3,493 1,662 2,213 2,885
7 6,497 100,000 100,000 100,000 2,622 3,366
4,309 2,090 2,834 3,777
8 7,620 100,000 100,000 100,000 2,954 3,920
5,195 2,498 3,464 4,739
9 8,799 100,000 100,000 100,000 3,262 4,480
6,156 2,958 4,176 5,852
10 10,037 100,000 100,000 100,000 3,546 5,046
7,199 3,394 4,894 7,047
11 11,337 100,000 100,000 100,000 3,840 5,658
8,379 3,840 5,658 8,379
12 12,702 100,000 100,000 100,000 4,112 6,280
9,670 4,112 6,280 9,670
13 14,135 100,000 100,000 100,000 4,358 6,911
11,080 4,358 6,911 11,080
14 15,640 100,000 100,000 100,000 4,577 7,550
12,624 4,577 7,550 12,624
15 17,220 100,000 100,000 100,000 4,766 8,194
14,313 4,766 8,194 14,313
16 18,879 100,000 100,000 100,000 4,982 8,901
16,220 4,982 8,901 16,220
17 20,621 100,000 100,000 100,000 5,158 9,606
18,305 5,158 9,606 18,305
18 22,450 100,000 100,000 100,000 5,280 10,298
20,579 5,280 10,298 20,579
19 24,370 100,000 100,000 100,000 5,347 10,974
23,063 5,347 10,974 23,063
20 26,387 100,000 100,000 100,000 5,359 11,634
25,787 5,359 11,634 25,787
25 38,086 100,000 100,000 100,000 4,856 14,966
44,458 4,856 14,966 44,458
30 53,018 100,000 100,000 100,000 3,333 18,382
76,493 3,333 18,382 76,493
35 72,076 ** 100,000 150,762 ** 20,917
131,097 ** 20,917 131,097
40 96,398 ** 100,000 232,821 ** 20,777
221,734 ** 20,777 221,734
45 127,441 ** 100,000 391,779 ** 15,007
373,122 ** 15,007 373,122
</TABLE>
---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit and
Surrender Value will differ if premiums are paid in different amounts or
frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
26
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $ 760 *
USING MAXIMUM CHARGES
<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 1,636 100,000 100,000 100,000 608 679
753 0 0 0
3 2,516 100,000 100,000 100,000 1,009 1,151
1,306 249 391 546
4 3,439 100,000 100,000 100,000 1,392 1,632
1,903 632 872 1,143
5 4,409 100,000 100,000 100,000 1,756 2,120
2,548 996 1,360 1,788
6 5,428 100,000 100,000 100,000 2,100 2,616
3,244 1,492 2,008 2,636
7 6,497 100,000 100,000 100,000 2,422 3,115
3,995 1,890 2,583 3,463
8 7,620 100,000 100,000 100,000 2,722 3,619
4,805 2,266 3,163 4,349
9 8,799 100,000 100,000 100,000 2,996 4,125
5,679 2,692 3,821 5,375
10 10,037 100,000 100,000 100,000 3,248 4,634
6,623 3,096 4,482 6,471
11 11,337 100,000 100,000 100,000 3,472 5,141
7,641 3,472 5,141 7,641
12 12,702 100,000 100,000 100,000 3,667 5,644
8,740 3,667 5,644 8,740
13 14,135 100,000 100,000 100,000 3,831 6,143
9,927 3,831 6,143 9,927
14 15,640 100,000 100,000 100,000 3,964 6,636
11,209 3,964 6,636 11,209
15 17,220 100,000 100,000 100,000 4,063 7,118
12,595 4,063 7,118 12,595
16 18,879 100,000 100,000 100,000 4,125 7,588
14,094 4,125 7,588 14,094
17 20,621 100,000 100,000 100,000 4,144 8,038
15,714 4,144 8,038 15,714
18 22,450 100,000 100,000 100,000 4,114 8,462
17,461 4,114 8,462 17,461
19 24,370 100,000 100,000 100,000 4,031 8,853
19,348 4,031 8,853 19,348
20 26,387 100,000 100,000 100,000 3,885 9,201
21,383 3,885 9,201 21,383
25 38,086 100,000 100,000 100,000 1,992 9,996
34,340 1,992 9,996 34,340
30 53,018 ** 100,000 100,000 ** 7,897
54,124 ** 7,897 54,124
35 72,076 ** ** 100,000 ** **
86,586 ** ** 86,586
40 96,398 ** ** 148,037 ** **
140,988 ** ** 140,988
45 127,441 ** ** 239,498 ** **
228,093 ** ** 228,093
</TABLE>
---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit and
Surrender Value will differ if premiums are paid in different amounts or
frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
27
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION B DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $ 760 *
USING CURRENT CHARGES
<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>
1 798 100,216 100,243 100,269 216 243
269 0 0 0
2 1,636 100,660 100,734 100,811 660 734
811 0 0 51
3 2,516 101,086 101,236 101,398 1,086 1,236
1,398 326 476 638
4 3,439 101,495 101,748 102,034 1,495 1,748
2,034 735 988 1,274
5 4,409 101,884 102,269 102,721 1,884 2,269
2,721 1,124 1,509 1,961
6 5,428 102,253 102,799 103,465 2,253 2,799
3,465 1,645 2,191 2,857
7 6,497 102,599 103,335 104,268 2,599 3,335
4,268 2,067 2,803 3,736
8 7,620 102,922 103,876 105,135 2,922 3,876
5,135 2,466 3,420 4,679
9 8,799 103,221 104,421 106,071 3,221 4,421
6,071 2,917 4,117 5,767
10 10,037 103,494 104,968 107,083 3,494 4,968
7,083 3,342 4,816 6,931
11 11,337 103,776 105,557 108,222 3,776 5,557
8,222 3,776 5,557 8,222
12 12,702 104,033 106,152 109,462 4,033 6,152
9,462 4,033 6,152 9,462
13 14,135 104,263 106,750 110,807 4,263 6,750
10,807 4,263 6,750 10,807
14 15,640 104,463 107,350 112,269 4,463 7,350
12,269 4,463 7,350 12,269
15 17,220 104,632 107,948 113,858 4,632 7,948
13,858 4,632 7,948 13,858
16 18,879 104,829 108,606 115,650 4,829 8,606
15,650 4,829 8,606 15,650
17 20,621 104,982 109,252 117,590 4,982 9,252
17,590 4,982 9,252 17,590
18 22,450 105,079 109,875 119,682 5,079 9,875
19,682 5,079 9,875 19,682
19 24,370 105,116 110,467 121,939 5,116 10,467
21,939 5,116 10,467 21,939
20 26,387 105,095 111,029 124,379 5,095 11,029
24,379 5,095 11,029 24,379
25 38,086 104,406 113,628 140,457 4,406 13,628
40,457 4,406 13,628 40,457
30 53,018 102,693 115,755 166,123 2,693 15,755
66,123 2,693 15,755 66,123
35 72,076 ** 115,986 206,323 ** 15,986
106,323 ** 15,986 106,323
40 96,398 ** 111,858 268,641 ** 11,858
168,641 ** 11,858 168,641
45 127,441 ** 100,135 365,665 ** 135
265,665 ** 135 265,665
</TABLE>
---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit and
Surrender Value will differ if premiums are paid in different amounts or
frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
28
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION B DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $ 760 *
USING MAXIMUM CHARGES
<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>
1 798 100,190 100,215 100,241 190 215
241 0 0 0
2 1,636 100,606 100,677 100,751 606 677
751 0 0 0
3 2,516 101,005 101,147 101,301 1,005 1,147
1,301 245 387 541
4 3,439 101,385 101,624 101,893 1,385 1,624
1,893 625 864 1,133
5 4,409 101,745 102,107 102,531 1,745 2,107
2,531 985 1,347 1,771
6 5,428 102,084 102,595 103,218 2,084 2,595
3,218 1,476 1,987 2,610
7 6,497 102,400 103,086 103,956 2,400 3,086
3,956 1,868 2,554 3,424
8 7,620 102,692 103,579 104,749 2,692 3,579
4,749 2,236 3,123 4,293
9 8,799 102,958 104,070 105,600 2,958 4,070
5,600 2,654 3,766 5,296
10 10,037 103,200 104,561 106,515 3,200 4,561
6,515 3,048 4,409 6,363
11 11,337 103,413 105,048 107,497 3,413 5,048
7,497 3,413 5,048 7,497
12 12,702 103,594 105,527 108,548 3,594 5,527
8,548 3,594 5,527 8,548
13 14,135 103,745 105,996 109,676 3,745 5,996
9,676 3,745 5,996 9,676
14 15,640 103,861 106,453 110,885 3,861 6,453
10,885 3,861 6,453 10,885
15 17,220 103,942 106,895 112,180 3,942 6,895
12,180 3,942 6,895 12,180
16 18,879 103,984 107,316 113,567 3,984 7,316
13,567 3,984 7,316 13,567
17 20,621 103,982 107,711 115,047 3,982 7,711
15,047 3,982 7,711 15,047
18 22,450 103,929 108,069 116,623 3,929 8,069
16,623 3,929 8,069 16,623
19 24,370 103,821 108,384 118,299 3,821 8,384
18,299 3,821 8,384 18,299
20 26,387 103,648 108,645 120,073 3,648 8,645
20,073 3,648 8,645 20,073
25 38,086 101,621 108,779 130,539 1,621 8,779
30,539 1,621 8,779 30,539
30 53,018 ** 105,576 143,625 ** 5,576
43,625 ** 5,576 43,625
35 72,076 ** ** 158,092 ** **
58,092 ** ** 58,092
40 96,398 ** ** 170,300 ** **
70,300 ** ** 70,300
45 127,441 ** ** 170,901 ** **
70,901 ** ** 70,901
</TABLE>
---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit and
Surrender Value will differ if premiums are paid in different amounts or
frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
29
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION A DEATH BENEFIT
CASH VALUE ACCUMULATION TEST
PLANNED PREMIUM: $ 760 *
USING CURRENT CHARGES
<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>
1 798 100,000 100,000 100,000 217 243
270 0 0 0
2 1,636 100,000 100,000 100,000 662 736
814 0 0 54
3 2,516 100,000 100,000 100,000 1,091 1,241
1,404 331 481 644
4 3,439 100,000 100,000 100,000 1,502 1,757
2,045 742 997 1,285
5 4,409 100,000 100,000 100,000 1,895 2,284
2,739 1,135 1,524 1,979
6 5,428 100,000 100,000 100,000 2,270 2,821
3,493 1,662 2,213 2,885
7 6,497 100,000 100,000 100,000 2,622 3,366
4,309 2,090 2,834 3,777
8 7,620 100,000 100,000 100,000 2,954 3,920
5,195 2,498 3,464 4,739
9 8,799 100,000 100,000 100,000 3,262 4,480
6,156 2,958 4,176 5,852
10 10,037 100,000 100,000 100,000 3,546 5,046
7,199 3,394 4,894 7,047
11 11,337 100,000 100,000 100,000 3,840 5,658
8,379 3,840 5,658 8,379
12 12,702 100,000 100,000 100,000 4,112 6,280
9,670 4,112 6,280 9,670
13 14,135 100,000 100,000 100,000 4,358 6,911
11,080 4,358 6,911 11,080
14 15,640 100,000 100,000 100,000 4,577 7,550
12,624 4,577 7,550 12,624
15 17,220 100,000 100,000 100,000 4,766 8,194
14,313 4,766 8,194 14,313
16 18,879 100,000 100,000 100,000 4,982 8,901
16,220 4,982 8,901 16,220
17 20,621 100,000 100,000 100,000 5,158 9,606
18,305 5,158 9,606 18,305
18 22,450 100,000 100,000 100,000 5,280 10,298
20,579 5,280 10,298 20,579
19 24,370 100,000 100,000 100,000 5,347 10,974
23,063 5,347 10,974 23,063
20 26,387 100,000 100,000 100,000 5,359 11,634
25,787 5,359 11,634 25,787
25 38,086 100,000 100,000 100,000 4,856 14,966
44,458 4,856 14,966 44,458
30 53,018 100,000 100,000 129,120 3,333 18,382
75,864 3,333 18,382 75,864
35 72,076 ** 100,000 191,025 ** 20,917
126,206 ** 20,917 126,206
40 96,398 ** 100,000 281,747 ** 20,777
205,835 ** 20,777 205,835
45 127,441 ** 100,000 418,451 ** 15,007
331,420 ** 15,007 331,420
</TABLE>
---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit and
Surrender Value will differ if premiums are paid in different amounts or
frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
30
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION A DEATH BENEFIT
CASH VALUE ACCUMULATION TEST
PLANNED PREMIUM: $ 760 *
USING MAXIMUM CHARGES
<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 1,636 100,000 100,000 100,000 608 679
753 0 0 0
3 2,516 100,000 100,000 100,000 1,009 1,151
1,306 249 391 546
4 3,439 100,000 100,000 100,000 1,392 1,632
1,903 632 872 1,143
5 4,409 100,000 100,000 100,000 1,756 2,120
2,548 996 1,360 1,788
6 5,428 100,000 100,000 100,000 2,100 2,616
3,244 1,492 2,008 2,636
7 6,497 100,000 100,000 100,000 2,422 3,115
3,995 1,890 2,583 3,463
8 7,620 100,000 100,000 100,000 2,722 3,619
4,805 2,266 3,163 4,349
9 8,799 100,000 100,000 100,000 2,996 4,125
5,679 2,692 3,821 5,375
10 10,037 100,000 100,000 100,000 3,248 4,634
6,623 3,096 4,482 6,471
11 11,337 100,000 100,000 100,000 3,472 5,141
7,641 3,472 5,141 7,641
12 12,702 100,000 100,000 100,000 3,667 5,644
8,740 3,667 5,644 8,740
13 14,135 100,000 100,000 100,000 3,831 6,143
9,927 3,831 6,143 9,927
14 15,640 100,000 100,000 100,000 3,964 6,636
11,209 3,964 6,636 11,209
15 17,220 100,000 100,000 100,000 4,063 7,118
12,595 4,063 7,118 12,595
16 18,879 100,000 100,000 100,000 4,125 7,588
14,094 4,125 7,588 14,094
17 20,621 100,000 100,000 100,000 4,144 8,038
15,714 4,144 8,038 15,714
18 22,450 100,000 100,000 100,000 4,114 8,462
17,461 4,114 8,462 17,461
19 24,370 100,000 100,000 100,000 4,031 8,853
19,348 4,031 8,853 19,348
20 26,387 100,000 100,000 100,000 3,885 9,201
21,383 3,885 9,201 21,383
25 38,086 100,000 100,000 100,000 1,992 9,996
34,340 1,992 9,996 34,340
30 53,018 ** 100,000 100,000 ** 7,897
54,124 ** 7,897 54,124
35 72,076 ** ** 128,038 ** **
84,592 ** ** 84,592
40 96,398 ** ** 175,144 ** **
127,954 ** ** 127,954
45 127,441 ** ** 237,023 ** **
187,726 ** ** 187,726
</TABLE>
---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit and
Surrender Value will differ if premiums are paid in different amounts or
frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
31
<PAGE>
ADDITIONAL INFORMATION
This section of the prospectus provides additional detailed information that
is not contained in the Basic Information section on pages 4 through 24.
<TABLE>
<CAPTION>
CONTENTS OF THIS SECTION BEGINNING ON PAGE
------------------------ -----------------
<S> <C>
Description of us ........................... 33
How we support the policy and investment options 33
Procedures for issuance of a policy......... 34
Basic Sum Insured vs. Additional Sum Insured 35
Commencement of investment performance...... 35
How we process certain policy transactions.. 36
Effects of policy loans..................... 37
Additional information about how certain policy charges 38
work........................................
How we market the policies.................. 39
Tax considerations.......................... 40
Reports that you will receive............... 42
Voting privileges that you will have........ 42
Changes that we can make as to your policy.. 42
Adjustments we make to death benefits....... 43
When we pay policy proceeds................. 43
Other details about exercising rights and paying benefits 44
Legal matters............................... 44
Registration statement filed with the SEC... 44
Accounting and actuarial experts............ 44
Financial statements of JHVLICO and the Account 44
List of our Directors and Executive Officers of JHVLICO 45
</TABLE>
32
<PAGE>
DESCRIPTION OF US
We are JHVLICO, a stock life insurance company chartered in 1979 under
Massachusetts law. We are authorized to transact a life insurance and annuity
business in all states other than New York and in the District of Columbia. We
began selling variable life insurance policies in 1980.
We are regulated and supervised by the Massachusetts Commissioner of
Insurance, who periodically examines our affairs. We also are subject to the
applicable insurance laws and regulations of all jurisdictions in which we are
authorized to do business. We are required to submit annual statements of our
operations, including financial statements, to the insurance departments of the
various jurisdictions in which we do business for purposes of determining
solvency and compliance with local insurance laws and regulations. The
regulation to which we are subject, however, does not provide a guarantee as to
such matters.
We are a wholly-owned subsidiary of John Hancock Life Insurance Company ("John
Hancock"), a Massachusetts stock life insurance company. On February 1, 2000,
John Hancock Mutual Life Insurance Company (which was chartered in Massachusetts
in 1862) converted to a stock company by "demutualizing" and changed its name to
John Hancock Life Insurance Company. As part of the demutualization process,
John Hancock became a subsidiary of John Hancock Financial Services, Inc., a
newly formed publicly-traded corporation. John Hancock's home office is at John
Hancock Place, Boston, Massachusetts 02117. As of December 31, 1999, John
Hancock's assets were approximately $71 billion and it had invested
approximately $575 million in JHVLICO in connection with JHVLICO's organization
and operation. It is anticipated that John Hancock will from time to time make
additional capital contributions to JHVLICO to enable us to meet our reserve
requirements and expenses in connection with our business. John Hancock is
committed to make additional capital contributions if necessary to ensure that
we maintain a positive net worth.
HOW WE SUPPORT THE POLICY AND INVESTMENT OPTIONS
Separate Account U
The variable investment options shown on page 1 are in fact subaccounts of
Separate Account U (the "Account"), a separate account established by us under
Massachusetts law. The Account 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"). Such registration does not
involve supervision by the SEC of the management of the Account or of us.
The Account's assets are our property. Each policy provides that amounts we
hold in the Account pursuant to the policies cannot be reached by any other
persons who may have claims against us.
The assets in each subaccount are invested in the corresponding fund of
theTrust. New subaccounts may be added as new funds are added to the Trust and
made available to policy owners. Existing subaccounts may be deleted if existing
funds are deleted from the Trust.
We will purchase and redeem Trust shares for the Account at their net asset
value without any sales or redemption charges. Shares of a Trust represent an
interest in one of the funds of the Trust which corresponds to a subaccount of
the Account. Any dividend or capital gains distributions received by the Account
will be reinvested in shares of that same fund at their net asset value as of
the dates paid.
On each business day, shares of each fund are purchased or redeemed by us for
each subaccount based on, among other things, the amount of net premiums
allocated to the subaccount, distributions reinvested, and transfers to, from
and among subaccounts, all to be effected as of that date. Such purchases and
redemptions are effected at each
33
<PAGE>
fund's net asset value per share determined for that same date. A "business day"
is any date on which the New York Stock Exchange is open for trading. We compute
policy values for each business day as of the close of that day (usually 4:00
p.m. Eastern Standard Time).
Our general account
Our obligations under the policy's fixed investment option are backed by our
general account assets. Our general account consists of assets owned by us other
than those in the Account and in other separate accounts that we may establish.
Subject to applicable law, we have sole discretion over the investment of assets
of the general account and policy owners do not share in the investment
experience of, or have any preferential claim on, those assets. Instead, we
guarantee that the account value allocated to the fixed investment option will
accrue interest daily at an effective annual rate of at least 4% without regard
to the actual investment experience of the general account.
Because of exemptive and exclusionary provisions, interests in our fixed
investment option have not been registered under the Securities Act of 1933 and
our 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 we have been advised that the staff
of the SEC has not reviewed the disclosure in this prospectus relating to the
fixed investment option. Disclosure regarding the fixed investment option may,
however, be subject to certain generally-applicable provisions of the Federal
securities laws relating to accuracy and completeness of statements made in
prospectuses.
PROCEDURES FOR ISSUANCE OF A POLICY
Generally, the policy is available with a minimum Basic Sum Insured at issue
of $100,000. At the time of issue, the insured person must have an attained age
of no more than 80. All insured persons must meet certain health and other
insurance risk criteria called "underwriting standards".
Policies issued in Montana or in connection with certain employee plans will
not directly reflect the sex of the insured person 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, may not reflect the rates, charges,
or values that would apply to such policies.
Minimum Initial Premium
The Minimum Initial Premium must be received by us at our Life Servicing
Office in order for the policy to be in full force and effect. There is no grace
period for the payment of the Minimum Initial Premium. The Minimum Initial
Premium is determined by us based on the characteristics of the insured person,
the Basic Sum Insured and the Additional Sum Insured at issue, and the policy
options you have selected.
Commencement of insurance coverage
After you apply for a policy, it can sometimes take up to several weeks for us
to gather and evaluate all the information we need to decide whether to issue a
policy to you and, if so, what the insured person's rate class should be. After
we approve an application for a policy and assign an appropriate insurance rate
class, we will prepare the policy for delivery. We will not pay a death benefit
under a policy unless the policy is in effect when the insured person dies
(except for the circumstances described under "Temporary insurance coverage
prior to policy delivery" on page 35).
The policy will take effect only if all of the following conditions are
satisfied:
. The policy is delivered to and received by the applicant.
. The Minimum Initial Premium is received by us.
. Each insured person is living and still meets our health criteria for
issuing insurance.
34
<PAGE>
If all of the above conditions are satisfied, the policy will take effect on
the date shown in the policy as the "date of issue." That is the date on which
we begin to deduct monthly charges. Policy months, policy years and policy
anniversaries are all measured from the date of issue.
Backdating
In order to preserve a younger age at issue for the insured person, we can
designate a date of issue that is up to 60 days earlier than the date that would
otherwise apply. This is referred to as "backdating" and is allowed under state
insurance laws. Backdating can also be used in certain corporate-owned life
insurance cases involving multiple policies to retain a common monthly deduction
date.
The conditions for coverage described above under "Commencement of insurance
coverage" must still be satisfied, but in a backdating situation the policy
always takes effect retroactively. Backdating results in a lower insurance
charge (because of the insured person's younger age at issue), but monthly
charges begin earlier than would otherwise be the case. Those monthly charges
will be deducted as soon as we receive premiums sufficient to pay them.
Temporary coverage prior to policy delivery
If a specified amount of premium is paid with the application for a policy and
other conditions are met, we will provide temporary term life insurance coverage
on the insured person for a period prior to the time coverage under the policy
takes effect. Such temporary term coverage will be subject to the terms and
conditions described in the application for the policy, including limits on
amount and duration of coverage.
Monthly deduction dates
Each charge that we deduct monthly is assessed against your account value or
the subaccounts at the close of business on the date of issue and at the close
of the first business day in each subsequent policy month.
BASIC SUM INSURED VS. ADDITIONAL SUM INSURED
As noted earlier in this prospectus, you should consider a number of factors
in determining whether to elect coverage in the form of Basic Sum Insured or in
the form of Additional Sum Insured.
The amount of sales charge deducted from premiums and the amount of
compensation paid to the selling insurance agent will be less if coverage is
included as Additional Sum Insured, rather than as Basic Sum Insured. On the
other hand, the amount of any Additional Sum Insured is not included in the
guaranteed death benefit feature. Therefore, if the policy's surrender value is
insufficient to pay the monthly charges as they fall due (including the charges
for the Additional Sum Insured), the Additional Sum Insured coverage will lapse,
even if the Basic Sum Insured stays in effect pursuant to the guaranteed death
benefit feature.
Generally, you will incur lower sales charges and have more flexible coverage
with respect to the Additional Sum Insured than with respect to the Basic Sum
Insured. If this is your priority, you may wish to maximize the proportion of
the Additional Sum Insured. However, if your priority is to take advantage of
the guaranteed death benefit feature, the proportion of the Policy's Total Sum
Insured that is guaranteed can be increased by taking out more coverage as Basic
Sum Insured at the time of policy issuance.
Any decision you make to modify the amount of Additional Sum Insured coverage
after issue can have significant tax consequences (see "Tax Considerations"
beginning on page 40).
COMMENCEMENT OF INVESTMENT PERFORMANCE
Any premium payment processed prior to the twentieth day after the policy's
date of issue will automatically be allocated to the Money Market investment
option. On the later of the date such payment is received or the twentieth day
following the date of issue, the portion of the Money Market investment option
attributable to such payment will
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be reallocated automatically among the investment options you have chosen.
All other premium payments will be allocated among the investment options you
have chosen as soon as they are processed.
HOW WE PROCESS CERTAIN POLICY TRANSACTIONS
Premium payments
We will process any premium payment as of the day we receive it, unless one of
the following exceptions applies:
(1) We will process a payment received prior to a policy's date of issue as if
received on the date of issue.
(2) If the Minimum Initial Premium is not received prior to the date of issue,
we will process each premium payment received thereafter as if received on the
business day immediately preceding the date of issue until all of the Minimum
Initial Premium is received.
(3) We will process the portion of any premium payment for which we require
evidence of the insured person's continued insurability only after we have
received such evidence and found it satisfactory to us.
(4) If we receive any premium payment that we think will cause a policy to
become a modified endowment or will cause a policy to lose its status as life
insurance under the tax laws, we will not accept the excess portion of that
premium payment and will immediately notify the owner. We will refund the excess
premium when the premium payment check has had time to clear the banking system
(but in no case more than two weeks after receipt), except in the following
circumstances:
. The tax problem resolves itself prior to the date the refund is to be
made; or
. The tax problem relates to modified endowment status and we receive a
signed acknowledgment from the owner prior to the refund date instructing
us to process the premium notwithstanding the tax issues involved.
In the above cases, we will treat the excess premium as having been received
on the date the tax problem resolves itself or the date we receive the signed
acknowledgment. We will then process it accordingly.
(4) If a premium payment is received or is otherwise scheduled to be processed
(as specified above) on a date that is not a business day, the premium payment
will be processed on the business day next following that date.
Transfers among investment options
Any reallocation among investment options must be such that the total in all
investment options after reallocation equals 100% of account value. Transfers
out of any investment option will be effective at the end of the business day in
which we receive at our Life Servicing Office notice satisfactory to us.
We have the right to defer transfers of amounts out of the fixed investment
option for up to six months.
Dollar cost averaging
Scheduled transfers under this option may be made from the Money Market
investment option to not more than nine other variable investment options.
However, the amount transferred to any one investment option must be at least
$100.
Once we receive the election in form satisfactory to us at our Life Servicing
Office, transfers will begin on the second monthly deduction date following its
receipt. 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 for
so long as you have at least $2,500 of your account value in the Money Market
investment option, or until we receive written notice from you of cancellation
of the option or notice
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of the death of the insured person. The dollar cost averaging and rebalancing
options cannot be in effect at the same time. We reserve the right to modify,
terminate or suspend the dollar cost averaging program at any time.
Asset Rebalancing
This option can be elected in the application or by sending the appropriate
form to our Life Servicing Office. You must specify the frequency for
rebalancing (quarterly, semi-annually or annually), the preset percentage for
each variable investment option and a future beginning date. The first
rebalancing will occur on the monthly deduction date that occurs on or next
follows the beginning date you select.
Once elected, rebalancing will continue until we receive notice of
cancellation of the option or notice of the death of the last surviving insured
person. If you cancel rebalancing, you will have to wait 30 days before you can
start it again.
The fixed investment option does not participate in and is not affected by
rebalancing.The rebalancing and dollar cost averaging options cannot be in
effect at the same time. We reserve the right to modify, terminate or suspend
the rebalancing program at any time.
Telephone transfers and policy loans
Once you have completed a written authorization, you may request a transfer or
policy loan by telephone or by fax. If the fax request option becomes
unavailable, another means of telecommunication will be substituted.
If you authorize telephone transactions, you will be liable for any loss,
expense or cost arising out of any unauthorized or fraudulent telephone
instructions which we reasonably believe to be genuine, unless such loss,
expense or cost is the result of our mistake or negligence. We employ procedures
which provide safeguards against the execution of unauthorized transactions, and
which are reasonably designed to confirm that instructions received by telephone
are genuine. These procedures include requiring personal identification, tape
recording calls, and providing written confirmation to the owner. If we do not
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, we may be liable for any loss due to unauthorized or
fraudulent instructions.
Effective date of other policy transactions
The following transactions take effect on the policy anniversary on or next
following the date we approve your request:
. Additional Sum Insured increases.
. Change of death benefit Option from A to B.
A change from Option B to Option A is effective on the policy anniversary on
or next following the date we receive the request.
The following transactions take effect on the monthly deduction date on or
next following the date we approve your request:
. Total Sum Insured decreases
. Reinstatements of lapsed policies
We process loans, surrenders, partial withdrawals and loan repayments as of
the day we receive such request or repayment.
EFFECTS OF POLICY LOANS
The account value, the surrender value, and any death benefit above the Total
Sum Insured are permanently affected by any loan, whether or not it is repaid in
whole or in part. This is because the amount of the loan is deducted from the
investment options and placed in a special loan account. The investment options
and the special loan account will generally have different rates of investment
return.
The amount of the outstanding loan (which includes accrued and unpaid
interest) is subtracted
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from the amount otherwise payable when the policy proceeds become payable.
Whenever the outstanding loan equals or exceeds the surrender value, the
policy will terminate 31 days after we have mailed notice of termination to you
(and to any assignee of record at such assignee's last known address) specifying
the minimum amount that must be paid to avoid termination, unless a repayment of
at least the amount specified is made within that period.
ADDITIONAL INFORMATION ABOUT HOW CERTAIN POLICY CHARGES WORK
Sales expenses and related charges
The sales charges (i.e., the premium sales charge and the CDSC) help to
compensate us for the cost of selling our policies. (See "What charges will we
deduct from your investment in the policy?" in the Basic Information section of
this prospectus.) The amount of the charges in any policy year does not
specifically correspond to sales expenses for that year. We expect to recover
our total sales expenses over the life of the policies. To the extent that the
sales charges do not 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 our general
assets. (See "How we market the policies" on page 39.)
Effect of premium payment pattern
You 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 any policy year, or paying more than one Target Premium in any
policy year could reduce your total sales charges over time. For example, if the
Target Premium was $1,000 and you paid a premium of $1,000 for ten years, you
would pay total premium sales charges of $400 and be subject to a maximum CDSC
of $1,000. If you paid $2,000 every other policy year for ten policy years,
you would pay total premium sales charges of only $200 and be subject to a
maximum CDSC of $1,000. However, delaying the payment of Target Premiums to
later policy years could increase the risk that the guaranteed death benefit
feature will lapse and the account value will be insufficient to pay policy
charges. As a result, the policy or any Additional Sum Insured may lapse and
eventually terminate. Conversely, accelerating the payment of Target 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 you upon receipt of policy
distributions. (See "Tax considerations" beginning on page 40.)
Monthly charges
Unless we agree otherwise, we will deduct the monthly charges described in the
Basic Information section from your policy's investment options in proportion to
the amount of account value you have in each. For each month that we cannot
deduct any charge because of insufficient account value, the uncollected charges
will accumulate and be deducted when and if sufficient account value becomes
available.
The insurance under the policy continues in full force during any grace period
but, if the insured person dies during the policy grace period, the amount of
unpaid monthly charges is deducted from the death benefit otherwise payable.
Reduced charges for eligible classes
The charges 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 we anticipate that the sales to the members of the class will
result in lower than normal sales or administrative expenses, lower taxes or
lower risks to us. We will make these reductions in accordance with our rules in
effect at the time of the application for a policy. The factors we consider in
determining the eligibility of a particular group for reduced charges, and the
level of the reduction, are as
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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
lapse and surrender rates of the policies; the size of the class of associated
individuals and the number of years it has been in existence; the aggregate
amount of premiums paid; and any other such circumstances which result in a
reduction in sales or administrative expenses, lower taxes or lower risks. Any
reduction in charges will be reasonable and will apply uniformly to all
prospective policy purchasers in the class and will not unfairly discriminate
against any owner.
HOW WE MARKET THE POLICIES
Signator Investors, Inc. ("Signator"), an indirect wholly-owned subsidiary of
John Hancock located at 197 Clarendon Street, Boston, MA 02117, is registered as
a broker-dealer under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. and the Securities Investor
Protection Corporation. Signator acts as principal underwriter and principal
distributor of the policies pursuant to a sales agreement among John Hancock,
Signator, JHVLICO, and the Account. Signator also serves as principal
underwriter for 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, all of which are registered under the 1940 Act. Signator is
also the principal underwriter for John Hancock Variable Series Trust I.
Applications for policies are solicited by agents who are licensed by state
insurance authorities to sell JHVLICO's policies and who are also registered
representatives ("representatives") of Signator or other broker-dealer firms, as
discussed below. John Hancock (on behlaf of JHVLICO) performs insurance
underwriting and determines whether to accept or reject the application for a
policy and each insured person's risk classification. JHVLICO will make the
appropriate refund if a policy ultimately is not issued or is returned under the
"free look" 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.
Signator's representatives are compensated for sales of the policies on a
commission and service fee basis by Signator, and JHVLICO reimburses Signator
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 Signator representative for selling a
policy is 45% of the Target Premium paid in the first policy year, and 3% of any
additional premium paid in the first policy year and thereafter. In addition, a
"trail" commission is payable at the end of policy year 5 and annually each year
thereafter equal to .15% of that portion of account value allocated to the
variable investment options for the applicable policy year.
Representatives with less than four years of service with Signator 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.
The policies are also sold through other registered broker-dealers that have
entered into selling agreements with Signator 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 Signator's
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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. Signator will compensate
the broker-dealers as provided in the selling agreements, and JHVLICO will
reimburse Signator for such amounts and for certain other direct expenses in
connection with marketing the policies through other broker-dealers.
Representatives of Signator and the other broker-dealers mentioned above may
also earn "credits" toward qualification for attendance at certain business
meetings sponsored by John Hancock.
The offering of the policies is intended to be continuous, but neither JHVLICO
nor Signator is obligated to sell any particular amount of policies.
TAX CONSIDERATIONS
This description of federal income tax consequences is only a brief summary
and is not intended as tax advice. Tax consequences will vary based on your own
particular circumstances, and for further information you should consult a
qualified tax advisor. Federal, state and local tax laws, regulations and
interpretations can change from time to time. As a result, the tax consequences
to you and the beneficiary may be altered, in some cases retroactively.
Policy proceeds
We believe the policy will receive the same federal income and estate tax
treatment as fixed benefit life insurance policies. Section 7702 of the Internal
Revenue Code (the "Code") defines life insurance for federal tax purposes. If
certain standards are met at issue and over the life of the policy, the policy
will satisfy that definition. We will monitor compliance with these standards.
If the policy complies with the definition of life insurance, we believe the
death benefit proceeds under the policy will be excludable from the
beneficiary's gross income under the Code. In addition, if you have elected the
Long-Term Care Acceleration rider, the rider's benefits generally will be
excludable from gross income under the Code. The tax-free nature of these
accelerated benefits is contingent on the rider meeting specific requirements
under Sections 101 and/or Section 7702B of the Code. We have designed the rider
to meet these standards.
Other policy distributions
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 distributions. In general, the owner will be taxed on the
amount of distributions that exceed the premiums paid under the policy. But
under certain circumstances within the first 15 policy years, the owner may be
taxed on a distribution even if total withdrawals do not exceed total premiums
paid. Any taxable distribution will be ordinary income to the owner (rather than
capital gains).
Distributions for tax purposes can include amounts received upon surrender or
partial withdrawals. You may also be deemed to have received a distribution for
tax purposes if you assign all or part of your policy rights or change your
policy's ownership. If you have elected the Long-Term Care Acceleration Rider,
as described beginning on page 19, you may be deemed to have received a
distribution for tax purposes each time a deduction is made from your policy's
account value to pay the rider charge.
We also believe 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 outstanding loan that
was not previously considered income (as discussed below) will be treated as if
it had been distributed to the owner if the policy terminates for any reason.
It is possible that, despite our monitoring, a policy might fail to qualify as
life insurance under
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Section 7702 of the Code. This could happen, for example, if we inadvertently
failed to return to you any premium payments that were in excess of permitted
amounts, or if the Trust failed to meet certain investment diversification or
other requirements of the Code. If this were to occur, you would be subject to
income tax on the income and gains under the policy for the period of the
disqualification and for subsequent periods.
In the past, the United States Treasury Department has stated that it
anticipated issuing guidelines prescribing circumstances in which the ability of
a policy owner to direct his or her investment to particular funds may cause the
policy owner, rather than the insurance company, to be treated as the owner of
the shares of those funds. In that case, any income and gains attributable to
those shares would be included in your current gross income for federal income
tax purposes. Under current law, however, we believe that we, and not the owner
of a policy, would be considered the owner of the fund's shares for tax
purposes.
Tax consequences of ownership or receipt of policy proceeds under federal,
state and local estate, inheritance, gift and other tax laws depend on the
circumstances of each owner or beneficiary.
Because there may be unfavorable tax consequences (including recognition of
taxable income and the loss of income tax-free treatment for any death benefit
payable to the beneficiary), you should consult a qualified tax adviser prior to
changing the policy's ownership or making any assignment of ownership interests.
7-pay premium limit
At the time of policy issuance, we will determine whether the Planned Premium
schedule will exceed the 7-pay limit discussed below. If so, our standard
procedures prohibit issuance of the policy unless you sign a form acknowledging
that fact.
The 7-pay limit is the total of net level premiums that would have been
payable at any time for a comparable fixed policy to be fully "paid-up" after
the payment of 7 equal annual premiums. "Paid-up" means that no further premiums
would be required to continue the coverage in force until maturity, based on
certain prescribed assumptions. If the total premiums paid at any time during
the first 7 policy years exceed the 7-pay limit, the policy will be treated as a
"modified endowment", which can have adverse tax consequences.
The owner will be taxed on distributions and loans from a "modified endowment"
to the extent of any income (gain) to the owner (on an income-first basis). The
distributions and loans 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 taxable portions of such
distributions or loans that are made before the owner attains age 591/2.
Furthermore, any time there is a "material change" in an increase in the
Additional Sum Insured, the addition of certain other policy benefits after
issue, a change in death benefit option, or reinstatement of a lapsed policy),
the policy will have a new 7-pay limit as if it were a newly-issued policy. If a
prescribed portion of the policy's then account value, plus all other premiums
paid within 7 years after the material change, at any time exceed the new 7-pay
limit, the policy will become a modified endowment.
Moreover, if benefits under a policy are reduced (such as a reduction in the
Total Sum Insured or death benefit or the reduction or cancellation of certain
rider benefits) during the 7 years in which a 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.
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All modified endowments issued by the same insurer (or its affiliates) to the
owner during any calendar year generally will be treated as one contract for the
purpose of applying the modified endowment rules. A policy received in exchange
for a modified endowment will itself also be a modified endowment. You should
consult your tax advisor if you have questions regarding the possible impact of
the 7-pay limit on your policy.
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. We are not responsible for compliance with the
terms of any such plan or with the requirements of applicable provisions of the
Code.
REPORTS THAT YOU WILL RECEIVE
At least annually, we will send you a statement setting forth the following
information as of the end of the most recent reporting period: the amount of the
death benefit, the Basic Sum Insured and the Additional Sum Insured, the account
value, the portion of the account value in each investment option, the 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). Moreover, you also will receive confirmations of premium payments,
transfers among investment options, policy loans, partial withdrawals and
certain other policy transactions.
Semiannually we will send you a report containing the financial statements of
the Trust, including a list of securities held in each fund.
VOTING PRIVILEGES THAT YOU WILL HAVE
All of the assets in the subaccounts of the Account are invested in shares of
the corresponding funds of the Trust. We will vote the shares of each of the
funds of the Trust which are deemed attributable to variable life insurance
policies at regular and special meetings of the Trust's shareholders in
accordance with instructions received from owners of such policies. Shares of
the Trust held in the Account which are not attributable to such policies, as
well as shares for which instructions from owners are not received, will be
represented by us at the meeting. We will vote such shares for and against each
matter in the same proportions as the votes based upon the instructions received
from the owners of such policies.
We determine the number of a fund's shares held in a subaccount attributable
to each owner by dividing the amount of a policy's account value held in the
subaccount by the net asset value of one share in the fund. Fractional votes
will be counted. We determine the number of shares as to which the owner may
give instructions as of the record date for the Trust's meeting. Owners of
policies may give instructions regarding the election of the Board of Trustees
or Board of Directors of the Trust, ratification of the selection of independent
auditors, approval of Trust investment advisory agreements and other matters
requiring a shareholder vote. We will furnish owners with information and forms
to enable owners to give voting instructions.
However, we may, in certain limited circumstances permitted by the SEC's
rules, disregard voting instructions. If we do disregard voting instructions,
you will receive a summary of that action and the reasons for it in the next
semi-annual report to owners.
CHANGES THAT WE CAN MAKE AS TO YOUR POLICY
Changes relating to a Trust or the Account
The voting privileges described in this prospectus reflect our 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, we reserve the right to proceed in accordance with any
such revised requirements. We
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also reserve 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 your policy belongs from
the Account to another separate account or subaccount, (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,
John Hancock, or an affiliate of either, (3) to deregister the Account under the
1940 Act, (4) to substitute for the fund shares held by a subaccount any other
investment permitted by law, and (5) to take any action necessary to comply with
or obtain any exemptions from the 1940 Act. We 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.
Other permissible changes
We reserve the right to make any changes in the policy necessary to ensure the
policy is within the definition of life insurance under the Federal tax laws and
is in compliance with any changes in Federal or state tax laws.
In our policies, we reserve the right to make certain changes if they would
serve the best interests of policy owners or would be appropriate in carrying
out the purposes of the policies. Such changes include the following:
. Changes necessary to comply with or obtain or continue exemptions under
the federal securities laws
. Combining or removing investment options
. Changes in the form of organization of any separate account
Any such changes will be made only to the extent permitted by applicable laws
and only in the manner permitted by such laws. When required by law, we will
obtain your approval of the changes and the approval of any appropriate
regulatory authority.
ADJUSTMENTS WE MAKE TO DEATH BENEFITS
If the insured person commits suicide within certain time periods, the amount
of death benefit we pay will be limited as described in the policy. Also, if an
application misstated the age or gender of the insured person, we will adjust
the amount of any death benefit as described in the policy.
WHEN WE PAY POLICY PROCEEDS
General
We will pay any death benefit, withdrawal, surrender value or loan within 7
days after we receive the last required form or request (and, with respect to
the death benefit, any other documentation that may be required). If we don't
have information about the desired manner of payment within 7 days after the
date we receive notification of the insured person's death, we will pay the
proceeds as a single sum, normally within 7 days thereafter.
Delay to challenge coverage
We may challenge the validity of your insurance policy based on any material
misstatements made to us in the application for the policy. We cannot make such
a challenge, however, beyond certain time limits that are specified in the
policy.
Delay for check clearance
We reserve the right to defer payment of that portion of your account value
that is attributable to a premium payment made by check for a reasonable period
of time (not to exceed 15 days) to allow the check to clear the banking system.
Delay of separate account proceeds
We reserve the right to defer payment of any death benefit, loan or other
distribution that is derived from a variable investment option if (1) the New
York Stock Exchange is closed (other than customary weekend and holiday
closings) or trading on the New York Stock Exchange is restricted; (2) an
emergency exists, as a result of which disposal of securities is not
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reasonably practicable or it is not reasonably practicable to fairly determine
the account value; or (3) the SEC by order permits the delay for the protection
of owners. Transfers and allocations of account value among the investment
options may also be postponed under these circumstances. If we need to defer
calculation of separate account values for any of the foregoing reasons, all
delayed transactions will be processed at the next values that we do compute.
OTHER DETAILS ABOUT EXERCISING RIGHTS AND PAYING BENEFITS
Joint ownership
If more than one person owns a policy, all owners must join in most requests
to exercise rights under the policy.
Assigning your policy
You may assign your rights in the policy to someone else as collateral for a
loan or for some other reason. Assignments do not require the consent of any
revocable beneficiary. A copy of the assignment must be forwarded to us. We are
not responsible for any payment we make or any action we take before we receive
notice of the assignment in good order. Nor are we responsible for the validity
of the assignment. An absolute assignment is a change of ownership. All
collateral assignees of record must consent to any full surrender, partial
withdrawal or loan from the policy.
Your beneficiary
You name your beneficiary when you apply for the policy. The beneficiary is
entitled to the proceeds we pay following the insured person's death. You may
change the beneficiary during the insured person's lifetime. Such a change
requires the consent of any irrevocable named beneficiary. A new beneficiary
designation is effective as of the date you sign it, but will not affect any
payments we make before we receive it. If no beneficiary is living when the
insured person dies, we will pay the insurance proceeds to the owner or the
owner's estate.
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 us on certain
Federal securities law matters in connection with the policies.
REGISTRATION STATEMENT FILED WITH THE SEC
This prospectus omits certain information contained in the Registration
Statement which has been filed with the SEC. More details may be obtained from
the SEC upon payment of the prescribed fee.
ACCOUNTING AND ACTUARIAL EXPERTS
Certain of 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 Todd G. Engelsen, F.S.A., F.S.A.,an Actuary of
JHVLICO and Second Vice President of John Hancock.
FINANCIAL STATEMENTS OF JHVLICO AND THE ACCOUNT
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.
In addition to those financial statements of JHVLICO and the Account included
herein that have been audited by Ernst & Young LLP, this prospectus also
contains unaudited financial statements of both JHVLICO and the Account for a
period subsequent to the audited financial statements.
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LIST 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 and Executive Principal Occupations
----------------------- ---------------------
Officers
--------
<S> <C>
David F. D'Alessandro Chairman of the Board and Chief Executive
Officer of JHVLICO; President and Chief
Executive Officer, John Hancock Life Insurance
Company.
Michele G. Van Leer. Vice Chairman of the Board and President of
JHVLICO; Senior Vice President, John Hancock
Life Insurance Company.
Ronald J. Bocage . . . Director, Vice President and Counsel of JHVLICO;
Vice President and Counsel, John Hancock Life
Insurance Company.
Bruce M. Jones. . . . Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Thomas J. Lee. . . . Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Barbara L. Luddy. . . Director, Vice President and Actuary of JHVLICO;
Senior Vice President, John Hancock Life
Insurance Company.
Robert S. Paster. . . Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Robert R. Reitano. . Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Paul Strong . . . . . Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Daniel L. Ouellette. Vice President, Marketing, of JHVLICO; Senior
Vice President, John Hancock Life Insurance
Company.
Edward P. Dowd. . . . Vice President, Investments, of JHVLICO; Senior
Vice President, John Hancock Life Insurance
Company
Roger G. Nastou. . . Vice President, Investments, of JHVLICO; Vice
President, John Hancock Life Insurance Company
Todd G. Engelsen. . . Vice President and Illustration Actuary of
JHVLICO; Second Vice President, John Hancock
Life Insurance Company
Julie H. Indge. . . . Treasurer of JHVLICO; Financial Officer, John
Hancock Life Insurance Company
Patrick J. Gill . . . Controller of JHVLICO; Senior Associate
Controller, John Hancock Life Insurance Company.
Peter Scavongelli. . Secretary of JHVLICO; State Compliance Officer,
John Hancock Life Insurance Company
</TABLE>
The business address of all Directors and officers of JHVLICO is John Hancock
Place, Boston, Massachusetts 02117.
45
<PAGE>
UNAUDITED FINANCIAL STATEMENTS
FOR
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
SECOND QUARTER 2000
46
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
2000 1999
----------------------- --------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Bonds . . . . . . . . . . . . . . . . $ 1,344.7 $ 1,216.3
Preferred stocks . . . . . . . . . . 36.9 35.9
Common stocks . . . . . . . . . . . . 2.0 3.2
Investment in affiliates . . . . . . 80.5 80.7
Mortgage loans on real estate . . . . 468.2 433.1
Real estate . . . . . . . . . . . . . 24.7 25.0
Policy loans . . . . . . . . . . . . 195.5 172.1
Cash Items:
Cash in banks . . . . . . . . . . . (3.0) 27.2
Temporary cash investments . . . . . 284.6 222.9
---------------------- ---------
281.6 250.1
Premiums due and deferred . . . . . . 28.9 29.9
Investment income due and accrued . . 40.9 33.2
Other general account assets . . . . 43.7 65.3
Assets held in separate accounts . . 8,569.0 8,268.2
---------------------- ---------
Total assets . . . . . . . . . . . $11,116.6 $10,613.0
====================== =========
OBLIGATIONS AND STOCKHOLDER'S EQUITY
Obligations
Policy reserves . . . . . . . . . . $ 2,048.1 $ 1,866.6
Federal income and other taxes
payable . . . . . . . . . . . . . . 97.8 67.3
Other general account obligations . 207.4 219.0
Transfers from separate account, net (229.6) (221.6)
Asset valuation reserve . . . . . . 19.3 23.1
Obligations related to separate
accounts. . . . . . . . . . . . . . 8,562.1 8,261.6
---------------------- ---------
Total obligations . . . . . . . . . 10,705.1 10,216.0
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 . . . . . . . . . . 572.4 572.4
Unassigned deficit . . . . . . . . . (163.4) (177.9)
---------------------- ---------
Total stockholder's equity . . . . . 411.5 397.0
---------------------- ---------
Total obligations and stockholder's
equity . . . . . . . . . . . . . . $11,116.6 $10,613.0
====================== =========
See condensed notes to the financial
statements (unaudited).
</TABLE>
47
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -----------------
2000 1999 2000 1999
--------- -------- -------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
INCOME
Premiums . . . . . . . . . . . . . . $ 255.7 $228.6 $ 487.0 $452.2
Net investment income . . . . . . . 43.4 31.9 83.0 64.4
Other, net . . . . . . . . . . . . . 110.1 116.6 242.5 261.9
------- ------ ------- ------
409.2 377.1 812.5 778.5
BENEFITS AND EXPENSES
Payments to policyholders and
beneficiaries . . . . . . . . . . . 93.2 94.1 182.4 174.4
Additions to reserves to provide for
future payments to policyholders and
beneficiaries . . . . . . . . . . . 213.4 198.6 429.7 436.8
Expenses of providing service to
policyholders and obtaining new
insurance . . . . . . . . . . . . . 80.4 77.8 153.9 153.5
State and miscellaneous taxes . . . 5.7 8.1 13.3 10.9
------- ------ ------- ------
392.7 378.6 779.3 775.6
------- ------ ------- ------
Gain from operations before federal
income taxes and net realized
capital gains (losses) . . . . . . 16.5 (1.5) 33.2 2.9
Federal income taxes . . . . . . . . 12.2 (1.4) 16.9 (0.4)
------- ------ ------- ------
Gain from operations before net
realized capital gains (losses) . 4.3 (0.1) 16.3 3.3
Net realized capital gains (losses) 0.1 0.5 0.5 (1.0)
------- ------ ------- ------
Net income . . . . . . . . . . . . 4.4 0.4 16.8 2.3
Unassigned deficit at beginning of
period. . . . . . . . . . . . . . . (164.5) (51.2) (177.9) (49.2)
Net unrealized capital gains (losses)
and other adjustments . . . . . . . (3.1) (3.4) (2.0) (3.1)
Other reserves and adjustments . . . (0.2) 2.0 (0.3) (2.2)
------- ------ ------- ------
Unassigned deficit at end of period $(163.4) $(52.2) $(163.4) $(52.2)
======= ====== ======= ======
See condensed notes to the financial
statements (unaudited).
</TABLE>
48
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
-----------------
2000 1999
-------- ----------
(IN MILLIONS)
<S> <C> <C>
Cash flows from operating activities:
Insurance premiums . . . . . . . . . . . . . . . . . . $ 495.7 $ 452.0
Net investment income . . . . . . . . . . . . . . . . . 75.2 60.5
Benefits to policyholders and beneficiaries . . . . . . (167.9) (274.6)
Dividends paid to policyholders . . . . . . . . . . . . (13.0) (12.6)
Insurance expenses and taxes . . . . . . . . . . . . . . (174.4) (195.0)
Net transfers to separate accounts . . . . . . . . . . . (254.7) (343.7)
Other, net . . . . . . . . . . . . . . . . . . . . . . 257.1 289.9
------- -------
Net cash provided from operations . . . . . . . . . . 218.0 (23.5)
------- -------
Cash flows used in investing activities:
Bond purchases . . . . . . . . . . . . . . . . . . . . (305.5) (143.7)
Bond sales . . . . . . . . . . . . . . . . . . . . . . 128.1 41.3
Bond maturities and scheduled redemptions . . . . . . . 36.6 38.9
Bond prepayments . . . . . . . . . . . . . . . . . . . 7.9 8.0
Stock purchases . . . . . . . . . . . . . . . . . . . . (1.9) (0.2)
Proceeds from stock sales . . . . . . . . . . . . . . . 1.4 3.6
Real estate purchases . . . . . . . . . . . . . . . . . (0.1) (1.5)
Real estate sales . . . . . . . . . . . . . . . . . . . 0.0 17.9
Other invested assets purchases . . . . . . . . . . . . (2.0) (4.5)
Proceeds from the sale of other invested assets . . . . 0.0 0.0
Mortgage loans issued . . . . . . . . . . . . . . . . . (49.7) (39.4)
Mortgage loan repayments . . . . . . . . . . . . . . . 14.5 11.4
Other, net . . . . . . . . . . . . . . . . . . . . . . (15.8) 75.1
------- -------
Net cash used in investing activities . . . . . . . . (186.5) 6.9
------- -------
Cash flows from financing activities:
Net increase (decrease) in short-term note payable . . (0.0) (10.7)
------- -------
Net cash provided from financing activities . . . . . (0.0) (10.7)
------- -------
Increase (decrease) in cash and temporary cash
investments . . . . . . . . . . . . . . . . . . . . . 31.5 (27.3)
Cash and temporary cash investments at beginning of year 250.1 19.9
------- -------
Cash and temporary cash investments at the end of
period. . . . . . . . . . . . . . . . . . . . . . . . $ 281.6 $ (7.4)
======= =======
See condensed notes to the financial statements
(unaudited).
</TABLE>
49
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON PAID-IN UNASSIGNED
STOCK CAPITAL DEFICIT TOTAL
------ ------- ---------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
Balance at January 1, 1999 . . . . . . $2.5 $377.5 $ (49.2) $330.8
1999 Transactions:
Capital contribution
Net gain . . . . . . . . . . . . . . 2.3 2.3
Net unrealized capital gains and other
adjustments. . . . . . . . . . . . . (3.1) (3.1)
Other reserves and adjustments . . . (2.2) (2.2)
------- ------
Balance at June 30, 1999 . . . . . . . $2.5 $377.5 $ (52.2) $327.8
==== ====== ======= ======
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
Balance at January 1, 2000 . . . . . . $2.5 $572.4 $(177.9) $397.0
2000 Transactions:
Capital contribution
Net gain . . . . . . . . . . . . . . 16.8 16.8
Net unrealized capital gains and other
adjustments. . . . . . . . . . . . . (2.0) (2.0)
Other reserves and adjustments . . . (0.3) (0.3)
------- ------
Balance at June 30, 2000 . . . . . . . $2.5 $572.4 $(163.4) $411.5
==== ====== ======= ======
See condensed notes to the financial
statements (unaudited).
</TABLE>
50
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited interim financial statements have been prepared on
the basis of 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, which practices differ from
generally accepted accounting principles (GAAP). Pursuant to Financial
Accounting Standard Board Interpretation 40, "Applicability of General Accepted
Accounting Principles to Mutual Life Insurance and Other Enterprises" (FIN 40),
as amended which was effective for 1996 financial statements, financial
statements based on statutory accounting practices can no longer be described as
prepared in conformity with GAAP.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six-month period ending June 30, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000.
51
<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, 1999
and 1998, 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.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Commonwealth of Massachusetts Division of Insurance, which
practices differ from accounting principles generally accepted in the United
States. The variances between such practices and accounting principles generally
accepted in the United States also are described in Note 1. The effects on the
financial statements of these variances are not reasonably determinable but are
presumed to be material.
In our opinion, because of the effects of the matter described in the
preceding paragraph, the financial statements referred to above do not present
fairly, in conformity with accounting principles generally accepted in the
United States, the financial position of John Hancock Variable Life Insurance
Company at December 31, 1999 and 1998, or the results of its operations or its
cash flows for the years then ended.
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of John Hancock
Variable Life Insurance Company at December 31, 1999 and 1998, and the results
of its operations and its cash flows for the years then ended in conformity with
accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance.
ERNST & YOUNG LLP
Boston, Massachusetts
March 10, 2000
52
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1999 1998
---------- -----------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Bonds--Note 6 . . . . . . . . . . . . . . . . . . . . $ 1,216.3 $1,185.8
Preferred stocks . . . . . . . . . . . . . . . . . . 35.9 36.5
Common stocks . . . . . . . . . . . . . . . . . . . . 3.2 3.1
Investment in affiliates . . . . . . . . . . . . . . 80.7 81.7
Mortgage loans on real estate--Note 6 . . . . . . . . 433.1 388.1
Real estate . . . . . . . . . . . . . . . . . . . . . 25.0 41.0
Policy loans . . . . . . . . . . . . . . . . . . . . 172.1 137.7
Cash items:
Cash in banks . . . . . . . . . . . . . . . . . . 27.2 11.4
Temporary cash investments . . . . . . . . . . . . 222.9 8.5
--------- --------
250.1 19.9
Premiums due and deferred . . . . . . . . . . . . . . 29.9 32.7
Investment income due and accrued . . . . . . . . . . 33.2 29.8
Other general account assets . . . . . . . . . . . . 65.3 47.5
Assets held in separate accounts . . . . . . . . . . 8,268.2 6,595.2
--------- --------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . $10,613.0 $8,599.0
========= ========
OBLIGATIONS AND STOCKHOLDER'S EQUITY
OBLIGATIONS
Policy reserves . . . . . . . . . . . . . . . . . . $ 1,866.6 $1,652.0
Federal income and other taxes payable--Note 1 . . 67.3 44.3
Other general account obligations . . . . . . . . . 219.0 150.9
Transfers from separate accounts, net . . . . . . . (221.6) (190.3)
Asset valuation reserve--Note 1 . . . . . . . . . . 23.1 21.9
Obligations related to separate accounts . . . . . 8,261.6 6,589.4
--------- --------
TOTAL OBLIGATIONS . . . . . . . . . . . . . . . . .
10,216.0 8,268.2
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 . . . . . . . . . . . . . . . . . . 572.4 377.5
Unassigned deficit--Note 10 . . . . . . . . . . . . (177.9) (49.2)
--------- --------
TOTAL STOCKHOLDER'S EQUITY . . . . . . . . . . . . 397.0 330.8
--------- --------
TOTAL OBLIGATIONS AND STOCKHOLDER'S EQUITY . . . . . $10,613.0 $8,599.0
========= ========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
53
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1999
1998
---------
---------
(IN
MILLIONS)
<S> <C>
INCOME
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,272.3
Net investment income--Note 3 . . . . . . . . . . . . . . .
136.0 122.8
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . 605.4
618.1
---------
--------
1,692.2
2,013.2
BENEFITS AND EXPENSES
Payments to policyholders and beneficiaries . . . . . . . . 349.9
301.4
Additions to reserves to provide for future payments to
policyholders and beneficiaries . . . . . . . . . . . . . 888.8
1,360.2
Expenses of providing service to policyholders and
obtaining new insurance--Note 5 . . . . . . . . . . . . . . 314.4
274.2
State and miscellaneous taxes. . . . . . . . . . . . . . . . 20.5
28.1
----------
--------
1,573.6
1,963.9
----------
Gain from operations before federal income
taxes and net realized capital losses 118.6
49.3
Federal income taxes--Note 1 . . . . . . . . . . . . . . . . 42.9
33.1
----------
--------
GAIN FROM OPERATIONS BEFORE NET REALIZED CAPITAL LOSSES 75.7
16.2
Net realized capital losses--Note 4 . . . . . . . . . . . . (1.7)
(0.6)
----------
--------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . 74.0
15.6
Unassigned deficit at beginning of year . . . . . . . . . . (49.2)
(58.3)
Net unrealized capital losses and other adjustments--Note 4 (3.8)
(6.0)
Other reserves and adjustments--Note 10 . . . . . . . . . . (198.9)
(0.5)
----------
--------
UNASSIGNED DEFICIT AT END OF YEAR . . . . . . . . . . . $(177.9)
$ (49.2)
==========
========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
54
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------
1999 1998
------- --------
(IN MILLIONS)
<S> <C>
Cash flows from operating activities:
Insurance premiums . . . . . . . . . . . . . .
Net investment income . . . . . . . . . . . 134.2 118.2
Benefits to policyholders and beneficiaries . (321.6) (275.5)
Dividends paid to policyholders . . . . . . . . . (25.6) (22.3)
Insurance expenses and taxes . . . . . . . . . (344.8) (296.9)
Net transfers to separate accounts . . . . . . . (705.3) (874.4)
Other, net . . . . . . . . . . . . . . . . . . 540.6 551.3
------- -----------
NET CASH PROVIDED FROM OPERATIONS . . . . . . 236.0 475.7
------- -----------
Cash flows used in investing activities:
Bond purchases . . . . . . . . . . . . . . . . (240.7) (618.8)
Bond sales . . . . . . . . . . . . . . . . . . 108.3 340.7
Bond maturities and scheduled redemptions . . 78.4 111.8
Bond prepayments . . . . . . . . . . . . . . . 18.7 76.5
Stock purchases . . . . . . . . . . . . . . . (3.9) (23.4)
Proceeds from stock sales . . . . . . . . . . 3.6 1.9
Real estate purchases . . . . . . . . . . . . (2.2) (4.2)
Real estate sales . . . . . . . . . . . . . . 17.8 2.1
Other invested assets purchases . . . . . . . (4.5) 0.0
Mortgage loans issued. . . . . . . . . . . . . (70.7) (145.5)
Mortgage loan repayments . . . . . . . . . . . 25.3 33.2
Other, net . . . . . . . . . . . . . . . . . . (68.9) (435.2)
------- -----------
NET CASH USED IN INVESTING ACTIVITIES . . . . (138.8) (660.9)
------- -----------
Cash flows from financing activities:
Capital contribution . . . . . . . . . . . . . 194.9
Net (decrease) increase in short-term note
payable. . . . . . . . . . . . . . . . . . . (61.9) 61.9
------- -----------
NET CASH PROVIDED FROM FINANCING ACTIVITIES . . 133.0 61.9
------- -----------
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH
INVESTMENTS 230.2
Cash and temporary cash investments at beginning
of year. . . . . . . . . . . . . . . . . . . . . 19.9 143.2
------- -----------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF
YEAR. . . . . . . . . . . . . . . . . . . . . 250.1 $19.9
======= ===========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
55
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES
John Hancock Variable Life Insurance Company (the Company) is a wholly-owned
subsidiary of John Hancock Life Insurance Company (formerly 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, Signator Insurance Agency, which includes a career
agency system composed of Company-supported independent general agencies and a
direct brokerage system that markets directly to external independent brokers.
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 in
relation to future estimated gross profits; (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, 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
During March 1998, the NAIC adopted codified statutory accounting principles
("Codification") effective January 1, 2001. Codification will likely change, to
some extent, prescribed statutory accounting practices and may result in changes
to the accounting practices that the Company uses to prepare its statutory-basis
financial statements. Codification will require adoption by the various states
before it becomes the prescribed statutory basis of accounting for insurance
companies domesticated within those states. Accordingly, before Codification
becomes effective for the Company, the Commonwealth of Massachusetts must adopt
Codification as the prescribed basis of accounting on which domestic insurers
must report their statutory-basis results to the Division
56
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
of Insurance. At this time, it is anticipated that the Commonwealth of
Massachusetts will adopt Codification effective January 1, 2001. The impact of
any such changes on the Company's unassigned deficit is not expected to be
material.
Revenues and Expenses
Premium revenues are recognized over the premium-paying period of the policies
whereas expenses, including the acquisition costs of new business, are charged
to operations as incurred and policyholder dividends are provided as paid or
accrued.
Cash and Temporary Cash Investments
Cash includes currency on hand and demand deposits with financial
institutions. Temporary cash investments are short-term, highly-liquid
investments both readily convertible to known amounts of cash and so near
maturity that there is insignificant risk of changes in value because of changes
in interest rates.
Valuation of Assets
General account investments are carried at amounts determined on the following
bases:
Bond and stock values are carried as prescribed by the NAIC; bonds generally
at amortized amounts or cost, preferred stocks generally at cost and common
stocks at fair value. The discount or premium on bonds is amortized using the
interest method.
Investments in affiliates are included on the statutory equity method.
Loan-backed bonds and structured securities are valued at amortized cost using
the interest method including anticipated prepayments. Prepayment assumptions
are obtained from broker dealer surveys or internal estimates and are based on
the current interest rate and economic environment. The retrospective
adjustment method is used to value all such securities except for interest-only
securities, which are valued using the prospective method.
The net interest effect of interest rate and currency rate swap transactions
is recorded as an adjustment of interest income as incurred. The initial cost
of interest rate cap agreements is amortized to net investment income over the
life of the related agreement. Gains and losses on financial futures contracts
used as hedges against interest rate fluctuations are deferred and recognized in
income over the period being hedged.
Mortgage loans are carried at outstanding principal balance or amortized
cost.
Investment 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 $1.9 million in 1999 and $3.0 million in
1998.
Real estate acquired in satisfaction of debt and real estate held for sale are
carried at the lower of cost or fair value.
Policy loans are carried at outstanding principal balance, not in excess of
policy cash surrender value.
57
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
Asset Valuation and Interest Maintenance Reserves
The Asset Valuation Reserve (AVR) is computed in accordance with the
prescribed NAIC formula and represents a provision for possible fluctuations in
the value of bonds, equity securities, mortgage loans, real estate and other
invested assets. 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, 1999, the IMR, net of 1999 amortization of $2.3 million, amounted to $7.4
million, which is included in policy reserves. The corresponding 1998 amounts
were $2.4 million and $10.7 million, respectively.
Goodwill
The excess of cost over the statutory book value of the net assets of life
insurance business acquired was $8.9 million and $11.4 million at December 31,
1999 and 1998, respectively, and generally is amortized over a ten-year period
using a straight-line method.
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
58
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
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.
Fair values for futures contracts are based on quoted market prices. Fair
values for interest rate swap, cap agreements, and currency swap agreements are
based on current settlement values. The current settlement values are based on
brokerage quotes that utilize pricing models or formulas using current
assumptions.
The fair value for mortgage loan 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 engaged 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, 1999.
Capital Gains and Losses
Realized capital gains and losses are determined using the specific
identification method. Realized capital gains and losses, net of taxes and
amounts transferred to the IMR, are included in net 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 1999.
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 basis for the affiliated group.
The federal income
59
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
taxes of the Company are allocated on a separate return basis with certain
adjustments. The Company made federal income tax payments of $10.6 million in
1999 and $38.2 million in 1998.
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.
Amounts for disputed tax issues relating to the prior years are charged or
credited directly to policyholders' contingency reserve.
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. Reserve
modifications resulting from such determinations are recorded directly to
stockholder's equity. No such refinements were made during 1999 or 1998.
Reinsurance
Premiums, commissions, expense reimbursements, benefits and reserves related
to reinsured business are accounted for on bases consistent with those used in
accounting for the original policies issued and the terms of the reinsurance
contracts. Premiums ceded to other companies have been reported as a reduction
of premium income. Amounts applicable to reinsurance ceded for future policy
benefits, unearned premium reserves and claim liabilities have been reported as
reductions of these items.
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 the
final contingent payment to CPAL of $1.5 million during 1998.
60
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
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 was subsequently renamed Investors Partner
Life Insurance Company (IPL) on March 5, 1998. IPL manages the business assumed
from Charter and began marketing term life and variable universal life products
through brokers in 1999. Summarized financial information for IPL for 1999 and
1998 is as follows:
<TABLE>
<CAPTION>
1999 1998
------- -------
(IN MILLIONS)
<S> <C> <C>
Total assets. . . . . . . . . . . . . . . . 570.7 587.8
Total liabilities. . . . . . . . . . . . . . 498.9 517.5
Total revenue. . . . . . . . . . . . . . . . 35.6 38.8
Net income. . . . . . . . . . . . . . . . . 3.5 3.8
</TABLE>
3. NET INVESTMENT INCOME
Investment income has been reduced by the following amounts:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
------ ------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Investment expenses . . . . . . . . . . . . . $ 9.5 $ 8.3
Interest expense. . . . . . . . . . . . . . 1.7 2.4
Depreciation expense. . . . . . . . . . . . 0.6 0.8
Investment taxes. . . . . . . . . . . . . . 0.3 0.7
------ ------
$12.1 $12.2
====== ======
</TABLE>
61
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
4. NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS
Net realized capital gains (losses) consist of the following items:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
------ ------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Net gains from asset sales . . . . . . . . . . . (2.8) 7.6
Capital gains tax . . . . . . . . . . . . . . . . 0.2 (2.9)
Net capital gains transferred to IMR . . . . . . 0.9 (5.3)
------ ------
Net REALIZED CAPITAL LOSSES . . . . . . . . . . . (1.7) (0.6)
====== ======
</TABLE>
Net unrealized capital gains (losses) and other adjustments consist of the
following items:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
------ ------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Net losses from changes in security values and book
value adjustments. . . . . . . . . . . . . . . (2.6) (2.7)
Increase in asset valuation reserve . . . . . . . . (1.2) (3.3)
------ ------
Net UNREALIZED CAPITAL LOSSES AND OTHER ADJUSTMENTS (3.8) (6.0)
====== ======
</TABLE>
62
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
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 1999 and 1998 to reflect continuing changes in
the Company's operations. The amount of the service fee charged to the Company
was $188.3 million and $157.5 million in 1999 and 1998, 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 $0.2 million and
$0.7 million in 1999 and 1998, 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 1999 issues of flexible premium variable life insurance and
scheduled premium variable life insurance policies. In connection with this
agreement, John Hancock transferred $44.5 million and $4.9 million of cash for
tax, commission, and expense allowances to the Company, which increased the
Company's net gain from operations by $20.6 million and $22.2 million in 1999
and 1998, respectively.
Effective January 1, 1996, the Company entered into a modified coinsurance
agreement with John Hancock to reinsure 50% of the 1995 inforce block and 50% of
1996 and all future issue years of certain variable annuity contracts
(Independence Preferred, Declaration, Independence 2000, MarketPlace, and
Revolution). In connection with this agreement, the Company received a net cash
payment of $40.0 million and $12.7 million in 1999 and 1998, respectively, for
surrender benefits, tax, reserve increase, commission, expense allowances and
premium, This agreement increased the Company's net gain from operations by
$26.9 million and $8.4 million in 1999 and 1998, 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 1999 and 1998 for all policies that are not reinsured under
any other indemnity agreement. In connection with the agreement, John Hancock
received $0.8 million and 1.0 million in 1999 and 1998, respectively, for
mortality claims to the Company. This agreement decreased the Company's net
gain from operations in both 1999 and 1998 by $0.5 million.
At December 31, 1998 the Company had outstanding a short-term note of $61.9
million payable to an affiliate at a variable rate of interest. The note was
part of a revolving line of credit and was repaid in 1999. Interest paid in
1999 and 1998 was $1.7 million and $2.9 million, respectively. The note is
included in other general account obligations at December 31, 1998.
63
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
6. INVESTMENTS
The statement value and fair value of bonds are shown below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
<C>
-------------- -------------- ---------------
---------
(IN MILLIONS)
December 31, 1999 . .
U.S. Treasury
securities and
obligations of U.S.
government
corporations and
agencies . . . . . . 5.9 0.0 0.1
5.8
Obligations of states
and political
subdivisions . . . . 2.2 0.1 0.1
2.2
Debit securities
issued by foreign
governments. . . . . 13.9 0.8 0.1
14.6
Corporate securities 964.9 13.0 59.4
918.5
Mortgage-backed
securities . . . . . 229.4 0.5 7.8
222.1
-------- ----- ------
--------
Total bonds . . . . .
======== ===== ======
========
December 31, 1998
U.S. Treasury
securities and
obligations of U.S.
government
corporations and
agencies . . . . . . 5.1 0.1 0.0
5.2
Obligations of states
and political
subdivisions . . . . 3.2 0.3 0.0
3.5
Corporate securities 925.2 50.4 15.0
960.6
Mortgage-backed
securities . . . . . 252.3 10.0 0.1
262.2
-------- ----- ------
--------
Total bonds . . . . . 15.1
======== ===== ======
========
</TABLE>
64
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
The statement value and fair value of bonds at December 31, 1999, by
contractual maturity, are shown below. Maturities will differ from contractual
maturities because eligible borrowers may exercise their right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
<S> <C> <C>
FAIR
VALUE VALUE
-------- ---------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Due in one year or less. . . . . . . . . . . . . . $ 58.5 58.2
Due after one year through five years. . . . . . . 286.8 282.0
Due after five years through ten years . . . . . . 425.4 405.6
Due after ten years. . . . . . . . . . . . . . . . 216.2 195.3
-------- ---------
986.9 941.1
Mortgage-backed securities . . . . . . . . . . . . 229.4 222.1
-------- ---------
$1,216.3
======== =========
</TABLE>
Gross gains of $0.3 million in 1999 and $3.4 million in 1998 and gross losses
of $4.0 million in 1999 and $0.7 million in 1998 were realized from the sale of
bonds.
At December 31, 1999, bonds with an admitted asset value of $9.1 million were
on deposit with state insurance departments to satisfy regulatory requirements.
The cost of common stocks was $3.1 million and $2.1 million at December 31,
1999 and 1998, respectively. At December 31, 1999, gross unrealized
appreciation on common stocks totaled $1.2 million, and gross unrealized
depreciation totaled $1.1 million. The fair value of preferred stock totaled
$35.9 million at December 31, 1999 and $36.5 million at December 31, 1998.
Bonds with amortized cost of $0.4 million were non-income producing for the
twelve months ended December 31, 1999.
At December 31, 1999, the mortgage loan portfolio was diversified by
geographic region and specific collateral property type as displayed below. The
Company controls credit risk through credit approvals, limits and monitoring
procedures.
65
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GEOGRAPHIC
PROPERTY TYPE CONCENTRATION
Apartments. . . . . . . . $112.1 East North Central $ 71.3
Hotels. . . . . . . . . . 11.3 East South Central 7.4
Industrial. . . . . . . . 66.0 Middle Atlantic 28.5
Office buildings. . . . . 86.4 Mountain 21.0
Retail. . . . . . . . . . 25.5 New England 37.5
Agricultural. . . . . . . 99.6 Pacific 111.1
Other . . . . . . . . . . 32.2 South Atlantic 87.6
West North Central 16.6
West South Central 48.6
Other 3.5
------
$433.1 $433.1
======
</TABLE>
At December 31, 1999, the fair values of the commercial and agricultural
mortgage loans portfolios were $323.5 million and $98.2 million, respectively.
The corresponding amounts as of December 31, 1998 were approximately $331.3
million and $70.0 million, respectively.
The maximum and minimum lending rates for mortgage loans during 1999 were
14.24% and 6.84% for agricultural loans, 7.45% and 7.00% 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.
66
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
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 1999 were $594.9 million, $132.8 million, and $13.6 million,
respectively. The corresponding amounts in 1998 were $590.2 million, $63.2
million, and $8.2 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 agreement in which the
reinsurer may unilaterally cancel any reinsurance for reasons other than
nonpayment of premiums or other similar credits. The Company does not have any
reinsurance agreements in effect in which the amount of losses paid or accrued
through December 31, 1999 would result in a payment to the reinsurer of amounts
which, in the aggregate and allowing for offset of mutual credits from other
reinsurance agreements with the same reinsurer, exceed the total direct premiums
collected under the reinsured policies.
8. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The notional amounts, carrying values and estimated fail values of the
Company's derivative instruments were as follows at December 31:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <S> <C>
<C>
NUMBER OF CONTRACTS/ ASSETS (LIABILITIES)
------------------
NOTIONAL AMOUNTS 1999
1998
FAIR VALUE
---------
------- ------- ---------
--------- ---------
(IN MILLIONS)
Futures contracts to
$ (0.5)
sell securities 362.0 947.0 $0.6 $0.6
$(0.5)
Interest rate swap
(17.7)
agreements $965.0 $365.0 -- 11.5
--
Interest rate cap
agreements 239.4 89.4 5.6 5.6
3.1
Currency rate swap
(3.3)
agreements 15.8 15.8 -- (1.6)
--
</TABLE>
67
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
The Company uses futures contracts, interest rate swap, cap agreements, and
currency rate swap agreements for other than trading purposes to hedge and
manage its exposure to changes in interest rate levels, foreign exchange rate
fluctuations and to manage duration mismatch of assets and liabilities.
The futures contracts expire in 2000. The interest rate swap agreements
expire in 2000 to 2011. The interest rate cap agreements expire in 2006 to
2008. The currency rate swap agreements expire in 2006 to 2009.
The Company's exposure to credit risk is the risk of loss from a counterparty
failing to perform to the terms of the contract. The Company continually
monitors its position and the credit ratings of the counterparties to these
derivative instruments. To limit exposure associated with counterparty
nonperformance on interest rate and currency swap agreements, the Company enters
into master netting agreements with its counterparties. The Company believes the
risk of incurring losses due to nonperformance by its counterparties is remote
and that such losses, if any, would be immaterial. Futures contracts trade on
organized exchanges and, therefore, have minimal credit risk.
9. POLICY RESERVES POLICYHOLDERS' AND BENIFICIARIES' FUNDS AND OBLIGATIONS
RELATED TO SEPARATE ACCOUNTS
The Company' annuity reserves and deposit fund liabilities that are subject to
discretionary withdrawal, with and without adjustment, are summarized as
follows.
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1999 PERCENT
---------------- ------
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Subject to discretionary withdrawal (with
adjustment)
With market value adjustment . . . . . . . . . $3.8 0.1%
At book value less surrender charge 40.5 1.5
At market value . . . . . . . . . . . . . . . . 2,326.6 87.1
--------
Total with adjustment. . . . . . . . . . . 2,370.9 88.7
Subject to discretionary withdrawal 287.1 10.7
at book value (without adjustment) . . . . .
Not subject to discretionary withdrawal--general
account. . . . . . . . . . . . . . . . . . . . 15.4 0.6
--------
Total annuity reserves and deposit liabilities $2,673.4 100.0%
========
</TABLE>
68
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
10. COMMITMENTS AND CONTINGENCIES
The Company has extended commitments to purchase long-term bonds and issue
real estate mortgages totaling $15.4 million and $3.5 million, respectively, at
December 31, 1999. The Company monitors the creditworthiness of borrowers under
long-term bonds 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 $19.4 million at December 31, 1999. The majority of these commitments
expire in 2000.
In the normal course of its business operations, the Company is involved with
litigation from time to time with claimants, beneficiaries and others, and a
number of litigation matters were pending as of December 31, 1999. It is the
opinion of management, after consultation with counsel, that the ultimate
liability with respect to these claims, if any, will not materially affect the
financial position or results of operations of the Company.
During 1997, John Hancock entered into a court-approved settlement relating to
a class action lawsuit involving certain individual life insurance policies sold
from 1979 through 1996. In entering into the settlement, John Hancock
specifically denied any wrongdoing. During 1999, the Company recorded a $194.9
million reserve, through a direct charge to its unassigned deficit, representing
the Company's share of the settlement and John Hancock contributed $194.9
million of capital to the Company. The reserve held at December 31, 1999
amounted to $136.5 million and is based on a number of factors, including the
estimated number of claims, the expected type of relief to be sought by class
members (general relief or alternative dispute resolution), the estimated cost
per claim and the estimated costs to administer the claims.
Given the uncertainties associated with estimating the reserve, it is
reasonably possible that the final cost of the settlement could differ
materially from the amounts presently provided for by the Company. John Hancock
and the Company will continue to update their estimate of the final cost of the
settlement as claims are processed and more specific information is developed,
particularly as the actual cost of the claims subject to alternative dispute
resolution becomes available. However, based on information available at this
time, and the uncertainties associated with the final claim processing and
alternative dispute resolution, the range of any additional costs related to the
settlement cannot be reasonably estimated. If the Company's share of the
settlement increases, John Hancock will contribute additional capital to the
Company so that the Company's total stockholder's equity would not be impacted.
69
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of the
Company's financial instruments:
<TABLE>
<CAPTION>
<S> <C>
DECEMBER 31,
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
--------------- ---------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ASSETS
Bonds--Note 6. . . . .
Preferred stocks--Note
6. . . . . . . . . . . . 35.9 35.9 36.5 36.5
Common stocks--Note 6. 3.2 3.2 3.1 3.1
Mortgage loans on real
estate--Note 6. . . . . 433.1 421.7 388.1 401.3
Policy loans--Note 1. 172.1 172.1 137.7 137.7
Cash items--Note 1. . 250.1 250.1 19.9 19.9
Derivatives assets
(liabilities) relating
to: --Note 8. . . . .
Futures contracts. . . 0.6 0.6 (0.5) (0.5)
Interest rate swaps. . -- 11.5 -- (17.7)
Currency rate swaps. . -- (1.6) -- (3.3)
Interest rate caps. . 5.6 5.6 3.1 3.1
LIABILITIES
Commitments--Note 10. -- 19.4 -- 32.1
</TABLE>
The carrying 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.
12. SUBSEQUENT EVENTS
REORGANIZATION AND INITIAL PUBLIC OFFERING
Pursuant to a Plan of Reorganization approved by the policyholders of John
Hancock and the Commonwealth of Massachusetts Division of Insurance, effective
February 1, 2000, John Hancock converted from a mutual life insurance company to
a stock life insurance company (i.e., demutualized) and became a wholly owned
subsidiary of John Hancock Financial Services, Inc., which is a holding company.
In connection with the reorganization, John Hancock changed its name to John
Hancock Life Insurance Company. In addition, on February 1, 2000, John Hancock
Financial Services, Inc. completed its initial public offering and 102 million
shares of common stock were issued at an initial public offering price of $17
per share.
70
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--(CONTINUED)
13. IMPACT OF YEAR 2000 (UNAUDITED)
The Company participated in the Year 2000 remediation project of its parent,
John Hancock. By late 1999, John Hancock and the Company completed their Year
2000 readiness plan to address issues that could result from computer programs
written using two digits to define the applicable year rather than four to
define the applicable year and century. As a result, John Hancock and the
Company were prepared for the transition to the Year 2000 and did not experience
any significant Year 2000 problems with respect to mission critical information
technology ("IT") or non-IT systems, applications or infrastructure. During the
date rollover to the year 2000, John Hancock and the Company implemented and
monitored their millennium rollover plan and conducted business as usual on
Monday, January 3, 2000.
Since January 3, 2000, the information systems, including mission critical
systems, which in the event of a Year 2000 failure would have the greatest
impact on operations, have functioned properly. In addition, neither John
Hancock nor the Company have experienced any significant Year 2000 issues
related to interactions with material business partners. No disruptions have
occurred which impact John Hancock or the Company's ability to process claims,
update customer accounts, process financial transactions, or report accurate
data to management and no business interruptions due to Year 2000 issues have
been experienced. While John Hancock and the Company continue to monitor their
systems, and those of material business partners, closely to ensure that no
unexpected Year 2000 issues develop, neither John Hancock nor the Company have
reason to expect any such issues.
The costs of the Year 2000 project consist of internal IT personnel and
external costs such as consultants, programmers, replacement software, and
hardware. The costs of the Year 2000 project are expensed as incurred. The
project is funded partially through a reallocation of resources from
discretionary projects. Through December 31, 1999, John Hancock has incurred
and expensed approximately $20.8 million in related payroll costs for internal
IT personnel on the project. The estimated remaining IT personnel costs of the
project are approximately $1.0 million. Through December 31, 1999, John Hancock
has incurred and expensed approximately $47.0 million in external costs for the
project. John Hancock's estimated remaining external cost of the project is
approximately $2.0 million. The total costs of the Year 2000 project to John
Hancock, based on management's best estimates, include approximately $21.7
million in internal IT personnel, $14.6 million in the external modification of
software, $18.3 million for external solution providers, $9.1 million in
replacement costs of non-compliant IT systems and $6.9 million in oversight,
test facilities and other expenses. Accordingly, the estimated range of total
costs of the Year 2000 project to John Hancock, internal and external, is
approximately $70 to $72.5 million. John Hancock's total Year 2000 project
costs include the estimated impact of external solution providers based on
presently available information.
71
<PAGE>
UNAUDITED FINANCIAL STATEMENTS
FOR
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
SECOND QUARTER 2000
72
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 2000
<TABLE>
<CAPTION>
INTERNATIONAL
LARGE CAP ACTIVE EQUITY SMALL CAP
GROWTH BOND INDEX GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash. . . . . . . . . $ -- $ -- $ -- $ --
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value. . . . . . . . 176,581,445 234,710,166 30,279,715 15,146,841
Policy loans and
accrued interest
receivable . . . . . 23,134,622 58,001,138 3,128,604 --
Receivable from:
John Hancock Variable
Series Trust I. . . 10,411 1,388,616 55,752 --
M Fund Inc.. . . . . -- -- -- --
------------ ------------ ----------- -----------
Total assets. . . . . 199,726,478 294,099,920 33,464,071 15,146,841
LIABILITIES
Payable to John
Hancock Variable Life
Insurance Company. . 2,452 3,267 447 245
Asset charges payable 474 1,189 -- --
------------ ------------ ----------- -----------
Total liabilities . . 2,926 4,456 447 245
------------ ------------ ----------- -----------
Net assets. . . . . . $199,723,552 $294,095,464 $33,463,624 $16,146,596
============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
GLOBAL MID CAP LARGE CAP MONEY
BALANCED GROWTH VALUE MARKET
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash. . . . . . . . . . . $ -- $ -- $ -- $ --
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value. . . . 1,009,123 26,659,950 10,182,562 62,828,554
Policy loans and accrued
interest receivable. . . -- -- -- 13,821,060
Receivable from:
John Hancock Variable
Series Trust I. . . . . 2,217 -- 13,241 32,906
M Fund Inc.. . . . . . . -- -- -- --
---------- ----------- ----------- -----------
Total assets. . . . . . . 1,011,340 26,659,950 10,195,803 76,682,520
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company. . . . . . . . . 17 429 169 2,664
Asset charges payable . . -- -- -- 850
---------- ----------- ----------- -----------
Total liabilities. . . . 17 429 169 3,514
---------- ----------- ----------- -----------
Net assets. . . . . . . . $1,011,323 $26,659,521 $10,195,634 $76,679,006
========== =========== =========== ===========
</TABLE>
See accompanying notes.
73
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SMALL/MID
MID CAP CAP REAL ESTATE GROWTH &
VALUE GROWTH EQUITY INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash. . . . . . . . . $ -- $ -- $ -- $ --
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value. . . . . . . . 5,655,397 12,697,945 12,765,326 1,054,098,419
Policy loans and
accrued interest
receivable . . . . . -- -- 2,042,422 192,979,449
Receivable from:
John Hancock Variable
Series Trust I. . . 4,035 -- -- 712,339
M Fund Inc.. . . . . -- -- -- --
------------ ----------- ----------- --------------
Total assets. . . . . 5,659,432 12,697,945 14,807,748 1,247,790,207
LIABILITIES
Payable to John
Hancock Variable Life
Insurance Company. . 93 208 194 14,546
Asset charges payable -- -- 42 3,955
------------ ----------- ----------- --------------
Total liabilities . . 93 208 236 18,501
------------ ----------- ----------- --------------
Net assets. . . . . . $ 5,659,339 $12,697,737 $14,807,512 $1,247,771,706
============ =========== =========== ==============
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM SMALL CAP INTERNATIONAL
MANAGED BOND VALUE OPPORTUNITIES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash. . . . . . . . . $ -- $ -- $ -- $ --
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value. . . . . . . . 412,811,976 1,051,732 4,409,122 6,171,237
Policy loans and
accrued interest
receivable. . . . . . 79,675,824 -- -- --
Receivable from:
John Hancock Variable
Series Trust I. . . 979,880 5,435 5,593 4,951
M Fund Inc.. . . . . -- -- -- --
------------ ---------- ---------- ----------
Total assets. . . . . 493,467,680 1,057,167 4,414,715 6,176,188
LIABILITIES
Payable to John Hancock
Variable Life
Insurance Company. . 5,741 17 74 100
Asset charges payable . 1,633 -- -- --
------------ ---------- ---------- ----------
Total liabilities. . . 7,374 17 74 100
------------ ---------- ---------- ----------
Net assets. . . . . . $493,460,306 $1,057,150 $4,414,641 $6,176,088
============ ========== ========== ==========
</TABLE>
See accompanying notes.
74
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
TURNER BRANDES
EQUITY GLOBAL CORE INTERNATIONAL
INDEX BOND GROWTH EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . . . $ -- $ -- $ -- $ --
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value . . . 25,463,881 1,610,930 450,305 655,428
Policy loans and accrued
interest receivable . . -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I . . . . 16,079 6,956 -- --
M Fund Inc. . . . . . . -- -- -- --
----------- ---------- -------- --------
Total assets . . . . . . 25,479,960 1,617,886 450,305 655,428
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company . . . . . . . . 414 27 7 11
Asset charges payable . -- -- -- --
----------- ---------- -------- --------
Total liabilities. . . . 414 27 7 11
----------- ---------- -------- --------
Net assets . . . . . . . $25,479,546 $1,617,859 $450,298 $655,417
=========== ========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
FRONTIER EMERGING INTERNATIONAL
CAPITAL MARKETS OPPORTUNITIES
APPRECIATION EQUITY II BOND INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ---------- ------------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash. . . . . . . . . . $ -- $ -- $ -- $ --
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value. . . 897,620 1,185,730 273,330 749,101
Policy loans and accrued
interest receivable. . -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I. . . . -- -- 190 4,094
M Fund Inc.. . . . . . -- -- -- --
-------- ---------- -------- --------
Total assets. . . . . . 897,620 1,185,730 273,520 753,195
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company. . . . . . . . 15 19 4 12
Asset charges payable . -- -- -- --
-------- ---------- -------- --------
Total liabilities. . . 15 19 4 12
-------- ---------- -------- --------
Net assets. . . . . . . $897,605 $1,185,711 $273,516 $753,183
======== ========== ======== ========
</TABLE>
See accompanying notes.
75
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
CLIFTON
SMALL/MID HIGH YIELD ENHANCED
CAP CORE BOND U.S. EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- -----------
<S> <C> <C> <C>
ASSETS
Cash. . . . . . . . . . . . . . . . . . $ -- $ -- $ --
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value . . . . . . . . . . . . . . . 188,808 295,903 18,155
Policy loans and accrued interest
receivable . . . . . . . . . . . . . . -- -- --
Receivable from:
John Hancock Variable Series Trust I . 285 2,023 --
M Fund Inc.. . . . . . . . . . . . . . -- -- --
-------- -------- -------
Total assets. . . . . . . . . . . . . . 189,093 297,926 18,155
LIABILITIES
Payable to John Hancock Variable Life
Insurance Company. . . . . . . . . . . 3 5 --
Asset charges payable . . . . . . . . . -- -- --
-------- -------- -------
Total liabilities . . . . . . . . . . . 3 5 --
-------- -------- -------
Net assets. . . . . . . . . . . . . . . $189,090 $297,921 $18,155
======== ======== =======
</TABLE>
See accompanying notes.
76
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT
ACTIVE BOND SUBACCOUNT
-------------------------------------
---------------------------------------
2000 1999 1998
2000 1999 1998
----------- -----------
----------- ----------- ------------- --------------
<S> <C> <C> <C>
<C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . . $ 193,334 $24,007,195
$11,641,271 $7,284,647 $ 17,792,726 $19,685,096
M Fund Inc.. . . . . . . . . . . . . . . . -- --
-- -- -- --
Interest income on policy loans . . . . . . 744,736 1,211,333
1,008,607 2,113,683 4,084,783 4,027,376
----------- -----------
----------- ---------- ------------ -----------
Total investment income . . . . . . . . . . 938,070 25,218,528
12,649,878 9,398,330 21,877,509 23,712,472
Expenses:
Mortality and expense risks. . . . . . . . 504,066 828,714
624,665 805,912 1,643,861 1,624,615
----------- -----------
----------- ---------- ------------ -----------
Net investment income . . . . . . . . . . . 434,004 24,389,814
12,025,213 8,592,418 20,233,648 22,087,857
Net realized and unrealized gain (loss) on
investments:
Net realized gain. . . . . . . . . . . . . 2,032,851 4,239,424
3,520,199 (29,483) 192,098 1,600,539
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . 7,172,532 1,727,703
18,509,310 505,228 (20,304,536) (2,317,324)
----------- -----------
----------- ---------- ------------ -----------
Net realized and unrealized gain (loss) on
investments. . . . . . . . . . . . . . . . 9,205,383 5,967,127
22,029,509 475,745 (20,112,438) (716,785)
----------- -----------
----------- ---------- ------------ -----------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . . $ 9,639,387 $30,356,941
$34,054,722 $9,068,163 $ 121,210 $21,371,072
=========== ===========
=========== ========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX SUBACCOUNT
---------------------------------------------------------------
2000 1999
1998
--------------------------------------- ----------
----------
<S> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . $ 260,035 $ 917,904
$3,394,842
M Fund Inc.. . . . -- --
--
Interest income on
policy loans. . . . 106,675 179,345
170,285
-------------------------------------- ----------
----------
Total investment
income. . . . . . . 366,710 1,097,249
3,565,127
Expenses:
Mortality and expense
risks. . . . . . . 91,898 147,126
124,891
-------------------------------------- ----------
----------
Net investment income
(loss). . . . . . . 274,812 950,123
3,440,236
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain. 816,122 168,248
148,419
Net unrealized
appreciation
(depreciation)
during the period. (2,574,516) 5,712,567
105,161
-------------------------------------- ----------
----------
Net realized and
unrealized gain
(loss) on investments (1,758,394) 5,880,815
253,580
-------------------------------------- ----------
----------
Net increase
(decrease) in net
assets resulting from
operations. . . . . $ (1,483,582) $6,830,938
$3,693,816
====================================== ==========
==========
<CAPTION>
SMALL CAP GROWTH SUBACCOUNT
----------------------------------------------------
2000 1999 1998
------------------------------ ---------- -----------
<S> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable $ -- $1,272,230 $ --
Series Trust I. .
M Fund Inc.. . . . -- -- --
Interest income on
policy loans. . . . -- -- --
---------------------------- ---------- --------
Total investment -- 1,272,230 --
income. . . . . . .
Expenses:
Mortality and expense
risks. . . . . . . 40,116 37,386 20,335
---------------------------- ---------- --------
Net investment income (40,116) 1,234,844 (20,335)
(loss). . . . . . .
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain. 1,170,187 491,241 55,393
Net unrealized
appreciation (647,342) 2,317,857 518,731
(depreciation) ---------------------------- ---------- --------
during the period.
Net realized and
unrealized gain 522,845
(loss) on investments ---------------------------- 2,809,098 574,124
---------- --------
Net increase
(decrease) in net $ 482,729 $4,043,942 $553,789
assets resulting from ============================ ========== ========
operations. . . . .
</TABLE>
See accompanying notes.
77
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
GLOBAL BALANCED SUBACCOUNT MID CAP GROWTH
SUBACCOUNT
---------------------------------
------------------------------------
2000 1999 1998 2000
1999 1998
---------- ---------- ---------- ------------
---------- ------------
<S> <C> <C> <C> <C> <C>
<C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 13,766 $ 99,184 $ 57,587 $ --
$2,117,559 $ 461,919
M Fund Inc.. . . . . -- -- -- --
-- --
Interest income on
policy loans . . . . -- -- -- --
-- --
--------- --------- --------- -----------
---------- ----------
Total investment
income . . . . . . . 13,766 99,184 57,587 --
2,117,559 461,919
Expenses:
Mortality and expense
risks . . . . . . . 2,953 6,368 4,696 74,097
58,898 16,758
--------- --------- --------- -----------
---------- ----------
Net investment income
(loss) . . . . . . . 10,813 92,816 52,891 (74,097)
2,058,661 445,161
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . (8,124) 4,711 (4,506) 1,167,801
773,222 73,958
Net unrealized
appreciation
(depreciation)
during the period . (52,902) (38,997) 78,455 (2,810,779)
6,801,000 647,137
--------- --------- --------- -----------
---------- ----------
Net realized and
unrealized gain
(loss) on
investments. . . . . (61,026) (34,286) 73,949 (1,642,978)
7,574,222 721,095
--------- --------- --------- -----------
---------- ----------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $ (50,213) $ 58,530 $ 126,840 $(1,717,075)
$9,632,883 $1,166,256
========= ========= ========= ===========
========== ==========
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE SUBACCOUNT MONEY MARKET
SUBACCOUNT
---------------------------------
----------------------------------
2000 1999 1998 2000 1999
1998
---------- ---------- ---------- ----------
---------- ------------
<S> <C> <C> <C> <C> <C>
<C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 110,055 $ 648,532 $ 433,626 $1,779,484
$2,943,852 $2,888,490
M Fund Inc.. . . . . -- -- -- --
-- --
Interest income on
policy loans. . . . -- -- -- 497,245
985,509 973,241
--------- --------- --------- ----------
---------- ----------
Total investment
income. . . . . . . 110,055 648,532 433,626 2,276,729
3,929,361 3,861,731
Expenses:
Mortality and expense
risks. . . . . . . 29,450 54,610 44,753 209,439
411,487 380,002
--------- --------- --------- ----------
---------- ----------
Net investment income 80,605 593,922 388,873 2,067,290
3,517,874 3,481,729
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . (1,671) 165,556 673,582 --
-- --
Net unrealized
appreciation
(depreciation)
during the period. (324,239) (569,216) (479,093) --
-- --
--------- --------- --------- ----------
---------- ----------
Net realized and
unrealized gain
(loss) on
investments. . . . . (325,910) (403,660) 194,489 --
-- --
--------- --------- --------- ----------
---------- ----------
Net increase
(decrease) in net
assets resulting from
operations. . . . . $(245,305) $ 190,262 $ 583,362 $2,067,290
$3,517,874 $3,481,729
========= ========= ========= ==========
========== ==========
</TABLE>
See accompanying notes.
78
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
MID CAP VALUE SUBACCOUNT
SMALL/MID CAP GROWTH SUBACCOUNT
--------------------------------------
---------------------------------------------
2000 1999 1998
2000 1999 1998
----------- -----------
------------- -------------- -------------- ---------------
<S> <C> <C> <C>
<C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . $ 12,329 $ 31,306 $
40,338 $ -- $ 1,903,687 $ 217,686
M Fund Inc. . . . . . . . . . . . . . . -- --
-- -- -- --
Interest income on policy loans. . . . . -- --
-- -- -- --
---------- ----------
------------ ------------- ------------- -------------
Total investment income. . . . . . . . . 12,239 31,306
40,338 -- 1,903,687 217,686
Expenses:
Mortality and expense risks . . . . . . 16,367 29,798
23,760 36,428 69,847 63,334
---------- ----------
------------ ------------- ------------- -------------
Net investment income (loss) . . . . . . (4,038) 1,508
16,578 (36,428) 1,833,840 154,352
Net realized and unrealized gain (loss)
on investments:
Net realized gain (loss). . . . . . . . (35,806) (241,740)
(422,902) (331,677) (13,020) 56,968
Net unrealized appreciation
(depreciation) during the period . . . 329,004 469,537
(260,362) 1,329,781 (1,274,161) 334,213
---------- ----------
------------ ------------- ------------- -------------
Net realized and unrealized gain (loss)
on investments. . . . . . . . . . . . . 293,198 227,797
(683,264) 998,104 (1,287,181) 391,181
---------- ----------
------------ ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations . . . . . . . $ 289,160 $ 229,305 $
(666,686) $ 961,676 $ 546,659 $ 545,533
========== ==========
============ ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY SUBACCOUNT
GROWTH & INCOME SUBACCOUNT
--------------------------------------
-----------------------------------------
2000 1999
1998 2000 1999 1998
----------- ------------
------------ ------------- ------------ --------------
<S> <C> <C> <C>
<C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I $ 331,794 $ 771,050 $
817,633 $ 5,332,033 $124,750,392 $ 96,326,313
M Fund Inc.. . . . -- --
-- -- -- --
Interest income on policy loans 67,503 131,461
145,212 6,953,633 12,877,539 11,727,553
---------- -----------
----------- ------------ ------------ ------------
Total investment income 399,297 902,511
962,845 12,285,666 137,627,931 108,053,866
Expenses:
Mortality and expense risks 39,508 78,893
86,610 3,349,588 6,531,512 5,589,689
---------- -----------
----------- ------------ ------------ ------------
Net investment income 359,789 823,618
876,235 8,936,078 131,096,419 102,464,177
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) (225,511) 123,591
442,876 16,053,184 22,802,197 22,835,488
Net unrealized appreciation (depreciation)
during the period. 1,416,393 (1,106,755)
(3,720,942) (26,767,597) 7,687,109 112,457,395
---------- -----------
----------- ------------ ------------ ------------
Net realized and unrealized gain (loss) on
investments. . . . 1,190,882 (983,164)
(3,278,066) (10,714,413) 30,489,306 135,292,883
---------- -----------
----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations $1,550,671 $ (159,546)
$(2,401,831) $ (1,778,335) $161,585,725 $237,757,060
========== ===========
=========== ============ ============ ============
</TABLE>
See accompanying notes.
79
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
MANAGED SUBACCOUNT SHORT-TERM
BOND SUBACCOUNT
---------------------------------------
----------------------------------
2000 1999 1998 2000
1999 1998
------------ ------------ ----------- -----------
----------- -----------
<S> <C> <C> <C> <C>
<C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 6,314,681 $39,951,885 $37,907,821 $ 31,666 $
53,689 $ 31,261
M Fund Inc.. . . . . -- -- -- --
-- --
Interest income on
policy loans . . . . 2,787,957 5,217,121 4,949,021 --
-- --
----------- ----------- ----------- ----------
---------- --------
Total investment
income . . . . . . . 9,102,638 45,169,006 42,856,842 31,666
53,689 31,261
Expenses:
Mortality and expense
risks . . . . . . . 1,333,143 2,636,085 2,381,406 3,022
5,065 3,052
----------- ----------- ----------- ----------
---------- --------
Net investment income 7,769,495 42,532,921 40,475,436 28,644
48,624 28,209
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 3,653,026 5,060,826 5,853,076 (12,368)
(3,107) 2,008
Net unrealized
appreciation
(depreciation)
during the period . (5,191,852) (9,288,287) 24,834,482 10,583
(23,648) (5,287)
----------- ----------- ----------- ----------
---------- --------
Net realized and
unrealized gain
(loss) on investments (1,538,826) (4,227,461) 30,687,558 (1,785)
(26,755) (3,279)
----------- ----------- ----------- ----------
---------- --------
Net increase in net
assets resulting from
operations . . . . . $ 6,230,669 $38,305,460 $71,162,994 $ 26,859 $
21,869 $ 24,930
=========== =========== =========== ==========
========== ========
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE SUBACCOUNT INTERNATIONAL
OPPORTUNITIES SUBACCOUNT
---------------------------------
---------------------------------------
2000 1999 1998 2000
1999 1998
---------- ---------- ---------- --------------
------------ ------------
<S> <C> <C> <C> <C> <C>
<C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 37,168 $ 97,290 $ 24,781 $ 21,730 $
354,646 $ 27,799
M Fund Inc.. . . . . -- -- -- --
-- --
Interest income on
policy loans. . . . -- -- -- --
-- --
--------- --------- --------- -----------
---------- --------
Total investment
income. . . . . . . 37,168 97,290 24,781 21,730
354,646 27,799
Expenses:
Mortality and expense
risks. . . . . . . 12,591 24,661 23,711 16,957
24,257 19,481
--------- --------- --------- -----------
---------- --------
Net investment income 24,577 72,629 1,070 4,773
330,389 8,318
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . (147,622) (217,582) 61,917 703,918
123,861 64,757
Net unrealized
appreciation
(depreciation)
during the period. 160,413 (40,472) (364,339) (929,318)
839,140 339,709
--------- --------- --------- -----------
---------- --------
Net realized and
unrealized gain
(loss) on investments 12,791 (258,054) (302,422) (225,400)
963,001 404,466
--------- --------- --------- -----------
---------- --------
Net increase
(decrease) in net
assets resulting from
operations. . . . . $ 37,368 $(185,425) $(301,352) $ (220,627)
$1,293,390 $412,784
========= ========= ========= ===========
========== ========
</TABLE>
See accompanying notes.
80
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
EQUITY INDEX SUBACCOUNT GLOBAL BOND
SUBACCOUNT
------------------------------------
------------------------------
2000 1999 1998 2000 1999
1998
------------ ---------- ---------- ---------
---------- ---------
<S> <C> <C> <C> <C> <C>
<C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 132,815 $ 921,698 $ 367,284 $ 25,777 $
91,316 $62,244
M Fund Inc.. . . . . -- -- -- --
-- --
Interest income on
policy loans . . . . -- -- -- --
-- --
----------- ---------- ---------- --------
--------- -------
Total investment
income . . . . . . . 132,815 921,698 367,284 25,777
91,316 62,244
Expenses:
Mortality and expense
risks . . . . . . . 70,140 103,983 60,274 4,763
9,736 7,516
----------- ---------- ---------- --------
--------- -------
Net investment income 62,675 817,715 307,010 21,014
81,580 54,728
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 339,524 471,802 132,619 (37,534)
(1,996) 32,917
Net unrealized
appreciation
(depreciation)
during the period . (498,165) 2,019,913 2,082,107 58,703
(126,001) 11,342
----------- ---------- ---------- --------
--------- -------
Net realized and
unrealized gain
(loss) on investments (156,641) 2,491,715 2,214,726 21,169
(127,997) 44,259
----------- ---------- ---------- --------
--------- -------
Net increase
(decrease) in net
assets resulting
from operations. . . $ 95,966 $3,309,430 $2,521,736 $ 42,183 $
(46,417) $98,987
=========== ========== ========== ========
========= =======
</TABLE>
<TABLE>
<CAPTION>
BRANDES INTERNATIONAL
EQUITY
TURNER CORE GROWTH SUBACCOUNT SUBACCOUNT
------------------------------
------------------------------
2000 1999 1998 2000 1999
1998
---------- --------- -------- --------- ----------
-----------
<S> <C> <C> <C> <C> <C>
<C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 5,157 $ -- $ -- $ 8,114 $ --
$ --
M Fund Inc.. . . . . -- 38,038 5,535 -- 18,453
13,237
Interest income on
policy loans . . . . -- -- -- -- --
--
-------- -------- ------- ------- --------
-------
Total investment
income . . . . . . . 5,157 38,038 5,535 8,114 18,453
13,237
Expenses:
Mortality and expense
risks . . . . . . . 1,625 2,102 1,022 1,740 1,904
1,143
-------- -------- ------- ------- --------
-------
Net investment income 3,532 35,936 4,513 6,374 16,549
12,094
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain. . 101,050 44,245 14,364 6,519 7,704
1,184
Net unrealized
appreciation
(depreciation)
during the period . (85,212) 37,727 49,605 13,873 119,400
15,813
-------- -------- ------- ------- --------
-------
Net realized and
unrealized gain on
investments. . . . . 15,838 81,972 63,969 20,392 127,104
16,997
-------- -------- ------- ------- --------
-------
Net increase in net
assets resulting from
operations . . . . . $ 19,370 $117,908 $68,482 $26,766 $143,653
$29,091
======== ======== ======= ======= ========
=======
</TABLE>
See accompanying notes.
81
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
FRONTIER CAPITAL APPRECIATION EMERGING MARKETS EQUITY
SUBACCOUNT SUBACCOUNT
------------------------------
--------------------------
2000 1999 1998 2000 1999
1998
--------- -------- --------- --------- --------
-------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 24,107 $ -- $ -- $ -- $ 13,510 $
1
M Fund Inc.. . . . . -- 20,787 1,888 -- --
--
Interest income on
policy loans . . . . -- -- -- -- --
--
-------- -------- -------- -------- --------
-----
Total investment
income . . . . . . . 24,107 20,787 1,888 -- 13,510
1
Expenses:
Mortality and expense
risks . . . . . . . 2,641 3,019 2,096 2,736 720
--
-------- -------- -------- -------- --------
-----
Net investment income
(loss) . . . . . . . 21,466 17,768 (208) (2,736) 12,790
1
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 82,236 22,678 12,123 (12,180) 5,339
--
Net unrealized
appreciation
(depreciation)
during the period . (12,210) 164,599 (17,930) (76,126) 86,570
10
-------- -------- -------- -------- --------
-----
Net realized and
unrealized gain
(loss) on investments 70,026 187,277 (5,807) (88,306) 91,909
10
-------- -------- -------- -------- --------
-----
Net increase
(decrease) in net
assets resulting from
operations . . . . . $ 91,492 $205,045 $ (6,015) $(91,042) $104,699 $
11
======== ======== ======== ======== ========
=====
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL OPPORTUNITIES II BOND INDEX
SUBACCOUNT SUBACCOUNT
-------------------------------
--------------------------
2000 1999 1998* 2000 1999
1998*
----------- --------- ------- -------- ---------
--------
<S> <C> <C> <C> <C> <C>
<C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 2,705 $ 508 $ 1 $24,785 $ 17,417 $
149
M Fund Inc.. . . . . -- -- -- -- --
--
Interest income on
policy loans. . . . -- -- -- -- --
--
-------- ------- --- ------- --------
-----
Total investment
income. . . . . . . 2,705 508 1 24,785 17,417
149
Expenses:
Mortality and expense
risks. . . . . . . 588 267 -- 2,044 1,565
3
-------- ------- --- ------- --------
-----
Net investment income 2,117 241 1 22,741 15,852
146
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 13,157 602 1 (2,201) (1,422)
(1)
Net unrealized
appreciation
(depreciation)
during the period. (13,987) 13,424 45 7,287 (22,820)
(196)
-------- ------- --- ------- --------
-----
Net realized and
unrealized gain
(loss) on investments (830) 14,026 46 5,086 (24,242)
(197)
-------- ------- --- ------- --------
-----
Net increase
(decrease) in net
assets resulting from
operations. . . . . $ 1,287 $14,267 $47 $27,827 $ (8,390) $
(51)
======== ======= === ======= ========
=====
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
See accompanying notes.
82
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
SMALL/MID CAP HIGH YIELD
CORE SUBACCOUNT BOND SUBACCOUNT
----------------------- -------------------------
2000 1999 1998* 2000 1999 1998*
-------- ------ ----- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . . . $ 298 $6,810 $ -- $ 9,291 $2,748 $ 19
M Fund Inc. . . . . . . -- -- -- -- -- --
Interest income on policy
loans . . . . . . . . . -- -- -- -- -- --
------- ------ ---- -------- ------ ----
Total investment income. 298 6,810 -- 9,291 2,748 19
Expenses:
Mortality and expense
risks. . . . . . . . . 440 178 -- 667 206 1
------- ------ ---- -------- ------ ----
Net investment income
(loss). . . . . . . . . (142) 6,632 -- 8,624 2,542 18
Net realized and
unrealized gain (loss)
on investments:
Net realized gain (loss) 10,745 252 -- (8,649) (186) --
Net unrealized
appreciation
(depreciation) during
the period . . . . . . (5,954) 3,005 6 (2,045) (511) (26)
------- ------ ---- -------- ------ ----
Net realized and
unrealized gain (loss)
on investments. . . . . 4,791 3,257 6 (10,694) (697) (26)
------- ------ ---- -------- ------ ----
Net increase (decrease)
in net assets resulting
from operations . . . . $ 4,649 $9,889 $ 6 $ (2,070) $1,845 $ (8)
======= ====== ==== ======== ====== ====
</TABLE>
<TABLE>
<CAPTION>
CLIFTON
ENHANCED
U.S. EQUITY
SUBACCOUNT
---------------
2000 1999**
------- ---------
<S> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . . . . . . . . . . $ 475 $1,117
M Fund Inc. . . . . . . . . . . . . . . . . . . . . . . . -- --
Interest income on policy loans. . . . . . . . . . . . . . -- --
------ ------
Total investment income. . . . . . . . . . . . . . . . . . 475 1,117
Expenses:
Mortality and expense risks . . . . . . . . . . . . . . . 50 4
------ ------
Net investment income. . . . . . . . . . . . . . . . . . . 425 1,113
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss). . . . . . . . . . . . . . . . . (33) 91
Net unrealized appreciation (depreciation) during the
period . . . . . . . . . . . . . . . . . . . . . . . . . 2,292 (879)
------ ------
Net realized and unrealized gain (loss) on investments . . 2,259 (788)
------ ------
Net increase in net assets resulting from operations . . . $2,684 $ 325
====== ======
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
** From March 9, 1999 (commencement of operations).
See accompanying notes.
83
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT
ACTIVE BOND SUBACCOUNT
------------------------------------------
------------------------------------------
2000 1999 1998
2000 1999 1998
------------- -------------
------------- ------------- ------------- ---------------
<S> <C> <C> <C>
<C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . $ 434,004 $ 24,389,814 $
12,025,213 $ 8,592,418 $ 20,233,648 $ 22,087,857
Net realized gains (losses) . . . . . 2,032,851 4,239,424
3,520,199 (29,483) 192,098 1,600,539
Net unrealized appreciation
(depreciation) during
the period . . . . . . . . . . . . . 7,172,532 1,727,703
18,509,310 505,228 (20,304,536) (2,317,324)
------------ ------------
------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations . . . . . . . . . . . 9,639,387 30,356,941
34,054,722 9,068,163 121,210 21,371,072
From policyholder transactions:
Net premiums from
policyholders. . . . . . . . . . . . 31,919,256 37,307,814
21,681,632 11,475,576 26,114,799 32,901,747
Net benefits to policyholders . . . . (21,738,362) (25,817,420)
(21,510,240) (20,536,374) (35,577,616) (39,577,750)
Net increase in policy loans. . . . . 2,840,939 --
2,561,877 967,300 -- 1,607,456
------------ ------------
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . . . . . . . . . . . 13,021,833 11,490,394
2,733,269 (8,093,498) (9,462,817) (5,068,547)
------------ ------------
------------ ------------ ------------ ------------
Net increase (decrease) in
net assets. . . . . . . . . . . . . . 22,661,220 41,847,335
36,787,991 974,665 (9,341,607) 16,302,525
Net assets at beginning of period. . . 177,062,332 135,214,997
98,427,006 293,120,799 302,462,406 286,159,881
------------ ------------
------------ ------------ ------------ ------------
Net assets at end of period. . . . . . $199,723,552 $177,062,332
$135,214,997 $294,095,464 $293,120,799 $302,462,406
============ ============
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX SUBACCOUNT
SMALL CAP GROWTH SUBACCOUNT
---------------------------------------
--------------------------------------
2000 1999 1998
2000 1999 1998
------------ ------------
------------ ------------ ------------ -------------
<S> <C> <C> <C>
<C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 274,812 $ 950,123 $ 3,440,236
$ (40,116) $ 1,234,844 $ (20,335)
Net realized gains 816,122 168,248 148,419
1,170,187 491,241 55,393
Net unrealized appreciation
(depreciation) during
the period. . (2,574,516) 5,712,567 105,161
(647,342) 2,317,857 518,731
----------- ----------- -----------
----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations (1,483,582) 6,830,938 3,693,816
482,729 4,043,942 553,789
From policyholder transactions:
Net premiums from
policyholders. 11,571,448 7,373,967 6,549,988
8,820,091 4,316,218 2,382,203
Net benefits to policyholders (8,784,406) (6,834,914)
(5,210,982) (4,981,803) (2,206,402) (998,381)
Net increase in policy loans 261,125 -- 86,200
-- -- --
----------- ----------- -----------
----------- ----------- ----------
Net increase in net assets resulting
from policyholder transactions 3,048,167 539,053 1,425,206
3,838,288 2,109,816 1,383,822
----------- ----------- -----------
----------- ----------- ----------
Net increase (decrease) in
net assets. . . 1,564,585 7,369,991 5,119,022
4,321,017 6,153,758 1,937,611
Net assets at beginning of period 31,899,039 24,529,048 19,410,026
10,825,578 4,671,820 2,734,209
----------- ----------- -----------
----------- ----------- ----------
Net assets at end of period $33,463,624 $31,899,039 $24,529,048
$15,146,595 $10,825,578 $4,671,820
=========== =========== ===========
=========== =========== ==========
</TABLE>
See accompanying notes.
84
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
GLOBAL BALANCED SUBACCOUNT
MID CAP GROWTH SUBACCOUNT
---------------------------------------------
----------------------------------------------
2000 1999 1998
2000 1999 1998
------------ -------------- ----------------
-------------- --------------- ----------------
<S> <C> <C> <C>
<C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income (loss) . $ 10,813 $ 92,816 $ 52,891
$ (74,097) $ 2,058,661 $ 445,161
Net realized gains (losses). . (8,124) 4,711 (4,506)
1,167,801 773,222 73,958
Net unrealized appreciation
(depreciation) during the
period. . . . . . . . . . . . (52,902) (38,997) 78,455
(2,810,779) 6,801,000 647,137
----------- ------------- ---------------
------------- -------------- -------------
Net increase (decrease) in net
assets resulting from
operations . . . . . . . . . . (50,213) 58,530 126,840
(1,717,075) 9,632,883 1,166,256
From policyholder transactions:
Net premiums from policyholders 182,567 377,958 341,482
12,180,008 8,941,124 3,164,065
Net benefits to policyholders. (298,263) (131,331) (310,766)
(4,655,667) (2,937,257) (612,975)
Net increase in policy loans . -- -- --
-- -- --
----------- ------------- ---------------
------------- -------------- -------------
Net increase (decrease) in net
assets resulting from
policyholder transactions. . . (115,696) 246,627 30,716
7,524,341 6,003,867 2,551,090
----------- ------------- ---------------
------------- -------------- -------------
Net increase (decrease) in net
assets . . . . . . . . . . . . (165,909) 305,157 157,556
5,807,266 15,636,750 3,717,346
Net assets at beginning of
period . . . . . . . . . . . . 1,177,232 872,075 714,519
20,852,255 5,215,505 1,498,159
----------- ------------- ---------------
------------- -------------- -------------
Net assets at end of period . . $ 1,011,323 $ 1,177,232 $ 872,075
$ 26,659,521 $ 20,852,255 $ 5,215,505
=========== ============= ===============
============= ============== =============
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE SUBACCOUNT
MONEY MARKET SUBACCOUNT
----------------------------------------
------------------------------------------
2000 1999 1998
2000 1999 1998
------------ ------------
------------- ------------- ------------- ---------------
<S> <C> <C> <C>
<C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income $ 80,605 $ 593,922 $
388,873 $ 2,067,290 $ 3,517,874 $ 3,481,729
Net realized gains (losses) (1,671) 165,556
673,582 -- -- --
Net unrealized appreciation
(depreciation) during the period (324,239) (569,216)
(479,093) -- -- --
----------- -----------
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations (245,305) 190,262
583,362 2,067,290 3,517,874 3,481,729
From policyholder transactions:
Net premiums from policyholders 2,039,750 3,166,658
4,214,076 31,101,772 33,694,123 24,612,731
Net benefits to policyholders (1,152,104) (1,903,017)
(3,212,048) (32,846,241) (30,672,090) (24,024,723)
Net increase (decrease) in policy loans -- --
-- (282,456) -- 421,166
----------- -----------
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder transactions 887,646 1,263,641
1,002,028 (2,026,925) 3,022,033 1,009,174
----------- -----------
------------ ------------ ------------ ------------
Net increase in net assets 642,341 1,453,903
1,585,390 40,365 6,539,907 4,490,903
Net assets at beginning of period 9,553,293 8,099,390
6,514,000 76,638,641 70,098,734 65,607,831
----------- -----------
------------ ------------ ------------ ------------
Net assets at end of period $10,195,634 $ 9,553,293 $
8,099,390 $ 76,679,006 $ 76,638,641 $ 70,098,734
=========== ===========
============ ============ ============ ============
</TABLE>
See accompanying notes.
85
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
MID CAP VALUE SUBACCOUNT
SMALL/MID CAP GROWTH SUBACCOUNT
----------------------------------------
---------------------------------------------------
2000 1999 1998
2000 1999 1998
------------ ------------ -------------
---------------- ---------------- ------------------
<S> <C> <C> <C> <C>
<C> <C>
Increase (decrease) in net
assets from operations:
Net investment income (loss) . $ (4,038) $ 1,508 $ 16,578 $
(36,428) $ 1,833,840 $ 154,352
Net realized gains (losses). . (35,806) (241,740) (422,902)
(331,677) (13,020) 56,968
Net unrealized appreciation
(depreciation) during the
period. . . . . . . . . . . . 329,004 469,537 (260,362)
1,329,781 (1,274,161) 334,213
----------- ----------- ------------
--------------- --------------- ---------------
Net increase (decrease) in net
assets resulting from
operations . . . . . . . . . . 289,160 229,305 (666,686)
961,676 546,659 545,533
From policyholder transactions:
Net premiums from policyholders 1,222,805 1,886,594 5,997,691
2,015,926 3,493,643 3,953,326
Net benefits to policyholders. (1,089,206) (1,745,112) (2,912,034)
(9,689,438) (3,105,108) (3,311,846)
Net increase in policy loans . -- -- --
-- -- --
----------- ----------- ------------
--------------- --------------- ---------------
Net increase (decrease) in net
assets resulting from
policyholder transactions. . . 133,599 141,482 3,085,657
(673,512) 388,535 641,480
----------- ----------- ------------
--------------- --------------- ---------------
Net increase in net assets. . . 422,759 370,787 2,418,971
288,164 935,194 1,187,013
Net assets at beginning of
period . . . . . . . . . . . . 5,236,580 4,865,793 2,446,822
12,409,573 11,474,379 10,287,366
----------- ----------- ------------
--------------- --------------- ---------------
Net assets at end of period . . $ 5,659,339 $ 5,236,580 $ 4,865,793 $
12,697,737 $ 12,409,573 $ 11,474,379
=========== =========== ============
=============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY SUBACCOUNT
GROWTH & INCOME SUBACCOUNT
---------------------------------------
------------------------------------------------
2000 1999 1998
2000 1999 1998
------------ ------------ ------------
--------------- --------------- -----------------
<S> <C> <C> <C>
<C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income $ 359,789 $ 823,618 $ 876,235
$ 8,936,078 $ 131,096,419 $ 102,464,177
Net realized gains (losses) (225,511) 123,591 442,876
16,053,184 22,802,197 22,835,488
Net unrealized appreciation
(depreciation) during the period 1,416,393 (1,106,755) (3,720,942)
(26,767,597) 7,687,109 112,457,395
----------- ----------- -----------
-------------- -------------- --------------
Net increase (decrease) in net
assets resulting from operations 1,550,671 (159,546) (2,401,831)
(1,778,335) 161,585,725 237,757,060
From policyholder transactions:
Net premiums from policyholders 3,954,225 2,304,591 6,295,255
47,243,335 101,973,160 92,955,980
Net benefits to policyholders (4,217,423) (3,311,591) (5,507,305)
(81,355,661) (133,701,210) (134,661,151)
Net increase (decrease) in policy
loans. . . . . 141,567 -- (83,216)
4,922,813 -- 18,165,114
----------- ----------- -----------
-------------- -------------- --------------
Net increase (decrease) in net
assets resulting from policyholder
transactions. . (121,631) (1,007,000) 704,734
(29,189,513) (31,728,050) (23,540,057)
Net increase (decrease) in net
assets. . . . . 1,429,040 (1,166,546) (1,697,097)
(30,967,848) 129,857,675 214,217,003
Net assets at beginning of period 13,378,472 14,545,018 16,242,115
1,278,739,554 1,148,881,879 934,664,876
Net assets at end of period $14,807,512 $13,378,472 $14,545,018
$1,247,771,706 $1,278,739,554 $1,148,881,879
=========== =========== ===========
============== ============== ==============
</TABLE>
See accompanying notes.
86
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
MANAGED SUBACCOUNT
SHORT-TERM BOND SUBACCOUNT
------------------------------------------
--------------------------------------
2000 1999
1998 2000 1999 1998
------------- -------------
------------- ----------- ------------ --------------
<S> <C> <C> <C>
<C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income. . . . . . . . . . $ 7,769,495 $ 42,532,921 $
40,475,436 $ 28,644 $ 48,624 $ 28,209
Net realized gains (losses). . . . . . . 3,653,026 5,060,826
5,853,076 (12,368) (3,107) 2,008
Net unrealized appreciation
(depreciation) during the period. . . . (5,191,852) (9,288,287)
24,834,482 10,583 (23,648) (5,287)
------------ ------------
------------ ---------- ----------- -----------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . 6,230,669 38,305,460
71,162,994 26,859 21,869 24,930
From policyholder transactions:
Net premiums from policyholders. . . . . 20,445,777 44,546,082
40,631,684 241,196 690,849 435,150
Net benefits to policyholders. . . . . . (35,113,472) (55,332,758)
(55,447,667) (340,388) (178,124) (274,762)
Net increase in policy loans . . . . . . 1,824,582 --
5,379,590 -- -- --
------------ ------------
------------ ---------- ----------- -----------
Net increase (decrease) in net assets
resulting from policyholder
transactions . . . . . . . . . . . . . . (12,843,113) (10,786,676)
(9,436,393) (99,192) 512,725 160,388
------------ ------------
------------ ---------- ----------- -----------
Net increase (decrease) in net assets . . (6,612,444) 27,518,784
61,726,601 (72,333) 534,594 185,318
Net assets at beginning of period . . . . 500,072,750 472,553,966
410,827,365 1,129,483 594,889 409,571
------------ ------------
------------ ---------- ----------- -----------
Net assets at end of period . . . . . . . $493,460,306 $500,072,750
$472,553,966 $1,057,150 $ 1,129,483 $ 594,889
============ ============
============ ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE SUBACCOUNT
INTERNATIONAL OPPORTUNITIES SUBACCOUNT
--------------------------------------
----------------------------------------
2000 1999 1998
2000 1999 1998
----------- ------------ ------------
------------- ------------ --------------
<S> <C> <C> <C>
<C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income $ 24,577 $ 72,629 $ 1,070
$ 4,773 $ 330,389 $ 8,318
Net realized gains (losses) (147,622) (217,582) 61,917
703,918 123,861 64,757
Net unrealized appreciation
(depreciation) during the period 160,413 (40,472) (364,359)
(929,318) 839,140 339,709
---------- ----------- -----------
------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations 37,368 (185,425) (301,372)
(220,627) 1,293,390 412,784
From policyholder transactions:
Net premiums from policyholders 1,159,319 1,446,109 2,644,808
5,362,651 1,632,955 2,203,753
Net benefits to policyholders (893,462) (1,547,128) (1,288,464)
(4,276,522) (1,315,539) (1,443,700)
Net increase in policy loans -- -- --
-- -- --
---------- ----------- -----------
------------ ----------- -----------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . 265,857 (101,019) 1,356,344
1,086,129 317,416 760,053
---------- ----------- -----------
------------ ----------- -----------
Net increase (decrease) in net assets 303,225 (286,444) 1,054,972
865,502 1,610,806 1,172,837
Net assets at beginning of period 4,111,416 4,397,860 3,342,888
5,310,586 3,699,780 2,526,943
---------- ----------- -----------
------------ ----------- -----------
Net assets at end of period $4,414,641 $ 4,111,416 $ 4,397,860
$ 6,176,088 $ 5,310,586 $ 3,699,780
========== =========== ===========
============ =========== ===========
</TABLE>
See accompanying notes.
87
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
EQUITY INDEX
SUBACCOUNT
---------------------------------------
2000 1999
1998
------------ ------------
------------
<S> <C> <C>
<C>
Increase (decrease) in net assets from
operations:
Net investment income. . . . . . . . . . . . . $ 62,675 $ 817,715 $
307,010
Net realized gains (losses). . . . . . . . . . 339,524 471,802
132,619
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . (498,165) 2,019,913
2,082,107
----------- -----------
-----------
Net increase (decrease) in net assets resulting
from operations. . . . . . . . . . . . . . . . (95,966) 3,309,430
2,521,736
From policyholder transactions:
Net premiums from policyholders. . . . . . . . 5,398,036 7,762,529
4,632,113
Net benefits to policyholders. . . . . . . . . (1,940,148) (2,563,485)
(1,120,852)
Net increase in policy loans . . . . . . . . . -- --
--
----------- -----------
-----------
Net increase (decrease) in net assets resulting
from policyholder transactions . . . . . . . . 3,361,922 5,199,044
3,511,261
----------- -----------
-----------
Net increase (decrease) in net assets . . . . . 22,117,624 8,508,474
6,032,997
Net assets at beginning of period . . . . . . . 22,117,624 13,609,150
7,576,153
----------- -----------
-----------
Net assets at end of period . . . . . . . . . . $25,479,546 $22,117,624
$13,609,150
=========== ===========
===========
<CAPTION>
GLOBAL BOND SUBACCOUNT
-------------------------------------
2000 1999
1998
----------- -----------
--------------
<S> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income. . . . . . . . . . . . . $ 21,014 $ 81,580 $
54,728
Net realized gains (losses). . . . . . . . . . (37,534) (1,996)
32,917
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . 58,703 (126,001)
11,342
---------- ----------
-----------
Net increase (decrease) in net assets resulting 42,183 (46,417)
98,987
from operations. . . . . . . . . . . . . . . .
From policyholder transactions:
Net premiums from policyholders. . . . . . . . 378,645 1,115,699
798,933
Net benefits to policyholders. . . . . . . . . (685,644) (292,075)
(1,158,109)
Net increase in policy loans . . . . . . . . . -- --
--
---------- ----------
-----------
Net increase (decrease) in net assets resulting
from policyholder transactions . . . . . . . . (306,999) 823,624
(359,176)
---------- ----------
-----------
Net increase (decrease) in net assets . . . . . (264,816) 777,207
(260,189)
Net assets at beginning of period . . . . . . . 1,882,675 1,105,468
1,365,657
---------- ----------
-----------
Net assets at end of period . . . . . . . . . . $1,617,859 $1,882,675 $
1,105,468
========== ==========
===========
</TABLE>
<TABLE>
<CAPTION>
TURNER CORE GROWTH SUBACCOUNT BRANDES INTERNATIONAL
EQUITY SUBACCOUNT
--------------------------------
----------------------------------------
2000 1999 1998 2000 1999
1998
---------- ---------- --------- ------------
------------ --------------
<S> <C> <C> <C> <C> <C>
<C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 3,532 $ 35,936 $ 4,513 $ 6,374 $
16,549 $ 12,094
Net realized gains. 101,050 44,245 14,364 6,519
7,704 1,184
Net unrealized
appreciation
(depreciation)
during the period. (85,212) 37,727 49,605 13,873
119,400 15,813
--------- --------- -------- --------
-------- --------
Net increase in net
assets resulting from
operations. . . . . 19,370 117,908 68,482 26,766
143,653 29,091
From policyholder
transactions:
Net premiums from
policyholders. . . 265,836 240,351 203,590 59,497
239,618 55,021
Net benefits to
policyholders. . . (371,100) (136,661) (77,651) (18,974)
(29,520) (10,341)
Net increase in
policy loans. . . -- -- -- --
-- --
--------- --------- -------- --------
-------- --------
Net increase
(decrease) in net
assets resulting from
policyholder
transactions. . . . (105,264) 103,690 125,939 40,523
210,098 44,680
--------- --------- -------- --------
-------- --------
Net increase
(decrease) in net
assets. . . . . . . (85,894) 221,598 194,421 67,289
353,751 73,771
Net assets at
beginning of period 536,192 314,594 120,173 588,128
234,377 160,606
--------- --------- -------- --------
-------- --------
Net assets at end of
period. . . . . . . $ 450,298 $ 536,192 $314,594 $655,417
$588,128 $234,377
========= ========= ======== ========
======== ========
</TABLE>
See accompanying notes.
88
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
FRONTIER CAPITAL EMERGING
MARKETS
APPRECIATION SUBACCOUNT EQUITY
SUBACCOUNT
--------------------------------
---------------------------------
2000 1999 1998 2000 1999
1998
---------- --------- ---------- ------------
---------- ---------
<S> <C> <C> <C> <C> <C>
<C>
Increase (decrease) in
net assets from
operations:
Net investment income
(loss). . . . . . . $ 21,466 $ 17,768 $ (208) $ (2,736) $
12,790 $ 1
Net realized gains
(losses). . . . . . 82,236 22,678 12,123 (12,180)
5,339 --
Net unrealized
appreciation
(depreciation)
during the period . (12,210) 164,599 (17,930) (76,126)
86,570 10
--------- -------- --------- -----------
--------- -------
Net increase
(decrease) in net
assets resulting from
operations . . . . . 91,492 205,045 (6,015) (91,042)
104,699 11
From policyholder
transactions:
Net premiums from
policyholders . . . 297,090 255,268 128,779 3,936,569
433,406 2,018
Net benefits to
policyholders . . . (219,651) (89,136) (146,083) (3,055,550)
(144,400) --
Net increase in
policy loans. . . . -- -- -- --
---- --
--------- -------- --------- -----------
--------- -------
Net increase
(decrease) in net
assets resulting from
policyholder
transactions . . . . 77,439 166,132 (17,304) 881,019
289,006 2,018
--------- -------- --------- -----------
--------- -------
Net increase
(decrease) in net
assets . . . . . . . 168,931 371,177 (23,319) 789,977
393,705 2,029
Net assets at
beginning of period. 728,674 357,497 380,816 395,734
2,029 --
--------- -------- --------- -----------
--------- -------
Net assets at end of
period . . . . . . . $ 897,605 $728,674 $ 357,497 $ 1,185,711 $
395,734 $ 2,029
========= ======== ========= ===========
========= =======
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL OPPORTUNITIES II BOND INDEX
SUBACCOUNT SUBACCOUNT
-------------------------------
-----------------------------
2000 1999 1998 2000 1999
1998
----------- ----------- ------- --------- ---------
----------
<S> <C> <C> <C> <C> <C>
<C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 2,117 $ 241 $ 1 $ 22,741 $ 15,852
$ 146
Net realized gains
(losses). . . . . . 13,157 602 1 (2,201) (1,422)
(1)
Net unrealized
appreciation
(depreciation)
during the period. (13,987) 13,424 45 7,287 (22,820)
(196)
-------- -------- ---- -------- --------
-------
Net increase
(decrease) in net
assets resulting from
operations. . . . . 1,287 14,267 47 27,827 (8,390)
(51)
From policyholder
transactions:
Net premiums from
policyholders. . . 214,628 108,420 915 362,018 412,326
10,254
Net benefits to
policyholders. . . (54,971) (11,064) (13) (24,425) (26,307)
(69)
Net increase in
policy loans. . . . -- -- -- -- --
--
-------- -------- ---- -------- --------
-------
Net increase in net
assets resulting from
policyholder
transactions. . . . 159,657 97,356 902 337,593 386,019
10,185
-------- -------- ---- -------- --------
-------
Net increase in net
assets. . . . . . . 160,944 111,623 949 365,420 377,629
10,134
Net assets at
beginning of period. 112,572 949 -- 387,763 10,134
--
-------- -------- ---- -------- --------
-------
Net assets at end of
period. . . . . . . $273,516 $112,572 $949 $753,183 $387,763
$10,134
======== ======== ==== ======== ========
=======
</TABLE>
See accompanying notes.
89
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
SMALL/MIDCAP HIGH YIELD
CORE SUBACCOUNT BOND SUBACCOUNT
---------------------------
-------------------------------
2000 1999 1998* 2000 1999
1998*
---------- -------- ----- ------------ ---------
---------
<S> <C> <C> <C> <C> <C>
<C>
Increase (decrease) in
net assets from
operations:
Net investment income
(loss). . . . . . . $ (142) $ 6,632 $ -- $ 8,624 $ 2,542 $
19
Net realized gains
(losses). . . . . . 10,745 252 -- (8,649) (186)
--
Net unrealized
appreciation
(depreciation)
during the period . (5,954) 3,005 6 (2,045) (511)
(26)
--------- ------- ---- ----------- --------
------
Net increase
(decrease) in net
assets resulting from
operations . . . . . 4,649 9,889 6 (2,070) 1,845
(8)
From policyholder
transactions:
Net premiums from
policyholders . . . 414,076 97,385 104 1,249,658 98,955
2,887
Net benefits to
policyholders . . . (329,116) (7,901) (2) (1,040,268) (13,078)
--
Net increase in
policy loans. . . . 0 -- -- 0 --
--
--------- ------- ---- ----------- --------
------
Net increase in net
assets resulting from
policyholder
transactions . . . . 84,960 89,484 102 209,390 85,877
2,887
--------- ------- ---- ----------- --------
------
Net increase in net
assets . . . . . . . 89,609 99,373 108 207,320 87,722
2,887
Net assets at
beginning of period. 99,481 108 -- 90,601 2,879
--
--------- ------- ---- ----------- --------
------
Net assets at end of
period . . . . . . . $ 189,090 $99,481 $108 $ 297,921 $ 90,601
$2,879
======== ====== ==== ========== =======
=====
</TABLE>
<TABLE>
<CAPTION>
CLIFTON
ENHANCED U.S.
EQUITY SUBACCOUNT
------------------
2000 1999**
-------- ----------
<S> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss). . . . . . . . . . . . . . $ 425 $ 1,113
Net realized gains (losses) . . . . . . . . . . . . . . (33) 91
Net unrealized appreciation (depreciation) during the
period . . . . . . . . . . . . . . . . . . . . . . . . (534) (879)
------- -------
Net increase (decrease) in net assets resulting from
operations. . . . . . . . . . . . . . . . . . . . . . . (142) 325
From policyholder transactions:
Net premiums from policyholders . . . . . . . . . . . . 4,452 13,814
Net benefits to policyholders . . . . . . . . . . . . . (294) --
Net increase in policy loans. . . . . . . . . . . . . . 0 --
------- -------
Net increase in net assets resulting from policyholder
transactions 4,158 13,814
------- -------
Net increase in net assets . . . . . . . . . . . . . . . 4,016 14,139
Net assets at beginning of period. . . . . . . . . . . . 14,139 --
------- -------
Net assets at end of period. . . . . . . . . . . . . . . $18,155 $14,139
======= =======
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
** From March 9, 1999 (commencement of operations).
See accompanying notes.
90
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
YEARS AND PERIODS ENDED JUNE 30, 2000
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 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-seven 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-seven Portfolios
of the Fund and M Fund which are currently available are the Large Cap Growth,
Active Bond (formerly, Sovereign Bond), International Equity Index, Small Cap
Growth, Global Balanced (formerly, International Balanced), Mid Cap Growth,
Large Cap Value, Money Market, Mid Cap Value, Small/Mid Cap Growth (formerly,
Diversified Mid Cap Growth), Real Estate Equity, Growth & Income, Managed,
Short-Term Bond, Small Cap Value, International Opportunities, Equity Index,
Global Bond (formerly, Strategic Bond), Turner Core Growth, Brandes
International Equity, Frontier Capital Appreciation, Emerging Markets Equity,
International Opportunities II (formerly, Global Equity), Bond Index, Small/Mid
Cap CORE, High Yield Bond and Clifton Enhanced U.S. Equity Portfolios (formerly,
Enhanced U.S. Equity). 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 underlying portfolio 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 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.
91
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
92
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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 June 30, 2000 are as follows:
<TABLE>
<CAPTION>
PORTFOLIO SHARES OWNED COST VALUE
--------- ------------ ------------ ----------------
<S> <C> <C> <C>
Large Cap Growth. . . . . 6,118,549 $133,197,126 $ 176,581,445
Active Bond . . . . . . . 25,676,557 250,059,856 234,710,166
International Equity Index 1,637,313 28,032,291 30,279,715
Small Cap Growth. . . . . 751,112 12,755,532 15,146,841
Global Balanced . . . . . 99,987 1,063,151 1,009,123
Mid Cap Growth. . . . . . 951,564 21,827,050 26,659,950
Large Cap Value . . . . . 781,363 10,837,990 10,182,562
Money Market. . . . . . . 6,282,855 62,861,460 62,828,554
Mid Cap Value . . . . . . 419,590 5,184,053 5,655,397
Small/Mid Cap Growth. . . 833,429 12,640,806 12,697,945
Real Estate Equity. . . . 1,006,818 13,855,749 12,765,326
Growth & Income . . . . . 53,177,519 786,999,791 1,054,098,419
Managed . . . . . . . . . 26,812,598 359,486,863 412,811,976
Short-Term Bond . . . . . 108,407 1,074,517 1,051,732
Small Cap Value . . . . . 402,638 4,641,679 4,409,122
International
Opportunities. . . . . . 424,604 6,010,304 6,171,237
Equity Index. . . . . . . 1,257,997 20,669,031 25,463,881
Global Bond . . . . . . . 161,599 1,670,350 1,610,930
Turner Core Growth. . . . 18,889 537,085 450,305
Brandes International
Equity . . . . . . . . . 41,067 456,415 655,428
Frontier Capital
Appreciation . . . . . . 37,890 1,499,897 897,620
Emerging Markets Equity . 103,852 296,973 1,185,730
International
Opportunities II. . . 22,760 274,038 273,330
Bond Index. . . . . . . . 80,112 768,927 749,101
Small/Mid Cap Core. . . . 18,350 192,035 188,808
High Yield Bond . . . . . 35,025 300,508 295,903
Clifton Enhanced US Equity
Fund . . . . . . . . . . 912 14,986 18,155
</TABLE>
93
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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 2000,
were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
--------- ----------- -------------
<S> <C> <C>
Large Cap Growth. . . . . . . . . . . $14,526,753 $ 4,071,523
Active Bond . . . . . . . . . . . . . 12,595,440 13,172,460
International Equity Index. . . . . . 8,546,295 5,508,370
Small Cap Growth. . . . . . . . . . . 6,763,851 2,965,434
Global Balanced . . . . . . . . . . . 170,170 275,036
Mid Cap Growth. . . . . . . . . . . . 9,665,686 2,215,013
Large Cap Value . . . . . . . . . . . 1,684,020 715,601
Money Market. . . . . . . . . . . . . 20,068,019 19,726,545
Mid Cap Value . . . . . . . . . . . . 831,482 701,828
Small/Mid Cap Growth. . . . . . . . . 1,420,670 2,130,402
Real Estate Equity. . . . . . . . . . 3,756,641 3,664,903
Growth & Income . . . . . . . . . . . 10,140,753 35,665,986
Managed . . . . . . . . . . . . . . . 9,078,644 16,420,432
Short-Term Bond . . . . . . . . . . . 223,617 294,148
Small Cap Value . . . . . . . . . . . 918,362 627,855
International Opportunities . . . . . 4,740,829 3,649,827
Equity Index. . . . . . . . . . . . . 4,320,990 800,013
Global Bond . . . . . . . . . . . . . 324,904 610,861
Turner Core Growth. . . . . . . . . . 0 0
Brandes International Equity. . . . . 0 0
Frontier Capital Appreciation . . . . 3,318,819 2,440,517
Emerging Markets Equity . . . . . . . 0 0
International Opportunities II. . . . 322,785 161,007
Bond Index. . . . . . . . . . . . . . 392,051 31,702
Small/Mid Cap Core. . . . . . . . . . 408,308 323,488
High Yield Bond . . . . . . . . . . . 1,251,885 1,033,876
Clifton Enhanced US Equity Fund . . . 0 0
</TABLE>
94
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
5. NET ASSETS
Accumulation shares attributable to net assets of contractowners and
accumulation share values for each Portfolio at June 30, 2000 were as follows:
<TABLE>
<CAPTION>
ACCUMULATION SHARE
PORTFOLIO SHARES VALUES
--------- ------------ --------
<S> <C> <C>
Large Cap Growth . . . . . . . . . . . . . 559,086 83.98
Active Bond. . . . . . . . . . . . . . . . 690,050 24.41
International Equity Index . . . . . . . . 487,610 26.08
Small Cap Growth . . . . . . . . . . . . . 663,124 22.82
Global Balanced. . . . . . . . . . . . . . 79,825 12.67
Mid Cap Growth . . . . . . . . . . . . . . 783,262 34.02
Large Cap Value. . . . . . . . . . . . . . 646,321 15.74
Money Market . . . . . . . . . . . . . . . 644,839 18.58
Mid Cap Value. . . . . . . . . . . . . . . 381,056 14.82
Small/Mid Cap Growth . . . . . . . . . . . 592,151 21.43
Real Estate Equity . . . . . . . . . . . . 203,675 25.09
Growth & Income. . . . . . . . . . . . . . 1,238,691 67.63
Managed. . . . . . . . . . . . . . . . . . 1,030,002 40.02
Short-Term Bond. . . . . . . . . . . . . . 79,247 13.34
Small Cap Value. . . . . . . . . . . . . . 354,503 12.43
International Opportunities. . . . . . . . 389,613 15.85
Equity Index . . . . . . . . . . . . . . . 1,112,540 22.90
Global Bond. . . . . . . . . . . . . . . . 129,203 12.51
Turner Core Growth . . . . . . . . . . . . 16,303 27.61
Brandes International Equity . . . . . . . 36,840 17.80
Frontier Capital Appreciation. . . . . . . 36,994 24.26
Emerging Markets Equity. . . . . . . . . . 99,862 11.88
International Opportunities II . . . . . . 22,407 12.21
Bond Index . . . . . . . . . . . . . . . . 69,381 10.72
Small/Mid Cap CORE . . . . . . . . . . . . 16,782 11.27
High Yield Bond. . . . . . . . . . . . . . 30,156 9.88
Clifton Enhanced US Equity . . . . . . . . 1,411 12.87
</TABLE>
95
<PAGE>
REPORT ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Policyholders of
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 Equity Index, Small Cap Growth,
International Balanced, Mid Cap Growth, Large Cap Value, Money Market, Mid Cap
Value, Small/Mid Cap Growth (formerly, Diversified Mid Cap Growth), Real Estate
Equity, Growth & Income, Managed, Short-Term Bond, Small Cap Value,
International Opportunities, Equity Index, Global Bond (formerly, Strategic
Bond), Turner Core Growth, Brandes International Equity, Frontier Capital
Appreciation, Emerging Markets Equity, Global Equity, Bond Index, Small/Mid Cap
CORE, High Yield Bond and Enhanced U.S. Equity Subaccounts) as of December 31,
1999, and the related statements of operations and changes in net assets for
each of the periods indicated therein. These financial statements are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
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,
1999, the results of their operations and the changes in their net assets for
each of the periods indicated, in conformity with accounting principles
generally accepted in the United States.
ERNST & YOUNG LLP
Boston, Massachusetts
February 11, 2000
96
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTERNATIONAL
LARGE CAP SOVEREIGN EQUITY SMALL CAP
GROWTH BOND INDEX GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . $ 18,374 $ 31,159 $ 3,363 $ 1,196
Investments in shares
of portfolios of
John Hancock
Variable Series Trust
I, at value . . . . 156,931,243 236,200,057 29,055,936 10,825,578
Policy loans and
accrued interest
receivable . . . . . 20,131,090 56,920,743 2,843,104 --
Receivable from:
John Hancock Variable
Series Trust I . . 166,807 45,107 32,276 20,662
M Fund Inc. . . . . -- -- -- --
------------ ------------ ----------- -----------
Total assets . . . . 177,247,514 293,197,066 31,934,679 10,847,436
LIABILITIES
Payable to John
Hancock Variable Life
Insurance Company . 164,174 40,650 31,788 20,488
Asset charges payable 21,008 35,617 3,852 1,370
------------ ------------ ----------- -----------
185,182 76,267 35,640 21,858
------------ ------------ ----------- -----------
Net assets . . . . . $177,062,332 $293,120,799 $31,899,039 $10,825,578
============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL MID CAP LARGE CAP MONEY
BALANCED GROWTH VALUE MARKET
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . . $ 133 $ 2,329 $ 1,091 $ 4,680
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value . . 1,177,232 20,852,255 9,553,293 62,519,986
Policy loans and accrued
interest receivable . -- -- -- 14,118,655
Receivable from:
John Hancock Variable
Series Trust I . . . 970 103,804 6,237 159,443
M Fund Inc. . . . . . -- -- -- --
----------- ----------- ---------- -----------
Total assets . . . . . 1,178,335 20,958,388 9,560,621 76,802,764
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company. . . . . . . . 950 103,466 6,081 158,266
Asset charges payable . 153 2,667 1,247 5,857
----------- ----------- ---------- -----------
1,103 106,133 7,328 164,123
----------- ----------- ---------- -----------
Net assets . . . . . . $ 1,177,232 $20,852,255 $9,553,293 $76,638,641
=========== =========== ========== ===========
</TABLE>
See accompanying notes.
97
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SMALL/MID
MID CAP CAP REAL ESTATE GROWTH &
VALUE GROWTH EQUITY INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ----------- ----------- ----------------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . $ 589 $ 1,386 $ 1,428 $ 132,575
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value. . . . . . . . 5,236,581 12,409,573 11,482,706 1,091,050,404
Policy loans and
accrued interest
receivable . . . . . -- -- 1,895,766 187,689,150
Receivable from:
John Hancock Variable
Series Trust I . . 27,820 34,285 1,966 333,111
M Fund Inc. . . . . -- -- -- --
------------ ----------- ----------- --------------
Total assets . . . . 5,264,990 12,445,244 13,381,866 1,279,205,240
LIABILITIES
Payable to John
Hancock Variable Life
Insurance Company . 27,735 34,083 1,758 314,139
Asset charges payable 675 1,588 1,636 151,547
------------ ----------- ----------- --------------
Total liabilities . . 28,410 35,671 3,394 465,686
------------ ----------- ----------- --------------
Net assets . . . . . $ 5,236,580 $12,409,573 $13,378,472 $1,278,739,554
============ =========== =========== ==============
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM SMALL CAP INTERNATIONAL
MANAGED BOND VALUE OPPORTUNITIES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . . $ 52,222 $ 129 $ 460 $ 593
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value . . 422,672,470 1,129,483 4,111,416 5,310,586
Policy loans and accrued
interest receivable . 77,400,280 -- -- --
Receivable from:
John Hancock Variable
Series Trust I . . . 123,268 218 2,954 5,072
M Fund Inc. . . . . . -- -- -- --
------------ ---------- ---------- ----------
Total assets . . . . . 500,248,240 1,129,830 4,114,830 5,316,251
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company. . . . . . . . 115,790 199 2,887 4,985
Asset charges payable . 59,700 148 527 680
------------ ---------- ---------- ----------
Total liabilities . . . 175,490 347 3,414 5,665
------------ ---------- ---------- ----------
Net assets . . . . . . $500,072,750 $1,129,483 $4,111,416 $5,310,586
============ ========== ========== ==========
</TABLE>
See accompanying notes.
98
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
TURNER BRANDES
EQUITY GLOBAL CORE INTERNATIONAL
INDEX BOND GROWTH EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . . . $ 2,517 $ 216 $ 60 $ 65
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value . . . 22,117,624 1,882,675 -- --
Investments in shares of
portfolios of M Fund
Inc., at value . . . . -- -- 536,192 588,128
Policy loans and accrued
interest receivable . . -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I . . . . 19,259 31 -- --
M Fund Inc. . . . . . . -- -- 9 10
----------- ---------- -------- --------
Total assets . . . . . . 22,139,400 1,882,922 536,261 588,203
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company . . . . . . . . 18,897 -- -- --
Asset charges payable . 2,879 247 69 75
----------- ---------- -------- --------
Total liabilities . . . 21,776 247 69 75
----------- ---------- -------- --------
Net assets . . . . . . . $22,117,624 $1,882,675 $536,192 $588,128
=========== ========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
FRONTIER EMERGING
CAPITAL MARKETS GLOBAL
APPRECIATION EQUITY EQUITY BOND INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . . . . $ 80 $ 43 $ 12 $ 45
Investments in shares of
portfolios of John Hancock
Variable Series Trust I,
at value . . . . . . . . -- 395,733 112,572 387,762
Investments in shares of
portfolios of M Fund Inc.,
at value . . . . . . . . 728,674 -- -- --
Policy loans and accrued
interest receivable . . . -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I . . . . . -- 2,536 2 1,123
M Fund Inc. . . . . . . . 12 -- -- --
-------- -------- -------- --------
Total assets . . . . . . . 728,766 398,312 112,586 388,930
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company . . . . . . . . . -- 2,529 -- 1,116
Asset charges payable . . 92 49 14 51
-------- -------- -------- --------
Total liabilities . . . . 92 2,578 14 1,167
-------- -------- -------- --------
Net assets . . . . . . . . $728,674 $395,734 $112,572 $387,763
======== ======== ======== ========
</TABLE>
See accompanying notes.
99
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SMALL/MID HIGH YIELD ENHANCED
CAP CORE BOND U.S. EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- -------------
<S> <C> <C> <C>
ASSETS
Cash . . . . . . . . . . . . . . . . . $ 9 $ -- $ 1
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value . . . . . . . . . . . . . . . 99,481 90,611 --
Investments in shares of portfolios of M
Fund Inc., at value . . . . . . . . . -- -- 14,140
Policy loans and accrued interest
receivable . . . . . . . . . . . . . . -- -- --
Receivable from:
John Hancock Variable Series Trust I . 16,714 1,478 --
M Fund Inc. . . . . . . . . . . . . . -- -- --
-------- ------- -------
Total assets . . . . . . . . . . . . . 116,204 92,089 14,141
LIABILITIES
Payable to John Hancock Variable Life
Insurance Company . . . . . . . . . . 16,712 1,477 --
Asset charges payable . . . . . . . . . 11 11 2
-------- ------- -------
Total liabilities . . . . . . . . . . . 16,723 1,488 2
-------- ------- -------
Net assets . . . . . . . . . . . . . . $ 99,481 $90,601 $14,139
======== ======= =======
</TABLE>
See accompanying notes.
100
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT
SOVEREIGN BOND SUBACCOUNT
-------------------------------------
----------------------------------------
1999 1998 1997
1999 1998 1997
----------- -----------
----------- ------------- ------------ -------------
<S> <C> <C> <C>
<C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I . . . . . . . . . . . . . . . . $24,007,195 $11,641,271 $
7,675,850 $ 17,792,726 $19,685,096 $17,409,990
M Fund Inc. . . . . . . . . . . . . . . . -- --
-- -- -- --
Interest income on policy loans . . . . . 1,211,333 1,008,607
875,892 4,084,783 4,027,376 3,926,698
----------- -----------
----------- ------------ ----------- -----------
Total investment income . . . . . . . . . 25,218,528 12,649,878
8,551,742 21,877,509 23,712,472 21,336,688
Expenses:
Mortality and expense risks . . . . . . . 828,714 624,665
480,057 1,643,861 1,624,615 1,514,127
----------- -----------
----------- ------------ ----------- -----------
Net investment income . . . . . . . . . . 24,389,814 12,025,213
8,071,685 20,233,648 22,087,857 19,822,561
Net realized and unrealized gain (loss) on
investments:
Net realized gain . . . . . . . . . . . . 4,239,424 3,520,199
4,216,904 192,098 1,600,539 1,088,488
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . 1,727,703 18,509,310
7,920,403 (20,304,536) (2,317,324) 2,987,952
----------- -----------
----------- ------------ ----------- -----------
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . 5,967,127 22,029,509
12,137,307 (20,112,438) (716,785) 4,076,440
----------- -----------
----------- ------------ ----------- -----------
Net increase in net assets resulting from
operations. . . . . . . . . . . . . . . . $30,356,941 $34,054,722
$20,208,992 $ 121,210 $21,371,072 $23,899,001
=========== ===========
=========== ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX SUBACCOUNT SMALL CAP
GROWTH SUBACCOUNT
--------------------------------------
-------------------------------
1999 1998 1997 1999
1998 1997
----------- ----------- ------------- ----------
--------- -----------
<S> <C> <C> <C> <C> <C>
<C>
Investment income:
Distributions received
from:
John Hancock Variable
Series
Trust I . . . . . . $ 917,904 $3,394,842 $ 840,616 $1,272,230 $
-- $ 976
M Fund Inc. . . . . -- -- -- --
-- --
Interest income on
policy loans . . . . 179,345 170,285 170,905 --
-- --
---------- ---------- ----------- ----------
-------- --------
Total investment
income . . . . . . . 1,097,249 3,565,127 1,011,521 1,272,230
-- 976
Expenses:
Mortality and expense
risks . . . . . . . 147,126 124,891 107,415 37,386
20,335 11,175
---------- ---------- ----------- ----------
-------- --------
Net investment income
(loss) . . . . . . . 950,123 3,440,236 904,106 1,234,844
(20,335) (10,199)
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain . 168,248 148,419 209,781 491,241
55,393 34,153
Net unrealized
appreciation
(depreciation)
during the period . 5,712,567 105,161 (2,036,425) 2,317,857
518,731 226,085
---------- ---------- ----------- ----------
-------- --------
Net realized and
unrealized gain
(loss) on investments 5,880,815 253,580 (1,826,644) 2,809,098
574,124 260,238
---------- ---------- ----------- ----------
-------- --------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $6,830,938 $3,693,816 $ (922,538) $4,043,942
$553,789 $250,039
========== ========== =========== ==========
======== ========
</TABLE>
See accompanying notes.
101
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INTERNATIONAL BALANCED SUBACCOUNT MID CAP
GROWTH SUBACCOUNT
----------------------------------
----------------------------------
1999 1998 1997 1999
1998 1997
----------- ----------- ---------- ----------
---------- -------------
<S> <C> <C> <C> <C> <C>
<C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . $ 99,184 $ 57,587 $ 30,867 $2,117,559 $
461,919 $ --
M Fund Inc. . . . . -- -- -- --
-- --
Interest income on
policy loans . . . . -- -- -- --
-- --
--------- --------- -------- ----------
---------- ----------
Total investment
income . . . . . . . 99,184 57,587 30,867 2,117,559
461,919 --
Expenses:
Mortality and expense
risks . . . . . . . 6,368 4,696 2,758 58,898
16,758 5,801
--------- --------- -------- ----------
---------- ----------
Net investment income
(loss) . . . . . . . 92,816 52,891 28,109 2,058,661
445,161 (5,801)
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 4,711 (4,506) 12,000 773,222
73,958 394
Net unrealized
appreciation
(depreciation)
during the period . (38,997) 78,455 (41,999) 6,801,000
647,137 199,441
--------- --------- -------- ----------
---------- ----------
Net realized and
unrealized gain
(loss) on
investments . . . . (34,286) 73,949 (29,999) 7,574,222
721,095 199,835
--------- --------- -------- ----------
---------- ----------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $ 58,530 $ 126,840 $ (1,890) $9,632,883
$1,166,256 $ 194,034
========= ========= ======== ==========
========== ==========
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE SUBACCOUNT MONEY MARKET
SUBACCOUNT
--------------------------------
----------------------------------
1999 1998 1997 1999 1998
1997
---------- ---------- -------- ---------- ----------
------------
<S> <C> <C> <C> <C> <C>
<C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . $ 648,532 $ 433,626 $266,440 $2,943,852 $2,888,490
$2,746,662
M Fund Inc. . . . . -- -- -- -- --
--
Interest income on
policy loans . . . . -- -- -- 985,509 973,241
957,390
--------- --------- -------- ---------- ----------
----------
Total investment
income . . . . . . . 648,532 433,626 266,440 3,929,361 3,861,731
3,704,052
Expenses:
Mortality and expense
risks . . . . . . . 54,610 44,753 25,295 411,487 380,002
361,409
--------- --------- -------- ---------- ----------
----------
Net investment income 593,922 388,873 241,145 3,517,874 3,481,729
3,342,643
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain . 165,556 673,582 217,073 -- --
--
Net unrealized
appreciation
(depreciation)
during the period . (569,216) (479,093) 532,936 -- --
--
--------- --------- -------- ---------- ----------
----------
Net realized and
unrealized gain
(loss) on
investments . . . . (403,660) 194,489 750,009 -- --
--
--------- --------- -------- ---------- ----------
----------
Net increase in net
assets resulting from
operations . . . . . $ 190,262 $ 583,362 $991,154 $3,517,874 $3,481,729
$3,342,643
========= ========= ======== ========== ==========
==========
</TABLE>
See accompanying notes.
102
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MID CAP VALUE SUBACCOUNT
SMALL/MID CAP GROWTH SUBACCOUNT
---------------------------------------
-----------------------------------------
1999 1998
1997 1999 1998 1997
----------- --------------
----------- ------------- ------------ ---------------
<S> <C> <C> <C>
<C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I . . . . . . . . . . . . . . . . $ 31,306 $ 40,338 $
178,590 $ 1,903,687 $ 217,686 $ 1,022,881
M Fund Inc. . . . . . . . . . . . . . . . -- --
-- -- -- --
Interest income on policy loans . . . . . -- --
-- -- -- --
---------- -------------
---------- ------------ ------------ ------------
Total investment income . . . . . . . . . 31,306 40,338
178,590 1,903,687 217,686 1,022,881
Expenses:
Mortality and expense risks . . . . . . . 29,798 23,760
6,329 69,847 63,334 54,469
---------- -------------
---------- ------------ ------------ ------------
Net investment income . . . . . . . . . . 1,508 16,578
172,261 1,833,840 154,352 968,412
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) . . . . . . . . (241,740) (422,902)
121,152 (13,020) 56,968 533,297
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . 469,537 (260,362)
(86,033) (1,274,161) 334,213 (1,073,252)
---------- -------------
---------- ------------ ------------ ------------
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . 227,797 (683,264)
35,119 (1,287,181) 391,181 (539,955)
---------- -------------
---------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . $ 229,305 $ (666,686) $
207,380 $ 546,659 $ 545,533 $ 428,457
========== =============
========== ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY SUBACCOUNT
GROWTH & INCOME SUBACCOUNT
--------------------------------------
----------------------------------------
1999 1998 1997
1999 1998 1997
------------ ------------
---------- ------------ ------------ --------------
<S> <C> <C> <C>
<C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I . . . . . . . . . . . . . . . . $ 771,050 $ 817,633 $
957,079 $124,750,392 $ 96,326,313 $ 99,799,718
M Fund Inc. . . . . . . . . . . . . . . . -- --
-- -- -- --
Interest income on policy loans . . . . . 131,461 145,212
140,517 12,877,539 11,727,553 10,448,315
----------- -----------
---------- ------------ ------------ ------------
Total investment income . . . . . . . . . 902,511 962,845
1,097,596 137,627,931 108,053,866 110,248,033
Expenses:
Mortality and expense risks . . . . . . . 78,893 86,610
76,454 6,531,512 5,589,689 4,658,703
----------- -----------
---------- ------------ ------------ ------------
Net investment income . . . . . . . . . . 823,618 876,235
1,021,142 131,096,419 102,464,177 105,589,330
Net realized and unrealized gain (loss) on
investments:
Net realized gain . . . . . . . . . . . . 123,591 442,876
551,925 22,802,197 22,835,488 16,543,458
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . (1,106,755) (3,720,942)
447,661 7,687,109 112,457,395 67,250,127
----------- -----------
---------- ------------ ------------ ------------
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . (983,164) (3,278,066)
999,586 30,489,306 135,292,883 83,793,585
----------- -----------
---------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . $ (159,546) $(2,401,831)
$2,020,728 $161,585,725 $237,757,060 $189,382,915
=========== ===========
========== ============ ============ ============
</TABLE>
See accompanying notes.
103
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MANAGED SUBACCOUNT SHORT-TERM
BOND SUBACCOUNT
--------------------------------------
---------------------------------
1999 1998 1997 1999
1998 1997
------------ ----------- ----------- -----------
--------- -----------
<S> <C> <C> <C> <C> <C>
<C>
Investment income:
Distributions received
from:
John Hancock Variable
Series
Trust I . . . . . . $39,951,885 $37,907,821 $32,757,460 $ 53,689 $
31,261 $ 22,079
M Fund Inc. . . . . -- -- -- --
-- --
Interest income on
policy loans . . . . 5,217,121 4,949,021 4,669,363 --
-- --
----------- ----------- ----------- ----------
-------- ---------
Total investment
income . . . . . . . 45,169,006 42,856,842 37,426,823 53,689
31,261 22,079
Expenses:
Mortality and expense
risks . . . . . . . 2,636,085 2,381,406 2,111,314 5,065
3,052 2,202
----------- ----------- ----------- ----------
-------- ---------
Net investment income 42,532,921 40,475,436 35,315,509 48,624
28,209 19,877
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 5,060,826 5,853,076 5,663,060 (3,107)
2,008 235
Net unrealized
appreciation
(depreciation)
during the period . (9,288,287) 24,834,482 16,843,903 (23,648)
(5,287) 1,405
----------- ----------- ----------- ----------
-------- ---------
Net realized and
unrealized gain
(loss) on investments (4,227,461) 30,687,558 22,506,963 (26,755)
(3,279) 1,640
----------- ----------- ----------- ----------
-------- ---------
Net increase in net
assets resulting from
operations . . . . . $38,305,460 $71,162,994 $57,822,472 $ 21,869 $
24,930 $ 21,517
=========== =========== =========== ==========
======== =========
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE SUBACCOUNT INTERNATIONAL
OPPORTUNITIES SUBACCOUNT
--------------------------------
---------------------------------------
1999 1998 1997 1999
1998 1997
---------- ---------- --------- -------------
----------- ---------------
<S> <C> <C> <C> <C> <C>
<C>
Investment income:
Distributions received
from:
John Hancock Variable
Series
Trust I . . . . . . $ 97,290 $ 24,781 $256,363 $ 354,646 $
27,799 $ 35,111
M Fund Inc. . . . . -- -- -- --
-- --
Interest income on
policy loans . . . . -- -- -- --
-- --
--------- --------- -------- ----------
-------- ---------
Total investment
income . . . . . . . 97,290 24,781 256,363 354,646
27,799 35,111
Expenses:
Mortality and expense
risks . . . . . . . 24,661 23,711 10,530 24,257
19,481 11,575
--------- --------- -------- ----------
-------- ---------
Net investment income 72,629 1,070 245,833 330,389
8,318 23,536
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . (217,582) 61,917 129,604 123,861
64,757 78,058
Net unrealized
appreciation
(depreciation)
during the period . (40,472) (364,339) (32,439) 839,140
339,709 (141,034)
--------- --------- -------- ----------
-------- ---------
Net realized and
unrealized gain
(loss) on investments (258,054) (302,422) 97,165 963,001
404,466 (62,976)
--------- --------- -------- ----------
-------- ---------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $(185,425) $(301,352) $342,998 $1,293,390
$412,784 $ (39,440)
========= ========= ======== ==========
======== =========
</TABLE>
See accompanying notes.
104
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EQUITY INDEX SUBACCOUNT GLOBAL BOND
SUBACCOUNT
----------------------------------
----------------------------
1999 1998 1997 1999 1998
1997
---------- ---------- ---------- ---------- -------
----------
<S> <C> <C> <C> <C> <C>
<C>
Investment income:
Distributions received
from:
John Hancock Variable
Series
Trust I . . . . . . $ 921,698 $ 367,284 $ 220,686 $ 91,316 $62,244
$84,597
M Fund Inc. . . . . -- -- -- -- --
--
Interest income on
policy loans . . . . -- -- -- -- --
--
---------- ---------- ---------- --------- -------
-------
Total investment
income . . . . . . . 921,698 367,284 220,686 91,316 62,244
84,597
Expenses:
Mortality and expense
risks . . . . . . . 103,983 60,274 28,637 9,736 7,516
5,827
---------- ---------- ---------- --------- -------
-------
Net investment income 817,715 307,010 192,049 81,580 54,728
78,770
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 471,802 132,619 38,987 (1,996) 32,917
5,891
Net unrealized
appreciation
(depreciation)
during the period . 2,019,913 2,082,107 1,193,531 (126,001) 11,342
(3,195)
---------- ---------- ---------- --------- -------
-------
Net realized and
unrealized gain
(loss) on investments 2,491,715 2,214,726 1,232,518 (127,997) 44,259
2,696
---------- ---------- ---------- --------- -------
-------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $3,309,430 $2,521,736 $1,424,567 $ (46,417) $98,987
$81,466
========== ========== ========== ========= =======
=======
</TABLE>
<TABLE>
<CAPTION>
TURNER CORE GROWTH SUBACCOUNT BRANDES INTERNATIONAL
EQUITY SUBACCOUNT
------------------------------
----------------------------------------
1999 1998 1997 1999
1998 1997
---------- --------- --------- -------------
------------ -------------
<S> <C> <C> <C> <C> <C>
<C>
Investment income:
Distributions received
from:
John Hancock Variable
Series
Trust I . . . . . . $ -- $ -- $ -- $ -- $
-- $ --
M Fund Inc. . . . . 38,038 5,535 11,090 18,453
13,237 2,278
Interest income on
policy loans . . . . -- -- -- --
-- --
-------- ------- ------- --------
------- ------
Total investment
income . . . . . . . 38,038 5,535 11,090 18,453
13,237 2,278
Expenses:
Mortality and expense
risks . . . . . . . 2,102 1,022 505 1,904
1,143 746
-------- ------- ------- --------
------- ------
Net investment income 35,936 4,513 10,585 16,549
12,094 1,532
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain . 44,245 14,364 3,166 7,704
1,184 133
Net unrealized
appreciation during
the period . . . . 37,727 49,605 12,370 119,400
15,813 2,674
-------- ------- ------- --------
------- ------
Net realized and
unrealized gain on
investments . . . . 81,972 63,969 15,536 127,104
16,997 2,807
-------- ------- ------- --------
------- ------
Net increase in net
assets resulting from
operations . . . . . $117,908 $68,482 $26,121 $143,653
$29,091 $4,339
======== ======= ======= ========
======= ======
</TABLE>
See accompanying notes.
105
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
FRONTIER CAPITAL APPRECIATION
EMERGING MARKETS EQUITY GLOBAL
SUBACCOUNT
SUBACCOUNT EQUITY SUBACCOUNT
------------------------------
------------------------ ------------------
1999 1998 1997
1999 1998* 1999 1998*
--------- ----------
-------- ------------- ---------- -------- ----------
<S> <C> <C> <C>
<C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . . . . $ -- $ $ --
$ 13,510 $ 1 $ 508 $ 1
M Fund Inc. . . . . . . . . . . . . . . . . . 20,787 1,888 8,986
-- -- -- --
Interest income on policy loans . . . . . . . . -- -- --
-- -- -- --
-------- -------- -------
-------- ----- ------- -------
Total investment income . . . . . . . . . . . . 20,787 1,888 8,986
13,510 1 508 1
Expenses:
Mortality and expense risks . . . . . . . . . 3,019 2,096 1,464
720 -- 267 --
-------- -------- -------
-------- ----- ------- -------
Net investment income (loss) . . . . . . . . . 17,768 (208) 7,522
12,790 1 241 1
Net realized and unrealized gain on investments:
Net realized gain . . . . . . . . . . . . . . 22,678 12,123 9,048
5,339 -- 602 1
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . 164,599 (17,930) 40,541
86,570 10 13,424 45
-------- -------- -------
-------- ----- ------- -------
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . . . 187,277 (5,807) 49,589
91,909 10 14,026 46
-------- -------- -------
-------- ----- ------- -------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . $205,045 $ (6,015) $57,111
$104,699 $ 11 $14,267 $ 47
======== ======== =======
======== ===== ======= =======
</TABLE>
<TABLE>
<CAPTION>
SMALL/MID
ENHANCED
CAP CORE HIGH YIELD
U.S. EQUITY
BOND INDEX SUBACCOUNT SUBACCOUNT BOND
SUBACCOUNT SUBACCOUNT
---------------------- -------------
---------------- --------------
1999 1998* 1999 1998* 1999
1998* 1999**
------------ --------- ------ ------- --------
------ --------------
<S> <C> <C> <C> <C> <C> <C>
<C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . $ 17,417 $ 149 $6,810 $-- $2,748 $ 19
$ --
M Fund Inc. . . . . -- -- -- -- -- --
1,117
Interest income on
policy loans . . . . -- -- -- -- -- --
--
-------- ----- ------ -- ------ ----
------
Total investment
income . . . . . . . 17,417 149 6,810 2,748 19
1,117
Expenses:
Mortality and expense
risks . . . . . . . 1,565 3 178 -- 206 1
4
-------- ----- ------ -- ------ ----
------
Net investment income 15,852 146 6,632 -- 2,542 18
1,113
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . (1,422) (1) 252 -- (186) --
91
Net unrealized
appreciation
(depreciation)
during the period . (22,820) (196) 3,005 6 (511)
(26) (879)
-------- ----- ------ -- ------ ----
------
Net realized and
unrealized gain
(loss) on
investments . . . . (24,242) (197) 3,257 6 (697)
(26) (788)
-------- ----- ------ -- ------ ----
------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $ (8,390) $ (51) $9,889 $6 $1,845 $
(8) $ 325
======== ===== ====== == ====== ====
======
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
** From March 9, 1999 (commencement of operations).
See accompanying notes.
106
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT
SOVEREIGN BOND SUBACCOUNT
------------------------------------------
------------------------------------------
1999 1998 1997
1999 1998 1997
------------- -------------
------------- ------------- ------------- ---------------
<S> <C> <C> <C>
<C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . $ 24,389,814 $ 12,025,213 $
8,071,685 $ 20,233,648 $ 22,087,857 $ 19,822,561
Net realized gains . . . . . . . . . 4,239,424 3,520,199
4,216,904 192,098 1,600,539 1,088,488
Net unrealized appreciation
(depreciation) during the period . 1,727,703 18,509,310
7,920,403 (20,304,536) (2,317,324) 2,987,952
------------ ------------
------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations . . . . . . . . . . 30,356,941 34,054,722
20,208,992 121,210 21,371,072 23,899,001
From policyholder transactions:
Net premiums from policyholders . . 37,307,814 21,681,632
18,819,133 26,114,799 32,901,747 31,136,450
Net benefits to policyholders . . . (25,817,420) (21,510,240)
(19,915,971) (35,577,616) (39,577,750) (39,506,771)
Net increase (decrease) in policy
loans . . . . . . . . . . . . . . . -- 2,561,877
(41,068) -- 1,607,456 1,612,490
------------ ------------
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder
transactions . . . . . . . . . . . . 11,490,394 2,733,269
(1,137,906) (9,462,817) (5,068,547) (6,757,831)
------------ ------------
------------ ------------ ------------ ------------
Net increase (decrease) in net assets 41,847,335 36,787,991
19,071,086 (9,341,607) 16,302,525 17,141,170
Net assets at beginning of
period . . . . . . . . . . . . . . . 135,214,997 98,427,006
79,355,920 302,462,406 286,159,881 269,018,711
------------ ------------
------------ ------------ ------------ ------------
Net assets at end of period . . . . . $177,062,332 $135,214,997 $
98,427,006 $293,120,799 $302,462,406 $286,159,881
============ ============
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX SUBACCOUNT
SMALL CAP GROWTH SUBACCOUNT
---------------------------------------
-------------------------------------
1999 1998 1997
1999 1998 1997
------------ ------------ ------------
------------ ----------- -------------
<S> <C> <C> <C>
<C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . $ 950,123 $ 3,440,236 $ 904,106
$ 1,234,844 $ (20,335) $ (10,199)
Net realized gains . . . . . . . . . 168,248 148,419 209,781
491,241 55,393 34,153
Net unrealized appreciation
(depreciation) during the period . 5,712,567 105,161 (2,036,425)
2,317,857 518,731 226,085
----------- ----------- -----------
----------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations . . . . . 6,830,938 3,693,816 (922,538)
4,043,942 553,789 250,039
From policyholder transactions:
Net premiums from policyholders . . 7,373,967 6,549,988 6,398,146
4,316,218 2,382,203 1,906,439
Net benefits to policyholders . . . (6,834,914) (5,210,982) (4,052,306)
(2,206,402) (998,381) (626,114)
Net increase in policy loans . . . . -- 86,200 41,466
-- -- --
----------- ----------- -----------
----------- ---------- ----------
Net increase in net assets resulting
from policyholder transactions . . . 539,053 1,425,206 2,387,306
2,109,816 1,383,822 1,280,325
----------- ----------- -----------
----------- ---------- ----------
Net increase in net assets . . . . . 7,369,991 5,119,022 1,464,768
6,153,758 1,937,611 1,530,364
Net assets at beginning of
period . . . . . . . . . . . . . . . 24,529,048 19,410,026 17,945,258
4,671,820 2,734,209 1,203,845
----------- ----------- -----------
----------- ---------- ----------
Net assets at end of period . . . . . $31,899,039 $24,529,048 $19,410,026
$10,825,578 $4,671,820 $2,734,209
=========== =========== ===========
=========== ========== ==========
</TABLE>
See accompanying notes.
107
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INTERNATIONAL BALANCED SUBACCOUNT
MID CAP GROWTH SUBACCOUNT
---------------------------------------
------------------------------------------
1999 1998 1997
1999 1998 1997
------------ ------------
------------ ------------- ------------- ---------------
<S> <C> <C> <C>
<C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . . . $ 92,816 $ 52,891 $
28,109 $ 2,058,661 $ 445,161 $ (5,801)
Net realized gains (losses) . . . . . . 4,711 (4,506)
12,000 773,222 73,958 394
Net unrealized appreciation
(depreciation) during the period . . . (38,997) 78,455
(41,999) 6,801,000 647,137 199,441
----------- -----------
----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations . . . . . . . 58,530 126,840
(1,890) 9,632,883 1,166,256 194,034
From policyholder transactions:
Net premiums from policyholders . . . . 377,958 341,482
602,033 8,941,124 3,164,065 1,031,218
Net benefits to policyholders . . . . . (131,331) (310,766)
(102,953) (2,937,257) (612,975) (294,344)
Net increase in policy loans . . . . . . -- --
-- -- -- --
----------- -----------
----------- ------------ ------------ ------------
Net increase in net assets resulting from
policyholder transactions . . . . . . . 246,627 30,716
499,080 6,003,867 2,551,090 736,874
----------- -----------
----------- ------------ ------------ ------------
Net increase in net assets . . . . . . . 305,157 157,556
497,190 15,636,750 3,717,346 930,908
Net assets at beginning of period . . . . 872,075 714,519
217,329 5,215,505 1,498,159 567,251
----------- -----------
----------- ------------ ------------ ------------
Net assets at end of period . . . . . . . $ 1,177,232 $ 872,075 $
714,519 $ 20,852,255 $ 5,215,505 $ 1,498,159
=========== ===========
=========== ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE SUBACCOUNT
MONEY MARKET SUBACCOUNT
---------------------------------------
------------------------------------------
1999 1998 1997
1999 1998 1997
------------ ------------
------------ ------------- ------------- ---------------
<S> <C> <C> <C>
<C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . $ 593,922 $ 388,873 $
241,145 $ 3,517,874 $ 3,481,729 $ 3,342,641
Net realized gains . . . . . . . . . . . 165,556 673,582
217,073 -- -- --
Net unrealized appreciation
(depreciation) during the period . . . (569,216) (479,093)
532,936 -- -- --
----------- -----------
----------- ------------ ------------ ------------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . 190,262 583,362
991,154 3,517,874 3,481,729 3,342,641
From policyholder transactions:
Net premiums from policyholders . . . . 3,166,658 4,214,076
3,739,319 33,694,123 24,612,731 19,023,054
Net benefits to policyholders . . . . . (1,903,017) (3,212,048)
(1,140,574) (30,672,090) (24,024,723) (20,817,572)
Net increase in policy loans . . . . . . -- --
-- -- 421,166 390,775
----------- -----------
----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder
transactions . . . . . . . . . . . . . . 1,263,641 1,002,028
2,598,745 3,022,033 1,009,174 (1,403,743)
----------- -----------
----------- ------------ ------------ ------------
Net increase in net assets . . . . . . . 1,453,903 1,585,390
3,589,899 6,539,907 4,490,903 1,938,898
Net assets at beginning of period . . . . 8,099,390 6,514,000
2,924,101 70,098,734 65,607,831 63,668,933
----------- -----------
----------- ------------ ------------ ------------
Net assets at end of period . . . . . . . $ 9,553,293 $ 8,099,390 $
6,514,000 $ 76,638,641 $ 70,098,734 $ 65,607,831
=========== ===========
=========== ============ ============ ============
</TABLE>
See accompanying notes.
108
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MID CAP VALUE SUBACCOUNT
SMALL/MID CAP GROWTH SUBACCOUNT
---------------------------------------
---------------------------------------------
1999 1998 1997
1999 1998 1997
------------ ------------
------------ -------------- -------------- ----------------
<S> <C> <C> <C>
<C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . $ 1,508 $ 16,578 $ 172,261
$ 1,833,840 $ 154,352 $ 968,412
Net realized gains (losses) . . . . . (241,740) (422,902) 121,152
(13,020) 56,968 533,297
Net unrealized appreciation
(depreciation) during the period . . 469,537 (260,362)
(86,033) (1,274,161) 334,213 (1,073,252)
----------- ----------- -----------
------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations . . . . . . 229,305 (666,686) 207,380
546,659 545,533 428,457
From policyholder transactions:
Net premiums from policyholders . . . 1,886,594 5,997,691 2,070,644
3,493,643 3,953,326 6,338,416
Net benefits to policyholders . . . . (1,745,112) (2,912,034)
(190,430) (3,105,108) (3,311,846) (3,379,629)
Net increase in policy loans . . . . -- -- --
-- -- --
----------- ----------- -----------
------------- ------------- -------------
Net increase in net assets resulting
from policyholder transactions . . . 141,482 3,085,657 1,880,214
388,535 641,480 2,958,787
----------- ----------- -----------
------------- ------------- -------------
Net increase in net assets . . . . . . 370,787 2,418,971 2,087,594
935,194 1,187,013 3,387,244
Net assets at beginning of period . . 4,865,793 2,446,822 359,228
11,474,379 10,287,366 6,900,122
----------- ----------- -----------
------------- ------------- -------------
Net assets at end of period . . . . . $ 5,236,580 $ 4,865,793 $ 2,446,822
$ 12,409,573 $ 11,474,379 $ 10,287,366
=========== =========== ===========
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY SUBACCOUNT
GROWTH & INCOME SUBACCOUNT
---------------------------------------
-----------------------------------------------
1999 1998 1997
1999 1998 1997
------------ ------------ ------------
--------------- --------------- ----------------
<S> <C> <C> <C>
<C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income . . . . . . . $ 823,618 $ 876,235 $ 1,021,142
$ 131,096,419 $ 102,464,177 $ 105,589,330
Net realized gains . . . . . . . . 123,591 442,876 551,925
22,802,197 22,835,488 16,543,458
Net unrealized appreciation
(depreciation) during the period . (1,106,755) (3,720,942) 447,661
7,687,109 112,457,395 67,250,127
----------- ----------- -----------
-------------- -------------- -------------
Net increase (decrease) in net assets
resulting from operations . . . . . (159,546) (2,401,831) 2,020,728
161,585,725 237,757,060 189,382,915
From policyholder transactions:
Net premiums from policyholders . . 2,304,591 6,295,255 7,786,904
101,973,160 92,955,980 86,308,294
Net benefits to policyholders . . . (3,311,591) (5,507,305) (5,481,110)
(133,701,210) (134,661,151) (115,839,460)
Net increase (decrease) in policy
loans. . . . . . . . . . . . . . . -- (83,216) 265,517
-- 18,165,114 18,568,293
----------- ----------- -----------
-------------- -------------- -------------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . . . . . . . . . . (1,007,000) 704,734 2,571,311
(31,728,050) (23,540,057) (10,962,873)
----------- ----------- -----------
-------------- -------------- -------------
Net increase (decrease) in net assets (1,166,546) (1,697,097) 4,592,039
129,857,675 214,217,003 178,420,042
Net assets at beginning of period . 14,545,018 16,242,115 11,650,076
1,148,881,879 934,664,876 756,244,834
----------- ----------- -----------
-------------- -------------- -------------
Net assets at end of period . . . . $13,378,472 $14,545,018 $16,242,115
$1,278,739,554 $1,148,881,879 $ 934,664,876
=========== =========== ===========
============== ============== =============
</TABLE>
See accompanying notes.
109
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MANAGED SUBACCOUNT
SHORT-TERM BOND SUBACCOUNT
------------------------------------------
-------------------------------------
1999 1998 1997
1999 1998 1997
------------- -------------
------------- ------------ ------------ ------------
<S> <C> <C> <C>
<C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . $ 42,532,921 $ 40,475,436 $
35,315,509 $ 48,624 $ 28,209 $ 19,877
Net realized gains (losses) . . . . . 5,060,826 5,853,076
5,663,060 (3,107) 2,008 235
Net unrealized appreciation
(depreciation) during the period . . (9,288,287) 24,834,482
16,843,903 (23,648) (5,287) 1,405
------------ ------------
------------ ----------- ----------- ---------
Net increase (decrease) in net assets
resulting from operations . . . . . . 38,305,460 71,162,994
57,822,472 21,869 24,930 21,517
From policyholder transactions:
Net premiums from policyholders . . . 44,546,082 40,631,684
40,318,523 690,849 435,150 278,114
Net benefits to policyholders . . . . (55,332,758) (55,447,667)
(54,498,285) (178,124) (274,762) (218,771)
Net increase in policy loans . . . . -- 5,379,590
4,761,829 -- -- --
------------ ------------
------------ ----------- ----------- ---------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . . . . . . . . . . . (10,786,676) (9,436,393)
(9,417,933) 512,725 160,388 59,343
------------ ------------
------------ ----------- ----------- ---------
Net increase in net assets . . . . . . 27,518,784 61,726,601
48,404,539 534,594 185,318 80,860
Net assets at beginning of period . . 472,553,966 410,827,365
362,422,826 594,889 409,571 328,711
------------ ------------
------------ ----------- ----------- ---------
Net assets at end of period . . . . . $500,072,750 $472,553,966
$410,827,365 $ 1,129,483 $ 594,889 $ 409,571
------------ ------------
------------ ----------- ----------- ---------
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE SUBACCOUNT
INTERNATIONAL OPPORTUNITIES SUBACCOUNT
--------------------------------------
---------------------------------------
1999 1998 1997
1999 1998 1997
------------ ------------ -----------
------------ ------------ -------------
<S> <C> <C> <C>
<C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . $ 72,629 $ 1,070 $ 245,833
$ 330,389 $ 8,318 $ 23,536
Net realized gains (losses) . . . . . (217,582) 61,917 129,604
123,861 64,757 78,058
Net unrealized appreciation
(depreciation) during the period . . (40,472) (364,359) (32,439)
839,140 339,709 (141,034)
----------- ----------- ----------
----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations . . . . . . (185,425) (301,372) 342,998
1,293,390 412,784 (39,440)
From policyholder transactions:
Net premiums from policyholders . . . 1,446,109 2,644,808 2,466,836
1,632,955 2,203,753 1,969,364
Net benefits to policyholders . . . . (1,547,128) (1,288,464) (358,679)
(1,315,539) (1,443,700) (709,490)
Net increase in policy loans . . . . -- -- --
-- -- --
----------- ----------- ----------
----------- ----------- ----------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . . . . . . . . . . . (101,019) 1,356,344 2,108,157
317,416 760,053 1,259,874
----------- ----------- ----------
----------- ----------- ----------
Net increase (decrease) in net assets (286,444) 1,054,972 2,451,155
1,610,806 1,172,837 1,220,434
Net assets at beginning of period . . 4,397,860 3,342,888 891,733
3,699,780 2,526,943 1,306,509
----------- ----------- ----------
----------- ----------- ----------
Net assets at end of period . . . . . $ 4,111,416 $ 4,397,860 $3,342,888
$ 5,310,586 $ 3,699,780 $2,526,943
=========== =========== ==========
=========== =========== ==========
</TABLE>
See accompanying notes.
110
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EQUITY INDEX SUBACCOUNT
GLOBAL BOND SUBACCOUNT
--------------------------------------
-------------------------------------
1999 1998
1997 1999 1998 1997
------------ ------------
----------- ----------- ------------ -------------
<S> <C> <C>
<C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . . . . $ 817,715 $ 307,010 $
192,049 $ 81,580 $ 54,728 $ 78,770
Net realized gains (losses) . . . . . . . . . 471,802 132,619
38,987 (1,996) 32,917 5,891
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . 2,019,913 2,082,107
1,193,531 (126,001) 11,342 (3,195)
----------- -----------
---------- ---------- ----------- ----------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . 3,309,430 2,521,736
1,424,567 (46,417) 98,987 81,466
From policyholder transactions:
Net premiums from policyholders . . . . . . . 7,762,529 4,632,113
6,068,371 1,115,699 798,933 807,985
Net benefits to policyholders . . . . . . . . (2,563,485) (1,120,852)
(260,531) (292,075) (1,158,109) (201,240)
Net increase in policy loans . . . . . . . . . -- --
-- -- -- --
----------- -----------
---------- ---------- ----------- ----------
Net increase (decrease) in net assets resulting
from policyholder transactions . . . . . . . . 5,199,044 3,511,261
5,807,840 823,624 (359,176) 606,745
----------- -----------
---------- ---------- ----------- ----------
Net increase (decrease) in net assets . . . . . 8,508,474 6,032,997
7,232,407 777,207 (260,189) 688,211
Net assets at beginning of period . . . . . . . 13,609,150 7,576,153
343,746 1,105,468 1,365,657 677,446
----------- -----------
---------- ---------- ----------- ----------
Net assets at end of period . . . . . . . . . . $22,117,624 $13,609,150
$7,576,153 $1,882,675 $ 1,105,468 $1,365,657
=========== ===========
========== ========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
TURNER CORE GROWTH SUBACCOUNT BRANDES INTERNATIONAL
EQUITY SUBACCOUNT
-------------------------------
----------------------------------------
1999 1998 1997 1999 1998
1997
---------- --------- --------- ------------
------------ --------------
<S> <C> <C> <C> <C> <C>
<C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 35,936 $ 4,513 $ 10,585 $ 16,549 $
12,094 $ 1,532
Net realized gains . 44,245 14,364 3,166 7,704
1,184 133
Net unrealized
appreciation during
the period . . . . 37,727 49,605 12,370 119,400
15,813 2,674
--------- -------- -------- --------
-------- --------
Net increase in net
assets resulting from
operations . . . . . 117,908 68,482 26,121 143,653
29,091 4,339
From policyholder
transactions:
Net premiums from
policyholders . . . 240,351 203,590 91,440 239,618
55,021 146,796
Net benefits to
policyholders . . . (136,661) (77,651) (9,878) (29,520)
(10,341) (34,985)
Net increase in
policy loans . . . -- -- -- --
-- --
--------- -------- -------- --------
-------- --------
Net increase in net
assets resulting from
policyholder
transactions . . . . 103,690 125,939 81,562 210,098
44,680 111,811
--------- -------- -------- --------
-------- --------
Net increase in net
assets . . . . . . . 221,598 194,421 107,683 353,751
73,771 116,150
Net assets at
beginning of period 314,594 120,173 12,490 234,377
160,606 44,456
--------- -------- -------- --------
-------- --------
Net assets at end of
period . . . . . . . $ 536,192 $314,594 $120,173 $588,128
$234,377 $160,606
========= ======== ======== ========
======== ========
</TABLE>
See accompanying notes.
111
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
FRONTIER CAPITAL
EMERGING MARKETS EQUITY GLOBAL
APPRECIATION SUBACCOUNT
SUBACCOUNT EQUITY SUBACCOUNT
-------------------------------
------------------------ ------------------
1999 1998 1997
1999 1998* 1999 1998*
--------- ---------- ---------
------------ ---------- --------- ----------
<S> <C> <C> <C> <C>
<C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . $ 17,768 $ (208) $ 7,522 $
12,790 $ 1 $ 241 $ 1
Net realized gains . . . . . . . . . 22,678 12,123 9,048
5,339 -- 602 1
Net unrealized appreciation
(depreciation) during the
period . . . . . . . . . . . . . . . 164,599 (17,930) 40,541
86,570 10 13,424 45
-------- --------- --------
--------- -------- -------- -------
Net increase (decrease) in net assets
resulting from operations . . . . . . 205,045 (6,015) 57,111
104,699 11 14,267 47
From policyholder transactions:
Net premiums from
policyholders . . . . . . . . . . . 255,268 128,779 327,804
433,406 2,018 108,420 915
Net benefits to policyholders . . . . (89,136) (146,083) (47,276)
(144,400) -- (11,064) (13)
Net increase in policy loans . . . . -- -- --
-- -- -- --
-------- --------- --------
--------- -------- -------- -------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . . . . . . . . . . . 166,132 (17,304) 280,528
289,006 2,018 97,356 902
-------- --------- --------
--------- -------- -------- -------
Net increase (decrease) in net assets 371,177 (23,319) 337,639
393,705 2,029 111,623 949
Net assets at beginning of period . . 357,497 380,816 43,177
2,029 0 949 0
-------- --------- --------
--------- -------- -------- -------
Net assets at end of period . . . . . $728,674 $ 357,497 $380,816 $
395,734 $ 2,029 $112,572 $ 949
======== ========= ========
========= ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
ENHANCED
U.S.
SMALL/MID
HIGH YIELD EQUITY
BOND INDEX SUBACCOUNT CAP CORE
SUBACCOUNT BOND SUBACCOUNT SUBACCOUNT
----------------------
-------------------- ----------------- ---------------
1999 1998* 1999
1998* 1999 1998* 1999**
----------- ---------- ----------
--------- --------- ------- ---------------
<S> <C> <C> <C>
<C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . $ 15,852 $ 146 $ 6,632
$ -- $ 2,542 $ 18 $ 1,113
Net realized gains (losses) . . . . . (1,422) (1) 252
-- (186) -- 91
Net unrealized appreciation
(depreciation) during the
period . . . . . . . . . . . . . . . (22,820) (196) 3,005
6 (511) (26) (879)
-------- ------- -------
---- -------- ------ -------
Net increase (decrease) in net assets
resulting from operations . . . . . . (8,390) (51) 9,889
6 1,845 (8) 325
From policyholder transactions:
Net premiums from
policyholders . . . . . . . . . . . 412,326 10,254 97,385
104 98,955 2,887 13,814
Net benefits to policyholders . . . . (26,307) (69) (7,901)
(2) (13,078) -- --
Net increase in policy loans . . . . -- -- --
-- -- -- --
-------- ------- -------
---- -------- ------ -------
Net increase in net assets resulting
from policyholder transactions . . . 386,019 10,185 89,484
102 85,877 2,887 13,814
-------- ------- -------
---- -------- ------ -------
Net increase in net assets . . . . . . 377,629 10,134 99,373
108 87,722 2,879 14,139
Net assets at beginning of period . . 10,134 0 108
0 2,879 0 0
-------- ------- -------
---- -------- ------ -------
Net assets at end of period . . . . . $387,763 $10,134 $99,481
$108 $ 90,601 $2,879 $14,139
======== ======= =======
==== ======== ====== =======
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
** From March 9, 1999 (commencement of operations).
See accompanying notes.
112
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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-seven 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-seven Portfolios of the Fund and M Fund which are currently available are
the Large Cap Growth, Sovereign Bond, International Equity Index, Small Cap
Growth, International Balanced, Mid Cap Growth, Large Cap Value, Money Market,
Mid Cap Value, Small/Mid Cap Growth (formerly, Diversified Mid Cap Growth), Real
Estate Equity, Growth & Income, Managed, Short-Term Bond, Small Cap Value,
International Opportunities, Equity Index, Global Bond (formerly, Strategic
Bond), Turner Core Growth, Brandes International Equity, Frontier Capital
Appreciation, Emerging Markets Equity, Global Equity, Bond Index, Small/Mid Cap
CORE, High Yield Bond, and Enhanced U.S. Equity 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 underlying portfolio 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 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.
113
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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.
114
<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, 1999 are as follows:
<TABLE>
<CAPTION>
PORTFOLIO SHARES OWNED COST VALUE
--------- ------------ ------------ ----------------
<S> <C> <C> <C>
Large Cap Growth . . . . . . 5,741,593 $120,709,045 $ 156,931,243
Sovereign Bond . . . . . . . 25,890,030 250,666,359 236,200,057
International Equity Index . 1,479,056 24,178,244 29,055,936
Small Cap Growth . . . . . . 566,326 7,786,928 10,825,578
International Balanced . . . 109,967 1,176,141 1,177,232
Mid Cap Growth . . . . . . . 713,403 13,208,576 20,852,255
Large Cap Value . . . . . . . 708,140 9,871,242 9,553,293
Money Market . . . . . . . . 6,251,999 62,519,986 62,519,986
Mid Cap Value . . . . . . . . 409,851 5,090,205 5,236,581
Small/Mid Cap Growth . . . . 884,190 13,682,215 12,409,573
Real Estate Equity . . . . . 1,000,760 13,989,522 11,482,706
Growth & Income . . . . . . . 54,521,668 796,471,840 1,091,050,404
Managed . . . . . . . . . . . 27,360,590 363,175,625 422,672,470
Short-Term Bond . . . . . . . 116,179 1,157,416 1,129,483
Small Cap Value . . . . . . . 376,603 4,498,794 4,111,416
International Opportunities . 350,017 4,215,384 5,310,586
Equity Index . . . . . . . . 1,081,124 16,808,530 22,117,624
Global Bond . . . . . . . . . 191,740 1,993,841 1,882,675
Turner Core Growth . . . . . 23,384 436,035 536,192
Brandes International Equity 37,895 449,896 588,128
Frontier Capital Appreciation 34,502 539,359 728,674
Emerging Markets Equity . . . 32,273 309,153 395,733
Global Equity . . . . . . . . 9,277 99,103 112,572
Bond Index . . . . . . . . . 41,614 410,779 387,762
Small/Mid Cap CORE . . . . . 10,135 96,470 99,481
High Yield Bond . . . . . . . 10,083 91,148 90,611
Enhanced U.S. Equity . . . . 674 15,019 14,140
</TABLE>
115
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS--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 1999,
were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
--------- ------------ -------------
<S> <C> <C>
Large Cap Growth . . . . . . . . . $ 40,147,156 $ 8,250,657
Sovereign Bond . . . . . . . . . . 27,217,744 17,748,511
International Equity Index . . . . 4,421,148 3,377,977
Small Cap Growth . . . . . . . . . 4,824,260 1,479,601
International Balanced . . . . . . 640,162 300,719
Mid Cap Growth . . . . . . . . . . 9,490,182 1,427,655
Large Cap Value . . . . . . . . . . 2,984,422 1,126,859
Money Market . . . . . . . . . . . 21,519,371 15,378,894
Mid Cap Value . . . . . . . . . . . 1,426,492 1,283,502
Small/Mid Cap Growth . . . . . . . 3,998,048 1,775,674
Real Estate Equity . . . . . . . . 1,670,570 1,772,028
Growth & Income . . . . . . . . . . 133,888,047 52,458,290
Managed . . . . . . . . . . . . . . 46,301,140 19,231,354
Short-Term Bond . . . . . . . . . . 682,313 120,964
Small Cap Value . . . . . . . . . . 1,054,005 1,082,396
International Opportunities . . . . 1,758,914 1,111,110
Equity Index . . . . . . . . . . . 7,177,051 1,160,291
Global Bond . . . . . . . . . . . . 1,188,656 283,452
Turner Core Growth . . . . . . . . 279,803 140,177
Brandes International Equity . . . 255,671 29,025
Frontier Capital Appreciation . . . 401,413 217,513
Emerging Markets Equity . . . . . . 454,479 152,683
Global Equity . . . . . . . . . . . 107,485 9,888
Bond Index . . . . . . . . . . . . 429,057 27,186
Small/Mid Cap CORE . . . . . . . . 106,540 10,425
High Yield Bond . . . . . . . . . . 99,666 11,238
Enhanced U.S. Equity . . . . . . . 26,361 11,432
</TABLE>
116
<PAGE>
ALPHABETICAL INDEX OF KEY WORDS AND PHRASES
This index should help you locate more information about many of the important
concepts in this prospectus.
<TABLE>
<CAPTION>
KEY WORD OR PHRASE PAGE KEY WORD OR PHRASE PAGE
<S> <C> <C> <C> <C>
Account . . . . . . . . . . 33 6
account value . . . . . . . 9 41
1
Additional Sum Insured. . . 7 34
1
asset - based charge. . 10 7
1
asset rebalancing . . . . . 5 10
attained age. . . . . . . . 10 5
1
Basic Sum Insured . . . . . 7 15
beneficiary . . . . . . . . 44 11
business day. . . . . . . . 34 21
2
changing Option A or B. . . 1 6
changing the Total Sum
Insured . . . . . . . . . 20 35
charges . . . . . . . . . . 9 35
Code. . . . . . . . . . . . 40 5
cost of insurance rates . . 9 2
2
date of issue . . . . . . . 35 4
death benefit . . . . . . . 5 8
deductions. . . . . . . . . 9 9
1
dollar cost averaging . . . 5 2
expenses of the Trust . . . 11 33
fixed investment option . . 34 2
full surrender. . . . . . . 15 16
fund. . . . . . . . . . . . 2 33
grace period. . . . . . . . 8 5
guaranteed death benefit
feature. . . . . . . . . . 7 15
Guaranteed Death Benefit
Premium. . . . . . . . . . 7 9
insurance charge. . . . . . 9 40
2
insured person. . . . . . . 5 4
1
investment options. . . . . 1 7
JHVLICO . . . . . . . . . . 33 14
lapse . . . . . . . . . . . 7 2
1
loan. . . . . . . . . . . . 6 1
loan interest . . . . . . . 16 33
Maximum Monthly Benefit. 19 15
maximum premiums. . . . . . 6 11
Minimum Initial Premium . . 34 5
minimum insurance amount. . 17
</TABLE>
117
<PAGE>
PROSPECTUS DATED NOVEMBER 1, 2000
MEDALLION VARIABLE UNIVERSAL LIFE II
a flexible premium variable life insurance policy
issued by
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY ("JHVLICO")
The policy provides an investment option with fixed rates of return
declared by JHVLICO and the following variable investment options:
<TABLE>
<CAPTION>
VARIABLE INVESTMENT OPTION MANAGED BY
-------------------------- ----------
------------------------------------------------------------------------------------------------------------------
<S> <C>
Managed. . . . . . . . . . . . . . . . . . . . . . . . . . Independence Investment Associates, Inc. and
Capital Guardian Trust Company
Growth & Income . . . . . Independence Investment Associates, Inc. and
Putnam Investment Management, Inc.
Fidelity VIP Contrafund/(R)/ . . . . . . . . . . . . . . . Fidelity Management and Research Company
Equity Index . . . . . . . State Street Global Advisors
Large Cap Value . . . . . T. Rowe Price Associates, Inc.
American Leaders Large Cap Value. . . . . . . . . . . . . Federated Investment Management Company
Large Cap Growth . . . . . Independence Investment Associates, Inc.
Large Cap Aggressive Growth. . . . . . . . . . . . . . . . Alliance Capital Management L.P.
Fidelity VIP Growth. . . Fidelity Management and Research Company
AIM V.I. Value. . . . . . A I M Advisors, Inc.
Janus Aspen Global Technology. . . . . . . . . . . . . . . Janus Capital Corporation
Mid Cap Value . . . . . . Neuberger Berman, LLC
Mid Cap Growth . . . . . . Janus Capital Corporation
Fundamental Growth. . . . Putnam Investment Management, Inc.
Real Estate Equity . . . . Independence Investment Associates, Inc. and
Morgan Stanley Dean Witter Investment
Management Inc.
Small/Mid Cap CORE /SM/ . Goldman Sachs Asset Management
Small/Mid Cap Growth. . . Wellington Management Company, LLP
Small Cap Equity . . . . . Capital Guardian Trust Company
Small Cap Growth . . . . . . . . . . . . . . . . . . . . . John Hancock Advisers, Inc.
MFS New Discovery. . . . MFS Investment Management/(R)/
Global Balanced . . . . . Capital Guardian Trust Company
Janus Aspen Worldwide Growth. . . . . . . . . . . . . . . Janus Capital Corporation
Templeton International Securities. . . . . . . . . . . . Templeton Investment Counsel, Inc.
International Equity Index . . . . . . . . . . . . . . . . Independence International Associates, Inc.
International Opportunities . . . . . . . . . . . . . . . . T. Rowe Price International, Inc.
Morgan Stanley Dean Witter Investment Management
Emerging Markets Equity . . . . . . . . . . . . . . . . . Inc.
Short-Term Bond . . . . . Independence Investment Associates, Inc.
Bond Index . . . . . . . . Mellon Bond Associates, LLP
Active Bond . . . . . . . . . . . . . . . . . . . . . . . John Hancock Advisers, Inc.
Core Bond. . . . . . . . Federated Investment Management Company
Global Bond . . . . . . . . . . . . . . . . . . . . . . . Capital Guardian Trust Company
High Yield Bond . . . . . Wellington Management Company, LLP
Money Market . . . . . . . John Hancock Life Insurance Company
------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The variable investment options shown on page 1 are those available as of the
date of this prospectus. We may add, modify or delete variable investment
options in the future.
When you select one or more of these variable investment options, we invest
your money in the corresponding investment option(s) of the John Hancock
Variable Series Trust I (the "Trust"). The Trust is a mutual fund that offers a
number of different investment options (which are called "funds").
The Trust is a so-called "series" type mutual fund registered with the
Securities and Exchange Commission ("SEC"). The investment results of each
variable investment option you select will depend on those of the corresponding
fund of the Trust. Each of the funds is separately managed and has its own
investment objective and strategies. Attached at the end of this prospectus is a
prospectus for the Trust. The Trust prospectus contains detailed information
about each available fund. Be sure to read that prospectus before selecting any
of the variable investment options shown on page 1.
* * * * * * * * * * * *
Please note that the SEC has not approved or disapproved these securities, or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
* * * * * * * * * * * *
JHVLICO LIFE SERVICING OFFICE
-----------------------------
2
<PAGE>
GUIDE TO THIS PROSPECTUS
This prospectus contains information that you should know before you buy a
policy or exercise any of your rights under the policy. However, please keep in
mind that this is a prospectus - - it is not the policy. The prospectus
---
simplifies many policy provisions to better communicate the policy's essential
features. Your rights and obligations under the policy will be determined by the
language of the policy itself. When you receive your policy, read it carefully.
This prospectus is arranged in the following way:
. The section which follows is called "Basic Information". It contains
basic information about the policy in a question and answer format.
You should read the Basic Information before reading any other
section of the prospectus.
. Behind the Basic Information section are illustrations of
hypothetical policy benefits that help clarify how the policy works.
These start on page 25.
. Behind the illustrations is a section called "Additional
Information." This section gives more details about the policy. It
generally does not repeat information contained in the Basic
---
Information section. A table of contents for the Additional
Information section appears on page 32.
. Behind the Additional Information section are the financial
statements for us and for the Separate Account that we use for this
policy. These start on page 46.
. Finally, there is an Alphabetical Index of Key Words and Phrases at
the back of the prospectus on page 117.
After the Alphabetical Index of Key Words and Phrases, this prospectus ends and
the prospectus for the Trust begins.
3
<PAGE>
BASIC INFORMATION
This "Basic Information" section provides answers to commonly asked questions
about the policy. Here are the page numbers where the questions and answers
appear:
<TABLE>
<CAPTION>
<S> <C>
Question Beginning on page
--------
.What is the policy?. . . . . . . . . . . . . . . 5
.Who owns the policy?. . . . . . . . . . . . . . 5
.How can you invest money in the policy?. . . . . 5
.Is there a minimum amount you must invest?. . . 6
.How will the value of your investment in the policy 8
change over time?. . . . . . . . . . . . . . . .
.What charges will we deduct from your investment in the 9
policy?. . . . . . . . . . . . . . . . . . . . .
.What charges will the Trust deduct from your investment 11
in the policy?. . . . . . . . . . . . . . . . . .
.What other charges can we impose in the future?. 13
.How can you change your policy's investment allocations? 14
.How can you access your investment in the policy? 15
.How much will we pay when the insured person dies? 16
.Can you add additional benefit riders?. . . . . 18
.How can you change your policy's insurance coverage? 20
.Can you cancel your policy after it's issued?. . 21
.Can you choose the form in which we pay out policy 21
proceeds?. . . . . . . . . . . . . . . . . . . .
.To what extent can we vary the terms and conditions of
the policies in particular
cases?. . . . . . . . . . . . . . . . . . . . . 22
.How will your policy be treated for income tax purposes? 22
.How do you communicate with us?. . . . . . . . . 23
</TABLE>
4
<PAGE>
WHAT IS THE POLICY?
The policy's primary purpose is to provide lifetime protection against
economic loss due to the death of the insured person. If the life insurance
protection is provided under a master group policy, the term "policy" as used in
this prospectus refers to the certificate you will be issued and not to the
master group policy. The value of the amount you have invested under the policy
may increase or decrease daily based upon the investment results of the variable
investment options that you choose. The amount we pay to the policy's
beneficiary if the insured person dies (we call this the "death benefit") may be
similarly affected.
While the insured person is alive, you will have a number of options under the
policy. Here are some major ones:
. Determine when and how much you invest in the various investment
options
. Borrow or withdraw amounts you have in the investment options
. Change the beneficiary who will receive the death benefit
. Change the amount of insurance
. Turn in (i.e., "surrender") the policy for the full amount of its
surrender value
. Choose the form in which we will pay out the death benefit or other
proceeds
Most of these options are subject to limits that are explained later in this
prospectus.
WHO OWNS THE POLICY?
That's up to the person who applies for the policy. The owner of the policy is
the person who can exercise most of the rights under the policy, such as the
right to choose the investment options or the right to surrender the policy. In
many cases, the person buying the policy is also the person who will be the
owner. However, the application for a policy can name another person or entity
(such as a trust) as owner. Whenever we've used the term "you" in this
prospectus, we've assumed that the reader is the person who has whatever right
or privilege is being discussed. There may be tax consequences if the owner and
the insured person are different, so you should discuss this issue with your tax
adviser.
HOW CAN YOU INVEST MONEY IN THE POLICY?
Premium Payments
We call the investments you make in the policy "premiums" or "premium
payments". The amount we require as your first premium depends upon the
-----
specifics of your policy and the insured person. Except as noted below, you can
make any other premium payments you wish at any time. That's why the policy is
called a "flexible premium" policy.
5
<PAGE>
Maximum premium payments
Federal tax law limits the amount of premium payments you can make relative to
the amount of your policy's insurance coverage. We will not knowingly accept any
amount by which a premium payment exceeds the maximum. If you exceed certain
other limits, the law may impose a penalty on amounts you take out of your
policy. More discussion of these tax law requirements begins on page 39. Also,
we may refuse to accept any amount of an additional premium if:
. that amount of premium would increase our insurance risk exposure,
and
. the insured person doesn't provide us with adequate evidence that he
or she continues to meet our requirements for issuing insurance.
In no event, however, will we refuse to accept any premium necessary to prevent
the policy or the guaranteed death benefit feature from terminating.
Ways to pay premiums
If you pay premiums by check or money order, they must be drawn on a U.S. bank
in U.S. dollars and made payable to "John Hancock Variable Life Insurance
Company." Premiums after the first must be sent to the JHVLICO Life Servicing
Office at the appropriate address shown on page 2 of this prospectus.
We will also accept premiums:
. by wire or by exchange from another insurance company,
. via an electronic funds transfer program (any owner interested in
making monthly premium payments must use this method), or
-------
. if we agree to it, through a salary deduction plan with your
employer.
You can obtain information on these other methods of premium payment by
contacting your JHVLICO representative or by contacting the JHVLICO Life
Servicing Office.
IS THERE A MINIMUM AMOUNT YOU MUST INVEST?
Planned Premiums
The Policy Specifications page of your policy will show the "Planned Premium"
for the policy. You choose this amount in the policy application. You will also
choose how often to pay premiums-- annually, semi-annually, quarterly or
monthly. The premium reminder notice we send you is based on the amount and
period you choose. However, payment of Planned Premiums is not necessarily
required. You need only invest enough to keep the policy in force (see
"Guaranteed death benefit feature" on page 7 and "Lapse and reinstatement" on
page 8).
6
<PAGE>
Guaranteed death benefit feature
This feature guarantees that your Basic Sum Insured will not terminate (i.e.,
"lapse"), regardless of adverse investment performance, if on each "grace period
testing date" the amount of cumulative premiums you have paid (less all
withdrawals from the policy and all outstanding loans) equals or exceeds the sum
of all Guaranteed Death Benefit Premium ("GDB Premium") due to date. If the
Guaranteed Death Benefit test is not satisfied on any grace period testing date,
the guaranteed death benefit feature will not be "in effect" on that date. We
currently test on a quarterly basis, but reserve the right to test on each
monthly deduction date. (The term "monthly deduction date" is defined on page 34
under "Procedures for issuance of a policy".)
Your policy will show two types of GDB Premium (or such other types as
permitted by your state):
. Age 65/10 Year GDB Premium - is used on each testing date until the
policy anniversary nearest the insured person's 65th birthday (or, if
longer, until the 10th policy anniversary). The GDB premium that is
"due" during this period is equal to the Age 65/10 Year GDB Premium
times the number of elapsed policy months on a testing date.
. Age 100 GDB Premium - is used on each testing date that occurs on and
after the policy anniversary nearest the insured person's 65th
birthday (or on and after the 10th policy anniversary) until the
policy anniversary nearest the insured person's 100th birthday. The
GDB premium that is "due" during this period is equal to the number
of elapsed policy months on the testing date, measured from the Date
of Issue, times the Age 100 GDB Premium.
The Age 100 GDB Premium is higher than the Age 65/10 Year GDB Premium, but
neither will ever be greater than the so-called "guideline premium" for the
policy as defined in Section 7702 of the Internal Revenue Code.
The guaranteed death benefit feature applies only to the Basic Sum Insured in
effect when we issue the policy. It does not apply to any amount of Additional
Sum Insured and it will not be in effect if you increase the Basic Sum Insured
(see "How much will we pay when the insured person dies?" on page 16). The
amount of the Basic Sum Insured that is guaranteed will be reduced to the extent
that we pay it to you under a living care or life-time care additional benefit
rider while the insured is living (see "Can you add additional benefit riders?"
on page 18). If there are monthly charges that remain unpaid because of this
feature, we will deduct such charges when there is sufficient surrender value to
pay them.
If an insufficient amount of GDB premium has been paid on a grace period
testing date, and your policy would lapse for failure to pay charges then due,
we will provide you with a notification as descibed in the next section, "Lapse
and Reinstatement".
7
<PAGE>
Lapse and Reinstatement
Either your entire policy or the Additional Sum Insured portion of your Total
Sum Insured can lapse for failure to pay charges due under the policy. If the
guaranteed death benefit feature is in effect, the Additional Sum Insured and
any additional benefit riders (unless otherwise stated therein) will lapse if
the policy's surrender value is not sufficient to pay the charges on a grace
period testing date. If the guaranteed death benefit feature is not in effect,
the entire policy will lapse if the policy's surrender value is not sufficient
to pay the charges on a grace period testing date. In either case, we will
notify you of how much you will need to pay to keep the Additional Sum Insured
or the policy in force. You will have a 61 day "grace period" to make these
payments. If you pay these amounts during the grace period, you may also
continue the Guaranteed Death Benefit feature by paying the GDB Premium
described in your policy.
If you don't pay at least the required amount by the end of the grace period,
the Additional Sum Insured and any additional benefit riders (unless otherwise
stated therein) or your policy will lapse. If your policy lapses, all coverage
under the policy will cease. Even if the policy or the Additional Sum Insured
terminates in this way, you can still reactivate (i.e., "reinstate") it within 3
years from the beginning of the grace period. You will have to provide evidence
that the insured person still meets our requirements for issuing coverage. You
will also have to pay a minimum amount of premium and be subject to the other
terms and conditions applicable to reinstatements, as specified in the policy.
If the guaranteed death benefit is not in effect and the insured person dies
during the grace period, we will deduct any unpaid monthly charges from the
death benefit. During a grace period, you cannot make a partial withdrawal or
policy loan.
HOW WILL THE VALUE OF YOUR INVESTMENT IN THE POLICY CHANGE OVER TIME?
From each premium payment you make, we deduct the charges described under
"Deductions from premium payments" below. We invest the rest in the investment
options you've elected. Special investment rules apply to premiums processed
prior to the 20th day after your policy becomes effective. (See "Commencement of
investment performance" beginning on page 35.)
Over time, the amount you've invested in any variable investment option will
increase or decrease the same as if you had invested the same amount directly in
the corresponding fund of the Trust and had reinvested all fund dividends and
distributions in additional fund shares; except that we will deduct certain
additional charges which will reduce your account value. We describe these
charges under "What charges will we deduct from your investment in the policy?"
on page 9.
The amount you've invested in the fixed investment option will earn interest
at a rate we declare from time to time. We guarantee that this rate will be at
least 4%. If you want to know what the current declared rate is, just call or
write to us. The current declared rate will also appear in the annual statement
we will send you. Amounts you invest in the fixed investment option will not be
subject to the asset-based risk charge described on page 10. Otherwise, the
charges applicable to the fixed investment option are the same as those
applicable to the variable investment options.
8
<PAGE>
At any time, the "account value" of your policy is equal to:
. the amount you invested,
. plus or minus the investment experience of the investment options
you've chosen,
. minus all charges we deduct, and
. minus all withdrawals you have made.
If you take a loan on the policy, however, your account value will be computed
somewhat differently. This is discussed beginning on page 37.
WHAT CHARGES WILL WE DEDUCT FROM YOUR INVESTMENT IN THE POLICY?
Deductions from premium payments
. Premium tax charge - A charge to cover state premium taxes we currently
--------------------
expect to pay, on average. This charge is currently 2.35% of each premium.
. DAC tax charge - A charge to cover the increased Federal income tax
----------------
burden that we currently expect will result from receipt of premiums. This
charge is currently 1.25% of each premium.
. Premium sales charge - A charge to help defray our sales costs. The
----------------------
charge is 4% of a certain portion of the premium you pay. The portion of
each year's premium that is subject to the charge is called the "Target
Premium". It's determined at the time the policy is issued and will appear
in the "Policy Specifications" section of the policy. We currently waive
one half of this charge for policies with a Total Sum Insured (excluding
any Premium Cost Recovery Benefit) of $250,000 or higher, but continuation
of that waiver is not guaranteed. Also, we currently intend to stop making
this charge on premiums received after the 10th policy year, but this is
not guaranteed either. Because policies of this type were first offered
for sale on May 1, 2000, no termination of this charge has yet occurred.
Deductions from account value
. Issue charge - A monthly charge to help defray our administrative costs.
--------------
This is a flat dollar charge of $20 and is deducted only during the first
policy year.
. Maintenance charge - A monthly charge to help defray our administrative
--------------------
costs. This is a flat dollar charge of up to $8 (currently $6).
. Insurance charge - A monthly charge for the cost of insurance. To
------------------
determine the charge, we multiply the amount of insurance for which we are
at risk by a cost of insurance rate. The rate is derived from an actuarial
table and the ratio of Basic Sum Insured to Additional Sum Insured on the
date we issue your policy. The table in your policy will show the maximum
-------
cost of insurance rates. The cost of insurance rates that we currently
apply are generally less than the maximum rates. We will review the cost
9
<PAGE>
of insurance rates at least every 5 years and may change them from time to
time. However, those rates will never be more than the maximum rates shown
in the policy. The table of rates we use will depend on the insurance risk
characteristics and (usually) gender of the insured person, the Total Sum
Insured and the length of time the policy has been in effect. Regardless
of the table used, cost of insurance rates generally increase each year
that you own your policy, as the insured person's attained age increases.
(The insured person's "attained age" on any date is his or her age on the
birthday nearest that date.) We currently apply three "bands" of insurance
rates, based on a policy's Total Sum Insured (excluding any Premium Cost
Recovery Benefit) on the date of issue, but continuation of that practice
is not guaranteed. The lowest band of rates is for policies of $1 million
or more, next lower for policies between $250,000 to $999,999, and the
highest band is for policies between $100,000 to $249,999. The insurance
charge for death benefit Option B will tend to be higher than the
insurance charge for death benefit Option A (see "How much will we pay
when the insured person dies?" on page 16).
. Extra mortality charge - A monthly charge specified in your policy for
------------------------
additional mortality risk if the insured person is subject to certain
types of special insurance risk.
. Asset-based risk charge - A monthly charge for mortality and expense
-------------------------
risks we assume. The charge is a percentage of that portion of your
account value allocated to variable investment options. The current
percentages are .050% for policy years 1 - 10, .035% for policy year 11,
decreasing by .001% each year thereafter through policy year 28, and .017%
for policy year 29 and each policy year thereafter. These percentages
equate to effective annual rates of .60% for policy years 1 - 10, .40% for
policy year 11, grading down to .20% for policy years 29 and thereafter.
The reductions after policy year 10 have not occurred yet under any
policy, since no policy has been outstanding for 10 years. We guarantee
that this charge will never exceed .075% of that portion of your account
value allocated to variable investment options. This percentage equates to
an effective annual rate of .90%. This charge does not apply to the fixed
investment option.
. Optional benefits charge - Monthly charges for certain optional insurance
--------------------------
benefits added to the policy by means of a rider. Some of the riders we
currently offer are described under "Can you add additional benefit
riders?" on page 18.
. ASI reduction charge - A charge we deduct if you decrease the Additional
----------------------
Sum Insured during the first 20 policy years. A table in your policy will
state the maximum rate for the charge per $1,000 of Additional Sum Insured
surrendered, based on the insured person's issue age, insurance risk
characteristics and (usually) gender. The rates are shown in the policy
and generally range from less than $1 per $1,000 for issue age 40 or less,
and increase for issue ages thereafter, to over $10 per $1,000 for issue
ages after 70. We do not deduct this charge if the Additional Sum Insured
is reduced because of a withdrawal of surrender value or surrender of the
policy.
. Contingent deferred sales charge ("CDSC") - A charge we deduct if the
-------------------------------------------
policy lapses or is surrendered within the first 10 policy years. We
deduct this charge to compensate us for sales expenses that we would
otherwise not recover in the event of early lapse
10
<PAGE>
or surrender. The charge is a percentage of the premiums we received in
the first policy year that do not exceed the first year Target Premium, as
shown in the following table:
POLICY YEAR(S) PERCENTAGE OF FIRST YEAR TARGET PREMIUM
-------------- ---------------------------------------
1-5 100%
6 80%
7 70%
8 60%
9 40%
10 20%
11 and later 0%
The above table applies only if the insured person is less than attained age 45
at issue. For older issue ages, the maximum is reached earlier and the
percentage may decrease to zero in fewer than 10 policy years. Regardless of
issue age, there is a further limitation on the CDSC that can be charged if
surrender or lapse occurs in the second policy year.
. Partial withdrawal charge - A charge for each partial withdrawal of
---------------------------
account value to compensate us for the administrative expenses of
processing the withdrawal. The charge is equal to the lesser of $20 or 2%
of the withdrawal amount.
WHAT CHARGES WILL THE TRUST DEDUCT FROM YOUR INVESTMENT IN THE POLICY?
The Trust must pay investment management fees and other operating expenses.
These fees and expenses are different for each fund and reduce the investment
return of each fund. Therefore, they also indirectly reduce the return you will
earn on any variable investment options you select.
The following figures for the funds are based on historical fund expenses, as
a percentage (rounded to two decimal places) of each fund's average daily net
assets for 1999, except as indicated in the Notes appearing at the end of this
table. Expenses of the funds are not fixed or specified under the terms of the
policy, and those expenses may vary from year to year.
<TABLE>
<CAPTION>
Investment Distribution and Other Operating Total Fund Other Operating
Management Service Expenses With Operating Expenses Absent
Fund Name Fee (12b-1) Fees Reimbursement Expenses Reimbursement
--------- ---------- ---------------- --------------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
JOHN HANCOCK VARIABLE SERIES TRUST I
(NOTE 1):
Managed . . . . . . . . . . . . . . . . 0.67% N/A 0.03% 0.70% 0.03%
Growth & Income . . . . . . . . . . . . 0.67% N/A 0.03% 0.70% 0.03%
Equity Index . . . . . . . . . . . . . 0.14% N/A 0.00% 0.14% 0.08%
American Leaders Large Cap Value. . . . 0.80% N/A 0.10% 0.90% N/A
Large Cap Growth . . . . . . . . . . . 0.36% N/A 0.03% 0.39% 0.03%
Large Cap Aggressive Growth . . . . . . 0.98% N/A 0.10% 1.08% 0.19%
Mid Cap Value . . . . . . . . . . . . . 0.80% N/A 0.10% 0.90% 0.12%
Mid Cap Growth . . . . . . . . . . . . 0.82% N/A 0.10% 0.92% 0.11%
Fundamental Growth * . . . . . . . . . 0.90% N/A 0.10% 1.00% 0.24%
Real Estate Equity . . . . . . . . . . 1.01% N/A 0.10% 1.11% 0.10%
Small/Mid Cap CORE /SM/ . . . . . . . . 0.80% N/A 0.10% 0.90% 0.66%
Small/Mid Cap Growth . . . . . . . . . 0.75% N/A 0.10% 0.85% 0.10%
Small Cap Equity * . . . . . . . . . . 0.90% N/A 0.10% 1.00% 0.16%
Small Cap Growth . . . . . . . . . . . 0.75% N/A 0.10% 0.85% 0.14%
Global Balanced * . . . . . . . . . . . 1.05% N/A 0.10% 1.15% 0.46%
International Equity Index . . . . . . 0.16% N/A 0.10% 0.26% 0.22%
International Opportunities . . . . . . 0.87% N/A 0.10% 0.97% 0.29%
Emerging Markets Equity . . . . . . . . 1.27% N/A 0.10% 1.37% 2.17%
Short-Term Bond . . . . . . . . . . . . 0.30% N/A 0.10% 0.40% 0.13%
Bond Index . . . . . . . . . . . . . . 0.15% N/A 0.10% 0.25% 0.20%
Active Bond * . . . . . . . . . . . . . 0.61% N/A 0.03% 0.64% 0.03%
Core Bond . . . . . . . . . . . . . . . 0.70% N/A 0.10% 0.80% N/A
Global Bond . . . . . . . . . . . . . . 0.85% N/A 0.10% 0.95% 0.15%
High Yield Bond . . . . . . . . . . . . 0.65% N/A 0.10% 0.75% 0.39%
Money Market . . . . . . . . . . . . . 0.25% N/A 0.06% 0.31% 0.06%
AIM VARIABLE INSURANCE FUNDS, INC.:
AIM V.I. Value . . . . . . . . . . . . 0.61% N/A 0.15% 0.76% 0.15%
VARIABLE INSURANCE PRODUCTS FUND -
SERVICE CLASS (NOTE 2):
Fidelity VIP Growth . . . . . . . . . . 0.58% 0.10% 0.07% 0.75% 0.09%
VARIABLE INSURANCE PRODUCTS FUND II -
SERVICE CLASS (NOTE 2):
Fidelity VIP Contrafund/(R)/ . . . . . 0.58% 0.10% 0.07% 0.75% 0.10%
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST - CLASS 2 SHARES (NOTE
3):
Templeton International Securities . . 0.69% 0.25% 0.19% 1.13% 0.19%
JANUS ASPEN SERIES - SERVICE SHARES
CLASS (NOTE 4):
Janus Aspen Global Technology . . . . . 0.65% 0.25% 0.13% 1.03% 0.13%
Janus Aspen Worldwide Growth. . . . . . 0.65% 0.25% 0.05% 0.95% 0.05%
MFS VARIABLE INSURANCE TRUST
(NOTE 5):
MFS New Discovery . . . . . . . . . . . 0.90% N/A 0.17% 1.07% 1.59%
</TABLE>
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NOTES TO FUND EXPENSE TABLE(1) John Hancock Variable Series Trust I funds'
percentages for "other fund expenses" are based on the allocation
methodology and expense reimbursement policy adopted April 23, 1999, and
are calculated as if that allocation methodology and expense reimbursement
policy had been in effect for all of 1999. Under the expense
reimbursement policy, John Hancock Life Insurance Company voluntarily
reimburses a fund when the fund's "other fund expenses" exceed 0.10% of
the fund's average daily net assets (0.00% for Equity Index). All
percentages for the American Leaders Large Cap Value Fund and the Core
Bond Fund are estimates for the current fiscal year because the funds were
not in operation in 1999. Shareholders of the Managed, Growth & Income,
Fundamental Growth, Real Estate Equity, Small Cap Equity, Global Balanced,
Active Bond, and Global Bond funds have approved new management fee
schedules, which apply to those funds effective November 1, 2000. The
investment management fee percentages for each of those funds are
calculated as if those new fee schedules had been in effect for all of
1999. The investment management fee percentages for all other funds
reflect the investment management fees that were actually payable for
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1999 .
* Fundamental Growth was formerly "Fundamental Mid Cap Growth", Small Cap
Equity was formerly "Small Cap Value", Global Balanced was formerly
"International Balanced" and Active Bond was formerly "Sovereign Bond".
"CORE /SM"/ IS A SERVICE MARK OF GOLDMAN, SACHS & CO.
(2) A portion of the brokerage commissions that certain of the Fidelity VIP
funds pay was used to reduce fund expenses. In addition, through
arrangements with certain funds' custodian, credits realized as a result
of uninvested cash balances were used to reduce a portion of each
applicable fund's expenses. Without these reductions, the operating
expenses of the funds would have been higher, as shown in the last column
of this table.
(3) On February 8, 2000, shareholders of each fund approved a merger and
reorganization that combined the Templeton International Equity Fund with
the Templeton International Securities Fund, effective May 1, 2000.
Shareholders of the Templeton International Securities Fund had approved
new management fees, which apply to the combined funds effective May 1,
2000. The table shows restated total expenses for the fund based on the
new fees and the assets, as of December 31, 1999, of the Templeton
International Securities Fund. However, if the table reflected both the
new fees and the combined assets of the Templeton International Equity
Fund and the Templeton International Securities Fund, the estimated
expenses for the two funds combined after May 1, 2000 would be:
Management Fees 0.65%, Distribution and Service Fees 0.25%, Other Expenses
0.20%, and Total Fund Operating Expenses 1.10%.
(4) The percentages for the new Service Shares Class of the Janus Aspen
Global Technology Fund and the Janus Aspen Worldwide Growth Fund are
estimates because the Service Shares Class was not in operation in 1999.
All such estimates have been made without regard to the effect of any
expense offset arrangements.
(5) MFS Variable Insurance Trust Funds have an expense offset arrangement
which reduces each fund's custodian fee based upon the amount of cash
maintained by the fund with its custodian and dividend disbursing agent.
Each fund may enter into other such arrangements and directed brokerage
arrangements, which would also have the effect of reducing the fund's
expenses. Expenses do not take into account these expense reductions, and
are therefore higher than the actual expenses of the fund. MFS Investment
Management(R) (also doing business as Massachusetts Financial Services
Company) has contractually agreed to bear expense for the New Discovery
Fund, subject to reimbursement by the fund, such that such fund's "other
fund expenses" shall not exceed 0.15% of the average daily net assets of
the fund during the current fiscal year.
WHAT OTHER CHARGES COULD WE IMPOSE IN THE FUTURE?
Except for the premium and DAC tax charges, we currently make no charge for
our Federal income taxes. However, if we incur, or expect to incur, income
taxes attributable to any subaccount of the Account or this class of policies in
future years, we reserve the right to make a charge for such taxes. Any such
charge would reduce what you earn on any affected investment options. However,
we expect that no such charge will be necessary.
We also reserve the right to increase the premium tax charge and the DAC tax
charge in order to correspond, respectively, with changes in the state premium
tax levels or in the Federal income tax treatment of the deferred acquisition
costs for this type of policy.
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Under current laws, we 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, we may make charges
for such taxes.
HOW CAN YOU CHANGE YOUR POLICY'S INVESTMENT ALLOCATIONS?
Future premium payments
At any time, you may change the investment options in which future premium
payments will be invested. You make the original allocation in the application
for the policy. The percentages you select must be in whole numbers and must
total 100%.
Transfers of existing account value
You may also transfer your existing account value from one investment option
to another. To do so, you must tell us how much to transfer, either as a whole
number percentage or as a specific dollar amount.
Under our current rules, you can make transfers out of any variable investment
option anytime you wish. However, transfers out of the fixed investment option
are currently subject to the following restrictions:
. You can only make such a transfer once in each policy year.
. The most you can transfer at any one time is the greater of $500 or 20%
of the assets in your fixed investment option.
We reserve the right to impose limits on:
. the minimum amount of each transfer out of the fixed investment option;
. the maximum amount of any transfer into the fixed investment option after
the second policy year; and
. the number and frequency of transfers out of the variable investment
options.
Dollar cost averaging
This is a program of automatic monthly transfers out of the Money Market
investment option into one or more of the other variable investment options. You
choose the investment options and the dollar amount and timing of the transfers.
The program is designed to reduce the risks that result from market
fluctuations. It does this by spreading out the allocation of your money to
investment options over a longer period of time. This allows you to reduce the
risk of investing most of your money at a time when market prices are high.
Obviously, the success of this strategy depends on market trends and is not
guaranteed.
Asset Rebalancing
This is a program that automatically re-sets the percentage of your account
value allocated to the variable investment options. Over time, the variations in
the investment results for each
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variable investment option you've elected will shift the percentage allocations
among them. The rebalancing program will periodically transfer your account
value among the variable investment options to reestablish the preset
percentages you have chosen. Rebalancing would usually result in transferring
amounts from a variable investment option with relatively higher investment
performance since the last rebalancing to one with relatively lower investment
performance. However, rebalancing can also result in transferring amounts from a
variable investment option with relatively lower current investment performance
to one with relatively higher current investment performance. Rebalancing and
dollar cost averaging cannot be in effect at the same time.
HOW CAN YOU ACCESS YOUR INVESTMENT IN THE POLICY?
Full surrender
You may surrender your policy in full at any time. If you do, we will pay you
the account value, less any policy loans and less any CDSC charge that then
applies. This is called your "surrender value." You must return your policy when
you request a full surrender.
Partial withdrawals
You may make a partial withdrawal of your surrender value at any time after
the first policy year. Each partial withdrawal must be at least $1,000. There is
a charge (usually $20) for each partial withdrawal. We will automatically reduce
the account value of your policy by the amount of the withdrawal and the related
charge. Unless we agree otherwise, each investment option will be reduced in the
same proportion as the account value is then allocated among them. We will not
permit a partial withdrawal if it would cause your surrender value to fall below
3 months' worth of monthly charges (see "Deductions from account value" on page
9). We also reserve the right to refuse any partial withdrawal that would cause
the policy's Total Sum Insured to fall below $100,000, or the policy's Basic Sum
Insured to fall below $100,000. Under the Option A death benefit, the reduction
of your account value occasioned by a partial withdrawal could cause the minimum
insurance amount to become less than your Total Sum Insured (see "How much will
we pay when the insured person dies?" on page 16). If that happens, we will
automatically reduce your Total Sum Insured. The calculation of that reduction
is explained in the policy, and will be implemented by first reducing any
Additional Sum Insured in effect. If the reduction in Total Sum Insured would
cause your policy to fail the Internal Revenue Code's definition of life
insurance, we will not permit the partial withdrawal.
Policy loans
You may borrow from your policy at any time by completing a form satisfactory
to us or, if the telephone transaction authorization form has been completed, by
telephone. The maximum amount you can borrow is determined as follows:
. We first determine the surrender value of your policy.
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<PAGE>
. We then subtract an amount equal to 12 times the monthly charges then
being deducted from account value.
. We then multiply the resulting amount by.75% in policy years 1
through 10, .50% in policy years 11 through 20, and .25% thereafter.
. We then subtract the third item above from the second item above.
The minimum amount of each loan is $300. The interest charged on any loan is
an effective annual rate of 4.75% in the first 10 policy years, 4.50% in policy
years 11 through 20, and 4.25% thereafter. Accrued interest will be added to the
loan daily and will bear interest at the same rate as the original loan amount.
The amount of the loan is deducted from the investment options in the same
proportion as the account value is then allocated among them and is placed in a
special loan account. This special loan account will earn interest at an
effective annual rate of 4.0%. However, if we determine that a loan will be
treated as a taxable distribution because of the differential between the loan
interest rate and the rate being credited on the special loan account, we
reserve the right to decrease the rate credited on the special loan account to a
rate that would, in our reasonable judgement, result in the transaction being
treated as a loan under Federal tax law.
You can repay all or part of a loan at any time. Unless we agree otherwise,
each repayment will be allocated among the investment options as follows:
. The same proportionate part of the loan as was borrowed from the
fixed investment option will be repaid to the fixed investment
option.
. The remainder of the repayment will be allocated among the investment
options in the same way a new premium payment would be allocated.
If you want a payment to be used as a loan repayment, you must include
instructions to that effect. Otherwise, all payments will be assumed to be
premium payments.
HOW MUCH WILL WE PAY WHEN THE INSURED PERSON DIES?
In your application for the policy, you will tell us how much life insurance
coverage you want on the life of the insured person. This is called the "Total
Sum Insured" of insurance. Total Sum Insured is composed of the Basic Sum
Insured and any Additional Sum Insured you elect. The maximum amount of
Additional Sum Insured you can have when we issue the policy is generally
limited to 400% of the Basic Sum Insured. There are a number of factors you
should consider in determining whether to elect coverage in the form of Basic
Sum Insured or in the form of Additional Sum Insured. These factors are
discussed under "Basic Sum Insured vs. Additional Sum Insured" on page 35.
When the insured person dies, we will pay the death benefit minus any
outstanding loans. There are two ways of calculating the death benefit. You
choose which one you want in the application. The two death benefit options are:
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<PAGE>
. Option A - The death benefit will equal the greater of (1) the Total
Sum Insured or (2) the minimum insurance amount under the "guideline
premium and cash value corridor test" or under the "cash value
accumulation test" (as described below).
. Option B - The death benefit will equal the greater of (1) the Total
Sum Insured amount plus your policy's account value on the date of
death, or (2) the minimum insurance amount under the "guideline
premium and cash value corridor test".
For the same premium payments, the death benefit under Option B will tend to
be higher than the death benefit under Option A. On the other hand, the monthly
insurance charge will be higher under Option B to compensate us for the
additional insurance risk. Because of that, the account value will tend to be
higher under Option A than under Option B for the same premium payments.
The minimum insurance amount
In order for a policy to qualify as life insurance under Federal tax law,
there has to be a minimum amount of insurance in relation to account value.
There are two tests that can be applied under Federal tax law - -the "guideline
premium and cash value corridor test" and the "cash value accumulation test."
When you elect the Option A death benefit, you must elect which test you wish
to have applied. If you elect the Option B death benefit, the guideline premium
and cash value corridor test will automatically be applied. Under the guideline
premium and cash value corridor test, we compute the minimum insurance amount
each business day by multiplying the account value on that date by the so-called
"corridor factor" applicable on that date. The corridor factors are derived by
applying the "guideline premium and cash value corridor test." The corridor
factor starts out at 2.50 for ages at or below 40 and decreases as attained age
increases, reaching a low of 1.0 at age 95. A table showing the factor for each
age will appear in the policy. Under the cash value accumulation test, we
compute the minimum insurance amount each business day by multiplying the
account value on that date by the so-called "death benefit factor" applicable on
that date. The death benefit factors are derived by applying the "cash value
accumulation test." The death benefit factor decreases as attained age
increases. A table showing the factor for each age will appear in the policy.
As noted above, you have to elect which test will be applied if you elect the
Option A death benefit. The cash value accumulation test may be preferable if
you want an increasing death benefit in later policy years and/or want to fund
the policy at the "7 pay" limit for the full 7 years (see "Tax Considerations"
beginning on page 39). The guideline premium and cash value corridor test may be
preferable if you want the account value under the policy to increase without
increasing the death benefit as quickly as might otherwise be required.
When the insured person reaches 100
On the policy anniversary nearest the insured person's 100th birthday, the
death benefit will become equal to the account value on the date of death. Death
benefit Options A and B (as
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<PAGE>
described above) will cease to apply. Also, we will stop deducting any monthly
charges (other than the asset-based risk charge) and will stop accepting any
premium payments.
In the next section, we describe an optional Age 100 Waiver of Charges Rider
that provides for continuation of the Total Sum Insured after the insured person
reaches 100.
CAN YOU ADD ADDITIONAL BENEFIT RIDERS?
When you apply for a policy, you can request any of the additional benefit
riders that we then make available. Availability and rider benefits may vary by
state. Charges for the selected rider will generally increase the monthly
deductions from your policy's account value. We may change the rates of these
charges, but not above the maximum amounts that will be stated in the Policy
Specifications page of your policy. Charges for the Long-Term Care Acceleration
Rider, as described below, may be considered a "distribution" for federal income
tax purposes (see "Tax considerations," beginning on page 39). Our rules and
procedures will govern eligibility for the riders, or any changes to these
benefits. Each rider contains specific details that you should review if you
desire to choose the additional benefit. We may add to, delete from, or modify
the following list of additional benefit riders:
. Disability Waiver of Charges Rider - Provides for the waiver of monthly
deductions if the insured person becomes totally and permanently disabled,
as defined in the rider, prior to age 60. If the insured person becomes
totally and permanently disabled after age 60, monthly deductions are only
waived until age 65. Benefits under this rider do not reduce the
Guaranteed Death Benefit Premium payment requirements described on page 7
that are necessary for the guaranteed death benefit feature to remain in
effect.
. Living Care Benefit Rider - Provides for an advance payment to you of a
portion of the death benefit if the insured person becomes terminally ill,
as defined in the rider, with death expected within 24 months. Advances
under the rider are discounted for interest at the rates specified in the
rider, and we may use a portion of any advance to repay loans under your
policy. The maximum advance is $1,000,000.
. Age 100 Waiver of Charges Rider - Provides for the continuation of the
Total Sum Insured in force when the insured person attains age 100,
without charge, if the policy's account value at the time is greater than
the sum of 1 plus the amount of any surrender charges then existing. The
monthly charge for this rider currently begins in the 6th policy year.
. Children's Insurance Benefit Rider - Provides term insurance up through
age 21 on each covered child of the insured person. A child must be more
than 14 days old and less than 15 years old to begin coverage.
. Accidental Death Benefit Rider - Provides for an additional insurance
benefit if the insured person's death is due to accidental causes between
the policy anniversaries nearest the insured person's 5th and 70th
birthdays.
. Long-Term Care Acceleration Rider - intended only for policies where the
death benefit is determined under Option A and the "cash value
accumulation test" described on page 17. This rider provides for periodic
advance payments to you of a portion of
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the death benefit if the insured person becomes "chronically ill" so that
such person: (1) is unable to perform at least 2 activities of daily
living without substantial human assistance or has a severe cognitive
impairment; and (2) is receiving certain qualified services described in
the rider.
Benefits under the Long-Term Care Acceleration rider will not begin until we
receive proof that the insured person qualifies and has received 100 days of
"qualified long-term care service" as defined in the rider, while the policy was
in force. You must continue to submit evidence during the insured person's
lifetime of the insured person's eligibility for rider benefits.
We determine a maximum amount of death benefit that we will advance for each
month of qualification. This amount, called the "Maximum Monthly Benefit" is
based on the percentage of the policy's death benefit that you select when you
apply for the policy, and the death benefit amount in effect when the insured
person qualifies for benefits. The actual amount of any advance is based on the
expense incurred by the insured person, up to the Maximum Monthly Benefit, for
each day of qualified long-term care service in a calendar month. The first 100
days of qualified long-term care service, however, are excluded in any
determination of an advance. We will recalculate the Maximum Monthly Benefit
if you make a partial withdrawal of account value, and for other events
described in the rider. Each advance reduces the remaining death benefit under
your policy, and causes a proportionate reduction in your policy's account
value. If you have a policy loan, we will use a portion of each death benefit
advance to repay indebtedness.
We restrict your account value's exposure to market risk when benefits are paid
under the Long-Term Care Acceleration rider. We do this in several ways. First,
before we begin paying any Monthly Benefit or waiving monthly deductions, we
will transfer all account value from the variable investment options to the
fixed investment option. (The amount to be transferred will be determined on the
Business Day immediately following the date we approve a request for benefits
under the rider.) In addition, you will not be permitted to transfer account
value or allocate any additional premium payment to a variable investment option
while rider benefits are paid. Your participation in any of the automatic
investment plans will also be suspended during this period.
If the insured person no longer qualifies for rider benefits and your policy
remains in force, you will be permitted to invest new premium payments or
existing account value in the variable investment options. (The restriction on
transfers from the Fixed Account described on page 14 will continue to apply.)
Benefits under this rider do not reduce the Guaranteed Death Benefit Premium
payment requirements described on page 7 that may be necessary for the
guaranteed death benefit feature to remain in effect after a termination of
rider benefits.
In certain marketing materials, the policy and this rider may be referred to as
"Unison." If you purchase this rider:
. you and your immediate family will also have access to a national
program designed to help the elderly maintain their independent
living by providing advice about an array of elder care services
available to seniors, and
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. you will have access to a list of long-term care providers in your
area who provide special discounts to persons who belong to the
national program.
HOW CAN YOU CHANGE YOUR POLICY'S INSURANCE COVERAGE?
Increase in coverage
You may request an increase in the Additional Sum Insured. As to when such an
increase would take effect, see "Effective date of other policy transactions" on
page 37). Generally, each such increase must be at least $50,000. However, you
will have to provide us with evidence that the insured person still meets our
requirements for issuing insurance coverage. Unless we consent otherwise, you
may not increase the Additional Sum Insured if the increase would cause the
entire Additional Sum Insured to equal or exceed 800% of the Basic Sum Insured.
Decrease in coverage
After the first policy year, you may request a reduction in the Total Sum
Insured at any time, but only if:
. the remaining Basic Sum Insured will be at least $100,000, and
. the remaining Additional Sum Insured will not exceed 800% of the
Basic Sum Insured, and
. the remaining Total Sum Insured will at least equal the minimum
required by the tax laws to maintain the policy's life insurance
status.
Change of death benefit option
If the "guideline premium and cash value corridor test" applies to your
policy, you may change your coverage from death benefit Option A to Option B or
vice-versa on any policy anniversary, but only if there is no change in the
Federal tax law test used to determine the minimum insurance amount. If you
change from Option A to Option B, we will require evidence that the insured
person still meets our requirements for issuing coverage. This is because such a
change increases our insurance risk exposure.
If the "cash value accumulation test" applies to your policy, you can never
change to either Option A under the "guideline premium and cash value corridor
test" or to Option B.
Please read "The minimum insurance amount" starting on page 17 for more
information about the "guideline premium and cash value corridor test" and the
"cash value accumulation test."
Tax consequences
Please read "Tax considerations" starting on page 39 to learn about possible
tax consequences of changing your insurance coverage under the policy.
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CAN YOU CANCEL YOUR POLICY AFTER IT'S ISSUED?
You have the right to cancel your policy within 10 days (or longer in some
states) after you receive it. This is often referred to as the "free look"
period. To cancel your policy, simply deliver or mail the policy to:
. JHVLICO at one of the addresses shown on page 2, or
. the JHVLICO representative who delivered the policy to you.
In most states, you will receive a refund of any premiums you've paid. In some
states, the refund will be your account value on the date of cancellation plus
all charges deducted by JHVLICO or the Trust prior to that date. The date of
cancellation will be the date of such mailing or delivery.
CAN YOU CHOOSE THE FORM IN WHICH WE PAY OUT POLICY PROCEEDS?
Choosing a payment option
You may choose to receive proceeds from the policy as a single sum. This
includes proceeds that become payable because of death or full surrender.
Alternatively, you can elect to have proceeds of $1,000 or more applied to any
of a number of other payment options, including the following:
. Option 1 - Proceeds left with us to accumulate with interest
. Option 2A - Equal monthly payments of a specified amount until all
proceeds are paid out
. Option 2B - Equal monthly payments for a specified period of time
. Option 3 - Equal monthly payments for life, but with payments
guaranteed for a specific number of years
. Option 4 - Equal monthly payments for life with no refund
. Option 5 - Equal monthly payments for life with a refund if all of
the proceeds haven't been paid out
You cannot choose an option if the monthly payments under the option would be
less than $50. We will issue a supplementary agreement when the proceeds are
applied to any alternative payment option. That agreement will spell out the
terms of the option in full. We will credit interest on each of the above
options. For options 1 and 2A, the interest will be at least an effective annual
rate of 3 1/2%.
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Changing a payment option
You can change the payment option at any time before the proceeds are payable.
If you haven't made a choice, the payee of the proceeds has a prescribed period
in which he or she can make that choice.
Tax impact
There may be tax consequences to you or your beneficiary depending upon which
payment option is chosen. You should consult with a qualified tax adviser before
making that choice.
TO WHAT EXTENT CAN WE VARY THE TERMS AND CONDITIONS OF OUR POLICIES IN
PARTICULAR CASES?
Listed below are some variations we can make in the terms of our policies. Any
variation will be made only in accordance with uniform rules that we apply
fairly to all of our customers.
State law insurance requirements
Insurance laws and regulations apply to us in every state in which its
policies are sold. As a result, various terms and conditions of your insurance
coverage may vary from the terms and conditions described in this prospectus,
depending upon where you reside. These variations will be reflected in your
policy or in endorsements attached to your policy.
Variations in expenses or risks
We may vary the charges and other terms of our policies where special
circumstances result in sales or administrative expenses, mortality risks or
other risks that are different from those normally associated with the policies.
These include the type of variations discussed under "Reduced charges for
eligible classes" on page 38. No variation in any charge will exceed any maximum
stated in this prospectus with respect to that charge.
HOW WILL YOUR POLICY BE TREATED FOR INCOME TAX PURPOSES?
Generally, death benefits paid under policies such as yours are not subject to
income tax. Earnings on your account value are not subject to income tax as long
as we don't pay them out to you. If we do pay out any amount of your account
value upon surrender or partial withdrawal, all or part of that distribution
should generally be treated as a return of the premiums you've paid and should
not be subject to income tax. Amounts you borrow are generally not taxable to
you.
However, some of the tax rules change if your policy is found to be a
"modified endowment contract." This can happen if you've paid more than a
certain amount of premiums that is prescribed by the tax laws. Additional taxes
and penalties may be payable for policy distributions of any kind.
For further information about the tax consequences of owning a policy or
adding the Long-Term Care Acceleration Rider, please read "Tax considerations"
beginning of page 39.
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HOW DO YOU COMMUNICATE WITH US?
General Rules
You should mail or express all checks and money orders for premium payments
and loan repayments to the JHVLICO Life Servicing Office at the appropriate
address shown on page 2.
Certain requests must be made in writing and be signed and dated by you. They
include the following:
. loans, surrenders or partial withdrawals
. transfers of account value among investment options
. change of allocation among investment options for new premium
payments
. change of death benefit option
. increase or decrease in Total Sum Insured
. change of beneficiary
. election of payment option for policy proceeds
. tax withholding elections
. election of telephone transaction privilege.
You should mail or express these requests to our Life Servicing Office at the
appropriate address shown on page 2. You should also send notice of the insured
person's death and related documentation to our Life Servicing Office. We don't
consider that we've "received" any communication until such time as it has
arrived at the proper place and in the proper and complete form.
We have special forms that should be used for a number of the requests
mentioned above. You can obtain these forms from our Life Servicing Office or
your JHVLICO representative. Each communication to us must include your name,
your policy number and the name of the insured person. We cannot process any
request that doesn't include this required information. Any communication that
arrives after the close of our business day, or on a day that is not a business
day, will be considered "received" by us on the next following business day. Our
business day currently closes at 4:00 p.m. Eastern Standard Time, but special
circumstances (such as suspension of trading on a major exchange) may dictate an
earlier closing time.
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Telephone Transactions
If you complete a special authorization form, you can request loans, transfers
among investment options and changes of allocation among investment options
simply by telephoning us at 1-800-732-5543 or by faxing us at 1-617-886-3048.
Any fax request should include your name, daytime telephone number, policy
number and, in the case of transfers and changes of allocation, the names of the
investment options involved. We will honor telephone instructions from anyone
who provides the correct identifying information, so there is a risk of loss to
you if this service is used by an unauthorized person. However, you will receive
written confirmation of all telephone transactions. There is also a risk that
you will be unable to place your request due to equipment malfunction or heavy
phone line usage. If this occurs, you should submit your request in writing.
The policies are not designed for professional market timing organizations or
other persons or entities that use programmed or frequent transfers among
investment options. For reasons such as that, we reserve the right to change our
telephone transaction policies or procedures at any time. We also reserve the
right to suspend or terminate the privilege altogether.
24
<PAGE>
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 under certain hypothetical circumstances that
we assume solely for this purpose. Each table separately illustrates the
operation of a policy for a specified issue age, premium payment schedule and
Total Sum Insured. The amounts shown are for the end of each policy year and
assume that all of the account value is invested in funds that achieve
investment returns at constant annual rates of 0%, 6% and 12% (i.e., before any
fees or expenses deducted from Trust assets). After the deduction of average
fees and expenses at the Trust level (as described below) the corresponding net
annual rates of return would be -0.80%, 5.15% and 11.10%. Investment
return reflects investment income and all realized and unrealized capital gains
and losses. The tables assume annual Planned Premiums that are paid at the
beginning of each policy year for an insured person who is a 35 year old male
standard non-smoker underwriting risk when the policy is issued.
Tables are provided for each of the two death benefit options. The tables
headed "Current Charges" assume that the current rates for all charges deducted
by JHVLICO will apply in each year illustrated, including the intended waiver of
the premium sales charge after the tenth policy year and the intended reduction
in the insurance charge after the twentieth policy year. The tables headed
"Maximum Charges" are the same, except that the maximum permitted rates for all
years are used for all charges. The tables do not reflect any charge that we
reserve the right to make but are not currently making. The tables assume that
no optional rider benefits and no Additional Sum Insured have been elected.
With respect to fees and expenses deducted from assets of the Trust, the
amounts shown in all tables reflect (1) investment management fees equivalent to
an effective annual rate of 0.71%, and (2) an assumed average asset charge for
all other operating expenses of the Trust equivalent to an effective annual rate
of 0.09%. These rates are the arithmetic average for all funds that are
available as investment options. In other words, they are based on the
hypothetical assumption that policy account values are allocated equally among
the variable investment options. The actual rates associated with any policy
will vary depending upon the actual allocation of policy values among the
investment options. The charge shown above for all other Trust operating
expenses reflects reimbursements to certain funds as described in the footnotes
to the table beginning on page 11. We currently expect those reimbursement
arrangements to continue indefinitely, but that is not guaranteed.
The second column of each table shows the amount you would have at the end of
each Policy year if an amount equal to the assumed Planned Premiums were
invested to earn interest, after taxes, at 5% compounded annually. This is not a
policy value. It is included for comparison purposes only.
Because your circumstances will no doubt differ from those in the
illustrations that follow, values under your policy will differ, in most cases
substantially. Upon request, we will furnish you with a comparable illustration
reflecting your proposed insured person's issue age, sex and underwriting risk
classification, and the Basic Sum Insured, Additional Sum Insured and annual
Planned Premium amount requested.
25
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $ 760 *
USING CURRENT CHARGES
<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>
1 798 100,000 100,000 100,000 217 243 270 0 0 0
2 1,636 100,000 100,000 100,000 662 736 814 0 0 54
3 2,516 100,000 100,000 100,000 1,091 1,241 1,404 331 481 644
4 3,439 100,000 100,000 100,000 1,502 1,757 2,045 742 997 1,285
5 4,409 100,000 100,000 100,000 1,895 2,284 2,739 1,135 1,524 1,979
6 5,428 100,000 100,000 100,000 2,270 2,821 3,493 1,662 2,213 2,885
7 6,497 100,000 100,000 100,000 2,622 3,366 4,309 2,090 2,834 3,777
8 7,620 100,000 100,000 100,000 2,954 3,920 5,195 2,498 3,464 4,739
9 8,799 100,000 100,000 100,000 3,262 4,480 6,156 2,958 4,176 5,852
10 10,037 100,000 100,000 100,000 3,546 5,046 7,199 3,394 4,894 7,047
11 11,337 100,000 100,000 100,000 3,840 5,658 8,379 3,840 5,658 8,379
12 12,702 100,000 100,000 100,000 4,112 6,280 9,670 4,112 6,280 9,670
13 14,135 100,000 100,000 100,000 4,358 6,911 11,080 4,358 6,911 11,080
14 15,640 100,000 100,000 100,000 4,577 7,550 12,624 4,577 7,550 12,624
15 17,220 100,000 100,000 100,000 4,766 8,194 14,313 4,766 8,194 14,313
16 18,879 100,000 100,000 100,000 4,982 8,901 16,220 4,982 8,901 16,220
17 20,621 100,000 100,000 100,000 5,158 9,606 18,305 5,158 9,606 18,305
18 22,450 100,000 100,000 100,000 5,280 10,298 20,579 5,280 10,298 20,579
19 24,370 100,000 100,000 100,000 5,347 10,974 23,063 5,347 10,974 23,063
20 26,387 100,000 100,000 100,000 5,359 11,634 25,787 5,359 11,634 25,787
25 38,086 100,000 100,000 100,000 4,856 14,966 44,458 4,856 14,966 44,458
30 53,018 100,000 100,000 100,000 3,333 18,382 76,493 3,333 18,382 76,493
35 72,076 ** 100,000 150,762 ** 20,917 131,097 ** 20,917 131,097
40 96,398 ** 100,000 232,821 ** 20,777 221,734 ** 20,777 221,734
45 127,441 ** 100,000 391,779 ** 15,007 373,122 ** 15,007 373,122
</TABLE>
---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit and
Surrender Value will differ if premiums are paid in different amounts or
frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
26
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $ 760 *
USING MAXIMUM CHARGES
<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 1,636 100,000 100,000 100,000 608 679 753 0 0 0
3 2,516 100,000 100,000 100,000 1,009 1,151 1,306 249 391 546
4 3,439 100,000 100,000 100,000 1,392 1,632 1,903 632 872 1,143
5 4,409 100,000 100,000 100,000 1,756 2,120 2,548 996 1,360 1,788
6 5,428 100,000 100,000 100,000 2,100 2,616 3,244 1,492 2,008 2,636
7 6,497 100,000 100,000 100,000 2,422 3,115 3,995 1,890 2,583 3,463
8 7,620 100,000 100,000 100,000 2,722 3,619 4,805 2,266 3,163 4,349
9 8,799 100,000 100,000 100,000 2,996 4,125 5,679 2,692 3,821 5,375
10 10,037 100,000 100,000 100,000 3,248 4,634 6,623 3,096 4,482 6,471
11 11,337 100,000 100,000 100,000 3,472 5,141 7,641 3,472 5,141 7,641
12 12,702 100,000 100,000 100,000 3,667 5,644 8,740 3,667 5,644 8,740
13 14,135 100,000 100,000 100,000 3,831 6,143 9,927 3,831 6,143 9,927
14 15,640 100,000 100,000 100,000 3,964 6,636 11,209 3,964 6,636 11,209
15 17,220 100,000 100,000 100,000 4,063 7,118 12,595 4,063 7,118 12,595
16 18,879 100,000 100,000 100,000 4,125 7,588 14,094 4,125 7,588 14,094
17 20,621 100,000 100,000 100,000 4,144 8,038 15,714 4,144 8,038 15,714
18 22,450 100,000 100,000 100,000 4,114 8,462 17,461 4,114 8,462 17,461
19 24,370 100,000 100,000 100,000 4,031 8,853 19,348 4,031 8,853 19,348
20 26,387 100,000 100,000 100,000 3,885 9,201 21,383 3,885 9,201 21,383
25 38,086 100,000 100,000 100,000 1,992 9,996 34,340 1,992 9,996 34,340
30 53,018 ** 100,000 100,000 ** 7,897 54,124 ** 7,897 54,124
35 72,076 ** ** 100,000 ** ** 86,586 ** ** 86,586
40 96,398 ** ** 148,037 ** ** 140,988 ** ** 140,988
45 127,441 ** ** 239,498 ** ** 228,093 ** ** 228,093
</TABLE>
---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit and
Surrender Value will differ if premiums are paid in different amounts or
frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
27
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION B DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $ 760 *
USING CURRENT CHARGES
<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>
1 798 100,216 100,243 100,269 216 243 269 0 0 0
2 1,636 100,660 100,734 100,811 660 734 811 0 0 51
3 2,516 101,086 101,236 101,398 1,086 1,236 1,398 326 476 638
4 3,439 101,495 101,748 102,034 1,495 1,748 2,034 735 988 1,274
5 4,409 101,884 102,269 102,721 1,884 2,269 2,721 1,124 1,509 1,961
6 5,428 102,253 102,799 103,465 2,253 2,799 3,465 1,645 2,191 2,857
7 6,497 102,599 103,335 104,268 2,599 3,335 4,268 2,067 2,803 3,736
8 7,620 102,922 103,876 105,135 2,922 3,876 5,135 2,466 3,420 4,679
9 8,799 103,221 104,421 106,071 3,221 4,421 6,071 2,917 4,117 5,767
10 10,037 103,494 104,968 107,083 3,494 4,968 7,083 3,342 4,816 6,931
11 11,337 103,776 105,557 108,222 3,776 5,557 8,222 3,776 5,557 8,222
12 12,702 104,033 106,152 109,462 4,033 6,152 9,462 4,033 6,152 9,462
13 14,135 104,263 106,750 110,807 4,263 6,750 10,807 4,263 6,750 10,807
14 15,640 104,463 107,350 112,269 4,463 7,350 12,269 4,463 7,350 12,269
15 17,220 104,632 107,948 113,858 4,632 7,948 13,858 4,632 7,948 13,858
16 18,879 104,829 108,606 115,650 4,829 8,606 15,650 4,829 8,606 15,650
17 20,621 104,982 109,252 117,590 4,982 9,252 17,590 4,982 9,252 17,590
18 22,450 105,079 109,875 119,682 5,079 9,875 19,682 5,079 9,875 19,682
19 24,370 105,116 110,467 121,939 5,116 10,467 21,939 5,116 10,467 21,939
20 26,387 105,095 111,029 124,379 5,095 11,029 24,379 5,095 11,029 24,379
25 38,086 104,406 113,628 140,457 4,406 13,628 40,457 4,406 13,628 40,457
30 53,018 102,693 115,755 166,123 2,693 15,755 66,123 2,693 15,755 66,123
35 72,076 ** 115,986 206,323 ** 15,986 106,323 ** 15,986 106,323
40 96,398 ** 111,858 268,641 ** 11,858 168,641 ** 11,858 168,641
45 127,441 ** 100,135 365,665 ** 135 265,665 ** 135 265,665
</TABLE>
---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit and
Surrender Value will differ if premiums are paid in different amounts or
frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
28
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION B DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $ 760 *
USING MAXIMUM CHARGES
<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>
1 798 100,190 100,215 100,241 190 215 241 0 0 0
2 1,636 100,606 100,677 100,751 606 677 751 0 0 0
3 2,516 101,005 101,147 101,301 1,005 1,147 1,301 245 387 541
4 3,439 101,385 101,624 101,893 1,385 1,624 1,893 625 864 1,133
5 4,409 101,745 102,107 102,531 1,745 2,107 2,531 985 1,347 1,771
6 5,428 102,084 102,595 103,218 2,084 2,595 3,218 1,476 1,987 2,610
7 6,497 102,400 103,086 103,956 2,400 3,086 3,956 1,868 2,554 3,424
8 7,620 102,692 103,579 104,749 2,692 3,579 4,749 2,236 3,123 4,293
9 8,799 102,958 104,070 105,600 2,958 4,070 5,600 2,654 3,766 5,296
10 10,037 103,200 104,561 106,515 3,200 4,561 6,515 3,048 4,409 6,363
11 11,337 103,413 105,048 107,497 3,413 5,048 7,497 3,413 5,048 7,497
12 12,702 103,594 105,527 108,548 3,594 5,527 8,548 3,594 5,527 8,548
13 14,135 103,745 105,996 109,676 3,745 5,996 9,676 3,745 5,996 9,676
14 15,640 103,861 106,453 110,885 3,861 6,453 10,885 3,861 6,453 10,885
15 17,220 103,942 106,895 112,180 3,942 6,895 12,180 3,942 6,895 12,180
16 18,879 103,984 107,316 113,567 3,984 7,316 13,567 3,984 7,316 13,567
17 20,621 103,982 107,711 115,047 3,982 7,711 15,047 3,982 7,711 15,047
18 22,450 103,929 108,069 116,623 3,929 8,069 16,623 3,929 8,069 16,623
19 24,370 103,821 108,384 118,299 3,821 8,384 18,299 3,821 8,384 18,299
20 26,387 103,648 108,645 120,073 3,648 8,645 20,073 3,648 8,645 20,073
25 38,086 101,621 108,779 130,539 1,621 8,779 30,539 1,621 8,779 30,539
30 53,018 ** 105,576 143,625 ** 5,576 43,625 ** 5,576 43,625
35 72,076 ** ** 158,092 ** ** 58,092 ** ** 58,092
40 96,398 ** ** 170,300 ** ** 70,300 ** ** 70,300
45 127,441 ** ** 170,901 ** ** 70,901 ** ** 70,901
</TABLE>
---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit and
Surrender Value will differ if premiums are paid in different amounts or
frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
29
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION A DEATH BENEFIT
CASH VALUE ACCUMULATION TEST
PLANNED PREMIUM: $ 760 *
USING CURRENT CHARGES
<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>
1 798 100,000 100,000 100,000 217 243 270 0 0 0
2 1,636 100,000 100,000 100,000 662 736 814 0 0 54
3 2,516 100,000 100,000 100,000 1,091 1,241 1,404 331 481 644
4 3,439 100,000 100,000 100,000 1,502 1,757 2,045 742 997 1,285
5 4,409 100,000 100,000 100,000 1,895 2,284 2,739 1,135 1,524 1,979
6 5,428 100,000 100,000 100,000 2,270 2,821 3,493 1,662 2,213 2,885
7 6,497 100,000 100,000 100,000 2,622 3,366 4,309 2,090 2,834 3,777
8 7,620 100,000 100,000 100,000 2,954 3,920 5,195 2,498 3,464 4,739
9 8,799 100,000 100,000 100,000 3,262 4,480 6,156 2,958 4,176 5,852
10 10,037 100,000 100,000 100,000 3,546 5,046 7,199 3,394 4,894 7,047
11 11,337 100,000 100,000 100,000 3,840 5,658 8,379 3,840 5,658 8,379
12 12,702 100,000 100,000 100,000 4,112 6,280 9,670 4,112 6,280 9,670
13 14,135 100,000 100,000 100,000 4,358 6,911 11,080 4,358 6,911 11,080
14 15,640 100,000 100,000 100,000 4,577 7,550 12,624 4,577 7,550 12,624
15 17,220 100,000 100,000 100,000 4,766 8,194 14,313 4,766 8,194 14,313
16 18,879 100,000 100,000 100,000 4,982 8,901 16,220 4,982 8,901 16,220
17 20,621 100,000 100,000 100,000 5,158 9,606 18,305 5,158 9,606 18,305
18 22,450 100,000 100,000 100,000 5,280 10,298 20,579 5,280 10,298 20,579
19 24,370 100,000 100,000 100,000 5,347 10,974 23,063 5,347 10,974 23,063
20 26,387 100,000 100,000 100,000 5,359 11,634 25,787 5,359 11,634 25,787
25 38,086 100,000 100,000 100,000 4,856 14,966 44,458 4,856 14,966 44,458
30 53,018 100,000 100,000 129,120 3,333 18,382 75,864 3,333 18,382 75,864
35 72,076 ** 100,000 191,025 ** 20,917 126,206 ** 20,917 126,206
40 96,398 ** 100,000 281,747 ** 20,777 205,835 ** 20,777 205,835
45 127,441 ** 100,000 418,451 ** 15,007 331,420 ** 15,007 331,420
</TABLE>
---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit and
Surrender Value will differ if premiums are paid in different amounts or
frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
30
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION A DEATH BENEFIT
CASH VALUE ACCUMULATION TEST
PLANNED PREMIUM: $ 760 *
USING MAXIMUM CHARGES
<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 1,636 100,000 100,000 100,000 608 679 753 0 0 0
3 2,516 100,000 100,000 100,000 1,009 1,151 1,306 249 391 546
4 3,439 100,000 100,000 100,000 1,392 1,632 1,903 632 872 1,143
5 4,409 100,000 100,000 100,000 1,756 2,120 2,548 996 1,360 1,788
6 5,428 100,000 100,000 100,000 2,100 2,616 3,244 1,492 2,008 2,636
7 6,497 100,000 100,000 100,000 2,422 3,115 3,995 1,890 2,583 3,463
8 7,620 100,000 100,000 100,000 2,722 3,619 4,805 2,266 3,163 4,349
9 8,799 100,000 100,000 100,000 2,996 4,125 5,679 2,692 3,821 5,375
10 10,037 100,000 100,000 100,000 3,248 4,634 6,623 3,096 4,482 6,471
11 11,337 100,000 100,000 100,000 3,472 5,141 7,641 3,472 5,141 7,641
12 12,702 100,000 100,000 100,000 3,667 5,644 8,740 3,667 5,644 8,740
13 14,135 100,000 100,000 100,000 3,831 6,143 9,927 3,831 6,143 9,927
14 15,640 100,000 100,000 100,000 3,964 6,636 11,209 3,964 6,636 11,209
15 17,220 100,000 100,000 100,000 4,063 7,118 12,595 4,063 7,118 12,595
16 18,879 100,000 100,000 100,000 4,125 7,588 14,094 4,125 7,588 14,094
17 20,621 100,000 100,000 100,000 4,144 8,038 15,714 4,144 8,038 15,714
18 22,450 100,000 100,000 100,000 4,114 8,462 17,461 4,114 8,462 17,461
19 24,370 100,000 100,000 100,000 4,031 8,853 19,348 4,031 8,853 19,348
20 26,387 100,000 100,000 100,000 3,885 9,201 21,383 3,885 9,201 21,383
25 38,086 100,000 100,000 100,000 1,992 9,996 34,340 1,992 9,996 34,340
30 53,018 ** 100,000 100,000 ** 7,897 54,124 ** 7,897 54,124
35 72,076 ** ** 128,038 ** ** 84,592 ** ** 84,592
40 96,398 ** ** 175,144 ** ** 127,954 ** ** 127,954
45 127,441 ** ** 237,023 ** ** 187,726 ** ** 187,726
</TABLE>
---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit and
Surrender Value will differ if premiums are paid in different amounts or
frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
31
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ADDITIONAL INFORMATION
This section of the prospectus provides additional detailed information that
is not contained in the Basic Information section on pages 4 through 24.
<TABLE>
<CAPTION>
CONTENTS OF THIS SECTION BEGINNING ON PAGE
------------------------ -----------------
<S> <C>
Description of us ........................... 33
How we support the policy and investment options 33
Procedures for issuance of a policy......... 34
Basic Sum Insured vs. Additional Sum Insured 35
Commencement of investment performance...... 35
How we process certain policy transactions.. 36
Effects of policy loans..................... 37
Additional information about how certain policy charges 38
work........................................
How we market the policies.................. 39
Tax considerations.......................... 39
Reports that you will receive............... 4
1
Voting privileges that you will have........ 4
1
Changes that we can make as to your policy.. 42
Adjustments we make to death benefits....... 4
2
When we pay policy proceeds................. 43
Other details about exercising rights and paying benefits 4
3
Legal matters............................... 44
Registration statement filed with the SEC... 44
Accounting and actuarial experts............ 44
Financial statements of JHVLICO and the Account 44
List of Directors and Executive Officers of JHVLICO 45
</TABLE>
32
<PAGE>
DESCRIPTION OF US
We are JHVLICO, a stock life insurance company chartered in 1979 under
Massachusetts law. We are authorized to transact a life insurance and annuity
business in all states other than New York and in the District of Columbia. We
began selling variable life insurance policies in 1980.
We are regulated and supervised by the Massachusetts Commissioner of
Insurance, who periodically examines our affairs. We also are subject to the
applicable insurance laws and regulations of all jurisdictions in which we are
authorized to do business. We are required to submit annual statements of our
operations, including financial statements, to the insurance departments of the
various jurisdictions in which we do business for purposes of determining
solvency and compliance with local insurance laws and regulations. The
regulation to which we are subject, however, does not provide a guarantee as to
such matters.
We are a wholly-owned subsidiary of John Hancock Life Insurance Company ("John
Hancock"), a Massachusetts stock life insurance company. On February 1, 2000,
John Hancock Mutual Life Insurance Company (which was chartered in Massachusetts
in 1862) converted to a stock company by "demutualizing" and changed its name to
John Hancock Life Insurance Company. As part of the demutualization process,
John Hancock became a subsidiary of John Hancock Financial Services, Inc., a
newly formed publicly-traded corporation. John Hancock's home office is at John
Hancock Place, Boston, Massachusetts 02117. As of December 31, 1999, John
Hancock's assets were approximately $71 billion and it had invested
approximately $575 million in JHVLICO in connection with JHVLICO's organization
and operation. It is anticipated that John Hancock will from time to time make
additional capital contributions to JHVLICO to enable us to meet our reserve
requirements and expenses in connection with our business. John Hancock is
committed to make additional capital contributions if necessary to ensure that
we maintain a positive net worth.
HOW WE SUPPORT THE POLICY AND INVESTMENT OPTIONS
Separate Account U
The variable investment options shown on page 1 are in fact subaccounts of
Separate Account U (the "Account"), a separate account established by us under
Massachusetts law. The Account 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"). Such registration does not
involve supervision by the SEC of the management of the Account or of us.
The Account's assets are our property. Each policy provides that amounts we
hold in the Account pursuant to the policies cannot be reached by any other
persons who may have claims against us.
The assets in each subaccount are invested in the corresponding fund of the
Trust. New subaccounts may be added as new funds are added to the Trust and made
available to policy owners. Existing subaccounts may be deleted if existing
funds are deleted from the Trust.
We will purchase and redeem Trust shares for the Account at their net asset
value without any sales or redemption charges. Shares of a Trust represent an
interest in one of the funds of the Trust which corresponds to a subaccount of
the Account. Any dividend or capital gains distributions received by the Account
will be reinvested in shares of that same fund at their net asset value as of
the dates paid.
On each business day, shares of each fund are purchased or redeemed by us for
each subaccount based on, among other things, the amount of net premiums
allocated to the subaccount, distributions reinvested, and transfers to, from
and among subaccounts, all to be effected as of that date. Such purchases and
redemptions are effected at each
33
<PAGE>
fund's net asset value per share determined for that same date. A "business day"
is any date on which the New York Stock Exchange is open for trading. We compute
policy values for each business day as of the close of that day (usually 4:00
p.m. Eastern Standard Time).
Our general account
Our obligations under the policy's fixed investment option are backed by our
general account assets. Our general account consists of assets owned by us other
than those in the Account and in other separate accounts that we may establish.
Subject to applicable law, we have sole discretion over the investment of assets
of the general account and policy owners do not share in the investment
experience of, or have any preferential claim on, those assets. Instead, we
guarantee that the account value allocated to the fixed investment option will
accrue interest daily at an effective annual rate of at least 4% without regard
to the actual investment experience of the general account.
Because of exemptive and exclusionary provisions, interests in our fixed
investment option have not been registered under the Securities Act of 1933 and
our 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 we have been advised that the staff
of the SEC has not reviewed the disclosure in this prospectus relating to the
fixed investment option. Disclosure regarding the fixed investment option may,
however, be subject to certain generally-applicable provisions of the Federal
securities laws relating to accuracy and completeness of statements made in
prospectuses.
PROCEDURES FOR ISSUANCE OF A POLICY
Generally, the policy is available with a minimum Basic Sum Insured at issue
of $100,000. At the time of issue, the insured person must have an attained age
of no more than 80. All insured persons must meet certain health and other
insurance risk criteria called "underwriting standards".
Policies issued in Montana or in connection with certain employee plans will
not directly reflect the sex of the insured person 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, may not reflect the rates, charges,
or values that would apply to such policies.
Minimum Initial Premium
The Minimum Initial Premium must be received by us at our Life Servicing
Office in order for the policy to be in full force and effect. There is no grace
period for the payment of the Minimum Initial Premium. The Minimum Initial
Premium is determined by us based on the characteristics of the insured person,
the Basic Sum Insured and the Additional Sum Insured at issue, and the policy
options you have selected.
Commencement of insurance coverage
After you apply for a policy, it can sometimes take up to several weeks for us
to gather and evaluate all the information we need to decide whether to issue a
policy to you and, if so, what the insured person's rate class should be. After
we approve an application for a policy and assign an appropriate insurance rate
class, we will prepare the policy for delivery. We will not pay a death benefit
under a policy unless the policy is in effect when the insured person dies
(except for the circumstances described under "Temporary insurance coverage
prior to policy delivery" on page 35).
The policy will take effect only if all of the following conditions are
satisfied:
. The policy is delivered to and received by the applicant.
. The Minimum Initial Premium is received by us.
. Each insured person is living and still meets our health criteria for
issuing insurance.
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<PAGE>
If all of the above conditions are satisfied, the policy will take effect on
the date shown in the policy as the "date of issue." That is the date on which
we begin to deduct monthly charges. Policy months, policy years and policy
anniversaries are all measured from the date of issue.
Backdating
In order to preserve a younger age at issue for the insured person, we can
designate a date of issue that is up to 60 days earlier than the date that would
otherwise apply. This is referred to as "backdating" and is allowed under state
insurance laws. Backdating can also be used in certain corporate-owned life
insurance cases involving multiple policies to retain a common monthly deduction
date.
The conditions for coverage described above under "Commencement of insurance
coverage" must still be satisfied, but in a backdating situation the policy
always takes effect retroactively. Backdating results in a lower insurance
charge (because of the insured person's younger age at issue), but monthly
charges begin earlier than would otherwise be the case. Those monthly charges
will be deducted as soon as we receive premiums sufficient to pay them.
Temporary coverage prior to policy delivery
If a specified amount of premium is paid with the application for a policy and
other conditions are met, we will provide temporary term life insurance coverage
on the insured person for a period prior to the time coverage under the policy
takes effect. Such temporary term coverage will be subject to the terms and
conditions described in the application for the policy, including limits on
amount and duration of coverage.
Monthly deduction dates
Each charge that we deduct monthly is assessed against your account value or
the subaccounts at the close of business on the date of issue and at the close
of the first business day in each subsequent policy month.
BASIC SUM INSURED VS. ADDITIONAL SUM INSURED
As noted earlier in this prospectus, you should consider a number of factors
in determining whether to elect coverage in the form of Basic Sum Insured or in
the form of Additional Sum Insured.
The amount of sales charge deducted from premiums and the amount of
compensation paid to the selling insurance agent will be less if coverage is
included as Additional Sum Insured, rather than as Basic Sum Insured. On the
other hand, the amount of any Additional Sum Insured is not included in the
guaranteed death benefit feature. Therefore, if the policy's surrender value is
insufficient to pay the monthly charges as they fall due (including the charges
for the Additional Sum Insured), the Additional Sum Insured coverage will lapse,
even if the Basic Sum Insured stays in effect pursuant to the guaranteed death
benefit feature.
Generally, you will incur lower sales charges and have more flexible coverage
with respect to the Additional Sum Insured than with respect to the Basic Sum
Insured. If this is your priority, you may wish to maximize the proportion of
the Additional Sum Insured. However, if your priority is to take advantage of
the guaranteed death benefit feature, the proportion of the Policy's Total Sum
Insured that is guaranteed can be increased by taking out more coverage as Basic
Sum Insured at the time of policy issuance.
Any decision you make to modify the amount of Additional Sum Insured coverage
after issue can have significant tax consequences (see "Tax Considerations"
beginning on page 39).
COMMENCEMENT OF INVESTMENT PERFORMANCE
Any premium payment processed prior to the twentieth day after the policy's
date of issue will automatically be allocated to the Money Market investment
option. On the later of the date such payment is received or the twentieth day
following the date of issue, the portion of the Money Market investment option
attributable to such payment will
35
<PAGE>
be reallocated automatically among the investment options you have chosen.
All other premium payments will be allocated among the investment options you
have chosen as soon as they are processed.
HOW WE PROCESS CERTAIN POLICY TRANSACTIONS
Premium payments
We will process any premium payment as of the day we receive it, unless one of
the following exceptions applies:
(1) We will process a payment received prior to a policy's date of issue as if
received on the date of issue.
(2) If the Minimum Initial Premium is not received prior to the date of issue,
we will process each premium payment received thereafter as if received on the
business day immediately preceding the date of issue until all of the Minimum
Initial Premium is received.
(3) We will process the portion of any premium payment for which we require
evidence of the insured person's continued insurability only after we have
received such evidence and found it satisfactory to us.
(4) If we receive any premium payment that we think will cause a policy to
become a modified endowment or will cause a policy to lose its status as life
insurance under the tax laws, we will not accept the excess portion of that
premium payment and will immediately notify the owner. We will refund the excess
premium when the premium payment check has had time to clear the banking system
(but in no case more than two weeks after receipt), except in the following
circumstances:
. The tax problem resolves itself prior to the date the refund is to be
made; or
. The tax problem relates to modified endowment status and we receive a
signed acknowledgment from the owner prior to the refund date instructing
us to process the premium notwithstanding the tax issues involved.
In the above cases, we will treat the excess premium as having been received
on the date the tax problem resolves itself or the date we receive the signed
acknowledgment. We will then process it accordingly.
(4) If a premium payment is received or is otherwise scheduled to be processed
(as specified above) on a date that is not a business day, the premium payment
will be processed on the business day next following that date.
Transfers among investment options
Any reallocation among investment options must be such that the total in all
investment options after reallocation equals 100% of account value. Transfers
out of any investment option will be effective at the end of the business day in
which we receive at our Life Servicing Office notice satisfactory to us.
We have the right to defer transfers of amounts out of the fixed investment
option for up to six months.
Dollar cost averaging
Scheduled transfers under this option may be made from the Money Market
investment option to not more than nine other variable investment options.
However, the amount transferred to any one investment option must be at least
$100.
Once we receive the election in form satisfactory to us at our Life Servicing
Office, transfers will begin on the second monthly deduction date following its
receipt. 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 for
so long as you have at least $2,500 of your account value in the Money Market
investment option, or until we receive written notice from you of cancellation
of the option or notice
36
<PAGE>
of the death of the insured person. The dollar cost averaging and rebalancing
options cannot be in effect at the same time. We reserve the right to modify,
terminate or suspend the dollar cost averaging program at any time.
Asset Rebalancing
This option can be elected in the application or by sending the appropriate
form to our Life Servicing Office. You must specify the frequency for
rebalancing (quarterly, semi-annually or annually), the preset percentage for
each variable investment option and a future beginning date. The first
rebalancing will occur on the monthly deduction date that occurs on or next
follows the beginning date you select.
Once elected, rebalancing will continue until we receive notice of
cancellation of the option or notice of the death of the last surviving insured
person. If you cancel rebalancing, you will have to wait 30 days before you can
start it again.
The fixed investment option does not participate in and is not affected by
rebalancing.The rebalancing and dollar cost averaging options cannot be in
effect at the same time. We reserve the right to modify, terminate or suspend
the rebalancing program at any time.
Telephone transfers and policy loans
Once you have completed a written authorization, you may request a transfer or
policy loan by telephone or by fax. If the fax request option becomes
unavailable, another means of telecommunication will be substituted.
If you authorize telephone transactions, you will be liable for any loss,
expense or cost arising out of any unauthorized or fraudulent telephone
instructions which we reasonably believe to be genuine, unless such loss,
expense or cost is the result of our mistake or negligence. We employ procedures
which provide safeguards against the execution of unauthorized transactions, and
which are reasonably designed to confirm that instructions received by telephone
are genuine. These procedures include requiring personal identification, tape
recording calls, and providing written confirmation to the owner. If we do not
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, we may be liable for any loss due to unauthorized or
fraudulent instructions.
Effective date of other policy transactions
The following transactions take effect on the policy anniversary on or next
following the date we approve your request:
. Additional Sum Insured increases.
. Change of death benefit Option from A to B.
A change from Option B to Option A is effective on the policy anniversary on
or next following the date we receive the request.
The following transactions take effect on the monthly deduction date on or
next following the date we approve your request:
. Total Sum Insured decreases
. Reinstatements of lapsed policies
We process loans, surrenders, partial withdrawals and loan repayments as of
the day we receive such request or repayment.
EFFECTS OF POLICY LOANS
The account value, the surrender value, and any death benefit above the Total
Sum Insured are permanently affected by any loan, whether or not it is repaid in
whole or in part. This is because the amount of the loan is deducted from the
investment options and placed in a special loan account. The investment options
and the special loan account will generally have different rates of investment
return.
The amount of the outstanding loan (which includes accrued and unpaid
interest) is subtracted
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<PAGE>
from the amount otherwise payable when the policy proceeds become payable.
Whenever the outstanding loan equals or exceeds the surrender value, the
policy will terminate 31 days after we have mailed notice of termination to you
(and to any assignee of record at such assignee's last known address) specifying
the minimum amount that must be paid to avoid termination, unless a repayment of
at least the amount specified is made within that period.
ADDITIONAL INFORMATION ABOUT HOW CERTAIN POLICY CHARGES WORK
Sales expenses and related charges
The sales charges (i.e., the premium sales charge and the CDSC) help to
compensate us for the cost of selling our policies. (See "What charges will we
deduct from your investment in the policy?" in the Basic Information section of
this prospectus.) The amount of the charges in any policy year does not
specifically correspond to sales expenses for that year. We expect to recover
our total sales expenses over the life of the policies. To the extent that the
sales charges do not 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 our general
assets. (See "How we market the policies" on page 39.)
Effect of premium payment pattern
You 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 any policy year, or paying more than one Target Premium in any
policy year could reduce your total sales charges over time. For example, if the
Target Premium was $1,000 and you paid a premium of $1,000 for ten years, you
would pay total premium sales charges of $400 and be subject to a maximum CDSC
of $1,000. If you paid $2,000 every other policy year for ten policy years,
you would pay total premium sales charges of only $200 and be subject to a
maximum CDSC of $1,000. However, delaying the payment of Target Premiums to
later policy years could increase the risk that the guaranteed death benefit
feature will lapse and the account value will be insufficient to pay policy
charges. As a result, the policy or any Additional Sum Insured may lapse and
eventually terminate. Conversely, accelerating the payment of Target 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 you upon receipt of policy
distributions. (See "Tax considerations" beginning on page 39.)
Monthly charges
Unless we agree otherwise, we will deduct the monthly charges described in the
Basic Information section from your policy's investment options in proportion to
the amount of account value you have in each. For each month that we cannot
deduct any charge because of insufficient account value, the uncollected charges
will accumulate and be deducted when and if sufficient account value becomes
available.
The insurance under the policy continues in full force during any grace period
but, if the insured person dies during the policy grace period, the amount of
unpaid monthly charges is deducted from the death benefit otherwise payable.
Reduced charges for eligible classes
The charges 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 we anticipate that the sales to the members of the class will
result in lower than normal sales or administrative expenses, lower taxes or
lower risks to us. We will make these reductions in accordance with our rules in
effect at the time of the application for a policy. The factors we consider in
determining the eligibility of a particular group for reduced charges, and the
level of the reduction, are as
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<PAGE>
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
lapse and surrender rates of the policies; the size of the class of associated
individuals and the number of years it has been in existence; the aggregate
amount of premiums paid; and any other such circumstances which result in a
reduction in sales or administrative expenses, lower taxes or lower risks. Any
reduction in charges will be reasonable and will apply uniformly to all
prospective policy purchasers in the class and will not unfairly discriminate
against any owner.
HOW WE MARKET THE POLICIES
John Hancock Funds, Inc. ("JHFI"), an indirect wholly-owned subsidiary of John
Hancock located at 101 Huntington Avenue, Boston, MA 02199, is registered as a
broker-dealer under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. JHFI acts as principal
underwriter and principal distributor of the policies sold through the use of
this prospectus. JHFI also serves as principal underwriter for John Hancock
Variable Annuity Accounts H and JF, John Hancock Mutual Variable Life Insurance
Account UV, John Hancock Variable Life Account S, and Investors Partner Life
Account L, all of which are registered under the 1940 Act.
The policies may be purchased through broker-dealers and certain financial
institutions who have entered into selling agreements with JHFI and JHVLICO, and
whose representatives are authorized by applicable law to sell variable life
insurance policies.Gross first year commissions plus any expense allowance
payments paid to such broker-dealers and financial institutions is not expected
to exceed 80% of premiums paid up to the Target Premium plus 3% of any excess
premium payments. Gross renewal commissions (i.e., after the first year) are not
expected to exceed 3% of total premiums paid in policy years 2 through 5 plus
0.15% of account value less loans in policy years 2 and thereafter. In some
situations where the broker dealer provides some or all of the marketing
services required, we may pay an additional gross first year commission of up to
20% of premiums paid up to the Target Premium. In such instances, we may also
pay an additional gross renewal commission. The additional gross renewal
commission would not be expected to exceed 0.10% of account value less loans in
policy years 2 and thereafter.
We reimburse JHFI for direct and indirect expenses actually incurred in
connection with the marketing and sale of the policies.
The offering of the policies is intended to be continuous, but neither JHVLICO
nor JHFI is obligated to sell any particular amount of policies.
TAX CONSIDERATIONS
This description of federal income tax consequences is only a brief summary
and is not intended as tax advice. Tax consequences will vary based on your own
particular circumstances, and for further information you should consult a
qualified tax advisor. Federal, state and local tax laws, regulations and
interpretations can change from time to time. As a result, the tax consequences
to you and the beneficiary may be altered, in some cases retroactively.
Policy proceeds
We believe the policy will receive the same federal income and estate tax
treatment as fixed benefit life insurance policies. Section 7702 of the Internal
Revenue Code (the "Code") defines life insurance for federal tax purposes. If
certain standards are met at issue and over the life of the policy, the policy
will satisfy that definition. We will monitor compliance with these standards.
If the policy complies with the definition of life insurance, we believe the
death benefit proceeds under the policy will be excludable from the
beneficiary's gross income under the Code. In
39
<PAGE>
addition, if you have elected the Long-Term Care Acceleration rider, the rider's
benefits generally will be excludable from gross income under the Code. The
tax-free nature of these accelerated benefits is contingent on the rider meeting
specific requirements under Sections 101 and/or Section 7702B of the Code. We
have designed the rider to meet these standards.
Other policy distributions
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 distributions. In general, the owner will be taxed on the
amount of distributions that exceed the premiums paid under the policy. But
under certain circumstances within the first 15 policy years, the owner may be
taxed on a distribution even if total withdrawals do not exceed total premiums
paid. Any taxable distribution will be ordinary income to the owner (rather than
capital gains).
Distributions for tax purposes can include amounts received upon surrender or
partial withdrawals. You may also be deemed to have received a distribution for
tax purposes if you assign all or part of your policy rights or change your
policy's ownership. If you have elected the Long-Term Care Acceleration Rider,
as described beginning on page 18, you may be deemed to have received a
distribution for tax purposes each time a deduction is made from your policy's
account value to pay the rider charge.
We also believe 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 outstanding loan that
was not previously considered income (as discussed below) will be treated as if
it had been distributed to the owner if the policy terminates for any reason.
It is possible that, despite our monitoring, a policy might fail to qualify as
life insurance under Section 7702 of the Code. This could happen, for example,
if we inadvertently failed to return to you any premium payments that were in
excess of permitted amounts, or if the Trust failed to meet certain investment
diversification or other requirements of the Code. If this were to occur, you
would be subject to income tax on the income and gains under the policy for the
period of the disqualification and for subsequent periods.
In the past, the United States Treasury Department has stated that it
anticipated issuing guidelines prescribing circumstances in which the ability of
a policy owner to direct his or her investment to particular funds may cause the
policy owner, rather than the insurance company, to be treated as the owner of
the shares of those funds. In that case, any income and gains attributable to
those shares would be included in your current gross income for federal income
tax purposes. Under current law, however, we believe that we, and not the owner
of a policy, would be considered the owner of the fund's shares for tax
purposes.
Tax consequences of ownership or receipt of policy proceeds under federal,
state and local estate, inheritance, gift and other tax laws depend on the
circumstances of each owner or beneficiary.
Because there may be unfavorable tax consequences (including recognition of
taxable income and the loss of income tax-free treatment for any death benefit
payable to the beneficiary), you should consult a qualified tax adviser prior to
changing the policy's ownership or making any assignment of ownership interests.
7-pay premium limit
At the time of policy issuance, we will determine whether the Planned Premium
schedule will exceed the 7-pay limit discussed below. If so, our standard
procedures prohibit issuance of the policy unless you sign a form acknowledging
that fact.
The 7-pay limit is the total of net level premiums that would have been
payable at any time for a comparable fixed policy to be fully "paid-up" after
40
<PAGE>
the payment of 7 equal annual premiums. "Paid-up" means that no further premiums
would be required to continue the coverage in force until maturity, based on
certain prescribed assumptions. If the total premiums paid at any time during
the first 7 policy years exceed the 7-pay limit, the policy will be treated as a
"modified endowment", which can have adverse tax consequences.
The owner will be taxed on distributions and loans from a "modified endowment"
to the extent of any income (gain) to the owner (on an income-first basis). The
distributions and loans 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 taxable portions of such
distributions or loans that are made before the owner attains age 591/2.
Furthermore, any time there is a "material change" in an increase in the
Additional Sum Insured, the addition of certain other policy benefits after
issue, a change in death benefit option, or reinstatement of a lapsed policy),
the policy will have a new 7-pay limit as if it were a newly-issued policy. If a
prescribed portion of the policy's then account value, plus all other premiums
paid within 7 years after the material change, at any time exceed the new 7-pay
limit, the policy will become a modified endowment.
Moreover, if benefits under a policy are reduced (such as a reduction in the
Total Sum Insured or death benefit or the reduction or cancellation of certain
rider benefits) during the 7 years in which a 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 its affiliates) to the
owner during any calendar year generally will be treated as one contract for the
purpose of applying the modified endowment rules. A policy received in exchange
for a modified endowment will itself also be a modified endowment. You should
consult your tax advisor if you have questions regarding the possible impact of
the 7-pay limit on your policy.
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. We are not responsible for compliance with the
terms of any such plan or with the requirements of applicable provisions of the
Code.
REPORTS THAT YOU WILL RECEIVE
At least annually, we will send you a statement setting forth the following
information as of the end of the most recent reporting period: the amount of the
death benefit, the Basic Sum Insured and the Additional Sum Insured, the account
value, the portion of the account value in each investment option, the 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). Moreover, you also will receive confirmations of premium payments,
transfers among investment options, policy loans, partial withdrawals and
certain other policy transactions.
Semiannually we will send you a report containing the financial statements of
the Trust, including a list of securities held in each fund.
VOTING PRIVILEGES THAT YOU WILL HAVE
All of the assets in the subaccounts of the Account are invested in shares of
the corresponding funds of the Trust. We will vote the shares of each of the
funds of the Trust which are deemed attributable to variable life insurance
policies at regular and special meetings of the Trust's shareholders in
accordance with instructions received from owners of such policies. Shares of
the Trust held in the Account which are not attributable to such policies, as
well as
41
<PAGE>
shares for which instructions from owners are not received, will be represented
by us at the meeting. We will vote such shares for and against each matter in
the same proportions as the votes based upon the instructions received from the
owners of such policies.
We determine the number of a fund's shares held in a subaccount attributable
to each owner by dividing the amount of a policy's account value held in the
subaccount by the net asset value of one share in the fund. Fractional votes
will be counted. We determine the number of shares as to which the owner may
give instructions as of the record date for the Trust's meeting. Owners of
policies may give instructions regarding the election of the Board of Trustees
or Board of Directors of the Trust, ratification of the selection of independent
auditors, approval of Trust investment advisory agreements and other matters
requiring a shareholder vote. We will furnish owners with information and forms
to enable owners to give voting instructions.
However, we may, in certain limited circumstances permitted by the SEC's
rules, disregard voting instructions. If we do disregard voting instructions,
you will receive a summary of that action and the reasons for it in the next
semi-annual report to owners.
CHANGES THAT WE CAN MAKE AS TO YOUR POLICY
Changes relating to a Trust or the Account
The voting privileges described in this prospectus reflect our 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, we reserve the right to proceed in accordance with any
such revised requirements. We also reserve 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 your policy belongs from the Account to another separate account or
subaccount, (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, John Hancock, or an affiliate of either, (3)
to deregister the Account under the 1940 Act, (4) to substitute for the fund
shares held by a subaccount any other investment permitted by law, and (5) to
take any action necessary to comply with or obtain any exemptions from the 1940
Act. We 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.
Other permissible changes
We reserve the right to make any changes in the policy necessary to ensure the
policy is within the definition of life insurance under the Federal tax laws and
is in compliance with any changes in Federal or state tax laws.
In our policies, we reserve the right to make certain changes if they would
serve the best interests of policy owners or would be appropriate in carrying
out the purposes of the policies. Such changes include the following:
. Changes necessary to comply with or obtain or continue exemptions under
the federal securities laws
. Combining or removing investment options
. Changes in the form of organization of any separate account
Any such changes will be made only to the extent permitted by applicable laws
and only in the manner permitted by such laws. When required by law, we will
obtain your approval of the changes and the approval of any appropriate
regulatory authority.
ADJUSTMENTS WE MAKE TO DEATH BENEFITS
If the insured person commits suicide within certain time periods, the amount
of death benefit we pay will be limited as described in the policy. Also, if
42
<PAGE>
an application misstated the age or gender of the insured person, we will adjust
the amount of any death benefit as described in the policy.
WHEN WE PAY POLICY PROCEEDS
General
We will pay any death benefit, withdrawal, surrender value or loan within 7
days after we receive the last required form or request (and, with respect to
the death benefit, any other documentation that may be required). If we don't
have information about the desired manner of payment within 7 days after the
date we receive notification of the insured person's death, we will pay the
proceeds as a single sum, normally within 7 days thereafter.
Delay to challenge coverage
We may challenge the validity of your insurance policy based on any material
misstatements made to us in the application for the policy. We cannot make such
a challenge, however, beyond certain time limits that are specified in the
policy.
Delay for check clearance
We reserve the right to defer payment of that portion of your account value
that is attributable to a premium payment made by check for a reasonable period
of time (not to exceed 15 days) to allow the check to clear the banking system.
Delay of separate account proceeds
We reserve the right to defer payment of any death benefit, loan or other
distribution that is derived from a variable investment option if (1) the New
York Stock Exchange is closed (other than customary weekend and holiday
closings) or trading on the New York Stock Exchange is restricted; (2) an
emergency exists, as a result of which disposal of securities is not reasonably
practicable or it is not reasonably practicable to fairly determine the account
value; or (3) the SEC by order permits the delay for the protection of owners.
Transfers and allocations of account value among the investment options may also
be postponed under these circumstances. If we need to defer calculation of
separate account values for any of the foregoing reasons, all delayed
transactions will be processed at the next values that we do compute.
OTHER DETAILS ABOUT EXERCISING RIGHTS AND PAYING BENEFITS
Joint ownership
If more than one person owns a policy, all owners must join in most requests
to exercise rights under the policy.
Assigning your policy
You may assign your rights in the policy to someone else as collateral for a
loan or for some other reason. Assignments do not require the consent of any
revocable beneficiary. A copy of the assignment must be forwarded to us. We are
not responsible for any payment we make or any action we take before we receive
notice of the assignment in good order. Nor are we responsible for the validity
of the assignment. An absolute assignment is a change of ownership. All
collateral assignees of record must consent to any full surrender, partial
withdrawal or loan from the policy.
Your beneficiary
You name your beneficiary when you apply for the policy. The beneficiary is
entitled to the proceeds we pay following the insured person's death. You may
change the beneficiary during the insured person's lifetime. Such a change
requires the consent of any irrevocable named beneficiary. A new beneficiary
designation is effective as of the date you sign it, but will not affect any
payments we make before we receive it. If no beneficiary is living when the
insured person dies, we will pay the insurance proceeds to the owner or the
owner's estate.
43
<PAGE>
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 us on certain
Federal securities law matters in connection with the policies.
REGISTRATION STATEMENT FILED WITH THE SEC
This prospectus omits certain information contained in the Registration
Statement which has been filed with the SEC. More details may be obtained from
the SEC upon payment of the prescribed fee.
ACCOUNTING AND ACTUARIAL EXPERTS
Certain of 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 Todd G. Engelsen, F.S.A., F.S.A., an Actuary of
JHVLICO and Second Vice President of John Hancock.
FINANCIAL STATEMENTS OF JHVLICO AND THE ACCOUNT
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.
In addition to those financial statements of JHVLICO and the Account included
herein that have been audited by Ernst & Young LLP, this prospectus also
contains unaudited financial statements of both JHVLICO and the Account for a
period subsequent to the audited financial statements.
44
<PAGE>
LIST 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 and Executive Principal Occupations
----------------------- ---------------------
Officers
--------
<S> <C>
David F. D'Alessandro Chairman of the Board and Chief Executive
Officer of JHVLICO; President and Chief
Executive Officer, John Hancock Life Insurance
Company.
Michele G. Van Leer. Vice Chairman of the Board and President of
JHVLICO; Senior Vice President, John Hancock
Life Insurance Company.
Ronald J. Bocage . . . Director, Vice President and Counsel of JHVLICO;
Vice President and Counsel, John Hancock Life
Insurance Company.
Bruce M. Jones. . . . Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Thomas J. Lee. . . . Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Barbara L. Luddy. . . Director, Vice President and Actuary of JHVLICO;
Senior Vice President, John Hancock Life
Insurance Company.
Robert S. Paster. . . Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Robert R. Reitano. . Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Paul Strong . . . . . Director and Vice President of JHVLICO; Vice
President, John Hancock Life Insurance Company.
Daniel L. Ouellette. Vice President, Marketing, of JHVLICO; Senior
Vice President, John Hancock Life Insurance
Company.
Edward P. Dowd. . . . Vice President, Investments, of JHVLICO; Senior
Vice President, John Hancock Life Insurance
Company
Roger G. Nastou. . . Vice President, Investments, of JHVLICO; Vice
President, John Hancock Life Insurance Company
Todd G. Engelsen. . . Vice President and Illustration Actuary of
JHVLICO; Second Vice President, John Hancock
Life Insurance Company
Julie H. Indge. . . . Treasurer of JHVLICO; Financial Officer, John
Hancock Life Insurance Company
Patrick J. Gill. . . Controller of JHVLICO; Senior Associate
Controller, John Hancock Life Insurance Company.
Peter Scavongelli. . Secretary of JHVLICO; State Compliance Officer,
John Hancock Life Insurance Company
</TABLE>
The business address of all Directors and officers of JHVLICO is John Hancock
Place, Boston, Massachusetts 02117.
45
<PAGE>
UNAUDITED FINANCIAL STATEMENTS
FOR
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
SECOND QUARTER 2000
46
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
2000 1999
----------------------- --------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Bonds . . . . . . . . . . . . . . . . $ 1,344.7 $ 1,216.3
Preferred stocks . . . . . . . . . . 36.9 35.9
Common stocks . . . . . . . . . . . . 2.0 3.2
Investment in affiliates . . . . . . 80.5 80.7
Mortgage loans on real estate . . . . 468.2 433.1
Real estate . . . . . . . . . . . . . 24.7 25.0
Policy loans . . . . . . . . . . . . 195.5 172.1
Cash Items:
Cash in banks . . . . . . . . . . . (3.0) 27.2
Temporary cash investments . . . . . 284.6 222.9
---------------------- ---------
281.6 250.1
Premiums due and deferred . . . . . . 28.9 29.9
Investment income due and accrued . . 40.9 33.2
Other general account assets . . . . 43.7 65.3
Assets held in separate accounts . . 8,569.0 8,268.2
---------------------- ---------
Total assets . . . . . . . . . . . $11,116.6 $10,613.0
====================== =========
OBLIGATIONS AND STOCKHOLDER'S EQUITY
Obligations
Policy reserves . . . . . . . . . . $ 2,048.1 $ 1,866.6
Federal income and other taxes
payable . . . . . . . . . . . . . . 97.8 67.3
Other general account obligations . 207.4 219.0
Transfers from separate account, net (229.6) (221.6)
Asset valuation reserve . . . . . . 19.3 23.1
Obligations related to separate
accounts. . . . . . . . . . . . . . 8,562.1 8,261.6
---------------------- ---------
Total obligations . . . . . . . . . 10,705.1 10,216.0
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 . . . . . . . . . . 572.4 572.4
Unassigned deficit . . . . . . . . . (163.4) (177.9)
---------------------- ---------
Total stockholder's equity . . . . . 411.5 397.0
---------------------- ---------
Total obligations and stockholder's
equity . . . . . . . . . . . . . . $11,116.6 $10,613.0
====================== =========
See condensed notes to the financial
statements (unaudited).
</TABLE>
47
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -----------------
2000 1999 2000 1999
--------- -------- -------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
INCOME
Premiums . . . . . . . . . . . . . . $ 255.7 $228.6 $ 487.0 $452.2
Net investment income . . . . . . . 43.4 31.9 83.0 64.4
Other, net . . . . . . . . . . . . . 110.1 116.6 242.5 261.9
------- ------ ------- ------
409.2 377.1 812.5 778.5
BENEFITS AND EXPENSES
Payments to policyholders and
beneficiaries . . . . . . . . . . . 93.2 94.1 182.4 174.4
Additions to reserves to provide for
future payments to policyholders and
beneficiaries . . . . . . . . . . . 213.4 198.6 429.7 436.8
Expenses of providing service to
policyholders and obtaining new
insurance . . . . . . . . . . . . . 80.4 77.8 153.9 153.5
State and miscellaneous taxes . . . 5.7 8.1 13.3 10.9
------- ------ ------- ------
392.7 378.6 779.3 775.6
------- ------ ------- ------
Gain from operations before federal
income taxes and net realized
capital gains (losses) . . . . . . 16.5 (1.5) 33.2 2.9
Federal income taxes . . . . . . . . 12.2 (1.4) 16.9 (0.4)
------- ------ ------- ------
Gain from operations before net
realized capital gains (losses) . 4.3 (0.1) 16.3 3.3
Net realized capital gains (losses) 0.1 0.5 0.5 (1.0)
------- ------ ------- ------
Net income . . . . . . . . . . . . 4.4 0.4 16.8 2.3
Unassigned deficit at beginning of
period. . . . . . . . . . . . . . . (164.5) (51.2) (177.9) (49.2)
Net unrealized capital gains (losses)
and other adjustments . . . . . . . (3.1) (3.4) (2.0) (3.1)
Other reserves and adjustments . . . (0.2) 2.0 (0.3) (2.2)
------- ------ ------- ------
Unassigned deficit at end of period $(163.4) $(52.2) $(163.4) $(52.2)
======= ====== ======= ======
See condensed notes to the financial
statements (unaudited).
</TABLE>
48
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
-----------------
2000 1999
-------- ----------
(IN MILLIONS)
<S> <C> <C>
Cash flows from operating activities:
Insurance premiums . . . . . . . . . . . . . . . . . . $ 495.7 $ 452.0
Net investment income . . . . . . . . . . . . . . . . . 75.2 60.5
Benefits to policyholders and beneficiaries . . . . . . (167.9) (274.6)
Dividends paid to policyholders . . . . . . . . . . . . (13.0) (12.6)
Insurance expenses and taxes . . . . . . . . . . . . . . (174.4) (195.0)
Net transfers to separate accounts . . . . . . . . . . . (254.7) (343.7)
Other, net . . . . . . . . . . . . . . . . . . . . . . 257.1 289.9
------- -------
Net cash provided from operations . . . . . . . . . . 218.0 (23.5)
------- -------
Cash flows used in investing activities:
Bond purchases . . . . . . . . . . . . . . . . . . . . (305.5) (143.7)
Bond sales . . . . . . . . . . . . . . . . . . . . . . 128.1 41.3
Bond maturities and scheduled redemptions . . . . . . . 36.6 38.9
Bond prepayments . . . . . . . . . . . . . . . . . . . 7.9 8.0
Stock purchases . . . . . . . . . . . . . . . . . . . . (1.9) (0.2)
Proceeds from stock sales . . . . . . . . . . . . . . . 1.4 3.6
Real estate purchases . . . . . . . . . . . . . . . . . (0.1) (1.5)
Real estate sales . . . . . . . . . . . . . . . . . . . 0.0 17.9
Other invested assets purchases . . . . . . . . . . . . (2.0) (4.5)
Proceeds from the sale of other invested assets . . . . 0.0 0.0
Mortgage loans issued . . . . . . . . . . . . . . . . . (49.7) (39.4)
Mortgage loan repayments . . . . . . . . . . . . . . . 14.5 11.4
Other, net . . . . . . . . . . . . . . . . . . . . . . (15.8) 75.1
------- -------
Net cash used in investing activities . . . . . . . . (186.5) 6.9
------- -------
Cash flows from financing activities:
Net increase (decrease) in short-term note payable . . (0.0) (10.7)
------- -------
Net cash provided from financing activities . . . . . (0.0) (10.7)
------- -------
Increase (decrease) in cash and temporary cash
investments . . . . . . . . . . . . . . . . . . . . . 31.5 (27.3)
Cash and temporary cash investments at beginning of year 250.1 19.9
------- -------
Cash and temporary cash investments at the end of
period. . . . . . . . . . . . . . . . . . . . . . . . $ 281.6 $ (7.4)
======= =======
See condensed notes to the financial statements
(unaudited).
</TABLE>
49
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON PAID-IN UNASSIGNED
STOCK CAPITAL DEFICIT TOTAL
------ ------- ---------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
Balance at January 1, 1999 . . . . . . $2.5 $377.5 $ (49.2) $330.8
1999 Transactions:
Capital contribution
Net gain . . . . . . . . . . . . . . 2.3 2.3
Net unrealized capital gains and other
adjustments. . . . . . . . . . . . . (3.1) (3.1)
Other reserves and adjustments . . . (2.2) (2.2)
------- ------
Balance at June 30, 1999 . . . . . . . $2.5 $377.5 $ (52.2) $327.8
==== ====== ======= ======
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
Balance at January 1, 2000 . . . . . . $2.5 $572.4 $(177.9) $397.0
2000 Transactions:
Capital contribution
Net gain . . . . . . . . . . . . . . 16.8 16.8
Net unrealized capital gains and other
adjustments. . . . . . . . . . . . . (2.0) (2.0)
Other reserves and adjustments . . . (0.3) (0.3)
------- ------
Balance at June 30, 2000 . . . . . . . $2.5 $572.4 $(163.4) $411.5
==== ====== ======= ======
See condensed notes to the financial
statements (unaudited).
</TABLE>
50
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited interim financial statements have been prepared on
the basis of 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, which practices differ from
generally accepted accounting principles (GAAP). Pursuant to Financial
Accounting Standard Board Interpretation 40, "Applicability of General Accepted
Accounting Principles to Mutual Life Insurance and Other Enterprises" (FIN 40),
as amended which was effective for 1996 financial statements, financial
statements based on statutory accounting practices can no longer be described as
prepared in conformity with GAAP.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six-month period ending June 30, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000.
51
<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, 1999
and 1998, 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.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Commonwealth of Massachusetts Division of Insurance, which
practices differ from accounting principles generally accepted in the United
States. The variances between such practices and accounting principles generally
accepted in the United States also are described in Note 1. The effects on the
financial statements of these variances are not reasonably determinable but are
presumed to be material.
In our opinion, because of the effects of the matter described in the
preceding paragraph, the financial statements referred to above do not present
fairly, in conformity with accounting principles generally accepted in the
United States, the financial position of John Hancock Variable Life Insurance
Company at December 31, 1999 and 1998, or the results of its operations or its
cash flows for the years then ended.
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of John Hancock
Variable Life Insurance Company at December 31, 1999 and 1998, and the results
of its operations and its cash flows for the years then ended in conformity with
accounting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance.
ERNST & YOUNG LLP
Boston, Massachusetts
March 10, 2000
52
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1999 1998
---------- -----------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Bonds--Note 6 . . . . . . . . . . . . . . . . . . . . $ 1,216.3 $1,185.8
Preferred stocks . . . . . . . . . . . . . . . . . . 35.9 36.5
Common stocks . . . . . . . . . . . . . . . . . . . . 3.2 3.1
Investment in affiliates . . . . . . . . . . . . . . 80.7 81.7
Mortgage loans on real estate--Note 6 . . . . . . . . 433.1 388.1
Real estate . . . . . . . . . . . . . . . . . . . . . 25.0 41.0
Policy loans . . . . . . . . . . . . . . . . . . . . 172.1 137.7
Cash items:
Cash in banks . . . . . . . . . . . . . . . . . . 27.2 11.4
Temporary cash investments . . . . . . . . . . . . 222.9 8.5
--------- --------
250.1 19.9
Premiums due and deferred . . . . . . . . . . . . . . 29.9 32.7
Investment income due and accrued . . . . . . . . . . 33.2 29.8
Other general account assets . . . . . . . . . . . . 65.3 47.5
Assets held in separate accounts . . . . . . . . . . 8,268.2 6,595.2
--------- --------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . $10,613.0 $8,599.0
========= ========
OBLIGATIONS AND STOCKHOLDER'S EQUITY
OBLIGATIONS
Policy reserves . . . . . . . . . . . . . . . . . . $ 1,866.6 $1,652.0
Federal income and other taxes payable--Note 1 . . 67.3 44.3
Other general account obligations . . . . . . . . . 219.0 150.9
Transfers from separate accounts, net . . . . . . . (221.6) (190.3)
Asset valuation reserve--Note 1 . . . . . . . . . . 23.1 21.9
Obligations related to separate accounts . . . . . 8,261.6 6,589.4
--------- --------
TOTAL OBLIGATIONS . . . . . . . . . . . . . . . . .
10,216.0 8,268.2
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 . . . . . . . . . . . . . . . . . . 572.4 377.5
Unassigned deficit--Note 10 . . . . . . . . . . . . (177.9) (49.2)
--------- --------
TOTAL STOCKHOLDER'S EQUITY . . . . . . . . . . . . 397.0 330.8
--------- --------
TOTAL OBLIGATIONS AND STOCKHOLDER'S EQUITY . . . . . $10,613.0 $8,599.0
========= ========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
53
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998
--------- ---------
(IN MILLIONS)
<S> <C>
INCOME
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . $1,272.3
Net investment income--Note 3 . . . . . . . . . . . . . . . 136.0 122.8
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . 605.4 618.1
--------- --------
1,692.2 2,013.2
BENEFITS AND EXPENSES
Payments to policyholders and beneficiaries . . . . . . . . 349.9 301.4
Additions to reserves to provide for future payments to
policyholders and beneficiaries . . . . . . . . . . . . . 888.8 1,360.2
Expenses of providing service to policyholders and
obtaining new insurance--Note 5 . . . . . . . . . . . . . . 314.4 274.2
State and miscellaneous taxes. . . . . . . . . . . . . . . . 20.5 28.1
---------- --------
1,573.6 1,963.9
----------
Gain from operations before federal income
taxes and net realized capital losses 118.6 49.3
Federal income taxes--Note 1 . . . . . . . . . . . . . . . . 42.9 33.1
---------- --------
GAIN FROM OPERATIONS BEFORE NET REALIZED CAPITAL LOSSES 75.7 16.2
Net realized capital losses--Note 4 . . . . . . . . . . . . (1.7) (0.6)
---------- --------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . 74.0 15.6
Unassigned deficit at beginning of year . . . . . . . . . . (49.2) (58.3)
Net unrealized capital losses and other adjustments--Note 4 (3.8) (6.0)
Other reserves and adjustments--Note 10 . . . . . . . . . . (198.9) (0.5)
---------- --------
UNASSIGNED DEFICIT AT END OF YEAR . . . . . . . . . . . $(177.9) $ (49.2)
========== ========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
54
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------
1999 1998
------- --------
(IN MILLIONS)
<S> <C>
Cash flows from operating activities:
Insurance premiums . . . . . . . . . . . . . .
Net investment income . . . . . . . . . . . 134.2 118.2
Benefits to policyholders and beneficiaries . (321.6) (275.5)
Dividends paid to policyholders . . . . . . . . . (25.6) (22.3)
Insurance expenses and taxes . . . . . . . . . (344.8) (296.9)
Net transfers to separate accounts . . . . . . . (705.3) (874.4)
Other, net . . . . . . . . . . . . . . . . . . 540.6 551.3
------- -----------
NET CASH PROVIDED FROM OPERATIONS . . . . . . 236.0 475.7
------- -----------
Cash flows used in investing activities:
Bond purchases . . . . . . . . . . . . . . . . (240.7) (618.8)
Bond sales . . . . . . . . . . . . . . . . . . 108.3 340.7
Bond maturities and scheduled redemptions . . 78.4 111.8
Bond prepayments . . . . . . . . . . . . . . . 18.7 76.5
Stock purchases . . . . . . . . . . . . . . . (3.9) (23.4)
Proceeds from stock sales . . . . . . . . . . 3.6 1.9
Real estate purchases . . . . . . . . . . . . (2.2) (4.2)
Real estate sales . . . . . . . . . . . . . . 17.8 2.1
Other invested assets purchases . . . . . . . (4.5) 0.0
Mortgage loans issued. . . . . . . . . . . . . (70.7) (145.5)
Mortgage loan repayments . . . . . . . . . . . 25.3 33.2
Other, net . . . . . . . . . . . . . . . . . . (68.9) (435.2)
------- -----------
NET CASH USED IN INVESTING ACTIVITIES . . . . (138.8) (660.9)
------- -----------
Cash flows from financing activities:
Capital contribution . . . . . . . . . . . . . 194.9
Net (decrease) increase in short-term note
payable. . . . . . . . . . . . . . . . . . . (61.9) 61.9
------- -----------
NET CASH PROVIDED FROM FINANCING ACTIVITIES . . 133.0 61.9
------- -----------
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH
INVESTMENTS 230.2
Cash and temporary cash investments at beginning
of year. . . . . . . . . . . . . . . . . . . . . 19.9 143.2
------- -----------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF
YEAR. . . . . . . . . . . . . . . . . . . . . 250.1 $19.9
======= ===========
</TABLE>
The accompanying notes are an integral part of the statutory-basis financial
statements.
55
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES
John Hancock Variable Life Insurance Company (the Company) is a wholly-owned
subsidiary of John Hancock Life Insurance Company (formerly 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, Signator Insurance Agency, which includes a career
agency system composed of Company-supported independent general agencies and a
direct brokerage system that markets directly to external independent brokers.
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 in
relation to future estimated gross profits; (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, 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
During March 1998, the NAIC adopted codified statutory accounting principles
("Codification") effective January 1, 2001. Codification will likely change, to
some extent, prescribed statutory accounting practices and may result in changes
to the accounting practices that the Company uses to prepare its statutory-basis
financial statements. Codification will require adoption by the various states
before it becomes the prescribed statutory basis of accounting for insurance
companies domesticated within those states. Accordingly, before Codification
becomes effective for the Company, the Commonwealth of Massachusetts must adopt
Codification as the prescribed basis of accounting on which domestic insurers
must report their statutory-basis results to the Division
56
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
of Insurance. At this time, it is anticipated that the Commonwealth of
Massachusetts will adopt Codification effective January 1, 2001. The impact of
any such changes on the Company's unassigned deficit is not expected to be
material.
Revenues and Expenses
Premium revenues are recognized over the premium-paying period of the policies
whereas expenses, including the acquisition costs of new business, are charged
to operations as incurred and policyholder dividends are provided as paid or
accrued.
Cash and Temporary Cash Investments
Cash includes currency on hand and demand deposits with financial
institutions. Temporary cash investments are short-term, highly-liquid
investments both readily convertible to known amounts of cash and so near
maturity that there is insignificant risk of changes in value because of changes
in interest rates.
Valuation of Assets
General account investments are carried at amounts determined on the following
bases:
Bond and stock values are carried as prescribed by the NAIC; bonds generally
at amortized amounts or cost, preferred stocks generally at cost and common
stocks at fair value. The discount or premium on bonds is amortized using the
interest method.
Investments in affiliates are included on the statutory equity method.
Loan-backed bonds and structured securities are valued at amortized cost using
the interest method including anticipated prepayments. Prepayment assumptions
are obtained from broker dealer surveys or internal estimates and are based on
the current interest rate and economic environment. The retrospective
adjustment method is used to value all such securities except for interest-only
securities, which are valued using the prospective method.
The net interest effect of interest rate and currency rate swap transactions
is recorded as an adjustment of interest income as incurred. The initial cost
of interest rate cap agreements is amortized to net investment income over the
life of the related agreement. Gains and losses on financial futures contracts
used as hedges against interest rate fluctuations are deferred and recognized in
income over the period being hedged.
Mortgage loans are carried at outstanding principal balance or amortized cost.
Investment 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 $1.9 million in 1999 and $3.0 million in
1998.
Real estate acquired in satisfaction of debt and real estate held for sale are
carried at the lower of cost or fair value.
Policy loans are carried at outstanding principal balance, not in excess of
policy cash surrender value.
57
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
Asset Valuation and Interest Maintenance Reserves
The Asset Valuation Reserve (AVR) is computed in accordance with the
prescribed NAIC formula and represents a provision for possible fluctuations in
the value of bonds, equity securities, mortgage loans, real estate and other
invested assets. 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, 1999, the IMR, net of 1999 amortization of $2.3 million, amounted to $7.4
million, which is included in policy reserves. The corresponding 1998 amounts
were $2.4 million and $10.7 million, respectively.
Goodwill
The excess of cost over the statutory book value of the net assets of life
insurance business acquired was $8.9 million and $11.4 million at December 31,
1999 and 1998, respectively, and generally is amortized over a ten-year period
using a straight-line method.
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
58
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
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.
Fair values for futures contracts are based on quoted market prices. Fair
values for interest rate swap, cap agreements, and currency swap agreements are
based on current settlement values. The current settlement values are based on
brokerage quotes that utilize pricing models or formulas using current
assumptions.
The fair value for mortgage loan 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 engaged 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, 1999.
Capital Gains and Losses
Realized capital gains and losses are determined using the specific
identification method. Realized capital gains and losses, net of taxes and
amounts transferred to the IMR, are included in net 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 1999.
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 basis for the affiliated group.
The federal income
59
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
taxes of the Company are allocated on a separate return basis with certain
adjustments. The Company made federal income tax payments of $10.6 million in
1999 and $38.2 million in 1998.
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.
Amounts for disputed tax issues relating to the prior years are charged or
credited directly to policyholders' contingency reserve.
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. Reserve
modifications resulting from such determinations are recorded directly to
stockholder's equity. No such refinements were made during 1999 or 1998.
Reinsurance
Premiums, commissions, expense reimbursements, benefits and reserves related
to reinsured business are accounted for on bases consistent with those used in
accounting for the original policies issued and the terms of the reinsurance
contracts. Premiums ceded to other companies have been reported as a reduction
of premium income. Amounts applicable to reinsurance ceded for future policy
benefits, unearned premium reserves and claim liabilities have been reported as
reductions of these items.
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 the
final contingent payment to CPAL of $1.5 million during 1998.
60
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
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 was subsequently renamed Investors Partner
Life Insurance Company (IPL) on March 5, 1998. IPL manages the business assumed
from Charter and began marketing term life and variable universal life products
through brokers in 1999. Summarized financial information for IPL for 1999 and
1998 is as follows:
<TABLE>
<CAPTION>
1999 1998
------- -------
(IN MILLIONS)
<S> <C> <C>
Total assets. . . . . . . . . . . . . . . . 570.7 587.8
Total liabilities. . . . . . . . . . . . . . 498.9 517.5
Total revenue. . . . . . . . . . . . . . . . 35.6 38.8
Net income. . . . . . . . . . . . . . . . . 3.5 3.8
</TABLE>
3. NET INVESTMENT INCOME
Investment income has been reduced by the following amounts:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
------ ------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Investment expenses . . . . . . . . . . . . . $ 9.5 $ 8.3
Interest expense. . . . . . . . . . . . . . 1.7 2.4
Depreciation expense. . . . . . . . . . . . 0.6 0.8
Investment taxes. . . . . . . . . . . . . . 0.3 0.7
------ ------
$12.1 $12.2
====== ======
</TABLE>
61
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
4. NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS
Net realized capital gains (losses) consist of the following items:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
------ ------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Net gains from asset sales . . . . . . . . . . . (2.8) 7.6
Capital gains tax . . . . . . . . . . . . . . . . 0.2 (2.9)
Net capital gains transferred to IMR . . . . . . 0.9 (5.3)
------ ------
Net REALIZED CAPITAL LOSSES . . . . . . . . . . . (1.7) (0.6)
====== ======
</TABLE>
Net unrealized capital gains (losses) and other adjustments consist of the
following items:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
------ ------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Net losses from changes in security values and book
value adjustments. . . . . . . . . . . . . . . (2.6) (2.7)
Increase in asset valuation reserve . . . . . . . . (1.2) (3.3)
------ ------
Net UNREALIZED CAPITAL LOSSES AND OTHER ADJUSTMENTS (3.8) (6.0)
====== ======
</TABLE>
62
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
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 1999 and 1998 to reflect continuing changes in
the Company's operations. The amount of the service fee charged to the Company
was $188.3 million and $157.5 million in 1999 and 1998, 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 $0.2 million and
$0.7 million in 1999 and 1998, 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 1999 issues of flexible premium variable life insurance and
scheduled premium variable life insurance policies. In connection with this
agreement, John Hancock transferred $44.5 million and $4.9 million of cash for
tax, commission, and expense allowances to the Company, which increased the
Company's net gain from operations by $20.6 million and $22.2 million in 1999
and 1998, respectively.
Effective January 1, 1996, the Company entered into a modified coinsurance
agreement with John Hancock to reinsure 50% of the 1995 inforce block and 50% of
1996 and all future issue years of certain variable annuity contracts
(Independence Preferred, Declaration, Independence 2000, MarketPlace, and
Revolution). In connection with this agreement, the Company received a net cash
payment of $40.0 million and $12.7 million in 1999 and 1998, respectively, for
surrender benefits, tax, reserve increase, commission, expense allowances and
premium, This agreement increased the Company's net gain from operations by
$26.9 million and $8.4 million in 1999 and 1998, 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 1999 and 1998 for all policies that are not reinsured under
any other indemnity agreement. In connection with the agreement, John Hancock
received $0.8 million and 1.0 million in 1999 and 1998, respectively, for
mortality claims to the Company. This agreement decreased the Company's net
gain from operations in both 1999 and 1998 by $0.5 million.
At December 31, 1998 the Company had outstanding a short-term note of $61.9
million payable to an affiliate at a variable rate of interest. The note was
part of a revolving line of credit and was repaid in 1999. Interest paid in
1999 and 1998 was $1.7 million and $2.9 million, respectively. The note is
included in other general account obligations at December 31, 1998.
63
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
6. INVESTMENTS
The statement value and fair value of bonds are shown below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
-------------- -------------- --------------- ---------
(IN MILLIONS)
December 31, 1999 . .
U.S. Treasury
securities and
obligations of U.S.
government
corporations and
agencies . . . . . . 5.9 0.0 0.1 5.8
Obligations of states
and political
subdivisions . . . . 2.2 0.1 0.1 2.2
Debit securities
issued by foreign
governments. . . . . 13.9 0.8 0.1 14.6
Corporate securities 964.9 13.0 59.4 918.5
Mortgage-backed
securities . . . . . 229.4 0.5 7.8 222.1
-------- ----- ------ --------
Total bonds . . . . .
======== ===== ====== ========
December 31, 1998
U.S. Treasury
securities and
obligations of U.S.
government
corporations and
agencies . . . . . . 5.1 0.1 0.0 5.2
Obligations of states
and political
subdivisions . . . . 3.2 0.3 0.0 3.5
Corporate securities 925.2 50.4 15.0 960.6
Mortgage-backed
securities . . . . . 252.3 10.0 0.1 262.2
-------- ----- ------ --------
Total bonds . . . . . 15.1
======== ===== ====== ========
</TABLE>
64
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
The statement value and fair value of bonds at December 31, 1999, by
contractual maturity, are shown below. Maturities will differ from contractual
maturities because eligible borrowers may exercise their right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
<S> <C> <C>
FAIR
VALUE VALUE
-------- ---------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Due in one year or less. . . . . . . . . . . . . . $ 58.5 58.2
Due after one year through five years. . . . . . . 286.8 282.0
Due after five years through ten years . . . . . . 425.4 405.6
Due after ten years. . . . . . . . . . . . . . . . 216.2 195.3
-------- ---------
986.9 941.1
Mortgage-backed securities . . . . . . . . . . . . 229.4 222.1
-------- ---------
$1,216.3
======== =========
</TABLE>
Gross gains of $0.3 million in 1999 and $3.4 million in 1998 and gross losses
of $4.0 million in 1999 and $0.7 million in 1998 were realized from the sale of
bonds.
At December 31, 1999, bonds with an admitted asset value of $9.1 million were
on deposit with state insurance departments to satisfy regulatory requirements.
The cost of common stocks was $3.1 million and $2.1 million at December 31,
1999 and 1998, respectively. At December 31, 1999, gross unrealized
appreciation on common stocks totaled $1.2 million, and gross unrealized
depreciation totaled $1.1 million. The fair value of preferred stock totaled
$35.9 million at December 31, 1999 and $36.5 million at December 31, 1998.
Bonds with amortized cost of $0.4 million were non-income producing for the
twelve months ended December 31, 1999.
At December 31, 1999, the mortgage loan portfolio was diversified by
geographic region and specific collateral property type as displayed below. The
Company controls credit risk through credit approvals, limits and monitoring
procedures.
65
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GEOGRAPHIC
PROPERTY TYPE CONCENTRATION
Apartments. . . . . . . . $112.1 East North Central $ 71.3
Hotels. . . . . . . . . . 11.3 East South Central 7.4
Industrial. . . . . . . . 66.0 Middle Atlantic 28.5
Office buildings. . . . . 86.4 Mountain 21.0
Retail. . . . . . . . . . 25.5 New England 37.5
Agricultural. . . . . . . 99.6 Pacific 111.1
Other . . . . . . . . . . 32.2 South Atlantic 87.6
West North Central 16.6
West South Central 48.6
Other 3.5
------
$433.1 $433.1
======
</TABLE>
At December 31, 1999, the fair values of the commercial and agricultural
mortgage loans portfolios were $323.5 million and $98.2 million, respectively.
The corresponding amounts as of December 31, 1998 were approximately $331.3
million and $70.0 million, respectively.
The maximum and minimum lending rates for mortgage loans during 1999 were
14.24% and 6.84% for agricultural loans, 7.45% and 7.00% 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.
66
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
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 1999 were $594.9 million, $132.8 million, and $13.6 million,
respectively. The corresponding amounts in 1998 were $590.2 million, $63.2
million, and $8.2 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 agreement in which the
reinsurer may unilaterally cancel any reinsurance for reasons other than
nonpayment of premiums or other similar credits. The Company does not have any
reinsurance agreements in effect in which the amount of losses paid or accrued
through December 31, 1999 would result in a payment to the reinsurer of amounts
which, in the aggregate and allowing for offset of mutual credits from other
reinsurance agreements with the same reinsurer, exceed the total direct premiums
collected under the reinsured policies.
8. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The notional amounts, carrying values and estimated fail values of the
Company's derivative instruments were as follows at December 31:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <S> <C> <C>
NUMBER OF CONTRACTS/ ASSETS (LIABILITIES)
------------------
NOTIONAL AMOUNTS 1999 1998
FAIR VALUE
---------
------- ------- --------- --------- ---------
(IN MILLIONS)
Futures contracts to $ (0.5)
sell securities 362.0 947.0 $0.6 $0.6 $(0.5)
Interest rate swap (17.7)
agreements $965.0 $365.0 -- 11.5 --
Interest rate cap
agreements 239.4 89.4 5.6 5.6 3.1
Currency rate swap (3.3)
agreements 15.8 15.8 -- (1.6) --
</TABLE>
67
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
The Company uses futures contracts, interest rate swap, cap agreements, and
currency rate swap agreements for other than trading purposes to hedge and
manage its exposure to changes in interest rate levels, foreign exchange rate
fluctuations and to manage duration mismatch of assets and liabilities.
The futures contracts expire in 2000. The interest rate swap agreements
expire in 2000 to 2011. The interest rate cap agreements expire in 2006 to
2008. The currency rate swap agreements expire in 2006 to 2009.
The Company's exposure to credit risk is the risk of loss from a counterparty
failing to perform to the terms of the contract. The Company continually
monitors its position and the credit ratings of the counterparties to these
derivative instruments. To limit exposure associated with counterparty
nonperformance on interest rate and currency swap agreements, the Company enters
into master netting agreements with its counterparties. The Company believes the
risk of incurring losses due to nonperformance by its counterparties is remote
and that such losses, if any, would be immaterial. Futures contracts trade on
organized exchanges and, therefore, have minimal credit risk.
9. POLICY RESERVES POLICYHOLDERS' AND BENIFICIARIES' FUNDS AND OBLIGATIONS
RELATED TO SEPARATE ACCOUNTS
The Company' annuity reserves and deposit fund liabilities that are subject to
discretionary withdrawal, with and without adjustment, are summarized as
follows.
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1999 PERCENT
---------------- ------
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Subject to discretionary withdrawal (with
adjustment)
With market value adjustment . . . . . . . . . $3.8 0.1%
At book value less surrender charge 40.5 1.5
At market value . . . . . . . . . . . . . . . . 2,326.6 87.1
--------
Total with adjustment. . . . . . . . . . . 2,370.9 88.7
Subject to discretionary withdrawal 287.1 10.7
at book value (without adjustment) . . . . .
Not subject to discretionary withdrawal--general
account. . . . . . . . . . . . . . . . . . . . 15.4 0.6
--------
Total annuity reserves and deposit liabilities $2,673.4 100.0%
========
</TABLE>
68
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
10. COMMITMENTS AND CONTINGENCIES
The Company has extended commitments to purchase long-term bonds and issue
real estate mortgages totaling $15.4 million and $3.5 million, respectively, at
December 31, 1999. The Company monitors the creditworthiness of borrowers under
long-term bonds 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 $19.4 million at December 31, 1999. The majority of these commitments
expire in 2000.
In the normal course of its business operations, the Company is involved with
litigation from time to time with claimants, beneficiaries and others, and a
number of litigation matters were pending as of December 31, 1999. It is the
opinion of management, after consultation with counsel, that the ultimate
liability with respect to these claims, if any, will not materially affect the
financial position or results of operations of the Company.
During 1997, John Hancock entered into a court-approved settlement relating to
a class action lawsuit involving certain individual life insurance policies sold
from 1979 through 1996. In entering into the settlement, John Hancock
specifically denied any wrongdoing. During 1999, the Company recorded a $194.9
million reserve, through a direct charge to its unassigned deficit, representing
the Company's share of the settlement and John Hancock contributed $194.9
million of capital to the Company. The reserve held at December 31, 1999
amounted to $136.5 million and is based on a number of factors, including the
estimated number of claims, the expected type of relief to be sought by class
members (general relief or alternative dispute resolution), the estimated cost
per claim and the estimated costs to administer the claims.
Given the uncertainties associated with estimating the reserve, it is
reasonably possible that the final cost of the settlement could differ
materially from the amounts presently provided for by the Company. John Hancock
and the Company will continue to update their estimate of the final cost of the
settlement as claims are processed and more specific information is developed,
particularly as the actual cost of the claims subject to alternative dispute
resolution becomes available. However, based on information available at this
time, and the uncertainties associated with the final claim processing and
alternative dispute resolution, the range of any additional costs related to the
settlement cannot be reasonably estimated. If the Company's share of the
settlement increases, John Hancock will contribute additional capital to the
Company so that the Company's total stockholder's equity would not be impacted.
69
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS--(CONTINUED)
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of the
Company's financial instruments:
<TABLE>
<CAPTION>
<S> <C>
DECEMBER 31,
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
--------------- ---------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(IN MILLIONS)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ASSETS
Bonds--Note 6. . . . .
Preferred stocks--Note
6. . . . . . . . . . . . 35.9 35.9 36.5 36.5
Common stocks--Note 6. 3.2 3.2 3.1 3.1
Mortgage loans on real
estate--Note 6. . . . . 433.1 421.7 388.1 401.3
Policy loans--Note 1. 172.1 172.1 137.7 137.7
Cash items--Note 1. . 250.1 250.1 19.9 19.9
Derivatives assets
(liabilities) relating
to: --Note 8. . . . .
Futures contracts. . . 0.6 0.6 (0.5) (0.5)
Interest rate swaps. . -- 11.5 -- (17.7)
Currency rate swaps. . -- (1.6) -- (3.3)
Interest rate caps. . 5.6 5.6 3.1 3.1
LIABILITIES
Commitments--Note 10. -- 19.4 -- 32.1
</TABLE>
The carrying 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.
12. SUBSEQUENT EVENTS
REORGANIZATION AND INITIAL PUBLIC OFFERING
Pursuant to a Plan of Reorganization approved by the policyholders of John
Hancock and the Commonwealth of Massachusetts Division of Insurance, effective
February 1, 2000, John Hancock converted from a mutual life insurance company to
a stock life insurance company (i.e., demutualized) and became a wholly owned
subsidiary of John Hancock Financial Services, Inc., which is a holding company.
In connection with the reorganization, John Hancock changed its name to John
Hancock Life Insurance Company. In addition, on February 1, 2000, John Hancock
Financial Services, Inc. completed its initial public offering and 102 million
shares of common stock were issued at an initial public offering price of $17
per share.
70
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENT--(CONTINUED)
13. IMPACT OF YEAR 2000 (UNAUDITED)
The Company participated in the Year 2000 remediation project of its parent,
John Hancock. By late 1999, John Hancock and the Company completed their Year
2000 readiness plan to address issues that could result from computer programs
written using two digits to define the applicable year rather than four to
define the applicable year and century. As a result, John Hancock and the
Company were prepared for the transition to the Year 2000 and did not experience
any significant Year 2000 problems with respect to mission critical information
technology ("IT") or non-IT systems, applications or infrastructure. During the
date rollover to the year 2000, John Hancock and the Company implemented and
monitored their millennium rollover plan and conducted business as usual on
Monday, January 3, 2000.
Since January 3, 2000, the information systems, including mission critical
systems, which in the event of a Year 2000 failure would have the greatest
impact on operations, have functioned properly. In addition, neither John
Hancock nor the Company have experienced any significant Year 2000 issues
related to interactions with material business partners. No disruptions have
occurred which impact John Hancock or the Company's ability to process claims,
update customer accounts, process financial transactions, or report accurate
data to management and no business interruptions due to Year 2000 issues have
been experienced. While John Hancock and the Company continue to monitor their
systems, and those of material business partners, closely to ensure that no
unexpected Year 2000 issues develop, neither John Hancock nor the Company have
reason to expect any such issues.
The costs of the Year 2000 project consist of internal IT personnel and
external costs such as consultants, programmers, replacement software, and
hardware. The costs of the Year 2000 project are expensed as incurred. The
project is funded partially through a reallocation of resources from
discretionary projects. Through December 31, 1999, John Hancock has incurred
and expensed approximately $20.8 million in related payroll costs for internal
IT personnel on the project. The estimated remaining IT personnel costs of the
project are approximately $1.0 million. Through December 31, 1999, John Hancock
has incurred and expensed approximately $47.0 million in external costs for the
project. John Hancock's estimated remaining external cost of the project is
approximately $2.0 million. The total costs of the Year 2000 project to John
Hancock, based on management's best estimates, include approximately $21.7
million in internal IT personnel, $14.6 million in the external modification of
software, $18.3 million for external solution providers, $9.1 million in
replacement costs of non-compliant IT systems and $6.9 million in oversight,
test facilities and other expenses. Accordingly, the estimated range of total
costs of the Year 2000 project to John Hancock, internal and external, is
approximately $70 to $72.5 million. John Hancock's total Year 2000 project
costs include the estimated impact of external solution providers based on
presently available information.
71
<PAGE>
UNAUDITED FINANCIAL STATEMENTS
FOR
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
SECOND QUARTER 2000
72
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 2000
<TABLE>
<CAPTION>
INTERNATIONAL
LARGE CAP ACTIVE EQUITY SMALL CAP
GROWTH BOND INDEX GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash. . . . . . . . . $ -- $ -- $ -- $ --
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value. . . . . . . . 176,581,445 234,710,166 30,279,715 15,146,841
Policy loans and
accrued interest
receivable . . . . . 23,134,622 58,001,138 3,128,604 --
Receivable from:
John Hancock Variable
Series Trust I. . . 10,411 1,388,616 55,752 --
M Fund Inc.. . . . . -- -- -- --
------------ ------------ ----------- -----------
Total assets. . . . . 199,726,478 294,099,920 33,464,071 15,146,841
LIABILITIES
Payable to John
Hancock Variable Life
Insurance Company. . 2,452 3,267 447 245
Asset charges payable 474 1,189 -- --
------------ ------------ ----------- -----------
Total liabilities . . 2,926 4,456 447 245
------------ ------------ ----------- -----------
Net assets. . . . . . $199,723,552 $294,095,464 $33,463,624 $16,146,596
============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
GLOBAL MID CAP LARGE CAP MONEY
BALANCED GROWTH VALUE MARKET
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash. . . . . . . . . . . $ -- $ -- $ -- $ --
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value. . . . 1,009,123 26,659,950 10,182,562 62,828,554
Policy loans and accrued
interest receivable. . . -- -- -- 13,821,060
Receivable from:
John Hancock Variable
Series Trust I. . . . . 2,217 -- 13,241 32,906
M Fund Inc.. . . . . . . -- -- -- --
---------- ----------- ----------- -----------
Total assets. . . . . . . 1,011,340 26,659,950 10,195,803 76,682,520
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company. . . . . . . . . 17 429 169 2,664
Asset charges payable . . -- -- -- 850
---------- ----------- ----------- -----------
Total liabilities. . . . 17 429 169 3,514
---------- ----------- ----------- -----------
Net assets. . . . . . . . $1,011,323 $26,659,521 $10,195,634 $76,679,006
========== =========== =========== ===========
</TABLE>
See accompanying notes.
73
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SMALL/MID
MID CAP CAP REAL ESTATE GROWTH &
VALUE GROWTH EQUITY INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash. . . . . . . . . $ -- $ -- $ -- $ --
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value. . . . . . . . 5,655,397 12,697,945 12,765,326 1,054,098,419
Policy loans and
accrued interest
receivable . . . . . -- -- 2,042,422 192,979,449
Receivable from:
John Hancock Variable
Series Trust I. . . 4,035 -- -- 712,339
M Fund Inc.. . . . . -- -- -- --
------------ ----------- ----------- --------------
Total assets. . . . . 5,659,432 12,697,945 14,807,748 1,247,790,207
LIABILITIES
Payable to John
Hancock Variable Life
Insurance Company. . 93 208 194 14,546
Asset charges payable -- -- 42 3,955
------------ ----------- ----------- --------------
Total liabilities . . 93 208 236 18,501
------------ ----------- ----------- --------------
Net assets. . . . . . $ 5,659,339 $12,697,737 $14,807,512 $1,247,771,706
============ =========== =========== ==============
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM SMALL CAP INTERNATIONAL
MANAGED BOND VALUE OPPORTUNITIES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash. . . . . . . . . $ -- $ -- $ -- $ --
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value. . . . . . . . 412,811,976 1,051,732 4,409,122 6,171,237
Policy loans and
accrued interest
receivable. . . . . . 79,675,824 -- -- --
Receivable from:
John Hancock Variable
Series Trust I. . . 979,880 5,435 5,593 4,951
M Fund Inc.. . . . . -- -- -- --
------------ ---------- ---------- ----------
Total assets. . . . . 493,467,680 1,057,167 4,414,715 6,176,188
LIABILITIES
Payable to John Hancock
Variable Life
Insurance Company. . 5,741 17 74 100
Asset charges payable . 1,633 -- -- --
------------ ---------- ---------- ----------
Total liabilities. . . 7,374 17 74 100
------------ ---------- ---------- ----------
Net assets. . . . . . $493,460,306 $1,057,150 $4,414,641 $6,176,088
============ ========== ========== ==========
</TABLE>
See accompanying notes.
74
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
TURNER BRANDES
EQUITY GLOBAL CORE INTERNATIONAL
INDEX BOND GROWTH EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . . . $ -- $ -- $ -- $ --
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value . . . 25,463,881 1,610,930 450,305 655,428
Policy loans and accrued
interest receivable . . -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I . . . . 16,079 6,956 -- --
M Fund Inc. . . . . . . -- -- -- --
----------- ---------- -------- --------
Total assets . . . . . . 25,479,960 1,617,886 450,305 655,428
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company . . . . . . . . 414 27 7 11
Asset charges payable . -- -- -- --
----------- ---------- -------- --------
Total liabilities. . . . 414 27 7 11
----------- ---------- -------- --------
Net assets . . . . . . . $25,479,546 $1,617,859 $450,298 $655,417
=========== ========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
FRONTIER EMERGING INTERNATIONAL
CAPITAL MARKETS OPPORTUNITIES
APPRECIATION EQUITY II BOND INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ---------- ------------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash. . . . . . . . . . $ -- $ -- $ -- $ --
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value. . . 897,620 1,185,730 273,330 749,101
Policy loans and accrued
interest receivable. . -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I. . . . -- -- 190 4,094
M Fund Inc.. . . . . . -- -- -- --
-------- ---------- -------- --------
Total assets. . . . . . 897,620 1,185,730 273,520 753,195
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company. . . . . . . . 15 19 4 12
Asset charges payable . -- -- -- --
-------- ---------- -------- --------
Total liabilities. . . 15 19 4 12
-------- ---------- -------- --------
Net assets. . . . . . . $897,605 $1,185,711 $273,516 $753,183
======== ========== ======== ========
</TABLE>
See accompanying notes.
75
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) (CONTINUED)
JUNE 30, 2000
<TABLE>
<CAPTION>
CLIFTON
SMALL/MID HIGH YIELD ENHANCED
CAP CORE BOND U.S. EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- -----------
<S> <C> <C> <C>
ASSETS
Cash. . . . . . . . . . . . . . . . . . $ -- $ -- $ --
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value . . . . . . . . . . . . . . . 188,808 295,903 18,155
Policy loans and accrued interest
receivable . . . . . . . . . . . . . . -- -- --
Receivable from:
John Hancock Variable Series Trust I . 285 2,023 --
M Fund Inc.. . . . . . . . . . . . . . -- -- --
-------- -------- -------
Total assets. . . . . . . . . . . . . . 189,093 297,926 18,155
LIABILITIES
Payable to John Hancock Variable Life
Insurance Company. . . . . . . . . . . 3 5 --
Asset charges payable . . . . . . . . . -- -- --
-------- -------- -------
Total liabilities . . . . . . . . . . . 3 5 --
-------- -------- -------
Net assets. . . . . . . . . . . . . . . $189,090 $297,921 $18,155
======== ======== =======
</TABLE>
See accompanying notes.
76
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT ACTIVE BOND SUBACCOUNT
------------------------------------- ---------------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . . $ 193,334 $24,007,195 $11,641,271 $7,284,647 $ 17,792,726 $19,685,096
M Fund Inc.. . . . . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans . . . . . . 744,736 1,211,333 1,008,607 2,113,683 4,084,783 4,027,376
----------- ----------- ----------- ---------- ------------ -----------
Total investment income . . . . . . . . . . 938,070 25,218,528 12,649,878 9,398,330 21,877,509 23,712,472
Expenses:
Mortality and expense risks. . . . . . . . 504,066 828,714 624,665 805,912 1,643,861 1,624,615
----------- ----------- ----------- ---------- ------------ -----------
Net investment income . . . . . . . . . . . 434,004 24,389,814 12,025,213 8,592,418 20,233,648 22,087,857
Net realized and unrealized gain (loss) on
investments:
Net realized gain. . . . . . . . . . . . . 2,032,851 4,239,424 3,520,199 (29,483) 192,098 1,600,539
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . 7,172,532 1,727,703 18,509,310 505,228 (20,304,536) (2,317,324)
----------- ----------- ----------- ---------- ------------ -----------
Net realized and unrealized gain (loss) on
investments. . . . . . . . . . . . . . . . 9,205,383 5,967,127 22,029,509 475,745 (20,112,438) (716,785)
----------- ----------- ----------- ---------- ------------ -----------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . . $ 9,639,387 $30,356,941 $34,054,722 $9,068,163 $ 121,210 $21,371,072
=========== =========== =========== ========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX SUBACCOUNT
---------------------------------------------------------------
2000 1999 1998
--------------------------------------- ---------- ----------
<S> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . $ 260,035 $ 917,904 $3,394,842
M Fund Inc.. . . . -- -- --
Interest income on
policy loans. . . . 106,675 179,345 170,285
-------------------------------------- ---------- ----------
Total investment
income. . . . . . . 366,710 1,097,249 3,565,127
Expenses:
Mortality and expense
risks. . . . . . . 91,898 147,126 124,891
-------------------------------------- ---------- ----------
Net investment income
(loss). . . . . . . 274,812 950,123 3,440,236
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain. 816,122 168,248 148,419
Net unrealized
appreciation
(depreciation)
during the period. (2,574,516) 5,712,567 105,161
-------------------------------------- ---------- ----------
Net realized and
unrealized gain
(loss) on investments (1,758,394) 5,880,815 253,580
-------------------------------------- ---------- ----------
Net increase
(decrease) in net
assets resulting from
operations. . . . . $ (1,483,582) $6,830,938 $3,693,816
====================================== ========== ==========
<CAPTION>
SMALL CAP GROWTH SUBACCOUNT
----------------------------------------------------
2000 1999 1998
------------------------------ ---------- -----------
<S> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable $ -- $1,272,230 $ --
Series Trust I. .
M Fund Inc.. . . . -- -- --
Interest income on
policy loans. . . . -- -- --
---------------------------- ---------- --------
Total investment -- 1,272,230 --
income. . . . . . .
Expenses:
Mortality and expense
risks. . . . . . . 40,116 37,386 20,335
---------------------------- ---------- --------
Net investment income (40,116) 1,234,844 (20,335)
(loss). . . . . . .
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain. 1,170,187 491,241 55,393
Net unrealized
appreciation (647,342) 2,317,857 518,731
(depreciation) ---------------------------- ---------- --------
during the period.
Net realized and
unrealized gain 522,845
(loss) on investments ---------------------------- 2,809,098 574,124
---------- --------
Net increase
(decrease) in net $ 482,729 $4,043,942 $553,789
assets resulting from ============================ ========== ========
operations. . . . .
</TABLE>
See accompanying notes.
77
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
GLOBAL BALANCED SUBACCOUNT MID CAP GROWTH SUBACCOUNT
--------------------------------- ------------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 13,766 $ 99,184 $ 57,587 $ -- $2,117,559 $ 461,919
M Fund Inc.. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . . -- -- -- -- -- --
--------- --------- --------- ----------- ---------- ----------
Total investment
income . . . . . . . 13,766 99,184 57,587 -- 2,117,559 461,919
Expenses:
Mortality and expense
risks . . . . . . . 2,953 6,368 4,696 74,097 58,898 16,758
--------- --------- --------- ----------- ---------- ----------
Net investment income
(loss) . . . . . . . 10,813 92,816 52,891 (74,097) 2,058,661 445,161
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . (8,124) 4,711 (4,506) 1,167,801 773,222 73,958
Net unrealized
appreciation
(depreciation)
during the period . (52,902) (38,997) 78,455 (2,810,779) 6,801,000 647,137
--------- --------- --------- ----------- ---------- ----------
Net realized and
unrealized gain
(loss) on
investments. . . . . (61,026) (34,286) 73,949 (1,642,978) 7,574,222 721,095
--------- --------- --------- ----------- ---------- ----------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $ (50,213) $ 58,530 $ 126,840 $(1,717,075) $9,632,883 $1,166,256
========= ========= ========= =========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE SUBACCOUNT MONEY MARKET SUBACCOUNT
--------------------------------- ----------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 110,055 $ 648,532 $ 433,626 $1,779,484 $2,943,852 $2,888,490
M Fund Inc.. . . . . -- -- -- -- -- --
Interest income on
policy loans. . . . -- -- -- 497,245 985,509 973,241
--------- --------- --------- ---------- ---------- ----------
Total investment
income. . . . . . . 110,055 648,532 433,626 2,276,729 3,929,361 3,861,731
Expenses:
Mortality and expense
risks. . . . . . . 29,450 54,610 44,753 209,439 411,487 380,002
--------- --------- --------- ---------- ---------- ----------
Net investment income 80,605 593,922 388,873 2,067,290 3,517,874 3,481,729
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . (1,671) 165,556 673,582 -- -- --
Net unrealized
appreciation
(depreciation)
during the period. (324,239) (569,216) (479,093) -- -- --
--------- --------- --------- ---------- ---------- ----------
Net realized and
unrealized gain
(loss) on
investments. . . . . (325,910) (403,660) 194,489 -- -- --
--------- --------- --------- ---------- ---------- ----------
Net increase
(decrease) in net
assets resulting from
operations. . . . . $(245,305) $ 190,262 $ 583,362 $2,067,290 $3,517,874 $3,481,729
========= ========= ========= ========== ========== ==========
</TABLE>
See accompanying notes.
78
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
MID CAP VALUE SUBACCOUNT SMALL/MID CAP GROWTH SUBACCOUNT
-------------------------------------- ---------------------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . $ 12,329 $ 31,306 $ 40,338 $ -- $ 1,903,687 $ 217,686
M Fund Inc. . . . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans. . . . . -- -- -- -- -- --
---------- ---------- ------------ ------------- ------------- -------------
Total investment income. . . . . . . . . 12,239 31,306 40,338 -- 1,903,687 217,686
Expenses:
Mortality and expense risks . . . . . . 16,367 29,798 23,760 36,428 69,847 63,334
---------- ---------- ------------ ------------- ------------- -------------
Net investment income (loss) . . . . . . (4,038) 1,508 16,578 (36,428) 1,833,840 154,352
Net realized and unrealized gain (loss)
on investments:
Net realized gain (loss). . . . . . . . (35,806) (241,740) (422,902) (331,677) (13,020) 56,968
Net unrealized appreciation
(depreciation) during the period . . . 329,004 469,537 (260,362) 1,329,781 (1,274,161) 334,213
---------- ---------- ------------ ------------- ------------- -------------
Net realized and unrealized gain (loss)
on investments. . . . . . . . . . . . . 293,198 227,797 (683,264) 998,104 (1,287,181) 391,181
---------- ---------- ------------ ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations . . . . . . . $ 289,160 $ 229,305 $ (666,686) $ 961,676 $ 546,659 $ 545,533
========== ========== ============ ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY SUBACCOUNT GROWTH & INCOME SUBACCOUNT
-------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
----------- ------------ ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I $ 331,794 $ 771,050 $ 817,633 $ 5,332,033 $124,750,392 $ 96,326,313
M Fund Inc.. . . . -- -- -- -- -- --
Interest income on policy loans 67,503 131,461 145,212 6,953,633 12,877,539 11,727,553
---------- ----------- ----------- ------------ ------------ ------------
Total investment income 399,297 902,511 962,845 12,285,666 137,627,931 108,053,866
Expenses:
Mortality and expense risks 39,508 78,893 86,610 3,349,588 6,531,512 5,589,689
---------- ----------- ----------- ------------ ------------ ------------
Net investment income 359,789 823,618 876,235 8,936,078 131,096,419 102,464,177
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) (225,511) 123,591 442,876 16,053,184 22,802,197 22,835,488
Net unrealized appreciation (depreciation)
during the period. 1,416,393 (1,106,755) (3,720,942) (26,767,597) 7,687,109 112,457,395
---------- ----------- ----------- ------------ ------------ ------------
Net realized and unrealized gain (loss) on
investments. . . . 1,190,882 (983,164) (3,278,066) (10,714,413) 30,489,306 135,292,883
---------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations $1,550,671 $ (159,546) $(2,401,831) $ (1,778,335) $161,585,725 $237,757,060
========== =========== =========== ============ ============ ============
</TABLE>
See accompanying notes.
79
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
MANAGED SUBACCOUNT SHORT-TERM BOND SUBACCOUNT
--------------------------------------- ----------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 6,314,681 $39,951,885 $37,907,821 $ 31,666 $ 53,689 $ 31,261
M Fund Inc.. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . . 2,787,957 5,217,121 4,949,021 -- -- --
----------- ----------- ----------- ---------- ---------- --------
Total investment
income . . . . . . . 9,102,638 45,169,006 42,856,842 31,666 53,689 31,261
Expenses:
Mortality and expense
risks . . . . . . . 1,333,143 2,636,085 2,381,406 3,022 5,065 3,052
----------- ----------- ----------- ---------- ---------- --------
Net investment income 7,769,495 42,532,921 40,475,436 28,644 48,624 28,209
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 3,653,026 5,060,826 5,853,076 (12,368) (3,107) 2,008
Net unrealized
appreciation
(depreciation)
during the period . (5,191,852) (9,288,287) 24,834,482 10,583 (23,648) (5,287)
----------- ----------- ----------- ---------- ---------- --------
Net realized and
unrealized gain
(loss) on investments (1,538,826) (4,227,461) 30,687,558 (1,785) (26,755) (3,279)
----------- ----------- ----------- ---------- ---------- --------
Net increase in net
assets resulting from
operations . . . . . $ 6,230,669 $38,305,460 $71,162,994 $ 26,859 $ 21,869 $ 24,930
=========== =========== =========== ========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE SUBACCOUNT INTERNATIONAL OPPORTUNITIES SUBACCOUNT
--------------------------------- ---------------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 37,168 $ 97,290 $ 24,781 $ 21,730 $ 354,646 $ 27,799
M Fund Inc.. . . . . -- -- -- -- -- --
Interest income on
policy loans. . . . -- -- -- -- -- --
--------- --------- --------- ----------- ---------- --------
Total investment
income. . . . . . . 37,168 97,290 24,781 21,730 354,646 27,799
Expenses:
Mortality and expense
risks. . . . . . . 12,591 24,661 23,711 16,957 24,257 19,481
--------- --------- --------- ----------- ---------- --------
Net investment income 24,577 72,629 1,070 4,773 330,389 8,318
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . (147,622) (217,582) 61,917 703,918 123,861 64,757
Net unrealized
appreciation
(depreciation)
during the period. 160,413 (40,472) (364,339) (929,318) 839,140 339,709
--------- --------- --------- ----------- ---------- --------
Net realized and
unrealized gain
(loss) on investments 12,791 (258,054) (302,422) (225,400) 963,001 404,466
--------- --------- --------- ----------- ---------- --------
Net increase
(decrease) in net
assets resulting from
operations. . . . . $ 37,368 $(185,425) $(301,352) $ (220,627) $1,293,390 $412,784
========= ========= ========= =========== ========== ========
</TABLE>
See accompanying notes.
80
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
EQUITY INDEX SUBACCOUNT GLOBAL BOND SUBACCOUNT
------------------------------------ ------------------------------
2000 1999 1998 2000 1999 1998
------------ ---------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 132,815 $ 921,698 $ 367,284 $ 25,777 $ 91,316 $62,244
M Fund Inc.. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . . -- -- -- -- -- --
----------- ---------- ---------- -------- --------- -------
Total investment
income . . . . . . . 132,815 921,698 367,284 25,777 91,316 62,244
Expenses:
Mortality and expense
risks . . . . . . . 70,140 103,983 60,274 4,763 9,736 7,516
----------- ---------- ---------- -------- --------- -------
Net investment income 62,675 817,715 307,010 21,014 81,580 54,728
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 339,524 471,802 132,619 (37,534) (1,996) 32,917
Net unrealized
appreciation
(depreciation)
during the period . (498,165) 2,019,913 2,082,107 58,703 (126,001) 11,342
----------- ---------- ---------- -------- --------- -------
Net realized and
unrealized gain
(loss) on investments (156,641) 2,491,715 2,214,726 21,169 (127,997) 44,259
----------- ---------- ---------- -------- --------- -------
Net increase
(decrease) in net
assets resulting
from operations. . . $ 95,966 $3,309,430 $2,521,736 $ 42,183 $ (46,417) $98,987
=========== ========== ========== ======== ========= =======
</TABLE>
<TABLE>
<CAPTION>
BRANDES INTERNATIONAL EQUITY
TURNER CORE GROWTH SUBACCOUNT SUBACCOUNT
------------------------------ ------------------------------
2000 1999 1998 2000 1999 1998
---------- --------- -------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 5,157 $ -- $ -- $ 8,114 $ -- $ --
M Fund Inc.. . . . . -- 38,038 5,535 -- 18,453 13,237
Interest income on
policy loans . . . . -- -- -- -- -- --
-------- -------- ------- ------- -------- -------
Total investment
income . . . . . . . 5,157 38,038 5,535 8,114 18,453 13,237
Expenses:
Mortality and expense
risks . . . . . . . 1,625 2,102 1,022 1,740 1,904 1,143
-------- -------- ------- ------- -------- -------
Net investment income 3,532 35,936 4,513 6,374 16,549 12,094
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain. . 101,050 44,245 14,364 6,519 7,704 1,184
Net unrealized
appreciation
(depreciation)
during the period . (85,212) 37,727 49,605 13,873 119,400 15,813
-------- -------- ------- ------- -------- -------
Net realized and
unrealized gain on
investments. . . . . 15,838 81,972 63,969 20,392 127,104 16,997
-------- -------- ------- ------- -------- -------
Net increase in net
assets resulting from
operations . . . . . $ 19,370 $117,908 $68,482 $26,766 $143,653 $29,091
======== ======== ======= ======= ======== =======
</TABLE>
See accompanying notes.
81
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
FRONTIER CAPITAL APPRECIATION EMERGING MARKETS EQUITY
SUBACCOUNT SUBACCOUNT
------------------------------ --------------------------
2000 1999 1998 2000 1999 1998
--------- -------- --------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 24,107 $ -- $ -- $ -- $ 13,510 $ 1
M Fund Inc.. . . . . -- 20,787 1,888 -- -- --
Interest income on
policy loans . . . . -- -- -- -- -- --
-------- -------- -------- -------- -------- -----
Total investment
income . . . . . . . 24,107 20,787 1,888 -- 13,510 1
Expenses:
Mortality and expense
risks . . . . . . . 2,641 3,019 2,096 2,736 720 --
-------- -------- -------- -------- -------- -----
Net investment income
(loss) . . . . . . . 21,466 17,768 (208) (2,736) 12,790 1
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 82,236 22,678 12,123 (12,180) 5,339 --
Net unrealized
appreciation
(depreciation)
during the period . (12,210) 164,599 (17,930) (76,126) 86,570 10
-------- -------- -------- -------- -------- -----
Net realized and
unrealized gain
(loss) on investments 70,026 187,277 (5,807) (88,306) 91,909 10
-------- -------- -------- -------- -------- -----
Net increase
(decrease) in net
assets resulting from
operations . . . . . $ 91,492 $205,045 $ (6,015) $(91,042) $104,699 $ 11
======== ======== ======== ======== ======== =====
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL OPPORTUNITIES II BOND INDEX
SUBACCOUNT SUBACCOUNT
------------------------------- --------------------------
2000 1999 1998* 2000 1999 1998*
----------- --------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I. . . $ 2,705 $ 508 $ 1 $24,785 $ 17,417 $ 149
M Fund Inc.. . . . . -- -- -- -- -- --
Interest income on
policy loans. . . . -- -- -- -- -- --
-------- ------- --- ------- -------- -----
Total investment
income. . . . . . . 2,705 508 1 24,785 17,417 149
Expenses:
Mortality and expense
risks. . . . . . . 588 267 -- 2,044 1,565 3
-------- ------- --- ------- -------- -----
Net investment income 2,117 241 1 22,741 15,852 146
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 13,157 602 1 (2,201) (1,422) (1)
Net unrealized
appreciation
(depreciation)
during the period. (13,987) 13,424 45 7,287 (22,820) (196)
-------- ------- --- ------- -------- -----
Net realized and
unrealized gain
(loss) on investments (830) 14,026 46 5,086 (24,242) (197)
-------- ------- --- ------- -------- -----
Net increase
(decrease) in net
assets resulting from
operations. . . . . $ 1,287 $14,267 $47 $27,827 $ (8,390) $ (51)
======== ======= === ======= ======== =====
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
See accompanying notes.
82
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
SMALL/MID CAP HIGH YIELD
CORE SUBACCOUNT BOND SUBACCOUNT
----------------------- -------------------------
2000 1999 1998* 2000 1999 1998*
-------- ------ ----- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . . . $ 298 $6,810 $ -- $ 9,291 $2,748 $ 19
M Fund Inc. . . . . . . -- -- -- -- -- --
Interest income on policy
loans . . . . . . . . . -- -- -- -- -- --
------- ------ ---- -------- ------ ----
Total investment income. 298 6,810 -- 9,291 2,748 19
Expenses:
Mortality and expense
risks. . . . . . . . . 440 178 -- 667 206 1
------- ------ ---- -------- ------ ----
Net investment income
(loss). . . . . . . . . (142) 6,632 -- 8,624 2,542 18
Net realized and
unrealized gain (loss)
on investments:
Net realized gain (loss) 10,745 252 -- (8,649) (186) --
Net unrealized
appreciation
(depreciation) during
the period . . . . . . (5,954) 3,005 6 (2,045) (511) (26)
------- ------ ---- -------- ------ ----
Net realized and
unrealized gain (loss)
on investments. . . . . 4,791 3,257 6 (10,694) (697) (26)
------- ------ ---- -------- ------ ----
Net increase (decrease)
in net assets resulting
from operations . . . . $ 4,649 $9,889 $ 6 $ (2,070) $1,845 $ (8)
======= ====== ==== ======== ====== ====
</TABLE>
<TABLE>
<CAPTION>
CLIFTON
ENHANCED
U.S. EQUITY
SUBACCOUNT
---------------
2000 1999**
------- ---------
<S> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I. . . . . . . . . . . $ 475 $1,117
M Fund Inc. . . . . . . . . . . . . . . . . . . . . . . . -- --
Interest income on policy loans. . . . . . . . . . . . . . -- --
------ ------
Total investment income. . . . . . . . . . . . . . . . . . 475 1,117
Expenses:
Mortality and expense risks . . . . . . . . . . . . . . . 50 4
------ ------
Net investment income. . . . . . . . . . . . . . . . . . . 425 1,113
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss). . . . . . . . . . . . . . . . . (33) 91
Net unrealized appreciation (depreciation) during the
period . . . . . . . . . . . . . . . . . . . . . . . . . 2,292 (879)
------ ------
Net realized and unrealized gain (loss) on investments . . 2,259 (788)
------ ------
Net increase in net assets resulting from operations . . . $2,684 $ 325
====== ======
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
** From March 9, 1999 (commencement of operations).
See accompanying notes.
83
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT ACTIVE BOND SUBACCOUNT
------------------------------------------ ------------------------------------------
2000 1999 1998 2000 1999 1998
------------- ------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . $ 434,004 $ 24,389,814 $ 12,025,213 $ 8,592,418 $ 20,233,648 $ 22,087,857
Net realized gains (losses) . . . . . 2,032,851 4,239,424 3,520,199 (29,483) 192,098 1,600,539
Net unrealized appreciation
(depreciation) during
the period . . . . . . . . . . . . . 7,172,532 1,727,703 18,509,310 505,228 (20,304,536) (2,317,324)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations . . . . . . . . . . . 9,639,387 30,356,941 34,054,722 9,068,163 121,210 21,371,072
From policyholder transactions:
Net premiums from
policyholders. . . . . . . . . . . . 31,919,256 37,307,814 21,681,632 11,475,576 26,114,799 32,901,747
Net benefits to policyholders . . . . (21,738,362) (25,817,420) (21,510,240) (20,536,374) (35,577,616) (39,577,750)
Net increase in policy loans. . . . . 2,840,939 -- 2,561,877 967,300 -- 1,607,456
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . . . . . . . . . . . 13,021,833 11,490,394 2,733,269 (8,093,498) (9,462,817) (5,068,547)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
net assets. . . . . . . . . . . . . . 22,661,220 41,847,335 36,787,991 974,665 (9,341,607) 16,302,525
Net assets at beginning of period. . . 177,062,332 135,214,997 98,427,006 293,120,799 302,462,406 286,159,881
------------ ------------ ------------ ------------ ------------ ------------
Net assets at end of period. . . . . . $199,723,552 $177,062,332 $135,214,997 $294,095,464 $293,120,799 $302,462,406
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX SUBACCOUNT SMALL CAP GROWTH SUBACCOUNT
--------------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 274,812 $ 950,123 $ 3,440,236 $ (40,116) $ 1,234,844 $ (20,335)
Net realized gains 816,122 168,248 148,419 1,170,187 491,241 55,393
Net unrealized appreciation
(depreciation) during
the period. . (2,574,516) 5,712,567 105,161 (647,342) 2,317,857 518,731
----------- ----------- ----------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations (1,483,582) 6,830,938 3,693,816 482,729 4,043,942 553,789
From policyholder transactions:
Net premiums from
policyholders. 11,571,448 7,373,967 6,549,988 8,820,091 4,316,218 2,382,203
Net benefits to policyholders (8,784,406) (6,834,914) (5,210,982) (4,981,803) (2,206,402) (998,381)
Net increase in policy loans 261,125 -- 86,200 -- -- --
----------- ----------- ----------- ----------- ----------- ----------
Net increase in net assets resulting
from policyholder transactions 3,048,167 539,053 1,425,206 3,838,288 2,109,816 1,383,822
----------- ----------- ----------- ----------- ----------- ----------
Net increase (decrease) in
net assets. . . 1,564,585 7,369,991 5,119,022 4,321,017 6,153,758 1,937,611
Net assets at beginning of period 31,899,039 24,529,048 19,410,026 10,825,578 4,671,820 2,734,209
----------- ----------- ----------- ----------- ----------- ----------
Net assets at end of period $33,463,624 $31,899,039 $24,529,048 $15,146,595 $10,825,578 $4,671,820
=========== =========== =========== =========== =========== ==========
</TABLE>
See accompanying notes.
84
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
GLOBAL BALANCED SUBACCOUNT MID CAP GROWTH SUBACCOUNT
--------------------------------------------- ----------------------------------------------
2000 1999 1998 2000 1999 1998
------------ -------------- ---------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income (loss) . $ 10,813 $ 92,816 $ 52,891 $ (74,097) $ 2,058,661 $ 445,161
Net realized gains (losses). . (8,124) 4,711 (4,506) 1,167,801 773,222 73,958
Net unrealized appreciation
(depreciation) during the
period. . . . . . . . . . . . (52,902) (38,997) 78,455 (2,810,779) 6,801,000 647,137
----------- ------------- --------------- ------------- -------------- -------------
Net increase (decrease) in net
assets resulting from
operations . . . . . . . . . . (50,213) 58,530 126,840 (1,717,075) 9,632,883 1,166,256
From policyholder transactions:
Net premiums from policyholders 182,567 377,958 341,482 12,180,008 8,941,124 3,164,065
Net benefits to policyholders. (298,263) (131,331) (310,766) (4,655,667) (2,937,257) (612,975)
Net increase in policy loans . -- -- -- -- -- --
----------- ------------- --------------- ------------- -------------- -------------
Net increase (decrease) in net
assets resulting from
policyholder transactions. . . (115,696) 246,627 30,716 7,524,341 6,003,867 2,551,090
----------- ------------- --------------- ------------- -------------- -------------
Net increase (decrease) in net
assets . . . . . . . . . . . . (165,909) 305,157 157,556 5,807,266 15,636,750 3,717,346
Net assets at beginning of
period . . . . . . . . . . . . 1,177,232 872,075 714,519 20,852,255 5,215,505 1,498,159
----------- ------------- --------------- ------------- -------------- -------------
Net assets at end of period . . $ 1,011,323 $ 1,177,232 $ 872,075 $ 26,659,521 $ 20,852,255 $ 5,215,505
=========== ============= =============== ============= ============== =============
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE SUBACCOUNT MONEY MARKET SUBACCOUNT
---------------------------------------- ------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income $ 80,605 $ 593,922 $ 388,873 $ 2,067,290 $ 3,517,874 $ 3,481,729
Net realized gains (losses) (1,671) 165,556 673,582 -- -- --
Net unrealized appreciation
(depreciation) during the period (324,239) (569,216) (479,093) -- -- --
----------- ----------- ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations (245,305) 190,262 583,362 2,067,290 3,517,874 3,481,729
From policyholder transactions:
Net premiums from policyholders 2,039,750 3,166,658 4,214,076 31,101,772 33,694,123 24,612,731
Net benefits to policyholders (1,152,104) (1,903,017) (3,212,048) (32,846,241) (30,672,090) (24,024,723)
Net increase (decrease) in policy loans -- -- -- (282,456) -- 421,166
----------- ----------- ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder transactions 887,646 1,263,641 1,002,028 (2,026,925) 3,022,033 1,009,174
----------- ----------- ------------ ------------ ------------ ------------
Net increase in net assets 642,341 1,453,903 1,585,390 40,365 6,539,907 4,490,903
Net assets at beginning of period 9,553,293 8,099,390 6,514,000 76,638,641 70,098,734 65,607,831
----------- ----------- ------------ ------------ ------------ ------------
Net assets at end of period $10,195,634 $ 9,553,293 $ 8,099,390 $ 76,679,006 $ 76,638,641 $ 70,098,734
=========== =========== ============ ============ ============ ============
</TABLE>
See accompanying notes.
85
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
MID CAP VALUE SUBACCOUNT SMALL/MID CAP GROWTH SUBACCOUNT
---------------------------------------- ---------------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------- ---------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income (loss) . $ (4,038) $ 1,508 $ 16,578 $ (36,428) $ 1,833,840 $ 154,352
Net realized gains (losses). . (35,806) (241,740) (422,902) (331,677) (13,020) 56,968
Net unrealized appreciation
(depreciation) during the
period. . . . . . . . . . . . 329,004 469,537 (260,362) 1,329,781 (1,274,161) 334,213
----------- ----------- ------------ --------------- --------------- ---------------
Net increase (decrease) in net
assets resulting from
operations . . . . . . . . . . 289,160 229,305 (666,686) 961,676 546,659 545,533
From policyholder transactions:
Net premiums from policyholders 1,222,805 1,886,594 5,997,691 2,015,926 3,493,643 3,953,326
Net benefits to policyholders. (1,089,206) (1,745,112) (2,912,034) (9,689,438) (3,105,108) (3,311,846)
Net increase in policy loans . -- -- -- -- -- --
----------- ----------- ------------ --------------- --------------- ---------------
Net increase (decrease) in net
assets resulting from
policyholder transactions. . . 133,599 141,482 3,085,657 (673,512) 388,535 641,480
----------- ----------- ------------ --------------- --------------- ---------------
Net increase in net assets. . . 422,759 370,787 2,418,971 288,164 935,194 1,187,013
Net assets at beginning of
period . . . . . . . . . . . . 5,236,580 4,865,793 2,446,822 12,409,573 11,474,379 10,287,366
----------- ----------- ------------ --------------- --------------- ---------------
Net assets at end of period . . $ 5,659,339 $ 5,236,580 $ 4,865,793 $ 12,697,737 $ 12,409,573 $ 11,474,379
=========== =========== ============ =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY SUBACCOUNT GROWTH & INCOME SUBACCOUNT
--------------------------------------- ------------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ --------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income $ 359,789 $ 823,618 $ 876,235 $ 8,936,078 $ 131,096,419 $ 102,464,177
Net realized gains (losses) (225,511) 123,591 442,876 16,053,184 22,802,197 22,835,488
Net unrealized appreciation
(depreciation) during the period 1,416,393 (1,106,755) (3,720,942) (26,767,597) 7,687,109 112,457,395
----------- ----------- ----------- -------------- -------------- --------------
Net increase (decrease) in net
assets resulting from operations 1,550,671 (159,546) (2,401,831) (1,778,335) 161,585,725 237,757,060
From policyholder transactions:
Net premiums from policyholders 3,954,225 2,304,591 6,295,255 47,243,335 101,973,160 92,955,980
Net benefits to policyholders (4,217,423) (3,311,591) (5,507,305) (81,355,661) (133,701,210) (134,661,151)
Net increase (decrease) in policy
loans. . . . . 141,567 -- (83,216) 4,922,813 -- 18,165,114
----------- ----------- ----------- -------------- -------------- --------------
Net increase (decrease) in net
assets resulting from policyholder
transactions. . (121,631) (1,007,000) 704,734 (29,189,513) (31,728,050) (23,540,057)
Net increase (decrease) in net
assets. . . . . 1,429,040 (1,166,546) (1,697,097) (30,967,848) 129,857,675 214,217,003
Net assets at beginning of period 13,378,472 14,545,018 16,242,115 1,278,739,554 1,148,881,879 934,664,876
Net assets at end of period $14,807,512 $13,378,472 $14,545,018 $1,247,771,706 $1,278,739,554 $1,148,881,879
=========== =========== =========== ============== ============== ==============
</TABLE>
See accompanying notes.
86
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
MANAGED SUBACCOUNT SHORT-TERM BOND SUBACCOUNT
------------------------------------------ --------------------------------------
2000 1999 1998 2000 1999 1998
------------- ------------- ------------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income. . . . . . . . . . $ 7,769,495 $ 42,532,921 $ 40,475,436 $ 28,644 $ 48,624 $ 28,209
Net realized gains (losses). . . . . . . 3,653,026 5,060,826 5,853,076 (12,368) (3,107) 2,008
Net unrealized appreciation
(depreciation) during the period. . . . (5,191,852) (9,288,287) 24,834,482 10,583 (23,648) (5,287)
------------ ------------ ------------ ---------- ----------- -----------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . 6,230,669 38,305,460 71,162,994 26,859 21,869 24,930
From policyholder transactions:
Net premiums from policyholders. . . . . 20,445,777 44,546,082 40,631,684 241,196 690,849 435,150
Net benefits to policyholders. . . . . . (35,113,472) (55,332,758) (55,447,667) (340,388) (178,124) (274,762)
Net increase in policy loans . . . . . . 1,824,582 -- 5,379,590 -- -- --
------------ ------------ ------------ ---------- ----------- -----------
Net increase (decrease) in net assets
resulting from policyholder
transactions . . . . . . . . . . . . . . (12,843,113) (10,786,676) (9,436,393) (99,192) 512,725 160,388
------------ ------------ ------------ ---------- ----------- -----------
Net increase (decrease) in net assets . . (6,612,444) 27,518,784 61,726,601 (72,333) 534,594 185,318
Net assets at beginning of period . . . . 500,072,750 472,553,966 410,827,365 1,129,483 594,889 409,571
------------ ------------ ------------ ---------- ----------- -----------
Net assets at end of period . . . . . . . $493,460,306 $500,072,750 $472,553,966 $1,057,150 $ 1,129,483 $ 594,889
============ ============ ============ ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE SUBACCOUNT INTERNATIONAL OPPORTUNITIES SUBACCOUNT
-------------------------------------- ----------------------------------------
2000 1999 1998 2000 1999 1998
----------- ------------ ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income $ 24,577 $ 72,629 $ 1,070 $ 4,773 $ 330,389 $ 8,318
Net realized gains (losses) (147,622) (217,582) 61,917 703,918 123,861 64,757
Net unrealized appreciation
(depreciation) during the period 160,413 (40,472) (364,359) (929,318) 839,140 339,709
---------- ----------- ----------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations 37,368 (185,425) (301,372) (220,627) 1,293,390 412,784
From policyholder transactions:
Net premiums from policyholders 1,159,319 1,446,109 2,644,808 5,362,651 1,632,955 2,203,753
Net benefits to policyholders (893,462) (1,547,128) (1,288,464) (4,276,522) (1,315,539) (1,443,700)
Net increase in policy loans -- -- -- -- -- --
---------- ----------- ----------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . 265,857 (101,019) 1,356,344 1,086,129 317,416 760,053
---------- ----------- ----------- ------------ ----------- -----------
Net increase (decrease) in net assets 303,225 (286,444) 1,054,972 865,502 1,610,806 1,172,837
Net assets at beginning of period 4,111,416 4,397,860 3,342,888 5,310,586 3,699,780 2,526,943
---------- ----------- ----------- ------------ ----------- -----------
Net assets at end of period $4,414,641 $ 4,111,416 $ 4,397,860 $ 6,176,088 $ 5,310,586 $ 3,699,780
========== =========== =========== ============ =========== ===========
</TABLE>
See accompanying notes.
87
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
EQUITY INDEX SUBACCOUNT
---------------------------------------
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income. . . . . . . . . . . . . $ 62,675 $ 817,715 $ 307,010
Net realized gains (losses). . . . . . . . . . 339,524 471,802 132,619
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . (498,165) 2,019,913 2,082,107
----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations. . . . . . . . . . . . . . . . (95,966) 3,309,430 2,521,736
From policyholder transactions:
Net premiums from policyholders. . . . . . . . 5,398,036 7,762,529 4,632,113
Net benefits to policyholders. . . . . . . . . (1,940,148) (2,563,485) (1,120,852)
Net increase in policy loans . . . . . . . . . -- -- --
----------- ----------- -----------
Net increase (decrease) in net assets resulting
from policyholder transactions . . . . . . . . 3,361,922 5,199,044 3,511,261
----------- ----------- -----------
Net increase (decrease) in net assets . . . . . 22,117,624 8,508,474 6,032,997
Net assets at beginning of period . . . . . . . 22,117,624 13,609,150 7,576,153
----------- ----------- -----------
Net assets at end of period . . . . . . . . . . $25,479,546 $22,117,624 $13,609,150
=========== =========== ===========
<CAPTION>
GLOBAL BOND SUBACCOUNT
-------------------------------------
2000 1999 1998
----------- ----------- --------------
<S> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income. . . . . . . . . . . . . $ 21,014 $ 81,580 $ 54,728
Net realized gains (losses). . . . . . . . . . (37,534) (1,996) 32,917
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . 58,703 (126,001) 11,342
---------- ---------- -----------
Net increase (decrease) in net assets resulting 42,183 (46,417) 98,987
from operations. . . . . . . . . . . . . . . .
From policyholder transactions:
Net premiums from policyholders. . . . . . . . 378,645 1,115,699 798,933
Net benefits to policyholders. . . . . . . . . (685,644) (292,075) (1,158,109)
Net increase in policy loans . . . . . . . . . -- -- --
---------- ---------- -----------
Net increase (decrease) in net assets resulting
from policyholder transactions . . . . . . . . (306,999) 823,624 (359,176)
---------- ---------- -----------
Net increase (decrease) in net assets . . . . . (264,816) 777,207 (260,189)
Net assets at beginning of period . . . . . . . 1,882,675 1,105,468 1,365,657
---------- ---------- -----------
Net assets at end of period . . . . . . . . . . $1,617,859 $1,882,675 $ 1,105,468
========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
TURNER CORE GROWTH SUBACCOUNT BRANDES INTERNATIONAL EQUITY SUBACCOUNT
-------------------------------- ----------------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- --------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 3,532 $ 35,936 $ 4,513 $ 6,374 $ 16,549 $ 12,094
Net realized gains. 101,050 44,245 14,364 6,519 7,704 1,184
Net unrealized
appreciation
(depreciation)
during the period. (85,212) 37,727 49,605 13,873 119,400 15,813
--------- --------- -------- -------- -------- --------
Net increase in net
assets resulting from
operations. . . . . 19,370 117,908 68,482 26,766 143,653 29,091
From policyholder
transactions:
Net premiums from
policyholders. . . 265,836 240,351 203,590 59,497 239,618 55,021
Net benefits to
policyholders. . . (371,100) (136,661) (77,651) (18,974) (29,520) (10,341)
Net increase in
policy loans. . . -- -- -- -- -- --
--------- --------- -------- -------- -------- --------
Net increase
(decrease) in net
assets resulting from
policyholder
transactions. . . . (105,264) 103,690 125,939 40,523 210,098 44,680
--------- --------- -------- -------- -------- --------
Net increase
(decrease) in net
assets. . . . . . . (85,894) 221,598 194,421 67,289 353,751 73,771
Net assets at
beginning of period 536,192 314,594 120,173 588,128 234,377 160,606
--------- --------- -------- -------- -------- --------
Net assets at end of
period. . . . . . . $ 450,298 $ 536,192 $314,594 $655,417 $588,128 $234,377
========= ========= ======== ======== ======== ========
</TABLE>
See accompanying notes.
88
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
FRONTIER CAPITAL EMERGING MARKETS
APPRECIATION SUBACCOUNT EQUITY SUBACCOUNT
-------------------------------- ---------------------------------
2000 1999 1998 2000 1999 1998
---------- --------- ---------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income
(loss). . . . . . . $ 21,466 $ 17,768 $ (208) $ (2,736) $ 12,790 $ 1
Net realized gains
(losses). . . . . . 82,236 22,678 12,123 (12,180) 5,339 --
Net unrealized
appreciation
(depreciation)
during the period . (12,210) 164,599 (17,930) (76,126) 86,570 10
--------- -------- --------- ----------- --------- -------
Net increase
(decrease) in net
assets resulting from
operations . . . . . 91,492 205,045 (6,015) (91,042) 104,699 11
From policyholder
transactions:
Net premiums from
policyholders . . . 297,090 255,268 128,779 3,936,569 433,406 2,018
Net benefits to
policyholders . . . (219,651) (89,136) (146,083) (3,055,550) (144,400) --
Net increase in
policy loans. . . . -- -- -- -- ---- --
--------- -------- --------- ----------- --------- -------
Net increase
(decrease) in net
assets resulting from
policyholder
transactions . . . . 77,439 166,132 (17,304) 881,019 289,006 2,018
--------- -------- --------- ----------- --------- -------
Net increase
(decrease) in net
assets . . . . . . . 168,931 371,177 (23,319) 789,977 393,705 2,029
Net assets at
beginning of period. 728,674 357,497 380,816 395,734 2,029 --
--------- -------- --------- ----------- --------- -------
Net assets at end of
period . . . . . . . $ 897,605 $728,674 $ 357,497 $ 1,185,711 $ 395,734 $ 2,029
========= ======== ========= =========== ========= =======
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL OPPORTUNITIES II BOND INDEX
SUBACCOUNT SUBACCOUNT
------------------------------- -----------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 2,117 $ 241 $ 1 $ 22,741 $ 15,852 $ 146
Net realized gains
(losses). . . . . . 13,157 602 1 (2,201) (1,422) (1)
Net unrealized
appreciation
(depreciation)
during the period. (13,987) 13,424 45 7,287 (22,820) (196)
-------- -------- ---- -------- -------- -------
Net increase
(decrease) in net
assets resulting from
operations. . . . . 1,287 14,267 47 27,827 (8,390) (51)
From policyholder
transactions:
Net premiums from
policyholders. . . 214,628 108,420 915 362,018 412,326 10,254
Net benefits to
policyholders. . . (54,971) (11,064) (13) (24,425) (26,307) (69)
Net increase in
policy loans. . . . -- -- -- -- -- --
-------- -------- ---- -------- -------- -------
Net increase in net
assets resulting from
policyholder
transactions. . . . 159,657 97,356 902 337,593 386,019 10,185
-------- -------- ---- -------- -------- -------
Net increase in net
assets. . . . . . . 160,944 111,623 949 365,420 377,629 10,134
Net assets at
beginning of period. 112,572 949 -- 387,763 10,134 --
-------- -------- ---- -------- -------- -------
Net assets at end of
period. . . . . . . $273,516 $112,572 $949 $753,183 $387,763 $10,134
======== ======== ==== ======== ======== =======
</TABLE>
See accompanying notes.
89
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
YEARS AND PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
SMALL/MIDCAP HIGH YIELD
CORE SUBACCOUNT BOND SUBACCOUNT
--------------------------- -------------------------------
2000 1999 1998* 2000 1999 1998*
---------- -------- ----- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income
(loss). . . . . . . $ (142) $ 6,632 $ -- $ 8,624 $ 2,542 $ 19
Net realized gains
(losses). . . . . . 10,745 252 -- (8,649) (186) --
Net unrealized
appreciation
(depreciation)
during the period . (5,954) 3,005 6 (2,045) (511) (26)
--------- ------- ---- ----------- -------- ------
Net increase
(decrease) in net
assets resulting from
operations . . . . . 4,649 9,889 6 (2,070) 1,845 (8)
From policyholder
transactions:
Net premiums from
policyholders . . . 414,076 97,385 104 1,249,658 98,955 2,887
Net benefits to
policyholders . . . (329,116) (7,901) (2) (1,040,268) (13,078) --
Net increase in
policy loans. . . . 0 -- -- 0 -- --
--------- ------- ---- ----------- -------- ------
Net increase in net
assets resulting from
policyholder
transactions . . . . 84,960 89,484 102 209,390 85,877 2,887
--------- ------- ---- ----------- -------- ------
Net increase in net
assets . . . . . . . 89,609 99,373 108 207,320 87,722 2,887
Net assets at
beginning of period. 99,481 108 -- 90,601 2,879 --
--------- ------- ---- ----------- -------- ------
Net assets at end of
period . . . . . . . $ 189,090 $99,481 $108 $ 297,921 $ 90,601 $2,879
======== ====== ==== ========== ======= =====
</TABLE>
<TABLE>
<CAPTION>
CLIFTON
ENHANCED U.S.
EQUITY SUBACCOUNT
------------------
2000 1999**
-------- ----------
<S> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss). . . . . . . . . . . . . . $ 425 $ 1,113
Net realized gains (losses) . . . . . . . . . . . . . . (33) 91
Net unrealized appreciation (depreciation) during the
period . . . . . . . . . . . . . . . . . . . . . . . . (534) (879)
------- -------
Net increase (decrease) in net assets resulting from
operations. . . . . . . . . . . . . . . . . . . . . . . (142) 325
From policyholder transactions:
Net premiums from policyholders . . . . . . . . . . . . 4,452 13,814
Net benefits to policyholders . . . . . . . . . . . . . (294) --
Net increase in policy loans. . . . . . . . . . . . . . 0 --
------- -------
Net increase in net assets resulting from policyholder
transactions 4,158 13,814
------- -------
Net increase in net assets . . . . . . . . . . . . . . . 4,016 14,139
Net assets at beginning of period. . . . . . . . . . . . 14,139 --
------- -------
Net assets at end of period. . . . . . . . . . . . . . . $18,155 $14,139
======= =======
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
** From March 9, 1999 (commencement of operations).
See accompanying notes.
90
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
YEARS AND PERIODS ENDED JUNE 30, 2000
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 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-seven 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-seven Portfolios
of the Fund and M Fund which are currently available are the Large Cap Growth,
Active Bond (formerly, Sovereign Bond), International Equity Index, Small Cap
Growth, Global Balanced (formerly, International Balanced), Mid Cap Growth,
Large Cap Value, Money Market, Mid Cap Value, Small/Mid Cap Growth (formerly,
Diversified Mid Cap Growth), Real Estate Equity, Growth & Income, Managed,
Short-Term Bond, Small Cap Value, International Opportunities, Equity Index,
Global Bond (formerly, Strategic Bond), Turner Core Growth, Brandes
International Equity, Frontier Capital Appreciation, Emerging Markets Equity,
International Opportunities II (formerly, Global Equity), Bond Index, Small/Mid
Cap CORE, High Yield Bond and Clifton Enhanced U.S. Equity Portfolios (formerly,
Enhanced U.S. Equity). 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 underlying portfolio 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 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.
91
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
92
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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 June 30, 2000 are as follows:
<TABLE>
<CAPTION>
PORTFOLIO SHARES OWNED COST VALUE
--------- ------------ ------------ ----------------
<S> <C> <C> <C>
Large Cap Growth. . . . . 6,118,549 $133,197,126 $ 176,581,445
Active Bond . . . . . . . 25,676,557 250,059,856 234,710,166
International Equity Index 1,637,313 28,032,291 30,279,715
Small Cap Growth. . . . . 751,112 12,755,532 15,146,841
Global Balanced . . . . . 99,987 1,063,151 1,009,123
Mid Cap Growth. . . . . . 951,564 21,827,050 26,659,950
Large Cap Value . . . . . 781,363 10,837,990 10,182,562
Money Market. . . . . . . 6,282,855 62,861,460 62,828,554
Mid Cap Value . . . . . . 419,590 5,184,053 5,655,397
Small/Mid Cap Growth. . . 833,429 12,640,806 12,697,945
Real Estate Equity. . . . 1,006,818 13,855,749 12,765,326
Growth & Income . . . . . 53,177,519 786,999,791 1,054,098,419
Managed . . . . . . . . . 26,812,598 359,486,863 412,811,976
Short-Term Bond . . . . . 108,407 1,074,517 1,051,732
Small Cap Value . . . . . 402,638 4,641,679 4,409,122
International
Opportunities. . . . . . 424,604 6,010,304 6,171,237
Equity Index. . . . . . . 1,257,997 20,669,031 25,463,881
Global Bond . . . . . . . 161,599 1,670,350 1,610,930
Turner Core Growth. . . . 18,889 537,085 450,305
Brandes International
Equity . . . . . . . . . 41,067 456,415 655,428
Frontier Capital
Appreciation . . . . . . 37,890 1,499,897 897,620
Emerging Markets Equity . 103,852 296,973 1,185,730
International
Opportunities II. . . 22,760 274,038 273,330
Bond Index. . . . . . . . 80,112 768,927 749,101
Small/Mid Cap Core. . . . 18,350 192,035 188,808
High Yield Bond . . . . . 35,025 300,508 295,903
Clifton Enhanced US Equity
Fund . . . . . . . . . . 912 14,986 18,155
</TABLE>
93
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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 2000,
were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
--------- ----------- -------------
<S> <C> <C>
Large Cap Growth. . . . . . . . . . . $14,526,753 $ 4,071,523
Active Bond . . . . . . . . . . . . . 12,595,440 13,172,460
International Equity Index. . . . . . 8,546,295 5,508,370
Small Cap Growth. . . . . . . . . . . 6,763,851 2,965,434
Global Balanced . . . . . . . . . . . 170,170 275,036
Mid Cap Growth. . . . . . . . . . . . 9,665,686 2,215,013
Large Cap Value . . . . . . . . . . . 1,684,020 715,601
Money Market. . . . . . . . . . . . . 20,068,019 19,726,545
Mid Cap Value . . . . . . . . . . . . 831,482 701,828
Small/Mid Cap Growth. . . . . . . . . 1,420,670 2,130,402
Real Estate Equity. . . . . . . . . . 3,756,641 3,664,903
Growth & Income . . . . . . . . . . . 10,140,753 35,665,986
Managed . . . . . . . . . . . . . . . 9,078,644 16,420,432
Short-Term Bond . . . . . . . . . . . 223,617 294,148
Small Cap Value . . . . . . . . . . . 918,362 627,855
International Opportunities . . . . . 4,740,829 3,649,827
Equity Index. . . . . . . . . . . . . 4,320,990 800,013
Global Bond . . . . . . . . . . . . . 324,904 610,861
Turner Core Growth. . . . . . . . . . 0 0
Brandes International Equity. . . . . 0 0
Frontier Capital Appreciation . . . . 3,318,819 2,440,517
Emerging Markets Equity . . . . . . . 0 0
International Opportunities II. . . . 322,785 161,007
Bond Index. . . . . . . . . . . . . . 392,051 31,702
Small/Mid Cap Core. . . . . . . . . . 408,308 323,488
High Yield Bond . . . . . . . . . . . 1,251,885 1,033,876
Clifton Enhanced US Equity Fund . . . 0 0
</TABLE>
94
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
5. NET ASSETS
Accumulation shares attributable to net assets of contractowners and
accumulation share values for each Portfolio at June 30, 2000 were as follows:
<TABLE>
<CAPTION>
ACCUMULATION SHARE
PORTFOLIO SHARES VALUES
--------- ------------ --------
<S> <C> <C>
Large Cap Growth . . . . . . . . . . . . . 559,086 83.98
Active Bond. . . . . . . . . . . . . . . . 690,050 24.41
International Equity Index . . . . . . . . 487,610 26.08
Small Cap Growth . . . . . . . . . . . . . 663,124 22.82
Global Balanced. . . . . . . . . . . . . . 79,825 12.67
Mid Cap Growth . . . . . . . . . . . . . . 783,262 34.02
Large Cap Value. . . . . . . . . . . . . . 646,321 15.74
Money Market . . . . . . . . . . . . . . . 644,839 18.58
Mid Cap Value. . . . . . . . . . . . . . . 381,056 14.82
Small/Mid Cap Growth . . . . . . . . . . . 592,151 21.43
Real Estate Equity . . . . . . . . . . . . 203,675 25.09
Growth & Income. . . . . . . . . . . . . . 1,238,691 67.63
Managed. . . . . . . . . . . . . . . . . . 1,030,002 40.02
Short-Term Bond. . . . . . . . . . . . . . 79,247 13.34
Small Cap Value. . . . . . . . . . . . . . 354,503 12.43
International Opportunities. . . . . . . . 389,613 15.85
Equity Index . . . . . . . . . . . . . . . 1,112,540 22.90
Global Bond. . . . . . . . . . . . . . . . 129,203 12.51
Turner Core Growth . . . . . . . . . . . . 16,303 27.61
Brandes International Equity . . . . . . . 36,840 17.80
Frontier Capital Appreciation. . . . . . . 36,994 24.26
Emerging Markets Equity. . . . . . . . . . 99,862 11.88
International Opportunities II . . . . . . 22,407 12.21
Bond Index . . . . . . . . . . . . . . . . 69,381 10.72
Small/Mid Cap CORE . . . . . . . . . . . . 16,782 11.27
High Yield Bond. . . . . . . . . . . . . . 30,156 9.88
Clifton Enhanced US Equity . . . . . . . . 1,411 12.87
</TABLE>
95
<PAGE>
REPORT ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Policyholders of
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 Equity Index, Small Cap Growth,
International Balanced, Mid Cap Growth, Large Cap Value, Money Market, Mid Cap
Value, Small/Mid Cap Growth (formerly, Diversified Mid Cap Growth), Real Estate
Equity, Growth & Income, Managed, Short-Term Bond, Small Cap Value,
International Opportunities, Equity Index, Global Bond (formerly, Strategic
Bond), Turner Core Growth, Brandes International Equity, Frontier Capital
Appreciation, Emerging Markets Equity, Global Equity, Bond Index, Small/Mid Cap
CORE, High Yield Bond and Enhanced U.S. Equity Subaccounts) as of December 31,
1999, and the related statements of operations and changes in net assets for
each of the periods indicated therein. These financial statements are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
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,
1999, the results of their operations and the changes in their net assets for
each of the periods indicated, in conformity with accounting principles
generally accepted in the United States.
ERNST & YOUNG LLP
Boston, Massachusetts
February 11, 2000
96
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
INTERNATIONAL
LARGE CAP SOVEREIGN EQUITY SMALL CAP
GROWTH BOND INDEX GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . $ 18,374 $ 31,159 $ 3,363 $ 1,196
Investments in shares
of portfolios of
John Hancock
Variable Series Trust
I, at value . . . . 156,931,243 236,200,057 29,055,936 10,825,578
Policy loans and
accrued interest
receivable . . . . . 20,131,090 56,920,743 2,843,104 --
Receivable from:
John Hancock Variable
Series Trust I . . 166,807 45,107 32,276 20,662
M Fund Inc. . . . . -- -- -- --
------------ ------------ ----------- -----------
Total assets . . . . 177,247,514 293,197,066 31,934,679 10,847,436
LIABILITIES
Payable to John
Hancock Variable Life
Insurance Company . 164,174 40,650 31,788 20,488
Asset charges payable 21,008 35,617 3,852 1,370
------------ ------------ ----------- -----------
185,182 76,267 35,640 21,858
------------ ------------ ----------- -----------
Net assets . . . . . $177,062,332 $293,120,799 $31,899,039 $10,825,578
============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL MID CAP LARGE CAP MONEY
BALANCED GROWTH VALUE MARKET
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . . $ 133 $ 2,329 $ 1,091 $ 4,680
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value . . 1,177,232 20,852,255 9,553,293 62,519,986
Policy loans and accrued
interest receivable . -- -- -- 14,118,655
Receivable from:
John Hancock Variable
Series Trust I . . . 970 103,804 6,237 159,443
M Fund Inc. . . . . . -- -- -- --
----------- ----------- ---------- -----------
Total assets . . . . . 1,178,335 20,958,388 9,560,621 76,802,764
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company. . . . . . . . 950 103,466 6,081 158,266
Asset charges payable . 153 2,667 1,247 5,857
----------- ----------- ---------- -----------
1,103 106,133 7,328 164,123
----------- ----------- ---------- -----------
Net assets . . . . . . $ 1,177,232 $20,852,255 $9,553,293 $76,638,641
=========== =========== ========== ===========
</TABLE>
See accompanying notes.
97
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SMALL/MID
MID CAP CAP REAL ESTATE GROWTH &
VALUE GROWTH EQUITY INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ----------- ----------- ----------------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . $ 589 $ 1,386 $ 1,428 $ 132,575
Investments in shares
of portfolios of John
Hancock Variable
Series Trust I, at
value. . . . . . . . 5,236,581 12,409,573 11,482,706 1,091,050,404
Policy loans and
accrued interest
receivable . . . . . -- -- 1,895,766 187,689,150
Receivable from:
John Hancock Variable
Series Trust I . . 27,820 34,285 1,966 333,111
M Fund Inc. . . . . -- -- -- --
------------ ----------- ----------- --------------
Total assets . . . . 5,264,990 12,445,244 13,381,866 1,279,205,240
LIABILITIES
Payable to John
Hancock Variable Life
Insurance Company . 27,735 34,083 1,758 314,139
Asset charges payable 675 1,588 1,636 151,547
------------ ----------- ----------- --------------
Total liabilities . . 28,410 35,671 3,394 465,686
------------ ----------- ----------- --------------
Net assets . . . . . $ 5,236,580 $12,409,573 $13,378,472 $1,278,739,554
============ =========== =========== ==============
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM SMALL CAP INTERNATIONAL
MANAGED BOND VALUE OPPORTUNITIES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . . $ 52,222 $ 129 $ 460 $ 593
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value . . 422,672,470 1,129,483 4,111,416 5,310,586
Policy loans and accrued
interest receivable . 77,400,280 -- -- --
Receivable from:
John Hancock Variable
Series Trust I . . . 123,268 218 2,954 5,072
M Fund Inc. . . . . . -- -- -- --
------------ ---------- ---------- ----------
Total assets . . . . . 500,248,240 1,129,830 4,114,830 5,316,251
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company. . . . . . . . 115,790 199 2,887 4,985
Asset charges payable . 59,700 148 527 680
------------ ---------- ---------- ----------
Total liabilities . . . 175,490 347 3,414 5,665
------------ ---------- ---------- ----------
Net assets . . . . . . $500,072,750 $1,129,483 $4,111,416 $5,310,586
============ ========== ========== ==========
</TABLE>
See accompanying notes.
98
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
TURNER BRANDES
EQUITY GLOBAL CORE INTERNATIONAL
INDEX BOND GROWTH EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . . . $ 2,517 $ 216 $ 60 $ 65
Investments in shares of
portfolios of John
Hancock Variable Series
Trust I, at value . . . 22,117,624 1,882,675 -- --
Investments in shares of
portfolios of M Fund
Inc., at value . . . . -- -- 536,192 588,128
Policy loans and accrued
interest receivable . . -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I . . . . 19,259 31 -- --
M Fund Inc. . . . . . . -- -- 9 10
----------- ---------- -------- --------
Total assets . . . . . . 22,139,400 1,882,922 536,261 588,203
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company . . . . . . . . 18,897 -- -- --
Asset charges payable . 2,879 247 69 75
----------- ---------- -------- --------
Total liabilities . . . 21,776 247 69 75
----------- ---------- -------- --------
Net assets . . . . . . . $22,117,624 $1,882,675 $536,192 $588,128
=========== ========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
FRONTIER EMERGING
CAPITAL MARKETS GLOBAL
APPRECIATION EQUITY EQUITY BOND INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . . . . $ 80 $ 43 $ 12 $ 45
Investments in shares of
portfolios of John Hancock
Variable Series Trust I,
at value . . . . . . . . -- 395,733 112,572 387,762
Investments in shares of
portfolios of M Fund Inc.,
at value . . . . . . . . 728,674 -- -- --
Policy loans and accrued
interest receivable . . . -- -- -- --
Receivable from:
John Hancock Variable
Series Trust I . . . . . -- 2,536 2 1,123
M Fund Inc. . . . . . . . 12 -- -- --
-------- -------- -------- --------
Total assets . . . . . . . 728,766 398,312 112,586 388,930
LIABILITIES
Payable to John Hancock
Variable Life Insurance
Company . . . . . . . . . -- 2,529 -- 1,116
Asset charges payable . . 92 49 14 51
-------- -------- -------- --------
Total liabilities . . . . 92 2,578 14 1,167
-------- -------- -------- --------
Net assets . . . . . . . . $728,674 $395,734 $112,572 $387,763
======== ======== ======== ========
</TABLE>
See accompanying notes.
99
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SMALL/MID HIGH YIELD ENHANCED
CAP CORE BOND U.S. EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- -------------
<S> <C> <C> <C>
ASSETS
Cash . . . . . . . . . . . . . . . . . $ 9 $ -- $ 1
Investments in shares of portfolios of
John Hancock Variable Series Trust I,
at value . . . . . . . . . . . . . . . 99,481 90,611 --
Investments in shares of portfolios of M
Fund Inc., at value . . . . . . . . . -- -- 14,140
Policy loans and accrued interest
receivable . . . . . . . . . . . . . . -- -- --
Receivable from:
John Hancock Variable Series Trust I . 16,714 1,478 --
M Fund Inc. . . . . . . . . . . . . . -- -- --
-------- ------- -------
Total assets . . . . . . . . . . . . . 116,204 92,089 14,141
LIABILITIES
Payable to John Hancock Variable Life
Insurance Company . . . . . . . . . . 16,712 1,477 --
Asset charges payable . . . . . . . . . 11 11 2
-------- ------- -------
Total liabilities . . . . . . . . . . . 16,723 1,488 2
-------- ------- -------
Net assets . . . . . . . . . . . . . . $ 99,481 $90,601 $14,139
======== ======= =======
</TABLE>
See accompanying notes.
100
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT SOVEREIGN BOND SUBACCOUNT
------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I . . . . . . . . . . . . . . . . $24,007,195 $11,641,271 $ 7,675,850 $ 17,792,726 $19,685,096 $17,409,990
M Fund Inc. . . . . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans . . . . . 1,211,333 1,008,607 875,892 4,084,783 4,027,376 3,926,698
----------- ----------- ----------- ------------ ----------- -----------
Total investment income . . . . . . . . . 25,218,528 12,649,878 8,551,742 21,877,509 23,712,472 21,336,688
Expenses:
Mortality and expense risks . . . . . . . 828,714 624,665 480,057 1,643,861 1,624,615 1,514,127
----------- ----------- ----------- ------------ ----------- -----------
Net investment income . . . . . . . . . . 24,389,814 12,025,213 8,071,685 20,233,648 22,087,857 19,822,561
Net realized and unrealized gain (loss) on
investments:
Net realized gain . . . . . . . . . . . . 4,239,424 3,520,199 4,216,904 192,098 1,600,539 1,088,488
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . 1,727,703 18,509,310 7,920,403 (20,304,536) (2,317,324) 2,987,952
----------- ----------- ----------- ------------ ----------- -----------
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . 5,967,127 22,029,509 12,137,307 (20,112,438) (716,785) 4,076,440
----------- ----------- ----------- ------------ ----------- -----------
Net increase in net assets resulting from
operations. . . . . . . . . . . . . . . . $30,356,941 $34,054,722 $20,208,992 $ 121,210 $21,371,072 $23,899,001
=========== =========== =========== ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX SUBACCOUNT SMALL CAP GROWTH SUBACCOUNT
-------------------------------------- -------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ------------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series
Trust I . . . . . . $ 917,904 $3,394,842 $ 840,616 $1,272,230 $ -- $ 976
M Fund Inc. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . . 179,345 170,285 170,905 -- -- --
---------- ---------- ----------- ---------- -------- --------
Total investment
income . . . . . . . 1,097,249 3,565,127 1,011,521 1,272,230 -- 976
Expenses:
Mortality and expense
risks . . . . . . . 147,126 124,891 107,415 37,386 20,335 11,175
---------- ---------- ----------- ---------- -------- --------
Net investment income
(loss) . . . . . . . 950,123 3,440,236 904,106 1,234,844 (20,335) (10,199)
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain . 168,248 148,419 209,781 491,241 55,393 34,153
Net unrealized
appreciation
(depreciation)
during the period . 5,712,567 105,161 (2,036,425) 2,317,857 518,731 226,085
---------- ---------- ----------- ---------- -------- --------
Net realized and
unrealized gain
(loss) on investments 5,880,815 253,580 (1,826,644) 2,809,098 574,124 260,238
---------- ---------- ----------- ---------- -------- --------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $6,830,938 $3,693,816 $ (922,538) $4,043,942 $553,789 $250,039
========== ========== =========== ========== ======== ========
</TABLE>
See accompanying notes.
101
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INTERNATIONAL BALANCED SUBACCOUNT MID CAP GROWTH SUBACCOUNT
---------------------------------- ----------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . $ 99,184 $ 57,587 $ 30,867 $2,117,559 $ 461,919 $ --
M Fund Inc. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . . -- -- -- -- -- --
--------- --------- -------- ---------- ---------- ----------
Total investment
income . . . . . . . 99,184 57,587 30,867 2,117,559 461,919 --
Expenses:
Mortality and expense
risks . . . . . . . 6,368 4,696 2,758 58,898 16,758 5,801
--------- --------- -------- ---------- ---------- ----------
Net investment income
(loss) . . . . . . . 92,816 52,891 28,109 2,058,661 445,161 (5,801)
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 4,711 (4,506) 12,000 773,222 73,958 394
Net unrealized
appreciation
(depreciation)
during the period . (38,997) 78,455 (41,999) 6,801,000 647,137 199,441
--------- --------- -------- ---------- ---------- ----------
Net realized and
unrealized gain
(loss) on
investments . . . . (34,286) 73,949 (29,999) 7,574,222 721,095 199,835
--------- --------- -------- ---------- ---------- ----------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $ 58,530 $ 126,840 $ (1,890) $9,632,883 $1,166,256 $ 194,034
========= ========= ======== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE SUBACCOUNT MONEY MARKET SUBACCOUNT
-------------------------------- ----------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . $ 648,532 $ 433,626 $266,440 $2,943,852 $2,888,490 $2,746,662
M Fund Inc. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . . -- -- -- 985,509 973,241 957,390
--------- --------- -------- ---------- ---------- ----------
Total investment
income . . . . . . . 648,532 433,626 266,440 3,929,361 3,861,731 3,704,052
Expenses:
Mortality and expense
risks . . . . . . . 54,610 44,753 25,295 411,487 380,002 361,409
--------- --------- -------- ---------- ---------- ----------
Net investment income 593,922 388,873 241,145 3,517,874 3,481,729 3,342,643
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain . 165,556 673,582 217,073 -- -- --
Net unrealized
appreciation
(depreciation)
during the period . (569,216) (479,093) 532,936 -- -- --
--------- --------- -------- ---------- ---------- ----------
Net realized and
unrealized gain
(loss) on
investments . . . . (403,660) 194,489 750,009 -- -- --
--------- --------- -------- ---------- ---------- ----------
Net increase in net
assets resulting from
operations . . . . . $ 190,262 $ 583,362 $991,154 $3,517,874 $3,481,729 $3,342,643
========= ========= ======== ========== ========== ==========
</TABLE>
See accompanying notes.
102
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MID CAP VALUE SUBACCOUNT SMALL/MID CAP GROWTH SUBACCOUNT
--------------------------------------- -----------------------------------------
1999 1998 1997 1999 1998 1997
----------- -------------- ----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I . . . . . . . . . . . . . . . . $ 31,306 $ 40,338 $ 178,590 $ 1,903,687 $ 217,686 $ 1,022,881
M Fund Inc. . . . . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans . . . . . -- -- -- -- -- --
---------- ------------- ---------- ------------ ------------ ------------
Total investment income . . . . . . . . . 31,306 40,338 178,590 1,903,687 217,686 1,022,881
Expenses:
Mortality and expense risks . . . . . . . 29,798 23,760 6,329 69,847 63,334 54,469
---------- ------------- ---------- ------------ ------------ ------------
Net investment income . . . . . . . . . . 1,508 16,578 172,261 1,833,840 154,352 968,412
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) . . . . . . . . (241,740) (422,902) 121,152 (13,020) 56,968 533,297
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . 469,537 (260,362) (86,033) (1,274,161) 334,213 (1,073,252)
---------- ------------- ---------- ------------ ------------ ------------
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . 227,797 (683,264) 35,119 (1,287,181) 391,181 (539,955)
---------- ------------- ---------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . $ 229,305 $ (666,686) $ 207,380 $ 546,659 $ 545,533 $ 428,457
========== ============= ========== ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY SUBACCOUNT GROWTH & INCOME SUBACCOUNT
-------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ---------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series
Trust I . . . . . . . . . . . . . . . . $ 771,050 $ 817,633 $ 957,079 $124,750,392 $ 96,326,313 $ 99,799,718
M Fund Inc. . . . . . . . . . . . . . . . -- -- -- -- -- --
Interest income on policy loans . . . . . 131,461 145,212 140,517 12,877,539 11,727,553 10,448,315
----------- ----------- ---------- ------------ ------------ ------------
Total investment income . . . . . . . . . 902,511 962,845 1,097,596 137,627,931 108,053,866 110,248,033
Expenses:
Mortality and expense risks . . . . . . . 78,893 86,610 76,454 6,531,512 5,589,689 4,658,703
----------- ----------- ---------- ------------ ------------ ------------
Net investment income . . . . . . . . . . 823,618 876,235 1,021,142 131,096,419 102,464,177 105,589,330
Net realized and unrealized gain (loss) on
investments:
Net realized gain . . . . . . . . . . . . 123,591 442,876 551,925 22,802,197 22,835,488 16,543,458
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . (1,106,755) (3,720,942) 447,661 7,687,109 112,457,395 67,250,127
----------- ----------- ---------- ------------ ------------ ------------
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . (983,164) (3,278,066) 999,586 30,489,306 135,292,883 83,793,585
----------- ----------- ---------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . $ (159,546) $(2,401,831) $2,020,728 $161,585,725 $237,757,060 $189,382,915
=========== =========== ========== ============ ============ ============
</TABLE>
See accompanying notes.
103
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MANAGED SUBACCOUNT SHORT-TERM BOND SUBACCOUNT
-------------------------------------- ---------------------------------
1999 1998 1997 1999 1998 1997
------------ ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series
Trust I . . . . . . $39,951,885 $37,907,821 $32,757,460 $ 53,689 $ 31,261 $ 22,079
M Fund Inc. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . . 5,217,121 4,949,021 4,669,363 -- -- --
----------- ----------- ----------- ---------- -------- ---------
Total investment
income . . . . . . . 45,169,006 42,856,842 37,426,823 53,689 31,261 22,079
Expenses:
Mortality and expense
risks . . . . . . . 2,636,085 2,381,406 2,111,314 5,065 3,052 2,202
----------- ----------- ----------- ---------- -------- ---------
Net investment income 42,532,921 40,475,436 35,315,509 48,624 28,209 19,877
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 5,060,826 5,853,076 5,663,060 (3,107) 2,008 235
Net unrealized
appreciation
(depreciation)
during the period . (9,288,287) 24,834,482 16,843,903 (23,648) (5,287) 1,405
----------- ----------- ----------- ---------- -------- ---------
Net realized and
unrealized gain
(loss) on investments (4,227,461) 30,687,558 22,506,963 (26,755) (3,279) 1,640
----------- ----------- ----------- ---------- -------- ---------
Net increase in net
assets resulting from
operations . . . . . $38,305,460 $71,162,994 $57,822,472 $ 21,869 $ 24,930 $ 21,517
=========== =========== =========== ========== ======== =========
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE SUBACCOUNT INTERNATIONAL OPPORTUNITIES SUBACCOUNT
-------------------------------- ---------------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- --------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series
Trust I . . . . . . $ 97,290 $ 24,781 $256,363 $ 354,646 $ 27,799 $ 35,111
M Fund Inc. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . . -- -- -- -- -- --
--------- --------- -------- ---------- -------- ---------
Total investment
income . . . . . . . 97,290 24,781 256,363 354,646 27,799 35,111
Expenses:
Mortality and expense
risks . . . . . . . 24,661 23,711 10,530 24,257 19,481 11,575
--------- --------- -------- ---------- -------- ---------
Net investment income 72,629 1,070 245,833 330,389 8,318 23,536
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . (217,582) 61,917 129,604 123,861 64,757 78,058
Net unrealized
appreciation
(depreciation)
during the period . (40,472) (364,339) (32,439) 839,140 339,709 (141,034)
--------- --------- -------- ---------- -------- ---------
Net realized and
unrealized gain
(loss) on investments (258,054) (302,422) 97,165 963,001 404,466 (62,976)
--------- --------- -------- ---------- -------- ---------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $(185,425) $(301,352) $342,998 $1,293,390 $412,784 $ (39,440)
========= ========= ======== ========== ======== =========
</TABLE>
See accompanying notes.
104
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EQUITY INDEX SUBACCOUNT GLOBAL BOND SUBACCOUNT
---------------------------------- ----------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series
Trust I . . . . . . $ 921,698 $ 367,284 $ 220,686 $ 91,316 $62,244 $84,597
M Fund Inc. . . . . -- -- -- -- -- --
Interest income on
policy loans . . . . -- -- -- -- -- --
---------- ---------- ---------- --------- ------- -------
Total investment
income . . . . . . . 921,698 367,284 220,686 91,316 62,244 84,597
Expenses:
Mortality and expense
risks . . . . . . . 103,983 60,274 28,637 9,736 7,516 5,827
---------- ---------- ---------- --------- ------- -------
Net investment income 817,715 307,010 192,049 81,580 54,728 78,770
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . 471,802 132,619 38,987 (1,996) 32,917 5,891
Net unrealized
appreciation
(depreciation)
during the period . 2,019,913 2,082,107 1,193,531 (126,001) 11,342 (3,195)
---------- ---------- ---------- --------- ------- -------
Net realized and
unrealized gain
(loss) on investments 2,491,715 2,214,726 1,232,518 (127,997) 44,259 2,696
---------- ---------- ---------- --------- ------- -------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $3,309,430 $2,521,736 $1,424,567 $ (46,417) $98,987 $81,466
========== ========== ========== ========= ======= =======
</TABLE>
<TABLE>
<CAPTION>
TURNER CORE GROWTH SUBACCOUNT BRANDES INTERNATIONAL EQUITY SUBACCOUNT
------------------------------ ----------------------------------------
1999 1998 1997 1999 1998 1997
---------- --------- --------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series
Trust I . . . . . . $ -- $ -- $ -- $ -- $ -- $ --
M Fund Inc. . . . . 38,038 5,535 11,090 18,453 13,237 2,278
Interest income on
policy loans . . . . -- -- -- -- -- --
-------- ------- ------- -------- ------- ------
Total investment
income . . . . . . . 38,038 5,535 11,090 18,453 13,237 2,278
Expenses:
Mortality and expense
risks . . . . . . . 2,102 1,022 505 1,904 1,143 746
-------- ------- ------- -------- ------- ------
Net investment income 35,936 4,513 10,585 16,549 12,094 1,532
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain . 44,245 14,364 3,166 7,704 1,184 133
Net unrealized
appreciation during
the period . . . . 37,727 49,605 12,370 119,400 15,813 2,674
-------- ------- ------- -------- ------- ------
Net realized and
unrealized gain on
investments . . . . 81,972 63,969 15,536 127,104 16,997 2,807
-------- ------- ------- -------- ------- ------
Net increase in net
assets resulting from
operations . . . . . $117,908 $68,482 $26,121 $143,653 $29,091 $4,339
======== ======= ======= ======== ======= ======
</TABLE>
See accompanying notes.
105
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF OPERATIONS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
FRONTIER CAPITAL APPRECIATION EMERGING MARKETS EQUITY GLOBAL
SUBACCOUNT SUBACCOUNT EQUITY SUBACCOUNT
------------------------------ ------------------------ ------------------
1999 1998 1997 1999 1998* 1999 1998*
--------- ---------- -------- ------------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I . . . . . $ -- $ 1,888 $ -- $ 13,510 $ 1 $ 508 $ 1
M Fund Inc. . . . . . . . . . . . . . . . . . 20,787 1,888 8,986 -- -- -- --
Interest income on policy loans . . . . . . . . -- -- -- -- -- -- --
-------- -------- ------- -------- ----- ------- -------
Total investment income . . . . . . . . . . . . 20,787 1,888 8,986 13,510 1 508 1
Expenses:
Mortality and expense risks . . . . . . . . . 3,019 2,096 1,464 720 -- 267 --
-------- -------- ------- -------- ----- ------- -------
Net investment income (loss) . . . . . . . . . 17,768 (208) 7,522 12,790 1 241 1
Net realized and unrealized gain on investments:
Net realized gain . . . . . . . . . . . . . . 22,678 12,123 9,048 5,339 -- 602 1
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . 164,599 (17,930) 40,541 86,570 10 13,424 45
-------- -------- ------- -------- ----- ------- -------
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . . . 187,277 (5,807) 49,589 91,909 10 14,026 46
-------- -------- ------- -------- ----- ------- -------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . $205,045 $ (6,015) $57,111 $104,699 $ 11 $14,267 $ 47
======== ======== ======= ======== ===== ======= =======
</TABLE>
<TABLE>
<CAPTION>
SMALL/MID ENHANCED
CAP CORE HIGH YIELD U.S. EQUITY
BOND INDEX SUBACCOUNT SUBACCOUNT BOND SUBACCOUNT SUBACCOUNT
---------------------- ------------- ---------------- --------------
1999 1998* 1999 1998* 1999 1998* 1999**
------------ --------- ------ ------- -------- ------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received
from:
John Hancock Variable
Series Trust I . . $ 17,417 $ 149 $6,810 $-- $2,748 $ 19 $ --
M Fund Inc. . . . . -- -- -- -- -- -- 1,117
Interest income on
policy loans . . . . -- -- -- -- -- -- --
-------- ----- ------ -- ------ ---- ------
Total investment
income . . . . . . . 17,417 149 6,810 2,748 19 1,117
Expenses:
Mortality and expense
risks . . . . . . . 1,565 3 178 -- 206 1 4
-------- ----- ------ -- ------ ---- ------
Net investment income 15,852 146 6,632 -- 2,542 18 1,113
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss). . . . . . . (1,422) (1) 252 -- (186) -- 91
Net unrealized
appreciation
(depreciation)
during the period . (22,820) (196) 3,005 6 (511) (26) (879)
-------- ----- ------ -- ------ ---- ------
Net realized and
unrealized gain
(loss) on
investments . . . . (24,242) (197) 3,257 6 (697) (26) (788)
-------- ----- ------ -- ------ ---- ------
Net increase
(decrease) in net
assets resulting from
operations . . . . . $ (8,390) $ (51) $9,889 $6 $1,845 $ (8) $ 325
======== ===== ====== == ====== ==== ======
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
** From March 9, 1999 (commencement of operations).
See accompanying notes.
106
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
LARGE CAP GROWTH SUBACCOUNT SOVEREIGN BOND SUBACCOUNT
------------------------------------------ ------------------------------------------
1999 1998 1997 1999 1998 1997
------------- ------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . $ 24,389,814 $ 12,025,213 $ 8,071,685 $ 20,233,648 $ 22,087,857 $ 19,822,561
Net realized gains . . . . . . . . . 4,239,424 3,520,199 4,216,904 192,098 1,600,539 1,088,488
Net unrealized appreciation
(depreciation) during the period . 1,727,703 18,509,310 7,920,403 (20,304,536) (2,317,324) 2,987,952
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations . . . . . . . . . . 30,356,941 34,054,722 20,208,992 121,210 21,371,072 23,899,001
From policyholder transactions:
Net premiums from policyholders . . 37,307,814 21,681,632 18,819,133 26,114,799 32,901,747 31,136,450
Net benefits to policyholders . . . (25,817,420) (21,510,240) (19,915,971) (35,577,616) (39,577,750) (39,506,771)
Net increase (decrease) in policy
loans . . . . . . . . . . . . . . . -- 2,561,877 (41,068) -- 1,607,456 1,612,490
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder
transactions . . . . . . . . . . . . 11,490,394 2,733,269 (1,137,906) (9,462,817) (5,068,547) (6,757,831)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets 41,847,335 36,787,991 19,071,086 (9,341,607) 16,302,525 17,141,170
Net assets at beginning of
period . . . . . . . . . . . . . . . 135,214,997 98,427,006 79,355,920 302,462,406 286,159,881 269,018,711
------------ ------------ ------------ ------------ ------------ ------------
Net assets at end of period . . . . . $177,062,332 $135,214,997 $ 98,427,006 $293,120,799 $302,462,406 $286,159,881
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX SUBACCOUNT SMALL CAP GROWTH SUBACCOUNT
--------------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . $ 950,123 $ 3,440,236 $ 904,106 $ 1,234,844 $ (20,335) $ (10,199)
Net realized gains . . . . . . . . . 168,248 148,419 209,781 491,241 55,393 34,153
Net unrealized appreciation
(depreciation) during the period . 5,712,567 105,161 (2,036,425) 2,317,857 518,731 226,085
----------- ----------- ----------- ----------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations . . . . . 6,830,938 3,693,816 (922,538) 4,043,942 553,789 250,039
From policyholder transactions:
Net premiums from policyholders . . 7,373,967 6,549,988 6,398,146 4,316,218 2,382,203 1,906,439
Net benefits to policyholders . . . (6,834,914) (5,210,982) (4,052,306) (2,206,402) (998,381) (626,114)
Net increase in policy loans . . . . -- 86,200 41,466 -- -- --
----------- ----------- ----------- ----------- ---------- ----------
Net increase in net assets resulting
from policyholder transactions . . . 539,053 1,425,206 2,387,306 2,109,816 1,383,822 1,280,325
----------- ----------- ----------- ----------- ---------- ----------
Net increase in net assets . . . . . 7,369,991 5,119,022 1,464,768 6,153,758 1,937,611 1,530,364
Net assets at beginning of
period . . . . . . . . . . . . . . . 24,529,048 19,410,026 17,945,258 4,671,820 2,734,209 1,203,845
----------- ----------- ----------- ----------- ---------- ----------
Net assets at end of period . . . . . $31,899,039 $24,529,048 $19,410,026 $10,825,578 $4,671,820 $2,734,209
=========== =========== =========== =========== ========== ==========
</TABLE>
See accompanying notes.
107
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INTERNATIONAL BALANCED SUBACCOUNT MID CAP GROWTH SUBACCOUNT
--------------------------------------- ------------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . . . $ 92,816 $ 52,891 $ 28,109 $ 2,058,661 $ 445,161 $ (5,801)
Net realized gains (losses) . . . . . . 4,711 (4,506) 12,000 773,222 73,958 394
Net unrealized appreciation
(depreciation) during the period . . . (38,997) 78,455 (41,999) 6,801,000 647,137 199,441
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations . . . . . . . 58,530 126,840 (1,890) 9,632,883 1,166,256 194,034
From policyholder transactions:
Net premiums from policyholders . . . . 377,958 341,482 602,033 8,941,124 3,164,065 1,031,218
Net benefits to policyholders . . . . . (131,331) (310,766) (102,953) (2,937,257) (612,975) (294,344)
Net increase in policy loans . . . . . . -- -- -- -- -- --
----------- ----------- ----------- ------------ ------------ ------------
Net increase in net assets resulting from
policyholder transactions . . . . . . . 246,627 30,716 499,080 6,003,867 2,551,090 736,874
----------- ----------- ----------- ------------ ------------ ------------
Net increase in net assets . . . . . . . 305,157 157,556 497,190 15,636,750 3,717,346 930,908
Net assets at beginning of period . . . . 872,075 714,519 217,329 5,215,505 1,498,159 567,251
----------- ----------- ----------- ------------ ------------ ------------
Net assets at end of period . . . . . . . $ 1,177,232 $ 872,075 $ 714,519 $ 20,852,255 $ 5,215,505 $ 1,498,159
=========== =========== =========== ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE SUBACCOUNT MONEY MARKET SUBACCOUNT
--------------------------------------- ------------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . $ 593,922 $ 388,873 $ 241,145 $ 3,517,874 $ 3,481,729 $ 3,342,641
Net realized gains . . . . . . . . . . . 165,556 673,582 217,073 -- -- --
Net unrealized appreciation
(depreciation) during the period . . . (569,216) (479,093) 532,936 -- -- --
----------- ----------- ----------- ------------ ------------ ------------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . 190,262 583,362 991,154 3,517,874 3,481,729 3,342,641
From policyholder transactions:
Net premiums from policyholders . . . . 3,166,658 4,214,076 3,739,319 33,694,123 24,612,731 19,023,054
Net benefits to policyholders . . . . . (1,903,017) (3,212,048) (1,140,574) (30,672,090) (24,024,723) (20,817,572)
Net increase in policy loans . . . . . . -- -- -- -- 421,166 390,775
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from policyholder
transactions . . . . . . . . . . . . . . 1,263,641 1,002,028 2,598,745 3,022,033 1,009,174 (1,403,743)
----------- ----------- ----------- ------------ ------------ ------------
Net increase in net assets . . . . . . . 1,453,903 1,585,390 3,589,899 6,539,907 4,490,903 1,938,898
Net assets at beginning of period . . . . 8,099,390 6,514,000 2,924,101 70,098,734 65,607,831 63,668,933
----------- ----------- ----------- ------------ ------------ ------------
Net assets at end of period . . . . . . . $ 9,553,293 $ 8,099,390 $ 6,514,000 $ 76,638,641 $ 70,098,734 $ 65,607,831
=========== =========== =========== ============ ============ ============
</TABLE>
See accompanying notes.
108
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MID CAP VALUE SUBACCOUNT SMALL/MID CAP GROWTH SUBACCOUNT
--------------------------------------- ---------------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . $ 1,508 $ 16,578 $ 172,261 $ 1,833,840 $ 154,352 $ 968,412
Net realized gains (losses) . . . . . (241,740) (422,902) 121,152 (13,020) 56,968 533,297
Net unrealized appreciation
(depreciation) during the period . . 469,537 (260,362) (86,033) (1,274,161) 334,213 (1,073,252)
----------- ----------- ----------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations . . . . . . 229,305 (666,686) 207,380 546,659 545,533 428,457
From policyholder transactions:
Net premiums from policyholders . . . 1,886,594 5,997,691 2,070,644 3,493,643 3,953,326 6,338,416
Net benefits to policyholders . . . . (1,745,112) (2,912,034) (190,430) (3,105,108) (3,311,846) (3,379,629)
Net increase in policy loans . . . . -- -- -- -- -- --
----------- ----------- ----------- ------------- ------------- -------------
Net increase in net assets resulting
from policyholder transactions . . . 141,482 3,085,657 1,880,214 388,535 641,480 2,958,787
----------- ----------- ----------- ------------- ------------- -------------
Net increase in net assets . . . . . . 370,787 2,418,971 2,087,594 935,194 1,187,013 3,387,244
Net assets at beginning of period . . 4,865,793 2,446,822 359,228 11,474,379 10,287,366 6,900,122
----------- ----------- ----------- ------------- ------------- -------------
Net assets at end of period . . . . . $ 5,236,580 $ 4,865,793 $ 2,446,822 $ 12,409,573 $ 11,474,379 $ 10,287,366
=========== =========== =========== ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE EQUITY SUBACCOUNT GROWTH & INCOME SUBACCOUNT
--------------------------------------- -----------------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income . . . . . . . $ 823,618 $ 876,235 $ 1,021,142 $ 131,096,419 $ 102,464,177 $ 105,589,330
Net realized gains . . . . . . . . 123,591 442,876 551,925 22,802,197 22,835,488 16,543,458
Net unrealized appreciation
(depreciation) during the period . (1,106,755) (3,720,942) 447,661 7,687,109 112,457,395 67,250,127
----------- ----------- ----------- -------------- -------------- -------------
Net increase (decrease) in net assets
resulting from operations . . . . . (159,546) (2,401,831) 2,020,728 161,585,725 237,757,060 189,382,915
From policyholder transactions:
Net premiums from policyholders . . 2,304,591 6,295,255 7,786,904 101,973,160 92,955,980 86,308,294
Net benefits to policyholders . . . (3,311,591) (5,507,305) (5,481,110) (133,701,210) (134,661,151) (115,839,460)
Net increase (decrease) in policy
loans. . . . . . . . . . . . . . . -- (83,216) 265,517 -- 18,165,114 18,568,293
----------- ----------- ----------- -------------- -------------- -------------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . . . . . . . . . . (1,007,000) 704,734 2,571,311 (31,728,050) (23,540,057) (10,962,873)
----------- ----------- ----------- -------------- -------------- -------------
Net increase (decrease) in net assets (1,166,546) (1,697,097) 4,592,039 129,857,675 214,217,003 178,420,042
Net assets at beginning of period . 14,545,018 16,242,115 11,650,076 1,148,881,879 934,664,876 756,244,834
----------- ----------- ----------- -------------- -------------- -------------
Net assets at end of period . . . . $13,378,472 $14,545,018 $16,242,115 $1,278,739,554 $1,148,881,879 $ 934,664,876
=========== =========== =========== ============== ============== =============
</TABLE>
See accompanying notes.
109
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MANAGED SUBACCOUNT SHORT-TERM BOND SUBACCOUNT
------------------------------------------ -------------------------------------
1999 1998 1997 1999 1998 1997
------------- ------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . $ 42,532,921 $ 40,475,436 $ 35,315,509 $ 48,624 $ 28,209 $ 19,877
Net realized gains (losses) . . . . . 5,060,826 5,853,076 5,663,060 (3,107) 2,008 235
Net unrealized appreciation
(depreciation) during the period . . (9,288,287) 24,834,482 16,843,903 (23,648) (5,287) 1,405
------------ ------------ ------------ ----------- ----------- ---------
Net increase (decrease) in net assets
resulting from operations . . . . . . 38,305,460 71,162,994 57,822,472 21,869 24,930 21,517
From policyholder transactions:
Net premiums from policyholders . . . 44,546,082 40,631,684 40,318,523 690,849 435,150 278,114
Net benefits to policyholders . . . . (55,332,758) (55,447,667) (54,498,285) (178,124) (274,762) (218,771)
Net increase in policy loans . . . . -- 5,379,590 4,761,829 -- -- --
------------ ------------ ------------ ----------- ----------- ---------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . . . . . . . . . . . (10,786,676) (9,436,393) (9,417,933) 512,725 160,388 59,343
------------ ------------ ------------ ----------- ----------- ---------
Net increase in net assets . . . . . . 27,518,784 61,726,601 48,404,539 534,594 185,318 80,860
Net assets at beginning of period . . 472,553,966 410,827,365 362,422,826 594,889 409,571 328,711
------------ ------------ ------------ ----------- ----------- ---------
Net assets at end of period . . . . . $500,072,750 $472,553,966 $410,827,365 $ 1,129,483 $ 594,889 $ 409,571
------------ ------------ ------------ ----------- ----------- ---------
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE SUBACCOUNT INTERNATIONAL OPPORTUNITIES SUBACCOUNT
-------------------------------------- ---------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . $ 72,629 $ 1,070 $ 245,833 $ 330,389 $ 8,318 $ 23,536
Net realized gains (losses) . . . . . (217,582) 61,917 129,604 123,861 64,757 78,058
Net unrealized appreciation
(depreciation) during the period . . (40,472) (364,359) (32,439) 839,140 339,709 (141,034)
----------- ----------- ---------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations . . . . . . (185,425) (301,372) 342,998 1,293,390 412,784 (39,440)
From policyholder transactions:
Net premiums from policyholders . . . 1,446,109 2,644,808 2,466,836 1,632,955 2,203,753 1,969,364
Net benefits to policyholders . . . . (1,547,128) (1,288,464) (358,679) (1,315,539) (1,443,700) (709,490)
Net increase in policy loans . . . . -- -- -- -- -- --
----------- ----------- ---------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . . . . . . . . . . . (101,019) 1,356,344 2,108,157 317,416 760,053 1,259,874
----------- ----------- ---------- ----------- ----------- ----------
Net increase (decrease) in net assets (286,444) 1,054,972 2,451,155 1,610,806 1,172,837 1,220,434
Net assets at beginning of period . . 4,397,860 3,342,888 891,733 3,699,780 2,526,943 1,306,509
----------- ----------- ---------- ----------- ----------- ----------
Net assets at end of period . . . . . $ 4,111,416 $ 4,397,860 $3,342,888 $ 5,310,586 $ 3,699,780 $2,526,943
=========== =========== ========== =========== =========== ==========
</TABLE>
See accompanying notes.
110
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EQUITY INDEX SUBACCOUNT GLOBAL BOND SUBACCOUNT
-------------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income . . . . . . . . . . . . $ 817,715 $ 307,010 $ 192,049 $ 81,580 $ 54,728 $ 78,770
Net realized gains (losses) . . . . . . . . . 471,802 132,619 38,987 (1,996) 32,917 5,891
Net unrealized appreciation (depreciation)
during the period . . . . . . . . . . . . . . 2,019,913 2,082,107 1,193,531 (126,001) 11,342 (3,195)
----------- ----------- ---------- ---------- ----------- ----------
Net increase (decrease) in net assets resulting
from operations . . . . . . . . . . . . . . . 3,309,430 2,521,736 1,424,567 (46,417) 98,987 81,466
From policyholder transactions:
Net premiums from policyholders . . . . . . . 7,762,529 4,632,113 6,068,371 1,115,699 798,933 807,985
Net benefits to policyholders . . . . . . . . (2,563,485) (1,120,852) (260,531) (292,075) (1,158,109) (201,240)
Net increase in policy loans . . . . . . . . . -- -- -- -- -- --
----------- ----------- ---------- ---------- ----------- ----------
Net increase (decrease) in net assets resulting
from policyholder transactions . . . . . . . . 5,199,044 3,511,261 5,807,840 823,624 (359,176) 606,745
----------- ----------- ---------- ---------- ----------- ----------
Net increase (decrease) in net assets . . . . . 8,508,474 6,032,997 7,232,407 777,207 (260,189) 688,211
Net assets at beginning of period . . . . . . . 13,609,150 7,576,153 343,746 1,105,468 1,365,657 677,446
----------- ----------- ---------- ---------- ----------- ----------
Net assets at end of period . . . . . . . . . . $22,117,624 $13,609,150 $7,576,153 $1,882,675 $ 1,105,468 $1,365,657
=========== =========== ========== ========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
TURNER CORE GROWTH SUBACCOUNT BRANDES INTERNATIONAL EQUITY SUBACCOUNT
------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
---------- --------- --------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income $ 35,936 $ 4,513 $ 10,585 $ 16,549 $ 12,094 $ 1,532
Net realized gains . 44,245 14,364 3,166 7,704 1,184 133
Net unrealized
appreciation during
the period . . . . 37,727 49,605 12,370 119,400 15,813 2,674
--------- -------- -------- -------- -------- --------
Net increase in net
assets resulting from
operations . . . . . 117,908 68,482 26,121 143,653 29,091 4,339
From policyholder
transactions:
Net premiums from
policyholders . . . 240,351 203,590 91,440 239,618 55,021 146,796
Net benefits to
policyholders . . . (136,661) (77,651) (9,878) (29,520) (10,341) (34,985)
Net increase in
policy loans . . . -- -- -- -- -- --
--------- -------- -------- -------- -------- --------
Net increase in net
assets resulting from
policyholder
transactions . . . . 103,690 125,939 81,562 210,098 44,680 111,811
--------- -------- -------- -------- -------- --------
Net increase in net
assets . . . . . . . 221,598 194,421 107,683 353,751 73,771 116,150
Net assets at
beginning of period 314,594 120,173 12,490 234,377 160,606 44,456
--------- -------- -------- -------- -------- --------
Net assets at end of
period . . . . . . . $ 536,192 $314,594 $120,173 $588,128 $234,377 $160,606
========= ======== ======== ======== ======== ========
</TABLE>
See accompanying notes.
111
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
FRONTIER CAPITAL EMERGING MARKETS EQUITY GLOBAL
APPRECIATION SUBACCOUNT SUBACCOUNT EQUITY SUBACCOUNT
------------------------------- ------------------------ ------------------
1999 1998 1997 1999 1998* 1999 1998*
--------- ---------- --------- ------------ ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . $ 17,768 $ (208) $ 7,522 $ 12,790 $ 1 $ 241 $ 1
Net realized gains . . . . . . . . . 22,678 12,123 9,048 5,339 -- 602 1
Net unrealized appreciation
(depreciation) during the
period . . . . . . . . . . . . . . . 164,599 (17,930) 40,541 86,570 10 13,424 45
-------- --------- -------- --------- -------- -------- -------
Net increase (decrease) in net assets
resulting from operations . . . . . . 205,045 (6,015) 57,111 104,699 11 14,267 47
From policyholder transactions:
Net premiums from
policyholders . . . . . . . . . . . 255,268 128,779 327,804 433,406 2,018 108,420 915
Net benefits to policyholders . . . . (89,136) (146,083) (47,276) (144,400) -- (11,064) (13)
Net increase in policy loans . . . . -- -- -- -- -- -- --
-------- --------- -------- --------- -------- -------- -------
Net increase (decrease) in net assets
resulting from policyholder
transactions. . . . . . . . . . . . . 166,132 (17,304) 280,528 289,006 2,018 97,356 902
-------- --------- -------- --------- -------- -------- -------
Net increase (decrease) in net assets 371,177 (23,319) 337,639 393,705 2,029 111,623 949
Net assets at beginning of period . . 357,497 380,816 43,177 2,029 0 949 0
-------- --------- -------- --------- -------- -------- -------
Net assets at end of period . . . . . $728,674 $ 357,497 $380,816 $ 395,734 $ 2,029 $112,572 $ 949
======== ========= ======== ========= ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
ENHANCED U.S.
SMALL/MID HIGH YIELD EQUITY
BOND INDEX SUBACCOUNT CAP CORE SUBACCOUNT BOND SUBACCOUNT SUBACCOUNT
---------------------- -------------------- ----------------- ---------------
1999 1998* 1999 1998* 1999 1998* 1999**
----------- ---------- ---------- --------- --------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) . . . . $ 15,852 $ 146 $ 6,632 $ -- $ 2,542 $ 18 $ 1,113
Net realized gains (losses) . . . . . (1,422) (1) 252 -- (186) -- 91
Net unrealized appreciation
(depreciation) during the
period . . . . . . . . . . . . . . . (22,820) (196) 3,005 6 (511) (26) (879)
-------- ------- ------- ---- -------- ------ -------
Net increase (decrease) in net assets
resulting from operations . . . . . . (8,390) (51) 9,889 6 1,845 (8) 325
From policyholder transactions:
Net premiums from
policyholders . . . . . . . . . . . 412,326 10,254 97,385 104 98,955 2,887 13,814
Net benefits to policyholders . . . . (26,307) (69) (7,901) (2) (13,078) -- --
Net increase in policy loans . . . . -- -- -- -- -- -- --
-------- ------- ------- ---- -------- ------ -------
Net increase in net assets resulting
from policyholder transactions . . . 386,019 10,185 89,484 102 85,877 2,887 13,814
-------- ------- ------- ---- -------- ------ -------
Net increase in net assets . . . . . . 377,629 10,134 99,373 108 87,722 2,879 14,139
Net assets at beginning of period . . 10,134 0 108 0 2,879 0 0
-------- ------- ------- ---- -------- ------ -------
Net assets at end of period . . . . . $387,763 $10,134 $99,481 $108 $ 90,601 $2,879 $14,139
======== ======= ======= ==== ======== ====== =======
</TABLE>
---------
* From May 1, 1998 (commencement of operations).
** From March 9, 1999 (commencement of operations).
See accompanying notes.
112
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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-seven 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-seven Portfolios of the Fund and M Fund which are currently available are
the Large Cap Growth, Sovereign Bond, International Equity Index, Small Cap
Growth, International Balanced, Mid Cap Growth, Large Cap Value, Money Market,
Mid Cap Value, Small/Mid Cap Growth (formerly, Diversified Mid Cap Growth), Real
Estate Equity, Growth & Income, Managed, Short-Term Bond, Small Cap Value,
International Opportunities, Equity Index, Global Bond (formerly, Strategic
Bond), Turner Core Growth, Brandes International Equity, Frontier Capital
Appreciation, Emerging Markets Equity, Global Equity, Bond Index, Small/Mid Cap
CORE, High Yield Bond, and Enhanced U.S. Equity 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 underlying portfolio 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 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.
113
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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.
114
<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, 1999 are as follows:
<TABLE>
<CAPTION>
PORTFOLIO SHARES OWNED COST VALUE
--------- ------------ ------------ ----------------
<S> <C> <C> <C>
Large Cap Growth . . . . . . 5,741,593 $120,709,045 $ 156,931,243
Sovereign Bond . . . . . . . 25,890,030 250,666,359 236,200,057
International Equity Index . 1,479,056 24,178,244 29,055,936
Small Cap Growth . . . . . . 566,326 7,786,928 10,825,578
International Balanced . . . 109,967 1,176,141 1,177,232
Mid Cap Growth . . . . . . . 713,403 13,208,576 20,852,255
Large Cap Value . . . . . . . 708,140 9,871,242 9,553,293
Money Market . . . . . . . . 6,251,999 62,519,986 62,519,986
Mid Cap Value . . . . . . . . 409,851 5,090,205 5,236,581
Small/Mid Cap Growth . . . . 884,190 13,682,215 12,409,573
Real Estate Equity . . . . . 1,000,760 13,989,522 11,482,706
Growth & Income . . . . . . . 54,521,668 796,471,840 1,091,050,404
Managed . . . . . . . . . . . 27,360,590 363,175,625 422,672,470
Short-Term Bond . . . . . . . 116,179 1,157,416 1,129,483
Small Cap Value . . . . . . . 376,603 4,498,794 4,111,416
International Opportunities . 350,017 4,215,384 5,310,586
Equity Index . . . . . . . . 1,081,124 16,808,530 22,117,624
Global Bond . . . . . . . . . 191,740 1,993,841 1,882,675
Turner Core Growth . . . . . 23,384 436,035 536,192
Brandes International Equity 37,895 449,896 588,128
Frontier Capital Appreciation 34,502 539,359 728,674
Emerging Markets Equity . . . 32,273 309,153 395,733
Global Equity . . . . . . . . 9,277 99,103 112,572
Bond Index . . . . . . . . . 41,614 410,779 387,762
Small/Mid Cap CORE . . . . . 10,135 96,470 99,481
High Yield Bond . . . . . . . 10,083 91,148 90,611
Enhanced U.S. Equity . . . . 674 15,019 14,140
</TABLE>
115
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS--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 1999,
were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
--------- ------------ -------------
<S> <C> <C>
Large Cap Growth . . . . . . . . . $ 40,147,156 $ 8,250,657
Sovereign Bond . . . . . . . . . . 27,217,744 17,748,511
International Equity Index . . . . 4,421,148 3,377,977
Small Cap Growth . . . . . . . . . 4,824,260 1,479,601
International Balanced . . . . . . 640,162 300,719
Mid Cap Growth . . . . . . . . . . 9,490,182 1,427,655
Large Cap Value . . . . . . . . . . 2,984,422 1,126,859
Money Market . . . . . . . . . . . 21,519,371 15,378,894
Mid Cap Value . . . . . . . . . . . 1,426,492 1,283,502
Small/Mid Cap Growth . . . . . . . 3,998,048 1,775,674
Real Estate Equity . . . . . . . . 1,670,570 1,772,028
Growth & Income . . . . . . . . . . 133,888,047 52,458,290
Managed . . . . . . . . . . . . . . 46,301,140 19,231,354
Short-Term Bond . . . . . . . . . . 682,313 120,964
Small Cap Value . . . . . . . . . . 1,054,005 1,082,396
International Opportunities . . . . 1,758,914 1,111,110
Equity Index . . . . . . . . . . . 7,177,051 1,160,291
Global Bond . . . . . . . . . . . . 1,188,656 283,452
Turner Core Growth . . . . . . . . 279,803 140,177
Brandes International Equity . . . 255,671 29,025
Frontier Capital Appreciation . . . 401,413 217,513
Emerging Markets Equity . . . . . . 454,479 152,683
Global Equity . . . . . . . . . . . 107,485 9,888
Bond Index . . . . . . . . . . . . 429,057 27,186
Small/Mid Cap CORE . . . . . . . . 106,540 10,425
High Yield Bond . . . . . . . . . . 99,666 11,238
Enhanced U.S. Equity . . . . . . . 26,361 11,432
</TABLE>
116
<PAGE>
ALPHABETICAL INDEX OF KEY WORDS AND PHRASES
This index should help you locate more information about many of the important
concepts in this prospectus.
<TABLE>
<CAPTION>
KEY WORD OR PHRASE PAGE KEY WORD OR PHRASE PAGE
<S> <C> <C> <C> <C>
Account . . . . . . . . . . 33 6
4
account value . . . . . . . 9 1
Additional Sum Insured. . . 16 35
asset - based charge. . 10 17
asset rebalancing . . . . . 14 10
attained age. . . . . . . . 10 5
Basic Sum Insured . . . . . 16 15
4
beneficiary . . . . . . . . 3 11
business day. . . . . . . . 34 21
changing Option A or B. . . 20 6
changing the Total Sum
Insured . . . . . . . . . 20 35
charges . . . . . . . . . . 9 35
Code. . . . . . . . . . . . 39 5
cost of insurance rates . . 9 3
date of issue . . . . . . . 35 23
death benefit . . . . . . . 5 8
deductions. . . . . . . . . 9 9
dollar cost averaging . . . 14 2
expenses of the Trust . . . 11 33
fixed investment option . . 34 2
full surrender. . . . . . . 15 16
fund. . . . . . . . . . . . 2 33
grace period. . . . . . . . 8 5
guaranteed death benefit
feature. . . . . . . . . . 7 15
Guaranteed Death Benefit
Premium. . . . . . . . . . 7 9
insurance charge. . . . . . 9 39
insured person. . . . . . . 5 24
investment options. . . . . 1 16
JHVLICO . . . . . . . . . . 33 14
lapse . . . . . . . . . . . 7 2
loan. . . . . . . . . . . . 15 1
loan interest . . . . . . . 16 33
Maximum Monthly Benefit. 19 15
maximum premiums. . . . . . 6 11
Minimum Initial Premium . . 34 5
minimum insurance amount. . 17
</TABLE>
117
<PAGE>
SUPPLEMENT DATED NOVEMBER 1, 2000
TO
PROSPECTUSES DATED NOVEMBER 1, 2000
__________________________
This Supplement is intended to be distributed with certain prospectuses dated
November 1, 2000 for variable life insurance policies issued by John Hancock
Life Insurance Company or John Hancock Variable Life Insurance Company. The
prospectuses involved bear the title "Medallion Variable Life", "Medallion
Variable Universal Life II", "Medallion Executive Variable Life", "Medallion
Executive Variable Life III", "Variable Estate Protection", "Variable Estate
Protection II", "Flex V-1" or "Flex V-2". We refer to these prospectuses as the
"Product Prospectuses."
This Supplement will be used only with policies sold through the Product
Prospectuses and through registered representatives affiliated with the M
Financial Group.
__________________________
GUIDE TO THIS SUPPLEMENT
. Page 2 of this Supplement contains amendments to the Product Prospectuses
relating to FOUR ADDITIONAL VARIABLE INVESTMENT OPTIONS.
. Starting on Page 3 of this Supplement, we provide REVISED ILLUSTRATIONS of
death benefits, account values, surrender values and accumulated premiums to
replace the illustration contained in each of the following Product
Prospectuses.
<TABLE>
<CAPTION>
Product Prospectus: Revised illustration begins on page:
------------------- ------------------------------------
<S> <C>
Medallion Variable Life ............... 3
Medallion Variable Universal Life II .. 17
Medallion Executive Variable Life ..... 25
Medallion Executive Variable Life III . 33
Variable Estate Protection ............ 41
Variable Estate Protection II .........
Flex V-2 ..............................
Flex V-1 .............................. 75
</TABLE>
THIS SUPPLEMENT IS ACCOMPANIED WITH A PROSPECTUS DATED MAY 1, 2000 FOR THE M
FUND, INC. THAT CONTAINS DETAILED INFORMATION ABOUT THE FUNDS. BE SURE TO READ
THAT PROSPECTUS BEFORE SELECTING ANY OF THE FOUR ADDITIONAL VARIABLE INVESTMENT
OPTIONS.
1
<PAGE>
AMENDMENTS TO PRODUCT PROSPECTUSES
----------------------------------
1. The table on the cover page of each Product Prospectus is amended to
include the following four additional variable investment options:
<TABLE>
<CAPTION>
VARIABLE INVESTMENT OPTION MANAGED BY:
-------------------------- --------- -
<S> <C>
Brandes International Equity . . . . . . . . . . . . . . . . . . Brandes Investment Partners, L.P.
Turner Core Growth . . . . Turner Investment Partners, Inc.
Frontier Capital Appreciation Frontier Capital Managment Company, LLC
Clifton Enhanced U.S. Equity . . . . . . . . . . . . . . . . . . The Clifton Group
------------------------------------------------------------------------------ --------------------------------
</TABLE>
2. The second paragraph on page 2 of each Product Prospectus is amended to
include the following:
"If you select one or more of the Brandes International Equity, Turner
Core Growth, Frontier Capital Appreciation or Clifton Enhanced U.S. Equity
variable investment options, we will invest your money in the corresponding
investment option(s) of the M Fund, Inc. M Fund, Inc. is a so-called "series"
type mutual fund registered with the SEC. In the prospectus, the term 'Trusts'
includes M Fund, Inc., and the term 'funds' includes the corresponding
investment options of M Fund, Inc. We may modify or delete the variable
investment options in the future."
3. The fund expense table appearing in the section of each Product Prospectus
entitled "What charges will the Trusts deduct from my investment in the policy?"
is amended to include the following:
<TABLE>
<CAPTION>
Investment Distribution Other Operating Total Fund Other Operating
Management and Service Expenses With Operating Expenses Absent
Fund Name Fee (12b-1) Fees Reimbursement Expenses Reimbursement*
--------- ---------- ------------- - -------------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
M FUND, INC.:
Brandes International Equity 0.96% N/A 0.25% 1.21% 0.97%
Turner Core Growth . . 0.45% N/A 0.25% 0.70% 0.95%
Frontier Capital Appreciation 0.90% N/A 0.25% 1.15% 0.57%
Clifton Enhanced U.S. Equity 0.55% N/A 0.25% 0.80% 1.08%
</TABLE>
* M Financial Advisers, Inc. reimburses a fund when the fund's other operating
expenses exceed 0.25% of the fund's average daily net assets.
2
<PAGE>
MEDALLION VARIABLE LIFE
REVISED ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES AND
ACCUMULATED PREMIUMS
The following tables on pages 4 TO 9 replace the illustration in the John
Hancock Life Insurance Company ("JOHN HANCOCK") Medallion Variable Life Product
Prospectus. The tables on pages 10 TO 15 replace the illustration in the John
Hancock Variable Life Insurance Company ("JHVLICO") Medallion Variable Life
Product Prospectus.
The assumptions used for the revised illustrations are generally the same as
those described in the respective Medallion Variable Life Product Prospectus.
With respect to fees and expenses deducted from Trust assets, however, the
amounts shown in all tables reflect (1) investment management fees equivalent to
an effective annual rate of .66, and (2) an assumed average asset charge for all
other Trust-level operating expenses equivalent to an effective annual rate of
.11%. These rates are the arithmetic average for all funds that are available
as investment options. In other words, they are based on the hypothetical
assumption that policy account values are allocated equally among the variable
investment options.
Each table separately illustrates the operation of a policy for a specified
issue age, premium payment schedule and face amount. The amounts shown are for
the end of each policy year and assume that all of the account value is invested
in funds that achieve investment returns at constant annual rates of 0%, 6% and
12% (i.e., before any fees or expenses deducted from Trust assets). After
deduction of the average Trust-level fees and expenses (as described above) the
corresponding net annual rates of return would be -.77%, 5.18% and 11.14%.
Investment return reflects investment income and all realized and unrealized
capital gains and losses.
The actual rates associated with any policy will vary depending upon the
actual allocation of policy values among the investment options. The charge
shown above for all other Trust-level operating expenses reflects reimbursements
to certain funds as described in the footnotes to the Fund expense table. We
currently expect those reimbursement arrangements to continue indefinitely, but
that is not guaranteed.
The second column of each table shows the amount you would have at the end of
each policy year if an amount equal to the assumed Planned Premiums were
invested to earn interest, after taxes, at 5% compounded annually. This is not a
policy value. It is included for comparison purposes only.
Because your circumstances will no doubt differ from those in the
illustrations that follow, values under your policy will differ, in most cases
substantially. Upon request, we will furnish you with a comparable illustration
reflecting your proposed insured person's issue age, sex and underwriting risk
classification, and the face amount and annual Planned Premium amount requested.
3
<PAGE>
JOHN HANCOCK MEDALLION VARIABLE LIFE
DEATH BENEFIT OPTION 1: LEVEL DEATH BENEFIT
ILLUSTRATION ASSUMES CURRENT CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,000 100,000 100,000 218 244 270 0 0 0
2 1,636 100,000 100,000 100,000 663 737 814 0 0 71
3 2,516 100,000 100,000 100,000 1,092 1,242 1,405 0 149 312
4 3,439 100,000 100,000 100,000 1,504 1,759 2,047 412 667 954
5 4,409 100,000 100,000 100,000 1,898 2,287 2,742 805 1,194 1,649
6 5,428 100,000 100,000 100,000 2,273 2,825 3,497 1,181 1,732 2,405
7 6,497 100,000 100,000 100,000 2,627 3,372 4,315 1,534 2,279 3,223
8 7,620 100,000 100,000 100,000 2,960 3,927 5,203 2,066 3,033 4,309
9 8,799 100,000 100,000 100,000 3,269 4,489 6,166 2,574 3,793 5,471
10 10,037 100,000 100,000 100,000 3,562 5,067 7,227 3,266 4,771 6,931
11 11,337 100,000 100,000 100,000 3,859 5,684 8,415 3,661 5,486 8,218
12 12,702 100,000 100,000 100,000 4,133 6,311 9,715 4,035 6,213 9,616
13 14,135 100,000 100,000 100,000 4,382 6,948 11,136 4,382 6,948 11,136
14 15,640 100,000 100,000 100,000 4,604 7,593 12,692 4,604 7,593 12,692
15 17,220 100,000 100,000 100,000 4,796 8,244 14,396 4,796 8,244 14,396
16 18,879 100,000 100,000 100,000 4,958 8,901 16,265 4,958 8,901 16,265
17 20,621 100,000 100,000 100,000 5,088 9,563 18,318 5,088 9,563 18,318
18 22,450 100,000 100,000 100,000 5,180 10,224 20,571 5,180 10,224 20,571
19 24,370 100,000 100,000 100,000 5,227 10,879 23,043 5,227 10,879 23,043
20 26,387 100,000 100,000 100,000 5,237 11,534 25,769 5,237 11,534 25,769
25 38,086 100,000 100,000 100,000 4,749 14,862 44,492 4,749 14,862 44,492
30 53,018 100,000 100,000 100,000 3,236 18,271 76,634 3,236 18,271 76,634
35 72,076 ** 100,000 151,226 ** 20,805 131,500 ** 20,805 131,500
40 96,398 ** 100,000 233,818 ** 20,665 222,684 ** 20,665 222,684
45 127,441 ** 100,000 393,938 ** 14,885 375,179 ** 14,885 375,179
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
4
<PAGE>
JOHN HANCOCK MEDALLION VARIABLE LIFE
DEATH BENEFIT OPTION 1: LEVEL DEATH BENEFIT
ILLUSTRATION ASSUMES MAXIMUM CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,000 100,000 100,000 191 217 242 0 0 0
2 1,636 100,000 100,000 100,000 609 680 754 0 0 11
3 2,516 100,000 100,000 100,000 1,011 1,153 1,308 0 60 215
4 3,439 100,000 100,000 100,000 1,395 1,635 1,906 302 542 813
5 4,409 100,000 100,000 100,000 1,759 2,124 2,552 666 1,031 1,459
6 5,428 100,000 100,000 100,000 2,104 2,621 3,249 1,011 1,528 2,157
7 6,497 100,000 100,000 100,000 2,426 3,122 4,002 1,334 2,029 2,909
8 7,620 100,000 100,000 100,000 2,727 3,627 4,814 1,833 2,733 3,920
9 8,799 100,000 100,000 100,000 3,003 4,135 5,690 2,308 3,440 4,995
10 10,037 100,000 100,000 100,000 3,263 4,656 6,651 2,967 4,359 6,355
11 11,337 100,000 100,000 100,000 3,496 5,177 7,692 3,298 4,979 7,494
12 12,702 100,000 100,000 100,000 3,700 5,698 8,818 3,602 5,599 8,719
13 14,135 100,000 100,000 100,000 3,876 6,216 10,039 3,876 6,216 10,039
14 15,640 100,000 100,000 100,000 4,020 6,731 11,365 4,020 6,731 11,365
15 17,220 100,000 100,000 100,000 4,130 7,240 12,803 4,130 7,240 12,803
16 18,879 100,000 100,000 100,000 4,205 7,739 14,367 4,205 7,739 14,367
17 20,621 100,000 100,000 100,000 4,237 8,223 16,063 4,237 8,223 16,063
18 22,450 100,000 100,000 100,000 4,221 8,684 17,904 4,221 8,684 17,904
19 24,370 100,000 100,000 100,000 4,152 9,117 19,904 4,152 9,117 19,904
20 26,387 100,000 100,000 100,000 4,020 9,511 22,072 4,020 9,511 22,072
25 38,086 100,000 100,000 100,000 2,190 10,618 36,178 2,190 10,618 36,178
30 53,018 ** 100,000 100,000 ** 8,982 58,591 ** 8,982 58,591
35 72,076 ** ** 111,311 ** 970 96,793 ** 970 96,793
40 96,398 ** ** 168,479 ** ** 160,456 ** ** 160,456
45 127,441 ** ** 277,758 ** ** 264,531 ** ** 264,531
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
5
<PAGE>
JOHN HANCOCK MEDALLION VARIABLE LIFE
DEATH BENEFIT OPTION 2: VARIABLE DEATH BENEFIT
ILLUSTRATION ASSUMES CURRENT CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,217 100,243 100,270 217 243 270 0 0 0
2 1,636 100,661 100,734 100,812 661 734 812 0 0 69
3 2,516 101,088 101,237 101,400 1,088 1,237 1,400 0 144 307
4 3,439 101,497 101,750 102,036 1,497 1,750 2,036 404 658 943
5 4,409 101,886 102,272 102,724 1,886 2,272 2,724 794 1,180 1,632
6 5,428 102,256 102,803 103,469 2,256 2,803 3,469 1,164 1,711 2,377
7 6,497 102,604 103,340 104,274 2,604 3,340 4,274 1,511 2,247 3,181
8 7,620 102,928 103,883 105,143 2,928 3,883 5,143 2,034 2,989 4,249
9 8,799 103,228 104,430 106,082 3,228 4,430 6,082 2,533 3,734 5,387
10 10,037 103,510 104,989 107,111 3,510 4,989 7,111 3,214 4,693 6,814
11 11,337 103,794 105,583 108,258 3,794 5,583 8,258 3,597 5,385 8,060
12 12,702 104,054 106,183 109,506 4,054 6,183 9,506 3,956 6,084 9,407
13 14,135 104,287 106,786 110,862 4,287 6,786 10,862 4,287 6,786 10,862
14 15,640 104,490 107,392 112,336 4,490 7,392 12,336 4,490 7,392 12,336
15 17,220 104,661 107,996 113,938 4,661 7,996 13,938 4,661 7,996 13,938
16 18,879 104,800 108,598 115,681 4,800 8,598 15,681 4,800 8,598 15,681
17 20,621 104,907 109,198 117,579 4,907 9,198 17,579 4,907 9,198 17,579
18 22,450 104,970 109,784 119,639 4,970 9,784 19,639 4,970 9,784 19,639
19 24,370 104,988 110,352 121,874 4,988 10,352 21,874 4,988 10,352 21,874
20 26,387 104,965 110,907 124,310 4,965 10,907 24,310 4,965 10,907 24,310
25 38,086 104,295 113,499 140,400 4,295 13,499 40,400 4,295 13,499 40,400
30 53,018 102,596 115,615 166,099 2,596 15,615 66,099 2,596 15,615 66,099
35 72,076 ** 115,840 206,427 ** 15,840 106,427 ** 15,840 106,427
40 96,398 ** 111,705 269,046 ** 11,705 169,046 ** 11,705 169,046
45 127,441 ** ** 366,706 ** ** 266,706 ** ** 266,706
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
6
<PAGE>
JOHN HANCOCK MEDALLION VARIABLE LIFE
DEATH BENEFIT OPTION 2: VARIABLE DEATH BENEFIT
ILLUSTRATION ASSUMES MAXIMUM CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,191 100,216 100,242 191 216 242 0 0 0
2 1,636 100,607 100,678 100,752 607 678 752 0 0 9
3 2,516 101,007 101,148 101,302 1,007 1,148 1,302 0 55 209
4 3,439 101,387 101,626 101,896 1,387 1,626 1,896 295 534 803
5 4,409 101,748 102,110 102,535 1,748 2,110 2,535 655 1,017 1,442
6 5,428 102,088 102,600 103,223 2,088 2,600 3,223 995 1,507 2,130
7 6,497 102,404 103,092 103,963 2,404 3,092 3,963 1,312 1,999 2,870
8 7,620 102,698 103,586 104,758 2,698 3,586 4,758 1,804 2,692 3,864
9 8,799 102,965 104,080 105,611 2,965 4,080 5,611 2,270 3,385 4,916
10 10,037 103,215 104,583 106,543 3,215 4,583 6,543 2,918 4,287 6,247
11 11,337 103,436 105,084 107,546 3,436 5,084 7,546 3,239 4,886 7,348
12 12,702 103,628 105,579 108,625 3,628 5,579 8,625 3,529 5,480 8,526
13 14,135 103,788 106,067 109,786 3,788 6,067 9,786 3,788 6,067 9,786
14 15,640 103,916 106,546 111,036 3,916 6,546 11,036 3,916 6,546 11,036
15 17,220 104,008 107,012 112,381 4,008 7,012 12,381 4,008 7,012 12,381
16 18,879 104,062 107,462 113,829 4,062 7,462 13,829 4,062 7,462 13,829
17 20,621 104,072 107,888 115,382 4,072 7,888 15,382 4,072 7,888 15,382
18 22,450 104,031 108,281 117,045 4,031 8,281 17,045 4,031 8,281 17,045
19 24,370 103,936 108,635 118,824 3,936 8,635 18,824 3,936 8,635 18,824
20 26,387 103,776 108,937 120,721 3,776 8,937 20,721 3,776 8,937 20,721
25 38,086 101,799 109,337 132,184 1,799 9,337 32,184 1,799 9,337 32,184
30 53,018 ** 106,465 147,310 ** 6,465 47,310 ** 6,465 47,310
35 72,076 ** ** 165,588 ** ** 65,588 ** ** 65,588
40 96,398 ** ** 184,493 ** ** 84,493 ** ** 84,493
45 127,441 ** ** 196,398 ** ** 96,398 ** ** 96,398
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
7
<PAGE>
JOHN HANCOCK MEDALLION VARIABLE LIFE
DEATH BENEFIT OPTION 3: LEVEL DEATH BENEFIT WITH GREATER FUNDING
ILLUSTRATION ASSUMES CURRENT CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,000 100,000 100,000 218 244 270 0 0 0
2 1,636 100,000 100,000 100,000 663 737 814 0 0 71
3 2,516 100,000 100,000 100,000 1,092 1,242 1,405 0 149 312
4 3,439 100,000 100,000 100,000 1,504 1,759 2,047 412 667 954
5 4,409 100,000 100,000 100,000 1,898 2,287 2,742 805 1,194 1,649
6 5,428 100,000 100,000 100,000 2,273 2,825 3,497 1,181 1,732 2,405
7 6,497 100,000 100,000 100,000 2,627 3,372 4,315 1,534 2,279 3,223
8 7,620 100,000 100,000 100,000 2,960 3,927 5,203 2,066 3,033 4,309
9 8,799 100,000 100,000 100,000 3,269 4,489 6,166 2,574 3,793 5,471
10 10,037 100,000 100,000 100,000 3,562 5,067 7,227 3,266 4,771 6,931
11 11,337 100,000 100,000 100,000 3,859 5,684 8,415 3,661 5,486 8,218
12 12,702 100,000 100,000 100,000 4,133 6,311 9,715 4,035 6,213 9,616
13 14,135 100,000 100,000 100,000 4,382 6,948 11,136 4,382 6,948 11,136
14 15,640 100,000 100,000 100,000 4,604 7,593 12,692 4,604 7,593 12,692
15 17,220 100,000 100,000 100,000 4,796 8,244 14,396 4,796 8,244 14,396
16 18,879 100,000 100,000 100,000 4,958 8,901 16,265 4,958 8,901 16,265
17 20,621 100,000 100,000 100,000 5,088 9,563 18,318 5,088 9,563 18,318
18 22,450 100,000 100,000 100,000 5,180 10,224 20,571 5,180 10,224 20,571
19 24,370 100,000 100,000 100,000 5,227 10,879 23,043 5,227 10,879 23,043
20 26,387 100,000 100,000 100,000 5,237 11,534 25,769 5,237 11,534 25,769
25 38,086 100,000 100,000 100,000 4,749 14,862 44,492 4,749 14,862 44,492
30 53,018 100,000 100,000 129,345 3,236 18,271 75,996 3,236 18,271 75,996
35 72,076 ** 100,000 191,588 ** 20,805 126,577 ** 20,805 126,577
40 96,398 ** 100,000 282,918 ** 20,665 206,691 ** 20,665 206,691
45 127,441 ** 100,000 420,701 ** 14,885 333,202 ** 14,885 333,202
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
8
<PAGE>
JOHN HANCOCK MEDALLION VARIABLE LIFE
DEATH BENEFIT OPTION 3: LEVEL DEATH BENEFIT WITH GREATER FUNDING
ILLUSTRATION ASSUMES MAXIMUM CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,000 100,000 100,000 191 217 242 0 0 0
2 1,636 100,000 100,000 100,000 609 680 754 0 0 11
3 2,516 100,000 100,000 100,000 1,011 1,153 1,308 0 60 215
4 3,439 100,000 100,000 100,000 1,395 1,635 1,906 302 542 813
5 4,409 100,000 100,000 100,000 1,759 2,124 2,552 666 1,031 1,459
6 5,428 100,000 100,000 100,000 2,104 2,621 3,249 1,011 1,528 2,157
7 6,497 100,000 100,000 100,000 2,426 3,122 4,002 1,334 2,029 2,909
8 7,620 100,000 100,000 100,000 2,727 3,627 4,814 1,833 2,733 3,920
9 8,799 100,000 100,000 100,000 3,003 4,135 5,690 2,308 3,440 4,995
10 10,037 100,000 100,000 100,000 3,263 4,656 6,651 2,967 4,359 6,355
11 11,337 100,000 100,000 100,000 3,496 5,177 7,692 3,298 4,979 7,494
12 12,702 100,000 100,000 100,000 3,700 5,698 8,818 3,602 5,599 8,719
13 14,135 100,000 100,000 100,000 3,876 6,216 10,039 3,876 6,216 10,039
14 15,640 100,000 100,000 100,000 4,020 6,731 11,365 4,020 6,731 11,365
15 17,220 100,000 100,000 100,000 4,130 7,240 12,803 4,130 7,240 12,803
16 18,879 100,000 100,000 100,000 4,205 7,739 14,367 4,205 7,739 14,367
17 20,621 100,000 100,000 100,000 4,237 8,223 16,063 4,237 8,223 16,063
18 22,450 100,000 100,000 100,000 4,221 8,684 17,904 4,221 8,684 17,904
19 24,370 100,000 100,000 100,000 4,152 9,117 19,904 4,152 9,117 19,904
20 26,387 100,000 100,000 100,000 4,020 9,511 22,072 4,020 9,511 22,072
25 38,086 100,000 100,000 100,000 2,190 10,618 36,178 2,190 10,618 36,178
30 53,018 ** 100,000 100,000 ** 8,982 58,586 ** 8,982 58,586
35 72,076 ** 100,000 141,182 ** 970 93,276 ** 970 93,276
40 96,398 ** ** 196,656 ** ** 143,670 ** ** 143,670
45 127,441 ** ** 271,181 ** ** 214,780 ** ** 214,780
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
9
<PAGE>
JHVLICO MEDALLION VARIABLE LIFE
DEATH BENEFIT OPTION 1: LEVEL DEATH BENEFIT
ILLUSTRATION ASSUMES CURRENT CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,000 100,000 100,000 218 244 270 0 0 0
2 1,636 100,000 100,000 100,000 663 737 815 0 0 72
3 2,516 100,000 100,000 100,000 1,093 1,243 1,406 0 150 313
4 3,439 100,000 100,000 100,000 1,506 1,761 2,048 413 668 956
5 4,409 100,000 100,000 100,000 1,900 2,289 2,745 807 1,196 1,652
6 5,428 100,000 100,000 100,000 2,276 2,828 3,501 1,183 1,736 2,408
7 6,497 100,000 100,000 100,000 2,631 3,376 4,321 1,538 2,283 3,228
8 7,620 100,000 100,000 100,000 2,964 3,932 5,211 2,070 3,038 4,317
9 8,799 100,000 100,000 100,000 3,274 4,496 6,176 2,579 3,801 5,481
10 10,037 100,000 100,000 100,000 3,568 5,076 7,240 3,272 4,780 6,944
11 11,337 100,000 100,000 100,000 3,866 5,695 8,432 3,669 5,497 8,234
12 12,702 100,000 100,000 100,000 4,142 6,325 9,736 4,043 6,226 9,637
13 14,135 100,000 100,000 100,000 4,392 6,965 11,163 4,392 6,965 11,163
14 15,640 100,000 100,000 100,000 4,615 7,612 12,725 4,615 7,612 12,725
15 17,220 100,000 100,000 100,000 4,809 8,267 14,437 4,809 8,267 14,437
16 18,879 100,000 100,000 100,000 4,972 8,928 16,315 4,972 8,928 16,315
17 20,621 100,000 100,000 100,000 5,105 9,595 18,379 5,105 9,595 18,379
18 22,450 100,000 100,000 100,000 5,197 10,260 20,644 5,197 10,260 20,644
19 24,370 100,000 100,000 100,000 5,247 10,920 23,132 5,247 10,920 23,132
20 26,387 100,000 100,000 100,000 5,258 11,581 25,875 5,258 11,581 25,875
25 38,086 100,000 100,000 100,000 4,777 14,946 44,737 4,777 14,946 44,737
30 53,018 100,000 100,000 100,000 3,271 18,411 77,172 3,271 18,411 77,172
35 72,076 ** 100,000 152,466 ** 21,031 132,579 ** 21,031 132,579
40 96,398 ** 100,000 236,015 ** 21,024 224,777 ** 21,024 224,777
45 127,441 ** 100,000 398,132 ** 15,461 379,174 ** 15,461 379,174
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
10
<PAGE>
JHVLICO MEDALLION VARIABLE LIFE
DEATH BENEFIT OPTION 1: LEVEL DEATH BENEFIT
ILLUSTRATION ASSUMES MAXIMUM CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,000 100,000 100,000 191 217 242 0 0 0
2 1,636 100,000 100,000 100,000 609 680 754 0 0 11
3 2,516 100,000 100,000 100,000 1,011 1,153 1,308 0 60 215
4 3,439 100,000 100,000 100,000 1,395 1,635 1,906 302 542 813
5 4,409 100,000 100,000 100,000 1,759 2,124 2,552 666 1,031 1,459
6 5,428 100,000 100,000 100,000 2,104 2,621 3,249 1,011 1,528 2,157
7 6,497 100,000 100,000 100,000 2,426 3,122 4,002 1,334 2,029 2,909
8 7,620 100,000 100,000 100,000 2,727 3,627 4,814 1,833 2,733 3,920
9 8,799 100,000 100,000 100,000 3,003 4,135 5,690 2,308 3,440 4,995
10 10,037 100,000 100,000 100,000 3,256 4,646 6,638 2,960 4,349 6,341
11 11,337 100,000 100,000 100,000 3,481 5,156 7,660 3,284 4,958 7,462
12 12,702 100,000 100,000 100,000 3,677 5,662 8,763 3,579 5,563 8,664
13 14,135 100,000 100,000 100,000 3,843 6,164 9,955 3,843 6,164 9,955
14 15,640 100,000 100,000 100,000 3,978 6,660 11,243 3,978 6,660 11,243
15 17,220 100,000 100,000 100,000 4,078 7,146 12,636 4,078 7,146 12,636
16 18,879 100,000 100,000 100,000 4,141 7,620 14,144 4,141 7,620 14,144
17 20,621 100,000 100,000 100,000 4,162 8,075 15,773 4,162 8,075 15,773
18 22,450 100,000 100,000 100,000 4,134 8,504 17,531 4,134 8,504 17,531
19 24,370 100,000 100,000 100,000 4,052 8,901 19,431 4,052 8,901 19,431
20 26,387 100,000 100,000 100,000 3,908 9,255 21,481 3,908 9,255 21,481
25 38,086 100,000 100,000 100,000 2,023 10,088 34,554 2,023 10,088 34,554
30 53,018 ** 100,000 100,000 ** 8,044 54,575 ** 8,044 54,575
35 72,076 ** ** 100,671 ** ** 87,540 ** ** 87,540
40 96,398 ** ** 149,796 ** ** 142,663 ** ** 142,663
45 127,441 ** ** 242,576 ** ** 231,025 ** ** 231,025
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
11
<PAGE>
JHVLICO MEDALLION VARIABLE LIFE
DEATH BENEFIT OPTION 2: VARIABLE DEATH BENEFIT
ILLUSTRATION ASSUMES CURRENT CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,217 100,243 100,270 217 243 270 0 0 0
2 1,636 100,661 100,734 100,812 661 734 812 0 0 69
3 2,516 101,088 101,237 101,400 1,088 1,237 1,400 0 144 307
4 3,439 101,497 101,750 102,036 1,497 1,750 2,036 404 658 943
5 4,409 101,886 102,272 102,724 1,886 2,272 2,724 794 1,180 1,632
6 5,428 102,256 102,803 103,469 2,256 2,803 3,469 1,164 1,711 2,377
7 6,497 102,604 103,340 104,274 2,604 3,340 4,274 1,511 2,247 3,181
8 7,620 102,928 103,883 105,143 2,928 3,883 5,143 2,034 2,989 4,249
9 8,799 103,228 104,430 106,082 3,228 4,430 6,082 2,533 3,734 5,387
10 10,037 103,510 104,989 107,111 3,510 4,989 7,111 3,214 4,693 6,814
11 11,337 103,794 105,583 108,258 3,794 5,583 8,258 3,597 5,385 8,060
12 12,702 104,054 106,183 109,506 4,054 6,183 9,506 3,956 6,084 9,407
13 14,135 104,287 106,786 110,862 4,287 6,786 10,862 4,287 6,786 10,862
14 15,640 104,490 107,392 112,336 4,490 7,392 12,336 4,490 7,392 12,336
15 17,220 104,661 107,996 113,938 4,661 7,996 13,938 4,661 7,996 13,938
16 18,879 104,800 108,598 115,681 4,800 8,598 15,681 4,800 8,598 15,681
17 20,621 104,907 109,198 117,579 4,907 9,198 17,579 4,907 9,198 17,579
18 22,450 104,970 109,784 119,639 4,970 9,784 19,639 4,970 9,784 19,639
19 24,370 104,988 110,352 121,874 4,988 10,352 21,874 4,988 10,352 21,874
20 26,387 104,965 110,907 124,310 4,965 10,907 24,310 4,965 10,907 24,310
25 38,086 104,295 113,499 140,400 4,295 13,499 40,400 4,295 13,499 40,400
30 53,018 102,596 115,615 166,099 2,596 15,615 66,099 2,596 15,615 66,099
35 72,076 ** 115,840 206,427 ** 15,840 106,427 ** 15,840 106,427
40 96,398 ** 111,705 269,046 ** 11,705 169,046 ** 11,705 169,046
45 127,441 ** ** 366,706 ** ** 266,706 ** ** 266,706
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
12
<PAGE>
JHVLICO MEDALLION VARIABLE LIFE
DEATH BENEFIT OPTION 2: VARIABLE DEATH BENEFIT
ILLUSTRATION ASSUMES MAXIMUM CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,191 100,216 100,242 191 216 242 0 0 0
2 1,636 100,607 100,678 100,752 607 678 752 0 0 9
3 2,516 101,007 101,148 101,302 1,007 1,148 1,302 0 55 209
4 3,439 101,387 101,626 101,896 1,387 1,626 1,896 295 534 803
5 4,409 101,748 102,110 102,535 1,748 2,110 2,535 655 1,017 1,442
6 5,428 102,088 102,600 103,223 2,088 2,600 3,223 995 1,507 2,130
7 6,497 102,404 103,092 103,963 2,404 3,092 3,963 1,312 1,999 2,870
8 7,620 102,698 103,586 104,758 2,698 3,586 4,758 1,804 2,692 3,864
9 8,799 102,965 104,080 105,611 2,965 4,080 5,611 2,270 3,385 4,916
10 10,037 103,208 104,574 106,530 3,208 4,574 6,530 2,912 4,277 6,233
11 11,337 103,422 105,062 107,515 3,422 5,062 7,515 3,224 4,865 7,317
12 12,702 103,605 105,544 108,571 3,605 5,544 8,571 3,506 5,445 8,472
13 14,135 103,757 106,016 109,704 3,757 6,016 9,704 3,757 6,016 9,704
14 15,640 103,875 106,477 110,919 3,875 6,477 10,919 3,875 6,477 10,919
15 17,220 103,957 106,922 112,220 3,957 6,922 12,220 3,957 6,922 12,220
16 18,879 104,000 107,348 113,615 4,000 7,348 13,615 4,000 7,348 13,615
17 20,621 104,000 107,746 115,104 4,000 7,746 15,104 4,000 7,746 15,104
18 22,450 103,948 108,109 116,690 3,948 8,109 16,690 3,948 8,109 16,690
19 24,370 103,841 108,430 118,377 3,841 8,430 18,377 3,841 8,430 18,377
20 26,387 103,670 108,695 120,165 3,670 8,695 20,165 3,670 8,695 20,165
25 38,086 101,650 108,862 130,731 1,650 8,862 30,731 1,650 8,862 30,731
30 53,018 ** 105,698 144,000 ** 5,698 44,000 ** 5,698 44,000
35 72,076 ** ** 158,787 ** ** 58,787 ** ** 58,787
40 96,398 ** ** 171,547 ** ** 71,547 ** ** 71,547
45 127,441 ** ** 173,065 ** ** 73,065 ** ** 73,065
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
13
<PAGE>
JHVLICO MEDALLION VARIABLE LIFE
DEATH BENEFIT OPTION 3: LEVEL DEATH BENEFIT WITH GREATER FUNDING
ILLUSTRATION ASSUMES CURRENT CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,000 100,000 100,000 218 244 270 0 0 0
2 1,636 100,000 100,000 100,000 663 737 814 0 0 71
3 2,516 100,000 100,000 100,000 1,092 1,242 1,405 0 149 312
4 3,439 100,000 100,000 100,000 1,504 1,759 2,047 412 667 954
5 4,409 100,000 100,000 100,000 1,898 2,287 2,742 805 1,194 1,649
6 5,428 100,000 100,000 100,000 2,273 2,825 3,497 1,181 1,732 2,405
7 6,497 100,000 100,000 100,000 2,627 3,372 4,315 1,534 2,279 3,223
8 7,620 100,000 100,000 100,000 2,960 3,927 5,203 2,066 3,033 4,309
9 8,799 100,000 100,000 100,000 3,269 4,489 6,166 2,574 3,793 5,471
10 10,037 100,000 100,000 100,000 3,562 5,067 7,227 3,266 4,771 6,931
11 11,337 100,000 100,000 100,000 3,859 5,684 8,415 3,661 5,486 8,218
12 12,702 100,000 100,000 100,000 4,133 6,311 9,715 4,035 6,213 9,616
13 14,135 100,000 100,000 100,000 4,382 6,948 11,136 4,382 6,948 11,136
14 15,640 100,000 100,000 100,000 4,604 7,593 12,692 4,604 7,593 12,692
15 17,220 100,000 100,000 100,000 4,796 8,244 14,396 4,796 8,244 14,396
16 18,879 100,000 100,000 100,000 4,958 8,901 16,265 4,958 8,901 16,265
17 20,621 100,000 100,000 100,000 5,088 9,563 18,318 5,088 9,563 18,318
18 22,450 100,000 100,000 100,000 5,180 10,224 20,571 5,180 10,224 20,571
19 24,370 100,000 100,000 100,000 5,227 10,879 23,043 5,227 10,879 23,043
20 26,387 100,000 100,000 100,000 5,237 11,534 25,769 5,237 11,534 25,769
25 38,086 100,000 100,000 100,000 4,749 14,862 44,492 4,749 14,862 44,492
30 53,018 100,000 100,000 129,345 3,236 18,271 75,996 3,236 18,271 75,996
35 72,076 ** 100,000 191,588 ** 20,805 126,577 ** 20,805 126,577
40 96,398 ** 100,000 282,918 ** 20,665 206,691 ** 20,665 206,691
45 127,441 ** 100,000 420,701 ** 14,885 333,202 ** 14,885 333,202
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
14
<PAGE>
JHVLICO MEDALLION VARIABLE LIFE
DEATH BENEFIT OPTION 3: LEVEL DEATH BENEFIT WITH GREATER FUNDING
ILLUSTRATION ASSUMES MAXIMUM CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK
FACE AMOUNT: $100,000
$760 PLANNED 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>
1 798 100,000 100,000 100,000 191 217 242 0 0 0
2 1,636 100,000 100,000 100,000 609 680 754 0 0 11
3 2,516 100,000 100,000 100,000 1,011 1,153 1,308 0 60 215
4 3,439 100,000 100,000 100,000 1,395 1,635 1,906 302 542 813
5 4,409 100,000 100,000 100,000 1,759 2,124 2,552 666 1,031 1,459
6 5,428 100,000 100,000 100,000 2,104 2,621 3,249 1,011 1,528 2,157
7 6,497 100,000 100,000 100,000 2,426 3,122 4,002 1,334 2,029 2,909
8 7,620 100,000 100,000 100,000 2,727 3,627 4,814 1,833 2,733 3,920
9 8,799 100,000 100,000 100,000 3,003 4,135 5,690 2,308 3,440 4,995
10 10,037 100,000 100,000 100,000 3,256 4,646 6,638 2,960 4,349 6,341
11 11,337 100,000 100,000 100,000 3,481 5,156 7,660 3,284 4,958 7,462
12 12,702 100,000 100,000 100,000 3,677 5,662 8,763 3,579 5,563 8,664
13 14,135 100,000 100,000 100,000 3,843 6,164 9,955 3,843 6,164 9,955
14 15,640 100,000 100,000 100,000 3,978 6,660 11,243 3,978 6,660 11,243
15 17,220 100,000 100,000 100,000 4,078 7,146 12,636 4,078 7,146 12,636
16 18,879 100,000 100,000 100,000 4,141 7,620 14,144 4,141 7,620 14,144
17 20,621 100,000 100,000 100,000 4,162 8,075 15,773 4,162 8,075 15,773
18 22,450 100,000 100,000 100,000 4,134 8,504 17,531 4,134 8,504 17,531
19 24,370 100,000 100,000 100,000 4,052 8,901 19,431 4,052 8,901 19,431
20 26,387 100,000 100,000 100,000 3,908 9,255 21,481 3,908 9,255 21,481
25 38,086 100,000 100,000 100,000 2,023 10,088 34,554 2,023 10,088 34,554
30 53,018 ** 100,000 100,000 ** 8,044 54,575 ** 8,044 54,575
35 72,076 ** ** 129,243 ** ** 85,388 ** ** 85,388
40 96,398 ** ** 176,949 ** ** 129,273 ** ** 129,273
45 127,441 ** ** 239,696 ** ** 189,843 ** ** 189,843
</TABLE>
---------
* If premiums are paid more frequently than annually, the above values shown
would be affected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
15
<PAGE>
[THIS PAGE IS INTENTIONALLY LEFT BLANK.]
16
<PAGE>
MEDALLION VARIABLE UNIVERSAL LIFE II
REVISED ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES AND
ACCUMULATED PREMIUMS
The following tables on pages 18 TO 23 replace the illustration in the John
Hancock Variable Life Insurance Company Medallion Variable Universal Life II
Product Prospectus.
The assumptions used for the revised illustration are generally the same as
those described in the Medallion Variable Universal Life II Product Prospectus.
With respect to fees and expenses deducted from Trust assets, however, the
amounts shown in all tables reflect (1) investment management fees equivalent to
an effective annual rate of .71, and (2) an assumed average asset charge for all
other Trust-level operating expenses equivalent to an effective annual rate of
.11%. These rates are the arithmetic average for all funds that are available as
investment options. In other words, they are based on the hypothetical
assumption that policy account values are allocated equally among the variable
investment options.
Each table separately illustrates the operation of a policy for a specified
issue age, premium payment schedule and face amount. The amounts shown are for
the end of each policy year and assume that all of the account value is invested
in funds that achieve investment returns at constant annual rates of 0%, 6% and
12% (i.e., before any fees or expenses deducted from Trust assets). After
deduction of the average Trust-level fees and expenses (as described above) the
corresponding net annual rates of return would be -.82%, 5.13% and 11.08%.
Investment return reflects investment income and all realized and unrealized
capital gains and losses.
The actual rates associated with any policy will vary depending upon the
actual allocation of policy values among the investment options. The charge
shown above for all other Trust-level operating expenses reflects reimbursements
to certain funds as described in the footnotes to the Fund expense table. We
currently expect those reimbursement arrangements to continue indefinitely, but
that is not guaranteed.
The second column of each table shows the amount you would have at the end of
each policy year if an amount equal to the assumed Planned Premiums were
invested to earn interest, after taxes, at 5% compounded annually. This is not a
policy value. It is included for comparison purposes only.
Because your circumstances will no doubt differ from those in the
illustrations that follow, values under your policy will differ, in most cases
substantially. Upon request, we will furnish you with a comparable illustration
reflecting your proposed insured person's issue age, sex and underwriting risk
classification, and the Basic Sum Insured, Additional Sum Insured and annual
Planned Premium amount requested.
17
<PAGE>
MEDALLION VARIABLE UNIVERSAL LIFE II (FLEXIBLE PREMIUM VARIABLE LIFE)
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $ 760 *
USING CURRENT CHARGES
<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>
1 798 100,000 100,000 100,000 217 243 270 0 0 0
2 1,636 100,000 100,000 100,000 662 736 813 0 0 53
3 2,516 100,000 100,000 100,000 1,090 1,240 1,403 330 480 643
4 3,439 100,000 100,000 100,000 1,502 1,756 2,043 742 996 1,283
5 4,409 100,000 100,000 100,000 1,894 2,283 2,737 1,134 1,523 1,977
6 5,428 100,000 100,000 100,000 2,268 2,819 3,489 1,660 2,211 2,881
7 6,497 100,000 100,000 100,000 2,620 3,363 4,304 2,088 2,831 3,772
8 7,620 100,000 100,000 100,000 2,951 3,916 5,188 2,495 3,460 4,732
9 8,799 100,000 100,000 100,000 3,258 4,475 6,146 2,954 4,171 5,842
10 10,037 100,000 100,000 100,000 3,542 5,040 7,186 3,390 4,888 7,034
11 11,337 100,000 100,000 100,000 3,835 5,650 8,363 3,835 5,650 8,363
12 12,702 100,000 100,000 100,000 4,106 6,271 9,649 4,106 6,271 9,649
13 14,135 100,000 100,000 100,000 4,351 6,901 11,054 4,351 6,901 11,054
14 15,640 100,000 100,000 100,000 4,569 7,537 12,591 4,569 7,537 12,591
15 17,220 100,000 100,000 100,000 4,757 8,179 14,273 4,757 8,179 14,273
16 18,879 100,000 100,000 100,000 4,973 8,883 16,171 4,973 8,883 16,171
17 20,621 100,000 100,000 100,000 5,147 9,585 18,245 5,147 9,585 18,245
18 22,450 100,000 100,000 100,000 5,269 10,275 20,507 5,269 10,275 20,507
19 24,370 100,000 100,000 100,000 5,334 10,947 22,977 5,334 10,947 22,977
20 26,387 100,000 100,000 100,000 5,345 11,604 25,684 5,345 11,604 25,684
25 38,086 100,000 100,000 100,000 4,837 14,911 44,218 4,837 14,911 44,218
30 53,018 100,000 100,000 100,000 3,309 18,290 75,967 3,309 18,290 75,967
35 72,076 ** 100,000 149,549 ** 20,768 130,043 ** 20,768 130,043
40 96,398 ** 100,000 230,677 ** 20,542 219,692 ** 20,542 219,692
45 127,441 ** 100,000 387,694 ** 14,631 369,232 ** 14,631 369,232
</TABLE>
---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit and
Surrender Value will differ if premiums are paid in different amounts or
frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
18
<PAGE>
MEDALLION VARIABLE UNIVERSAL LIFE II (FLEXIBLE PREMIUM VARIABLE LIFE)
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $ 760 *
USING MAXIMUM CHARGES
<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 1,636 100,000 100,000 100,000 608 679 753 0 0 0
3 2,516 100,000 100,000 100,000 1,009 1,151 1,305 249 391 545
4 3,439 100,000 100,000 100,000 1,392 1,632 1,902 632 872 1,142
5 4,409 100,000 100,000 100,000 1,755 2,119 2,546 995 1,359 1,786
6 5,428 100,000 100,000 100,000 2,099 2,614 3,241 1,491 2,006 2,633
7 6,497 100,000 100,000 100,000 2,420 3,113 3,990 1,888 2,581 3,458
8 7,620 100,000 100,000 100,000 2,719 3,616 4,799 2,263 3,160 4,343
9 8,799 100,000 100,000 100,000 2,993 4,121 5,670 2,689 3,817 5,366
10 10,037 100,000 100,000 100,000 3,244 4,628 6,611 3,092 4,476 6,459
11 11,337 100,000 100,000 100,000 3,467 5,134 7,626 3,467 5,134 7,626
12 12,702 100,000 100,000 100,000 3,661 5,636 8,721 3,661 5,636 8,721
13 14,135 100,000 100,000 100,000 3,825 6,134 9,903 3,825 6,134 9,903
14 15,640 100,000 100,000 100,000 3,957 6,624 11,180 3,957 6,624 11,180
15 17,220 100,000 100,000 100,000 4,055 7,105 12,559 4,055 7,105 12,559
16 18,879 100,000 100,000 100,000 4,116 7,572 14,050 4,116 7,572 14,050
17 20,621 100,000 100,000 100,000 4,134 8,020 15,661 4,134 8,020 15,661
18 22,450 100,000 100,000 100,000 4,104 8,441 17,398 4,104 8,441 17,398
19 24,370 100,000 100,000 100,000 4,020 8,830 19,272 4,020 8,830 19,272
20 26,387 100,000 100,000 100,000 3,873 9,175 21,293 3,873 9,175 21,293
25 38,086 100,000 100,000 100,000 1,978 9,951 34,140 1,978 9,951 34,140
30 53,018 ** 100,000 100,000 ** 7,827 53,695 ** 7,827 53,695
35 72,076 ** ** 100,000 ** ** 85,669 ** ** 85,669
40 96,398 ** ** 146,316 ** ** 139,349 ** ** 139,349
45 127,441 ** ** 236,445 ** ** 225,186 ** ** 225,186
</TABLE>
---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit and
Surrender Value will differ if premiums are paid in different amounts or
frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
19
<PAGE>
MEDALLION VARIABLE UNIVERSAL LIFE II (FLEXIBLE PREMIUM VARIABLE LIFE)
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION B DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $ 760 *
USING CURRENT CHARGES
<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>
1 798 100,216 100,243 100,269 216 243 269 0 0 0
2 1,636 100,660 100,733 100,811 660 733 811 0 0 51
3 2,516 101,086 101,235 101,398 1,086 1,235 1,398 326 475 638
4 3,439 101,494 101,747 102,033 1,494 1,747 2,033 734 987 1,273
5 4,409 101,882 102,268 102,719 1,882 2,268 2,719 1,122 1,508 1,959
6 5,428 102,251 102,797 103,461 2,251 2,797 3,461 1,643 2,189 2,853
7 6,497 102,597 103,332 104,262 2,597 3,332 4,262 2,065 2,800 3,730
8 7,620 102,920 103,872 105,128 2,920 3,872 5,128 2,464 3,416 4,672
9 8,799 103,218 104,416 106,062 3,218 4,416 6,062 2,914 4,112 5,758
10 10,037 103,490 104,963 107,070 3,490 4,963 7,070 3,338 4,811 6,918
11 11,337 103,771 105,550 108,206 3,771 5,550 8,206 3,771 5,550 8,206
12 12,702 104,028 106,144 109,441 4,028 6,144 9,441 4,028 6,144 9,441
13 14,135 104,257 106,740 110,782 4,257 6,740 10,782 4,257 6,740 10,782
14 15,640 104,456 107,337 112,238 4,456 7,337 12,238 4,456 7,337 12,238
15 17,220 104,624 107,933 113,819 4,624 7,933 13,819 4,624 7,933 13,819
16 18,879 104,820 108,589 115,602 4,820 8,589 15,602 4,820 8,589 15,602
17 20,621 104,972 109,233 117,533 4,972 9,233 17,533 4,972 9,233 17,533
18 22,450 105,068 109,853 119,614 5,068 9,853 19,614 5,068 9,853 19,614
19 24,370 105,104 110,441 121,857 5,104 10,441 21,857 5,104 10,441 21,857
20 26,387 105,082 111,000 124,282 5,082 11,000 24,282 5,082 11,000 24,282
25 38,086 104,389 113,578 140,238 4,389 13,578 40,238 4,389 13,578 40,238
30 53,018 102,673 115,675 165,666 2,673 15,675 65,666 2,673 15,675 65,666
35 72,076 ** 115,866 205,411 ** 15,866 105,411 ** 15,866 105,411
40 96,398 ** 111,691 266,881 ** 11,691 166,881 ** 11,691 166,881
45 127,441 ** ** 362,348 ** ** 262,348 ** ** 262,348
</TABLE>
---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit and
Surrender Value will differ if premiums are paid in different amounts or
frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
20
<PAGE>
MEDALLION VARIABLE UNIVERSAL LIFE II (FLEXIBLE PREMIUM VARIABLE LIFE)
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION B DEATH BENEFIT
GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
PLANNED PREMIUM: $ 760 *
USING MAXIMUM CHARGES
<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>
1 798 100,190 100,215 100,241 190 215 241 0 0 0
2 1,636 100,606 100,677 100,750 606 677 750 0 0 0
3 2,516 101,005 101,146 101,300 1,005 1,146 1,300 245 386 540
4 3,439 101,385 101,623 101,892 1,385 1,623 1,892 625 863 1,132
5 4,409 101,744 102,105 102,529 1,744 2,105 2,529 984 1,345 1,769
6 5,428 102,082 102,593 103,215 2,082 2,593 3,215 1,474 1,985 2,607
7 6,497 102,398 103,083 103,951 2,398 3,083 3,951 1,866 2,551 3,419
8 7,620 102,690 103,575 104,742 2,690 3,575 4,742 2,234 3,119 4,286
9 8,799 102,955 104,066 105,591 2,955 4,066 5,591 2,651 3,762 5,287
10 10,037 103,196 104,556 106,503 3,196 4,556 6,503 3,044 4,404 6,351
11 11,337 103,408 105,041 107,482 3,408 5,041 7,482 3,408 5,041 7,482
12 12,702 103,589 105,519 108,530 3,589 5,519 8,530 3,589 5,519 8,530
13 14,135 103,739 105,987 109,653 3,739 5,987 9,653 3,739 5,987 9,653
14 15,640 103,855 106,442 110,857 3,855 6,442 10,857 3,855 6,442 10,857
15 17,220 103,935 106,881 112,145 3,935 6,881 12,145 3,935 6,881 12,145
16 18,879 103,976 107,301 113,524 3,976 7,301 13,524 3,976 7,301 13,524
17 20,621 103,973 107,693 114,996 3,973 7,693 14,996 3,973 7,693 14,996
18 22,450 103,919 108,049 116,562 3,919 8,049 16,562 3,919 8,049 16,562
19 24,370 103,811 108,362 118,227 3,811 8,362 18,227 3,811 8,362 18,227
20 26,387 103,637 108,620 119,989 3,637 8,620 19,989 3,637 8,620 19,989
25 38,086 101,608 108,739 130,359 1,608 8,739 30,359 1,608 8,739 30,359
30 53,018 ** 105,518 143,271 ** 5,518 43,271 ** 5,518 43,271
35 72,076 ** ** 157,431 ** ** 57,431 ** ** 57,431
40 96,398 ** ** 169,120 ** ** 69,120 ** ** 69,120
45 127,441 ** ** 168,868 ** ** 68,868 ** ** 68,868
</TABLE>
---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit and
Surrender Value will differ if premiums are paid in different amounts or
frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
21
<PAGE>
MEDALLION VARIABLE UNIVERSAL LIFE II (FLEXIBLE PREMIUM VARIABLE LIFE)
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION A DEATH BENEFIT
CASH VALUE ACCUMULATION TEST
PLANNED PREMIUM: $ 760 *
USING CURRENT CHARGES
<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>
1 798 100,000 100,000 100,000 217 243 270 0 0 0
2 1,636 100,000 100,000 100,000 662 736 813 0 0 53
3 2,516 100,000 100,000 100,000 1,090 1,240 1,403 330 480 643
4 3,439 100,000 100,000 100,000 1,502 1,756 2,043 742 996 1,283
5 4,409 100,000 100,000 100,000 1,894 2,283 2,737 1,134 1,523 1,977
6 5,428 100,000 100,000 100,000 2,268 2,819 3,489 1,660 2,211 2,881
7 6,497 100,000 100,000 100,000 2,620 3,363 4,304 2,088 2,831 3,772
8 7,620 100,000 100,000 100,000 2,951 3,916 5,188 2,495 3,460 4,732
9 8,799 100,000 100,000 100,000 3,258 4,475 6,146 2,954 4,171 5,842
10 10,037 100,000 100,000 100,000 3,542 5,040 7,186 3,390 4,888 7,034
11 11,337 100,000 100,000 100,000 3,835 5,650 8,363 3,835 5,650 8,363
12 12,702 100,000 100,000 100,000 4,106 6,271 9,649 4,106 6,271 9,649
13 14,135 100,000 100,000 100,000 4,351 6,901 11,054 4,351 6,901 11,054
14 15,640 100,000 100,000 100,000 4,569 7,537 12,591 4,569 7,537 12,591
15 17,220 100,000 100,000 100,000 4,757 8,179 14,273 4,757 8,179 14,273
16 18,879 100,000 100,000 100,000 4,973 8,883 16,171 4,973 8,883 16,171
17 20,621 100,000 100,000 100,000 5,147 9,585 18,245 5,147 9,585 18,245
18 22,450 100,000 100,000 100,000 5,269 10,275 20,507 5,269 10,275 20,507
19 24,370 100,000 100,000 100,000 5,334 10,947 22,977 5,334 10,947 22,977
20 26,387 100,000 100,000 100,000 5,345 11,604 25,684 5,345 11,604 25,684
25 38,086 100,000 100,000 100,000 4,837 14,911 44,218 4,837 14,911 44,218
30 53,018 100,000 100,000 128,276 3,309 18,290 75,368 3,309 18,290 75,368
35 72,076 ** 100,000 189,568 ** 20,768 125,243 ** 20,768 125,243
40 96,398 ** 100,000 279,270 ** 20,542 204,026 ** 20,542 204,026
45 127,441 ** 100,000 414,264 ** 14,631 328,104 ** 14,631 328,104
</TABLE>
---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit and
Surrender Value will differ if premiums are paid in different amounts or
frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
22
<PAGE>
MEDALLION VARIABLE UNIVERSAL LIFE II (FLEXIBLE PREMIUM VARIABLE LIFE)
$100,000 TOTAL SUM INSURED
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK CLASS
OPTION A DEATH BENEFIT
CASH VALUE ACCUMULATION TEST
PLANNED PREMIUM: $ 760 *
USING MAXIMUM CHARGES
<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 1,636 100,000 100,000 100,000 608 679 753 0 0 0
3 2,516 100,000 100,000 100,000 1,009 1,151 1,305 249 391 545
4 3,439 100,000 100,000 100,000 1,392 1,632 1,902 632 872 1,142
5 4,409 100,000 100,000 100,000 1,755 2,119 2,546 995 1,359 1,786
6 5,428 100,000 100,000 100,000 2,099 2,614 3,241 1,491 2,006 2,633
7 6,497 100,000 100,000 100,000 2,420 3,113 3,990 1,888 2,581 3,458
8 7,620 100,000 100,000 100,000 2,719 3,616 4,799 2,263 3,160 4,343
9 8,799 100,000 100,000 100,000 2,993 4,121 5,670 2,689 3,817 5,366
10 10,037 100,000 100,000 100,000 3,244 4,628 6,611 3,092 4,476 6,459
11 11,337 100,000 100,000 100,000 3,467 5,134 7,626 3,467 5,134 7,626
12 12,702 100,000 100,000 100,000 3,661 5,636 8,721 3,661 5,636 8,721
13 14,135 100,000 100,000 100,000 3,825 6,134 9,903 3,825 6,134 9,903
14 15,640 100,000 100,000 100,000 3,957 6,624 11,180 3,957 6,624 11,180
15 17,220 100,000 100,000 100,000 4,055 7,105 12,559 4,055 7,105 12,559
16 18,879 100,000 100,000 100,000 4,116 7,572 14,050 4,116 7,572 14,050
17 20,621 100,000 100,000 100,000 4,134 8,020 15,661 4,134 8,020 15,661
18 22,450 100,000 100,000 100,000 4,104 8,441 17,398 4,104 8,441 17,398
19 24,370 100,000 100,000 100,000 4,020 8,830 19,272 4,020 8,830 19,272
20 26,387 100,000 100,000 100,000 3,873 9,175 21,293 3,873 9,175 21,293
25 38,086 100,000 100,000 100,000 1,978 9,951 34,140 1,978 9,951 34,140
30 53,018 ** 100,000 100,000 ** 7,827 53,695 ** 7,827 53,695
35 72,076 ** ** 126,861 ** ** 83,814 ** ** 83,814
40 96,398 ** ** 173,350 ** ** 126,644 ** ** 126,644
45 127,441 ** ** 234,330 ** ** 185,593 ** ** 185,593
</TABLE>
---------
* The illustrations assume that Planned Premiums are equal to the Target
Premium and are paid at the start of each Policy Year. The Death Benefit and
Surrender Value will differ if premiums are paid in different amounts or
frequencies, if policy loans are taken, or if Additional Sum Insured or
optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
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. WE CAN MAKE NO REPRESENTATION THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ANY ONE YEAR OR CONTINUED OVER ANY PERIOD OF TIME.
23
<PAGE>
[THIS PAGE IS INTENTIONALLY LEFT BLANK.]
24
<PAGE>
MEDALLION EXECUTIVE VARIABLE LIFE
REVISED ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES AND
ACCUMULATED PREMIUMS
The following tables on pages 26 TO 31 replace the illustration in the John
Hancock Variable Life Insurance Company Medallion Executive Variable Life
Product Prospectus.
The assumptions used for the revised illustration are generally the same as
those described in the Medallion Executive Variable Life Product Prospectus.
With respect to fees and expenses deducted from Trust assets, however, the
amounts shown in all tables reflect (1) investment management fees equivalent to
an effective annual rate of .71%, and (2) an assumed average asset charge for
all other Trust-level operating expenses equivalent to an effective annual rate
of .11%. These rates are the arithmetic average for all funds that are
available as investment options. In other words, they are based on the
hypothetical assumption that policy account values are allocated equally among
the variable investment options.
Each table separately illustrates the operation of a policy for a specified
issue age, premium payment schedule and Total Sum Insured. The amounts shown are
for the end of each policy year and assume that all of the account value is
invested in funds that achieve investment returns at constant annual rates of
0%, 6% and 12% (i.e., before any fees or expenses deducted from Trust assets).
After deduction of the average Trust-level fees and expenses (as described
above) the corresponding net annual rates of return would be -.82%, 5.13% and
11.08%. Investment return reflects investment income and all realized and
unrealized capital gains and losses.
The actual rates associated with any policy will vary depending upon the
actual allocation of policy values among the investment options. The charge
shown above for all other Trust-level operating expenses reflects reimbursements
to certain funds as described in the footnotes to the Fund expense table. We
currently expect those reimbursement arrangements to continue indefinitely, but
that is not guaranteed.
The second column of each table shows the amount you would have at the end of
each policy year if an amount equal to the assumed Planned Premiums were
invested to earn interest, after taxes, at 5% compounded annually. This is not a
policy value. It is included for comparison purposes only.
Because your circumstances will no doubt differ from those in the
illustrations that follow, values under your policy will differ, in most cases
substantially. Upon request, we will furnish you with a comparable illustration
reflecting your proposed insured person's issue age, sex and underwriting risk
classification, and the Total Sum Insured and annual Planned Premium amount
requested.
25
<PAGE>
PLAN: MEDALLION EXECUTIVE VARIABLE LIFE (FLEXIBLE PREMIUM VARIABLE LIFE)
$100,000 TOTAL SUM INSURED MALE, ISSUE AGE 45, FULLY UNDERWRITTEN SELECT
UNDERWRITING CLASS OPTION A DEATH BENEFIT GUIDELINE PREMIUM AND CASH VALUE
CORRIDOR TEST PLANNED PREMIUM: $2,000* USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------- ---------------------- --
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------- ---------------------- --
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------ ------------------ ------- ------- ------- ------ ------- ----- ----
<S> <S> <S> <S> <S> <S> <S> <C>
1 2,100 100,000 100,000 100,000 926 1,006 1,086
2 4,305 100,000 100,000 100,000 2,224 2,448 2,683
3 6,620 100,000 100,000 100,000 3,168 3,611 4,094
4 9,051 100,000 100,000 100,000 4,239 4,976 5,810
5 11,604 100,000 100,000 100,000 5,274 6,382 7,686
6 14,284 100,000 100,000 100,000 6,666 8,235 10,154
7 17,098 100,000 100,000 100,000 8,014 10,150 12,859
8 20,053 100,000 100,000 100,000 9,318 12,127 15,826
9 23,156 100,000 100,000 100,000 10,575 14,167 19,081
10 26,414 100,000 100,000 100,000 11,807 16,305 22,700
11 29,834 100,000 100,000 100,000 13,111 18,642 26,822
12 33,426 100,000 100,000 100,000 14,363 21,063 31,368
13 37,197 100,000 100,000 100,000 15,562 23,568 36,390
14 41,157 100,000 100,000 100,000 16,702 26,162 41,942
15 45,315 100,000 100,000 100,000 17,781 28,847 48,092
16 49,681 100,000 100,000 100,000 18,794 31,628 54,912
17 54,265 100,000 100,000 100,000 19,737 34,510 62,491
18 59,078 100,000 100,000 100,000 20,604 37,496 70,928
19 64,132 100,000 100,000 100,000 21,389 40,594 80,341
20 69,439 100,000 100,000 108,963 22,084 43,811 90,802
25 100,227 100,000 100,000 186,337 23,994 62,110 162,032
30 139,522 100,000 100,000 294,031 22,180 85,977 280,029
35 189,673 100,000 124,505 500,517 13,328 118,576 476,683
</TABLE>
---------
* The illustrations assume that Planned Premiums equal to the Target Premium are
paid at the start of each Policy Year. The Death Benefit and Surrender Value
will differ if premiums are paid in different amounts or frequencies, if policy
loans are taken, or if Additional Sum Insured, or optional rider benefits are
elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
26
<PAGE>
PLAN: MEDALLION EXECUTIVE VARIABLE LIFE (FLEXIBLE PREMIUM VARIABLE LIFE)
$100,000 TOTAL SUM INSURED MALE, ISSUE AGE 45, FULLY UNDERWRITTEN SELECT
UNDERWRITING CLASS OPTION A DEATH BENEFIT GUIDELINE PREMIUM AND CASH VALUE
CORRIDOR TEST PLANNED PREMIUM: $2,000* USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefits Surrender Value
------------------------- ---------------------- -
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------- ---------------------- -
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------ ------------------ ------- ------- ------- ------ ------ ------ ---
<S> <S> <S> <S> <S> <S> <S> <C>
1 2,100 100,000 100,000 100,000 607 676 746
2 4,305 100,000 100,000 100,000 1,568 1,753 1,946
3 6,620 100,000 100,000 100,000 2,161 2,512 2,896
4 9,051 100,000 100,000 100,000 2,865 3,434 4,081
5 11,604 100,000 100,000 100,000 3,516 4,354 5,347
6 14,284 100,000 100,000 100,000 4,505 5,677 7,118
7 17,098 100,000 100,000 100,000 5,429 7,008 9,024
8 20,053 100,000 100,000 100,000 6,283 8,342 11,075
9 23,156 100,000 100,000 100,000 7,059 9,674 13,281
10 26,414 100,000 100,000 100,000 7,751 10,997 15,655
11 29,834 100,000 100,000 100,000 8,414 12,368 18,280
12 33,426 100,000 100,000 100,000 8,983 13,724 21,117
13 37,197 100,000 100,000 100,000 9,455 15,063 24,191
14 41,157 100,000 100,000 100,000 9,827 16,380 27,532
15 45,315 100,000 100,000 100,000 10,091 17,671 31,172
16 49,681 100,000 100,000 100,000 10,237 18,926 35,146
17 54,265 100,000 100,000 100,000 10,251 20,133 39,495
18 59,078 100,000 100,000 100,000 10,117 21,278 44,265
19 64,132 100,000 100,000 100,000 9,813 22,342 49,514
20 69,439 100,000 100,000 100,000 9,318 23,308 55,310
25 100,227 100,000 100,000 110,519 3,191 26,010 96,104
30 139,522 ** 100,000 171,247 ** 21,767 163,092
35 189,673 ** ** 283,683 ** ** 270,174
</TABLE>
---------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy Year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies, if
policy loans are taken, or if Additional Sum Insured, or optional rider
benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
27
<PAGE>
PLAN: MEDALLION EXECUTIVE VARIABLE LIFE (FLEXIBLE PREMIUM VARIABLE LIFE)
$100,000 TOTAL SUM INSURED MALE, ISSUE AGE 45, FULLY UNDERWRITTEN SELECT
UNDERWRITING CLASS OPTION B DEATH BENEFIT GUIDELINE PREMIUM AND CASH VALUE
CORRIDOR TEST PLANNED PREMIUM: $2,000* USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------- ---------------------- -
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------- ---------------------- -
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------ ------------------ ------- ------- ------- ------ ------ ------ ---
<S> <S> <S> <S> <S> <S> <S> <C>
1 2,100 100,924 101,004 101,084 924 1,004 1,084
2 4,305 102,057 102,281 102,516 2,217 2,441 2,676
3 6,620 103,155 103,597 104,077 3,155 3,597 4,077
4 9,051 104,216 104,949 105,778 4,216 4,949 5,778
5 11,604 105,239 106,338 107,632 5,239 6,338 7,632
6 14,284 106,613 108,167 110,067 6,613 8,167 10,067
7 17,098 107,937 110,048 112,724 7,937 10,048 12,724
8 20,053 109,211 111,980 115,625 9,211 11,980 15,625
9 23,156 110,430 113,961 118,788 10,430 13,961 18,788
10 26,414 111,616 116,022 122,283 11,616 16,022 22,283
11 29,834 112,861 118,261 126,237 12,861 18,261 26,237
12 33,426 114,043 120,556 130,563 14,043 20,556 30,563
13 37,197 115,157 122,905 135,294 15,157 22,905 35,294
14 41,157 116,196 125,302 140,467 16,196 25,302 40,467
15 45,315 117,156 127,745 146,124 17,156 27,745 46,124
16 49,681 118,030 130,228 152,310 18,030 30,228 52,310
17 54,265 118,809 132,744 159,072 18,809 32,744 59,072
18 59,078 119,487 135,286 166,465 19,487 35,286 66,465
19 64,132 120,053 137,844 174,546 20,053 37,844 74,546
20 69,439 120,498 140,408 183,379 20,498 40,408 83,379
25 100,227 120,593 152,960 241,625 20,593 52,960 141,625
30 139,522 115,859 163,432 332,991 15,859 63,432 232,991
35 189,673 103,378 167,620 475,677 3,378 67,620 375,677
</TABLE>
---------
* The illustrations assume that Planned Premiums equal to the Target Premium are
paid at the start of each Policy Year. The Death Benefit and Surrender Value
will differ if premiums are paid in different amounts or frequencies, if policy
loans are taken, or if Additional Sum Insured, or optional rider benefits are
elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
28
<PAGE>
PLAN: MEDALLION EXECUTIVE VARIABLE LIFE (FLEXIBLE PREMIUM VARIABLE LIFE)
$100,000 TOTAL SUM INSURED MALE, ISSUE AGE 45, FULLY UNDERWRITTEN SELECT
UNDERWRITING CLASS OPTION B DEATH BENEFIT GUIDELINE PREMIUM AND CASH VALUE
CORRIDOR TEST PLANNED PREMIUM: $2,000* USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------- ---------------------- --
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------- ---------------------- --
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------ ------------------ ------- ------- ------- ------ ------- ----- ----
<S> <S> <S> <S> <S> <S> <S> <C>
1 2,100 100,602 100,670 100,740 602 670 740
2 4,305 101,394 101,577 101,768 1,554 1,737 1,928
3 6,620 102,133 102,480 102,858 2,133 2,480 2,858
4 9,051 102,818 103,378 104,014 2,818 3,378 4,014
5 11,604 103,445 104,265 105,236 3,445 4,265 5,236
6 14,284 104,403 105,544 106,946 4,403 5,544 6,946
7 17,098 105,286 106,815 108,765 5,286 6,815 8,765
8 20,053 106,089 108,072 110,699 6,089 8,072 10,699
9 23,156 106,803 109,304 112,748 6,803 9,304 12,748
10 26,414 107,421 110,501 114,913 7,421 10,501 14,913
11 29,834 107,996 111,717 117,267 7,996 11,717 17,267
12 33,426 108,462 112,882 119,752 8,462 12,882 19,752
13 37,197 108,818 113,989 122,379 8,818 13,989 22,379
14 41,157 109,058 115,030 125,154 9,058 15,030 25,154
15 45,315 109,176 115,992 128,082 9,176 15,992 28,082
16 49,681 109,160 116,859 131,166 9,160 16,859 31,166
17 54,265 108,998 117,611 134,406 8,998 17,611 34,406
18 59,078 108,673 118,224 137,795 8,673 18,224 37,795
19 64,132 108,166 118,668 141,327 8,166 18,668 41,327
20 69,439 107,458 118,914 144,991 7,458 18,914 44,991
25 100,227 100,389 116,186 165,067 389 16,186 65,067
30 139,522 ** 102,778 186,009 ** 2,778 86,009
35 189,673 ** ** 200,295 ** ** 100,295
</TABLE>
---------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy Year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies, if
policy loans are taken, or if Additional Sum Insured, or optional rider
benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
29
<PAGE>
PLAN: MEDALLION EXECUTIVE VARIABLE LIFE (FLEXIBLE PREMIUM VARIABLE LIFE)
$100,000 TOTAL SUM INSURED MALE, ISSUE AGE 45, FULLY UNDERWRITTEN SELECT
UNDERWRITING CLASS OPTION A DEATH BENEFIT CASH VALUE ACCUMULATION TEST
PLANNED PREMIUM: $2,000* USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------- ---------------------- --
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------- ---------------------- --
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------ ------------------ ------- ------- ------- ------ ------- ----- ----
<S> <S> <S> <S> <S> <S> <S> <C>
1 2,100 100,000 100,000 100,000 926 1,006 1,086
2 4,305 100,000 100,000 100,000 2,224 2,448 2,683
3 6,620 100,000 100,000 100,000 3,168 3,611 4,094
4 9,051 100,000 100,000 100,000 4,239 4,976 5,810
5 11,604 100,000 100,000 100,000 5,274 6,382 7,686
6 14,284 100,000 100,000 100,000 6,666 8,235 10,154
7 17,098 100,000 100,000 100,000 8,014 10,150 12,859
8 20,053 100,000 100,000 100,000 9,318 12,127 15,826
9 23,156 100,000 100,000 100,000 10,575 14,167 19,081
10 26,414 100,000 100,000 100,000 11,807 16,305 22,700
11 29,834 100,000 100,000 100,000 13,111 18,642 26,822
12 33,426 100,000 100,000 100,000 14,363 21,063 31,368
13 37,197 100,000 100,000 100,000 15,562 23,568 36,390
14 41,157 100,000 100,000 100,000 16,702 26,162 41,942
15 45,315 100,000 100,000 100,000 17,781 28,847 48,092
16 49,681 100,000 100,000 100,314 18,794 31,628 54,909
17 54,265 100,000 100,000 111,201 19,737 34,510 62,409
18 59,078 100,000 100,000 122,814 20,604 37,496 70,636
19 64,132 100,000 100,000 135,222 21,389 40,594 79,655
20 69,439 100,000 100,000 148,492 22,084 43,811 89,539
25 100,227 100,000 100,000 230,654 23,994 62,110 155,009
30 139,522 100,000 115,032 349,000 22,180 84,920 257,641
35 189,673 100,000 139,931 522,847 13,328 111,410 416,280
</TABLE>
---------
* The illustrations assume that Planned Premiums equal to the Target Premium are
paid at the start of each Policy Year. The Death Benefit and Surrender Value
will differ if premiums are paid in different amounts or frequencies, if policy
loans are taken, or if Additional Sum Insured, or optional rider benefits are
elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
30
<PAGE>
PLAN: MEDALLION EXECUTIVE VARIABLE LIFE (FLEXIBLE PREMIUM VARIABLE LIFE)
$100,000 TOTAL SUM INSURED MALE, ISSUE AGE 45, FULLY UNDERWRITTEN SELECT
UNDERWRITING CLASS OPTION A DEATH BENEFIT CASH VALUE ACCUMULATION TEST
PLANNED PREMIUM: $2,000* USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------- ---------------------- -
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------- ---------------------- -
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------ ------------------ ------- ------- ------- ------ ------ ------ ---
<S> <S> <S> <S> <S> <S> <S> <C>
1 2,100 100,000 100,000 100,000 607 676 746
2 4,305 100,000 100,000 100,000 1,568 1,753 1,946
3 6,620 100,000 100,000 100,000 2,161 2,512 2,896
4 9,051 100,000 100,000 100,000 2,865 3,434 4,081
5 11,604 100,000 100,000 100,000 3,516 4,354 5,347
6 14,284 100,000 100,000 100,000 4,505 5,677 7,118
7 17,098 100,000 100,000 100,000 5,429 7,008 9,024
8 20,053 100,000 100,000 100,000 6,283 8,342 11,075
9 23,156 100,000 100,000 100,000 7,059 9,674 13,281
10 26,414 100,000 100,000 100,000 7,751 10,997 15,655
11 29,834 100,000 100,000 100,000 8,414 12,368 18,280
12 33,426 100,000 100,000 100,000 8,983 13,724 21,117
13 37,197 100,000 100,000 100,000 9,455 15,063 24,191
14 41,157 100,000 100,000 100,000 9,827 16,380 27,532
15 45,315 100,000 100,000 100,000 10,091 17,671 31,172
16 49,681 100,000 100,000 100,000 10,237 18,926 35,146
17 54,265 100,000 100,000 100,000 10,251 20,133 39,495
18 59,078 100,000 100,000 100,000 10,117 21,278 44,265
19 64,132 100,000 100,000 100,000 9,813 22,342 49,514
20 69,439 100,000 100,000 100,000 9,318 23,308 55,310
25 100,227 100,000 100,000 138,229 3,191 26,010 92,896
30 139,522 ** 100,000 198,224 ** 21,767 146,334
35 189,673 ** ** 276,280 ** ** 219,968
</TABLE>
---------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy Year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies, if
policy loans are taken, or if Additional Sum Insured, or optional rider
benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
31
<PAGE>
[THIS PAGE IS INTENTIONALLY LEFT BLANK.]
32
<PAGE>
MEDALLION EXECUTIVE VARIABLE LIFE III
REVISED ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES AND
ACCUMULATED PREMIUMS
The following tables on pages 34 TO 39 replace the illustration in the John
Hancock Variable Life Insurance Company Medallion Executive Variable Life III
Product Prospectus.
The assumptions used for the revised illustration are generally the same as
those described in the Medallion Executive Variable Life III Product Prospectus.
With respect to fees and expenses deducted from Trust assets, however, the
amounts shown in all tables reflect (1) investment management fees equivalent to
an effective annual rate of .71%, and (2) an assumed average asset charge for
all other Trust-level operating expenses equivalent to an effective annual rate
of .11%. These rates are the arithmetic average for all funds that are
available as investment options. In other words, they are based on the
hypothetical assumption that policy account values are allocated equally among
the variable investment options.
Each table separately illustrates the operation of a policy for a specified
issue age, premium payment schedule and Total Sum Insured. The amounts shown are
for the end of each policy year and assume that all of the account value is
invested in funds that achieve investment returns at constant annual rates of
0%, 6% and 12% (i.e., before any fees or expenses deducted from Trust assets).
After deduction of the average Trust-level fees and expenses (as described
above) the corresponding net annual rates of return would be -.82%, 5.13% and
11.08%. Investment return reflects investment income and all realized and
unrealized capital gains and losses.
The actual rates associated with any policy will vary depending upon the
actual allocation of policy values among the investment options. The charge
shown above for all other Trust-level operating expenses reflects reimbursements
to certain funds as described in the footnotes to the Fund expense table. We
currently expect those reimbursement arrangements to continue indefinitely, but
that is not guaranteed.
The second column of each table shows the amount you would have at the end of
each policy year if an amount equal to the assumed Planned Premiums were
invested to earn interest, after taxes, at 5% compounded annually. This is not a
policy value. It is included for comparison purposes only.
Because your circumstances will no doubt differ from those in the
illustrations that follow, values under your policy will differ, in most cases
substantially. Upon request, we will furnish you with a comparable illustration
reflecting your proposed insured person's issue age, sex and underwriting risk
classification, and the Total Sum Insured and annual Planned Premium amount
requested.
33
<PAGE>
PLAN: MEDALLION EXECUTIVE VARIABLE LIFE III (FLEXIBLE PREMIUM VARIABLE LIFE)
$100,000 TOTAL SUM INSURED MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONTOBACCO
UNDERWRITING CLASS OPTION A DEATH BENEFIT GUIDELINE PREMIUM AND CASH VALUE
CORRIDOR TEST PLANNED PREMIUM: $5,649 FOR SEVEN POLICY YEARS, GUIDELINE
PREMIUM LIMIT THEREAFTER* USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------ ----------------------- -
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------ ----------------------- -
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------ ------------------ ------- ------- ------ ------ ------- ------ ---
<S> <S> <S> <S> <S> <S> <S> <C>
1 5,931 100,000 100,000 4,915 5,214 5,512 100,000
2 12,159 100,000 100,000 9,625 10,522 11,455 100,000
3 18,699 100,000 100,000 14,239 16,041 17,989 100,000
4 25,565 100,000 100,000 18,775 21,798 25,197 100,000
5 32,775 100,000 100,000 19,789 24,153 29,290 100,000
6 40,345 100,000 100,000 19,176 24,909 32,018 100,000
7 48,294 100,000 100,000 18,543 25,677 35,013 100,000
8 50,709 100,000 100,000 17,888 26,454 38,307 100,000
9 53,244 100,000 100,000 17,237 27,265 41,953 100,000
10 55,906 100,000 100,000 16,588 28,112 45,990 100,000
11 58,702 100,000 100,000 16,074 29,169 50,696 100,000
12 61,637 100,000 100,000 15,524 30,246 55,901 100,000
13 64,718 100,000 100,000 14,929 31,337 61,663 100,000
14 67,954 100,000 100,000 14,293 32,450 68,052 100,000
15 71,352 100,000 100,000 13,616 33,585 75,147 100,000
16 74,920 100,000 106,264 12,902 34,750 83,019 106,264
17 78,666 100,000 115,553 12,125 35,926 91,709 115,553
18 82,599 100,000 125,613 11,277 37,113 101,301 125,613
19 86,729 100,000 136,506 10,352 38,309 111,890 136,506
20 91,065 100,000 148,297 9,338 39,509 123,581 148,297
25 95,619 100,000 235,874 3,125 46,318 205,108 235,874
30 100,400 ** 357,747 ** 53,553 340,711 357,747
35 105,420 ** 595,833 ** 60,851 567,460 595,833
</TABLE>
---------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each of the first seven Policy Years and that
premuims equal to the Guideline Premium Limit are paid at the start of each
Policy Year thereafter. The Death Benefit and Surrender Value will differ if
premiums are paid in different amounts or frequencies, if policy loans are
taken, or if Additional Sum Insured, Guaranteed Minimum Death benefit after
the tenth Policy Year, or optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
34
<PAGE>
PLAN: MEDALLION EXECUTIVE VARIABLE LIFE III (FLEXIBLE PREMIUM VARIABLE LIFE)
$100,000 TOTAL SUM INSURED MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONTOBACCO
UNDERWRITING CLASS OPTION A DEATH BENEFIT GUIDELINE PREMIUM AND CASH VALUE
CORRIDOR TEST PLANNED PREMIUM: $5,649 FOR SEVEN POLICY YEARS, GUIDELINE
PREMIUM LIMIT THEREAFTER* USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefits Surrender Value
------------------------- ---------------------- -
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------- ---------------------- -
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------ ------------------ ------- ------- ------- ------ ------ ------ ---
<S> <S> <S> <S> <S> <S> <S> <C>
1 5,931 100,000 100,000 100,000 4,356 4,635 4,914
2 12,159 100,000 100,000 100,000 8,623 9,451 10,313
3 18,699 100,000 100,000 100,000 12,803 14,459 16,249
4 25,565 100,000 100,000 100,000 16,900 19,669 22,785
5 32,775 100,000 100,000 100,000 17,490 21,464 26,152
6 40,345 100,000 100,000 100,000 16,460 21,639 28,082
7 48,294 100,000 100,000 100,000 15,391 21,775 30,176
8 50,709 100,000 100,000 100,000 14,276 21,865 32,450
9 53,244 100,000 100,000 100,000 13,108 21,899 34,921
10 55,906 100,000 100,000 100,000 11,874 21,865 37,607
11 58,702 100,000 100,000 100,000 10,569 21,757 40,533
12 61,637 100,000 100,000 100,000 9,184 21,562 43,726
13 64,718 100,000 100,000 100,000 7,711 21,273 47,222
14 67,954 100,000 100,000 100,000 6,142 20,877 51,059
15 71,352 100,000 100,000 100,000 4,466 20,362 55,281
16 74,920 100,000 100,000 100,000 2,666 19,708 59,938
17 78,666 100,000 100,000 100,000 723 18,892 65,090
18 82,599 ** 100,000 100,000 ** 17,886 70,804
19 86,729 ** 100,000 100,000 ** 16,654 77,164
20 91,065 ** 100,000 101,116 ** 15,159 84,264
25 95,619 ** 100,000 151,046 ** 2,074 131,344
30 100,400 ** ** 215,959 ** ** 205,676
35 105,420 ** ** 340,938 ** ** 324,703
</TABLE>
---------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each of the first seven Policy Years and that
premuims equal to the Guideline Premium Limit are paid at the start of each
Policy Year thereafter. The Death Benefit and Surrender Value will differ if
premiums are paid in different amounts or frequencies, if policy loans are
taken, or if Additional Sum Insured, Guaranteed Minimum Death benefit after
the tenth Policy Year, or optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
35
<PAGE>
PLAN: MEDALLION EXECUTIVE VARIABLE LIFE III (FLEXIBLE PREMIUM VARIABLE LIFE)
$100,000 TOTAL SUM INSURED MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONTOBACCO
UNDERWRITING CLASS OPTION B DEATH BENEFIT GUIDELINE PREMIUM AND CASH VALUE
CORRIDOR TEST PLANNED PREMIUM: $5,649 FOR SEVEN POLICY YEARS, GUIDELINE
PREMIUM LIMIT THEREAFTER* USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------- ---------------------- -
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------- ---------------------- -
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------ ------------------ ------- ------- ------- ------ ------ ------ ---
<S> <S> <S> <S> <S> <S> <S> <C>
1 5,931 104,915 105,214 105,512 4,915 5,214 5,512
2 12,159 109,610 110,506 111,437 9,610 10,506 11,437
3 18,699 114,196 115,992 117,934 14,196 15,992 17,934
4 25,565 118,691 121,699 125,080 18,691 21,699 25,080
5 32,775 123,109 127,648 132,956 23,109 27,648 32,956
6 40,345 127,431 133,831 141,617 27,431 33,831 41,617
7 48,294 131,659 140,258 151,144 31,659 40,258 51,144
8 50,709 130,758 141,601 155,987 30,758 41,601 55,987
9 53,244 129,865 143,001 161,331 29,865 43,001 61,331
10 55,906 128,979 144,457 167,225 28,979 44,457 67,225
11 58,702 128,258 146,180 174,005 28,258 46,180 74,005
12 61,637 127,498 147,935 181,460 27,498 47,935 81,460
13 64,718 126,688 149,713 189,649 26,688 49,713 89,649
14 67,954 125,836 151,522 198,658 25,836 51,522 98,658
15 71,352 124,941 153,363 208,575 24,941 53,363 108,575
16 74,920 124,011 155,245 219,503 24,011 55,245 119,503
17 78,666 123,013 157,136 231,518 23,013 57,136 131,518
18 82,599 121,945 159,031 244,728 21,945 59,031 144,728
19 86,729 120,799 160,924 259,255 20,799 60,924 159,255
20 91,065 119,566 162,803 275,228 19,566 62,803 175,228
25 95,619 112,487 172,968 385,977 12,487 72,968 285,977
30 100,400 102,334 182,021 567,406 2,334 82,021 467,406
35 105,420 ** 187,153 864,596 ** 87,153 764,596
</TABLE>
---------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each of the first seven Policy Years and that
premuims equal to the Guideline Premium Limit are paid at the start of each
Policy Year thereafter. The Death Benefit and Surrender Value will differ if
premiums are paid in different amounts or frequencies, if policy loans are
taken, or if Additional Sum Insured, Guaranteed Minimum Death benefit after
the tenth Policy Year, or optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
36
<PAGE>
PLAN: MEDALLION EXECUTIVE VARIABLE LIFE III (FLEXIBLE PREMIUM VARIABLE LIFE)
$100,000 TOTAL SUM INSURED MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONTOBACCO
UNDERWRITING CLASS OPTION B DEATH BENEFIT GUIDELINE PREMIUM AND CASH VALUE
CORRIDOR TEST PLANNED PREMIUM: $5,649 FOR SEVEN POLICY YEARS, GUIDELINE
PREMIUM LIMIT THEREAFTER* USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------- ---------------------- -
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------- ---------------------- -
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------ ------------------ ------- ------- ------- ------ ------ ------ ---
<S> <S> <S> <S> <S> <S> <S> <C>
1 5,931 104,335 104,612 104,890 4,335 4,612 4,890
2 12,159 108,558 109,379 110,234 8,558 9,379 10,234
3 18,699 112,670 114,305 116,075 12,670 14,305 16,075
4 25,565 116,670 119,394 122,460 16,670 19,394 22,460
5 32,775 120,554 124,648 129,439 20,554 24,648 29,439
6 40,345 124,322 130,070 137,068 24,322 30,070 37,068
7 48,294 127,967 135,658 145,404 27,967 35,658 45,404
8 50,709 126,520 136,151 148,952 26,520 36,151 48,952
9 53,244 125,023 136,588 152,777 25,023 36,588 52,777
10 55,906 123,467 136,955 156,898 23,467 36,955 56,898
11 58,702 121,848 137,244 161,338 21,848 37,244 61,338
12 61,637 120,156 137,443 166,120 20,156 37,443 66,120
13 64,718 118,391 137,544 171,276 18,391 37,544 71,276
14 67,954 116,547 137,536 176,833 16,547 37,536 76,833
15 71,352 114,615 137,405 182,825 14,615 37,405 82,825
16 74,920 112,586 137,134 189,282 12,586 37,134 89,282
17 78,666 110,444 136,700 196,233 10,444 36,700 96,233
18 82,599 108,174 136,077 203,709 8,174 36,077 103,709
19 86,729 105,754 135,233 211,738 5,754 35,233 111,738
20 91,065 103,165 134,137 220,353 3,165 34,137 120,353
25 95,619 ** 123,804 273,755 ** 23,804 173,755
30 100,400 ** 101,058 348,556 ** 1,058 248,556
35 105,420 ** ** 449,885 ** ** 349,885
</TABLE>
---------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each of the first seven Policy Years and that
premuims equal to the Guideline Premium Limit are paid at the start of each
Policy Year thereafter. The Death Benefit and Surrender Value will differ if
premiums are paid in different amounts or frequencies, if policy loans are
taken, or if Additional Sum Insured, Guaranteed Minimum Death benefit after
the tenth Policy Year, or optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
37
<PAGE>
PLAN: MEDALLION EXECUTIVE VARIABLE LIFE III (FLEXIBLE PREMIUM VARIABLE LIFE)
$100,000 TOTAL SUM INSURED MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONTOBACCO
UNDERWRITING CLASS OPTION A DEATH BENEFIT CASH VALUE ACCUMULATION TEST
PLANNED PREMIUM: $5,649 FOR SEVEN POLICY YEARS, GUIDELINE PREMIUM LIMIT
THEREAFTER* USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------- ---------------------- --
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------- ---------------------- --
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------ ------------------ ------- ------- ------- ------ ------- ----- ----
<S> <S> <S> <S> <S> <S> <S> <C>
1 5,931 100,000 100,000 100,000 4,915 5,214 5,512
2 12,159 100,000 100,000 100,000 9,625 10,522 11,455
3 18,699 100,000 100,000 100,000 14,239 16,041 17,989
4 25,565 100,000 100,000 100,000 18,775 21,798 25,197
5 32,775 100,000 100,000 100,000 23,247 27,818 33,163
6 40,345 100,000 100,000 100,731 27,642 34,101 41,957
7 48,294 100,000 100,000 120,360 31,964 40,664 51,619
8 50,709 100,000 100,000 128,249 31,164 42,168 56,612
9 53,244 100,000 100,000 136,763 30,370 43,743 62,111
10 55,906 100,000 100,000 145,959 29,581 45,392 68,167
11 58,702 100,000 100,000 156,489 28,965 47,340 75,123
12 61,637 100,000 100,080 167,806 28,320 49,361 82,765
13 64,718 100,000 101,574 179,949 27,638 51,451 91,151
14 67,954 100,000 103,102 192,994 26,923 53,615 100,361
15 71,352 100,000 104,679 207,037 26,173 55,859 110,479
16 74,920 100,000 106,307 222,155 25,394 58,190 121,602
17 78,666 100,000 107,972 238,406 24,560 60,597 133,801
18 82,599 100,000 109,683 255,891 23,667 63,084 147,174
19 86,729 100,000 111,449 274,727 22,708 65,651 161,833
20 91,065 100,000 113,269 295,013 21,673 68,300 177,890
25 95,619 100,000 124,870 428,289 15,639 83,918 287,829
30 100,400 100,000 138,961 627,651 6,384 102,585 463,348
35 105,420 ** 156,538 931,089 ** 124,632 741,313
</TABLE>
---------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each of the first seven Policy Years and that
premuims equal to the Guideline Premium Limit are paid at the start of each
Policy Year thereafter. The Death Benefit and Surrender Value will differ if
premiums are paid in different amounts or frequencies, if policy loans are
taken, or if Additional Sum Insured, Guaranteed Minimum Death benefit after
the tenth Policy Year, or optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
38
<PAGE>
PLAN: MEDALLION EXECUTIVE VARIABLE LIFE III (FLEXIBLE PREMIUM VARIABLE LIFE)
$100,000 TOTAL SUM INSURED MALE, ISSUE AGE 45, FULLY UNDERWRITTEN NONTOBACCO
UNDERWRITING CLASS OPTION A DEATH BENEFIT CASH VALUE ACCUMULATION TEST
PLANNED PREMIUM: $5,649 FOR SEVEN POLICY YEARS, GUIDELINE PREMIUM LIMIT
THEREAFTER* USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------- ---------------------- -
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------- ---------------------- -
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------ ------------------ ------- ------- ------- ------ ------ ------ ---
<S> <S> <S> <S> <S> <S> <S> <C>
1 5,931 100,000 100,000 100,000 4,356 4,635 4,914
2 12,159 100,000 100,000 100,000 8,623 9,451 10,313
3 18,699 100,000 100,000 100,000 12,803 14,459 16,249
4 25,565 100,000 100,000 100,000 16,900 19,669 22,785
5 32,775 100,000 100,000 100,000 20,912 25,092 29,985
6 40,345 100,000 100,000 100,000 24,844 30,741 37,927
7 48,294 100,000 100,000 108,746 28,692 36,628 46,638
8 50,709 100,000 100,000 114,646 27,455 37,464 50,607
9 53,244 100,000 100,000 120,901 26,174 38,293 54,907
10 55,906 100,000 100,000 127,531 24,841 39,110 59,561
11 58,702 100,000 100,000 134,556 23,449 39,913 64,594
12 61,637 100,000 100,000 141,997 21,989 40,698 70,035
13 64,718 100,000 100,000 149,879 20,457 41,461 75,919
14 67,954 100,000 100,000 158,220 18,842 42,200 82,278
15 71,352 100,000 100,000 167,066 17,136 42,910 89,149
16 74,920 100,000 100,000 176,422 15,323 43,583 96,569
17 78,666 100,000 100,000 186,328 13,385 44,211 104,573
18 82,599 100,000 100,000 196,818 11,299 44,780 113,198
19 86,729 100,000 100,000 207,922 9,038 45,276 122,480
20 91,065 100,000 100,000 219,668 6,572 45,685 132,458
25 95,619 ** 100,000 289,482 ** 45,847 194,544
30 100,400 ** 100,000 381,983 ** 39,909 281,990
35 105,420 ** 100,000 504,349 ** 17,046 401,552
</TABLE>
---------
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each of the first seven Policy Years and that
premuims equal to the Guideline Premium Limit are paid at the start of each
Policy Year thereafter. The Death Benefit and Surrender Value will differ if
premiums are paid in different amounts or frequencies, if policy loans are
taken, or if Additional Sum Insured, Guaranteed Minimum Death benefit after
the tenth Policy Year, or optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
39
<PAGE>
[THIS PAGE IS INTENTIONALLY LEFT BLANK.]
40
<PAGE>
VARIABLE ESTATE PROTECTION
REVISED ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES AND
ACCUMULATED PREMIUMS
The following tables on pages 42 TO 45 replace the illustration in the John
Hancock Life Insurance Company ("JOHN HANCOCK") Variable Estate Protection
Product Prospectus. The tables on pages 46 TO 49 replace the illustration in
the John Hancock Variable Life Insurance Company ("JHVLICO") Variable Estate
Protection Product Prospectus.
The assumptions used for the revised illustration are generally the same as
those described in the respective Variable Estate Protection Product Prospectus.
With respect to fees and expenses deducted from Trust assets, however, the
amounts shown in all tables reflect (1) investment management fees equivalent to
an effective annual rate of .71%, and (2) an assumed average asset charge for
all other Trust-level operating expenses equivalent to an effective annual rate
of .11%. These rates are the arithmetic average for all funds that are available
as investment options. In other words, they are based on the hypothetical
assumption that policy account values are allocated equally among the variable
investment options.
Tables are provided for each of the two death benefit options. The amounts
shown are for the end of each policy year and assume that all of the account
value is invested in funds that achieve investment returns at constant annual
rates of 0%, 6% and 12% (i.e., before any fees or expenses deducted from Trust
assets). After deduction of the average Trust-level fees and expenses (as
described above) the corresponding net annual rates of return would be -.82%,
5.13% and 11.08%. Investment return reflects investment income and all realized
and unrealized capital gains and losses.
The actual rates associated with any policy will vary depending upon the
actual allocation of policy values among the investment options. The charge
shown above for all other Trust-level operating expenses reflects reimbursements
to certain funds as described in the footnotes to the Fund expense table. We
currently expect those reimbursement arrangements to continue indefinitely, but
that is not guaranteed.
The second column of each table shows the amount you would have at the end of
each policy year if an amount equal to the assumed Planned Premiums were
invested to earn interest, after taxes, at 5% compounded annually. This is not a
policy value. It is included for comparison purposes only.
Because your circumstances will no doubt differ from those in the
illustrations that follow, values under your policy will differ, in most cases
substantially. Upon request, we will furnish you with a comparable illustration
reflecting your proposed insured persons' issue ages, sex and underwriting risk
classification, and the Total Sum Insured and annual Planned Premium amount
requested.
41
<PAGE>
PLAN: JOHN HANCOCK VARIABLE ESTATE PROTECTION (FLEXIBLE PREMIUM VARIABLE LIFE
SURVIVORSHIP) $1,000,000 SUM INSURED ($500,000 BASIC SUM INSURED; $500,000
ADDITIONAL SUM INSURED) MALE, ISSUE AGE 55, PREFERRED UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS OPTION A DEATH BENEFIT NO
GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR PLANNED PREMIUM:
$15,969* USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------- ---------------- -------------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------------- ---------------- -------------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ --------- --------- --------- ------- ------- -- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 16,768 1,000,000 1,000,000 1,000,000 11,200 11,904 12,609
2 34,374 1,000,000 1,000,000 1,000,000 23,392 25,562 27,821
3 52,861 1,000,000 1,000,000 1,000,000 35,408 39,831 44,613
4 72,271 1,000,000 1,000,000 1,000,000 47,487 54,981 63,401
5 92,653 1,000,000 1,000,000 1,000,000 59,387 70,805 84,137
6 114,053 1,000,000 1,000,000 1,000,000 72,165 88,429 108,166
7 136,524 1,000,000 1,000,000 1,000,000 84,750 106,832 134,684
8 160,118 1,000,000 1,000,000 1,000,000 97,138 126,044 163,944
9 184,891 1,000,000 1,000,000 1,000,000 109,329 146,096 196,227
10 210,904 1,000,000 1,000,000 1,000,000 121,315 167,017 231,841
11 238,217 1,000,000 1,000,000 1,000,000 133,853 189,637 271,960
12 266,895 1,000,000 1,000,000 1,000,000 146,158 213,221 316,208
13 297,008 1,000,000 1,000,000 1,000,000 158,219 237,799 365,006
14 328,626 1,000,000 1,000,000 1,000,000 170,017 263,398 418,818
15 361,825 1,000,000 1,000,000 1,000,000 181,533 290,045 478,163
16 396,684 1,000,000 1,000,000 1,044,599 192,738 317,766 543,590
17 433,286 1,000,000 1,000,000 1,145,037 203,600 346,584 615,656
18 471,718 1,000,000 1,000,000 1,251,940 214,076 376,522 694,995
19 512,072 1,000,000 1,000,000 1,365,979 224,119 407,601 782,295
20 554,444 1,000,000 1,000,000 1,487,825 233,667 439,841 878,299
25 800,279 1,000,000 1,000,000 2,249,218 274,084 622,750 1,523,123
30 1,114,034 1,000,000 1,115,312 3,366,197 288,814 842,289 2,542,168
35 1,514,473 1,000,000 1,338,337 5,034,083 252,846 1,096,756 4,125,388
</TABLE>
* The illustrations assume that Planned Premiums equal to $15,969.34 are paid at
the start of each Policy Year. The Death Benefit and Surrender Value will
differ if premiums are paid in different amounts or frequencies, if policy
loans are taken, or if Guaranteed Minimum Death Benefit after the tenth Policy
Year, or optional rider benefits are elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
42
<PAGE>
PLAN: JOHN HANCOCK VARIABLE ESTATE PROTECTION (FLEXIBLE PREMIUM VARIABLE LIFE
SURVIVORSHIP) $1,000,000 SUM INSURED ($500,000 BASIC SUM INSURED; $500,000
ADDITIONAL SUM INSURED) MALE, ISSUE AGE 55, PREFERRED UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS OPTION B DEATH BENEFIT NO
GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR PLANNED PREMIUM:
$15,969* USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------- ---------------- -----------
Assuming Hypothetical Assuming Hypothetical
End of Planned Premiums Gross Annual Return of Gross Annual Return of
Policy Accumulated at ------------------------------- ---------------- -----------
Year 5% Annual Interest 0% 6% 12% 0% 6% 12%
------- ------------------ --------- --------- --------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 16,768 1,011,200 1,011,903 1,012,608 11,200 11,903 12,608
2 34,374 1,023,390 1,025,560 1,027,818 23,390 25,560 27,818
3 52,861 1,035,404 1,039,826 1,044,607 35,404 39,826 44,608
4 72,271 1,047,479 1,054,973 1,063,391 47,479 54,973 63,391
5 92,653 1,059,376 1,070,791 1,084,120 59,376 70,791 84,120
6 114,053 1,072,148 1,088,407 1,108,139 72,148 88,407 108,139
7 136,524 1,084,725 1,106,800 1,134,642 84,725 106,800 134,642
8 160,118 1,097,104 1,125,997 1,163,880 97,104 125,997 163,880
9 184,891 1,109,281 1,146,027 1,196,130 109,281 146,027 196,130
10 210,904 1,121,247 1,166,917 1,231,695 121,247 166,917 231,695
11 238,217 1,133,765 1,189,504 1,271,757 133,765 189,504 271,757
12 266,895 1,146,040 1,213,036 1,315,916 146,040 213,036 315,916
13 297,008 1,158,055 1,237,534 1,364,574 158,055 237,534 364,574
14 328,626 1,169,786 1,263,013 1,418,169 169,786 263,013 418,169
15 361,825 1,181,203 1,289,480 1,477,178 181,203 289,480 477,178
16 396,684 1,192,268 1,316,938 1,542,120 192,268 316,938 542,120
17 433,286 1,202,935 1,345,375 1,613,554 202,935 345,375 613,554
18 471,718 1,213,142 1,374,768 1,692,085 213,142 374,768 692,085
19 512,072 1,222,818 1,405,080 1,778,367 222,819 405,080 778,367
20 554,444 1,231,875 1,436,249 1,873,102 231,875 436,249 873,102
25 800,279 1,266,737 1,605,056 2,506,535 266,737 605,056 1,506,535
30 1,114,034 1,265,989 1,777,283 3,501,773 265,989 777,283 2,501,773
35 1,514,473 1,196,987 1,913,469 5,043,925 196,988 913,469 4,043,925
</TABLE>
* The illustrations assume that Planned Premiums equal to $15,969.34 are paid at
the start of each Policy Year. The Death Benefit and Surrender Value will
differ if premiums are paid in different amounts or frequencies, if policy
loans are taken, or if Guaranteed Minimum Death Benefit after the tenth Policy
Year, or optional rider benefits are elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
43
<PAGE>
PLAN: JOHN HANCOCK VARIABLE ESTATE PROTECTION (FLEXIBLE PREMIUM VARIABLE LIFE
SURVIVORSHIP) $1,000,000 SUM INSURED ($500,000 BASIC SUM INSURED; $500,000
ADDITIONAL SUM INSURED) MALE, ISSUE AGE 55, PREFERRED UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS OPTION A DEATH BENEFIT NO
GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR PLANNED PREMIUM:
$15,969* USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------- ---------------- -----------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------------- ---------------- -----------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ --------- --------- --------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 16,768 1,000,000 1,000,000 1,000,000 10,901 11,594 12,287
2 34,374 1,000,000 1,000,000 1,000,000 22,718 24,846 27,053
3 52,861 1,000,000 1,000,000 1,000,000 34,245 38,562 43,214
4 72,271 1,000,000 1,000,000 1,000,000 45,703 52,986 61,144
5 92,653 1,000,000 1,000,000 1,000,000 56,834 67,882 80,746
6 114,053 1,000,000 1,000,000 1,000,000 68,671 84,342 103,310
7 136,524 1,000,000 1,000,000 1,000,000 80,120 101,308 127,969
8 160,118 1,000,000 1,000,000 1,000,000 91,155 118,771 154,907
9 184,891 1,000,000 1,000,000 1,000,000 101,747 136,720 184,335
10 210,904 1,000,000 1,000,000 1,000,000 111,860 155,140 216,477
11 238,217 1,000,000 1,000,000 1,000,000 121,960 174,547 252,154
12 266,895 1,000,000 1,000,000 1,000,000 131,474 194,393 291,127
13 297,008 1,000,000 1,000,000 1,000,000 140,331 214,633 333,707
14 328,626 1,000,000 1,000,000 1,000,000 148,441 235,207 380,234
15 361,825 1,000,000 1,000,000 1,000,000 155,697 256,044 431,104
16 396,684 1,000,000 1,000,000 1,000,000 161,984 277,072 486,780
17 433,286 1,000,000 1,000,000 1,018,580 167,116 298,160 547,664
18 471,718 1,000,000 1,000,000 1,105,725 171,044 319,305 613,826
19 512,072 1,000,000 1,000,000 1,197,018 173,563 340,382 685,532
20 554,444 1,000,000 1,000,000 1,292,741 174,480 361,291 763,136
25 800,279 1,000,000 1,000,000 1,849,337 144,641 458,581 1,252,332
30 1,114,034 1,000,000 1,000,000 2,567,693 2,132 521,335 1,939,134
35 1,514,473 ** 1,000,000 3,503,540 ** 494,468 2,871,120
</TABLE>
* The illustrations assume that Planned Premiums equal to $15,969.34 are paid
at the start of each Policy Year. The Death Benefit and Surrender Value will
differ if premiums are paid in different amounts or frequencies, if policy
loans are taken, or if Guaranteed Minimum Death Benefit after the tenth Policy
Year, or optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
44
<PAGE>
PLAN: JOHN HANCOCK VARIABLE ESTATE PROTECTION (FLEXIBLE PREMIUM VARIABLE LIFE
SURVIVORSHIP) $1,000,000 SUM INSURED ($500,000 BASIC SUM INSURED; $500,000
ADDITIONAL SUM INSURED) MALE, ISSUE AGE 55, PREFERRED UNDERWRITING CLASS
FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS OPTION B DEATH BENEFIT NO
GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR PLANNED PREMIUM:
$15,969* USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
------------------------------- ---------------- -----------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at ------------------------------- ---------------- -----------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ --------- --------- --------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 16,768 1,010,900 1,011,594 1,012,287 10,900 11,594 12,287
2 34,374 1,022,715 1,024,843 1,027,050 22,715 24,843 27,050
3 52,861 1,034,235 1,038,551 1,043,202 34,235 38,551 43,202
4 72,271 1,045,678 1,052,957 1,061,110 45,678 52,957 61,110
5 92,653 1,056,783 1,067,819 1,080,670 56,783 67,819 80,670
6 114,053 1,068,576 1,084,222 1,103,160 68,576 84,222 103,160
7 136,524 1,079,958 1,101,096 1,127,693 79,958 101,096 127,693
8 160,118 1,090,893 1,118,417 1,154,431 90,893 118,417 154,431
9 184,891 1,101,345 1,136,158 1,183,550 101,345 136,158 183,550
10 210,904 1,111,265 1,154,278 1,215,228 111,265 154,278 215,228
11 238,217 1,121,105 1,173,262 1,250,222 121,105 173,263 250,222
12 266,895 1,130,274 1,192,525 1,288,210 130,274 192,525 288,210
13 297,008 1,138,681 1,211,970 1,329,383 138,681 211,970 329,383
14 328,626 1,146,208 1,231,469 1,373,923 146,208 231,469 373,923
15 361,825 1,152,719 1,250,869 1,422,009 152,719 250,869 422,009
16 396,684 1,158,064 1,269,994 1,473,820 158,064 269,994 473,820
17 433,286 1,162,012 1,288,572 1,529,465 162,012 288,572 529,465
18 471,718 1,164,496 1,306,488 1,589,234 164,496 306,488 589,234
19 512,072 1,165,268 1,323,431 1,653,251 165,268 323,431 653,251
20 554,444 1,164,099 1,339,095 1,721,671 164,099 339,095 721,671
25 800,279 1,118,067 1,382,982 2,132,594 118,067 382,982 1,132,594
30 1,114,034 ** 1,303,944 2,644,892 ** 303,944 1,644,892
35 1,514,473 ** ** 3,209,172 ** ** 2,209,172
</TABLE>
* The illustrations assume that Planned Premiums equal to $15,969.34 are paid
at the start of each Policy Year. The Death Benefit and Surrender Value will
differ if premiums are paid in different amounts or frequencies, if policy
loans are taken, or if Guaranteed Minimum Death Benefit after the tenth Policy
Year, or optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
45
<PAGE>
PLAN: JHVLICO VARIABLE ESTATE PROTECTION (FLEXIBLE PREMIUM VARIABLE LIFE
SURVIVORSHIP) $500,000 TOTAL SUM INSURED MALE, ISSUE AGE 55, PREFERRED
UNDERWRITING CLASS FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS OPTION
A DEATH BENEFIT NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $8,156* USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
--------------------------- -------------------- -------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at --------------------------- -------------------- -------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ ------- ------- --------- ------- ------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 8,564 500,000 500,000 500,000 4,292 4,576 4,860
2 17,556 500,000 500,000 500,000 10,122 11,028 11,970
3 26,998 500,000 500,000 500,000 15,058 16,934 18,960
4 36,912 500,000 500,000 500,000 20,443 23,652 27,251
5 47,322 500,000 500,000 500,000 25,749 30,669 36,402
6 58,252 500,000 500,000 500,000 32,037 39,104 47,655
7 69,728 500,000 500,000 500,000 38,231 47,913 60,073
8 81,779 500,000 500,000 500,000 44,328 57,107 73,774
9 94,432 500,000 500,000 500,000 50,328 66,703 88,890
10 107,717 500,000 500,000 500,000 56,226 76,714 105,564
11 121,667 500,000 500,000 500,000 62,669 87,839 124,672
12 136,314 500,000 500,000 500,000 68,993 99,437 145,746
13 151,694 500,000 500,000 500,000 75,192 111,522 168,983
14 167,843 500,000 500,000 500,000 81,258 124,107 194,606
15 184,799 500,000 500,000 500,000 87,179 137,206 222,858
16 202,603 500,000 500,000 500,000 92,941 150,830 254,012
17 221,297 500,000 500,000 536,277 98,530 164,990 288,342
18 240,926 500,000 500,000 587,493 103,922 179,696 326,137
19 261,536 500,000 500,000 642,094 109,095 194,957 367,727
20 283,177 500,000 500,000 700,402 114,016 210,781 413,464
25 408,735 500,000 500,000 1,064,419 134,937 300,440 720,802
30 568,983 500,000 540,508 1,597,663 142,923 408,194 1,206,563
35 773,504 500,000 650,986 2,393,352 125,472 533,477 1,961,331
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium are
paid at the start of each Policy Year. The Death Benefit and Surrender Value
will differ if premiums are paid in different amounts or frequencies, if policy
loans are taken, or if Additional Sum Insured, Guaranteed Minimum Death Benefit
after the tenth Policy Year, or optional rider benefits are elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
46
<PAGE>
PLAN: JHVLICO VARIABLE ESTATE PROTECTION (FLEXIBLE PREMIUM VARIABLE LIFE
SURVIVORSHIP) $500,000 TOTAL SUM INSURED MALE, ISSUE AGE 55, PREFERRED
UNDERWRITING CLASS FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS OPTION
B DEATH BENEFIT NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $8,156* USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
--------------------------- -------------------- -------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at --------------------------- -------------------- -------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ ------- ------- --------- ------- ------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 8,564 504,292 504,576 504,860 4,292 4,576 4,860
2 17,556 509,714 510,619 511,561 10,122 11,027 11,969
3 26,998 515,057 516,932 518,957 15,057 16,932 18,957
4 36,912 520,440 523,649 527,247 20,440 23,649 27,247
5 47,322 525,744 530,663 536,395 25,744 30,663 36,395
6 58,252 532,030 539,095 547,643 32,030 39,095 47,643
7 69,728 538,220 547,898 560,054 38,220 47,898 60,054
8 81,779 544,313 557,086 573,745 44,313 57,086 73,745
9 94,432 550,306 566,673 588,846 50,306 66,673 88,847
10 107,717 556,195 576,670 605,498 56,195 76,670 105,498
11 121,667 562,629 587,779 624,581 62,629 87,779 124,581
12 136,314 568,939 599,352 645,614 68,939 99,352 145,614
13 151,694 575,116 611,400 668,787 75,116 111,400 168,787
14 167,843 581,149 623,929 694,309 81,149 123,929 194,309
15 184,799 587,023 636,943 722,406 87,023 136,943 222,406
16 202,603 592,718 650,442 753,322 92,718 150,442 253,322
17 221,297 598,212 664,421 787,323 98,212 164,421 287,323
18 240,926 603,473 678,867 824,694 103,473 178,867 324,694
19 261,536 608,467 693,761 865,744 108,467 193,761 365,744
20 283,177 613,149 709,073 910,803 113,149 209,073 410,803
25 408,735 631,340 791,944 1,211,876 131,340 291,944 711,876
30 568,983 631,672 876,151 1,683,852 131,672 376,151 1,183,852
35 773,504 597,828 941,871 2,412,890 97,828 441,872 1,912,891
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium are
paid at the start of each Policy Year. The Death Benefit and Surrender Value
will differ if premiums are paid in different amounts or frequencies, if policy
loans are taken, or if Additional Sum Insured, Guaranteed Minimum Death Benefit
after the tenth Policy Year, or optional rider benefits are elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
47
<PAGE>
PLAN: JHVLICO VARIABLE ESTATE PROTECTION (FLEXIBLE PREMIUM VARIABLE LIFE
SURVIVORSHIP) $500,000 TOTAL SUM INSURED MALE, ISSUE AGE 55, PREFERRED
UNDERWRITING CLASS FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS OPTION
A DEATH BENEFIT NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $8,156* USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
--------------------------- -------------------- ------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at --------------------------- -------------------- ------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ ------- ------- --------- ------ ------- --- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 8,564 500,000 500,000 500,000 4,131 4,409 4,688
2 17,556 500,000 500,000 500,000 9,764 10,647 11,563
3 26,998 500,000 500,000 500,000 14,447 16,268 18,227
4 36,912 500,000 500,000 500,000 19,515 22,615 26,081
5 47,322 500,000 500,000 500,000 24,430 29,161 34,659
6 58,252 500,000 500,000 500,000 30,243 37,008 45,172
7 69,728 500,000 500,000 500,000 35,863 45,091 56,654
8 81,779 500,000 500,000 500,000 41,277 53,403 69,187
9 94,432 500,000 500,000 500,000 46,469 61,938 82,867
10 107,717 500,000 500,000 500,000 51,422 70,687 97,794
11 121,667 500,000 500,000 500,000 56,595 80,147 114,619
12 136,314 500,000 500,000 500,000 61,470 89,811 132,982
13 151,694 500,000 500,000 500,000 66,013 99,656 153,022
14 167,843 500,000 500,000 500,000 70,178 109,650 174,895
15 184,799 500,000 500,000 500,000 73,910 119,755 198,778
16 202,603 500,000 500,000 500,000 77,153 129,930 224,879
17 221,297 500,000 500,000 500,000 79,813 140,108 253,425
18 240,926 500,000 500,000 512,772 81,864 150,283 284,658
19 261,536 500,000 500,000 556,201 83,204 160,387 318,536
20 283,177 500,000 500,000 601,713 83,736 170,364 355,206
25 408,735 500,000 500,000 866,439 69,251 215,884 586,734
30 568,983 ** 500,000 1,207,606 ** 240,694 911,990
35 773,504 ** 500,000 1,651,719 ** 210,051 1,353,569
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy Year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies, if
policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum Death
Benefit after the tenth Policy Year, or optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
48
<PAGE>
PLAN: JHVLICO VARIABLE ESTATE PROTECTION (FLEXIBLE PREMIUM VARIABLE LIFE
SURVIVORSHIP) $500,000 TOTAL SUM INSURED MALE, ISSUE AGE 55, PREFERRED
UNDERWRITING CLASS FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS OPTION
B DEATH BENEFIT NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR
PLANNED PREMIUM: $8,156* USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
--------------------------- -------------------- ----
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at --------------------------- -------------------- ----
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ ------- ------- --------- ------ ------- --- ------
<S> <C> <C> <C> <C> <C> <C> <C>
1 8,564 504,130 504,409 504,687 4,130 4,409 4,687
2 17,556 509,355 510,238 511,154 9,763 10,646 11,561
3 26,998 514,443 516,263 518,222 14,443 16,263 18,222
4 36,912 519,505 522,603 526,067 19,505 22,603 26,067
5 47,322 524,408 529,134 534,626 24,408 29,134 34,626
6 58,252 530,202 536,956 545,107 30,202 36,956 45,107
7 69,728 535,792 544,997 556,534 35,792 44,997 56,534
8 81,779 541,160 553,246 568,977 41,160 53,246 68,977
9 94,432 546,288 561,687 582,518 46,288 61,687 82,518
10 107,717 551,152 570,299 597,236 51,152 70,299 97,236
11 121,667 556,204 579,565 613,752 56,204 79,565 113,752
12 136,314 560,918 588,960 631,666 60,918 88,960 131,666
13 151,694 565,249 598,436 651,063 65,249 98,436 151,063
14 167,843 569,137 607,930 672,025 69,137 107,930 172,025
15 184,799 572,515 617,363 694,627 72,515 117,363 194,627
16 202,603 575,309 626,647 718,946 75,309 126,647 218,946
17 221,297 577,401 635,646 745,023 77,401 135,646 245,023
18 240,926 578,760 644,302 772,986 78,760 144,302 272,986
19 261,536 579,260 652,459 802,879 79,260 152,459 302,879
20 283,177 578,789 659,963 834,760 78,789 159,963 334,760
25 408,735 556,505 680,285 1,024,827 56,505 180,285 524,827
30 568,983 ** 638,775 1,256,092 ** 138,775 756,092
35 773,504 ** ** 1,498,010 ** ** 998,010
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy Year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies, if
policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum Death
Benefit after the tenth Policy Year, or optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
49
<PAGE>
[THIS PAGE IS INTENTIONALLY LEFT BLANK.]
50
<PAGE>
VARIABLE ESTATE PROTECTION II
REVISED ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES AND
ACCUMULATED PREMIUMS
The following tables on pages 52 TO 61 replace the illustration in the John
Hancock Variable Life Insurance Company Variable Estate Protection II Product
Prospectus.
The assumptions used for the revised illustration are generally the same as
those described in the Variable Estate Protection II Product Prospectus. With
respect to fees and expenses deducted from Trust assets, however, the amounts
shown in all tables reflect (1) investment management fees equivalent to an
effective annual rate of .71%, and (2) an assumed average asset charge for all
other Trust-level operating expenses equivalent to an effective annual rate of
.11%. These rates are the arithmetic average for all funds that are available
as investment options. In other words, they are based on the hypothetical
assumption that policy account values are allocated equally among the variable
investment options.
Tables are provided for each of the two death benefit options. The amounts
shown are for the end of each policy year and assume that all of the account
value is invested in funds that achieve investment returns at constant annual
rates of 0%, 6% and 12% (i.e., before any fees or expenses deducted from Trust
assets). After deduction of the average Trust-level fees and expenses (as
described above) the corresponding net annual rates of return would be -.82%,
5.13% and 11.08%. Investment return reflects investment income and all realized
and unrealized capital gains and losses.
The actual rates associated with any policy will vary depending upon the
actual allocation of policy values among the investment options. The charge
shown above for all other Trust-level operating expenses reflects reimbursements
to certain funds as described in the footnotes to the Fund expense table. We
currently expect those reimbursement arrangements to continue indefinitely, but
that is not guaranteed.
The second column of each table shows the amount you would have at the end of
each policy year if an amount equal to the assumed Planned Premiums were
invested to earn interest, after taxes, at 5% compounded annually. This is not a
policy value. It is included for comparison purposes only.
Because your circumstances will no doubt differ from those in the
illustrations that follow, values under your policy will differ, in most cases
substantially. Upon request, we will furnish you with a comparable illustration
reflecting the issue age, sex and underwriting risk classification of each of
your proposed insured persons, and the Total Sum Insured and annual Planned
Premium amount requested.
51
<PAGE>
PLAN: VARIABLE ESTATE PROTECTION II (FLEXIBLE PREMIUM VARIABLE LIFE
SURVIVORSHIP) $500,000 TOTAL SUM INSURED MALE, ISSUE AGE 55, PREFERRED
UNDERWRITING CLASS FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS OPTION
A DEATH BENEFIT GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR PLANNED PREMIUM:
$8,156* USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
--------------------------- -------------------- -------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at --------------------------- -------------------- -------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ ------- ------- --------- ------- ------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 8,564 500,000 500,000 500,000 4,283 4,566 4,850
2 17,556 500,000 500,000 500,000 10,095 10,998 11,936
3 26,998 500,000 500,000 500,000 15,004 16,873 18,887
4 36,912 500,000 500,000 500,000 20,352 23,546 27,121
5 47,322 500,000 500,000 500,000 25,612 30,504 36,192
6 58,252 500,000 500,000 500,000 31,847 38,864 47,337
7 69,728 500,000 500,000 500,000 37,976 47,579 59,614
8 81,779 500,000 500,000 500,000 43,999 56,660 73,136
9 94,432 500,000 500,000 500,000 49,915 66,121 88,026
10 107,717 500,000 500,000 500,000 55,721 75,974 104,422
11 121,667 500,000 500,000 500,000 62,061 86,914 123,189
12 136,314 500,000 500,000 500,000 68,274 98,299 143,849
13 151,694 500,000 500,000 500,000 74,352 110,141 166,589
14 167,843 500,000 500,000 500,000 80,287 122,452 191,616
15 184,799 500,000 500,000 500,000 86,069 135,241 219,160
16 202,603 500,000 500,000 500,000 92,148 149,267 250,736
17 221,297 500,000 500,000 500,000 98,068 163,896 285,673
18 240,926 500,000 500,000 500,000 103,807 179,142 324,340
19 261,536 500,000 500,000 500,000 109,339 195,020 367,157
20 283,177 500,000 500,000 500,000 114,633 211,545 414,601
25 408,735 500,000 500,000 778,830 137,609 306,250 741,743
30 568,983 500,000 500,000 1,349,037 147,952 423,789 1,284,797
35 773,504 500,000 604,624 2,288,241 133,255 575,832 2,179,277
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium are
paid at the start of each Policy Year. The Death Benefit and Surrender Value
will differ if premiums are paid in different amounts or frequencies, if policy
loans are taken, or if Additional Sum Insured, Guaranteed Minimum Death Benefit
after the tenth Policy Year, or optional rider benefits are elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
52
<PAGE>
PLAN: VARIABLE ESTATE PROTECTION II (FLEXIBLE PREMIUM VARIABLE LIFE
SURVIVORSHIP) $500,000 TOTAL SUM INSURED MALE, ISSUE AGE 55, PREFERRED
UNDERWRITING CLASS FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS OPTION
B DEATH BENEFIT GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR PLANNED PREMIUM:
$8,156* USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
--------------------------- -------------------- -------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at --------------------------- -------------------- -------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ ------- ------- --------- ------- ------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 8,564 504,283 504,566 504,850 4,283 4,566 4,850
2 17,556 509,686 510,590 511,527 10,094 10,997 11,935
3 26,998 515,002 516,871 518,885 15,002 16,871 18,885
4 36,912 520,349 523,542 527,117 20,349 23,542 27,117
5 47,322 525,608 530,498 536,185 25,608 30,498 36,185
6 58,252 531,840 538,855 547,325 31,840 38,855 47,325
7 69,728 537,966 547,565 559,596 37,966 47,565 59,596
8 81,779 543,984 556,639 573,107 43,984 56,639 73,107
9 94,432 549,893 566,090 587,983 49,893 66,090 87,983
10 107,717 555,690 575,929 604,357 55,690 75,929 104,357
11 121,667 562,022 586,854 623,100 62,022 86,854 123,100
12 136,314 568,220 598,216 643,719 68,220 98,216 143,719
13 151,694 574,277 610,021 666,395 74,277 110,021 166,395
14 167,843 580,180 622,276 691,324 80,180 122,276 191,324
15 184,799 585,915 634,982 718,716 85,915 134,982 218,716
16 202,603 591,927 648,884 750,056 91,927 148,884 250,056
17 221,297 597,752 663,332 784,636 97,752 163,332 284,636
18 240,926 603,359 678,317 822,770 103,359 178,317 322,770
19 261,536 608,711 693,826 864,798 108,711 193,826 364,798
20 283,177 613,762 709,832 911,087 113,762 209,832 411,087
25 408,735 633,937 797,588 1,223,749 133,937 297,588 723,749
30 568,983 636,301 889,538 1,722,895 136,301 389,538 1,222,895
35 773,504 604,121 966,478 2,509,427 104,121 466,478 2,009,427
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium are
paid at the start of each Policy Year. The Death Benefit and Surrender Value
will differ if premiums are paid in different amounts or frequencies, if policy
loans are taken, or if Additional Sum Insured, Guaranteed Minimum Death Benefit
after the tenth Policy Year, or optional rider benefits are elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
53
<PAGE>
PLAN: VARIABLE ESTATE PROTECTION II (FLEXIBLE PREMIUM VARIABLE LIFE
SURVIVORSHIP) $500,000 TOTAL SUM INSURED MALE, ISSUE AGE 55, PREFERRED
UNDERWRITING CLASS FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS OPTION
A DEATH BENEFIT GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR PLANNED PREMIUM:
$8,156* USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
--------------------------- -------------------- ------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at --------------------------- -------------------- ------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ ------- ------- --------- ------ ------- --- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 8,564 500,000 500,000 500,000 4,130 4,408 4,687
2 17,556 500,000 500,000 500,000 9,762 10,644 11,561
3 26,998 500,000 500,000 500,000 14,444 16,263 18,224
4 36,912 500,000 500,000 500,000 19,511 22,608 26,077
5 47,322 500,000 500,000 500,000 24,424 29,151 34,654
6 58,252 500,000 500,000 500,000 30,236 36,995 45,167
7 69,728 500,000 500,000 500,000 35,855 45,074 56,647
8 81,779 500,000 500,000 500,000 41,267 53,381 69,179
9 94,432 500,000 500,000 500,000 46,457 61,911 82,857
10 107,717 500,000 500,000 500,000 51,409 70,654 97,783
11 121,667 500,000 500,000 500,000 56,579 80,107 114,606
12 136,314 500,000 500,000 500,000 61,451 89,762 132,967
13 151,694 500,000 500,000 500,000 65,992 99,598 153,005
14 167,843 500,000 500,000 500,000 70,153 109,581 174,875
15 184,799 500,000 500,000 500,000 73,882 119,674 198,754
16 202,603 500,000 500,000 500,000 77,121 129,835 224,851
17 221,297 500,000 500,000 500,000 79,775 139,997 253,392
18 240,926 500,000 500,000 500,000 81,822 150,154 284,703
19 261,536 500,000 500,000 500,000 83,156 160,237 319,124
20 283,177 500,000 500,000 500,000 83,680 170,191 357,087
25 408,735 500,000 500,000 648,337 69,143 215,534 617,464
30 568,983 ** 500,000 1,086,910 ** 239,964 1,035,152
35 773,504 ** 500,000 1,769,417 ** 208,337 1,685,159
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy Year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies, if
policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum Death
Benefit after the tenth Policy Year, or optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
54
<PAGE>
PLAN: VARIABLE ESTATE PROTECTION II (FLEXIBLE PREMIUM VARIABLE LIFE
SURVIVORSHIP) $500,000 TOTAL SUM INSURED MALE, ISSUE AGE 55, PREFERRED
UNDERWRITING CLASS FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS OPTION
B DEATH BENEFIT GUIDELINE PREMIUM AND CASH VALUE CORRIDOR TEST
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR PLANNED PREMIUM:
$8,156* USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
--------------------------- -------------------- ----
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at --------------------------- -------------------- ----
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ ------- ------- --------- ------ ------- --- ------
<S> <C> <C> <C> <C> <C> <C> <C>
1 8,564 504,129 504,408 504,686 4,129 4,408 4,686
2 17,556 509,353 510,235 511,152 9,761 10,643 11,560
3 26,998 514,440 516,258 518,219 14,440 16,258 18,219
4 36,912 519,500 522,596 526,063 19,500 22,596 26,063
5 47,322 524,402 529,124 534,621 24,402 29,124 34,621
6 58,252 530,195 536,943 545,101 30,195 36,943 45,101
7 69,728 535,783 544,981 556,527 35,783 44,981 56,527
8 81,779 541,150 553,224 568,969 41,150 53,224 68,969
9 94,432 546,276 561,660 582,509 46,276 61,660 82,509
10 107,717 551,139 570,267 597,225 51,139 70,267 97,225
11 121,667 556,188 579,525 613,739 56,188 79,525 113,739
12 136,314 560,899 588,912 631,651 60,899 88,912 131,651
13 151,694 565,227 598,379 651,046 65,227 98,379 151,046
14 167,843 569,113 607,862 672,005 69,113 107,862 172,005
15 184,799 572,487 617,283 694,603 72,487 117,283 194,603
16 202,603 575,277 626,554 718,919 75,277 126,554 218,919
17 221,297 577,365 635,539 744,990 77,365 135,539 244,990
18 240,926 578,719 644,178 772,947 78,719 144,178 272,947
19 261,536 579,214 652,316 802,833 79,214 152,316 302,833
20 283,177 578,736 659,800 834,706 78,736 159,800 334,706
25 408,735 556,409 679,984 1,024,700 56,409 179,984 524,700
30 568,983 ** 638,257 1,255,794 ** 138,257 755,794
35 773,504 ** ** 1,497,344 ** ** 997,344
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy Year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies, if
policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum Death
Benefit after the tenth Policy Year, or optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
55
<PAGE>
PLAN: VARIABLE ESTATE PROTECTION II (FLEXIBLE PREMIUM VARIABLE LIFE
SURVIVORSHIP) $500,000 TOTAL SUM INSURED MALE, ISSUE AGE 55, PREFERRED
UNDERWRITING CLASS FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS OPTION
A DEATH BENEFIT CASH VALUE ACCUMULATION TEST
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR PLANNED PREMIUM:
$8,156* USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
--------------------------- -------------------- -------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at --------------------------- -------------------- -------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ ------- ------- --------- ------- ------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 8,564 500,000 500,000 500,000 4,283 4,566 4,850
2 17,556 500,000 500,000 500,000 10,095 10,998 11,936
3 26,998 500,000 500,000 500,000 15,004 16,873 18,887
4 36,912 500,000 500,000 500,000 20,352 23,546 27,121
5 47,322 500,000 500,000 500,000 25,612 30,504 36,192
6 58,252 500,000 500,000 500,000 31,847 38,864 47,337
7 69,728 500,000 500,000 500,000 37,976 47,579 59,614
8 81,779 500,000 500,000 500,000 43,999 56,660 73,136
9 94,432 500,000 500,000 500,000 49,915 66,121 88,026
10 107,717 500,000 500,000 500,000 55,721 75,974 104,422
11 121,667 500,000 500,000 500,000 62,061 86,914 123,189
12 136,314 500,000 500,000 500,000 68,274 98,299 143,849
13 151,694 500,000 500,000 500,000 74,352 110,141 166,589
14 167,843 500,000 500,000 500,000 80,287 122,452 191,616
15 184,799 500,000 500,000 500,000 86,069 135,241 219,160
16 202,603 500,000 500,000 500,000 92,148 149,267 250,736
17 221,297 500,000 500,000 531,271 98,068 163,896 285,650
18 240,926 500,000 500,000 584,030 103,807 179,142 324,215
19 261,536 500,000 500,000 640,460 109,339 195,020 366,791
20 283,177 500,000 500,000 700,916 114,633 211,545 413,767
25 408,735 500,000 500,000 1,082,040 137,609 306,250 732,734
30 568,983 500,000 558,933 1,649,014 147,952 422,109 1,245,344
35 773,504 500,000 682,220 2,508,108 133,255 559,074 2,055,373
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium are
paid at the start of each Policy Year. The Death Benefit and Surrender Value
will differ if premiums are paid in different amounts or frequencies, if policy
loans are taken, or if Additional Sum Insured, Guaranteed Minimum Death Benefit
after the tenth Policy Year, or optional rider benefits are elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
56
<PAGE>
PLAN: VARIABLE ESTATE PROTECTION II (FLEXIBLE PREMIUM VARIABLE LIFE
SURVIVORSHIP) $500,000 TOTAL SUM INSURED MALE, ISSUE AGE 55, PREFERRED
UNDERWRITING CLASS FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS OPTION
B DEATH BENEFIT CASH VALUE ACCUMULATION TEST
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR PLANNED PREMIUM:
$8,156* USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
--------------------------- -------------------- -------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at --------------------------- -------------------- -------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ ------- ------- --------- ------- ------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 8,564 504,283 504,566 504,850 4,283 4,566 4,850
2 17,556 509,686 510,590 511,527 10,094 10,997 11,935
3 26,998 515,002 516,871 518,885 15,002 16,871 18,885
4 36,912 520,349 523,542 527,117 20,349 23,542 27,117
5 47,322 525,608 530,498 536,185 25,608 30,498 36,185
6 58,252 531,840 538,855 547,325 31,840 38,855 47,325
7 69,728 537,966 547,565 559,596 37,966 47,565 59,596
8 81,779 543,984 556,639 573,107 43,984 56,639 73,107
9 94,432 549,893 566,090 587,983 49,893 66,090 87,983
10 107,717 555,690 575,929 604,357 55,690 75,929 104,357
11 121,667 562,022 586,854 623,100 62,022 86,854 123,100
12 136,314 568,220 598,216 643,719 68,220 98,216 143,719
13 151,694 574,277 610,021 666,395 74,277 110,021 166,395
14 167,843 580,180 622,276 691,324 80,180 122,276 191,324
15 184,799 585,915 634,982 718,716 85,915 134,982 218,716
16 202,603 591,927 648,884 750,056 91,927 148,884 250,056
17 221,297 597,752 663,332 784,636 97,752 163,332 284,636
18 240,926 603,359 678,317 822,770 103,359 178,317 322,770
19 261,536 608,711 693,826 864,798 108,711 193,826 364,798
20 283,177 613,762 709,832 911,087 113,762 209,832 411,087
25 408,735 633,937 797,588 1,223,749 133,937 297,588 723,749
30 568,983 636,301 889,538 1,722,895 136,301 389,538 1,222,895
35 773,504 604,121 966,478 2,509,427 104,121 466,478 2,009,427
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium are
paid at the start of each Policy Year. The Death Benefit and Surrender Value
will differ if premiums are paid in different amounts or frequencies, if policy
loans are taken, or if Additional Sum Insured, Guaranteed Minimum Death Benefit
after the tenth Policy Year, or optional rider benefits are elected.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
57
<PAGE>
PLAN: VARIABLE ESTATE PROTECTION II (FLEXIBLE PREMIUM VARIABLE LIFE
SURVIVORSHIP) $500,000 TOTAL SUM INSURED MALE, ISSUE AGE 55, PREFERRED
UNDERWRITING CLASS FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS OPTION
A DEATH BENEFIT CASH VALUE ACCUMULATION TEST
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR PLANNED PREMIUM:
$8,156* USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
--------------------------- -------------------- ------
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at --------------------------- -------------------- ------
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ ------- ------- --------- ------ ------- --- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 8,564 500,000 500,000 500,000 4,130 4,408 4,687
2 17,556 500,000 500,000 500,000 9,762 10,644 11,561
3 26,998 500,000 500,000 500,000 14,444 16,263 18,224
4 36,912 500,000 500,000 500,000 19,511 22,608 26,077
5 47,322 500,000 500,000 500,000 24,424 29,151 34,654
6 58,252 500,000 500,000 500,000 30,236 36,995 45,167
7 69,728 500,000 500,000 500,000 35,855 45,074 56,647
8 81,779 500,000 500,000 500,000 41,267 53,381 69,179
9 94,432 500,000 500,000 500,000 46,457 61,911 82,857
10 107,717 500,000 500,000 500,000 51,409 70,654 97,783
11 121,667 500,000 500,000 500,000 56,579 80,107 114,606
12 136,314 500,000 500,000 500,000 61,451 89,762 132,967
13 151,694 500,000 500,000 500,000 65,992 99,598 153,005
14 167,843 500,000 500,000 500,000 70,153 109,581 174,875
15 184,799 500,000 500,000 500,000 73,882 119,674 198,754
16 202,603 500,000 500,000 500,000 77,121 129,835 224,851
17 221,297 500,000 500,000 500,000 79,775 139,997 253,392
18 240,926 500,000 500,000 512,706 81,822 150,154 284,621
19 261,536 500,000 500,000 556,132 83,156 160,237 318,497
20 283,177 500,000 500,000 601,642 83,680 170,191 355,164
25 408,735 500,000 500,000 866,359 69,143 215,534 586,680
30 568,983 ** 500,000 1,207,522 ** 239,964 911,926
35 773,504 ** 500,000 1,651,637 ** 208,337 1,353,503
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy Year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies, if
policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum Death
Benefit after the tenth Policy Year, or optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
58
<PAGE>
PLAN: VARIABLE ESTATE PROTECTION II (FLEXIBLE PREMIUM VARIABLE LIFE
SURVIVORSHIP) $500,000 TOTAL SUM INSURED MALE, ISSUE AGE 55, PREFERRED
UNDERWRITING CLASS FEMALE, ISSUE AGE 50, PREFERRED UNDERWRITING CLASS OPTION
B DEATH BENEFIT CASH VALUE ACCUMULATION TEST
NO GUARANTEED MINIMUM DEATH BENEFIT AFTER TENTH POLICY YEAR PLANNED PREMIUM:
$8,156* USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
--------------------------- -------------------- ----
Assuming hypothetical Assuming hypothetical
End of Planned Premiums gross annual return of gross annual return of
Policy accumulated at --------------------------- -------------------- ----
Year 5% annual interest 0% 6% 12% 0% 6% 12%
------- ------------------ ------- ------- --------- ------ ------- --- ------
<S> <C> <C> <C> <C> <C> <C> <C>
1 8,564 504,129 504,408 504,686 4,129 4,408 4,686
2 17,556 509,353 510,235 511,152 9,761 10,643 11,560
3 26,998 514,440 516,258 518,219 14,440 16,258 18,219
4 36,912 519,500 522,596 526,063 19,500 22,596 26,063
5 47,322 524,402 529,124 534,621 24,402 29,124 34,621
6 58,252 530,195 536,943 545,101 30,195 36,943 45,101
7 69,728 535,783 544,981 556,527 35,783 44,981 56,527
8 81,779 541,150 553,224 568,969 41,150 53,224 68,969
9 94,432 546,276 561,660 582,509 46,276 61,660 82,509
10 107,717 551,139 570,267 597,225 51,139 70,267 97,225
11 121,667 556,188 579,525 613,739 56,188 79,525 113,739
12 136,314 560,899 588,912 631,651 60,899 88,912 131,651
13 151,694 565,227 598,379 651,046 65,227 98,379 151,046
14 167,843 569,113 607,862 672,005 69,113 107,862 172,005
15 184,799 572,487 617,283 694,603 72,487 117,283 194,603
16 202,603 575,277 626,554 718,919 75,277 126,554 218,919
17 221,297 577,365 635,539 744,990 77,365 135,539 244,990
18 240,926 578,719 644,178 772,947 78,719 144,178 272,947
19 261,536 579,214 652,316 802,833 79,214 152,316 302,833
20 283,177 578,736 659,800 834,706 78,736 159,800 334,706
25 408,735 556,409 679,984 1,024,700 56,409 179,984 524,700
30 568,983 ** 638,257 1,255,794 ** 138,257 755,794
35 773,504 ** ** 1,497,344 ** ** 997,344
</TABLE>
* The illustrations assume that Planned Premiums equal to the Target Premium
are paid at the start of each Policy Year. The Death Benefit and Surrender
Value will differ if premiums are paid in different amounts or frequencies, if
policy loans are taken, or if Additional Sum Insured, Guaranteed Minimum Death
Benefit after the tenth Policy Year, or optional rider benefits are elected.
** Policy lapses unless additional premium payments are made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RETURNS 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 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 FLUCTUATE ABOVE OR BELOW THE AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATIONS CAN BE MADE THAT THESE HYPOTHETICAL INVESTMENT
RESULTS CAN BE ACHIEVED FOR ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
59
<PAGE>
[THIS PAGE IS INTENTIONALLY LEFT BLANK.]
60
<PAGE>
FLEX-V2
REVISED ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES AND
ACCUMULATED PREMIUMS
The following tables on pages 62 TO 67 replace the illustration in the John
Hancock Life Insurance Company ("JOHN HANCOCK") Flex V-2 Product Prospectus.
The tables on pages 68 TO 73 replace the illustration in the John Hancock
Variable Life Insurance Company ("JHVLICO") Flex V-2 Product Prospectus.
The assumptions used for the revised illustrations are generally the same as
those described in the respective Flex V-1 Product Prospectus. With respect to
fees and expenses deducted from Trust assets, however, the amounts shown in all
tables reflect (1) investment management fees equivalent to an effective annual
rate of .66%, and (2) an assumed average asset charge for all other Trust- level
operating expenses equivalent to an effective annual rate of .11%. These rates
are the arithmetic average for all funds that are available as investment
options. In other words, they are based on the hypothetical assumption that
policy account values are allocated equally among the variable investment
options.
Tables are provided for each of the three death benefit options. The amounts
shown are for the end of each policy year and assume that all of the account
value is invested in funds that achieve investment returns at constant annual
rates of 0%, 6% and 12% (i.e., before any fees or expenses deducted from Trust
assets). After deduction of the average Trust-level fees and expenses (as
described above) the corresponding net annual rates of return would be -.77%,
5.18% and 11.14%. Investment return reflects investment income and all realized
and unrealized capital gains and losses.
The actual rates associated with any policy will vary depending upon the
actual allocation of policy values among the investment options. The charge
shown above for all other Trust-level operating expenses reflects reimbursements
to certain funds as described in the footnotes to the Fund expense table. We
currently expect those reimbursement arrangements to continue indefinitely, but
that is not guaranteed.
The second column of each table shows the amount you would have at the end of
each policy year if an amount equal to the assumed Required Premiums were
invested to earn interest, after taxes, at 5% compounded annually. This is not a
policy value. It is included for comparison purposes only.
Because your circumstances will no doubt differ from those in the
illustrations that follow, values under your policy will differ, in most cases
substantially. Upon request, we will furnish you with a comparable illustration
reflecting your proposed insured person's issue age, sex and underwriting risk
classification, and the Guaranteed Death Benefit and annual Required Premium
amount requested.
61
<PAGE>
JOHN HANCOCK FLEX V-2
DEATH BENEFIT OPTION 1: --LEVEL DEATH BENEFIT ILLUSTRATION ASSUMES CURRENT
CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<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 (2) 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>
1 945 100,000 100,000 100,000 323 356 390 0 0 0
2 1,937 100,000 100,000 100,000 873 967 1,066 303 397 496
3 2,979 100,000 100,000 100,000 1,406 1,596 1,803 701 891 1,098
4 4,073 100,000 100,000 100,000 1,920 2,243 2,606 1,080 1,403 1,766
5 5,222 100,000 100,000 100,000 2,415 2,906 3,481 1,740 2,231 2,806
6 6,428 100,000 100,000 100,000 2,891 3,587 4,434 2,081 2,777 3,624
7 7,694 100,000 100,000 100,000 3,343 4,282 5,472 2,533 3,472 4,662
8 9,024 100,000 100,000 100,000 3,774 4,994 6,604 3,054 4,274 5,884
9 10,420 100,000 100,000 100,000 4,179 5,719 7,837 3,549 5,089 7,207
10 11,886 100,000 100,000 100,000 4,571 6,473 9,202 4,031 5,933 8,662
11 13,425 100,000 100,000 100,000 4,982 7,292 10,747 4,532 6,842 10,297
12 15,042 100,000 100,000 100,000 5,369 8,131 12,441 5,054 7,816 12,126
13 16,739 100,000 100,000 100,000 5,729 8,991 14,303 5,549 8,811 14,123
14 18,521 100,000 100,000 100,000 6,063 9,872 16,350 6,063 9,872 16,350
15 20,392 100,000 100,000 100,000 6,367 10,773 18,602 6,367 10,773 18,602
16 22,356 100,000 100,000 100,000 6,641 11,694 21,083 6,641 11,694 21,083
17 24,419 100,000 100,000 100,000 6,875 12,628 23,811 6,875 12,628 23,811
18 26,585 100,000 100,000 100,000 7,064 13,569 26,813 7,064 13,569 26,813
19 28,859 100,000 100,000 100,000 7,201 14,515 30,119 7,201 14,515 30,119
20 31,247 100,000 100,000 100,000 7,281 15,460 33,762 7,281 15,460 33,762
25 45,102 100,000 100,000 100,000 6,602 20,007 58,691 6,602 20,007 58,691
30 62,785 100,000 100,000 121,542 3,204 23,538 101,285 3,204 23,538 101,285
35 85,353 100,000 100,000 197,338 0 23,973 171,598 0 23,973 171,598
40 142,504 100,000 100,000 301,256 0 35,006 286,910 0 35,006 286,910
45 215,445 100,000 100,000 502,783 0 29,472 478,841 0 29,472 478,841
</TABLE>
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts thereafter. If
premiums are paid more frequently than annually, the above values shown would
be affected.
(2) Assumes payment of recalculated annual premium amounts of $5,751 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $5,751 at 6% and $0 at 12%, subject to any maximums required to
maintain the Policy's status for federal income tax purposes.
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.
62
<PAGE>
JOHN HANCOCK FLEX V-2
DEATH BENEFIT OPTION 1: LEVEL DEATH BENEFIT ILLUSTRATION ASSUMES MAXIMUM CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<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 (2) 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>
1 945 100,000 100,000 100,000 276 307 339 0 0 0
2 1,937 100,000 100,000 100,000 778 866 959 8 96 189
3 2,979 100,000 100,000 100,000 1,264 1,441 1,634 359 536 729
4 4,073 100,000 100,000 100,000 1,733 2,031 2,368 693 991 1,328
5 5,222 100,000 100,000 100,000 2,182 2,635 3,167 1,007 1,460 1,992
6 6,428 100,000 100,000 100,000 2,613 3,254 4,036 1,303 1,944 2,726
7 7,694 100,000 100,000 100,000 3,021 3,884 4,980 1,811 2,674 3,770
8 9,024 100,000 100,000 100,000 3,407 4,527 6,009 2,287 3,407 4,889
9 10,420 100,000 100,000 100,000 3,769 5,181 7,126 2,839 4,251 6,196
10 11,886 100,000 100,000 100,000 4,116 5,858 8,362 3,576 5,318 7,822
11 13,425 100,000 100,000 100,000 4,437 6,547 9,710 3,987 6,097 9,260
12 15,042 100,000 100,000 100,000 4,729 7,245 11,184 4,414 6,930 10,869
13 16,739 100,000 100,000 100,000 4,993 7,953 12,795 4,813 7,773 12,615
14 18,521 100,000 100,000 100,000 5,226 8,670 14,560 5,226 8,670 14,560
15 20,392 100,000 100,000 100,000 5,425 9,392 16,493 5,425 9,392 16,493
16 22,356 100,000 100,000 100,000 5,589 10,120 18,613 5,589 10,120 18,613
17 24,419 100,000 100,000 100,000 5,711 10,848 20,937 5,711 10,848 20,937
18 26,585 100,000 100,000 100,000 5,785 11,568 23,486 5,785 11,568 23,486
19 28,859 100,000 100,000 100,000 5,807 12,279 26,284 5,807 12,279 26,284
20 31,247 100,000 100,000 100,000 5,766 12,971 29,356 5,766 12,971 29,356
25 45,102 100,000 100,000 100,000 4,407 15,918 50,141 4,407 15,918 50,141
30 62,785 100,000 100,000 102,564 88 16,986 85,470 88 16,986 85,470
35 85,353 100,000 100,000 166,579 0 13,263 144,852 0 13,263 144,852
40 149,286 100,000 100,000 253,979 0 18,578 241,885 0 18,578 241,885
45 230,884 100,000 100,000 423,713 0 0 403,536 0 0 403,536
</TABLE>
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts thereafter. If
premiums are paid more frequently than annually, the above values shown would
be affected.
(2) Assumes payment of recalculated annual premium amounts of $7,184 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $7,184 at 6% and $0 at 12%, subject to any maximums required to
maintain the Policy's status for federal income tax purposes.
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.
63
<PAGE>
JOHN HANCOCK FLEX V-2
DEATH BENEFIT OPTION 2: VARIABLE DEATH BENEFIT ILLUSTRATION ASSUMES CURRENT
CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<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 (2) 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>
1 945 100,000 100,000 100,000 323 356 390 0 0 0
2 1,937 100,000 100,000 100,000 873 967 1,066 303 397 496
3 2,979 100,000 100,000 100,000 1,406 1,596 1,803 701 891 1,098
4 4,073 100,000 100,000 100,000 1,920 2,243 2,606 1,080 1,403 1,766
5 5,222 100,000 100,000 100,000 2,415 2,906 3,481 1,740 2,231 2,806
6 6,428 100,000 100,000 100,000 2,891 3,587 4,434 2,081 2,777 3,624
7 7,694 100,000 100,000 100,000 3,343 4,282 5,472 2,533 3,472 4,662
8 9,024 100,000 100,000 100,000 3,774 4,994 6,604 3,054 4,274 5,884
9 10,420 100,000 100,000 100,000 4,179 5,719 7,837 3,549 5,089 7,207
10 11,886 100,000 100,000 100,000 4,571 6,473 9,202 4,031 5,933 8,662
11 13,425 100,000 100,000 100,000 4,982 7,292 10,747 4,532 6,842 10,297
12 15,042 100,000 100,000 100,000 5,369 8,131 12,441 5,054 7,816 12,126
13 16,739 100,000 100,000 100,000 5,729 8,991 14,303 5,549 8,811 14,123
14 18,521 100,000 100,000 100,000 6,063 9,872 16,350 6,063 9,872 16,350
15 20,392 100,000 100,000 100,000 6,367 10,773 18,602 6,367 10,773 18,602
16 22,356 100,000 100,000 100,216 6,641 11,694 21,083 6,641 11,694 21,083
17 24,419 100,000 100,000 101,325 6,875 12,628 23,809 6,875 12,628 23,809
18 26,585 100,000 100,000 102,665 7,064 13,569 26,802 7,064 13,569 26,802
19 28,859 100,000 100,000 104,266 7,201 14,515 30,087 7,201 14,515 30,087
20 31,247 100,000 100,000 106,159 7,281 15,460 33,693 7,281 15,460 33,693
25 45,102 100,000 100,000 121,336 6,602 20,007 57,835 6,602 20,007 57,835
30 62,785 100,000 100,000 150,904 3,204 23,538 96,853 3,204 23,538 96,853
35 85,353 100,000 100,000 204,781 0 23,973 160,210 0 23,973 160,210
40 142,504 100,000 100,746 293,184 0 34,517 266,241 0 34,517 266,241
45 215,445 100,000 100,000 464,388 0 28,568 442,274 0 28,568 442,274
</TABLE>
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts thereafter. If
premiums are paid more frequently than annually, the above values shown would
be affected.
(2) Assumes payment of recalculated annual premium amounts of $5,751 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $5,751 at 6% and $0 at 12%, subject to any maximum required to
maintain the Policy's status for federal income tax purposes.
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.
64
<PAGE>
JOHN HANCOCK FLEX V-2
DEATH BENEFIT OPTION 2: VARIABLE DEATH BENEFIT ILLUSTRATION ASSUMES MAXIMUM
CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<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 (2) 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>
1 945 100,000 100,000 100,000 276 307 339 0 0 0
2 1,937 100,000 100,000 100,000 778 866 959 8 96 189
3 2,979 100,000 100,000 100,000 1,264 1,441 1,634 359 536 729
4 4,073 100,000 100,000 100,000 1,733 2,031 2,368 693 991 1,328
5 5,222 100,000 100,000 100,000 2,182 2,635 3,167 1,007 1,460 1,992
6 6,428 100,000 100,000 100,000 2,613 3,254 4,036 1,303 1,944 2,726
7 7,694 100,000 100,000 100,000 3,021 3,884 4,980 1,811 2,674 3,770
8 9,024 100,000 100,000 100,000 3,407 4,527 6,009 2,287 3,407 4,889
9 10,420 100,000 100,000 100,000 3,769 5,181 7,126 2,839 4,251 6,196
10 11,886 100,000 100,000 100,000 4,116 5,858 8,362 3,576 5,318 7,822
11 13,425 100,000 100,000 100,000 4,437 6,547 9,710 3,987 6,097 9,260
12 15,042 100,000 100,000 100,000 4,729 7,245 11,184 4,414 6,930 10,869
13 16,739 100,000 100,000 100,000 4,993 7,953 12,795 4,813 7,773 12,615
14 18,521 100,000 100,000 100,000 5,226 8,670 14,560 5,226 8,670 14,560
15 20,392 100,000 100,000 100,000 5,425 9,392 16,493 5,425 9,392 16,493
16 22,356 100,000 100,000 100,000 5,589 10,120 18,613 5,589 10,120 18,613
17 24,419 100,000 100,000 100,000 5,711 10,848 20,937 5,711 10,848 20,937
18 26,585 100,000 100,000 100,000 5,785 11,568 23,486 5,785 11,568 23,486
19 28,859 100,000 100,000 100,463 5,807 12,279 26,284 5,807 12,279 26,284
20 31,247 100,000 100,000 101,818 5,766 12,971 29,351 5,766 12,971 29,351
25 45,102 100,000 100,000 113,242 4,407 15,918 49,741 4,407 15,918 49,741
30 62,785 100,000 100,000 136,411 88 16,986 82,360 88 16,986 82,360
35 85,353 100,000 100,000 179,413 0 13,263 134,842 0 13,263 134,842
40 149,286 100,000 100,000 249,271 0 18,334 222,328 0 18,334 222,328
45 230,884 100,000 100,000 388,038 0 0 367,240 0 0 367,240
</TABLE>
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts thereafter. If
premiums are paid more frequently than annually, the above values shown would
be affected.
(2) Assumes payment of recalculated annual premium amounts of $7,184 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $7,184 at 6% and $0 at 12%, subject to any maximums required to
maintain the Policy's status for federal income tax purposes.
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.
65
<PAGE>
JOHN HANCOCK FLEX V-2
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
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<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 (2) 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>
1 945 100,000 100,000 100,000 323 356 390 0 0 0
2 1,937 100,000 100,000 100,000 873 967 1,066 303 397 496
3 2,979 100,000 100,000 100,000 1,406 1,596 1,803 701 891 1,098
4 4,073 100,000 100,000 100,000 1,920 2,243 2,606 1,080 1,403 1,766
5 5,222 100,000 100,000 100,000 2,415 2,906 3,481 1,740 2,231 2,806
6 6,428 100,000 100,000 100,000 2,891 3,587 4,434 2,081 2,777 3,624
7 7,694 100,000 100,000 100,000 3,343 4,282 5,472 2,533 3,472 4,662
8 9,024 100,000 100,000 100,000 3,774 4,994 6,604 3,054 4,274 5,884
9 10,420 100,000 100,000 100,000 4,179 5,719 7,837 3,549 5,089 7,207
10 11,886 100,000 100,000 100,000 4,571 6,473 9,202 4,031 5,933 8,662
11 13,425 100,000 100,000 100,000 4,982 7,292 10,747 4,532 6,842 10,297
12 15,042 100,000 100,000 100,000 5,369 8,131 12,441 5,054 7,816 12,126
13 16,739 100,000 100,000 100,000 5,729 8,991 14,303 5,549 8,811 14,123
14 18,521 100,000 100,000 100,000 6,063 9,872 16,350 6,063 9,872 16,350
15 20,392 100,000 100,000 100,000 6,367 10,773 18,602 6,367 10,773 18,602
16 22,356 100,000 100,000 100,000 6,641 11,694 21,083 6,641 11,694 21,083
17 24,419 100,000 100,000 100,000 6,875 12,628 23,811 6,875 12,628 23,811
18 26,585 100,000 100,000 100,000 7,064 13,569 26,813 7,064 13,569 26,813
19 28,859 100,000 100,000 100,000 7,201 14,515 30,119 7,201 14,515 30,119
20 31,247 100,000 100,000 100,000 7,281 15,460 33,762 7,281 15,460 33,762
25 45,102 100,000 100,000 113,707 6,602 20,007 58,518 6,602 20,007 58,518
30 62,785 100,000 100,000 165,800 3,204 23,538 97,415 3,204 23,538 97,415
35 85,353 100,000 100,000 236,943 0 23,973 156,542 0 23,973 156,542
40 142,504 100,000 100,000 335,122 16,227 35,006 244,829 16,227 35,006 244,829
45 215,445 100,000 100,000 472,183 31,005 50,394 373,977 31,005 50,394 373,977
</TABLE>
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts thereafter. If
premiums are paid more frequently than annually, the above values shown would
be affected.
(2) Assumes payment of recalculated annual premium amounts of $5,751 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $5,751 at 6% and $0 at 12%, subject to any maximums required to
maintain the Policy's status for federal income tax purposes.
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.
66
<PAGE>
JOHN HANCOCK FLEX V-2
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
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<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 (2) 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>
1 945 100,000 100,000 100,000 276 307 339 0 0 0
2 1,937 100,000 100,000 100,000 778 866 959 8 96 189
3 2,979 100,000 100,000 100,000 1,264 1,441 1,634 359 536 729
4 4,073 100,000 100,000 100,000 1,733 2,031 2,368 693 991 1,328
5 5,222 100,000 100,000 100,000 2,182 2,635 3,167 1,007 1,460 1,992
6 6,428 100,000 100,000 100,000 2,613 3,254 4,036 1,303 1,944 2,726
7 7,694 100,000 100,000 100,000 3,021 3,884 4,980 1,811 2,674 3,770
8 9,024 100,000 100,000 100,000 3,407 4,527 6,009 2,287 3,407 4,889
9 10,420 100,000 100,000 100,000 3,769 5,181 7,126 2,839 4,251 6,196
10 11,886 100,000 100,000 100,000 4,116 5,858 8,362 3,576 5,318 7,822
11 13,425 100,000 100,000 100,000 4,437 6,547 9,710 3,987 6,097 9,260
12 15,042 100,000 100,000 100,000 4,729 7,245 11,184 4,414 6,930 10,869
13 16,739 100,000 100,000 100,000 4,993 7,953 12,795 4,813 7,773 12,615
14 18,521 100,000 100,000 100,000 5,226 8,670 14,560 5,226 8,670 14,560
15 20,392 100,000 100,000 100,000 5,425 9,392 16,493 5,425 9,392 16,493
16 22,356 100,000 100,000 100,000 5,589 10,120 18,613 5,589 10,120 18,613
17 24,419 100,000 100,000 100,000 5,711 10,848 20,937 5,711 10,848 20,937
18 26,585 100,000 100,000 100,000 5,785 11,568 23,486 5,785 11,568 23,486
19 28,859 100,000 100,000 100,000 5,807 12,279 26,284 5,807 12,279 26,284
20 31,247 100,000 100,000 100,000 5,766 12,971 29,356 5,766 12,971 29,356
25 45,102 100,000 100,000 100,000 4,407 15,918 50,141 4,407 15,918 50,141
30 62,785 100,000 100,000 141,847 88 16,986 83,341 88 16,986 83,341
35 85,353 100,000 100,000 202,116 0 13,263 133,533 0 13,263 133,533
40 149,286 100,000 100,000 283,727 6,763 26,332 207,282 6,763 26,332 207,282
45 230,884 100,000 100,000 395,986 12,058 44,092 313,628 12,058 44,092 313,628
</TABLE>
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts thereafter. If
premiums are paid more frequently than annually, the above values shown would
be affected.
(2) Assumes payment of recalculated annual premium amounts of $7,184 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $7,184 at 6% and $0 at 12%, subject to any maximums required to
maintain the Policy's status for federal income tax purposes.
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.
67
<PAGE>
JHVLICO FLEX V-2
DEATH BENEFIT OPTION 1: --LEVEL DEATH BENEFIT ILLUSTRATION ASSUMES CURRENT
CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<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 (2) 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>
1 945 100,000 100,000 100,000 323 356 390 0 0 0
2 1,937 100,000 100,000 100,000 873 967 1,066 303 397 496
3 2,979 100,000 100,000 100,000 1,406 1,596 1,803 701 891 1,098
4 4,073 100,000 100,000 100,000 1,920 2,243 2,606 1,080 1,403 1,766
5 5,222 100,000 100,000 100,000 2,415 2,906 3,481 1,740 2,231 2,806
6 6,428 100,000 100,000 100,000 2,891 3,587 4,434 2,081 2,777 3,624
7 7,694 100,000 100,000 100,000 3,343 4,282 5,472 2,533 3,472 4,662
8 9,024 100,000 100,000 100,000 3,774 4,994 6,604 3,054 4,274 5,884
9 10,420 100,000 100,000 100,000 4,179 5,719 7,837 3,549 5,089 7,207
10 11,886 100,000 100,000 100,000 4,571 6,473 9,202 4,031 5,933 8,662
11 13,425 100,000 100,000 100,000 4,982 7,292 10,747 4,532 6,842 10,297
12 15,042 100,000 100,000 100,000 5,369 8,131 12,441 5,054 7,816 12,126
13 16,739 100,000 100,000 100,000 5,729 8,991 14,303 5,549 8,811 14,123
14 18,521 100,000 100,000 100,000 6,063 9,872 16,350 6,063 9,872 16,350
15 20,392 100,000 100,000 100,000 6,367 10,773 18,602 6,367 10,773 18,602
16 22,356 100,000 100,000 100,000 6,641 11,694 21,083 6,641 11,694 21,083
17 24,419 100,000 100,000 100,000 6,875 12,628 23,811 6,875 12,628 23,811
18 26,585 100,000 100,000 100,000 7,064 13,569 26,813 7,064 13,569 26,813
19 28,859 100,000 100,000 100,000 7,201 14,515 30,119 7,201 14,515 30,119
20 31,247 100,000 100,000 100,000 7,281 15,460 33,762 7,281 15,460 33,762
25 45,102 100,000 100,000 100,000 6,602 20,007 58,691 6,602 20,007 58,691
30 62,785 100,000 100,000 121,542 3,204 23,538 101,285 3,204 23,538 101,285
35 85,353 100,000 100,000 197,338 0 23,973 171,598 0 23,973 171,598
40 142,504 100,000 100,000 301,256 0 35,006 286,910 0 35,006 286,910
45 215,445 100,000 100,000 502,783 0 29,472 478,841 0 29,472 478,841
</TABLE>
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts thereafter. If
premiums are paid more frequently than annually, the above values shown would
be affected.
(2) Assumes payment of recalculated annual premium amounts of $5,751 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $5,751 at 6% and $0 at 12%, subject to any maximums required to
maintain the Policy's status for federal income tax purposes.
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>
JHVLICO FLEX V-2
DEATH BENEFIT OPTION 1: LEVEL DEATH BENEFIT ILLUSTRATION ASSUMES MAXIMUM CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<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 (2) 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>
1 945 100,000 100,000 100,000 276 307 339 0 0 0
2 1,937 100,000 100,000 100,000 778 866 959 8 96 189
3 2,979 100,000 100,000 100,000 1,264 1,441 1,634 359 536 729
4 4,073 100,000 100,000 100,000 1,733 2,031 2,368 693 991 1,328
5 5,222 100,000 100,000 100,000 2,182 2,635 3,167 1,007 1,460 1,992
6 6,428 100,000 100,000 100,000 2,613 3,254 4,036 1,303 1,944 2,726
7 7,694 100,000 100,000 100,000 3,021 3,884 4,980 1,811 2,674 3,770
8 9,024 100,000 100,000 100,000 3,407 4,527 6,009 2,287 3,407 4,889
9 10,420 100,000 100,000 100,000 3,769 5,181 7,126 2,839 4,251 6,196
10 11,886 100,000 100,000 100,000 4,107 5,846 8,344 3,567 5,306 7,804
11 13,425 100,000 100,000 100,000 4,418 6,520 9,671 3,968 6,070 9,221
12 15,042 100,000 100,000 100,000 4,700 7,200 11,114 4,385 6,885 10,799
13 16,739 100,000 100,000 100,000 4,952 7,887 12,688 4,772 7,707 12,508
14 18,521 100,000 100,000 100,000 5,172 8,579 14,406 5,172 8,579 14,406
15 20,392 100,000 100,000 100,000 5,358 9,273 16,280 5,358 9,273 16,280
16 22,356 100,000 100,000 100,000 5,507 9,968 18,327 5,507 9,968 18,327
17 24,419 100,000 100,000 100,000 5,613 10,657 20,563 5,613 10,657 20,563
18 26,585 100,000 100,000 100,000 5,671 11,335 23,003 5,671 11,335 23,003
19 28,859 100,000 100,000 100,000 5,675 11,997 25,670 5,675 11,997 25,670
20 31,247 100,000 100,000 100,000 5,617 12,633 28,584 5,617 12,633 28,584
25 45,102 100,000 100,000 100,000 4,168 15,192 47,965 4,168 15,192 47,965
30 62,785 100,000 100,000 100,000 0 15,626 79,940 0 15,626 79,940
35 85,353 100,000 100,000 153,083 0 10,932 133,116 0 10,932 133,116
40 150,406 100,000 100,000 229,191 0 14,560 218,277 0 14,560 218,277
45 233,433 100,000 100,000 375,346 0 0 357,472 0 0 357,472
</TABLE>
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts thereafter. If
premiums are paid more frequently than annually, the above values shown would
be affected.
(2) Assumes payment of recalculated annual premium amounts of $7,184 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $7,184 at 6% and $0 at 12%, subject to any maximums required to
maintain the Policy's status for federal income tax purposes.
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.
69
<PAGE>
JHVLICO FLEX V-2
DEATH BENEFIT OPTION 2: VARIABLE DEATH BENEFIT ILLUSTRATION ASSUMES CURRENT
CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<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 (2) 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>
1 945 100,000 100,000 100,000 323 356 390 0 0 0
2 1,937 100,000 100,000 100,000 873 967 1,066 303 397 496
3 2,979 100,000 100,000 100,000 1,406 1,596 1,803 701 891 1,098
4 4,073 100,000 100,000 100,000 1,920 2,243 2,606 1,080 1,403 1,766
5 5,222 100,000 100,000 100,000 2,415 2,906 3,481 1,740 2,231 2,806
6 6,428 100,000 100,000 100,000 2,891 3,587 4,434 2,081 2,777 3,624
7 7,694 100,000 100,000 100,000 3,343 4,282 5,472 2,533 3,472 4,662
8 9,024 100,000 100,000 100,000 3,774 4,994 6,604 3,054 4,274 5,884
9 10,420 100,000 100,000 100,000 4,179 5,719 7,837 3,549 5,089 7,207
10 11,886 100,000 100,000 100,000 4,571 6,473 9,202 4,031 5,933 8,662
11 13,425 100,000 100,000 100,000 4,982 7,292 10,747 4,532 6,842 10,297
12 15,042 100,000 100,000 100,000 5,369 8,131 12,441 5,054 7,816 12,126
13 16,739 100,000 100,000 100,000 5,729 8,991 14,303 5,549 8,811 14,123
14 18,521 100,000 100,000 100,000 6,063 9,872 16,350 6,063 9,872 16,350
15 20,392 100,000 100,000 100,000 6,367 10,773 18,602 6,367 10,773 18,602
16 22,356 100,000 100,000 100,216 6,641 11,694 21,083 6,641 11,694 21,083
17 24,419 100,000 100,000 101,325 6,875 12,628 23,809 6,875 12,628 23,809
18 26,585 100,000 100,000 102,665 7,064 13,569 26,802 7,064 13,569 26,802
19 28,859 100,000 100,000 104,266 7,201 14,515 30,087 7,201 14,515 30,087
20 31,247 100,000 100,000 106,159 7,281 15,460 33,693 7,281 15,460 33,693
25 45,102 100,000 100,000 121,336 6,602 20,007 57,835 6,602 20,007 57,835
30 62,785 100,000 100,000 150,904 3,204 23,538 96,853 3,204 23,538 96,853
35 85,353 100,000 100,000 204,781 0 23,973 160,210 0 23,973 160,210
40 142,504 100,000 100,746 293,184 0 34,517 266,241 0 34,517 266,241
45 215,445 100,000 100,000 464,388 0 28,568 442,274 0 28,568 442,274
</TABLE>
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts thereafter. If
premiums are paid more frequently than annually, the above values shown would
be affected.
(2) Assumes payment of recalculated annual premium amounts of $5,751 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $5,751 at 6% and $0 at 12%, subject to any maximum required to
maintain the Policy's status for federal income tax purposes.
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.
70
<PAGE>
JHVLICO FLEX V-2
DEATH BENEFIT OPTION 2: VARIABLE DEATH BENEFIT ILLUSTRATION ASSUMES MAXIMUM
CHARGES
MALE, ISSUE AGE 35, STANDARD NONSMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<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 (2) 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>
1 945 100,000 100,000 100,000 276 307 339 0 0 0
2 1,937 100,000 100,000 100,000 778 866 959 8 96 189
3 2,979 100,000 100,000 100,000 1,264 1,441 1,634 359 536 729
4 4,073 100,000 100,000 100,000 1,733 2,031 2,368 693 991 1,328
5 5,222 100,000 100,000 100,000 2,182 2,635 3,167 1,007 1,460 1,992
6 6,428 100,000 100,000 100,000 2,613 3,254 4,036 1,303 1,944 2,726
7 7,694 100,000 100,000 100,000 3,021 3,884 4,980 1,811 2,674 3,770
8 9,024 100,000 100,000 100,000 3,407 4,527 6,009 2,287 3,407 4,889
9 10,420 100,000 100,000 100,000 3,769 5,181 7,126 2,839 4,251 6,196
10 11,886 100,000 100,000 100,000 4,107 5,846 8,344 3,567 5,306 7,804
11 13,425 100,000 100,000 100,000 4,418 6,520 9,671 3,968 6,070 9,221
12 15,042 100,000 100,000 100,000 4,700 7,200 11,114 4,385 6,885 10,799
13 16,739 100,000 100,000 100,000 4,952 7,887 12,688 4,772 7,707 12,508
14 18,521 100,000 100,000 100,000 5,172 8,579 14,406 5,172 8,579 14,406
15 20,392 100,000 100,000 100,000 5,358 9,273 16,280 5,358 9,273 16,280
16 22,356 100,000 100,000 100,000 5,507 9,968 18,327 5,507 9,968 18,327
17 24,419 100,000 100,000 100,000 5,613 10,657 20,563 5,613 10,657 20,563
18 26,585 100,000 100,000 100,000 5,671 11,335 23,003 5,671 11,335 23,003
19 28,859 100,000 100,000 100,000 5,675 11,997 25,670 5,675 11,997 25,670
20 31,247 100,000 100,000 101,049 5,617 12,633 28,582 5,617 12,633 28,582
25 45,102 100,000 100,000 111,157 4,168 15,192 47,656 4,168 15,192 47,656
30 62,785 100,000 100,000 131,408 0 15,626 77,357 0 15,626 77,357
35 85,353 100,000 100,000 168,465 0 10,932 123,894 0 10,932 123,894
40 150,406 100,000 100,000 226,803 0 14,403 199,860 0 14,403 199,860
45 233,433 100,000 100,000 343,701 0 0 322,902 0 0 322,902
</TABLE>
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts thereafter. If
premiums are paid more frequently than annually, the above values shown would
be affected.
(2) Assumes payment of recalculated annual premium amounts of $7,184 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $7,184 at 6% and $0 at 12%, subject to any maximums required to
maintain the Policy's status for federal income tax purposes.
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.
71
<PAGE>
JHVLICO FLEX V-2
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
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<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 (2) 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>
1 945 100,000 100,000 100,000 323 356 390 0 0 0
2 1,937 100,000 100,000 100,000 873 967 1,066 303 397 496
3 2,979 100,000 100,000 100,000 1,406 1,596 1,803 701 891 1,098
4 4,073 100,000 100,000 100,000 1,920 2,243 2,606 1,080 1,403 1,766
5 5,222 100,000 100,000 100,000 2,415 2,906 3,481 1,740 2,231 2,806
6 6,428 100,000 100,000 100,000 2,891 3,587 4,434 2,081 2,777 3,624
7 7,694 100,000 100,000 100,000 3,343 4,282 5,472 2,533 3,472 4,662
8 9,024 100,000 100,000 100,000 3,774 4,994 6,604 3,054 4,274 5,884
9 10,420 100,000 100,000 100,000 4,179 5,719 7,837 3,549 5,089 7,207
10 11,886 100,000 100,000 100,000 4,571 6,473 9,202 4,031 5,933 8,662
11 13,425 100,000 100,000 100,000 4,982 7,292 10,747 4,532 6,842 10,297
12 15,042 100,000 100,000 100,000 5,369 8,131 12,441 5,054 7,816 12,126
13 16,739 100,000 100,000 100,000 5,729 8,991 14,303 5,549 8,811 14,123
14 18,521 100,000 100,000 100,000 6,063 9,872 16,350 6,063 9,872 16,350
15 20,392 100,000 100,000 100,000 6,367 10,773 18,602 6,367 10,773 18,602
16 22,356 100,000 100,000 100,000 6,641 11,694 21,083 6,641 11,694 21,083
17 24,419 100,000 100,000 100,000 6,875 12,628 23,811 6,875 12,628 23,811
18 26,585 100,000 100,000 100,000 7,064 13,569 26,813 7,064 13,569 26,813
19 28,859 100,000 100,000 100,000 7,201 14,515 30,119 7,201 14,515 30,119
20 31,247 100,000 100,000 100,000 7,281 15,460 33,762 7,281 15,460 33,762
25 45,102 100,000 100,000 113,707 6,602 20,007 58,518 6,602 20,007 58,518
30 62,785 100,000 100,000 165,800 3,204 23,538 97,415 3,204 23,538 97,415
35 85,353 100,000 100,000 236,943 0 23,973 156,542 0 23,973 156,542
40 142,504 100,000 100,000 335,122 16,227 35,006 244,829 16,227 35,006 244,829
45 215,445 100,000 100,000 472,183 31,005 50,394 373,977 31,005 50,394 373,977
</TABLE>
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts thereafter. If
premiums are paid more frequently than annually, the above values shown would
be affected.
(2) Assumes payment of recalculated annual premium amounts of $5,751 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $5,751 at 6% and $0 at 12%, subject to any maximums required to
maintain the Policy's status for federal income tax purposes.
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.
72
<PAGE>
JHVLICO FLEX V-2
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
(GUARANTEED DEATH BENEFIT): $100,000 $900 BASE POLICY PREMIUM (1)
<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 (2) 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>
1 945 100,000 100,000 100,000 276 307 339 0 0 0
2 1,937 100,000 100,000 100,000 778 866 959 8 96 189
3 2,979 100,000 100,000 100,000 1,264 1,441 1,634 359 536 729
4 4,073 100,000 100,000 100,000 1,733 2,031 2,368 693 991 1,328
5 5,222 100,000 100,000 100,000 2,182 2,635 3,167 1,007 1,460 1,992
6 6,428 100,000 100,000 100,000 2,613 3,254 4,036 1,303 1,944 2,726
7 7,694 100,000 100,000 100,000 3,021 3,884 4,980 1,811 2,674 3,770
8 9,024 100,000 100,000 100,000 3,407 4,527 6,009 2,287 3,407 4,889
9 10,420 100,000 100,000 100,000 3,769 5,181 7,126 2,839 4,251 6,196
10 11,886 100,000 100,000 100,000 4,107 5,846 8,344 3,567 5,306 7,804
11 13,425 100,000 100,000 100,000 4,418 6,520 9,671 3,968 6,070 9,221
12 15,042 100,000 100,000 100,000 4,700 7,200 11,114 4,385 6,885 10,799
13 16,739 100,000 100,000 100,000 4,952 7,887 12,688 4,772 7,707 12,508
14 18,521 100,000 100,000 100,000 5,172 8,579 14,406 5,172 8,579 14,406
15 20,392 100,000 100,000 100,000 5,358 9,273 16,280 5,358 9,273 16,280
16 22,356 100,000 100,000 100,000 5,507 9,968 18,327 5,507 9,968 18,327
17 24,419 100,000 100,000 100,000 5,613 10,657 20,563 5,613 10,657 20,563
18 26,585 100,000 100,000 100,000 5,671 11,335 23,003 5,671 11,335 23,003
19 28,859 100,000 100,000 100,000 5,675 11,997 25,670 5,675 11,997 25,670
20 31,247 100,000 100,000 100,000 5,617 12,633 28,584 5,617 12,633 28,584
25 45,102 100,000 100,000 100,000 4,168 15,192 47,965 4,168 15,192 47,965
30 62,785 100,000 100,000 133,466 0 15,626 78,417 0 15,626 78,417
35 85,353 100,000 100,000 186,862 0 10,932 123,455 0 10,932 123,455
40 150,406 100,000 100,000 257,599 6,442 23,377 188,193 6,442 23,377 188,193
45 233,433 100,000 100,000 352,995 11,276 39,390 279,578 11,276 39,390 279,578
</TABLE>
(1) Assumes annual premium payments of $900 per year until the premium
recalculation at age 70 and annual recalculated premium amounts thereafter. If
premiums are paid more frequently than annually, the above values shown would
be affected.
(2) Assumes payment of recalculated annual premium amounts of $7,184 after age
70. As indicated in note (3) below, the actual recalculated premium may be
lower or higher than this amount.
(3) Assumes payment of recalculated premiums after age 70 in annual amounts of
$8,404 at 0%, $7,184 at 6% and $0 at 12%, subject to any maximums required to
maintain the Policy's status for federal income tax purposes.
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.
73
<PAGE>
[THIS PAGE IS INTENTIONALLY LEFT BLANK.]
74
<PAGE>
FLEX-V1
REVISED ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES AND
ACCUMULATED PREMIUMS
The following tables on pages 76 TO 83 replace the illustration in the John
Hancock Life Insurance Company ("JOHN HANCOCK") Flex V-2 Product Prospectus.
The tables on pages 84 TO 91 replace the illustration in the John Hancock
Variable Life Insurance Company ("JHVLICO") Flex V-2 Product Prospectus.
The assumptions used for the revised illustration are generally the same as
those described in the Flex V-1 Product Prospectus. With respect to fees and
expenses deducted from Trust assets, however, the amounts shown in all tables
reflect (1) investment management fees equivalent to an effective annual rate of
.66%, and (2) an assumed average asset charge for all other Trust-level
operating expenses equivalent to an effective annual rate of .11%. These rates
are the arithmetic average for all funds that are available as investment
options. In other words, they are based on the hypothetical assumption that
policy account values are allocated equally among the variable investment
options.
Tables are provided for each of the three death benefit options. The amounts
shown are for the end of each policy year and assume that all of the account
value is invested in funds that achieve investment returns at constant annual
rates of 0%, 6% and 12% (i.e., before any fees or expenses deducted from Trust
assets). After deduction of the average Trust-level fees and expenses (as
described above) the corresponding net annual rates of return would be -.77%,
5.18% and 11.14%. Investment return reflects investment income and all realized
and unrealized capital gains and losses.
The actual rates associated with any policy will vary depending upon the
actual allocation of policy values among the investment options. The charge
shown above for all other Trust-level operating expenses reflects reimbursements
to certain funds as described in the footnotes to the Fund expense table. We
currently expect those reimbursement arrangements to continue indefinitely, but
that is not guaranteed.
The second column of each table shows the amount you would have at the end of
each policy year if an amount equal to the assumed Required Premiums were
invested to earn interest, after taxes, at 5% compounded annually. This is not a
policy value. It is included for comparison purposes only.
Because your circumstances will no doubt differ from those in the
illustrations that follow, values under your policy will differ, in most cases
substantially. Upon request, we will furnish you with a comparable illustration
reflecting your proposed insured person's issue age, sex and underwriting risk
classification, and the face amount and annual Required Premium amount
requested.
75
<PAGE>
PLAN: JOHN HANCOCK FLEX V-1 (SCHEDULED PREMIUM VARIABLE WHOLE LIFE) MALE, ISSUE
AGE 25, STANDARD NON-SMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT) $100,000 PREMIUM SCHEDULE--LEVEL $1,113 BASIC
PREMIUM (1) USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
----------------------------- ---------------------- -------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of Annual Investment Return of
Policy At 5% Interest ----------------------------- ---------------------- -------
Year Per Year(2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
------- -------------- -------- -------- --------- -------- -------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,169 100,000 100,000 100,000 364 414 464
2 2,396 100,000 100,000 100,000 1,010 1,154 1,304
3 3,684 100,000 100,000 100,000 1,651 1,934 2,240
4 5,037 100,000 100,000 100,000 2,285 2,753 3,280
5 6,458 100,000 100,000 100,000 2,910 3,613 4,438
6 7,949 100,000 100,000 100,000 3,558 4,551 5,763
7 9,515 100,000 100,000 100,000 4,265 5,604 7,304
8 11,160 100,000 100,000 100,000 5,022 6,766 9,067
9 12,886 100,000 100,000 100,000 5,834 8,042 11,075
10 14,699 100,000 100,000 100,000 6,630 9,366 13,276
11 16,603 100,000 100,000 100,000 7,408 10,735 15,687
12 18,602 100,000 100,000 100,000 8,168 12,153 18,331
13 20,700 100,000 100,000 100,000 8,773 13,485 21,099
14 22,904 100,000 100,000 100,000 9,356 14,865 24,148
15 25,218 100,000 100,000 100,000 9,914 16,294 27,510
16 27,647 100,000 100,000 101,910 10,446 17,775 31,214
17 30,198 100,000 100,000 111,532 10,950 19,305 35,269
18 32,877 100,000 100,000 121,644 11,424 20,888 39,706
19 35,689 100,000 100,000 132,291 11,867 22,524 44,559
20 38,643 100,000 100,000 143,502 12,278 24,217 49,864
25 55,776 100,000 100,000 209,494 13,796 33,601 84,720
30 77,644 100,000 100,000 296,548 14,137 44,736 138,496
35 105,553 100,000 108,035 412,423 12,573 57,650 220,077
40 141,173 100,000 119,415 567,541 7,999 72,006 342,222
45 186,634 100,000 129,968 774,964 0 87,344 520,809
50 244,655 100,000 139,909 1,053,024 0 103,284 777,369
55 318,706 100,000 149,431 1,426,430 0 118,974 1,135,692
</TABLE>
---------
(1) If premiums are paid more frequently than annually the payments would be
$556.50 semiannually, $278.25 quarterly, or $92.75 on a special monthly basis.
The death benefits and surrender values shown would be affected by the more
frequent premium payments.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
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 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.
76
<PAGE>
PLAN: JOHN HANCOCK FLEX V-1 (SCHEDULED PREMIUM VARIABLE WHOLE LIFE) MALE, ISSUE
AGE 25, STANDARD NON-SMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT) $100,000 PREMIUM SCHEDULE AT ISSUE--MODIFIED $708
INITIAL BASIC PREMIUM AT ISSUE (1) USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
----------------------------- ---------------------- -------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of Annual Investment Return of
Policy At 5% Interest ----------------------------- ---------------------- -------
Year Per Year(2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
------- -------------- -------- -------- --------- -------- -------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 743 100,000 100,000 100,000 0 22 50
2 1,524 100,000 100,000 100,000 275 351 431
3 2,344 100,000 100,000 100,000 554 700 859
4 3,204 100,000 100,000 100,000 831 1,068 1,338
5 4,108 100,000 100,000 100,000 1,103 1,456 1,874
6 5,057 100,000 100,000 100,000 1,403 1,901 2,511
7 6,053 100,000 100,000 100,000 1,765 2,436 3,290
8 7,099 100,000 100,000 100,000 2,182 3,055 4,211
9 8,197 100,000 100,000 100,000 2,657 3,763 5,286
10 9,350 100,000 100,000 100,000 3,121 4,490 6,452
11 10,561 100,000 100,000 100,000 3,568 5,234 7,718
12 11,833 100,000 100,000 100,000 4,003 5,996 9,094
13 13,168 100,000 100,000 100,000 4,285 6,640 10,455
14 14,570 100,000 100,000 100,000 4,547 7,298 11,946
15 16,042 100,000 100,000 100,000 4,787 7,969 13,578
16 17,587 100,000 100,000 100,000 5,005 8,652 15,366
17 19,210 100,000 100,000 100,000 5,195 9,343 17,325
18 20,914 100,000 100,000 100,000 5,357 10,043 19,471
19 22,703 100,000 100,000 100,000 5,490 10,750 21,826
20 24,581 100,000 100,000 100,000 5,591 11,462 24,411
25 35,480 100,000 100,000 103,312 5,560 15,062 41,779
30 49,391 100,000 100,000 147,727 4,296 18,440 68,993
35 67,144 100,000 100,000 206,682 932 20,803 110,289
40 89,803 100,000 100,000 285,469 0 20,877 172,135
45 118,721 100,000 100,000 390,718 0 15,451 262,579
50 181,776 100,000 100,000 528,397 12,596 24,214 390,076
55 281,934 100,000 100,000 711,379 26,721 48,846 566,384
</TABLE>
---------
(1) If premiums are paid more frequently than annually the payments would be
$354.00 semiannually, $177.00 quarterly, or $59.00 on a special monthly basis.
The death benefits and surrender values shown would be affected by the more
frequent premium payments. The basic premium (annual) after a recalculation at
age 72 will be as follows: $9,973.00 for a hypothetical gross investment
return of 0%, $8,658 for a gross return of 6%, and $0 for a gross return of
12%.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
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 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.
77
<PAGE>
PLAN: JOHN HANCOCK FLEX V-1 (SCHEDULED PREMIUM VARIABLE WHOLE LIFE) MALE, ISSUE
AGE 40, PREFERRED UNDERWRITING RISK SUM INSURED AT ISSUE (GUARANTEED DEATH
BENEFIT) $100,000 PREMIUM SCHEDULE AT ISSUE--MODIFIED $1,305 INITIAL BASIC
PREMIUM AT ISSUE (1) USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
----------------------------- ---------------------- -------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of Annual Investment Return of
Policy At 5% Interest ----------------------------- ---------------------- -------
Year Per Year(2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
------- -------------- -------- -------- --------- -------- -------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,370 100,000 100,000 100,000 460 521 583
2 2,809 100,000 100,000 100,000 1,184 1,360 1,544
3 4,320 100,000 100,000 100,000 1,884 2,232 2,608
4 5,906 100,000 100,000 100,000 2,561 3,136 3,785
5 7,571 100,000 100,000 100,000 3,216 4,079 5,091
6 9,320 100,000 100,000 100,000 3,901 5,115 6,597
7 11,157 100,000 100,000 100,000 4,693 6,323 8,396
8 13,085 100,000 100,000 100,000 5,569 7,682 10,479
9 15,109 100,000 100,000 100,000 6,541 9,206 12,880
10 17,235 100,000 100,000 100,000 7,469 10,756 15,478
11 19,467 100,000 100,000 100,000 8,352 12,331 18,294
12 21,810 100,000 100,000 100,000 9,204 13,949 21,368
13 24,271 100,000 100,000 100,000 9,766 15,352 24,470
14 26,855 100,000 100,000 100,000 10,286 16,789 27,880
15 29,568 100,000 100,000 100,000 10,752 18,254 31,627
16 32,417 100,000 100,000 100,000 11,167 19,748 35,750
17 35,408 100,000 100,000 100,000 11,518 21,265 40,289
18 38,548 100,000 100,000 100,000 11,807 22,806 45,297
19 41,846 100,000 100,000 100,000 12,021 24,366 50,826
20 45,309 100,000 100,000 106,634 12,163 25,947 56,902
25 65,398 100,000 100,000 160,357 11,563 34,136 96,694
30 91,038 100,000 100,000 233,694 7,048 41,974 157,052
35 133,056 100,000 100,000 330,155 20,358 58,314 243,729
40 193,680 100,000 108,193 464,660 45,514 86,141 369,952
</TABLE>
---------
(1) If premiums are paid more frequently than annually the payments would be
$652.50 semiannually, $326.25 quarterly, or $108.75 on a special monthly
basis. The death benefits and surrender values shown would be affected by the
more frequent premium payments. The basic premium (annual) after a
recalculation at age 72 will be as follows: $9,488 for a hypothetical gross
investment return of 0%, $4,148 for a gross return of 6%, and $0 for a gross
return of 12%.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
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 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.
78
<PAGE>
PLAN: JOHN HANCOCK FLEX V-1 (SCHEDULED PREMIUM VARIABLE WHOLE LIFE) MALE, ISSUE
AGE 40, PREFERRED UNDERWRITING RISK SUM INSURED AT ISSUE (GUARANTEED DEATH
BENEFIT) $100,000 PREMIUM SCHEDULE--LEVEL $1,954 BASIC PREMIUM (1) USING
CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
----------------------------- ---------------------- -------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of Annual Investment Return of
Policy At 5% Interest ----------------------------- ---------------------- -------
Year Per Year(2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
------- -------------- -------- -------- --------- -------- -------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,052 100,000 100,000 100,000 1,053 1,150 1,247
2 4,206 100,000 100,000 100,000 2,363 2,647 2,944
3 6,468 100,000 100,000 100,000 3,643 4,209 4,822
4 8,843 100,000 100,000 100,000 4,893 5,837 6,900
5 11,337 100,000 100,000 100,000 6,114 7,537 9,205
6 13,955 100,000 100,000 100,000 7,360 9,369 11,818
7 16,705 100,000 100,000 100,000 8,707 11,412 14,843
8 19,592 100,000 100,000 100,000 10,133 13,647 18,287
9 22,623 100,000 100,000 100,000 11,652 16,093 22,198
10 25,806 100,000 100,000 100,000 13,122 18,611 26,474
11 29,148 100,000 100,000 100,000 14,544 21,208 31,156
12 32,657 100,000 100,000 100,000 15,932 23,899 36,304
13 36,342 100,000 100,000 100,000 17,028 26,434 41,713
14 40,211 100,000 100,000 104,978 18,080 29,066 47,676
15 44,273 100,000 100,000 116,060 19,079 31,793 54,203
16 48,538 100,000 100,000 127,793 20,026 34,624 61,348
17 53,017 100,000 100,000 140,217 20,913 37,557 69,158
18 57,719 100,000 100,000 153,386 21,740 40,602 77,695
19 62,657 100,000 100,000 167,337 22,499 43,762 87,019
20 67,841 100,000 100,000 182,157 23,191 47,048 97,202
25 97,922 100,000 108,623 271,781 25,501 65,499 163,881
30 136,313 100,000 128,684 394,313 24,582 86,481 264,995
35 185,310 100,000 149,287 566,051 19,076 110,208 417,873
40 247,845 100,000 171,543 811,796 4,562 136,579 646,334
</TABLE>
---------
(1) If premiums are paid more frequently than annually the payments would be
$977.00 semiannually, $488.50 quarterly, or $162.83 on a special monthly
basis. The death benefits and surrender values shown would be affected by the
more frequent premium payments.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
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 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.
79
<PAGE>
PLAN: JOHN HANCOCK FLEX V-1 (SCHEDULED PREMIUM VARIABLE WHOLE LIFE) MALE, ISSUE
AGE 25, STANDARD NON-SMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT) $100,000 PREMIUM SCHEDULE--LEVEL $1,113 BASIC
PREMIUM (1) USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
----------------------------- ---------------------- -------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of Annual Investment Return of
Policy At 5% Interest ----------------------------- ---------------------- -------
Year Per Year(2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
------- -------------- -------- -------- --------- -------- -------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,169 100,000 100,000 100,000 340 389 439
2 2,396 100,000 100,000 100,000 963 1,104 1,251
3 3,684 100,000 100,000 100,000 1,581 1,856 2,156
4 5,037 100,000 100,000 100,000 2,192 2,647 3,161
5 6,458 100,000 100,000 100,000 2,793 3,477 4,281
6 7,949 100,000 100,000 100,000 3,420 4,385 5,564
7 9,515 100,000 100,000 100,000 4,104 5,405 7,058
8 11,160 100,000 100,000 100,000 4,839 6,533 8,770
9 12,886 100,000 100,000 100,000 5,629 7,774 10,721
10 14,699 100,000 100,000 100,000 6,404 9,060 12,859
11 16,603 100,000 100,000 100,000 7,160 10,389 15,199
12 18,602 100,000 100,000 100,000 7,898 11,765 17,765
13 20,700 100,000 100,000 100,000 8,480 13,051 20,443
14 22,904 100,000 100,000 100,000 9,038 14,383 23,394
15 25,218 100,000 100,000 100,000 9,573 15,761 26,647
16 27,647 100,000 100,000 100,000 10,080 17,185 30,231
17 30,198 100,000 100,000 108,029 10,558 18,657 34,162
18 32,877 100,000 100,000 117,831 11,007 20,179 38,462
19 35,689 100,000 100,000 128,146 11,424 21,750 43,163
20 38,643 100,000 100,000 139,011 11,810 23,374 48,303
25 55,776 100,000 100,000 202,893 13,191 32,348 82,050
30 77,644 100,000 100,000 287,031 13,370 42,919 134,052
35 105,553 100,000 103,540 398,833 11,597 55,251 212,824
40 141,173 100,000 114,434 548,172 6,710 69,002 330,543
45 186,634 100,000 124,620 748,276 0 83,750 502,874
50 244,655 100,000 134,261 1,016,841 0 99,115 750,658
55 318,706 100,000 143,495 1,377,491 0 114,247 1,096,728
</TABLE>
---------
(1) If premiums are paid more frequently than annually the payments would be
$556.50 semiannually, $278.25 quarterly, or $92.75 on a special monthly basis.
The death benefits and surrender values shown would be affected by the more
frequent premium payments.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
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 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.
80
<PAGE>
PLAN: JOHN HANCOCK FLEX V-1 (SCHEDULED PREMIUM VARIABLE WHOLE LIFE) MALE, ISSUE
AGE 25, STANDARD NON-SMOKER UNDERWRITING RISK SUM INSURED AT ISSUE
(GUARANTEED DEATH BENEFIT) $100,000 PREMIUM SCHEDULE AT ISSUE--MODIFIED $708
INITIAL BASIC PREMIUM AT ISSUE (1) USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
----------------------------- ---------------------- -------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of Annual Investment Return of
Policy At 5% Interest ----------------------------- ---------------------- -------
Year Per Year(2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
------- -------------- -------- -------- --------- -------- -------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 743 100,000 100,000 100,000 0 0 24
2 1,524 100,000 100,000 100,000 227 301 378
3 2,344 100,000 100,000 100,000 484 623 775
4 3,204 100,000 100,000 100,000 738 963 1,219
5 4,108 100,000 100,000 100,000 987 1,321 1,717
6 5,057 100,000 100,000 100,000 1,264 1,734 2,312
7 6,053 100,000 100,000 100,000 1,604 2,237 3,044
8 7,099 100,000 100,000 100,000 1,999 2,822 3,914
9 8,197 100,000 100,000 100,000 2,453 3,494 4,931
10 9,350 100,000 100,000 100,000 2,894 4,184 6,035
11 10,561 100,000 100,000 100,000 3,321 4,889 7,230
12 11,833 100,000 100,000 100,000 3,733 5,609 8,528
13 13,168 100,000 100,000 100,000 3,991 6,206 9,799
14 14,570 100,000 100,000 100,000 4,230 6,815 11,191
15 16,042 100,000 100,000 100,000 4,446 7,434 12,713
16 17,587 100,000 100,000 100,000 4,637 8,061 14,377
17 19,210 100,000 100,000 100,000 4,802 8,693 16,197
18 20,914 100,000 100,000 100,000 4,939 9,331 18,191
19 22,703 100,000 100,000 100,000 5,045 9,971 20,375
20 24,581 100,000 100,000 100,000 5,121 10,615 22,771
25 35,480 100,000 100,000 100,000 4,950 13,794 38,823
30 49,391 100,000 100,000 137,384 3,518 16,586 64,162
35 67,144 100,000 100,000 192,206 0 18,095 102,564
40 89,803 100,000 100,000 265,292 0 16,840 159,969
45 118,721 100,000 100,000 363,109 0 9,339 244,025
50 184,937 100,000 100,000 490,744 12,519 17,531 362,279
55 291,510 100,000 100,000 660,458 26,469 42,807 525,842
</TABLE>
---------
(1) If premiums are paid more frequently than annually the payments would be
$354.00 semiannually, $177.00 quarterly, or $59.00 on a special monthly basis.
The death benefits and surrender values shown would be affected by the more
frequent premium payments. The basic premium (annual) after a recalculation at
age 72 will be as follows: $9,973 for a hypothetical gross investment return
of 0%, $9,608 for a gross return of 6%, and $0 for a gross return of 12%.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
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 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.
81
<PAGE>
PLAN: JOHN HANCOCK FLEX V-1 (SCHEDULED PREMIUM VARIABLE WHOLE LIFE) MALE, ISSUE
AGE 40, PREFERRED UNDERWRITING RISK SUM INSURED AT ISSUE (GUARANTEED DEATH
BENEFIT) $100,000 PREMIUM SCHEDULE--LEVEL $1,954 BASIC PREMIUM (1) USING
MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
----------------------------- ---------------------- -------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of Annual Investment Return of
Policy At 5% Interest ----------------------------- ---------------------- -------
Year Per Year(2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
------- -------------- -------- -------- --------- -------- -------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,052 100,000 100,000 100,000 896 988 1,080
2 4,206 100,000 100,000 100,000 2,040 2,305 2,582
3 6,468 100,000 100,000 100,000 3,145 3,667 4,232
4 8,843 100,000 100,000 100,000 4,209 5,071 6,045
5 11,337 100,000 100,000 100,000 5,231 6,523 8,043
6 13,955 100,000 100,000 100,000 6,273 8,090 10,312
7 16,705 100,000 100,000 100,000 7,402 9,838 12,941
8 19,592 100,000 100,000 100,000 8,602 11,756 15,941
9 22,623 100,000 100,000 100,000 9,887 13,860 19,354
10 25,806 100,000 100,000 100,000 11,122 16,019 23,081
11 29,148 100,000 100,000 100,000 12,306 18,235 27,157
12 32,657 100,000 100,000 100,000 13,432 20,507 31,618
13 36,342 100,000 100,000 100,000 14,249 22,585 36,261
14 40,211 100,000 100,000 100,000 14,997 24,716 41,383
15 44,273 100,000 100,000 100,709 15,670 26,900 47,034
16 48,538 100,000 100,000 110,814 16,265 29,138 53,197
17 53,017 100,000 100,000 121,436 16,775 31,431 59,895
18 57,719 100,000 100,000 132,615 17,199 33,786 67,174
19 62,657 100,000 100,000 144,381 17,532 36,206 75,081
20 67,841 100,000 100,000 156,791 17,768 38,695 83,667
25 97,922 100,000 100,000 229,885 17,034 52,259 138,619
30 136,313 100,000 101,534 326,360 11,354 68,236 219,328
35 185,310 100,000 116,276 454,680 0 85,838 335,656
40 247,845 100,000 130,272 626,113 0 103,720 498,498
</TABLE>
---------
(1) If premiums are paid more frequently than annually the payments would be
$977.00 semiannually, $488.50 quarterly, or $162.83 on a special monthly
basis. The death benefits and surrender values shown would be affected by the
more frequent premium payments.
(2) The premium accumulated at 5% interest in Column 2 are those payable is the
gross investment return is 6%.
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 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.
82
<PAGE>
PLAN: JOHN HANCOCK FLEX V-1 (SCHEDULED PREMIUM VARIABLE WHOLE LIFE) MALE, ISSUE
AGE 40, PREFERRED UNDERWRITING RISK SUM INSURED AT ISSUE (GUARANTEED DEATH
BENEFIT) $100,000 PREMIUM SCHEDULE AT ISSUE--MODIFIED $1,305 INITIAL BASIC
PREMIUM AT ISSUE (1) USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
----------------------------- ---------------------- -------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of Annual Investment Return of
Policy At 5% Interest ----------------------------- ---------------------- -------
Year Per Year(2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
------- -------------- -------- -------- --------- -------- -------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,370 100,000 100,000 100,000 302 358 415
2 2,809 100,000 100,000 100,000 859 1,015 1,179
3 4,320 100,000 100,000 100,000 1,381 1,683 2,012
4 5,906 100,000 100,000 100,000 1,868 2,359 2,916
5 7,571 100,000 100,000 100,000 2,318 3,046 3,906
6 9,320 100,000 100,000 100,000 2,792 3,807 5,055
7 11,157 100,000 100,000 100,000 3,357 4,708 6,439
8 13,085 100,000 100,000 100,000 3,996 5,733 8,053
9 15,109 100,000 100,000 100,000 4,721 6,895 9,923
10 17,235 100,000 100,000 100,000 5,400 8,060 11,930
11 19,467 100,000 100,000 100,000 6,028 9,226 14,088
12 21,810 100,000 100,000 100,000 6,598 10,386 16,407
13 24,271 100,000 100,000 100,000 6,858 11,286 18,654
14 26,855 100,000 100,000 100,000 7,046 12,167 21,092
15 29,568 100,000 100,000 100,000 7,155 13,019 23,740
16 32,417 100,000 100,000 100,000 7,179 13,838 26,620
17 35,408 100,000 100,000 100,000 7,110 14,615 29,761
18 38,548 100,000 100,000 100,000 6,947 15,347 33,195
19 41,846 100,000 100,000 100,000 6,681 16,026 36,961
20 45,309 100,000 100,000 100,000 6,304 16,643 41,102
25 65,398 100,000 100,000 114,493 2,168 18,212 69,038
30 91,038 100,000 100,000 164,967 0 14,843 110,865
35 147,723 100,000 100,000 225,382 12,519 24,566 166,382
40 238,108 100,000 100,000 302,880 26,469 48,896 241,146
</TABLE>
---------
(1) If premiums are paid more frequently than annually the payments would be
$652.50 semiannually, $326.25 quarterly, or $108.75 on a special monthly
basis. The death benefits and surrender values shown would be affected by the
more frequent premium payments. The basic premium (annual) after a
recalculation at age 72 will be as follows: $9,973 for a hypothetical gross
investment return of 0%, $8,568 for a gross return of 6%, and $0 for a gross
return of 12%.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
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 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.
83
<PAGE>
PLAN: JHVLICO FLEX V-1 (SCHEDULED PREMIUM VARIABLE WHOLE LIFE) MALE, ISSUE AGE
25, STANDARD NON-SMOKER UNDERWRITING RISK SUM INSURED AT ISSUE (GUARANTEED
DEATH BENEFIT) $100,000 PREMIUM SCHEDULE--LEVEL $1,113 BASIC PREMIUM (1)
USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
----------------------------- ---------------------- -------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest ----------------------------- ---------------------- -------
Year Per Year (2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
------- -------------- -------- -------- --------- -------- -------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,169 100,000 100,000 100,000 369 420 471
2 2,396 100,000 100,000 100,000 1,021 1,166 1,317
3 3,684 100,000 100,000 100,000 1,668 1,952 2,261
4 5,037 100,000 100,000 100,000 2,307 2,778 3,309
5 6,458 100,000 100,000 100,000 2,936 3,644 4,476
6 7,949 100,000 100,000 100,000 3,555 4,555 5,776
7 9,515 100,000 100,000 100,000 4,160 5,509 7,221
8 11,160 100,000 100,000 100,000 4,788 6,545 8,863
9 12,886 100,000 100,000 100,000 5,399 7,624 10,680
10 14,699 100,000 100,000 100,000 6,066 8,822 12,761
11 16,603 100,000 100,000 100,000 6,834 10,186 15,175
12 18,602 100,000 100,000 100,000 7,656 11,670 17,895
13 20,700 100,000 100,000 100,000 8,457 13,204 20,874
14 22,904 100,000 100,000 100,000 9,236 14,786 24,138
15 25,218 100,000 100,000 100,000 9,989 16,418 27,716
16 27,647 100,000 100,000 102,672 10,527 17,910 31,447
17 30,198 100,000 100,000 112,361 11,035 19,452 35,531
18 32,877 100,000 100,000 122,543 11,514 21,048 40,000
19 35,689 100,000 100,000 133,264 11,962 22,699 44,887
20 38,643 100,000 100,000 144,553 12,377 24,405 50,229
25 55,776 100,000 100,000 211,006 13,917 33,876 85,331
30 77,644 100,000 100,000 298,669 14,282 45,126 139,487
35 105,553 100,000 108,958 415,358 12,746 58,142 221,643
40 141,173 100,000 120,412 571,567 8,204 72,607 344,650
45 186,634 100,000 131,034 780,450 0 88,061 524,496
50 244,655 100,000 141,040 1,060,468 0 104,119 782,865
55 318,706 100,000 150,626 1,436,505 0 119,925 1,143,714
</TABLE>
---------
(1) If premiums are paid more frequently than annually the payments would be
$556.50 semiannually, $278.25 quarterly, or $92.75 on a special monthly basis.
The death benefits and surrender values shown would be affected by the more
frequent premium payments.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
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 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.
84
<PAGE>
PLAN: JHVLICO FLEX V-1 (SCHEDULED PREMIUM VARIABLE WHOLE LIFE) MALE, ISSUE AGE
25, STANDARD NON-SMOKER UNDERWRITING RISK SUM INSURED AT ISSUE (GUARANTEED
DEATH BENEFIT) $100,000 PREMIUM SCHEDULE AT ISSUE--MODIFIED $708 INITIAL
BASIC PREMIUM AT ISSUE (1) USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
----------------------------- ---------------------- -------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest ----------------------------- ---------------------- -------
Year Per Year (2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
------- -------------- -------- -------- --------- -------- -------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 743 100,000 100,000 100,000 0 25 54
2 1,524 100,000 100,000 100,000 281 358 439
3 2,344 100,000 100,000 100,000 565 712 872
4 3,204 100,000 100,000 100,000 845 1,084 1,356
5 4,108 100,000 100,000 100,000 1,120 1,477 1,898
6 5,057 100,000 100,000 100,000 1,388 1,890 2,506
7 6,053 100,000 100,000 100,000 1,647 2,324 3,186
8 7,099 100,000 100,000 100,000 1,933 2,814 3,980
9 8,197 100,000 100,000 100,000 2,206 3,322 4,859
10 9,350 100,000 100,000 100,000 2,538 3,920 5,901
11 10,561 100,000 100,000 100,000 2,975 4,655 7,163
12 11,833 100,000 100,000 100,000 3,468 5,481 8,608
13 13,168 100,000 100,000 100,000 3,945 6,322 10,173
14 14,570 100,000 100,000 100,000 4,402 7,178 11,870
15 16,042 100,000 100,000 100,000 4,836 8,047 13,709
16 17,587 100,000 100,000 100,000 5,056 8,737 15,516
17 19,210 100,000 100,000 100,000 5,249 9,437 17,494
18 20,914 100,000 100,000 100,000 5,414 10,145 19,663
19 22,703 100,000 100,000 100,000 5,550 10,861 22,042
20 24,581 100,000 100,000 100,000 5,654 11,582 24,655
25 35,480 100,000 100,000 104,379 5,638 15,237 42,211
30 49,391 100,000 100,000 149,219 4,389 18,688 69,689
35 67,144 100,000 100,000 208,742 1,041 21,153 111,389
40 89,803 100,000 100,000 288,291 0 21,380 173,837
45 118,721 100,000 100,000 394,560 0 16,207 265,161
50 181,385 100,000 100,000 533,590 12,758 25,187 393,910
55 280,751 100,000 100,000 718,377 27,259 50,163 571,956
</TABLE>
---------
(1) If premiums are paid more frequently than annually the payments would be
$354.00 semiannually, $177.00 quarterly, or $59.00 on a special monthly basis.
The death benefits and surrender values shown would be affected by the more
frequent premium payments. The basic premium (annual) after a recalculation at
age 72 will be as follows: $9,973 for a hypothetical gross investment return
of 0%, $8,541 for a gross return of 6%, and $0 for a gross return of 12%.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
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 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.
85
<PAGE>
PLAN: JHVLICO FLEX V-1 (SCHEDULED PREMIUM VARIABLE WHOLE LIFE) MALE, ISSUE AGE
40, PREFERRED UNDERWRITING RISK SUM INSURED AT ISSUE (GUARANTEED DEATH
BENEFIT) $100,000 PREMIUM SCHEDULE--LEVEL $1,954 BASIC PREMIUM (1) USING
CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
----------------------------- ---------------------- -------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest ----------------------------- ---------------------- -------
Year Per Year (2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
------- -------------- -------- -------- --------- -------- -------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,052 100,000 100,000 100,000 1,063 1,160 1,258
2 4,206 100,000 100,000 100,000 2,382 2,668 2,967
3 6,468 100,000 100,000 100,000 3,671 4,241 4,858
4 8,843 100,000 100,000 100,000 4,931 5,880 6,950
5 11,337 100,000 100,000 100,000 6,161 7,594 9,272
6 13,955 100,000 100,000 100,000 7,351 9,373 11,837
7 16,705 100,000 100,000 100,000 8,512 11,234 14,686
8 19,592 100,000 100,000 100,000 9,699 13,235 17,905
9 22,623 100,000 100,000 100,000 10,847 15,317 21,462
10 25,806 100,000 100,000 100,000 12,078 17,603 25,517
11 29,148 100,000 100,000 100,000 13,483 20,190 30,204
12 32,657 100,000 100,000 100,000 14,985 23,004 35,489
13 36,342 100,000 100,000 100,000 16,442 25,910 41,289
14 40,211 100,000 100,000 105,680 17,855 28,913 47,643
15 44,273 100,000 100,000 116,832 19,215 32,013 54,564
16 48,538 100,000 100,000 128,639 20,170 34,865 61,754
17 53,017 100,000 100,000 141,142 21,066 37,822 69,614
18 57,719 100,000 100,000 154,394 21,902 40,891 78,206
19 62,657 100,000 100,000 168,434 22,669 44,077 87,589
20 67,841 100,000 100,000 183,347 23,370 47,391 97,837
25 97,922 100,000 109,419 273,541 25,728 65,979 164,942
30 136,313 100,000 129,603 396,852 24,867 87,099 266,702
35 185,310 100,000 150,335 569,684 19,441 110,981 420,555
40 247,845 100,000 172,732 816,995 5,057 137,525 650,474
</TABLE>
---------
(1) If premiums are paid more frequently than annually the payments would be
$977.00 semiannually, $488.50 quarterly, or $162.83 on a special monthly
basis. The death benefits and surrender values shown would be affected by the
more frequent premium payments.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
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 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.
86
<PAGE>
PLAN: JHVLICO FLEX V-1 (SCHEDULED PREMIUM VARIABLE WHOLE LIFE) MALE, ISSUE AGE
40, PREFERRED UNDERWRITING RISK SUM INSURED AT ISSUE (GUARANTEED DEATH
BENEFIT) $100,000 PREMIUM SCHEDULE AT ISSUE--MODIFIED $1,305 INITIAL BASIC
PREMIUM AT ISSUE (1) USING CURRENT CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
----------------------------- ---------------------- -------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest ----------------------------- ---------------------- -------
Year Per Year (2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
------- -------------- -------- -------- --------- -------- -------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,370 100,000 100,000 100,000 466 528 590
2 2,809 100,000 100,000 100,000 1,196 1,374 1,560
3 4,320 100,000 100,000 100,000 1,903 2,253 2,632
4 5,906 100,000 100,000 100,000 2,587 3,165 3,819
5 7,571 100,000 100,000 100,000 3,248 4,116 5,136
6 9,320 100,000 100,000 100,000 3,873 5,095 6,589
7 11,157 100,000 100,000 100,000 4,476 6,118 8,205
8 13,085 100,000 100,000 100,000 5,109 7,238 10,055
9 15,109 100,000 100,000 100,000 5,709 8,394 12,094
10 17,235 100,000 100,000 100,000 6,395 9,705 14,462
11 19,467 100,000 100,000 100,000 7,258 11,266 17,272
12 21,810 100,000 100,000 100,000 8,220 13,000 20,473
13 24,271 100,000 100,000 100,000 9,140 14,767 23,952
14 26,855 100,000 100,000 100,000 10,018 16,570 27,743
15 29,568 100,000 100,000 100,000 10,843 18,401 31,873
16 32,417 100,000 100,000 100,000 11,263 19,909 36,031
17 35,408 100,000 100,000 100,000 11,620 21,442 40,609
18 38,548 100,000 100,000 100,000 11,914 22,999 45,660
19 41,846 100,000 100,000 100,000 12,135 24,576 51,237
20 45,309 100,000 100,000 107,491 12,282 26,176 57,359
25 65,398 100,000 100,000 161,618 11,714 34,479 97,454
30 91,038 100,000 100,000 235,509 7,238 42,490 158,272
35 132,791 100,000 100,000 332,717 20,650 58,901 245,620
40 192,878 100,000 108,820 468,270 45,991 86,640 372,826
</TABLE>
---------
(1) If premiums are paid more frequently than annually the payments would be
$652.50 semiannually, $326.25 quarterly, or $108.75 on a special monthly
basis. The death benefits and surrender values shown would be affected by the
more frequent premium payments. The basic premium (annual) after a
recalculation at age 72 will be as follows: $9,461 for a hypothetical gross
investment return of 0%, $4,068 for a gross return of 6%, and $0 for a gross
return of 12%.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
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 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.
87
<PAGE>
PLAN: JHVLICO FLEX V-1 (SCHEDULED PREMIUM VARIABLE WHOLE LIFE) MALE, ISSUE AGE
25, STANDARD NON-SMOKER UNDERWRITING RISK SUM INSURED AT ISSUE (GUARANTEED
DEATH BENEFIT) $100,000 PREMIUM SCHEDULE--LEVEL $1,113 BASIC PREMIUM (1)
USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
----------------------------- ---------------------- -------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest ----------------------------- ---------------------- -------
Year Per Year (2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
------- -------------- -------- -------- --------- -------- -------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,169 100,000 100,000 100,000 345 395 445
2 2,396 100,000 100,000 100,000 974 1,116 1,264
3 3,684 100,000 100,000 100,000 1,597 1,874 2,176
4 5,037 100,000 100,000 100,000 2,213 2,672 3,190
5 6,458 100,000 100,000 100,000 2,820 3,509 4,319
6 7,949 100,000 100,000 100,000 3,416 4,389 5,577
7 9,515 100,000 100,000 100,000 3,999 5,311 6,976
8 11,160 100,000 100,000 100,000 4,605 6,312 8,566
9 12,886 100,000 100,000 100,000 5,195 7,356 10,326
10 14,699 100,000 100,000 100,000 5,840 8,516 12,344
11 16,603 100,000 100,000 100,000 6,587 9,841 14,687
12 18,602 100,000 100,000 100,000 7,387 11,283 17,329
13 20,700 100,000 100,000 100,000 8,164 12,770 20,219
14 22,904 100,000 100,000 100,000 8,919 14,303 23,384
15 25,218 100,000 100,000 100,000 9,649 15,884 26,853
16 27,647 100,000 100,000 100,000 10,160 17,321 30,465
17 30,198 100,000 100,000 108,860 10,643 18,805 34,424
18 32,877 100,000 100,000 118,733 11,097 20,339 38,756
19 35,689 100,000 100,000 129,122 11,519 21,924 43,491
20 38,643 100,000 100,000 140,065 11,909 23,563 48,669
25 55,776 100,000 100,000 204,407 13,313 32,623 82,662
30 77,644 100,000 100,000 289,154 13,516 43,309 135,043
35 105,553 100,000 104,501 401,767 11,770 55,764 214,390
40 141,173 100,000 115,469 552,192 6,916 69,627 332,967
45 186,634 100,000 125,725 753,751 0 84,493 506,553
50 244,655 100,000 135,433 1,024,271 0 99,980 756,143
55 318,706 100,000 144,730 1,387,546 0 115,231 1,104,734
</TABLE>
---------
(1) If premiums are paid more frequently than annually the payments would be
$556.50 semiannually, $278.25 quarterly, or $92.75 on a special monthly basis.
The death benefits and surrender values shown would be affected by the more
frequent premium payments.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
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 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.
88
<PAGE>
PLAN: JHVLICO FLEX V-1 (SCHEDULED PREMIUM VARIABLE WHOLE LIFE) MALE, ISSUE AGE
25, STANDARD NON-SMOKER UNDERWRITING RISK SUM INSURED AT ISSUE (GUARANTEED
DEATH BENEFIT) $100,000 PREMIUM SCHEDULE AT ISSUE--MODIFIED $708 INITIAL
BASIC PREMIUM AT ISSUE (1) USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
----------------------------- ---------------------- -------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest ----------------------------- ---------------------- -------
Year Per Year (2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
------- -------------- -------- -------- --------- -------- -------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 743 100,000 100,000 100,000 0 1 28
2 1,524 100,000 100,000 100,000 234 308 386
3 2,344 100,000 100,000 100,000 494 634 788
4 3,204 100,000 100,000 100,000 751 979 1,237
5 4,108 100,000 100,000 100,000 1,004 1,341 1,741
6 5,057 100,000 100,000 100,000 1,249 1,724 2,307
7 6,053 100,000 100,000 100,000 1,486 2,125 2,941
8 7,099 100,000 100,000 100,000 1,750 2,581 3,683
9 8,197 100,000 100,000 100,000 2,001 3,053 4,504
10 9,350 100,000 100,000 100,000 2,312 3,614 5,483
11 10,561 100,000 100,000 100,000 2,727 4,310 6,675
12 11,833 100,000 100,000 100,000 3,199 5,093 8,041
13 13,168 100,000 100,000 100,000 3,651 5,888 9,517
14 14,570 100,000 100,000 100,000 4,084 6,695 11,115
15 16,042 100,000 100,000 100,000 4,494 7,513 12,844
16 17,587 100,000 100,000 100,000 4,689 8,147 14,526
17 19,210 100,000 100,000 100,000 4,856 8,787 16,367
18 20,914 100,000 100,000 100,000 4,996 9,433 18,383
19 22,703 100,000 100,000 100,000 5,105 10,082 20,591
20 24,581 100,000 100,000 100,000 5,184 10,735 23,015
25 35,480 100,000 100,000 100,000 5,028 13,969 39,260
30 49,391 100,000 100,000 138,898 3,611 16,834 64,869
35 67,144 100,000 100,000 194,294 41 18,446 103,679
40 89,803 100,000 100,000 268,148 0 17,345 161,691
45 118,721 100,000 100,000 366,995 0 10,098 246,637
50 184,543 100,000 100,000 495,997 12,681 18,526 366,158
55 290,317 100,000 100,000 667,537 27,007 44,196 531,478
</TABLE>
---------
(1) If premiums are paid more frequently than annually the payments would be
$354.00 semiannually, $177.00 quarterly, or $59.00 on a special monthly basis.
The death benefits and surrender values shown would be affected by the more
frequent premium payments. The basic premium (annual) after a recalculation at
age 72 will be as follows: $9,973 for a hypothetical gross investment return
of 0%, $9,490 for a gross return of 6%, and $0 for a gross return of 12%.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
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 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.
89
<PAGE>
PLAN: JHVLICO FLEX V-1 (SCHEDULED PREMIUM VARIABLE WHOLE LIFE) MALE, ISSUE AGE
40, PREFERRED UNDERWRITING RISK SUM INSURED AT ISSUE (GUARANTEED DEATH
BENEFIT) $100,000 PREMIUM SCHEDULE--LEVEL $1,954 BASIC PREMIUM (1) USING
MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
----------------------------- ---------------------- -------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest ----------------------------- ---------------------- -------
Year Per Year (2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
------- -------------- -------- -------- --------- -------- -------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,052 100,000 100,000 100,000 906 998 1,091
2 4,206 100,000 100,000 100,000 2,060 2,326 2,605
3 6,468 100,000 100,000 100,000 3,174 3,699 4,268
4 8,843 100,000 100,000 100,000 4,247 5,115 6,096
5 11,337 100,000 100,000 100,000 5,278 6,580 8,110
6 13,955 100,000 100,000 100,000 6,265 8,094 10,332
7 16,705 100,000 100,000 100,000 7,207 9,661 12,785
8 19,592 100,000 100,000 100,000 8,168 11,345 15,560
9 22,623 100,000 100,000 100,000 9,083 13,086 18,620
10 25,806 100,000 100,000 100,000 10,079 15,013 22,127
11 29,148 100,000 100,000 100,000 11,246 17,221 26,208
12 32,657 100,000 100,000 100,000 12,486 19,614 30,808
13 36,342 100,000 100,000 100,000 13,664 22,064 35,842
14 40,211 100,000 100,000 100,000 14,774 24,568 41,360
15 44,273 100,000 100,000 101,512 15,809 27,125 47,409
16 48,538 100,000 100,000 111,689 16,413 29,387 53,617
17 53,017 100,000 100,000 122,387 16,932 31,705 60,363
18 57,719 100,000 100,000 133,645 17,366 34,086 67,696
19 62,657 100,000 100,000 145,496 17,709 36,534 75,661
20 67,841 100,000 100,000 157,995 17,954 39,053 84,309
25 97,922 100,000 100,000 231,613 17,276 52,812 139,661
30 136,313 100,000 102,727 328,785 11,669 69,037 220,957
35 185,310 100,000 117,568 458,033 0 86,792 338,132
40 247,845 100,000 131,658 630,709 0 104,823 502,157
</TABLE>
---------
(1) If premiums are paid more frequently than annually the payments would be
$977.00 semiannually, $488.50 quarterly, or $162.83 on a special monthly
basis. The death benefits and surrender values shown would be affected by the
more frequent premium payments.
(2) The premium accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
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 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.
90
<PAGE>
PLAN: JHVLICO FLEX V-1 (SCHEDULED PREMIUM VARIABLE WHOLE LIFE) MALE, ISSUE AGE
40, PREFERRED UNDERWRITING RISK SUM INSURED AT ISSUE (GUARANTEED DEATH
BENEFIT) $100,000 PREMIUM SCHEDULE AT ISSUE--MODIFIED $1,305 INITIAL BASIC
PREMIUM AT ISSUE (1) USING MAXIMUM CHARGES
<TABLE>
<CAPTION>
Death Benefit Surrender Value
----------------------------- ---------------------- -------
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross
End of Accumulated Annual Investment Return of: Annual Investment Return of:
Policy At 5% Interest ----------------------------- ---------------------- -------
Year Per Year (2) 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
------- -------------- -------- -------- --------- -------- -------- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,370 100,000 100,000 100,000 308 365 422
2 2,809 100,000 100,000 100,000 871 1,029 1,194
3 4,320 100,000 100,000 100,000 1,401 1,705 2,036
4 5,906 100,000 100,000 100,000 1,893 2,388 2,950
5 7,571 100,000 100,000 100,000 2,349 3,084 3,951
6 9,320 100,000 100,000 100,000 2,765 3,788 5,047
7 11,157 100,000 100,000 100,000 3,140 4,502 6,248
8 13,085 100,000 100,000 100,000 3,537 5,289 7,629
9 15,109 100,000 100,000 100,000 3,890 6,083 9,138
10 17,235 100,000 100,000 100,000 4,326 7,011 10,916
11 19,467 100,000 100,000 100,000 4,935 8,163 13,068
12 21,810 100,000 100,000 100,000 5,615 9,439 15,514
13 24,271 100,000 100,000 100,000 6,233 10,704 18,140
14 26,855 100,000 100,000 100,000 6,780 11,951 20,960
15 29,568 100,000 100,000 100,000 7,247 13,170 23,992
16 32,417 100,000 100,000 100,000 7,277 14,004 26,910
17 35,408 100,000 100,000 100,000 7,215 14,797 30,091
18 38,548 100,000 100,000 100,000 7,058 15,547 33,572
19 41,846 100,000 100,000 100,000 6,799 16,245 37,391
20 45,309 100,000 100,000 100,000 6,428 16,882 41,591
25 65,398 100,000 100,000 115,923 2,329 18,582 69,901
30 91,038 100,000 100,000 166,958 0 15,424 112,203
35 147,419 100,000 100,000 228,092 12,681 25,357 168,383
40 237,186 100,000 100,000 306,532 27,007 50,053 244,054
</TABLE>
---------
(1) If premiums are paid more frequently than annually the payments would be
$652.50 semiannually, $326.25 quarterly, or $108.75 on a special monthly
basis. The death benefits and surrender values shown would be affected by the
more frequent premium payments. The basic premium (annual) after a
recalculation at age 72 will be as follows: $9,973 for a hypothetical gross
investment return of 0%, $8,477 for a gross return of 6%, and $0 for a gross
return of 12%.
(2) The premiums accumulated at 5% interest in Column 2 are those payable if the
gross investment return is 6%.
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 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.
91
<PAGE>
SUPPLEMENT DATED NOVEMBER 1, 2000
TO
VARIABLE LIFE INSURANCE
PROSPECTUSES DATED NOVEMBER 1, 2000
This Supplement is intended to be distributed with prospectuses dated November
1, 2000 for certain VARIABLE LIFE INSURANCE POLICIES ISSUED ON OR BEFORE MAY 1,
2000 by John Hancock Life Insurance Company, John Hancock Variable Life
Insurance Company, or Investors Partner Life Insurance Company. The variable
life insurance policies involved bear the title "Variable Estate Protection",
"Variable Estate Protection II", "Majestic Variable Estate Protection",
"Majestic Variable Estate Protection 98", "Medallion Variable Life", "Medallion
Executive Variable Life", "Medallion Executive Variable Life II", "Medallion
Executive Variable Life III", "Majestic Variable Universal Life", "Majestic
Variable Universal Life 98", "Variable Master Plan Plus", "Investors Partner
Variable Life", "Flex V-1" or "Flex V-2".
------------------------
GUIDE TO THIS SUPPLEMENT
------------------------
. Your policy enables you to invest in the INTERNATIONAL OPPORTUNITIES II
VARIABLE INVESTMENT OPTION. This variable investment option is subject to
all the terms and conditions of the policies and the procedures described
in the Product Prospectuses. Prior to June, 2000, this variable investment
option was known as the "Global Equity" variable investment option. We may
modify or delete this investment option in the future.
. If you select the International Opportunities II variable investment
option, we will invest your money in the corresponding fund of the John
Hancock Variable Series Trust I. The International Opportunities II Fund is
managed by T. Rowe Price International, Inc.
. Page 2 of this Supplement amends the fund expense table in each of the
Product Prospectuses that follows the question "What charges will the
Trust[s] deduct from my investment in the policy?"
. Pages 3, 4 and 5 of the Supplement amend the John Hancock Variable Series
Trust I prospectus and describe the Goal and Strategy, Subadviser, Past
Performance, Main Risks, Financial Highlights, and Expenses, Dividends and
Taxes of the International Opportunities II Fund.
1
<PAGE>
ANNUAL FUND EXPENSES
The following figures for the International Opportunities II fund are based
on historical and current fund expenses, as a percentage (rounded to two decimal
places) of the fund's average daily net assets for 1999. Shareholders of the
International Opportunities II fund have approved a new management fee schedule,
effective November 1, 2000, and the "investment management fee" percentage is
calculated as if the new fee schedule had been in effect for all of 1999. The
percentage for "other operating expenses" is based on the allocation methodology
and expense reimbursement policy adopted by the John Hancock Variable Series
Trust I on April 23, 1999, and is calculated as if that allocation methodology
and expense reimbursement policy had been in effect for all of 1999. Under the
expense reimbursement policy, John Hancock Life Insurance Company voluntarily
reimburses the International Opportunities II fund when the fund's "other fund
expenses" exceed 0.10% of the fund's average daily net assets.
<TABLE>
<CAPTION>
Investment Distribution and Other Operating Total Fund Other Operating
Management Service Expenses With Operating Expenses Absent
Fund Name Fee (12b-1) Fees Reimbursement Expenses Reimbursement
--------- ---------- ---------------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
JOHN HANCOCK VARIABLE SERIES TRUST I:
International Opportunities II ....... 1.00% N/A 0.10% 1.10% 0.50%
</TABLE>
2
<PAGE>
International Opportunities II Fund
(Formerly Global Equity Fund)
GOAL AND STRATEGY
This is an international stock fund that seeks long-term growth in capital.
The Fund primarily invests in a diversified mix of common stocks of large
established and medium-sized foreign companies located throughout the world,
including developed, newly industrialized, and emerging countries.
The manager determines the distribution among countries and regions by using a
combination of fundamental research and economic analysis, emphasizing:
. prospects for relative economic growth between foreign countries;
. expected levels of inflation;
. government policies influencing business conditions; and
. outlook for currency relationships.
The manager selects stocks that have growth characteristics such as:
. leading market position or technological leadership;
. high return on invested capital;
. healthy balance sheets with relatively low debt;
. strong competitive advantage;
. strength of management; and
. earnings growth and cash flow sufficient to support growing dividends.
The Fund invests:
. in at least 3 different countries other than the U.S., and
. no more than 20% of its assets in emerging market stocks.
Although the Fund may employ foreign currency hedging techniques, the Fund nor-
mally maintains the currency exposure of the underlying equity investments.
The Fund normally invests in 150 to 250 stocks in 15 to 20 countries, with at
least 65% of its assets in securities of non-U.S. entities. The Fund normally
has 10% or less of its assets in cash and cashequivalents.
The Fund also may purchase other types of securities that are not primary
investment vehicles, for example: American Depository Receipts (ADRs), Global
Depository Receipts (GDRs), European Depository Receipts (EDRs), and certain
derivatives (investments whose value is based on indices or other securities).
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
--------------------------------------------------------------------------------
SUBADVISER
T. Rowe Price International, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
Managing since 1979
Managed approximately $42 billion in assets at the end of 1999
Managing Fund since June 13, 2000
FUND MANAGERS
Management by Investment Advisory Group overseen by:
David J. L. Warren
-----------------
Portfolio Manager of subadviser
Joined subadvisor in 1983
Began career in 1981
John R. Ford
-----------------
Portfolio Manager of subadviser
Joined subadvisor in 1982
Began career in 1980
James B. M. Seddon
-----------------
Portfolio Manager of subadvisor
Joined subadvisor in 1987
Began career in 1987
Mark Bickford-Smith
-----------------
Portfolio Manager of subadvisor
Joined subadvisor in 1995
Began career in 1985
PAST PERFORMANCE
The graph will show how the fund's total return varies from year to year, while
the table will show performance over time (along with a broad-based market
index for reference). This information may help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the
variable contracts. Such fees and charges would cause the investment returns
under the contracts to be less than that shown below.
Year-by-year total returns -- calendar years
[GRAPH]
1999 24.19%
Best quarter: up 15.94%, fourth quarter 1999 Worst quarter: down 12.39%, third
quarter 1998
Average annual total returns -- for periods ending 12/31/99(/1/)
<TABLE>
<CAPTION>
Fund Index
<S> <C> <C>
1 year 24.19% 25.34%
Life of fund 13.48% 19.92%
</TABLE>
Index:MSCI World Index
(1)Began operations on May 1, 1998.
3
<PAGE>
MAIN RISKS
Primary
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, economic, political
and social instability and foreign currency rate fluctuations. Factors such as
lack of liquidity, foreign ownership limits and restrictions on removing cur-
rency also pose special risks. All foreign securities have some degree of for-
eign risk. However, to the extent the Fund invests in emerging market coun-
tries, it will have a significantly higher degree of foreign risk than if it
invested exclusively in developed or newly-industrialized countries.
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct equity investments. Also, in a down market,
derivatives could become harder to value or sell at a fair price.
-------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
<TABLE>
<S> <C> <C>
--------------------------------------------------------------------------------
International Opportunities II Fund (Formerly Global Equity
Fund) -- Period ended December 31; 1998** 1999
--------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.00 $ 9.87
Income from investment operations:
Net investment income (loss) 0.07 0.10
Net realized and unrealized gain (loss) on investments* (0.13) 2.27
Total from investment operations (0.06) 2.37
Less distributions:
Distributions from net investment income and capital paid
in (0.07) (0.07)
Distributions from net realized gain on investments sold -- --
Distributions in excess of income, capital paid in & gains -- (0.04)
Total distributions (0.07) (0.11)
Net asset value, end of period $ 9.87 $ 12.13
Total investment return (0.55)% 24.19%
Ratios and supplemental data
Net assets, end of period (000s omitted)($) $15,281 $22,311
Ratio of expenses to average net assets (%)*** 1.15% 1.04%
Ratio of net investment income (loss) to average net assets
(%) 1.11% 0.96%
Turnover rate (%) 33.17% 49.51%
</TABLE>
* The amount shown may not accord with the change in the aggregate gains
and losses in the fund securities for the period because of the timing of
purchases and withdrawals of shares in relation to the fluctuation in
market values of the fund.
** Fund began operations May 1, 1998.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 2.47% and 1.26% for the years
ended December 31, 1998, and 1999, respectively.
4
<PAGE>
. The table entitled "FUNDS' EXPENSES" in the prospectus for the John Hancock
Variable Series Trust I dated November 1, 20000 is supplemented with the
following information:
The advisory fee paid by the International Opportunities II fund to the
adviser in 1999 was 0.90% of the fund's net assets. The International
Opportunities II fund was formerly the "Global Equity" fund.
. The section entitled "DIVIDENDS AND TAXES" in the prospectus for the John
Hancock Variable Series Trust I dated November 1, 20000 is supplemented
with the following information:
The International Opportunities II fund reinvests and declares its
dividends and distributions in the manner described in this section.
5
