<PAGE>
As filed with the Securities and Exchange Commission on June 30, 2000
Registration No. 33-76660
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-6
Post-Effective Amendment No. 8 to
Registration Statement Under
THE SECURITIES ACT OF 1933
----------------------
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
(Exact name of trust)
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
(Name of depositor)
JOHN HANCOCK PLACE
BOSTON, MASSACHUSETTS 02117
(Complete address of depositor's principal executive offices)
--------------------
RONALD J. BOCAGE, ESQ.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE, BOSTON, 02117
(Name and complete address of agent for service)
--------------------
Copy to:
GARY O. COHEN, ESQ.
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
--------------------
It is proposed that this filing become effective(check appropriate box)
/ /immediately upon filing pursuant to paragraph (b) of Rule 485
--
/X/on June 30, 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 consists of __ pages.
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.
<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
contemporaneously herewith. 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. Not Applicable. The Registrant invests only in shares of open-end Funds.
<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 F. SMITH
--------------------
Patrick F. Smith Controller (Principal Accounting June 30, 2000
Officer and Acting Principal
Financial Officer)
/s/ MICHELE G. VAN LEER
-----------------------
Michele G. Van Leer Vice Chairman of the Board June 30, 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 M. 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 30th day of June, 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
President
Attest /s/ PETER H. SCAVONGELLI
------------------------
Peter H. Scavongelli
Secretary
<PAGE>
PROSPECTUS DATED JUNE 30, 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 U.S. MAIL
---------------- ---------
529 Main Street (X-4) P.O. Box 111
Charlestown, MA 02129 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.
Growth & Income.................................... Independence Investment Associates, 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................................. Goldman Sachs Asset Management
Small/Mid Cap Growth............................... Wellington Management Company, LLP
Small Cap Value.................................... INVESCO Management & Research, Inc.
Small Cap Growth................................... John Hancock Advisers, Inc.
Global Balanced.................................... Brinson Partners, Inc.
International Equity Index......................... Independence International Associates, Inc.
International Opportunities........................ Rowe Price-Fleming International, Inc.
Emerging Markets Equity............................ Morgan Stanley Dean Witter Investment Management, Inc.
Short-Term Bond.................................... Investment Associates, Inc.
Bond Index......................................... Mellon Bond Associates, LLP
Active Bond........................................ John Hancock Advisers, Inc.
Global Bond........................................ J.P. Morgan Investment Management, Inc.
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 105.
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.
Here are the page numbers where the questions and answers appear:
<TABLE>
<CAPTION>
Question Beginning on page
-------- -----------------
<S> <C>
.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>
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). The percentages reflect the
investment management fees that were payable for1999 and the 1999 other
operating expenses that would have been allocated to the funds under the
allocation rules currently in effect.
9
<PAGE>
<TABLE>
<CAPTION>
Other Total Fund Other Operating
Investment Operating Operating Expenses
Fund Name Management Fee Expenses Expenses Absent Reimbursement*
--------- -------------- ---------- ---------- ----------------------
<S> <C> <C> <C> <C>
Managed................................... 0.32% 0.03% 0.35% 0.03%
Growth & Income........................... 0.25% 0.03% 0.28% 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........................ 0.60% 0.10% 0.70% 0.10%
Small/Mid Cap CORE........................ 0.80% 0.10% 0.90% 0.66%
Small/Mid Cap Growth...................... 0.75% 0.10% 0.85% 0.10%
Small Cap Value........................... 0.80% 0.10% 0.90% 0.16%
Small Cap Growth.......................... 0.75% 0.10% 0.85% 0.14%
Global Balanced** ........................ 0.85% 0.10% 0.95% 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**............................. 0.25% 0.03% 0.28% 0.03%
Global Bond............................... 0.69% 0.10% 0.79% 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 reimburses a fund when the fund's other operating expenses
exceed 0.10% of the fund's average daily net assets (0.00% for Equity Index).
**Global Balanced was formerly "International Balanced" and Active Bond was
formerly "Sovereign Bond".
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.
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.
10
<PAGE>
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 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.
11
<PAGE>
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 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
12
<PAGE>
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.
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
13
<PAGE>
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.
Tax consequences
Please read "Tax considerations" starting on page 33 to learn about
possible tax consequences of changing your insurance coverage under the policy.
14
<PAGE>
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
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
15
<PAGE>
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 prescribed by the tax laws. Additional taxes
and penalties may be payable for policy distributions of any kind.
16
<PAGE>
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. 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.
17
<PAGE>
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 -.68%, 5.28% and 11.24%. 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 .59%, and (2) an assumed average asset charge for all
other Trust operating expenses equivalent to an effective annual rate of .09%.
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>
1 798 100,000 100,000 100,000 218 244 271 0 0 0
2 1,636 100,000 100,000 100,000 664 738 816 0 0 73
3 2,516 100,000 100,000 100,000 1,094 1,245 1,408 1 152 315
4 3,439 100,000 100,000 100,000 1,508 1,764 2,052 415 671 959
5 4,409 100,000 100,000 100,000 1,904 2,294 2,750 811 1,201 1,658
6 5,428 100,000 100,000 100,000 2,281 2,836 3,510 1,188 1,743 2,417
7 6,497 100,000 100,000 100,000 2,637 3,386 4,333 1,544 2,293 3,240
8 7,620 100,000 100,000 100,000 2,972 3,945 5,228 2,079 3,051 4,334
9 8,799 100,000 100,000 100,000 3,285 4,513 6,199 2,590 3,818 5,504
10 10,037 100,000 100,000 100,000 3,581 5,098 7,271 3,285 4,801 6,974
11 11,337 100,000 100,000 100,000 3,882 5,721 8,471 3,684 5,524 8,274
12 12,702 100,000 100,000 100,000 4,160 6,357 9,786 4,061 6,258 9,687
13 14,135 100,000 100,000 100,000 4,413 7,003 11,226 4,413 7,003 11,226
14 15,640 100,000 100,000 100,000 4,638 7,658 12,804 4,638 7,658 12,804
15 17,220 100,000 100,000 100,000 4,835 8,321 14,533 4,835 8,321 14,533
16 18,879 100,000 100,000 100,000 5,001 8,991 16,433 5,001 8,991 16,433
17 20,621 100,000 100,000 100,000 5,137 9,668 18,522 5,137 9,668 18,522
18 22,450 100,000 100,000 100,000 5,233 10,344 20,817 5,233 10,344 20,817
19 24,370 100,000 100,000 100,000 5,285 11,017 23,339 5,285 11,017 23,339
20 26,387 100,000 100,000 100,000 5,299 11,691 26,123 5,299 11,691 26,123
25 38,086 100,000 100,000 100,000 4,835 15,144 45,314 4,835 15,144 45,314
30 53,018 100,000 100,000 100,000 3,343 18,743 78,440 3,343 18,743 78,440
35 72,076 ** 100,000 155,394 ** 21,566 135,126 ** 21,566 135,126
40 96,398 ** 100,000 241,214 ** 21,875 229,727 ** 21,875 229,727
45 127,441 ** 100,000 408,081 ** 16,832 388,648 ** 16,832 388,648
</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>
1 798 100,000 100,000 100,000 192 217 243 0 0 0
2 1,636 100,000 100,000 100,000 610 681 755 0 0 12
3 2,516 100,000 100,000 100,000 1,013 1,155 1,310 0 62 218
4 3,439 100,000 100,000 100,000 1,398 1,639 1,911 305 546 818
5 4,409 100,000 100,000 100,000 1,764 2,130 2,559 671 1,037 1,467
6 5,428 100,000 100,000 100,000 2,111 2,629 3,261 1,018 1,536 2,168
7 6,497 100,000 100,000 100,000 2,436 3,133 4,019 1,343 2,041 2,926
8 7,620 100,000 100,000 100,000 2,739 3,643 4,838 1,845 2,749 3,944
9 8,799 100,000 100,000 100,000 3,018 4,155 5,721 2,323 3,460 5,026
10 10,037 100,000 100,000 100,000 3,274 4,671 6,678 2,977 4,375 6,382
11 11,337 100,000 100,000 100,000 3,502 5,187 7,712 3,305 4,989 7,514
12 12,702 100,000 100,000 100,000 3,701 5,700 8,828 3,603 5,601 8,730
13 14,135 100,000 100,000 100,000 3,871 6,209 10,036 3,871 6,209 10,036
14 15,640 100,000 100,000 100,000 4,009 6,713 11,344 4,009 6,713 11,344
15 17,220 100,000 100,000 100,000 4,112 7,209 12,760 4,112 7,209 12,760
16 18,879 100,000 100,000 100,000 4,180 7,692 14,294 4,180 7,692 14,294
17 20,621 100,000 100,000 100,000 4,204 8,158 15,953 4,204 8,158 15,953
18 22,450 100,000 100,000 100,000 4,179 8,598 17,748 4,179 8,598 17,748
19 24,370 100,000 100,000 100,000 4,101 9,008 19,689 4,101 9,008 19,689
20 26,387 100,000 100,000 100,000 3,960 9,375 21,788 3,960 9,375 21,788
25 38,086 100,000 100,000 100,000 2,090 10,295 35,242 2,090 10,295 35,242
30 53,018 ** 100,000 100,000 ** 8,369 56,051 ** 8,369 56,051
35 72,076 ** ** 104,274 ** ** 90,673 ** ** 90,673
40 96,398 ** ** 155,703 ** ** 148,289 ** ** 148,289
45 127,441 ** ** 253,113 ** ** 241,060 ** ** 241,060
</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>
1 798 100,217 100,244 100,270 217 244 270 0 0 0
2 1,636 100,662 100,736 100,813 662 736 813 0 0 70
3 2,516 101,090 101,240 101,403 1,090 1,240 1,403 0 147 310
4 3,439 101,501 101,755 102,041 1,501 1,755 2,041 408 662 949
5 4,409 101,892 102,279 102,733 1,892 2,279 2,733 799 1,187 1,640
6 5,428 102,264 102,814 103,482 2,264 2,814 3,482 1,171 1,721 2,389
7 6,497 102,614 103,354 104,291 2,614 3,354 4,291 1,521 2,261 3,199
8 7,620 102,941 103,901 105,167 2,941 3,901 5,167 2,047 3,007 4,273
9 8,799 103,244 104,453 106,115 3,244 4,453 6,115 2,549 3,758 5,419
10 10,037 103,529 105,019 107,154 3,529 5,019 7,154 3,233 4,723 6,857
11 11,337 103,817 105,620 108,313 3,817 5,620 8,313 3,619 5,422 8,115
12 12,702 104,080 106,228 109,576 4,080 6,228 9,576 3,981 6,129 9,477
13 14,135 104,316 106,840 110,950 4,316 6,840 10,950 4,316 6,840 10,950
14 15,640 104,523 107,455 112,444 4,523 7,455 12,444 4,523 7,455 12,444
15 17,220 104,699 108,070 114,071 4,699 8,070 14,071 4,699 8,070 14,071
16 18,879 104,842 108,685 115,843 4,842 8,685 15,843 4,842 8,685 15,843
17 20,621 104,953 109,298 117,774 4,953 9,298 17,774 4,953 9,298 17,774
18 22,450 105,021 109,899 119,874 5,021 9,899 19,874 5,021 9,899 19,874
19 24,370 105,043 110,482 122,154 5,043 10,482 22,154 5,043 10,482 22,154
20 26,387 105,024 111,055 124,643 5,024 11,055 24,643 5,024 11,055 24,643
25 38,086 104,374 113,755 141,146 4,374 13,755 41,146 4,374 13,755 41,146
30 53,018 102,689 116,024 167,661 2,689 16,024 67,661 2,689 16,024 67,661
35 72,076 ** 116,452 209,556 ** 16,452 109,556 ** 16,452 109,556
40 96,398 ** 112,567 275,111 ** 12,567 175,111 ** 12,567 175,111
45 127,441 ** 101,105 378,182 ** 1,105 278,182 ** 1,105 278,182
</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 1,636 100,608 100,679 100,753 608 679 753 0 0 10
3 2,516 101,009 101,151 101,305 1,009 1,151 1,305 0 58 212
4 3,439 101,391 101,630 101,901 1,391 1,630 1,901 298 538 808
5 4,409 101,753 102,116 102,542 1,753 2,116 2,542 660 1,023 1,450
6 5,428 102,095 102,609 103,235 2,095 2,609 3,235 1,002 1,516 2,142
7 6,497 102,414 103,104 103,979 2,414 3,104 3,979 1,321 2,011 2,886
8 7,620 102,710 103,602 104,781 2,710 3,602 4,781 1,816 2,708 3,887
9 8,799 102,980 104,100 105,642 2,980 4,100 5,642 2,285 3,405 4,946
10 10,037 103,225 104,598 106,569 3,225 4,598 6,569 2,929 4,302 6,273
11 11,337 103,442 105,093 107,565 3,442 5,093 7,565 3,245 4,895 7,368
12 12,702 103,629 105,581 108,635 3,629 5,581 8,635 3,530 5,482 8,536
13 14,135 103,783 106,060 109,783 3,783 6,060 9,783 3,783 6,060 9,783
14 15,640 103,905 106,529 111,016 3,905 6,529 11,016 3,905 6,529 11,016
15 17,220 103,990 106,982 112,339 3,990 6,982 12,339 3,990 6,982 12,339
16 18,879 104,037 107,417 113,758 4,037 7,417 13,758 4,037 7,417 13,758
17 20,621 104,040 107,825 115,276 4,040 7,825 15,276 4,040 7,825 15,276
18 22,450 103,991 108,199 116,895 3,991 8,199 16,895 3,991 8,199 16,895
19 24,370 103,888 108,531 118,621 3,888 8,531 18,621 3,888 8,531 18,621
20 26,387 103,720 108,809 120,452 3,720 8,809 20,452 3,720 8,809 20,452
25 38,086 101,709 109,047 131,345 1,709 9,047 31,345 1,709 9,047 31,345
30 53,018 ** 105,965 145,215 ** 5,965 45,215 ** 5,965 45,215
35 72,076 ** ** 161,065 ** ** 61,065 ** ** 61,065
40 96,398 ** ** 175,636 ** ** 75,636 ** ** 75,636
45 127,441 ** ** 180,154 ** ** 80,154 ** ** 80,154
</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>
1 798 100,000 100,000 100,000 218 244 271 0 0 0
2 1,636 100,000 100,000 100,000 664 738 816 0 0 73
3 2,516 100,000 100,000 100,000 1,094 1,245 1,408 1 152 315
4 3,439 100,000 100,000 100,000 1,508 1,764 2,052 415 671 959
5 4,409 100,000 100,000 100,000 1,904 2,294 2,750 811 1,201 1,658
6 5,428 100,000 100,000 100,000 2,281 2,836 3,510 1,188 1,743 2,417
7 6,497 100,000 100,000 100,000 2,637 3,386 4,333 1,544 2,293 3,240
8 7,620 100,000 100,000 100,000 2,972 3,945 5,228 2,079 3,051 4,334
9 8,799 100,000 100,000 100,000 3,285 4,513 6,199 2,590 3,818 5,504
10 10,037 100,000 100,000 100,000 3,581 5,098 7,271 3,285 4,801 6,974
11 11,337 100,000 100,000 100,000 3,882 5,721 8,471 3,684 5,524 8,274
12 12,702 100,000 100,000 100,000 4,160 6,357 9,786 4,061 6,258 9,687
13 14,135 100,000 100,000 100,000 4,413 7,003 11,226 4,413 7,003 11,226
14 15,640 100,000 100,000 100,000 4,638 7,658 12,804 4,638 7,658 12,804
15 17,220 100,000 100,000 100,000 4,835 8,321 14,533 4,835 8,321 14,533
16 18,879 100,000 100,000 100,000 5,001 8,991 16,433 5,001 8,991 16,433
17 20,621 100,000 100,000 100,000 5,137 9,668 18,522 5,137 9,668 18,522
18 22,450 100,000 100,000 100,000 5,233 10,344 20,817 5,233 10,344 20,817
19 24,370 100,000 100,000 100,000 5,285 11,017 23,339 5,285 11,017 23,339
20 26,387 100,000 100,000 100,000 5,299 11,691 26,123 5,299 11,691 26,123
25 38,086 100,000 100,000 100,000 4,835 15,144 45,314 4,835 15,144 45,314
30 53,018 100,000 100,000 132,237 3,343 18,743 77,695 3,343 18,743 77,695
35 72,076 ** 100,000 196,598 ** 21,566 129,888 ** 21,566 129,888
40 96,398 ** 100,000 291,464 ** 21,875 212,934 ** 21,875 212,934
45 127,441 ** 100,000 435,196 ** 16,832 344,682 ** 16,832 344,682
</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>
1 798 100,000 100,000 100,000 192 217 243 0 0 0
2 1,636 100,000 100,000 100,000 610 681 755 0 0 12
3 2,516 100,000 100,000 100,000 1,013 1,155 1,310 0 62 218
4 3,439 100,000 100,000 100,000 1,398 1,639 1,911 305 546 818
5 4,409 100,000 100,000 100,000 1,764 2,130 2,559 671 1,037 1,467
6 5,428 100,000 100,000 100,000 2,111 2,629 3,261 1,018 1,536 2,168
7 6,497 100,000 100,000 100,000 2,436 3,133 4,019 1,343 2,041 2,926
8 7,620 100,000 100,000 100,000 2,739 3,643 4,838 1,845 2,749 3,944
9 8,799 100,000 100,000 100,000 3,018 4,155 5,721 2,323 3,460 5,026
10 10,037 100,000 100,000 100,000 3,274 4,671 6,678 2,977 4,375 6,382
11 11,337 100,000 100,000 100,000 3,502 5,187 7,712 3,305 4,989 7,514
12 12,702 100,000 100,000 100,000 3,701 5,700 8,828 3,603 5,601 8,730
13 14,135 100,000 100,000 100,000 3,871 6,209 10,036 3,871 6,209 10,036
14 15,640 100,000 100,000 100,000 4,009 6,713 11,344 4,009 6,713 11,344
15 17,220 100,000 100,000 100,000 4,112 7,209 12,760 4,112 7,209 12,760
16 18,879 100,000 100,000 100,000 4,180 7,692 14,294 4,180 7,692 14,294
17 20,621 100,000 100,000 100,000 4,204 8,158 15,953 4,204 8,158 15,953
18 22,450 100,000 100,000 100,000 4,179 8,598 17,748 4,179 8,598 17,748
19 24,370 100,000 100,000 100,000 4,101 9,008 19,689 4,101 9,008 19,689
20 26,387 100,000 100,000 100,000 3,960 9,375 21,788 3,960 9,375 21,788
25 38,086 100,000 100,000 100,000 2,090 10,295 35,242 2,090 10,295 35,242
30 53,018 ** 100,000 100,000 ** 8,369 56,051 ** 8,369 56,051
35 72,076 ** ** 133,254 ** ** 88,038 ** ** 88,038
40 96,398 ** ** 183,096 ** ** 133,764 ** ** 133,764
45 127,441 ** ** 248,976 ** ** 197,193 ** ** 197,193
</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................................. 34
Voting privileges that you will have.......................... 35
Changes that JHVLICO can make as to your policy............... 35
Adjustments we make to death benefits......................... 36
When we pay policy proceeds................................... 36
Other details about exercising rights and paying benefits..... 36
Legal matters................................................. 37
Registration statement filed with the SEC..................... 37
Accounting and actuarial experts.............................. 37
Financial statements of JHVLICO and the Account............... 37
List of Directors and Executive Officers of JHVLICO........... 38
</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 decreases
. Face amount increases, when and if permitted by our administrative rules
. Change of death benefit option
Reinstatements of lapsed policies take effect on the monthly deduction date on
or next following the date we approve the request for 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 consequences" 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 has 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 Officers Principal Occupations
-------------------------------- ---------------------
<S> <C>
David F. D'Alessandro........ Chairman of the Board and Chief Executive
Officer of JHVLICO; President, Chief
Operations Officer and Chief Executive
Officer-Elect, 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 F. Smith............. Controller of JHVLICO; Senior Associate
Controller, John Hancock Life Insurance
Company.
Peter H. 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
FIRST QUARTER 2000
39
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
(Unaudited)
March 31 December 31
2000 1999
---------- -------------
(In millions)
<S> <C> <C>
ASSETS
Bonds.............................................. $ 1,276.6 $ 1,216.3
Preferred stocks................................. 35.6 35.9
Common stocks.................................... 1.7 3.2
Investment in affiliates......................... 81.3 80.7
Mortgage loans on real estate...................... 429.0 433.1
Real estate........................................ 24.8 25.0
Policy loans....................................... 181.8 172.1
Cash Items:
Cash in banks.................................... (3.3) 27.2
Temporary cash investments....................... 309.4 222.9
--------- ---------
306.1 250.1
Premiums due and deferred.......................... 23.1 29.9
Investment income due and accrued.................. 35.7 33.2
Other general account assets....................... 52.3 65.3
Assets held in separate accounts................... 8,597.7 8,268.2
--------- ---------
TOTAL ASSETS....................................... $11,045.7 $10,613.0
========= =========
OBLIGATIONS AND STOCKHOLDER'S EQUITY
OBLIGATIONS
Policy reserves.................................. $ 1,945.6 $ 1,866.6
Federal income and other taxes payable........... 73.6 67.3
Other general account obligations................ 232.1 219.0
Transfers from separate account, net............. (225.7) (221.6)
Asset valuation reserve.......................... 18.8 23.1
Obligations related to separate accounts......... 8,590.9 8,261.6
--------- ---------
TOTAL OBLIGATIONS.................................. 10,635.3 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............................... (164.5) (177.9)
--------- ---------
TOTAL STOCKHOLDER'S EQUITY......................... 410.4 397.0
--------- ---------
TOTAL OBLIGATIONS AND STOCKHOLDER'S EQUITY......... $11,045.7 $10,613.0
========= =========
</TABLE>
See condensed notes to the financial statements (unaudited).
40
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND UNASSIGNED DEFICIT
<TABLE>
<CAPTION>
(Unaudited)
Three months ended
March 31
-------------------
2000 1999
--------- --------
(In millions)
<S> <C> <C>
INCOME
Premiums............................................. $ 231.3 $223.6
Net investment income................................ 39.6 32.5
Other, net........................................... 132.4 145.3
------- ------
403.3 401.4
BENEFITS AND EXPENSES
Payments to policyholders and beneficiaries.......... 89.2 80.3
Additions to reserves to provide for future payments
to policyholders and beneficiaries................. 216.3 238.2
Expenses of providing service to policyholders and
obtaining new insurance............................ 73.5 75.7
State and miscellaneous taxes........................ 7.6 2.8
------- ------
386.6 397.0
------- ------
GAIN FROM OPERATIONS BEFORE FEDERAL INCOME TAXES
AND NET REALIZED CAPITAL GAINS (LOSSES).......... 16.7 4.4
Federal income taxes................................... 4.7 1.0
------- ------
GAIN FROM OPERATIONS BEFORE NET REALIZED CAPITAL
GAINS (LOSSES)................................... 12.0 3.4
Net realized capital gains (losses).................... 0.4 (1.5)
------- ------
NET INCOME........................................ 12.4 1.9
Unassigned deficit at beginning of period.............. (177.9) (49.2)
Net unrealized capital gains (losses) and other
adjustments........................................... 1.1 0.3
Other reserves and adjustments......................... (0.1) (4.2)
------- ------
UNASSIGNED DEFICIT AT END OF PERIOD.................... $(164.5) $(51.2)
======= ======
</TABLE>
See condensed notes to the financial statements (unaudited).
41
<PAGE>
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
Three months ended
March 31
-------------------
2000 1999
--------- --------
(In millions)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Insurance premiums.................................. $ 241.4 $ 225.3
Net investment income............................... 37.2 29.9
Benefits to policyholders and beneficiaries......... (79.6) (70.8)
Dividends paid to policyholders..................... (6.4) (6.1)
Insurance expenses and taxes........................ (91.9) (107.8)
Net transfers to separate accounts.................. (141.4) (182.0)
Other, net.......................................... 134.4 175.7
------- -------
NET CASH PROVIDED FROM OPERATIONS................ 93.7 64.2
------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Bond purchases...................................... (157.5) (71.3)
Bond sales.......................................... 73.5 8.7
Bond maturities and scheduled redemptions........... 18.9 18.8
Bond prepayments.................................... 2.6 3.2
Stock purchases..................................... (0.4) (0.2)
Proceeds from stock sales........................... 1.2 1.5
Real estate purchases............................... (0.1) (0.9)
Real estate sales................................... 0.0 10.4
Other invested assets purchases..................... (0.1) 0.0
Proceeds from the sale of other invested assets..... 0.0 0.0
Mortgage loans issued............................... (4.3) (23.4)
Mortgage loan repayments............................ 8.4 5.2
Other, net.......................................... 20.1 (2.8)
------- -------
NET CASH USED IN INVESTING ACTIVITIES............ (37.7) (50.8)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in short-term note payable.. (0.0) (32.3)
------- -------
NET CASH PROVIDED FROM FINANCING ACTIVITIES...... (0.0) (32.3)
------- -------
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH
INVESTMENTS.......................................... 56.0 (18.9)
Cash and temporary cash investments at beginning of
year................................................. 250.1 19.9
------- -------
CASH AND TEMPORARY CASH INVESTMENTS AT THE END OF
PERIOD............................................... $ 306.1 $ 1.0
======= =======
</TABLE>
See condensed notes to the financial statements (unaudited).
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 three months ended March 31,
1999 (unaudited)
Balance at January 1, 1999............ $2.5 $377.5 $ (49.2) $330.8
1999 Transactions:
Capital contribution................
Net gain............................ 1.9 1.9
Net unrealized capital gains and
other adjustments................. 0.3 0.3
Other reserves and adjustments...... (4.2) (4.2)
---- ------ ------- ------
Balance at March 31, 1999............. $2.5 $377.5 $ (51.2) $328.8
==== ====== ======= ======
For the three months ended March 31,
2000 (unaudited)
Balance at January 1, 2000............ $2.5 $572.4 $(177.9) $397.0
2000 Transactions:
Capital contribution................
Net gain............................ 12.4 12.4
Net unrealized capital gains and
other adjustments................. 1.1 1.1
Provision for Litigation Reserve....
Other reserves and adjustments...... (0.1) (0.1)
---- ------ ------- ------
Balance at March 31, 2000............. $2.5 $572.4 $(164.5) $410.4
==== ====== ======= ======
</TABLE>
See condensed notes to the financial statements (unaudited).
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 three months period ended March 31, 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>
INCOME
Premiums.................................................... $ 950.8 $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>
Cash flows from operating activities:
Insurance premiums............................ $ 958.5 $1,275.3
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>
Gross Unrealized Gross Unrealized
Statement Value Gains Losses Fair Value
--------------- ---------------- ---------------- ----------
(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............................................ $ 1,216.3 $ 14.4 $ 67.5 $ 1,163.2
========= ====== ========= =========
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............................................ $ 1,185.8 $ 60.8 $ 15.1 $ 1,231.5
========= ====== ========= =========
</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.
Statement Fair
Value Value
----- -----
(In millions)
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 $ 1,163.2
========== =========
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)
Statement Geographic Statement
Property Type Value Concentration Value
(In millions) (In millions)
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
======== =======
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>
Number of Contracts/ Assets (Liabilities)
----------------------------------------------------
Notional Amounts 1999 1998
Carrying Carrying
1999 1998 Value Fair Value Value Fair Value
---- ---- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
(In millions)
Futures contracts to sell securities 362.0 947.0 $ 0.6 $ 0.6 $ (0.5) $ (0.5)
Interest rate swap agreements $ 965.0 $ 365.0 -- 11.5 -- (17.7)
Interest rate cap agreements 239.4 89.4 5.6 5.6 3.1 3.1
Currency rate swap agreements 15.8 15.8 -- (1.6) -- (3.3)
</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
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%
========= =====
</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
-------- ----- ------- -----
(In millions)
<S> <C> <C> <C> <C>
Assets
Bonds--Note 6 $ 1,216.3 $ 1,163.2 $ 1,185.8 $ 1,231.5
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
FIRST QUARTER 2000
65
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (Unaudited)
March 31, 2000
<TABLE>
<CAPTION>
Large Cap International Small Cap
Growth Active Bond Equity Growth
------------ ----------- ------------- -----------
<S> <C> <C> <C> <C>
Assets
Cash ........................................................... -- -- -- --
Investments in shares of portfolios of John Hancock Variable
Series Trust I, at value ..................................... $174,861,561 $234,884,827 $31,570,772 $14,833,170
Investments in shares of portfolios of M Fund Inc., at value ... -- -- -- --
Policy loans and accrued interest receivable ................... 21,919,288 57,095,808 3,002,489 --
Receivable from:
John Hancock Variable Series Trust I ......................... 56,699 1,396,298 52,536 --
M Fund Inc.................................................... -- -- -- --
------------ ----------- ----------- -----------
Total Assets ................................................... 196,837,548 293,376,933 34,625,797 14,833,170
Liabilities
Payable to JHVLICO.............................................. -- -- -- --
Asset Charges payable .......................................... 2,899 4,438 525 235
------------ ----------- ----------- -----------
Total Liabilities .............................................. 2,899 4,438 525 235
------------ ----------- ----------- -----------
Net Assets ..................................................... $196,834,649 $293,372,495 $34,625,272 $14,832,935
============ ============ =========== ===========
<CAPTION>
International Mid Cap Large Cap Money
Balanced Growth Value Market
------------ ------------ ----------- ---------
<S> <C> <C> <C> <C>
Assets
Cash ........................................................... -- -- -- --
Investments in shares of portfolios of John Hancock Variable
Series Trust I, at value ..................................... $ 943,471 $ 26,128,545 $ 9,984,441 $60,394,274
Investments in shares of portfolios of M Fund Inc., at value ... -- -- -- --
Policy loans and accrued interest receivable ................... -- -- -- 14,008,282
Receivable from:
John Hancock Variable Series Trust I ......................... 2,342 -- 19,580 28,181
M Fund Inc. .................................................. -- -- -- --
------------ ------------ ------------- -----------
Total Assets ................................................... 945,813 26,128,545 10,004,021 74,430,737
Liabilities
Payable to JHVLICO ............................................. -- -- -- --
Asset Charges payable .......................................... 15 416 163 3,415
------------- ------------ ------------- -----------
Total Liabilities .............................................. 15 416 163 3,415
------------- ------------ ------------- -----------
Net Assets ..................................................... $ 945,798 $ 26,128,129 $10,003,858 $74,427,322
============= ============ =========== ===========
</TABLE>
66
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (Unaudited) (continued)
March 31, 2000
<TABLE>
<CAPTION>
Mid Cap Small/Mid Cap Real Estate Growth &
Value Growth Equity Income
------------ ------------- ----------- --------------
<S> <C> <C> <C> <C>
Assets
Cash................................................................. -- -- -- --
Investments in shares of portfolios of John Hancock Variable
Series Trust I, at value........................................... $ 5,742,590 $ 12,638,999 $11,473,072 $1,091,691,749
Investments in shares of portfolios of M Fund Inc., at value......... -- -- -- --
Policy loans and accrued interest receivable......................... -- -- 1,914,987 190,402,302
Receivable from:
John Hancock Variable Series Trust I............................... -- -- 106,392 1,026,167
M Fund Inc......................................................... -- -- -- --
------------ ------------ ----------- --------------
Total Assets......................................................... 5,742,590 12,638,999 13,494,451 1,283,120,218
Liabilities
Payable to JHVLICO................................................... -- -- -- --
Asset Charges payable................................................ 92 201 208 18,924
------------ ------------ ----------- --------------
Total Liabilities.................................................... 92 201 208 18,924
------------ ------------ ----------- --------------
Net Assets........................................................... $ 5,742,498 $ 12,638,798 $13,494,243 $1,283,101,294
============ ============ =========== ==============
<CAPTION>
Short-Term
U.S. Small Cap International
Managed Government Value Opportunities
------------ ------------ ----------- --------------
<S>.................................................................. <C> <C> <C> <C>
Assets
Cash................................................................. -- -- -- --
Investments in shares of portfolios of John Hancock Variable
Series Trust I, at value........................................... $421,340,461 $ 964,359 $ 4,195,612 $ 5,766,520
Investments in shares of portfolios of M Fund Inc., at value......... -- -- -- --
Policy loans and accrued interest receivable......................... 78,745,818 -- -- --
Receivable from:
John Hancock Variable Series Trust I............................... 1,039,317 5,043 5,046 --
M Fund Inc......................................................... -- -- -- --
------------ ------------ ----------- --------------
Total Assets......................................................... 501,125,596 969,402 4,200,658 5,766,520
Liabilities
Payable to JHVLICO................................................... -- -- -- --
Asset Charges payable................................................ 7,457 16 68 94
------------ ------------ ----------- --------------
Total Liabilities.................................................... 7,457 16 68 94
------------ ------------ ----------- --------------
Net Assets........................................................... $501,118,139 $ 969,386 $ 4,200,590 $ 5,766,426
============ ============ =========== ==============
</TABLE>
67
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (Unaudited) (continued)
March 31, 2000
<TABLE>
<CAPTION>
Turner Brandes
Equity Global Core International
Index Bond Growth Equity
----------- ---------- -------- -------------
<S> <C> <C> <C> <C>
Assets
Cash.................................................................. -- -- -- --
Investments in shares of portfolios of John Hancock Variable
Series Trust I, at value............................................ $24,855,784 $1,503,338 $645,943 $589,962
Investments in shares of portfolios of M Fund Inc., at value.......... -- -- -- --
Policy loans and accrued interest receivable.......................... -- -- -- --
Receivable from:
John Hancock Variable Series Trust I................................ 22,123 5,625 -- --
M Fund Inc.......................................................... -- -- -- --
----------- ---------- -------- --------
Total Assets.......................................................... 24,877,907 1,508,963 645,943 589,962
Liabilities
Payable to JHVLICO.................................................... -- -- -- --
Asset Charges payable................................................. 404 25 10 10
----------- ---------- -------- --------
Total Liabilities..................................................... 404 25 10 10
----------- ---------- -------- --------
Net Assets............................................................ $24,877,503 $1,508,938 $645,933 $589,952
=========== ========== ======== ========
<CAPTION>
Frontier Emerging
Capital Markets International
Appreciation Equity Opportunities II Bond Index
------------ --------- ---------------- ----------
<S>................................................................... <C> <C> <C> <C>
Assets
Cash.................................................................. -- -- -- --
Investments in shares of portfolios of John Hancock Variable
Series Trust I, at value............................................ $ 1,036,922 $1,021,858 $212,136 $711,214
Investments in shares of portfolios of M Fund Inc., at value.......... -- -- -- --
Policy loans and accrued interest receivable.......................... -- -- -- --
Receivable from:
John Hancock Variable Series Trust I................................ -- -- -- 3,874
M Fund Inc.......................................................... -- -- -- --
----------- ---------- -------- --------
Total Assets.......................................................... 1,036,922 1,021,858 212,136 715,088
Liabilities
Payable to JHVLICO.................................................... -- -- -- --
Asset Charges payable................................................. 17 17 3 12
----------- ---------- -------- --------
Total Liabilities..................................................... 7 17 3 12
----------- ---------- -------- --------
Net Assets............................................................ $ 1,036,905 $1,021,841 $212,133 $715,076
=========== ========== ======== ========
</TABLE>
68
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES (Unaudited) (continued)
March 31, 2000
<TABLE>
<CAPTION>
Small/Mid High Yield Enhanced US
Cap CORE Bond Equity Fund
--------- ---------- -----------
<S> <C> <C> <C>
Assets
Cash .................................................................................... -- -- --
Investments in shares of portfolios of John Hancock Variable Series Trust I, at value ... $47,223 $223,317 $18,840
Investments in shares of portfolios of M Fund Inc., at value ............................ -- -- --
Policy loans and accrued interest receivable ............................................ -- -- --
Receivable from:
John Hancock Variable Series Trust I .................................................. -- 1,539 --
M Fund Inc ............................................................................ -- -- --
-------- -------- -------
Total Assets ............................................................................ 147,223 224,856 18,840
Liabilities
Payable to JHVLICO ...................................................................... -- -- --
Asset Charges payable ................................................................... 2 4 --
-------- -------- -------
Total Liabilities ....................................................................... 2 4 --
-------- -------- -------
Net Assets .............................................................................. $147,221 $224,852 $18,840
======== ======== =======
</TABLE>
69
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (Unaudited)
Years and periods ended March 31, 2000
<TABLE>
<CAPTION>
Large Cap Growth Active Bond International Equities
Subaccount Subaccount Index Subaccount
------------------ ------------------------ ----------------------
3/31/00 12/31/99 3/31/00 12/31/99 3/31/00 12/31/99
------- -------- ------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I ....... $ 127,900 $24,007,195 $ 3,129,650 $ 17,792,726 $ 73,625 $ 917,904
M Fund Inc.................................. -- -- -- -- -- --
Interest income on pol. loans ................ 351,907 1,211,333 1,041,962 4,084,783 51,638 179,345
----------- ----------- ----------- ------------ --------- ----------
Total investment income ...................... 479,807 25,218,528 4,171,612 21,877,509 125,263 1,097,249
Expenses:
Mortality and expense risks ................ 243,212 828,714 403,187 1,643,861 45,694 147,126
----------- ----------- ----------- ------------ --------- ----------
Net investment income ........................ 236,595 24,389,814 3,768,425 20,233,648 79,569 950,123
Net real/unreal gain (loss):
Net realized gains (loss) .................. 833,861 4,239,424 (35,588) 192,098 75,508 168,248
Net unrealized appreciation/(depreciation)
during year .............................. 11,027,522 1,727,703 911,538 (20,304,536) (103,509) 5,712,567
----------- ----------- ----------- ------------ --------- ----------
Net real and unreal gain/loss on investments 11,861,383 5,967,127 875,950 (20,112,438) (28,001) 5,880,815
----------- ----------- ----------- ------------ --------- ----------
Net increase in net assets resulting from
operations ................................. $12,097,978 $30,356,941 $ 4,644,375 $ 121,210 $ 51,568 $6,830,938
=========== =========== =========== ============ ========= ==========
</TABLE>
<TABLE>
<CAPTION>
Small Cap Growth International Balanced Mid Cap Growth
Subaccount Subaccount Subaccount
--------------------- ---------------------- -------------------
3/31/00 12/31/99 3/31/00 12/31/99 3/31/00 12/31/99
------- -------- --------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I ................. -- $ 1,272,230 $ 6,368 $ 99,184 $ -- $ 2,117,559
M Fund Inc............................................ -- -- -- -- -- --
Interest income on pol. loans .......................... -- -- -- -- -- --
---------- ----------- --------- -------- -------- -----------
Total investment income ................................ -- 1,272,230 6,368 99,184 -- 2,117,559
Expenses:
Mortality and expense risks .......................... 20,232 37,386 1,521 6,368 38,680 58,898
---------- ----------- --------- -------- -------- -----------
Net investment income (loss) ........................... (20,232) 1,234,844 4,847 92,816 (38,680) 2,058,661
Net realized/unrealized gain (loss):
Net realized gain (loss) ............................. 284,315 491,241 (6,325) 4,711 208,009 773,222
Net unrealized appreciation/(depreciation)
during year ........................................ 1,372,558 2,317,857 (33,662) (38,997) (141,158) 6,801,000
---------- ----------- --------- -------- -------- -----------
Net realized and unrealized gain/loss on investments ... 1,656,873 2,809,098 (39,987) (34,286) 66,851 7,574,222
---------- ----------- --------- -------- -------- -----------
Net increase (decrease) in net assets resulting
from operations ...................................... $1,636,641 $ 4,043,942 $ (35,140) $ 58,530 $ 28,171 $ 9,632,883
========== =========== ========= ======== ======== ===========
</TABLE>
70
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U STATEMENTS OF
OPERATIONS (Unaudited) (continued) Years and periods
ended March 31, 2000
<TABLE>
<CAPTION>
Large Cap Value Money Market Mid Cap Value
Subaccount Subaccount Subaccount
----------------- ---------------------- ------------------
3/31/00 12/31/99 3/31/00 12/31/99 3/31/00 12/31/99
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I ..... $ 56,350 $ 648,532 $ 862,509 $ 2,943,852 $ -- $ 31,306
M Fund Inc................................ -- -- -- -- -- --
Interest income on pol. loans .............. -- -- 247,488 985,509 -- --
Total investment income .................... 56,350 648,532 1,109,997 3,929,361 -- 31,306
--------- --------- ----------- ------------ ---------- ---------
Expenses:
Mortality and expense risks .............. 13,988 54,610 105,458 411,487 8,049 29,798
--------- --------- ----------- ------------ ---------- ---------
Net investment income (loss) ............... 42,362 593,922 1,004,539 3,517,874 (8,049) 1,508
Net realized and unrealized gain (loss):
Net realized gains (loss) ................ (14,489) 165,556 -- -- (29,925) (241,740)
Net unrealized appreciation/(depreciation)
during year ............................ (300,198) (569,216) -- -- 476,989 469,537
--------- --------- ----------- ------------ ---------- ---------
Net realized and unrealized gain/loss on
investments .............................. (314,687) (403,660) -- -- 447,064 227,797
--------- --------- ----------- ------------ ---------- ---------
Net increase (decrease) in net assets
resulting from operations .................. $(272,325) $ 190,262 $1,004,539 $ 3,517,874 $ 439,015 $ 229,305
========= ========= =========== ============ ========== =========
</TABLE>
<TABLE>
<CAPTION>
Small/Mid Cap Growth Real Estate Equity Growth & Income
Subaccount Subaccount Subaccount
-------------------- ---------------------- ---------------------------
3/31/00 12/31/99 3/31/00 12/31/99 3/31/00 12/31/99
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I ..... $ -- $ 1,903,687 $ 244,053 $ 771,050 $ 2,643,561 $ 124,750,392
M Fund Inc................................ -- -- -- -- -- --
Interest income on pol. loans .............. -- -- 32,615 131,461 3,405,219 12,877,539
---------- ----------- --------- ---------- ------------ -------------
Total investment income .................... -- 1,903,687 276,668 902,511 6,048,780 137,627,931
Expenses:
Mortality and expense risks .............. 18,267 69,847 18,989 78,893 1,660,489 6,531,512
---------- ----------- --------- ---------- ------------ -------------
Net investment income (loss) ............... (18,267) 1,833,840 257,679 823,618 4,388,291 131,096,419
Net realized and unrealized gain (loss):....
Net realized gains (loss) ................ (182,463) (13,020) (43,024) 123,591 8,209,775 22,802,197
Net unrealized appreciation/(depreciation)
during year ............................ 1,024,783 (1,274,161) 51,455 (1,106,755) 7,713,859 7,687,109
---------- ----------- --------- ---------- ------------ -------------
Net realized and unrealized gain (loss) on
investments .............................. 842,320 (1,287,181) 108,431 (983,164) 15,923,634 30,489,306
---------- ----------- --------- ---------- ------------ -------------
Net increase (decrease) in net assets
resulting from operations ................ $ 824,053 $ 546,659 $ 366,110 $ (159,546) $ 20,311,925 $ 161,585,725
=========== =========== ========= ========== ============ =============
</TABLE>
71
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U STATEMENTS OF
OPERATIONS (Unaudited) (continued) Years and periods
ended March 31, 2000
<TABLE>
<CAPTION>
Managed Short-Term Bond Small Cap Value
Subaccount Subaccount Subaccount
-------------------- ------------------- -------------------
3/31/00 12/31/99 3/31/00 12/31/99 3/31/00 12/31/99
------- -------- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I ................. $3,259,037 $ 39,951,885 $ 15,547 $ 53,689 $ 19,612 $ 97,290
M Fund Inc............................................ -- -- -- -- -- --
Interest income on pol. loans .......................... 1,368,321 5,217,121 -- -- -- --
---------- ------------ -------- -------- -------- ---------
Total investment income ................................ 4,627,358 45,169,006 15,547 53,689 19,612 97,290
Expenses:.....
Mortality and expense risks .......................... 663,688 2,636,085 1,503 5,065 6,137 24,661
---------- ------------ -------- -------- -------- ---------
Net investment income .................................. 3,963,670 42,532,921 14,044 48,624 13,475 72,629
Net realized /unrealized gain (loss):
Net realized gains (loss) ............................ 1,779,374 5,060,826 (11,242) (3,107) (89,286) (217,582)
Net unrealized appreciation/(depreciation) during
year ............................................... 2,190,074 (9,288,287) 7,393 (23,648) 64,023 (40,472)
---------- ------------ -------- -------- -------- ---------
Net realized and unrealized gain/loss on investments ... 3,969,448 (4,227,461) (3,849) (26,755) (25,263) (258,054)
---------- ------------ -------- -------- -------- ---------
Net increase (decrease) in net assets resulting from
operations ........................................... $7,933,118 $ 38,305,460 $ 10,195 $ 21,869 $(11,788) $(185,425)
========== ============ ======== ======== ======== =========
</TABLE>
<TABLE>
<CAPTION>
International
Opportunities Equity Index Global Bond
Subaccount Subaccount Subaccount
-------------------- ------------------- ------------------
3/31/00 12/31/99 3/31/00 12/31/99 3/31/00 12/31/99
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I ................ $ -- $ 354,646 $ 68,127 $ 921,698 $ 6,003 $ 91,316
M Fund Inc........................................... -- -- -- -- -- --
Interest income on pol. loans ......................... -- -- -- -- -- --
--------- ---------- -------- --------- -------- ----------
Total investment income ............................... -- 354,646 68,127 921,698 6,003 91,316
Expenses:
Mortality and expense risks ......................... 8,298 24,257 33,425 103,983 2,419 9,736
--------- ---------- -------- --------- -------- ----------
Net investment income (loss) .......................... (8,298) 330,389 34,702 817,715 3,584 81,580
Net realized and unrealized gain (loss):
Net realized gains (loss) ........................... 273,099 123,861 211,295 471,802 (34,492) (1,996)
Net unrealized appreciation/(depreciation) during
year .............................................. (264,847) 839,140 357,753 2,019,913 56,600 (126,001)
--------- ---------- -------- --------- -------- ----------
Net realized and unrealized gain/loss on investments .. 8,252 963,001 569,048 2,491,715 22,108 (127,997)
--------- ---------- -------- --------- -------- ----------
Net increase (decrease) in net assets resulting from
operations .......................................... $ (46) $1,293,390 $ 603,750 $3,309,430 $ 25,692 $ (46,417)
========= ========== ======== ========= ======== ==========
</TABLE>
72
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (Unaudited) (continued)
Years and periods ended March 31, 2000
<TABLE>
<CAPTION>
Frontier Capital
Turner Core Growth Brandes International Appreciation
Subaccount Equity Subaccount Subaccount
------------------ --------------------- -------------------
3/31/00 12/31/99 3/31/00 12/31/99 3/31/00 12/31/99
------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I..................... $ -- $ 38,038 $ -- $ 18,453 $ -- $ 20,787
M Fund Inc............................................... -- -- -- -- -- --
Interest income on pol. loans.............................. -- -- -- -- -- --
------- -------- -------- -------- -------- --------
Total investment income.................................... -- 38,038 -- 18,453 -- 20,787
Expenses:
Mortality and expense risks.............................. 896 2,102 839 1,904 1,272 3,019
------- -------- -------- -------- -------- --------
Net investment income (loss)............................... (896) 35,936 (839) 16,549 (1,272) 17,768
Net realized and unrealized gain (loss):
Net realized gains....................................... 30,452 44,245 4,371 7,704 4,012 22,678
Net unrealized appreciation/(depreciation) during year... 33,249 37,727 (23,065) 119,400 133,921 164,599
------- -------- -------- -------- -------- --------
Net realized and unrealized gain/loss on investments....... 63,701 81,972 (18,694) 127,104 137,933 187,277
------- -------- -------- -------- -------- --------
Net increase (decrease) in net assets resulting from
operations............................................... $62,805 $117,908 $(19,533) $143,653 $136,661 $205,045
======= ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Emerging International
Markets Equity Opportunities II Bond Index
Subaccount Subaccount Subaccount
------------------ ----------------- -------------------
3/31/00 12/31/99 3/31/00 12/31/99 3/31/00 12/31/99
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I...................... $ -- $ 13,510 $ -- $ -- $ 12,540 $ 17,417
M Fund Inc................................................ -- -- -- -- -- --
Interest income on pol. loans............................... -- -- -- -- -- --
------- -------- ------- ----- -------- --------
Total investment income..................................... -- 13,510 -- -- 12,540 17,417
Expenses:
Mortality and expense risks............................... 1,021 720 243 -- 967 1,565
------- -------- ------- ----- -------- --------
Net investment income (loss)................................ (1,021) 12,790 (243) -- 11,573 15,852
Net realized and unrealized gain (loss):
Net realized gains (loss)................................. 32,912 5,339 12,897 -- (1,322) (1,422)
Net unrealized appreciation/(depreciation) during year.... 987 86,570 (4,172) -- 8,814 (22,820)
------- -------- ------- ----- -------- --------
Net realized and unrealized gain/loss on investments........ 33,899 91,909 8,725 -- 7,492 (24,242)
------- -------- ------- ----- -------- --------
Net increase (decrease) in net assets resulting from
operations.................................................. $32,878 $104,699 $ 8,482 $ -- $ 19,065 $ (8,390)
======= ======== ======= ===== ======== ========
</TABLE>
73
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF OPERATIONS (Unaudited) (continued)
Years and periods ended March 31, 2000
<TABLE>
<CAPTION>
Small/Mid High Yield Enhanced US
Cap Core Bond Equity Fund
Subaccount Subaccount Subaccount
------------------- ------------------ --------------------
3/31/00 12/31/99 3/31/00 12/31/99 3/31/00 12/31/99
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Distributions received from:
John Hancock Variable Series Trust I.................... $ 14 $ 6,810 $ 3,675 $ 2,748 $ -- $ 1,117
M Fund Inc.............................................. -- -- -- -- -- --
Interest income on pol. loans............................. -- -- -- -- -- --
Total investment income................................... 14 6,810 3,675 2,748 -- 1,117
Expenses:
Mortality and expense risks............................. 200 178 218 206 23 4
Net investment income (loss).............................. (186) 6,632 3,457 2,542 (23) 1,113
Net realized and unrealized gain (loss):
Net realized gains (loss)............................... 9,798 252 (260) (186) (16) 91
Net unrealized appreciation/(depreciation) during year.. (1,113) 3,005 (10,047) (511) 473 (879)
Net realized and unrealized gain/loss on investments...... 8,685 3,257 (10,307) (697) 457 (788)
Net increase (decrease) in net assets resulting from
operations.............................................. $ 8,499 $ 9,889 $ (6,850) $ 1,845 $ 434 $ 325
======= ======== ======== ======== ======= ========
</TABLE>
74
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
Years and periods ended March 31, 2000
<TABLE>
<CAPTION>
Large Cap Growth Active Bond International Equity
Subaccount Subaccount Index Subaccount
--------------------------- --------------------------- -------------------------
3/31/00 12/31/99 3/31/00 12/31/99 3/31/00 12/31/99
------------ ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss).......... $ 236,595 $ 24,389,814 $ 3,768,425 $ 20,233,648 $ 79,569 $ 950,123
Net realized gain (loss).............. 833,861 4,239,424 (35,588) 192,098 75,508 168,248
Net unrealized appreciation
(depreciation) during year........... 11,027,522 1,727,703 911,538 (20,304,536) (103,509) 5,712,567
------------ ------------ ------------ ------------ ----------- -----------
Net increase (decrease) in net assets
from operations....................... 12,097,978 30,356,941 4,644,375 121,210 51,568 6,830,938
From policyholder transactions:
Net premiums from
policyholders....................... 17,535,837 37,307,814 6,448,058 26,114,799 5,057,274 7,373,967
Net benefits to policyholders......... 11,509,631 (25,817,420) 10,977,903 (35,577,616) 2,533,065 (6,834,914)
Net increase in policy loans.......... 1,648,133 -- 137,166 -- 150,456 --
------------ ------------ ------------ ------------ ----------- -----------
Net increase (decrease) in net assets
from policyholder transactions........ 7,674,339 11,490,394 (4,392,679) (9,462,817) 2,674,665 539,053
------------ ------------ ------------ ------------ ----------- -----------
Net increase (decrease) in net
assets................................ 19,772,317 41,847,335 251,696 (9,341,607) 2,726,233 7,369,991
Net assets at beginning of year......... 177,062,332 135,214,997 293,120,799 302,462,406 31,899,039 24,529,048
------------ ------------ ------------ ------------ ----------- -----------
Net assets at end of year............... $196,834,649 $177,062,332 $293,372,495 $293,120,799 $34,625,272 $31,899,039
============ ============ ============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Small Cap Growth International Balanced Mid Cap Growth
Subaccount Subaccount Subaccount
---------------------------- -------------------- -------------------------
3/31/00 12/31/99 3/31/00 12/31/99 3/31/00 12/31/99
------------- ------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss)......... $ (20,232) $ 1,234,844 $ 4,847 $ 92,816 $ (38,680) $ 2,058,661
Net realized gain (loss)............. 284,315 491,241 (6,325) 4,711 208,009 773,222
Net unrealized appreciation
(depreciation) during year......... 1,372,558 2,317,857 (33,662) (38,997) (141,158) 6,801,000
------------- ------------- -------- ----------- ----------- -----------
Net increase (decrease) in net assets
from operations...................... 1,636,641 4,043,942 (35,140) 58,530 28,171 9,632,883
From policyholder transactions:
Net premiums from
policyholders...................... 3,906,647 4,316,218 53,815 7,140,951 7,140,951 8,941,124
Net benefits to policyholders........ 1,535,931 (2,206,402) 250,109 1,893,248 1,893,248 (2,937,257)
Net increase in policy loans......... -- -- -- -- -- --
------------- ------------- -------- ----------- ----------- -----------
Net increase (decrease) in net assets
from policyholder transactions....... 2,370,716 2,109,816 (196,294) 246,627 5,247,703 6,003,867
------------- ------------- -------- ----------- ----------- -----------
Net increase (decrease) in net assets.. 4,007,357 6,153,758 (231,434) 305,157 5,275,874 15,636,750
Net assets at beginning of year........ 10,825,578 4,671,820 1,177,232 872,075 20,852,255 5,215,505
------------- ------------- -------- ----------- ----------- -----------
Net assets at end of year.............. $ 14,832,935 $ 10,825,578 $ 945,798 $ 1,177,232 $26,128,129 $20,852,255
============= ============= ======== =========== =========== ===========
</TABLE>
75
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited) (continued)
Years and periods ended March 31, 2000
<TABLE>
<CAPTION>
Large Cap Value Money Market Mid Cap Value
Subaccount Subaccount Subaccount
-------------------------- -------------------------- ----------------------------
3/31/00 12/31/99 3/31/00 12/31/99 3/31/00 12/31/99
----------- ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss)........... $ 42,362 $ 593,922 $ 1,004,539 $ 3,517,874 $ (8,049) $ 1,508
Net realized gain (loss)............... (14,489) 165,556 -- -- (29,925) (241,740)
Net unrealized appreciation
(depreciation) during year........... (300,198) (569,216) -- -- 476,989 469,537
----------- ------------ ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
from operations........................ (272,325) 190,262 1,004,539 3,517,874 439,015 229,305
From policyholder transactions:
Net premiums from policyholders........ 1,393,271 3,166,658 7,811,240 33,694,123 769,913 1,886,594
Net benefits to policyholders.......... 670,381 (1,903,017) 10,874,536 (30,672,090) 703,010 (1,754,112)
Net increase in policy loans........... -- -- (152,562) -- -- --
----------- ------------ ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
from policyholder transactions......... 722,890 1,263,641 (3,215,858) 3,022,033 66,903 141,482
----------- ------------ ----------- ------------ ------------ ------------
Net increase (decrease) in net assets.... 450,565 1,453,903 (2,211,319) 6,539,907 505,918 370,787
Net assets at beginning of year.......... 9,553,293 8,099,390 76,638,641 70,098,734 5,236,580 4,865,793
----------- ------------ ----------- ------------ ------------ ------------
Net assets at end of year................ $10,003,858 $ 9,553,293 $74,427,322 $ 76,638,641 $ 5,742,498 $ 5,236,580
=========== ============ =========== ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Small/Mid Cap Growth Real Estate Equity Growth & Income
Subaccount Subaccount Subaccount
------------------------- -------------------------- -------------------------------
3/31/00 12/31/99 3/31/00 12/31/99 3/31/00 12/31/99
----------- ----------- ----------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income (loss)......... $ (18,267) $ 1,833,840 $ 257,679 $ 823,618 $ 4,388,291 $ 131,096,419
Net realized gain (loss)............. (182,463) (13,020) (43,024) 123,591 8,209,775 22,802,197
Net unrealized appreciation
(depreciation) during year......... 1,024,783 (1,274,161) 151,455 (1,106,755) 7,713,859 7,687,109
----------- ----------- ----------- ------------ -------------- --------------
Net increase (decrease) in net assets
from operations...................... 824,053 546,659 366,110 (159,546) 20,311,925 161,585,725
From policyholder transactions:
Net premiums from policyholders...... 646,259 3,493,643 783,270 2,304,591 25,986,761 101,973,160
Net benefits to policyholders........ 1,241,087 (3,105,108) 1,054,195 (3,311,591) 44,381,986 (133,701,210)
Net increase in policy loans......... -- -- 20,586 -- 2,445,040 --
----------- ----------- ----------- ------------ -------------- --------------
Net increase (decrease) in net assets
from policyholder transactions....... (594,828) 388,535 (250,339) (1,007,000) (15,950,185) (31,728,050)
----------- ----------- ----------- ------------ -------------- --------------
Net increase (decrease) in net assets.. 229,225 935,194 115,771 (1,166,546) 4,361,740 129,857,675
Net assets at beginning of year........ 12,409,573 11,474,379 13,378,472 14,545,018 1,278,739,554 1,148,881,879
----------- ----------- ----------- ------------ -------------- --------------
Net assets at end of year.............. $12,638,798 $12,409,573 $13,494,243 $ 13,378,472 $1,283,101,294 $1,278,739,554
=========== =========== =========== ============ ============== ==============
</TABLE>
76
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited) (continued)
Years and periods ended March 31, 2000
<TABLE>
<CAPTION>
Short-Term
US Government Small Cap Value
Managed Subaccount Subaccount Subaccount
------------------------- ---------------------- -----------------------
3/31/00 12/31/99 3/31/00 12/31/99 3/31/00 12/31/99
------------ --------- ---------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income.......................... $ 3,963,670 $ 42,532,921 $ 14,044 $ 48,624 $ 13,475 $ 72,629
Net realized gain (loss)....................... 1,779,374 5,060,826 (11,242) (3,107) (89,286) (217,582)
Net unrealized appreciation (depreciation)
during year.................................... 2,190,074 (9,288,287) 7,393 (23,648) 64,023 (40,472)
------------ ------------ --------- --------- --------- -----------
Net increase (decrease) in net assets from
operations..................................... 7,933,118 38,305,460 10,195 21,869 (11,788) (185,425)
From policyholder transactions:
Net premiums from policyholders................ 11,055,778 44,546,082 128,741 690,849 778,782 1,446,109
Net benefits to policyholders.................. 18,933,923 (55,332,758) 299,033 (178,124) 677,820 (1,547,128)
Net increase in policy loans................... 990,416 -- -- -- -- --
------------ ------------ --------- --------- --------- -----------
Net increase (decrease) in net assets from
policyholder transactions...................... (6,887,729) (10,786,676) (170,292) 512,725 100,962 (101,019)
------------ ------------ --------- --------- --------- -----------
Net increase (decrease) in net assets............ 1,045,389 27,518,784 (160,097) 534,594 89,174 (286,444)
Net assets at beginning of year.................. 500,072,750 472,553,966 1,129,483 594,889 4,111,416 4,397,860
------------ ------------ --------- --------- ---------- -----------
Net assets at end of year........................ $501,118,139 $500,072,750 $ 969,386 $1,129,483 $4,200,590 $ 4,111,416
============ ============ ========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
International Opportunities Equity Index Global Bond
Subaccount Subaccount Subaccount
--------------------------- ----------------------- -----------------------
3/31/00 12/31/99 3/31/00 12/31/99 3/31/00 12/31/99
--------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income..................... $ (8,298) $ 330,389 $ 34,702 $ 817,715 $ 3,584 $ 81,580
Net realized gain (loss).................. 273,099 123,861 211,295 471,802 (34,492) (1,996)
Net unrealized appreciation (depreciation)
during year............................... (264,847) 839,140 357,753 2,019,913 56,600 (126,001)
---------- ----------- ----------- ----------- ---------- ----------
Net increase (decrease) in net assets from
operations................................ (46) 1,293,390 603,750 3,309,430 25,692 (46,417)
From policyholder transactions:assets from
Net premiums from policyholders........... 1,588,931 1,632,955 3,319,881 7,762,529 158,914 1,115,699
Net benefits to policyholders............. 1,133,045 (1,315,539) 1,163,753 (2,563,485) 558,343 (292,075)
Net increase in policy loans.............. -- -- -- -- -- --
---------- ----------- ----------- ----------- ---------- ----------
Net increase (decrease) in net assets from
policyholder transactions................. 455,886 317,416 2,156,129 5,199,044 (399,429) 823,624
---------- ----------- ----------- ----------- ---------- ----------
Net increase (decrease) in net assets....... 455,840 1,610,806 2,759,879 8,508,474 (373,737) 777,207
Net assets at beginning of year............. 5,310,586 3,699,780 22,117,624 13,609,150 1,882,675 1,105,468
---------- ----------- ----------- ----------- ---------- ----------
Net assets at end of year................... $5,766,426 $ 5,310,586 $24,877,503 $22,117,624 $1,508,938 $1,882,675
========== =========== =========== =========== ========== ==========
</TABLE>
77
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited) (continued)
Years and periods ended March 31, 2000
<TABLE>
<CAPTION>
Turner Core Growth Brandes International Frontier Capital
Subaccount Equity Subaccount Appreciation Subaccount
--------------------- --------------------- -----------------------
3/31/00 12/31/99 3/31/00 12/31/99 3/31/00 12/31/99
--------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss).......................... $ (896) $ 35,936 $ (839) $ 16,549 $ (1,272) $ 17,768
Net realized gain..................................... 30,452 44,245 4,371 7,704 4,012 22,678
Net unrealized appreciation (depreciation)
during year.......................................... 33,249 37,727 (23,065) 119,400 133,921 164,599
-------- --------- -------- -------- ---------- --------
Net increase (decrease) in net assets from operations... 62,805 117,908 (19,533) 143,653 136,661 205,045
From policyholder transactions:
Net premiums from policyholders....................... 124,348 240,351 34,073 239,618 181,792 255,268
Net benefits to policyholders......................... 77,412 (136,661) 12,716 (29,520) 10,222 (89,136)
Net increase in policy loans.......................... -- -- -- -- -- --
-------- --------- -------- -------- ---------- --------
Net increase in net assets from policyholder
transactions......................................... 46,936 103,690 21,357 210,098 171,570 166,132
-------- --------- -------- -------- ---------- --------
Net increase in net assets 109,741 221,598 1,824 353,751 308,231 371,177
Net assets at beginning of year......................... 536,192 314,594 588,128 234,377 728,674 357,497
-------- --------- -------- -------- ---------- --------
Net assets at end of year............................... $645,933 $ 536,192 $589,952 $588,128 $1,036,905 $728,674
======== ========= ======== ======== ========== ========
</TABLE>
<TABLE>
<CAPTION>
Emerging Markets International
Equity Opportunities II Bond Index
Subaccount Subaccount Subaccount
---------------------- ---------------------- ----------------------
3/31/00 12/31/99 3/31/00 12/31/99 3/31/00 12/31/99
--------- ---------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss)............................. $ (1,021) $ 12,790 $ (243) $ 241 $ 11,573 $ 15,852
Net realized gain (loss)................................. 32,912 5,339 12,897 602 (1,322) (1,422)
Net unrealized appreciation (depreciation)
during year............................................ 886 86,570 (4,172) 13,424 8,814 (22,820)
---------- --------- -------- -------- -------- --------
Net increase (decrease) in net assets from operations..... 32,777 104,699 8,482 14,267 19,065 (8,390)
From policyholder transactions:
Net premiums from policyholders.......................... 716,194 433,406 144,487 108,420 323,644 412,326
Net benefits to policyholders............................ 122,864 (144,400) 53,408 (11,064) 15,396 (26,307)
Net increase in policy loans............................. -- -- -- -- -- --
---------- --------- -------- -------- -------- --------
Net increase in net assets from policyholder
transactions........................................... 593,330 289,006 91,079 97,356 308,248 386,019
---------- --------- -------- -------- -------- --------
Net increase in net assets................................ 626,107 393,705 99,561 111,623 327,313 377,629
Net assets at beginning of year........................... 395,734 2,029 112,572 949 387,763 10,134
---------- --------- -------- -------- -------- --------
Net assets at end of year................................. $1,021,841 $ 395,734 $212,133 $112,572 $715,076 $387,763
========== ========= ======== ======== ======== ========
</TABLE>
78
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited) (continued)
Years and periods ended March 31, 2000
<TABLE>
<CAPTION>
Small/Mid Cap CORE High Yield Bond Enhanced US Equity Fund
Subaccount Subaccount Subaccount
--------------------- --------------------- -----------------------
3/31/00 12/31/99 3/31/00 12/31/99 3/31/00 12/31/99
--------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss).............................. $ (186) $ 6,632 $ 3,457 $ 2,542 $ (23) $ 1,113
Net realized gain (loss).................................. 9,798 252 (260) (186) (16) 91
Net unrealized appreciation (depreciation)
during year.............................................. (1,113) 3,005 (10,047) (511) 473 (879)
-------- ------- -------- -------- ------- -------
Net increase (decrease) in net assets from operations...... 8,499 9,889 (6,850) 1,845 434 325
From policyholder transactions:
Net premiums from policyholders........................... 125,879 97,285 117,055 98,955 4,402 13,814
Net benefits to policyholders............................. 86,638 (7,901) (24,046) (13,078) 135 --
Net increase in policy loans.............................. -- -- -- -- -- --
-------- ------- -------- -------- ------- -------
Net increase in net assets resulting from policyholder
transactions............................................. 39,241 89,484 141,101 85,877 4,267 13,814
-------- ------- -------- -------- ------- -------
Net increase in net assets................................. 47,740 99,373 134,251 87,722 4,701 14,139
Net assets at beginning of year............................ 99,481 108 90,601 2,879 14,139 --
-------- ------- -------- -------- ------- -------
Net assets at end of year.................................. $147,221 $99,481 $224,852 $ 90,601 $18,840 $14,139
======== ======= ======== ======== ======= =======
</TABLE>
79
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (Unaudited)
March 31, 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 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.
80
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (Unaudited) (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.
81
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Note 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 March 31, 2000 were as follows:
<TABLE>
<CAPTION>
Subaccount Shares Owned Cost Value
---------- ---------------- -------------- ---------------
<S> <C> <C> <C>
Large Cap Growth................................................ 5,741,593 $127,611,841 $ 174,861,561
Active Bond..................................................... 25,890,030 248,439,590 234,884,827
International Equities.......................................... 1,479,056 26,796,589 31,570,772
Small Cap Growth................................................ 566,326 10,421,963 14,833,170
International Balanced.......................................... 109,967 976,041 943,471
Mid Cap Growth.................................................. 713,403 18,626,024 26,128,545
Large Cap Value................................................. 708,140 10,602,588 9,984,441
Money Market.................................................... 6,251,999 60,394,274 60,394,274
Mid Cap Value................................................... 409,851 5,119,226 5,742,590
Small/Mid Cap Growth............................................ 884,190 12,886,858 12,638,999
Real Estate Equity.............................................. 1,000,760 13,828,433 11,473,072
Growth & Income................................................. 54,521,668 789,399,326 1,091,691,749
Managed......................................................... 27,360,590 359,653,541 421,340,461
Short-Term Bond................................................. 116,179 984,899 964,359
Small Cap Value................................................. 376,603 4,518,967 4,195,612
International Opportunities..................................... 350,017 4,936,164 5,766,520
Equity Index.................................................... 1,081,124 19,188,937 24,855,784
Global Bond..................................................... 191,740 1,557,904 1,503,338
Turner Core Growth.............................................. 23,384 512,537 645,943
Brandes International Equity.................................... 37,895 474,795 589,962
Frontier Capital Appreciation................................... 34,502 713,685 1,036,922
Emerging Markets Equity......................................... 32,273 934,391 1,021,858
International Opportunities II.................................. 9,277 202,840 212,136
Bond Index...................................................... 41,614 725,415 711,214
Small/Mid Cap CORE.............................................. 10,135 145,325 147,223
High Yield Bond................................................. 10,083 233,901 233,317
Enhanced US Equity Fund......................................... 674 19,248 18,840
</TABLE>
82
<PAGE>
JOHN HANCOCK VARIABLE LIFE ACCOUNT U
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Note 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 through
March 31, 2000, were as follows:
<TABLE>
<CAPTION>
Subaccount Purchases Sales
---------- ------------ -------------
<S> <C> <C>
Large Cap Growth...................................................................... $7,703,632 $ 1,634,696
Active Bond........................................................................... 4,631,457 6,822,636
International Equities Index.......................................................... 2,952,172 409,335
Small Cap Growth...................................................................... 2,927,333 576,614
International Balanced................................................................ 47,905 241,680
Mid Cap Growth........................................................................ 5,525,701 316,264
Large Cap Value....................................................................... 1,068,502 322,668
Money Market.......................................................................... 3,921,376 6,047,088
Mid Cap Value......................................................................... 519,074 460,127
Small/Mid Cap Growth.................................................................. 333,038 945,931
Real Estate Equity.................................................................... 561,232 679,296
Growth & Income....................................................................... 3,312,140 18,594,430
Managed............................................................................... 3,380,888 8,682,348
Short-Term U.S. Government............................................................ 109,566 270,842
Small Cap Value....................................................................... 431,639 322,180
International Opportunities........................................................... 1,486,284 1,038,602
Equity Index.......................................................................... 2,672,849 503,739
Global Bond........................................................................... 161,296 562,740
Turner Core Growth.................................................................... 121,407 75,357
Brandes International Equity.......................................................... 33,343 12,815
Frontier Capital Appreciation......................................................... 180,928 10,614
Emerging Markets Equity............................................................... 685,355 93,029
International Opportunities II........................................................ 193,288 102,449
Bond Index............................................................................ 335,583 19,625
Small/Mid Cap CORE.................................................................... 123,200 84,142
High Yield Bond....................................................................... 147,370 4,355
Enhanced US Equity Fund............................................................... 4,387 143
</TABLE>
83
<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
84
<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.
85
<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
------------ ------------- -------------- -------------
Assets
<S> <C> <C> <C> <C>
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 $ 3,378,472 $1,278,739,554
========== =========== =========== ==============
</TABLE>
<TABLE>
<CAPTION>
Short-Term Small Cap International
Managed Bond Value Opportunities
Subaccount Subaccount Subaccount Subaccount
---------- ----------- ------------ --------------
Assets
<S> <C> <C> <C> <C>
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.
86
<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.
87
<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.
88
<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.
89
<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.
90
<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.
91
<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 operations.......................... $ (185,425) $ (301,352) $ 342,998 $1,293,390 $ 412,784 $ (39,440)
=========== =========== =========== ========== ========== ==========
</TABLE>
See accompanying notes.
92
<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.
93
<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.
94
<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.
95
<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 (decrease) 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.
96
<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) 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>
97
<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.
98
<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.
99
<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
========= ========== ========= ========= ======= ========== =========
<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.................. (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 (decrease) in net assets
resulting from policyholder
transactions...................... 386,019 10,185 89,484 102 85,877 2,887 13,814
--------- --------- -------- ------ -------- ------- --------
Net increase (decrease) 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.
100
<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.
101
<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.
102
<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>
103
<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>
104
<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
<S> <C>
Account................................................................. 27
account value........................................................... 7
attained age............................................................ 8
beneficiary............................................................. 37
business day............................................................ 28
changing Option 1 or 2.................................................. 14
changing the face amount................................................ 14
charges................................................................. 7
Code.................................................................... 33
cost of insurance rates................................................. 8
date of issue........................................................... 29
death benefit........................................................... 4
deductions.............................................................. 7
dollar cost averaging................................................... 11
expenses of the Series Funds............................................ 9
face amount............................................................. 13
fixed investment option................................................. 28
full surrender.......................................................... 12
fund.................................................................... 2
grace period............................................................ 6
guaranteed death benefit feature........................................ 6
Guaranteed Death Benefit Premium........................................ 6
insurance charge........................................................ 8
insured person.......................................................... 4
investment options...................................................... 1
JHVLICO................................................................. 27
John Hancock Variable Series Trust...................................... 2
lapse................................................................... 6
loan.................................................................... 12
loan interest........................................................... 12
maximum premiums........................................................ 5
Minimum Initial Premium................................................. 28
minimum insurance amount................................................ 13
modified endowment contract............................................. 34
monthly deduction date.................................................. 29
mortality and expense risk charge....................................... 8
Option 1; Option 2; Option 3............................................ 13
optional benefits charge................................................ 8
owner................................................................... 4
partial withdrawal...................................................... 12
partial withdrawal charge............................................... 9
payment options......................................................... 15
Planned Premium......................................................... 5
policy anniversary...................................................... 29
policy year............................................................. 29
premium; premium payment................................................ 4
prospectus.............................................................. 2
receive; receipt........................................................ 17
reinstate; reinstatement................................................ 6
sales and administrative charges........................................ 7
SEC..................................................................... 2
Separate Account U...................................................... 27
Servicing Office........................................................ 1
special loan account.................................................... 12
subaccount.............................................................. 27
surrender............................................................... 12
surrender charge........................................................ 8
surrender value......................................................... 12
Target Premium.......................................................... 7
tax considerations...................................................... 33
telephone transfers..................................................... 18
transfers of account value.............................................. 11
variable investment options............................................. 1
we; us.................................................................. 27
withdrawal.............................................................. 12
withdrawal charges...................................................... 9
you; your............................................................... 4
</TABLE>
105
