<PAGE>
FILE NOS. 2-38827
811-2143
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [_]
[X]
POST-EFFECTIVE AMENDMENT NO. 38
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
[X]
AMENDMENT NO. 19
(CHECK APPROPRIATE BOX OR BOXES.)
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT U
(EXACT NAME OF REGISTRANT)
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
JOHN HANCOCK PLACE, BOSTON, MA 02117
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 572-6475
FRANCIS C. CLEARY, JR., ESQUIRE
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
JOHN HANCOCK PLACE
BOSTON, MA 02117
(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing will become effective (check appropriate
space)
[_] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1996, pursuant to paragraph (b) of Rule 485
[_] 60 days after filing pursuant to paragraph (a) of Rule 485
[_] on (date) pursuant to paragraph (a) of Rule 485
If appropriate check the following box
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Pursuant to the provisions of Rule 24f-2, Registrant has registered an in-
definite amount of the securities being offered and filed its Notice for fis-
cal 1995 pursuant to Rule 24f-2 on February 22, 1996.
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<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT U
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-4 ITEM NO. SECTION IN PROSPECTUS
----------------- ---------------------
<C> <S> <C>
1. Cover Page................... Cover Page
2. Definitions.................. Special Terms; Variable Account Valuation
Procedures
3. Synopsis or Highlights....... Summary Information
4. Condensed Financial Condensed Financial Information
Information.................
5. General Description of
Registrant, Depositor and John Hancock, The Account and the Series
Portfolio Companies......... Fund; Voting Privileges; Distribution of
the Contracts
6. Deductions................... Charges Under Variable Annuity Contracts
7. General Description of The Contracts; The Accumulation Period;
Variable Annuity Contracts.. Miscellaneous Provisions; Changes in
Applicable Law--Funding and Otherwise
8. Annuity Period............... The Annuity Period
9. Death Benefit................ The Accumulation Period; The Annuity Period
10. Purchases and Contract The Contracts; The Accumulation Period;
Values...................... Variable Account Valuation Procedures;
Performance
11. Redemptions.................. The Accumulation Period; Miscellaneous
Provisions; Summary Information
12. Taxes........................ Federal Income Taxes
13. Legal Proceedings............ Not Applicable
14. Table of Contents of
Statement of Additional Table of Contents of Statement of
Information................. Additional Information
</TABLE>
<PAGE>
[LOGO OF JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY APPEARS HERE]
Mutual Life
Insurance Company
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT U
JOHN HANCOCK PLACE, BOSTON, MASSACHUSETTS 02117
TELEPHONE 800-REAL LIFE (800-732-5543)
PROSPECTUS MAY 1, 1996
The individual variable annuity contracts ("Contracts") described in this
prospectus can be funded, at the discretion of the Owner by, at any one time,
up to ten of the eighteen subaccounts of John Hancock Variable Annuity Account
U ("Account"). The assets of each subaccount will be invested in a correspond-
ing Portfolio of John Hancock Variable Series Trust I ("Fund"), a mutual fund
advised by John Hancock Mutual Life Insurance Company ("John Hancock").
Three types of Contracts are offered: (1) a periodic payment deferred con-
tract, (2) a single payment deferred contract, and (3) a single payment imme-
diate contract.
This prospectus sets forth concisely information about the Account that a
prospective investor ought to know before investing. A statement of additional
information for the Account, dated May 1, 1996, has been filed with the Secu-
rities and Exchange Commission ("Commission") and is incorporated herein by
reference. This statement, the table of contents of which appears at page 34
of this prospectus, is available upon request and without charge from the Ac-
count at the address or telephone number above.
The prospectus for the Fund, which is attached to this prospectus, describes
the investment objectives, policies and risks of investing in the Portfolios
of the Fund: Growth & Income (formerly Stock), Sovereign Bond (formerly Bond),
Money Market, Large Cap Growth (formerly Select Stock), Managed, Real Estate
Equity, International Equities (formerly International), Short-Term U.S. Gov-
ernment, Special Opportunities, Equity Index, Large Cap Value, Mid Cap Growth,
Mid Cap Value, Small Cap Growth, Small Cap Value, Strategic Bond, Interna-
tional Opportunities, and International Balanced.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
IT IS NOT VALID UNLESS ATTACHED TO A CURRENT PROSPECTUS FOR THE FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADE-
QUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OF-
FENSE.
<PAGE>
SYNOPSIS OF EXPENSE INFORMATION
SINGLE PAYMENT IMMEDIATE CONTRACTS
<TABLE>
<CAPTION>
SHORT-
TERM
LARGE REAL INTER- U.S. SPECIAL
GROWTH & SOVEREIGN MONEY CAP ESTATE NATIONAL GOVERN- OPPOR-
INCOME BOND MARKET GROWTH MANAGED EQUITY EQUITIES MENT TUNITIES
-------- --------- ------ ------ ------- ------ --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONTRACTOWNER
TRANSACTION EXPENSES
Maximum Sales Load on
Purchases (as a
percentage of purchase
payments)1............. 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
Deferred Sales Load (as
a percentage of
purchase payments)..... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Maximum Surrender Fees. NA NA NA NA NA NA NA NA NA
Exchange Fee........... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
ANNUAL CONTRACT FEE..... $0 $0 $0 $0 $0 $0 $0 $0 $0
SEPARATE ACCOUNT ANNUAL
EXPENSES
(as percentage of
average account value)
Mortality and Expense
Risk Fees.............. 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
Account Fees and
Expenses............... 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Total Separate Account
Annual Expenses........ 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of
average net assets)
Management Fees........ 0.25% 0.25% 0.25% 0.40% 0.34% 0.60% 0.60% 0.50% 0.75%
Other Expenses2........ 0.03% 0.05% 0.10% 0.07% 0.04% 0.13% 0.25%3 0.25%3 0.25%3
Total Fund Annual
Expenses............... 0.28% 0.30% 0.35% 0.47% 0.38% 0.73% 0.85% 0.75% 1.00%
<CAPTION>
INTER-
LARGE MID MID SMALL SMALL NATIONAL INTER-
EQUITY CAP CAP CAP CAP CAP STRATEGIC OPPOR- NATIONAL
INDEX VALUE GROWTH VALUE GROWTH VALUE BOND TUNITIES BALANCED
-------- --------- ------ ------ ------- ------ --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONTRACTOWNER
TRANSACTION EXPENSES
Maximum Sales Load on
Purchases (as a
percentage of purchase
payments)1............. 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
Deferred Sales Load (as
a percentage of
purchase payments)..... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Maximum Surrender Fees. NA NA NA NA NA NA NA NA NA
Exchange Fee........... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
ANNUAL CONTRACT FEE..... $0 $0 $0 $0 $0 $0 $0 $0 $0
SEPARATE ACCOUNT ANNUAL
EXPENSES
(as percentage of
average account value)
Mortality and Expense
Risk Fees.............. 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
Account Fees and
Expenses............... 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Total Separate Account
Annual Expenses........ 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of
average net assets)
Management Fees........ 0.25% 0.75% 0.85% 0.80% 0.75% 0.80% 0.75% 1.00% 0.85%
Other Expenses2........ 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Total Fund Annual
Expenses............... 0.50% 1.00% 1.10% 1.05% 1.00% 1.05% 1.00% 1.25% 1.10%
</TABLE>
2
<PAGE>
EXAMPLES
Single payment immediate annuity contracts cannot be surrendered and must be
annuitized not more than two months after receipt of the purchase payment at
the Home Office of John Hancock. You would pay the following expenses on a
$1000 investment, at the end of the applicable time period, assuming 5% return
on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS/4/ 10 YEARS/4/
------ ------- ---------- -----------
<S> <C> <C> <C> <C>
GROWTH & INCOME........................... $62 $ 89 $117 $197
SOVEREIGN BOND............................ $63 $ 89 $118 $199
MONEY MARKET.............................. $63 $ 91 $120 $204
LARGE CAP GROWTH.......................... $64 $ 94 $126 $217
MANAGED................................... $63 $ 92 $122 $207
REAL ESTATE EQUITY........................ $67 $102 $139 $244
INTERNATIONAL EQUITIES.................... $68 $105 $145 $256
SHORT-TERM U.S. GOVERNMENT................ $67 $102 $140 $246
SPECIAL OPPORTUNITIES..................... $69 $110 $152 $271
EQUITY INDEX.............................. $64 $ 95 NA NA
LARGE CAP VALUE........................... $69 $110 NA NA
MID CAP GROWTH............................ $70 $112 NA NA
MID CAP VALUE............................. $70 $111 NA NA
SMALL CAP GROWTH.......................... $69 $110 NA NA
SMALL CAP VALUE........................... $70 $111 NA NA
STRATEGIC BOND............................ $69 $110 NA NA
INTERNATIONAL OPPORTUNITIES............... $72 $117 NA NA
INTERNATIONAL BALANCED.................... $70 $113 NA NA
</TABLE>
/1/ The Sales Load Imposed on Purchase falls with increasing purchase size. The
sales load is calculated as follows:
$50 Administrative Expense Deduction per sale PLUS
4.00% of the first $10,000 (minimum sale is $5,000)
3.00% of the next $15,000
2.00% of the next $75,000
1.00% of any amount over $100,000
/2/ Other fund expenses in the Synopsis and Examples are based on the year
ended December 31, 1995, except with respect to the Equity Index, Large Cap
Value, Mid Cap Growth, Mid Cap Value, Small Cap Growth, Small Cap Value,
Strategic Bond, International Opportunities, and International Balanced
Portfolios, they are based on estimates for the current fiscal year.
/3/ John Hancock reimburses a Portfolio when the Portfolio's Other Expenses
exceed 0.25% of its average daily net asset value. This was done for the
year ended December 31, 1995 with respect to three Portfolios. Absent the
reimbursement, the other expenses percentages for the International
Equities, Short-Term U.S. Government, and Special Opportunities Portfolios
would have been 0.87%, 1.83%, and 1.91%, respectively.
/4/ Expense information for five and ten years is currently not available for
the Equity Index, Large Cap Value, Mid Cap Growth, Mid Cap Value, Small Cap
Growth, Small Cap Value, Strategic Bond, International Opportunities, and
International Balanced Portfolios.
3
<PAGE>
SINGLE PAYMENT DEFERRED CONTRACTS
<TABLE>
<CAPTION>
SHORT-
TERM
LARGE REAL INTER- U.S. SPECIAL
GROWTH & SOVEREIGN MONEY CAP ESTATE NATIONAL GOVERN- OPPOR-
INCOME BOND MARKET GROWTH MANAGED EQUITY EQUITIES MENT TUNITIES
-------- --------- ------ ------ ------- ------ --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONTRACTOWNER
TRANSACTION EXPENSES
Maximum Sales Load on
Purchases (as a
percentage of purchase
payments)/1/.......... 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50%
Deferred Sales Load (as
a percentage of
purchase payments).... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Maximum Surrender Fees. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Exchange Fee........... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
ANNUAL CONTRACT FEE..... $0 $0 $0 $0 $0 $0 $0 $0 $0
SEPARATE ACCOUNT ANNUAL
EXPENSES
(as a percentage of
average account value)
Mortality and Expense
Risk Fees............. 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
Account Fees and Ex-
penses................ 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Total Separate Account
Annual Expenses....... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of av-
erage net assets)
Management Fees........ 0.25% 0.25% 0.25% 0.40% 0.34% 0.60% 0.60% 0.50% 0.75%
Other Expenses/2/...... 0.03% 0.05% 0.10% 0.07% 0.04% 0.13% 0.25%3 0.25%/3/ 0.25%/3/
Total Fund Annual
Expenses.............. 0.28% 0.30% 0.35% 0.47% 0.38% 0.73% 0.85% 0.75% 1.00%
<CAPTION>
INTER-
MID MID SMALL SMALL NATIONAL INTER-
EQUITY LARGE CAP CAP CAP CAP CAP STRATEGIC OPPOR- NATIONAL
INDEX VALUE GROWTH VALUE GROWTH VALUE BOND TUNITIES BALANCED
-------- --------- ------ ------ ------- ------ --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONTRACTOWNER
TRANSACTION EXPENSES
Maximum Sales Load on
Purchases (as a
percentage of purchase
payments)/1/.......... 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50%
Deferred Sales Load (as
a percentage of
purchase payments).... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Maximum Surrender Fees. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Exchange Fee........... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
ANNUAL CONTRACT FEE..... $0 $0 $0 $0 $0 $0 $0 $0 $0
SEPARATE ACCOUNT ANNUAL
EXPENSES
(as a percentage of
average account value)
Mortality and Expense
Risk Fees............. 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
Account Fees and Ex-
penses................ 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Total Separate Account
Annual Expenses....... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of av-
erage net assets)
Management Fees........ 0.25% 0.75% 0.85% 0.80% 0.75% 0.80% 0.75% 1.00% 0.85%
Other Expenses/2/...... 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Total Fund Annual
Expenses.............. 0.50% 1.00% 1.10% 1.05% 1.00% 1.05% 1.00% 1.25% 1.10%
</TABLE>
4
<PAGE>
EXAMPLES
Whether or not you surrender your contract or annuitize at the end of the ap-
plicable time period, you would pay the following expenses on a $1000 invest-
ment, assuming 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS/4/ 10 YEARS/4/
------ ------- ---------- -----------
<S> <C> <C> <C> <C>
GROWTH & INCOME........................... $67 $ 93 $121 $201
SOVEREIGN BOND............................ $68 $ 94 $122 $203
MONEY MARKET.............................. $68 $ 95 $125 $208
LARGE CAP GROWTH.......................... $69 $ 99 $131 $221
MANAGED................................... $68 $ 96 $126 $212
REAL ESTATE EQUITY........................ $72 $106 $144 $248
INTERNATIONAL EQUITIES.................... $73 $110 $150 $260
SHORT-TERM US GOVERNMENT.................. $72 $107 $145 $250
SPECIAL OPPORTUNITIES..................... $74 $114 $157 $275
EQUITY INDEX.............................. $69 $100 NA NA
LARGE CAP VALUE........................... $74 $114 NA NA
MID CAP GROWTH............................ $75 $117 NA NA
MID CAP VALUE............................. $75 $116 NA NA
SMALL CAP GROWTH.......................... $74 $114 NA NA
SMALL CAP VALUE........................... $75 $116 NA NA
STRATEGIC BOND............................ $74 $114 NA NA
INTERNATIONAL OPPORTUNITIES............... $77 $121 NA NA
INTERNATIONAL BALANCED.................... $75 $117 NA NA
</TABLE>
/1/ The Sales Load Imposed on Purchase falls with increasing purchase size.
The sales load is calculated as follows:
$50 Administrative Expense Deduction PLUS:
4.50% of the first $10,000 (minimum sale is $5,000)
3.50% of the next $15,000
2.50% of the next $75,000
1.50% of any amount over $100,000
/2/ Other fund expenses in the Synopsis and Examples are based on the year ended
December 31, 1995, except with respect to the Equity Index, Large Cap Value,
Mid Cap Growth, Mid Cap Value, Small Cap Growth, Small Cap Value, Strategic
Bond, International Opportunities, and International Balanced Portfolios,
they are based on estimates for the current fiscal year.
The minimum death benefit charge included in the above sales loads is
0.50%. Because no minimum death benefit is provided under single payment
immediate Contracts or under deferred Contracts where the single payment is
made on or after the Contract anniversary nearest the Annuitant's 65th
birthday, no deduction is made for such benefit from payments made on or
after such date.
/3/ John Hancock reimburses a Portfolio when the Portfolio's Other Expenses
exceed 0.25% of its average daily net asset value. This was done for the
year ended December 31, 1995 with respect to three Portfolios. Absent the
reimbursement, the Other Expenses percentages for the International
Equities, Short-Term U.S. Government, and Special Opportunities Portfolios
would have been 0.87%, 1.83%, and 1.91%, respectively.
/4/ Expense information for five and ten years is currently not available for
the Equity Index, Large Cap Value, Mid Cap Growth, Mid Cap Value, Small Cap
Growth, Small Cap Value, Strategic Bond, International Opportunities, and
International Balanced Portfolios.
5
<PAGE>
PERIODIC PAYMENT DEFERRED CONTRACTS
<TABLE>
<CAPTION>
SHORT-
TERM
LARGE REAL INTER- U.S. SPECIAL
GROWTH & SOVEREIGN MONEY CAP ESTATE NATIONAL GOVERN- OPPOR-
INCOME BOND MARKET GROWTH MANAGED EQUITY EQUITIES MENT TUNITIES
-------- --------- ------ ------ ------- ------ --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONTRACTOWNER
TRANSACTION EXPENSES
Maximum Sales Load on
Purchases (as a
percentage of purchase
payments)/1/.......... 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00%
Deferred Sales Load (as
a percentage of
purchase payments).... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Maximum Surrender Fees. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Exchange Fee........... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
ANNUAL CONTRACT FEE/2/.. $10 $10 $10 $10 $10 $10 $10 $10 $10
SEPARATE ACCOUNT ANNUAL
EXPENSES
(as a percentage of
average account value)
Mortality and Expense
Risk Fees.............. 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
Account Fees and Ex-
penses................. 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Total Separate Account
Annual Expenses........ 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of
average net assets)
Management Fees......... 0.25% 0.25% 0.25% 0.40% 0.34% 0.60% 0.60% 0.50% 0.75%
Other Expenses/3/....... 0.03% 0.05% 0.10% 0.07% 0.04% 0.13% 0.25%4 0.25%/4/ 0.25%/4/
Total Fund Annual
Expenses............... 0.28% 0.30% 0.35% 0.47% 0.38% 0.73% 0.85% 0.75% 1.00%
<CAPTION>
INTER-
LARGE MID MID SMALL SMALL NATIONAL INTER-
EQUITY CAP CAP CAP CAP CAP STRATEGIC OPPOR- NATIONAL
INDEX VALUE GROWTH VALUE GROWTH VALUE BOND TUNITIES BALANCED
-------- --------- ------ ------ ------- ------ --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONTRACTOWNER
TRANSACTION EXPENSES
Maximum Sales Load on
Purchases (as a
percentage of purchase
payments)/1/.......... 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00%
Deferred Sales Load (as
a percentage of
purchase payments).... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Maximum Surrender Fees. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Exchange Fee........... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
ANNUAL CONTRACT FEE/2/.. $10 $10 $10 $10 $10 $10 $10 $10 $10
SEPARATE ACCOUNT ANNUAL
EXPENSES
(as a percentage of
average account value)
Mortality and Expense
Risk Fees.............. 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
Account Fees and Ex-
penses................. 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Total Separate Account
Annual Expenses........ 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of
average net assets)
Management Fees......... 0.25% 0.75% 0.85% 0.80% 0.75% 0.80% 0.75% 1.00% 0.85%
Other Expenses/3/....... 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Total Fund Annual
Expenses............... 0.50% 1.00% 1.10% 1.05% 1.00% 1.05% 1.00% 1.25% 1.10%
</TABLE>
6
<PAGE>
EXAMPLES
Whether or not you surrender your contract or annuitize the end of the appli-
cable time period, you would pay the following expenses on a $1000 investment,
assuming 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS/5/ 10 YEARS/5/
------ ------- ---------- -----------
<S> <C> <C> <C> <C>
GROWTH & INCOME........................... $ 92 $118 $145 $223
SOVEREIGN BOND............................ $ 92 $118 $146 $225
MONEY MARKET.............................. $ 93 $120 $149 $230
LARGE CAP GROWTH.......................... $ 94 $123 $154 $243
MANAGED................................... $ 93 $120 $150 $234
REAL ESTATE EQUITY........................ $ 96 $130 $167 $269
INTERNATIONAL EQUITIES.................... $ 97 $134 $173 $281
SHORT-TERM US GOVERNMENT.................. $ 96 $131 $168 $271
SPECIAL OPPORTUNITIES..................... $ 99 $138 $180 $295
EQUITIES INDEX............................ $ 94 $124 NA NA
LARGE CAP VALUE........................... $ 99 $138 NA NA
MID CAP GROWTH............................ $100 $141 NA NA
MID CAP VALUE............................. $ 99 $139 NA NA
SMALL CAP GROWTH.......................... $ 99 $138 NA NA
SMALL CAP VALUE........................... $ 99 $139 NA NA
STRATEGIC BOND............................ $ 99 $138 NA NA
INTERNATIONAL OPPORTUNITIES............... $101 $145 NA NA
INTERNATIONAL BALANCED.................... $100 $141 NA NA
</TABLE>
/1/ The Sales Load Imposed on Purchases falls with increasing purchase size.
The sales load is calculated as follows:
8.00% of the first $10,000 (minimum sale is $5,000)
7.00% of the next $15,000
3.00% of any amount over $25,000
The minimum death benefit charge included in the above sales loads is
0.50%. Because no minimum death benefit is provided on or after the contract
anniversary nearest the Annuitant's 65th birthday, no deduction is made for
such benefit from payments made on or after such date.
/2/ The Annual Contract Fee will be the lesser of $10 or 2% of the value of a
Contract's Accumulation Shares. The annual contract fee is assessed only dur-
ing the Accumulation Period. In the preceding Examples, the annual contract
fee has been expressed as an annual percentage of assets based on the average
Contract size during the year ended December 31, 1995.
/3/ Other fund expenses in the Synopsis and Examples are based on the year
ended December 31, 1995, except with respect to the Equity Index, Large Cap
Value, Mid Cap Growth, Mid Cap Value, Small Cap Growth, Small Cap Value, Stra-
tegic Bond, International Opportunities, and International Balanced Portfo-
lios, they are based on estimates for the current fiscal year.
/4/ John Hancock reimburses a Portfolio when the Portfolio's Other Expenses
exceed 0.25% of its average daily net asset value. This was done for the year
ended December 31, 1995 with respect to three Portfolios. Absent the reim-
bursement, the Other Expenses percentages for the International Equities,
Short-Term U.S. Government, and Special Opportunities Portfolios would have
been 0.87%, 1.83% and 1.91%, respectively.
/5/ Expense information for five and ten years is currently not available for
the Equity Index, Large Cap Value, Mid Cap Growth, Mid Cap Value, Small Cap
Growth, Small Cap Value, Strategic Bond, International Opportunities, and In-
ternational Balanced Portfolios.
These examples should not be considered representations of past or future ex-
penses; actual expenses may be greater than or less than those shown.
The purpose of the above synopsis is to assist the Owner in understanding the
various costs and expenses that an Owner will bear directly or indirectly.
This synopsis includes expenses of the Separate Account as well as those of
the Fund for the year ended December 31, 1995. For a more complete description
of the Separate Account charges, see "Charges under Variable Annuity Con-
tracts." For a more complete description of the investment advisory fee
charged each Portfolio and the annual operating expenses of each Portfolio,
see the Prospectus for the Fund. Any applicable premium taxes are not re-
flected in the foregoing examples.
7
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT U
CONDENSED FINANCIAL INFORMATION
- -------------------------------------------------------------------------------
The tables below reflect the historical information for a share outstanding
throughout the period for John Hancock Variable Annuity Account U and for the
John Hancock Variable Account A and C (the stock accounts), A-1 and C-1 (the
bond accounts), and A-2 and C-2 (the money market accounts). Each of the for-
mer Stock (A and C), Bond (A-1 and C-1) and Money Market (A-2 and C-2) Ac-
counts held substantially the same investment portfolios since the investment
policies, objectives and restrictions applicable to the respective Accounts
were identical. They were also identical to those of the corresponding portfo-
lios of John Hancock Variable Series Trust I. Accordingly, the combined infor-
mation on a historical basis, as if John Hancock Variable Annuity Account U
had invested the net assets of the Accounts in the John Hancock Variable Se-
ries Trust I Stock Portfolio, Bond Portfolio and Money Market Portfolio from
its inception, would not vary materially from the historical results.
SELECTED DATA FOR EACH ACCUMULATION SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31,
1995 1994 1993 1992 1991 1990 1989 1988
------------ ------------ ------------ ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STOCK SUBACCOUNT
Accumulation
share value:
Beginning of
period......... $70.532 $71.638 $63.844 $59.218 $47.482 $46.043 $36.714 $31.474
End of period... $93.721 $70.532 $71.638 $63.844 $59.218 $47.482 $46.043 $36.714
Number of
Accumulation
Shares
outstanding at
end of period... 2,225,393 2,417,577 2,566,107 2,736,951 2,924,816 3,193,137 3,523,823 4,108,528
BOND SUBACCOUNT
Accumulation
share value:
Beginning of
period......... $36.491 $37.828 $34.492 $32.360 $28.016 $26.350 $23.666 $22.052
End of period... $43.188 $36.491 $37.828 $34.492 $32.360 $28.016 $26.350 $23.666
Number of
Accumulation
Shares
outstanding at
end of period... 2,205,467 2,486,013 2,730,735 2,953,463 3,166,240 3,455,875 3,913,241 4,557,497
MONEY MARKET SUBACCOUNT
Accumulation
share value:
Beginning of
period......... $20.649 $20.036 $19.636 $19.136 $18.238 $17.015 $15.718 $14.755
End of period... $21.627 $20.649 $20.036 $19.636 $19.136 $18.238 $17.015 $15.718
Number of
Accumulation
Shares
outstanding at
end of period... 972,149 1,068,017 1,171,917 1,598,576 2,013,162 2,357,840 2,653,748 2,948,321
<CAPTION>
Period from
February 21,
1987 to
December 31,
1987
------------
<S> <C>
STOCK SUBACCOUNT
Accumulation
share value:
Beginning of
period......... $35.395
End of period... $31.474
Number of
Accumulation
Shares
outstanding at
end of period... 4,943,324
BOND SUBACCOUNT
Accumulation
share value:
Beginning of
period......... $22.082
End of period... $22.052
Number of
Accumulation
Shares
outstanding at
end of period... 5,164,334
MONEY MARKET SUBACCOUNT
Accumulation
share value:
Beginning of
period......... $14.063
End of period... $14.755
Number of
Accumulation
Shares
outstanding at
end of period... 2,916,769
</TABLE>
<TABLE>
<CAPTION>
Period from
January 1,
1987 to Year Ended
February 20, December 31,
1987**** 1986
------------ ------------
<S> <C> <C>
JOHN HANCOCK VARIABLE ACCOUNT A (STOCK ACCOUNT)
Accumulation share value:
Beginning of period................................. $30.593 $26.702
End of period....................................... $35.395 $30.593
Number of Accumulation Shares outstanding at end of
period.............................................. 2,346,758 2,255,969
JOHN HANCOCK VARIABLE ACCOUNT C (STOCK ACCOUNT)
Accumulation share value:
Beginning of period................................. $32.966 $28.763
End of period....................................... $38.092 $32.966
Number of Accumulation Shares outstanding at end of
period.............................................. 1,771,606 1,675,871
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Period from
January 1,
1987 to Year Ended
February 20, December 31,
1987**** 1986
------------ ------------
<S> <C> <C>
JOHN HANCOCK VARIABLE ACCOUNT A-1 (BOND ACCOUNT)
Accumulation share value:
Beginning of period................................. $21.698 $19.307
End of period....................................... $22.082 $21.698
Number of Accumulation Shares outstanding
at end of period.................................... 2,288,161 2,190,684
JOHN HANCOCK VARIABLE ACCOUNT C-1 (BOND ACCOUNT)
Accumulation share value:
Beginning of period................................. $20.872 $18.573
End of period....................................... $21.252 $20.872
Number of Accumulation Shares outstanding at end of
period.............................................. 2,895,151 2,776,975
</TABLE>
<TABLE>
<CAPTION>
Period from
January 1,
1987 to Year Ended
February 20, December 31,
1987**** 1986
------------ ------------
<S> <C> <C>
JOHN HANCOCK VARIABLE ACCOUNT A-2 (MONEY MARKET ACCOUNT)
Accumulation share value:
Beginning of period................................. $13.968 $13.222
End of period....................................... $14.063 $13.968
Number of Accumulation Shares outstanding at end of
period.............................................. 982,168 1,002,016
JOHN HANCOCK VARIABLE ACCOUNT C-2 (MONEY MARKET ACCOUNT)
Accumulation share value:
Beginning of period................................. $14.302 $13.535
End of period....................................... $14.400 $14.302
Number of Accumulation Shares outstanding at end of
period.............................................. 1,188,858 1,203,443
</TABLE>
<TABLE>
<CAPTION>
Period from
***May 1,
Year Ended Year Ended Year Ended Year Ended Year Ended 1990 to
December 31, December 31, December 31, December 31, December 31, December 31,
1995 1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
SELECT STOCK SUBACCOUNT
Accumulation Share Val-
ue:
Beginning of Period.... $16.339 $16.666 $14.791 $13.589 $10.941 $10.000
End of Period.......... $21.295 $16.339 $16.666 $14.791 $13.589 $10.941
Number of Accumulation
Shares outstanding at
end of period.......... 159,494 141,064 110,712 86,619 58,121 36,358
INTERNATIONAL SUBACCOUNT
Accumulation Share Val-
ue:
Beginning of Period.... $14.053 $15.117 $11.559 $11.871 $ 9.719 $10.000
End of Period.......... $15.028 $14.053 $15.117 $11.559 $11.871 $ 9.719
Number of Accumulation
Shares outstanding at
end of period.......... 133,791 156,006 89,934 33,160 27,855 28,024
REAL ESTATE EQUITY
SUBACCOUNT
Accumulation Share Val-
ue:
Beginning of Period.... $14.955 $14.684 $12.644 $11.009 $ 8.328 $10.000
End of Period.......... $16.628 $14.955 $14.684 $12.644 $11.009 $ 8.328
Number of Accumulation
Shares outstanding at
end of period.......... 92,870 130,412 131,016 25,136 8,004 7,621
MANAGED SUBACCOUNT
Accumulation Share Val-
ue:
Beginning of Period.... $14.826 $15.316 $13.861 $11.962 $10.763 $10.000
End of Period.......... $18.655 $14.826 $15.316 $13.861 $11.962 $10.763
Number of Accumulation
Shares outstanding at
end of period.......... 1,072,417 1,100,811 1,115,432 806,671 451,945 262,273
</TABLE>
- --------
*** Date of initial public offering of Accumulation Shares.
**** Date of reorganization.
9
<PAGE>
SPECIAL TERMS
As used in this prospectus, the following terms have the indicated meanings:
ACCUMULATION SHARE: a unit of measurement used in determining the value of a
Contract prior to the commencement of annuity payments or, if earlier, con-
tract lapse. The value of an Accumulation Share for each subaccount will re-
flect the investment performance of that subaccount and will vary in dollar
amount.
ANNUITANT: the person on whose life the Contract is issued.
ANNUITY OPTION: the provisions under which a series of annuity payments is
made to the Annuitant or other payee, such as the Life Annuity with Twenty
Years Certain.
ANNUITY UNIT: a unit of measurement used in determining the amount of each
variable annuity payment. The value of an Annuity Unit for each subaccount
will depend upon the assumed investment rate and the investment performance of
that subaccount and will vary in dollar amount.
OWNER: the person or entity, usually the one to whom the Contract is issued,
who has the sole right to exercise all rights and privileges under the Con-
tract except as otherwise provided in the Contract.
DATE OF MATURITY OF A DEFERRED CONTRACT: the date elected by the Owner as of
which annuity payments will commence. The election is subject to certain con-
ditions described in "The Annuity Period--Deferred Variable Annuity Con-
tracts".
MAJORITY VOTE OF THE OUTSTANDING CONTRACTS: the vote of Owners, at any meeting
of Owners duly called, having more than 50% of the number of votes represented
by outstanding contracts or, if it is less, having 67% or more of the votes
represented at a meeting at which more than 50% of such a number of votes are
present or represented by proxy.
MINIMUM DEATH BENEFIT: the undertaking of John Hancock under a deferred Con-
tract to make a payment on the death of the Annuitant at any time before the
contract anniversary nearest the Annuitant's 65th birthday equal to the
greater of the aggregate amount of the purchase payments made under the Con-
tract (reduced to reflect redemptions of Accumulation Shares, if any, previ-
ously made as partial withdrawals) or the value of the Accumulation Shares
credited to the Contract next determined following John Hancock's receipt of
due proof of death. See "The Accumulation Period--Death Benefit Before Date of
Maturity".
NET PURCHASE PAYMENT: the amount of any purchase payment reduced by (i) appli-
cable taxes, if any, based on the amount of the purchase payment, (ii) the de-
duction to compensate John Hancock for its minimum death benefit undertaking,
if any, and (iii) the deduction for sales and administrative expenses.
SURRENDER VALUE: a cash payment, made prior to a Contract's maturity, equal to
all or part of the Accumulation Shares credited to the Contract.
10
<PAGE>
SUMMARY INFORMATION
The Contracts are designed both for purchase by individuals doing their own
retirement planning, including plans and trusts not qualifying under the In-
ternal Revenue Code of 1986 ("Code") and for purchase for persons participat-
ing in (1) pension and profit-sharing plans qualified under Section 401(c) of
the Code, known as "H.R. 10 plans", (2) pension or profit-sharing plans quali-
fied under Sections 401(a) or 403(a) of the Code, known as "corporate plans",
(3) annuity purchase plans adopted under the provisions of Section 403(b) of
the Code by public school systems and certain other tax-exempt organizations,
(4) individual retirement annuity plans satisfying the requirements of Section
408 of the Code, and (5) deferred compensation plans maintained by a state or
political subdivision under Section 457 of the Code.
In order to accommodate "employer-related" plans funded by the Contracts,
contract forms using "unisex" purchase rates, i.e. rates the same for males
and females, are available. Any questions you have as to whether you are par-
ticipating in an employer-related plan should be directed to your employer.
Any other question you or your employer may have with respect to this topic
can be asked of John Hancock by calling 800-REAL LIFE (732-5543) or by writing
Life and Annuity Services, Post Office Box 111, Boston, MA 02117.
WHAT ARE THE VARIABLE ANNUITIES BEING OFFERED?
Three kinds of Contracts are offered: (1) a periodic payment deferred Con-
tract under which purchase payments may be made at intervals until the matu-
rity date selected by the Owner at which time annuity payments by John Hancock
will begin; (2) a single payment deferred Contract under which one purchase
payment is made and annuity payments begin as of the maturity date; and (3) a
single payment immediate Contract under which one purchase payment is made and
annuity payments begin immediately thereafter.
An application for a Contract is available from a sales representative. Upon
completion, it is transmitted along with the purchase payment to John
Hancock's Home Office for review. See page 21.
WHAT IS JOHN HANCOCK VARIABLE ANNUITY ACCOUNT U?
The Account is a separate investment account of John Hancock, operated as a
unit investment trust, which supports benefits payable under its Contracts.
There are currently eighteen subaccounts within the Account: Growth & Income
(formerly Stock), Sovereign Bond (formerly Bond), Money Market, Large Cap
Growth (formerly Select Stock), Managed, Real Estate Equity, International Eq-
uities (formerly International), Short-Term U.S. Government, Special Opportu-
nities, Equity Index, Large Cap Value, Mid Cap Growth, Mid Cap Value, Small
Cap Growth, Small Cap Value, Strategic Bond, International Opportunities, and
International Balanced. Each is invested in a corresponding Portfolio of John
Hancock Variable Series Trust I, a "series" type of mutual fund.
Each Portfolio has a different investment objective. As stated below, John
Hancock receives a fee from the Fund for providing investment management serv-
ices. Independence Investment Associates, Inc., ("IIA") provides sub-invest-
ment management services with respect to the Growth & Income, Large Cap
Growth, Equity Index, Managed, Real Estate Equity, and Short-Term U.S. Govern-
ment Portfolios.
John Hancock Advisers, Inc., and John Hancock Advisers International Limited
provide sub-investment management services for the International Equities
Portfolio. John Hancock Advisers provides sub-investment management services
for the Sovereign Bond, Small Cap Growth and Special Opportunities Portfolios.
T. Rowe Price Associates, Inc., provides sub-investment advice to the Large
Cap Value Portfolio and, together with its subsidiary, Rowe Price-Fleming In-
ternational, Inc., provides sub-investment advice with respect to the Interna-
tional Opportunities Portfolio.
11
<PAGE>
INVESCO Management and Research is the sub-investment adviser to the Small
Cap Value Portfolio. Janus Capital Corporations the sub-investment adviser to
the Mid Cap Growth Portfolio. Neuberger & Berman L.P., provides sub-investment
advice with respect to the Mid Cap Value Portfolio. J.P. Morgan Investment
Management Inc., provides sub-investment advice with respect to the Strategic
Bond Portfolio and Brinson Partners, Inc., does likewise with respect to the
International Balanced Portfolio. Each sub-investment manager receives an an-
nual percentage fee from John Hancock for its services which in no way in-
creases the costs borne by the Fund, the Account, or Owners.
For a full description of the Fund, see the prospectus for the Fund attached
to this prospectus.
HOW ARE PURCHASE PAYMENTS ALLOCATED?
Purchase payments received under Contracts, after certain deductions, are al-
located by John Hancock to any one or more of the subaccounts of the Account,
as directed by the Owner. The assets in each subaccount are invested in shares
of the corresponding Portfolio of the Fund.
Purchase payments should be mailed to Life and Annuity Services, John Hancock
Place, Post Office Box 111, Boston, MA 02117.
WHAT FEES ARE CHARGED TO THE ACCOUNT?
The charges made directly to the Account aggregate approximately 1% per annum
of the net asset value of the Account and are made up of daily charges aggre-
gating 0.75% annually for mortality and expense risks assumed (0.50% on an an-
nual basis for mortality risks and 0.25% on an annual basis for expense risks)
and 0.25% for certain administrative services. See page 20.
WHAT FEES ARE CHARGED TO THE FUND?
John Hancock receives a fee from the Fund with respect to the Growth & In-
come, Sovereign, Bond, Equity Index, and Money Market Portfolios at an annual
rate of 0.25% of the average daily net assets; with respect to the Large Cap
Growth and Managed Portfolios, at an annual rate of 0.40% for the first $500
million of average daily net assets, 0.35% for average daily net assets be-
tween $500 million and $1 billion, and at lesser percentages for amounts above
$1 billion; with respect to the Real Estate Equity Portfolio, at an annual
rate of 0.60% for the first $300 million of average daily net assets and at
lesser percentages for amounts above $300 million; with respect to the Inter-
national Equities Portfolio, at an annual rate of 0.60% for the first $250
million of average daily net assets and at lesser percentages for amounts
above $250 million; with respect to the Short-Term U.S. Government Portfolio,
at an annual rate of 0.50% for the first $250 million of average daily net as-
sets and at lesser percentages for amounts above $250 million; and with re-
spect to the Special Opportunities Portfolio, at an annual rate of 0.75% for
the first $250 million of average daily net assets and at lesser percentages
for amounts above $250 million; with respect to the Large Cap Value and Small
Cap Growth Portfolios at an annual rate of 0.75% of average daily net assets;
with respect to the Mid Cap Growth Portfolio at an annual rate of 0.85% for
the first $100,000,000 of average daily net assets and at lesser percentages
for amounts above $100,000,000; with respect to the Mid Cap Value Portfolio at
an annual rate of 0.80% of the first $250,000,000 of average daily net assets
and at lesser percentages for amounts above $250,000,000; with respect to the
Small Cap Value Portfolio at an annual rate of 0.80% of the first $100,000,000
of average daily net assets and at lesser percentages for amounts above
$100,000,000; with respect to the Strategic Bond Portfolio at an annual rate
of 0.75% of the first $25,000,000 of average daily net assets and at lesser
percentages for amounts above $25,000,000; with respect to the International
Opportunities Portfolio at an annual rate of 1% of the first $20,000,000 of
average daily net assets and at lesser percentages for amounts above
$20,000,000; and for the International Balanced Portfolio at an annual rate of
0.85% of the first $100,000,000 of average daily net assets and at a lesser
percentage for amounts above $100,000,000. Certain other operating expenses
are charged each Portfolio.
WHO IS THE PRINCIPAL UNDERWRITER OF THE ACCOUNT?
John Hancock, a registered broker-dealer since 1970, makes Contracts avail-
able through its registered representatives licensed to sell life insurance
policies and annuity contracts.
12
<PAGE>
WHAT ARE THE AMOUNTS DEDUCTED FROM PURCHASE PAYMENTS FOR SALES AND
ADMINISTRATIVE EXPENSES?
For periodic payment deferred Contracts the deduction (including 0.50% for
the minimum death benefit) is 8% of the first $10,000 paid (8.7% of the net
amount invested), 7% of the next $15,000, and 3% of any amount over $25,000.
For single payment immediate and deferred Contracts the deduction is 4% of
the first $10,000 paid, 3% of the next $15,000, 2% of the next $75,000 and 1%
of any amount over $100,000, plus an administrative expense deduction of $50
in any event. An additional deduction of 0.5% of the purchase payment is made
under single payment deferred Contracts for the minimum death benefit. These
deductions total 5.82% of the net amount invested under a minimum single pay-
ment deferred Contract. See page 19.
ARE THERE ANY OTHER CHARGES OR DEDUCTIONS?
Deductions are made for any applicable taxes based on the amount of a pur-
chase payment: currently such taxes in certain states may be as high as 3% of
each purchase payment. See page 20.
Charges are made for any taxes or interest expense attributable to the Ac-
count. See page 19.
Under periodic payment Contracts, a maintenance charge equal to the lesser of
$10 or 2% of the value of the Contract will be deducted from each Contract an-
nually. See page 18.
WHAT ARE THE MINIMUMS APPLICABLE TO PURCHASE PAYMENTS?
The minimum for a single payment Contract is $5,000. The minimum for a pay-
ment under a periodic payment Contract is $50. One additional payment of at
least $2,500 can be made prior to maturity under a single payment deferred
Contract. The initial purchase payment under any periodic payment Contract
must be at least $1,000; thereafter any periodic payment must be at least $50.
See page 21.
CAN MONEY BE WITHDRAWN PRIOR TO MATURITY?
At any time before annuity payments begin, if the Annuitant is living, a de-
ferred Contract may be surrendered in full for its then value or a portion of
the value of the Contract may be withdrawn, subject to certain limits. See
page 22. A 10 percent penalty tax is generally applicable to premature with-
drawals.
DOES THE CONTRACT PROVIDE A DEATH BENEFIT?
Deferred Contracts include a death benefit. The amount depends upon whether
the Annuitant dies before or after the contract anniversary nearest his or her
65th birthday. If before that date, the death benefit is the greater of (a)
the then value of the Accumulation Shares credited to the Contract or (b) the
purchase payments made under the Contract, adjusted for any prior partial
withdrawals. If after that date, the death benefit is equal to the then value
of the Accumulation Shares credited to the Contract.
However, if the Contract is used to fund an annuity purchase plan adopted un-
der Section 403(b) of the Code by a public school system or by a tax-exempt
organization as defined in Section 501(c)(3) of the Code, or is purchased
other than to fund a tax-qualified plan, the death benefit payable may be pay-
able on the death of the Owner of the Contract and in an amount different than
that which would have been payable on the Annuitant's death.
IS THERE A SHORT-TERM CANCELLATION RIGHT?
An Owner may surrender the Contract for any reason within 10 days after its
receipt and receive in cash the total purchase payment. An Owner of a periodic
payment Contract in Illinois, Minnesota, New York, Pennsylvania, Arizona or
South Dakota will receive the sum of the Contract's current value and all de-
ductions from the purchase payment.
13
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SYNOPSIS OF EXPENSE INFORMATION........................................... 2
CONDENSED FINANCIAL INFORMATION........................................... 8
SPECIAL TERMS............................................................. 10
SUMMARY INFORMATION....................................................... 11
THE VARIABLE ANNUITY...................................................... 15
JOHN HANCOCK, THE ACCOUNT AND THE SERIES FUND............................. 15
CHARGES UNDER VARIABLE ANNUITY CONTRACTS.................................. 18
Deductions for Sales and Administrative Expenses and Minimum Death
Benefit................................................................. 19
Premium or Similar Taxes................................................. 20
Charges for Mortality and Expense Risks.................................. 20
Charges for Administrative Services...................................... 20
THE CONTRACTS............................................................. 21
THE ACCUMULATION PERIOD................................................... 21
Accumulation Shares...................................................... 21
Value of Accumulation Shares............................................. 22
Transfers Among Subaccounts.............................................. 22
Surrender of Contract; Partial Withdrawals............................... 22
Death Benefit Before Date of Maturity.................................... 23
THE ANNUITY PERIOD........................................................ 24
Deferred Variable Annuity Contracts...................................... 24
Immediate Variable Annuity Contracts..................................... 24
Variable Monthly Annuity Payments........................................ 24
Assumed Investment Rate.................................................. 25
Calculation of Annuity Units............................................. 25
Annuity Options.......................................................... 25
Option VA-1 Life Annuity with Five, Ten or Twenty Years Certain.......... 25
Option VA-2 Life Annuity without Refund.................................. 26
Other Conditions......................................................... 26
VARIABLE ACCOUNT VALUATION PROCEDURES..................................... 26
MISCELLANEOUS PROVISIONS.................................................. 27
FEDERAL INCOME TAXES...................................................... 28
The Account and John Hancock............................................. 28
Contracts Purchased Other Than to Fund a Tax Qualified Plan.............. 28
Diversification Requirements............................................. 29
Contracts Purchased to Fund a Tax Qualified Plan......................... 29
PERFORMANCE............................................................... 32
STATE REGULATION.......................................................... 33
REPORTS................................................................... 33
VOTING PRIVILEGES......................................................... 33
CHANGES IN APPLICABLE LAW--FUNDING AND OTHERWISE.......................... 33
LEGAL MATTERS............................................................. 34
DISTRIBUTION OF THE CONTRACTS............................................. 34
REGISTRATION STATEMENT.................................................... 34
EXPERTS................................................................... 34
FINANCIAL STATEMENTS...................................................... 34
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.................. 34
APPENDIX--ILLUSTRATIVE ACCUMULATION VALUE AND ANNUITY PAYMENT TABLES...... 35
</TABLE>
14
<PAGE>
THE VARIABLE ANNUITY
A variable annuity is significantly different from a fixed annuity in that it
is the Owner and Annuitant under a variable annuity who assume the risk of in-
vestment gain or loss rather than the insurance company. While under a fixed
annuity the insurance company guarantees a specified interest rate and spe-
cific monthly annuity payments, the amounts of annuity payments under a vari-
able annuity are not guaranteed and will vary with the investment performance
of the portfolio securities in the underlying Fund.
The Owner will be determining the investment objective of each contract on a
continuing basis by directing the allocation of purchase payments, and possi-
bly accumulated values, between the subaccounts. There can be no assurance
that these investment objectives will be achieved.
JOHN HANCOCK, THE ACCOUNT AND THE SERIES FUND
JOHN HANCOCK
John Hancock is a mutual life insurance company chartered in Massachusetts in
1862. Its Home Office is at 200 Clarendon Street, Boston, Massachusetts 02117.
It conducts a conventional life insurance business in all of the United
States, the District of Columbia and Puerto Rico. John Hancock sells insurance
policies and annuity contracts primarily through its own field force of full
time agents.
THE ACCOUNT
The Account is a separate account established in its current form under Mas-
sachusetts Law on January 14, 1985. The Account, although an integral part of
John Hancock, meets the definition of "separate account" under the Federal Se-
curities laws and is registered as a unit investment trust under the Invest-
ment Company Act of 1940, as amended ("1940 Act"). Three of the Account's
subaccounts replaced the six management-type investment companies previously
established by John Hancock. Pursuant to a reorganization as of February 20,
1987, the investment assets formerly held in these Accounts were contributed
to the Stock (renamed Growth & Income), Bond (renamed Sovereign Bond), and
Money Market Portfolios, as appropriate, of the Fund. This reorganization was
accomplished by dividing the former Variable Account A into three subaccounts
and renaming it the John Hancock Variable Annuity Account U ("Account").
The Account's assets are the property of John Hancock and the obligations un-
der the Contracts are the obligations of John Hancock. Each Contract provides
that the portion of the Account's assets equal to the reserves and other lia-
bilities under the Contract with respect to the Account shall not be charge-
able with liabilities arising out of any other business John Hancock may con-
duct. In addition to the net assets and other liabilities for Contracts, the
Account's assets include assets derived from charges made by John Hancock and,
possibly, funds contributed by John Hancock to commence operation of the
subaccounts or their predecessors. From time to time these additional assets
may be transferred in cash by John Hancock to its general account. Before mak-
ing any such transfer, John Hancock will consider any possible adverse impact
the transfer might have on any subaccount.
Income, gains and losses, whether or not realized, from assets allocated to
the Account are, in accordance with the Contracts, credited to or charged
against the Account without regard to other income, gains or losses of John
Hancock.
There currently are eighteen subaccounts in the Account: Growth & Income,
Sovereign Bond, Money Market, Large Cap Growth, Managed, Real Estate Equity,
International Equities, Short-Term U.S. Government, Special Opportunities, Eq-
uity Index, Large Cap Value, Mid Cap Growth, Mid Cap Value, Small Cap Growth,
Small Cap Value, Strategic Bond, International Opportunities, and Interna-
tional Balanced.The assets in each are invested in shares of beneficial inter-
est issued by each Portfolio of the Fund, but the
15
<PAGE>
assets of one subaccount are not necessarily legally insulated from liabili-
ties associated with another subaccount. New subaccounts may be added and made
available to Owners.
THE SERIES FUND
The Fund is a "series" type of mutual fund which is registered under the 1940
Act as an open-end diversified management investment company and organized as
a Massachusetts business trust. The Fund serves as the investment medium for
the Account and for various unit investment trust separate accounts estab-
lished by John Hancock and John Hancock Variable Life Insurance Company for
variable life insurance policies and variable annuity contracts. A full de-
scription of the Fund, its investment objectives, policies and restrictions,
its charges, expenses and all other aspects of its operation is contained in
the attached prospectus (which should be read carefully before investing) and
the statement of additional information referred to therein, which should be
read together with this prospectus. Among other items, note the description of
the need to monitor events on the part of the Fund's Board of Trustees for
possible conflicts between separate accounts and other consequences.
A very brief summary of the investment objectives of each Portfolio is set
forth below.
Growth & Income (formerly Stock) Portfolio
The investment objective of this Portfolio is to achieve intermediate and
long-term growth of capital, with income as a secondary consideration. This
objective will be pursued by investments principally in common stocks (and in
securities convertible into or with rights to purchase common stocks) of com-
panies believed by management to offer growth potential over both the interme-
diate and the long-term.
Sovereign Bond (Bond) Portfolio
The investment objective of this Portfolio is to provide as high a level of
long-term total rate of return as is consistent with prudent investment risk,
through investment primarily in a diversified portfolio of freely marketable
debt securities. Total rate of return consists of current income, including
interest and discount accruals, and capital appreciation.
Money Market Portfolio
The investment objective of this Portfolio is to provide maximum current in-
come consistent with capital preservation and liquidity. It seeks to achieve
this objective by investing in a managed portfolio of high quality money mar-
ket instruments.
Large Cap Growth (formerly Select Stock) Portfolio
The investment objective of this Portfolio is to achieve above-average capi-
tal appreciation through the ownership of common stocks of companies believed
by management to offer above-average capital appreciation opportunities. Cur-
rent income is not an objective of the Portfolio.
Managed Portfolio
The investment objective of this Portfolio is to achieve maximum long-term
total return consistent with prudent investment risk. Investments will be made
in common stocks, convertibles and other fixed income securities and in money
market instruments.
Real Estate Equity Portfolio
The investment objective of this Portfolio is to provide above-average income
and long-term growth of capital by investment principally in equity securities
of companies in the real estate and related industries.
International Equities (formerly International) Portfolio
The investment objective of this Portfolio is to achieve long-term growth of
capital by investing primarily in foreign equity securities.
16
<PAGE>
Short-Term U.S. Government Portfolio:
The investment objective of this Portfolio is to provide a high level of cur-
rent income consistent with the maintenance of principal, through investment
in a portfolio of short-term U.S. Treasury securities and U.S. Government
agency securities
Special Opportunities Portfolio:
The investment objective of this Portfolio is to achieve long-term capital
appreciation by emphasizing investments in equity securities of issuers in
various economic sectors.
Equity Index Portfolio
The investment objective of this Portfolio is to provide investment results
that correspond to the total return of the U.S. market as represented by the
S&P 500 utilizing common stocks that are publicly traded in the United States.
Large Cap Value Portfolio
The investment objective of this Portfolio is to provide substantial dividend
income, as well as long-term capital appreciation, through investments in the
common stocks of established companies believed to offer favorable prospects
for increasing dividends and capital appreciation.
Mid Cap Growth Portfolio
The investment objective of this Portfolio is to provide long-term growth of
capital through a non-diversified portfolio investing primarily in common
stocks of medium capitalization companies.
Mid Cap Value Portfolio
The investment objective of this Portfolio is to provide long-term growth of
capital primarily through investment in the common stocks of medium capital-
ization companies believed to sell at a discount to their intrinsic value.
Small Cap Growth Portfolio
The investment objective of this Portfolio is to provide long-term growth of
capital through a diversified portfolio investing primarily in common stocks
of small capitalization emerging growth companies.
Small Cap Value Portfolio
The investment objective of this Portfolio is to provide long-term growth of
capital by investing in a well diversified portfolio of equity securities of
small capitalization companies exhibiting value characteristics.
Strategic Bond Portfolio
The investment objective of this Portfolio is to provide a high total return
consistent with moderate risk of capital and maintenance of liquidity, from a
portfolio of domestic and international fixed income securities.
International Opportunities Portfolio
The investment objective of this Portfolio is to provide capital appreciation
through investments in common stocks of primarily well-established, non-United
States companies.
17
<PAGE>
International Balanced Portfolio
The investment objective of this Portfolio is to maximize total U.S. dollar
return, consisting of capital appreciation and current income, through invest-
ment in non-U.S. equity and fixed income securities.
John Hancock acts as the investment manager for the Fund. Independence In-
vestment Associates, Inc. ("IIA"), an indirectly owned subsidiary of John Han-
cock with its principal place of business at 53 State Street, Boston, Massa-
chusetts, provides sub-investment advice with respect to the Growth & Income,
Large Cap Growth, Equity Index, Managed, Real Estate Equity, and Short-Term
U.S. Government Portfolios.
John Hancock Advisers, Inc., another indirectly owned subsidiary, located at
101 Huntington Avenue, Boston, Massachusetts, and its subsidiary, John Hancock
Advisers International, Limited, located at 34 Dover Street, London, England,
provide sub-investment advice with respect to the International Equities Port-
folio. John Hancock Advisers provides sub-investment advice with respect to
the Sovereign Bond, Small Cap Growth, and Special Opportunities Portfolios.
T. Rowe Price Associates, Inc., located at 100 East Pratt St., Baltimore, MD
21202, provides sub- investment advice with respect to the Large Cap Value
Portfolio and, together with its subsidiary, Rowe Price-Fleming International,
Inc., also located at 100 East Pratt St., Baltimore, MD 21202, provides sub-
investment advice with respect to the International Opportunities Portfolio.
INVESCO Management and Research located at 101 Federal Street, Boston, MA
02110, is the sub-investment adviser to the Small Cap Value Portfolio. Janus
Capital Corporation, with its principal place of business at 100 Filmore
Street, Denver, CO 80206, is the sub-investment adviser to the Mid Cap Growth
Portfolio. Neuberger & Berman L.P., of 605 Third Avenue, New York, NY 10158,
provides sub-investment advice to the Mid Cap Value Portfolio. J.P. Morgan In-
vestment Management Inc., located at 522 Fifth Avenue, New York, NY 10036,
provides investment advice with respect to the Strategic Bond Portfolio and
Brinson Partners, Inc., of 209 South LaSalle Street, Chicago, IL 60604, does
likewise with respect to the International Balanced Portfolio.
John Hancock will purchase and redeem Fund shares for the Account at their
net asset value without any sales or redemption charges. Shares of the Fund
represent an interest in one of the Portfolios of the Fund which corresponds
to the subaccount of the Account. Any dividend or capital gains distributions
received by the Account will be reinvested in Fund shares at their net asset
value as of the dates paid. Any such distribution will result in a reduction
in the value of the Fund shares of the Portfolio from which the distribution
was made. The total net asset value of the Account will not change because of
such distribution, however.
On each Valuation Date, shares of each Portfolio are purchased or redeemed by
John Hancock for each subaccount based on, among other things, the amount of
net purchase payments allocated to the subaccount, dividends and distributions
reinvested, transfers to, from and among subaccounts, all to be effected as of
that date. Such purchases and redemptions are effected at the net asset value
per Fund share for each Portfolio determined on that same Valuation Date.
CHARGES UNDER VARIABLE ANNUITY CONTRACTS
Charges under Contracts are assessed in two ways: as deductions from purchase
payments for sales and administrative expenses and John Hancock's minimum
death benefit undertaking and as daily charges to the Account for mortality
and expense risks and administrative services. Under a periodic payment Con-
tract, there is also an annual maintenance charge equal to the lesser of $10
or 2% of the value of the Contract. These charges (which are exclusive of
taxes based on the amount of a purchase payment) and the Contract's annuity
purchase rates will apply for the duration of each Contract and will not be
increased by John Hancock.
18
<PAGE>
As illustrated above, John Hancock is compensated and reimbursed for adminis-
trative services and expenses through the deduction from purchase payments and
in part through charges, described below. John Hancock makes no allocation of
administrative costs of this character as between the two sources of payment.
John Hancock believes that the principal administrative costs result from ac-
counting for the interest of each Owner, Annuitant or beneficiary and from
other phases of contract administration. The aggregate of the deductions from
purchase payments for administration services is expected by John Hancock not
to exceed the average expected cost of administrative services for the life of
the Contracts.
The foregoing charges do not include all of the expenses which may be in-
curred for the account of Owners and Annuitants. Additional charges will be
made directly to the Account for taxes, if any, based on the income of, capi-
tal gains of, assets in, or the existence of, the Account and interest on
funds borrowed. Moreover, the Account purchases and redeems shares of the Fund
at net asset value, a value which reflects the deduction from the assets of
the Fund of its investment management fee and of certain operating expenses
described, above, under "Summary Information--What fees are charged to the
Fund?".
DEDUCTIONS FOR SALES AND ADMINISTRATIVE EXPENSES AND MINIMUM DEATH BENEFIT
John Hancock acts as "principal underwriter" (as defined in the 1940 Act) for
the Account.
As compensation for sales and administrative expenses and for providing the
minimum death benefit, John Hancock currently makes the deductions from pur-
chase payments set forth in the tables below (expressed as a percentage of the
purchase payments except where stated as a percentage of the amount invested).
To the extent that the proceeds from the explicit sales charges deducted from
the purchase payments may be insufficient to cover distribution costs, John
Hancock will recover them from its general account assets, which may consist
of, among other things, proceeds derived from mortality and expense risk
charges deducted from the Account.
In the case of a purchase payment for a single payment Contract which is de-
rived from proceeds (maturity benefit, cash surrender values, sums due under
optional methods of settlement and the like) of fixed dollar insurance poli-
cies and annuity contracts issued by John Hancock, the deduction for sales ex-
penses is at one-half the rate otherwise applicable and the $50 administrative
expense deduction will be waived; the other deductions, however, are made from
such a purchase payment. No deductions for sales expenses will be made from
purchase payments received from any officer or member of the Board of Trustees
of the Fund or from any sales representative of John Hancock who has acted as
such for not less than 90 days. Deductions other than for sales expenses are
nevertheless made from such purchase payments.
- -------------------------------------------------------------------------------
SINGLE PAYMENT CONTRACT TABLE (IMMEDIATE AND DEFERRED)
<TABLE>
<CAPTION>
Percentage Total Deductions including
Percentage Percentage Deduction Deduction for $50 Administrative
Amount of Deduction for Sales for Administrative Minimum Death Total Percentage Deduction as a Percentage of
Payment Expenses Expenses Benefit/a/ Deduction/b/ Amount Invested/b/
- --------- ------------------- -------------------- ------------- ---------------- ----------------------------
<S> <C> <C> <C> <C> <C>
First $10,000 3.5% .5% .5% 4.5% 5.82-5.26%
Next $15,000 2.5% .5% .5% 3.5% 5.26-4.27%
Next $75,000 2.0% -- .5% 2.5% 4.27-2.99%
Over $100,000 1.0% -- .5% 1.5% 2.99-1.81%
</TABLE>
/a/ Because no minimum death benefit is provided under single payment immediate
Contracts or under deferred Contracts where the single payment is made on or
after the contract anniversary nearest the Annuitant's 65th birthday, no
deduction is made from such payments.
/b/ Percentages do not include any deduction for taxes based on the amount of
the purchase payment.
- -------------------------------------------------------------------------------
19
<PAGE>
- -------------------------------------------------------------------------------
PERIODIC PAYMENT DEFERRED CONTRACT TABLE
<TABLE>
<CAPTION>
Percentage Percentage Deduction Percentage Deduction Total Deductions as a
Cumulative Deduction for Sales for Administrative for Minimum Death Total Percentage Percentage of Amount
Purchase Payments Expenses Expenses Benefit/a/ Deduction/b/ Invested/b/
- ----------------- ------------------- -------------------- -------------------- ---------------- ---------------------
<S> <C> <C> <C> <C> <C>
First $10,000 6% 1.5% .5% 8% 8.7%
Next $15,000 5% 1.5% .5% 7% 8.70-7.99%
Over $25,000 1.5% 1.0% .5% 3% 7.99-3.33%
</TABLE>
/a/ Because no minimum death benefit is provided on or after the contract
anniversary nearest the Annuitant's 65th birthday, no deduction is made for
such benefit from payments made on or after such date.
/b/ Percentages do not include any deduction for taxes based on the amount of
the purchase payment.
- -------------------------------------------------------------------------------
PREMIUM OR SIMILAR TAXES
In addition, any applicable taxes based on the amount applied to an annuity
option will be deducted normally from the amount applied to an Annuity Option,
but the right is reserved to deduct such taxes from the purchase payments. The
deductions in states having such a tax may currently be as high as 3%.
CHARGES FOR MORTALITY AND EXPENSE RISKS
While the variable annuity payments to Annuitants will vary in accordance
with the investment performance of the Account, the amount of such payments
will not be decreased because of adverse mortality experience of Annuitants as
a class or because of an increase in actual expenses of John Hancock over the
expense charges provided for in the Contracts. John Hancock assumes the risk
that Annuitants as a class may live longer than expected (necessitating a
greater number of annuity payments) and that its expenses may be higher than
the deductions for such expenses.
In return for the assumption for these mortality and expense risks, John Han-
cock charges the Account daily 0.00137% (0.5% on an annual basis) of the cur-
rent value of Account net assets for mortality risks and 0.000685% (0.25% on
an annual basis) for expense risks.
CHARGES FOR ADMINISTRATIVE SERVICES
John Hancock maintains an account for each Owner and Annuitant and makes all
disbursements of benefits. John Hancock also furnishes such administrative and
clerical services, including the calculation of net asset values and the val-
ues and interests determined thereby, as are required for each subaccount.
John Hancock makes disbursements from Account funds to pay obligations charge-
able to the Account and maintains the accounts, records, and other documents
relating to the business of the Account required by regulatory authorities.
For these and other administrative services, John Hancock makes a daily
charge to the Account of 0.000685% (0.25% on an annual basis) of the current
value of its net assets, and with respect to periodic payment contracts, an
annual maintenance charge equal to the lesser of $10 or 2% of the value of a
Contract's Accumulation Shares will be deducted from such value (on the con-
tract anniversary) each year prior to the Contract's date of maturity. The an-
nual maintenance charge will be allocated among the subaccounts in the propor-
tion that the value of the Accumulation Shares in each subaccount bears to the
total value of the Accumulation Shares. The annual maintenance charge is as-
sessed only during the Accumulation Period.
The administrative service charges were not designed, nor are they expected,
to exceed John Hancock's cost in providing these services.
20
<PAGE>
THE CONTRACTS
This section is based on certain provisions of the Contracts offered by this
Prospectus. Reference should be made to the actual Contracts and to the terms
and limitations of any tax-qualified plan which is to be funded by such Con-
tracts. Tax-qualified plans are subject to several requirements and limita-
tions which may affect the terms of any particular Contract or the advisabil-
ity of taking certain action permitted thereby.
PURCHASE OF CONTRACTS
The sales representative will assist in the completion of the application for
the Contract and will be responsible for its transmittal, together with the
necessary purchase payment, to John Hancock's Home Office. If the application
is complete and the Contract applied for is suitable, the Contract will be is-
sued and thereafter delivered by the sales representative. If a completed ap-
plication is received in proper order, the purchase payment accompanying the
application is applied within two business days after receipt. If an initial
purchase payment is not applied within five business days after receipt, it
will be refunded unless John Hancock has received the consent of the applicant
to retain the purchase payment until receipt of information necessary to com-
plete the issuance of the Contract.
Single payment deferred and immediate Contracts may be purchased by a single
purchase payment of $5,000 or more. However, in the case of a single payment
deferred Contract being purchased with the proceeds of fixed dollar insurance
policies and annuity contracts issued by John Hancock the single purchase pay-
ment may be $2,000 or more. One additional payment of at least $2,500 can be
made prior to maturity under a single payment deferred Contract.
Under periodic payment deferred Contracts, the initial purchase payment must
be at least $1,000, subsequent scheduled payments payable on a monthly basis
must be at least $50 in amount, and, if subsequent purchase payments are
scheduled to be made less frequently, purchase payments must total at least
$600 on an annual basis, except where a lower amount is required under the
terms of a plan or arrangement of an employer or organization. Although an
amount is specified in the Contract for the purchase payments, each purchase
payment after the first must be at least $50. Payments for the first contract
year may exceed the specified amount but shall not be more than twice the
amount of the specified payments for a contract year, and payments for any
contract year after the first shall not be more than twice the total payments
actually made with respect to any prior contract year. Increases in purchase
payments beyond the foregoing limits may be made only with John Hancock's
written consent. If a specified purchase payment is not made on its due date
or within 31 days thereafter, the Contract will nevertheless remain in force
as a paid-up annuity. While the Annuitant is living and the Contract is in
force purchase payments may be resumed at any time before maturity.
THE ACCUMULATION PERIOD
ACCUMULATION SHARES
Net purchase payments are allocated by John Hancock to any one or more of the
subaccounts or allocated among the subaccounts in the proportion specified in
the application for the Contract or as directed by the Owner from time to
time. Any change in the election will be effective as to purchase payments
made after the receipt by John Hancock at its Home Office of notice in form
satisfactory to John Hancock.
Each net purchase payment allocated to a subaccount under a deferred Contract
purchases Accumulation Shares of that subaccount at the value of such shares
next determined after the receipt of such net purchase payment at the Home Of-
fice of John Hancock. See "Variable Account Valuation Procedures." The number
of Accumulation Shares of a subaccount purchased with a specific purchase pay-
ment will be determined
21
<PAGE>
by dividing the net purchase payment by the value of an Accumulation Share in
that subaccount when the net purchase payment is applied. The value of the Ac-
cumulation Shares so purchased will vary in amount thereafter depending upon
the investment performance of the subaccount and the charges and deductions
made against the subaccount.
VALUE OF ACCUMULATION SHARES
At any date prior to a Contract's maturity date, the total value of the Accu-
mulation Shares in a subaccount which have been credited to a Contract can be
computed by multiplying the number of such Accumulation Shares by the appro-
priate Accumulation Share Value in effect for such date.
TRANSFERS AMONG SUBACCOUNTS
Not more often than four times in each contract year, the Owner may elect to
transfer all or any part of the Accumulation Shares or Annuity Units credited
to a Contract from one subaccount to another. Any such transfer will result in
the redemption and purchase of Accumulation Shares or Annuity Units, whichever
is applicable, on the basis of the respective values next determined after re-
ceipt of notice satisfactory to John Hancock at its Home Office. Currently,
there is no charge for transfers, and John Hancock has no present intention of
imposing a charge on transfers among subaccounts.
An Owner may request a transfer in writing or, once a written telephone
transfer authorization form is completed by the Owner, the Owner may request a
transfer by telephoning John Hancock at 800-REAL LIFE (732-5543). During peri-
ods of heavy telephone transfers, implementing a telephone transfer may be
difficult. If an Owner is unable to reach John Hancock via the telephone
transfer number cited above, the Owner may send a written request to John Han-
cock via an express mailing service or via the John Hancock fax machine at
617-572-5410. (Transfer requests received via fax are considered telephone
transfers and are bound by the conditions outlined in the Owner's signed tele-
phone transfer authorization form.) Any written request should include the
Owner's name, daytime telephone number, and contract number as well as the
names of the subaccounts from which and to which money will be transferred.
John Hancock reserves the right to discontinue telephone transfers at any time
without notice to the Owners.
An Owner who authorizes telephone transfers will be liable for any loss, ex-
pense or cost arising out of any unauthorized or fraudulent telephone transfer
instructions which John Hancock reasonably believes to be genuine, unless such
loss, expense or cost is the result of John Hancock's mistake or negligence.
John Hancock employs procedures which provide adequate safeguards against the
execution of unauthorized transfers, and which are reasonably designed to con-
firm that transfer instructions received by telephone are genuine. These pro-
cedures include requiring personal identification, tape recording calls, and
providing written confirmation to the Owner.
SURRENDER OF CONTRACT; PARTIAL WITHDRAWALS
Prior to its date of maturity, if the Annuitant is living, a deferred Con-
tract may be surrendered for a cash payment representing all or part of the
total value of Accumulation Shares credited to the Contract. The appropriate
number of Accumulation Shares will be redeemed at their value next determined
after the receipt by John Hancock at its Home Office of notice in form satis-
factory to John Hancock. Unless directed otherwise by the Owner, the Accumula-
tion Shares redeemed in a partial withdrawal will be redeemed in each
subaccount in the same proportion as the Accumulation Share Value of the Con-
tract is then allocated among the subaccounts. The redemption value may be
more or less than the net purchase payments applied under the Contract to pur-
chase the Accumulation Shares, depending upon the market value of the Fund
shares held in the subaccount at the time. The resulting cash payment will be
made in a single sum, ordinarily within seven days after receipt of such no-
tice. As described under "Miscellaneous Provisions--Deferment of Payment,"
however, redemption and payment may be delayed under certain circumstances.
22
<PAGE>
See "Federal Income Taxes" for possible adverse tax consequences of certain
surrenders and partial withdrawals.
Any request for a surrender or partial withdrawal should be mailed to Life
and Annuity Services, Post Office Box 111, Boston, MA 02117.
A partial withdrawal is not permitted in an amount less than $100 or if the
total value of all Accumulation Shares credited to a Contract remaining after
the withdrawal would be less than $500. A partial withdrawal is not a loan
and, once made, cannot be repaid.
DEATH BENEFIT BEFORE DATE OF MATURITY
If the Annuitant dies before the date of maturity of a deferred Contract or
the redemption or conversion of all of the Accumulation Shares credited to
such Contract, a death benefit is payable. If the death occurs at any time be-
fore the contract anniversary nearest the Annuitant's 65th birthday, the death
benefit will be greater of (a) the value of all Accumulation Shares credited
to the Contract next determined following receipt at the Home Office of John
Hancock of due proof of death or (b) the amount of the purchase payments made
under the Contract reduced to reflect redemptions of Accumulation Shares, if
any, previously made as partial withdrawals. The reduction in purchase pay-
ments to reflect a prior withdrawal is in the proportion to which the number
of Accumulation Shares of each subaccount redeemed bore to the number of Accu-
mulation Shares of each subaccount to the credit of the Contract at the date
of receipt of the withdrawal request. In the event of a partial withdrawal
when the value of the Accumulation Shares in a subaccount is less than the
amount of the purchase payments made, the reduction in death benefit will be
greater than the amount of the withdrawal. If the death occurs on or subse-
quent to the contract anniversary nearest the Annuitant's 65th birthday, the
death benefit will be equal to the value of all the Accumulation Shares cred-
ited to the Contract next determined following receipt at the Home Office of
John Hancock of due proof of death.
Payment of the death benefit will be made in a single sum to the beneficiary
designated by the Owner prior to the Annuitant's death unless an optional
method of settlement has been elected by the Owner. If an optional method of
settlement has not been elected by the Owner, the beneficiary may elect an op-
tional method of settlement in lieu of a single sum. No deduction is made for
sales or other expenses upon such election. Payment will be made in single sum
in any event if the death benefit is less than $2,000. See "Annuity Period--
Annuity Options". If there is no surviving beneficiary, the Owner, or his or
her estate is the beneficiary.
Some Contracts are subject to different provisions than those outlined above,
however. The Code requires certain distribution provisions to be included in
any Contract used to fund other than a tax-qualified plan (see "Federal Income
Taxes"). Failure to include the required distribution provisions results in
the Contract not being treated as an annuity for Federal tax purposes. These
required provisions will be reflected by means of an "endorsement" to the Con-
tract furnished by John Hancock.
The Code distribution requirements are expected to present no practical prob-
lems when the Annuitant and Owner are the same person. Nevertheless, all Own-
ers for whom these endorsements are required should be aware that the follow-
ing distribution requirements are applicable notwithstanding any provision to
the contrary in the Contract (or in this prospectus) relating to payment of
the death benefit or death of the Annuitant.
If the Owner dies: (1) on or after annuity payments have begun, any remaining
benefit must be paid out at least as rapidly as under the method of making an-
nuity payments then in effect; or (2) before annuity payments have begun: (a)
if the beneficiary is the spouse of the Owner, the beneficiary may continue
the Contract in force as Owner; or (b) otherwise, the entire interest in the
Contract on the date of death of the Owner must be: (i) paid out in full
within 5 years of the Owner's death; or (ii) applied in full towards the pur-
chase of a life annuity on the beneficiary with payments commencing within 1
year of the Owner's death. The Code imposes comparable distribution require-
ments on tax-qualified plans.
23
<PAGE>
Note that "the entire interest in the Contract on the date of death of the
Owner" which is payable if the Owner dies before annuity payments have begun
may be an amount less than the death benefit which would have been payable if
the Annuitant had died instead. Note also that notice should be furnished
promptly to John Hancock upon the death of the Owner.
THE ANNUITY PERIOD
DEFERRED VARIABLE ANNUITY CONTRACTS
During the annuity period, the total value of any one Contract must be allo-
cated among no more than four subaccounts.
Annuity payments will commence on the date of maturity of the Contract if the
Annuitant is then living and the Contract is then in force. Each deferred Con-
tract will provide at the time of its issuance for a Life Annuity with Ten
Years Certain. Under this form of annuity, variable annuity payments are made
monthly to the Annuitant for life and, if the Annuitant dies within ten years
after the date of maturity of the Contract, the beneficiary will be paid a
single sum equal in amount to the commuted value of the payments remaining in
the ten-year period, based upon the appropriate Annuity Unit Values next de-
termined after receipt at the Home Office of John Hancock of due proof of
death of the Annuitant. A different form of annuity may be elected by the Own-
er, as described in "Annuity Options", prior to the date of maturity of the
Contract. Once a given form of annuity takes effect, it may not be changed.
If the initial monthly annuity payment under a Contract would be less than
$20, John Hancock may make a single sum payment equal to the total value of
the Accumulation Shares credited to the Contract on the date the initial pay-
ment would be payable, in place of all other benefits, or, if agreed to by the
Owner, make periodic payments at quarterly, semi-annual or annual intervals in
place of monthly payments.
Each deferred Contract specifies a provisional date of maturity at the time
of its issuance. The Owner may subsequently elect a different date of maturi-
ty, however, which may be any earlier date or a date not later than five years
after the provisional date of maturity specified in the Contract. The election
is made by written notice received by John Hancock at its Home Office before
the provisional date of maturity and at least 31 days prior to the date of ma-
turity. If a date of maturity different from the provisional date of maturity
is not elected by the Owner, the provisional date of maturity shall be the
date of maturity of the Contract. Particular care should be taken in electing
the date of maturity of Contracts issued under tax-qualified plans. See "Fed-
eral Income Taxes".
IMMEDIATE VARIABLE ANNUITY CONTRACTS
Variable annuity payments under immediate Contracts will commence on a date
mutually agreed upon by the Owner and John Hancock, which date normally is one
month and may not be more than one year after the receipt of the purchase pay-
ment at the Home Office of John Hancock. The Annuity Options available under
such Contracts are Life Annuity without Refund, Life Annuity with Ten or
Twenty Years Certain (see "Annuity Options") and Joint and Last Survivor Life
Annuity. A Joint and Last Survivor Life Annuity provides variable monthly an-
nuity payments during the joint lifetime of the two persons on whose survival
payments depend and thereafter during the lifetime of the survivor. No minimum
number of payments is guaranteed. Immediate Contracts may not be surrendered.
VARIABLE MONTHLY ANNUITY PAYMENTS
Variable monthly annuity payments under any deferred Contract are determined
by converting each subaccount's Accumulation Shares credited to the Contract
(less any applicable premium tax) into the respective Annuity Units of each
subaccount on the date of maturity of the Contract or some other date elected
for commencement of variable annuity payments. Variable monthly annuity pay-
ments under any immediate Contract are determined by converting the net pur-
chase payment allocated to each subaccount into the respective Annuity Units
of each subaccount as of the date of issuance, which will be the later of (a)
the date of approval by John Hancock of the application for the Contract and
(b) the date of receipt of the purchase payment at the Home Office of John
Hancock. See "Calculation of Annuity Units".
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The amount of each annuity payment after the first payment will depend on the
investment performance of the subaccounts being used. If the actual net in-
vestment return (after deducting all charges) of a subaccount during the pe-
riod between the dates for determining two monthly payments based on that
subaccount exceeds the "assumed investment rate" (explained below), the latter
monthly payment will be larger than the former. On the other hand, if the ac-
tual net investment return is less than the assumed investment rate, the lat-
ter monthly payment will be smaller than the former.
ASSUMED INVESTMENT RATE
The assumed investment rate for all Contracts will be 3 1/2% per year except
as provided below. The assumed investment rate is significant in determining
the amount of the initial monthly annuity payment and the amount by which sub-
sequent variable monthly payments are more or less than the initial variable
monthly payment.
Where applicable state law so provides, an Owner may elect a variable annuity
option with a different assumed investment rate, not in excess of 5%, if such
a rate is made available by John Hancock in the Owner's state. Election of a
higher assumed investment rate produces a larger initial annuity payment but
also means that eventually the monthly annuity payments would be smaller than
if a lower assumed investment rate had been elected.
CALCULATION OF ANNUITY UNITS
Under a deferred Contract, Accumulation Shares are converted into Annuity
Units by first multiplying the number of each subaccount's Accumulation Shares
credited to the Contract on the date of conversion by the appropriate Accumu-
lation Share Value as of ten calendar days prior to the date the initial vari-
able monthly annuity payment is due. For each subaccount the resulting value
(less any applicable premium tax) is then multiplied by the applicable annuity
purchase rate, which reflects the sex and age of the Annuitant and the assumed
investment rate, specified in the Contract. This computation determines the
amount of each subaccount's initial monthly variable annuity payment to the
Annuitant. The number of each subaccount's Annuity Units to be credited to the
Contract is then determined by dividing the amount of each subaccount's ini-
tial variable monthly annuity payment by each subaccount's Annuity Unit Value
as of ten calendar days prior to the date the initial payment is due.
Under an immediate Contract, the number of each subaccount's Annuity Units to
be credited to the Contract is determined by first multiplying the net pur-
chase payment allocated to each subaccount by the applicable annuity purchase
rate, which reflects the sex and age of the Annuitant and the assumed invest-
ment rate, for the Annuity Option elected, and then dividing the result by the
appropriate Annuity Unit Value on the date of issuance of the immediate Con-
tract.
ANNUITY OPTIONS
The Owner may elect an Annuity Option during the lifetime of the Annuitant by
written notice received by John Hancock at its Home Office prior to the date
of maturity of the Contract. If no option is selected, Option VA-1 with Ten
Years Certain will be used. A beneficiary entitled to payment of a death bene-
fit in a single sum may, if no election has been made by the Owner prior to
the Annuitant's death, elect an Annuity Option by written notice received by
John Hancock at its Home Office prior to the date the proceeds become payable.
No option may be elected if the value of the Accumulation Shares to be applied
is less than $2,000. Two basic Annuity Options are available under deferred
Contracts.
OPTION VA-1 LIFE ANNUITY WITH FIVE, TEN OR TWENTY YEARS CERTAIN
Variable monthly payments will be made for a designated period of 5, 10 or 20
years and thereafter as long as the payee lives, with the guarantee that if
the payee dies prior to the end of the 5, 10 or 20 year
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period, whichever is applicable, the commuted value of the remaining payments
during the guaranteed period, based upon the applicable Annuity Unit Values
next determined after receipt by John Hancock of due proof of death of the
payee, will then be paid within seven days of such determination in a single
sum as a final payment to the payee's estate or to another person designated
as contingent payee.
OPTION VA-2 LIFE ANNUITY WITHOUT REFUND
Variable monthly payments will be made to the payee as long as he lives. No
minimum number of payments is guaranteed.
OTHER CONDITIONS
John Hancock reserves the right at its sole discretion to make available to
Owners and other payees optional methods of payment in addition to the Annuity
Options described in this Prospectus and the applicable Contract.
Federal income tax requirements currently applicable to H.R. 10 and individ-
ual retirement annuity plans provide that the period of years guaranteed under
Option VA-1 cannot be any greater than the joint life expectancies of the
payee and his or her designated beneficiary.
If the Owner of a Contract used to fund an annuity purchase plan or to fund
other than a tax-qualified plan (See "Federal Income Taxes") dies on or after
annuity payments have begun, the remaining benefit payments must be distrib-
uted at least as rapidly as under the method of making annuity payments then
in effect.
If the initial monthly annuity payment under an Annuity Option would be less
than $20, John Hancock may make a single sum payment equal to the total value
of the Accumulation Shares on the date the initial payment would be payable,
in place of all other benefits provided by the Contract, or if agreed to by
the Owner, may make periodic payments at quarterly, semi-annual or annual in-
tervals in place of monthly payments.
VARIABLE ACCOUNT VALUATION PROCEDURES
VALUATION DATE--A Valuation Date is any date on which the New York Stock Ex-
change is open for trading and on which the Fund values its shares. On any
date other than a Valuation Date, the Accumulation Share Value or Annuity Unit
Value will be the same as that on the next following Valuation Date.
VALUATION PERIOD--A Valuation Period is that period of time from the beginning
of the day following a Valuation Date to the end of the next following Valua-
tion Date.
ACCUMULATION SHARE VALUE--The Accumulation Share Value is calculated sepa-
rately for each subaccount. The value of one Accumulation Share on any Valua-
tion Date is determined for each subaccount by multiplying the immediately
preceding Accumulation Share Value by the applicable Net Investment Factor for
the Valuation Period ending on such Valuation Date.
ANNUITY UNIT VALUE--The Annuity Unit Value is calculated separately for each
subaccount. The value of one Annuity Unit on any Valuation Date is determined
for each subaccount by first multiplying the immediately preceding Annuity
Unit Value by the applicable Net Investment Factor for the Valuation Period
ending on such date and then multiplying this product by an adjustment factor
which will neutralize the assumed investment rate used in determining the
amounts of annuity payable. The adjustment factor for a Valuation Period of
one day for Contracts with an assumed investment rate of 3 1/2% per year is
.99990575. The assumed investment rate is neutralized by applying the adjust-
ment factor so that the variable annuity payments will reflect only the actual
net investment rate of the subaccount.
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NET INVESTMENT FACTOR--The Net Investment Factor for each subaccount for any
Valuation Period is equal to 1.00000000 plus the applicable net investment
rate for such Valuation Period. A Net Investment Factor may be more or less
than 1.00000000. The net investment rate for each subaccount for any Valuation
Period is equal to (a) the accrued investment income and capital gains and
losses, whether realized or unrealized, of the subaccount for such Valuation
Period less (b) the sum of a deduction for any applicable income taxes and,
for each calendar day in the Valuation Period, a deduction of 0.002740% of the
value of each subaccount at the beginning of the Valuation Period, as de-
scribed under "Charges for Mortality and Expense Risks and Administrative
Services" the result then being divided by (c) the value of the total net as-
sets of each subaccount at the beginning of the Valuation Period determined as
described below under "Valuation of Assets".
ADJUSTMENT OF UNITS AND VALUES--John Hancock reserves the right to change the
number and value of the Accumulation Shares or Annuity Units or both credited
to any Contract, without the consent of the Owner or any other person, pro-
vided strict equity is preserved and the change does not otherwise affect the
benefits, provisions or investment return of the Contract.
MISCELLANEOUS PROVISIONS
RESTRICTION ON ASSIGNMENT
In order to qualify for favorable tax treatment, certain Contracts may not be
sold, assigned, discounted or pledged as collateral for a loan or as security
for the performance of an obligation or for any other purpose, to any person
other than John Hancock, unless the Owner is the trustee of a trust described
in Section 401(a) of the Code.
DEFERMENT OF PAYMENT
Payment of the value of any Accumulation Shares in a single sum upon a sur-
render or partial withdrawal will ordinarily be made within seven days after
receipt of the written request therefor by John Hancock at its Home Office.
However, redemption may be suspended and payment may be postponed at times (a)
when the New York Stock Exchange is closed, other than customary week-end and
holiday closings, (b) when trading on that Exchange is restricted, (c) when an
emergency exists as a result of which disposal of securities in a subaccount
is not reasonably practicable or it is not reasonably practicable to determine
the value of the net assets of a subaccount or (d) when a governmental body
having jurisdiction over the Account by order permits such suspension. Rules
and regulations of the Securities and Exchange Commission, if any are applica-
ble, will govern as to whether conditions described in (b) or (c) exist.
RESERVATION OF RIGHTS
John Hancock reserves the right to add or delete subaccounts, to change the
underlying investments of any subaccount, to operate the Account in any form
permitted by law and to terminate the Account's registration under the 1940
Act if such registration should no longer be legally required. Such registra-
tion may be terminated only upon majority vote of Owners, and certain other
changes may, under applicable laws and regulations, require notice to or ap-
proval of Owners. Otherwise, changes do not require such notice or approval.
OWNER AND BENEFICIARY
The Owner has the sole and absolute power to exercise all rights and privi-
leges under the Contract, except as otherwise provided by the Contract or by
written notice of the Owner. The Owner and the beneficiary are designated in
the application and may be changed by the Owner, effective upon receipt of
written notice at the Home Office, subject to the rights of any assignee of
record, any action taken prior to receipt of the notice and certain other con-
ditions. While the Annuitant is alive, the Owner may be changed by written no-
tice. The beneficiary may be changed by written notice no later than receipt
of due proof of the Annuitant's death. The change will take effect whether or
not the Owner or the Annuitant is then alive.
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FEDERAL INCOME TAXES
THE ACCOUNT AND JOHN HANCOCK
John Hancock is taxed as a life insurance company under the Code. The Account
is part of John Hancock's total operations and is not taxed separately as a
"regulated investment company" or otherwise.
The Contracts permit John Hancock to charge against the Account any taxes, or
provisions for taxes, attributable to the operation or existence of the Con-
tracts or the Account. Currently, John Hancock does not anticipate making a
charge for income and other taxes because of the level of such taxes. If the
level of current tax is increased, or is expected to increase in the future,
John Hancock reserves the right to make a charge in the future.
John Hancock assumes no responsibility for determining whether a particular
retirement plan satisfies the applicable requirements of the Code or whether a
particular employee is eligible for inclusion under a plan.
CONTRACTS PURCHASED OTHER THAN TO FUND A TAX QUALIFIED PLAN
THE ANNUITANT OR OTHER PAYEE
The Contracts are considered annuity contracts under Section 72 of the Code.
Currently no Federal income tax is payable on increases in value of Accumula-
tion Shares or Annuity Units credited to a variable annuity contract until
payments are made to the Annuitant or other payee under such Contract. Howev-
er, a Contract owned other than by a natural person is not generally an annu-
ity for tax purposes and any increase in the value thereunder is taxable as
ordinary income as accrued.
When payments under a Contract are made in the form of an annuity, the amount
of each payment is taxed to the Annuitant or other payee as ordinary income to
the extent that such payment exceeds any allocable portion of the Annuitant's
"investment in the contract" (as defined in the Code). In general, an
Annuitant's "investment in the contract" is the aggregate amount of purchase
payments made by him, reduced by any amounts previously distributed from the
Contract that were not subject to tax. The portion of each variable annuity
payment to be excluded from income is determined by dividing the "investment
in the contract", adjusted by any refund feature, by the number of periodic
payments anticipated during the time that periodic payments are to be made. In
the case of a fixed annuity payment, the amount to be excluded in each year is
determined by dividing the "investment in the contract," adjusted by any re-
fund feature, by the amount of "expected return" during the time that periodic
payments are to be made, and then multiplying by the amount of the payment.
When a payment under a Contract is made in a single sum, the amount of the
payment is taxed as ordinary income to the Annuitant or other payee to the ex-
tent it exceeds the Annuitant's "investment in the contract".
PARTIAL WITHDRAWALS BEFORE ANNUITY STARTING DATE
When a payment under a Contract is less than the amount that would be paid
upon the Contract's complete surrender and such payment is made prior to the
commencement of annuity payments under the Contract, part or all of the pay-
ment (the partial withdrawal) may be taxed to the Annuitant or other payee as
ordinary income.
On the date of the partial withdrawal, if the cash value of the Contract is
greater than the investment in the Contract, any part of such excess value so
withdrawn is subject to tax as ordinary income. But to the extent that the
amount of the partial withdrawal is greater than such excess value, that
greater part will not be taxed as ordinary income and will be allocable to the
investment in the Contract.
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If an individual assigns or pledges any part of the value of a Contract, the
value so pledged or assigned is taxed as ordinary income to the same extent as
a partial withdrawal.
PENALTY FOR PREMATURE WITHDRAWALS
In addition to being included in ordinary income, the taxable portion of any
withdrawal will be subject to a 10-percent penalty tax. The penalty tax does
not apply to payments made to the Annuitant or other payee after age 59 1/2,
or on account of death or disability. If the withdrawal is made in substan-
tially equal periodic payments over the life of the Annuitant or other payee
or over the joint lives of the Annuitant and the Annuitant's beneficiary, the
penalty will also not apply.
DIVERSIFICATION REQUIREMENTS
Each of the Portfolios of the Fund intends to qualify as a regulated invest-
ment company under Subchapter M of the Code and will have to meet the invest-
ment diversification tests of Section 817(h) of the Code and the underlying
regulations. The Treasury Department and the Internal Revenue Service may, at
some future time, issue a ruling or a regulation presenting situations in
which it will deem "investor control" to be present over the assets of the un-
derlying Portfolios, causing the Owner to be taxed currently on income cred-
ited to the Contracts. In such a case, John Hancock reserves the right to
amend the Contract or the choice of underlying portfolios to avoid current
taxation to the Owners.
CONTRACTS PURCHASED TO FUND A TAX QUALIFIED PLAN
WITHHOLDING ON ELIGIBLE ROLLOVER DISTRIBUTIONS
Recent legislation requires 20% withholding on certain distributions from tax
qualified plans. An Owner wishing to rollover his entire distribution should
have it paid directly to the successor plan. Otherwise, the Owner's distribu-
tion will be reduced by the 20% mandatory income tax. Consult a qualified tax
adviser before taking such a distribution.
CONTRACTS PURCHASED UNDER CORPORATE PLANS
In general, purchase payments made by a corporation under a qualified pension
or profit-sharing plan described in Section 401(a) of the Code or a qualified
annuity plan described in Section 403(a) of the Code are deductible by the
corporation and are not taxable currently to the employees.
When payments under a Contract are made in the form of an annuity, the amount
of each payment is taxed to the Annuitant or other payee as ordinary income
except in those cases where the Annuitant has an "investment in the contract"
(as defined in the Code). In general, an Annuitant's "investment in the con-
tract" is the aggregate amount of purchase payments made by him. If an Annui-
tant has an "investment in the contract," a portion of each annuity payment is
excluded from income until the investment in the contract is recovered. The
amount to be excluded in each year, in the case of a variable annuity payment,
is determined by dividing the "investment in the contract," adjusted by any
refund feature, by the number of periodic payments anticipated during the time
that periodic payments are to be made.
When payment under a Contract is made in a single sum or total distribution
is made within one taxable year of the Annuitant or other payee, the amount of
the payment is taxed to the Annuitant or other payee to the extent it exceeds
the Annuitant's "investment in the contract." If such payment is made after
the Annuitant has attained the age of 59 1/2, or on account of his death, re-
tirement or other termination of employment or on account of his death after
termination of employment, five year averaging and a phase-out of capital
gains treatment for pre-1974 contributions may be available with respect to
one distribution. Other rules may be available to taxpayers who have attained
age 50 prior to January 1, 1986.
IRS required minimum distributions must begin no later than April 1 of the
year following the year in which the Annuitant attains age 70 1/2 even if the
Annuitant has not retired.
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CONTRACTS PURCHASED UNDER SECTION 403(B) PLANS (TSA)
Purchase payments made by an employer which is a public school system or a
tax-exempt organization described in Section 501(c)(3) of the Code under annu-
ity purchase arrangements described in Section 403(b) of the Code are not tax-
able currently to the Annuitant, to the extent that the aggregate of such
amounts does not exceed the Annuitant's "exclusion allowance" (as defined in
the Code). In general, an Annuitant's "exclusion allowance" is determined by
multiplying 20% of his "includible compensation" (as defined in the Code) by
the number of years of his service with the employer and then subtracting from
that product the aggregate amount of purchase payments previously excluded
from income and certain other employer payments to retirement plans in which
the Annuitant is a participant. Additional limitations applicable to purchase
payments are described in Section 415 of the Code. Deferrals under all plans
made at the election of the Annuitant generally are limited to an aggregate of
$9,500 annually.
When payments under a Contract are made in the form of an annuity, such pay-
ments are taxed to the Annuitant or other payee under the same rules that ap-
ply to such payments under corporate plans (discussed earlier), except that
five-year averaging and capital gain phase-out are not available.
When payment under a Contract is made in a single sum, such as on surrender
of the Contract or by partial withdrawal, the taxable portion of the payment
is taxed as ordinary income and the penalty for premature withdrawals may be
applicable.
Ordinarily an Annuitant in a Section 403(b) plan does not have an "investment
in the contract" and, thus, any distribution is fully taxed as ordinary in-
come.
Distributions are prohibited before the Owner is age 59 1/2, except on the
Owner's separation from service, death, or disability and except with respect
to distributions attributable to assets held as of December 31, 1988. This
prohibition does not (1) preclude transfers and exchanges to other products
that qualify under Section 403 (b) and (2) restrict withdrawals of certain
amounts attributable to pre-January 1, 1989, premium payments.
CONTRACTS PURCHASED UNDER H.R. 10 PLANS
Self-employed persons, including partnerships, may establish tax-qualified
pension and profit sharing plans and annuity plans for themselves and for
their employees. Generally, the maximum amount of purchase payments deductible
each year with respect to variable annuity contracts issued on the life of
self-employed persons is $30,000 or 25% of "earned income" (as defined in the
Code), whichever is less. Self-employed persons must also make purchase pay-
ments for their employees (who have met certain eligibility requirements) at
least at the same rate as they do for themselves. In general, such purchase
payments are deductible in full and are not taxable currently to such employ-
ees.
Tax-qualified plans may permit self-employed persons and their employees to
make additional purchase payments themselves (which are not deductible) of up
to 10% of earned income or compensation (discussed earlier).
When payments under a Contract are made in the form of an annuity, such pay-
ments are taxed to the Annuitant or other payee under the same rules that ap-
ply to such payments under corporate plans.
The tax treatment of single sum payments is also the same as under corporate
plans except that five year averaging may be unavailable to a self-employed
Annuitant on termination of service for reasons other than disability.
The same rules that apply to commencement of annuity payments under corporate
plans apply to H.R. 10 plans.
CONTRACTS PURCHASED BY TOP-HEAVY PLANS
Certain corporate and H.R. 10 plans may be characterized under Section 416 of
the Code as "top-heavy plans" if a significant portion of the plan assets is
held for the benefit of "key employees" (as defined in
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the Code). Care must be taken to consider the special limitations applicable
to top-heavy plans and the potentially adverse tax consequences to key employ-
ees.
CONTRACTS PURCHASED UNDER INDIVIDUAL RETIREMENT ANNUITY PLANS (IRA)
The maximum amount of purchase payments deductible each year with respect to
an individual retirement annuity contract (as defined in Section 408 of the
Code) issued on the life of an eligible purchaser is the lesser of $2,000 or
100% of compensation includible in gross income. A person may also purchase a
Contract for the benefit of his or her non-working spouse. Where an individual
elects to deduct amounts contributed on his or her own behalf and on behalf of
a spouse, the maximum amount of purchase payments deductible is the lesser of
$2,250 or 100% of the compensation included in the gross income of the working
spouse; provided, however, not more than $2,000 can be allocated to either
person's account. Taxpayers who are active participants in an employer-spon-
sored retirement plan are permitted to make a deductible purchase payment only
if their adjusted gross incomes are below certain amounts.
No deduction is allowed for purchase payments made in or after the taxable
year in which the annuitant has attained the age of 70 1/2 years nor is a de-
duction allowed for a "rollover contribution" as defined in the Code.
When payments under a Contract are made in the form of an annuity, or in a
single sum such as on surrender of the Contract or by partial withdrawal, the
payment is taxed as ordinary income.
IRS required minimum distributions must begin no later than April 1 of the
year following the year in which the Annuitant attains age 70 1/2. The Annui-
tant can suffer adverse tax consequences if a distribution or surrender of the
Contract or partial withdrawal is made prior to his attaining age 59 1/2, ex-
cept in the event of death or total disability.
CONTRACTS PURCHASED UNDER GOVERNMENT DEFERRED COMPENSATION PLANS (SECTION
457)
Participants in certain deferred compensation plans maintained by a state, a
political subdivision of a state, or their agencies or instrumentalities or
tax-exempt organizations and tax-exempt employers are permitted to exclude a
portion of their compensation from gross income. Amounts so deferred (includ-
ing any income thereon) shall be includible in gross income only for the tax-
able year in which such amounts are paid or otherwise made available to the
Annuitant or other payee.
In general, the maximum amount of compensation which may be deferred under
such tax-favored plans is the lesser of $7,500 or 33 1/3% of the participant's
"includible compensation" (as defined in the Code). The deferred compensation
plan itself must satisfy several conditions, among which are that the plan
must not permit distributions prior to the participant's separation from serv-
ice (except in the case of an unforeseen emergency), and that all compensation
deferred under the plan shall remain solely the employer's property and may be
subject to the claims of its creditors.
When payment under a Contract is made in the form of an annuity, or in a sin-
gle sum such as on surrender of the Contract or by partial withdrawal, the
payment is taxed as ordinary income.
WITHHOLDING OF TAXES
John Hancock is obligated to withhold taxes from certain payments unless the
recipient elects otherwise. The withholding rate varies depending upon the na-
ture and the amount of the distribution. John Hancock will notify the Annui-
tant or other payee in advance of the first payment of his or her right to
elect out of withholding and furnish a form on which the election may be made.
Any election must be received by John Hancock in advance of the payment in or-
der to avoid withholding.
SEE YOUR OWN TAX ADVISER
The above description of Federal income tax consequences of owning a Contract
and of the different kinds of tax-qualified plans which may be funded by the
Contracts is only a brief summary and is not
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intended as tax advice. Nor does it include a discussion of Federal estate or
gift tax or state tax consequences. Tax laws and regulations are subject to
change and such changes may be retroactive. The rules governing the provisions
of tax-qualified plans are extremely complex and often difficult to under-
stand. Anything less than full compliance with the applicable rules, all of
which are subject to change from time to time, can have adverse tax conse-
quences. For example, premature withdrawals are generally subject to a 10-per-
cent penalty tax. The taxation of an Annuitant or other payee has become so
complex and confusing that great care must be taken to avoid pitfalls. For
further information a prospective purchaser should consult a qualified tax ad-
viser.
PERFORMANCE
The Account may, from time to time, advertise certain performance information
with respect to its Subaccounts. THE PERFORMANCE INFORMATION IS BASED ON HIS-
TORICAL INVESTMENT EXPERIENCE OF THE SUBACCOUNTS AND DOES NOT INDICATE OR REP-
RESENT FUTURE PERFORMANCE.
The Subaccounts may include total return in advertisements. When a Subaccount
advertises its total return, it will usually be calculated for one year, five
years, and ten years or some other relevant period, if the corresponding Port-
folio has not been in existence for at least ten years. Total return is the
percentage change between the value of a hypothetical investment in the
Subaccount at the beginning of the relevant period to the value of the invest-
ment at the end of the period, if the Contract Owner surrendered the Contract
at the end of the period indicated. Total return at the Account level reflects
all Contract charges (other than any premium tax charges)--mortality and ex-
pense risk charges, administrative service charge, (including the annual main-
tenance charge in the case of a periodic payment Contract), and the sales
charges--and is therefore lower than total return at the Fund level where no
comparable charges have been deducted.
The Money Market Subaccount may advertise "current yield" and "effective
yield." Current yield refers to the income earned by the Subaccount over a
seven-day period and then annualized; i.e., the income earned in the period is
assumed to be earned every seven days over a 52-week period and stated as a
percentage of the investment. Effective yield is calculated similarly but,
when annualized, the income earned by the investment is assumed to be rein-
vested in the Subaccount and thus compounded in the course of a 52-week peri-
od. The effective yield will be slightly higher than the current yield because
of this compounding effect of the assumed reinvestment.
The other Subaccounts may also advertise current yield. For these
Subaccounts, the current yield will be calculated by dividing the annualiza-
tion of the income earned by the Subaccount during a recent thirty-day period
by the maximum offering price per unit at the end of such period. In all
cases, current yield and effective yield reflect the recurring charges on the
Account level including the periodic administrative expense charges, but do
not include any premium tax charges or any charges for minimum death benefit,
sales expenses, or administrative expenses that are deducted from premium pay-
ments.
Performance information for the Subaccounts may be compared to other variable
annuity separate accounts or other investment products surveyed by Lipper Ana-
lytical Services, Inc., an independent service which monitors and ranks the
performance of investment companies, or tracked by other rating services, com-
panies, publications, or persons who independently monitor and rank investment
company performance. Performance figures are calculated in accordance with
standardized methods established by each reporting service.
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STATE REGULATION
John Hancock is subject to the provisions of the Massachusetts insurance laws
applicable to mutual life insurance companies and to regulation and supervi-
sion by the Massachusetts Commissioner of Insurance. John Hancock is also sub-
ject to the applicable insurance laws of all the other states and jurisdic-
tions in which it does an insurance business.
REPORTS
Reports will be furnished at least annually to an Owner showing the number
and value of Accumulation Shares credited to the variable annuity contract and
containing the financial statements of the Fund.
VOTING PRIVILEGES
THE ACCOUNT
All of the assets in the subaccounts of the Account are invested in shares of
the corresponding Portfolios of the Fund. John Hancock will vote the shares of
each of the Portfolios of the Fund which are deemed attributable to the Con-
tracts at meetings of the Fund's shareholders in accordance with instructions
received from Owners of the Contracts. Shares of the Fund held in the Account
which are not attributable to the Contracts and those for which instructions
from Owners are not received will be represented by John Hancock at the meet-
ing and will be voted for and against each matter in the same proportion as
the votes based upon the instructions received from the Owners of all annuity
contracts funded through the Account's corresponding variable subaccounts.
The number of Fund shares held in each subaccount deemed attributable to each
Owner is determined by dividing a Contract's Accumulation Share Value (or for
a Contract under which annuity payments have commenced, the equivalent) in the
subaccount by the net asset value of one share in the corresponding Fund Port-
folio in which the assets of that subaccount are invested. Fractional votes
will be counted. The number of shares as to which the Owner may give instruc-
tions will be determined as of the record date for the Fund's meeting.
Owners of Contracts may give instructions regarding the election of the Board
of Trustees of the Fund, ratification of the selection of independent audi-
tors, approval of the Fund's investment management agreement and other matters
requiring a vote under the 1940 Act. Owners will be furnished information and
forms by John Hancock in order that voting instructions may be given.
JOHN HANCOCK
An Owner (or the Annuitant if a different person) will have the right to vote
at annual meetings of all John Hancock policyholders for the election of mem-
bers of the Board of Directors of John Hancock and on other corporate matters,
if any, where a policyholders' vote is taken. The Owner (or the Annuitant if a
different person) may cast only one vote as the holder of a variable annuity
contract, irrespective of the value of the contract or the number of variable
annuity contracts held.
CHANGES IN APPLICABLE LAW--FUNDING AND OTHERWISE
The voting privileges described in this prospectus are afforded based on John
Hancock's understanding of applicable Federal securities law requirements. To
the extent that applicable law, regulations or interpretations change to elim-
inate or restrict the need for such voting privileges, John Hancock reserves
the right to proceed in accordance with any such revised requirements. John
Hancock also reserves the right, subject to compliance with applicable law,
including approval of Owners if so required, to transfer assets determined by
John Hancock to be associated with the class of contracts to which the Con-
tracts belong from the Account to another separate account by withdrawing the
same percentage of each investment in the Account with appropriate adjustments
to avoid odd lots and fractions.
33
<PAGE>
LEGAL MATTERS
Legal matters in connection with the Contracts and Federal laws and regula-
tions relating to their issue and sale have been passed upon by Francis C.
Cleary, Jr., Vice President and Counsel of John Hancock.
DISTRIBUTION OF THE CONTRACTS
John Hancock, the principal underwriter and distributor of the Contracts , is
registered as a broker-dealer with the Commission under the Securities Ex-
change Act of 1934 and is a member of the National Association of Securities
Dealers, Inc. The Contracts may be purchased through either registered repre-
sentatives licensed to sell John Hancock life insurance policies and annuity
contracts or other registered broker-dealers whose representatives are autho-
rized by applicable law to sell variable annuity contracts. The compensation
paid to such broker-dealers is not expected to exceed 3% of purchase payments.
REGISTRATION STATEMENT
This Prospectus omits certain information contained in the Registration
Statement which has been filed with the Securities and Exchange Commission.
More details may be obtained from the Commission upon payment of the pre-
scribed fee.
EXPERTS
The financial statements of the Account and of John Hancock included in the
Statement of Additional Information have been audited by Ernst & Young LLP,
independent auditors, whose reports thereon appear in the Statement of Addi-
tional Information and have been so included in reliance on their reports
given on their authority as experts in accounting and auditing.
FINANCIAL STATEMENTS
Financial statements of the Account and John Hancock may be found in the
Statement of Additional Information. The financial statements of John Hancock
should be distinguished from the financial statements of the Account and
should be considered only as bearing upon the ability of John Hancock to meet
its obligations under the Contracts.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
CROSS REFERENCE TO
PAGE PAGE IN PROSPECTUS
---- ------------------
<S> <C> <C>
Business History........................................ 1 15-16
Distribution Agreement and Other Services............... 1 18, 19-20, 34
Distribution Agreement................................ 1 19-20, 34
Investment Advisory Agreement......................... 2 18
Custodian Agreement................................... 2 --
Independent Auditors.................................. 3 34
Calculation of Performance Data......................... 3 32
Calculation of Annuity Payments......................... 4 25-27
Financial Statements.................................... 6 34
</TABLE>
34
<PAGE>
APPENDIX--ILLUSTRATIVE ACCUMULATION VALUE AND ANNUITY PAYMENT TABLES
The following Tables present illustrative periodic accumulation values and
annuity payments that would have resulted under a Contract described in this
prospectus had such values and payments been based exclusively upon the in-
vestment experience of the predecessors of each of the three Subaccounts dur-
ing the periods shown.
Since 1980 the Contracts may have participated in more than one investment
option. Moreover, Contracts offered prior to 1980 differ somewhat from the
Contracts described in this current prospectus. Accordingly, the results shown
in the Tables applicable to each investment option are illustrative only, but
reflect the actual investment performance of each investment option.
John Hancock reorganized its variable annuity separate accounts on February
20, 1987, as described under "John Hancock, the Account and the Series Fund."
Figures are based on the pre-reorganization financial results of John
Hancock's separate accounts which combined and ceased their separate opera-
tions pursuant to the reorganization (i.e., John Hancock Variable Accounts A,
A-1, A-2, C, C-1 and C-2) are, for illustrative purposes, shown separately in
the following Tables.
Pro forma adjustments were unnecessary for all of the years shown in Tables I
and II even though the contract forms described in this prospectus are not ex-
actly the same as those available in those years. The current forms differ,
for example, in that the deductions from a $10,000 single purchase payment for
sales expenses and administrative expense now total 4% (plus an administrative
expense deduction of $50) rather than 7%. They also differ in that the annuity
purchase rates were liberalized for the years 1980 and thereafter so that a
greater amount of annuity is now purchased by the same amount of net purchase
payment.
The Tables assume investment of a single purchase payment of $10,000, net of
all deductions from purchase payments for sales and administrative expenses,
any minimum death benefit guarantee and premium taxes, and that charges have
been made at an annual rate of 1.00% for mortality and expense risks and in-
vestment advisory services. A gross purchase payment of $10,450, in a state in
which no premium tax was applicable, would result in a $10,000 net purchase
payment. The Tables also reflect actual investment management fees and other
portfolio expenses for the periods illustrated.
WHAT THE TABLES ILLUSTRATE
Subject to the foregoing, Table I presents for the periods shown the illus-
trative periodic accumulation values for each Account which would have re-
sulted at yearly intervals under a Contract where a net single purchase pay-
ment of $10,000 was made. The Tables indicate the accumulation value which
would have resulted upon a full surrender of the Contract, based upon the in-
vestment performance of the applicable funding medium.
Subject to the foregoing, the Tables II indicate, at yearly intervals, illus-
trative monthly variable annuity payments for each subaccount which would have
been received by an Annuitant, assuming that an initial annuity payment of
$100 was received in the month and year indicated in the respective Tables.
The form of annuity illustrated is a life annuity with payments guaranteed for
10 years.
CAUTION
The following Tables do not necessarily represent the operating results of an
actual contract of the single payment form described in this prospectus and
are qualified by, and should be read with, the foregoing introductory materi-
als.
The results shown should not be considered a representation of the future. A
program of the type illustrated in the Tables does not assure a profit or pro-
tect against depreciation in declining markets.
35
<PAGE>
GROWTH & INCOME (FORMERLY STOCK) SUBACCOUNT
ILLUSTRATIVE PERIODIC ACCUMULATION VALUES
AND ANNUITY PAYMENTS
TABLE I--ACCUMULATION PERIOD--ILLUSTRATIVE ACCUMULATION VALUES RESULTING FROM
A $10,000 NET PURCHASE PAYMENT CONTRACT ISSUED JANUARY 2, 1975
<TABLE>
<CAPTION>
ACCUMULATION
VALUE ON
DECEMBER 31
CONTRACT YEAR COMMENCING OF THE SAME YEAR
------------------------ ----------------
<S> <C>
January 1975........................................... $12,819.53
January 1976........................................... 14,966.77
January 1977........................................... 13,228.07
January 1978........................................... 13,894.65
January 1979........................................... 15,986.35
January 1980........................................... 20,643.34
January 1981........................................... 20,623.76
January 1982........................................... 26,146.27
January 1983........................................... 31,543.15
January 1984........................................... 32,710.95
January 1985........................................... 43,647.00
January 1986........................................... 50,007.66
January 1987........................................... 51,890.42
January 1988........................................... 59,612.93
January 1989........................................... 76,444.82
January 1990........................................... 77,614.58
January 1991........................................... 96,797.30
January 1992........................................... 104,360.13
January 1993........................................... 117,099.31
January 1994 .......................................... 115,292.09
January 1995........................................... 153,196.33
</TABLE>
TABLE II--ANNUITY PERIOD--ILLUSTRATIVE MONTHLY VARIABLE ANNUITY PAYMENTS--
GROWTH & INCOME SUBACCOUNT
This Table shows, at annual intervals, the illustrative monthly variable an-
nuity payments an annuitant would receive assuming the annuitant received a
first annuity payment of $100 in January 1975.
<TABLE>
<CAPTION>
PAYMENT
MONTH FOR MONTH
----- ---------
<S> <C>
January 1975.................................................... $100.00
January 1976.................................................... 126.56
January 1977.................................................... 141.12
January 1978.................................................... 123.05
January 1979.................................................... 125.58
January 1980.................................................... 139.22
January 1981.................................................... 172.58
January 1982.................................................... 167.75
January 1983.................................................... 204.49
January 1984.................................................... 235.65
January 1985.................................................... 237.41
January 1986.................................................... 307.45
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
PAYMENT
MONTH FOR MONTH
----- ---------
<S> <C>
January 1987.................................................... $348.17
January 1988.................................................... 347.67
January 1989.................................................... 384.54
January 1990.................................................... 456.19
January 1991.................................................... 462.95
January 1992.................................................... 530.83
January 1993.................................................... 583.54
January 1994.................................................... 631.13
January 1995 ................................................... 602.56
January 1996.................................................... 768.39
</TABLE>
The amounts shown are based on the investment performance of the Growth & In-
come Subaccount and its predecessors. All amounts reflect the provisions of
the contracts described in this prospectus, including annuity tables based on
the standard assumed investment rate of 3 1/2% per annum. The amounts shown do
not reflect the deduction for any applicable premium tax. See text preceding
these Tables.
SOVEREIGN BOND (FORMERLY BOND) SUBACCOUNT
ILLUSTRATIVE PERIODIC ACCUMULATION VALUES
AND ANNUITY PAYMENTS
TABLE I--ACCUMULATION PERIOD--ILLUSTRATIVE ACCUMULATION VALUES RESULTING FROM
A $10,000 NET PURCHASE PAYMENT CONTRACT ISSUED JUNE 2, 1980
<TABLE>
<CAPTION>
ACCUMULATION
VALUE ON DECEMBER
CONTRACT YEAR COMMENCING 31 OF THE SAME YEAR
------------------------ -------------------
<S> <C>
June 1980........................................... $10,253.83
June 1981........................................... 10,562.69
June 1982........................................... 13,469.69
June 1983........................................... 14,149.33
June 1984........................................... 16,041.33
June 1985........................................... 19,306.75
June 1986........................................... 21,698.31
June 1987........................................... 22,052.03
June 1988........................................... 23,615.72
June 1989........................................... 26,354.41
June 1990........................................... 28,015.98
June 1991........................................... 32,360.46
June 1992........................................... 34,492.94
June 1993........................................... 37,828.50
June 1994 .......................................... 36,490.86
June 1995........................................... 43,187.99
</TABLE>
37
<PAGE>
TABLE II--ANNUITY PERIOD--ILLUSTRATIVE MONTHLY VARIABLE ANNUITY PAYMENTS--
SOVEREIGN BOND SUBACCOUNT
This Table shows, at annual intervals, the illustrative monthly variable an-
nuity payments an annuitant would receive assuming the annuitant received a
first annuity payment of $100 in June 1980.
<TABLE>
<CAPTION>
PAYMENT
MONTH FOR MONTH
----- ---------
<S> <C>
June 1980....................................................... $100.00
June 1981....................................................... 96.41
June 1982....................................................... 105.17
June 1983....................................................... 126.21
June 1984....................................................... 120.98
June 1985....................................................... 145.80
June 1986....................................................... 165.31
June 1987....................................................... 166.02
June 1988....................................................... 172.28
June 1989....................................................... 181.81
June 1990....................................................... 187.02
June 1991....................................................... 200.83
June 1992....................................................... 215.21
June 1993....................................................... 230.96
June 1994....................................................... 224.68
June 1995....................................................... 238.43
</TABLE>
The amounts shown are based on the investment performance of the Sovereign
Bond Subaccount and its predecessors. All amounts reflect the provisions of
the contracts described in this prospectus, including annuity tables based on
the standard assumed investment rate of 3 1/2% per annum. The amounts shown do
not reflect the deduction for any applicable premium tax. See text preceding
these Tables.
MONEY MARKET SUBACCOUNT
ILLUSTRATIVE PERIODIC ACCUMULATION VALUES
AND ANNUITY PAYMENTS
TABLE I--ACCUMULATION PERIOD--ILLUSTRATIVE ACCUMULATION VALUES RESULTING FROM
A $10,000 NET PURCHASE PAYMENT CONTRACT ISSUED MAY 13, 1982
<TABLE>
<CAPTION>
ACCUMULATION
VALUE ON DECEMBER
31 OF THE SAME
CONTRACT YEAR COMMENCING YEAR
------------------------ -----------------
<S> <C>
May 1982.............................................. $10,482.07
May 1983.............................................. 11,284.20
May 1984.............................................. 12,347.06
May 1985.............................................. 13,220.57
May 1986.............................................. 13,966.07
May 1987.............................................. 14,753.07
May 1988.............................................. 15,728.09
May 1989.............................................. 17,018.30
May 1990.............................................. 18,236.49
May 1991.............................................. 19,134.07
May 1992.............................................. 19,633.92
May 1993.............................................. 20,034.00
May 1994.............................................. 20,646.91
May 1995.............................................. 21,624.81
</TABLE>
38
<PAGE>
TABLE II--ANNUITY PERIOD--ILLUSTRATIVE MONTHLY VARIABLE ANNUITY PAYMENTS--
MONEY MARKET SUBACCOUNT
This Table shows, at annual intervals, the illustrative monthly variable an-
nuity payments an annuitant would receive assuming that annuitant received a
first annuity payment of $100 in May 1982.
<TABLE>
<CAPTION>
PAYMENT FOR
MONTH MONTH
----- -----------
<S> <C>
May 1982...................................................... $100.00
May 1983...................................................... 103.76
May 1984...................................................... 108.45
May 1985...................................................... 114.21
May 1986...................................................... 117.81
May 1987...................................................... 119.65
May 1988...................................................... 122.42
May 1989...................................................... 127.07
May 1990...................................................... 132.40
May 1991...................................................... 136.49
May 1992...................................................... 137.10
May 1993...................................................... 135.53
May 1994...................................................... 133.62
May 1995...................................................... 134.22
</TABLE>
The amounts shown are based on the investment performance of the Money Market
Subaccount and its predecessors. All amounts reflect the provisions of the
contracts described in this prospectus, including annuity tables based on the
standard assumed investment rate of 3 1/2% per annum. The amounts shown do not
reflect the deduction for any applicable premium tax. See text preceding these
Tables.
39
<PAGE>
[LOGO OF JOHN HANCOCK MUTUAL JOHN HANCOCK
LIFE INSURANCE COMPANY APPEARS HERE] MUTUAL LIFE INSURANCE COMPANY
ANNUITY TRANSFERLINE
AUTHORIZATION FORM
- --------------------------------------------------------------------------------
INSTRUCTIONS: Please complete and sign where indicated. If your Contract
will be jointly owned, each Owner must sign. An acknowledgement letter
will be sent as soon as your Contract is issued.
THIS COMPLETED FORM MUST BE SUBMITTED WITH THE APPLICATION.
- --------------------------------------------------------------------------------
( ) Yes! I want TRANSFERLINE, John Hancock's telephone transfer program that
permits fast and toll-free transfers of funds within my Contract, as con-
ditions dictate.
As the applicant for a Contract funded by John Hancock Variable Series Trust I
(the "Fund"), I hereby authorize John Hancock, on behalf of the Fund, to act
upon my telephone instructions to:
(1) reallocate my then current value held in any one or more Subaccounts,
and
(2) to change the allocation of future purchase payments to the
Subaccounts.
I understand that John Hancock employs the following procedures reasonably de-
signed to confirm that the instructions received by telephone are genuine: re-
quiring disclosure of personal identification; tape recording calls; and pro-
viding the Owner with a confirmation of the transfer. As long as John Hancock
follows such procedures, I will not hold John Hancock or the Fund (or any of
their successors) liable for any loss, expense, or cost resulting from any un-
authorized or fraudulent telephone instructions.
I further understand that this authorization is limited by the conditions and
procedures for telephone account transfers and investment option changes set
forth in the prospectus describing my contract.
I further understand that this authorization will continue in force unless and
until the earlier of (a) written revocation received by John Hancock at its
home office or (b) John Hancock discontinues this service.
Signature(s) of Prospective
Contract Owner(s)
Date: _______________________________ /s/__________________________________
Date: _______________________________ /s/__________________________________
Questions call: 1-800-REAL LIFE (732-5543)
Mail to: Life and Annuity Services
P.O. Box 111
Boston, MA 02117
<PAGE>
[LOGO OF JOHN HANCOCK WORLDWIDE SPONSOR APPEARS HERE]
Policies Issued by John Hancock Mutual Life Insurance Company John Hancock
Place, Boston, Massachusetts 02117
S8136 5/96
<PAGE>
[LOGO OF JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY APPEARS HERE]
Mutual Life
Insurance Company
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT U
STATEMENT OF ADDITIONAL INFORMATION
This statement of additional information is not a prospectus. It is intended
that this statement of additional information be read in conjunction with the
prospectus of John Hancock Variable Annuity Account U, dated May 1, 1996. A
copy of the prospectus may be obtained from John Hancock Variable Annuity
Account U, Life and Annuity Services, P.O. Box 111, Boston Massachusetts,
02117, telephone number (800) REAL LIFE (732-5543).
This statement of additional information is dated May 1, 1996.
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT U
CROSS REFERENCE SHEET
----------------
<TABLE>
<CAPTION>
SECTION IN STATEMENT OF
FORM N-4 ITEM NO. ADDITIONAL INFORMATION
----------------- -----------------------
<C> <S> <C>
15. Cover Page..................... Cover Page
16. Table of Contents.............. Table of Contents
17. General Information and
History....................... Business History
18. Services....................... Distribution Agreement and Other Services
19. Purchase of Securities Being Not Applicable (relevant information in
Offered....................... prospectus)
20. Underwriters................... Distribution Agreement and Other Services
21. Calculation of Yield Quotations
of Money Market Subaccounts... Calculation of Performance Data
22. Annuity Payments............... Calculation of Annuity Payments
23. Financial Statements........... Financial Statements
</TABLE>
<PAGE>
TABLE OF CONTENTS
----------------
<TABLE>
<CAPTION>
CROSS REFERENCE TO
PAGE PAGE IN PROSPECTUS
---- ------------------
<S> <C> <C>
Business History........................................ 1 15-16
Distribution Agreement and Other Services............... 1 18, 19-20, 34
Distribution Agreement................................ 1 19-20, 34
Investment Advisory Agreement......................... 2 18
Custodian Agreement................................... 3 --
Independent Auditors.................................. 3 34
Calculation of Performance Data......................... 3 32
Calculation of Annuity Payments......................... 5 25-27
Financial Statements.................................... 7 34
</TABLE>
<PAGE>
BUSINESS HISTORY
John Hancock Variable Annuity Account U (the "Account") is a separate
account of John Hancock Mutual Life Insurance Company ("John Hancock"),
established under the laws of the State of Massachusetts. The Account is
organized as a unit investment trust and registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 (the "Act") and
the Securities Act of 1933. The Account currently has eighteen separate
subaccounts (Growth & Income, Sovereign Bond, Money Market, Large Cap Growth,
Managed, Real Estate Equity, International Equities, Short-Term U.S.
Government, Special Opportunities, Equity Index, Large Cap Value, Mid Cap
Growth, Mid Cap Value, Small Cap Growth, Small Cap Value, Strategic Bond,
International Opportunities, and International Balanced) through which John
Hancock's individual variable annuity contracts are funded, at the discretion
of the individual contract owner (the "Owner"). The assets of each subaccount
are, in turn, invested in a corresponding Portfolio of John Hancock Variable
Series Trust I (the "Fund"), a registered open-end diversified management
investment company advised by John Hancock.
The Account is the successor to six separate investment accounts of John
Hancock: John Hancock Variable Accounts A and C (the stock accounts), John
Hancock Variable Accounts A-1 and C-1 (the bond accounts), and John Hancock
Variable Accounts A-2 and C-2 (the money market accounts). These six accounts
(collectively, the "Variable Accounts") had investment objectives, policies,
and restrictions which were the same as those of the respective subaccounts of
the Account. On February 20, 1987, John Hancock, on behalf of the Variable
Accounts, combined the stock accounts to form the Account's newly-created
stock subaccount, combined the bond accounts to form the Account's newly-
created bond subaccount, and combined the money market accounts to form the
Account's newly-created money market subaccount. The newly created subaccounts
were established within John Hancock Variable Annuity Account A, the name of
which was changed to John Hancock Variable Annuity Account U.
Simultaneously with the transactions described above, John Hancock, on
behalf of the Variable Accounts, transferred all of the portfolio assets of
the newly-created stock, bond, and money market subaccounts of Account A to
the Fund's Stock (renamed Growth & Income), Bond (renamed Sovereign Bond), and
Money Market Portfolios, respectively, in exchange for shares of the
corresponding Fund Portfolio. In addition, the Fund assumed, in effect, any
unsatisfied liability incurred by the corresponding Variable Account.
All of these transactions are referred to as the "Reorganization." They were
effected pursuant to an Agreement and Plan of Reorganization, dated June 10,
1986, entered into by John Hancock, the Variable Accounts, and the Fund.
DISTRIBUTION AGREEMENT AND OTHER SERVICES
DISTRIBUTION AGREEMENT
Pursuant to a Distribution Agreement, dated August 5, 1986, John Hancock, a
registered broker-dealer, acts as "principal underwriter" for the Account.
Tables showing John Hancock's compensation for sales and included in the
Account's Prospectus under "Charges Under Variable Annuity Contracts." John
Hancock's major responsibility as underwriter is to perform all sales and
marketing functions relating to the Contracts. The offering of the Account's
interests is continuous, but John Hancock is not obligated to sell any
particular amount of the Account's interests.
1
<PAGE>
INVESTMENT ADVISORY AGREEMENT
The Fund, in which the Contracts are invested, has contracted with John
Hancock for investment advisory services. Pursuant to two Investment
Management Agreements, both dated as of April 12, 1988, one Investment
Management Agreement, dated as of April 15, 1994, and one Investment
Management Agreement dated as of March 14, 1996, John Hancock, a registered
investment adviser under the Act, advises the Fund in connection with policy
decisions; provides administration of day-to-day operations; negotiates the
quantity or price of its investments; provides personnel, office space,
equipment, and supplies for the Fund; maintains records required by the Act;
values assets and liabilities of the Fund; computes income, net asset value,
and yield of each Portfolio; and supervises activities of the sub-investment
managers referred to below.
John Hancock has day-to-day responsibility for making investment decisions
and placing investment orders for the Money Market Portfolio. However, with
respect to the other Portfolios, John Hancock has contracted with the
following registered investment advisors to perform these and certain other
recordkeeping functions as sub-investment manager pursuant to sub-investment
agreements dated as indicated:
<TABLE>
<C> <S> <C>
Growth & Income Independence Investment Associates, Inc. 4/15/88
Sovereign Bond John Hancock Advisers, Inc. 5/01/95
Large Cap Growth Independence Investment Associates, Inc. 4/15/88
Managed Independence Investment Associates, Inc. 4/15/88
Real Estate Equity Independence Investment Associates, Inc. 4/15/94
International Equities John Hancock Advisers, Inc. 4/15/88
John Hancock Advisers International, Inc. 4/15/88
Short-Term U.S. Government Independence Investment Associates, Inc. 4/15/94
Equity Index Independence Investment Associates, Inc. 3/29/96
Large Cap Value T. Rowe Price Associates, Inc. 3/29/96
Mid Cap Growth Janus Capital Corporation 3/29/96
Mid Cap Value Neuberger & Berman L.P. 5/01/96
Small Cap Growth John Hancock Advisers, Inc. 3/29/96
Small Cap Value INVESCO Management & Research 3/22/96
Strategic Bond J.P. Morgan Investment Management, Inc. 3/29/96
International Opportunities T.Rowe Price Associates, Inc. 3/29/96
Rowe Price-Fleming International, Inc. 3/29/96
International Balanced Brinson Partners, Inc. 3/29/96
</TABLE>
John Hancock pays the sub-investment management fees pursuant to the
Agreements and, therefore, the sub-investment management arrangements result
in no additional charge or expense to the Fund or to contractholders. A more
complete description of the Fund's management and the investment advisory fees
is included under "Management of the Fund" in the Fund's Prospectus and under
"Investment Advisory and Other Services" in the Fund's Statement of Additional
Information.
2
<PAGE>
CUSTODIAN AGREEMENT
The Fund's custodian with respect to the Growth & Income, Money Market,
Large Cap Growth, Managed, Real Estate Equity, and Short-Term U.S. Government
Portfolios is Chemical Banking Corporation of 4 New York Plaza, New York, New
York, pursuant to a Custodian Agreement, dated January 15, 1988, and amended
April 29, 1988. The Fund's custodian with respect to the Sovereign Bond
Portfolio is Investors Bank & Trust Company, 24 Federal Street, Boston,
Massachusetts; dated May 2, 1995. The Fund's custodian with respect to the
other Portfolios is State Street Bank and Trust, 225 Franklin Street, Boston,
Massachusetts, pursuant to a Custodian Agreement, dated January 30, 1995, and
amended March 18, 1996. The custodian's duties include safeguarding and
controlling the Fund's cash investments, handling the receipt and delivery of
securities, and collecting interest and dividends on the Fund's investments.
INDEPENDENT AUDITORS
Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts, has been
selected as the independent auditors of the Account. The firm is responsible
for auditing the financial statements of the Account and JHMLICO.
CALCULATION OF PERFORMANCE DATA
The Account will show the average annual total return for each Subaccount,
according to the following formula prescribed by the Securities and Exchange
Commission:
P(1 + T)/n/ = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment,
made at the beginning of a period (or fractional portion
thereof)
Average annual total return is the annual compounded rate of return that
would have produced the cash redemption value under a Contract had the
subaccount been invested in a specified Portfolio of the Fund (or its
predecessor) over the stated period had the performance remained constant
throughout. The calculation assumes a single $1,000 payment made at the
beginning of the period and full redemption at the end of the period. It
reflects a deduction for sales charges and all other Fund and Contract level
charges except premium taxes, if any.
3
<PAGE>
The following table shows the average annual total return for each
Subaccount for the period ended December 31, 1995:
<TABLE>
<CAPTION>
AVERAGE
ANNUALIZED
RETURNS
-------------------------
YEAR TO 1 5 10 DATE OF
SUBACCOUNT*** DATE YEAR YEAR* YEAR* INCEPTION**
------------- ------- ----- ----- ----- -----------
<S> <C> <C> <C> <C> <C>
Large Cap Growth..................... 23.8% 23.8% 13.1% 14.1% 11/24/87
Sovereign Bond....................... 12.4% 12.4% 7.9% 7.8% 06/02/80
International Equities............... 1.6% 1.6% 8.0% 5.9% 02/01/89
Money Market......................... -0.5% -0.5% 2.4% 4.5% 05/13/82
Real Estate Equity................... 5.6% 5.6% 13.7% 6.4% 02/01/89
Growth & Income...................... 26.2% 26.2% 13.4% 12.8% 04/03/72
Managed.............................. 19.5% 19.5% 10.5% 10.6% 11/09/87
</TABLE>
- --------
* or since inception of the applicable Portfolio or its predecessor.
** of the Portfolio or its predecessor.
*** Absent reimbursement from John Hancock to certain Portfolios for some
periods, total return figures related to the subaccounts would have been
lower.
The Account will show current yield and effective yield figures for the
Money Market Subaccount. The current yield of the Money Market Subaccount for
a seven-day period (the "base period") will be computed by determining the
"net change in value" (calculated as set forth below) of a hypothetical
account having a balance of one share at the beginning of the period, dividing
the net change in account value by the value of the account at the beginning
of the base period to obtain the base period return, and multiplying the base
period return by 365/7 with the resulting yield figure carried to the nearest
hundredth of one percent. Net changes in value of a hypothetical account will
include net investment income of the account (accrued daily dividends as
declared by the Money Market Portfolio, less daily expense charges of the
account) for the period, but will not include realized gains or losses or
unrealized appreciation or depreciation on the underlying fund shares.
Mortality and expense risk and periodic charges are reflected, but charges for
premium taxes and charges deducted from premiums for sales expenses,
administrative expenses and minimum death benefit are not reflected.
The effective yield reflects the effects of compounding and represents an
annualization of the current return with all dividends reinvested. The formula
for effective yield, as prescribed by the SEC, is:
Effective yield [(Base period return + 1) /365 divided by 7/] - 1
For the 7-day period ending December 31, 1995, the Money Market Subaccount's
current yield was 4.63% and its effective yield was 4.73%.
The Account will calculate current yield for each of the other Subaccounts
according to the following formula prescribed by the SEC:
Yield = 2[([(a-b)/cd]+1)/6/-1
where:
a= dividends and interest earned during the period
b= expenses accrued for the period (net of reimbursement)
4
<PAGE>
c= the average daily number of shares outstanding during the
period that were entitled to receive dividends
d= the maximum offering price per share on the last day of the
period.
According to this formula, yield is determined by dividing the net
investment income per Accumulation Shared earned during the period (minus the
deduction for mortality and expense risk charge, contract fee, administrative
services charge) by the Accumulation Share Value on the last day of the period
and annualizing the resulting figure. The calculation is based on specified
30-day period identified in the advertisement. No sales loads are assumed.
CALCULATION OF ANNUITY PAYMENTS
The variable monthly annuity payment to an Annuitant under a Contract is
equal to the sum of the products of the number of each subaccount's "Annuity
Units" credited to the Contract multiplied by the applicable "Annuity Unit
Value," as these terms are defined under "Special Terms" and "Variable Account
Valuation Procedures," respectively, in the Account's prospectus. The number
of each subaccount's Annuity Units credited to the Contract is multiplied by
the applicable Annuity Unit Value as of ten calendar days prior to the date
the payment is due. The value of the Annuity Units varies from day to day,
depending on the investment performance of the subaccount, the deductions made
against the subaccount, and the assumed investment rate used in computing
Annuity Unit Values. Thus, the variable monthly annuity payments vary in
amount from month to month.
The amount of the initial variable monthly payment is determined on the
assumption that the actual net investment rate of each subaccount used in
calculating the Net Investment Factor (as described under "Variable Account
Valuation Procedures--Net Investment Factor" in the Account's prospectus) will
be equal on an annual basis to the assumed investment rate. If the actual net
investment rate between the dates for determining two monthly annuity payments
is greater than the assumed investment rate, the latter monthly payment will
be larger in amount than the former. On the other hand, if the actual net
investment rate between the dates for determining two monthly annuity payments
is less than the assumed investment rate, the latter monthly payment will be
smaller in amount than the former.
The mortality table used as a basis for the annuity purchase rates of the
Contracts is the 1971 Individual Annuity Mortality Table, with a five-year
setback for females and with certain age adjustments based on the calendar
year of birth. The annuity purchase rates used in a Contract purchased in
connection with certain employer-related plans and used in all Contracts
issued in Montana and Massachusetts will be the annuity purchase rates for
females. The impact of this change will be lower benefits (5% to 15%) from a
male's viewpoint than would otherwise be the case.
The following outline is an illustration of the method of calculating
variable monthly annuity payments and the number of Annuity Units under the
deferred Contracts.
5
<PAGE>
A. GENERAL FORMULAE TO DETERMINE ACCUMULATION SHARE VALUES AND ANNUITY UNIT
VALUES
Net Investment Rate =
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Subaccount Charges (0.002740% per
Investment + Capital - Capital - Taxes - Day of the Value of the Subaccount at
Income Gains Losses (if any) the Beginning of the Valuation Period)
-------------------------------------------------------------------------------------------
Value of the Subaccount at the Beginning of the Valuation Period
</TABLE>
Net Investment Factor = 1.00000000 + Net Investment Rate
<TABLE>
<S> <C> <C> <C> <C>
Accumulation Share Value = Accumulation Share Value on X Net Investment
Preceding Valuation Date Factor
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Annuity Unit Net Factor to Neutralize
Annuity Unit Value = Value on Preceding X Investment X the Assumed
Valuation Date Factor Investment Rate
</TABLE>
B. HYPOTHETICAL EXAMPLE ILLUSTRATING THE CALCULATION OF ACCUMULATION SHARE
VALUES AND ANNUITY UNIT VALUES
Assume at the beginning of the Valuation Period being considered, the value
of the Subaccount was $4,000,000. Investment income during the Valuation
Period totaled $2000 while capital gains were $3000 and capital losses were
$1000. No taxes accrued. Charges against the beginning value of the Subaccount
amount to $109.60 assuming a one day Valuation Period. The $109.60 was
computed by multiplying the beginning Subaccount value of $4,000,000 by the
factor 0.00002740. By substituting in the first formula above, the net
investment rate is equal to $3890.40 ($2000 + $3000 - $1000 - $109.60) divided
by $4,000,000 or 0.0009726. The Net Investment Factor would then be 1.0009726.
Assume further that each Accumulation Share had a value of $11.250000 on the
previous Valuation Date, and the value of an Annuity Unit on such date was
$1.0850000. Based upon the experience of the Subaccount during the Valuation
Period, the value of an Accumulation Share at the end of the Valuation Period
would be $11.260942 ($11.250000 X 1.0009726). The value of an Annuity Unit at
the end of the Valuation Period would be $1.0859529
($1.0850000 X 1.0009726 X .99990575). The final figure, .99990575, neutralizes
the effect of a 3 1/2% assumed investment rate so that the Annuity Unit
recognizes only the actual investment experience.
C. GENERAL FORMULAE TO DETERMINE AMOUNT OF MONTHLY VARIABLE ANNUITY PAYMENTS
AND NUMBER OF ANNUITY UNITS FOR DEFERRED CONTRACTS
Amount of the First Variable Annuity Payment =
<TABLE>
<S> <C> <C> <C> <C>
Number of Accumulation X Accumulation Share Value X First Monthly Annuity
Shares Applied 10 Days Before Maturity Date Payment Factor
---------------------------------------------------------
$1,000
</TABLE>
6
<PAGE>
Amount of First Variable Annuity Payment
Number of Annuity Units = ----------------------------------------------
Annuity Unit Value 10 Days Before Maturity Date
Amount of Subsequent Number of Annuity Unit Value
Variable Annuity Payment = Annuity Units X 10 Days Before Payment Date
D. HYPOTHETICAL EXAMPLE ILLUSTRATING THE CALCULATION OF THE AMOUNT OF MONTHLY
VARIABLE ANNUITY PAYMENT FOR DEFERRED CONTRACTS
Assume that 10 days before the date of maturity a Contract has credited to
it 4000.000 Accumulation Shares each having a value of $12.000000. The
appropriate annuity purchase rate in the contract for an assumed investment
rate of 3 1/2% is $6.35 per $1000 of proceeds for the Annuity Option elected.
The Annuitant's first monthly payment would then be $304.80.
4000.000 X $12.00000 X $6.35
----------------------------
$1000
If the value of an Annuity Unit 10 days before the date of maturity was
$1.4000000, the number of Annuity Units represented by the first and
subsequent payments would be 217.714 ($304.80/$1.4000000). If the Annuity Unit
Value 10 days before the due date of the second monthly payment was $1.405000,
the amount of the second payment would be $305.89 (217.714 X $1.405000).
FINANCIAL STATEMENTS
(SEE NEXT PAGE)
7
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Contractowners
John Hancock Variable Annuity Account U of John Hancock Mutual Life Insurance
Company
We have audited the accompanying statement of assets and liabilities of John
Hancock Variable Annuity Account U (the Account) (comprising, respectively,
the Select Stock, Bond, International, Money Market, Real Estate Equity,
Special Opportunities, Stock, Short-Term U.S. Government and Managed
Subaccounts) as of December 31, 1995, and the related statement of operations
for the year then ended, and the statements of changes in net assets for each
of the two years then ended for the Select Stock, Bond, International, Money
Market, Real Estate Equity, Stock and Managed Subaccounts, for the year then
ended and for the period from May 6, 1994 (commencement of operations) to
December 31, 1994 for the Special Opportunities Subaccount, and for the year
then ended and for the period from May 1, 1994 (commencement of operations) to
December 31, 1994 for the Short-Term U.S. Government Subaccount. These
financial statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of each of the respective
subaccounts constituting John Hancock Variable Annuity Account U at December
31, 1995, and the results of their operations and the changes in their net
assets for each of the periods indicated, in conformity with generally
accepted accounting principles.
Boston, Massachusetts
February 9, 1996 ERNST & YOUNG LLP
----------------
To the Directors and Policyholders John Hancock Mutual Life Insurance Company
We have audited the accompanying statements of financial position of John
Hancock Mutual Life Insurance Company as of December 31, 1995 and 1994, and
the related summary of operations and changes in policyholders' contingency
reserves and statements of cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of John Hancock Mutual Life
Insurance Company at December 31, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles for mutual life insurance companies
and with reporting practices prescribed or permitted by the Commonwealth of
Massachusetts Division of Insurance.
ERNST & YOUNG LLP
Boston, Massachusetts
February 7, 1996
8
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT U
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
REAL SHORT-TERM
SELECT MONEY ESTATE SPECIAL U.S.
STOCK BOND INTERNATIONAL MARKET EQUITY OPPORTUNITIES STOCK GOVERNMENT
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ------------ ------------- ----------- ----------- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value........... $164,220,305 $315,237,317 $67,992,871 $65,053,867 $68,593,421 $13,804,870 $587,377,742 $5,809,748
Receivable from
John Hancock
Variable Series
Trust I......... 76,519 84,849 33,739 162,021 75,931 30,579 367,168 668
------------ ------------ ----------- ----------- ----------- ----------- ------------ ----------
Total assets.... 164,296,824 315,322,166 68,026,610 65,215,888 68,669,352 13,835,449 587,744,910 5,810,416
LIABILITIES
Payable to John
Hancock Variable
Series Trust I.. 57,789 51,850 26,003 155,282 68,130 29,021 306,739 --
Asset charges
payable......... 18,730 32,999 7,736 6,739 7,801 1,558 60,429 668
------------ ------------ ----------- ----------- ----------- ----------- ------------ ----------
Total
liabilities..... 76,519 84,849 33,739 162,021 75,931 30,579 367,168 668
------------ ------------ ----------- ----------- ----------- ----------- ------------ ----------
Net assets...... $164,220,305 $315,237,317 $67,992,871 $65,053,867 $68,593,421 $13,804,870 $587,377,742 $5,809,748
============ ============ =========== =========== =========== =========== ============ ==========
NET ASSETS
Attributable to
John Hancock
Mutual Life
Insurance
Company......... $ -- $ 567,487 $ -- $ 302,360 $ -- $ -- $ 1,377,721 $ --
Attributable to
contractowners.. 164,220,305 314,669,830 67,992,871 64,751,507 68,593,421 13,804,870 586,000,021 5,809,748
------------ ------------ ----------- ----------- ----------- ----------- ------------ ----------
$164,220,305 $315,237,317 $67,992,871 $65,053,867 $68,593,421 $13,804,870 $587,377,742 $5,809,748
============ ============ =========== =========== =========== =========== ============ ==========
<CAPTION>
MANAGED
SUBACCOUNT
--------------
<S> <C>
ASSETS
Investment in
shares of
portfolios of
John Hancock
Variable Series
Trust I, at
value........... $1,126,414,038
Receivable from
John Hancock
Variable Series
Trust I......... 473,573
--------------
Total assets.... 1,126,887,611
LIABILITIES
Payable to John
Hancock Variable
Series Trust I.. 345,006
Asset charges
payable......... 128,567
--------------
Total
liabilities..... 473,573
--------------
Net assets...... $1,126,414,038
==============
NET ASSETS
Attributable to
John Hancock
Mutual Life
Insurance
Company......... $ --
Attributable to
contractowners.. 1,126,414,038
--------------
$1,126,414,038
==============
</TABLE>
See accompanying notes.
9
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT U
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
REAL SHORT-TERM
SELECT MONEY ESTATE SPECIAL U.S.
STOCK BOND INTERNATIONAL MARKET EQUITY OPPORTUNITIES STOCK GOVERNMENT
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ------------- ---------- ---------- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
income:
Distributions
received from
the portfolio of
John Hancock
Variable Series
Trust I......... $13,505,036 $24,335,809 $ 823,275 $3,713,406 $4,870,341 $ 329,577 $ 56,237,590 $143,233
Expenses:
Mortality and
expense risks... 1,947,354 3,803,490 988,434 835,348 995,562 85,929 6,386,044 32,687
----------- ----------- ---------- ---------- ---------- ---------- ------------ --------
Net investment
income (loss).... 11,557,682 20,532,319 (165,159) 2,878,058 3,874,779 243,648 49,851,546 110,546
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain (loss)..... 511,687 (625,195) 1,637,360 -- (602,325) 428,216 1,872,473 33,726
Net unrealized
appreciation
during the year. 23,842,221 29,341,954 2,920,738 -- 3,675,422 923,379 90,535,270 54,822
----------- ----------- ---------- ---------- ---------- ---------- ------------ --------
Net realized and
unrealized gain
on investments... 24,353,908 28,716,759 4,558,098 -- 3,073,097 1,351,595 92,407,743 88,548
----------- ----------- ---------- ---------- ---------- ---------- ------------ --------
Net increase in
net assets
resulting from
operations....... $35,911,590 $49,249,078 $4,392,939 $2,878,058 $6,947,876 $1,595,243 $142,259,289 $199,094
=========== =========== ========== ========== ========== ========== ============ ========
<CAPTION>
MANAGED
SUBACCOUNT
------------
<S> <C>
Investment
income:
Distributions
received from
the portfolio of
John Hancock
Variable Series
Trust I......... $108,439,190
Expenses:
Mortality and
expense risks... 14,196,202
------------
Net investment
income (loss).... 94,242,988
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain (loss)..... 5,271,590
Net unrealized
appreciation
during the year. 129,134,123
------------
Net realized and
unrealized gain
on investments... 134,405,713
------------
Net increase in
net assets
resulting from
operations....... $228,648,701
============
</TABLE>
See accompanying notes.
10
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31
<TABLE>
<CAPTION>
INTERNATIONAL MONEY MARKET
SELECT STOCK SUBACCOUNT BOND SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------------------- -------------------------- -------------------------- --------------------------
1995 1994 1995 1994 1995 1994 1995 1994
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase
(decrease) in net
assets:
From operations:
Net investment
income (loss)... $ 11,557,682 $ 4,461,287 $ 20,532,319 $ 17,257,487 $ (165,159) $ 312,538 $ 2,878,058 $ 1,548,780
Net realized
gain (loss)..... 511,687 103,330 (625,195) (1,058,046) 1,637,360 1,031,123 -- --
Net unrealized
appreciation
(depreciation)
during the year. 23,842,221 (6,678,513) 29,341,954 (27,597,239) 2,920,738 (6,245,956) -- --
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Net increase
(decrease) in net
assets resulting
from operations.. 35,911,590 (2,113,896) 49,249,078 (11,397,798) 4,392,939 (4,902,295) 2,878,058 1,548,780
From
contractowner
transactions:
Net
contributions
from
contractowners.. 29,927,518 49,472,993 25,381,525 40,213,754 12,868,780 56,137,634 39,335,269 51,272,809
Net benefits to
contractowners.. (13,575,854) (11,657,122) (38,302,985) (48,805,118) (23,857,543) (12,031,108) (41,035,536) (31,888,734)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Net increase
(decrease) in net
assets from
contractowner
transactions..... 16,351,664 37,815,871 (12,921,460) (8,591,364) (10,988,763) 44,106,526 (1,700,267) 19,384,075
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Net increase
(decrease) in net
assets........... 52,263,254 35,701,975 36,327,618 (19,989,162) (6,595,824) 39,204,231 1,177,791 20,932,855
Net assets at
beginning of
year............. 111,957,051 76,255,076 278,909,699 298,898,861 74,588,695 35,384,464 63,876,076 42,943,221
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Net assets at end
of year.......... $164,220,305 $111,957,051 $315,237,317 $278,909,699 $ 67,992,871 $ 74,588,695 $ 65,053,867 $ 63,876,076
============ ============ ============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes.
11
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT U
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEARS AND PERIODS ENDED DECEMBER 31
<TABLE>
<CAPTION>
SHORT-TERM U.S.
REAL ESTATE SPECIAL OPPORTUNITIES GOVERNMENT
EQUITY SUBACCOUNT SUBACCOUNT* STOCK SUBACCOUNT SUBACCOUNT*
-------------------------- ----------------------- -------------------------- ---------------------
1995 1994 1995 1994 1994 1993 1995 1994
------------ ------------ ----------- ---------- ------------ ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase in net
assets:
From operations:
Net investment
income (loss)... $ 3,874,779 $ 3,474,754 $ 243,648 $ (277) $ 49,851,546 $ 23,488,966 $ 110,546 $ 3,416
Net realized
gain (loss)..... (602,325) 1,024,100 428,216 1,158 1,872,473 120,346 33,726 (69)
Net unrealized
appreciation
(depreciation)
during the year. 3,675,422 (4,377,793) 923,379 12,944 90,535,270 (30,478,597) 54,822 (5,247)
------------ ------------ ----------- ---------- ------------ ------------ ----------- --------
Net increase
(decrease) in net
assets resulting
from operations.. 6,947,876 121,061 1,595,243 13,825 142,259,289 (6,869,285) 199,094 (1,900)
From
contractowner
transactions:
Net
contributions
from
contractowners.. 6,265,583 40,118,585 13,296,094 1,556,216 64,442,746 85,843,087 6,169,362 585,453
Net benefits to
contractowners.. (23,650,208) (18,119,181) (2,628,805) (27,703) (47,367,868) (32,978,952) (1,141,269) (992)
------------ ------------ ----------- ---------- ------------ ------------ ----------- --------
Net increase
(decrease) in net
assets from
contractowner
transactions..... (17,384,625) 21,999,404 10,667,289 1,528,513 17,074,878 52,864,135 5,028,093 584,461
------------ ------------ ----------- ---------- ------------ ------------ ----------- --------
Net increase
(decrease) in net
assets........... (10,436,749) 22,120,465 12,262,532 1,542,338 159,334,167 45,994,850 5,227,187 582,561
Net assets at
beginning of
period........... 79,030,170 56,909,705 1,542,338 -- 428,043,575 382,048,725 582,561 --
------------ ------------ ----------- ---------- ------------ ------------ ----------- --------
Net assets at end
of period........ $ 68,593,421 $ 79,030,170 $13,804,870 $1,542,338 $587,377,742 $428,043,575 $ 5,809,748 $582,561
============ ============ =========== ========== ============ ============ =========== ========
<CAPTION>
MANAGED SUBACCOUNT
-----------------------------
1995 1994
--------------- -------------
<S> <C> <C>
Increase in net
assets:
From operations:
Net investment
income (loss)... $ 94,242,988 $ 29,088,187
Net realized
gain (loss)..... 5,271,590 2,154,824
Net unrealized
appreciation
(depreciation)
during the year. 129,134,123 (63,196,047)
--------------- -------------
Net increase
(decrease) in net
assets resulting
from operations.. 228,648,701 (31,953,036)
From
contractowner
transactions:
Net
contributions
from
contractowners.. 86,433,676 229,171,991
Net benefits to
contractowners.. (105,246,492) (93,370,591)
--------------- -------------
Net increase
(decrease) in net
assets from
contractowner
transactions..... (18,812,816) 135,801,400
--------------- -------------
Net increase
(decrease) in net
assets........... 209,835,885 103,848,364
Net assets at
beginning of
period........... 916,578,153 812,729,789
--------------- -------------
Net assets at end
of period........ $1,126,414,038 $916,578,153
=============== =============
</TABLE>
- ----
* The Short-Term U.S. Government and the Special Opportunities subaccounts
commenced operations on May 1 and May 6, 1994, respectively.
See accompanying notes.
12
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT U
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION
John Hancock Variable Annuity Account U (the Account) is a separate
investment account of John Hancock Mutual Life Insurance Company (JHMLICO or
John Hancock). The Account was formed to fund variable annuity contracts
(Contracts) issued by JHMLICO. Currently, the Account funds the Accommodator
and Independence Annuity Contracts. The Account is operated as a unit
investment trust registered under the Investment Company Act of 1940, as
amended, and currently consists of nine subaccounts. The assets of each
subaccount are invested exclusively in shares of a corresponding portfolio of
John Hancock Variable Series Trust I (the Fund). New subaccounts may be added
as new portfolios are added to the Fund or as other investment options are
developed and made available to contractowners. The nine portfolios of the
Fund which are currently available are Select Stock, Bond, International,
Money Market, Real Estate Equity, Special Opportunities, Stock, Short-Term
U.S. Government and Managed. Each portfolio has a different investment
objective.
The assets of the Account are the property of JHMLICO. The portion of the
Account's assets applicable to the Contracts may not be charged with
liabilities arising out of any other business JHMLICO may conduct.
2. SIGNIFICANT ACCOUNTING POLICIES
Valuation of Investments
Investment in shares of the Fund are valued at the reported net asset value
of the respective portfolios. Investment transactions are recorded on the
trade date. Dividend income is recognized on the ex-dividend date. Realized
gains and losses on sales of Fund shares are determined on the basis of
identified cost.
Federal Income Taxes
The operations of the Account are included in the federal income tax return
of JHMLICO, which is taxed as a life insurance company under the Internal
Revenue Code. JHMLICO has the right to charge the Account any federal income
taxes, or provisions for federal income taxes, attributable to the operations
of the Account or to the Contracts funded in the Account. Currently, John
Hancock does not make a charge for income or other taxes. JHMLICO retains the
right to charge the Account for any federal income taxes arising from changes
in the tax law. Charges for state and local taxes, if any, attributable to the
Account may also be made.
Expenses
JHMLICO assumes mortality and expense risks of the Contracts and provides
administrative services to the Account for which asset charges are deducted at
an annual rate of 1.00% and 1.40% of net assets of the Accommodator and
Independence Contracts, respectively.
JHMLICO makes certain other deductions from contractowner payments for
administrative expenses, premium taxes, guaranteed minimum death benefit,
sales charges on purchases (Accommodator only) and the surrender fee and
annual contract fee (Independence only), which are accounted for as a
reduction of net assets resulting from contractowner transactions.
13
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT U
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. DETAILS OF INVESTMENTS
The details of the shares owned and cost and value of investments in the
portfolios of the Fund at December 31, 1995 were as follows:
<TABLE>
<CAPTION>
PORTFOLIO SHARES OWNED COST VALUES
--------- ------------ -------------- --------------
<S> <C> <C> <C>
Select Stock.................... 9,455,144 $ 144,030,975 $ 164,220,305
Bond............................ 31,126,205 303,377,280 315,237,317
International................... 4,355,824 67,131,679 67,992,871
Money Market.................... 6,505,387 65,053,867 65,053,867
Real Estate Equity.............. 5,864,594 68,405,858 68,593,421
Special Opportunities........... 1,047,047 12,868,546 13,804,870
Stock........................... 42,132,449 505,779,730 587,377,742
Short-Term U.S. Government...... 567,780 5,760,173 5,809,748
Managed......................... 82,058,696 1,040,571,226 1,126,414,038
</TABLE>
Purchases, including reinvestment of dividend distributions and proceeds
from sales of shares in the portfolios of the Fund during 1995, were as
follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
--------- ------------ -----------
<S> <C> <C>
Select Stock..................................... $ 30,944,458 $ 3,035,112
Bond............................................. 29,546,333 21,935,476
International.................................... 5,180,064 16,333,986
Money Market..................................... 22,003,907 20,826,115
Real Estate Equity............................... 5,978,128 19,487,975
Special Opportunities............................ 12,961,462 2,050,526
Stock............................................ 79,408,102 12,481,677
Short-Term U.S. Government....................... 6,009,784 871,145
Managed.......................................... 122,315,142 46,884,971
</TABLE>
4. NET ASSETS
Accumulation shares attributable to net assets of contractowners and
accumulation share values for each subaccount at December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
ACCOMMODATOR INDEPENDENCE
------------------------- -------------------------
ACCUMULATION ACCUMULATION ACCUMULATION ACCUMULATION
SUBACCOUNT SHARES SHARE VALUES SHARES SHARE VALUES
---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Select Stock............ 159,494 $21.295 8,352,298 $19.225
Bond.................... 2,205,467 43.188 13,974,544 15.701
International........... 133,791 15.028 4,932,128 13.387
Money Market............ 972,149 21.627 3,658,467 11.952
Real Estate Equity...... 92,870 16.628 4,042,426 16.586
Special Opportunities... -- -- 1,038,790 13.289
Stock................... 2,225,393 93.721 19,861,908 19.003
Short-Term U.S. Govern-
ment................... -- -- 533,029 10.899
Managed................. 1,072,417 18.655 64,645,449 17.115
</TABLE>
14
<PAGE>
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT U
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The net assets attributable to JHMLICO represent JHMLICO's funds deposited
in the Account. At its discretion, these amounts may be transferred by JHMLICO
to its general account.
5. 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 JHMLICO or the
Fund.
15
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31
-------------------
1995 1994
--------- ---------
(In millions)
<S> <C> <C>
ASSETS
Bonds--Note 6............................................... $21,108.5 $19,884.0
Stocks:
Preferred................................................. 338.8 274.4
Common.................................................... 130.9 115.9
Investments in affiliates................................. 1,265.3 1,089.4
--------- ---------
1,735.0 1,479.7
Mortgage loans on real estate--Note 6....................... 8,801.5 8,274.2
Real estate:
Company occupied.......................................... 377.4 385.2
Investment properties..................................... 1,949.5 1,765.5
--------- ---------
2,326.9 2,150.7
Policy loans................................................ 1,621.3 1,669.2
Cash items:
Cash in banks and offices................................. 286.6 336.7
Temporary cash investments................................ 254.1 556.2
--------- ---------
540.7 892.9
Premiums due and deferred................................... 234.0 230.9
Investment income due and accrued........................... 597.5 578.2
Other general account assets................................ 883.0 979.4
Assets held in separate accounts............................ 12,928.2 10,712.5
--------- ---------
TOTAL ASSETS................................................ $50,776.6 $46,851.7
========= =========
Obligations and Policyholders' Contingency Reserves
OBLIGATIONS
Policy reserves........................................... $17,711.4 $16,817.9
Policyholders' and beneficiaries' funds................... 14,724.8 13,974.8
Dividends payable to policyholders........................ 378.6 377.6
Policy benefits in process of payment..................... 217.1 224.4
Other policy obligations.................................. 159.6 256.5
Asset valuation reserve--Note 1........................... 1,014.3 835.7
Federal income and other accrued taxes--Note 1............ 250.5 231.8
Other general account obligations......................... 873.2 1,120.7
Obligations related to separate accounts.................. 12,913.6 10,682.3
--------- ---------
TOTAL OBLIGATIONS........................................... 48,243.1 44,521.7
Policyholders' Contingency Reserves
Surplus notes--Note 2..................................... 450.0 450.0
Special contingency reserve for group insurance........... 193.1 191.7
General contingency reserve............................... 1,890.4 1,688.3
--------- ---------
TOTAL POLICYHOLDERS' CONTINGENCY RESERVES................... 2,533.5 2,330.0
--------- ---------
TOTAL OBLIGATIONS AND POLICYHOLDERS' CONTINGENCY RESERVES... $50,776.6 $46,851.7
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
SUMMARY OF OPERATIONS AND CHANGES IN POLICYHOLDERS' CONTINGENCY RESERVES
<TABLE>
<CAPTION>
Year ended December 31
------------------------
1995 1994
----------- -----------
(In millions)
<S> <C> <C>
Income
Premiums, annuity considerations and pension fund
contributions..................................... $ 8,127.8 $ 7,617.4
Net investment income--Note 4...................... 2,678.5 2,557.8
Other, net......................................... 90.8 64.1
----------- -----------
10,897.1 10,239.3
Benefits and Expenses
Payments to policyholders and beneficiaries:
Death benefits................................... 787.4 817.6
Accident and health benefits..................... 321.3 350.2
Annuity benefits................................. 1,342.7 1,273.9
Surrender benefits and annuity fund withdrawals.. 5,243.6 4,759.3
Matured endowments............................... 19.8 20.8
----------- -----------
7,714.8 7,221.8
Additions to reserves to provide for future
payments to policyholders and beneficiaries....... 1,497.0 1,503.5
Expenses of providing service to policyholders and
obtaining new insurance:
Field sales compensation and expenses............ 277.4 303.2
Home office and general expenses................. 455.8 437.3
Cost of restructuring.............................. 0.0 57.8
Payroll, state premium and miscellaneous taxes..... 78.6 72.1
----------- -----------
10,023.6 9,595.7
----------- -----------
GAIN FROM OPERATIONS BEFORE DIVIDENDS TO
POLICYHOLDERS, FEDERAL INCOME TAXES AND NET
REALIZED CAPITAL GAINS (LOSSES)............... 873.5 643.6
Dividends to policyholders........................... 465.9 385.0
Federal income taxes--Note 1......................... 128.5 59.7
----------- -----------
594.4 444.7
----------- -----------
GAIN FROM OPERATIONS BEFORE NET REALIZED
CAPITAL GAINS (LOSSES)........................ 279.1 198.9
Net realized capital gains (losses)--Note 5.......... 21.2 (35.3)
----------- -----------
NET INCOME..................................... 300.3 163.6
Other increases (decreases) in policyholders' contin-
gency reserves:
Net unrealized capital losses and other adjust-
ments--Note 5..................................... (85.1) (118.2)
Valuation reserve changes--Note 1.................. 0.0 41.0
Net gain from separate accounts.................... 2.6 0.8
Issuance of surplus notes.......................... 0.0 450.0
Prior years' federal income taxes.................. (36.8) (26.2)
Other reserves and adjustments..................... 22.5 4.3
----------- -----------
NET INCREASE IN POLICYHOLDERS' CONTINGENCY
RESERVES...................................... 203.5 515.3
Policyholders' contingency reserves at beginning of
year................................................ 2,330.0 1,814.7
----------- -----------
POLICYHOLDERS' CONTINGENCY RESERVES AT END OF YEAR... $ 2,533.5 $ 2,330.0
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
------------------------
1995 1994
----------- -----------
(In millions)
<S> <C> <C>
Cash Flows From Operating Activities:
Insurance premiums, annuity considerations and de-
posits............................................ $ 8,280.3 $ 7,827.5
Net investment income.............................. 2,756.9 2,560.0
Benefits to policyholders and beneficiaries........ (7,917.6) (7,417.0)
Dividends paid to policyholders.................... (464.9) (391.4)
Insurance expenses and taxes....................... (795.1) (801.0)
Net transfers (to) from separate accounts.......... 132.0 (548.4)
Other, net......................................... (154.7) (88.1)
----------- -----------
NET CASH PROVIDED FROM OPERATIONS................ 1,836.9 1,141.6
----------- -----------
Cash Flows Used In Investing Activities:
Bond purchases..................................... (6,456.9) (6,834.2)
Bond sales......................................... 2,874.9 2,530.2
Bond maturities and scheduled redemptions.......... 1,600.6 1,437.6
Bond prepayments................................... 795.9 620.8
Stock purchases.................................... (224.3) (282.7)
Proceeds from stock sales.......................... 131.4 70.8
Real estate purchases.............................. (375.1) (255.9)
Real estate sales.................................. 365.0 280.6
Other invested assets purchases.................... (46.5) (66.5)
Proceeds from the sale of other invested assets.... 251.1 169.3
Mortgage loans issued.............................. (2,041.6) (1,547.7)
Mortgage loan repayments........................... 1,277.9 1,391.8
Other, net......................................... (554.6) 845.3
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES............ (2,402.2) (1,640.6)
----------- -----------
Cash Flows From Financing Activities:
Issuance of surplus notes.......................... 0.0 450.0
Issuance of REMIC notes payable.................... 213.1 0.0
----------- -----------
NET CASH PROVIDED FROM FINANCING ACTIVITIES...... 213.1 450.0
----------- -----------
DECREASE IN CASH AND TEMPORARY CASH INVESTMENTS...... (352.2) (49.0)
Cash and temporary cash investments at beginning of
year................................................ 892.9 941.9
----------- -----------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR... $ 540.7 $ 892.9
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES
John Hancock Mutual Life Insurance Company (the Company) provides a broad
range of financial services and insurance products. The Company's insurance
operations focus principally in three segments: the Retail Sector, which
encompasses the Company's individual life, annuity, and long-term care
operations; Business Insurance, its group life, health, and long-term care
operations including administrative services provided to group customers; and
Group Pension, which offers single premium annuity and guaranteed investment
contracts through both the general and separate accounts. In addition, through
its subsidiaries and affiliates, the Company also offers a wide range of
investment management and advisory services and other related products
including domestic property and casualty insurance, life insurance products
for the Canadian market, a full range of retail and institutional securities
brokerage services, investment management and advisory services, sponsorship
and distribution of mutual funds, real estate financing and management, and
various other financial services. Investments in these subsidiaries and other
affiliates are recorded on the statutory equity method.
The Company is licensed in all fifty of the United States, the District of
Columbia, Puerto Rico, Guam, the US Virgin Islands, and Canada. The Company
distributes its individual products in North America primarily through a
career agency system. The career agency system is composed of company owned,
unionized branch offices and independent general agencies. The Company also
distributes its individual products through several alternative distribution
channels.
The Company distributes its group benefit products through group
representatives, who are John Hancock employees or through intermediaries, in
key markets nationwide.
The Company markets pension and other investment-related products primarily to
sponsors of retirement and savings plans covering employees of private sector
companies, and plans covering public employees and collective bargaining
unions and non-profit organizations. Products are marketed and sold through a
combination of group pension field employee representatives, as well as
marketing personnel and investment professionals employed by the Company.
The preparation of the financial statements of insurance companies 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 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 are currently
considered generally accepted accounting principles for mutual life insurance
companies. However, in April 1993, the Financial Accounting Standard Board
(FASB) issued Interpretation 40, "Applicability of Generally Accepted
Accounting Principles to Mutual Life Insurance and Other Enterprises"
(Interpretation). The Interpretation, as amended, is effective for 1996 annual
financial statements and thereafter, and no longer will allow statutory-basis
financial statements to be described as being prepared in conformity with
generally accepted accounting principles (GAAP). Upon the effective date of
the Interpretation in order for their financial statements to be described as
being prepared in conformity with GAAP, mutual life insurance companies will
be required to adopt all
19
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
applicable authoritative GAAP pronouncements in any general-purpose financial
statements that they may issue. The Company has not quantified the effects of
the application of the Interpretation on its financial statements.
The Company has not yet determined whether for general purposes it will
continue to issue statutory-basis financial statements or statements adopting
all applicable authoritative GAAP pronouncements. If the Company decides that
its general purpose financial statements will be prepared in accordance with
GAAP rather than statutory accounting practices, the financial statements
included herein would have to be restated to reflect all applicable
authoritative GAAP pronouncements, including Statement of Financial Accounting
Standards (SFAS) Nos. 60, 97, and 113, and the American Institute of Certified
Public Accountants' Statement of Position 95-1, which addresses the accounting
for long-duration and short-duration insurance and reinsurance contracts,
including all participating business.
The significant accounting practices of the Company are as follows:
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 National Association
of Insurance Commissioners (NAIC): bonds generally at amortized amounts or
cost, preferred stocks generally at cost and common stocks at market. The
discount or premium on bonds is amortized using the interest method.
Investments in affiliates are included on the statutory equity method.
Mortgage loans are carried at outstanding principal balance or amortized
cost.
Investment and company occupied real estate is carried at depreciated cost,
less encumbrances. Depreciation on investment and company occupied real
estate is recorded on a straight-line basis.
Real estate acquired in satisfaction of debt and held for sale, which is
classified with investment properties, is carried at the lower of cost or
market as of the date of foreclosure.
Policy loans are carried at outstanding principal balance, not in excess of
policy cash surrender value.
Other invested assets, which are classified with other general account
assets, include real estate and energy joint ventures and limited
partnerships and are valued based on the Company's equity in the underlying
net assets.
Asset Valuation and Interest Maintenance Reserves: The Asset Valuation Reserve
(AVR) is computed in accordance with the prescribed NAIC formula and
represents a provision for possible fluctuations in the value
20
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
of bonds, equity securities, mortgage loans, real estate and other invested
assets. The Company makes additional contributions to the AVR in excess of the
required amounts to account for potential losses and risks in the investment
portfolio when the Company believes such provisions are prudent. Changes to
the AVR are charged or credited directly to policyholders' contingency
reserves.
The Company also records the NAIC prescribed Interest Maintenance Reserve
(IMR) that represents that portion of the after tax net accumulated
unamortized realized capital gains and losses on sales of fixed income
securities, principally bonds and mortgage loans, attributable to 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, 1995, the IMR, net of 1995 amortization of $16.4
million, amounted to $69.5 million which is included in other policy
obligations. The corresponding 1994 amounts were $17.1 million and $52.7
million, respectively.
Property and Equipment: Data processing equipment, included in other general
account assets, is reported at depreciated cost, with depreciation recorded on
a straight-line basis. Nonadmitted furniture and equipment also is depreciated
on a straight-line basis. The useful lives of these assets range from three to
twenty years.
Separate Accounts: Separate account assets (valued at market) and obligations
are included as separate captions in the statements of financial position. The
change in separate account surplus is recognized through direct charges or
credits to policyholders' contingency reserves.
Fair Values 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 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.
The methods and assumptions utilized by the Company in estimating its fair
value disclosures for financial instruments are as follows:
The carrying amounts reported in the statement of financial position for
cash and temporary cash investments approximate their fair values.
Fair values for public bonds are obtained from an independent pricing
service. Fair values for private placement securities and publicly traded
bonds not provided by the independent pricing service are estimated by the
Company by discounting expected future cash flows using current market
rates applicable to the yield, credit quality and maturity of the
investments. The fair values for common and preferred stocks, other than
subsidiary investments which are carried at equity values, are based on
quoted market prices.
The fair value for mortgage loans is estimated using discounted cash flow
analyses using interest rates adjusted to reflect the credit
characteristics of the underlying loans. Mortgage loans with similar
21
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
characteristics and credit risks are aggregated into qualitative categories
for purposes of the fair value calculations.
The carrying amounts in the statement of financial position for policy
loans approximates their fair value.
The fair value of interest rate swaps and currency rate swaps is estimated
using a discounted cash flow method adjusted for the difference between the
rate of the existing swap and the current swap market rate. Discounted cash
flows in foreign currencies are converted to U.S. dollars using current
exchange rates.
The fair value for outstanding commitments to purchase long-term bonds and
issue real estate mortgages is estimated using a discounted cash flow
method incorporating adjustments for the difference in the level of
interest rates between the dates the commitments were made and December 31,
1995. The fair value for commitments to purchase real estate approximates
the amount of the initial commitment.
Fair values for the Company's guaranteed investment contracts are estimated
using discounted cash flow calculations, based on interest rates currently
being offered for similar contracts with maturities consistent with those
remaining for the contracts being valued. The fair value for fixed-rate
deferred annuities is the cash surrender value, which represents the
account value less applicable surrender charges. Fair values for immediate
annuities without life contingencies and supplementary contracts without
life contingencies are estimated based on discounted cash flow calculations
using current market rates.
Capital Gains and Losses: Realized capital gains and losses, net of taxes and
amounts transferred to the IMR, are included in net income. Unrealized gains
and losses, which consist of market value and book value adjustments, are
shown as adjustments to policyholders' contingency reserves.
Interest Rate and Currency Rate Swap Contracts and Financial Futures
Contracts: The net interest effect of interest rate and currency rate swap
transactions is recorded as an adjustment of interest income as incurred.
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.
Foreign Exchange Gains and Losses: Foreign exchange gains and losses are
reflected as direct credits or charges to policyholders' contingency reserves
through unrealized capital gains and losses.
Policy Reserves: Reserves for traditional individual life insurance policies
are maintained using the 1941, 1958 and 1980 Commissioner's Standard Ordinary
and American Experience mortality tables, with assumed interest rates ranging
from 2 1/2% to 6%, and using principally the net level premium method for
policies issued prior to 1978 and a modified preliminary term method for
policies issued in 1979 and later. Annuity and supplementary contracts with
life contingency reserves are based principally on modifications of the 1937
Standard Annuity Table, the Group Annuity Mortality Tables for 1951, 1971 and
1983, the 1971 Individual Annuity Mortality Table and the a-1983 Individual
Annuity Mortality Table, with interest rates ranging from 2% to 11 1/4%.
Reserves for deposit administration funds and immediate participation
guarantee funds are based on accepted actuarial methods at various interest
rates. Accident and health policy reserves generally are calculated using
either the two-year preliminary term or the net level premium method based on
various morbidity tables.
22
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
The statement value and fair value for investment-type insurance contracts are
as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
------------------- -------------------
Statement Fair Statement Fair
Value Value Value Value
--------- --------- --------- ---------
(In millions)
<S> <C> <C> <C> <C>
Guaranteed investment contracts........ $12,014.3 $12,325.3 $11,333.3 $10,966.3
Fixed-rate deferred and immediate annu-
ities................................. 3,494.5 3,478.6 2,918.5 2,840.3
Supplementary contracts without life
contingencies......................... 39.6 40.7 36.5 35.4
--------- --------- --------- ---------
$15,548.4 $15,844.6 $14,288.3 $13,842.0
========= ========= ========= =========
</TABLE>
Federal Income Taxes: Federal income taxes are provided in the financial
statements based on amounts determined to be payable as a result of operations
within the current accounting period. The operations of the Company and its
subsidiaries and affiliates are combined in filing a consolidated federal
income tax return for the group. The federal income taxes of the Company are
determined on a separate return basis with certain adjustments.
Income before taxes differs from taxable income principally due to tax-exempt
investment income, dividends-received tax deductions, the limitation placed on
the tax deductibility of mutual companies' policyholder dividends, accelerated
depreciation, differences in policy and contract liabilities for tax return
and financial statement purposes, capitalization of policy acquisition
expenses for tax purposes and other adjustments prescribed by the Internal
Revenue Code.
Amounts for disputed tax issues relating to prior years are charged or
credited directly to policyholders' contingency reserves. No provision is
generally recognized for timing differences that may exist between financial
reporting and taxable income.
At December 31, 1994, the Company's subsidiaries had total estimated tax loss
carryforwards for federal income tax purposes of $26.5 million expiring in
years 2003 to 2005. After the 1994 federal income tax return was filed on
September 15, 1995, the Company's subsidiaries remaining tax loss
carryforwards for federal income tax purposes totaled $9.9 million. It is
expected that these losses will be fully utilized in the 1995 federal income
tax return. Certain subsidiaries acquired by the Company have additional
potential tax loss carryforwards of $117.8 million expiring in years 1996 to
1998. These amounts also may be used in the consolidated tax return but only
to offset future taxable income related to those subsidiaries. The Company
made federal tax payments of $211.5 million in 1995 and $78.8 million in 1994.
Adjustments to Policy Reserves and Policyholders' and Beneficiaries'
Funds: From time to time, the Company finds it appropriate to modify certain
required policy reserves because of changes in actuarial assumptions or
increased benefits. Reserve modifications resulting from such determinations
are recorded directly to policyholders' contingency reserves. During 1994, the
Company refined certain actuarial assumptions inherent
23
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING PRACTICES--CONTINUED
in the calculation of preconversion yearly renewable term and gross premium
deficiency reserves resulting in a $41.0 million increase in policyholders'
contingency reserves at December 31, 1994.
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.
Restructuring Charge: In 1994, the Company provided for restructuring charges
of $57.8 million in accordance with the Company's plan to reduce its cost
structure and consolidate operations. The restructuring charge includes
severance costs and facilities consolidation expenses. During 1995 and 1994,
the Company paid $32.9 million and $10.7 million, respectively, under its
restructuring plan. The remaining liability for restructuring charges at
December 31, 1995 was $14.2 million.
Reclassifications: Certain 1994 amounts have been reclassified to permit
comparison with the corresponding 1995 amounts.
NOTE 2--SURPLUS NOTES
On February 25, 1994, the Company issued $450 million of surplus notes that
bear interest at 7 3/8% and are scheduled to mature on February 15, 2024. The
issuance of the surplus notes was approved by the Massachusetts Division of
Insurance and any payment of interest on and principal of the notes may be
made only with the prior approval of the Commissioner of the Massachusetts
Division of Insurance. Surplus notes are reported as surplus rather than
liabilities. Interest paid on the notes during 1995 and 1994 were $33.2
million and $15.7 million, respectively.
NOTE 3--BORROWED MONEY
At December 31, 1995, the Company had a $500 million syndicated line of
credit. There are 29 banks who joined the syndicate of lenders under the
leadership of Morgan Guaranty Trust Company of New York. The banks will commit
when requested to loan funds for a period of two years at prevailing interest
rates as determined in accordance with the line of credit agreement. The
agreement does not contain a material adverse change clause. As of December
31, 1995, no amounts had been borrowed under this agreement.
In 1995 the Company issued $213.1 million of debt through a Real Estate
Mortgage Investment Conduit (REMIC). As collateral to the debt, the Company
pledged $1,065.8 million of commercial mortgages to the REMIC Trust. The debt
was issued in two notes of equal amounts with last scheduled payment dates on
March 25, 1997 and June 25, 1998, respectively. The interest rates on the two
notes are calculated on a floating basis, based on LIBOR rates, and were
6.1575% and 6.2075%, respectively, at December 31, 1995. The outstanding
balances of the Notes totaled $213.1 million at December 31, 1995 and are
included in other general account obligations.
24
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 4--NET INVESTMENT INCOME
Investment income has been reduced by the following amounts:
<TABLE>
<CAPTION>
1995 1994
------ ------
(In millions)
<S> <C> <C>
Investment expenses.............................................. $332.9 $291.2
Interest expense................................................. 38.3 19.8
Depreciation on real estate and other invested assets............ 62.7 54.7
Real estate and other investment taxes........................... 61.2 61.3
------ ------
$495.1 $427.0
====== ======
</TABLE>
NOTE 5--NET CAPITAL GAINS (LOSSES) AND OTHER ADJUSTMENTS
Net realized capital gains (losses) consist of the following items:
<TABLE>
<CAPTION>
1995 1994
------ ------
(In millions)
<S> <C> <C>
Gains (losses) from asset sales and foreclosures............... $118.6 $(41.5)
Capital gains tax.............................................. (64.2) (20.2)
Net capital (gains) losses transferred to the IMR.............. (33.2) 26.4
------ ------
Net Realized Capital Gains (Losses).......................... $ 21.2 $(35.3)
====== ======
</TABLE>
Net unrealized capital losses and other adjustments consist of the following
items:
<TABLE>
<CAPTION>
1995 1994
------ -------
(In millions)
<S> <C> <C>
Gains from changes in security values and book value adjust-
ments......................................................... $ 93.4 $ 36.4
Increase in asset valuation reserve............................ (178.5) (154.6)
------ -------
Net Unrealized Capital Losses and Other Adjustments.......... $(85.1) $(118.2)
====== =======
</TABLE>
25
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 6--INVESTMENTS
The statement value and fair value of bonds are shown below:
<TABLE>
<CAPTION>
Gross Gross
Statement Unrealized Unrealized
Value Gains Losses Fair Value
--------- ---------- ---------- ----------
(In millions)
Year ended December 31, 1995
----------------------------
<S> <C> <C> <C> <C>
U.S. treasury securities and
obligations of U.S. government
corporations and agencies............ $ 638.5 $ 42.5 $ 0.2 $ 680.8
Obligations of states and political
subdivisions......................... 194.1 20.6 0.1 214.6
Debt securities issued by foreign gov-
ernments............................. 297.7 42.2 0.0 339.9
Corporate securities.................. 18,358.6 1,818.3 73.9 20,103.0
Mortgage-backed securities............ 1,619.6 57.9 20.8 1,656.7
--------- -------- ------ ---------
Totals.............................. $21,108.5 $1,981.5 $ 95.0 $22,995.0
========= ======== ====== =========
<CAPTION>
Year ended December 31, 1994
----------------------------
<S> <C> <C> <C> <C>
U.S. treasury securities and
obligations of U.S. government
corporations and agencies............ $ 1,545.1 $ 1.8 $128.6 $ 1,418.3
Obligations of states and political
subdivisions......................... 170.6 4.5 1.7 173.4
Debt securities issued by foreign gov-
ernments............................. 143.5 9.8 0.5 152.8
Corporate securities.................. 16,208.9 471.1 401.8 16,278.2
Mortgage-backed securities............ 1,815.9 4.8 44.1 1,776.6
--------- -------- ------ ---------
Totals.............................. $19,884.0 $ 492.0 $576.7 $19,799.3
========= ======== ====== =========
</TABLE>
The statement value and fair value of bonds at December 31, 1995, by
contractual maturity, are shown below. Maturities will differ from contractual
maturities because eligible borrowers may exercise their right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Statement Value Fair Value
--------------- ----------
(In millions)
<S> <C> <C>
Due in one year or less.............................. $ 1,408.9 $ 1,456.4
Due after one year through five years................ 6,406.1 6,795.4
Due after five years through ten years............... 5,969.7 6,551.4
Due after ten years.................................. 5,704.2 6,535.1
--------- ---------
19,488.9 21,338.3
Mortgage-backed securities........................... 1,619.6 1,656.7
--------- ---------
$21,108.5 $22,995.0
========= =========
</TABLE>
Proceeds from sales of bonds during 1995 and 1994 were $2.9 billion and $2.5
billion, respectively. Gross gains of $69.7 million in 1995 and $16.6 million
in 1994 and gross losses of $44.3 million in 1995 and $99.3 million in 1994
were realized on these transactions.
The cost of common stocks was $78.1 million and $82.1 million at December 31,
1995 and 1994, respectively. At December 31, 1995, gross unrealized
appreciation on common stocks totaled $76.3 million, and gross
26
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 6--INVESTMENTS--CONTINUED
unrealized depreciation totaled $23.5 million. The fair value of preferred
stock totaled $338.8 million at December 31, 1995 and $281.6 million at
December 31, 1994.
Mortgage loans with outstanding principal balances of $115.5 million, bonds
with amortized cost of $32.8 million and real estate with depreciated cost of
$28.5 million were nonincome producing for the twelve months ended December
31, 1995.
Restructured commercial mortgage loans aggregated $466.0 million and $507.1
million as of December 31, 1995 and 1994, respectively. The expected gross
interest income that would have been recorded had the loans been current in
accordance with the original loan agreements and the actual interest income
recorded were as follows:
<TABLE>
<CAPTION>
Year ended
December 31
-------------
1995 1994
------ ------
(In millions)
<S> <C> <C>
Expected.................................................... $ 47.0 $ 54.5
Actual...................................................... $ 26.8 34.2
</TABLE>
Generally, the terms of the restructured mortgage loans call for the Company
to receive some form or combination of an equity participation in the
underlying collateral, excess cash flows or an effective yield at the maturity
of the loans sufficient to meet the original terms of the loans.
At December 31, 1995, the mortgage loan portfolio was diversified by
geographic region and specific collateral property type as displayed below.
The Company controls credit risk through credit approvals, limits and
monitoring procedures.
<TABLE>
<CAPTION>
Geographic
Concentration Statement Value
------------- ---------------
(In millions)
<S> <C>
East North Central....... $ 822.7
East South Central....... 178.2
Middle Atlantic.......... 1,861.1
Mountain................. 431.3
New England.............. 915.6
Pacific.................. 2,253.4
South Atlantic........... 1,611.7
West North Central....... 217.7
West South Central....... 447.4
Other.................... 62.4
--------
$8,801.5
========
</TABLE>
<TABLE>
<CAPTION>
Property
Type Statement Value
-------- ---------------
(In millions)
<S> <C>
Apartments................ $2,374.6
Hotels.................... 164.4
Industrial................ 780.4
Office buildings.......... 1,823.6
Retail.................... 1,545.1
1-4 Family................ 9.5
Agricultural.............. 1,607.0
Other..................... 496.9
--------
$8,801.5
========
</TABLE>
At December 31, 1995, the fair values of the commercial and agricultural
mortgage loan portfolios were $7.6 billion and $1.8 billion, respectively. The
corresponding amounts as of December 31, 1994 were approximately $6.5 billion
and $1.7 billion, respectively.
27
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 7--REINSURANCE
Premiums, benefits and reserves associated with reinsurance assumed in 1995
were $455.2 million, $276.7 million, and $12.7 million, respectively. The
corresponding amounts in 1994 were $385.9 million, $266.0 million, and $12.1
million, respectively.
The Company cedes business to reinsurers to share risks under life, health and
annuity contracts for the purpose of reducing exposure to large losses.
Premiums, benefits and reserves ceded to reinsurers in 1995 were $281.0
million, $217.0 million and $185.4 million, respectively. The corresponding
amounts in 1994 were $246.7 million, $203.2 million and $217.3 million,
respectively.
The Company has a coinsurance agreement with another insurer to cede 100% of
its individual disability business. Reserves ceded under this agreement,
included in the amount shown above, were $212.7 million at December 31, 1995
and $184.5 million at December 31, 1994.
To the extent that an assuming reinsurance company is unable to meet its
obligations under a reinsurance agreement, the Company remains liable as the
direct insurer on all risks reinsured.
NOTE 8--BENEFIT PLANS
The Company provides retirement benefits to substantially all employees and
general agency personnel. These benefits are provided through both defined
benefit and defined contribution pension plans. Pension benefits under the
defined benefit plans are based on years of service and average compensation
generally during the five years prior to retirement. The Company's funding
policy for qualified defined benefit plans is to contribute annually an amount
in excess of the minimum annual contribution required under the Employee
Retirement Income Security Act (ERISA). This amount is limited by the maximum
amount that can be deducted for federal income tax purposes. The funding
policy for nonqualified defined benefit plans is to contribute the amount of
the benefit payments made during the year. Plan assets consist principally of
listed equity securities, corporate obligations and U.S. government
securities.
Defined contribution plans include The Investment Incentive Plan (TIP) and the
Savings and Investment Plan (SIP). Employees are eligible to participate in
TIP after one year of service and may contribute up to the lesser of 15% of
their salary or $9,240 annually to the plan. The Company matches the first 2%
of pre-tax contributions and makes an additional annual profit sharing
contribution for employees who have completed at least two years of service.
Through SIP, marketing representatives, sales managers and agency managers are
eligible to contribute up to the lesser of 13% of their salary or $9,240. The
Company matches the first 3% of pretax contributions for marketing
representatives and the first 2% of pretax contributions for sales managers
and agency managers. The Company makes an annual profit sharing contribution
of up to 1% for sales managers and agency managers who have completed at least
two years of service.
The Company provides additional compensation to certain employees based on
achievement of annual and long-term corporate financial objectives.
28
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 8--BENEFIT PLANS--CONTINUED
Pension expense is summarized as follows:
<TABLE>
<CAPTION>
Year ended
December 31
----------------
1995 1994
------- -------
(In millions)
<S> <C> <C>
Defined benefit plans:
Service cost--benefits earned during the period............. $ 30.1 $ 46.5
Interest cost on the projected benefit obligation........... 103.5 96.1
Actual return on plan assets................................ (369.5) 29.4
Net amortization and deferral............................... 260.5 (144.7)
------- -------
24.6 27.3
Defined contribution plans.................................... 19.8 15.8
------- -------
Total pension expense..................................... $ 44.4 $ 43.1
======= =======
</TABLE>
Assumptions used in accounting for the defined benefit pension plans were as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Discount rate....................................................... 7.50% 8.00%
Weighted rate of increase in compensation levels.................... 5.10% 5.30%
Expected long-term rate of return on assets......................... 7.75% 8.25%
</TABLE>
The following table sets forth the funded status and actuarially determined
amounts related to the Company's defined benefit pension plans:
<TABLE>
<CAPTION>
Year ended December 31
------------------------
1995 1994
----------- -----------
(In millions)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation.......................... $ (1,242.9) $ (1,108.9)
=========== ===========
Accumulated benefit obligation..................... $ (1,300.3) $ (1,151.0)
=========== ===========
Projected benefit obligation......................... $ (1,480.0) $ (1,350.2)
Plan assets fair value............................... 1,645.3 1,355.0
----------- -----------
Excess of plan assets over projected benefit obliga-
tion................................................ 165.3 4.8
Unrecognized net (gain) loss......................... (139.1) 36.3
Prior service cost not yet recognized in net periodic
pension cost........................................ 50.0 57.7
Unrecognized net asset, net of amortization.......... (111.2) (126.6)
----------- -----------
Net pension liability................................ $ (35.0) $ (27.8)
=========== ===========
</TABLE>
Since 1988, the Massachusetts Division of Insurance has provided the Company
with approval to recognize the pension plan prepaid expense, if any, in
accordance with the requirements of SFAS No. 87, "Employers' Accounting for
Pensions." The Company furnishes the Division of Insurance with an actuarial
certification of the prepaid expense computation on an annual basis.
29
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 9--OTHER POSTRETIREMENT BENEFIT PLANS
In addition to the Company's defined benefit pension plans, the Company has
employee welfare plans for medical, dental, and life insurance covering most
of its retired employees and general agency personnel. Substantially all
employees may become eligible for these benefits if they reach retirement age
while employed by the Company. The postretirement health care and dental
coverages are contributory based on service for post January 1, 1992 non-union
retirees. A small portion of pre-January 1, 1992 non-union retirees also
contribute. The applicable contributions are based on service.
In 1993, the Company changed its method of accounting for the costs of its
retiree benefit plans to the accrual method and elected to amortize its
transition liability for retirees and fully eligible or vested employees over
twenty years.
Since 1993, the Company funded a portion of the postretirement obligation. The
Company's policy is to fund postretirement benefits for non-union employees to
the maximum amount that can be deducted for federal income tax purposes and to
fund the benefits for union employees, which are fully tax qualified, at
sufficient amounts so that the total accrued liability related to
postretirement benefits is zero. As of December 31, 1995, plan assets related
to non-union employees were comprised of an irrevocable health insurance
contract to provide future health benefits to retirees while plan assets
related to union employees were comprised of approximately 60% equity
securities and 40% fixed income investments. The following table shows the
plans' combined funding status for vested benefits reconciled with the amounts
recognized in the Company's statements of financial position.
<TABLE>
<CAPTION>
December 31
-------------------------------------
1995 1994
------------------ ------------------
Medical Medical
and Life and Life
Dental Insurance Dental Insurance
Plans Plans Plans Plans
------- --------- ------- ---------
(In millions)
<S> <C> <C> <C> <C>
Accumulated postretirement benefit obli-
gation:
Retirees............................... $(236.5) $(89.2) $(239.2) $(76.5)
Fully eligible active plan partici-
pants................................. (42.9) (20.1) (51.3) (22.2)
------- ------ ------- ------
(279.4) (109.3) (290.5) (98.7)
Plan assets at fair value................ 96.9 0.0 59.9 0.0
------- ------ ------- ------
Accumulated postretirement benefit
obligation in excess of plan assets..... (182.5) (109.3) (230.6) (98.7)
Unrecognized prior service cost.......... 18.2 5.8 22.2 6.2
Unrecognized prior net gain.............. (84.2) (4.2) (63.9) (12.3)
Unrecognized transition obligation....... 272.9 83.3 288.9 88.2
------- ------ ------- ------
Accrued postretirement benefit cost...... $ 24.4 $(24.4) $ 16.6 $(16.6)
======= ====== ======= ======
</TABLE>
Net postretirement benefits costs for the years ended December 31, 1995 and
1994 were $50.2 million and $52.1 million, respectively, and include the
expected cost of such benefits for newly eligible or vested employees,
interest cost, and amortization of the transition liability.
30
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 9--OTHER POSTRETIREMENT BENEFIT PLANS--CONTINUED
Net periodic postretirement benefits cost included the following components:
<TABLE>
<CAPTION>
December 31
------------------------------------
1995 1994
------------------ -----------------
Medical Medical
and Life and Life
Dental Insurance Dental Insurance
Plans Plans Plans Plans
------- --------- ------- ---------
(In millions)
<S> <C> <C> <C> <C>
Eligibility cost............................ $ 5.3 $ 1.5 $ 6.1 $ 2.3
Interest cost............................... 21.1 7.8 19.9 6.8
Actual return on plan assets................ (15.5) 0.0 (2.1) 0.0
Net amortization and deferral............... 25.0 5.0 14.4 4.7
------ ----- ----- -----
Net periodic postretirement benefit cost.... $ 35.9 $14.3 $38.3 $13.8
====== ===== ===== =====
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation at December 31, 1995 was 7.5% (8.0% for 1994). The annual assumed
rate of increase in the health care cost trend rate for the medical coverages
is 8.25% for 1996 (9.75% was assumed for 1995) and is assumed to decrease
gradually to 5.5% in 2001 and remain at that level thereafter. The health care
cost trend rate assumption has a significant effect on the amounts reported.
For example, increasing the assumed health care cost trend rates by one
percentage point in each year would increase the accumulated post retirement
benefit obligation for the medical coverages as of December 31, 1995 by $35.0
million and the aggregate of the eligibility and interest cost components of
net periodic postretirement benefit cost by $3.6 million for 1995 and $2.7
million for 1994.
Postretirement welfare benefits for non-vested employees are not reflected in
the above expenses or accumulated postretirement benefit obligations. As of
December 31, 1995, the accumulated postretirement benefit obligations for non-
vested employees amounted to $67.7 million for medical and dental plans and
$10.8 million for life insurance plans. The corresponding amounts as of
December 31, 1994 were $70.4 million and $9.1 million, respectively.
NOTE 10--AFFILIATES
The Company has subsidiaries and affiliates in a variety of industries
including domestic and foreign life insurance and domestic property casualty
insurance, real estate, mutual funds, investment brokerage and various other
financial services entities.
Total assets of unconsolidated affiliates amounted to $9.5 billion at December
31, 1995 and $7.8 billion at December 31, 1994; total liabilities amounted to
$8.3 billion at December 31, 1995 and $6.7 billion at December 31, 1994; and
total net income was $89.5 million in 1995 and $61.9 million in 1994.
The Company customarily engages in transactions with its unconsolidated
affiliates, including the cession and assumption of certain insurance business
under the terms of established reinsurance agreements. Various services are
performed by the Company for certain affiliates for which the Company is
reimbursed on the basis of cost. Certain affiliates have entered into various
financial arrangements relating to borrowings and capital maintenance under
which agreements the Company would be obligated in the event of nonperformance
by an affiliate (see Note 14).
31
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 10--AFFILIATES--CONTINUED
The Company received dividends of $9.7 million and $10.1 million in 1995 and
1994, respectively, from unconsolidated affiliates.
NOTE 11--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company enters into interest rate swap contracts for the purpose of
converting the interest rate characteristics (fixed or variable) of certain
investments to match those of related insurance liabilities. Maturities of
current agreements range from 1996 to 2005. These swaps involve, to varying
degrees, interest rate risk in excess of amounts recognized in the statement
of financial position.
The Company enters into currency rate swap agreements to manage exposure to
foreign exchange rate fluctuations. Maturities of current agreements range
through 2009. Should the counterparty fail to meet the terms of the contract,
the Company's market risk is limited to the currency rate differential.
The Company enters into interest rate cap contracts to manage exposure on
underlying security values due to a rise in interest rates. Maturities of
current agreements range through 2001.
The Company also uses financial futures contracts to hedge risks associated
with interest rate fluctuations on sales of guaranteed investment contracts.
The Company is subject to the risks associated with changes in the value of
the underlying securities; however, such changes in value generally are offset
by opposite changes in the value of the hedged items. The contract or notional
amounts of the contracts represent the extent of the Company's involvement but
not the future cash requirements, as the Company intends to close the open
positions prior to settlement.
The contract or notional amount of the foregoing financial instruments, which
indicates the Company's involvement and, in certain instances, maximum credit
risk related to those instruments, is as follows:
<TABLE>
<CAPTION>
December 31
-----------------
1995 1994
-------- --------
(In millions)
<S> <C> <C>
Futures contracts to purchase securities.................... $ 62.2 $ 147.9
======== ========
Futures contracts to sell securities........................ $ 299.9 $ 98.1
======== ========
Notional amount of interest rate swaps, currency rate swaps,
and interest rate caps to:
Receive variable rates.................................... $1,735.0 $ 916.0
======== ========
Receive fixed rates....................................... $1,756.3 $1,365.2
======== ========
</TABLE>
The Company continually monitors its positions and the credit ratings of the
counterparties to these financial instruments. The Company believes the risk
of incurring losses due to nonperformance by its counterparties is remote and
that any such losses would be immaterial.
Based on market rates in effect at December 31, 1995, the Company's interest
rate swaps, currency rate swaps, and interest rate caps represented (assets)
liabilities to the Company with fair values of $37.0 million, $23.3 million
and $(0.3) million, respectively. The corresponding amounts as of December 31,
1994 were $12.0 million, $15.4 million, and $(1.5) million, respectively.
32
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 12--LEASES
The Company leases office space and furniture and equipment under various
operating leases. Rental expenses for all operating leases totaled $32.2
million in 1995 and $35.2 million in 1994. At December 31, 1995, future
minimum rental commitments under noncancellable operating leases for office
space and furniture and equipment totaled approximately $44.3 million.
NOTE 13--POLICYHOLDERS' RESERVES AND BENEFICIARIES' FUNDS
The Company's annuity reserves and deposit fund liabilities that are subject
to discretionary withdrawal (with adjustment), subject to discretionary
withdrawal (without adjustment), and not subject to discretionary withdrawal
provisions are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1995 Percent
----------------- -------
(In millions)
<S> <C> <C>
Subject to discretionary withdrawal (with adjust-
ment):
With market value adjustment....................... $ 2,517.0 7.3%
At book value less surrender charge................ 2,502.2 7.3
--------- -----
Total with adjustment.............................. 5,019.2 14.6
Subject to discretionary withdrawal (without ad-
justment) at book value........................... 594.8 1.7
Subject to discretionary withdrawal--separate ac-
counts............................................ 10,813.9 31.4
Not subject to discretionary withdrawal:
General account.................................... 16,634.4 48.3
Separate accounts.................................. 1,387.2 4.0
--------- -----
Total annuity reserves and deposit liabilities--be-
fore reinsurance.................................... 34,449.5 100.0%
=====
Less reinsurance ceded............................... (0.2)
---------
Net annuity reserves and deposit fund liabilities.... $34,449.3
=========
</TABLE>
Activity in the liability for accident and health unpaid claims is:
<TABLE>
<CAPTION>
1995 1994
------ ------
(In millions)
<S> <C> <C>
Balance at January 1............................................ $216.2 $210.6
Less reinsurance recoverables................................. (7.3) (4.6)
------ ------
Net balance at January 1........................................ 208.9 206.0
------ ------
Incurred related to:
Current year.................................................. 301.0 350.4
Prior years................................................... (25.2) (40.4)
------ ------
Total incurred.................................................. 275.8 310.0
------ ------
Paid related to:
Current year.................................................. 192.0 231.2
Prior years................................................... 89.0 75.9
------ ------
Total paid...................................................... 281.0 307.1
------ ------
Net balance at December 31...................................... 203.7 208.9
Plus reinsurance recoverable.................................. 4.0 7.3
------ ------
Balance at December 31.......................................... $207.7 $216.2
====== ======
</TABLE>
33
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 13--POLICYHOLDERS' RESERVES AND BENEFICIARIES' FUNDS--CONTINUED
As a result of favorable changes in claim estimates and a decline in fully
insured business, the liability for prior year claims decreased in 1995 and
1994.
NOTE 14--COMMITMENTS AND CONTINGENCIES
The Company has extended commitments to purchase long-term bonds, preferred
stocks, and real estate and issue real estate mortgages totaling $620.7
million, $19.1 million, $5.0 million and $396.6 million, respectively, at
December 31, 1995. If funded, loans related to real estate mortgages would be
fully collateralized by related properties. The Company monitors the credit
worthiness of borrowers under long-term bond commitments and requires
collateral as deemed necessary. The fair value of the commitments described
above is $1.1 billion at December 31, 1995. The majority of these commitments
expire in 1996.
During 1991, the Company entered into a credit support and collateral pledge
agreement with the Federal National Mortgage Association (FNMA). Under the
agreement, the Company sold $1.042 billion of multi-family loans and acquired
an equivalent amount of FNMA securities. FNMA is guarantying the full face
value of the bonds to the bondholders. However, the Company has agreed to
absorb the first 15% of original principal and interest losses (less buy-
backs) for the pool of loans involved, but is not required to commit
collateral to support this loss contingency. Historically, the Company has
experienced total losses as a percentage of its multi-family mortgage
portfolio of approximately 3%. Mortgage loan buy-backs required by FNMA in
1995 and 1994 amounted to $29.5 million and $12.7 million, respectively. There
were no losses associated with these buy-backs. At December 31, 1995, the
remaining pool of loans had an outstanding principal balance of $591.2
million.
The Company has a support agreement with JHVLICo under which the Company
agrees to continue directly or indirectly to own all of JHVLICo's common stock
and maintain JHVLICo's net worth at not less than $1 million.
The Company has a support agreement with John Hancock Capital Corporation
(JHCC) under which the Company agrees to continue directly or indirectly to
own all of JHCC's common stock and maintain JHCC's net worth at not less than
$1 million. JHCC's outstanding borrowings as of December 31, 1995 were $363.6
million for short-term borrowings and $142.7 million for notes payable.
The Company is subject to insurance guaranty fund laws in the states in which
it does business. These laws assess insurance companies amounts to be used to
pay benefits to policyholders and claimants of insolvent insurance companies.
Many states allow these assessments to be credited against future premium
taxes. The Company believes such assessments in excess of amounts accrued will
not materially affect its financial position.
In the normal course of its business operations, the Company is involved in
litigation from time to time with claimants, beneficiaries and others, and a
number of litigation matters were pending as of December 31, 1995. 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 of the Company.
34
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
<TABLE>
<C> <C> <S>
1. Condensed Financial Information (Part A)
2. Statement of Assets and Liabilities, John Hancock Variable
Annuity Account U, at December 31, 1995. (Part B)
3. Statement of Operations, John Hancock Variable Annuity Account
U, year ended December 31, 1995. (Part B)
4. Statement of Changes in Net Assets, John Hancock Variable
Annuity Account U, for each of the two years in the period ended
December 31, 1995. (Part B)
5. Notes to Financial Statements, John Hancock Variable Annuity
Account U. (Part B)
6. Statements of Financial Position, John Hancock Mutual Life
Insurance Company, at December 31, 1994, and December 31, 1995.
(Part B)
7. Summary of Operations and Changes in Policyholder's Contingency
Reserves, John Hancock Mutual Life Insurance Company, for each
of the two years in the period ended December 31, 1995. (Part B)
8. Statement of Cash Flows, John Hancock Mutual Life Insurance
Company, for each of the two years in the period ended December
31, 1995. (Part B)
9. Notes to Financial Statements, John Hancock Mutual Life
Insurance Company. (Part B)
(b) Exhibits:
1. John Hancock Board Resolution establishing the Continuing
Separate Account, dated January 14, 1985, included in Post-
Effective Amendment No. 37 to this File No. 2-38827, filed April
26, 1995.
2. Not Applicable.
3. Distribution Agreement between John Hancock Mutual Life
Insurance Company and John Hancock Variable Annuity Account U,
dated August 5, 1986, included in Post-Effective Amendment No.
37 to this File No. 2-38827, filed April 26, 1995.
4. (a) Form of periodic payment deferred annuity contract (80-70),
included in Post-Effective Amendment No. 17 to Form N-1
Registration Statement of John Hancock Variable Account A (File
No. 2-38827) filed in December, 1979.
(b) Form of single premium deferred annuity contract (78-71),
included in Post-Effective Amendment No. 14 to Form N-1
Registration Statement of John Hancock Variable Account A (File
No. 2-38827) filed in April, 1978.
(c) Form of single premium immediate annuity contract (80-72),
included in Post-Effective Amendment No. 17 to Form N-1
Registration Statement of John Hancock Variable Account A (File
No. 2-38827) filed in December, 1979.
(d) Forms of endorsement (92-8 and 92-9) for periodic premium
deferred annuity contracts to reflect separate account
restructuring, included in Post-Effective Amendment No. 37 to
this File No. 2-38827, filed April 26, 1995.
</TABLE>
C-1
<PAGE>
<TABLE>
<C> <C> <S>
(e) Form of endorsement (92-10) for single premium deferred annuity
contract to reflect separate account restructuring, included in
Post-Effective Amendment No. 37 to this File No. 2-38827, filed
April 26, 1996.
(f) Forms of endorsement (92-11, 92-12 and 92-13) for single premium
immediate annuity contracts to reflect separate account
restructuring, included in Post-Effective Amendment No. 37 to
this File No. 2-38827, filed April 26, 1996.
(g) Forms of endorsement (92-7) containing distribution provisions
applicable to certain plans, included in Post-Effective
Amendment No. 37 to this File No. 2-38827, filed April 26, 1996.
5. (a) Form of periodic premium deferred annuity contract application
(80-70), included in Post-Effective Amendment No. 17 to Form N-1
Registration Statement of John Hancock Variable Account A (File
No. 2-38827) filed in December, 1979.
(b) Form of single premium deferred annuity contract application
(78-71), included in Post-Effective Amendment No. 14 to Form N-1
Registration Statement of John Hancock Variable Account A (File
No. 2-38827) filed in April, 1978.
(c) Form of single premium immediate annuity contract application
(80-72), included in Post-Effective Amendment No. 17 to Form N-1
Registration Statement of John Hancock Variable Account A (File
No. 2-38827) filed in December, 1979.
6. Charter and By-Laws of John Hancock Mutual Life Insurance
Company, included in Post-Effective Amendment No. 27 to Form N-4
Registration Statement of John Hancock Variable Annuity Account
U (File No. 2-38827) filed on December 11, 1986.
7. Not Applicable.
8. Not Applicable.
9. Opinion and Consent of Counsel as to legality of interests being
offered, included in Post-Effective Amendment No. 28 to the Form
N-4 Registration Statement of John Hancock Variable Annuity
Account U (File No. 2-38827) filed February 2, 1987.
10. (a) Consent of Independent Auditor.
(b) Representation of Counsel Pursuant to Rule 485(b).
11. Not Applicable
12. Not Applicable.
13. Diagram of Subsidiaries of John Hancock Mutual Life Insurance
Company, incorporated by reference from Post-Effective Amendment
No. 13 to the Form N-1A Registration Statement of John Hancock
Variable Series Trust I (File No. 33-2081) filed April 24, 1996.
14. Copy of Power of Attorney for Michael C. Hawley. Copies of
Powers of Attorney for all other directors, included in Post-
Effective Amendment No. 37 to this File No. 2-38827, filed April
26, 1996.
</TABLE>
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<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
DIRECTORS
<TABLE>
<CAPTION>
NAME POSITION WITH DEPOSITOR
- ---- -----------------------
<S> <C>
Samuel W. Bodman........... Director
Nelson S. Gifford.......... Director
Randolph W. Bromery........ Director
William L. Boyan........... President and Chief Operations Officer
E. James Morton............ Director
John F. Magee.............. Director
John M. Connors, Jr........ Director
Stephen L. Brown........... Chairman of the Board and Chief Executive Officer
Richard F. Syron........... Director
Michael C. Hawley.......... Director
I. MacAllister Booth....... Director
C. Vincent Vappi........... Director
Delbert C. Staley.......... Director
David F. D'Alessandro...... Senior Executive Vice President and Director
Joan T. Bok................ Director
Robert E. Fast............. Director
Foster L. Aborn............ Vice Chairman of the Board
Lawrence K. Fish........... Director
Kathleen F. Feldstein...... Director
EXECUTIVE OFFICERS OTHER THAN DIRECTORS
Richard S. Scipione........ General Counsel
Thomas E. Moloney.......... Executive Vice President and Chief Financial Officer
Diane M. Capstaff.......... Executive Vice President
Bruce E. Skrine............ Senior Vice President, Counsel and Secretary
</TABLE>
All of the above-named officers and directors can be contacted at the fol-
lowing business address: John Hancock Mutual Life Insurance Company, John Han-
cock Place, P.O. Box 111, Boston, MA 02117.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant is a separate account of John Hancock, operated as a unit invest-
ment trust. Registrant supports benefits payable under John Hancock's variable
annuity contracts by investing in shares of John Hancock Variable Series Trust
I (the "Fund") a "series" type of mutual fund, registered under the Investment
Company Act of 1940 (the "Act") as an open-end management investment company.
The Registrant and other separate accounts of John Hancock and John Hancock
Variable Life Insurance Company ("JHVLICO") own all of the Fund's outstanding
shares of beneficial interest. The purchasers of variable annuity and variable
life insurance contracts, in connection with which the Fund is used, will have
the opportunity to instruct John Hancock and JHVLICO with respect to the vot-
ing of the shares of the Fund held by Registrant as to certain matters. Sub-
ject to the voting instructions, John Hancock directly controls Registrant.
A diagram of the subsidiaries John Hancock is incorporated by reference from
Exhibit 17 to Post Effective Amendment No. 13 to the Form N-1A Registration
Statement of John Hancock Variable Series Trust I (File No. 33-2081) filed
April 24, 1996. All such subsidiaries are included in John Hancock's consoli-
dated financial statements.
C-3
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of February 28, 1996, the number of Contract Owners of variable annuity
contracts offered by Account was 105,439.
ITEM 28. INDEMNIFICATION
Article 9a of the By-Laws of John Hancock provides indemnification to each
present and former director, officer, and employee of John Hancock against
litigation expenses and liabilities incurred while acting as such, subject to
limitations of law, including under the Act. No indemnification shall be paid
if a director or officer is finally adjudicated not to have acted in good
faith in the reasonable belief that his action was in the best interest of
John Hancock. John Hancock may pay expenses incurred in defending an action or
claim in advance of its final disposition, but only upon receipt of an under-
taking by the person indemnified to repay such amounts if he or she should be
determined not be entitled to indemnification.
Reference is made to Article VI of the ByLaws of the Fund, filed as Exhibit
2 to Post Effective Amendment No. 2 to the Fund's Registration Statement (File
No. 33-2081) dated April 12, 1988, which provides that the Fund shall indem-
nify or advance any expenses to the trustees, shareholders, officers, or em-
ployees of the Fund to the extent set forth in the Declaration of Trust.
Sections 6.3 through 6.17 of the Declaration of Trust, included as Exhibit 1
to the Fund's Post Effective Amendment No. 2, relate to the indemnification of
trustees, shareholders, officers, and employees. It is provided that the Fund
shall indemnify any trustee made a party to any proceeding by reason of serv-
ice in that capacity if the trustee (a) acted in good faith and (b) reasonably
believed, (1) in the case of conduct in the trustee's official capacity with
the Fund, that the conduct was in the best interest of the Fund and (2) in all
other cases, that the conduct was at least not opposed to the best interests
of the Fund, and (c) in the case of any criminal proceeding, the Fund shall
indemnify the trustee if the trustee acted in good faith and had no reasonable
cause to believe that the conduct was unlawful. Indemnification may not be
made by the Fund unless authorized in each case by a determination by the
Board of Trustees or by special legal counsel or by the shareholders. Neither
indemnification nor advancement of expenses may be made if the trustee or of-
ficer has incurred liability by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of duties involved in the conduct of
his office ("Disabling Conduct"). The means for determining whether indemnifi-
cation shall be made shall be (1) a final decision on the merits by a court or
other body before whom the proceeding was brought that the person to be indem-
nified was not liable by reason of Disabling Conduct or (2) in the absence of
such a decision, a reasonable determination, based upon a review of the facts,
that such person was not liable by reason of Disabling Conduct. Such latter
determination may be made either (a) by the vote of a majority of a quorum of
Trustees of the Fund who are neither "interested" persons of the Fund (as de-
fined in the Act) nor parties to the proceeding or (b) by an independent legal
counsel in a written opinion. The advancement of legal expenses may not occur
unless the trustee or officer agrees to repay the advance (unless it is ulti-
mately determined that he is entitled to indemnification) and at least one of
three conditions is satisfied: (1) he provides security for his agreement to
repay, (2) the Fund is insured against loss by reason of lawful advances, or
(3) a majority of a quorum of the Trustees of the Fund who are not interested
persons and are not parties to the proceedings, or independent counsel in a
written opinion, determine that there is reason to believe that the trustee or
officer will be found entitled to indemnification.
Similar types of provisions dealing with the indemnification of the Fund's
officers and trustee are hereby incorporated by reference from documents pre-
viously filed with the Commission, specifically, Section 14 of the Investment
Management Agreement by and between John Hancock Variable Series Trust I and
John Hancock Mutual Life Insurance Company (Exhibit 5.f. to Post-Effective
Amendment No. 4 to the Registration Statement of the Fund (File No. 33-2081)
dated April, 1989), Section 14 of the Investment Management Agreement by and
between John Hancock Variable Series Trust I and John Hancock Mutual Life In-
surance Company (Exhibit 5.a. to the Registration Statement (File No. 33-2081)
C-4
<PAGE>
dated December 11, 1985), Section 14 of Investment Management Agreement by and
between John Hancock Variable Series Trust I and John Hancock Mutual Life In-
surance Company (Exhibit 5.g. to Post-Effective Amendment No. 9 to the Regis-
tration Statement of the Fund (File No. 33-2081) dated March 2, 1994), Section
7 of the Underwriting and Administrative Services Agreement by and between
John Hancock Variable Series Trust I and John Hancock Mutual Life Insurance
Company (Exhibit 6 to Post-Effective Amendment No. 4 to the Registration
Statement of the Fund (File No. 33-2081) dated April, 1989), and Section 15 of
the Transfer Agency Agreement by and between John Hancock Variable Series
Trust I and John Hancock Mutual Life Insurance Company (Exhibit 9 to Pre-Ef-
fective Amendment No. 1 to the Registration Statement of the Fund (File No.
33-2081) dated March 13, 1986).
Insofar as indemnification for liabilities 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 Regis-
trant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in that
Act and is, therefore, unenforceable. In the event that a claim for indemnifi-
cation against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit, or proceeding) is
asserted by such director, officer, or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by a controlling precedent, submit to
a court of appropriate jurisdiction the question of whether indemnification by
it is against public policy as expressed in that Act and will be governed by
the final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) John Hancock is also the principal underwriter for the Fund and John
Hancock Variable Annuity Account V and I and John Hancock Variable Life Ac-
counts U, V, and S and John Hancock Mutual Variable Life Insurance Account UV
and the depositor for those accounts. John Hancock is an investment adviser to
the Fund.
(b) Reference is made to the response to Item 25, above.
(c) The information under "Distribution Agreement and Other Services--Dis-
tribution Agreement" in the statement of additional information forming a part
of this registration statement is incorporated herein by reference.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
John Hancock Mutual Life Insurance Company, 200 Clarendon Street, P.O. Box
111, Boston, Massachusetts 02117, will serve as Registrant's distributor and
depositor, and, in such capacities, will keep all records required by Section
31(a) of the Act.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS AND REPRESENTATIVES
(a) Registrant hereby undertakes to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that the au-
dited financial statements in the registration statement are never more than
16 months old for so long as payments under the variable annuity Contracts may
be accepted.
(b) Registrant hereby undertakes to include as part of any application to
purchase a Contract offered by the prospectus a space that an applicant can
check to request a Statement of Additional Information.
C-5
<PAGE>
(c) Registrant hereby undertakes to deliver any Statement of Additional In-
formation and any financial statements required to be made available under
Form N-4 promptly upon written or oral request.
(d) Registrant represents that, in connection with the sale of the Contracts
offered pursuant to this registration statement, it has complied with the con-
ditions of the SEC no-action letter regarding the purchase of variable annuity
contracts under retirement plans meeting the requirements of Section 403(b) of
the Internal Revenue Code (American Council of Life Insurance (pub. avail.
Nov. 28, 1988)). Specifically, Registrant has (1) included appropriate disclo-
sure regarding the redemption restrictions imposed by Section 403(b)(11) in
the prospectus; (b) included appropriate disclosure regarding the redemption
restrictions imposed by Section 403(b)(11) in any sales literature used in
connection with the offer of the Contracts; (3) instructed sales representa-
tives specifically to bring the redemption restrictions imposed by Section
403(b)(11) to the attention of potential plan participants; and (4) obtained
from each plan participant who purchases a Section 403(b) annuity contract,
prior to or at the time of such purchase, a signed statement acknowledging the
participant's understanding of (a) the restrictions on redemptions imposed by
Section 403(b)(11) and (b) the investment alternatives available under the em-
ployer's Section 403(b) arrangement to which the participant may elect to
transfer his contract value.
C-6
<PAGE>
SIGNATURES
As required by 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 caused this
amended Registration Statement to be signed on its behalf, in the City of Bos-
ton and the Commonwealth of Massachusetts on this 22nd day of April, 1996.
John Hancock Variable Annuity Account U
(Registrant)
By John Hancock Mutual Life Insurance
Company
/s/ Stephen L. Brown
By______________________________________
Stephen L. Brown
Chairman of the Board and Chief
Executive Officer
John Hancock Mutual Life Insurance
Company (Depositor)
/s/ Stephen L. Brown
By______________________________________
Stephen L. Brown
Chairman of the Board and Chief
Executive Officer
C-7
<PAGE>
As required by the Securities Act of 1933 and the Investment Company Act of
1940, this amended Registration Statement has been signed by the following
persons in their capacities with John Hancock Mutual Life Insurance Company
and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ Thomas E. Moloney Chief Financial Officer (Principal 4/22/96
________________________________________ Financial Officer and Principal
Thomas E. Moloney Accounting Officer)
/s/ Stephen L. Brown Chairman of the Board and Chief 4/22/96
________________________________________ Executive Officer (Principal Executive
Stephen L. Brown Officer)
for himself and as
Attorney-in-Fact
</TABLE>
<TABLE>
<C> <C> <S>
FOR: Foster L. Aborn.................. Vice Chairman of the Board
Senior Executive Vice President &
David F. D'Alessandro............ Director
President of the Board and Chief
William L. Boyan................. Operations Officer
</TABLE>
<TABLE>
<S> <C>
Nelson S. Gifford...................... Director
Richard F. Syron....................... Director
John F. Magee.......................... Director
John M. Connors, Jr.................... Director
Lawrence K. Fish....................... Director
Joan T. Bok............................ Director
Robert E. Fast......................... Director
I. MacAllister Booth................... Director
</TABLE>
<TABLE>
<S> <C>
E. James Morton........................ Director
Michael C. Hawley...................... Director
Samuel W. Bodman....................... Director
Delbert C. Staley...................... Director
C. Vincent Vappi....................... Director
Randolph W. Bromery.................... Director
Kathleen F. Feldstein.................. Director
</TABLE>
C-8
<PAGE>
LIST OF EXHIBITS
FORM N-4
JOHN HANCOCK VARIABLE ANNUITY ACCOUNT U
EXHIBITS
10.(a) Consent of Independent Auditors
10.(b) Representation of Counsel pursuant to Rule 485(b)
14. Copy of Powers of Attorney for Michael C. Hawley.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> SELECT STOCK
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 144,030,975
<INVESTMENTS-AT-VALUE> 164,220,305
<RECEIVABLES> 76,519
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 164,296,824
<PAYABLE-FOR-SECURITIES> 57,789
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18,730
<TOTAL-LIABILITIES> 76,519
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 164,220,305
<DIVIDEND-INCOME> 13,505,036
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,947,354
<NET-INVESTMENT-INCOME> 11,557,682
<REALIZED-GAINS-CURRENT> 511,687
<APPREC-INCREASE-CURRENT> 23,842,221
<NET-CHANGE-FROM-OPS> 35,911,590
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 30,944,458
<NUMBER-OF-SHARES-REDEEMED> 3,035,112
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 52,263,254
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,947,354
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> BOND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 303,377,280
<INVESTMENTS-AT-VALUE> 315,237,317
<RECEIVABLES> 84,849
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 315,322,166
<PAYABLE-FOR-SECURITIES> 51,850
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 32,999
<TOTAL-LIABILITIES> 84,849
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 315,237,317
<DIVIDEND-INCOME> 24,335,809
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 3,803,490
<NET-INVESTMENT-INCOME> 20,532,319
<REALIZED-GAINS-CURRENT> (625,195)
<APPREC-INCREASE-CURRENT> 29,341,954
<NET-CHANGE-FROM-OPS> 49,249,078
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 29,546,333
<NUMBER-OF-SHARES-REDEEMED> 21,935,476
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 315,237,317
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,803,490
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> INTERNATIONAL
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 67,131,679
<INVESTMENTS-AT-VALUE> 67,992,871
<RECEIVABLES> 33,739
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 68,026,610
<PAYABLE-FOR-SECURITIES> 26,003
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,736
<TOTAL-LIABILITIES> 33,739
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 67,992,871
<DIVIDEND-INCOME> 823,275
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 988,434
<NET-INVESTMENT-INCOME> (165,159)
<REALIZED-GAINS-CURRENT> 1,637,360
<APPREC-INCREASE-CURRENT> 2,920,738
<NET-CHANGE-FROM-OPS> 4,392,939
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,180,064
<NUMBER-OF-SHARES-REDEEMED> 16,333,986
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (6,595,824)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 988,434
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 65,053,867
<INVESTMENTS-AT-VALUE> 65,053,867
<RECEIVABLES> 162,021
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 65,215,888
<PAYABLE-FOR-SECURITIES> 155,282
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,739
<TOTAL-LIABILITIES> 162,021
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 65,053,867
<DIVIDEND-INCOME> 3,713,406
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 835,348
<NET-INVESTMENT-INCOME> 2,878,058
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,878,058
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 22,003,907
<NUMBER-OF-SHARES-REDEEMED> 20,826,115
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,177,791
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 835,348
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<PER-SHARE-NII> 0
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> REAL ESTATE EQUITY
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 68,405,858
<INVESTMENTS-AT-VALUE> 68,593,421
<RECEIVABLES> 75,931
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 68,669,352
<PAYABLE-FOR-SECURITIES> 68,130
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,801
<TOTAL-LIABILITIES> 75,931
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 68,593,421
<DIVIDEND-INCOME> 4,870,341
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 995,562
<NET-INVESTMENT-INCOME> 3,874,779
<REALIZED-GAINS-CURRENT> (602,325)
<APPREC-INCREASE-CURRENT> 3,675,422
<NET-CHANGE-FROM-OPS> 6,947,876
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,978,128
<NUMBER-OF-SHARES-REDEEMED> 19,487,975
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (10,436,749)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 995,562
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> SPECIAL OPPORTUNITIES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 12,868,546
<INVESTMENTS-AT-VALUE> 13,804,870
<RECEIVABLES> 30,579
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13,835,449
<PAYABLE-FOR-SECURITIES> 29,021
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,558
<TOTAL-LIABILITIES> 30,579
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 13,804,870
<DIVIDEND-INCOME> 329,577
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 85,929
<NET-INVESTMENT-INCOME> 243,648
<REALIZED-GAINS-CURRENT> 428,216
<APPREC-INCREASE-CURRENT> 923,379
<NET-CHANGE-FROM-OPS> 1,595,243
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,961,462
<NUMBER-OF-SHARES-REDEEMED> 2,050,526
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 12,262,532
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 85,929
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> STOCK
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 505,779,730
<INVESTMENTS-AT-VALUE> 587,377,742
<RECEIVABLES> 367,168
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 587,744,910
<PAYABLE-FOR-SECURITIES> 306,739
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 60,429
<TOTAL-LIABILITIES> 367,168
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 587,377,742
<DIVIDEND-INCOME> 56,237,590
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 6,386,044
<NET-INVESTMENT-INCOME> 49,851,546
<REALIZED-GAINS-CURRENT> 1,872,473
<APPREC-INCREASE-CURRENT> 90,535,270
<NET-CHANGE-FROM-OPS> 142,259,289
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 79,408,102
<NUMBER-OF-SHARES-REDEEMED> 12,481,677
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 159,334,167
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 6,386,044
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
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<PER-SHARE-NAV-END> 0
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> SHORT-TERM U.S. GOVERNMENT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 5,760,173
<INVESTMENTS-AT-VALUE> 5,809,748
<RECEIVABLES> 668
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,810,416
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 668
<TOTAL-LIABILITIES> 668
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 5,809,748
<DIVIDEND-INCOME> 143,233
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 32,687
<NET-INVESTMENT-INCOME> 110,546
<REALIZED-GAINS-CURRENT> 33,726
<APPREC-INCREASE-CURRENT> 54,822
<NET-CHANGE-FROM-OPS> 199,094
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,009,784
<NUMBER-OF-SHARES-REDEEMED> 871,145
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5,227,187
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 32,687
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> MANAGED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1,040,571,226
<INVESTMENTS-AT-VALUE> 1,126,414,038
<RECEIVABLES> 473,573
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,126,887,611
<PAYABLE-FOR-SECURITIES> 345,006
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 128,567
<TOTAL-LIABILITIES> 473,573
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,126,414,038
<DIVIDEND-INCOME> 108,439,190
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 14,196,202
<NET-INVESTMENT-INCOME> 94,242,988
<REALIZED-GAINS-CURRENT> 5,271,590
<APPREC-INCREASE-CURRENT> 129,134,123
<NET-CHANGE-FROM-OPS> 228,648,701
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 122,315,142
<NUMBER-OF-SHARES-REDEEMED> 46,884,971
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 209,835,885
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 14,196,202
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
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</TABLE>
<PAGE>
EXHIBIT 10(A)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Experts" in the
Prospectus and "Independent Auditors" in the Statement of Additional Informa-
tion in Post-Effective Amendment Number 38 to the Registration Statement (Form
N-4, No. 2-38827) of John Hancock Variable Annuity Account U.
We also consent to the incorporation of our reports dated February 9, 1996
on the financial statements included in the Annual Report of the John Hancock
Variable Annuity Account U and dated February 7, 1996 on financial statements
included in the Annual Report of the John Hancock Mutual Life Insurance Com-
pany for the year ended December 31, 1995.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Boston, Massachusetts
April 24, 1996
<PAGE>
EXHIBIT 10(B)
[JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY LETTERHEAD]
April 16, 1996
SECURITIES & EXCHANGE COMMISSION
450 FIFTH STREET, N.W.
WASHINGTON, DC 20549
RE: John Hancock Variable Annuity Account U
File Nos. 2-38827 and 811-2143
Dear Commissioners:
This opinion is being furnished with respect to the filing of Post-Effective
Amendment No. 38 under the Securities Act of 1933 (Post-Effective Amendment
No. 19 under the Investment Company Act of 1940) of the Form N-4 Registration
Statement of John Hancock Variable Annuity Account U as required by Rule 485
under the 1933 Act.
I have acted as counsel to Registrant for the purpose of preparing this
Post-Effective Amendment which is being filed pursuant to paragraph (b) of
Rule 485 and hereby represent to the Commission that in my opinion this Post-
Effective Amendment does not contain disclosures which would render it ineli-
gible to become effective pursuant to paragraph (b).
We hereby consent to the filing of this opinion with and as a part of this
Post-Effective Amendment to Registrant's Registration Statement with the Com-
mission.
Very truly yours,
/s/ FRANCIS C. CLEARY, JR.
Francis C. Cleary, Jr.
Vice President and Counsel
SD0103.DOC (Acct U)
<PAGE>
EXHIBIT 14
JOHN HANCOCK VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE ACCOUNTS
POWER OF ATTORNEY
The undersigned member of the Board of Directors of John Hancock Mutual Life
Insurance Company does hereby constitute and appoint Stephen L. Brown, Foster
L. Aborn, William L. Boyan, Richard S. Scipione and Bruce E. Skrine, and each
of them individually, with full power of substitution, his or her true and
lawful attorneys and agents to execute, in the name of, and on behalf of, the
undersigned as a member of said Board of Directors, the Registration State-
ments under the Securities Act of 1933 and the Investment Company Act of 1940,
and each amendment to the Registration Statements, to be filed for John Han-
cock Variable Annuity Account U, John Hancock Mutual Variable Life Insurance
Account UV and any other variable annuity or variable life insurance account
of John Hancock Mutual Life Insurance Company with the Securities and Exchange
Commission and to take any and all action and to execute in the name of, and
on behalf of, the undersigned as a member of said Board of Directors or other-
wise any and all instruments, including applications for exemptions from such
Acts, which said attorneys and agents deem necessary or advisable to enable
any variable annuity or variable life insurance account of John Hancock Mutual
Life Insurance Company to comply with the Securities Act of 1933, as amended,
the Investment Company Act of 1940, as amended, and the rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof; and
the undersigned hereby ratifies and confirms as his or her own act and deed
all that each of said attorneys and agents shall do or cause to have done by
virtue hereof. Each of said attorneys and agents shall have, and may exercise,
all of the powers hereby conferred.
In Witness Whereof, the undersigned has hereunto set his or her hand on the
date shown.
September 30, 1995 /s/ Michael C. Hawley
------------------ ---------------------
DATE DIRECTOR
